Petaquilla Minerals (PTQ) 20-F/A 2008 FY Annual report (foreign) (amended)

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549 USA

FORM 20-F/A

AMENDMENT NO. 2

(Mark One)

o

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

OR

o

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

For the fiscal year ended

___________________________

OR

þ

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

OR

o

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

________________________________

For the transition period from           May 1, 2007               to        May 31, 2008             

Commission file number:000-26296

Petaquilla Minerals Ltd.
(Exact name of Registrant as specified in its charter)

Not applicable
(Translation of Registrant's name into English)

Province of British Columbia, Canada
(Jurisdiction of incorporation or organization)

Suite 410, 475 West Georgia Street, Vancouver, British Columbia, Canada V6B 4M9

(Address of principal executive offices)

Bassam Moubarak, telephone (604) 694-0021, fax (604) 694-0063,

Suite 410, 475 West Georgia Street,Vancouver, British Columbia, Canada V6B 4M9

(Name, telephone, e-mail and/or facsimile number and address of company contact person)

Form 20-F/A_Amendment No.2_Transition Period Ended 2008 May 31 Page 1

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

Title of each class	Name of each exchange on which registered
None	Not applicable

Securities registered or 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

(Title of Class)

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.

          95,958,641          

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

oYes  þNo

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.

oYesþNo

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 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 90 days.

þYes  oNo

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. (Check one):

oLarge accelerated filer             þAccelerated filer             oNon-accelerated filer

Form 20-F/A_Amendment No.2_Transition Period Ended 2008 May 31 Page 2

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

o U.S. GAAP o International Financial reporting Standards as issued by the International Accounting Standards Board þ Other

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

þItem 17  oItem 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).

oYes  þNo

Form 20-F/A_Amendment No.2_Transition Period Ended 2008 May 31 Page 3

Explanatory Note

Petaquilla Minerals Ltd. (the “Company”) has filed this Amendment No. 2 (“Amendment No. 2”) to its Annual Report on Form 20-F for the transition period ended May 31, 2008, to (i) expand the Company’s disclosures concerning the material effects of governmental regulation on the Company’s Molejon gold project in Panama; (ii) update its operating results, liquidity and capital resources to reflect changes to the Company’s amended financial statements included in the Amendment No. 2 and to include additional disclosure regarding the Company’s ability to continue as a going concern; (iii) expand the Company’s disclosure regarding its controls and procedures and how it intends to take remedial actions with respect to identified material weaknesses; (iv) file certain material contracts as exhibits that were not previously filed; (v) update its list of subsidiaries; and (vi) update its presentation of e xploration results.  The Company directs the reader of Amendment No. 2 to the following specific Items in this Amendment No. 2 for further details:   Item 3.A – Selected Financial Data, Item 3.D. – Key Information – Risk Factors, Item 4.A. – History and Development of Our Company, Item 4.B – Business Overview, Item 4.D.– Property, Plants and Equipment, Item 5.A. – Operating Results, Item 5.B. – Liquidity and Capital Resources, Item 8.A. – Financial Information – Consolidated Statements and Other Financial Information, Item 15 (Controls and Procedures), Item 17 (Financial Statements) and Item 19 (Exhibits).  Further, pursuant to Rule 13a-10(g)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which does not permit transition reports to cover periods longer than 12 months, this Amendment No. 2 amends the periods of the Company’s financial disclosures from the 15-month period ended April 30, 2007, and the 13-month period ended May 31, 2008, to the 12-month period ended January 31, 2007, the three-month period ended April 30, 2007, the 12-month period ended April 30, 2008, and the one-month period ended May 31, 2008.

This Amendment No. 2 sets forth the complete text of the above-referenced Items and all amendments thereto as well as updated responses to the other Form 20-F Items, and includes new certifications pursuant to Rules 13a-14(a) and 15d-14(a) and Rules 13a-14(b) and 15d-14(b) under the Exchange Act.

The information set forth in this report on Form 20-F is as at November 6, 2009, unless an earlier or later date is indicated.

Financial information in this Amendment No. 2 is presented in accordance with accounting principles generally accepted in Canada (“Canadian GAAP”).  Measurement differences between accounting principles generally accepted in Canada and in the United States, as applicable to the Company are set forth in Item 5 of this Amendment No. 2 and in Note 28 to the accompanying financial statements of the Company.

This Amendment No. 2 contains forward-looking statements within the meaning of applicable securities laws.  These statements relate to future events or our future financial performance.  In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology.  These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors”, that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Statements in this Amendment No. 2 regarding expected completion dates of feasibility studies, anticipated commencement dates of mining or metal production operations, including when our Molejon project is anticipated to begin production, projected quantities of future metal production and anticipated production rates, operating efficiencies, costs and expenditures are forward-looking statements.  Actual results could differ materially depending upon the availability of materials, equipment, required permits or approvals and financing, the occurrence of unusual weather or operating conditions, the accuracy of reserve estimates, lower than expected ore grades or the failure of equipment or processes to operate in accordance with specifications.  See“Item 3 – Key Information – 3.D. Risk Factors” for other factors that may affect our future financial performance.  

Form 20-F/A_Amendment No.2_Transition Period Ended 2008 May 31 Page 4

As used in this report, the terms "we", "us" and "our" mean Petaquilla Minerals Ltd. and its subsidiaries, unless otherwise indicated.

Unless otherwise indicated, all dollar amounts referred to herein are in Canadian dollars.

Form 20-F/A_Amendment No.2_Transition Period Ended 2008 May 31 Page 5

PETAQUILLA MINERALS LTD.
SECURITIES AND EXCHANGE COMMISSION
FORM 20-F/A
AMENDMENT NO. 2
TABLE OF CONTENTS

Page No.

	GLOSSARY OF MINING TERMS	10
	CAUTIONARY NOTE REGARDING RESOURCE AND RESERVE ESTIMATES	11
PART I		12
ITEM 1	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	12
ITEM 2	OFFER STATISTICS AND EXPECTED TIMETABLE	12
ITEM 3	KEY INFORMATION	12
3.A.	Selected Financial Data	12
3.B.	Capitalization and Indebtedness	13
3.C.	Reasons For The Offer and Use of Proceeds	13
3.D.	Risk Factors	14
	Risks related to our exploration, construction and mining operations could adversely affect our business	14
	Our estimates of reserves, mineral deposits and potential future production costs may be inaccurate, which could impact our results of operations in the future	14
	Our properties may be subject to undetected title defects	15
	Our directors may have conflicts of interest	15
	Exchange rate fluctuations may effectively increase our costs of exploration and production	15
	We are dependent upon additional funding in order to sustain our operations	15
	Our company has a history of losses and there is substantial uncertainty regarding our ability to continue as a going concern	16
	The requirements of the Ley Petaquilla may have an adverse impact on our company	16
	We have a history of net losses, an accumulated deficit and a lack of revenue from operations	17
	We have limited experience with development-stage mining operations	17
	Our common shares are subject to penny stock rules, which could affect trading in our shares	17
	We face strong competition for the acquisition of mining properties.	18
	Mineral prices can fluctuate dramatically and have a material adverse effect on our results of operations	18
	We face risks related to our operations in foreign countries	18
	Our operations are subject to environmental and other regulation	18
	We face political risks in Panama	19

Form 20-F/A_Amendment No.2_Transition Period Ended 2008 May 31 Page 6

	We have not paid dividends in the past and do not expect to pay dividends in the foreseeable future	19
	U.S. investors may not be able to enforce their civil liabilities against us or our directors, controlling person and officers	19
	If We are Characterized as a Passive Foreign Investment Company (“PFIC”), Our U.S. Shareholders May Be Subject to Adverse U.S. Federal Income Tax Consequences	20
ITEM 4	INFORMATION ON THE COMPANY	20
4.A.	History and Development of the Company	20
	Molejon Property – Panama	21
	Mineral Properties – Other	22
	Directors and Officers of Our Company	22
	Principal Capital Expenditures/Divestitures Over Last Three Fiscal Years	23
	Current and Planned Capital Expenditures/Divestitures	23
	Public Takeover Offers	23
4.B.	Business Overview	23
4.C.	Organizational Structure	24
4.D.	Property, Plants and Equipment	26
	Cerro Petaquilla Concession, Panama	26
	Introduction	26
	Property Location	26
	Location, Access & Physiography	27
	Plants and Equipment	28
	Title	29
	Exploration History	30
	Outlook – 2010	33
	Regional and Local Geology	34
	Mineralization	36
	Doing Business in Panama	37
ITEM 4A	UNRESOLVED STAFF COMMENTS	40
ITEM 5	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	40
5.A.	Operating Results	40
	Restatement of U.S. GAAP Financial Statements	40
	Restatement of January 31, 2007 Interim Financial Statements and May 31, 2008 Balance Sheet	41
	One Month Ended May 31, 2008 Compared to One Month Ended May 31, 2007	43
	12 Months Ended April 30, 2008,Compared to 12 Months Ended April 30, 2007	44
	Three Months Ended April 30, 2008 Compared to Three Months Ended April 30, 2007	46
	12 Months Ended January 31, 2007 Compared to Fiscal Year Ended January 31, 2006	47
5.B.	Liquidity and Capital Resources	47
	May 31, 2008, Compared to April 30, 2008	48
	April 30, 2008, Compared to April 30, 2007	48
	April 30, 2007, Compared to January 31, 2007	49
	January 31, 2007, Compared to January 31, 2006	49
5.C.	Research and Development, Patents and Licenses, etc.	50
5.D.	Trend Information	50
5.E.	Off-Balance Sheet Arrangements	50
5.F.	Tabular Disclosure of Contractual Obligations	50

Form 20-F/A_Amendment No.2_Transition Period Ended 2008 May 31 Page 7

ITEM 6	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	52
6.A.	Directors and Senior Management	52
6.B.	Compensation	53
	Cash and Non-Cash Compensation - Executive Officers and Directors	53
	Option Grants in Last Two Fiscal Periods	54
	Aggregated Option Exercises in Last Two Fiscal Periods	55
	Defined Benefit or Actuarial Plan Disclosure	55
	Termination of Employment, Change in Responsibilities and Employment Contracts	55
	Directors	55
6.C.	Board Practices	56
6.D.	Employees	57
6.E.	Share Ownership	57
ITEM 7	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	58
7.A.	Major Shareholders	58
7.B.	Related Party Transactions	59
7.C.	Interests of Experts and Counsel	60
ITEM 8	FINANCIAL INFORMATION	60
8.A.	Consolidated Statements and Other Financial Information	60
8.B.	Significant Changes	60
ITEM 9	THE OFFER AND LISTING	62
9.A.	Offer and Listing Details	62
9.B.	Plan of Distribution	64
9.C.	Markets	64
9.D.	Selling Shareholders	64
9.E.	Dilution	64
9.F.	Expenses of the Issue	64
ITEM 10	ADDITIONAL INFORMATION	64
10.A.	Share Capital	64
10.B.	Memorandum and Articles of Association	64
10.C.	Material Contracts	68
10.D.	Exchange Controls	68
10.E.	Taxation	70
	Material Canadian Federal Income Tax Consequences	70
	Dividends	70
	Capital Gains	70
	Material United States Federal Income Tax Consequences	71
	U.S. Holders	71
	Distributions on our Common Shares	71
	Disposition of Our Common Shares	72
	Passive Foreign Investment Company	72
	Foreign Tax Credit	73
	Controlled Foreign Corporations	73
	Information Reporting:  Backup Withholding	74
10.F.	Dividends and Paying Agents	74
10.G.	Statements by Experts	74
10.H.	Documents on Display	74
10.I.	Subsidiary Information	74

Form 20-F/A_Amendment No.2_Transition Period Ended 2008 May 31 Page 8

ITEM 11	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	74
ITEM 12	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	74
PART II		75
ITEM 13	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	75
ITEM 14	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	75
ITEM 15	CONTROLS AND PROCEDURES	77
ITEM 16	[RESERVED]	78
16.A.	Audit Committee Financial Expert	78
16.B.	Code of Ethics	78
16.C.	Principal Accountant Fees and Services	79
16.D.	Exemptions From the Listing Standards for Audit Committees	79
16.E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	79
16.F.	Change in Registrant’s Certifying Accountant	79
16.G.	Corporate Governance	80
PART III		80
ITEM 17	FINANCIAL STATEMENTS	80
ITEM 18	FINANCIAL STATEMENTS	129
ITEM 19	EXHIBITS	129
	SIGNATURES	131

Form 20-F/A_Amendment No.2_Transition Period Ended 2008 May 31 Page 9

GLOSSARY OF MINING TERMS

The following is a glossary of some of the terms used in the mining industry and referenced herein:

cutoff grade - deemed grade of mineralization, established by reference to economic factors, above which material is included in mineral deposit calculations and below which material is considered waste.  May be either an external cutoff grade, which refers to the grade of mineralization used to control the external or design limits of an open pit based upon the expected economic parameters of the operation, or an internal cutoff grade, which refers to the minimum grade required for blocks of mineralization present within the confines of an open pit to be included in mineral deposit estimates.

diamond drill - a machine designed to rotate under pressure an annular diamond-studded cutting tool to produce a more or less continuous solid sample (drill core) of the material that is drilled.

epithermal - a term applied to those mineral deposits formed in and along fissures or other openings in rocks by deposition at shallow depths from ascending hot solutions.

indicated reserves orprobable reserves - reserves for which quantity and grade and/or quality are computed from information similar to that used for measured or proven reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced.  The degree of assurance, although lower than that for measured reserves, is high enough to assume continuity between points of observation.

junior resource company - as used herein means a company whose mineral resource properties are in the exploration phase only and which is wholly or substantially dependent on equity financing or joint ventures to fund its ongoing activities.

measured reserves orproven reserves - reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling; and (b) the sites for inspection, sampling and measurement are spaced so closely and the geological character is so well defined that size, shape, depth and mineral content of reserves are well established.

mineral deposit, deposit ormineralized material - a mineralized body which has been physically delineated by sufficient drilling, trenching and/or underground work, and found to contain a sufficient average grade of metal or metals to warrant further exploration and/or development expenditures.  Such a deposit does not qualify under Commission standards as a commercially mineable ore body or as containing ore reserves, until final legal, technical and economic factors have been resolved.

open pit mining - the process of mining an ore body from the surface in progressively deeper steps.  Sufficient waste rock adjacent to the ore body is removed to maintain mining access and to maintain the stability of the resulting pit.

ore - a natural aggregate of one or more minerals which, at a specified time and place, may be mined and sold at a profit, or from which some part may be profitably separated.

ounces - troy ounces.

oz/tonne - troy ounces per metric ton.

ppb - parts per billion.

ppm - parts per million.

Form 20-F/A_Amendment No.2_Transition Period Ended 2008 May 31 Page 10

porphyry deposit - a disseminated mineral deposit often closely associated with porphyritic intrusive rocks.

reserve - that part of a mineral deposit which can be economically and legally extracted or produced at the time of the reserve determination.  Reserves are customarily stated in terms of "ore" when dealing with metalliferous minerals.

stockwork - a rock mass so interpenetrated by small veins of ore that the whole must be mined together.  Stockworks are distinguished from tabular or sheet deposits, i.e. veins or beds, which have a small thickness in comparison with their extension in the main plane of the deposit.

strike length - the longest horizontal dimensions of a body or zone of mineralization.

stripping ratio - the ratio of waste material to ore that is experienced in mining an ore body.

tonne - metric ton (2,204 pounds).

CAUTIONARY NOTE REGARDING RESOURCE AND RESERVE ESTIMATES

The terms “mineral reserve”, “proven mineral reserve” and “probable mineral reserve” are Canadian mining terms as defined in accordance with Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) -CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as amended. These definitions differ from the definitions in SEC Industry Guide 7 under the United States Securities Act of 1993, as amended (the “Securities Act”). Under SEC Industry Guide 7 standards, a “final” or “bankable” feasibility study is required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis to designate reserves and the primary environmental analy sis or report must be filed with the appropriate governmental authority.

In addition, the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are defined in and required to be disclosed by NI 43-101; however, these terms are not defined terms under SEC Industry Guide 7 and are normally not permitted to be used in reports and registration statements filed with the SEC. Investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves. “Inferred mineral 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 ba sis of feasibility or pre-feasibility studies, except in rare cases. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable. Disclosure of “contained ounces” in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC Industry Guide 7 standards as in place tonnage and grade without reference to unit measures.

Accordingly, information contained in this Amendment No. 2 contains descriptions of our mineral deposits that may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder.

Form 20-F/A_Amendment No.2_Transition Period Ended 2008 May 31 Page 11

PART I

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

This Amendment No. 2 is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide the information called for by this item.

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

This Amendment No. 2 is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide the information called for by this item.

ITEM 3.  KEY INFORMATION

3.A.  Selected Financial Data

The following tables summarize our selected financial data (stated in Canadian dollars) prepared in accordance with Canadian GAAP and reconciled for measurement differences to United States generally accepted accounting principles (“U.S. GAAP”).  The information in the tables was extracted from the more detailed financial statements and related notes included with this filing and should be read in conjunction with these financial statements and with the information appearing under the heading “Item 5 – Operating and Financial Review and Prospects”.  Note 28 of our consolidated financial statements , included with this filing , sets forth the material variations in U.S. GAAP.  Results for the periods presented are not necessarily indicative of results for future periods.

INFORMATION IN ACCORDANCE WITH CANADIAN GAAP:

			1 Month Ended May 31	12 Months Ended April 30	3 Months Ended April 30	12 Months Ended January 31
			2008	2008	2007	2007	2006	2005	2004
(a)	Total revenue		$0	$0	$0	$0	$0	$0	$0
(b)	(Loss) before extraordinary items(1)
		Total	($4,513,145)	($1,031,155)	($6,443,991)	($21,518,459)	($2,567,758)	($1,798,273)	($811,190)
		Per Share(1)	($0.05)	($0.01)	($0.07)	($0.28)	($0.05)	($0.04)	($0.02)
(c)	Total assets		$106,282,486	$93,935,092	$46,581,365	$42,300,633	$12,807,172	$1,989,474	$2,670,561
(d)	Total long-term debt		$30,760,220	$1,377,094	$699,185	$869,990	$0	$0	$0
(e)	Total shareholder equity (deficiency)		$50,008,735	$53,623,536	$34,837,619	$37,479,809	$12,256,076	$1,886,423	$2,543,620
(f)	Cash dividends declared per share		n/a	n/a	n/a	n/a	n/a	n/a	n/a
(g)	Capital stock   (number of issued and outstanding common shares)		95,958,641	95,958,641	89,876,951	89,367,031	70,246,303	51,264,537	48,829,542
(h)	Net earnings (loss) for the period
		Total	($4,513,145)	($1,031,155)	($6,443,991)	($21,518,459)	($2,567,758)	($1,798,273)	($811,190)
		Per Share(1)	($0.05)	($0.01)	($0.07)	($0.28)	($0.05)	($0.04)	($0.02)

(1)

The effect of potential share issuances pursuant to the exercise of options and warrants would be anti-dilutive and, therefore, basic and diluted losses per share are the same.

Form 20-F/A_Amendment No.2_Transition Period Ended 2008 May 31 Page 12

INFORMATION IN ACCORDANCE WITH U.S. GAAP:

			1 Month Ended May 31	12 Months Ended April 30	3 Months Ended April 30	12 Months Ended January 31
			2008	2008	2007	2007	2006	2005	2004
(a)	Total revenue		$0	$0	$0	$0	$0	$0	$0
(b)	Loss before extraordinary items
		Total	($3,280,379)	($51,227,478)	($16,408,094)	($40,967,629)	($4,979,571)	($1,798,273)	($811,190)
		Per Share(1)	($0.04)	($0.55)	($0.18)	($0.53)	($0.09)	($0.04)	($0.02)
(c)	Total assets		$40,985,357	$27,428,456	$17,439,671	$22,390,538	$10,432,778	$2,026,893	$2,715,567
(d)	Total long-term debt		$20,932,559	$1,377,094	$699,185	$869,990	$0	$0	$0
(e)	Total shareholder equity (deficiency)		($5,460,733)	($12,883,100)	$5,695,925	$17,569,714	$9,881,682	$1,923,842	$2,588,626
(f)	Cash dividends declared per share		n/a	n/a	n/a	n/a	n/a	n/a	n/a
(g)	Capital stock   (number of issued and outstanding common shares)		95,958,641	95,958,641	89,876,951	89,367,031	70,246,303	51,264,537	48,829,542
(h)	Net loss for the period
		Total	($3,280,379)	($51,227,478)	($16,408,094)	($40,967,629)	($4,979,571)	($1,805,860)	(766,184)
		Per Share(1)	($0.04)	($0.55)	($0.18)	($0.53)	($0.09)	($0.04)	($0.02)

⁽¹⁾

The effect of potential share issuances pursuant to the exercise of options and warrants would be anti-dilutive and, therefore, basic and diluted losses are the same.

We have not declared or paid any dividends in any of our last five financial years.

On November 6, 2009, the exchange rate, based on the noon buying rate published by The Bank of Canada, for the conversion of Canadian dollars into United States dollars (the "Noon Rate of Exchange") was $1.0720 (US$1.00 = $1.0720 ).

The following table sets out the high and low exchange rates for each month during the last six months.

	2009
	October	September	August	July	June	May
High for period	1.0845	1.1065	1.1079	1.1655	1.1625	1.1872
Low for period	1.0292	1.0613	1.0686	1.0790	1.0827	1.0872

The following table sets out the average exchange rates for the five most recent financial years calculated by using the average of the Noon Rate of Exchange on the last day of each month during the period.

	12 Months Ended May 31	1 Month Ended May 31	12 Months Ended April 30	3 Months Ended April 30	12 Months Ended January 31
	2009	2008	2008	2007	2007	2006	2005
Average for the period	1.1585	0.9995	1.0225	1.1581	1.1358	1.2060	1.2906

3.B.  Capitalization and Indebtedness

This Amendment No. 2 is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide the information called for by this item.

3.C.  Reasons For The Offer and Use of Proceeds

This Amendment No. 2 is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide the information called for by this item.

Form 20-F/A_Amendment No.2_Transition Period Ended 2008 May 31 Page 13

3.D.  Risk Factors

We operate in a dynamic and rapidly changing environment that involves numerous risks and uncertainties. Investors should carefully consider the risks described below before investing in our securities. The occurrence of any of the following events could harm us. If these events occur, the trading price of our common shares could decline, and investors may lose part or even all of their investment.

Risks related to our exploration, construction and mining operations could adversely affect our business.

We are engaged in the acquisition, exploration, exploration management and sale of mineral properties, with the primary aim of developing them to a stage where they can be exploited at a profit.  Our property interests are in the exploration stage and are without a known body of commercial ore.  Although an open pit mine is planned and construction of a gold plant for the processing of gold-bearing ores is currently underway at the Molejon gold property, located in the Cerro Petaquilla Concession, for the processing of gold-bearing ores, there is no guarantee we will realize any profits or positive cash flow from this property.  Any profitability in the future from our business will be dependent upon locating mineral reserves, which itself is subject to numerous risk factors.

The business of exploring for minerals and mining involves a high degree of risk.  Few properties that are explored are ultimately developed into producing mines.  Should our mineral deposits reach the development stage, we will be subjected to an array of complex economic factors and accordingly there is no assurance that a positive feasibility study or any projected results contained in a feasibility study of a mineral deposit will be attained.

Our ability to meet timing and cost estimates for properties cannot be assured.  Technical considerations, delays in obtaining governmental approvals, inability to obtain financing or other factors could cause delays in exploring properties and such delays could materially adversely affect our financial performance.

The business of mining is subject to a variety of risks such as cave-ins and other accidents, flooding, environmental hazards, the discharge of toxic chemicals and other hazards.  Should our mineral properties reach the production stage, such occurrences may delay production, increase production costs or result in liability.  We intend to obtain insurance in amounts that we consider to be adequate to protect ourselves against certain risks of mining and processing.  However, we may become subject to liability for hazards against which we cannot insure ourselves or which we may elect not to insure against because of premium costs or other reasons.  In particular, we are not insured for environmental liability nor earthquake damage.

In order to further the Molejon gold property located in Panama, it will be necessary to continue construction of electrical, transportation, and other infrastructure facilities, the costs of which could be substantial.  

Our estimates of reserves, mineral deposits and potential future production costs may be inaccurate, which could impact our results of operations in the future.

Although the ore reserve and mineral deposit figures included herein, some of which, as noted, are not compliant with National Instrument (“NI”) 43-101, have been carefully prepared by us, or, in some instances have been prepared, reviewed or verified by independent mining experts, these amounts are estimates only and no assurance can be given that any particular level of recovery of minerals from ore reserves will in fact be realized or that an identified mineral deposit will ever qualify as a commercially mineable (or viable) ore body which can be legally and economically exploited.  Further drilling and engineering analyses are required in order to have any of our resources classified as proven reserves.  Estimates of reserves, mineral deposits and potential future production costs can also be affected by such factors as permitting regulations and requirements, weather, environmental facto rs, unforeseen technical difficulties, unusual or unexpected geological formations and work interruptions.  In addition, the grade of ore ultimately mined may differ from that indicated by drilling results.  Short-term factors relating to ore reserves, such as the need for orderly exploration of ore bodies or the processing of new or different grades, may also have an adverse effect on mining operations and on the results of operations.  Historical and comparative results should not be relied upon as indicators of potential future performance.  There can be no assurance that minerals recovered in small-scale laboratory tests will be duplicated in large-scale tests under on-site conditions.  Material changes in ore reserves, grades, stripping ratios or recovery rates may affect the economic viability of projects.  Ore reserves are reported as general indicators of mine life.  Reserves should not be interpreted as assurances of mine life or of the profitability of current or future operations.

Form 20-F/A_Amendment No.2_Transition Period Ended 2008 May 31 Page 14

Our properties may be subject to undetected title defects.

It is possible there may be undetected title defects affecting our properties.  Title insurance generally is not available, and our ability to ensure that we have obtained secure claim to individual mineral properties or mining concessions may be severely constrained.  Furthermore, we have not conducted surveys of the claims in which we hold interests and, therefore, the precise area and location of such claims may be in doubt.  Accordingly, our properties may be subject to prior unregistered liens, agreements, transfers or claims, and title may be affected by, among other things, undetected defects which could have a material adverse impact on our operations.  In addition, we may be unable to operate our properties as permitted or to enforce our rights with respect to our properties.

Our directors may have conflicts of interest.

As at November 6, 2009, two of our directors, David Levy and Daniel Small, hold positions with Platinum Management (NY) LLC, an investment advising firm to Platinum Partners Value Arbitrage Fund LP, a New York based investment fund.  Platinum Partners Value Arbitrage Fund LP holds securities in our company and a portion of our debt.  However, none of our directors are directors or officers of Platinum Partners Value Arbitrage Fund LP nor are any of our directors insiders of any other reporting company.  While currently none of our directors beneficially owns a 10% or greater interest in the voting power of any other mineral resource companies, they could in the future.  To the extent that these other companies may participate in ventures in which we may participate, our directors may have a conflict of interest in negotiating and concluding terms respecting the extent of such p articipation, which could result in competitive harm to us.  In the event that such a conflict of interest arises at a meeting of our directors, a director who has such a conflict will abstain from voting for or against the approval of such participation or such terms.  In appropriate cases we will establish a special committee of independent directors to review a matter in which several directors, or management, may have a conflict.  In accordance with the laws of the Province of British Columbia, our directors are required to act honestly, in good faith and in our best interests.  In determining whether or not we will participate in a particular program and the interest therein to be acquired by it, our directors primarily consider the potential benefits to us, the degree of risk to which we may be exposed and our financial position at that time.  Other than as indicated, we have no other procedures or mechanisms to prevent conflicts of interest.

Exchange rate fluctuations may effectively increase our costs of exploration and production.

Exchange rate fluctuations may affect the costs that we incur in our operations. The appreciation of non-U.S. dollar currencies against the U.S. dollar can increase the cost of exploration and production in U.S. dollar terms, which could materially and adversely affect our profitability, results of operations and financial condition.

We are dependent upon additional funding in order to sustain our operations.

We have not generated cash flow from operations in the past and, although we are currently commissioning our surface gold processing plant at the Molejon gold property, cash flow to satisfy our operational requirements, debt repayments and cash commitments is not assured from the operations of the Molejon gold plant.  In the past, we have relied on sales of equity securities or debt financing to meet most of our cash requirements, together with project management fees, property payments and sales or joint ventures of properties.  There can be no assurance that funding from these sources will be sufficient in the future to satisfy our operational requirements and cash commitments.

Form 20-F/A_Amendment No.2_Transition Period Ended 2008 May 31 Page 15

We do not presently have sufficient financial resources to undertake all of our planned exploration programs.  Advancement of our properties depends upon our ability to obtain financing through any or all of the joint venturing of projects, debt financing, equity financing or other means. There is no assurance that we will be successful in obtaining the required financing.  Failure to obtain additional financing on a timely basis could cause us to forfeit our interest in our properties and reduce or terminate our operations on such properties.  

Our company has a history of losses and there is substantial uncertainty regarding our ability to continue as a going concern.

In their report on the consolidated financial statements for the periods ended May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007 , and January 31, 2006, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern.  Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

As at May 31, 2008, we had an accumulated deficit of $85,065,382 and for the one month ended May 31, 2008 and 12 months ended April 30, 2008, incurred a net loss from continuing operations of $4,513,145 and $1,031,155, respectively. Continuing operations are dependent on us achieving profitable operations and being able to raise capital, if and when necessary to meet our obligations and repay liabilities when they come due.

We are executing a business plan to allow us to continue as a going concern, which is to achieve profitability through cost containment and increased revenues.  We have reduced our losses and intend to reduce them further, ultimately achieving profitability. There is significant uncertainty that we will be successful in executing this plan. Should we fail to achieve profitability, or if necessary, raise sufficient capital to sustain operations, we may be forced to suspend our operations, and possibly even liquidate our assets and wind-up and dissolve our company.

During May 2007 and January 2008, we completed private placements for gross proceeds of $2,824,305 and $9,421,500, respectively. In May 2008, we raised gross proceeds of $31,801,725 through debt financing.

We did not generate revenue from operations during the one month ended May 31, 2008, 12 months ended April 30, 2008, three months ended April 30, 2007 , twelve months ended January 31, 2007 , or twelve months ended January 31, 2006. Expenses for the one month ended May 31, 2008 were $4,709,927, for the twelve months ended April 30, 2008 were $14,889,731, for the three months ended April 30, 2007 were $4,890,565 , for the twelve months ended January 31, 2007 were $23,951,217 , and for the twelve months ended January 31, 2006 were $2,538,350.

Our consolidated financial statements are prepared on a going concern basis, which assumes that we will be able to realize our assets at the amounts recorded and discharge our liabilities in the normal course of business in the foreseeable future.  Should this assumption not be appropriate, adjustments in the carrying amounts of the assets and liabilities to their realizable amounts and the classifications thereof will be required and these adjustments and reclassifications may be material.  

The requirements of the Ley Petaquilla may have an adverse impact on our company.

Our operations in Panama are governed primarily by Law No. 9 of the Legislative Assembly of Panama (the “Ley Petaquilla”), a project-specific piece of legislation enacted in February 1997 to deal with the orderly development of the Cerro Petaquilla Concession.

The Ley Petaquilla granted a mineral exploration and exploitation concession to Minera Petaquilla, S.A. (“MPSA”), a Panamanian company formed in 1997 to hold the Cerro Petaquilla Concession covering approximately 136 square kilometers in north-central Panama.  Although we no longer hold an interest in MPSA, we continue to hold the rights to the Molejon gold deposit and, as the Cerro Petaquilla Concession encompasses this deposit, the Ley Petaquilla governs our exploration activities.

Form 20-F/A_Amendment No.2_Transition Period Ended 2008 May 31 Page 16

The Ley Petaquilla contains fiscal and legal stability clauses necessary in order to obtain project financing and includes tax exemptions on income, dividends and imports.  The Ley Petaquilla also provides for an increase in the annual available infrastructure tax credit, higher depreciation rates for depreciable assets, which cannot be used in the infrastructure tax credit pool, and a favorable depletion allowance.

In order to maintain the Cerro Petaquilla Concession in good standing, MPSA must pay to the Government of Panama an annual rental fee of US$1.00 per hectare during the first five years of the concession, US$2.50 per hectare in the sixth to the tenth years of the concession and US$3.50 per hectare thereafter.  Initially, the annual rental was approximately US$13,600 payable by MPSA and was funded pro rata by its shareholders.  The current annual rental is approximately US$34,000.  The concession was granted for a 20-year term with up to two 20-year extensions permitted subject to the requirement to begin mine development and to make a minimum investment, as described below.

Under the Ley Petaquilla, MPSA was required to begin mine development by May 2001.  However, MPSA was able to defer commencing development operations for one month for every month that the price of copper remained below US$1.155 per pound for up to a further five years (i.e., until May 2006 at the latest).  The Ley Petaquilla also requires MPSA to (i) make a minimum investment of US$400 million in the development of the Cerro Petaquilla Concession; (ii) deliver an environmental report to the General Direction of Mineral Resources of the Ministry of Commerce and Industiries (“MICI”) for evaluation; (iii) submit, prior to extraction, an environmental feasibility study specific to the project area in which the respective extradition will take place; (iv) submit annually a work plan comprising the projections and approximate costs for the respective year to the MICI; (v) post letters of credit in support of required complia nce and environmental protection guarantees; (vi) annually pay surface canons; (vii) annually pay royalties for extracted minerals; (viii) annually present to the MICI detailed reports covering operations and  employment and training; (ix) create and participate in the administration of a scholarship fund to finance studies and training courses or professional training for the inhabitants of the communities neighboring the Cerro Petaquilla Concession in the provinces of Cocle and Colon; and (x) maintain all mining and infrastructure works and services of the project, always complying with the standards and regulations of general application in force that pertain to occupational safety, health and construction.  

For reference, a copy of Law No. 9 as passed by the Legislative Assembly of Panama on February 26, 1997, is attached to this Amendment No. 2 as Exhibit 4.V. and an English translation of the law has also been provided as Exhibit 4.W.

We have a history of net losses, an accumulated deficit and a lack of revenue from operations.

We have incurred net losses to date.  Our deficit as of May 31, 2008, was $85,065,382.  We have not yet had any revenue from the exploration activities on our properties.  The Molejon gold property is our most advanced property. Even if we generate future revenue from any of our properties, including the Molejon gold property, we may continue to incur losses beyond the period of commencement of such activity.  There is no certainty that we will produce revenue, operate profitably or provide a return on investment in the future and recent significant increases in metal commodity prices may not be sustainable.  They may not be reliable as indicators of future consistent realizable values, should any of our mineral deposits reach commercial production.

We have limited experience with development-stage mining operations.

We have limited experience in placing resource properties into production and our ability to do so will be dependent upon using the services of appropriately experienced personnel or entering into agreements with other major resource companies that can provide such expertise.  There can be no assurance that we will have available to us the necessary expertise when and if we place our resource properties into production.  There also exists significant risk in being able to recruit experienced employees or contractors to allow us to move forward in pursuing development-stage mining operations.

Our common shares are subject to penny stock rules, which could affect trading in our shares.

Our common shares are classified as “penny stock” as defined in Rule 15g-9 promulgated under the Exchange Act.  In response to perceived abuse in the penny stock market generally, the Exchange Act was amended in 1990 to add new requirements in connection with penny stocks.  In connection with effecting any transaction in a penny stock, a broker or dealer must give the customer a written risk disclosure document that (a) describes the nature and level of risk in the market for penny stocks in both public offerings and secondary trading, (b) describes the broker's or dealer's duties to the customer and the rights and remedies available to such customer with respect to violations of such duties, (c) describes the dealer market, including “bid” and “ask” prices for penny stock and the significance of the spread between the bid and ask prices, (d) contains a toll-free telephone number for inquiries on disciplinary histories of brokers and dealers, and (e) defines significant terms used in the disclosure document or the conduct of trading in penny stocks.  In addition, the broker-dealer must provide to a penny stock customer a written monthly account statement that discloses the identity and number of shares of each penny stock held in the customer’s account, and the estimated market value of such shares.  The extensive disclosure and other broker-dealer compliance related to penny stocks may result in reducing the level of trading activity in the secondary market for our common shares, thus limiting the ability of our shareholder to sell their shares.

Form 20-F/A_Amendment No.2_Transition Period Ended 2008 May 31 Page 17

We face strong competition for the acquisition of mining properties.

Significant and increasing competition exists for the limited number of mineral property acquisition opportunities available.  As a result of this competition, some of which is with large established mining companies with substantial capabilities and greater financial and technical resources than we have, we may be unable to acquire additional attractive mineral properties on terms we consider acceptable.  Accordingly, there can be no assurance that our exploration and acquisition programs will yield any new reserves or result in any commercial mining operation.

Mineral prices can fluctuate dramatically and have a material adverse effect on our results of operations.

The mining industry in general is intensely competitive and there is no assurance that, even if commercial quantities of minerals are discovered, a profitable market will exist for the sale of same.  Factors beyond our control may affect the marketability of any substances discovered.  The prices of minerals such as gold have experienced volatile and significant price movements over short periods of time and are affected by numerous factors beyond our control, including international economic and political trends, expectations of inflation, currency exchange fluctuations (specifically, the U.S. dollar relative to other currencies), interest rates and global or regional consumption patterns (such as the development of gold coin programs), speculative activities and increased production due to improved mining and production methods.  The supply of and demand for minerals such as gold is affected by various factors, including political events, economic conditions and production costs in major producing regions and governmental policies with respect to holdings by a nation or its citizens.  There can be no assurance that the price of recovered minerals will be such that our properties can be mined at a profit.

We face risks related to our operations in foreign countries.

Currently our only properties are located in Panama.  Consequently, we are subject to certain risks associated with foreign ownership, including currency fluctuations, inflation, political instability and political risk.  Mineral exploration and mining activities in foreign countries may be affected in varying degrees by political stability and government regulations relating to the mining industry.  Any changes in regulations or shifts in political conditions are beyond our control and may adversely affect our business. Operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, restriction of earnings distribution, taxation laws, expropriation of property, environmental legislation, water use and mine safety.  In particular, the status of Panama as a developing country may make it more difficult for us to obtain any required production financing for our properties from senior lending institutions.

Our operations are subject to environmental and other regulation.

Our current or planned operations, including development activities and commencement of production on our properties, require permits from various governmental authorities and such operations are and will be subject to laws and regulations governing prospecting, development, mining, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety, community services and other matters.  Companies engaged in the development and operation of mines and related facilities generally experience increased costs and delays in production and other schedules as a result of the need to comply with applicable laws, regulations and permits.  There can be no assurance that approvals and permits required to commence production on our various properties will be obtained.  Additional permits and studies, which may include environmen tal impact studies conducted before permits can be obtained, may be necessary prior to operation of the properties in which we have interests and there can be no assurance that we will be able to obtain or maintain all necessary permits that may be required to commence construction, development or operation of mining facilities at these properties on terms which enable operations to be conducted at economically justifiable costs.

Form 20-F/A_Amendment No.2_Transition Period Ended 2008 May 31 Page 18

Our potential mining and processing operations and exploration activities in Panama are subject to various federal and provincial laws governing land use, the protection of the environment, prospecting, development, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, mine safety, community services and other matters.  Such operations and exploration activities are also subject to substantial regulation under these laws by governmental agencies and may require that we obtain permits from various governmental agencies.  We believe we are in substantial compliance with all material laws and regulations that currently apply to our activities.  There can be no assurance, however, that all permits we may require for construction of mining facilities and conduct of mining operations will be obtainable on reasonable terms or that s uch laws and regulations would not have a material adverse effect on any mining project we might undertake.

Failure to comply with applicable laws, regulations, and permitting requirements may result in enforcement actions thereunder, 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 mining operations 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 violations of applicable laws or regulations.

Amendments to current laws, regulations and permits governing operations and activities of mining companies, or more stringent implementation thereof, could have a material adverse impact on us and cause increases in capital expenditures or production costs or reduction in levels of production at producing properties or abandonment or delays in development of new mining properties.

To the best of our knowledge, we are currently operating in compliance with all applicable environmental regulations.

We face political risks in Panama.

Mineral exploration and mining activities in Panama may be affected in varying degrees by political conditions and government regulations relating to the mining industry.  Any changes in regulations or shifts in political conditions are beyond our control and may adversely affect our business.  Operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, income taxes, expropriation of property, environmental legislation and mine safety.

We have not paid dividends in the past and do not expect to pay dividends in the foreseeable future.

All of our available funds will be invested to finance the growth of our business and, therefore, investors cannot expect and should not anticipate receiving a dividend on our common shares in the foreseeable future.

U.S. investors may not be able to enforce their civil liabilities against us or our directors, controlling persons and officers.

Our company and our officers and directors are residents of countries other than the United States, and all of our assets are located outside the United States.  As a result, it may not be possible for investors to effect service of process within the United States upon such persons or enforce in the United States against such persons judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of United States federal securities laws or state securities laws.

Form 20-F/A_Amendment No.2_Transition Period Ended 2008 May 31 Page 19

We believe that a judgment of a United States court predicated solely upon civil liability under United States securities laws would probably be enforceable in Canada if the United States court in which the judgment was obtained has a basis for jurisdiction in the matter that was recognized by a Canadian court for such purposes.  However, there is doubt whether an action could be brought in Canada in the first instance on the basis of liability predicated solely upon such laws.

If We are Characterized as a Passive Foreign Investment Company (“PFIC”), Our U.S. Shareholders May Be Subject to Adverse U.S. Federal Income Tax Consequences.

We have not made a determination as to whether we are considered a PFIC as such term is defined in the U.S. Internal Revenue Code of 1986, as amended (the “Code”), for U.S. federal income tax purposes for the current tax year and any prior tax years.  A non-U.S. corporation generally will be considered a PFIC for any tax year if either (1) at least 75% of its gross income is passive income or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income.

In general, if we are or become a PFIC, any gain recognized on the sale of our common stock and any “excess distributions” (as specifically defined in the Code) paid on the common stock must be ratably allocated to each day in a U.S. taxpayer’s holding period for the common stock.  The amount of any such gain or excess distribution allocated to prior years of such U.S. taxpayer’s holding period for the common stock generally will be subject to U.S. federal income tax at the highest tax applicable to ordinary income in each such prior year, and the U.S. taxpayer will be required to pay interest on the resulting tax liability for each such prior year, calculated as if such tax liability had been due in each such prior year.  For more information, see “Material United States Federal Income Tax Consequences-Passive Foreign Investment Company.”

ITEM 4.  INFORMATION ON THE COMPANY

4.A.  History and Development of the Company

Our company, Petaquilla Minerals Ltd., is a British Columbia company engaged in the acquisition, exploration and exploration management of mineral properties with the goal of bringing properties to production.  Our company was incorporated under the laws of the Province of British Columbia, Canada, on October 10, 1985, by registration of our Memorandum and Articles of Association (the “Articles”) with the British Columbia Registrar of Companies under the name Adrian Resources Ltd.  We changed our name to Petaquilla Minerals Ltd. on October 12, 2004.

Our head office and principal office address is Suite 410, 475 West Georgia Street, Vancouver, British Columbia, V6B 4M9 Canada.  Our telephone number is (604) 694-0021 and our facsimile number is (604) 694-0063.

We have eleven subsidiaries and one joint venture interest as detailed below:

(i)

We own all of the issued shares of Adrian Resources (BVI) Ltd., incorporated in the British Virgin Islands on December 17, 1999.

(ii)

Adrian Resources (BVI) Ltd. owns all of the issued shares of Petaquilla Minerals, S.A., incorporated in the Republic of Panama on April 28, 1992, and holding title to certain of our exploration concessions in the Republic of Panama.  Although originally incorporated under the name Adrian Resources, S.A., the name of this subsidiary was changed to Petaquilla Minerals, S.A. on February 3, 2005.

(iii)

Petaquilla Minerals, S.A. owns all of the issued shares of Petaquilla Gold, S.A., a Panamanian corporation formed on August 11, 2005.  Petaquilla Gold, S.A. holds the Molejon gold property interest and other potential gold deposits within the Cerro Petaquilla Concession lands.

Form 20-F/A_Amendment No.2_Transition Period Ended 2008 May 31 Page 20

(iv)

Petaquilla Minerals, S.A. owns all of the issued shares of Instituto Petaquilla, S.A., a Panamanian corporation formed on April 23, 2007, to conduct training and education programs for our personnel.

(v)

Petaquilla Minerals, S.A. owns all of the issued shares of Brigadas Verdes, S.A., a Panamanian corporation formed on March 27, 2007, to coordinate and manage reforestation activities.

(vi)

Compañìa Minera Belencillo, S.A., a Panamanian corporation, was created on September 21, 2005, in accordance with the agreement signed between Petaquilla Minerals, S.A. and Madison Enterprises (Latin American), S.A.  Petaquilla Minerals, S.A. owns 68.88% of Compañìa Minera Belencillo, S.A., which in turn holds a 100% interest in Zone 2 of the Rio Belencillo Concession and 68.88% of Zone 1, subject to an option by Madison Enterprises (Latin American), S.A. to earn a 31.12% interest in Zone 1 of the Rio Belencillo Concession.  On May 7, 2005, we entered into an option agreement with Gold Dragon Capital Management Ltd. (“Gold Dragon”) whereby Gold Dragon could earn a 100% interest in the concession lands by the expenditure of US $500,000 over two years on mutually agreed upon property expenditures.

(vii)

Petaquilla Gold, S.A. owns 50.2% of the shares of Petaquilla Infraestructura, S.A. (formerly named Petaquilla Power & Water, S.A.), a Panamanian corporation formed on September 21, 2006, to primarily (i) design, construct, operate, maintain and install equipment and networks for the generation, transmission and commercialization of electrical energy; and (ii) to develop projects for the production, distribution and commercialization of potable water.

(viii)

Petaquilla Gold, S.A. also owns all of the issued shares of Aqua Azure, S.A., a Panamanian corporation formed on October 10, 2006, to purchase, sell, lease, manage, commercialize and hold investment in all sorts of moveable goods.  

(ix)

We own all of the issued shares of Petaquilla Infrastructure Ltd., incorporated in British Columbia, Canada, on May 29, 2009.

(x)

Petaquilla Infrastructure Ltd. owns all of the issued shares of Petaquilla Infraestructura Ltd. incorporated in the British Virgin Islands on February 21, 2008.  

(xi)

Petaquilla Infraestructura Ltd. owns all of the issued shares of Petaquilla Hidro, S.A., a Panamanian corporation formed on October 10, 2008.

(xii)

Petaquilla Infraestructura Ltd. owns all of the issued shares of Panama Central Electrica, S.A., a Panamanian corporation formed on February 16, 2009.

Molejon Property – Panama

Our interest in the Molejon deposit was acquired in 1992 and 1993 through two separate series of transactions and in 2005 by way of an agreement amongst the shareholders of MPSA.  Specifically,in June 2005, the shareholders of MPSA agreed to separate the gold deposit and other precious metal mineral deposits that might be developed within the Cerro Petaquilla Concession from the copper mineral deposits within the Cerro Petaquilla Concession.  The agreement provided for us, through our subsidiary, Petaquilla Gold, S.A., to own a 100% interest in the Molejon gold deposit, as well as all other gold and precious metal mineral deposits that might be developed within the Cerro Petaquilla Concession, subject to a graduated 1% - 5% Net Smelter Return, based on the future gold price at the time of production, payable to others.

In September 2005, the multi-phase Petaquilla Mine Development Plan (the “Plan”) submitted to the Government of Panama by MPSA was approved by Ministerial Resolution.  The Molejon gold mineral deposit forms part of the Cerro Petaquilla Concession lands and the first phase of the Plan focuses on the advancement of the Molejon gold deposit by our company commencing in 2006.  Subsequent phases of the plan will be the responsibility of MPSA, the joint venture company in which we no longer hold an interest.  

Form 20-F/A_Amendment No.2_Transition Period Ended 2008 May 31 Page 21

As at May 31, 2008, we incurred the following costs related to the Molejon gold deposit (except as noted below for Rio Belencillo).  These costs have been capitalized on our audited consolidated balance sheet as mineral property costs:

Trenching –   Molejon	$            4,308,854
Trenching – Rio Belencillo	48,872
Camp costs	6,158,386
Transportation	250,126
Drilling costs	11,046,825
Indirect drilling costs	1,106,528
Geologist	1,128,193
Topography	153,571
Engineering and design	517,156
Engineering and consulting	2,807,641
Technical support	120,272
Property permits	408,381
Water samples	3,857
Environment	488,040
Communications	192,370
Logistics	395,581
Plant equipment	3,927,704
Communications - plant	6,179
Plant – site	22,272,755
Roads	1,634,057
Roads agreements	105,939
Bridges	50,261
Deferred amortization on mining equipment	3,938,717
Reclamation costs	4,400,000
Stock-based compensation	723,668
Accreted interest	955,682
	$67,149,615

Mineral Properties - Other

We hold various interests in other land concession areas adjacent to the Cerro Petaquilla Concession lands in Panama, including the Rio Belencillo and Rio Petaquilla Concessions.

By an agreement dated May 7, 2005, and amended on June 10, 2005, Gold Dragon Capital Management Ltd. (“Gold Dragon”), had an option to purchase all of our interest in the Rio Belencillo and Rio Petaquilla Concessions by the expenditure of $100,000 in approved exploration costs by May 7, 2007, an additional $400,000 in approved exploration costs by February 7, 2008, and by then paying us $1,152,400. This sum is payable in shares of Gold Dragon.

The payment of $100,000 on account of exploration expenditures has not been made in accordance with the terms and conditions of the May 7, 2005 agreement and we are in the process of amending the agreement with Gold Dragon.

Directors and Officers of Our Company

Effective May 1, 2007, our Board of Directors (the “Board”) consisted of Ralph Ansley, John Cook, Richard Fifer, and Marco Tejeira.  Our officers were Richard Fifer as President and Chief Executive Officer, Tony M. Ricci as interim Chief Financial Officer, and Graham Scott as Corporate Secretary.  On June 11, 2007, Robert Baxter was appointed to the Board of Directors and on September 10, 2007, Pablo Mauricio Buenano joined our company as VP Finance.   

Form 20-F/A_Amendment No.2_Transition Period Ended 2008 May 31 Page 22

At our Annual General Meeting of Shareholders held on November 6, 2007, the following Board members stood for election and were duly re-elected: Ralph Ansley, Robert Baxter, John Cook, Richard Fifer, and Marco Tejeira.  Tony M. Ricci, who had been serving as our interim Chief Financial Officer while we conducted our search for a full-time Chief Financial Officer, stepped down when Bassam Moubarak was appointed as Chief Financial Officer on February 11, 2008.  On July 7, 2008, Dr. Ralph Ansley resigned from our Board citing medical reasons.  

At our Annual General Meeting of Shareholders held on November 18, 2008, the following Board members stood for election and were duly re-elected:  Robert Baxter, John Cook, and Richard Fifer.  Gaston Araya and John Resing were proposed for election for the first time and were duly elected to the Board.  Bassam Moubarak and Graham Scott continued in their roles as Chief Financial Officer and Corporate Secretary, respectively, and on December 1, 2008, Joao Manuel joined the Company in the capacity of Chief Operating Officer.

Principal Capital Expenditures/Divestitures Over Last Three Fiscal Years

At May 31, 2008, we incurred $67,100,743 in Molejon property expenses and $48,872 in Rio Belencillo property expenses for a total of $67,149,615 that has been capitalized as mineral property costs.  On February 10, 2005, we sold 500,000 of our own shares on the Toronto Stock Exchange (“TSX”) at a price of $0.65 per share.  These shares were previously issued and reacquired by us some years ago pursuant to an issuer bid.  Accordingly, there was no change to the number of shares issued and outstanding as a result of this sale.  The proceeds of the sale were directed towards general working capital purposes.

Current and Planned Capital Expenditures/Divestitures

We have either ongoing or anticipated capital expenditures during the fiscal year ending May 31, 2010. With respect to the planned exploration and advancement of the Molejon property, we anticipate having capital expenditures of approximately $5,000,000 to $10,000,000 during the fiscal year ending May 31, 2010. However, such expenditures are subject to further consideration and to our ability to obtain external financing. There is no assurance that we will be successful in obtaining such financing.

Public Takeover Offers

During the one-month period ended May 31, 2008, the 12-month period ended April 30, 2008, the three-month period ended April 30, 2007, the 12-month period ended January 31, 2007, and the 12-month period ended January 31, 2006, we did not receive any public takeover offers from third parties nor did we make any such takeover offers.  

4.B.  Business Overview

Molejon Property – Panama

We currently have no significant properties in Canada and we are not actively exploring, or seeking to acquire interests in, mineral properties in Canada.  Our primary focus has been the exploration of the Molejon gold deposit and other mineral properties in the Republic of Panama.

The Republic of Panama, through the Ministry of Commerce and Industry, is the regulatory body overseeing the Cerro Petaquilla Concession and potential future development thereof.  Law No. 9, the Ley Petaquilla, passed by the Legislative Assembly of Panama on February 26, 1997, is a project-specific piece of legislation dealing with the orderly development of the Cerro Petaquilla Concession, including the Molejon gold deposit.  The Ley Petaquilla could be amended by the government of Panama through the enaction of a subsequent law but no such law has been enacted since the Ley Petaquilla legislation passed in February 1997.  At that time, the Ley Petaquilla granted a mineral exploration and exploitation concession to MPSA, a Panamanian company formed in 1997 to hold the 136 square kilometer Cerro Petaquilla Concession.  Our Molejon property comprises approximately 10% of the Cerro Petaquilla l ands.

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The Ley Petaquilla contains fiscal and legal stability clauses necessary in order to obtain project financing and includes tax exemptions on income, dividends and imports.  The Ley Petaquilla also provides for an increase in the annual available infrastructure tax credit, higher depreciation rates for depreciable assets, which cannot be used in the infrastructure tax credit pool, and a favourable depletion allowance.

There were no competing bidders for the concession at the time the Ley Petaquilla was enacted and the concession was granted for an initial 20-year term with two 20-year extensions permissible subject to the requirements to begin mine development and to make a minimum required investment.  In 2005, we and our former partners in MPSA delivered the Plan to the Government of Panama and the Plan was approved by Ministerial Resolution in September 2005.  Development of the Molejon gold mineral deposit by our company commencing in 2006 forms the first phase of the Plan.  Subsequent phases of the Plan will be the responsibility of MPSA.

This government’s approval of the Plan resulted in the extension of the land tenure for an initial 20-year period commencing September 2005, subject to MPSA meeting certain other ongoing development and operational conditions.  In addition, pursuant to the Ley Petaquilla, in order to maintain the Cerro Petaquilla Concession in good standing, we and MPSA must continue to meet certain obligations.

The Ley Petaquilla comprises the agreement between the Republic of Panama and the corporation of Minera Petaquilla, S.A. and its affiliates and expresses each party’s rights and obligations.  The majority of our obligations require that the Republic of Panama be provided with a variety of reports, studies and work plans, payment of surface canons, access and use of port installations, evidence of bonding, etc.  An example of an obligation that requires government approvals concerns the environment and states that an Environmental Feasibility Study specific to the project area in which the respective extradition will take place must be submitted to the General Direction of Mineral Resources of the Ministry of Commerce and Industries.  Said study shall be evaluated and its approval, modification or rejection shall be defined within a term of 45 days counted as of the date of its presentation to the General Direction of Mineral Resources.  After the end of this term, if there is no statement from the General Direction of Mining Resources, the Environmental Feasibility Study shall be considered approved.  For complete disclosure of Panama’s requirements, please refer to Exhibit 4.V., Law No. 9 as passed by the Legislative Assembly of Panama on February 26, 1997, attached to this Amendment No. 2. An English translation of the law has also been provided as Exhibit 4.W. to this Amendment No. 2.

4.C.  Organizational Structure

The following chart sets out our corporate structure and the mineral properties owned by each of our subsidiaries:

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4.D.  Property, Plants and Equipment

All our properties are in the exploration stage and are without a known body of commercial ore.  Although an open pit mine is planned and a gold processing plant is currently being commissioned at the Molejon gold property, we currently have no mineral producing properties and have not generated any revenue from any mineral producing properties in the one month ended May 31, 2008, the 12 months ended April 30, 2008, the three months ended April 30, 2007, the 12 months ended January 31, 2007, and the 12 months ended January 31, 2006 .

Cerro Petaquilla Concession, Panama

Introduction

The Cerro Petaquilla Concession is largely held by MPSA although, pursuant to the 2005 Molejon Gold Project Agreement, we hold the rights to the Molejon gold deposit found within the concession lands as well as to other gold and precious metal mineral deposits that might be developed within Cerro Petaquilla Concession.  This concession contains a large copper-gold porphyry system and our epithermal gold deposit, Molejon, is amenable to open pit mining.  To date, exploration has identified eight copper-gold porphyry deposits along with the Molejon gold deposit.

Our activities are focused on the Molejon gold deposit and the first phase of the Plan submitted by MPSA and approved by the Government of Panama in 2005.  We have begun construction and development of the area for the purposes of extracting ore from the Molejon gold deposit.  In addition, we intend to perform further exploration on other identified gold targets within the Cerro Petaquilla Concession, and those within our wholly owned properties surrounding the Cerro Petaquilla Concession.  

Property Location

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Location, Access & Physiography

Although we are currently focusing on the Molejon gold project located on the Cerro Petaquilla Concession, we also hold the rights to 659 square kilometres of virtually unexplored land surrounding the known deposits of the Cerro Petaquilla Concession including various interests in the Rio Belencillo and the Rio Petaquilla Concessions adjacent thereto.  

A map of the various concession lands located in north-central Panama with the 136-square kilometre Cerro Petaquilla Concession highlighted in the colour blue is shown below:

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Close-up of the 136-square kilometre Cerro Petaquilla Concession with the Molejon deposit area cross-hatched in red:

The concession lands are located approximately 75 miles west of Panama City, six miles from the Caribbean coast and lie within the Donoso District of the Province of Colon in the Republic of Panama.  The Cerro Petaquilla Concession, specifically, is located 20 kilometres inland from the Caribbean coast and elevation within the concession boundaries ranges between 70 metres and 350 metres above sea level.  The Cerro Petaquilla Concession falls within the rainfall shadow of the Continental Divide and the terrain is generally rugged and covered with heavy rainforest vegetation.  The climate of the Cerro Petaquilla Concession is characteristic of tropical rainforests.  Precipitation is high throughout the year with annual rainfall averaging at least 4,700 mm in the concession area.  The heaviest precipitation is evenly distributed from May to December and the months of January to April are typically the driest months.

Access to the Molejon gold property within the Cerro Petaquilla Concession is by road or helicopter.  We have completed construction of the 28-kilometre Llano Grande–Coclesito dirt road from Coclesito, a village of approximately 700 inhabitants, to the mine site.  As part of the Llano Grande-Coclesito Road Improvement Project, the Cascajal Bridge has been completed and was inaugurated January 16, 2007, by the Minister of Public Works of Panama.  One more bridge spanning the San Juan River is also now complete.  This road replaces a network of trails, which was the previous access, and the new road portion will ultimately be upgraded to rural paved status as part of ongoing development work.  While the road has initially been designed to provide access to the mine site, it will ultimately comprise part of a future expansion of the national road network connecting communities with the region.  Thirty kilometres of gravel road connects Coclesito with La Pintada, a town of 5,000 people on the country's paved highway network, and the Pan-American Highway to the south.  This road will also be upgraded to rural paved status as part of ongoing development work.  

Plants and Equipment

Currently, a gold-processing surface plant that will initially utilize three ball mills and a carbon-in-pulp processing facility is under construction and near completion.  Ball mills are operational, and construction of leach tanks, carbon-in pulp tanks, and pulp and tailings thickeners is complete.  The ADR plant building and the CN detoxification system are 100% complete.  The carbon, acid wash and elution columns are mounted, the regeneration kiln structure and frames are mounted, and six generator sets are in place and functioning.  The emergency pond is complete.  Tailings pond no. 2 is being completed in three stages, of which two have been finalized.  

The final construction item – completion of the plant’s crushing system – is expected to be finished in fiscal 2010.  Commissioning of the Molejon gold plant is currently underway.

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Title

Cerro Petaquilla Concession – Panama

Prior to October 18, 2006, we owned, through our indirect share ownership in MPSA, a 52% interest in the Cerro Petaquilla Concession.  Specifically, our company’s 52% ownership of MPSA was held through our wholly owned subsidiary of Georecursos Internacional, S.A. (“Georecursos”).  On October 18, 2006, we entered into a Plan of Arrangement with Petaquilla Copper Ltd. (“Copper”), whereby we effectively transferred ownership of Georecursos to Copper, and, thereby, our interest in the copper assets within the Cerro Petaquilla Concession lands to Copper.  

We retain the rights to the Molejon gold deposit as well as to other gold and precious metal mineral deposits that may be developed within the Cerro Petaquilla Concession and continue to operate under the Ley Petaquilla as does the joint venture company, MPSA.  

Molejon Property – Panama

With the above noted and as per the Molejon Gold Project Agreement dated June 2, 2005, the shareholders of MPSA agreed to separate the gold deposit and other precious metal mineral deposits that might be developed from the copper mineral deposits within the Cerro Petaquilla Concession.  The agreement provides for our company, through our subsidiary, Petaquilla Gold, S.A., to own a 100% interest in the Molejon gold deposit, as well as all other gold and precious metal mineral deposits that might be developed within the Cerro Petaquilla Concession, subject to a graduated 1% - 5% Net Smelter Return, based on the future gold price at the time of production, payable to shareholders of MPSA.

Pursuant to the contract law under which the Cerro Petaquilla Concession was granted by the Government of the Republic of Panama, our company with our then partners delivered the phased Plan to the Government of Panama.  In September 2005, the multi-phase Plan submitted to the Government of Panama by MPSA was approved by Ministerial Resolution.  This approval resulted in the extension of the land tenure for an initial 20 year period commencing September 2005, subject to MPSA meeting certain other development and operational conditions on an ongoing basis. The land tenure provides for two additional 20-year terms that are also subject to MPSA meeting certain other ongoing development and operational conditions.

The Molejon gold mineral deposit, owned 100% by our company, forms part of the Cerro Petaquilla Concession lands and the first phase of Plan focuses on the development of the Molejon gold deposit by our company commencing in 2006.  The development of the Cerro Petaquilla copper deposit is included in subsequent phases of the plan, and is the responsibility of MPSA.

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Mineral Properties – Other

We hold various interests in other land concession areas adjacent to the Cerro Petaquilla Concession in Panama, including the Rio Belencillo and Rio Petaquilla Concessions.

By an agreement dated May 7, 2005, and amended on June 10, 2005, Gold Dragon has an option to purchase all of our company’s interest in the Rio Belencillo and Rio Petaquilla Concessions by the expenditure of $100,000 in approved exploration costs by May 7, 2007, an additional $400,000 in approved exploration costs by February 7, 2008, and by then paying us $1,152,400.  This sum is payable in common shares of Gold Dragon.

Exploration History

Although the Cerro Petaquilla Concession has been investigated since 1968 when the potential for copper porphyry mineral deposits within the area was first recognized, no former exploration program analyzed the drilling and surface sampling for gold.  As such, the only existing gold data is that accumulated by our company.  Drilling to date has shown that the distribution and intensity of gold values within mineralized zones varies directly with areas of elevated copper and depleted molybdenum contents.

Exploration - Results Obtained by Us or on Our Behalf

In October 2005, we received an NI 43-101 compliant mineral resource estimate on the Molejon gold deposit from SRK Consulting (Canada) Inc. (“SRK”).  SRK estimated inferred mineral resources at 0.5 g/t cut off were 11.2 million tonnes at 2.48 g/t Au.  We used a cut off grade at 0.5g/t for all resources estimates since other mines in the Central America region have operated profitably at a gold price of $500 per ounce using a resource estimate at this cut off. Inferred mineral resources at 0.5, 0.6 and 0.7 g/t Au cut-offs are included in the following table. 

Table:  Mineral Resource Estimate at. 0.5, 0.6 and 0.7 g/t Au Cut-Offs

	Inferred Resources
Au g/t Cut -Off	Million Tonnes *	Au g/t	Contained Ounces Au *
0.5	11.2	2.48	893,000
0.6	10.8	2.56	889,000
0.7	10.1	2.68	870,000

(* Note: Tonnes and ounces have been rounded to reflect relative accuracy of the resource estimate.)

SRK found the drilling, sampling methods and approach, sample preparation, analysis, security (chain of custody), and quality assurance/quality control procedures (“QA/QC”) used during the exploration and delineation of the Molejon gold mineralization to be acceptable for resource estimation.

Based on the results of the resource estimate, SRK recommended that we proceed with the planned infill drill program, use the infill drill data along with twinned holes to revalidate the previous drilling and surface trench results, and complete specific gravity and mineralogical testwork.  Upon completion of this work, a re-estimation of resources would be warranted in preparation for subsequent engineering studies.  Additional metallurgical and geotechnical work was also recommended in preparation for future engineering work.

The October 2005 SRK report represents an increase of 35% over a pre-NI 43-101 resource estimate of 7.8 million tones grading 2.63 grams for total contained gold of 661,000 ounces using a bottom cut-off grade of 0.500 g/t Au.

In January 2006, during a follow-up trenching program on the Molejon gold deposit, a 200-metre strike length of high-grade gold mineralization in the Central Zone was delineated.  Overall, the trenching program resulted in a significant reinterpretation of the Molejon mineralization - three or more mineralization trends in quartz breccia and silicified andesite breccia extend across the deposit.

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At the same time, we commenced, and during the course of 2006 completed, a 14,005-metre diamond-drilling program at the Molejon gold deposit.  The drilling program was threefold.  First, the majority of drilling, or 11,398 metres, consisted of infill drilling in the southern part (the starter pit area) of the deposit to bring the separation between existing drill holes down to 20 to 35 metres.  The Molejon gold deposit was previously diamond drilled in a 124-hole program conducted by Teck Corporation, Inmet Mining Corporation and us (formerly Adrian Resources Ltd.) in 1994-95 on 50-metre grid lines with 40 to 70 metres between holes.  Second, additional resource drilling totaling 1,627 metres was performed on areas where trenching had identified new targets.  Third, the remaining approximately 980 metres focused on condemnation drilling and established the locat ion for the 2,200 tonne per day plant currently being constructed.  Geotechnical drilling was also performed in order to characterize construction conditions.

One of our objectives when we commenced the 2006 drill program was to confirm the location of the starter pit and to upgrade SRK’s October 2005 inferred mineral resource estimate to an indicated and measured category.  In April 2007, we received an NI 43-101 compliant gold resource estimate completed by AAT Mining Services (AquAeTer, Inc. dba AAT Mining Services) that significantly upgraded the prior resource estimate of 893,000 ounces of inferred gold ounces.  The new resource calculation outlined 405,141 ounces of measured resources, 109,192 ounces of indicated resources and 361,011 ounces of inferred resources at the Molejon Gold deposit.  AAT Mining Services also estimated that 179,934 ounces of the measured and indicated ounces contained in the low-grade material have potential for blending with the high-grade to achieve an optimum mill feed without loss of resources. Moreover, drilling confirmed the high-grade are a of 1.667 mm tonnes grading 5.0 g/tonne at a cutoff grade of 2.5 g/tonne.

Category	Tonnage	Cut-off (g/tonnes)	Average Grade	Ounces
Measured	6.846 Mio	0.5	1.84	405,141
Indicated	3.121 Mio	0.5	1.09	109,192
Inferred	10.473 Mio	0.5	1.07	361,011

The 361,011 ounces of gold presently defined as inferred resources are currently being evaluated by infill drilling to 25 metre centres with an aim to convert this resource to measured and indicated resources for the Molejon Gold Plant Expansion Feasibility Study. Most of these mineralized drill holes are 50 to 75 metres away from Measured and Indicated mineralized resources.  The on-site Qualified Person, Sean C. Muller, P. Geo., observed and verified that the 2006 drilling and laboratory procedures on the Molejon gold project met or exceeded NI 43-101 standards.  Strict quality assurance and quality control protocols were defined and implemented under his supervision including the submission of blanks, standards and duplicate core samples to the laboratory.

More than 120 new test holes were used to update SRK’s October 2005 resource estimate.

The second objective was to test for additional mineralization.  The additional resource drilling discovered another deeper mineralization trend north of the known resource at Molejon. This new trend, known as the NW Deep, exhibits two cohesive blocks of mineralization, one near the surface and another at a depth of approximately 100 metres. The extension of the known mineralization trends to the NNE, and the WSW continues to be extended through step-out drilling.

The third objective was to confirm the location of the gold processing plant.  Thus, condemnation drilling was conducted to ensure that ore zones do not underlie the proposed plant, related infrastructure, and tailings impoundment sites. 

In addition, the results obtained from both the 1994-95 and 2006 diamond-drilling programs will be used to assist in the completion of pit modeling and a feasibility study.

In early 2007, we continued drilling by commencing a minimum 40,000 metre exploration and development diamond-drill program focusing on the 20 square kilometer area known as the El Real Trend, which includes our 100% owned Molejon deposit and Copper’s Botija Abajo/Brazo project zones, and which is open in three directions.  In August and September 2007, we released results and details concerning this drill program along the El Real copper gold trend.  At the time, we and Copper had jointly been active in five different zones in the Cerro Petaquilla Concession with six drill rigs working on the El Real mineralized gold and copper trend between Molejon and Botija Abajo/Brazo.  Results from several drill holes indicated the zone may be much larger in size than previously estimated, that the area had a new silver zone and confirmed the mineralized trend between the Bo tija Abajo, Botija Abajo West, Brazo and Molejon open pit. The overall goal of this large scale, wide spaced drill program was to identify and delineate the many targets on the El Real Trend and tie the Botija Abajo/Brazo zone to the Molejon open pit gold deposit.

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Two drill rigs were also working on a new extension of the Molejon deposit in the North Central zone outside of the current pit outline. Drill hole 332, included in the first results from this program and located within the south-western part of the current pit design, intercepted high grade mineralization near surface: 9 metres @ 17.24g/t Au. In addition, deep mineralization found in several holes confirmed our structural model and indicated a significant extension of known mineralized breccias outside of the current designed pit limits. The results offered encouraging support for our stated goal of increasing resources.  The new hole locations were designed to test mineralization trends suggested by recent resource modeling.  Results from several holes located within the south-western part of the current pit indicated a significant volume of near surface, higher grade material in an area drilled p reviously on a wide spacing and previously interpreted as a lower grade zone. The results supported upgrading previously low grade material, with new higher grade intervals.

In October 2007, we announced the results of an updated NI 43-101 compliant gold resource estimate based on results obtained through September 2007.  AAT Mining Services has estimated a total measured resource of 532,801 ounces and an indicated resource of 223,785 ounces at the Molejon Gold deposit (see table below).  Additionally, an inferred resource of 342,111 ounces at an average grade of 0.872 g/t above a cutoff of 0.5 g/t was estimated. The 123,000 indicated resource ounces of gold delineated at the nearby Botija Abajo deposit through June 2007 increases the total gold resources at the global Molejon Project by 40% since the last resource estimate announced in April 2007.

Measured

Grade cutoff	Tonnes	Au	Au	Au
in g/t		grams/tonne	grams	ounces
.5	7,683,176	1.013	7,784,218	250,272
2.5	1,170,618	3.469	4,060,956	130,565
5.0	591,315	7.993	4,726,538	151,964
Total	9,445,109	1.75	16,571,712	532,801

Indicated

Grade cutoff	Tonnes	Au	Au	Au
in g/t		grams/tonne	grams	ounces
.5	5,873,534	0.924	5,426,666	174,474
2.5	345,516	3.236	1,117,982	35,944
5.0	62,508	6.651	415,769	13,367
Total	6,281,558	1.11	6,960,417	223,785

Inferred

Grade Cutoff g/Tonne	Inferred Tonnes	Average Gold Grade g/Tonne	Inferred Gold Grams (contained)	Inferred Gold Troy Ounces (contained)
0.5	12,190,533	0.869	10,589,925	340,479
2.5	18,471	2.747	50,747	1,632
Total	12,209,004	0.872	10,640,672	342,111

Another 342,111 inferred ounces have been geostatistically shown in a new area northwest of the Molejon measured and indicated resources.

In2006, about 500,000 ounces of gold were in the inferred category of which over 50% have been converted to measured and indicated resources by infill drilling in 2007.  Over 22,000 metres have been cored at Molejon in 2007 bringing the total drilling along the gold trend to about 40,000 metres since the beginning of the program in 2006.  As at October 18, 2007, seven rigs were currently drilling in the area, three in Molejon and four elsewhere along the El Real trend.

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The recent modeling effort included a complete review of the drilling, geology, sampling methods and approach, sample preparation, analysis, security (chain of custody), and quality assurance/quality control procedures used during the exploration of the Molejon gold deposit.  The on-site independent qualified person, Sean C. Muller, P. Geo., a Qualified Person under NI 43-101, oversaw the drilling program ensuring that the appropriate quality assurance protocols were being followed and that the data was being qualified under strict quality controls. He observed and verified that recent drilling, sample preparation and ALS Chemex laboratory procedures utilized for the Molejon project meet NI 43-101 standards.  Strict quality assurance/quality control protocols have been defined and implemented under Mr. Muller’s supervision including the submission of blanks, standards an d duplicate core samples to the laboratory.

In March 2008, we announced drill hole results received for 132 holes added since the last resource model update of the Molejon gold deposit in October 2007.  

The two objectives of the drill program were to provide infill information to complement data obtained from previous drilling and to advance towards delineating the mineral deposit. The program succeeded in meeting both its objectives. First, the results obtained from infill drilling would allow for the conversion of inferred and indicated resources to indicated and measured resources, respectively. Second, as the condemnation holes supported the model, the results obtained from delineation drilling have verified the geologic interpretation and have also provided for important increases in geologic understanding.

The holes that did not intercept mineralization were effectively around the perimeter of the known deposit. The holes that did intersect mineralization were drilled to define the suspected high grade and, while important for increasing the high grade envelope, also verified the model. Additionally, these results provided the basis to expand the previously modeled high grade ore shell to encompass a previously undrilled region.

The independent qualified person, Cathryn Stewart, P. Geo., verified that recent drilling, sample preparation and laboratory procedures utilized for the Molejon project met NI 43-101 standards. Strict quality assurance/quality control protocols have been defined and implemented for the submission of blanks, standards and duplicate core samples to the laboratory.  Samples were analyzed at ALS Chemex Labs Ltd.

Outlook – 2010

Molejon

We are focusing on bringing our Molejon gold deposit to production and are currently in the process of commissioning the mill. In addition, with the establishment of base camp and logistics across our other concessions, we plan to expand our exploration efforts during the fiscal year ending May 31, 2010.

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Map of the project area:

Regional and Local Geology

Panama is underlain by an island arc built upon late Cretaceous oceanic crust and is considered prospective for porphyry copper-gold-molybdenum deposits.

Andesitic tuffs and flows of presumed Early to Middle Tertiary age cover the majority of the Cerro Petaquilla Concession lying at the southern limit of a 400 square kilometre batholith, dated at 32.6+2 million years, which has intruded the older volcanic sequence.  The core of the batholith is composed of quartz monzonite, grading outward to granodiorite and porphyritic granodiorite.  The Petaquilla and Botija deposits are centered on porphyritic stocks and dykes lying peripheral to the southern margin of the batholith.

At the Botija deposit, the intrusive is a medium-grained, crowded porphyry composed of 25% plagioclase phenocrysts, 15% hornblende phenocrysts and 5-10% quartz grains in a feldspar rich matrix.  At the Petaquilla deposit, the intrusive is more obviously porphyritic, with a generally lower percentage of phenocrysts.  Contact phases and dykes at each deposit are finer-grained varieties of the main intrusive.  In particular, feldspar, hornblende, quartz porphyry dykes appear to be late stage phases of the granodiorite.  Most of these porphyry dykes post-date the mineralization, indicating that they were introduced during the waning stages of hydrothermal alteration and mineralization.  The youngest units encountered on the property are the unmineralized basalt and andesite dykes.

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Copper-gold-molybdenum porphyry deposits have been identified and partially delineated at the Petaquilla and Botija deposits, which are centred four kilometres apart on an east-west trend within the Cerro Petaquilla Concession.  Four types of well-developed alteration have been observed within the various intrusive units:  potassic, phyllic, quartz-chloritic and propylitic.  Potassic alteration is found near the core of the porphyry system and is not extensive.  It is characterized by quartz, potassium feldspar, biotite, sericite, and lesser amounts of anhydrite and magnetite.  The majority of copper mineralization is hosted in the phyllic altered rock, which is composed of quartz and sericite with minor kaolinite and K-spar.  Propylitic alteration, marked by chlorite, pyrite, calcite and epidote, marks the outer extent of alteration in a porphyry system. & nbsp;The phyllic and quartz-chlonite alteration zones are usually found between the potassic core and the peripheral propylitic zone, although either may be missing.  Alteration of the andesitic volcanic units, characterized by prograde biotite hornfels and fine grained sulphide mineralization occurs when they are found to be proximal to the intrusive contact or within zones of intrusive dyking.

The Petaquilla deposit is largely hosted by porphyritic granodiorite below its intrusive contact with andesite forming a flat-lying to gently dipping sheet, trending east-west and dipping to the north.  It has been drilled for 1,600 metres along strike and remains open along strike to the south, east and west, and at depth.

The Valle Grande deposit is hosted dominantly by prophyritic granodiorite and similar to Petaquilla is a flat-lying sheet, trending northwest-southeast and dipping to the north.  It has been drilled for 2,400 meters along strike and is considered to have limited expansion potential.

The Botija deposit trends east-west and dips 20-30 degrees to the north or northeast.  It has been intersected by drilling along strike for 1,800 metres and up to 600 metres down dip. The Botija deposit remains open near surface to the south, along strike to the east and the west and in many places at depth both vertically and down dip to the north.

The general geology of the Molejon epithermal gold target is dominated by volcanic and subvolcanic intrusives including massive andesite flows, feldspar-porphyritic andesite flows, andesitic tuffs, and andesitic agglomerates.  This volcanic package has been intruded by feldspar-quartz porphyry and feldspar porphyry units.  A northeast trending fault is believed to be the major structural control for the emplacement of the hydrothermally altered quartz-carbonate breccia.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 35

Mineralization

Mineralization at the Petaquilla, Valle Grande and Botija deposits is largely concentrated within potassic or phyllic altered porphyritic intrusives of granodioritic composition.  Volcanic-hosted copper mineralization, associated with strong biotite alteration, is widespread at the Petaquilla deposit and contributes significantly to its tonnage.  Mineralization in each deposit consists of chalcopyrite and pyrite as disseminations, within quartz veinlets and filling brittle, irregular fractures.  Pyrite content generally decreases with higher grade copper mineralization and increases towards the periphery of the deposits.  Chalcopyrite occurs most commonly as very fine disseminations within an altered intrusive matrix or biotite hornfels.  It is often associated with magnetite and/or chlorite or biotite altered mafic minerals, most notably in lower-grade sections of propylitic alteration.  Stockwork quartz veinlets are best developed within potassic alteration, where they crosscut pervasive silicification.  The irregular fracture-filling style of copper mineralization, which locally approaches a sulphide net, is largely confined to biotite-altered andesite at the Petaquilla deposit.  This is cut in places by narrow quartz-chalcopyrite veins which have developed bleached selvages of biotite destruction.  A fourth style of mineralization, consisting of chalcopyrite and pyrite coatings along steep, widely spaced, cooling joints, is confined to granodiorite along the eastern periphery of the Botija deposit.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 36

Molybdenite is present mainly in quartz, carbonate, chalcopyrite veinlets hosted by granodiorite within the most intensely altered and mineralized portion of each deposit.  Bornite occurs locally with chalcopyrite and contributes significantly to the copper grade in some sections, mainly within hornfelsed andesites in the Petaquilla deposit.  Although leaching is widespread throughout the upper 10 to 30 metres of the deposits, supergene copper mineralization is not present in significant amounts.  Magnetite is an important accessory in both deposits, disseminated throughout both the porphyritic intrusives and the intruded andesite.

At the Molejon deposit, epithermal gold-silver mineralization occurs within structurally controlled zones of hydrothermal quartz-carbonate breccia and the fractured and altered rocks marginal to the quartz-carbonate breccia.  Assay boundaries of gold-silver mineralization are not sharply constrained by geological contacts.  Highest grade mineralization usually occurs in the quartz-carbonate breccia but economic mineralization also occurs in feldspar-quartz porphyry, and more rarely in feldspar-porphyritic andesite flows.

Molejon

Since our company’s Plan of Arrangement with Copper effective October 18, 2006, we have focused on our Molejon Gold Project.  For a summary of the latest technical report announced in October 2007, please refer to “Item 4.D. Property, Plants and Equipment – Exploration - Results Obtained by Us or on Our Behalf”.

Doing Business in Panama

The following briefly summarizes our understanding of the economic and political climate in Panama based on research and information compiled by us from various sources we believe to be reliable:

Democracy was restored in Panama in December 1989 following the invasion of Panama by the U.S. military.  In May 1994, Panama held its first democratic elections in almost 30 years, resulting in the election of Partido Revolucionario Democratico ("PRD") candidate, Dr. Ernesto Perez Balladares, as President of the Republic.  The next election was held in May 1999 and resulted in Mireya Moscoso, leader of the Arnulfista Party, becoming President of the Republic.

In the elections held May 2, 2004, Martin Torrijos won a clear victory as President gaining 47% of the votes and outdistancing his closest rival with 31%. President Torrijos' party, PRD, also performed strongly in legislative and local races held the same day.  Unlike the previous administration, President Torrijos' party holds a majority of Senate seats.

Martin Torrijos is the son of a famous Panamanian leader, General Omar Torrijos, who ruled from 1968 until he died in a plane crash in 1981.  General Torrijos won Panama control over the Panama Canal from the United States and instituted land reform and populist social and economic developments. General Torrijos supported the development of a modern mining sector and had close links in the Province of Cocle in the area of the Petaquilla property. The General championed numerous social development initiatives in the area of Petaquilla including the founding of the village of Coclesito near the property.

President Martin Torrijos campaigned on a platform of zero corruption, social development and economic (and job) expansion.  In his mid-forties and with the backing of Ruben Blades, a popular musician, he is generally expected to lead a youthful and vigorous administration.  He stands on an agenda that includes strengthening democracy and free trade talks with the United States.  

We note that the comparative overall country risk rating for Panama by The Economist Intelligence Unit is in the mid-range, both globally and regionally, as follows:

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 37

Countries	Month	Score	Overall Country Risk Rating (AAA=least risky, D=most risky)	Outlook
Argentina	February 2009	64	CCC	Stable
Bolivia	February 2009	56	B	Stable
Brazil	February 2009	45	BB	Stable
Chile	February 2009	30	A	Stable
Columbia	February 2009	46	BB	Stable
Costa Rica	February 2009	55	B	Stable
Ecuador	February 2009	74	CC	Stable
Guatemala	February 2009	49	BB	Stable
Honduras	February 2009	58	B	Negative
Mexico	February 2009	42	BBB	Stable
Panama	February 2009	47	BB	Stable
Peru	February 2009	38	BBB	Stable
Venezuela	February 2009	60	B	Negative

Rating Band Characteristics
AAA	Capacity and commitment to honour obligations not in question under any foreseeable circumstances.
AA	Capacity and commitment to honour obligations not in question.
A	Capacity and commitment to honour obligations strong.
BBB	Capacity and commitment to honour obligations currently, but somewhat susceptible to changes in economic climate.
BB	Capacity and commitment to honour obligations currently, but susceptible to changes in economic climate.
B	Capacity and commitment to honour obligations currently, but very susceptible to changes in economic climate
CCC	Questionable capacity and commitment to honour obligations.  Patchy payment record.
CC	Somewhat weak capacity and commitment to honour obligations.  Patchy payment record.  Likely to be in default on some obligations.
C	Weak capacity and commitment to honour obligations.  Patchy payment record.  Likely to be in default on significant amount of obligations.
D	Very weak capacity and commitment to honour obligations.  Poor payment record.  Currently in default on significant amount of obligations.

Mining has not historically been a significant factor in the Panamanian economy and, consequently, Panama does not have the infrastructure and trained personnel required for modern mining operations. The government of Panama has, however, included the development of mineral resources in its economic plan to diversify the Panamanian economy and has taken steps to put in place the legislative framework needed to foster development of these resources.

The Code of Mineral Resources of the Republic of Panama has been subject to substantial modifications, among which the most important are Law No. 3 of January 28, 1988, and Law No. 32 of February 9, 1996.  The main purpose of such amendments was to simplify the procedure for filing the necessary petitions to obtain concessions, either for conducting mining exploration or mining extraction operations and property rights over the minerals extracted.  These amendments grant total exemption for import taxes and customs duties for all equipment, spare parts and materials used in the development of any type of mining operations and there are no export taxes on mineral production.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 38

An exploration concession permits the holder to explore for the minerals specified in the concession.  The rental rates payable by the holder to the Government of Panama are US$0.50 per hectare for the first 2 years, US$1.00 per hectare for the third and fourth years, and US$1.50 for the fifth year and thereon. A 2% gross overriding royalty on the value received for all minerals of higher commercial value, i.e. gold and silver, mined from the concession is payable to the Government of Panama.

The holder of an exploration concession has the exclusive right to obtain an exploitation concession for the subject area upon determining that the minerals covered by the concession may be produced in commercial quantities through a separate request to the Government of Panama.  Rental rates for exploitation concessions fluctuate, depending on the mineral concerned and the extraction period, between US $0.75 and US $4.00 per hectare.  Rental rates for metallic minerals like copper, iron, zinc, aluminum and precious metals like gold and silver, are US$1.00 per hectare for the first 5 years, US$2.00 from the sixth to the tenth year, and US $3.00 the eleventh year and thereon.  A 2% gross overriding royalty on the value received for all minerals mined from the concession is payable to the Government of Panama. However, this overriding royalty will be 4% for minerals of higher commercial value like g old and silver.

Exploitation concessions generally permit the holder to carry out additional pre-development exploration, to construct all necessary production facilities and to extract, process, store, transport, market and export the minerals subject to the concession so long as production is ongoing.

In 1995, the Panamanian Tax Reform Law was enacted to simplify the corporate income tax rates applicable to income earned in Panama (Law No. 28 of June 20, 1995).  Since June 1995, the corporate income tax rate is 30%.  In addition to corporate income tax, Panamanian law provides for a dividend tax.  With the exceptions provided for in the Fiscal Code of the Republic of Panama, all corporations must retain 10% of the amounts they may distribute among their shareholders as dividends or share quotas.  In case dividends are not distributed, or the entire amount distributed as dividend or share quota is less than 40% of the net profit of that fiscal period, minus taxes paid by the corporation, the corporation must cover 10% of the remainder.

The Fiscal Code of the Republic of Panama indicates certain expenses, which may be deducted from the income tax, applicable to companies conducting mining activities.  Additionally, the Code of Mineral Resources establishes certain expenses related to said activities that may be deducted from income tax as well.

There are currently no significant restrictions on repatriation from Panama of earnings to foreign entities other than the income tax and the dividends tax referred to above.  There are currently no currency exchange or foreign investment restrictions of material significance.

Based on our understanding of current Panamanian environmental laws and regulations, we do not anticipate that such laws will have any adverse material impact on any operations we may conduct in the future.  Based on Geochemical Analysis and Reporting, we anticipate that our company’s Molejon gold project will meet or exceed the effluent and leachate requirements of Panamanian environmental laws and regulations.  We will be using a Carbon in Pulp floatation process, which allows in process cyanide destruction before effluent is discharged.  This process is inherently safer and more controllable than traditional acid and cyanide open-air heap leach processing.  Any acidity produced at the experimental pH is expected to be buffered by the receiving waters around the Molejon project, which have a pH between 7.4 and 7.8 and total alkalinity between 15 mg/L and 27 mg/L (as CaCO3).  Resul ts for both tails and waste rock leachate indicate that the Molejon Project will have net acid neutralizing potential.  The results of the continuous tests showed that the INCO SO2 cyanide destruction method is an efficient process for decreasing the total cyanide concentrations in the Petaquilla CIP leach pulp.

The foregoing laws of general application apply to our Panamanian mineral properties other than the Cerro Petaquilla Concession which is governed primarily by the Ley Petaquilla.  See“Item 4 - Information on the Company - B. Business Overview”.

Panama's currency, the Balboa, is at parity with the U.S. dollar.  Exchange transactions are allowed in U.S. dollars and, as a result, foreign currency fluctuations will only be material for us to the extent that fluctuations between the Canadian and U.S. dollar are material.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 39

Item 4A. UNRESOLVED STAFF COMMENTS

None.

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

5.A.  Operating Results

We are in the business of the acquisition and exploration of mineral properties, with the primary aim of developing them to a stage where they can be exploited at a profit.  At that stage, our operations would, to a significant extent, be dependent on the prevailing market prices for any of the minerals produced by such operations.  We do not currently have any producing properties and our operations on our various properties are currently limited to exploratory searches for mineable deposits of minerals.  We are hopeful that our activities on the Molejon deposit will both expand the reserves and classify the reserves as proven mineral reserves.  However, there is no guarantee such results will be obtained.  During the 13-month period ended May 31, 2008, we were primarily engaged in the continued exploration of our Molejon property in Panama.  As a result, our future mineral explora tion and mining activities may be affected in varying degrees by Panama's political stability and government regulation, all of which are beyond our control.  See"Item 3 -  Key Information – 3.D. Risk Factors”.

Historically our fiscal year end was January 31.  During the period ended April 30, 2007, we changed our fiscal year end from January 31 to April 30 due to the complexities of the Plan of Arrangement with Copper.  We changed our fiscal year end again in 2008 from April 30 to May 31.  We made this change because the Company wanted to demonstrate to the Panamanian government it had sufficient funds to continue work on the mine.

Restatement of U.S. GAAP Financial Statements

Certain capital assets purchased in the twelve months ended January 31, 2007 were originally included in mineral properties and were incorrectly expensed for accounting purposes under U.S. GAAP.  We have restated our U.S. GAAP financials, the effect of which is to decrease mineral properties expensed under U.S. GAAP by $3,901,761, increase total assets under U.S. GAAP by $3,901,761 and increase shareholders’ equity under U.S. GAAP by $3,901,761 at each of May 31, 2008 and April 30, 2007.

Debt issuance costs of $3,808,672 were written off during the month ended May 31, 2008 rather than being capitalized.  The effect of the restatement is to increase deferred debt issuance costs under U.S. GAAP by $3,808,672, decrease debt issuance costs expensed under U.S. GAAP by $3,808,672 and increase shareholders’ equity under U.S. GAAP by $3,808,672.

As a result of a review of the accounting for the investment in Copper under U.S. GAAP, the presentation of the investment balance and the dilution gains and equity losses have been adjusted.  The effect of these adjustments is to increase the investment in Copper at May 31, 2008 by $2,394,474, and increase shareholders’ equity by $2,394,474.

The effect of the restatement is summarized in the tables below.  

Consolidated Balance Sheet		May 31, 2008 as			Adjustment			May 31, 2008
		previously reported						restated
Mineral properties expensed under U.S. GAAP	$	(67,149,615	)	$	3,901,761		$	(63,247,854	)
Equity investments		-		$	2,394,474		$	2,394,474
Total assets – U.S. GAAP	$	30,880,450		$	10,104,907		$	40,985,357
Shareholders’(deficit) equity - U.S. GAAP	$	(15,565,640	)	$	10,104,907		$	(5,460,733	)
Consolidated Statement of Operations and		May 31, 2008 as			Adjustment			May 31, 2008
Comprehensive Loss and Deficit		previously						restated
		reported
Debt issuance costs	$	3,974,266		$	( 3,808,672	)	$	165,594

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 40

Consolidated Balance Sheet		April 30, 2007 as			Adjustment		April 30, 2007
		previously reported					restated
Mineral properties expensed under U.S. GAAP	$	(31,236,455	)	$	3,901,761	$	(27,334,694	)
Total assets – U.S. GAAP	$	13,537,910		$	3,901,761	$	17,439,671
Shareholders’ equity – U.S. GAAP	$	1,794,164		$	3,901,761	$	5,695,925

Restatement of January 31, 2007 Interim Financial Statements and May 31, 2008 Balance Sheet

During the fourth quarter of fiscal 2009, we concluded that:

·

The accounting for the spin-out of Copper was not properly recorded in the financial statements for the period ended January 31, 2007;

·

Stock-based compensation relating to the options issued prior to the Plan of Arrangement was not properly recorded in the financial statements for the period ended January 31, 2007;

·

Certain capital assets were recorded as mineral properties in the financial statements as at January 31, 2007;

·

Dilution gains and equity losses for the equity investment in Copper which were applicable to the twelve months ended January 31, 2007 were not recorded in that period; and

·

The carrying value of the investment in Copper was not correctly recorded during the period ended May 31, 2008.

The Plan of Arrangement, whereby each of our shareholders as at 12:01 a.m. on October 18, 2006, was entitled to receive one common share of Copper for each common share of our company held, was accounted for in the twelve months ended January 31, 2007, based on a tentative plan.  According to the terms of the initial plan, Copper was to receive $5,500,000.  The plan was later finalized and this amount was no longer required to be transferred to Copper.  The effect of this change to the January 31, 2007 financial statements was to decrease the amount payable to a related company by $2,856,227, increase the amount receivable from a related company by $2,143,773, decrease the amount distributed to Petaquilla Copper Ltd. by $5,500,000 and increase the investment in Petaquilla Copper Ltd. by $500,000.  The receivable from a related company relates t o mineral property costs and general administrative expenses of Copper that were funded by the Company.

Incorrect accounting was applied to options issued prior to the Plan of Arrangement.  The effect of the adjustment to the January 31, 2007 financial statements was to increase stock-based compensation by $7,000,840, increase contributed surplus by $4,244,807, increase share capital by $2,874,427 and increase mineral properties by $118,394.

Certain capital assets acquired during the twelve months ended January 31, 2007 were incorrectly recorded as mineral properties.  As a result, equipment was understated by $4,015,000, accumulated amortization on production equipment was understated by $480,430 and mineral properties were overstated by $3,534,570. The effect of the adjustment to the January 31, 2007 financial statements is an increase in property and equipment by $3,534,570 and a decrease in mineral properties of $3,534,570.

The Company was required to record the investment in Copper using the equity method commencing October 18, 2006, the date of the Plan of Arrangement.  Dilution gains resulting from the issue of additional shares by Copper as well as our proportionate share of losses incurred by Copper were required to be recorded by us in the period in which these transactions occurred.   Due to the inability of Copper to provide information on a timely basis, the dilution gain and equity loss for the twelve months ended January 31, 2007 were not recorded until the period ending April 30, 2007.  The result of the adjustment required to the January 31, 2007 financial statements was to increase the investment in Copper by $2,074,818 , increase the gain on dilution of equity investment by $2,268,465 and increase the loss from equity investment by $193,64 7.

The proceeds used in the calculation of dilution gains did not include transaction costs and the gain on sale of Copper shares did not exclude the gain attributable to our equity interest in Copper.  As a result, the investment in Copper was overstated at May 31, 2008 by $1,200,000. The impact of these adjustments is reflected in the 12 month period ended April 30, 2008 which was previously presented as part of the 13 month period ended May 31, 2008.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 41

The effect of the adjustments on the financial statements is summarized in the tables below.

Consolidated Balance Sheet		January 31, 2007 as			Adjustment			January 31, 2007
		previously reported						restated
Amount receivable from a related company	$	-		$	2,143,773		$	2,143,773
Investment in Petaquilla Copper Ltd.	$	-		$	2,574,818		$	2,574,818
Property and equipment	$	1,686,480		$	3,534,570		$	5,221,050
Mineral properties	$	26,304,170		$	(3,416,174	)	$	22,887,996
Amount payable to a related company	$	2,856,227		$	(2,856,227	)	$	-
Contributed Surplus	$	5,201,477		$	4,244,807		$	9,446,284
Share Capital	$	87,696,672		$	2,874,427		$	90,571,099
Deficit	$	(73,651,067	)	$	573,977		$	(73,077,091	)
Consolidated Statement of Operations		January 31, 2007 as			Adjustment			January 31, 2007
and Comprehensive Loss and Deficit		previously reported						restated
Stock-based compensation	$	(10,007,962	)	$	(7,000,840	)	$	(17,008,802	)
Gain on dilution of equity investment	$	-		$	2,268,465		$	2,268,465
Loss from equity investment	$	-		$	(193,647	)	$	(193,647	)
Amount distributed to Petaquilla Copper Ltd.	$	(5,500,000	)	$	5,500,000		$	-
Net loss and comprehensive loss	$	(6,592,435	)	$	(4,926,024	)	$	(21,518,459	)
Basic and diluted loss per share	$	(0.21	)	$	(0.07	)	$	(0.28	)
Consolidated Statement of Cash Flows		January 31, 2007 as			Adjustment			January 31, 2007
		previously reported						restated
Operating activities:
Stock-based compensation	$	10,007,962		$	7,000,840		$	17,008,802
Gain on dilution of equity investment	$	-		$	(2,268,465	)	$	(2,268,465	)
Loss from equity investment	$	-		$	193,647		$	193,647
Total operating activities	$	10,007,962		$	4,926,022		$	14,933,984
Investing activities:
Advances from (to) Petaquilla Copper Ltd.	$	2,856,227		$	(5,000,000	)	$	(2,143,773	)
Acquisition of property and equipment	$	(1,737,388	)	$	(4,015,000	)	$	(5,752,388	)
Investment in mineral properties	$	(23,914,401	)	$	4,526,557		$	(19,387,844	)
Distribution to Petaquilla Copper Ltd.	$	(5,500,000	)	$	5,500,000		$	-
Purchase of equity investment	$	-		$	(500,000	)	$	(500,000	)
Total investing activities	$	(28,295,562	)	$	511,557		$	(27,784,005	)
Consolidated Balance Sheet		May 31, 2008 as			Adjustment			May 31, 2008
		previously reported						restated
Investment in Petaquilla Copper Ltd.	$	9,452,421		$	(1,200,000	)	$	8,252,421
Deficit	$	(83,865,382	)	$	(1,200,000	)	$	(85,065,382	)

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 42

One Month Ended May 31, 2008 Compared to One Month Ended May 31, 2007

Summarized Financial Information
		One Month Ended			One Month Ended
		May 31, 2008			May 31, 2007
					(unaudited)
EXPENSES
Consulting fees	$	21,174		$	98,973
Amortization		35,517			145,711
Stock-based compensation		77,902			703,001
Debt issuance costs		3,974,266			-
Other expenses		601,068			643,501
Total expenses		(4,709,927	)		(1,591,186	)
OTHER INCOME (EXPENSE)
Foreign exchange gain (loss)		295,105			(158,400	)
Loss from equity investment		(230,788	)		(420,586	)
Gain on dilution of equity investment		-			3,191,618
Other		132,465			74,688
		196,782			2,687,320
Net earnings (loss) and comprehensive earnings (loss) for the period	$	(4,513,145	)	$	1,096,134
Basic and diluted earnings (loss) per share	$	(0.05	)	$	0.01
Basic weighted average number of common shares outstanding		93,131,030			90,893,766
Diluted weighted average number of common shares outstanding		93,131,030			95,811,357

We did not generate revenue from operations during the one month ended May 31, 2008 or the one month ended May 31, 2007.  

Expenses for the one month ended May 31, 2008 were $4,709,927 compared to $1,591,186 for the one month ended May 31, 2007, an increase of $3,118,741.  The increase was attributable to debt issuance costs of $3,974,266 related to the senior secured notes financing in May 2008.  There were no debt issuance costs during the one month ended May 31, 2007.  This increase was partially offset by a decrease of $625,099 in stock-based compensation expense.  The decrease is related to a lower number of options vesting during the one month ended May 31, 2008.

Other income for the one month ended May 31, 2008 was $196,782 compared to $2,687,320 for the one month ended May 31, 2007.  The decrease in other income is largely due to the gain on dilution of equity investment of $3,191,618 recorded in the one month ended May 31, 2007.  There was no dilution gain recorded during the one month ended May 31, 2008 as there were no additional shares issued by Copper during that period.  This decrease was partially offset by a foreign exchange gain of $295,105 for the one month ended May 31, 2008 compared to a foreign exchange loss of $158,400 for the one month ended May 31, 2007.  The foreign exchange gain reflects the increase in value of the Canadian dollar relative to the United States dollar, affecting the valuation of the Company’s liabilities which are predominantly denominated in United States dollars.

The net loss for the one month ended May 31, 2008 was $4,513,145 or $(0.05) per share compared to net earnings of $1,096,134 or $0.01 per share for the one month ended May 31, 2007.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 43

12 Months Ended April 30, 2008, Compared to 12 Months Ended April 30, 2007

Financial Results for the Twelve Months Ended April 30, 2008
	Twelve months ended April 30, 2008
EXPENSES
Accounting and legal (Note 18)	1,333,876
Accretion of asset retirement obligation (Note 24)	312,977
Consulting fees (Note 18)	962,905
Amortization	352,717
Filing fees	88,784
Investor relations and shareholder information	1,034,572
Office administration	2,418,781
Rent (Note 18)	125,025
Stock-based compensation (Notes 15 and 16)	5,676,183
Travel	877,859
Wages and benefits (Note 18)	1,706,052
Total expenses	(14,889,731)
OTHER INCOME (EXPENSE)
Foreign exchange gain (loss)	1,375,774
Interest income	54,575
Interest on long-term debt	(70,176)
Asset usage fees (Note 18)	129,345
Gain on sale of equity investment (Note 18)	4,037,182
Power and drilling services	79,406
Loss from equity investment (Note 6)	(4,484,625)
Gain on dilution of equity investment (Note 6)	12,737,095
Total other income (expenses)	13,858,576
Net (loss) and comprehensive (loss) for the period	(1,031,155)
Deficit, beginning of period	(79,521,082)
Deficit, end of period	(80,552,237)
Basic and diluted (loss) per share	(0.01)
Basic and diluted weighted average number of common shares outstanding	93,131,030

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 44

		12 Months			3 Months			3 Months			12 Months
		Ended			Ended			Ended			Ended
		January 31,			April 30,			April 30,			April 30,
		2007			2007			2006			2007
								(unaudited)			(unaudited)
EXPENSES
Accounting and legal	$	490,351		$	236,578		$	94,313		$	632,616
Consulting fees		756,453			320,908			155,874			921,487
Amortization		335,912			135,397			33,423			437,886
Filing fees		76,329			6,339			4,153			78,515
Investor relations and shareholder information		1,114,102			153,403			149,527			1,117,978
Office administration		795,840			176,097			114,512			857,425
Rent		141,187			38,310			17,837			161,660
Mineral property costs		-			-			5,937			(5,937	)
Stock-based compensation		17,008,802			3,377,468			58,059			20,328,211
Travel		1,419,788			266,748			169,698			1,516,838
Wages and benefits		1,812,453			179,317			165,611			1,826,159
Total expenses		(23,951,217	)		(4,890,565	)		(968,944	)		(27,872,838	)
OTHER INCOME (EXPENSE)
Foreign exchange gain (loss)		40,718			(877,565	)		(35,152	)		(801,695	)
Gain on sale of marketable securities		21,191			-			21,191			-
Interest income		296,031			56,849			82,817			270,063
Interest on long-term debt		-			(68,240	)		-			(68,240	)
Asset usage fees		-			103,348			-			103,348
Loss from equity investment		(193,647	)		(1,579,353	)		-			(1,773,000	)
Gain on dilution of equity investment		2,268,465			811,535			-			3,080,000
Total other income (expenses)		2,432,758			(1,553,426	)		68,856			810,476
Net loss and comprehensive loss for the period	$	(21,518,459	)	$	(6,443,991	)	$	(900,088	)	$	(27,062,362	)
Basic and diluted loss per share										$	(0.34	)
Basic and diluted weighted average number of commonshares outstanding											79,992,262

Expenses for the 12 months ended April 30,2008, decreased by $12,983,107 to $14,889,731 compared with $27,872,838 for the 12 months ended April 30, 2007, due to the following: (i) a decrease in stock-based compensation of $14,652,028, due to fewer options being granted and the decreasing fair market value of the Company’s common shares; (ii) a decrease in travel expense of $638,979 due to fewer employees and consultants traveling abroad; (iii) an increase in office administration costs of $1,561,357 due to an increase in insurance expense, additional employees, rent for new offices in Panama and donations to local social programs; (iv) an increase in accounting and legal of $701,260 expenses due to additional work performed as a result of the increase in activities of the Company; and (v) accretion of asset retirement obligation of $312,977.

In the 12 months ended April 30, 2008, other income increased by $13,048,100 to $13,858,576 compared with $810,476 for the 12 months ended April 30, 2007.  The increase in other income is due to the following: (i) the Company  recorded a foreign exchange gain of $1,375,774 compared with a foreign exchange loss of $801,695 for the 12 months ended April 30, 2007, which was primarily the result of a significant increase in the exchange rate from Canadian dollars to United States dollars; (ii) the Company recorded a gain of $4,037,182 on the transfer of 1,815,069 Copper shares back to Copper in settlement of the amount owing to Copper as at December 31, 2007, with no such gain recorded in the prior 12 months; (iii) the Company  recorded $79,406 from power and drilling services provided to Copper compared to nil in the 12 months ended April 30, 2007, due to no such services being provided in that period; (iv) the Company earned i nterest income of $54,575 compared with $270,063 for the 12 months ended April 30, 2007, due to lower cash balances during the 12 months ended April 30, 2008; and  (v) the Company recorded an equity loss of $4,484,625 compared with $1,773,000 in the 12 months ended April 30, 2007, and a dilution gain of $12,737,095 compared with $3,080,000 in the 12 months ended April 30, 2007, related to its investment in Copper.  The equity loss reflects the Company’s portion of the losses that are attributed to its percentage ownership in Copper and the dilution gain resulted from the difference between the Company’s carrying cost of Copper and the amount paid up for each Copper share issued.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 45

The net loss for the 12 months ended April 30, 2008, was $1,031,155 or $(0.01) per basic and diluted share compared to a net loss for the 12 months ended April 30, 2007 of $27,062,362 or $(0.34) per basic and diluted share.  The difference is largely accounted for by the decrease in stock-based compensation, the gain on dilution of the equity investment in Copper, the gain from the sale of Copper shares, and the foreign exchange gain.

Three Months Ended April 30, 2008 Compared to Three Months Ended April 30, 2007

Summarized Financial Information
		Three months			Three months
		ended April 30,			ended April 30,
		2008			2007
		(unaudited)
EXPENSES
Accounting and legal	$	620,006		$	236,578
Stock-based compensation		591,227			3,377,468
Travel		66,937			266,748
Other expenses		1,076,623			1,009,771
Total expenses		(2,354,793	)		(4,890,565	)
OTHER INCOME (EXPENSE)
Foreign exchange gain (loss)		(386,361	)		(877,565	)
Loss from equity investment (Note 6)		(905,384	)		(1,579,353	)
Gain on dilution of equity investment (Note 6)		50,670			811,535
Other		31,534			91,957
Total other income (expenses)		(1,209,541	)		(1,553,426	)
Net (loss) and comprehensive (loss) for the period	$	(3,564,334	)	$	(6,443,991	)
Basic and diluted earnings (loss) per share	$	(0.04	)	$	(0.07	)
Basic and diluted weighted average number of common shares outstanding		95,694,330			89,615,924

We did not generate revenue from operations during the three months ended April 30, 2008 or the three months ended April 30, 2007.  

Expenses for the three months ended April 30, 2008 were $2,354,793 compared to $4,890,565 for the three months ended April 30, 2007, a decrease of $2,535,772.  This decrease was largely attributable to a decrease in stock-based compensation of $2,786,241 due to a fewer number of options vesting during the period and well as a decrease of $199,811 in travel.   This decrease was partially offset by an increase in accounting and legal of $383,428 related to higher audit fees for the 2008 year end audit.

Other expenses for the three months ended April 30, 2008 were $1,209,541 compared to $1,553,426 for the three months ended April 30, 2007, a decrease of $343,885.  This decrease was largely attributable to a lower foreign exchange loss of $491,204 as well as a lower loss from equity investment of $673,969.  The foreign exchange loss relates to the value of the Canadian dollar compared to the United States dollar and the loss from equity investment reflects the Company’s portion of the losses that are attributed to its percentage ownership in Copper.  The decreases were partially offset by a decrease in the gain on dilution of equity investment of $760,865.  The dilution gain resulted from the difference between the Company’s carrying cost of Copper and the amount paid by other investors for additional Copper shares issued.  The dilution gain is lower for the three months ended April 30, 2008 as fewer additional shares were issued by Copper during this period.

The net loss for the three months ended April 30, 2008 was $3,564,334 or $(0.04) per share compared to $6,443,991 or $(0.07) per share for the three months ended April 30, 2007.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 46

12 Months Ended January 31, 2007, Compared to Fiscal Year Ended January 31, 2006

We did not generate revenue from operations during the 12 months ended January 31, 2007, or during the fiscal year ended January 31, 2006.  Expenses for the 12 months ended January 31, 2007 were $23,951,217, a substantial increase from $2,538,350 for the year ended January 31, 2006.  The increase in expenses is primarily due to the escalation of our operations at the Molejon gold deposit.  Increased levels of operations including drilling, equipment procurement, plant construction, and construction of roads, bridges and other infrastructure have also led to increased general and administrative costs.  Our largest cash outflow in the 12 months ended January 31, 2007, was for capitalized expenditures relating to our mineral properties of $19,387,844, as compared to $2,197,611 in the prior year.  Stock-based compensation, a non-cash expense, increased to $17,008,802 compared to $410,301 in the prior year, as a result of options granted and vested during the period, options previously valued at grant date and revalued at approval date, and options arising from the Plan of Arrangement that were revalued on the Plan of Arrangement date.

During the 12 months ended January 31, 2007, we recorded a foreign exchange gain of $40,718, a gain on the sale of marketable securities of $21,191, interest income of $296,031, a loss of $193,647 from equity investment and a gain of $2,268,465 on dilution of equity investment.  During the fiscal year ended January 31, 2006, we recorded a foreign exchange loss of $77,647 and interest income of $48,239.  

The net loss for the 12 months ended January 31, 2007, was $21,518,419 or $(0.28) per share compared to a net loss of $2,567,758 or $(0.05) per share for the fiscal year ended January 31, 2006.

5.B.  Liquidity and Capital Resources

In our management's view, given the nature of our activities, which consist of the acquisition, exploration, exploration management, and sale of mineral properties, the most meaningful and material financial information concerning us relates to our current liquidity and capital resources.  We do not currently own or have an interest in any mineral producing properties and have not derived any revenues from the sale of gold, copper or other materials in the last three financial years.  Our principal property, the Molejon gold deposit, is located in the Cerro Petaquilla Concession in Panama and, as a result our operations on the property may be subject to additional risks as more fully described in“Item 3 - Key Information – 3.D. Risk Factors”.

Our mineral exploration activities have been funded through sales of common shares and through debt financing.  We have not made use of any financial instruments for hedging purposes.  During the 12 months ended April 30, 2008, we raised funds from two private placements and during the one month ended May 31, 2008, we issued a senior secured notes debt financing.   On June 4, 2008 and July 9, 2008 we closed the remaining US$ 27,750,000 of our senior secured notes financing.  Net proceeds received were US$ 20,612,480. On September 19, 2008 we sold 100% of our 20,418,565 Petaquilla Copper shares for proceeds of $44,920,843 and repaid $38,355,744 (US$ 36,032,376) of the face value of our senior secured notes. The total amount paid including the 20% premium on redemption was $44,920,843 (US$ 43,238,852). On October 2, 2008 we issued a supplemental US$ 20,000,000 of our senior secured notes.  Net pro ceeds received were US$ 15,875,000.  In March 2009, we closed a convertible senior secured notes financing for US$ 40,000,000.

As a result of operational issues, the Company has been unable to meet its current production targets and requires additional funding in order to continue operations.  Management is currently in substantive negotiations with lenders to secure additional financing; however, there is no guarantee that management will be successful in its efforts.  Accordingly, there is substantial doubt about our ability to continue as a going concern.

We had material commitments for capital expenditures in the amount of $5,047,133 at May 31, 2008.    We have not generated any operating revenues to May 31, 2008 and have experienced recurring operating losses and accumulated a deficit of $85,065,382 as at May 31, 2008 (April 30, 2008 - $80,552,237, April 30, 2007 - $79,521,082, January 31, 2007 - $73,077,091 and  January 31, 2006 - $51,558,632). Also the Company had a working capital deficiency of $3,692,913 at May 31, 2008 (April 30, 2008 - $27,844,532, April 30, 2007 - $269,631 net working capital, January 31, 2007 net working capital of $5,920,199 and January 31, 2006 net working capital of $8,689,060). Our continued operations, as intended, are dependent upon our ability to raise additional funding to meet our obligations and to attain profitable operations.  

Mineral properties and marketable securities were written down in the years ended January 31, 2002, and January 31, 2001, when we decided there was little or no possibility of recovery from these properties.  All expenses incurred during the fiscal year ended January 31, 2005, that were associated with our mineral properties were expensed during the period.  Our management reviews annually the carrying value of our interest in each mineral property and where necessary, properties are written down to the estimated recoverable amount determined on a non-discounted basis after giving effect to any property option agreements and cost recovery agreements.  Costs relating to properties abandoned are written off when the decision to abandon is made.

Other than as discussed herein, we are not aware of any trends, demands, commitments, events or uncertainties that may result in our liquidity either materially increasing or decreasing at present or in the foreseeable future.  Material increases or decreases in our liquidity will be substantially determined by the timing of any production decision on the Cerro Petaquilla Concession.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 47

May 31, 2008, Compared with April 30, 2008

At May 31, 2008, our current assets totaled $13,532,332 and our working capital deficiency was $3,692,913 compared with current assets of $2,691,971 and a working capital deficiency of $27,844,532 at April 30, 2008 due to funds raised from our senior secured notes financing in May 2008.  

At May 31, 2008, total liabilities were $56,273,751 compared to $40,311,556 at April 30, 2008 due to a senior secured notes balance at May 31, 2008 of $26,630,004 partially offset by a decrease of $8,722,589 in amount payable to a related party.  

At May 31, 2008, we had total assets of $106,282,486 compared to $93,935,092 at April 30, 2008.

Share capital at May 31, 2008 was $105,858,083 (95,958,641 shares) compared to $106,487,564 (95,958,641 shares) at April 30, 2008.  

The most significant contribution to working capital in the one month ended May 31, 2008, came from the issue of senior secured notes for net proceeds of $23,010,599 whereas, in the 12 months ended April 30, 2008, the most significant contribution to working capital came from advances from Copper of $18,043,254 and issuance of capital stock for net proceeds of $13,286,719.

In May 2008, we closed on a gross amount of $31,746,900 (US$32,250,000) comprising the first tranche of our US$60 million senior secured notes financing.  The notes issued with respect to this debt financing bear interest at an annual rate of 15% and will mature five years from date of issuance at 120% of the principal and are guaranteed, on a joint and several basis, by all of our and our subsidiaries’ assets.  We have the right to redeem the notes at any time at 120% of the principal amount plus any accrued or unpaid interest on the notes. If the notes are redeemed within one year of issuance, all prepaid interest totalling $4,762,035 (US$4,875,000) shall be forfeited. After 24 months from the date of issuance of the notes, holders of the notes shall have the right to cause us to purchase all of our notes then outstanding at a price equal to the sum of (a) 120% of the principa l amount of such notes to be purchased and (b) accrued and unpaid interest on the principal amount of the notes.  On an annual basis, the note holders can cause us to redeem notes equal to 35% of free cash flow.  Each of the 32,250 notes issued in this first tranche of the financing was issued with 382 share purchase warrants, thus, totalling 12,812,280 warrants inclusive of compensation warrants.   Each warrant entitles the holder to purchase one common share at $2.30 for a period of five years from the date of purchase. The warrants are subject to a weighted average anti-dilution price protection with a floor equivalent to $2.15.  As we incurred $3,974,266 (US$4,029,536) in financing costs, the net amount received by us for this first tranche equalled $27,772,187.  For more information, please refer to"Item 8 -  Financial Information – 8.B. Significant Changes – Section (v)”.

April 30, 2008, Compared to April 30, 2007

At April 30, 2008, current assets totaled $2,691,971 compared to $6,914,192 at April 30, 2007.  The decrease is attributable to a decrease of $4,582,937 in amount receivable from related company.

At April 30, 2008, total liabilities were significantly higher at $40,311,556 compared to $11,743,746 as at April 30, 2007.  The increase is due to an increase in amount payable to a related company of $9,880,377, an increase in the operating credit line facility of $8,249,356, an increase in deferred services and materials of $4,308,299, an increase in accounts payable and accrued liabilities of $3,713,984, an increase in obligation under capital leases of $2,111,032 and an increase in bank overdraft of $914,568.

Our working capital deficiency was $27,844,532 at April 30, 2008, compared with working capital of $269,631 at April 30, 2007.  At April 30, 2008, we had long-term liabilities of $9,775,053 compared to $5,099,185 at April 30, 2007.

At April 30, 2008, we had total assets of $93,935,092  compared with $46,581,365 at April 30, 2007.This is primarily a result of increases in capitalized project development costs and property plant and equipment.

Share capital at April 30, 2008, and April 30, 2007, was $106,487,564 (95,958,641 shares) and $91,596,035 (89,876,951 shares), respectively.

Operating expenses for the 12 months ended April 30, 2008, and the 12 months endedApril 30, 2007, were$14,889,731, inclusive of general and administrative expenses, and $27,872,839, respectively.

The most significant contributions to working capital in the 12 months ended April 30, 2008, came from advances from Copper of $18,043,254 and issuance of capital stock, which provided net proceeds of $13,286,719.  The most significant contribution to working capital in the 12 months ended April 30, 2007, came from the issuance of capital stock which provided net proceeds of $29,657,761.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 48

In May 2007, we completed a non-brokered private placement issuing 1,387,879 units at a price of $2.00 per unit and 24,033 units priced at $2.02 per unit, for gross proceeds of $2,824,305.  Each unit consisted of one common share and one-half of one common share purchase warrant, with each whole warrant exercisable into a common share at a price of $3.50 per share until the warrants expired on May 8, 2009.  No finders’ fees were paid resulting in net proceeds of $2,824,305.

In January 2008, we completed a non-brokered private placement issuing a total of 3,140,500 units at a price of $3.00 per unit and raising gross proceeds of $9,421,500.  Each unit consisted of one common share and one-half of one common share purchase warrant aggregating 1,691,875 warrants with the inclusion of the issued compensation warrants.  Each whole warrant is exercisable into a common share at a price of $3.50 per share until the warrants expire on October 31, 2009 (1,120,875), December 19, 2009 (182,000), and January 9, 2010 (389,000).   We paid finders’ fees of $370,875 for net proceeds of $9,050,625.

April 30, 2007, Compared to January 31, 2007

At April 30, 2007, current assets totaled $6,914,192 compared to $9,871,033 at January 31, 2007.  Total liabilities were $11,743,746 at April 30, 2007 compared with $4,820,824 at January 31, 2007.  Working capital at April 30, 2007 was $269,631 compared to $5,920,199 at January 31, 2007.

At April 30, 2007, we had total assets of $46,581,365 compared with $42,300,633 at January 31, 2007.This is primarily a result of increases in capitalized project development costs partially offset by a decrease in cash.

Share capital at April 30, 2007, and January 31, 2007, was $91,596,035 (89,876,951 shares) and $90,571,099 (89,367,031 shares), respectively.

January 31, 2007, Compared to January 31, 2006

At January 31, 2007, current assets totaled $9,871,033 compared to $9,240,156 at January 31, 2006. 

At January 31, 2007, total liabilities were significantly higher at $4,820,824 compared to $551,096 as at January 31, 2006.

Working capital was $5,920,199 at January 31, 2007, compared with working capital of $8,689,060 at January 31, 2006.  Long-term debt at January 31, 2007 was $869,990 compared to nil at January 31, 2006.

Total assets were $42,300,633 at January 31, 2007 compared with $12,807,172 at January 31, 2006.  This is primarily a result of increases in capitalized project development costs and property plant and equipment.

Share capital as at January 31, 2007 and January 31, 2006 was $90,571,099 (89,367,031 shares) and $61,684,216 (70,246,303 shares), respectively.

Operating expenses in the 12 months ended January 31, 2007, and fiscal year ended January 31, 2006, were $23,951,217, inclusive of general and administrative expenses, and $2,538,350, respectively.

The most significant contribution to working capital in the 12 months ended January 31, 2007, came from the issuance of capital stock which provided net proceeds of $29,689,685.  The most significant contribution to working capital in the year ended January 31, 2006, was from the issuance of capital stock which provided net proceeds of $11,253,164.

In October 2006, we completed a non-brokered private placement issuing 9,400,000 units at a price of $2.40 per unit, for gross proceeds of $22,560,000.  Each unit consisted of one common share and one transferable share purchase warrant aggregating 9,798,000 warrants with the inclusion of the issued compensation warrants.  Each warrant entitles the holder to purchase one additional common share at a price of $3.00 per share until the warrants expire on October 17, 2011.  We paid finders’ fees of $956,800 for net proceeds of $21,603,200.

Outlook

We are currently in the process of commissioning our mill at the Molejon property and are also proceeding with exploration of other properties.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 49

5.C.  Research and Development, Patents and Licenses, etc.

As we are a mineral exploration company with no producing properties, the information required by this section is not applicable.

5.D.  Trend Information

As we are a mineral exploration company with no producing properties, the information required by this section is not applicable.

5.E.  Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements required to be disclosed in this Amendment No. 2.

5.F.  Tabular Disclosure of Contractual Obligations

As at May 31, 2008, we had the following contractual obligations:

		Payments due by period
	Total	<1 year	1-3 years	3-5 years	> 5 years
Long Term Debt	595,246.00	433,621.00	161,625.00	-	-
Capital Lease Obligation	6,130,880	2,162,289	3,968,591	-	-
Purchase Obligations	5,047,133	5,047,133	-	-	-
Rent	107,640	33,120	66,240	8,280	-
Asset Retirement Obligation	4,308,083	-	-	-	4,308,083
Operating Credit Line Facility	3,849,974	3,849,974	-	-	-
Senior Secured Notes	38,475,540	-	38,475,540	-	-
Total	58,514,496	11,526,137	42,671,996	8,280	4,308,083

In the fiscal year 2009, we are committed to the following plant and equipment acquisitions related to the gold-processing plant currently under construction at the Molejon gold deposit:

Gold Recovery Equipment	$1,841,191
Generators	$1,423,240
Other Support Items	$679,704
Other Construction in Progress	$1,102,998

In addition, we have one commitment relating to our leasehold obligation for our office premises.  During the 12 months ended January 31, 2007, we entered into a five-year lease (commencement date:  September 1, 2006) for office premises at an estimated annual cost of $66,240 (approximately $331,200 over five years) as of January 1, 2007.  From October 18, 2006, the office leasing costs were split equally between our company and Copper, as a result of the Plan of Arrangement.  Therefore, the estimated annual cost of the office premises lease is approximately $33,120 to the Company.

Capital Lease Obligation

We have a capital lease arrangement with Banco Bilbao Vizcaya Argentaria (Panama) S.A. (“BBVA”) for the purchase of equipment to advance the Molejon project into production.  The equipment includes but is not restricted to: ball mills, Metso crushing plant, cranes and an aggregate crushing plant.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 50

As a condition of the lease, the equipment will serve as collateral throughout the amortization period and will be registered with the Public Registry of the Republic of Panama.  Further, a related company has pledged a term deposit in the amount of $2,347,403 as additional security.

Future minimum lease payments on the capital lease obligation are as follows:

2009	$	2,648,121
2010		2,648,121
2011		1,674,278
		6,970,520
Less: Imputed interest of 9%		(839,640	)
Total		6,130,880
Current obligation		2,162,289
Long-term obligation	$	3,968,591

Operating Credit Facility

We have a capital lease operating credit facility with BBVA up to a maximum of $13,301,952.  The facility is drawdown, reduced and converted to a capital lease upon completion of equipment purchase.  The facility has a fixed rate of 9% on $10,954,549 and fixed rate of 6% on $2,347,403. The facility is secured by the assets purchased under the facility and is registered with the Public Registry of the Republic of Panama.

Long-term debt

The Company has long-term debt for various equipment and vehicles. The following table summarizes the loans outstanding as at May 31, 2008:

		May 31, 2008			April 30, 2008			April 30, 2007			January 31, 2007
Long-term debt
Equipment loan #1	$	125,053		$	138,043		$	303,203		$	347,059
		27,978			30,674			64,061			72,964
Equipment loan #2		110,984			119,181			218,115			245,989
Equipment loan #3		317,324			337,568			576,443			646,171
Vehicle loan #2		13,907			14,792			25,245			28,300
		595,246			640,258			1,187,067			1,340,483
Less: current portion		(433,621	)		(451,195	)		(487,882	)		(470,493	)
	$	161,625		$	189,063		$	699,185		$	869,990

Asset retirement obligation

The Company’s asset retirement obligation relates to site-restoration and clean-up costs related to its Molejon gold project located in Panama.

A reconciliation of the provision for asset retirement obligations is as follows:

Beginning balance - January 31, 2007	$	-
Balance - April 30, 2007		4,400,000
Accretion		312,977
Foreign exchange gain on re-measurement		(375,974	)
Balance - April 30, 2008		4,337,003
Accretion		52,106
Foreign exchange gain on re-measurement		(81,026	)
Ending balance - May 31, 2008	$	4,308,083

The provision for asset retirement obligations is based upon the following assumptions:

a)

The total undiscounted cash flow required to settle the obligation is approximately $6,848,000 (US$ 6,225,000);

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 51

b)

Asset retirement obligation payments are expected to occur during fiscal years 2014 and 2015;

c)

A credit adjusted risk-free rate of 7.65% has been used to discount cash flows.

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

6.A.  Directors and Senior Management

The following information regarding our directors and members of senior management, including names, business experience, offices held and outside principal business activities, is at November 6, 2009:

Raul Ferrer

Mr. Raul Ferrer (born January 8, 1973) was appointed to our board of directors (the “Board of Directors”) on November 6, 2009.  Mr. Ferrer is a leading financial advisor to a number of businesses operating in Panama.  He is a former financial investments director with the Panamanian equity investment firm, Wall Street Securities.

Richard Fifer

Mr. Richard Fifer (born January 23, 1957) is a Panamanian citizen and a U.S.-trained geologist.  He has served on our Board of Directors from March 1993 to November 1998, July 2002 to July 2003, and from November 12, 2003, to the present.  In addition, he served as our Chief Executive Officer from December 14, 2004, to March 23, 2005, and from April 14, 2007, to September 15, 2009.  Since 1994, he has been President of Geoinfo, S.A., a Panamanian company that provides geographic mapping technology and solutions.  He was Chairman and President of CODEMIN, Panama’s state mining company, from January 1997 to January 2000.  Under the Ministry of Foreign Affairs Panama, he was the President's Plenipotentiary Ambassador-at-large from March 2002 to September 2003.  He was also Governor of the Province of Cocle, Panama, from March 2002 to September 2003.  Mr. Fifer holds a B.Sc. in both Geology and Geophysical Engineering and an M.A. in Finance.

David Kaplan

Mr. David Kaplan was appointed to our Board of Directors on November 6, 2009.  He is a former key member of LIM Advisors LLC, a multi-strategy investment group, where he managed a portfolio of metal and energy futures and securities for a commodity hedge fund. He is a also a former Vice-President of Gerald Metals Inc., financial analyst with Glencore Ltd., and graduate of the Wharton School of the University of Pennsylvania .

David Levy

Mr. David Levy (born December 22, 1984) was appointed to our Board of Directors on November 6, 2009.  He is a member of the private placement group at the investment advising firm of Platinum Management (NY) LLC, where he has participated in over 25 capital raising transactions for public and private corporations. He specializes in structuring and negotiating financings at all levels of the capital structure through extensive industry research, financial analysis and modeling. Mr. Levy graduated with honors from Sy Syms School of Business of Yeshiva University.  

Joao Manuel

Mr. Joao Manuel (born November 6, 1952) was appointed our President and Chief Executive Officer on November 6, 2009, after having served as our Chief Operating Officer since December 1, 2008.  Before joining us, Mr. Manuel held the position of Chief Financial Officer of Copper, which was also a reporting issuer listed on the Toronto Stock Exchange.  Mr. Manuel has over 20 years of management experience in large, multinational corporations worldwide, including General Electric Company, ITT Europe Ltd. and Nokia Consumer Electronics.  He is a former Managing Director of Inapa France S.A. and Chief Financial Officer and Deputy Chief Executive Officer of the Inapa Group, Europe’s fourth largest paper merchant with operations in eight countries.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 52

Bassam Moubarak

Mr. Bassam Moubarak (born February 6, 1977), a Chartered Accountant, was appointed our Chief Financial Officer on February 11, 2008.  Before joining us, Mr. Moubarak held the position of Senior Manager with the public accounting firm of Deloitte & Touche LLP, where he led audits of public companies and oversaw implementations pursuant to Section 404 of the Sarbanes-Oxley Act of 2002.  Prior to joining Deloitte & Touche LLP, he was responsible for audits of companies in both the public and private sectors with Grant Thornton LLP.  His expertise covers corporate financial reporting, designing financial processes and controls and risk management.  He also holds an economics degree.

Daniel Small

Mr. Daniel Small (born April 16, 1969) was appointed to our Board of Directors on November 6, 2009.  He is a Managing Director at the investment advising firm of Platinum Management (NY) LLC (“Platinum”), where he leads the firm’s private placement group.  Prior to joining Platinum, Mr. Small was a Senior Analyst, who served on the investment committee at Glenview Capital Management, a $7 billion hedge fund. He is a former Director of the Strategic Risk Group at Merrill Lynch responsible for a $1 billion multi-strategy proprietary investing platform. As a former Director in the Mergers & Acquisitions Department at SG Cowen Securities, he advised corporations in the financing and restructuring of public and private corporations. Mr. Small is a graduate of the Wharton School of the University of Pennsylvania and earned a doctorate in law from the University of Pennsylvan ia Law School.

6.B.    Compensation

During the one month ended May 31, 2008, and the 12 months ended April 30, 2008, we paid cash compensation to our directors and officers as provided for herein.  No other funds were set aside or accrued by us during the one month period ended May 31, 2008, or 12 months ended April 30, 2008, to provide pension, retirement or similar benefits for our directors or officers pursuant to any existing plan provided or contributed to by us or our subsidiaries under applicable Canadian laws.

We are required, under applicable securities legislation in Canada to disclose to our shareholders details of compensation paid to our executive officers.  The following fairly reflects all material information regarding compensation paid to our executive officers disclosed to our shareholders under applicable Canadian law.

Cash and Non-Cash Compensation - Executive Officers and Directors

Effective May 1, 2007, we had four directors namely Ralph Ansley, John Cook, Richard Fifer and Marco Tejeira and three executive officers being Richard Fifer as President and Chief Executive Officer, Tony M. Ricci as interim Chief Financial Officer, and Graham Scott as Corporate Secretary.  On June 11, 2007, Robert Baxter joined the board of directors.  Further, Tony M. Ricci served as interim Chief Financial Officer, while we undertook a search for a permanent Chief Financial Officer until Bassam Moubarak was appointed Chief Financial Officer on February 11, 2008.

Effective June 1, 2008, we had five directors including Ralph Ansley, Robert Baxter, John Cook, Richard Fifer and Marco Tejeira and three officers including Richard Fifer as President and Chief Executive Officer, Bassam Moubarak as Chief Financial Officer and Graham Scott as Corporate Secretary.  During the course of our fiscal year ended May 31, 2009, Ralph Ansley resigned from his directorship on July 7, 2008, due to medical reasons and Marco Tejeira did not stand for re-election at our annual general meeting of shareholders held on November 18, 2008.

At our annual general meeting of shareholders, five directors namely Robert Baxter, John Cook, Richard Fifer, Gaston Araya and John Resing were elected to the board by our shareholders on November 18, 2008.  Subsequently, Christopher Davie, joined our company on September 15, 2009, in the capacity of President and Chief Executive Officer.  On November 5, 2009, Robert Baxter, John Cook, Gaston Araya and John Resing resigned from our board, Graham H. Scott resigned as Corporate Secretary and Christopher Davie resigned as President and Chief Executive Officer.  On November 6, 2009, sole director, Richard Fifer, was joined on the board by Raul Ferrer, David Kaplan, David Levy and Daniel Small to re-establish the number of directors at five./P>

We currently have three officers namely Joao Manuel, appointed as President and Chief Executive Officer on November 6, 2009; Bassam Moubarak, appointed as Chief Financial Officer on February 11, 2008; and Richard Fifer, appointed as Non-Executive Chairman of our Board of Directors on November 6, 2009.

The following table sets forth all annual and long term compensation for services provided to us during the one month ended May 31, 2008, and the 12 months ended April 30, 2008, in respect of the individuals who were, at May 31, 2008, our directors and executive officers:

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 53

Summary Compensation Table

Short Term Compensation			Long Term Compensation
For One Month Ended May 31, 2008
				Awards		Payouts
Name and Principal Position	Salary ($)	Bonus ($)	Other Annual Compen- sation ($)	Securities Under Options granted (#)	Restricted Shares or Restricted Share Units ($)	LTIP Payouts ($)	All Other Compensation ($)
Ralph Ansley	nil	nil	nil	nil	n/a	n/a	nil
Robert Baxter	nil	nil	nil	nil	n/a	n/a	nil
John Cook	$10,000	nil	nil	nil	n/a	n/a	nil
Richard Fifer President & Chief Executive Officer	$15,141	nil	nil	nil	n/a	n/a	nil
Bassam Moubarak Chief Financial Officer(1)	$17,083	nil	nil	nil	n/a	n/a	nil
Graham Scott Corporate Secretary	nil	nil	nil	nil	n/a	n/a	nil
Marco Tejeira	$6,016	nil	nil	nil	n/a	n/a	nil
For Twelve Months Ended April 30, 2008
Ralph Ansley	$21,863	nil	nil	nil	n/a	n/a	nil
Robert Baxter	$7,150	nil	nil	400,000(2)	n/a	n/a	nil
John Cook	$120,000	nil	nil	nil	n/a	n/a	nil
Richard Fifer President & Chief Executive Officer	$184,954	nil	nil	nil	n/a	n/a	nil
Bassam Moubarak Chief Financial Officer(1)	$46,296	nil	nil	100,000(2)	n/a	n/a	nil
Graham Scott Corporate Secretary	nil	nil	nil	nil	n/a	n/a	nil
Marco Tejeira	$61,277	nil	nil	nil	n/a	n/a	nil

⁽¹⁾

Bassam Moubarak was appointed Chief Financial Officer of our company on February 11, 2008.

⁽²⁾

Stock options subsequently cancelled effective July 31, 2009.

Option Grants in Last Two Fiscal Periods (One Month Ended May 31, 2008, and Twelve Months Ended April 30, 2008)

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 54

The table below sets forth stock options granted by us during the 12 months ended April 30, 2008, to our then executive officers.  We did not grant any options during the one month ended May 31, 2008.

Name	Securities Under Options Granted (#)	% of Total Options Granted in 13-Months(1)	Exercise or Base Price ($/Security)(2)	Market Value of Securities Underlying Options on Date of Grant ($/Security)	Expiration Date
Bassam Moubarak	100,000 (3)	5.97%	$2.80	nil	February 11, 2013

⁽¹⁾

Percentage of all options granted during the 12 months ended April 30, 2008.

⁽²⁾  

The exercise price of stock options is set at not less than the Volume Weighted Average Trading Price (VWAP) for the five trading days immediately preceding the date of the stock option grant.  Stock options granted as shown above vest over a period of 21 months.

⁽³⁾

Stock options subsequently cancelled effective July 31, 2009.

Aggregated Option Exercises in Last Two Fiscal Periods

None of our executive officers exercised any stock options during the 1 month ended May 31, 2008 or the 12 months ended April 30, 2008.

Defined Benefit or Actuarial Plan Disclosure

We do not provide retirement benefits for directors and executive officers.

Termination of Employment, Change in Responsibilities and Employment Contracts

We have entered into formal agreements with our President and Chief Executive Officer, our Chief Financial Officer, our Chief Operating Officer and with the head of our Exploration and Resources Development division establishing financial arrangements that would be in effect in the event of a change of control of our company.  Each agreement provides for, in the event of the termination of the engagement of such persons following a change of control of our company, the payment of an amount equal to two times the annual compensation being paid to such person as at the time of the change of control.

Our Employment Agreement with our Chief Financial Officer, Bassam Moubarak, also contains a risk mitigation provision providing 12 months’ compensation in the event of termination of his employment without just cause.  The 12 months’ compensation provision will also apply in the event of his dismissal due to any layoff based on group restructuring or a sale of assets.

Directors

With the exception of directors whom also serve as officers, we have arrangements in place in which directors are entitled to receive an attendance fee of US$1,000 per meeting of our Board of Directors and an attendance fee of US$800 per committee meeting attended during our most recently completed financial year and subsequently up to and including the date of this Amendment No. 2.  In addition, directors are entitled to compensation of US$800 per day for technical or professional services performed on behalf of our company and directors are also reimbursed for actual expenses incurred in the performance of their duties as directors.

Further, with the exception of directors whom also serve as officers, directors are entitled to an annual retainer of US$24,000.  The Non-Executive Chairman of the Board is entitled to annual base compensation in the amount of CAD$60,000.

The following table sets forth stock options granted by us during the 12 months ended April 30, 2008, to our directors who are not also our executive officers (no options were granted to our directors during the 1 month ended May 30, 2008):

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 55

Name	Securities Under Options Granted (#)	% of Total Options Granted in Fiscal Year(1)	Exercise or Base Price ($/Security)(2)	Market Value of Securities Underlying Options on Date of Grant ($/Security)	Expiration Date
Robert Baxter	400,000 (3)	23.88%	$2.25	nil	June 20, 2012

⁽¹⁾

Percentage of all options granted during the 12 months ended April 30, 2008.

⁽²⁾

The exercise price of stock options is set at not less than the Volume Weighted Average Trading Price (VWAP) for the five trading days immediately preceding the date of the stock option grant.  Stock options granted as shown above vest over a period of 21 months.

⁽³⁾

Stock options subsequently cancelled effective July 31, 2009.

The following table sets forth details of all exercises of stock options during the 12 months ended April 30, 2008, by our directors who are not also our executive officers (no options were exercised by our directors during the one month ended May 31, 2008), and the value as of May 31, 2008, of unexercised options on an aggregate basis:

Name	Securities Acquired on Exercise (#)(1)	Aggregate Value Realized ($)(2)	Unexercised Options at Fiscal Year-End (#)(3) (4) Exercisable/ Unexercisable	Value of Unexercised In-the-Money Options at Fiscal Year-End ($)(3), (4) Exercisable/ Unexercisable
Ralph Ansley(5)	23,100	70,224	251,320 / 83,772	nil
Robert Baxter	nil	nil	200,000(6) / 200,000(6)	nil
John Cook	60,000	$153,900	323,400(6) / 107,800(6)	nil
Marco Tejeira	150,000	$424,500	60,000 / 0 90,000 / 0 438,000 / 146,000	$99,600 / $0 $124,650 / $0 nil

⁽¹⁾

Number of our common shares acquired on the exercise of stock options.

⁽²⁾

Calculated using the closing price of our common shares on the date of exercise less the exercise price of the stock options.

⁽³⁾

The figures relate solely to stock options.

⁽⁴⁾

Value of unexercised in-the-money options calculated using the closing price of our common shares on the TSX on Friday, May 30, 2008, which was $1.91, less the exercise price of in-the-money stock options.

⁽⁵⁾

Dr. Ralph Ansley served on our Board of Directors for the period June 6, 2006 to July 7, 2008.

⁽⁶⁾

Stock options subsequently cancelled effective July 31, 2009.

6.C.  Board Practices

The directors hold office for a term of one year or until our next annual general meeting, at which time all directors retire, and are eligible for re-election.  We do not nor do any of our subsidiaries have any arrangement to provide benefits to our directors upon termination of employment.

As at November 6, 2009, our Audit Committee is composed of Raul Ferrer, David Kaplan and David Levy.

Each director is financially literate.  The Audit Committee is appointed by the Board of Directors and its members hold office until removed by the Board of Directors or until our next annual general meeting, at which time their appointments expire and they are then eligible for re-appointment.  The Audit Committee reviews our audited consolidated financial statements and liaises with our auditors and recommends to the Board of Directors whether or not to approve such statements.  At the request of our auditor, the Audit Committee must convene a meeting to consider any matters the auditor believes should be brought to the attention of the Board of Directors or our shareholders.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 56

The Audit Committee operates pursuant to a charter adopted by the Board of Directors. The Audit Committee is responsible primarily for monitoring: (i) the integrity of our financial statements; (ii) compliance with legal and regulatory requirements; and (iii) the independence and performance of our internal and external auditors.

We are currently conducting an internal investigation under the oversight of the Audit Committee and with the assistance of outside independent counsel of certain of our international operations, focusing on the material weakness identified during our assessment of internal controls as at May 31, 2009.

As at November 6, 2009, our Compensation Committee is composed of Raul Ferrer, Richard Fifer and Daniel Small; and our Corporate Governance Committee is composed of Raul Ferrer, Richard Fifer and David Kaplan.

6.D.  Employees

As at April 30, 2008, and May 31, 2008, our corporate head office had six permanent employees (two in Administration and four in Finance and Accounting) and three contract staff members working out of our location in Vancouver, Canada, and our administrative office in Panama City, Panama, had twenty five employees.  Our locations in Santa Ana and La Pintada had 33 permanent employees, including administration and technical staff, as of May 31, 2008.  In addition, our company had a pool of approximately 4 temporary or casual workers (labourers, drilling helpers, etc.) employed at the Molejon gold deposit site.

6.E.  Share Ownership

As at November 6, 2009 , the following table sets forth the share ownership of those persons listed in subsection 6.B. above and includes the details of all options or warrants to purchase our shares held by such persons:

Name	Number of Common Shares Held at November 6, 2009	Number of Common Shares Subject to Options or Warrants at November 6, 2009	Beneficial Percentage Ownership(1)	Exercise Price	Expiry Date
Ralph Ansley	nil	100,000 options	*	$0.39	March 1, 2014
Robert Baxter	87,500	nil	*	n/a	n/a
John Cook	95,000	nil	*	n/a	n/a
Richard Fifer	4,348,783	118,800 options 585,000 options	5.22%	$0.26 $0.54	July 11, 2010 February 1, 2011
Bassam Moubarak	10,000	200,000 options	*	$0.39	January 5, 2014
Tony M. Ricci	24,033	200,000 options	*	$2.01	January 15, 2012
Graham Scott	28,000	43,200 options	*	$0.54	February 1, 2011
Marco Tejeira	23,000	60,000 options 90,000 options 584,000 options	*	$0.26 $0.54 $2.01	July 11, 2010 February 1, 2011 January 15, 2012

*

Indicates less than 1%.

⁽¹⁾

Beneficial ownership is determined in accordance with the rules of the SEC.  In computing the number of shares owned by a person and the percentage ownership of that person, common shares subject to options and warrants held by that person that are currently exercisable or exercisable within 60 days of November 6, 2009 , are deemed outstanding.  Such shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person.  This table has been prepared based on 96,040,121 common shares outstanding as of November 6, 2009 .

On June 23, 1994, we adopted a stock option plan (the "Option Plan") which authorized our Board of Directors to grant incentive stock options to our directors, officers and employees or our associated, affiliated, controlled or subsidiary companies, in accordance with the terms of the Option Plan and the rules and policies of the Toronto Stock Exchange.  Under the terms of the Option Plan, the aggregate number of our common shares reserved for issuance under the Option Plan at any time may not exceed 4,950,968 and the aggregate number of common shares reserved for issuance to any person may not exceed 5% of the number of outstanding common shares.  On July 24, 2002, our Board of Directors amended the Option Plan to increase the number of shares reserved for issuance thereunder from 4,950,968 to 7,436,158.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 57

During the 12-month period ended January 31, 2007, we received approval for a new stock option plan (the “New Plan”).   On December 8, 2006, our company adopted the New Plan authorizing our Board of Directors to grant incentive stock options to directors, executive officers, employees, or consultants of our company or of our subsidiaries in accordance with the terms of the Option Plan and as may be acceptable pursuant to the policies of the TSX.  Under the terms of the New Plan, the aggregate number of our common shares reserved for issuance under the New Plan at any time may not exceed 10,000,000.  The approval of the disinterested shareholders of our company must be obtained before (a) the number of common shares under option to insiders within any 12-month period; or (b) the number of common shares issuable to insiders at any time, when combined with all of our company’s security based compensation arrangements, may exceed 10% of our company’s issued and outstanding common shares.  The approval of the disinterested shareholders of our company must also be obtained for the reduction in the exercise price, or extension of the term, of options previously granted to insiders.

As at May 31, 2008, the maximum number of common shares reserved for issuance under our company’s New Plan is 10,000,000 common shares of which 1,615,803 have been exercised, leaving 8,384,197 common shares available under the New Plan.  The exercise price of the options will not be lower than the “market price” as defined in the TSX Company Manual, being the volume weighted average trading price on the TSX for the shares for the five trading days immediately preceding the date on which the option is granted.  Options granted must be exercised no later than 10 years after the date of grant or such lesser period as may be determined by the Board.  The Board may at its discretion in any granting of an option set a vesting period whereby the option may only be exercisable in pre-determined installments.

At our Annual General Meeting of Shareholders held on November 18, 2008, shareholders of our company approved an amended and restated stock option plan increasing the maximum number of shares that may be the subject of options at any given time from 10,000,000 to 10,700,000 shares.  

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7.A.  Major Shareholders

The following table sets forth the name of the only shareholder who, to the knowledge of our management, as at November 6, 2009 , beneficially owns greater than 5% of any class of our voting securities:

Name	Number of Common Shares Held at November 6, 2009	Percentage of Common Shares Outstanding at November 6, 2009
Walnut Street Absolute Return Fund, L.P.	9,539,050	9.93%

There has been no significant change in the percentage ownership held by our major shareholder during the past three years and our major shareholder does not have different voting rights.  

As at November 6, 2009 , there were 96,040,121 of our common shares issued and outstanding.  Based on the records of our registrar and transfer agent, Computershare Trust Company of 510 Burrard Street, Vancouver, British Columbia, Canada, as at such date there were a total of 205 holders of our common shares, of which 43 were resident in Canada holding an aggregate 82,868,260 common shares, 114 were resident in the United States holding an aggregate 11,166,447 common shares, and 48 holders holding an aggregate of 2,005,414 common shares were not resident in either Canada nor the United States.  The shareholdings of United States holders represented approximately 11.6269% of our total issued and outstanding common shares as at November 6, 2009 .

To the extent known to our management, our company is not directly or indirectly owned or controlled by another corporation(s), by any foreign government or by any other natural or legal person(s) severally or jointly.  Further, we do not know of any arrangements that may, at a subsequent date, result in a change of control of our company.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 58

7.B.  Related Party Transactions

During the 12 months ended April 30, 2008, and the one month ended May 31, 2008, we had the following transactions with related parties:

a)

We paid consulting fees of $1,890 (12 months ended April 30, 2008 - $106,033, three months ended April 30, 2007 - $15,545, 12 months ended January 31, 2007 - $411,179 and 12 months ended January 31, 2006 - $114,559) to companies controlled by a director and a former officer.

b)

We paid consultant fees and wages of $9,052 (12 months ended April 30, 2008 - $143,583, three months ended April 30, 2007 – Nil, 12 months ended January 31, 2007 – Nil and 12 months ended January 31, 2006 - Nil) to companies controlled by directors and an officer.

c)

We paid legal fees of Nil (12 months ended April 30, 2008 - $109,517, three months ended April 30, 2007 - $44,523, 12 months ended January 31, 2007 - $230,061 and 12 months ended January 31, 2006 - Nil), share issue costs of Nil (12 months ended April 30, 2008 - $165,836, three months ended April 30, 2007 – Nil, 12 months ended January 31, 2007 - $113,097 and 12 months ended January 31, 2006 - Nil) and financing costs of $95,272 (12 months ended April 30, 2008 – Nil, three months ended April 30, 2007 – Nil, 12 months ended January 31, 2007 – Nil and 12 months ended January 31, 2006 - Nil) to a law firm controlled by an officer.  We paid for services and goods of Nil (12 months ended April 30, 2008 - $129,921, three months ended April 30, 2007 - $26,768, 12 months ended January 31, 2007 - $107,359 and 12 months ended January 31, 2006 - $61,749) to a company cont rolled by an officer and a director.

d)

We received $3,425 (12 months ended April 30, 2008 - $34,875, three months ended April 30, 2007 - $8,549,  12 months ended January 31, 2007 - $7,573 and 12 months ended January 31, 2006 - Nil) from Copper as payment of office rent.

e)

We received or accrued Nil (12 months ended April 30, 2008 - $129,345, three months ended April 30, 2007 - $103,348, 12 months ended January 31, 2007 – Nil and 12 months ended January 31, 2006 - Nil) in asset usage fees from Copper for the use of certain office and mining equipment. Also during the period, the Company and Copper advanced negotiations with the lessor of the equipment to have the commercial terms of the leasing arrangement correspond with the terms of the Plan of Arrangement made effective on October 18, 2006, such that Copper will ultimately become the lessee of the equipment. The cost recovery arrangement will be subject to review and revision to reflect changes in operations.

f)

During the 12 months ended April 30, 2008, we had a cost sharing arrangement with Copper varying from 50% to 80% of the cost.  This arrangement was terminated on September 30, 2007, when the terms of the agreement were fulfilled.

Certain employees of the Company with knowledge in mining, government, environmental and community relations were previously employed and trained by the Company.  In January 2008, we charged Copper for technical know-how and other intellectual property transferred to Copper.  The amount of these fees has been determined to be $4,587,320 (US$ 4,577,250).  In April 2008, the Company and Copper agreed to rescind the agreement and the fees were refunded to Copper.

As at May 31, 2008, we have an amount payable to Copper of $1,157,788 (April 30, 2008 - $9,880,377 payable, April 30, 2007 - $4,582,937 receivable and January 31, 2007 - $2,143,774 receivable) resulting from mineral property costs and general and administrative expenses paid on Copper’s behalf.  This account bears interest at a rate of US prime plus 1%.  As at May 31, 2008, we have a balance of $113,832 payable to all other related parties (April 30, 2008 – $16,707, April 30, 2007 – $55,901 and January 31, 2007 – $81,305)

During the period of this annual report, we had posted 5,000,000 common shares of Copper as security for our account payable to Copper.  Copper’s common shares posted as security were held in escrow pending payment of the account payable and could not be sold until the account payable was paid in full pursuant to a Warranty Agreement dated September 30, 2007.  The common shares serving as security were based on a market value of $2.00 per common share.  If the market value of the common shares changed, the number of shares required to be posted as security would be adjusted accordingly.  Effective December 31, 2007, we transferred back to Copper 1,815,069 of our Copper shares held as repayment of advances payable to Copper as at December 31, 2007, of $5,608,564.  These shares were transferred at a fair market value of $3.09 per share.  The fair market value of Copper shares tra nsferred back to Copper was calculated in accordance with the Warranty Agreement dated September 30, 2007.  As Copper did not publicly trade until December 31, 2007, the fair value was determined using the Black-Scholes options pricing model to determine the fair market value of a Copper common share and half warrant in each unit issued in Copper’s first tranche of a non-brokered private placement in December 2007.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 59

In September of 2007, we entered into an agreement with Copper to sell some of our surplus property and equipment and mineral properties that are no longer required for current operations. The net book value of these assets is $3,464,048 which approximates their fair market value.  We did not recognize a gain or loss on this disposal.  

On September 30,2007, Petaquilla Gold S.A. (“Gold”), a subsidiary of the Company entered into a Service Agreement with Copper to provide electric generation, aggregate for construction and the rental of a drill machine (collectively, the “services”) for a three-year period.  In return for receiving certain benefits and assurances, payment for services has been assumed and prepaid by Copper in the amount of $4,387,705 (US$4,404,000).

Other than the above transactions, there were no material transactions in the 12 months ended April 30, 2008, or the one month ended May 31, 2008, or proposed material transactions between us or any of our subsidiaries and:

(a)

enterprises that directly or indirectly through one or more intermediaries, control or are controlled by, or are under common control with, our company;

(b)

associates;

(c)

individuals owning, directly or indirectly, an interest in the voting power of our company that gives them significant influence over us, and close members of any such individual's family;

(d)

key management personnel, that is, those persons having authority and responsibility for planning, directing and controlling our activities (or their wholly owned private companies), including directors and senior management of companies and close members of such individuals' families;

(e)

enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (c) or (d) or over which such a person is able to exercise significant influence including enterprises owned by our directors or major shareholders and enterprises that have a member of key management in common with our company.

None of our officers or directors, or any associate of such person, was indebted to the Company at any time during the one month ended May 31, 2008, the 12 months ended April 30, 2008, the three months ended April 30, 2007, nor during the 12 months ended January 31, 2007.

7.C.  Interests of Experts and Counsel

This Amendment No. 2 is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this section.

ITEM 8.  FINANCIAL INFORMATION

8.A.  Consolidated Statements and Other Financial Information

This Annual Report contains our consolidated financial statements for the one month ended May 31, 2008, the 12 months ended April 30, 2008, the three months ended April 30, 2007, the 12 months ended January 31, 2007, and the twelve months ended January 31, 2006, which contains an Independent Auditor’s Report on Financial Statements dated June 16, 2009, comments by Auditors for U.S. Readers on Canada – U.S. Reporting Conflict, Consolidated Balance Sheets as at May 31, 2008, April 30, 2008, April 30, 2007, and January 31, 2007, Consolidated Statements of Operations and Comprehensive Loss and Deficit for the Fiscal Periods ended May 31, 2008, April 30, 2008, April 30, 2007, January 31, 2007, and January 31 2006 Consolidated Statements of Cash Flows for the Fiscal Periods Ended May 31, 2008, April 30, 2008 , April 30, 2007 January 31, 2007, and January 31, 2006 and Notes to the Consolidated Financial Statements.

8.B.  Significant Changes

Subsequent to May 31, 2008:

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 60

(i)

The Company closed the remaining US$27,750,000 of its senior secured notes financing.  Net proceeds received were US$20,612,480. 11,024,520 warrants were issued as part of the senior secured notes financing.

(ii)

The Company sold all 20,418,565 Copper shares for proceeds of $44,920,843.

(iii)

The Company repaid $38,355,744 (US$ 36,032,376) of the face value of its senior secured notes. Total amount paid including the 20% premium on redemption is $44,920,843 (US$ 43,238,852).

(iv)

The Company issued a supplemental US$20,000,000 of its senior secured notes.  Net proceeds received were US$15,875,000.

(v)

On March 30, 2009, the Company closed a Convertible Senior Secured Notes (“Convertible Notes”) financing of up to US$40,000,000 (“Convertible Notes”). The Convertible Notes are convertible at a price of $2.25 per share. The Convertible Notes will bear interest at an annual rate of fifteen percent (15%), of which the first twelve months’ interest shall be prepaid in full at the time of issuance of the Convertible Notes. The Convertible Notes will mature two years from date of issuance at 110% of the principal amount. The Company is required to make semi-annual repayments on the previously issued senior secured notes commencing on September 15, 2009 and on the Convertible Notes commencing September 15, 2010  ranging from $nil to $8,000,000 depending upon the average price of gold.  The Company has the right to redeem the Convertible Notes at any time at 110% of the principal amount plus a ny accrued or unpaid interest on the Convertible Notes. If the Convertible Notes are redeemed within one year of issuance, all prepaid interest is forfeited. Holders of the previously issued Series 1, Series B and Series C notes were offered to exchange amounts due upon maturity of their existing notes and participate pro-rata in the Convertible Notes offering up to a maximum of US$24,187,083.  The remaining proceeds of the private placement will be used for the continued commissioning of the Molejon Gold Project located in Panama and for working capital purposes.  Holders of the Series 1 notes representing 11,984 notes (US$11,983,812) have agreed not to exercise their put right until June 1, 2010. In addition, the Company has agreed to reduce the exercise price of 23,836,800 warrants from $2.30 per share to $0.65 per share.  Under the revised terms of the warrants, if the common shares of the Company trade at a weighted average trading price of $1.00 or more per share for 30 consecutive tradi ng days, the holders of the warrants must exercise the warrants within 30 days.

(vi)

The Company’s management conducted an assessment of the Molejon Gold Mine resulting in the identification of several deficiencies in the plant construction and operation. These deficiencies have led to several areas of the plant not operating to design specifications resulting in additional future costs to mitigate construction deficiencies. A process for estimating costs of mitigation is in the identification stage thus no amounts can be quantified at this time.

(vii)

The Company entered into a forward sale agreement for 7,000 ounces of gold to be delivered in October and November 2009. Disruption of plant operations from any cause may result in delivery default and result in additional cost being incurred. The Company received $5,129,600 representing 80% of the ounces sold.

(viii)

In September 2009, the Company made a principal, premium and interest payment of $6,208,844 on its senior secured notes pursuant to the provisions of the debt agreement.

 (ix)

As a result of operational issues, the Company has been unable to meet its current production targets and requires additional funding in order to continue operations.  Management is currently in substantive negotiations with lenders to secure additional financing; however, there is no guarantee that management will be successful in its efforts.

(x)

On November 5, 2009, Gaston Araya, Robert Baxter, John Cook and John Resing resigned from the Company’s board of directors, Christopher Davie resigned as President and Chief Executive Officer and Graham H. Scott resigned as Corporate Secretary.

(ix)

As a result of operational issues, the Company has been unable to meet its current production targets and requires additional funding in order to continue operations.  On November 6, 2009 Management negotiated with a related party a $5,000,000 bridge loan that matures in 120 days. The Company will pay $500,000 on maturity as a restructuring fee. In the event the amount is paid in 30 days, the fee is reduced to $150,000. The lender also agreed to forbear any amounts due under the indenture until the repayment of bridge loan.

(x)

On November 5, 2009, Gaston Araya, Robert Baxter, John Cook and John Resing resigned from the Company’s board of directors, Christopher Davie resigned as President and Chief Executive Officer and Graham H. Scott resigned as Corporate Secretary.

(xi)

On November 6, 2009, Raul Ferrer, David Kaplan, David Levy and Daniel Small joined the Company’s board of directors.  In addition, Richard Fifer was appointed Non-Executive Chairman of the board of directors and Joao Manuel was appointed President and Chief Executive Officer.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 61

ITEM 9.  THE OFFER AND LISTING

9.A.  Offer and Listing Details

The high and low sale prices for our common shares on the Toronto Stock Exchange for each of the preceding six months, each fiscal quarter in each of the last two full financial years and subsequent period and each of the last five full financial years are as follows:

		High (CAD)		Low (CAD)
October 2009	$	0.39	$	0.20
September 2009	$	0.49	$	0.31
August 2009	$	0.65	$	0.45
July 2009	$	0.73	$	0.55
June 2009	$	0.79	$	0.57
May 2009	$	0.73	$	0.53
June 1, 2009 – May 31, 2010
First Quarter (June 1, 2009 – August 31, 2009)	$	0.79	$	0.45
June 1, 2008 – May 31, 2009	$	1.98	$	0.285
Fourth Quarter (March 1, 2009 – May 31, 2009)	$	0.73	$	0.35
Third Quarter (December 1, 2008 – February 28, 2009)	$	0.61	$	0.285
Second Quarter (September 1, 2008 – November 30, 2008)	$	1.30	$	0.36
First Quarter (June 1, 2008 – August 31, 2008)	$	1.98	$	0.93
May 1, 2008 – May 31, 2008	$	2.32	$	1.75

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 62

The closing price of our common shares on the Toronto Stock Exchange on November 6, 2009, was $0.32 CAD.

The high and low sale prices for our common shares on the Over The Counter Bulletin Board for each of the preceding six months, each fiscal quarter in each of the last two full financial years and subsequent period and each of the last five full financial years are as follows:

2009		High (USD)		Low (USD)
October 2009	$	0.37	$	0.20
September 2009	$	0.458	$	0.2923
August 2009	$	0.68	$	0.411
July 2009	$	0.729	$	0.4971
June 2009	$	0.729	$	0.4971
May 2009	$	0.64	$	0.4453
June 1, 2009 – May 31, 2010
First Quarter (June 1, 2009 – August 31, 2009)	$	0.729	$	0.411
June 1, 2008 – May 31, 2009	$	1.99	$	0.26
Fourth Quarter (March 1, 2009 – May 31, 2009)	$	0.64	$	0.26
Third Quarter (December 1, 2008 – February 28, 2009)	$	0.53	$	0.26
Second Quarter	$	1.18	$	0.28
(September 1, 2008 – November 30, 2008)
First Quarter	$	1.99	$	0.852
(June 1, 2008 – August 31, 2008)
May 1, 2008 – May 31, 2008	$	2.349	$	1.75
May 2007 – April 2008	$	3.40	$	1.80
Fourth Quarter (February 1, 2008 – April 30, 2008)	$	3.06	$	1.80
Third Quarter (November 1, 2007 – January 31, 2008)	$	3.40	$	2.50
Second Quarter (August 1, 2007 – October 31, 2007)	$	3.331	$	2.1824
First Quarter (May 1, 2007 – July 31, 2007)	$	3.08	$	2.00
February 2007 – April 2007	$	2.24	$	1.6398
February 2006 – January 2007	$	2.7059	$	0.901
February 2005 – January 2006	$	1.19	$	0.30

The closing price of our common shares on the Over the Counter Bulletin Board on November 6, 2009, was US$0.3025.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 63

9.B.  Plan of Distribution

This Amendment No. 2 is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this section.

9.C.  Markets

Our common shares traded on the Vancouver Stock Exchange from March 29, 1988, until August 21, 1998, when they were delisted from trading at our request.  Our common shares have traded on the Toronto Stock Exchange since January 28, 1994.  We trade our shares on the Toronto Stock Exchange under the trading symbol "PTQ".  Our common shares traded on the NASDAQ Small Cap Market from February 5, 1996, until April 12, 1999, when they were delisted for failure to meet minimum bid requirements and began to trade on the Over the Counter Bulletin Board on April 13, 1999.  We trade our shares on the Over the Counter Bulletin Board under the trading symbol "PTQMF".  We commenced trading on the Frankfurt Stock Exchange under the trading symbol “P7Z” on October 24, 2005.

9.D.  Selling Shareholders

This Amendment No. 2 is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this section.

9.E.  Dilution

This Amendment No. 2 is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this section.

9.F.  Expenses of the Issue

This Amendment No. 2 is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this section.

ITEM 10.  ADDITIONAL INFORMATION

10.A.  Share Capital

This Amendment No. 2 is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this section.

10.B.  Memorandum and Articles of Association

We were incorporated on October 10, 1985, pursuant to theCompany Act,which has been replaced by theBusiness Corporations Act(British Columbia) (the "Act") and are registered with the Registrar of Companies for British Columbia under incorporation number 298967.  We are not limited in our objects and purposes.

With respect to our directors, our Articles provide that a director who is, in any way, directly or indirectly interested in an existing or proposed contract or transaction with PTQ, or who holds any office or possesses any property whereby, directly or indirectly, a duty or interest might be created to conflict with his duty or interest as a director, shall declare the nature and extent of his interest in such contract or transaction or the conflict or potential conflict with his duty and interest as a director, as the case may be, in accordance with the provisions of the Act and shall abstain from voting in respect thereof.  This prohibition does not apply to:

(i)

any such contract or transaction relating to a loan to our company, which a director or a specified corporation or a specific firm in which he has an interest has guaranteed or joined in guaranteeing the repayment of the loan or any part of the loan;

(ii)

any contract or transaction made or to be made with, or for the benefit of a holding corporation or a subsidiary corporation of which a director is a director;

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 64

(iii)

any contract by a director to subscribe for or underwrite shares or debentures to be issued by  us or our subsidiary, or any contract, arrangement or transaction in which a director is, directly or indirectly interested if all the other directors are also, directly or indirectly interested in the contract, arrangement or transaction;

(iv)

determining the remuneration of the directors;

(v)

purchasing and maintaining insurance to cover directors against liability incurred by them as directors; or

(vi)

the indemnification of any director by us.

Our Articles also provide that our directors may from time to time on our behalf borrow such money in such manner and amount, on such security, from such sources and upon such terms and conditions as they think fit; issue bonds, debentures and other debt obligations, either outright or as security for any liability or obligation of our company, or any other person; and mortgage, charge, whether by way of specific or floating charge, or give other security on the undertaking, or on the whole or any part of our property and assets (both present and future).  Variation of these borrowing powers would require an amendment to our Articles which would, in turn, require the approval of our shareholders by way of a Special Resolution, as defined hereinafter.  A “Special Resolution” means a resolution cast by a majority of not less than ¾ of the votes cast by our shareholders who, being entitled to do so, vote in person or by proxy at our general meeting of which notice as our Articles provide and not being less than 21 days notice specifying the intention to propose the resolution as a special resolution, has been duly given (or, if every shareholder entitled to attend and vote at the meeting agrees, at a meeting of which less than 21 days notice has been given), or a resolution consented to in writing by each of our shareholders who would have been entitled to vote in person or by proxy at our general meeting, and a resolution so consented to is deemed to be a special resolution passed at our general meeting.

There is no requirement in our Articles or in the Act requiring retirement or non-retirement of directors under an age limit requirement, nor is there any minimum shareholding required for a director's qualification.

Holders of our common shares are entitled to vote at meetings of shareholders, and a Special Resolution, as described above, is required to effect a change in the rights of shareholders.  Holders of common shares are not entitled to pre-emptive rights.  Holders of common shares are entitled, ratably, to the remaining property of our company upon our liquidation, dissolution or winding up, and such holders receive dividends if, as, and when, declared by our directors.  There are no restrictions on the purchase or redemption of common shares by us while there is an arrearage in the payment of dividends or sinking fund installments.  There is no liability on the part of any shareholder to further capital calls by us nor any provision discriminating against any existing or prospective holder of our securities as a result of such shareholder owning a substantial number of common shares.  Ther e are no limitations on the rights to own securities, including the rights of non-resident or foreign shareholders to hold or exercise voting rights on the securities imposed by the Act or by our constating documents.

We are required to give our registered shareholders not less than 21 days notice of any general meeting held by us unless all such shareholders consent to reduce or waive the period.  In addition, we are obliged to give notice to registrants and intermediaries who hold common shares on behalf of the ultimate beneficial owners no fewer than 35 or more than 60 days prior to the date of the meeting.  We then deliver, in bulk, proxy-related materials in amounts specified by the intermediaries.  None of our common shares owned by registrants or intermediaries may be voted at our general meeting unless all proxy-related materials are delivered to the ultimate beneficial owners of such common shares.  Such ultimate beneficial owner must then deliver a proxy to us within the time limited by us for the deposit of proxies in order to vote the common shares in respect of which such person is the benefic ial owner.

There is no provision in our Articles that would have an effect of delaying, deferring or preventing our change in control and that would operate only with respect to a merger, acquisition or corporate restructuring involving us (or any of our subsidiaries) other than a shareholder rights plan adopted by our Board of Directors effective March 7, 2006, and approved by our company’s shareholders at the Annual and Special Meeting held on June 6, 2006 (the “Shareholder Rights Plan”).

The Shareholder Rights Plan is designed to ensure that all shareholders receive equal treatment and to maximize shareholder values in the event of a take-over bid or other acquisition that could lead to a change in control of our company.  It is not intended to deter take-over bids. Take-over bid contests for corporate control provide a singular opportunity for shareholders to obtain a one-time gain.  After the acquisition of effective control, the opportunity for this one-time gain normally does not reoccur.  As with most public companies, control of our company can probably be secured through the ownership of much less than 50% of the shares. Without a shareholder rights plan, it would be possible for a bidder to acquire effective control, over a relatively short period of time, through open market and private purchases, using various techniques permitted under the securities legislation in Canada, without making a bid ava ilable to all shareholders. Such acquisition of control would probably be an effective deterrent to other potential offerors.  The person acquiring control would probably, over a period of time, be able to consolidate and increase its control without the price for control ever being tested through an open market auction.   Shareholder rights plans are designed to prevent this occurrence by forcing all acquisitions of control into a public offer mode.  A public offer will not necessarily achieve all of the objectives of ensuring the maximum value to shareholders. A take-over bid can be completed in a time period as short as 35 days. This is too short a time period to ensure that the directors can develop other competing alternatives. The Shareholder Rights Plan is intended to provide time to shareholders to properly assess any take-over bid and to provide the Board of Directors with sufficient time to explore and develop alternatives for maximizing shareholder value, including, if consider ed appropriate, identifying and locating other potential bidders.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 65

The following is a summary of the terms of the Shareholder Rights Plan:

General

The rights have been issued pursuant to a shareholder rights plan agreement dated and effective March 7, 2006, between our company and the rights agent.  Each right will entitle the holder to purchase from our company one common share at the exercise price of Cdn$30 per share, subject to adjustments, at any time after the separation time (defined below). However, if a flip-in event (defined below) occurs, each right will entitle the holder to receive, upon payment of the exercise price, common shares having a market value equal to two-times the exercise price. The rights are non-exercisable until the separation time.

Trading of Rights

Until the separation time, the rights will be evidenced by the outstanding certificates for common shares and the rights will be transferred with, and only with, the common shares.  As soon as practicable following the separation time, separate certificates evidencing the rights will be mailed to holders of record of common shares as of the close of business at the separation time and the separate rights certificates will thereafter evidence the rights.

Separation Time and Acquiring Person

The rights will separate and trade apart from the common shares and become exercisable at the separation time.  "Separation time" generally means the close of business on the 10th trading day following the commencement or announcement of the intent of any person to commence a take-over bid, other than a permitted bid or a competing bid, but under certain circumstances can mean the eighth trading day after a person becomes an "acquiring person" by acquiring 20% or more of the voting shares of any class.

Flip-in Event

A "flip-in event" will, in general terms, occur when a person becomes an acquiring person.  Upon the occurrence of a flip-in event, each right will entitle the holder to acquire, on payment of the exercise price, that number of common shares having a market value equal to two-times the exercise price.  However, any rights beneficially owned by an acquiring person or by any direct or indirect transferees of such person, will be void.  The term "beneficial ownership" is defined to include, under certain circumstances, common shares owned indirectly through affiliates, associates, trusts and partnerships, other situations of ownership deemed by operation of law, common shares subject to acquisition or voting agreements and common shares owned by persons acting jointly or in concert.  There are several exceptions, including exceptions directed towards investment managers, trust companies, and independent managers of pension plans who are not participating in a take-over bid.

Permitted Bids

Permitted bids are exempted from the operation of the Shareholder Rights Plan.  In summary, a permitted bid is a take-over bid made by way of take-over bid circular which complies with the following provisions:

(a)  It is made to all holders of voting shares of our company of a particular class and for all those voting shares.

(b) No voting shares can be taken up and paid for before the close of business on the Permitted Bid Expiry Date, as defined below, and unless more than 50% of voting shares held by shareholders independent of the offeror are tendered and not withdrawn.

(c) Voting shares may be tendered at any time until the Permitted Bid Expiry Date and may be withdrawn until taken up and paid for.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 66

(d) If the condition described in (b) above is met, there will be a public announcement and the takeover bid will be open for a further period of 10 business days.

The Shareholder Rights Plan contains provisions designed to ensure that, if considered appropriate, the time for tendering to two or more competing permitted bids will occur on the same date.

Permitted Bid Expiry Date

The permitted bid provisions require that for a take-over to be a permitted bid it must be left open until the Permitted Bid Expiry Date.  The “Permitted Bid Expiry Date” means 60 days following the date of the take-over bid.

Exchange Option

Under certain circumstances, the Board of Directors of our company can, on exercise of a right and payment of the exercise price, issue other of our company’s securities or assets in lieu of common shares.  Our company’s Board of Directors can also determine to issue in exchange for the rights, but without payment of the exercise price, common shares having a value equal to the exercise price or other securities or assets of our company having the same value.

Adjustments

The exercise price, the number and kind of shares subject to purchase upon exercise of each right and the number of rights outstanding are subject to adjustment from time to time to prevent dilution in the event that our company takes certain actions involving our company’s share capital which would otherwise have a dilutive effect.

Redemption

At any time before the occurrence of a flip-in event, our Board of Directors may elect to redeem the rights in whole at a redemption price of $0.0001 per right.

Waiver

Our Board of Directors may waive the application of the Shareholder Rights Plan to any flip-in event if it determines that a person became an acquiring person by inadvertence, conditional upon such person having, within 10 days after the determination by our Board of Directors, reduced its beneficial ownership of common shares such that it is no longer an acquiring person.  The Board of Directors may also, until a flip-in event has occurred, waive the application of the Shareholder Rights Plan to any particular flip-in event, but in that event, our Board of Directors shall be deemed to have waived the application of the Shareholder Rights Plan to any other flip-in event which may arise under any take-over bid then in effect.

Amendments

Our Board of Directors may amend the Shareholder Rights Plan to correct clerical or typographical errors, to maintain the validity of the plan as a result of any changes in any applicable legislation or to increase or decrease the exercise price. Any amendments required to maintain the validity of the Shareholder Rights Plan must be submitted to our company’s shareholders or, after the separation time, to the holders of the rights for confirmation.

Other amendments can only be made with the approval of our company’s shareholders or, after the separation time, the holders of the rights.  Any supplements or amendments to the Shareholder Rights Plan require the prior written consent of the Toronto Stock Exchange.

Term

The Shareholder Rights Plan has a term of 10 years and is subject to ratification at each of the shareholder meetings following the third and sixth anniversaries of the effective date of the Shareholder Rights Plan. If the Shareholder Rights Plan is not so ratified at any meeting, the Shareholder Rights Plan shall terminate forthwith.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 67

Securities legislation in our home jurisdiction of British Columbia requires that shareholder ownership must be disclosed once a person owns beneficially or has control or direction over greater than 10% of our issued shares.  This threshold is higher than the 5% threshold under U.S. securities legislation at which shareholders must report their share ownership.

10.C.  Material Contracts

We have entered into formal agreements with our President and Chief Executive Officer, our Chief Financial Officer, our Chief Operating Officer and with the head of our Exploration and Resources Development division establishing financial arrangements that would be in effect in the event of a change of control of our company.  Each agreement provides for, in the event of the termination of the engagement of such persons following a change of control of our company, the payment of an amount equal to two times the annual compensation being paid to such person as at the time of the change of control.  A copy of each of these agreements has been previously filed with the SEC, except for the agreement with the Company’s Chief Financial Officer, which is attached to this Amendment No. 2 as Exhibit 4.U.

Our Employment Agreement with our Chief Financial Officer, Bassam Moubarak, also contains a risk mitigation provision providing 12 months’ compensation in the event of termination of his employment without just cause.  The 12 months’ compensation provision will also apply in the event of his dismissal due to any layoff based on group restructuring or a sale of assets.  A copy of the Employment Agreement dated February 11, 2008, between Petaquilla Minerals Ltd. and Bassam Moubarak is attached to this Amendment No. 2 as Exhibit 4.U.

10.D.  Exchange Controls

There are no governmental laws, decrees or regulations in Canada relating to restrictions on the export or import of capital, or affecting the remittance of interest, dividends or other payments to non-resident holders of our common shares.  Any remittances of dividends to United States residents are, however, subject to a 15% withholding tax (5% if the shareholder is a corporation owning at least 10% of our outstanding common shares) pursuant to Article X of the reciprocal tax treaty between Canada and the United States.  See“Item 10 – Additional Information – E.  Taxation” below.  

Except as provided in the Investment Canada Act (the "Act"), which has provisions which govern the acquisition of a control block of voting shares by non-Canadians of a corporation carrying on a Canadian business, there are no limitations specific to the rights of non-Canadians to hold or vote our common shares under the laws of Canada or the Province of British Columbia or in our charter documents.

Our management considers that the following general summary fairly describes those provisions of the Act pertinent to an investment in our company by a person who is not a Canadian resident (a "non-Canadian").

The Act requires a non-Canadian making an investment which would result in the acquisition of  control of the Canadian business to notify the Investment Review Division of Industry Canada, the federal agency created by the Act; or in the case of an acquisition of a Canadian business, the gross value of the assets of which exceeds certain threshold levels or the business activity of which is related to Canada's cultural heritage or national identity, to file an application for review with the Investment Review Division.  

The notification procedure involves a brief statement of information about the investment on a prescribed form which is required to be filed with Investment Canada by the investor at any time up to 30 days following implementation of the investment.  Once the completed notice has been filed, a receipt bearing the certificate date will be issued to the non-Canadian investor.  The receipt must advise the investor either that the investment proposal is unconditionally non-reviewable or that the proposal will not be reviewed as long as notice of review is not issued within 21 days of the date certified under the receipt.  It is intended that investments requiring only notification will proceed without government intervention unless the investment is in a specific type of business activity related to Canada's cultural heritage and national identity.

If an investment is reviewable under the Act, an order for review must be issued within 21 days after the certified date on which notice of investment was received.  An application for review in the form prescribed is required to be filed with Investment Canada prior to the investment taking place.  Once the application has been filed, a receipt will be issued to the applicant, certifying the date on which the application was received.  For incomplete applications, a deficiency notice will be sent to the applicant, and if not done within 15 days of receipt of application, the application will be deemed to be complete as of the date it was received.  Within 45 days after the complete application has been received, the Minister responsible for theInvestment Canada Act must notify the potential investor that the Minister is satisfied that the investment is likely to be of net benefit to Canada.  If within such 45-day period the Minister is unable to complete the review, the Minister has an additional 30 days to complete the review, unless the applicant agrees to a longer period.  Within such additional period, the Minister must advise either that he is satisfied or not satisfied that the investment is likely to be of net benefit to Canada.  If the time limits have elapsed, the Minister will be deemed to be satisfied that the investment is likely to be of net benefit to Canada.  The investment may not be implemented until the review has been completed and the Minister is satisfied that the investment is likely to be of net benefit to Canada.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 68

If the Minister is not satisfied that the investment is likely to be of net benefit to Canada, the non-Canadian must not implement the investment or, if the investment has been implemented, could be penalized by being required to divest himself of control of the business that is the subject of the investment.  To date, the only types of business activities which have been prescribed by regulation as related to Canada's cultural heritage or national identity deal largely with publication, film and music industries.  Because our total assets are less than the $5 million notification threshold, and because our business activities would likely not be deemed related to Canada's cultural heritage or national identity, acquisition of a controlling interest in our company by a non-Canadian investor would not be subject to even the notification requirements under the Investment Cana da Act.  

The following investments by non-Canadians are subject to notification under the Act:

1.

an investment to establish a new Canadian business; and

2.

an investment to acquire control of a Canadian business that is not reviewable pursuant to the Act.

The following investments by a non-Canadian are subject to review under the Act:

1.

direct acquisition of control of Canadian businesses with assets of $5 million or more, unless the acquisition is being made by a World Trade Organization ("WTO") member country investor (the United States being a member of the WTO);

2.

direct acquisition of control of Canadian businesses with assets of $250,000,000 or more by a WTO investor;

3.

indirect acquisition of control of Canadian business with assets of $5 million or more if such assets represent more than 50% of the total value of the assets of the entities, the control of which is being acquired, unless the acquisition is being made by a WTO investor, in which case there is no review;

4.

indirect acquisition of control of Canadian businesses with assets of $50 million or more even if such assets represent less than 50% of the total value of the assets of the entities, the control of which is being acquired, unless the acquisition is being made by a WTO investor, in which case there is no review; and

5.

an investment subject to notification that would not otherwise be reviewable if the Canadian business engages in the activity of publication, distribution or sale of books, magazines, periodicals, newspapers, film or video recordings, audio or video music recordings, or music in print or machine-readable form.

Generally speaking, an acquisition is direct if it involves the acquisition of control of the Canadian business or of its Canadian parent or grandparent and an acquisition is indirect if it involves the acquisition of control of a non-Canadian parent or grandparent of an entity carrying on the Canadian business.  Control may be acquired through the acquisition of actual voting control by the acquisition of voting shares of a Canadian corporation or through the acquisition of substantially all of the assets of the Canadian business.  No change of voting control will be deemed to have occurred if less than one-third of the voting control of a Canadian corporation is acquired by an investor.

A WTO investor, as defined in the Act, includes an individual who is a national of a member country of the World Trade Organization or who has the right of permanent residence in relation to that WTO member, a government or government agency of a WTO investor-controlled corporation, limited partnership, trust or joint venture and a corporation, limited partnership, trust or joint venture that is neither WTO-investor controlled or Canadian controlled of which two-thirds of its board of directors, general partners or trustees, as the case may be, or any combination of Canadians and WTO investors.

The higher thresholds for WTO investors do not apply if the Canadian business engages in activities in certain sectors such as uranium, financial services, transportation services or communications.

The Act specifically exempts certain transactions from either notification or review.  Included among this category of transactions is the acquisition of voting shares or other voting interests by any person in the ordinary course of that person's business as a trader or dealer in securities.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 69

10.E.  Taxation

Material Canadian Federal Income Tax Consequences

Through consultation with counsel, our management believes that the following general summary accurately describes all material Canadian federal income tax consequences applicable to a holder of our common shares who is a resident of the United States, that qualifies for benefits under the Canada-U.S. Income Tax convention (“1980”) (the “Treaty”) and who is not a resident of Canada and who does not use or hold, and is not deemed to use or hold, his common shares of our company in connection with carrying on a business in Canada (a "non-resident holder").

This summary is based upon the current provisions of the Income Tax Act (Canada) (the "ITA"), the regulations thereunder (the "Regulations"), the current publicly announced administrative and assessing policies of Canada, Customs and Revenue Agency, and all specific proposals (the "Tax Proposals") to amend the ITA and Regulations announced by the Minister of Finance (Canada) prior to the date hereof.  This summary assumes that the Tax Proposals will be enacted in their form as of the date of this Annual Report.  This description, except for the Tax Proposals, does not take into account or anticipate any changes in law, whether by legislative, government or judicial action, nor does it take into account provincial, territorial, or foreign tax considerations which may differ significantly from those discussed herein.

Dividends

Dividends paid on our common shares to a non-resident holder will be subject to withholding tax.  The Treaty provides that the normal 25% withholding tax rate under the ITA is reduced to 15% on dividends paid on shares of a corporation resident in Canada (such as our company) to beneficial owners of the dividends who are residents of the United States, and may also provide for a further reduction of this rate to 5% where the beneficial owner of the dividends is a corporation that is a resident of the United States which owns at least 10% of the voting shares of the corporation paying the dividend.  

No dividends have ever been paid by us.

Capital Gains

Under the ITA, a taxpayer's capital gain or capital loss from a disposition of a share of our company is the amount, if any, by which his proceeds of disposition exceed (or are exceeded by) the aggregate of his adjusted cost base of the share and reasonable expenses of disposition.  One half of a capital gain (the "taxable capital gain") is included in income, and one half of a capital loss in a year (the "allowable capital loss") is deductible from taxable capital gains realized in the same year.  The amount by which a shareholder's allowable capital loss exceeds his taxable capital gains in a year may be deducted from a taxable capital gain realized by the shareholder in the three previous or any subsequent year, subject to certain restrictions in the case of a corporate shareholder.

A non-resident holder is not subject to tax under the ITA in respect of a capital gain realized upon the disposition of a share of a public corporation unless the share represents "taxable Canadian property" to the holder thereof.  We are a public corporation for purposes of the ITA and a common share of our company will be taxable Canadian property to a non-resident holder if, at any time during the 60 months period immediately preceding the disposition, the non-resident holder, persons with whom the non-resident holder did not deal at arm's length, or the non-resident holder and persons with whom he did not deal at arm's length together owned not less than 25% of the issued shares of any class of shares of our company.  Our shares may also be taxable Canadian property to a holder if the holder acquired them pursuant to certain tax-deferred "rollover" transactions whereby the holde r exchanged property that was taxable Canadian property for our shares.

Where a non-resident holder who is an individual ceased to be resident in Canada, he will be subject to Canadian tax on any capital gain realized on disposition of our shares at that time.  

Where a non-resident holder realizes a capital gain on a disposition of our shares that constitute taxable Canadian property, the Treaty relieves the non-resident shareholder from liability for Canadian tax on such capital gains unless:

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 70

(a)

the non-resident holder is an individual who was resident in Canada for not less than 120 months during any period of 20 consecutive years preceding, and at any time during the 10 years immediately preceding, the disposition and the shares were owned by him when he ceased to be resident in Canada or are property substituted for property that was owned at that time, or

(b)

the shares formed part of the business property of a "permanent establishment" or pertained to a fixed base used for the purpose of performing independent personal services that the shareholder has or had in Canada within the 12 months preceding the disposition.

Material United States Federal Income Tax Consequences

The following is a discussion of material U.S. federal income tax consequences that may be relevant with respect to the acquisition, ownership and disposition of our common shares by a U.S. Holder (as hereinafter defined).  This discussion does not address all potentially relevant federal income tax matters and it does not address consequences peculiar to persons subject to special provisions of federal income tax law, such as those described below as excluded from the definition of a U.S. Holder.  In addition, this discussion does not cover any state, local or foreign tax consequences.  Accordingly, holders and prospective holders of our common shares are urged to consult their own tax advisors about the specific federal, state, local, and foreign tax consequences to them of acquiring, holding and disposing of our common shares, based upon their individual circumstances.

The following discussion is based upon the sections of the Code, Treasury Regulations, published Internal Revenue Service (“IRS”) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time and which are subject to differing interpretations. This discussion does not consider the potential effects, both adverse and beneficial, of any proposed legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time.

U.S. Holders

As used in this annual report, a “U.S. Holder” means a holder of our common shares who is (i) a citizen or individual resident of the United States, (ii) corporation, or other entity treated as a corporation for U.S. tax purposes, created or organized in or under the laws of the United States or any state thereof (including the District of Columbia), (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source, or (iv) a trust if such trust was in existence on August 20, 1996 and validly elected to be treated as a United States person for U.S. federal income tax purposes or if (1) a court within the U.S. is able to exercise primary supervision over its administration and (2) one or more U.S. persons have the authority to control all of the substantial decisions of such trust.   This summary does not address the tax consequences to, and the term U.S. Holder does not inclu de, persons subject to specific provisions of federal income tax law, such as tax-exempt organizations, qualified retirement plans, individual retirement accounts and other tax-deferred accounts, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident alien individuals, persons or entities that have a “functional currency” other than the U.S. dollar, shareholders subject to the alternative minimum tax, shareholders who hold common shares as part of a straddle, hedging or conversion transaction, and shareholders who acquired their common shares through the exercise of employee stock options or otherwise as compensation for services.  This summary is limited to U.S. Holders who own common shares as capital assets, within the meaning of Section 1221 of the Code, and who own (directly and indirectly, pursuant to applicable rules of constructive ownership) no more than 10% of the value of our total outstanding s tock.  This summary does not address the consequences to a person of the ownership, exercise or disposition of any options, warrants or other rights to acquire common shares.

If a partnership (or any other entity treated as a partnership for U.S. federal income tax purposes) holds our common shares, the tax treatment of a partner in such partnership will generally depend on the status of the partner and the activities of the partnership. Such a partner should consult its own tax advisors as to the U.S. tax consequences of being a partner in a partnership that acquires, holds, or disposes of our common shares.

Distributions on Our Common Shares

Subject to the discussion below under “Passive Foreign Investment Company,” U.S. Holders receiving dividend distributions (including constructive dividends) with respect to our common shares generally are required to include in gross income for U.S. federal income tax purposes the gross amount of such distributions (without reduction of any Canadian income or other tax withheld from such distributions), equal to the U.S. dollar value of such distributions on the date of receipt (based on the exchange rate on such date), to the extent that we have current or accumulated earnings and profits.  Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holder’s federal income tax liability or, alternatively, may be deducted in computing the U.S. Holder’s federal taxable income by those who itemize deductions (See more detailed discussion at “Foreign Tax Credit” below). Dividends paid on our common shares will not generally be eligible for the dividends received deduction provided to corporations receiving dividends from certain U.S. corporations.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 71

For taxable years beginning before January 1, 2011, dividends received by U.S. Holders that are individuals, estates or trusts from “qualified foreign corporations,” as defined in Section 1(h)(11) of the Code, generally are taxed at the same preferential tax rates applicable to long-term capital gains. Although not free from doubt, it appears that we are a “qualified foreign corporation,” as defined in Section 1(h)(11) of the Code if we are not, and have not been, a PFIC, as described below under “Passive Foreign Investment Company.” We have not determined whether or not we meet the definition of a PFIC for the current tax year and any prior tax years. A corporation that is a PFIC, along with other foreign corporations given special status under the Code, for its taxable year during which it pays a dividend, or for its immediately preceding taxable year, will not be treated as a “qualifying foreign corporation” and dividends received by U.S. Holders that are individuals, estates or trusts generally will be subject to U.S. federal income tax at ordinary income tax rates (and not at the preferential tax rates applicable to long-term capital gains).

In the case of foreign currency received as a dividend that is not converted by the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have a tax basis in the foreign currency equal to its U.S. dollar value on the date of receipt.  Generally any gain or loss recognized upon a subsequent sale or other disposition of the foreign currency, including the exchange for U.S. dollars, will be ordinary income or loss.

Disposition of Our Common Shares

Subject to the discussion below under “Passive Foreign Investment Company,” U.S. Holders will recognize gain or loss upon the sale of our common shares equal to the difference, if any, between (i) the amount of cash plus the fair market value of any property received, and (ii) the shareholder’s tax basis in our common shares.  Preferential tax rates apply to long-term capital gains of U.S. Holders that are individuals, estates or trusts.  In general, gain or loss on the sale of our common shares will be long-term capital gain or loss if our common shares are a capital asset in the hands of the U.S. Holder and are held for more than one year.  Deductions for net capital losses are subject to significant limitations.

Passive Foreign Investment Company

We have not determined whether or not we meet the definition of PFIC, within the meaning of Sections 1291 through 1298 of the Code for the current tax year and any prior tax years.  We may or may not qualify as a PFIC in subsequent years due to changes in our assets and business operations.  A U.S. Holder who holds stock in a foreign corporation during any year in which such corporation qualifies as a PFIC is subject to numerous special U.S. federal income taxation rules.  The following is a discussion of these special rules as they apply to U.S. Holders of our common shares.  

Section 1297 of the Code defines a PFIC as a corporation that is not formed in the U.S. if, for any taxable year, either (i) 75% or more of its gross income is “passive income,” which includes interest, dividends and certain rents and royalties or (ii) the average percentage, by fair market value (or, if the corporation is not publicly traded and either is a controlled foreign corporation or makes an election, by adjusted tax basis), of its assets that produce or are held for the production of passive income is 50% or more.

U.S. Holders owning shares of a PFIC are subject to a special tax and to an interest charge based on the value of deferral of U.S. tax attributable to undistributed earnings of a PFIC for the period during which the shares of the PFIC are owned.  This special tax would apply to any gain realized on the disposition of shares of a PFIC.  In addition, the gain is subject to U.S. federal income tax as ordinary income, taxed at top marginal rates, rather than as capital gain income.  The special tax would also be payable on receipt of excess distributions (any distributions received in the current year that are in excess of 125% of the average distributions received during the 3 preceding years or, if shorter, the shareholder’s holding period).  However, if the U.S. Holder makes for any tax year a timely election to treat a PFIC as a qualified electing fund (“QEF”) with respect to such shareholder’ s interest therein, the above-described rules generally will not apply.  Instead, the electing U.S. Holder would include annually in his gross income his pro rata share of the PFIC’s ordinary earnings and any net capital gain regardless of whether such income or gain was actually distributed.  Special rules apply to U.S. Holders who own their interests in a PFIC through intermediate entities or persons.  Generally, shareholders do not make a QEF election unless they have sufficient information to determine their proportionate share of a corporation’s net capital gain and ordinary earnings. We have not calculated these amounts for any shareholder, and do not anticipate making these calculations in the foreseeable future.Therefore, U.S. Holders of our common shares should consult their own financial advisor, legal counsel or accountant regarding the QEF election before making this election.   

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 72

U.S. Holders who hold, actually or constructively, marketable stock of a foreign corporation that qualifies as a PFIC may elect to mark such stock to the market (a “mark-to-market election”).  If such an election is made, such U.S. Holder will not be subject to the special taxation rules of PFIC described above for the taxable years for which the mark-to-market election is made.  A U.S. Holder who makes such an election will include in income for the taxable year an amount equal to the excess, if any, of the fair market value of our common shares as of the close of such tax year over such U.S. Holder’s adjusted basis in such shares.  In addition, the U.S. Holder is allowed a deduction for the lesser of (i) the excess, if any, of such U.S. Holder’s adjusted tax basis in the shares over the fair market value of such shares as of the close of the tax year, or (ii) the excess, if any of (A) the mark-to-market gains for our common shares included by such U.S. Holder for prior tax years, including any amount which would have been included for any prior year but for Section 1291 interest on tax deferral rules discussed above with respect to a U.S. Holder, who has not made a timely QEF election during the year in which he holds (or is deemed to have held) our common shares and the Company is a PFIC (“Non-Electing U.S. Holder”), over (B) the mark-to-market losses for shares that were allowed as deductions for prior tax years.  A U.S. Holder’s adjusted tax basis in our common shares will be increased or decreased to reflect the amount included or deducted as a result of mark-to-market election.  A mark-to-market election will apply to the tax year for which the election is made and to all later tax years, unless the PFIC stock ceases to be marketable or the IRS consents to the revocation of the election.

The IRS has issued proposed regulations that, subject to certain exceptions, would treat as taxable certain transfers of PFIC stock by a Non-Electing U.S. Holder that are generally not otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death. Generally, in such cases, the basis of our common shares in the hands of the transferee and the basis of any property received in the exchange for those shares would be increased by the amount of gain recognized.  A U.S. Holder who has made a timely QEF election (as discussed above) would not be taxed on certain transfers of PFIC stock, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death.  The transferee’s basis in this case will depend on the manner of the transfer. The specific tax effect to the U.S. Holder and the transferee may vary based on the manner in which the common shares are transferred.   Each U.S. Holder should consult a tax advisor with respect to how the PFIC rules affect their tax situation.

The PFIC and QEF election rules are complex.  U.S. Holders should consult a tax advisor regarding the availability and procedure for making the QEF election as well as the applicable method for recognizing gains or earnings and profits under the foregoing rules. 

Foreign Tax Credit

A U.S. Holder who pays (or has withheld from distributions) Canadian or other foreign income tax with respect to the ownership of our common shares  may be entitled, at the option of the U.S. Holder, to either receive a deduction or a tax credit for U.S. federal income tax purposes with respect to such foreign tax paid or withheld. Complex limitations apply to the foreign tax credit, including the general limitation that the credit cannot exceed the proportionate share of a U.S. Holder’s U.S. federal income tax liability that such U.S. Holder’s “foreign source” taxable income bears to such U.S. Holder’s worldwide taxable income. In applying this limitation, a U.S. Holder’s various items of income and deduction must be classified, under complex rules, as either “foreign source” or “U.S. source.” In addition, this limitation is calculated separately with respe ct to specific categories of income including “passive category income” and “general category income.”  Gain or loss recognized by a U.S. Holder on the sale or other taxable disposition of our common shares generally will be treated as “U.S. source” for purposes of applying the foreign tax credit rules.  Dividends received by U.S. Holders on our common shares generally will be treated as “foreign source” and generally will be categorized as “passive income” for purposes of applying the foreign tax credit rules.  The availability of the foreign tax credit and the application of the limitations with respect to the foreign tax credit are fact specific, and each U.S. Holder of our common shares should consult their own financial advisor, legal counsel or accountant regarding the foreign tax credit rules.

Controlled Foreign Corporation

If more than 50% of the total voting power or the total value of our outstanding shares is owned, directly or indirectly, by citizens or residents of the U.S., U.S. partnerships or corporations, or U.S. estates or trusts (as defined by Section 7701(a)(30) of the Code), each of which own, directly or indirectly, 10% or more of the total voting power of the our outstanding shares (each a “10% Shareholder”), we could be treated as a “Controlled Foreign Corporation” (“CFC”) under Section 957 of the Code.

Our classification as a CFC would effect many complex results, including that 10% Shareholders would generally (i) be treated as having received a current distribution of our “Subpart F income” and (ii) would also be subject to current U.S. federal income tax on their pro rata share of our earnings invested in “U.S. property.” The foreign tax credit may reduce the U.S. federal income tax on these amounts for such 10% Shareholders (See more detailed discussion at “Foreign Tax Credit” above). In addition, under Section 1248 of the Code, gain from the sale or other taxable disposition of our common shares by a U.S. Holder that is or was a 10% Shareholder at any time during the five-year period ending with the sale is treated as a dividend to the extent of our earnings and profits attributable to the common shares sold or exchanged.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 73

If we are classified as both a PFIC and a CFC, we generally will not be treated as a PFIC with respect to 10% Shareholders. This rule generally will be effective for taxable years of 10% Shareholders beginning after 1997 and for its taxable years ending with or within such taxable years of 10% Shareholders.

We have not determined whether we meet the definition of a CFC, and there can be no assurance that we will not be considered a CFC for the current or any future taxable year.

The CFC rules are very complicated, and U.S. Holders should consult their own financial advisor, legal counsel or accountant regarding the CFC rules and how these rules may impact their U.S. federal income tax situation.

Information Reporting; Backup Withholding

Certain information reporting and backup withholding rules may apply with respect to certain payments related to our common shares. In particular, a payor or middleman within the U.S., or in certain cases outside the U.S., will be required to withhold at a current rate of 28% (which rate is scheduled for periodic adjustment) of any payments to a U.S. Holder regarding dividends paid by the Company, or proceeds from the sale of, such common shares within the U.S., if a U.S. Holder fails to furnish its correct taxpayer identification number (generally on Form W-9) or otherwise fails to comply with, or establish an exemption from, the backup withholding tax requirements. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a refund or a credit against the U.S. Holder’s U.S. federal income tax liability, provided the required information is furnished to the IRS.U.S. Holders sho uld consult their own financial advisor, legal counsel or accountant regarding the information reporting and backup withholding rules applicable to our common shares.

10.F.  Dividends and Paying Agents

This Amendment No. 2 is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this section.

10.G.  Statements by Experts

This Amendment No. 2 is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this section.

10.H.  Documents on Display

Any documents referred to in this Amendment No. 2 may be inspected at our head office, Suite 410, 475 West Georgia Street, Vancouver, British Columbia, V6B 4M9 Canada, during normal business hours.

10.I.  Subsidiary Information

There is no additional information relating to our subsidiaries, which must be provided in Canada and which is not otherwise called for by the body of Canadian Generally Accepted Accounting Principles used in preparing the consolidated financial statements.

ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We anticipate our primary market risk, if any, to be related to fluctuations in exchange rates.  Exchange rate risk may arise if we are required to use different currencies for various aspects of our operations.  At present, our functional currency is the Canadian dollar.  Based on our overall exchange rate risk as at May 31, 2008, we believe that a ten percent change in exchange rates would not have a material adverse effect on our financial position, results of operations, or changes in financial position.  We intend to monitor our exchange rate risk and take reasonable steps to reduce our exposure.  We do not intend to purchase or sell derivative instruments for speculative purposes.  

ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 74

This Amendment No. 2 is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.  

PART II

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

There has not been a material default in the payment of principal, interest, a sinking or purchase fund installment, or any other material default not cured within thirty days, relating to our indebtedness or any of our significant subsidiaries.  There are no payments of dividends by us in arrears, nor has there been any other material delinquency relating to any class of our preference shares.  

ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Effective March 7, 2006, our Board of Directors adopted a shareholder rights plan, which was subsequently approved by our company’s shareholders at our Annual and Special Meeting held on June 6, 2006.

The Shareholder Rights Plan is designed to ensure that all shareholders receive equal treatment and to maximize shareholder values in the event of a take-over bid or other acquisition that could lead to a change in control of our company.  It is not intended to deter take-over bids. Take-over bid contests for corporate control provide a singular opportunity for shareholders to obtain a one-time gain.  After the acquisition of effective control, the opportunity for this one-time gain normally does not reoccur.  As with most public companies, control of our company can probably be secured through the ownership of much less than 50% of our shares. Without a shareholder rights plan, it would be possible for a bidder to acquire effective control, over a relatively short period of time, through open market and private purchases, using various techniques permitted under the securities legislation in Canada, without making a bid ava ilable to all shareholders. Such acquisition of control would probably be an effective deterrent to other potential offerors.  The person acquiring control would probably, over a period of time, be able to consolidate and increase its control without the price for control ever being tested through an open market auction.   Shareholder rights plans are designed to prevent this occurrence by forcing all acquisitions of control into a public offer mode.  A public offer will not necessarily achieve all of the objectives of ensuring the maximum value to shareholders. A take-over bid can be completed in a time period as short as 35 days. This is too short a time period to ensure that the directors can develop other competing alternatives. The Shareholder Rights Plan is intended to provide time to shareholders to properly assess any take-over bid and to provide our Board of Directors with sufficient time to explore and develop alternatives for maximizing shareholder value, including, if consider ed appropriate, identifying and locating other potential bidders.

The following is a summary of the terms of the Shareholder Rights Plan:

General

The rights have been issued pursuant to a shareholder rights plan agreement dated and effective March 7, 2006, between us and the Rights Agent.  Each right will entitle the holder to purchase from us one common share at the exercise price of C$30 per share, subject to adjustments, at any time after the separation time (defined below). However, if a flip-in event (defined below) occurs, each right will entitle the holder to receive, upon payment of the exercise price, common shares having a market value equal to two-times the exercise price. The rights are non-exercisable until the separation time.

Trading of Rights

Until the separation time, the rights will be evidenced by the outstanding certificates for common shares and the rights will be transferred with, and only with, the common shares.  As soon as practicable following the separation time, separate certificates evidencing the rights will be mailed to holders of record of common shares as of the close of business at the separation time and the separate rights certificates will thereafter evidence the rights.

Separation Time and Acquiring Person

The rights will separate and trade apart from the common shares and become exercisable at the separation time.  “Separation time” generally means the close of business on the 10th trading day following the commencement or announcement of the intent of any person to commence a take-over bid, other than a permitted bid or a competing bid, but under certain circumstances can mean the eighth trading day after a person becomes an "acquiring person" by acquiring 20% or more of the voting shares of any class.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 75

Flip-in Event

A “flip-in event” will, in general terms, occur when a person becomes an acquiring person.  Upon the occurrence of a flip-in event, each right will entitle the holder to acquire, on payment of the exercise price, that number of common shares having a market value equal to two-times the exercise price.  However, any rights beneficially owned by an acquiring person or by any direct or indirect transferees of such person, will be void.  The term “beneficial ownership” is defined to include, under certain circumstances, shares owned indirectly through affiliates, associates, trusts and partnerships, other situations of ownership deemed by operation of law, shares subject to acquisition or voting agreements and shares owned by persons acting jointly or in concert.  There are several exceptions, including exceptions directed towards investment managers, trust companies, and independent managers of pension plans who are not participating in a take-over bid.

Permitted Bids

Permitted bids are exempted from the operation of the Shareholder Rights Plan.  In summary, a permitted bid is a take-over bid made by way of take-over bid circular which complies with the following provisions:

(a) It is made to all holders of voting shares of our company of a particular class and for all those voting shares.

(b) No voting shares can be taken up and paid for before the close of business on the “Permitted Bid Expiry Date”, as described below, and unless more than 50% of voting shares held by shareholders independent of the offeror are tendered and not withdrawn.

(c) Voting shares may be tendered at any time until the Permitted Bid Expiry Date and may be withdrawn until taken up and paid for.

(d) If the condition described in (b) above is met, there will be a public announcement and the takeover bid will be open for a further period of 10 business days.

The Shareholder Rights Plan contains provisions designed to ensure that, if considered appropriate, the time for tendering to two or more competing permitted bids will occur on the same date.

Permitted Bid Expiry Date

The permitted bid provisions require that for a take-over to be a permitted bid it must be left open until the “Permitted Bid Expiry Date”, which means 60 days following the date of the take-over Bid.

Exchange Option

Under certain circumstances, the Board of Directors of our company can, on exercise of a right and payment of the exercise price, issue other company securities or assets in lieu of common shares.  The Board of Directors can also determine to issue in exchange for the rights, but without payment of the exercise price, common shares having a value equal to the exercise price or other securities or assets of our company having the same value.

Adjustments

The exercise price, the number and kind of shares subject to purchase upon exercise of each right and the number of rights outstanding are subject to adjustment from time to time to prevent dilution in the event that we take certain actions involving our share capital which would otherwise have a dilutive effect.

Redemption

At any time before the occurrence of a flip-in event, the Board of Directors may elect to redeem the rights in whole at a redemption price of $0.0001 per right.

Waiver

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 76

The Board of Directors may waive the application of the Shareholder Rights Plan to any flip-in event if it determines that a person became an acquiring person by inadvertence, conditional upon such person having, within 10 days after the determination by the Board of Directors, reduced its beneficial ownership of shares such that it is no longer an acquiring person.  The Board of Directors may also, until a flip-in event has occurred, waive the application of the Shareholder Rights Plan to any particular flip-in event, but in that event, the board of directors shall be deemed to have waived the application of the Shareholder Rights Plan to any other flip-in event which may arise under any take-over bid then in effect.

Amendments

The Board of Directors may amend the Shareholder Rights Plan to correct clerical or typographical errors, to maintain the validity of the plan as a result of any changes in any applicable legislation or to increase or decrease the exercise price. Any amendments required to maintain the validity of the Shareholder Rights Plan must be submitted to our company’s shareholders or, after the separation time, to the holders of the rights for confirmation.

Other amendments can only be made with the approval of our shareholders or, after the separation time, the holders of the rights.  Any supplements or amendments to the Shareholder Rights Plan require the prior written consent of the Toronto Stock Exchange.

Term

The Shareholder Rights Plan has a term of 10 years and is subject to ratification at each of the shareholder meetings following the third and sixth anniversaries of the effective date of the Shareholder Rights Plan. If the Shareholder Rights Plan is not so ratified at any meeting, the Shareholder Rights Plan shall terminate forthwith.

ITEM 15.  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures.  Under the supervision and with the participation of our President (serving as our principal executive officer) and Chief Financial Officer (serving as our principal financial officer), we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of the end of the period covered by this report (the “Evaluation Date”).  Based upon that evaluation, the President and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the SEC’s rules and forms, and accumulated and communicated to our management, including the President and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting:Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act.  Our internal control system was designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

An internal control material weakness is a deficiency, or aggregation of deficiencies, such that the risk that material misstatements in financial statements will not be prevented or detected on a timely basis by employees in the normal course of their work.  An internal control significant deficiency, or aggregation of deficiencies, is one that could result in a misstatement of the financial statements that is more than inconsequential.

Our management assessed the effectiveness of our internal control over financial reporting as of May 31, 2008, and this assessment identified the following material weaknesses in our company’s internal control over financial reporting.

We do not have sufficient accounting resources at one of our subsidiaries in order to account for and apply internal control to transactions origination at the subsidiary.  There is a lack of detective and preventative controls with regard to oversight of recorded transactions at one of our operating subsidiaries.  We intend to hire additional accounting staff with the requisite skills in order to ensure that appropriate controls are applied to transactions origination and recording.  Further, we intend to have our head office staff perform detailed review of key balances to ensure amounts are recorded appropriately.  The expected cost to hire the additional staff is expected to be $150,000 to $200,000.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 77

The information technology configuration at one of our subsidiaries does not have the appropriate system privileges set up for each job function.  We intend to convert our accounting system to SAP Business One Solution on September 1, 2008.  This will ensure that the appropriate privileges are reflective of the job function of each user.  Cost related to the conversion has been substantially incurred in the 13 months ended May 31, 2008. The estimated remaining cost to complete during fiscal 2009 will be $15,000 to $25,000.

In making our assessment of internal control over financial reporting management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework.  Because of the material weaknesses described in the preceding paragraph, management believes that, as of May 31, 2008, our company’s internal control over financial reporting was not effective as of the Evaluation Date based on those criteria.

The Audit Committee has been provided information on the deficiencies.  Together, the Audit Committee, Board of Directors, and management continue to work to mitigate the risk of a material misstatement in our financial statements.  Management has identified certain areas where it can improve process controls and intends to incorporate these changes into the control over the financial reporting over the next twelve months.

Other than the foregoing, during the period covered by this report, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our independent registered public accounting firm has issued an opinion on the effectiveness of our internal control over financial reporting as of May 31, 2008.  The report can be found in the “Independent Auditor’s Report on Internal Controls under Standards of the Public Company Accounting Oversight Board (United States of America).”

ITEM 16.  [RESERVED]

16.A.  AUDIT COMMITTEE FINANCIAL EXPERT

Our Board of directors has determined that it does not have a member that qualifies as an “audit committee financial expert” as defined in Form 20-F of the SEC.

We have been unable to retain the services of a person who qualifies as an “audit committee financial expert”.  Until we appoint such a person, we believe that the members of our Board of Directors are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting.

16.B.  CODE OF ETHICS

Effective May 31, 2008, our Board of Directors adopted an updated Code of Business Ethics and Conduct that applies to, among other persons, our company's President and Chief Executive Officer (being our principal executive officer) and our Company's Chief Financial Officer (being our principal financial and accounting officer and controller), as well as persons performing similar functions.  As adopted, our Code of Business Ethics and Conduct sets forth written standards that are designed to deter wrongdoing and to promote:

(1)

honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

(2)

full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in other public communications made by us;

(3)

compliance with applicable governmental laws, rules and regulations;

(4)

the prompt internal reporting of violations of the Code of Business Ethics and Conduct to an appropriate person or persons identified in the Code of Business Ethics and Conduct; and

(5)

accountability for adherence to the Code of Business Ethics and Conduct.

Our Code of Business Ethics and Conduct requires, among other things, that all of our company's personnel shall be accorded full access to our President and Chief Executive Officer and Chief Financial Officer with respect to any matter which may arise relating to the Code of Business Ethics and Conduct.  Further, all of our company's personnel are to accorded full access to our company's Board of Directors if any such matter involves an alleged breach of the Code of Business Ethics and Conduct by our President and Chief Executive Officer or Chief Financial Officer.  

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 78

In addition, our Code of Business Ethics and Conduct emphasizes that all employees, and particularly managers and/or supervisors, have a responsibility for maintaining financial integrity within our company, consistent with generally accepted accounting principles, and federal, provincial and state securities laws.  Any employee who becomes aware of any incidents involving financial or accounting manipulation or other irregularities, whether by witnessing the incident or being told of it, must report it to his or her immediate supervisor or to our Company's Chairman of the Audit Committee or Chief Financial Officer or, if anonymity is preferred, to an independent whistle-blower hotline operated and controlled by a third party.  It is against our company policy to retaliate against any individual who reports in good faith the violation or potential violation of our Company's Co de of Business Ethics and Conduct by another.

Our Code of Business Ethics and Conduct and our Whistle-Blower Policy are filed herewith with the SEC as Exhibits 11.A and 11.B to this Amendment No. 2.  We will provide a copy of the Code of Business Ethics and Conduct and Whistle-Blower Policy to any person without charge, upon request.  Requests can be sent to: Petaquilla Minerals Ltd., Suite 410 - 475 West Georgia Street, Vancouver, BC, Canada V6B 4M9.

16.C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

The aggregate amounts billed by our auditors to us for (i) the period covered by the one month ended May 31, 2008 and the 12 months ended April 30, 2008 ; (ii) the period covered by the three months ended April 30, 2007 and the 12 months ended January 31, 2007 ; and (iii) the period covered by the 12 months ended January 31, 2006, for audit fees, audit-related fees, tax fees and all other fees are set forth below:

	One Month Ended May 31, 2008 and 12 Months Ended April 30, 2008	Three Months Ended April 30, 2007 and  12 Months Ended January 31, 2007	12 Months Ended January 31, 2006
Audit Fees(1)	$571,675	$424,155	$42,672
Audit-Related Fees(2)	$35,110	Nil	Nil
Tax Fees(3)	$17,616	Nil	Nil
All Other Fees	$130,000	Nil	Nil
Totals	$754,401	$424,155	$42,672

(1)  "Audit Fees" represent fees for the audit of our annual financial statements.

(2)  "Audit-Related Fees" represent fees for assurance and related services that are related to the performance of the audit.

(3)  "Tax Fees" represent fees for tax compliance, tax advice and tax planning.

The Audit Committee has adopted procedures requiring Audit Committee review and approval in advance of all particular engagements for services provided by our independent auditors.  Consistent with applicable laws, the procedures permit limited amounts of services, other than audit, review or attest services, to be approved by one or more members of the Audit Committee pursuant to authority delegated by the Audit Committee, provided the Audit Committee is informed of each particular service.  All of the engagements and fees for the one month ended May 31, 2008, the 12 months ended April 30, 2008, the three months ended April 30, 2007, the 12 months ended January 31, 2007, and the 12 months ended January 31, 2006 were approved by the Audit Committee.  The Audit Committee reviews with our auditors whether the non-audit services to be provided are compatible with maintai ning the auditors' independence.  The Board has determined that, starting in the fiscal year ended January 31, 2005, fees paid to the independent auditors for non-audit services in any year would not exceed the fees paid for audit services during the year.  Permissible non-audit services will be limited to fees for tax services, accounting assistance or audits in connection with acquisitions, and other services specifically related to accounting or audit matters such as audits of employee benefit plans

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

Not Applicable.

16.E.  PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Not Applicable.

16.F.  CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 79

Not Applicable.

16.G.  CORPORATE GOVERNANCE

Not Applicable.

PART III

ITEM 17.  FINANCIAL STATEMENTS

See the Financial Statements and Exhibits listed in Item 19 hereof and filed as part of this Amendment No. 2.  These consolidated financial statements were prepared in accordance with Canadian GAAP and are expressed in Canadian dollars.  Such consolidated financial statements have been reconciled to U.S. GAAP (see Note 28 therein).  For a history of exchange rates in effect for Canadian dollars as against U.S. dollars, see page 13 of Amendment No. 1 to the Company’s Annual Report on Form 20-F for the 13-month period ended May 31, 2008.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 80

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

One Month Ended May 31, 2008, Twelve Months Ended April 30, 2008,
Three Months Ended April 30, 2007 , Twelve Months Ended January 31, 2007,
and Twelve Months Ended January 31, 2006

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 81

Management Report on Internal Controls over Financial Reporting

The management of Petaquilla Minerals Ltd. (“Petaquilla”) is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act.  Petaquilla’s internal control system was designed to provide reasonable assurance to the company’s management and board of directors regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

An internal control material weakness is a deficiency, or aggregation of deficiencies, such that the risk that material misstatements in financial statements will not be prevented or detected on a timely basis by employees in the normal course of their work.  An internal control significant deficiency, or aggregation of deficiencies, is one that could result in a misstatement of the financial statements that is more than inconsequential.

The management of Petaquilla assessed the effectiveness of the Company’s internal control over financial reporting as of May 31, 2008, and this assessment identified the following material weaknesses in our company’s internal control over financial reporting.

§

We do not have sufficient accounting resources at one of our subsidiaries in order to account for and apply internal control to transaction origination at the subsidiary.

§

The IT configuration at one of our subsidiaries does not have the appropriate system privileges set up for each job function

§

We have a lack of detective and preventative controls with regard to oversight of recorded transactions at one of our operating subsidiaries

In making our assessment of internal control over financial reporting management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Because of the material weaknesses described in the preceding paragraph, management believes that, as of May 31, 2008, our company’s internal control over financial reporting was not effective as of the Evaluation Date based on those criteria.

The Audit Committee has been provided information on the deficiencies.  Together, the Audit Committee, Board of Directors, and management continue to work to mitigate the risk of a material misstatement in our financial statements.  Management has identified certain areas where it can improve process controls and intends to incorporate these changes into the control over the financial reporting over the next twelve months.

Other than the foregoing, during the period covered by this report, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our independent registered public accounting firm has issued an opinion on the effectiveness of our internal control over financial reporting as of May 31, 2008. The report can be found in the "Independent Auditor's Report on Internal Controls under Standards of the Public Company Accounting Oversight Board (United States of America)".

PETAQUILLA MINERALS LTD.

By:	/s/ Richard Fifer	By:	/s/ Bassam Moubarak
	Richard Fifer, President and Chief Executive Officer (principal executive officer)		Bassam Moubarak, Chief Financial Officer (principal financial and accounting officer)

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 82

INDEPENDENT AUDITORS’ REPORT ON FINANCIAL STATEMENTS

To the Shareholders of

Petaquilla Minerals Ltd.

We have audited the consolidated balance sheets of Petaquilla Minerals Ltd. (an exploration stage company) (the “Company”) as at May 31, 2008, April 30, 2008, April 30, 2007, and January 31, 2007 and the consolidated statements of operations and comprehensive loss and deficit and cash flows for each of the one month period ended May 31, 2008, the year ended April 30, 2008, the three month period ended April 30, 2007 and the year ended January 31, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at May 31, 2008, April 30, 2008, April 30, 2007 and January 31, 2007 and the results of its operations and its cash flows for each of the one month period ended May 31, 2008, the year ended April 30, 2008, the three month period ended April 30, 2007 and the year ended January 31, 2007 in conformity with Canadian generally accepted accounting principles.

The consolidated financial statements as at January 31, 2006 and for the year then ended were audited by other auditors who expressed an opinion without reservation on those statements in their report dated April 5, 2006.

Our previous audit report dated August 20, 2008 has been withdrawn and the consolidated financial statements have been revised as described in notes 27 and 28 to the consolidated financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of May 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 20, 2008 contained an adverse opinion thereon.

Vancouver, Canada
July 8, 2009 (except for note 26 which is as of November 6, 2009)	Chartered Accountants

COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA – U.S. REPORTING CONFLICT

In the United States, reporting standards for auditors require the addition of an explanatory paragraph, following the opinion paragraph, when the financial statements are affected by conditions and events that cast substantial doubt on the Company’s ability to continue as a going concern, such as those described in note 1 to the consolidated financial statements. Our report to the shareholders dated July 8, 2009 is expressed in accordance with Canadian reporting standards which do not permit a reference to such events and conditions in the auditors’ report when these are adequately disclosed in the financial statements.

Vancouver, Canada
July 8, 2009 (except for note 26 which is as of November 6, 2009)	Chartered Accountants

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 83

INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROLS UNDER STANDARDS OF THE PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD (UNITED STATES)

To the Shareholders of

Petaquilla Minerals Ltd.

We have audited Petaquilla Minerals Ltd.’s (an exploration stage company)(the “Company”) internal control over financial reporting as at May 31, 2008 and April 30, 2008, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“the COSO criteria”).  The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audits included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances.  We believe that our audits provide a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assu rance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

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

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management’s assessment.

·

The Company does not have sufficient accounting resources at one of its subsidiaries in order to account for and apply internal controls to transactions originating at the subsidiary.

·

The Information Technology configuration at one of the Company’s subsidiaries does not have the appropriate system privileges set up for each job function.

·

The Company lacks detective and preventative controls with regard to oversight of recorded transactions at one of its operating subsidiaries.

These material weaknesses were considered in determining the nature, timing and extent of audit tests applied in our audits of the one month period ended May 31, 2008 consolidated financial statements and the year ended April 30, 2008 consolidated financial statements and this report does not affect our report dated July 8, 2009 on those financial statements.

In our opinion, because of the effect of the material weaknesses described above on the achievement of the objectives of the control criteria, Petaquilla Minerals Ltd. has not maintained effective internal control over financial reporting as of May 31, 2008 and April 30, 2008, based on the COSO criteria.

We also have audited, in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as at May 31, 2008, April 30, 2008, April 30, 2007 and January 31, 2007 and the consolidated statements of operations and comprehensive loss and deficit and cash flows for each of the one month period ended May 31, 2008, the year ended April 30, 2008, the three month period ended April 30, 2007 and the year ended January 31, 2007 of the Company and our report dated July 8, 2009 expressed an unqualified opinion thereon.

Vancouver, Canada
August 20, 2008	Chartered Accountants

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 84

DAVIDSON&COMPANY LLP  Chartered Accountants A Partnership of Incorporated Professionals

INDEPENDENT AUDITORS’ REPORT

To the Shareholders of

Petaquilla Minerals Ltd.

We have audited the consolidated statements of operations and comprehensive loss and deficit and cash flows of Petaquilla Minerals Ltd. for the twelve months ended January 31, 2006.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with Canadian generally accepted auditing standards and with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the results of the Company’s operations and cash flows for the twelve months ended January 31, 2006 in accordance with Canadian generally accepted accounting principles.  

"DAVIDSON & COMPANY LLP"

Vancouver, Canada	Chartered Accountants
April 5, 2006

COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA –

U.S. REPORTING DIFFERENCE

In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the Company's ability to continue as a going concern, such as those described in Note 1 to the financial statements.  Our report to the shareholders dated April 5, 2006 is expressed in accordance with Canadian reporting standards which do not permit a reference to such events and conditions in the auditors' report when these are adequately disclosed in the financial statements.

"DAVIDSON & COMPANY LLP"

Vancouver, Canada	Chartered Accountants
April 5, 2006

Telephone (604) 687-0947  Fax (604) 687-6172

1200 - 609 Granville Street, P.O. Box 10372, Pacific Centre, Vancouver, BC, Canada, V7Y 1G6

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 85

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

CONSOLIDATED BALANCE SHEETS

(Expressed in Canadian Dollars) (See Note 1 Nature of Operations and Going Concern Uncertainty)

		May 31, 2008			May 31, 2008			April 30, 2007			January 31, 2007
		(Restated – Note 27)									(Restated – Note 27)
ASSETS (Note 12)
Current
Cash and cash equivalents (Note 13)	$	12,775,606		$	1,778,973		$	1,778,127		$	6,929,824
Receivables		448,270			260,627			100,410			108,318
Prepaid expenses		308,456			652,371			452,718			689,118
Amount receivable from related company (Notes 6 and 18)		-			-			4,582,937			2,143,773
Total current assets		13,532,332			2,691,971			6,914,192			9,871,033
Restricted cash(Note 7)		666,288			676,080			1,280,571			1,745,736
Investment in Petaquilla Copper Ltd.(Notes 6 and 18)		8,252,421			8,483,209			1,807,000			2,574,818
Property and equipment(Notes 4 and 10)		16,681,830			16,984,201			5,343,147			5,221,050
Mineral properties(Note 5)		67,149,615			65,099,631			31,236,455			22,887,996
Total assets	$	106,282,486		$	93,935,092		$	46,581,365		$	42,300,633
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank overdraft (Note 13)	$	2,087,820		$	2,119,950		$	1,205,382		$	-
Operating credit line facility (Note 11)		3,849,974			8,249,356			-			-
Accounts payable and accrued liabilities		7,286,410			8,665,281			4,951,297			3,480,341
Amount payable to a related party (Notes 6 and 18)		1,157,788			9,880,377			-			-
Current portion of deferred services and materials (Note 9)		247,343			247,343			-			-
Current portion of obligation under capital leases (Note 10)		2,162,289			923,001			-			-
Current portion of long-term debt (Note 8)		433,621			451,195			487,882			470,493
Total current liabilities		17,225,245			30,536,503			6,644,561			3,950,834
Deferred services and materials(Note 9)		3,980,203			4,060,956			-			-
Asset retirement obligations(Note 24)		4,308,083			4,337,003			4,400,000			-
Senior secured notes(Note 12)		26,630,004			-			-			-
Long-term debt(Note 8)		161,625			189,063			699,185			869,990
Obligations under capital leases(Note 10)		3,968,591			1,188,031			-			-
Total liabilities		56,273,751			40,311,556			11,743,746			4,820,824
Commitments and contingencies(Notes 21 and 25)
Shareholders' equity
Share capital (Notes 14 and 15)
Authorized
Unlimited common shares and preferred shares withoutpar value (Note 14)
Issued and outstanding
95,958,641 (April 30, 2008 – 95,958,641, April 30, 2007 –  89,876,951 and January 31, 2007 – 89,367,031) commonshares		105,858,083			106,487,564			91,596,035			90,571,099
Shares subscribed		-			-			150,000			-
Warrants (Notes 14 and 16		12,976,997			11,539,189			10,706,498			10,706,498
Treasury shares, at cost (Note 17)
44,200 (April 30, 2008, April 30, 2007, and January 31,2007 – 44,200) common shares		(166,981	)		(166,981	)		(166,981	)		(166,981	)
Contributed surplus (Note 14)		16,406,018			16,316,001			12,073,149			9,446,284
Deficit		(85,065,382	)		(80,552,237	)		(79,521,082	)		(73,077,091	)
Total shareholders’ equity		50,008,735			53,623,536			34,837,619			37,479,809
Total liabilities and shareholders’ equity	$	106,282,486		$	93,935,092		$	46,581,365		$	42,300,633
On behalf of the Board:

“                                  ”

       Director                                                      “                             ”

Director

The accompanying notes are an integral part of these consolidated financial statements.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 86

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS AND DEFICIT

(Expressed in Canadian Dollars)

		One month			Twelve months			Three months			Twelve months			Twelve months
		ended May 31,			ended April 30,			ended April 30,			ended January 31,			ended January 31,
		2008			2008			2007			2007			2006
											(Restated – Note 27)
EXPENSES
Accounting and legal (Note 18)	$	15,538		$	1,333,876		$	236,578		$	490,351		$	266,967
Accretion of asset retirement obligation (Note 24)		52,106			312,977			-			-			-
Consulting fees (Note 18)		21,174			962,905			320,908			756,453			291,034
Amortization		35,517			352,717			135,397			335,912			56,697
Filing fees		280			88,784			6,339			76,329			30,637
Investor relations and shareholder information		54,604			1,034,572			153,403			1,114,102			388,991
Office administration		177,685			2,418,781			176,097			795,840			257,859
Rent (Note 18)		1,630			125,025			38,310			141,187			80,520
Mineral property costs		-			-			-			-			11,105
Stock-based compensation (Notes 15 and 16)		77,902			5,676,183			3,377,468			17,008,802			410,301
Travel		121,868			877,859			266,748			1,419,788			346,332
Debt issuance costs		3,974,266			-			-			-			-
Wages and benefits (Note 18)		177,357			1,706,052			179,317			1,812,453			397,907
Total expenses		(4,709,927	)		(14,889,731	)		(4,890,565	)		(23,951,217	)		(2,538,350	)
OTHER INCOME (EXPENSE)
Foreign exchange gain (loss)		295,105			1,375,774			(877,565	)		40,718			(77,647	)
Gain on sale of marketable securities		-			-			-			21,191			-
Interest income		78,670			54,575			56,849			296,031			48,238
Interest on long-term debt		(15,615	)		(70,176	)		(68,240	)		-			-
Asset usage fees (Note 18)		(695	)		129,345			103,348			-			-
Gain on sale of equity investment (Note 18)		-			4,037,182			-			-			-
Power and drilling services		70,105			79,406			-			-			-
Loss from equity investment (Note 6)		(230,788	)		(4,484,625	)		(1,579,353	)		(193,647	)		-
Gain on dilution of equity investment (Note 6)		-			12,737,095			811,535			2,268,465			-
Total other income (expenses)		196,782			13,858,576			(1,553,426	)		2,432,758			(29,408	)
Net (loss) income and comprehensive (loss) income for the period		(4,513,145	)		(1,031,155	)		(6,443,991	)		(21,518,459	)		(2,567,758	)
Deficit, beginning of period		(80,552,237	)		(79,521,082	)		(73,077,091	)		(51,558,632	)		(44,143,412	)
		(85,065,382	)		(80,552,237	)		(79,521,082	)		(73,077,091	)		(46,711,170	)
Loss on sale of treasury shares(Note 17)		-			-			-			-			(4,847,462	)
Deficit, end of period	$	(85,065,382	)	$	(80,552,237	)	$	(79,521,082	)	$	(73,077,091	)		(51,558,632	)
Basic and diluted (loss) per share	$	(0.05	)	$	(0.01	)	$	(0.07	)	$	(0.28	)	$	(0.05	)
Basic weighted average number of common shares outstanding
		93,131,030			93,131,030			89,615,924			77,695,782			56,115,596

The accompanying notes are an integral part of these consolidated financial statements.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 87

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in Canadian Dollars)

		One month			Twelve months			Three months			Twelve months			Twelve months
		ended May 31,			ended April 30,			ended April 30,			ended January 31,			ended January
		2008			2008			2007			2007			31, 2006
											(Restated – Note
											27	)
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) for the period	$	(4,513,145	)	$	(1,031,155	)	$	(6,443,991	)	$	(21,518,459	)	$	(2,567,758	)
Items not affecting cash:
Accretion of asset retirement obligation		52,106			312,977			-			-			-
Amortization		35,517			352,717			135,397			335,911			56,697
Gain on dilution of equity investment		-			(12,737,095	)		(811,535	)		(2,268,465	)		-
Gain on sale of equity investment		-			(4,037,182	)		-			-			-
Loss from equity investment		230,788			4,484,625			1,579,353			193,647			-
Stock-based compensation		77,902			5,676,183			3,377,468			17,008,802			410,301
Debt issuance costs		3,974,266			-			-			-			-
Gain on sale of marketable securities		-			-			-			(21,191	)		73,813
Foreign exchange loss (gain) on restricted cash		-			-			56,550			(27,534	)		-
Unrealized foreign exchange (gain) on asset retirement obligation		(81,027	)		(375,974	)		-			-			-
Unrealized foreign exchange (gain) loss on capital leases and lease credit facility		(155,724	)		97,497			-			-			-
Unrealized foreign exchange (gain) on senior secured notes		(155,356	)		-			-			-			-
Unrealized foreign exchange (gain) loss on long-term debt		(5,708	)		(61,648	)		77,765			(42,198	)		-
Changes in non-cash working capital items:
(Increase) decrease in receivables		(187,643	)		(160,217	)		7,908			(76,130	)		39,075
(Increase) decrease in prepaid expenses		343,915			(199,653	)		236,400			(652,468	)		(25,867	)
Prepaid services and materials		(70,105	)		(79,406	)		-			-			-
(Decrease) increase in accounts payable to arelated party		(8,722,589	)		9,880,377			-			-			-
(Decrease) increase in accounts payable andaccrued liabilities		(777,760	)		(860,384	)		(2,600,539	)		2,417,1071			255,887
Net cash used in operating activities		(9,954,563	)		1,261,662			(4,385,224	)		(4,650,934	)		(1,757,852	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from exercise of warrants and options		-			1,658,655			199,642			8,680,028			11,826,329
Proceeds from shares subscribed		-			12,095,805			150,000			22,560,000			-
Share issuance costs		-			(467,741	)		-			(1,550,343	)		(573,165	)
Advances from (to) Petaquilla Copper Ltd.		-			18,043,254			(2,439,163	)		(2,143,773	)		-
Net proceeds from sale of treasury stock		-			-			-			-			1,273,946
(Repayment of) proceeds from bank overdraft		(32,130	)		914,568			1,205,382			-			-
Proceeds from senior secured notes		26,984,865			-			-			-			-
Proceeds from long term debt		-			-			-			1,413,510			-
Payment of capital leases		(60,399	)		(715,510	)		-			-			-
Debt issuance costs		(3,974,266	)		-			-			-			-
Repayment of long-term debt		(45,012	)		(546,809	)		(106,798	)		(119,645	)		-
Net cash provided by financing activities		22,873,058			30,982,222			(990,937	)		28,839,777			12,527,110
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment		-			(6,713,118	)		(127,369	)		(5,752,388	)		(291,877	)
Investment in mineral properties		(1,852,430	)		(26,159,388	)		-			(19,387,844	)		(2,197,611	)
Redemption (purchase) of performance bond and restricted cash		-			614,283			387,400			(811,296	)		-
Proceeds from sale of marketable securities		-			-			-			21,191			-
Purchase of equity investment		-			-			-			(500,000	)		-
Net cash (used in) provided by investing activities		(1,852,430	)		(32,258,223	)		260,031			(26,430,337	)		(2,489,488	)
Impact of exchange rate changes on cash and cashequivalents		(69,432	)		15,185			(35,567	)		-			-
Change in cash and cash equivalents		10,996,633			846			(5,151,697	)		(2,241,494	)		8,279,770
Cash and cash equivalents, beginning of period		1,778,973			1,778,127			6,929,824			9,171,318			891,548
Cash and cash equivalents, end of period	$	12,775,606		$	1,778,973		$	1,778,127		$	6,929,824			9,171,318
Supplemental disclosure with respect to cash flows(Note 23)

The accompanying notes are an integral part of these consolidated financial statements.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 88

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

1.

NATURE OF OPERATIONS AND GOING CONCERN UNCERTAINTY

Petaquilla Minerals Ltd. (“the Company”) was incorporated in the Province of British Columbia and is in process of exploring its mineral properties. The Company has not yet determined whether these properties contain reserves that are economically recoverable. The recoverability of amounts shown for mineral properties and related deferred exploration costs is dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain necessary financing and permits to complete the development, and future profitable productions or proceeds from the disposition thereof.

These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has not generated any operating revenues to date and has experienced recurring operating losses and accumulated a deficit of $85,065,382 as at May 31, 2008 (April 30, 2008 - $80,552,237, April 30, 2007 - $79,521,082 and January 31, 2007 - $73,077,091). Also the Company had a working capital deficiency of $3,692,913 at May 31, 2008 (April 30, 2008 - $27,844,532, April 30, 2007 - $269,631 net working capital and January 31, 2007 net working capital of $5,920,199). These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s continued operations, as intended , are dependent upon its ability to raise additional funding to meet its obligations and to attain profitable operations. Management’s plan in this regard is to raise equity and debt financing as required. There are no assurances that the Company will be successful in achieving these goals. These consolidated financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

Change in fiscal year ends

In 2007, the Company changed its fiscal year end to April 30.  This arose from the fact that the Company wanted to change its audit firm to an international company due to the increased complexity of its organization. Because the operations of Petaquilla Copper Ltd. were intertwined with that of the Company, due to the fact that their properties were contiguous with those of the Company, the sharing of resources and the fact that development costs would likely be shared in the future, it was decided that the two companies should have the same audit firm.  It was not possible to obtain acceptance of the audit engagement for both companies by an international firm in time to meet the filing deadline of the January 31 year end and, therefore, the fiscal year end was changed to April 30.

In 2008, the Company changed its fiscal year end to May 31.  This arose because the Company was in the midst of obtaining financing to complete mine construction and did not want to show a cash shortfall in its April 30 financial balance sheet for fear of jeopardizing the mine development agreement with the Government of Panama.  Financing was obtained May 22 and the decision was therefore made to change the fiscal year end to May 31.  

SIGNIFICANT ACCOUNTING POLICIES

These consolidated financial statements and accompanying notes have been prepared in conformity with Canadian Generally Accepted Accounting Principles (“GAAP”). For a description of the differences between Canadian GAAP and United States GAAP for the Company, see note 28.  

Basis of consolidation

These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Petaquilla Minerals, S.A. (a Panama corporation), Adrian Resources (BVI) Ltd. (a British Virgin Island corporation), Petaquilla Gold, S.A. (a Panama corporation), Aqua Azure S.A (a Panama corporation) and its 51% interest in Petaquilla Infraestructura Ltd. (“PQI”) formerly Petaquilla Power and Water, S.A. (“PPW”) (a Panama corporation). The Company proportionately consolidates its 69% interest in a joint venture investment, Compania Minera Belencillo, S.A. (“Belencillo”) (a Panama corporation).

All inter-company transactions and balances have been eliminated upon consolidation.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 89

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

2.

SIGNIFICANT ACCOUNTING POLICIES(continued)

Use of estimates

The preparation of consolidated financial statements in accordance with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the amount of revenues and expenses reported during the period. Actual results could differ from these estimates.

Significant estimates used in the preparation of the consolidated financial statements include, but are not limited to, recoverability of accounts receivable, investments, estimates of useful life of properties and equipment, the future cost of asset retirement obligations, amount and the likelihood of contingencies, valuation allowance for future income tax assets, accounting for stock-based compensation and warrants.

Accounting Policy for Petaquilla Copper Ltd.

The Company owns 12.82%in Petaquilla Copper Ltd. (“Copper”), a Company listed on the Toronto Stock Exchange, and uses the equity method to account for the investment. The two companies share common directors and management. The Company’s proportionate share of income and expenses is recorded with a corresponding entry made to the investment account. The Company periodically assesses whether there have been any indications of impairment and if there are and the carrying amount would not be expected to be recovered, there would be a write down to fair value.

Cash and cash equivalents

Cash and cash equivalents are classified as held for trading and include short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. The Company places its deposits with financial institutions with high credit standing. The Company regularly maintains cash balances in financial institutions in excess of insured limits.

Property and equipment

Equipment is recorded at cost less accumulated amortization, which is provided on the declining balance basis at rates as follows:

Furniture and fixtures	20%
Office equipment	20%
Computer equipment	30%
Equipment under capital lease	30%
Equipment	30%
Vehicles	30%
Computer software	50%
Leasehold improvements	5 year straight-line
Buildings	4%

Mineral properties

Acquisition costs of mineral properties, together with direct exploration and development expenditures incurred thereon, are deferred until the property to which they relate is placed into production, sold or abandoned. The carrying values of mineral properties are, where necessary, written down to the fair value if the carrying value is not recoverable. Costs relating to properties abandoned are written off when the decision to abandon is made.

The Company follows the cost reduction method of accounting for the receipt of property option and similar payments.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 90

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

2.

SIGNIFICANT ACCOUNTING POLICIES(continued)

Cash and other property payments received from the Company’s exploration partners are credited to the respective property until all capitalized costs are recovered; thereafter, such payments are included in income. Option payments are exercisable at the discretion of the optionee and are only recognized when received. Management fees earned for the management of properties are included in income.

On an annual basis, the Company reviews the carrying values of deferred mineral property acquisition and exploration expenditures with a view to assessing whether there has been impairment in value. In the event that management determines potential reserves to be insufficient to recover the carrying value of any property, the carrying value will be written down or written off, as appropriate.

Restricted cash

The Company has elected to classify restricted cash as held for trading.

Receivables

Receivables are classified as loans and receivables and are measured at amortized costs. Receivables are comprised of refundable government value added taxes and amounts due from third parties for overpayments.

Asset retirement obligations

An asset retirement obligation is a legal obligation associated with the retirement of tangible long-lived assets that the Company is required to settle. The Company recognizes the fair value of a liability for an asset retirement obligation in the period in which it is incurred when a reasonable estimate of fair value can be made. The carrying amount of the related long-lived asset is increased by the same amount as the liability. Subsequently, these capitalized asset retirement costs will be amortized to expense over the life of the related assets using the unit-of-production method. At the end of each period, the liability is increased to reflect the passage of time (accretion expense) and adjusted for changes in the estimated future cash flows underlying any initial fair value measurements (additional asset retirement costs).

Impairment of long-lived assets

A long-lived asset which included property and related costs and equipment is tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. An impairment loss is recognized when the carrying amount of a long-lived asset exceeds its fair value. For purposes of recognition and measurement of an impairment loss, a long-lived asset is grouped with other assets and liabilities to form an asset group, at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Estimates of future cash flows used to test recoverability of a long-lived asset include only the future cash flows that are directly associated with, and that are expected to arise as a direct result of, its use and eventual disposition.

Foreign currency translation

Integrated foreign operations are translated using the temporal method. Under this method, monetary assets and liabilities are translated at the period-end exchange rate, non-monetary assets and liabilities are translated at rates prevailing at the respective transaction dates, and revenue and expenses are translated at rates approximating those in effect at the time of the transactions. Translation gains and losses are reflected in operations for the period.

The Company considers all of its subsidiaries and joint venture investments to be integrated operations. All foreign currency-denominated monetary accounts of the Company are translated at the period-end exchange rate. All other income statement transactions are translated using the exchange rate at the date of the transaction.

Exchange gains and losses on translation are recognized as a gain or loss in operations in the period they arise.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 91

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

2.

SIGNIFICANT ACCOUNTING POLICIES(continued)

Debt issuance costs

Debt issuance costs are expensed in the year that they are incurred.

Interest expense

Interest expense relating to project development, construction and mill equipment is capitalized to mineral properties and to be amortized over the recoverable reserves. Interest on operating long-term debt is expensed to operations as it is incurred.

Operating leases

Operating leases are charged to operations as the expense is incurred.

Loss per share

The Company uses the treasury stock method to compute the dilutive effect of options, warrants and similar instruments. Under this method, the dilutive effect on loss per share is recognized as a result of the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments. It assumes that the proceeds would be used to purchase common shares at the average market price during the period. For all periods presented, all outstanding options were anti-dilutive.

Stock-based compensation

The Company accounts for all stock-based payments and awards using the fair value-based method.

Under the fair value-based method, stock-based payments to non-employees are measured at the fair value of the consideration received, or the fair value of the equity instruments issued, or liabilities incurred, whichever is more reliably measurable. The fair value of stock-based payments to non-employees is periodically remeasured until counterparty performance is complete, and any change therein is recognized over the vesting period of the award and in the same manner as if the Company had paid cash instead of paying with or using equity instruments. The cost of stock-based payments to non-employees that are fully vested and non-forfeitable at the grant date is measured and recognized at that date. Compensation cost attributable to awards to employees is measured at fair value at the grant date and recognized over the vesting period.

Income taxes

Future income taxes are recorded using the liability method under which future tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income or loss in the period that substantive enactment or enactment occurs. To the extent that the Company does not consider it more likely than not that a future tax asset will be recovered, it provides a valuation allowance against the excess.

Comparative figures

Certain comparative figures have been reclassified to conform to the current period’s presentation. The accounts affected were cash, warrants, share capital and contributed surplus.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 92

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

2.

SIGNIFICANT ACCOUNTING POLICIES(continued)

Adoption of new accounting policies

Effective February 1, 2007, the Company has adopted the provisions of the following Canadian Institute of Chartered Accountants (CICA) Handbook Sections:

(a)

Section 3855 Financial Instruments – Recognition and Measurement

This section describes the standards for recognizing and measuring financial assets, financial liabilities and non-financial derivatives. Under the new standard, financial assets will be classified as one of the following: Held-to-maturity; Loans and receivables; Held-for-trading; or Available-for-sale. Financial liabilities will be classified as held-for-trading or other liabilities. Financial assets and liabilities held-for-trading will be measured at fair value with gains and losses recognized in net income.  

Financial assets held-to-maturity, loans and receivables and financial liabilities other than those held-for-trading, will be measured at amortized cost. Available-for-sale financial instruments will be measured at fair value with unrealized gains and losses recognized in other comprehensive income. The standard also permits designation of any financial instrument as held-for-trading on initial recognition. In addition, the Company adopted a policy to expense debt financing costs when they are incurred.

The Company's financial instruments include cash and cash equivalents, receivables, bank overdraft, operating credit line facility and accounts payable and accrued liabilities. Upon adoption of these new standards, the Company designates its cash and cash equivalents as held-for-trading, its receivables, as receivables, and its bank overdraft, operating credit line facility, and accounts payable and accrued liabilities as other financial liabilities. The fair values of these financial instruments approximate their carrying values because of their short-term nature. The fair value of senior secured notes approximate the carrying value as the Company closed notes of the same series for the same consideration. The Company had no held-to-maturity financial assets for any of the periods presented in these financial statements.  In management's opinion the Company is not exposed to significant interest rate, currency exchange rate or credit risk arising from these financial instruments except for the senior secured notes. The Company is exposed to embedded derivative financial instruments. The Company is unable to fair value the embedded derivative component separately in its senior secured notes and thus has classified the combined contract as financial liability that is held for trading, measured at fair value.

(b)

The Company has adopted the policies in CICA Handbook Sections 3861, 3251, 1651, and 3051.

CICA Handbook Section 3861 establishes standards for presentation of financial instruments and non-financial derivatives, and identifies the information that should be disclosed about them. The presentation paragraphs deal with the classification of financial instruments, from the perspective of the issuer, between liabilities and equity, the classification of related interest, dividends, losses and gains, and the circumstances in which financial assets and financial liabilities are offset. The disclosure paragraphs deal with information about factors that affect the amount, timing and certainty of an entity's future cash flows relating to financial instruments. This Section also deals with disclosure of information about the nature and extent of an entity's use of financial instruments, the business purposes they serve, the risks associated with them and management's policies for controlling those risks. This Section applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2006. An entity adopting this Section for a fiscal year beginning before October 1, 2006 also adopts Financial Instruments – Recognition and Measurement, Section 3855, Hedges, Section 3865, and Comprehensive Income, Section 1530.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 93

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

2.

SIGNIFICANT ACCOUNTING POLICIES(continued)

CICA Handbook Section 3250, Surplus, was revised and reissued as CICA Handbook Section 3251, Equity.  This section is effective for years beginning on or after October 1, 2006. The changes in how to report and disclose equity and changes in equity are consistent with the new requirements of Section 1530, Comprehensive Income.

Comprehensive income represents the change in shareholders’ equity from transactions and other events from non-owner sources. Other comprehensive income refers to items that are recognized in comprehensive income but excluded from net income calculated in accordance with Canadian generally accepted accounting principles until such time as it is considered appropriate to recognize them in net income. The Company had no “other comprehensive income or loss” for any of the periods presented in these financial statements.

CICA Handbook Section 1650 was revised and reissued as CICA Handbook Section 1651.  The revision deleted the paragraphs relating to hedging of foreign currency items.  These paragraphs have been included in the new Section 3865, Hedges. The adoption of Section 1651 did not have a material impact on the Company’s consolidated financial position and results of operations.  This Section applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2006. An entity adopting this Section for a fiscal year beginning before October 1, 2006 also adopts Financial Instruments – Recognition and Measurement, Section 3855, Hedges, Section 3865, and Comprehensive Income, Section 1530.

CICA Handbook Section 3051 was issued to replace Section 3050 and to establish standards for accounting for investments subject to significant influence and for measuring and disclosing certain other non-financial instrument investments. This section applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2006. The adoption of Section 3051 did not have a material impact on the Company’s consolidated financial position and results of operations.

Future Accounting Pronouncements

(a)

 Section 1535 – Capital Disclosures

This Section establishes standards for disclosing information about a company’s capital and how it is managed.  Under this standard the Company will be required to disclose the following, based on the information provided internally to the Company’s key management personnel:

(i)

qualitative information about its objectives, policies and processes for managing capital;

(ii)

summary quantitative data about what it manages as capital;

(iii)

whether during the period it complied with externally imposed capital requirements to which it is subject; and

(iv)

when the Company has not complied with such externally imposed capital requirements, the consequences of

such non-compliance.

This standard will require additional disclosure in the financial statements.

(b)

Section 3031 - Inventories

This Section prescribes the accounting treatment for inventories and provides guidance on the determination of costs and its subsequent recognition as an expense, including any write-down to net realizable value.  It also provides guidance on the cost formulas that are used to assign costs to inventories.  Management has reviewed the requirements of the standard and does not believe that the Company’s financial statements will be materially affected by the new recommendations.

(c)

Section 3862 & 3863 - Financial Instruments – Disclosure and Presentation

These new standards replace Section 3861, Financial Instruments – Disclosure and Presentation, revising and enhancing disclosure requirements, and carrying forward unchanged the presentation requirements. Section 3862 requires entities to provide disclosure of quantitative and qualitative information in their financial statements that enable users to evaluate (a) the significance of financial instruments for the entity’s financial position and performance; and (b) the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the balance sheet date, and management’s objectives, policies and procedures for managing such risks.  Entities will be required to disclose the measurement basis or bases used, and the criteria used to determine classification for different types of instruments.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 94

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

2.

SIGNIFICANT ACCOUNTING POLICIES(continued)

The Section requires specific disclosures to be made, including the criteria for:

(i)

designating financial assets and liabilities as held for trading;

(ii)

designating financial assets as available-for-sale; and

(iii)

determining when impairment is recorded against the related financial asset or when an allowance account is used.

Management has reviewed the requirements of the standard and does not believe that the Company’s financial statements will be materially affected by the new recommendations.

(d)

 Section 1400 - General Standards of Financial Statement Presentation

CICA Handbook Section 1400 has been amended to require management to make an assessment of an entity’s ability to continue as a going concern. Financial statements shall be prepared on a going concern basis unless management either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so. When management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt upon the entity’s ability to continue as a going concern, those uncertainties shall be disclosed. When financial statements are not prepared on a going concern basis, that fact shall be disclosed, together with the basis on which the financial statements are prepared and the reason why the entity is not regarded as a going concern. The amendments apply to interim and annual financial statements relating to fiscal years beginning on or after June 1, 2008. Management has reviewed the requirements and concluded that they do not affect the Company’s financial statements. This standard will require additional disclosure in the financial statements.

Accounting Policies to be Implemented Effective January 1, 2011

In January 2009, the CICA issued Handbook Sections 1582 – Business Combinations (“Section 1582”), 1601 – Consolidated Financial Statements (“Section 1601”) and 1602 – Non-controlling Interests (“Section 1602”) which replaces CICA Handbook Sections 1581 – Business Combinations and 1600 – Consolidated Financial Statements. Section 1582 establishes standards for the accounting for business combinations that is equivalent to the business combination accounting standard under International Financial Reporting Standards (“IFRS”). Section 1582 is applicable for the Company’s business combinations with acquisition dates on or after January 1, 2011.  Early adoption of this Section is permitted.  Section 1601, together with Section 1602, establishes standards for the preparation of consolidated financial statements.  Section 1601 is applicable for the Company’ ;s interim and annual consolidated financial statements for its fiscal year beginning June 1, 2010.  Early adoption of this Section is permitted.  If the Company chooses to early adopt any one of these Sections, the other two sections must also be adopted at the same time.

Convergence with International Financial Reporting Standards (IFRS)

In February 2008, Canada’s Accounting Standards Board ratified a strategic plan that will result in Canadian GAAP, as used by public companies, being evolved and converged with International Financial Reporting Standards (IFRS) over a transitional period to be complete by 2011. The Company will be required to report using the converged standards effective for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011.

Canadian GAAP will be converged with IFRS through a combination of two methods: as current joint-convergence projects of the United States’ Financial Accounting Standards Board and the International Accounting Standards Board are agreed upon, they will be adopted by Canada’s Accounting Standards Board and may be introduced in Canada before the complete changeover to IFRS; and standards not subject to a joint-convergence project will be exposed in an omnibus manner for introduction at the time of the complete changeover to IFRS. Also the United States’ Financial Accounting Standards Board and the International Accounting Standards Board have completed a joint-project on business combinations and non-controlling interests. As the International Accounting Standards Board currently, and expectedly,  has projects underway that should result in new pronouncements that continue to evolve IFRS, and as this Canadian convergence initiative is i n an early stage as of the date of these consolidated financial statements, it is premature to currently assess the impact of the Canadian initiative on the Company.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 95

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

3.

INVESTMENT IN JOINT VENTURES

Investment in Compania Minera Bellencillo, S.A.

The Company owns a 69% joint venture interest in Minera Bellencillo S.A., which is proportionately consolidated in the financial statements. The Company’s interest is summarized as follows:

	May 31, 2008		April 30, 2008	April 30, 2007		January 31, 2007
	$		$	$		$
ASSETS
Mineral properties	48,872		26,006	26,006		2,259
LIABILITIES AND SHAREHOLDERS’EQUITY
Other liabilities	47,809		25,519	25,802		2,259
Shareholders’ equity	1,063		486	204		-
	48,872		26,006	26,006		2,259
Cash flows provided by (used in)						-
Financing activities	22,007		-	25,802		2,259
Investing activities	(22,866	)	-	(26,006	)	(2,259	)

4.

PROPERTY AND EQUIPMENT

				May 31,						April 30,
				2008						2008
				Accumulated		Net				Accumulated		Net
		Cost		Amortization		Book Value		Cost		Amortization		Book Value
Computer equipment	$	59,429	$	40,613	$	18,816	$	59,429	$	39,756	$	19,673
Computer software		167,847		111,829		56,018		163,870		109,466		54,404
Equipment under capitalleases		10,925,172		1,638,776		9,286,396		10,925,172		1,512,716		9,412,456
Equipment		9,395,507		2,586,114		6,809,393		9,293,748		2,312,647		6,981,101
Furniture and fixtures		21,000		7,185		13,815		21,000		6,978		14,022
Land		125,440		-		125,440		125,440		-		125,440
Buildings		380,667		8,715		371,952		384,391		7,286		377,105
	$	21,075,062	$	4,393,232	$	16,681,830	$	20,973,050	$	3,988,849	$	16,984,201
				April 30,						January 31,
				2007						2007
				Accumulated		Net				Accumulated		Net
		Cost		Amortization		Book Value		Cost		Amortization		Book Value
Computer equipment	$	395,852	$	118,321	$	277,531	$	364,189	$	87,418	$	276,771
Computer software		526,252		187,329		338,923		526,252		138,976		387,276
Equipment		4,393,729		681,008		3,712,721		4,334,336		529,797		3,804,539
Furniture and fixtures		30,523		9,905		20,618		30,523		8,836		21,687
Leasehold improvements		8,951		8,951		-		8,951		8,951		-
Office equipment		36,101		8,553		27,548		30,657		7,280		23,377
Vehicles		600,671		107,909		492,762		381,477		77,999		303,478
Land		34,130		-		34,130		34,130		-		34,130
Buildings		445,169		6,255		438,914		375,588		5,796		369,792
	$	6,471,378	$	1,128,231	$	5,343,147	$	6,086,103	$	865,053	$	5,221,050

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 96

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

4.

PROPERTY AND EQUIPMENT (continued)

In September of 2007, the Company entered into an agreement with Copper to sell some of its surplus property and equipment that are no longer required for its current operations. The net book value of these assets was $2,730,404.   The Company did not recognize a gain or loss on this disposal.  

5.

MINERAL PROPERTIES

		May 31, 2008		April 30, 2008		April 30, 2007		January 31, 2007
Molejon property	$	67,100,743	$	65,073,625	$	31,210,449	$	22,885,737
Rio Belencillo concession		48,872		26,006		26,006		2,259
	$	67,149,615	$	65,099,631	$	31,236,455	$	22,887,996

The Company has capitalized $67,149,615 in mineral property costs as at May 31, 2008:

		Molejon		Rio Belencillo		Total
Drilling costs	$	11,046,825	$	-	$	11,046,825
Trenching		4,308,854		48,872		4,357,726
Plant equipment		3,927,704		-		3,927,704
Plant-site		22,272,755		-		22,272,755
Engineering and consulting		2,807,641		-		2,807,641
Camp costs		6,158,386		-		6,158,386
Roads		1,634,057		-		1,634,057
Geologist		1,128,193		-		1,128,193
Property permits		408,381		-		408,381
Environment		488,040		-		488,040
Logistics		395,581		-		395,581
Indirect drilling costs		1,106,528		-		1,106,528
Engineering and design		517,156		-		517,156
Transportation		250,126		-		250,126
Communications		192,370		-		192,370
Topography		153,571		-		153,571
Technical support		120,272		-		120,272
Bridges		50,261		-		50,261
Communications - plant		6,179		-		6,179
Road agreements		105,939		-		105,939
Water samples		3,857		-		3,857
Total		57,082,676		48,872		57,131,548
Deferred amortization on mining equipment		3,938,717		-		3,938,717
Asset retirement obligation (Note 24)		4,400,000		-		4,400,000
Stock-based compensation (Note 15)		723,668		-		723,668
Deferred interest expense		955,682		-		955,682
	$	67,100,743	$	48,872	$	67,149,615

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 97

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

5.

MINERAL PROPERTIES(continued)

The Company has capitalized $65,099,631 in mineral property costs as at April 30, 2008:

		Molejon		Rio Belencillo		Total
Drilling costs	$	11,042,964	$	-	$	11,042,964
Trenching		4,308,854		26,006		4,334,860
Plant equipment		4,092,802		-		4,092,802
Plant-site		20,986,149		-		20,986,149
Engineering and consulting		2,806,455		-		2,806,455
Camp costs		6,019,342		-		6,019,342
Roads		1,632,364		-		1,632,364
Geologist		1,090,266		-		1,090,266
Property permits		374,558		-		374,558
Environment		479,886		-		479,886
Logistics		387,659		-		387,659
Indirect drilling costs		1,069,783		-		1,069,783
Engineering and design		491,928		-		491,928
Transportation		250,098		-		250,098
Communications		192,391		-		192,391
Topography		151,615		-		151,615
Technical support		120,272		-		120,272
Bridges		50,253		-		50,253
Communications - plant		6,179		-		6,179
Road agreements		105,972		-		105,972
Water samples		3,857		-		3,857
Total		55,663,647		26,006		55,689,653
Deferred amortization on mining equipment		3,569,850		-		3,569,850
Asset retirement obligation (Note 24)		4,400,000		-		4,400,000
Stock-based compensation (Note 15)		711,553		-		711,553
Deferred interest expense		728,575		-		728,575
	$	65,073,625	$	26,006	$	65,099,631

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 98

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

5.

MINERAL PROPERTIES(continued)

The Company has capitalized $31,236,455 as at April 30, 2007:

		Molejon		Rio Belencillo		Total
Drilling costs	$	5,947,874	$	-	$	5,947,874
Trenching		3,929,987		26,006		3,955,993
Plant equipment		3,901,761		-		3,901,761
Plant-site		3,703,891		-		3,703,891
Engineering and consulting		2,152,648		-		2,152,648
Camp costs		2,103,628		-		2,103,628
Roads		1,729,614		-		1,729,614
Geologist		663,641		-		663,641
Property permits		374,558		-		374,558
Environment		359,780		-		359,780
Logistics		299,939		-		299,939
Indirect drilling costs		199,218		-		199,218
Engineering and design		149,392		-		149,392
Transportation		145,347		-		145,347
Communications		128,729		-		128,729
Topography		113,008		-		113,008
Technical support		110,248		-		110,248
Bridges		63,332		-		63,332
Communications - plant		6,179		-		6,179
Road agreements		4,127		-		4,127
Water samples		3,857		-		3,857
Total		26,090,758		26,006		26,116,764
Deferred amortization on mining equipment		601,295		-		601,295
Asset retirement obligation (Note 24)		4,400,000		-		4,400,000
Stock-based compensation (Note 15)		118,396		-		118,396
	$	31,210,449	$	26,006	$	31,236,455

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 99

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

5.

MINERAL PROPERTIES(continued)

The Company has capitalized $22,887,996 as at January 31, 2007:

		Molejon		Rio Belencillo		Total
Drilling costs	$	5,062,542	$	-	$	5,062,542
Trenching		2,607,526		2,259		2,609,785
Plant equipment		3,901,556		-		3,901,556
Plant-site		2,394,927		-		2,394,927
Engineering and consulting		2,035,109		-		2,035,109
Camp costs		1,974,785		-		1,974,785
Roads		2,684,800		-		2,684,800
Geologist		162,964		-		162,964
Property permits		373,395		-		373,395
Environment		343,612		-		343,612
Logistics		170,083		-		170,083
Indirect drilling costs		18,061		-		18,061
Engineering and design		87,955		-		87,955
Transportation		105,845		-		105,845
Communications		115,988		-		115,988
Topography		96,877		-		96,877
Technical support		89,387		-		89,387
Bridges		51,463		-		51,463
Communications - plant		6,179		-		6,179
Water samples		3,856		-		3,856
Total		22,286,910		2,259		22,289,169
Deferred amortization on mining equipment		480,431		-		480,431
Stock-based compensation (Note 15)		118,396		-		118,396
	$	22,885,737	$	2,259	$	22,887,996

Molejon Property – Panama

The Molejon Property is located in the District of Donos, Province of Colon, Panama. The project is located in the Ley Petaquilla Property. In June 2005, the shareholders of Minera Petaquilla S.A. (“Minera Petaquilla”) (formerly a joint venture investment) agreed to separate the gold deposit and other precious metal mineral deposits that might be developed within the Ley Petaquilla mineral concession from the copper mineral deposits within the Ley Petaquilla mineral concession. The agreement provides for the Company, through Petaquilla Gold, S.A., to own a 100% interest in the Molejon gold deposit, as well as all other gold and precious metal mineral deposits that might be developed within the Ley Petaquilla mineral concession, subject to a graduated 1% - 5% Net Smelter Return, based on the future gold price at the time of production, payable to the former joint venture partners as to 35.135% and 64.865% respectively. (See Note 6).

Approval of the phased Mine Development Plan was obtained in September 2005. The Company proceeded with the development of the property and construction of the processing mill commenced in July of 2007.  (See Note 26(vii)).

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 100

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

5.

MINERAL PROPERTIES(continued)

Rio Bellencillo Concession - Panama

The Company holds various interests in other land concession areas adjacent to the Ley Petaquilla Property in Panama, including the Rio Belencillo and Rio Petaquilla concessions.

By an Agreement dated May 7, 2005 and amended on June 10, 2005, Gold Dragon Capital Management Ltd. (“Gold Dragon”), a company having a common director, had an option to purchase all of the Company’s interest in the Rio Belencillo and Rio Petaquilla concessions by the expenditure of $100,000 in approved exploration costs by May 7, 2007, an additional $400,000 in approved exploration costs by February 7, 2008 and by then paying the Company $1,152,400. This sum is payable in shares of Gold Dragon.

The payment of $100,000 on account of exploration expenditures has not been made in accordance with the terms and conditions of the May 7, 2005 agreement. The Company is in the process of amending the agreement with Gold Dragon.

The Company’s proportionate share of exploration costs totalling $48,872 (April 30, 2008 - $26,006, April 30, 2007 - $26,006 and January 31, 2007 - $2,259) has been capitalized on the Company’s balance sheet (Note 3).

San Juan Concessions - Panama

During the period ended April 30, 2007, the Company entered into an agreement with Geneva Gold, formerly Eurogold Mining Inc. (“Eurogold”), for the exploration and development of the San Juan Concessions. The San Juan Property is adjacent to the Company’s Molejon gold project and the Petaquilla porphyry copper project in west central Panama. Under the agreement, Geneva Gold may earn a 60% interest in the San Juan Property by incurring exploration expenditures of at least US$6,000,000, by paying Petaquilla Minerals Ltd. US$600,000 in cash and by causing to be issued to Petaquilla Minerals Ltd. 9,000,000 shares of Geneva Gold, over a period of three years. If Geneva Gold acquired a 60% interest in the property, it may increase its interest to 70% by incurring US$3,000,000 in additional exploration expenditures in the fourth year. The Company was to be the operator of the project. The Company received the initial c ash option payment of $111,120 (US$100,000). All capitalized costs relating to this concession have been previously written off.

During the period ended January 31, 2007, the Company rescinded the above agreement and returned the initial cash option payment of $111,120 (US$100,000) to Geneva Gold.

Geneva Gold has claimed a loss in the share value said to be caused by the Company’s news release announcing that the agreement with the Company has been rescinded. The legal claim was settled by issuing 100,000 shares in Petaquilla Minerals Ltd., valued at the market value of $2.61 per share. No legal fees were incurred during the one month ended May 31, 2008 ($41,692 – twelve months ended  April 30, 2008, $14,251 – three months ended April 30, 2007 and Nil – twelve months ended January 31, 2007).

6.

PLAN OF ARRANGEMENT AND ADVANCES TO PETAQUILLA COPPER LTD.

During the period ended January 31, 2007, the shareholders of the Company voted in favour of the April 21, 2006 proposed Plan of Arrangement. During the same period, Supreme Court approval in the Province of British Columbia was obtained for the Plan of Arrangement.

The result of the Plan of Arrangement was that each shareholder of the Company received one share of Petaquilla Copper Ltd. (“Copper”), a private company. Each shareholder continued to hold one share of the Company and one share of Copper, for each one share of the Company held on the effective date of the Plan of Arrangement.

The Effective Date of the Plan of Arrangement was October 18, 2006 whereby each holder of the common shares of the Company on October 17, 2006 was entitled to receive one common share of Copper for each common share of the Company held.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 101

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

6.

PLAN OF ARRANGEMENT AND ADVANCES TO PETAQUILLA COPPER LTD.(continued)

According to the terms of the Plan of Arrangement, the Company transferred title to Copper of its wholly-owned subsidiary, Georecursos International S.A., the holder of the 52% interest in the Ley Petaquilla concession lands. The Company would retain 100% ownership of the gold and precious metal deposits within the Ley Petaquilla concession as well as all the other concession lands adjacent to the Ley Petaquilla concession.

The Company initially owned 22,233,634 of the issued shares of Copper at a cost of $500,000. This initial 20% equity stake has been and may be further diluted upon future share capital financings that are anticipated to be necessary for the ongoing funding of the Copper deposit project. Subsequent to the Plan of Arrangement, the Company has accounted for Copper on an equity basis reporting an equity loss of $230,788 (twelve months ended April 30, 2008 - $4,484,625, three months ended April 30, 2007 - $1,579,353 and twelve months ended January 31, 2007 - $193,647) and a gain on dilution of nil (twelve months ended April 30, 2008 - $12,737,095, three months ended April 30, 2007 - $811,535 and twelve months ended January 31, 2007 - $2,268,465) for the one month period ended May 31, 2008. Under the equity method, the Company records the percentage of net income (loss) that would be attributed to the investment by adjusting the car rying value of the investment. If the percentage of loss from the investee is greater than carrying cost, the amount is not reduced beyond the full carrying value. Dilution gains arise whenever Copper issues equity at a price greater than the carrying value of the equity investment.

As at May 31, 2008, the amount payable to Copper is $1,157,788 (April 30, 2008, payable of $9,880,377, April 30, 2007, receivable of $4,582,937 and January 31, 2007, receivable of $2,143,773) related to advances to pay for mineral property costs and administrative expenses.

7.

RESTRICTED CASH

The Company has a deposit of $30,000 (April 30, 2008 - $30,000, April 30, 2007 - $30,000 and January 31, 2007 - $30,000) with HSBC Bank as collateral for the credit card used by the Company to pay ongoing travel and related costs.

The Company has pledged a term deposit in the amount of $397,680 (US$ 400,000) (April 30, 2008 - $403,800 (US$ 400,000), April 30, 2007 - $276,675 (US$ 250,000) and January 31, 2007 - $294,800 (US$ 250,000)) as security for financings (Note 8).

The Company has posted a term deposit in the amount of $198,840 (US$ 200,000) (April 30, 2008 - $201,900 (US$ 200,000), April 30, 2007 - $110,670 (US$ 100,000) and January 31, 2007 - $117,920 (US$ 100,000)) as a guarantee for a performance bond to comply with Environmental law, article 112 in Panama.

The Company has also posted a term deposit in the amount of $39,768 (US$ 40,000) (April 30, 2008 - $40,380 (US$ 40,000), April 30, 2007 – Nil and January 31, 2007 – Nil) to satisfy the requirement for a performance bond with the Ministry of Commerce and Trade in Panama.

During the period ended January 31, 2007, the Company was required to post a performance bond of US$780,000 to maintain its interest in the Petaquilla property.  To satisfy this requirement, at January 31, 2007, the Company pledged a guaranteed investment certificate for $919,776 (US$ 780,000) (May 31, 2008 – Nil, April 30, 2008 – Nil, and April 30, 2007 - $863,226 (US$ 780,000)) as security.

During the period ended January 31, 2007, the Company pledged $383,240 (US$ 325,000) (May 31, 2008 – Nil, April 30, 2008 – Nil and April 30, 2007 – Nil) by way of a term deposit to the bank as a reserve to meet statutory employer payroll obligations.

Interest rates on these deposits ranges from 2.60% to 4.875%.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 102

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

8.

LONG-TERM DEBT

During the twelve months ended January 31, 2007, the Company arranged a bank loan of $407,524 (US$ 382,400) to acquire road and mine site equipment. The loan is repayable in 36 equal monthly instalments of $12,513 (US$ 11,742) commencing in May 2006 and bears interest at an annual rate of 5.625%. Collateral for this loan is comprised of a pledge of a fixed first charge on the purchased equipment and a $248,550 (US$ 250,000) renewable term deposit.

During the twelve months ended January 31, 2007, the Company arranged a bank loan of $83,988 (US$ 78,810) to acquire vehicles to be used for the mine site. The loan is repayable in 36 equal monthly instalments of $2,671 (US$ 2,506) commencing in May 2006 and bears interest at an annual rate of 9.25%. Collateral for this loan is comprised of a fixed first charge on the purchased equipment.

During the twelve months ended January 31, 2007, the Company arranged a bank loan of $245,878 (US$ 230,720) to acquire additional road and mine site equipment. The loan is repayable in 36 monthly instalments of $7,934 (US $7,445) commencing in October 2006 and bears interest at an annual rate of 9.00%. Collateral for this loan is comprised of a first charge on the purchased equipment.

During the twelve months ended January 31, 2007, the Company arranged a bank loan of $597,645 (US $560,800) to acquire additional road and mine site equipment. The loan is repayable in 36 monthly instalments of $19,284 (US $18,095) commencing in January 2007 and bears interest at an annual rate of 9.25%. Collateral for this loan is comprised of a pledge of a first charge on the purchased equipment and a $149,130 (US $150,000) renewable term deposit.

During the twelve months ended January 31, 2007, the Company arranged a bank loan of $26,110 (US $24,500) to acquire a vehicle to be used for the mine site. The loan is repayable in 36 monthly instalments of $845 (US $793) commencing in January 2007 and bears interest at an annual rate of 9.25%. Collateral for this loan is comprised of a first charge on the purchased vehicle.

The following table summarizes the loans outstanding as at May 31, 2008, April 30, 2008, April 30, 2007 and January 31, 2007:

		May 31, 2008			April 30, 2008			April 30, 2007			January 31, 2007
Long-term debt
Equipment loan #1	$	125,053		$	138,043		$	303,203		$	347,059
Vehicle loan #1		27,978			30,674			64,061			72,964
Equipment loan #2		110,984			119,181			218,115			245,989
Equipment loan #3		317,324			337,568			576,443			646,171
Vehicle loan #2		13,907			14,792			25,245			28,300
		595,246			640,258			1,187,067			1,340,483
Less: current portion		(433,621	)		(451,195	)		(487,882	)		(470,493	)
	$	161,625		$	189,063		$	699,185		$	869,990

Anticipated long-term debt principal repayments are as follows:

2009	$	433,621
2010		161,625
	$	595,246

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 103

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

9.

DEFERRED SERVICES AND MATERIALS TO BE PROVIDED TO PETAQUILLA COPPER LTD.

On September 30, 2007, Petaquilla Gold S.A. (“Gold”), a subsidiary of the Company entered into a Service Agreement with Copper to provide electric generation, aggregate for construction and the rental of a drill machine (collectively, the “services”) for a 3-year period.  In return for receiving certain benefits and assurances, payment for services has been assumed and prepaid by Petaquilla Copper Ltd. in the amount of $4,387,705 (US $ 4,400,000) as per the following table, which details Copper’s minimum needs:

Service/Supply	Minimum	Estimated Cost		Estimated Cost per		Estimated cost for 3-
	Requirement	per Unit		Month		year contract
Electric Generation	350,000kw.hr/month	0.19USD /kw.hr	$	66,254	$	2,385,142
Aggregate for construction, including transportation to site	100,000yd3	16.4/yd3		-		1,643,895
Rental of LF 70 Drill Machine	-	-		99,630		358,668
Total prepaid services					$	4,387,705

		May 31, 2008		April 30, 2008		April 30, 2007		January 31, 2007
Current portion	$	247,343	$	247,343	$	-	$	-
Non-current portion		3,980,203		4,060,956		-		-
	$	4,227,546	$	4,308,299	$	-	$	-

The first two years of the Service Agreement, Copper shall have the option to purchase the equipment from Gold at the market price of the equipment less the unamortized amount of rental costs prepaid. See Note 18.

During the period ended May 31, 2008 the Company provided $70,105 (US$ 65,263) (twelve months ended April 30, 2008 - $ 79,406 (US$ 73,852), three months ended April 30, 2007 – Nil and twelve months ended January 31, 2007 – Nil) in services under this agreement.

10.

CAPITAL LEASE OBLIGATIONS

During the current period and the twelve months ended April 30, 2008, the Company entered into two capital lease arrangements with Banco Bilbao Vizcaya Argentaria (Panama) S.A. (“BBVA”) for the purchase of equipment to advance the Molejon project into production.

The equipment includes but is not restricted to: ball mills, a Metso crushing plant, cranes and an aggregate crushing plant.

As a condition of the lease, the equipment will serve as collateral throughout the amortization period and will be registered with the Public Registry of the Republic of Panama. Further, a related company subject to significant influence, has pledged a term deposit in the amount of $2,347,403 (US$ 2,361,098) (April 30, 2008 - $2,383,528 (US$ 2,361,098) April 30, 2007 – Nil, January 31, 2007 - Nil) as additional security.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 104

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

10.

CAPITAL LEASE OBLIGATIONS(continued)

Future minimum lease payments on the capital lease obligation are as follows:

2009	$	2,648,121
2010		2,648,121
2011		1,674,278
		6,970,520
Less: Imputed interest of 9%		(839,640	)
Total		6,130,880
Current obligation		2,162,289
Long-term obligation	$	3,968,591

11.

OPERATING CREDIT LINE FACILITY

The Company has an operating credit line facility with BBVA up to a maximum of $13,301,952 (US$ 13,379,554) (April 30, 2008 - $13,506,660 (US$ 13,379,554), April 30, 2007 – Nil, January 31, 2007 - Nil).  The facility is drawdown, reduced and converted to a capital lease when the purchase of assets has been completed.  The facility has a fixed rate of 9% on $10,954,549 (US$ 11,018,456) (April 30, 2008 - $11,123,131 (US$ 11,018,456), April 30, 2007 – Nil, January 31, 2007 - Nil) and fixed rate of 6% on $2,347,403 (US$ 2,361,098) (April 30, 2008 - $2,383,528 (US$ 2,361,098), April 30, 2007 – Nil, January 31, 2007 - Nil)  The facility is secured by the assets purchased under the facility and is registered with the Public Registry of the Republic of Panama.

12.

SENIOR SECURED NOTES

	May 31, 2008
US$ 60 Million Senior Secured Notes	$26,630,004

On May 21, 2008, the Company closed $31,746,900 (US$ 32,250,000), the first tranche of its US$60 Million senior secured notes (“Notes”). The Notes bear interest at an annual rate of 15%. The Notes will mature five years from date of issuance at 120% of the principal. The Company has the right to redeem the notes at any time at 120% of the principal amount plus any accrued or unpaid interest on the notes. If the Notes are redeemed within one year of issuance, all prepaid interest is forfeited. After 24 months from the date of issuance of the Notes, holders of the Notes shall have the right to cause the Company to purchase all of its notes then outstanding at a price equal to the sum of (a) 120% of the principal amount of such Notes to be purchased and (b) accrued and unpaid interest on the principal amount of the Notes. On an annual basis, the Note holders can cause the Company to redeem Notes equal to 35% of free cash flow. Free cash flow is to be define d mutually between the Company and the Note holders. As of May 31, 2008, no definition of free cash flow has been defined.

Each Note was issued with 382 share purchase warrants. Each warrant entitles the holder to purchase one common share at CDN $2.30 for a period of five years from the date of purchase. The warrants are subject to a weighted average anti-dilution price protection with a floor equivalent to CDN $ 2.15.

The Notes have been accounted for in accordance with HB 3855 “Financial Instruments – Recognition and Measurement” and HB 3861 “Financial Instruments – Disclosure and Presentation”. Under this guidance, the Company valued the liability component of the Notes and assigned the difference to the warrants. On the valuation date, the value of the Notes was calculated to be $30,993,398 (US$ 31,430,279) and the amount allocated to the warrants $808,327 (US$ 819,721).  Prepaid interest of $4,762,035 (US$ 4,875,000) was applied as a reduction of the Notes. The Company will capitalize interest and accretion based on expenditures on qualifying assets. The liability component was calculated using a discount rate of 26.65% and a maturity date of two years from issue. The senior secured notes contain embedded derivatives as a result of the call and put options. The Company is unable to fair value the embedded derivatives component separately and thus has classified the combined contract as a financial liability that is held for trading.

The Company incurred $3,974,266(US$ 4,029,536) in financing costs. These costs have been expensed in the period they are incurred

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 105

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

12.

SENIOR SECURED NOTES(continued)

in accordance with the Company’s accounting policy. Accreted interest of $189,904 had been capitalized to mineral properties in accordance with the Company’s accounting policy.

The Notes are collateralized, on a joint and several basis, by all the assets of the Company and of the Company’s subsidiaries.

13.

BANK OVERDRAFT

The Company has a bank overdraft facility with one of its financial institutions for $2,087,820 (US$ 2,100,000).  (April 30, 2008 - $2,119,950 (US$ 2,100,000), April 30, 2007 - $1,205,382 (US$ 1,089,168), January 31, 2007 - Nil). The overdraft bears a fixed interest of 7.5% per annum and is secured by one of the Company’s savings account up to $1,168,282 (US$ 1,175,098). A related company subject to significant influence, has posted a $919,538 (US$ 924,902) term deposit as guarantee for this facility.

14.

SHARE CAPITAL, WARRANTS AND CONTRIBUTED SURPLUS

Authorized Capital

Unlimited common shares without par value

Unlimited preference shares without par value – rights and privileges conferred on issuance

	Number		Amount			Contributed			Warrants
	of Common					Surplus
	Shares
Issued
Balance as at January 31, 2006	70,246,303		61,684,216			1,004,480			1,292,993
Non-brokered private placement, net of finders’ fees (b)	9,400,000		11,717,220			-			9,885,980
Exercise of stock options	4,737,893		11,311,328			(8,685,394	)		-
Exercise of warrants	4,982,835		7,272,396			-			(1,292,993	)
Stock-based compensation	-		-			17,127,198			-
Share issuance costs	-		(1,414,061	)		-			820,518
Balance as at January 31, 2007	89,367,031		90,571,099			9,446,284			10,706,498
Exercise of stock options	509,920		1,024,936			(750,603	)		-
Stock-based compensation	-		-			3,377,468			-
Balance as at April 30, 2007	89,876,951		91,596,035			12,073,149			10,706,498
Non-brokered private placement, net of finders’ fees (c)	4,552,412		10,918,342			-			1,327,463
Exercise of stock options	1,055,883		3,110,114			(2,026,487	)		-
Exercise of warrants	373,395		1,153,659			-			(578,617	)
Share issue relating to legal settlement	100,000		261,000			-			-
Stock-based compensation	-		-			6,269,339			-
Share issuance costs	-		(551,586	)		-			83,845
Balance as at April 30, 2008	95,958,641		106,487,564			16,316,001			11,539,189
Stock-based compensation	-		-			90,017			-
Share issuance costs	-		(629,481	)		-			629,481
Senior secured notes warrants	-		-			-			808,327
Balance as at May 31, 2008	95,958,641	$	105,858,083		$	16,406,018		$	12,976,997

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 106

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

14.

SHARE CAPITAL, WARRANTS AND CONTRIBUTED SURPLUS(continued)

(a)

In January 2006, the Company completed a non-brokered private placement and issued 9,965,670 units at a price of $0.95 per unit, for gross proceeds of $9,467,387. Each unit consists of one common share and one-half of one non-transferable share purchase warrant aggregating 4,982,835 warrants. Each whole warrant entitles the holder to purchase one common share of the Company at a price of $1.20 per share if exercised in the first year following the closing, and at a price of $1.44 per share if exercised in the second year following the closing. The warrant will terminate within 20 days unless exercised in the event the Company’s closing stock price meets or exceeds $2.00 for 10 consecutive trading days and the Company issues a press release of such an event. The Company paid finders’ fees of $534,053 for net proceeds of $8,933,334. The warrants were exercised during fiscal 2007.

(b)

In October 2006, the Company completed a non-brokered private placement and issued 9,400,000 units at a   price of $2.40 per unit, for gross proceeds of $22,560,000. Each unit consists of one common share and one share purchase warrant (see Note 16). The Company agreed to issue 398,000 share purchase warrants as finders’ fees in connection with part of the private placement (see Note 16). The fair value of the finders’ warrants is $820,518 that was approved and recorded during the fiscal year. In addition, the Company paid finders’ fees of $956,800 for net cash proceeds of $21,603,200.

(c)

In May 2007, the Company closed a non-brokered private placement comprising of 1,387,879 units at $2.00 per unit, and 24,033 units at $2.02 per unit for gross proceeds of $2,824,305. Each unit consists of one common share and one-half of one common share purchase warrant, with each whole warrant exercisable into a common share at a price of $3.50 per share for a period of two years following closing of the private placement. The share purchase warrants are subject to an accelerated expiry provision that, if the volume weighted average trading price of the common shares of the Company as traded on the Toronto Stock Exchange exceeds $7.00 per share for at least 30 consecutive trading days, the Company shall have the right, exercisable within 30 days thereafter, to give notice to each warrant holder requiring the exercising of the warrants within a 30 day period. If the Company exercises such right, the warrant will, if not exercised by the warrant hold er in accordance with their terms and conditions, expire at the end of such 30 day period. The securities issued under this private placement were subject to a four-month and a day resale restriction that expired on September 10, 2007.  The fair value of the warrants issued on this private placement is $291,274.

In October 2007, the Company closed the first tranche of the non-brokered private placement announced in October 2007 comprising 2,093,500 units at $3.00 per unit for gross proceeds of $6,280,500. Each unit consists of one common share and one-half of one common share purchase warrant, with each whole warrant exercisable into a common share at a price of $3.50 per share for a period of two years following closing of the private placement. The Company paid $222,375 and agreed to issue 74,125 share purchase warrants as finders’ fees in connection with part of the private placement. The fair value of the finders’ warrants is $52,584.

In December 2007, the Company closed the second tranche of the non-brokered private placement announced in October 2007 comprising of 339,000 units at $3.00 per unit for gross proceeds of $1,017,000. Each unit consists of one common share and one-half of one common share purchase warrant, with each whole warrant exercisable into a common share at a price of $3.50 per share for a period of two years following closing of the private placement. The Company paid $43,500 and agreed to issue 12,500 share purchase warrants as finders’ fees in connection with part of the private placement. The fair value of the finders’ warrants is $8,304.

In January 2008, the Company closed the third tranche of the non-brokered private placement announced in    October 2007 comprising of 708,000 units at $3.00 per unit for gross proceeds of $2,124,000. Each unit consists of one common share and one-half of one common share purchase warrant, with each whole warrant exercisable into a common share at a price of $3.50 per share for a period of two years following closing of the private placement. The Company paid $105,000 and agreed to issue 35,000 share purchase warrants as finders’ fees in connection with part of the private placement. The fair value of the finders’ warrants is $22,957.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 107

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

14.

CAPITAL STOCK, WARRANTS AND CONTRIBUTED SURPLUS(continued)

In May 2008, the Company closed the first tranche of its Senior Secured Notes issuing 32,250 units with gross proceeds of US$ 32,250,000. Each unit of US$ 1,000 consists of one Secured Senior Note and a warrant to purchase 382 Common shares. Each warrant entitles the holder to purchase one common share at CDN $2.30 for a period of five years from the date of purchase. The warrant is subject to a weighted average anti-dilution price protection with a floor equivalent to $2.15. The notes will mature at 120% of the principal amount. The notes also carry a 15% interest of which the first year’s interest is prepaid at the date the funds were received. The Company paid $1,612,500 and agreed to issue 492,780 share purchase warrants as finders’ fees in connection with this tranche of the private placement. The fair value of the finders’ warrants is $629,481.

The Company adopted a new shareholder rights plan, which was approved by the shareholders and by the    Toronto Stock Exchange on June 6, 2006. Under the Plan, the Company issued one Right for no consideration for each outstanding common share of the Company to all holders of record of common shares as at 5:00 p.m., Pacific Time, March 7, 2006. Thereafter, each common share issued by the Company during the term of the Plan will have one Right attached to it. The term of the Plan is five years unless the rights are earlier redeemed or exchanged. The Plan will be subject to review after the third year of its term.

The Rights are attached to the common shares and cannot be exercised until eight trading days after a triggering event has taken place. A triggering event is one of the following: (i) an Acquiring Person, as defined in the Plan, acquires 20% or more of the common shares of the Company; or (ii) an Acquiring Person announces his intention to make a take-over bid that would result in the person owning 20% or more of the outstanding common shares of the Company. Upon such a triggering event occurring, each Right would separate from the common share and thereafter entitle the holder to purchase common shares at a discount of 50% to the market price, up to the amount of the $30 exercise price of the Right.

The Rights will not be separated from the shares if the Acquiring Person makes a Permitted Bid, defined in the  Plan to mean a bid made pursuant to a take-over bid circular to all shareholders of the Company, which has a minimum deposit period of at least 60 days and pursuant to which not less than 50% of the common shares, other than those held by the Acquiring Person, are deposited and not withdrawn.

15.

STOCK OPTIONS

During the twelve months ended January 31, 2007, the Company received approval for its stock option plan (the “New Plan”) which authorizes the board of directors to grant incentive stock options to directors, officers and employees. The maximum number of shares reserved for issuance under the Company’s Plan is 10,000,000.

On December 8, 2006, no shares remained in reserve under the Company’s former incentive stock option plan (the “Former Plan”). The 2,556,144 options that remained outstanding as of December 8, 2006 under the Former Plan were carried forward to the New Plan. In January 2007, the Company granted a total of 5,989,543 incentive stock options under the New Plan.  During the period ended May 31, 2008, 1,375,000 incentive stock options were granted. As at May 31, 2008, the total number of outstanding incentive stock options under the Plan is 8,115,134 (April 30, 2008 -8,015,134, April 30, 2007 - 8,115,767 and January 31, 2007 – 8,495,687).

Prior to the Plan of Arrangement taking effect, and in order to create unallocated options to be granted in the future to new employees, officers and directors, the existing optionees were asked to voluntarily reduce the number of shares under option to each of them to 60% of the number of shares held under the option on the day before the Effective Date (“October 18, 2006”) of the Plan of Arrangement. All of the optionees agreed to this arrangement except for an option holder holding 675,000 options who elected to retain the number of options held under the existing grants. Each revised option outstanding would enable the option holder to receive one share of the Company and one share of Copper upon exercising. For example, when an optionee prior to the Effective Date held an option to purchase 100,000 shares of the Company, that optionee after the Effective Date would hold an option to purchase 60,000 shares of the Com pany and 60,000 shares of Copper. Both options must be exercised together. The modification of stock options as a result of the Plan of Arrangement resulted in no incremental stock-based compensation expense to recognize.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 108

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

15.

STOCK OPTIONS(continued)

The aggregate number of common shares reserved for issuance to any person may not exceed 5% of the number of outstanding common shares. The exercise price of the options will be determined by the five day volume weighted average price of the Company’s shares prior to the date of the grant. Options granted must be exercised no later than 10 years after the date of grant or such lesser period as may be determined by the Board. The Board may at its discretion in any granting of an option set a vesting period whereby the option may only be exercisable in pre-determined instalments. Stock option transactions are summarized as follows:

			Weighted
			Average
	Number		Exercise
	of Shares		Price
Balance at January 31, 2006	6,031,200		0.53	(1)
Granted (re: Plan of Arrangement)	3,730,000		1.14	(1)
Granted	5,989,543		2.01
Exercised	(4,737,893)		0.54	(1)
Expired	(400,000)		1.24	(1)
Forfeited	(493,400)		0.98	(1)
Voluntary reduction	(1,623,763)		0.91	(1)
Balance at January 31, 2007	8,495,687		1.55	(1)
Granted	150,000		2.25
Exercised	(509,920)		0.39
Forfeited	(20,000)		2.01
Balance at April 30, 2007	8,115,767		1.76	(1)
Granted	1,245,000		2.45
Exercised	(1,055,883)		1.03	(1)
Cancelled	(179,750)		2.01
Forfeited	(110,000)		3.04
Balance at April 30, 2008	8,015,134		1.82
Granted	130,000		1.96
Forfeited	(30,000)		2.58
Balance at May 31, 2008	8,115,134		1.82
Number of stock options exercisable	6,003,944	$	1.71

(1)

Exercise price is the aggregate exercise price required to exercise one option of Petaquilla Copper Ltd. and one option of the Company with half of the proceeds to be allocated to the Company and half to Petaquilla Copper Ltd.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 109

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

15.

STOCK OPTIONS(continued)

As at May 31, 2008, the following stock options were outstanding as follows:

Number of Shares
Outstanding	Exercise Price		Expiry Date
150,000	2.25		October 19, 2008
36,480	0.25	(1)	April 21, 2010
193,800	0.25	(1)	July 11, 2010
994,200	0.525	(1)	February 1, 2011
96,000	0.865	(1)	April 27, 2011
5,409,654	2.01		January 15, 2012
200,000	2.22		June 12, 2012
500,000	2.25		June 20, 2012
50,000	2.48		July 11, 2012
75,000	2.49		July 12, 2012
50,000	2.54		July 23, 2012
50,000	2.76		September 10, 2012
5,000	3.04		November 15, 2012
75,000	2.70		February 14, 2013
100,000	2.80		February 11, 2013
30,000	1.96		May 5, 2013
100,000	1.96		May 5, 2013
8,115,134

(1)

Exercise price is the aggregate exercise price required to exercise one option of Petaquilla Copper Ltd. and one option of the Company with half of the proceeds to be allocated to the Company and half to Petaquilla Copper Ltd.

Total stock options granted during the one month ended May 31, 2008 are 130,000 (twelve months ended April 30, 2008 - 1,245,000, three months ended April 30, 2007 - 150,000,  twelve months ended January 31, 2007 - 9,719,543 and twelve months ended January 31, 2006 – 5,573,000), of which Nil (twelve months ended April 30, 2008 - Nil, three months ended April 30, 2007 – Nil,twelve months ended January 31, 2007 – 400,000 and  twelve months ended January 31, 2006 - Nil ) are expired and Nil (twelve months ended April 30, 2008 - Nil, three months ended April 30, 2007 – Nil,twelve months ended January 31, 2007 - 155,200 and  twelve months ended January 31, 2006 - 450,000) were forfeited during the period. Stock options granted that are not vested have been excluded from the calculation of stock-based compensation. Total stock-based compensation recognized for the fair value of stock options granted, vested and approved by the shareholders during the one month period ended May 31, 2008 was $77,902 (twelve months ended April 30, 2008 - $5,676,183, three months ended April 30, 2007 - $3,377,468, twelve months ended January 31, 2007 - $17,008,802 and twelve months ended January 31, 2006 - $410,301). Stock-based compensation charged to mineral property costs amounted to $12,115 for the one month ended May 31, 2008 (twelve months ended April 30, 2008 - $593,157, three months ended April 30, 2007 – Nil, twelve months ended January 31, 2007 - $118,396 and twelve months ended January 31, 2006 - Nil).

These financial statements include the stock-based compensation costs associated with the exchange of options and warrants in connection with the Plan of Arrangement, and the options and warrants issued to Copper in respect thereof.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 110

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

15.

STOCK OPTIONS(continued)

Options

The weighted average fair value of stock options granted is estimated to be approximately $1.18 for the one month ended May 31, 2008 (twelve months ended April 30, 2008 - $1.65, three months ended April 30, 2007 - $0.32 and twelve months ended January 31, 2007 - $1.21 ) by using the Black-Scholes options pricing model with the following weighted average assumptions:

	One month		Twelve
	ended		months ended		Three months		Twelve months		Twelve months
	May 31,		April 30,		ended		ended January		ended January
	2008		2008		April 30, 2007		31, 2007		31, 2006
Risk-free interest	3.05	%	4.44	%	4.16	%	4.04	%	3.34 to 4.20	%
Expected dividend yield	-		-		-		-		-
Expected stock price volatility	74	%	87	%	39	%	106	%	47 to 65	%
Expected option life in years	5.00		5.00		1.00		5.00		2.00 - 5.00

16.

SHARE PURCHASE WARRANTS

Share purchase warrant transactions are summarized as follows:

				Weighted
				Average
	Number			Exercise
	of Shares			Price
Balance at January 31, 2006	4,982,835			1.20/1.44
Issued	9,798,000			1.54
Exercised	(4,982,835	)		1.20
Balance at January 31, 2007 and April 30, 2007	9,798,000			1.54
Issued	2,397,830			3.50
Exercised	(373,395	)		1.54
Balance at April 30, 2008	11,822,435			1.94
Issued	12,812,280			2.30
Balance at May 31, 2008	24,634,715		$	2.13

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 111

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

16.

SHARE PURCHASE WARRANTS(continued)

On October 17, 2006, the Company issued share purchase warrants in connection with the non-brokered private placement which closed during the period.  Each warrant entitles the holder to purchase an additional common share of the Company for a period of five years at a price of $3.00 per share. In addition, the Company agreed to issue 398,000 finders’ warrants, each finder’s warrant entitling the holder to purchase one additional common share of the Company at an exercise price of $3.00 per share for a period of five years.

On the Effective Date of the Plan of Arrangement, the warrant holders received:

a.

one share purchase warrant (a “PTQ Warrant”), where each PTQ Warrant entitles the holder to purchase one common share of the Company for a period of five years; and

b.

one share purchase warrant (a “Copper Warrant”), where each Copper Warrant entitles the holder to purchase one common share of Copper for a period of five years.

Until such time as Copper has been listed on a recognized Canadian stock exchange (the “Copper Listing Date”), the Copper Warrant and the PTQ Warrant must be exercised together. From and after the first five trading days after the Copper Listing Date, the Warrants can be exercised separately, and in that event, the respective exercise prices of the PTQ Warrants and the Copper Warrants will be based on $3.00 multiplied by the ratio of the five day volume weighted average price of each of the PTQ and Copper shares during the first five trading days for Copper.

The PTQ Warrants were subject to a hold period that expired on February 18, 2007. The Copper shares and Copper Warrants are subject to resale restrictions until such time that Copper becomes a reporting issuer or another exemption from resale restrictions is available. The PTQ common shares will be freely tradable following the Effective Date.

On December 31, 2007, Copper commenced trading on the Toronto Stock Exchange. The respective exercise prices of the PTQ Warrants and the Copper Warrants have been determined to be $1.54 and $1.46 based on $3.00 multiplied by the ratio of the five day weighted average price of each of the PTQ and Copper shares during the first five trading days of Copper.

On May 10, 2007, the Company closed a non-brokered private placement comprising of 1,387,879 units at $2.00 per unit, and 24,033 units at $2.02 per unit for gross proceeds of $2,824,305.  Each unit consists of one common share and one-half of one common share purchase warrant, with each whole warrant exercisable into a common share at a price of $3.50 per share for a period of two years following closing of the private placement (See Note 14).  The fair value of the warrants issued on this private placement is $291,274.

In October 2007, the Company closed a non-brokered private placement comprising of 2,093,500 units at $3.00 per unit for gross proceeds of $6,280,500. Each unit consists of one common share and one-half of one common share purchase warrants, with each whole warrant exercisable into a common share at a price of $3.50 per share for a period of two years following closing of the private placement. The Company paid $222,375 and agreed to issue 74,125 share purchase warrants as finders’ fees in connection with part of the private placement. The fair value of the warrants issued on this tranche of the private placement is $720,134. The fair value of the finders’ warrants is $52,584.

In December 2007, the Company closed the second tranche of the non-brokered private placement announced in October 2007 comprising of 339,000 units at $3.00 per unit for gross proceeds of $1,017,000. Each unit consists of one common share and one-half of one common share purchase warrants, with each whole warrant exercisable into a common share at a price of $3.50 per share for a period of two years following closing of the private placement. The Company paid $43,500 and agreed to issue 12,500 share purchase warrants as finders’ fees in connection with part of the private placement. The fair value of the warrants issued on this tranche of the private placement is $103,549. The fair value of the finders’ warrants is $8,304.

In January 2008, the Company closed the third tranche of the non-brokered private placement announced in October 2007 comprising of 708,000 units at $3.00 per unit for gross proceeds of $2,124,000. Each unit consists of one common share and one-half of one common share purchase warrants, with each whole warrant exercisable into a common share at a price of $3.50 per share for a period of two years following closing of the private placement. The Company paid $105,000 and agreed to issue 35,000 share purchase warrants as finders’ fees in connection with part of the private placement. The fair value of the warrants issued on this tranche of the private placement is $212,504. The fair value of the finders’ warrants is $22,957.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 112

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

16.

SHARE PURCHASE WARRANTS(continued)

In May 2008, the Company closed the first tranche of its Senior Secured Notes issuing 32,250 units with gross proceeds of US$ 32,250,000 (Note 12). Each unit of US$ 1,000 consists of one Secured Senior Note and a warrant to purchase 382 Common shares. Each warrant entitles the holder to purchase one common share at CDN $2.30 for a period of five years from the date of purchase. The warrant is subject to a weighted average anti-dilution price protection with a floor equivalent to $2.15. The notes will mature at 120% of the principal amount. The notes also carry a 15% interest of which the first year’s interest is prepaid at the date the funds were received. The Company paid $1,612,500 and agreed to issue 492,780 share purchase warrants as finders’ fees in connection with part of the private placement. The fair value of the finders’ warrants is $629,481.

The weighted average fair value of the finders’ warrants issued is estimated to be approximately $1.28 for the one month ended May 31, 2008 (twelve months ended April 30, 2008 - $0.69, three months ended April 30, 2007 - Nil, and twelve months ended January 31, 2007 -  $2.06)  by using the Black-Scholes options pricing model with the following assumptions:

	One month ended  May 31, 2008	Twelve months ended  April 30, 2008	Three months ended April 30, 2007	Twelve months ended January 31, 2007
Risk-free interest Expected dividend yield Expected stock price volatility Expected option life in years	3.18% - 74% 5.00	4.00% - 47% 2.00	- - - -	4.04% - 108% 5.00 years

17.

TREASURY SHARES

During the period ended January 31, 2006, the Company sold 1,616,000 of its shares held in treasury at an average price of $0.79 per share for net proceeds of $1,273,946. These shares were previously issued and reacquired at a cost of $3.79 per share by the Company pursuant to an issuer bid. The loss of $4,847,462 resulting from the sale of these shares and related broker fees has been charged to deficit during the period ended January 31, 2006. As at May 31, 2008, 44,200 common shares were held in treasury.

18.

RELATED PARTY TRANSACTIONS

During the one month ended May 31, 2008:

a)

The Company paid consulting fees of $1,890 (twelve months ended April 30, 2008 - $106,033, three months ended April 30, 2007 - $15,545, twelve months ended January 31, 2007 - $411,179 and twelve months ended January 31, 2006 - $114,559) to related companies controlled by a director and a former officer.

b)

The Company paid legal fees of Nil (twelve months ended April 30, 2008 - $109,517, three months ended April 30, 2007 - $44,523, twelve months ended January 31, 2007 - $230,061 and  twelve months ended January 31, 2006 -  Nil), share issue costs of Nil (twelve months ended April 30, 2008 - $165,836, three months ended April 30, 2007 – Nil, twelve months ended January 31, 2007 – $113,097 and twelve months ended January 31, 2006 - Nil) and financing costs of $95,272 (twelve months ended April 30, 2008 – Nil, three months ended April 30, 2007 – Nil, twelve months ended January 31, 2007 – Nil and twelve months ended January 31, 2006 - Nil) to a law firm controlled by an officer. The Company paid for services and goods of Nil (twelve months ended April 30, 2008 - $129,921, three months ended April 30, 2007 - $26,768, twelve months ended January 31, 2007 - $107,359 and twelve months ended Ja nuary 31, 2006 - $61,749) to a company controlled by an officer and a director.

c)

The Company paid consultant fees and wages of $9,052 (twelve months ended April 30, 2008 - $143,583, three months ended April 30, 2007 - Nil, twelve months ended January 31, 2007 - Nil and twelve months ended January 31, 2006 - Nil) to companies controlled by directors and an officer.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 113

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

18.

RELATED PARTY TRANSACTIONS (continued)

d)

The Company received $3,425 (twelve months ended April 30, 2008 - $34,875, three months ended April 30, 2007 - $8,549, twelve months ended January 31, 2007 - $7,573 and twelve months ended January 31, 2006 - Nil) from Copper as payment of office rent.

e)

The Company received or accrued Nil (12 months ended April 30, 2008 - $129,345, 3 months ended April 30, 2007 - $103,348, twelve months ended January 31, 2007 - Nil and twelve months ended January 31, 2006 - Nil) in asset usage fees from Copper for the use of certain office and mining equipment. Also during the period, the Company and Copper advanced negotiations with the lessor of the equipment to have the commercial terms of the leasing arrangement correspond with the terms of the Plan of Arrangement made effective on October 18, 2006, such that Copper will ultimately become the lessee of the equipment. The cost recovery arrangement will be subject to review and revision to reflect changes in operations.

f)

During the period ended April 30, 2008 the Company had a cost sharing arrangement with Copper varying from 50% to 80% of the cost. This arrangement was terminated on September 30, 2007 when the terms of the agreement were fulfilled.

Certain employees of the Company with knowledge in mining, government, environmental and community relations were previously employed and trained by the Company. In January 2008, the Company charged Copper for technical know-how and other intellectual property transferred to Copper. The amount of these fees has been determined to be  $4,587,320 (US$ 4,577,250). In April 2008, the Company and Copper agreed to rescind the agreement and the fees were refunded to Copper.

As at May 31, 2008, the Company has an amount payable to Copper of $1,157,788 (April 30, 2008 - $9,880,377 payable, April 30, 2007 - $4,582,937 receivable and January 31, 2007 - $2,143,774 receivable) resulting from mineral property costs and general and administrative expenses paid by the Company on Copper’s behalf. This account bears interest at a rate of US prime plus 1%.  As at May 31, 2008, the Company has $113,832 payable to all other related parties (April 30, 2008 – $16,707, April 30, 2007 – $55,901 and January 31, 2007 – $81,305).

The Company has posted 5,000,000 common shares of PTC as security of its account payable to PTC.  PTC’s common shares posted as security were held in escrow pending payment of the account payable and cannot be sold until the account payable has been paid in full pursuant to a Warranty Agreement dated September 30, 2007.

The common shares serving as security are based on a market value of $2.00 per common share.  If the market value of the common shares changes, the number of shares required to be posted as security shall be adjusted accordingly.

Effective December 31, 2007, the Company transferred back to Copper 1,815,069 of its Copper shares held as repayment of advances payable to Copper as at December 31, 2007 of $5,608,564. These shares were transferred at a fair market value of $3.09 per share.

The fair market value of Copper shares transferred back to Copper was calculated in accordance with the Warranty Agreement dated September 30, 2007. As Copper did not publicly trade until December 31, 2007, the fair value was determined using the Black-Scholes options pricing model to determine the fair market value of a Copper common share and half warrant in each unit issued in Copper’s first tranche of a non-brokered private placement in December 2007.

The following assumptions were used:

Risk-free interest	3.22
Expected dividend yield	-
Expected stock price volatility	58.49%

Subsequent to the transfer of shares, Copper released to the Company the remaining shares it held in escrow.

These transactions are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 114

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

18.

RELATED PARTY TRANSACTIONS (continued)

In September of 2007, the Company entered into an agreement with Copper to sell some of its surplus property and equipment and mineral properties that are no longer required for its current operations. The net book value of these assets is $3,464,048 which approximates their fair market value. The Company did not recognize a gain or loss on this disposal.  

On September 30,2007, Petaquilla Gold S.A. (“Gold”), a subsidiary of the Company entered into a Service Agreement with Petaquilla Copper, S.A. (“Copper”) to provide electric generation, aggregate for construction and the rental of a drill machine (collectively, the “services”) for a 3-year period.  In return for receiving certain benefits and assurances, payment for services has been assumed and prepaid by Petaquilla Copper Ltd. in the amount of $4,387,705 (US $4,404,000).

19.

INCOME TAXES

A reconciliation of income taxes of statutory rates with the reported taxes is as follows:

		One month			Twelve months			Three months			Twelve months			Twelve months
		ended May 31,			ended			ended			ended			ended
		2008			April 30, 2008			April 30, 2007			January 31, 2007			January 31, 2006
Statutory tax rate		30.67	%		33.08	%		34.12	%		34.12	%		34.70	%
(Loss) for the period	$	(4,513,145	)	$	(1,031,155	)	$	(6,443,991	)	$	(21,518,419	)	$	(2,567,758	)
Income tax recovery	$	(1,384,182	)	$	(341,106	)	$	(2,191,815	)	$	(7,342,085	)	$	(892,168	)
Permanent differences		(61,546	)		(53,318	)		1,273,166			5,467,798			117,045
Income tax rate change and differential		895,534			1,347,730			(266,240	)		758,00			14,107
Change in valuation allowance		550,194			(953,306	)		1,184,889			1,116,287			761,016
Income tax recovery	$	-		$	-		$	-		$	-		$	-

The significant components of the Company’s future income tax assets (liabilities) are as follows:

		May 31, 2008			April 30, 2008			April 30, 2007			January 31, 2007
Future income tax assets (liabilities)
Non-capital and other loss carry-forwards	$	3,249,789		$	3,278,893		$	4,264,620		$	3,090,661
Equipment and mineral properties		54,878			54,878			235,412			232,851
Deferred financing costs		1,623,839			547,524			-			405,876
Future income tax on investment		(1,347,586	)		(1,202,204	)		-			(320,021	)
Other		13,060			13,947			386,036			16,873
Total future income tax assets		3,593,980			2,693,038			4,886,068			3,426,240
Valuation allowance		(3,593,980	)		(2,693,038	)		(4,886,068	)		(3,426,240	)
Net future income tax assets	$	-		$	-		$	-		$	-

The Company has non-capital losses of approximately $12,934,532 available for deduction against future years’ taxable income in Canada. These losses, if unutilized, will expire beginning in 2009 as follows:

2009	$	184,526
2010		133,088
2011		420,267
2015		882,063
2026		1,932,414
2027		5,173,260
2028		4,208,913
	$	12,934,531

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 115

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

19.

INCOME TAXES(continued)

The Company will not be subject to any income taxes in Panama until such time that all of the debts incurred by all the affiliated / subsidiary companies have been repaid in full.  At that time the Company will be able to claim accelerated write-offs for all Panamanian subsidiaries.

20.

SEGMENT INFORMATION

The Company has one operating segment being the exploration of resource properties. Details of geographic information are as follows:

	May 31, 2008		Canada		Panama		Total
	Interest income	$	-	$	78,670	$	78,670
	Property and equipment		-	$	16,681,830	$	16,681,830
	Mineral properties		-	$	67,149,615	$	67,149,615
��	April 30, 2008		Canada		Panama		Total
	Interest income	$	39,593	$	14,982	$	54,575
	Property and equipment		-	$	16,984,201	$	16,984,201
	Mineral properties		-	$	65,099,631	$	65,099,631
	April 30, 2007		Canada		Panama		Total
	Interest income	$	47,623	$	9,226	$	56,849
	Property and equipment	$	63,284	$	5,279,863	$	5,343,147
	Mineral properties		-	$	31,236,455	$	31,236,455
	January 31, 2007		Canada		Panama		Total
	Interest income	$	264,210	$	31,821	$	296,031
	Property and equipment	$	86,106	$	5,134,944	$	5,221,050
	Mineral properties		-	$	22,887,996	$	22,887,996
	January 31, 2006		Canada		Panama		Total
	Interest income	$	48,239	$	-	$	48,239

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 116

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

21.

COMMITMENTS

(a)

During the period ended April 30, 2007, the Company entered into a five-year lease for office premises at an estimated annual cost of $66,240 commencing September 1, 2006. Cancellation of two previous lease obligations was obtained effective May 15, 2006.

From October 18, 2006, the office leasing costs have been split equally between the Company and Petaquilla Copper Ltd., consequent to the Plan of Arrangement. Therefore the estimated annual cost is $33,120 to the Company.

(b)

As of May 31, 2008, the Company had a commitment to purchase plant of $1,102,998 (US$1,109,433), generators of $1,423,240 (US$1,431,543), equipment of $1,841,191(US$1,851,932) and other support equipment of $679,704 (US$683,669).

22.

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company’s financial instruments consist of cash and cash equivalents, receivables, accounts payable, long-term debt, restricted cash, and the amount payable from Petaquilla Copper Ltd.  Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments other than the senior secured notes. The fair value of these financial instruments approximates their carrying values, unless otherwise noted.

The Company is exposed to interest rate risk on its senior secured notes. These notes bear a fixed interest rate. The Company monitors its exposure to interest rates and is currently comfortable with its exposure.

The Company is subject to financial risk arising from fluctuations in foreign currency exchange rates. The Company does not use any derivative instruments or hedging activities to reduce its exposure to fluctuations in foreign currency exchange rates.

23.

SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS

		One month			Twelve months			Three months		Twelve months			Twelve months
		ended May			ended April 30,			ended April		ended January			ended January
		31, 2008			2008			30, 2007		31, 2007			31, 2006
Non-cash financing activities
Finder’s fee	$	629,481		$	83,845		$	-	$	820,518		$	-
Share issue costs		(629,481	)		(83,845	)		-		(820,518	)		-
Settlement of advances for deferred services		-			(4,387,705	)		-		-			-
Settlement of advances for property andequipment and mineral properties		-			(3,464,048	)		-		-			-
Shares issued re legal settlement		-			261,000			-		-			-
Non-cash investing activities
Property and equipment incurred throughpayables		-			-			188,383		-			-
Property and equipment acquired throughcapital leases		-			6,906,789			-		-			-
Property and equipment acquired throughcredit line facility		-			3,849,974			-		-			-
Mineral property costs incurred throughpayables		1,441,895			2,516,178			3,827,595		511,556			192,158
Stock-based compensation capitalized tomineral properties		12,115			593,157			-		118,396			-
Asset retirement obligation capitalized tomineral properties		-			-			4 ,400,000		-			-

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 117

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

23.

SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS(continued)

		One month		Twelve months		Three months		Twelve months
		ended May 31,		ended April 30,		ended April		ended January
		2008		2008		30, 2007		31, 2007
Cash and cash equivalents consist of:
Cash	$	6,357,871	$	1,642,691	$	1,076,253	$	575,881
Term deposits		6,417,735		136,282		701,874		6,353,943
	$	12,775,606	$	1,778,973	$	1,778,127	$	6,929,824
		One month		Twelve months		Three months		Twelve months
		ended May 31,		ended April 30,		ended April		ended January
		2008		2008		30, 2007		31, 2007
Interest paid in cash	$	5,868,253	$	70,176	$	68,329		-
Income taxes paid in cash		-		-		-		-

24.

ASSET RETIREMENT OBLIGATIONS

The Company’s asset retirement obligation relates to site-restoration and clean-up costs related to its Molejon gold project located in Panama.

A reconciliation of the provision for asset retirement obligations is as follows:

Initial recognition – April 30, 2007	$	4,400,000
Accretion		312,977
Foreign exchange gain on re-measurement in Canadian dollars		(375,974	)
Balance - April 30, 2008		4,337,003
Accretion		52,106
Foreign exchange gain on re-measurement		(81,026	)
Ending balance - May 31, 2008	$	4,308,083

The provision for asset retirement obligations is based upon the following assumptions:

d)

The total undiscounted cash flow required to settle the obligation is approximately $6,848,000 (US$ 6,225,000);

e)

Asset retirement obligation payments are expected to occur during fiscal years 2014 and 2015;

f)

A credit adjusted risk-free rate of 7.65% has been used to discount cash flows.

Prior to April 30, 2007, the Company could not reasonably estimate the fair value of the asset retirement obligation.

25.

CONTINGENCIES

The Company is engaged in certain legal actions in the ordinary course of business and believe that the ultimate outcome of these actions will not have a material adverse effect on our operating results, liquidity or financial position.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 118

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

26.

 SUBSEQUENT EVENTS

Subsequent to May 31, 2008 the following events took place:

(i)

On various dates, 967,801 stock options were forfeited and 81,480 stock options were exercised for $40,995. The Company granted 1,370,000 options at an exercise price ranging from $0.60 to $1.25.

(ii)

On June 4, 2008 and July 9, 2008 the Company closed the remaining US$ 27,750,000 of its senior secured notes financing.  Net proceeds received US$ 20,612,480. 11,024,520 warrants were issued as part of the senior secured notes financing.

(iii)

On September 19, 2008 the Company sold 100% of its 20,418,565 Petaquilla Copper Shares for proceeds of $44,920,843.

(iv)

On September 30, 2008 the Company repaid $38,355,744 (US$ 36,032,376) of the face value of its senior secured notes. Total amount paid including the 20% premium on redemption is $44,920,843 (US$ 43,238,852).

(v)

On October 2, 2008 the Company issued a supplemental US$ 20,000,000 of its senior secured notes.  Net proceeds received US$ 15,875,000.

(vi)

As a result of the Inmet Mining Corporation’s offer for Petaquilla Copper Ltd. the proceeds allocated to the pre-plan of arrangement options are based on the option price multiplied by the ratio of the five day weighted average price of each of the PTQ and Copper shares during the first five trading days of Copper.

(vii)

On November 13, 2008 the Autoridad Nacional del Ambiente (“ANAM”), the environmental agency of the Government of the Republic of Panama, issued a Resolution purporting to fine the Company and its present and former affiliates US$ 1,000,000 for alleged violations of environmental laws that took place on the main Petaquilla Copper Concession in 2005 and an additional US$ 934,695 for damages. On November 26, 2008, ANAM by Resolution approved the Company’s Environmental Impact Study (“EIS”) Category III submitted in July 2007 for the Molejon Gold Project. The Resolution sets out a number of conditions to be satisfied before the Company can attain full commercial production.   Based on the approval of the EIS, the Company filed for reconsideration by ANAM to have the fines reduced to nil. In January 2009, the Company was advised that ANAM has not accepted the Company’s request for reconsideration that the amount of the financial sanctions purportedly levied against the Company and its present and former affiliates be reduced to nil.  On March 10, 2009, the Supreme Court of the Republic of Panama issued a statement regarding a fine that ANAM had sought to enforce upon the Company. In its decision, the Supreme Court suspended the imposition of ANAM’s fine until the matter of the Company’s appeal is resolved.  Consequently, the amount, if any, that may ultimately be payable by the Company cannot be determined.

(viii)

On March 30, 2009, the Company closed a Convertible Senior Secured Notes financing of up to US$ 40,000,000 (“Convertible Notes”). The Convertible Notes are convertible at a price of $2.25 per share. The Convertible Notes will bear interest at an annual rate of fifteen percent (15%), of which the first twelve months shall be prepaid in full at the time of issuance of the Convertible Notes. The Convertible Notes will mature two years from date of issuance at 110% of the principal amount. The Company is required to make semi-annual repayments on the previously issued senior secured notes commencing on September 15, 2009 and on the Convertible Notes commencing September 15, 2010  ranging from $nil to $8,000,000 depending upon the average price of gold.  The Company has the right to redeem the Convertible Notes at any time at 110% of the principal amount plus any accrued or unpaid interest on the Convertible Notes. If the Convertible Notes are redeemed within one year of issuance, all prepaid interest is forfeited. Holders of the previously issued Series 1, Series B and Series C notes were offered to exchange amounts due upon maturity of their existing notes and participate pro-rata in the Convertible Notes offering up to a maximum of US$ 24,187,083.  The remaining proceeds of the private placement will be used for the continued commissioning of the Molejon Gold Project located in Panama and for working capital purposes.  Holders of the Series 1 notes representing 11,984 notes (US$ 11,983,812) have agreed not to exercise their put right until June 1, 2010. In addition, the Company has agreed to reduce the exercise price of 23,836,800 warrants from $2.30 per share to $0.65 per share.  Under the revised terms of the warrants, if the common shares of the Company trade at a weighted average trading price of CAD $1.00 or more per share for 30 consecutive trading days, the holders of the warrants must exercise the warrants within 30 days.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 119

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

26.

SUBSEQUENT EVENTS(continued)

(ix)

On January 28, 2009, Pro-Con Industries, Inc. filed a claim in the Central District of California against Petaquilla Minerals Ltd. and Petaquilla Minerals, S.A. for breach of written contract, breach of oral contract, fraud, intentional interference with economic relationship and negligent interference with economic relationship.  The claim seeks damages in excess of US$ 3,250,000 in addition to punitive damages and attorney fees. On April 28, 2009, the United States District Court Central District

of California dismissed the claim.

(x)

705,955 share purchase warrants expired unexercised.

(xi)

On June 29, 2009, the Company’s wholly-owned subsidiary, Panama Central Electrica, S.A. entered into a Memorandum of Understanding  with Generadora Hidroelectrica Santa Maria, S.A. for the development of a 25MW hydroelectric plant in the Province of Veraguas, Panama.

(xii)

The Company granted 150,000 stock options, 60,000 options expired and 3,245,080 options were cancelled. The Company is currently reviewing the accounting impact of the option cancellations.

(xiii)

The Company is currently conducting an internal investigation under the oversight of the Audit Committee and with the assistance of independent counsel of certain of our international operations, focusing on the material weakness identified during the Company’s assessment of internal controls as at May 31, 2009.

(xiv)

The Company’s management conducted an assessment of the Molejon Gold Mine resulting in the identification of several deficiencies in the plant construction and operation. These deficiencies have led to several areas of the plant not operating to design specifications resulting in additional future costs to mitigate construction deficiencies. A process for estimating costs of mitigation is in the identification stage thus no amounts can be quantified at this time.

(xv)

The Company entered into a forward sale agreement for 7,000 ounces of gold to be delivered in October and November 2009. Disruption of plant operations from any cause may result in delivery default and result in additional cost being incurred. The Company received $5,129,600 representing 80% of the ounces sold.

(xvi)

In September 2009, the Company made a principal, premium and interest payment of $6,208,844 on its senior secured notes pursuant to the provisions of the debt agreement (Note 12).

(xvii)

As a result of operational issues, the Company has been unable to meet its current production targets and requires additional funding in order to continue operations. On November 6, 2009, the Company negotiated with a related party a $5,000,000 bridge loan that matures in 120 days.  The Company will pay $500,000 on maturity as a restructuring fee. In the event the amount is paid in 30 days, the fee is reduced to $150,000. The lender also agreed to forbear any amounts due under the indenture until the repayment of bridge loan.

(xviii)

On November 5, 2009, Gaston Araya, Robert Baxter, John Cook and John Resing resigned from the Company’s board of directors, Christopher Davie resigned as President and Chief Executive Officer and Graham H. Scott resigned as Corporate Secretary.

(xix)

On November 6, 2009, Raul Ferrer, David Kaplan, David Levy and Daniel Small joined the Company’s board of directors.  In addition, Richard Fifer was appointed Non-Executive Chairman of the board of directors and Joao Manuel was appointed President and Chief Executive Officer.

27.

RESTATEMENT OF JANUARY 31, 2007 INTERIM FINANCIAL STATEMENTS AND MAY 31, 2008 BALANCE SHEET

During the fourth quarter of fiscal 2009, the Company concluded that:

·

The accounting for the spin-out of Petaquilla Copper Ltd. was not properly recorded in the interim financial statements.

·

Stock-based compensation relating to the options issued prior to the Plan of Arrangement was not properly recorded in the interim financial statements.

·

Certain capital assets were recorded as mineral properties.

·

Dilution gains and equity losses for the equity investment in Petaquilla Copper Ltd. which were applicable to the twelve months ended January 31, 2007 were not recorded in that period.

·

The carrying value of the Investment in Petaquilla Copper Ltd. was not correctly recorded during the period ended May 31, 2008.

The Plan of Arrangement, whereby each holder of the common shares of the Company on October 17, 2006 was entitled to receive one common share of Copper for each common share of the Company held, was accounted for in the twelve months ended January 31, 2007 based on a tentative plan.  According to the terms of the initial plan, Copper was to receive $5,500,000.  The plan was later revised and this amount was no longer required to be transferred to Copper.  The effect of this change to the January 31, 2007 financial statements was to decrease the amount payable to a related company by $2,856,227, increase the amount receivable from a related company by $2,143,773, and decrease the amount distributed to Petaquilla Copper Ltd. by $5,500,000 and increase the investment in Petaquilla Copper Ltd. by $500,000 .

Incorrect accounting was applied to options issued prior to the Plan of Arrangement.  The effect of the adjustment to the January 31, 2007 financial statements was to increase stock-based compensation by $7,000,840, increase contributed surplus by $4,244,807, increase share capital by $2,874,427 and increase mineral properties by $118,394.

Certain capital assets acquired during the twelve months ending January 31, 2007 were incorrectly recorded as mineral properties.  As a result, equipment was understated by $4,015,000, accumulated amortization on production equipment was understated by $480,430 and mineral properties was overstated by $3,534,570. The effect of the adjustment to the January 31, 2007 financial statements is an increase in property and equipment by $3,534,570 and a decrease to mineral properties of $3,534,570.

The Company was required to record the investment in Copper using the equity method commencing October 18, 2006, the date of the Plan of Arrangement.  Dilution gains resulting from the issue of additional shares by Copper as well as the Company’s proportionate

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 120

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

27.

RESTATEMENT OF JANUARY 31, 2007 INTERIM FINANCIAL STATEMENTS AND MAY 31, 2008 BALANCE SHEET(continued)

share of losses incurred by Copper were required to be recorded by the Company in the period in which these transactions occurred.   Due to the inability of Copper to provide information on a timely basis, the dilution gain and equity loss for the twelve months ended January 31, 2007 were not recorded until the period ending April 30, 2007.  The result of the adjustment required to the January 31, 2007 financial statements was to increase the investment in Petaquilla Copper Ltd. by $2,074,818 , increase the gain on dilution of equity investment by $2,268,465 and increase the loss from equity investment by $193,647.

The proceeds used in the calculation of dilution gains did not include transaction costs and the gain on sale of Petaquilla Copper Ltd. shares did not exclude the gain attributable to Petaquilla Minerals Ltd.’s equity interest in Petaquilla Copper Ltd.  As a result, the investment in Petaquilla Copper Ltd. was overstated at May 31, 2008 by $1,200,000. The impact of these adjustment is reflected in the 12 month period ended April 30, 2008 which was previously presented as part of the 13 month period ended May 31, 2008.

The effect of the adjustments on the January 31, 2007 financial statements is summarized in the tables below.

Consolidated Balance Sheet		January 31, 2007			Adjustment			January 31, 2007
		as previously						restated
		reported
Amount receivable from a related company	$	-		$	2,143,773		$	2,143,773
Investment in Petaquilla Copper Ltd.	$	-		$	2,574,818		$	2,574,818
Property and equipment	$	1,686,480		$	3,534,570		$	5,221,050
Mineral properties	$	26,304,170		$	(3,416,174	)	$	22,887,996
Amount payable to a related company	$	2,856,227		$	(2,856,227	)	$	-
Contributed Surplus	$	5,201,477		$	4,244,807		$	9,446,284
Share Capital	$	87,696,672		$	2,874,427		$	90,571,099
Deficit	$	(73,651,067	)	$	573,977		$	(73,077,091	)
Consolidated Statement of Operations and		January 31, 2007			Adjustment			January 31, 2007
Comprehensive Loss and Deficit		as previously						restated
		reported
Stock-based compensation	$	(10,007,962	)	$	(7,000,840	)	$	(17,008,802	)
Gain on dilution of equity investment	$	-		$	2,268,465		$	2,268,465
Loss from equity investment	$	-		$	(193,647	)	$	(193,647	)
Amount distributed to Petaquilla Copper Ltd.	$	(5,500,000	)	$	5,500,000		$	-
Net loss and comprehensive loss	$	(16,592,435	)	$	(4,926,024	)	$	(21,518,459	)
Basic and diluted loss per share	$	(0.21	)	$	(0.07	)	$	(0.28	)

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 121

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

27.

RESTATEMENT OF JANUARY 31, 2007 INTERIM FINANCIAL STATEMENTS AND MAY 31, 2008 BALANCE SHEET(continued)

Consolidated Statement of Cash Flows		January 31, 2007 as			Adjustment			January 31, 2007
		previously reported						restated
Operating activities:
Stock-based compensation	$	10,007,962		$	7,000,840		$	17,008,802
Gain on dilution of equity investment	$	-		$	(2,268,465	)	$	(2,268,465	)
Loss from equity investment	$	-		$	193,647		$	193,647
Total operating activities	$	10,007,962		$	4,926,022		$	14,933,984
Investing activities:
Advances from (to) Petaquilla Copper Ltd.	$	2,856,227		$	(5,000,000	)	$	(2,143,773	)
Acquisition of property and equipment	$	(1,737,388	)	$	(4,015,000	)	$	(5,752,388	)
Investment in mineral properties	$	(23,914,401	)	$	4,526,557		$	(19,387,844	)
Distribution to Petaquilla Copper Ltd.	$	(5,500,000	)	$	5,500,000		$	-
Purchase of equity investment	$	-		$	(500,000	)	$	(500,000	)
Total investing activities	$	(28,295,562	)	$	511,557		$	(27,784,005	)
Consolidated Balance Sheet		May 31, 2008 as			Adjustment			May 31, 2008
		previously						restated
		reported
Investment in Petaquilla Copper Ltd.	$	9,452,421		$	(1,200,000	)	$	8,252,421
Deficit	$	(83,865,382	)	$	(1,200,000	)	$	(85,065,382	)

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 122

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

28.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”). Material variations in the accounting principles, practices and methods used in preparing these financial statements from United States Generally Accepted Accounting Principles (“U.S. GAAP”) are described and quantified below.

Loss for the periods

		One month			Three months			Three months			Twelve months			Twelve months
		ended May 31,			ended April 30,			ended April 30,			ended January31,			ended January31,
		2008			2008			2007			2007			2006
								Restated -			Restated -
								Note 28 (a)			Note 27
(Loss) income for the period – Canadian GAAP	$	(4,513,145	)	$	(1,031,155	)	$	(6,443,991	)	$	(21,518,459	)	$	(2,567,758	)
Gain on dilution of equity investment (b)		-			(12,737,095	)		(811,535	)		(2,268,465	)		-
Gain on sale of equity investment under U.S. GAAP (b)		-			405,683			-			-			-
Mineral properties expensed under U.S. GAAP (c)		(2,049,984	)		(33,863,176	)		(8,348,459	)		(16,596,466	)		(2,389,769	)
Accreted interest on senior notes under U.S. GAAP (i)		(56,811	)		-			-			-			-
Foreign exchange on senior notes under U.S. GAAP (i)		80,070			-			-			-			-
Debt issuance costs capitalized under U.S. GAAP (h)		3,974,266			-			-			-			-
Debt issuance costs amortized under U.S. GAAP (h)		(165,594	)		-			-			-			-
Equity pickup under U.S. GAAP (b)		(549,181	)		(4,001,735	)		(804,109	)		(584,239	)		-
Loss for the year - U.S. GAAP		(3,280,379	)		(51,227,478	)		(16,408,094	)		(40,967,629	)		(4,957,527	)
Holding losses on marketable securities (d)		-			-			-			-			22,044
Net loss and comprehensive loss – U.S. GAAP	$	(3,280,379	)	$	(51,227,478	)	$	(16,408,094	)	$	(40,967,629	)	$	(4,979,571	)
Basic and diluted loss per share – U.S. GAAP	$	(0.04	)	$	(0.55	)	$	(0.18	)	$	(0.53	)	$	(0.09	)

Balance Sheets		May 31,			April 30,			April 30,			January 31,
		2008			2008			2007			2007
		Restated -						Restated -			Restated -
		Notes 27 and 28(a)						Note 28 (a)			Note 27
Total assets – Canadian GAAP	$	106,282,486		$	93,935,092		$	46,581,365		$	42,300,633
Mineral properties expensed under U.S. GAAP (c)		(63,247,854	)		(61,197,870	)		(27,334,694	)		(18,986,235	)
Investment in Petaquilla Copper Ltd. (b)		(5,857,947	)		(5,308,766	)		(1,807,000	)		(923,860	)
Debt issuance costs capitalized under U.S. GAAP (h)		3,808,672			-			-			-
Total assets – U.S. GAAP	$	40,985,357		$	27,428,456		$	17,439,671		$	22,390,538
Liabilities – Canadian GAAP	$	56,273,751		$	40,311,556		$	11,743,746		$	4,820,824
Allocation of fair value of senior notes under U.S. GAAP (i)		(9,827,661	)		-			-			-
Liabilities – U.S. GAAP	$	46,446,090		$	40,311,556		$	11,743,746		$	4,820,824
Shareholder’ s equity – Canadian GAAP	$	50,008,735		$	53,623,536		$	34,837,619		$	37,479,809
Mineral properties expensed under U.S. GAAP (b)		(63,247,854	)		(61,197,870	)		(27,334,694	)		(18,986,235	)
Debt issuance costs capitalized under U.S. GAAP (h)		3,808,672			-			-			-
Additional loss from equity investment (b)		(5,857,947	)		(5,308,766	)		(1,807,000	)		(923,860	)
Allocation of fair value of senior notes under U.S. GAAP (i)		9,804,402			-			-			-
Accreted interest on senior notes and related foreign exchange impact under U.S. GAAP (i)		23,259			-			-			-
Shareholders’ equity – U.S. GAAP	$	( 5,460,733	)	$	(12,883,100	)	$	5,695,925		$	17,569,714

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 123

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

28.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES(continued)

Mineral properties		May 31 , 2008			April 30, 2008			April 30, 2007			January 31, 2007
		Restated -						Restated -
		Note 28 (a)						Note 28 (a)
Mineral properties – Canadian GAAP	$	67,149,615		$	65,099,631		$	31,236,455		$	22,887,996
Mineral properties expensed under U.S. GAAP (c)		(63,247,854	)		(61,197,870	)		(27,334,694	)	(18,986,235		)
Mineral properties – U.S. GAAP	$	3,901,761		$	3,901,761		$	3,901,761		$	3,901,761
Equity investments		May 31 , 2008			April 30, 2008			April 30, 2007			January 31, 2007
		Restated – Notes
		27 and 28 (a)
Equity investments – Canadian GAAP	$	8,252,421		$	8,483,209		$	1,807,000		$	2,574,818
Equity investments expensed under U.S. GAAP (b)		(5,857,947	)		(5,308,766	)		(1,807,000	)		(923,860	)
Equity investments – U.S. GAAP	$	2,394,474		$	3,174,443		$	-		$	1,650,958

		One month ended			Twelve months			Three months			Twelve months			Twelve months
Statement of Cash Flows		May 31,			ended April 30,			ended April 30,			ended January31,			ended January31,
		2008			2008			2007			2007			2006
								Restated -			Restated – Notes
								Note 28 (a)			27 and 28 (a)
Cash (used in) provided by operatingactivities – Canadian GAAP	$	(9,954,563	)	$	1,261,662		$	(4,385,224	)	$	(4,650,934	)	$	(1,757,852	)
Expenditures on mineral properties		(2,049,984	)		(33,863,176	)		(8,348,459	)		(16,596,466	)		(2,197,611	)
Cash used in operating activities – U.S.GAAP	$	(12,004,547	)	$	(32,601,514	)	$	12,733,683	)	$	(21,247,400	)	$	(3,955,463	)
Cash from (used in) financing activities –Canadian GAAP	$	22,873,058		$	30,982,222		$	(990,937	)	$	28,839,777		$	12,527,110
Cash from (used in) financing activities –U.S. GAAP	$	22,873,058		$	30,982,222		$	(990,937	)	$	28,839,777		$	12,527,110
Cash from (used in) investing activities –Canadian GAAP	$	(1,852,430	)	$	(32,258,223	)	$	260,031		$	(26,430,337	)	$	(2,489,488	)
Expenditures on mineral properties		2,049,984			33,863,176			8,348,459			16,596,466			2,197,611
Cash from investing activities – U.S.GAAP	$	197,554		$	1,604,953		$	8,608,490		$	(9,833,871	)	$	(291,877	)
Cash and cash equivalents, end of period –Canadian GAAP	$	12,775,606		$	1,778,973		$	1,778,127		$	6,929,824		$	9,171,318
Cash and cash equivalents, end of period –U.S. GAAP	$	12,775,606		$	1,778,973		$	1,778,127		$	6,929,824		$	9,171,318

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 124

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

28.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES(continued)

a)

Restatement

Certain capital assets purchased in the twelve months ending January 31, 2007 were included in mineral properties and were incorrectly expensed for accounting purposes under U.S. GAAP.  The effect of the restatement is to decrease mineral properties expensed under U.S. GAAP by $3,901,761, increase total assets under U.S. GAAP by $3,901,761 and increase shareholders’ equity under U.S. GAAP by $3,901,761 at May 31, 2008 and April 30, 2007 as well as decrease mineral properties – exploration expenditures by $3,901,761 for the twelve months ended January 31, 2007.  

Debt issuance costs of $3,808,672 were written off during the month ending May 31, 2008 rather than being capitalized.  The effect of this restatement is to increase deferred debt issuance costs under U.S. GAAP by $3,808,672, decrease debt issuance costs expensed under U.S. GAAP by $3,808,672 and increase shareholders’ equity under U.S. GAAP by $3,808,672.

As a result of a review of the accounting for the investment in Petaquilla Copper Ltd. under U.S. GAAP, the presentation of the investment balance and the dilution gains and equity losses have been adjusted.  The effect of these adjustments is to increase the investment in Petaquilla Copper Ltd. at May 31, 2008 by $2,394,474 , and increase shareholders’ equity by $2,394,474 .

The effect of the restatement is summarized in the tables below.  

Consolidated Balance Sheet		May 31, 2008 as			Adjustment			May 31, 2008
		previously						restated
		reported
Mineral properties expensed under U.S. GAAP	$	(67,149,615	)	$	3,901,761		$	(63,247,854	)
Equity investments		-		$	2,394,474		$	2,394,474
Total assets – U.S. GAAP	$	30,880,450		$	10,104,907		$	40,985,357
Shareholders’(deficit) equity - U.S. GAAP	$	(15,565,640	)	$	10,104,907		$	(5,460,733	)
Consolidated Statement of Operations		May 31, 2008 as			Adjustment			May 31, 2008
and Comprehensive Loss and Deficit		previously						restated
		reported
Debt issuance costs	$	3,974,266		$	( 3,808,672	)	$	165,594
Consolidated Balance Sheet		April 30, 2007 as			Adjustment			April 30, 2007
		previously						restated
		reported
Mineral properties expensed under U.S. GAAP	$	(31,236,455	)	$	3,901,761		$	(27,334,694	)
Total assets – U.S. GAAP	$	13,537,910		$	3,901,761		$	17,439,671
Shareholders’ equity – U.S. GAAP	$	1,794,164		$	3,901,761		$	5,695,925

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 125

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

28.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED  ACCOUNTING PRINCIPLES(continued)

b)

Equity investment in Petaquilla Copper Ltd.

Under U.S. GAAP, increases in the parent company’s proportionate share of equity resulting from the additional equity raised by an entity subject to significant influence in the development stage are accounted for as increases to additional paid in capital. Under Canadian GAAP, these gains have been credited to income.  The market value of this investment based on the closing price of the shares on the TSX as at May 31, 2008 is $26,544,135

c)

Mineral properties and deferred costs

Mineral property costs and related exploration expenditures are accounted for in accordance with Canadian GAAP as disclosed in Note 2. For U.S. GAAP purposes, the Company expenses, as incurred, the exploration costs relating to unproven mineral properties. This also applies to the Company’s proportionate share of costs incurred by entities in which the Company has significant influence.  When proven and probable reserves are determined for a property and a feasibility study is prepared, then subsequent exploration and development costs of the property would be capitalized. The capitalized costs of such properties are measured periodically for recoverability of carrying values.

d)

Marketable securities

Under Canadian GAAP, the marketable securities held by the Company were recorded at the lower of cost and net realizable value. Under U.S. GAAP, these investments are classified as “available-for-sale” securities and recorded at market value. The accumulated difference between cost and market value is recorded as part of comprehensive income. Effective May 1, 2007 Canadian and U.S. GAAP relating to accounting for investments has converged and no differences exist for the period ended May 31, 2008.

e)

Development stage company

Pursuant to U.S. GAAP, the Company would be subject to the disclosure requirements applicable to a development stage enterprise as the Company is devoting its efforts to establishing commercially viable mineral properties. However, the identification of the Company as such for accounting purposes does not impact the measurement principles applied to these consolidated financial statements.

f)

Income taxes

Under Canadian GAAP, future tax assets and liabilities are recorded at substantively enacted tax rates. Under U.S. GAAP, deferred tax assets and liabilities are recorded at enacted rates. There were no significant differences between enacted and substantively enacted rates for the periods presented.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 126

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

28.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED  ACCOUNTING PRINCIPLES(continued)

g)

Accounting for Uncertainty in Income Taxes

In July 2006, the FASB issued FIN 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109 ("FIN 48"). This interpretation provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 prescribes a recognition threshold and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

Effective May 1, 2007 the Company adopted FIN 48. The adoption did not result in any adjustment to opening  retained earnings under U.S. GAAP. As a result of the implementation of FIN 48, the Company did not recognize any liabilities for unrecognized tax benefits. In the event that the Company recognizes interest accrued related to unrecognized tax benefits, it will be recorded in interest expense. Any penalties will be recorded in general and administrative expense.

The Company is subject to taxation in Canada and various other foreign jurisdictions. The Company is currently open to audit under the statute of limitations by the Canada Revenue Agency for years ended January 31, 2003 through April 30, 2007.

h)

Debt issuance costs

Under Canadian GAAP, debt issuance costs is expensed in the period incurred. Under U.S. GAAP, debt issue costs are reported in the balance sheet as deferred charges and amortized over the term of the debt. In accordance with the accounting for the senior secured notes (Note 12) the term of the debt is estimated to be two years.

i)

Senior secured notes

Under Canadian GAAP, compound financial instruments can be accounted for using the residual method when allocating between the liability and equity component. Under U.S. GAAP, compound financial instruments are accounted for using the fair value method when allocating between the liability and equity component. This difference resulted in senior secured notes being reduced by $9,827,661, warrants increased by $9,804,402, accreted interest increased by $56,811 and foreign exchange gain increasing $80,070.

j)

Reclassification

Certain comparative numbers have been reclassified to take into consideration the current period’s financial statement presentation. The accounts affected were cash, warrants and share capital.

k)

Recent accounting pronouncements:

i.

Statement of Financial Accounting Standards No. 157, Fair Value Measurements, defines fair value, establishes a framework for measuring value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007 and applies under other accounting pronouncements that require or permit fair value measurements. Accordingly, SFAS 157 does not require any new fair value measurements. The adoption of SFAS 157 is not expected to have an impact on the Company’s consolidated financial statements. SFAS 157-2 defers the Statement’s effective date for certain nonfinancial assets and liabilities to fiscal years beginning after November 15, 2008, and interim periods within those years. The adoption of SFAS 157-2 is not expected to have an impact on the Company’s consolidated financial statements.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 127

PETAQUILLA MINERALS LTD.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars)

May 31, 2008, April 30, 2008, April 30, 2007 , January 31, 2007, and January 31, 2006

28.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED  ACCOUNTING PRINCIPLES(continued)

ii.

Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Liabilities, provides companies with an option to report selected assets and liabilities (principally financial assets and liabilities) at fair value. The objective of SFAS 159 is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. SFAS 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 requires entities to display the fair value of those assets and liabilities for which the Company has chosen to use fair value on the face of the balance sheet. SFAS 15 9 does not eliminate disclosure requirements included in other accounting standards. The adoption of SFAS 159 is not expected to have an impact on the Company’s consolidated financial statements.

iii.

SFAS No. 141(R), Business Combinations, is to replace SFAS No. 141, Business Combinations. The new        statement retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting be used for all business combinations. The new standard defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. The new statement improves the comparability of the information about business combinations provided in financial reports. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Management is reviewing the requirements of the new statement and its impact on the Company’s financial statements.

iv.

SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51, is to amend ARB 51 to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. A non-controlling interest is sometimes called a minority interest. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Management is reviewing the requirements of the new statement and its impact on the Company’s financial statements.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 128

ITEM 18.  FINANCIAL STATEMENTS

Not applicable

ITEM 19.  EXHIBITS

(a)  Financial Statements

Description of Document

Cover Sheet

Management Report on Internal Controls over Financial Reporting

Report of Independent Auditors dated July 8, 2009

Report of Independent Auditors on Internal Controls over Financial Reporting

Balance Sheets as at May 31, 2008, April 30, 2008, April 30, 2007 and January 31, 2007.

Consolidated Statements of Operations and Deficit for One Month Ended May 31, 2008, Twelve Months Ended April 30, 2008, Three Months Ended April 30, 2007 , Fiscal Year Ended January 31, 2007, and Fiscal Year Ended January 31, 2006

Consolidated Statements of Cash Flows for One Month Ended May 31, 2008, Twelve Months Ended April 30, 2008, Three Months Ended April 30, 2007 , Fiscal Year Ended January 31, 2007, and Fiscal Year Ended January 31, 2006

Notes to the Consolidated Financial Statements

(b)  Exhibits

Exhibit Number	Description of Document
*1.A.	Memorandum of Incorporation and Articles of Petaquilla Minerals Ltd.
*2.A.	Shareholder Rights Plan Agreement dated April 28, 1995, between Petaquilla Minerals Ltd. and Montreal Trust Company of Canada
*3.A.	Share Purchase and Voting Trust Agreement dated December 29, 1994, between Petaquilla Minerals Ltd., Teck Corporation and Montreal Trust Company of Canada
*3.B.	Special Resolution dated June 8, 1995, increasing the authorized share capital of Petaquilla Minerals Ltd.
*4.A.	Agreement dated April 7, 1992, between Petaquilla Minerals Ltd. and Minnova (Panama) Inc. to acquire a 40% interest in Petaquilla Property
*4.B.	Letter of Intent dated October 4, 1994, between Petaquilla Minerals Ltd., Inmet Mining Corporation, Minnova (Panama) Inc. and Georecursos Internacional, S.A. with respect to the Petaquilla Property
*4.D.	Financing Agreement dated April 29, 1991, between Petaquilla Minerals Ltd. and Teck Corporation
*4.F.	Option Agreement dated August 10, 1993, between Petaquilla Minerals, S.A., Madison Enterprises Corp. and Madison Enterprises (Latin America), S.A. with respect to the Belencillo Property.
*4.G.	Association Agreement dated September 23, 1994, as amended, between Petaquilla Minerals, S.A. and Madison Enterprises (Latin America), S.A., with respect to the Belencillo Property
*4.H.	Heads of Agreement dated November 7, 1994, between Petaquilla Minerals Ltd., Georecursos Internacional, S.A. and Teck Corporation
*4.I.	Option Agreement dated February 17, 1994, between Petaquilla Minerals, S.A. and Arlo Resources Ltd. with respect to the Oro del Norte Property
*4.J.	Option Agreement dated February 17, 1994, between Petaquilla Minerals, S.A. and Arlo Resources Ltd. with respect to the Santa Lucia Property
*4.K.	Option Agreement dated January 27, 1994, between Petaquilla Minerals, S.A. and Silverstone Resources Ltd. with respect to the La Esperanza Property
*4.L.	Option Agreement dated November 7, 1994, between Petaquilla Minerals, S.A., Arlo Resources Ltd. and Arlo Resources (Panama) S.A. with respect to the Iglesias Property
*4.N.	Employment Agreements dated July 1, 1995, between Petaquilla Minerals Ltd. and Messrs. Idziszek, Stewart, Fifer and Mallo

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 129

*4.O.	Petaquilla Shareholders Agreement dated February 21, 1997, between Petaquilla Minerals Ltd., Teck Corporation, Inmet Mining Corporation, Georecursos Internacional, S.A. and Minera Petaquilla, S.A.
*4.S.	Assignment dated May 23, 2000, between Adrian Resources (Colorado) Ltd. And Hyperion Resources (Colorado) Ltd. respecting the Baca Ranch Property
4.T.	Molejon Gold Project Agreement dated June 2, 2005, among Petaquilla Minerals Ltd., Teck Cominco Limited, Inmet Mining Corporation and Minera Petaquilla, S.A.
4.U.	Employment agreement dated February 11, 2008, between Petaquilla Minerals Ltd. and Bassam Moubarak
4.V.	Law No. 9, dated February 26, 1997, of the Legislative Assembly of Panama (original Spanish version)
4.W.	Law No. 9, dated February 26, 1997, of the Legislative Assembly of Panama (Englishtranslation of original Spanish version)
*8	Subsidiaries of Petaquilla Minerals Ltd.
11.A	Code of Business Ethics and Conduct dated May 31, 2008
11.B	Whistle-Blower Policy dated May 31, 2008
12.A	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act 2002
12.B	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-OxleyAct 2002
13.A	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the Sarbanes-Oxley Act of 2002
13.B	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the Sarbanes-Oxley Act of 2002
*	These exhibits were previously filed with Petaquilla Minerals Ltd.'s RegistrationStatement or a previous Annual Report on Form 20-F (file no. 000-26296).

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 130

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant certifies that it meets all of the requirements for filing on amended Form 20-F and has duly caused this annual report to be signed on its behalf by the undersigned, hereunto duly authorized.

Dated at Vancouver, British Columbia, this 6^th day of November, 2009 .

PETAQUILLA MINERALS LTD.

By:	/s/ Joao Manuel	By:	/s/ Bassam Moubarak
	Joao Manuel , President and Chief Executive Officer (principal executive officer)		Bassam Moubarak, Chief Financial Officer (principal financial and accounting officer)

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 131

EXHIBIT 4.T.

MOLEJON GOLD PROJECT AGREEMENT

THIS AGREEMENT made the 1st day of June, 2005.

BETWEEN:

Teck ComincoLimited (formerly Teck Corporation), a body corporate under the laws of Canada and having an office at 600 - 200 Burrard Street, Vancouver, BC V6C 3L9, together with its wholly-owned subsidiary,Minera TeckPanama, S.A., with a registered office at Torre Swiss Bank Building, 18th floor, P.O. Box 1824, Panama 1, Republic of Panama.

(collectively referred to as “Teck Cominco”)

OF THE FIRST PART

AND:

Petaquilla Minerals Ltd. (formerly Adrian Resources Ltd.), a body corporate under the laws of British Columbia and having an office at 1820 - 701 West Georgia Street, Vancouver, BC V7Y 1C6, together with its wholly-owned subsidiary,Georecursos Internacional S.A, a corporation incorporated under the laws of the Republic of Panama, with an office at Torre Banco General, 25th Floor, Panama 7, Republic of Panama

(collectively referred to as "PTQ")

OF THE SECOND PART

AND:

Inmet Mining Corporation, a body corporate under the laws of Canada and having an office at Suite 1000, 330 Bay Street, Toronto, ON M5H 2S8 together with its wholly-owned subsidiary,Minnova (Panama) Inc., a corporation incorporated under the laws of the Republic of Panama, with an office at P.H. Plaza 2000 Building, 50^th  Street, 16^th  Floor, Panama, Republic of Panama.

(collectively referred to as "Inmet")

OF THE THIRD PART

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 132

AND:

Minera Petaquilla, S.A., a body corporate under the laws of the Republic of Panama and having a head office at Torre Swiss Bank Building, 18th Floor, P.O. Box 1824, Panama 1, Republic of Panama

(herein referred to as the "Corporation")

OF THE FOURTH PART

RECITALS:

A.

The Corporation is the holder of an exploration mining Concession granted by the Government of the Republic of Panama pursuant to that Contract Law No. 9 of February 26, 1997, known as the "Ley Petaquilla" which covers certain land and mineral interests;

B.

The Parties or their assigns entered into a shareholders' agreement dated February 21, 1997 (the “Shareholders’ Agreement”) whereby Teck Cominco, PTQ and Inmet (through their respective wholly-owned subsidiaries) agreed to establish the Corporation for the purposes of the ownership of the Concession and the exploration, development and operation of one or more mines on the Concession;

C.

To date, the Parties have not proceeded with mine development on the Concession;

D.

The Parties have agreed to enter into this Agreement as a way to attempt to realize value from their respective interests in the Corporation,

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual covenants and agreements and other good and valuable consideration, the Parties agree as follows:

ARTICLE 1

INTERPRETATION

1.1

Defined terms

In this Agreement, unless otherwise expressly defined, capitalized terms have the same meanings ascribed to them in the Shareholders' Agreement. Other defined terms have the meanings ascribed to them in this Agreement.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 133

1.2

Sections

The term "Sections" followed by a number refers to the specified Section in this Agreement unless otherwise expressly stated to refer to a section in the Shareholders' Agreement. Article, section or other headings contained in this Agreement are inserted for convenience only and will not affect the meaning or construction of any of the provisions of this Agreement.

1.3

Number and Gender

Words importing the singular number only will include the plural and vice versa where the context requires, and words importing gender include the male, female and neuter genders.  

0.4

Governing Law

The Parties acknowledge that this Agreement regulates the relationship with respect to the Corporation which is a Panamanian corporation, and its assets, and therefore all matters that deal with corporate proceedings of a corporation under Panamanian corporate law shall be governed by that law. In all other respects, including as to matters of contract law and the application of conflict of laws principles to assets located outside of Canada, this Agreement shall be governed by the laws of the Province of British Columbia and the laws of Canada applicable therein.

1.5

Currency

All statements of or references to dollar amounts in this Agreement are references to United States dollars.

16

Schedules

The following are the schedules attached to and forming part of this Agreement:

Schedule A - Description of Molejon Deposit

Schedule B - Net Smelter Returns

Schedule C - Review of Strategic Alternatives

1.7

Entire Agreement

This Agreement, together with the Schedules attached, constitute the entire agreement among the Parties with respect to the subject matter of this Agreement, and replace and supersede all prior agreements with respect thereto, whether oral or written, including without limitation, the Letter of Intent dated December 13, 2004 between Teck Cominco, PTQ and Inmet, provided that, except to the extent expressly set forth herein, nothing in this Agreement shall affect the 1991 Financing Agreement or the Shareholders Agreement, which shall continue in full force and effect, unamended.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 134

­1.8

Paramountcy of this Agreement

In the event the terms of this Agreement conflict with the Articles or by-laws of the Corporation, the provisions of this Agreement shall prevail, and the Parties shall cause the Articles or by-laws, as the case may be, to be amended to the extent necessary to accord with this Agreement.

ARTICLE 2

SCOPE OF AGREEMENT

2.1

Purpose of Agreement

The Parties wish to have a mine development plan for the Concession approved pursuant to the Ley Petaquilla prior to December 31, 2005 on a basis that will facilitate the development of the Molejon deposit on a stand-alone basis. The Parties agree that the Corporation shall seek Government approval of a phased mine development plan to be prepared by PTQ and approved by Teck Cominco and Inmet. In addition, the Parties agree to cooperate in respect of the sale of their respective share interests in the Corporation on the basis set out herein.

2.2

Definition of the Concession Rights to be Transferred to PTQ

Subject to the terms and conditions set out in this Agreement, on receipt of the Government Approval (as defined below), the following property and mineral rights are to be transferred to PTQ in accordance with this Agreement:

(a)

that portion of the Concession on which is situated the Molejon gold deposit, whose boundaries and legal description is set out in Schedule A attached to this Agreement (the "Molejon Deposit"); and

(b)

the right to explore and mine Gold Deposits on the Concession Remainder (both as defined in Section 5.3), subject to the restrictions set out in Section 5.3 (the "Ancillary Rights").

2.3

Shareholders' Agreement

From and after the date of the transfer of the Molejon Deposit to PTQ, the Shareholders' Agreement shall continue in full force and affect,mutatis mutandis, taking into account that the Concession, as defined therein, shall be the Concession as the same shall exist following the assignment of concession rights in connection with the Molejon Deposit to PTQ as contemplated hereby and provided that Section 5.7 of the Shareholders Agreement is suspended during the conduct of the marketing process contemplated by Article 6 hereof.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 135

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

3.1

Representation and Warranties

Each of the Parties severally represents and warrants to the other Parties that:

(a)

it is a company duly incorporated and validly subsisting under the laws of the jurisdiction of its incorporation, and is qualified to carry on its business in each jurisdiction where its business would require such a qualification;

(b)

it has full power and authority to carry on its business and to enter into this Agreement and any agreement or instrument referred to in or contemplated by this Agreement and to carry out and perform all of its obligations and duties hereunder; and

(c)

it has obtained all authorizations for the execution, delivery and performance of this Agreement.

0.2

Guarantee of Subsidiaries' Representations and Warranties

In making the representations and warranties set out in Section 3.1, the Parties acknowledge that notwithstanding their several liability, each Party which is a parent company of a subsidiary which is itself making such representations and warranties, hereby guarantees the accuracy of such representations and warranties of its subsidiary to each of the other Parties.

ARTICLE 4

MULTI-PHASE MINE DEVELOPMENT PLAN

4.1

Timing

PTQ will develop a multi-phase mine development plan (the "Plan") for the Concession, which will be provided to Teck Cominco and Inmet for comment and approval prior to its submission to the Government of Panama and will be submitted for approval by the Government of Panama on or before December 31, 2005.

4.2

Government Relations

PTQ agrees that Morgan & Morgan, the Corporation's legal counsel, will participate in all discussions with the Government of Panama with respect to the approval of the Plan. PTQ will develop and plan the approach and content of such discussions in conjunction with Morgan & Morgan.

The Parties acknowledge that so long as the Corporation is the holder of the  Concession pursuant to the Ley Petaquilla, any proposals to the Government of Panama with respect to the Plan shall be made in the name of the Corporation.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 136

Each of the Parties will be entitled, but not obligated in the case of Teck Cominco and Inmet, to participate in any such meetings and discussions with the Government of Panama and PTQ will provide reasonable advance notice of such meetings. None of PTQ , Teck Cominco or Inmet will separately approach the Government of Panama with respect to the Plan without the written permission of each of the others nor will any of PTQ, Teck Cominco or Inmet hold out to the Government of Panama that it has the ability to bind the other Parties in relation to the Plan or any proposal in respect thereof.

4.3

Cost Sham

PTQ will bear all costs associated with the development of the Plan. The Corporation will bear the costs of Morgan & Morgan in connection with the presentation of the Plan to the Government of Panama and the securing of the Government Approval.

4.4

Plan Conditions and Characteristics

The Parties agree that the Plan will be subject to the approval of Teck Cominco and Inmet, and will include the following conditions and characteristics:

(a)

the Molejon Deposit will be developed in the first phase starting in 2006;

(b)

the Molejon Deposit will be designated as a separate development zone which will be developed independently by a corporate entity other than the Corporation and without implying any obligation or commitment of the Panics or the Corporation to proceed with a subsequent phase or phases on the Concession Remainder;

(c)

the decision to proceed and the timing of the development of any or all of the phases of the Plan will be subject to unfavourable economic conditions, and technical constraints; and

(d)

the Plan will be consistent with, and not require any legislative amendments to the Ley Petaquilla.

4.5

Government Approval

The Corporation will seek the approval of the Plan by the Government of Panama, and each of the Parties agree that such approval shall only constitute the "Government Approval" for the purposes of this Agreement to the extent that it provides as follows:

(a)

the Government Approval will be on terms such that the obligations of the Corporation in respect of the Concession Remainder (as defined below) will not be more onerous to the Corporation or any other Party than the obligations currently contained in Ley Petaquilla and, without limiting the generality of the foregoing, the Government Approval will not:

(i)

detract in any manner from the tax and other incentives provided to the Corporation under the Ley Petaquilla; or

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 137

(ii)

impose on the Corporation any liability, including in respect of environmental protection or environmental reclamation, in respect of activities conducted by PTQ in relation to the Molejon Deposit;

(b)

the Government Approval will provide that the commencement of construction of a mine on the Molejon Deposit will constitute the commencement of a development of a copper mine for the purposes of clause 6(2) of the Ley Petaquilla such that the Ley Petaquilla shall not terminate and the Concession shall not expire pursuant to such clause 6(2) and, in any event, the Government of Panama shall not have the right to terminate or otherwise affect the interests of the Corporation in the Concession and in Ley Petaquilla at any time prior to December 31, 2007 at the earliest, failing commencement of development of a copper mine on the Concession Remainder by that time;

(c)

the Government Approval will constitute a consent of the Government of Panama under clause 9 of the Ley Petaquilla to the partial assignment of the contract law and the Concession to PTQ or an affiliate of it pursuant to clause 9 of the Ley Petaquilla; and

(d)

the Government Approval will not impose on the Corporation the obligation to proceed with any subsequent phase or phases of development on the Concession.

ARTICLE 5

PTQ'S EXPLOITATION OF GOLD DEPOSITS IN THE CONCESSION

5.1

Transfer of Molejon Deposit

Upon receipt of the Government Approval in form satisfactory to each of Teck Cominco, Inmet and PTQ, acting reasonably, the Corporation will transfer all right, title and interest to the Molejon Deposit to PTQ or an Affiliate, on the condition that such transfer shall not expose the Corporation, Teck Cominco or Inmet to any liability in respect of tax.

5.2

Rights to Develop Copper on the Molejon Deposit

Notwithstanding Section 5.1, the Corporation will retain its right to develop any Copper Deposits on the Molejon Deposit provided that such development does not impair or impede PTQ's ability to develop or otherwise exploit Gold Deposits (as defined below) on the Molejon Deposit. For this purpose, a deposit will be a "Copper Deposit" if more than 50% of its net present value as a developed mine would derive from its copper content (allocating capital and operating costs as between copper and other commodities on the basis of their contribution to revenue using reasonable and consistent price assumptions as may be agreed between the Parties or, failing agreement, as determined in accordance with the arbitration procedures set forth in Section 8.9 of this Agreement.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 138

5.3

Transfer of Ancillary Rights

Upon receipt of the Government Approval and transfer of the Molejon Deposit in accordance with Section 5.1 of this Agreement, the Parties also agree that PTQ will have the exclusive right to develop any Gold Deposits in the remainder of the Concession (the "Concession Remainder") provided that such rights granted to PTQ herein does not impair or impede the Corporation's interest or ability to exploit Copper Deposit or the Concession Remainder.

For this purpose, a deposit will be a "Gold Deposit" if more than 50% of its net present value as a developed mine would derive from its gold or other precious metals content (allocating capital and operating costs as between gold, other precious metals and other commodities on the basis of their contribution to revenue using reasonable and consistent price assumptions for gold and other commodities as may be agreed between the Parties or, failing agreement, as determined in accordance with the arbitration procedures set forth in Section 8.9 of this Agreement).

In the event that a resource relating to a Gold Deposit is identified on the Concession Remainder, the Parties will co-operate to effect a transfer of such deposit to PTQ, on a basis similar to the transfer of the Molejon Deposit contemplated by this Agreement.

5.4

Amendment to Section 7.6 of Shareholders' Agreement

The Parties agree that Section 7.6(b) of the Shareholders' Agreement is amended to further provide that Teck Cominco will not vote any of PTQ's Shares without PTQ's consent on any matter relating to the Plan, the Government Approval or the execution of any transaction effected pursuant to Schedule C provided that such amendment shall not affect the right of the Corporation pursuant to Section 5.5 hereof or any decision in respect of the exercise of that right.

0.5

Right of Corporation to Implement Plan

If any rights in respect of the Concession Remainder under the Ley Petaquilla arise out of the Government Approval that are contingent on the performance by PTQ of any obligations with respect to the Molejon Deposit, the Corporation, Teck Cominco and Inmet will have the right, but not the obligation, to step in and perform such obligations and shall have a lien on the Molejon Deposit to the extent of expenditures made in connection with such performance.

5.6

PTQ Activities Prior to Plan Approval

From the date of this Agreement until the date of the transfer of the Molejon Deposit pursuant to Section 5.1, PTQ may conduct field work or other feasibility work, with respect to the Molejon Deposit provided that:

(a)

such work is conducted in compliance with all applicable laws and regulations, including environmental regulations, at PTQ's own risk and expense; and

(b)

regular reports of such work are provided to the other Parties.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 139

PTQ acknowledges that until receipt of the Government Approval, the Corporation remains the holder of the Concession in its entirety.

5.7

Indemnity

PTQ hereby indemnifies the Corporation, Teck Cominco and Inmet and their respective directors, officers, employees and agents from and against any liabilities, losses, costs, damages and expenses which any of them may suffer, directly or indirectly, as a consequence of work conducted by PTQ with respect to the Molejon Deposit or the Ancillary Rights pursuant to this Agreement, including with respect to reclamation, or any breach by PTQ of its obligations hereunder.

5.8

Net Smelter Return

In consideration of the rights and obligations transferred to PTQ pursuant to this Agreement, PTQ or its affiliate which holds the Molejon Deposit or the Ancillary Rights (the "Royalty Payor") will pay a Net Smelter Return royalty in respect of production from the Molejon Deposit or the Ancillary Rights. The royalty percentage will be determined quarterly using the average of the daily p.m. gold fix established by the London Metal Exchange for each day in a calendar quarter, as follows:

Quarterly average p.m.

gold fix

Net Smelter Return

(US Dollars per ounce)

$350 to $399

 1%

$400 to $449

2%

$450 to $499

 3%

$500 to $549

4%

$550 and above

5%

The Net Smelter Return royalty will be paid in accordance with Schedule B to Teck Cominco as to 35.135% and to Inmet as to 64.865%, as consideration for their consent to the transactions contemplated by this Agreement. Net Smelter Return will have the meaning ascribed to that term in Schedule. B. The Parties will take such actions as may be necessary to register the royalty granted hereunder against title to the Molejon Deposit and the Concession Remainder.

ARTICLE 6

REVIEW OF STRATEGIC ALTERNATIVES

6.1

Review of Strategic Alternatives

Upon receipt of the Government Approval, PTQ, Teck Cominco and Inmet will jointly conduct a review of strategic alternatives in connection with the Corporation and the Petaquilla Project on the terms set out in Schedule C.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 140

ARTICLE 7

CONFIDENTIALITY

7.1

Information Relating to Development of Molejon Deposit

Notwithstanding Section 13.1 of the Shareholders' Agreement, all work, plans, feasibility reports, data and other information prepared by or at the request of PTQ with respect to the Molejon Deposit, will be the exclusive property of PTQ and will be treated as confidential by the other Parties and not disclosed to any third parties or to the public without the prior written consent of PTQ, provided that such documents may be disclosed to Panamanian Government authorities to the extent necessary in connection with the process agreed for seeking the Government Approval.

7.2

Information Relating to this Agreement

Except as required by applicable securities laws, each of the Parties will keep the terms of this Agreement and the status of the process contemplated by Schedule C, and will not disclose such matters to any third parties. No public announcement, press release or other information will be issued or released by any of the Parties on any matter relating to this Agreement or the transactions contemplated herein, except with the prior approval of the other Parties, which approval will not be unreasonably withheld.

A Party shall be permitted to make disclosure with respect to this Agreement as may be required by law or by the rules and regulations of any Securities Commission, stock exchange or other regulatory authority having jurisdiction over a Party, provided that such Party required to make any disclosure concerning such matters shall provide the other Parties a reasonable opportunity to review and comment on the content of the proposed disclosure. Teck Cominco and Inmet acknowledge that the nature of transactions contemplated by this Agreement are material to PTQ and accordingly that PTQ will be required to make disclosure.

7.3

Permitted Disclosure

The restrictions set out in Section 7.2 above on disclosure of information will not apply to disclosure by a Party or its representatives:

(a)

to an affiliate, employee, contractor, sub-contractor, consultant or professional that has a bona fide need to be informed:  

(b)

to a third party:

(i)

as is reasonably necessary in connection with the issuance of securities of the disclosing Party to the public, or

(ii)

for the purposes of arranging financing in connection with its obligations under this Agreement or other financing with a recognized and reputable financial institution,

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 141

provided that such third party gives its undertaking to the Parties in a form satisfactory to the other Parties, acting reasonably, that such information will be kept confidential and not disclosed to other; or

(c)

of information which is or becomes part of the public domain, other than through a breach of the provisions of this Agreement by another Party.

ARTICLE 8

GENERAL PROVISIONS

8.1

Notice

Any notice, invoice or communication to be given under this Agreement may be effectively given by delivering the same at the following addresses or by sending the same by facsimile to the following numbers. Any communication so delivered will be deemed to have been received on the date delivered and any facsimile thereof will be deemed to have been received on transmission, if in either case the date is a BUSINESS DAY and it is prior to 3:00 p.m. at the place of receipt and, if not, on the next BUSINESS DAY following delivery or transmission. The addresses for delivery and numbers for facsimile of the Parties (including their respective subsidiaries) for the purposes of this Agreement are:

(a)

If  to Teck Cominco:

Teck Cominco Limited

600 - 200 Burrard Street

Vancouver, BC V6C 3L9

Attention: Corporate Secretary

Facsimile: (604) 640-5395

and

Minera Teck Panama, S.A.

c/o Morgan & Morgan

Torre Swiss Bank Building, 18th Floor

P.O. Box 1824

Panama 1, Republic of Panama

Attention: Romulo Roux

Facsimile: (507) 265-7700

(b)

If to PTQ:

Petaquilla Minerals Ltd.

1820 - 701 West Georgia Street

Vancouver, BC V7Y I C6

Attention: President

Facsimile: (604) 694-0063

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 142

and

Georecursos Internacional S.A.  

P.O. Box 87-1666

Zona 7, Republic of Panama

Attention: Marco Tejeira

Facsimile: (507) 269-5595

(c)

If to Inmet:

Inmet Mining Corporation

Suite 1000, 330 Bay Street

Toronto, ON M5H 2S8

Attention: Vice-President, Corporate Development

Facsimile: (416) 368-4692

and

Minnova (Panama) Inc.

P.H_ Plaza 2000 Building

50^th  Street, 16" Floor

Panama, Republic of Panama

Attention: Secretary

(d)

If to the Corporation:

Minera Petaquilla, S.A.

Torre Swiss Bank Building, 18th Floor

P.O. Box 1824

Panama 1, Republic of Panama

Attention: Romulo Roux

Facsimile: (507) 265-7700

8.2

Successors and Assigns

This Agreement will be binding upon and enure to the benefit of the Parties and their respective successors and permitted assigns.

0.3

Further Assurances

The Parties will from time to time do, make and execute all such documents, acts, matters and things as may be reasonably required in order to give effect to this Agreement.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 143

0.4

Unenforceable Provisions

Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction will not invalidate the remaining provisions and any such prohibitions or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other jurisdiction.

8.5

Amendments

No supplement, modification, amendment, waiver or termination of this Agreement will be binding unless executed in writing by the Parties.

8.6

Time of the Essence

Time will be of the essence of this Agreement.

8.7

Counterparts and Facsimiles

This Agreement may be executed in any number of counterparts and by facsimile, each of which will be considered to be an original and together will constitute one and the same document.

8.8

Manner of Payment

All payments to be made by or to any Party may be made by cheque, bank draft, delivered to such Party at its address for notice or deposited by wire transfer to an account of such Party if so approved by the payee Party.

8.9

Arbitration

(a)

All disputes arising in connection with this Agreement and which are not resolved by agreement between the Parties shall be finally settled by arbitration under the Rules of Procedure of the British Columbia International Commercial Arbitration Centre (hereinafter referred to as the "Commission") by three arbitrators. Judgment upon any award so rendered may be entered in any jurisdiction, or application may be made to any court for confirmation of such award or a judicial acceptance of such award and for an order of enforcement or other legal remedy, as the case may be. Consent is hereby given by each Parry, which is a party to any such arbitration, to the jurisdiction of any such court regarding any matter arising out of such arbitration or the enforcement of any award rendered in such arbitration.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 144

(b)

The Party initiating arbitration and the Party named as respondent shall each nominate an arbitrator in its request or answer, as the case may be, provided that any such individual so nominated shall be knowledgeable in the mining industry  and independent of each of the Parties. If more than one Party initiates an arbitration or if more than one Party is named as a respondent and the initiating Parties or the respondents are unable to agree on the identity of their arbitrator they shall apply to the Commission to select an arbitrator on their behalves.

(c)

If any Party or Parties entitled to nominate an arbitrator should abstain from nominating its arbitrator, the Commission shall itself appoint him.

(d)

The two arbitrators so chosen shall select a third arbitrator, provided, however, that if such two arbitrators shall fail to choose a third arbitrator within 30 days after the later of such two arbitrators has been appointed, the Commission, upon the request of any Party involved in the dispute, shall appoint a third arbitrator. The third arbitrator shall be chairman of the arbitral tribunal.

(e)

The arbitration shall be conducted in the English language in Vancouver, British Columbia, and matters of procedure not governed by the Commission's own rules shall be governed by the laws of the Province of British Columbia and the laws of Canada applicable therein.

8.10

Termination

(a)

If the Government Approval is not obtained by 'February 28, 2006, then this Agreement shall automatically terminate at 11:59 p.m. (Pacific Standard Time) on such date.

(b)

In the event of termination of this Agreement as provided tinder Section 8.10(a), this Agreement shall forthwith become null and void, except for Sections 4.3, 5.7, 8.9 and 8.10.

IN WITNESS WHEREOF the Parties hereto have executed this Agreement as of the day and year first above written.

TECK COMINCO LIMITED
Per:	/signed/
	Authorized Signatory
Per:	/signed/
	Authorized Signatory
MINERA TECK PANAMA, S.A.
Per:	/signed/
	Authorized Signatory
Per:	/signed/
	Authorized Signatory

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 145

PETAQUILLA MINERALS LTD.
Per:	/signed/
	Authorized Signatory
GEORECURSOS INTERNACIONAL S.A.
Per:	/signed/
	Authorized Signatory
INMET MINING CORPORATION
Per:
	Authorized Signatory
MINNOVA (PANAMA) INC.
Per:
	Authorized Signatory
MINERA PETAQUILLA S.A.
Per:
	Authorized Signatory

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 146

PETAQUILLA MINERALS LTD.
Per:
	Authorized Signatory
GEORECURSOS INTERNACIONAL S.A.
Per:
	Authorized Signatory
INMET MINING CORPORATION
Per:	/signed/
	Authorized Signatory
MINNOVA (PANAMA) INC.
Per:
	Authorized Signatory
MINERA PETAQUILLA S.A.
Per:
	Authorized Signatory

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 147

PETAQUILLA MINERALS LTD.
Per:
	Authorized Signatory
GEORECURSOS INTERNACIONAL S.A.
Per:
	Authorized Signatory
INMET MINING CORPORATION
Per:
	Authorized Signatory
MINNOVA (PANAMA) INC.
Per:	/signed/
	Authorized Signatory
MINERA PETAQUILLA S.A.
Per:
	Authorized Signatory

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 148

PETAQUILLA MINERALS LTD.
Per:
	Authorized Signatory
GEORECURSOS INTERNACIONAL S.A.
Per:
	Authorized Signatory
INMET MINING CORPORATION
Per:
	Authorized Signatory
MINNOVA (PANAMA) INC.
Per:
	Authorized Signatory
MINERA PETAQUILLA S.A.
Per:	/signed/
	Authorized Signatory
Per:	/signed/
	Authorized Signatory

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 149

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 150

Schedule B - Page I

SCHEDULE B

NET SMELTER RETURNS

In this Schedule, "Payor" refers to PTQ or the holder from time to time of the Molejon Deposit or the Ancillary Rights, as the case may be, and "Royalty Holder" refers to Teck Cominco or Inmet or their respective successors or assigns.

I.

DEFINITION

1.01

"Net Smelter Returns" for purposes of the Agreement are defined as follows:

(a)

where all or a portion of the ores or metals derived from the Molejon Deposit or the Ancillary Rights (in this Schedule, the "Property") are sold as ores, solutions, concentrates or doré, the Net Smelter Returns shall be the gross amount received from the purchaser following sale thereof after deduction, (i) if applicable under the sale contract, of all smelter or refining charges, penalties and other deductions; (ii) all costs of transporting and insuring the ores or concentrates or doré from the mine to the smelter, refinery or other place of final delivery; and (iii) sales, use, severance, excise, net proceeds of mine, and ad valorem taxes and any tax on or measured by mineral production, but excluding income taxes of the Payor; and

(b)

where all or a portion of the said ores, -solutions, concentrates or doré derived from the Property are treated in a smelter or refinery and a portion of the metals recovered therefrom are delivered to, and sold by Payor, the  Net Smelter Returns shall be the gross amount received from the purchaser following sale of the metals so delivered, after deduction of (i) all smelter charges, penalties and other deductions; (ii) all costs of transporting and insuring the ores or concentrates or doré from the mine to the smelter, (iii) if applicable under the smelter or refinery contract, all costs of transporting and insuring the metals from the smelter to the place of final delivery by the purchaser; and (iv)) sales, use, severance, excise, net proceeds of mine, and ad valorem taxes and any tax on or measured by mineral production, but excluding income taxes of the Payor.

Where any ores, solutions, concentrates or dore are sold to, or treated in, a smelter or refinery owned or controlled by Payor, the pricing for that sale or treatment will be established by Payor on an arms-length basis so as to be fairly competitive with pricing, net of transportation, insurance, treatment charges and other related costs, then available on world markets for product of like quantity and quality.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 151

Schedule B Page 2

2.

PAYMENT OF NET SMELTER RETURNS

2.01

Payor shall calculate the Net Smelter Returns and the sums to be disbursed to each Royalty Holder as at the end of each calendar quarter.

2.02

Payor shall, within 60 days of the end of each calendar quarter, as and when any Net Smelter Returns are available for distribution:

(a)

pay or cause to be paid to each Royalty Holder that percentage of the Net Smelter Returns to which the Royalty Holder is entitled under the Agreement;

(b)

deliver to the Royalty Holder a statement indicating:

(i)

the gross amounts received from the purchaser contemplated in

subsection 1.01 of this Schedule B;

(ii)

the deductions therefrom in accordance with subsection 1.01 of

this Schedule B;

(iii)

the amount of Net Smelter Returns remaining; and

(iv)

the amount of those Net Smelter Returns to which the Royalty Holder is entitled;

supported by such reasonable information as to the tonnage and grade of ores or concentrates shipped as will enable the Royalty Holder to verify the gross amount payable by the smelter or other purchaser.

3.

ADJUSTMENTS AND VERIFICATION

 3.01

Payment of any Net Smelter Returns by Payor shall not prejudice the right of Payor to adjust any statement supporting the payment; provided, however, that all statements presented to a Royalty Holder by Payor for any quarter shall conclusively be presumed to be true and correct upon the expiration of 12 months following the end of the quarter to which the statement relates, unless within that 12-month period Payor gives notice to the Royalty Holder claiming an adjustment to the statement which will be reflected in subsequent payment of Net Smelter Returns,

3.02

Payor shall not adjust any statement in favour of itself more than 12 months following the end of the quarter to which the statement relates.

3.03

Each Royalty Holder shall, upon 30 days' notice in advance to Payor, have the right to request that Payor have its independent external auditors provide their audit certificate for the statement or adjusted statement, as it may relate to the Agreement and the calculation of Net Smelter Returns.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 152

Schedule B - Page 3

3.04

The cost of the audit certificate shall be solely for the account of the Royalty Holder requiring same unless the audit certificate discloses material error in the calculation of Net Smelter Returns, in which case Payor shall reimburse the Royalty Holder the cost of the audit certificate.  Without limiting the generality of  the foregoing, a discrepancy of one percent in the calculation of Net Smelter Returns shall be deemed to be material.

4.

PAYOR TO DETERMINE OPERATIONS

4.01

Subject to any express provision of the Agreement to the contrary:

(a)

the Payor will have complete discretion concerning the nature, timing and extent of all exploration, development, mining and other operations conducted on or for the benefit of the Property and may suspend operations and production on the Property at any time it considers prudent or appropriate to do so;

(b)

the Payor will owe the Royalty Holders no duty to explore, develop or mine the Property, or to do so at any rate or in any manner other than that which the Payor may determine in its sole and unfettered discretion; and

(c)

the Payor may, but will not be obligated to treat, mill, heap leach, sort, concentrate, refine, smelt, or otherwise process, beneficiate or upgrade the ores, concentrates, and other products at sites located on or off the Property, prior to sale, transfer, or conveyance to a purchaser, user, or consumer.

The Payor will not be liable for mineral values lost in processing under sound practices and procedures, and no royalty will be due on any such lost mineral values.

5.

COMMINGLING

5.01

Ores, concentrates, doré and derivatives mined or retrieved from the Property shay be commingled with ores, solutions, concentrates, dore or derivatives mined or retrieved from other properties. All determinations required for calculation of Net Smelter Returns, including without limitation the amount of the metals contained in or recovered from ores, solutions, concentrates, doré or derivatives mined or retrieved from the Property, the amount of the metals contained in or recovered from commingled ores, solutions, concentrates, doré or derivatives shall be made in accordance with prudent engineering, metallurgical and cost accounting practices.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 153

Schedule B - Page 4

6.

TRADING ACTIVITIES

6.01

The Payor may, but need not, engage in forward sales, futures trading or commodity options trading, and other price hedging, price protection, and speculative arrangements ("Trading Activities") which may involve the possible delivery of base or precious metals produced from the Property. The Parties' acknowledge and agree that the Royalty Holders shall not be entitled to participate in the proceeds or be obligated to share in any losses generated by the Trading Activities.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 154

Schedule C - Page 1

SCHEDULE C

REVIEW OF STRATEGIC ALTERNATIVES

1.

Retention of Investment Banker

Upon receipt of the Government Approval, PTQ, Teck Cominco and Inmet will jointly retain an investment banking firm (the "Investment Banker") to act as their financial advisor in connection with the potential sale of all of the shares of the Corporation, or of a 100% interest in the Concession Remainder, or the admission of a new shareholder in the Corporation, or some other form of joint development agreement with respect to the Concession Remainder (any such transaction being hereinafter referred to as a "Monetization").

2.

Marketing Post-Plan Approval

The "Marketing Period" will commence as soon as possible after the Plan has been approved by the Government of Panama and transfer of title to the Molejon Deposit and the Ancillary Rights to PTQ or its affiliate has occurred. The investment banker retained by the Parties will be authorized to represent to potential purchasers that the Parties have agreed to participate in a Monetization on receipt of an acceptable offer.

3.

PTQ's Right to Acquire,

Teck Cominco and Inmet agree that prior to the public solicitation of third party offers for a Monetization, PTQ will be given a reasonable opportunity to make an offer to Teck Cominco and Inmet to acquire their interests in the Corporation.

4.

Waiver of Rights of First Refusal

Subject to paragraph 3, Teck Cominco, PTQ and Inmet agree that for the purposes of effecting any Monetization as contemplated by this Agreement, they waive all rights of first refusal and rights of second refusal as set out in Section 11.5 of the Shareholders' Agreement and the Investment Banker will be authorized to so represent to third parties.

5.

Offer

Teck Cominco, PTQ and Inmet agree that they will in good faith evaluate all bona fide third party offers for the Corporation's assets or shares provided any such offer includes consideration in cash or its equivalent in shares of reasonable liquidity, and otherwise contains terms and conditions customary for a transaction of this nature and acceptable to the Parties, acting reasonably (the "Offer").

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 155

Schedule C - Page 2

6.

Proceeds of Sale of Shares or Corporation's Assets

In the event Teck Cominco, PTQ and Inmet accept an Offer for the sale of all of the shares of the Corporation or all of the Corporation's assets, the proceeds after payment of fees and related expenses incurred by the investment banker and payment of the Corporation's costs to effect such transfer (including, in the case of a sale of assets, any applicable taxes) will be distributed to Teck Cominco, PTQ and Inmet in the following proportions:

Teck Cominco 23%

PTQ 29%

Inmet

48%

Teck Cominco, PTQ and Inmet agree that they will do all such acts and things as may be reasonably necessary and within their control or direction to facilitate the completion of such a transactions which form part of an accepted Offer.

7.

PTQ Shareholder Approval

Teck Cominco and Inmet acknowledge that PTQ may require that its Board of Directors-and shareholders approve any Monetization, and that any determination as to whether or not shareholder approval is required will be the sole decision of the board of PTQ.

8.

Rejection of Offer

In the event any of Teck Cominco or PTQ Or Inmet rejects an Offer or is unable to obtain the requisite corporate approval for such Offer, and provided that the other two of these three parties wish to accept the Offer, then the Party rejecting such Offer will, within 10 business days of such rejection, pay a "Break Fee" calculated at 2% of the value of the Offer (which value will be determined by the investment banker retained by the Parties pursuant to this Agreement if the Offer includes non-cash consideration) to the other Parties. The Break Fee will be divided between the other two Parties in proportion to the Equity Ratio.

9.

PTQ's Right to Issue Shares in Lieu of a cash Break Fey

In the event that PTQ is required to pay a break fee pursuant to Section 8 above, PTQ may issue shares to the other two Parties in lieu of paying the fee. Such shares will be issued at the market price (as defined by the rules/policies of the stock exchange on which PTQ shares are listed for trading) of the shares as of the date on which PTQ informs the other two Parties of its intention not to accept the Offer. Teck Cominco and Inmet agree to execute subscription agreements and such other documents required for share issuance as provided by PTQ, acting reasonably.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 156

Schedule C - Page 3

10.

Restrictions on Transfer During Marketing Period

Teck Cominco, PTQ and Inmet agree that during the Marketing Period they will not sell nor grant any option with respect to their respective interests in the Corporation, other than among themselves, and will not, directly nor indirectly, solicit, initiate, assist, facilitate, promote or knowingly encourage proposals from third parties other than in accordance with the process contemplated in this Agreement.

11.

Termination of Marketing Period

The Marketing Period will terminate six months after the Government Approval. The Parties agree that the termination of the Marketing Period may be extended by up to 30 days in the event there are delays in the Monetization beyond the reasonable control of the Parties.

12.

1991 Financing Agreement

Teck Cominco and PTQ agree that Teck Cominco shall not have any back-in rights under the 1991 Financing Agreement in respect of the Molejon Deposit or the Ancillary Rights. On the completion of any Monetization pursuant to which Teck Cominco sells its entire interest in the Corporation, the 1991 Financing Agreement will terminate.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 157

EXHIBIT 4.U.

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT made as of and to have effect from the 11^th day of February, 2008.

BETWEEN:

PETAQUILLA MINERALS LTD., a company duly incorporated under the laws of the Province of British Columbia, and having its head office at Suite 410, 475 West Georgia Street, Vancouver, British Columbia, V6B 4M9

(hereinafter called the“Company”)

 OF THE FIRST PART

AND:

BASSAM MOUBARAK,Chartered Accountant, of ________________________________________________________________

(hereinafter called "Mr.Moubarak")

 OF THE SECOND PART

WHEREAS:

A.

The Company is a mining and exploration company with offices in Vancouver, B.C. and the Republic of Panama, and with mineral resource properties in the Republic of Panama;

B.

The Company is a reporting company whose shares are posted and listed for trading on the Toronto Stock Exchange;

C.

Mr. Moubarak has certain skills, expertise and experience which the Company wishes to employ;

D.

the Company agrees to retain and Mr Moubarak agrees to serve in the capacity more particularly set out in Article 2 of this Agreement;

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the representations, warranties, covenants and agreements hereinafter set forth and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged by each of the parties), the parties represent, warrant, covenant and agree as follows:

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 158

ARTICLE 1

ENGAGEMENT AND DURATION

1.1

Subject to the terms and conditions hereof, Mr. Moubarak shall be employed by the Company as Chief Financial Officer (“CFO”), with the duties set out in paragraph 2.1, as amended from time to time, and such other duties as may from time to time be assigned to or vested in Mr. Moubarak by the Board of Directors of the Company, and Mr. Moubarak agrees to provide his services to the best of its ability and in accordance with the terms and conditions of this agreement.

1.2

The employment of Mr. Moubarak under this Agreement shall commence on February 11, 2008 and shall continue until terminated in accordance with this Agreement(the“Termination Date”).

ARTICLE 2

DUTIES

2.1

Mr. Moubarak shall perform all duties customarily performed by a CFO of a publicly-traded company engaged in a business similar to the Company’s business including, without limiting the generality of the foregoing,  the financial, compliance and regulatory requirements of the business and affairs of the Company.

2.2

Mr. Moubarak shall devote not less than 80% of the business days during the year of this Agreement to the business and affairs of the Company, use his best efforts to promote the interests of the Company and, to the extent necessary to discharge the responsibilities assigned to Mr. Moubarak, perform faithfully and efficiently such responsibilities.  The Company acknowledges that Mr. Moubarak’s duties as CFO will usually be performed on business days, but may also be performed on weekends and holidays.

2.3

Mr. Moubarak shall report directly to the Audit Committee and the Board of Directors.

2.4

In the event of a change of control of the Company, Mr. Moubarak shall continue to serve the Company in the same capacity and have the same authority, responsibilities and status as he had as of the date immediately prior to the change of control.  For the purposes of this Agreement, a“change of control” shall be deemed to have occurred when:

(a)

a person becomes a “control person” (as that term is defined in theSecurities Act, (British Columbia)) of the Company; or

(b)

a majority of the directors elected at any annual or special general meeting of shareholders of the Company are not individuals nominated by the Company’s then-incumbent board of directors; or

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 159

(c)

any person or group of persons acquires the ability, directly or indirectly through one or more intermediaries, to direct or cause the direction of the management and policies of the Company through:

(i)

the legal or beneficial ownership of voting securities;

(ii)

the right to appoint managers, directors or corporate management;

(iii)

contract;

(iv)

operating agreement;

(iv)

voting trust;

or otherwise.

ARTICLE 3

REMUNERATION AND BENEFITS

Remuneration

3.1

Mr. Moubarak shall be paid $ 205,000 annually in Canadian funds payable semi-monthly in arrears.  Such salary shall be reviewed by the parties at the end of each calendar year and any changes in such salary (which may be based upon, among other things, Mr. Moubarak’s performance) shall be as agreed upon in writing between the parties from time to time.  In addition, the aforesaid remuneration shall be increased annually by the annual percentage increase in the Consumer Price Index published by Statistics Canada for Vancouver.  The remuneration paid to Mr. Moubarak hereunder may be increased during the term of this agreement by mutual consent in the event of a change in the circumstances of either Mr. Moubarak or the Company.  For example, such remuneration shall be increased in the event of an increase in the scope of the services provided and responsibilities borne by Mr. Moubarak.

Bonus

3.2

Mr. Moubarak shall be eligible for an annual cash bonus equal to 30% of annual salary, pursuant to policies established by the Board of Directors of the Company.

Options

3.3

Mr. Moubarak shall be eligible for share options as may be approved by the Board of Directors of the Company.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 160

Reimbursement of Expenses

3.4

The Company shall reimburse Mr. Moubarak for all reasonable expenses incurred by Mr. Moubarak in the performance of duties pursuant to this Agreement, provided that Mr. Moubarak provides the Company with a reasonably-detailed written expense account on a monthly basis.

Benefits

3.5

Mr. Moubarak will be entitled to participate in all of the Company’s benefit plans available to its employees in accordance with the terms thereof, augmented, if necessary, to provide a reasonable overall package of benefits for a position of the nature held by Mr. Moubarak hereunder, including the benefits set out in Schedule “A” hereto as amended from time to time.

Professional Dues / Club Memberships

3.6

During the term of this Agreement, the Company shall pay to or on behalf of Mr. Moubarak and at his request from time to time, professional dues to the professional institutes that he belongs to and membership fees in such clubs and associations as are approved by the Board's Compensation Committee and as are desirable for Mr. Moubarak to join in connection with his employment and activities on behalf of the Company.

Vacation

3.7

The Company agrees that Mr. Moubarak shall be entitled to 4 weeks annual paid vacation.

ARTICLE 4

RESTRICTIVE COVENANTS

Non-Competition

4.1

Subject to the provisions of paragraph 4.11 hereof, during the term of this Agreement and for 12 months following the termination or expiration of this Agreement, Mr. Moubarak shall not:

(a)

own or have any interest directly in; nor

(b)

act as an officer, director, agent, employee or consultant of;

any person, firm, association, partnership, corporation or other entity (the“Competitive Entity”) engaged in mineral exploration within two kilometres of mineral claims owned by the Company during the term of this Agreement, but excluding any claims abandoned by the Company.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 161

4.2

The restriction set out in Section 4.1 above shall not apply to ownership by Mr. Moubarak of less than ten percent (10%) of the publicly traded securities of any Competitive Entity.  Except as provided in Section 4.1, Mr. Moubarak shall be free to engage in, and receive the full benefit of, any activity that he sees fit, whether or not competitive with the business of the Company.

4.3

Mr. Moubarak acknowledges that the restrictions contained in Section 4.1 are reasonable; however, in the event that any court should determine that any of the restrictive covenants contained in Section 4.1 or 4.2 of this Agreement, or any part thereof, are unenforceable because of the duration of such provision or the area covered thereby, such court shall have the power to reduce the duration or area of such provision and, in its reduced form, such provision shall then be enforceable and shall be enforced.

Confidentiality

4.4

The term“Confidential Information” means any and all information concerning any aspect of the Company not generally known to persons other than those associated with the Company.  The Company may disclose, in writing or orally, certain Confidential Information to Mr. Moubarak.

4.5

Mr. Moubarak acknowledges and agrees that, subject to the provisions of paragraph 4.11 hereof, any Confidential Information disclosed to Mr. Moubarak is in the strictest confidence.  Any Confidential Information disclosed to Mr. Moubarak in any form whatsoever is and shall be considered confidential and proprietary information of the Company.

4.6

Except as authorized by the Company, Mr. Moubarak will not, except in the course of his duties to the Company:

(a)

duplicate, transfer or disclose nor allow any other person to duplicate, transfer or disclose any of the Company’s Confidential Information; or

(b)

use the Company’s Confidential Information without the prior written consent of the Company.

4.7

Mr. Moubarak will safeguard all Confidential Information at all times so that it is not exposed to or used by unauthorized persons, and will exercise at least the same degree of care that would be used to protect Mr. Moubarak’s own confidential information.

4.8

Any and all maps, drill logs, core tests, reports, surveys, assays, analyses, production reports, technical, accounting and financial records and like information and materials received from the Company and any copies or excerpts thereof containing proprietary or Confidential Information will remain the property of the Company and will, upon the request of the Company, be promptly returned to the Company by Mr. Moubarak.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 162

4.9

The restrictive obligations set forth above shall not apply to the disclosure or use of any information which:

(a)

is or later becomes publicly known under circumstances involving no breach of this Agreement by Mr. Moubarak;

(b)

is already known to Mr. Moubarak at the time of receipt of the Confidential Information;

(c)

is lawfully made available to Mr. Moubarak by a third party; or

(d)

is authorized by the Board of Directors of the Company.

4.10

Subject to the provisions of paragraph 4.11 hereof, the provisions of Article 4 shall survive the termination of this Agreement for a period of one year after termination.

4.11

Mr. Moubarak shall be absolutely released from the provisions of paragraphs 4.1 to 4.10 inclusive hereof in the event that this Agreement is terminated pursuant to paragraph 5.3 of this Agreement.  For more certainty, in the event of such termination, Mr. Moubarak shall be free to use all and any Confidential Information received by him hereunder for any purpose whatsoever, including uses in connection with activities which are competitive with those of the Company.

ARTICLE 5

TERMINATION

5.1

The Company may terminate Mr. Moubarak’s engagement under this Agreement only upon the occurrence of any of the following events:

(a)

Mr. Moubarak committing an act of gross negligence of wilful misconduct;

(b)

the conviction of Mr. Moubarak under theCriminal Code of Canada or the Securities Acts of any of the Provinces of Canada;

(c)

the breach or default of any material term of this Agreement by Mr. Moubarak if such breach or default has not been remedied to the satisfaction of the Company within 14 days after written notice of the breach of default has been delivered by the Company to Mr. Moubarak;

(d)

without Cause, upon giving Mr. Moubarak at least 60 days written notice of termination; or

(e)

for Cause, with immediate effect;

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 163

PROVIDED THAT the Company may not terminate this Agreement nor commence proceedings to terminate this Agreement pursuant to sub-paragraph 5.1(c) within 180 days of a “change of control”, as defined in paragraph 2.4 of this Agreement.

5.2

In this agreement,“Cause” means:

(a)

the inability of Mr. Moubarak to perform his duties due to a legal impediment such as an injunction, restraining order or other judicial judgment, decree or order entered against Mr. Moubarak;

(b)

a breach by Mr. Moubarak of a material provision of this Agreement;

(c)

the failure of Mr. Moubarak to follow the Corporation's reasonable instructions with respect to the performance of his duties;

(d)

any material breach by Mr. Moubarak of his obligations under any code of ethics, any other code of business conduct or any lawful policies or procedures of the Corporation;

(e)

excessive absenteeism, flagrant neglect of duties or serious misconduct; or

(f)

any act or omission of Mr. Moubarak that would in law permit an employer to, without notice or payment in lieu of notice, terminate the employment of an employee.

5.3

In the event of the termination of Mr. Moubarak’s engagement under this Agreement pursuant to Subsections 5.1(a), (b), (c) or (e) of this Agreement, the Company shall pay to Mr. Moubarak, within 10 days of the effective date of termination the full amount of compensation accrued pursuant to Section 3.1 of this Agreement as of the date of termination.  In the event of the termination of Mr. Moubarak’s engagement under Subsection 5.1(d) of this Agreement, the Company shall pay to Mr. Moubarak, within 10 days of the effective date of termination, an amount equal to 1 times the annual compensation to be paid to Mr. Moubarak under Section 3.1.

5.4

Mr. Moubarak may terminate his obligations under this Agreement only as follows:

(a)

at any time after the expiry of 90 days of the date on which there is a change of control, as described in subsection 2.4 of this Agreement; or

(b)

upon the breach or default of any material term of this Agreement by the Company if such breach or default has not been remedied to the satisfaction of Mr. Moubarak, within 14 days after written notice of the breach of default has been delivered by Mr. Moubarak to the Company.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 164

5.5

In the event of the termination of Mr. Moubarak’s engagement under this Agreement pursuant to Section 5.4 of this Agreement, the Company shall pay to Mr. Moubarak, within 10 days of termination 100% of all compensation to be paid to Mr. Moubarak under Section 3.1.

5.6

The rights of the Company and Mr. Moubarak under this Article 5.0 are in addition to and not in derogation of any other remedies which may be available to the Company or Mr. Moubarak at law or in equity.

5.7

The amounts payable to Mr. Moubarak hereunder in the event of the termination of this Agreement shall not be reduced if Mr. Moubarak shall secure, or shall not reasonably pursue, alternative employment following the termination of his employment with the Company.

ARTICLE 6

PERSONAL NATURE

6.1

This Agreement is personal and is entered into based upon the singular skill, qualifications and experience of Mr. Moubarak.

ARTICLE 7

INDEMNITY

7.1

To the extent that it is lawfully able to do so, the Company agrees to indemnify and hold harmless Mr. Moubarak from and against any losses, costs, claims and liabilities which Mr. Moubarak may suffer or incur by reason of any matter or thing which Mr. Moubarak may properly do or have done or cause to be done as an employee, officer or director of the Company.

7.2

To the extent that it is lawfully able to do so, the Company shall indemnify Mr. Moubarak and his heirs and legal representatives against all costs, charges and expenses (including any amounts paid to settle any actions or satisfy any judgment) reasonably incurred by Mr. Moubarak in respect of any civil, criminal or administrative action or proceeding to which he is made a party by reason of being or having been an employee, director or officer of the Company if:

(a)

Mr. Moubarak acted honestly and in good faith with a view to the best interests of the Company; and

(b)

in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, Mr. Moubarak had reasonable grounds for believing that his conduct was lawful.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 165

ARTICLE 8

GENERAL PROVISIONS

Waiver

8.1

No consent or waiver, express or implied, by any party to this Agreement of any breach or default by any other party in the performance of its obligations under this Agreement or of any of the terms, covenants or conditions of this Agreement shall be deemed or construed to be a consent or waiver of any subsequent or continuing breach or default in such party's performance or in the terms, covenants and conditions of this Agreement.  The failure of any party to this Agreement to assert any claim in a timely fashion for any of its rights or remedies under this Agreement shall not be construed as a waiver of any such claim and shall not serve to modify, alter or restrict any such party's right to assert such claim at any time thereafter.

Notices

8.2

Any notice relating to this Agreement or required or permitted to be given in accordance with this Agreement shall be in writing and shall be personally delivered, telefaxed or mailed by registered mail, postage prepaid to the address of the parties set out on the first page of this Agreement.  Any notice shall be deemed to have been received if delivered or telefaxed, when delivered or telefaxed, and if mailed, on the fifth day (excluding Saturdays, Sundays and holidays) after the mailing thereof.  If normal mail service is interrupted by strike, slowdown, force majeure or other cause, a notice sent by registered mail will not be deemed to be received until actually received and the party sending the notice shall utilise any other services which have not been so interrupted or shall deliver such notice in order to ensure prompt receipt thereof.  A party may change its address for service by notice in writ ing to the other parties.

8.3

Each party to this Agreement may change its address for the purpose of this section 8.0 by giving written notice of such change in the manner provided for in section 8.1.

Applicable Law

8.4

This Agreement shall be governed by and construed in accordance with the laws of the province of British Columbia and the federal laws of Canada applicable therein, which shall be deemed to be the proper law hereof.  The parties hereto hereby submit to the jurisdiction of the courts of British Columbia.

Severability

8.5

If any provision of this Agreement for any reason is declared invalid, such declaration shall not affect the validity of any remaining portion of the Agreement, which remaining portion shall remain in full force and effect as if this Agreement had been executed with the invalid portion thereof eliminated and it is hereby declared the intention of the parties that they would have executed the remaining portions of this Agreement without including therein any such part, parts or portion which may, for any reason, be hereafter declared invalid.

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Entire Agreement

8.6

This Agreement constitutes the entire Agreement between the parties hereto and there are no representations or warranties, express or implied, statutory or otherwise other than set forth in this Agreement and there are no Agreements collateral hereto other than as are expressly set forth or referred to herein.  This Agreement cannot be amended or supplemented except by a written Agreement executed by all parties hereto.

Non-Assignability

8.7

This Agreement shall not be assigned by any party to this Agreement without the prior written consent of all other parties to this Agreement.

Burden and Benefit

8.8

This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and permitted assigns.

Time

8.9

Time is of the essence of this Agreement.

Independent Advice

8.10

Mr. Moubarak hereby acknowledges that he has had an opportunity to seek and obtain independent legal advice in respect of this Agreement, and confirms that he has either sought and obtained such advice or waives any right of action he may have against the Company as a result of failing to obtain such advice.

Counterpart

8.11

This Agreement may be executed in counterpart and such counterparts together shall constitute one and the same instrument and notwithstanding the date of execution shall be deemed to bear the date as set out on the first page of this Agreement.

IN WITNESS WHEREOF the parties have duly executed this Agreement as of the date set out on the first page of this Agreement.

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PETAQUILLA MINERALS LTD.

/s/ John Cook

John Cook

Chairman of the Board of Directors

Bassam Moubarak

/s/ Bassam Moubarak

This is page 11 to that certain Employment Agreement dated as of February 11, 2008, between PETAQUILLA MINERALS LTD. and Mr. Moubarak

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 168

SCHEDULE “A”

Benefits

·

Pension contribution of 5% of base gross salary.

·

The company will cover the cost of courses and seminars up to a maximum of $10,000 per annum.

·

Parking at 475 West Georgia Street, Vancouver, BC.

·

Business Class travel on all flight arrangement

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 169

EXHIBIT 4.V.

ASAMBLEA LEGISLATIVA
LEY Nª 9
(De 26 de febrero de 1997)
Por la cual se aprueba el Contrato celebrado entre EL ETADO
Y la sociedad MINERA PETAQUILLA, S.A.

LA ASAMBLEA LEGISLATIVA

DECRETA:

Artículo 1.

Apruébase el Contrato celebrado entre EL ESTADO y la

sociedad denominada MINER PETAQUILLA, S.A., que lee así:

Entre los suscritos a saber, por una parte, NITZIA RODRIGUEZ DE VILLARREAL, mujer, panameña, mayor de edad, con cédula de identidad personla nicmero 8-207-2450 en su calidad de Ministra de Comercio e Industrias, en represnentación de EL ESTADO, debidamente autorizada por el Consejo de Gabinete celebrado el día 13 de febrero de 1996, en ejercicio de la facultad que le confiere el numera tercero del Artículo 195 de la Constutución Política de la Repicblica de Panamá, en adelante denominado EL ESTADO, "y por o tra parte, Ingeniero Richard Fifer, varón, panameño, mayor de e dad, portador de la cédula de identidad personal nicmero 8-433-163, en su condición de Presidente y Representante Legal de la MINERA PETAQUILLA, S.A., sociedad org anizada y existente de conformidad a las leyes de la Repicblica de Panamá y debidamente inscrita en la Sección de Micropelículas Mercantil del Registro Picblico a la Ficha 303869, Rollo 46505, Imagen 0096, debidamente autorizado para celebrar este acto mediante resolución de la Junta Directiva de fecha de 1 de diciembre de 1995, quien en adelante se denominará LA EMPRESA, se celebra este Contrato de concesión mineral

Comparecen también a este acto y se adhieren al presente Contrato las siguientes personals para los siguientes fines: (a) GEORECURSOS INTERNACIONAL, S.A., sociedad organizada y existente de conformidad a las leyes de la Repicblica de Panamá debidamente

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 170

Inscrita en el Sección de Micropelículas Mercantil del Registro Público a al Ficaha 239116, Rollo 30512, Imagen 181, representada en este acto por el Ingeniero Richard Fifer, cuyas generales han sido descritas en anterioridad, en su condición de Presidente y Representante Legal, debidamente autorizado para este acto mediante resolución de la Junta Directiva de fecha de 1 de diciembre de 1995, quien en adelante se denominará GEORECURSOS, con el fin de dar por terminada y subrogada la concesión existenteconforme al Contrato No. 27-A de 7 de agosto de 1991, tal como se contempla en la Cláusula Vigésima Octava de este Contrato, y (b) ADRIAN RESOURSES, S.A., sociedad organizada y existente de conformidad a leyes de la República de Panamá y debidamente inscrita en la sección de Micropelículas Mercantil del Registro Público a la Ficha 259118, Rollo 35173, Imagen 002. debidamente representada en este acto por el Ingeniero Richard Fifer, cuyas generales han sido descritas con anterioridad, en su condición de Presidente y Representante Legal, debidamente autorizado para celebrar este acto mediante resolución de la Junta Directiva de fecha de 1 de diciembre de 1995, quien en adelante se denominará ADRIAN, con el fin de reconocer ciertos derechos y obligaciones recíprocos conjuntamente con LA EMPRESA respecto a ciertas concesiones minera colindantes al AREA DE LA CONCESIÓN, según lo previsto en el Anexo IV de este Contrato.

EN CONSECUENCIA , las prtes han convenido la celebración de este Contrato sujeto a las siguientes Cláusulas:

CLÁUSULA PRIMERA:

Objeto

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El objeto principal de l presente Contrato es el de otorgar a LA EMPRESA, com en efecto se le otorga con la celebreación y aprobación del presente Contrato, la concesión de los derechos posteriormente estipulados sobre los yacimientos mineros de oro, cobre y otros minerales ubicados en el área conocida como Cerro Petaquilla”, descrita n el Anexo de ste Contrato omo Área de a Concesion", con los fines de explorar, extraer, explotar, beneficiar, procesar, refinar, transportar, vender y comercializar todos los minerales, bases o preciosos, ubicados en el Área de la Concesi6n y, tales fines, LA EMPRESA podrá diseñar, construir y operar toda clase de obras de infraestructura, incluyendo unidades de vivienda, centros de salud, educaci6n y recreaci6n, todo tipo de instalaciones aéreas y terrestres, instalaciones de ge neraci6n de energía eléctrica para satisfacer las necesidades de esta Concesi6n así como para otros usos expresamente permitidos por el presente Contrato, plantas de procesamiento de aguas; almacenar y utilizar agua, naturales: y, en general, diseñar, construir y operar todas, aquellas instalaciones y prestar todos aquellos servicios que sean necesarios o pertinentes para el desarrollo de esta Concesi6n, todo lo cual en lo sucesivo se denomina "EL PROYECTO".

EL ESTADO reconoce que el desarrollo de EL PROYECTO amparado bajo el presente Contrato representa un gran beneficio para el impulso de la industria minera en la República de Panamá y por lo tanto EL ESTADO lo considerará como prioritario y le prestará su asistencia a LA EMPRESA para lograr el cumplimiento y perfecciona- miento del objeto y los fines del presente Contrato.

CLÁUSULA SEGUNDA
Definiciones

Para los efectos del Contrato, los siguientes términos tendrán el significado que a continuaci6n se indica:

AFILIADA

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Para los efectos del Contrato, se entenderá como AFILIADA con relaci6n a cualquier otra persona natural o jurídica, aquella persona natural o jurídica que directa o indirectamente, contro laes controlada por, o está bajo control común con dicha otra persona natural o jurídica mediante la tenencia del cincuenta por ciento (50%) o más de las acciones emitidas y en circulación con derecho ordinario a voto para la elección de los directores de dicha otra personal natural o jurídica, o mediante cualquier otro método o forma que represente control de hecho sobre dicha personal natural o jurídica. Para efectos de este Contrato se entiende además que TECK CORPORATION, INMET MINING CORPORATION y ADRIAN RESOURSES LTD., y las afiliadas a subsidiarias de éstas, serán consideradas como Afiliadas de LA EMPRESA mientras sean accionistas de ésta.

AREA DE PROYECTO

Será el área que LA EMPRESA designe dentreo del Area de la Concesión para desarrollar la explotación de minerales y comprende todas las instalaciones, facilidades y estructuras que sobre dicha áreaestablezcan LA EMPRESA, sus Afiliadas, contratistas o subcontratistas.

CERRO PETAQUILLA

Es la concesión amparada bajo el Contrato celebrado por y entre el Ministerio de Comercio e Industrias y Geo -Recursos Internacional, S.A., identificado como el Contrato No. 27-A de 7 de agosto de 1991, con sus prórrogas y extensiones, y descrito en el Anexo I del presente Contrato.

CONCESION

Es el conjunto de derechos otorgados por EL ESTADO en virtud de este Contrato, los cuales incluyen, entre otros, el derecho de explorar, explotar y usufructuar los yacimientos minerales ubicados en el área de Cerro Petaquilla que se describe en el Anexo I de este Contrato, la cual se denomina como Area de la Concesión

CONCESIONES COLINDANTES

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Se refiere a las concesiones o solicitudes de concessions, segun sea el caso, a favor de ADRIAN identificadas como: Contrato No. 41 del 12 de julio de 1994, Contrato No. 39-A del 7 de julio de 1994, Contrato No. 39-B de 7 de julio de 1994, Contrato No. 59 de 29 dde diciembre de 1994 todos celebrados por y entre el Ministerio de Comercio e Industrias y AADRIAN; y las solicitudes de concesiones Nos. 93-92, 93-93 y 94-39 según los registros que reposan en la Direcci6n General de Recursos Minerales del Ministerio de Comercio e Industrias de la República de Panamá.

CONTRATISTA

Serán. Aquellas personas naturales o jurídicas que LA EMPRESA, sus Afiliadas o cesionarias designen como Contratistas para efectos del presente Contrato, y bastará que LA EMPRESA notifique al Ministerio de Comercio e Industrias dicha designaci6n para que la misma tenga efecto.

EMPRESA

Se refiere, a través del contenido del presente Contrato, a MINERA PETAQUILLA, S.A., al igual que a sus Afiliadas, y a las entidades cesionarias de estas y aquella.

ESTUDIO DE FACTIBILIDAD

Tendrá el significado que se le da en el Anexo II del presente Contrato, el cual forma parte integral del mismo.

FACILIDAD

Es toda excavaci6n, fosa, agujero, pozo, zanja, canal, desagüe, equipo, ferrocarril, calles, carreteras, caminos, albergues o habitaciones para los trabajadores, tuberías, líneas de transmisi6n eléctrica, instalaciones y equipo para la generaci6n de cualquier tipo de energía, acumulaci6n o almacenamiento de materiales y materia prima, escombrera o acumulaci6n de desechos y desperdicios de cualquier tipo, muelles, dársenas, flotadores o plataformas flotantes, estanque de residuos, estanque de sedimentaci6n o asentamiento, y otros mejoramientos a al propiedad, accesorios fijos molinos, trituradoras instalaciones de lixiviaci6n o flotaci6n, instalaciones para mejoramiento o reclamaci6n de

Aguas, rutas de acarreo o transporte, además de cualquier otras mejoras, accesorios, instalaciones o construcciones que sean, según LA EMPRESA, necesarias o recomendables para la exploraci6n, desarrillo, extracci6n, beneficio o transporte de minerales o productos relacionados con el Area de la Concesi6n, las cuales se realizarán en cumplimiento con las reglamentaciones ambientales pertinentes.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 174

PRODUCCION BRUTA NEGOCIABLE

Para los prop6sitos del presente Contrato:

(a)

cuando la mena o el concentrado derivado de ésta sean vendidos como mena o como concentrado, la suma bruta recibida del comprador por raz6n de la venta luego de deducirse, de haberlos, todos los costos de fundici6n, penalidades y otras deducciones, y luego de deducidos todos los costos del transporte y el seguro de la mena o del concentrado, incurridos en su traslado desde la mina hasta la fundici6n o fábrica u otro lugar donde se lleve a cabo su entrega definitiva al comprador; o

(b)

cuando la mena o el concentrado sean procesados en una fundici6n y los metales recuperados en dicho proceso sean vendidos y entregados por LA EMPRESA, la suma bruta recibida del comprador por raz6n de la venta de los metales así entregados, luego de deducidos todos llos costos de fundici6n, penalidades y otras deducciones, y luego de deducidos todos los costos del transporte y el seguro de la mena o del concentrado incurridos en su traslado desde la mina hasta la fundici6n, y todos los costos del transporte y el seguro de los metales, incurridos en su traslado desde la fundici6n hasta el lugar donde se lleve a cabo su entrega definitiva al comprador; o

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 175

(c)

cuando la mena o el concentrado sean procesados en una fundici6n de propiedad de LA ASAMBLEA o bajo el control de la misma bruta que se estime devengada por razón de la venta de la mena o del concentrado no será inferior a aquella suma que se hubiera podido obtener de una fundición que no fuera de propiedad de LA EMPRESA o que no estuviera controlada por ella con relación al procesamiento de mena o de concentrado de calidad y cantidad iguales.

PRODUCCION COMERCIAL

Se refiere a la extracción y procesamiento del mineral con el propósit:o de vender un producto final. Le extracción y procesamiento del mineral para hacer pruebas y determinar el proceso metalúrgico que se utilizará, no se considerará Producción Comercial. Cuando se haya alcanzado el setenta por ciento (70a) de la capacidad de producción diseñada, conforme se defina en el Estudio de Factibilidad, y ésta se mantenga durante noventa días consecutivos, se considerará que se ha alcanzado Producción Comercial.

SUBCONTRATISTA

Serán aquellas personas naturales o jurídicas que LA EMPRESA, sus Afiliadas o cesionarias designen como Subcontratistas para efectos del presente Contrato, y bastará que LA EMPRESA notifique al Ministerio de Comercio e Industrias dicha designación para que la misma tenga efecto.

TERMINO INICIAL

Es el período de veinte (20) años siguiente a la fecha de promulgación de la ley por medio de la cual se apruebe este Contrato.

CLAUSULA TERCERA

Derechos y Obligaciones

A. DERECHOS DE LA EMPRESA

Durante la vigencia del presente Contrato EL ESTADO otorga a LA EMPRESA, lo cual hace extensivo, para los efectos del desarrollo de EL PROYECTO, a sus Afiliados, y a los contratistas y subcontra-tistas que ellas designen, las siguientes facultades y derechos:

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1.

Dentro del Área de la concesión, según se describe en el Anexo I, realizar investigaciones geológicas relacionadas con los minerales que se encuentren en dicha Área de la Concesión antes y durante la extracción de los mismos.

2.

Realizar todo tipo de operaciones de minería, incluyendo pero sin limitarse a exploración, extracción, explotación, procesamiento, refinamiento, transporte, beneficio, venta y comercialización, dentro del Área de la Concesión, y llevar a cabo todas las demás operaciones y actividades necesarias y adecuadas para dichas operaciones de minería dentro y fuera del Área de la Concesión, siempre en cumplimiento con las reglamentaciones ambientales pertinentes.

3.

Llevar a cabo las actividades necesarias para beneficiar los minerales extraídos en las denominadas Áreas del Proyecto de conformidad a las estipulaciones del presente Contrato.

4.

Transportar la mena, concentrado y los minerales extraídos, al igual que cualquier artículo, provisión, material o bien que LA EMPRESA estime necesario para su operación, empleando cualquier medio de transporte y método de seguridad reconocido dentro de la industria de la minería.

5.

Almacenar dentro y fuera del Área de la Concesión y exportar y comercializar la mena, concentrado y los minerales que haya extraído dentro del Área de la Concesión, de conformidad con las disposiciones legales y reglamentarias vigentes.

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6.

El derecho de servidumbre de paso, cuando LA EMPRESA lo considere necesario para el desarrollo de EL PROYECTO, a través de la superficie y subsuelo de todas las tierras y aguas que sean propiedad de EL ESTADO a la fecha en que el Contrato entre en vigencia, sujeto a lo dispuesto en el Anexo IV de este Contrato, en la medida en que el mismo no vulnere los derechos adquiridos de terceros a este Contrato; y el derecho de instruir, instalar, mantener y usar en la superficie o subsuelo de dichas tierras y aguas aquellas facilidades e instalaciones que LA EMPRESA necesite para el desarrollo de EL PROYECTO. En caso tal de que hiciera uso de una servidumbre de paso por el subsuelo, LA EMPRESA coordinará con la entidad estatal correspondiente todo lo relacionado con la protecci6n de la capa freática en las reservas de agua dulce que pudiesen existir en el si tio de dicha servidumbre. LA EMPRESA gozará de este derecho de servidumbre y podrá ejercerlo sin estar sujeta a pagos por ningún concepto. Cuando las tierras propiedad de EL ESTADO sean enajenadas a terceros particulares luego de la entrada en vigencia del presente Contrato, prevalecerá el derecho de servidumbre de LA EMFRESA, sin perjuicio de la indemnizaci6n cine corresponda por daños físicos a cultivos y mejoras permanentes construidas sobre las mismas.

En lo que respecta a lo dispuesto en el Anexo IV de este Contrato, LA EMPRESA y ADRIAN declaran que cualquier conflicto o controversia que se suscite entre las mismas con motivo de la ejecuci6n o cumplimiento de lo convenido en dicho Anexo IV no afectará en modo alguno las respectivas obligaciones y compromisos que vinculan a LA EMPRESA conforme al presente Contrato y a ADRIAN respecto a las Concesiones Colindantes frente a EL ESTADO, a menos que el respectivo conflicto o controversia sea motivado o causado por algún acto u omisi6n de EL ESTADO.

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7.

El derecho de servirse de y desviar las aguas de fuentes naturales cuando así lo requieran las actividades de EL PROYECTO, sin carga alguno, entendiéndose que si estos usos perjudican interfieren con los derechos o las propiedades de personas o entidades privadas o estatales que utilicen dichas aguas a la fecha en que entre en vigencia el presente Contra-estas personas o entidades recibirán de LA EMPRESA justa compensación por el perjuicio sufrido de conformidad con las normas vigentes. De igual forma, LA EMPRESA garantizará el suministro de^, agua potable suficiente para la subsistencia de aquellas personas naturales que legalmente ocupen áreas afectadas al momento en que entre en vigencia el presente Contrato.

8.

El derecho a diseñar^- y construir puentes de acceso, tuberías,

canales, rieles, ferrocarriles y demás facilidades de acceso o medios de transporte, y cualesquiera otras instalaciones y facilidades útiles o necesarias para la realización de EL PROYECTO, y usufructuar dichas instalaciones y facilidades sin estar sujeta al pago de ningún tipo de gravamen, canon, regalía, impuesto, ni ningún otro tipo de cargo por parte de EL ESTADO, .3 excepción del pago de cánones superficiales, regalías e impuestos municipales de conformidad con lo establecido en el presente Contrato. Se entiende que LA EMPRESA esta facultada para extraer y utilizar los materiales o minerales que sean necesarios para llevar a cabo las obras de infraestructura, incluyendo pero sin limitarse a piedra, arena y cascajo, y que tendrá derecho a explotar canteras con el mismo fin sujeto a lo dispuesto por este C ontrato y la legislación vigente que regule o reglamente la explotación de minerales no metálicos utilizados como materiales de construcción.

9.

Generar electricidad para uso de EL PROYECTO y vender o comercializar cualquier excedente de electricidad generada de acuerdo a la legislación vigente, así como establecer, construir y operar cualesquiera instalaciones de comunicación que LA EMP, "1ESA considere necesaria para EL PROYECTO y las operaciones relacionadas con éste.

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10.

El derecho a obtener, sin mayor demora, las licencias,permisos, aprobaciones y otras autorizaciones que sean generalmente requeridas por EL ESTADO o cualquiera de sus dependencia, o instituciones aut6nomas o semiaut6nomas y que se necesiten para el desarrollo de EL PROYECTO Sujeto a las demás disposiciones del presente Contrato, se entiende que todas estar licencias, aprobaciones o autorizaciones se otorgarán a los cargos usuales de aplicaci6n general.

11.

Poseer, operar y estructurar, libre del pago de cualquier tasa, gravamen o cargo por parte de EL ESTADO, vehículos, helic6pteros, aviones, barcazas, equipo pesado de uso en tierra o en agua o anfibio, remolcadores, barcos de gran calado, embarcaciones de transporte de trabajadores, y cualquier otra maquinaria o equipo que sea necesario para el desarrollo efectivo de EL PROYECTO, y prestar los servicios aéreos, marítimos y terrestres dentro del territorio Panameño en la medida en que dichos servicios sean necesarios para el desarrollo de EL PROYECTO.

12.

LA EMPRESA tendrá el derecho de adquirir, arrendar o usufructuar aquellas tiernas de EL ESTADO dentro o fuera del Área de la Concesi6n obre sean necesarias o útiles para el desarrollo de EL PRCYE, ": C. LA EP4PRSSA podrá adquirir estas tierras en propiedad, en arrendamiento e en usufructo por conducto del Ministerio de Hacienda y Tesoro, el cual dará curso a tales solicitudes y accederá a concederlas directamente a LA EMPRESA sin necesidad de someter dicha concesi6n a los mecanismos de licitaci6n pública, concurso o solicitud de precios establecidas en el C6digo Fiscal siempre que dichas tierras estén disponibles y en la medida en que no se vulneren derechos adquiridos de terceros a este Contrato por raz6n de otras concesiones mineras, sujeto a lo dispuesto en el Anexo IV de este Contrato. Cuando se trate de tierras adq uiridas en usufructo o en arrendamiento, las s umas a pagar po r parte de LA EMPRESA no serán superiores a los cánones superficiales por hectárea cure se establecen en la presente Cláusula. Cuando se trate de tierras que LA EMPRESA desee adquirir en propiedad, el precio a pagar por dichas tierras será determinado por los procedimientos establecidos en la legislación vigente.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 180

En caso de que LA EMPRESA necesite tierras de propiedad privada que se encuentren dentro o fuera del Área de la Concesión, todo lo relativo a su uso, su posesión o su adquisición, con excepción de lo estipulado en el numeral siete (7) del Literal A de la presente Cláusula, se tramitará de conformidad con lo dispuesto en el Código de Recursos Minerales y este Contrato.

13.

LA EMPRESA tendrá derecho a diseñar, construir y operar, directamente o a través de terceros, siempre bajo su propia dirección, muelles, dársenas y demás instalaciones portuarias y atracaderos que LA EMPRESA requiera dentro del Área del Puerto, según se determine en el Estudio de Factibilidad, en relación con las actividades contempladas en el presente Contrato, y se entenderá que dichos muelles, dársenas y demás instalaciones portuarias y atracaderos serán para el uso prioritario de LA EMPRESA. Las tasas o los derechos portuarios que pudiesen establecerse por el uso de dichas instalaciones no se aplicarán ni a LA EMPRESA y sus naves ni a las naves pertenecientes a o que estén bajo el control de terceros que presten servicios relacionados con el objeto del Contrato. Tan pronto como este Contrato llegue al término de su duración de acuerdo con la Cláusula Quinta, las citadas instalaciones portuarias pasarán a ser propiedad de EL ESTADO, y éste asumirá la responsabilidad de su operación.

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No obstante lo expresado en el párrafo que antecede, EL ESTADO se reservará el derecho de permitir el uso de dichas instalaciones portuarias a otras naves para fines distintos amparados baje el presente Contrato. En este último caso, LA EMPRESA se reservará el derecho de cobrar a dichas naves los derechos de muel1aje que estime convenientes y podrá objetar el uso de l.as instalaciones portuarias por dichas naves si dicho uso perjudica o interfiere de algún modo con las actividades les que LA EMPRESA, sus Afiliadas, contratistas o subcontratistas desarrollan. En todo caso, LA EMPRESA podrá además cobrar derechos o tasas razonables por el uso de grúas, tuber-ías, almacenes de depósito, y demás servicios, instalaciones y facilidades que LA EMPRESA provea o suministre o ponga a disposici&# 243;n ole dichas naves.

14.

Organizar, establecer y prestar servicios de pilotaje, remolque, reparación, movilización en lanchas y, en general, servicios de ayuda a la navegación. Se entiende que esta facultad no implica la obligación de hacerlo y, por consiguiente, su ejercicio es una potestad discrecional de LA EMPRESA. Estos servicios serán prestados por personal idóneo escogido por EMPRESA al amparo de las licencias que al efecto le otorgará EL ESTADO a dicho personal. El costo de estos servicios será sufragado con cargo a las tasas o derechos que al efecto establezca EL ESTADO. No se aplicarán derechos o tasas a favor de EL ESTADO cuando se trate de naves de propiedad de LA EMPRESA, naves que estén prestando servicios a LA EMPRESA, o naves que presten servicios en relación con las artiividades contempladas en el presente Contrato. Cuando LA EMPRESA no desee seguir prestando alguno de los servicios a que se refiere esta cláusula, deberá notificárselo a EL ESTADO a más tardar con seis (6) meses de antelación. En ese caso, EL ESTADO prestará el servicio cobrando las tarifas de plicación general que se hayan establecida, y éstas se le aplicarán junto a LA EMPRESA como o a quienes presten servicio a LA EMPRESA en relación con las actividades contempladas en el presente Contrato, dando siempre prioridad a LA EMPRESA en la prestación de dichos servicios y actividades. No obstante lo anterior, se entiende que EL ESTADO ofrecerá a LA EMPRESA la tarifa más favorable que al momento ofrezca o pueda ofrecer a otros usuarios.

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15.

Diseñar, establecer, construir, mantener, renovar y expandir obras, instalaciones, anexos, obras y servicios auxiliares, que tengan que ver con actividades aéreas, marítimas o terrestres, al igual que diseñar, construir, mantener, renovar y expandir rompeolas, muelles, helipuertos, pistas de aterrizaje, torres de comunicación, caminos, puentes, carreteras, malecones, dragados, canales y dársenas en relación con las actividades contempladas en el presente Contrato o con el desarrollo 9e dichas actividades, y hacer uso de semejantes instalaciones sin costo alguno, siempre que ese uso cumpla lo dispuesto en las leyes y reglamentos so b re construcción, sanidad, seguridad, higiene ocupacional y protección del medio ambiente que estén vigentes y sean de aplicación general.

16.

Se entienden incluidas dentro del Área de la Concesión, y parte integral de EL PROYECTO, las instalaciones y el equipo de transporte que sean inamovibles y que LA EMPRESA utilice en relación con las actividades contempladas en el presente Contrato, así como tuberías, acueductos, duetos, rieles, terminales y demás instalaciones destinadas al transporte de mena o minerales, de carga y de mercaderías en general, o a actividades inherentes al funcionamiento de LA EMPRESA, cuando hayan sido construidos o vayan a ser construidos con miras al ejercicio de los derechos de servidumbre de paso que tenga LA EMPRESA.

17.

Administrar y operar EL PROYECTO, y ceder total o parcialmente los correspondientes derechos respecto de una porción o de una etapa o fase de EL PROYECTO o de su totalidad, conforme a lo dispuesto en la Cláusula Novena de este Contrato.

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18.

Además de los derechos autorizaciones que anteceden, LA EMPRESA tendrá el derecho y la facultad para realizar aquellos actos o actividades que considere incidentales o conducentes a la consecuci6n de los objetivos descritos en la Cláusula Primera de este Contrato y al ejercicio de los derechos y facultades torcidos en la presente Cláusula.

B. OBLIGACIONES DE LA EMPRESA

1.

Los estudios de Evaluaci6n Ambiental Preliminar, de Reconocimiento Ambiental y de Viabilidad Ambiental y sus anexos, en su conjunto denominarles Informe Ambiental, requeridos por el Reglamento Ambiental del Sector Minero vigente a la fecha en que entre en vigencia el presente Contrato, formarán parte integral de este Contrato y serán de obligatorio cumplimiento por LA EMPRESA. La Direcci6n General de Recursos Minerales evaluará los estudios que conforman el Informe Ambiental en consulta con el INRENARE.

2.

Antes de iniciar el período de extracci6n, LA EMPRESA presentará un

Estudio de Viabilidad Ambiental específicamente del Área del Proyecto en la cual se llevará a cabo la respectiva extracci6n. Dicho estudio será realizado o revisado por expertos en la materia previamente aprobados por la Direcci6n General de Recursos Minerales del Ministerio de Comercio e Industrias. Dicho estudio deberá ser evaluado, y se deberá definir su aprobaci6n, modificaci6n o rechazo en un plazo de 45 días luego de la fecha de presentaci6n a la Direcci6n General de Recursos Minerales. Transcurrido dicho plazo, de no haber emanado un pronunciamiento por parte de la Direcci6n General de Recursos Minerales, se entenderá por aprobado el Estudio de Viabilidad Ambiental, de manera que LA EMPRESApodrá proceder a desarrollar sus actividades de acuerdo al contenido de dicho Estudio.

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3.

Al inicio de cada año, LA EMPRESA deberá presentar un Plan de

Trabajo que <abarque las proyecciones y costos aproximados para el respectivo año a la Dirección General de Recursos Minerales del

Ministerio de Comercio e Industrias.

4.

  LA EMPRESA deberá pagar en efectivo a EL ESTADO, sujeto a

las deducciones establecidas en la Cláusula Décima Tercera del presente Contrato, los siguientes cánones superficiales anuales por hectárea sobre el Área de la Concesión no definida como Área 'i' Proyecto según la Cláusula Cuarta del presente

contrato

Años	US$ porHectárea
1 ªy 2 ª	0.50
3 ªy 4 ª	1.00
Del 5ª en adelante	1.50

5. LA EMPRESA deberá pagar en efectivo a EL ESTADO, sujeto a las deducciones establecidas en la Cláusula Décima Tercera del Contrato, los cánones superficiales por cada hectárea que comprenda las zonas identificadas como Área (s) de Proyecto según la Cláusula Cuarta del presente Contrato y las regalías anuales sobre los minerales extraídos, conforme a la siguiente tabla:

Clase de Mineral	Primeros 5 años	Del 6ª al 1 0ª años	11 ª años en adelante	Regalía
I	B/ 0.75	B/ 1.25	B/ 2.00	2%
II	1.00	2.00	3.00	2%
III	1.00	2.00	3.00	4%
IV	1.00	2.50	3.50	2%
V	0.50	1.00	1.00	2%
VI	1.50	3.00	4.00	2%

Se entiende que las clases de minerales que anteceden tendrán los siguientes significados:

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Clase I: Minerales no metálicos, excluyendo los materiales de construcción.

Clase II: Minerales metálicos excepto los minerales precio. sos.

Clase III: Minerales preciosos aluvionales,

Clase IV: Minerales preciosos no aluvionales.

Clase V: Minerales energéticos, excepto los hidrocarburos.

Clase V1: Minerales, de reserva.

Los pagos de cánones superficiales se harán por anualidades adelantadas y los de regalía por trimestres vencidos dentro de un período de sesenta (60) días contados a partir de la fecha de su vencimiento. Los cánones superficiales se computarán basándose en el total de la superficie retenida al principio de cada año.

En la presente cláusula, la regalía a pagar por LA EMPRESA se ex cesa como un porcentaje de la Producción Bruta Negociable según se define en la Cláusula Segunda del presente Contrato .

6.

LA EMPRESA se obliga a presentar anualmente al Ministerio de Comercio e Industrias los informes que se detallan a continuación, y dicha dirección se encargará de informar a otras institución es gubernamentales y, según convenga, proporcionar la información del caso:

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a)

Informe de operaciones, el cual formará parte del informe anual, a ¡ renos que, previo aviso a LA EMPRESA con un mínimo de sesenta (60) días de antelación, el Ministerio de Comercio e Industrias requiera que sea entregado en otra forma. Dicho informe deberá contener información relativa a los minerales extraídos, transportados y beneficiados precios aplicables, el número y tipo de operaciones mineras llevadas a cabo durante el período cubierto por el informe y el éxito obtenido en estas operaciones; los procedimientos que se hayan aplicado a las operaciones mineras de acuerdo con las buenas normas de operación, los registros de sondeos, las muestras, los datos topográficos, geológicos y mineralógicos obtenidos, la ubicación de las perforaciones y de los lugares estudiados, mapas, plano s y cortes geológicos y toda la demás información técnica adicional importante obtenida en el proceso de las operaciones y los datos que no se hayan sometido previamente, indicándose el se flan obtenido minerales en cantidades comerciales,y si éste es el caso, un estimado de la fecha en que se Iniciará la extracción y la magnitud de las operaciones planeadas.

b) Informe sobre empleo y adiestramiento, que formará parte del informe anual, a menos que EL ESTADO requiera que tea entregado en otra forma. Este informe consistirá en una declaración que cubra el año fiscal anterior en cuanto al empleo de panameños y extranjeros y al desenvolvimiento de los programas de adiestramiento.

Todo informe contendrá una declaración jurada de lA EMPRESA o de la persona autorizada para actuar en su

nombre.

7.

LA EMPRESA permitirá a EL ESTADO el examen de los informe s técnicos relacionados con EL PROYECTO y la inspeecit5n rutina ría de todas las instalaciones de dicho Proyecto durante días y horas laborables, entendiéndose que EL ESTAPO asume todo gasto y riesgo que las citadas inspecciones le puedan ocasionar.

8.

LA EMPRESA permitirá a EL ESTADO el acceso y la utilisaci6t7 da las facilidades portuarias y las instalaciones complementarias, que LA EMPRESA establezca con sujeción a las disposiciones de la Cláusula Tercera, literal A, numerales 13 y 14 del Contrato.

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9.

Antes de que se inicien las actividades de extracc 6r:, LR EMPRESA creará y participará en la administraci6n de un fondo de becas por un monto total de DOSCIENTOS CINCUENTA MIL DOLARES de los Estados Unidos de América (US$250, 000. 00) que será empleado para sufragar estudios y cursos de adiestramiento o formaci6n profesional de habitantes de las comunidades aledañas a EL PROYECTO, ubicadas en las Provincias de Coclé y Col6n. Dichos habitantes serán seleccionados por un comité integrado por representantes de las comunidades y de LA EMPRESA.

10.

LA EMPRESA se obliga a dar el debido mantenimiento a todas las obras de minería e infraestructura y de servicios del PROYECTO, siempre ajustándose a las normas y reglamentos vigentes de aplicaci6n general en materia de seguridad ocupacional, sanidad y construcci6n. De igual forma, LA EMPRESA podrá abandonar EL PROYECTO, parcialmente o en su totalidad, cuando lo estime necesario, siempre que cumpla con todas las obligaciones estipuladas en el presente Contrato.

CLÁUSULA CUARTA
Arcas de Proyecto e Inversi6n Inicial

1.

Bajo los términos del presente Contrato, LA EMPRESA, sus Afiliadas, contratistas sub-contratistas podrán en todo momento rea' izar trabajos y estudios de evaluaci6n, factibilidad y exploraci6n minera en todo o en parte del Área de la Concesi6n, con miras a la explotaci6n comercial de EL PROYECTO o cualquier AREA DE PROYECTO.

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2.

LA EMPRESA y sus Afiliadas tendrán la opci6n de devolver al ESTADO cualquier parte, secci6n o porci6n del Área de La Concesi6n ajustándose de ser procedente, a lo estipulado en la Cláusula Séptima de este Contrato sobre la Protecci6n del Medio Ambiente. Además, LA EMPRESA podrá realizar una evaluación de mineralización del Área de la Concesión, y definir una o más 'Área(s) de Proyecto". Una vez definida un Área de Proyecto, LA EMPRESA iniciará un estudio de factibilidad ('Estudio de Factibilidad') en dicha Área de Proyecto, el cual deberá ser presentado al Ministerio de Comercio e Industrias. LA EMPRESA podrá dividir el Área de la Concesión en un número plural de zonas de desarrollo que estime conveniente y podrá designar una o más de tales zon as como Área de Proyecto, entendiéndose que las mismas podrán tener cualquier forma o configuración. De cualquier forma, LA EMPRESA deberá presentar ante el Ministerio de Comercio e Industrias un estudio de tactibilidad referente a alguna de las Áreas de la Concesión definida como Área de Proyecto, a más tardar dentro de los 18 meses siguientes a la fecha de promulgación de la Ley por medio de la cual se apruebe el presente Contrato, y dicho estudio deberá cumplir con los requisitos establecidos en el Anexo II que forma parte integral del presente Contrato.

3.

Dentro de un período de no más de sesenta (60) meses luego de la

entrada en vigencia del presente Contrato, LA EMPRESA invertirá en exploración, infraestructura, carreteras y un estudio de factibilidad no menos de DIEZ MILLONES DE DOLARES de los Estados Unidos de América (US$1 0, 000, 000. 00).

CLAUSULA QUINTA
Duración del Contrato

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Este Contrato tendrá una duración de veinte (20) años contados a partir de la entrada en vigencia de la presente ley que lo aprueba. Si LA EMPRESA ha cumplido sustancial y razonablemente con las obligaciones que contrae por virtud del presente Contrato, y si no se ha producido su terminación por mutuo acuerdo antes de que Haya transcurrido dicho lapso, LA EMPRESA solicitará y obtendrá hasta dos (2) prórrogas consecutivas del Contrato, entendiéndose que cada una de dichas prórrogas tendrá una duración de veinte (20) años. Queda entendido que en atención a solicitud presentada ante el Ministerio de Comercio e Industrias dentro de los ciento veinte (120) días anteriores a los veinte días posteriores al término de cada período de veinte (20) años, el citado Ministerio de Comercio e Industrias otorgará cada una de las respectivas prórrogas de que trata la presente Cláusula, entendiéndose otorgadas dichas prórrogas si el Ministerio de Comercio e Industrias no se pronuncia respecto a la misma dentro de un período de sesenta (60) días luego de presentada la citada solicitud ante el Ministerio de Comercio e Industrias

Al finalizar el presente Contrato, incluyendo sus prórrogas, LA EMPRESA, podrá dejar en sus propiedades o remover de ellas libremente, pero con la debida observancia de este Contrato y de las disposiciones legales y reglamentarias de la República de Panamá que le sean aplicables en materia de demolición, urbanismo y sanidad, todos los artículos de su propiedad, las instalaciones, mejoras, accesorios, anexos, equipos y toda otra propiedad de cualquier naturaleza, sea propiedad mueble o conectada total o parcialmente a la propiedad inmueble de LA EMPRESA, sin que LA EMPRESA tenga que hacer pago alguno a EL ESTADO por razón de tal retiro oo remoción. Sim embargo, de darse tal supuesto, todos los muelles, rellenos, obras e instalaciones marítimas o terrestres construidas por LA EMPRESA sobre tierras u otros bienes de propiedad de EL ESTADO, pasarán a ser propiedad de EL ESTADO. Sin cosot alguno para este.

CLÁUSULA SEXTA

Compromiso de Desarrollo e Inversión

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Para que LA EMPRESA mantenga los beneficios fiscales que ELESTADO le otorga mediante el presente Contrato, y como consideraci6n por parte de LA EMPRESA para que EL ESTADO celebre el presente Contrato, LA EMPRE SA se compromete a lo siguiente:

1.

LA EMPRESA, sus AFILIADAS, Contratistas o Subcontratistas llevaran a cabo un ESTUDIO DE FACTIBILIDAD para el desarrollo de la mina de cobre en el AREA DE LA CONCESION y para el procesamiento de la mena a concentrado. El costo de dicho ESTUDIO DE FACTIBILIDAD no será inferior a SIETE MILLONES DE DOLARES de los Estados Unidos de América (US$7,000,000.00), incluyendo as sumas que se hayan invertido en dicho estudio con anterioridad a la fecha de este Contrato. La preparaci6n de dicho ESTUDXO DE FACTIBILIDAD se ajustará a los parámetros establecidos en el Anexo II de este Contrato. LA EMPRESA se obliga a entregar una copia del ESTUDIO DE FACTIBILIDAD al Ministerio de Comercio e Industrias dentro de los 18 meses siguiente:: a la fecha de promulgaci6n de la ley por medio de la cual se apruebe el presente Contrato. LA EMPRESA igualmente entregar& #225; a dicho Ministerio una declaraci6n jurada en la que se detallen las sumas invertidas en la preparaci6n de dicho ESTUDIO DE FACTIBILIDAD.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 191

2.

Durante los tres años posteriores a la fecha de entrega del ESTUDIO DE FACTIBILIDAD de que trata el numeral anterior al Ministerio de Comercio e Industrias, LA EMPRESA deberá iniciar el desarrollo de la mina de cobre y la construcci6n de la infraestructura necesaria para la operaci6n de dicha mina de conformidad con el programa contemplado en el Anexo III del presente Contrato. No obstante lo anterior, LA EMPRESA podrá aplazar el inicio del desarrollo de la mina y de la construcci6n de la infraestructura correspondiente y por consiguiente el periodo de tiempo equivalente a los meses que transcurran desde la fecha de entrega del mencionado ESTUDIO DE FA CTIBILIDAD durante los cuales el precio promedio de la libra de cobrerefinado según las cotizaciones de la Bolsa de Metales de Londres sea inferior a la s uma que resulte de sumar (a) el precio del cobre utilizado en el citado ESTUDIO DE FACTIBILIDAD que arroja una tasa de retorno que permita conseguir el financiamiento necesario en los mercados de capitales internacionales más (b) un cinco por ciento (5%) de éste. PARÁGRAFO: El aplazamiento por razones de bajo precio del cual trata el ordinal 2 de esta Cláusula no podrá extenderse más allá de cinco (5) años contados desde el vencimiento del plazo inicial de tres (3) años de que trata dicho ordinal, sin que la Empresa le comunique a EL ESTADO su decisión de proceder a realizar la inversión correspondiente al desarrollo y construcción de la mencionada infraestructura y dé inicio a dichos trabajos. De extenderse el aplazamiento más allá de dichos cinco (5) años, quedará resuelto el presente Contrato y vencida la Concesión. Durante el período de aplazamiento, LA EMPRESA podrá formula propuestas para el desarrollo d e EL PROYECTO en términos y condiciones distintos a los pactados en el presente Contrato y EL ESTADO conviene en considerar de buena fe dichas propuestas. No obstante, por los (2) años subsiguientes al vencimiento de dicho plazo de cinco (5) años, LA EMPRESA gozará de primera opción para el desarrollo de EL PROYECTO en caso de que EL ESTADO reciba de algún tercero (el Tercero Ofebente) u na oferta (la Oferta) para ta propósito.

Si el ESTADO recibe alguna Oferta que pretenda aceptar, deberá comunicársela y dar traslado de la misma por escrito a LA EMPRESA, la cual dispondrá de noventa (90) días contados a partir de la fecha de recibo de dicha comunicación para ejercer su primera opción de llevar a cabo el desarrollo de EL PROYECTO, en términos al menos igual de ventajosos para EL ESTADO a los propuestos en dicha Oferta. Si LA EMPRESA lecomunica a EL ESTADO su decisión de no ejercer dicha primera opción o deja de ejercer la misma contados los noventa (90) días de la comunicación y traslado antes señalados, EL ESTADO podrá negociar el o los contratos de concesión con el respectivo Tercero Oferente, siempre que los mismos no reflejen un conjunto de derecho s y obligaciones más ventajosos para el Tercero Oferente que los contenidos en la respectiva Oferta. Este procedimiento de primera opción se aplicará a cualquier Oferta formulada por un Tercero Oferente durante el mencionado período de dos años respecto de la cual LA EMPRESA no haya negado o dejado de ejercer su primera opción.

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3.

Antes del inicio de la producción comercial de cobre, LA EMPRESA conjuntamente con sus Afiliadas, contratistas y subcontratistas cumplirán los siguientes compromisos:

(a)

Invertir no menos de CUATROCIENTOS MILLONES DE DOLARES de los Estados Unidos de América (US$400,000,000.00) en el desarrollo y construcción de la mina e infraestructura de modo consecuente con lo previsto en el Estudio de Factibilidad mencionado en el numeral 1 de esta Cláusula a en cualquier otro Estudio de Factibilidad que se realice con posterioridad o modificaciones a los mismos, que apruebe LA EMPRESA, siempre que se hayan entregado copias de dichos estudios o modificaciones al Ministerio de Comercio e Industrias.

(b)

Contratar no menos de 700 trabajadores panameños para el desarrollo y construcción de la mina, utilizando preferi­blemente la grano de obra proveniente del Municipio o los Municipios d o nd e se encuentre ubicada el Área de la Concesión.

4.

Una vez que se alcance la producción sostenida de concentrado de cobre en el Área de la Concesión a las tasas proyectadas en el Estudio de Factibilidad, LA EMPRESA, sus Afiliadas, contratistas y subcontratistas contratarán para la operaci6n de EL PROYECTO a no menos de 300 trabajadores panameños permanentes, quedando entendido que el número total de dichos trabajadores podrá variar como resultado de los cambios en las condiciones de mercado y la innovaciones tecnol6gicas.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 193

5.

Para efectos de 1n dispuesto en el numeral 2 de esta Cláusula, el precio promedio ajustado del cobre refinado en la Bolsa de Metales de Londres para un mes determinado será igual al promedio de los precios de cierre para una libra de cobre refinado el! cada día de dicho mes durante el cual la Bolsa esté abierta para el ejercicio de las actividades mercantiles, derivado de las cotizaciones publicadas por dicha Bolsa.

6.

En adici6n a cualesquiera demoras que ocurran en el desarrollo de la mina, permitidas por la Cláusula Vigésima del presente Contrato, LA EMPRESA, en consulta con el Ministerio de Comercio e Industrias, podrá aplazar el inicio de dicho desarrollo o la terminaci6n del mismo durante los períodos de inestabilidad econ6mica comprobada en el país o a nivel internacional que ocasionen aumentos imprevistos en los costos de los materiales, suministros o mano de obra por encima de los comtemplados en el Estudio de Factibillidad referido en el numeral primero de esta Cláusula, o cuando dichos períodos de comprobada inestabilidad impidan la obtenci6n de financiamiento para EL PROYECTO en los mercados financieros internacionales bajo términos y condiciones haBITUALES. LA EMPRESA nitificará inmediatamente al Ministerio de Comercio e Industrias en caso de que cualquiera de estos eventos ocurra y consultará con dicho Ministerio mientras dure el respectivo período de inestabilidad con el objeto de detrminar si las condiciones han cambiado o si se hace necesaria una modificaci6n al Estudio de Factibilidad a fin de poder inicial el desarrollo de la misma o la reanudaci6n de dicho desarrollo.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 194

CLAUSULA SEPTIMA
Protecci6n de.¡ Medio Ambiente

LA EMPRESA se obliga a realizar sus actividades manteniendo en todo momento una protecci6n apropiada del medio ambiente del Área de la Concesi6n, cumpliendo con las disposiciones legales y reglamentarias de aplicaci6n general que estén vigentes en la República de Panamá.

LA EMPRESA responderá por los daños que por su culpa, dolo o negligencia se ocasionen al medio ambiente por raz6n de sus operaciones, y con este fin LA EMPRESA constituirá una fianza a favor de EL ESTADO por la suma de TRES MILLONES DE DOLARES de los Estados Unidos de América (US$3,000,000.00), mediante efectivo, cheque certificado, p6liza de compañía de seguros, carta de promesa de pago de una instituci6n financiera, carta de crédito emitida por un banco local, garantías bancarias, o mediante cualquier o tro medio permitido por las leyes en vigencia. Dicha fianza se constituirá al inicio de la construcci6n de la mina, y la totalidad de la misma o la porci6n no reclamada por EL ESTADO será cancelada o devuelta a LA EMPRESA, según sea el caso, a más tardar al año luego de la term inaci6n del presente Contrato. La misma deberá emitirse a favor del Ministerio de Comercio e Industrias y de la Contraloría General de la República de Panamá. El monto de la fianza no significa límite de responsabilidad para LA EMPRESA.

En adici6n a las obligaciones de restauraci6n contempladas en el C6digo de Recursos Minerales, LA EMPRESA se compromete a financiar un Programa de Reforestaci6n para aquellas áreas de la concesi6n en las cuales LA EMPRESA haya causado algún tipo de deforestaci6n, sujeto al grado de deterioro que se haya causado a la naturaleza. El programa se llevará a cabo utilizando especies de árboles nativos en la zona cercana al Área de la Concesi6n en consulta con las autoridades respectivas, y con posibilidades de que se puedan plantar especies de mayor conveniencia para la población y el medio ambiente.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 195

CLAUSULA OCTAVA
Contratación de Experta

LA EMPRESA, sus Afiliadas, contratistas y subcontratistas darán preferencia a la contratación de mano de obra nacional. Sin embargo, podrán contratar personal extranjero siempre que el número total de extranjeros contratados no exceda el veinticinco por ciento (25%) de la totalidad de la fuerza laboral de EL PROYECTO.

No obstante lo anterior, desde la entrada en vigencia del presente Contrata y durante los prime os cinco (5) años contados a partir del de las obras de construcción a que se refiere este Contrato, se permitirá un porcentaje mayor de especialistas, técnicos o trabajadores extranjeros con experiencia en el ramo de la minería en atención a los requerimientos de LA EMPRESA, sus Afiliadas, contratistas o subcontratistas, a los que EL ESTADO otorgará los permisos de trabajo, las licencias y las visas que necesiten para tal efecto.

LA EMPRESA se compromete a cumplir con la transferencia de tecnología al personal panameño en caso de contratación de extranjeros.

Para los efectos de la aplicación de los porcentajes antedichos, se considerará la totalidad de la fuerza laboral de EL PROYECTO, que comprenderá los trabajadores contratados por LA EMPRESA, sus Afiliadas, contratistas y subcontratistas.

CLAUSULA NOVENA
Cesión de Contrato

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LA EMPRESA podrá ceder o traspasar total o parcialmente este Contrato sin alterar ninguno de sus términos ni condiciones, al igual que la totalidad o parte del Área de la Concesi6n, siempre que la cesionaria cuente con la capacidad técnica y financiera, pudiendo ser una sociedad panameña o una sociedad extranjera debidamente registrada y facultada para realizar negocios en la República de Panamá_ Dicha cesi6n concederá al cesionario todos los derechos y obligaciones que mediante el presente Contrato asume LA EMPRESA.

Cuando la cesi6n o traspaso a que hace referencia esta Cláusula sea a favor de urja Afiliada de LA EMPRESA, el único requisito con que LA EMPRESA deberá cumplir para efectuar dicha cesi6n o traspaso será el de comunicarlo por escrito al Ministerio de Comercio e Industrias con quince (15) días de anticipaci6n. Una vez realizada dicha notificaci6n, la cesi6n o traspaso será efectiva y el Ministerio de Comercio e Industrias deberá emitir una certificaci6n mediante la cual conste dicha cesi6n o traspaso dentro de los treinta (30) días siguientes.

Cuando la cesi6n o traspaso haya de hacerse a favor de terceros que no sean Afiliadas de LA EMPRESA, se requerirá la autorizaci6n previa del Ministerio de Comercio e Industrias, excepto en los anos a que se refiere el último párrafo de la presente Cláusula. En casos de cesi6n o traspaso a terceros, LA EMPRESA notificará dicho hecho al Ministerio de Comercio e Industrias el cijr1 deberá pronunciarse dentro de los treinta (30) días siguientes a la fecha de la respectiva notificaci6n. Si transcurrido dicho período de treinta (30) días, el Ministerio de Comercio e Industrias no se ha pronunciado con relaci6n a la cesi6n o traspaso respectivo, se entenderá que no existe objeci6n a dicha cesi6n o traspaso y que la misma ha sido aprobada, entendiéndose que el Ministerio de Comercio e Industrias certificará dicho traspaso o cesi6n.

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En caso de sesi6n total o parcial del presente Contrato, el cesionario asumirá todos los derechos y obligaciones que se deriven del mismo, entendiéndose que LA EMPRESA quedará libre de toda obligación dimanante de hechos o actos que se den con fecha posterior a la cesión con respecto a lo cesionado, en caso de cesión o traspaso parcial el Cesionario asumirá la proporción que corresponde de los derechos y obligaciones contrayentes en que se estipule en el respectivo acuerdo de cesión o traspaso.

La cesión o traspaso, ya sea total o parcial, no generalizar a favor de del ESTADO ningún tipo de impuesto, derecho, contribución, tasa o gravamen.

Queda entendido que las concesión mineras amparadas bajo el presente Contrato pueden ser gravadas total o parcialmente, previa notificación al Ministerio de Comercio e Industrias, siempre y cuando el acreedor sea una institución financiera de solidez reconocida y comprobada. Además, no obstante lo anterior, el acreedor hipotecario podrá asumir total o parcialmente la concesión gravada y podrá a su vez traspasarla o cederla a un tercero, siempre que dicho tercero sea una sociedad Panameña o extranjera debidamente registrada en la República de Panamá directamente o a través de una subsidiaria con reconocida capacidad técnica y financiera, con un valor patrimonial neto consolidado para sus accionistas que no será inferior a TRESCIENTOS MILLONES DE DOLARES de los Estados Unidos de A mérica (US$300, 000, 00), incluyendo sus Afiliadas. Bastará la previa notificación al Ministerio de Comercio e Industrias para que dicho traspaso o cesión sea efectiva.

CL AUSULA DÉCIMA
Energía

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LA EMPRESA, directamente o a través de terceros, podrá generar energía eléctrica rara su uso, y con este fin podrá construir y operar instalaciones hidroeléctricas y plantas térmicas, así como otros medios de generaci6n de energía tanto dentro como fuera del Área de la Concesi6n, según lo que LA EMPRESA considere necesario para el desarrollo de las actividades que el presente Contrato contempla. Queda entendido que LA EMPRESA podrá vender y comercializar cualquier excedente de energía eléctrica, siempre y cuando cumpla con las normas y disposiciones vigentes.

CLAUSULA DECIMA PRIMERA

 Obligaciones de EL ESTADO

EL ESTADO tendrá las siguientes obligaciones:

A.

Conceder y procurar a LA EMPRESA el uso pleno, ininterrumpido y pacífico del Área de la Concesi6n, la cual se define y describe en la Cláusula Segunda y el Anexo I, que forma parte integral de. presente Contrato.

B.

De ser requeridos por LA EMPRESA, suministrar dentro o fuera del Área de la Concesi6n los servicios de bomberos, policía, aduana, migraci6n, sanidad y cualquier otro servicio público que no preste EL ESTADO. Queda entendido que el costo adicional de dichos servicios así como el de la infraestructura necesaria para la prestaci6n de los mismas correrán por cuenta de LA EMPRESA. Se entiende que los bienes muebles necesarios para la prestaci6n de estos servicios, cuyo coste corra por cuenta de LA EMPRESA, serán propiedad de LA EMPRESA.

C. Otorgar a LA EMPRESA las licencias o permisos, aprobaciones y autorizaciones que requiera EL ESTADO o cualquiera de sus dependencias, instituciones aut6nomas o semiaut6nomas y subdivisiones políticas, en relaci6n con las actividades que desarrolle LA EMPRESA de conformidad con el presente Contrato, quedando entendido que tales licencias, autorizaciones y aprobaciones le serán concedidas a las tarifas vigentes de aplicación general  previo cumplimiento de los requisitos correspondientes establecidos por la ley.

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CLAUSURA DECIMA SEGUNDA

Exenciones Fiscales

EL ESTADO le otorga a LA EMPRESA, y a sus Afiliadas (y, en los casos expresamente mencionados, a sus contratistas y subcontratistas), las siguientes exenciones fiscales durante toda la vigencia del presente Contrato.

A.

Exoneración para LA EMPRESA, sus Afiliadas, contratistas y subcontratistas de todo derecho o impuesto de importación, contribución, cargo, derecho consular, gravamen, tasa u otro impuesto o contribución, o de cualquier denominación o clase que recaigan sobre la introducción e importación de equipos, maquinarias, materiales, repuestos, diesel y Bunker C y otros derivados del petróleo quedando entendido que se causará, no obstante, cuando sea aplicable, la tarifa de protección comtemplada en al Cláusula Vigésima Segunda del Contrato No. 35 del 15 de septiembre de 1992, aprobado mediante la Ley No. 31 del 31 de diciembre de 1992, la cual fue instrumentada mediante el Decreto de Gabinete No. 38 del 9 de septiembre de 1992; materias primas, lubricantes, vehículos de trabajo necesarios utilizados en el d esarrollo eficiente y económico de las operaciones amparadas en el presente contrato, naves aeronaves, artefactos, partes y accesorios exclusivamente destinados a la construcción, desarrollo, operación, mantenimiento, infraestructura y actividades de EL PROYECTO. Queda entendido por las partes que los bienes exonerados conforme a este numeral deberán ser utilizados únicamaente en el desarrollo de EL PROYECTO. Dichos bienes no podrán ser vndidos ni traspasados sin autorización previa por escrito de ELESTADO,sino cuando hayan transcurrido un mínimo de dos (2) años desde la fecha de su compra y siempre con sujeci6n al pago del impuesto respectivo, el cual será calculado en base al valor del hiera al momento de la venta o traspaso. Queda entendido, no obstante, que se podrá realizar el traspaso de estos bienes cualquier Afiliada de LA EMPRESA o a cualquier otra persona natural o jurídica (pie goce del beneficio de exenci6n del impuesto de intro ducci6n de que goza LA EMPRESA, cumpliendo con las disposiciones legales vigentes.

Para efectos de acogerse a las exoneraciones del Impuesto de Importaci6n de que trata el literal A de la presente Cláusula, LA EMPRESA, sus Afiliadas, contratistas o subcontratistas, notificarán a la Direcci6n General de Recursos Minerales del Ministerio de Comercio e industrias su intenci6n de introducir los bienes o productos exonerados, y dicha Direcci6n expedirá, dentro de un período máximo de treinta (30) días luego de recibida la notificaci6n, una certificaci6n mediante la cual conste que el solicitante está amparado por la respectiva exoneraci6n. Dicha certificaci6n será aceptada por la Direcci6n General de Aduanas del Ministerio de Hacienda y Tesoro, la cual dará trámite expedito a la introducci6n o importaci6n correspondiente debidamente exonerada.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 200

B.

Exoneraci6n total para LA EMPRESA, sus Afiliadas, contratistas y subcontratistas del impuesto de transferencia de bienes corporales muebles sobre minerales, equipos, maquinaria, materiales, partes, accesorios, materias primas, grúas, vehículos de trabajo, naves, aeronaves, artefactos, diesel y lubricantes y otros derivados del petr6leo, carga y contenedores, destinarlos parra la operaci6n, construcci6n o mantenimiento de EL PROYECTO, así como sobre aquellos que sean necesarios para el desarrollo de las actividades que lleve a cabo LA EMPRESA o que se lleven a cabo para el beneficio de ésta, en el Área de la Concesi6n de acuerdo con lo establecido en el presente Contrato.

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Los bienes exonerados deberán ser utilizados en actividades propias de EL PROYECTO, y no podrán ser vendidos o traspasados sino transcurridos dos (2) años desde la fecha de su compra, y siempre con sujeci6n al pago del impuesto respectivo que se calculará en base al valor del bien al momento de su venta o traspaso.

Queda entendido que se podrá realizar el traspaso de estos bienes a una afiliada de LA EMPRESA, según se definen en el presente Contrato, o a cualquier otra persona natural o jurídica que goce del beneficio de exenci6n del impuesto de introducci6n de que goza LA EMPRESA sin ningún tipo de restricciones liras que la notificaci6n previa de dicho traspaso a las autoridades del Ministerio de Comercio e Industrias, y que estos traspasos no estarán sujetos al pago de ningún tipo de impuestos e tasas a favor de EL ESTADO.

C.

Exoneraci6n de impuestos sobre la renta aplicable a remesas o transferencias al extranjero, que se hagan para pagar comisiones, préstamos, regalías, devoluciones, cargos por asesoramiento profesional o de administraci6n realizados fuera del territorio nacional, descuentos, pagos a que se refiere la Cláusula Décima Sexta del Contrato, o por cualquier otro concepto relacionado con las actividades objeto del presente Contrato.

D.

Exoneraci6n del pago de las tarifas de carga de productos

minerales y del muellaje de contenedores, estiba, desestiba, manejo, manipulaci6n de estadía, que puedan ser aplicables dentro de las instalaciones portuarias de LA EMPRESA.

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E.

Exoneración de todo impuesto, gravamen o contribución que recaiga sobre las utilidades no distribuidas de LA EMPRESA y sus Afiliadas en cualquier año fiscal.

F.

Exoneración de la obligación de pagar primas y ofertas por los derechos de explotación de minerales en el Área de la Concesión.

CLÁUSULA DECIMA TERCERA
Deducciones Fiscales

1. LA EMPRESA y sus Afiliadas tendrán derecha a incluir como gastos de operación aquellos que sean deducibles según las leyes del Impuesto Sobre la Renta que estén vigentes. Además de los cánones superficiales, regalías, impuestos, y el cargo por depreciación, los siguientes renglones podrán deducirse como gastos de operación.

a)

La deducción anual por concepto de agotamiento de cada uno de los yacimientos minerales conforme a lo contemplado en el literal b del numeral 6 de esta Cláusula;

b)

El costo de las excavaciones, de socavones, calicatas y galerías, excavaciones de tajo abierto, perforación de pozos y demás operaciones afines, que se hayan llevado a cabo sin encontrar minerales en cantidades que ameriten una explotación comercial; y

c) Los gastos por servicios y abastos, así como los demás gastos que se realicen en relación con las investigaciones geológicas preliminares, exploraciones mineras, operaciones preextractivas, y también los gastos que se realicen en relación con las excavaciones de socavones, calicatas y galerías, excavaciones de tajo abierto, perforación de pozos y demás operaciones afines hayan llevado a cabo con miras a las actividades de extracci6n de los minerales.

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Los gastos en artículos sobre los cuales se permitan deducciones en concepto de depreciaci6n, o en concepto de amortizaci6n de capital, no podrán ser incluidos como gastos de operaci6n.

2.

Para determinar las pérdidas de operaci6n sufridas en un período fiscal, LA EMPRESA deberá substraer del ingreso bruto atribuible a las operaciones mineras todas las deducciones autorizada_ por el C6digo de Recursos Minerales, este Contrato y otras leyes aplicables, con excepci6n de las pérdidas que se hayan diferido de un período fiscal anterior.

3.

Se considerarán como gastos generales deducibles los impuestos, derechos, tasas, cargos y demás contribuciones y las sumas pagadas a EL ESTADO, así como los gastos que sean inherentes ,, que se realicen en relaci6n con la educaci6n y adiestramiento de ciudadanos panameños de conformidad con este Contrato, De igual manera se considerarán como gastos generales deducibles los impuestos municipales pagaderos por LA EMPRESA a les municipios de EL ESTADO, en la medida que estos no hayan sido acreditados contra el impuesto sobre la renta a payar por LA EMPRESA, conforme a lo dispuesto en el literal (L) del numeral (I) de la Cláusula Décima Cuarta del presente Contrato.

4. LA EMPRESA establecerá cuentas de depreciaci6n para los bienes depreciables que adquiera durante la vigencia del presente Contrato, Lis cuales se segregarán conforme a las siguientes categorías de bienes:

CATEGORIA A: Edificios y otras mejoras permanentes edificados sobre terrenos, áreas de -estacionamiento, rieles ferroviarios, túneles, represas, puentes y carreteras, repositorios dedesechos instalaciones portuarias, instalaciones de aeropuertos y pistas de aterrizaje;

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CATEGORIA B: Otros activos fjos, incluyendo maquinaría y equipo ubicado en algún inmueble para su mejor uso y otros bienes inmuebles por destinaci6n (excluyendo equipo m6vil, naves y barcazas), elevadores, sistemas eléctricos y de plomería, estructuradas e instalaciones fjas para la generaci6n y transmisi6n de energía eléctrica.

CATEGORÍA C: Equipo m6vil, naves y barcazas, y equipo de minería de cualquier tipo o clase, incluyendo pero sin limitarse a tractores, buses, locomotoras y vagones, aeronaves, facilidades de carga y descarga, equipo para el transporte de carga, cualquier otro tipo de equipo y maquinaria m6vil no incluido dentro de la Categoría D que sigue, sistemas telef6nicos y de comunicaci6n en general;

CATECORIA D: Equipo de laboratorio, equipo de perforaci6n, bienes utilizados para el ensayo o muestreo y otras de naturaleza tecnol6gica, incluyendo equipo de computaci6n, accesorios y programas;

CATEGORIA E: Otros bienes de capital que no resulten incluidos dentro de ninguna de las categorías que anteceden.

El costo de cada activo depreciable que LA EMPRESA adquiera, respecto del cual LA EMPRESA hará uso del beneficio de la depreciaci6n, será adicionado a la cuanta correspondiente a la Categoría a la que pertenezca y, para cada año fiscal, al calcular el respectivo ingreso gravable LA EMPRESA podrá tomar la depreciaci6n por sumas iguales a los porcentajes que a continuaci6n se enumeran aplicados sobre el acumulado del (a) costo original de los activos ya incluidos en las Categorías respectivas al inicio del correspondiente año fiscal, y (b) el cincuenta por ciento (50%) del costo de los bienes añadidos a dichas Categorías durante el referido año fiscal:

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Categoría A: 7%

Categoría B: 15%

Categoría C: 25%

Categoría D: 33%

Categoría E: 20%

Sin embargo, se entiende que con relaci6n a cualesquiera de dichas Categorías, no se podrán deducir en concepto de depreciaci6n sumas mayores al excedente que resulte de restar del acumulado del costo de adquisici6n original de los activos incluidos en la respectiva Categoría, el monto total de la depreciaci6n previamente deducida sobre dicho costo de adquisici6n.

En cualquier año fiscal en que el monto máximo de deducci6n por depreciaci6n permisible en cuanto a activos de cualquier Categoría no sea utilizado para la determinaci6n de la renta neta gravable correspondiente a dicho año fiscal, el saldo no utilizado podrá ser diferido indefinidamente para su deducci6n, total o parcial, en cualquier año fiscal futuro, conjuntamente con cualquier otro monto deducible en dicho futuro año fiscal, quedando entendido, no obstante, que la deducci6n por depreciaci6n en un determinado año fiscal, en cuanto a activos de cualquier Categoría, no excederá el cincuenta por ciento (50%) del acumulado del costo de adquisici6n de los activos incluidos en la Categoría respectiva al final del respectivo año fiscal, y quedará también limitada conforme a lo p revisto en el párrafo inmediatamente anterior de este numeral 4.

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5.

Las pérdidas sufridas en las operaciones de LA EMPRESA de acuerdo con los cómputos del impuesto sobre la renta del año en curso y de años anteriores podrán diferirse a los períodos fiscales siguientes mientras no hayan sido deducidas, pero no podrán diferirse por más de cinco (5) años contados a partir del período fiscal durante el cual se originaron. Una vez transcurridos estos cinco (5) años, esas pérdidas no se podrán deducir ni Causarán devolución alguna por parte del Tesoro Nacional.

6.

Entre otras deducciones permitidas por el Código de Recursos Minerales a la fecha en que entre en vigencia el presente Contrato, LA EMPRESA podrá realizar las deducciones que a continuación se describen:

a.

Los gastos que se comprueben como debidamente incurridos durante un período fiscal en exploraciones mineras relacionadas con la concesión podrán deducirse de los cánones superficiales pagaderos a la Nación por ese período fiscal hasta un máximo del setenta y cinco por ciento (75¢) del monto total de dichos cánones superficiales. Cuando estos hayan sido pagados con anterioridad a la autorización de la deducción, LA EMPRESA podrá acreditar las sumas ya pagadas al pago de cánones superficiales pagaderos en el período fiscal siguiente. No se harán devoluciones en efectivo por dicho concepto.

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b.

En la explotación de minas, canteras y demás recursos naturales no renovables, LA EMPRESA podrá incluir como gastos de operación para efectos del cálculo de la renta neta gravable de cada año fiscal, deducciones por agotamiento en función de las unidades producidas o extraídas. A tal fin, se calculará el contenido probable de tales yacimientos al primer día del año fiscal y se sumará a las unidades producidas en dicho año. La relación de la suma anterior y las unidades producidas en el año, produce la tasa de amortización para ese año, la cual se aplicará porcentualmente sobre el valor del activo, para obtener la deducción por agotamiento. Esta misma operación se hará en los años siguientes hasta el agotamiento completo del yacimiento mineral.

Para efectos de este literal, el párrafo anterior se aplicará segiun la siguiente fórmula:

DA= Deducción de Agotamiento

TA= Porcentaje de Agotamiento

RMi= Reservas Minerales al Inicio del Período

UP= Unidades Extraídas o Producidas durante el Período RA= Reservas o Unidades Adicionales durante el Período

RMf= Reservas Minerales al Final del Año

VA= Valor del Activo

Pf= Precio Promedio de las declaraciones trimestrales de regalías PR= Porcentaje de Recuperación

TM= Toneladas Métricas

LEY- Cantidad de metal contenido en una roca o mena.

FORMULA A SEGUIR

PASO 1

TA0 RMI + UP + RA

UP

PASO 2

RMF= RMI-UP + RA

PASO 3:

VA= (RMF-UP + RA) x PR

PASO 4:

DA= TA x VA

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 208

El valor del contenido probable de los yacimientos y de las nuevas reservas probadas a que se refiere este Literal, será certificado por la Direcci6n General de Recursos Minerales del Ministerio de Comercio e Industrias.

La deducci6n por amortizaci6n minera no podrá exceder el cincuenta por ciento (50%) de los ingresos netos de LA EMPRESA, después de deducir del ingreso bruto de extracci6n todos los gastos de operaci6n, con excepci6n de la amortizaci6n minera permitida, entendiéndose que, para efectos del cálculo de los ingresos netos de que trata este párrafo, dichos gastos de operaci6n no incluyen los intereses a pagar por LA EMPRESA ni la depreciaci6n de activos correspondientes al respectivo período fiscal. Esta limitaci6n se aplicará por separado a cada lugar o dep6sito en el cual se extraiga el mineral o conjuntamente a todos los yacimientos que sean explotados por LA EMPRESA en el mismo molino o trituradora, según LA EMPRESA lo estime conveniente, y el ingreso bruto de extracci6n y los gastos de operaciones se asigna rán a cada lugar o conjuntamente, según sea el caso, de acuerdo con las normas de contabilidad financiera generalmente aceptadas.

c.

La deducci6n por amortizaci6n minera se calculará independientemente para cada uno de los lugares donde se extraiga el mineral y de aumento con la clase de mineral.

LA EMPRESA deberá preparar y presentar junto con la declaraci6n jurada de impuesto sobre la renta para cada período fiscal, un cuadro en el que se resuman los c6mputos hechos para la deducci6n de amortizaci6n minera para cada uno de los lugares mencionados.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 209

CLAUSULA DÉCIMA CUARTA
Contribuciones a favor de EL ESTADO

I.

Sin perjuicio de las exoneraciones y beneficios que EL ESTADO otorga a LA EMPRESA y sus Afiliadas conforme a lo expresado en este Contrato, LA EMPRESA y sus Afiliadas pagarán al ESTADO los siguientes impuestos, derechos, tasas o gravámenes, contribuciones, cargos o imposiciones:

A.

El impuesto sobre la Renta respecto de las utilidades que obtenga LA EMPRESA, sujeto a lo dispuesto por este Contrato;

B.

Los siguientes .impuestos, derechos y tasas de inscripci6n:

(1)

Un cincuenta por ciento (500) de los impuestos, derechos o tasas que se causen por la inscripci6n de los títulos de propiedad q u e LA EMPRESA o sus Afiliadas constituyan sobre sus bienes o derechos;

(2)

Un cincuenta por ciento (50:) de los impuestos, derechos o tasas que se causen por la Inscripci6n de los gravámenes que LA EMPRESA o sus Afiliadas constituyan sobre sus bienes o derechos;

(3)

Un cincuenta por ciento (50%) de los impuestos, d e re ch o s o tasas que se causen por la inscripci6n de los contratos de arrendamiento financiero q u e LA EMPRESA o sus Afiliadas suscriban;

(4)

Otros derechos o tasas de inscripci6n en el Registro Público que se causen.

C.

Los derechos notariales;

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 210

D.

Un cinco por ciento (54) de impuesto sobre la transferencia de bienes corporales muebles que recaiga sobre la importaci6n o transferencia de bienes corporales muebles según la legislación vigente a la fecha en que entre en vigencia el presente contrato, cuando no se trate de los señalados en los literales A y B de la Cláusula Décima Segunda, los cuales estarán en todo tiempo exentos de impuesto;

E.

Un cincuenta por ciento (50%) del impuesto de timbres que se cause según lo establecido en la legislación vigente;

F.

Los derechos y tasas por el uso de servicios públicos que El EST.2DO o cualquiera de sus subdivisiones o dependencias suministren a LA EMPRESA, y que no sean de aquellos con relación a los cuales LA EMPRESA goce de exoneración conforme a lo dispuesto en el presente Contrato. En todo caso, los derechos o tasas serán pagaderos a las tarifas corrientes de aplicación general;

G.

Las contribuciones y cuotas patronales de la Caja de Seguro Social, las primas por riesgos profesionales y demás contribuciones patronales de naturaleza social basados en la planilla de empleados de LA EMPRESA, las cuales serán pagaderas a las tasas o tarifas corrientes de aplicación general;

H.

El Impuesto de Inmuebles según la legislación y tarifas vigentes de aplicación general, No obstante lo anterior, el Impuesto de Inmueble se pagará hasta un máximo de CIEN MIL DOLARES de los Estados Unidos de América (US$100,000.09) por año, siempre que los inmuebles adquiridos o construidos por LA EMPRESA o sus Afiliadas sean utilizadas para el desarrollo de EL PROYECTO y se encuentren localizados en alguna provincia de la República en que LA EMPRESA o sus Afiliadas hubiesen invertido no menos de DIEZ MILLONES DE DOLARES de los Estados Unidos de América (US$10,000,000.00) en plantas procesadoras de minerales, puertos o instalaciones de transporte Y manejo de carga;

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 211

I.

El impuesto sobre Licencias Comerciales o Industriales hasta un máximo de VEINTE MIL DOLARES de los Estados Unidos de Am6rica (US$20, 000. 00) por año;

J.

Los cánones superficiales y las regalías, sujeto a lo dispuesto por la Cláusula Tercera, literal B, acápites 4 y 5 de este Contrato;

K.

Al o los municipios dentro de los cuales se encuentre ubicada el AREA DE LA CONCESIÓN, le(s) corresponderá el quince por ciento (151) de los beneficios que perciba EL ESTADO en concepto de cánones superficiales y regalías que le correspondan pagar a LA EMPRESA según el presente Contrato, suma 6sta cure será pagada directamente por LA EMPRESA al municipio o los municipios que les corresponda. EL ESTADO, a trav6s de sus entidades competentes, verificará el cumplimiento de dicha obligación.

L.

Impuestos Municipales. El total de los Impuestos Municipales 're se paguen a cualesquiera Municipios no excederá la suma de CIEN MIL DOLARES de los Estados Unidos de Am6rica (US$100,000.00) al año. Cualquier suma adicional que LA EMPRESA deba pagar en concepto de Impuestos Municipales, por encima de las cifras antes mencionadas, será deducible por LA EMPRESA como cr6dito fiscal contra el pago d6. su Impuesto Sobre la Renta en dicho año. El monto máximo de la suma a pagar en concepto de Impuestos Municipales será ajustado en proporción a los cambios en el índice de precios al por mayor de las manufacturas totales de la Contraloría General de la República de Panamá durante períodos de dos araos. El primer ajuste se hará a los cinc() años de vigencia del presente Contrato, tomando en cuenta los cambios ocurridos en el índice de precios mencionado durante los dos años inmediatamente anteriores. Posteriormente los ajustes sucesivos se efectuarán al ;inal de cada período de dos años. En caso de que dicho índice no estuviese disponible de manera que nc se ruedan efectuar los ajustes de que trata esta Cláusula, EL ESTADO y LA EMPRESA, de común acuerdo, aplicarán otro índice o método de ajuste;

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 212

M. Cualesquiera otros impuestos, derechos, gravámenes, tasas, contribuciones, cargos o imposiciones establecidos o que se establezcan en el futuro distintos de aquellos con relaci6n a los cuales LA EMPRESA goce de exoneraci6n en virtud del presente Contrato y siempre que los mismos sean de aplicaci6n general, y que no sean contrarios a ni excedan los establecidos en el presente Contrato y en la legislaci6n vigente a la fecha en que entre en vigor el presente Contrato. Queda entendido que no se considerarán de aplicaci6n general aquellos impuestos, derechos, gravámenes, tasas, contribuciones, cargos o imposiciones que s6lo se apliquen a una industria específica o a una determinada actividad.

II. Sin perjuicio de in dispuesto anteriormente en la presente Cláusula y en las demás disposiciones del,presente Contrato y a excepci6n únicamente de los respectivos cánones superficiales y regalías, mientras LA EMPRESA o no laya terminado de repagar la deuda que LA EMPRESA y sus Afiliadas adquieran para la construcci6n y desarrollo del proyecto, LA EMPRESA y sus Afiliadas estarán exentas totalmente del pago de todo tipo de impuesto, derecho, Casa, cargo, gravamen, contribuci6n o tributo que pudiera causarse por cualquier motivo en relaci6n con el desarrollo de EL PROYECTO, con excepci6n de los impuestos municipales.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 213

CLAUSULA DÉCIMA QUINTA
Inversión Directa y en Infraestructura

LA EMPRESA, sus Afiliadas, contratistas y subcontratistas tendrán derecho a la utilización de un crédito fiscal que podrá ser usado para pagar al ESTADO los impuestos, tasas, cargos, contribuciones y derechos establecidos por la ley vigente y este Contrato. Dicho crédito fiscal será igual a las sumas invertidas por LA EMPRESA, sus Afiliadas, contratistas y subcontratistas durante la vigencia de este Contrato en infraestructura atinente a EL PROYECTO de los siguientes tipos o categorías:

A.

Infraestructura y equipos de transporte, incluyendo pero sin limitarse a carreteras, ferrocarriles, puentes, plantas generadoras de energía, líneas de transmisión de energía eléctrica y líneas de transmisión de telecomunicaciones;

B.

Facilidades e instalaciones para el transporte, almacenaje, tratamiento y remoción de aguas, incluyendo canales, diques, acueductos, cañerías, tuberías, represas, tan ques de almacenaje J, embalses;

C.

Instalaciones marítimas, puertos, muelles, dársenas, rompeolas, instalaciones móviles y fijas para la carga y descarga de naves, facilidades para la carga botadura y carga de barcazas;

D.

Viviendas o alojamiento para trabajadores;

E.

Infraestructura de tipo social, incluyendo hospitales y estaciones de primeros auxilios, estructuras para uso social y recreacional de la comunidad, calles, aceras y ornamentación, construidos previa autorización de EL ESTADO.

Parágrafo .1 °: El crédito fiscal por inversión directa se podrá utilizar en varias ejercicios fiscales hasta cubrir el 1001 de la inversión que lo motivó. Parágrafo 2°: rara acogerse al beneficio a que se refiere estacláusula, la sociedad que haya realizado la inversión presentará una solicitud al Ministerio de Hacienda y Tesoro, a fin de qué esta certifique la inversión en el año fiscal correspondiente.  

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 214

A dicha solicitud deberán adjuntarse, entre otros, los siguientes documentos:

1. Copia de los contratos de obra, si corresponde, relativos a la inversión de cure ce trate;

2.Comprobantes de Paso de todos los costos y gastos efectuados; 3. Copia de los planos de la obra;

4.Permisos de construcción y ocupación; y

5. Certificación emitida por Contador Público Autorizado en la que se haga constar el monto de la inversión.

Parágrafo 3'. La Dirección General de Ingresos del Ministerio de Hacienda y Tesoro, previo análisis de la documentación que presente la sociedad que ejecutó la inversión e inspección de la obra construida, expedirá, a la mayor brevedad, el crédito fiscal correspondiente.

Parágrafo 4'. No habrá lugar a percibir un crédito con respecto al costo de activos depreciables, a pesar de que formen parte de la infraestructura anteriormente descrita, si LA EMPRESA, sus AFILIADAS, Contratistas o Subcontratistas según sea el caso, han optado por incluir el costo de dichos activos en las cuentas de depreciación establecidas conforme a la Cláusula Décima Tercera de este Contrato.

Parágrafo 5ª. En cualquier año fiscal LA EMPRESA, sus Afiliadas, Contratistas o Subcontratistas podrán utilizar la porción que ella determine del saldo de los créditos por inversiones en infraestructura no utilizados en años anteriores, como un crédito para el pago de aquellos impuestos ,que LA FMPRESA seleccione, quedando entendido que dicho crédito no se aplicará con el fin de reducir las sumas a pagar en concepto de impuestos o regalías en cualquier año a menos de la mitad de 1o que LA EMPRESA estaría obligada a pagar de loParágrafo 6'. La Dirección General de Ingresos mantendrá un registro del monto de los créditos fiscales otorgados en virtud de esta Cláusula, así corno de su uso, cesión y los saldos favorables de los mismos.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 215

CLAUSULA DECIMA SEXTA
Impuestos sobre Prestamistas Y Accionistas de LA EMPRESA

Las personas naturales o jurídicas y agencias internacionales, que otorguen o garanticen financiamiento en cualquier forma o modalidad reconocida a LA EMPRESA o sus Afiliadas, contratistas o subcontratistas, para la construcción, operación o desarrollo de EL PROYECTO, o de cualquier parte de este, estarán exentas de cualquier tipo de impuesto, derecho, tasa, cargo, gravamen, contribución, imposición, incluyendo el Impuestos sobre la Renta que se pueda causar por los intereses devengados por dichos préstamos, descuentos, comisiones, u otros cargos financieros pagaderos por razón de los préstamos o garantías, sea cual fuere la fuente de los fondos de dichos préstamos o garantías, sea cual fuere la fase de desarrollo de EL PROYECTO objeto del respectivo crédito o la forma como dichos tributos se carguen o cobren, entendiéndose que LA EMPRESA no estará obligada a realizar ningún tipo de retenciones con relación al citado financiamiento. Dichos créditos tampoco estarán sujeto a lo dispuesto por el Artículo 2 de la Ley 4 de 1935.

CLAUSULA DECIMA SÉPTIMA

Asuntos Monetarios

EL ESTADO le permitirá a LA EMPRESA y a sus Afiliadas mantener sumas en el extranjero en cualquier moneda y efectuar remesas de cualquier naturaleza libremente, incluyendo pero sin limitarse aremesas para repagar adelantos e inversiones, para pagar dividendos, intereses v utilidades provenientes o relacionadas de alguna u otra forma con EL PROYECTO, exentas de todo impuesto y de todo tributo y obligación de retención durante la vigencia de este Contrato. Igualmente, L . EMPRESA y sus Afiliadas podrán mantener cuentas bancarias fuera de La República de Panamá.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 216

CLÁUSULA DECIMA OCTAVA
Registrosde lasConcesiones, Derechos y Privilegios

EL ESTADO ha extendido y extenderá a favor de LA EMPRESA los documentos adecuados en que consten las concesiones, derechos y privilegios específicos que emanan de este Contrato y de las cesiones o transferencias del mismo, y en todo momento deberá cumplir con los requisitos administrativos y legales, con el fin de que LA EMPRESA pueda desarrollar sus actividades, ejercer sus derechos y gozar de sus privilegios sin que se produzcan interfere ncias ni obstáculos que impidan el pleno goce de los mismos. Únicamente para fines de publicidad, pero sin que ello se entienda como un requisito o formalidad que afecte la vigencia o efectividad de la Concesión, LA EMPRESA podrá inscribir libre de cesto la Conces ión que ampara el presente Contrato en el Registro Minero de la Dirección General de Recursos Minerales.

CLÁUSULA DECIMA NOVENA
Notificaciones

Los avisos y demás comunicaciones que las disposiciones del presente Contrato estimulan deberán hacerse por escrito y ser entregados personalmente en las direcciones que se indican a continuación, según sea el caso, o deberán ser enviados a la dirección que la parte correspondiente indique a la otra mediante aviso por escrito, con confirmación de su recibo, a menos que las partes convengan otra cosa.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 217

1)

Ministerio de Comercio e Industrias Edificio de la Lotería, Piso N°21

Calle entre Avenida Cuba y Avenida Perú Tel: 227-4177

Fax: 227-5604

2)

Minera Petaquilla, S.A. Torre Swiss Bank, Piso 13 Urbanización: Marbella Te1:223-5341 Fax:223-3032

3)

Geo-Recursos Internacional, S.A. Torre Banco General, Piso 25 Urbanización Marbella

Tel: 223-5488

Fax: 223-8425

4)

Adrian Resources, S.A.

Torre Banco General, Piso 25 Urbanización Marbella

Tel. 223-5438

Fax: 223-84.25

CLAUSULA VIGISIMA
Caso Fortuito o Fuerza Mayor

Para los fines del presente Contrato, se cons iderarán como caso fortuito, entre otros, los siguientes eventos, hechos o circunstancias: epidemias: terremotos, derrumbes, inundaciones, tormentas u otras condiciones meteorológicas adversas, explosiones, incendios, .rayos, y cualquier otra causa, sea o no de la naturaleza descrita, que sea imprevisible o que esté fuera del control de la parte afectada y en la medida que demore, restrinja o impida la acción oportuna de la parte afectada.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 218

Para los fines del presente Contrato, se entenderán como fuerza mayor, entre otros, los siguientes eventos, hechos o circunstancias nuevas, revoluciones, ins urrecciones, dis turbio s civiles, bloqueos, tumultos, embargos, huelgas y otros conflictos laborales que no sean atribuibles a culpa o negligencia del empleador o de LA EMPRESA o Afiliadas o contratistas o subcontratistas que correspondan, órdenes o instrucciones de cualquier Gobierno de jure o de facto, o entidad o sub-división del mismo, el precio de los minerales en el mercado internacional de manera que no sea económicamente rentable la explotación de EL PRO YECTO, retrasos en la entrega de maquinarias, fallas de las instalaciones o maquinarias donde quiera que ocurran no imputables a la parte afectada, que afecten adversamente el funcionamiento de EL PROYECTO y, en general, cualquier evento, suceso o circunstancia que sea imprevisible o que esté fuera del control de la parte afectada y en la medida que demore, restrinja o impida la acción oportuna de la misma y no le sea atribuible a su culpa o neglig encia.

Queda entendido que, siempre que no sean obligaciones consistentes en pago de dinero, si una de las partes deja de cumplir alguna de las obligaciones que contrae de acuerdo con este Contrato, tal incumplimiento se considerará corno violación o incumplimiento cuando el mismo sea causado por caso fortuito o por fuerza mayor. Si alguna actividad, siempre que no sea una actividad consistente en pago de dinero, es demorada, restringida o impedida por caso fortuito o por fuerza mayor, tanto el plazo consignado para real izar la actividad afectada como los plazos del presente Contrato serán prorrogados por un período igual al período de duración efectiva del caso fortuito, fuerza mayor o sus causas. Las inversiones aire LA EMPRESA se compromete a realizar en base alEstudio de Factibilidad no serán consideradas bajo ni ngún concepto como obligaciones consistentes en pago de dinero.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 219

La parte cuya capacidad para cumplir sus obligaciones se vea afectada por fuerza mayor o caso fortuito deberá notificar tan pronto como sea factible a la otra parte por escrito del suceso, señalando sus causas, y las partes harán todos los esfuerzos razonables dentro de sus posibilidades para superar las mismas. No obstante lo anterior, ninguna de las partes estará obligada a solucionar o terminar cualquier conflicto que tuviere con terceras personas o con la fuerza laboral relacionada con EL PROYECTO salvo en condiciones que sean aceptables para ella o de conformidad con laudo arbitral dictado conforme a la Cláusula Vigésima Tercera de este Contrato orden de autoridad judicial o administrativa competente que haya quedado ejecutoriado o que de otro modo tenga carácter definitivo y obligatorio.

CLAUSULA VIGESIMA PRIMERA

Ley Aplicable

El presente Contrato será la norma legal entre las partes y el mismo se regirá por las leyes actualmente en vigor y que rijan en el futuro en la República de Panamá que le sean aplicables, excepto en la medida en que tales leyes o disposiciones legales le sean contrarias o seas, inconsistentes o incompatibles con este Contrato o no sean de aplicación general, entendiéndose que aquellas leyes aplicables a una industria o a una determinada actividad no se considerarán de aplicación general. En los casos no previstos en el presente Contrato, y en cuanto no sean inconsistentes o incompatibles con sus estipulaciones, se aplicarán a este Contrato las normas del Código de Recursos Humanos Minerales en forma supletoria.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 220

LA EMPRESA, sus Afiliadas, sucesores, cesionarios y causahabientes renuncian a la reclamación diplomática en lo relativo a los deberes y derechos que emanen del presente Contrato, salvo en caso de denegación de justicia. Queda entendido que no se considerará que ha ocurrido denegación de justicia si LA EMPRESA previamente no ha intentado acer uso del derecho al arbitraje que le confiere el presente Contrato.

CLAÚSULA VIGESIMA SEGUNDA
Incumplimientos Sustanciales

Para les electos del presente Contrato, se entenderá como "Incumplimiento Sustancial", el incumplimiento o mora con respecto a alguna de las obligaciones a que se encuentran sujetas las partes de acuerdo con este Contrato cuando, si como consecuencia de ese incumplimiento e mora, se reducen sustancialmente el valor y los intereses del Contrato para la otra parte. Mientras subsista la situación de Incumplimiento Sustancial, la parte afectada por dicho incumplimiento podrá dar a la parte responsable aviso escrito de su decisión de resolver el Contrato, en cuyo caso el presente Contrato quedará resuelto ciento ochenta (180) días calendarios después de recibido dicho aviso, a no ser que el incumplimiento o la mora haya sido subsanado antes del vencimiento de dicho plazo. En el caso de que dicho Incumplimiento Sustancial fuere de tal nat uraleza que haga necesario un plazo mayor de ciento ochenta (180) días calendarios para que pueda ser subsanado, y la parte responsable se encontrare dedicada diligentemente a subsanar dicho incumplimiento o mora, no habrá lugar a la resolución del Contrato al finalizar el plazo establecido, a menos que posteriormente ocurriesen interrupciones de esos esfuerzos atribuibles a la parte responsable de subsanar el incumplimiento o mora. Las partes acuerdan que el derecho de la corte afectada .a resolver el Contrato quedará suspendido mientras las partes se encuentren en el proceso de solucionar cualquier conflicto relacionado con el supuestoIncumplimiento Sustancial según lo establece la Cláusula Vigésima Segunda o mediante cualquier otro método permitido por las leyes vigentes y el presente Contrato, y por un período de sesenta (60) días luego de la fecha en que se determine la existencia del Incumplimiento Sustancial ale gad o por la parte afectada.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 221

La resolución del Contrato de conformidad con lo dispuesto en la presente Cláusula, no afectará los siguientes derechos:

(a)

El derecho de la parte perjudicada a recibir de la otra parte una compensación monetaria por los daños y perjuicios causados por el incumplimiento o la mora; y

(b)

Los derechos de cualesquiera de las partes emanados y cumulados de conformidad con las disposiciones de este contrato hasta la fecha en que la resolución se haga efectiva.

CLAUSULA VIGESIMA TERCERA
Arbitraje

Las partes declaran su firme propósito de examinar con el ánimo más objetivo y amigable todas las divergencias que pudieran surgir entre ellas con relación al presente Contrato, con el fin de solucionar dicha.; divergencias. Todos los conflictos que surjan en relación con el presente Contrato y que no pudieran ser solucionados en la forma antes indicador, deberán ser resueltos finalmente mediante arbitraje, de conformidad con las Reglas de Procedimiento de la Comisión Interamericana de Arbitraje Comercial, vigentes a la fecha de la entrada en vigencia del presente Contrato, a no ser que al momento de someterse al arbitraje, las partes convengan expresamente regirse por las reglas que puedan estar entonces en vigencia.

Serán susceptibles de arbitraje conforme a lo dispuesto en esta Cláusula las controversias que surjan entre las partes relacionadas con el objeto, la aplicación, la ejecución o laInterpretación del presente Contrato, así como aquellas relacionadas con la validez, el cumplimiento o la terminación del mismo, salvo aquellas controversias que se refieran a la guarda de la integridad de la Constitución.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 222

El arbitraje se circunscribirá al tema objeto de la controversia y el mismo, pendiente su resolución, no tendrá el efecto de suspender o retardar el cumplimiento de las obligaciones dimanantes del presente Contrato, salvo que medien circunstancias de fuerza mayor o caso fortuito descritas en la Cláusula Vigésima del presente Contrato o que se aplique lo establecido en la Cláusula Vigésima Segunda que DA= Deducción por Agotamiento

TA antecede. Las partes acuerdan que las órdenes de ejecución de los laudos arbitrales serán dictadas por los tribunales de justicia de la República de Panamá o, en caso de que requieran de ejecución en el extranjero, por los tribunales de justicia de cualquier Estado parte de tratados internacionales de reconocimiento de laudos arbitrales de los cuales Panamá sea también parte. vara tales efectos dichos laudos arbitrales serán considerados como si hubieren sido pronunciados por tribunales arbitrales panameños, de conformidad con las disposiciones legales actualmente en vigencia.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 223

CLAUSULA VIGESIMA CUARTA
Abandono

En caso de que LA EMPRESA decida abandonar total o parcialmente EL PROYECTO, durante la vigencia del Contrato o por motivo de su terminación o vencimiento cualquiera que sea su causa, esta se obliga a notificar dicha decisión al Ministerio de Comercio e Industrias con 'dos años de ant.icipacíón. Conjuntamente con dicha notificación, de presentará ~_in Plan de Restauración del área afectada para su connsideración y aprobación por parte del Minis terio de Comercio e Industrias. Una vez aprobado dicho Plan, el mismo será de obligatorio cumplimiento para LA EMPRESA.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 224

CLAUSULA VIGÉSIMA QUINTA
Separabilidad

Si alguna de las cláusulas de este Contrato se invalidara total o parcialmente, la validez del resto del Contrato no quedará afectada.

CLÁUSULA VIGÉSIMA SEXTA
Fianza de Cumplimiento

A fin de garantizar el cumplimiento de este Contrato LA EMPRESA consignará una fianza por TRES MILLONES DE DOLARES de los Estados Unidos de América (US$3,000,000.00) a favor de EL ESTADO mediante efectivo, cheque certificado, póliza de compañía de seguros, carta de promesa de pago de una institución financiera, carta de crédito emitida por un banco local, garantías bancarias, o mediante cualquier medio permitido por las leyes en vigencia. Dicha fianza será consignada por LA EMPRESA dentro de los ciento ochenta (180) días siguientes a la fecha en que la ley por medio de la cual se aprueba el presente Contrato sea publicada en la Gaceta Oficial y por el término del Contrato. La misma deberá emitirse a favor del Ministerio de Comercio e Industrias y de la Contraloría General de la Repúbli ca de Panamá. Dicha fianza será cancelada y devuelta a LA EMPRESA a la terminación del presente Contrato.

CLAUSULA VIGÉSIMA SEPTIMA
Timbres

El presente Contrato entrará en vigor a partir de la vigencia de la ley que apruebe su celebración y el mismo causará el pago de la suma de B/.1,000.00 en concepto de impuesto de timbres.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 225

CLAUSULA VIGESIMA OCTAVA
Subrogación

El presente Contrato, incluyendo y sus Anexos I, II, II y IV, constituye el único acuerdo entre las partes en relación con la materia objeto del mismo. Efectivo a partir de la promulgación de la Ley por medio de la cual se aprueba el presente Contrato, quedará terminado, cancelado, subrogado y extinguido el Contrato No. 27- A de 7 de agosto de 1991 celebrado entre el ESTADO y GEORECURSOS y cualquier otro contrato, modificación, acuerdo o entendimiento entre el ESTADO y GEORECURSOS en relación con el AREA DE LA CONCESIÓN, así como cualquier reclamo o acción que tengan entre sí dichas partes por razón o con motivo de la celebración,cumplimiento o terminación de tales contratos o acuerdos anteriores.

Mediante la Ley que apruebe el presente Contrato y sus Anexos, se entenderá derogado en su totalidad el decreto de Gabinete número 267 de 21 de agosto de 1969.

Este Contrato, incluyendo sus Anexos, requiere la aprobación de la Asamblea Legislativa de la República de Panamá. La Ministra de Comercio e Industrias presentará a la Asamblea Legislativa de la República de Panamá el proyecto de ley por medio del cual se aprueba este Contrato y sus Anexos dentro de los quince (15) días siguientes a la celebración del mismo.

EN FE DE LO CUAL, las partes suscriben el presente Contrato, en dos (2) ejemplares originales de igual tenor y efecto, en la Ciudad de Panamá, el día 16 de febrero de mil novecientos noventa y seis (1996).

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 226

Por EL ESTADO:

Por LA EMPRESA:

(Fdo.)

(Fdo.)

(Nitzia R. de Vi llarrea1)

(Richard Fifer)

Por GEORECURSOS:

Por ADRIAN:

(Fdo.)

(Fdo.)

(Richard Fifer)

(Richard Fifer)

Refrendo:

Gustavo Pérez
Contralor General de la República, a. i.

ANEXO I
Descripción del Área de la Concesión

La Concesión, según se define en este Contrato, tiene un área total de 13,600 Has. y su descripción es la siguiente:

Zona No.1: Partiendo del Punto No.1, cuyas coordenadas geográficas son 80°41 '59.02" de longitud oeste y 8°51'25.11" de latitud norte se sigue una línea recta en dirección este por una distancia de 8,000 metros hasta encontrar el Punto No.2, cuyas coordenadas geográficas son 80°37'38. 15" de longitud oeste y 8°51 '25.11" de latitud norte, de allí se sigue una línea recta en dirección sur por una distancia de 5,000 metros hasta llegar al Punto No. 3, cuyas coordenadas geográficas son 80°37'38. 15" de longitud oeste y 8°48'42.07" de latitud norte, de allí se sigue una línea recta de dirección oeste por una distancia de 8,000 metros hasta llegar al Punto No.4, cuyas coordenadas geográficas son 60°41 '59.02" de longitud oeste y 8°48'42.07" de latitud norte, de allí se sigue una línea recta en dirección norte por una distancia de 5,000 metros hasta encontrar '1. Punto No .l de partida.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 227

Esta zona tiene una superficie total de cuatro mil (4,000) Has. Y está ubicada en los Corregimientos de Coclé del Norte y San José del General, Distrito de Donoso, Provincia de Colón.

Zona No.2: Partiendo del Punto No.1, cuyas coordenadas geográficas son 80°45'14.67° de longitud oeste y 8^ª54`40.76 de latitud norte se sigue una línea recta en dirección este por una distancia de 6,000 metros hasta encontrar el Punto No. 2, cuyas coordenadas geográficas son 80<sup>º</sup>41`59.02de longitud oeste y 8^º54`40. 76de latitud norte, de allí se sigue una línea recta en dirección sur por una distancia de 6,000 metros hasta llegar al Punto No. 4, cuyas coordenadas geográficas son 80°45'14.67" de longitud oeste y 8°48'42.07" de latitud norte, de allí se sigue una línea recta en dirección norte hasta llegar al punto 1 que es el punto de partida. Esta zona tiene un área total de 6,000 Has. Está ubicada en el Corregimiento de Coclé del Norte, Distrito de Donoso, Provincia de Colón y colinda al este con la zona No. 1.

Zona No.3: Partiendo del Punto No .l, cuyas coordenadas geográficas son 80°40'53.8" de longitud oeste y 8°48'42.07" de latitud norte se sigue una línea recta en dirección este por una distancia de 6,000 metros hasta encontrar e1 Punto No. 2, cuyas coordenadas geográficas son 80 °37'3 .1.5" de longitud oeste y 6°48'42.07" de latitud norte, de allí se sigue una línea recta en dirección sur por una distancia de 2, 000 metros hasta llegar al Punto No.3, cuyas coordenadasgeográficas son 80°37'38.15" de longitud oeste y 8°47'36.85" de latitud norte, de-^, allí se sigue una línea recta en dirección oeste por un distancia de 6,000 metro s hasta llegar al Punto No.4, cuyas coordenadas geográficas son 80°40 '53.8" de longitud oeste y 8°4 7'36. 85" de latitud norte, de allí se sigue una línea recta en dirección norte hasta llegar al punto 1, que es el punto de partida. Esta zona tiene una área total de 1,200 Has., está ubicada en el Corregimiento de San José del General, Distrito del Donoso, Provincia de Colón y colinda al norte con la zona No. l otorgada a CEO-RECURSOS INTERNACIONAL, S. A., según Contrato No. 27-A del 7 de agosto de1991.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 228

Zona No.4: Partiendo del Punto NO. 1, cuyas coordenadas geográficas son 80°37 '38.15" de longitud oeste y 8°50 '52.55" de latitud norte se sigue una línea recta en dirección este por una distancia de 3,000 metros hasta llegar al Punto No. 2, cuyas coordenadas geográficas son ,1 0°36'0.48" de longitud oeste y 8°50'52.55" de latitud norte, de allí se sigue en línea recta en dirección sur por una distancia de 6,000 metros hasta llegar al Punto No. 3, cuyas coordenadas geográficas son 80°36'0.48" de longitud oeste y 8 °47'36.85" de latitud norte, de allí se sigue una línea recta en dirección oeste por una distancia de 3,000 metros hasta llegar al Punto No.4, cuyas coordenadas geográficas son 80°37'38.. 15" de longitud oeste y 8
76;47'36.85" de latitud norte, de allí se sigue en línea recta en dirección norte por una distancia de 6,000 metros hasta llegar al punto 1, que es el punto de partida. Esta zona tiene un área total de 1,800 Has. Está ubicada en el Corregimiento de San José del General, Distrito de Donoso, Provincia de Colón, República de Panamá y colinda al oeste con la Zona No.1 otorgada a la Compañía GEO-RECURSCOS INTERNACIONAL, S. A., según Contrato No 27-A del 7 de agosto de 1991 y a la zona No.3 solicitada por la Compañía del mismo nombre.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 229

ANEXO II

Definición del Estudio de Factibilidad-Proyecto Cerro Petaquilla Base

El Estudio de Factibilidad, el cual incluirá cualquier modificación necesaria al momento en que se establezcan los aspectos económicos y el costo de financiamiento consistirá en un estudio de que- contenga la información necesaria que permita decidir si se explotará comercialmente EL PROYECTO.

En la preparación del Estudio de Factibilidad se seguirán los siguientes procedimientos:

Las pruebas en modelos a escala se habrán completado en su mayor parte y serán respaldadas por pruebas efectuadas en plantas pilotos, si este último es necesario. Las especificaciones de los productos estarán basadas en investigaciones de mercado. Varias visitas al lugar donde se instale la planta podrán ser requeridas.

Se confeccionarán listados de equipos y diseños acerca de la colocación de loar mismos, apoyados en planos de tuberías de un sólo tramo y de tendido eléctrico. No se incluirán las especificaciones de los equipos y no se solicitarán ofertas formales de suplidores, sin embargo, se deberán obtener cotizaciones por escrito de por lo menos un suplidor por cada artículo importante. Los costos de instalación de la maquinaria determinarán, basados en experiencias anteriores, con base a facto res de peso o porcentuales. Los costos de instalación de tuberías y tendido eléctrico podrán basarse en aproximaciones acerca de las extensiones del tendido eléctrico y de las tuberías. Se proveerá un estimado del costo de construccicón de la planta y del campamento y los estimados acerca de los costos de d iseño podrán ser más preciosos. Los ingresos serán calculados en base a estimaciones acerca del desempeño de la planta y a indicadores de pagos pro venientes de fundaciones u otros compradores.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 230

Información Requerida

Será necesario tener a disposición información topográfica y geotécnica apropiada. Info rmes escritos relacionados con trabajos metalúrgicos deberán estar disponibles. Se deberán determinar los costos reales asociados a la mano de obra disponible en la región y se deberán procurar cotizaciones por escrito de suplidores de mate riales básicos tales romo: combustible, explosivos, pulverizantes, reactives, et., si ello es necesario. Se deberán obtener tarifas de las compañías que provean servicios públicos, tales como, agua, luz, gas, teléfono, que atiendan la región. Si es necesario se debe: investigar la obtención de permisos y licencias de agencias gubernamentales en cuanto éstos sean requeridos. Se deberá investigar la reglamentación aplicable a la polució ;n de aguas y del aire.

Capacitación Requerida

El Estudio de Factibilidad se confeccionará bajo la supervisión de un ingeniero de proyecto con conocimientos en el sector de la industria de la minería de que trata dicho estudio. Dada la existencia de planos generales de diseño, planos de tuberías, tendido eléctrico y de colocación de instrumentos, será posible utilizar las servicios de proyectistas profesionales capacitados para hacer' pro yecciones relativas al tendido eléctrico, tuberías e instrumentación así corno pro yectistas experimentados con relación a la industria de cace trata el estudio.

Utilidad de los Estimados

El factor global de contingencia para el Estudio de Factibilidad estará entre un 103' y un !.SI. Los porcentajes que se asignen a las contingencias constituirán precios valorativos y no deberán interpretarse corno aria indicación de que los estimados son necesariamente precisos dentro de dicho margen de contingencia, ni como una referencia implica a ningún grado de precisión. El Estudio de Factibilidad será en general adecuado para determinar la factibilidad y ayudar a la administración en la confección de un presupuesto para EL PROYECTO.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 231

ANEXO III
Pro grama Preliminar de Inversión

INGENIERÍA Y ADQUISICIONES US$24,000,000.00

Solicitudes y Autorizaciones de Permisos de Construcción Ingeniería Detallada

Adquisiciones

Contratos

Estudios de Campo

CONSTRUCCIÓN/MINERÍA US$67,000,000, 00

Pre-producción (Fase I)

Depósito de Desechos (Inicial)

Ruta de Acceso (Llano Grande a Petaquilla)

INSTALACIONES DE PROCESAMIEIVTO US$102,000,000.00

Trituración

-

Excavación y Relleno/Concreto

-

Muro de Retención - Tierra Reforzada

-

Instalación de Trituradora

-

Acero para la Construcción de Edificio y Recinto

-

Maquinaria, Tuberías, Tend ido Eléctrico e Instrumentación

Transportadores

Apilamiento de Mena y Restauración

Concentrador

-

Excavación, Concreto y Losa

-

Edificio, Acero Interno y Recinto

-

Instalación de Molinos

-

Maquinaria, Tuberías, Tendido Eléctrico e Instrumentación

SITIO Y GENERAL,US$118,000,000.00

Limpieza, Corte de Maleza, Nivelación Preliminar

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 232

Caminos,

Cercado,

Caseta

de

Entrada,

Estacionamientos
Almacenamiento, Suministro y Distribución de Agua Recolección y Eliminación de Aguas Negras Estanque para el Asentamiento de Desechos de la Mina

Suministro y Transmisión de Electricidad Tendido y Adiciones de la Subestación Principal Distribución de Energía en el Proyecto Comunicaciones

Almacenamiento y Distribución de Combustible

EDIFICIOS DE SERVICIO AL PROYECTO US$9,000,000.00

Edificio de Administración e Ingeniería

Taller de Equipo Rodante/Depósito/Depósito de Explosivos Seco Laboratorio de Pruebas

SISTEMA DE DESECHOS Y RESTAURACIÓN US$28,000,000,00

INFRAESTRUCTURA E INS TALA CIONES US$13,000,000,00QQ. OQ

Campamento de Construcción

Instalaciones Aeronáuticas

Nuevo Aeródromo/Pista

PUERTO US$47,000,000,00

Acondicionamiento del Sitio y Calles

Acueductos y Cañerías

Generación de Energía Eléctrica

Instalaciones para Embarque de Concentrado y Suministros

Nota: las cifras que anteceden están sujetas a variación en base a los resultados finales del Estudio de Factibilidad.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 233

ANEXO IV

MINERA FETAQUILLA, S.A., debidamente representada por el Ing. Richard Fifer, varón, panameño, mayor de edad, ingeniero, portador de la cédula de identidad personal número 8-433-263 en adelante "MINERA", y ADRIAN RESCURCES, S.A., debidamente representada por Juan Francisco Pardini, varón, panameño, mayor de edad, portador de la cédula de identidad personal número 8-223-797, en adelante ADRIAN", declaran que convienen lo siguiente:

POR CUANTO; MINERA celebrará con EL ESTADO un Contrato de Concesión Minera ("CONTRATO") sobre el Área de la Concesión según dicho término ha sido definido en el Contrato, y recibirá determinados derechos conforme, al mismo respecto de yacimientos ubicados en el área de Cerro Petaquilla; y,

POR CUANTO; ADRIAN es titular de ciertas concesiones mineras colindantes al Área de la Concesión antedicha que se identifican como: Contrato No. 41 del 12 de julio de 1994, Contrato No. 39-A del 7 de julio d- 1994, Contrato No. 39-B de 7 de julio de 1994, Contrato No. 59 de 29 de diciembre de 1994 todos celebrados por y entre el Ministerio de Comercio e Industrias y ADRIAN; y las solicitudes de concesiones Nos. 93-92, 93-93 y 94-3 9 según los registros que reposan en la Dirección General de Recursos Minerales del Ministerio d-' Comercio e Industrias de la República de Panamá ( en adelante `(" )NCESIONES COLINDANTES"); v, POR CUANTO; MINERA y ADRIAN desean reconocerse ciertos derechos y obligaciones recíprocos respecto al uso de derechos de servidumbre de paso y de uso sobre el Área de la Concesión antedicha y sobre las áreas corres¡:endientes a las Concesiones Colindantes, así como de construcción o ubicación y uso de facilidades e instalaciones. En consideración a lo anterior, MINERA y ADRIAN declaran y convienen lo siguiente:

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 234

1.

LA EMPRESA y sus Afiliadas gozarán del derecho de servidumbre de uso sobre la superficie y subsuelo del Área identificada como Concesiones Colindantes y del derecho de acceso al área comprendida por las Concesiones Colindantes por cualquier motivo o causa que según LA EMPRESA sea conveniente para la apropiada exploración, construcción, desarrollo o explotación de EL PROYI'CTO, incluyendo el derecho a situar, construir, eregir, operar, mantener y usar en, o remover de, las Concesiones; Colindantes cualquier tipo de facilidad o instalación que LA EMPRESA estime conveniente (en adelante las "Instalaciones Colindantes "). Se entiende que los derechos de acceso y de servidumbre de uso a que se refiere este párrafo otorgados a favor de la Concesión correrán con y serán inseparables de las tierras que comprenden las Co ncesiones Colindantes y que los mismos sobrevivirán cualquier venta, transferencia, cesión u otorgamiento de cualquier tipo de derecho o interés, incluyendo derechos amparados bajo cualquier tipo de concesión minera, que exista o pueda exi stir sobre dicho predios colindantes.

2.

Sin perjuicio de lo anterior, antes de establecer o construir alguna instalación o estructura permanente e inamovible en las áreas comprendidas por las Concesiones Colindantes, LA EMPRESA o cualquier Afiliada o contratista o sub-contratista de la misma o cualquier cesionario o causahabiente de parte o de la totalidad^,¡^,-- la Concesión, según se define la misma en el Anexo I del Contrato, deberá llevar a cabo todas las investigaciones geotécnicas, incluyendo trabajos de perforación para condenación de áreas especificas, y cualesquier-1 otras que sean necesarias para determinar la viabilidad ambiental, técnica y económica del sitio en el cual se propone construir o establecer las instalaciones o estructuras permanentes, y realizará una exploración del área de la Concesión Colindante, que será cubierta por dicha instalación., o estructura, para confirmar que no existan minerales actuales o potenciales suficientemente cercanos a la superficie del sitio propuesto come para que la extracción segura y económica de los mismos se vea imposibilitada o perjudicada por la presencia de la instalación o estructura permanente que se pretende establecer, y facilitará los resultados de las citadas investigaciones y exploraciones al titular de la o las Concesión(es) Colindante (s) que se pueda ver afectada.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 235

Sin perjuicio de lo establecido en el numeral 1 de este Anexo IV, LA EMPRESA o el respectivo titular o beneficiario de la Concesión, según sea el caso, que haya situado alguna estructura o instalación mueble en el área comprendida por la Concesiones Colindantes, removerá, por su propia cuenta y costo, y tan pronto como sea procedente, dicha estructura o instalación o una porción de la misma, si según la opinión razonable del titular de la Conces ión Colindante afectada su localización es desventajosa para la explotación mineral contemplada en dicha Concesión Colindante.

Sin perjuicio de lo establecido en el numeral 1 de este Anexo IV, LA EMPRESA o el respectivo titular o el beneficiario de la Concesión, según sean el caso, llevará a cabo sus actividades relacionadas cc;- la construcción, instalación y operación de cualquier estructura o instalación situada en el área comprendida por la Concesión Sirviente en forma cuidadosa y de acuerdo a los principios de buena pr+cti.a minera y a las leyes vigentes en la República de Panamá, y deberá indemnizar al titular de la Concesión Colindante afectada por cualquier gasto, acción o demanda en su contra que resu1te de las citadas actividades realizadas por LA EMPRESA o el titular beneficiario de la Concesión.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 236

3.

En la medida en que, en cualquier momento, cualquiera de las Instalaciones Colindantes tenga capacidad en exceso que no sea necesaria para realizar las operaciones existentes o pro gramadas de LA EMPRESA y que no se hubiese previamente comprometido a terceros luego de haberse otorgado tina primera opción al titular de la Concesión Colindante respectiva, LA EMPRESA pondrá a disposición del titular de la Concesión Colindante donde se encuentre ubicada instalación respectiva dicha capacidad en exceso siempre y cuando este titular sea una Afiliada de LA EMPRESA, en el entendimiento de que se hará en términos equitativos y siempre en condiciones no más favorables para LA EMPRESA que aquellas que fuesen aplicables en caso de venta, licencia u otros derechos de uso a terceros o Afiliadas de una instalación similar a l a Instalación Colindante.

4.

Las partes declaran que cualquier conflicto o controversia que se suscite entre las mismas con motivo de la ejecución o cumplimiento de lo convenido en este acuerdo no afectará en modo alguno las respectivas obligaciones y compromisos que vinculan a LINERA conforme al Contrato y a ADRIAN respecto a las Concesiones Colindantes frente a EL ESTADO, a menos el respectivo conflicto o controversia sea motivado o causado por algún acto u omisión de EL ESTADO.

En fe de lo cual se suscribe este documento en dos ejemplares del mismo terror y efecto, en Panamá el 5 de diciembre de 1995.

por ADRIAN RESOURCES, S.A.

MINERA PETAQUILLA, S.A.

(Fdo.)

(Fdo.)

JUAN FRANCISCO PARDINI

RICHARD FIFER

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 237

Artículo 2. Esta Ley entrará en vigencia a partir de su promulgación, deroga el Decreto de Gabinete 267 de 1969 y cualquier disposición que le sea contraria.

COMUNÍQUESE Y CÚMPLACE

Aprobada en tercer debate en el Palacio Justo Arosemena, ciudad de Panamá, a los 30 días del mes de enero de mil novecientos noventa y siete.

CESAR A. PARDIC

VICTOR M. DE GRACIA M.

Presidente

Secretario General

ORGANO EJECUTIVO NACIONAL MINISTERIO DE LA PRESIDENCIA PANAMA, REPUBLICA DE PANAMÁ, 25 DE FEBRERO DE 1997

ERNESTO PEREZ BALLADARESUNES

RAUL ARANGO GASTEAZORO

Presidente de la República

Ministro de Comercio e Industrias

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 238

Exhibit 4.W

OFFICIAL GAZETTE

STATE AGENCY

YEAR XCIII     PANAMA, REPUBLIC OF PANAMA     FRIDAY, FEBRUARY 28, 1997              No. 23,235

CONTENT

LEGISLATIVE ASSEMBLY

LAW NO. 9

 (of February 26, 1997)

“                     BY WHICH THE AGREEMENT SUBSCRIBED BETWEEN THE STATE AND THE CORPORATION MINERA PETAQUILLA, S.A., IS APPROVED”....................….. Page 1

NOTICES AND EDICTS

LEGISLATIVE ASSEMBLY

LAW NO. 9

(Of February 26, 1997)

By which the Agreement subscribed between the State

and the Corporation Minera Petaquilla, S.A. is approved.

THE LEGISLATIVE ASSEMBLY

DECREES

Article 1.  The Agreement subscribed between THE STATE and the Corporation named MINERA PETAQUILLA, S.A., is approved, and reads as follows:

Between the undersigned, to wit, on the one part NITZIA RODRIGUEZ DE VILLAREAL, female Panamanian, of legal age, with personal identification card Item 8-207-2450 in her capacity as Minister of Commerce and Industries, on behalf of THE STATE, duly authorized by the Cabinet Council meeting held on February 13, 1996, by the authority conferred by Article 195, numeral three, of the Political Constitution of the Republic of Panama, hereinafter called “THE STATE”, and on the other, Richard Fifer, Engineer., male, Panamanian, of legal age, holder of personal Identification card Item 8-433-163 in his capacity as President and Legal Representative of MINERA PETAQUILLA, S.A. a corporation organized, and existing according to the laws of the Republic of Panama, and duly registered in the Microfilm Mercantile Section of the Public Registry, Microjacket 303869, Roll 46505, Frame 0096, duly authorized for this act by a Resolution of the Board of Director of said corporation, dated December 1, 1995, who hereinafter shall be called “THE COMPANY”, subscribe this mineral concession Agreement.  Also present at this act and subscribing the present Agreement were the following persons for the following purposes: (a)  GEORECURSOS INTERNACIONAL, S.A., corporation constituted and existing pursuant to the laws of the Republic of Panama, duly registered in the Microfilm Section Mercantile of the Public Registry at Microjacket 239116, Roll 30512, Frame 181, represented in this act by Engineer Richard Fifer, whose particulars have been previously presented, in his capacity as President and Legal Representative, duly authorized for this act by Resolution of the Board of Directors dated December 1, 1995, who hereinafter shall be called GEORECURSOS, with the purpose of terminating and substituting the existent concession in conformity with Agreement No. 27-A of August 7, 1991, as stipulated in Clause Twenty Eight of this Agreement and (b) ADR IAN RESOURCES, S.A., corporation constituted and existing pursuant to the laws of the Republic of Panama, duly registered in the microfilm Section Mercantile of the Public Registry at Microjacket 259118, Roll 35173, Frame 002, duly represented in this act by Engineer Richard Fifer, whose particulars have been previously presented, in his capacity as President and Legal Representative, duly authorized to enter into this act by means of a Resolution of the Board of Directors, dated December 1, 1995, who hereinafter shall be called ADRIAN with  the purpose of recognizing certain reciprocal rights and obligations jointly with THE COMPANY in relation to certain mining concessions adjacent to the CONCESSION AREAS, according to Annex IV of this Agreement.

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THEREFORE, the parties have agreed to enter into this Agreement subject to the following Clauses:

CLAUSE ONE

Purpose

The main purpose of this Agreement is to grant THE COMPANY, as in fact it is granted with the subscription and approval of this Agreement, the concession of the rights hereinafter stipulated over the gold, copper and other mining deposits, located in the area known as “Cerro Petaquilla”, described in Annex 1 of this Agreement as the “Concession Area”, with the purposes of exploring, extracting, exploiting, benefiting, processing, refining, transporting, selling and marketing all the minerals, base or precious, located in the Concession Area and, for such purposes THE COMPANY may design, construct and operate all sorts of infrastructure work, including housing units, health, education and recreation centers, all types of air and land installations, electric power generation facilities to satisfy the needs of this Concession as well as for other uses expressly allowed, by this Agreement, water treatment plants, storage an d use of natural waters, and in general design, construct and operate all those installations and provide all those other services which are necessary or pertinent for the development of this Concession, all of which hereinafter shall be called “THE PROJECT”.

THE STATE recognizes that the development of THE PROJECT protected by the present Agreement represents a great benefit to stimulate the mining industry in the Republic of Panama, and therefore, THE STATE will consider it a priority and shall provide its assistance to THE COMPANY in order to achieve compliance and fulfillment of the objects and purposes of this Agreement.

CLAUSE TWO

Definitions

For the purposes of this Agreement, the following terms shall have the meaning indicated hereinafter.

AFFILIATE

For the purposes of this Agreement, AFFILIATE shall mean in regards to any natural person or body corporate, the natural person or body corporate that directly or indirectly, controls, is controlled by or is under the common control with said other natural person or body corporate through the holding of fifty percent (50%) or more of the issued and outstanding shares with the ordinary right to vote for the election of the directors of said other natural person or body corporate, or by means of any other method or manner that represents control of said natural person or body corporate. For the purposes of this Agreement it is also understood that TECK CORPORATION, INMET MINING CORPORATION and ADRIAN RESOURCES LTD.; and their affiliates or subsidiaries, shall be considered as Affiliates of THE COMPANY while they are its shareholders.

PROJECT AREA

Is the area that THE COMPANY appoints in the Concession Area to develop the exploitation of minerals and comprises all the installations, facilities and structures that are established on said area by THE COMPANY, its Affiliates, contractors or sub-contractors.

CERRO PETAQUILLA

Is the concession protected under the Agreement subscribed by and between the Ministry of Commerce and Industries and Geo-Recursos Internacional, S.A., identified as Agreement Item 27-A, August 7, 1991, with its renewals and extensions, and described in Annex 1 of the present  Agreement.

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CONCESSION

The ensemble of rights granted by THE STATE due to this Agreement, which includes, among others, the right to explore, exploit, and usufruct the ore deposits located in the Cerro Petaquilla area described in Annex 1 of this Agreement, which is called the “Concession Area”.

ADJACENT CONCESSION

Refers to the concessions or requests for concessions, as the case may be, in favor of ADRIAN identified as:  Agreement No. 41 of July 12, 1994, Agreement NO. 39-A of July 7, 1994, Agreement No. 39-B of July 7, 1994, Agreement No. 59 of December 29, 1994, all subscribed by and between the Ministry of Commerce and Industries and ADRIAN, and the requests for concessions  Nos. 93-92, 93-93 and 94-39 according to the registries filed at the General Direction of Mineral Resources of the Ministry of Commerce and Industries of the Republic of Panama.

CONTRACTOR

Shall be those natural persons or body corporate that THE COMPANY, its Affiliates or Assignees appoint as Contractors for the effects of this Agreement, and it shall suffice that THE COMPANY notifies the Ministry of Commerce and Industries on such appointments for the same to have effect.

COMPANY

Refers to, through the contents of the present Agreement, to MINERA PETAQUILLA, S.A., as well as to its Affiliates and the cessionary entities of the Affiliates and Minera Petaquilla, S.A.

FEASIBILITY STUDY

Shall have the meaning given in Annex II of the present Agreement, which forms an integral part thereof.

FACILITY

Is any excavation, pit, hole, shaft, trench, channel, outlet, equipment, railroad, streets, highways, roads, shelters or rooms for the workers, piping, electric transmission lines, installations and equipment for the generation of any type of energy, accumulation or storage of materials and raw materials, slag heap or accumulation of waste or residues of any type, piers, docks, floaters or floating pads, waste ponds, sedimentation or settling ponds, and other improvements to the property, fixed accessories, mills, crushers, elution or floating installations, installation for the improvement or claiming of waters, trucking or transportation routes, in addition to any other improvements, accessories, installations or constructions that are, according to THE COMPANY,  necessary or advisable for the exploration, development, extraction, benefit or transportation of minerals or products related to the Concession Area, which shall be execut ed in compliance with the pertinent environmental regulations.

NEGOTIABLE GROSS PRODUCTION

For the purposes of the present Agreement:

a)

when the ore or its derived concentrate are sold as ore or as concentrate, the gross amount received from the buyer as a result of the sale after deductions, if there were any, all foundry costs, fines and other deductions, and after the deduction of all transportation costs and the insurance of the ore or the concentrate, incurred in their transfer from the mine to the smelter or factory or other place where the final delivery to the buyer is carried out, or

b)

when the ore or the concentrate are processed in a smelter, and the metals recovered in said process are sold and delivered by THE COMPANY, the gross amount received from the buyer as a result of the sale of the metals so delivered, after the deduction of all the costs of smelting, fines and other deductions and after deducting all the costs of transportation and insurance of the ore or the concentrate incurred in their transportation from the mine to the smelter, and all costs of transportation and insurance of the metals, incurred in their transportation from the smelter to the place where its definite delivery to the buyer is carried out, or

c)

when the ore or the concentrate are processed in a smelter property of THE COMPANY or under the control

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             thereof, the gross amount that is considered earned regarding the sale of the ore or the concentrate, shall not be less than the amount that may have been obtained from a smelter that was not property of, nor controlled by THE COMPANY in regards to the processing of ore or of concentrate of the same quality and amount.

COMMERCIAL PRODUCTON

Refers to the extraction and processing of the mineral with the purpose of selling a final product.  The extraction and processing of mineral to perform tests and determine the metallurgical process to be employed shall not be considered Commercial Production.  When seventy per cent (70%) of the designed production capability is achieved, as defined in the Feasibility Study, and this is maintained during ninety consecutive days, it shall be considered that Commercial Production has been attained.  

SUBCONTRACTOR

Shall be those natural persons or body corporate that THE COMPANY, its Affiliates or assignees, appoint as Subcontractors for the effects of the present Agreement and it shall suffice that THE COMPANY notifies the Ministry of Commerce and Industries on such appointment forof the same to have effect.

INITIAL TERM

Is the twenty (20) year term following the date of the enactment of the law approving the present Agreement.

CLAUSE THREE

Rights and Obligations

A. RIGHTS OF THE COMPANY

During the life of this Agreement, THE STATE grants THE COMPANY, which it extends, for the effects of the development of THE PROJECT, to its Affiliates, to the contractors and subcontractors that it appoints, the following powers and rights:

1.

In the Concession Area, as described in Annex 1, to perform geological researches related to minerals found in said Concession Area before and during their extraction.

2.

Perform all types of mineral operations, including but not limited to exploration, extraction, exploitation, processing, refining, transportation, benefits, sale and commercialization, within the Concession Area, and carry out all the other necessary and adequate operations and activities for said mining operations inside and outside the Concession Area, always in compliance with the pertinent environmental regulations.

3.

Carry out the activities necessary to benefit the minerals extracted in the Areas of the Project in compliance with the stipulations of the present Agreement.

4.

Transport the extracted ore, concentrate and minerals, as well as any item, supply, materials or goods that THE COMPANY deems convenient for its operation, using any transportation means and security method acknowledged in the mining industry.

5.

Store inside and outside the Concession Area and export and commercialize the ore, concentrate and the minerals extracted in the Concession Area, in accordance with the legal and regulatory provisions in force.

6.

The right of way, when THE COMPANY considers it necessary for the development of THE PROJECT, through the surface and subsoil of all lands and waters property of THE STATE on the date on which the Agreement comes into force, subject to the stipulations of Annex IV of this Agreement, to the point where they do not violate the rights acquired by third parties to this Agreement, and the rights to build, install, maintain and use in the surface or the subsoil of such lands and waters those facilities and installations that THE COMPANY deems convenient for the development of THE PROJECT.  In the event of using the right of way by the subsoil, THE COMPANY shall coordinate with the corresponding state entity, everything pertaining to the protection of the underground water in the fresh water reserves that might exist in the site of said right of way.  The COMPANY shall enjoy this right of way and can use it withou t being subject to payment for any concept.  When the lands property of THE STATE are transferred  to private third parties after the enforcement of this Agreement,  the rights of way of THE COMPANY shall prevail without detriment to the compensation corresponding to physical damages to crops or permanent improvements built there.

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In relation to the stipulations of Annex IV of this Agreement, THE COMPANY and ADRIAN declare that any conflict or controversy arising between them in the execution or compliance with what has been agreed in Annex IV shall not in any manner affect the respective obligations and commitments which bind THE COMPANY pursuant to this Agreement and ADRIAN with respect to the Adjacent Concessions with THE STATE, unless the respective conflict or controversy is motivated or caused by any act or omission by THE STATE.

7.

The right to make use of and deviate the waters coming form natural sources, when the activities of THE PROJECT so requires, without any charges, it being understood that if these uses damage or interfere with the rights or the properties of persons or private or state entities using such waters on the date that this Agreement comes into effect, these persons or entities shall receive from THE COMPANY fair compensation for the damaged caused pursuant to the standards in force.  Likewise, THE COMPANY shall guarantee sufficient drinking water supply for the subsistence of those natural persons lawfully occupying the affected area at the time that this Agreement comes into force.

8.

The right to design and build access bridges, pipelines, canals, railroads, and other access facilities or transportation means, and any other installations and facilities that  may be useful or necessary for the realization of THE PROJECT and use said installations or facilities without having to pay any liens, canons, royalties, taxes, nor any other type of charges to THE STATE, excepting the payment of surface canons, royalties and municipal taxes stipulated in this Agreement. It is understood that THE COMPANY is empowered to extract and use any minerals or materials needed to carry out infrastructure works, including but not limited to rock, sand and gravel, and shall have the right to exploit quarries for the same purpose subject to the stipulations of this Agreement and the legislation in force that rules or regulates the exploitation of non-metallic minerals used as construction materials.

9.

Generate electricity for the use of THE PROJECT and sell or commercialize any electricity surplus generated according to the legislation in force, as well as to establish, build and operate any communication installations that THE COMPANY deems necessary for THE PROJECT and the operations related thereto.

10.

The right to obtain without delay licenses, permits, approvals and other authorizations generally required from THE STATE or any of its departments or autonomous or semi-autonomous institutions, and that are necessary for the development of THE PROJECT.  Subject to the other provisions of this Agreement, it is understood that all these licenses, approvals or authorizations shall be granted at the usual general application rate.

11.

To process, operate and structure, exempted from the payment of any type of duty, tax or fees from THE STATE, vehicles, helicopters, airplanes, barges, heavy equipment for the use on land or water or amphibian, towboats, ships of great draft, ships for the transportation of workers, and any other machinery or equipment necessary for the effective development of THE PROJECT, and provide air, maritime and land services, on the Panamanian territory as these services are required for the development of THE PROJECT.

12.

THE COMPANY shall have the right to acquire, lease or use, those STATE lands inside or outside the Concession Area that are necessary or useful for the development of THE PROJECT.  The COMPANY may acquire these lands in property, lease or use through the Ministry of Finance and Treasury that shall give due course to such requests and will approve their direct concession, to THE COMPANY without the need of submitting such concession to the mechanisms of public biding, tendering or price requests established in the Fiscal Code, provided that said lands are available and inasmuch as the rights acquired by third parties to this Agreement are not violated due to other mining concessions, subject to the provisions of Annex IV of this Agreement.  When related to lands acquired in use or in leasing, the amounts to be paid by THE COMPANY shall not be higher than the surface canons by hectare provided for in this Cla use.  When it pertains to lands that THE COMPANY wishes to acquire in property, the price to be paid for such lands will be determined by the procedures stipulated by the legislation in force.

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In the event that THE COMPANY needs lands inside or outside the Concession Area that are private property, anything pertaining to its use, possession or acquisition, with the exception of the stipulations of Clause Seven (7) Sub-clause A herein, shall be transacted according to the provisions of the Mineral Resources Code and this Agreement

13.

The COMPANY will have the right to design, build and operate, directly or through third parties, and always under its own management, piers, docks, and other port installations and landing places that THE COMPANY requires in the Port Area as determined in the Feasibility Study, regarding activities anticipated in this Agreement, and it will be understood that such piers, docks and other port installations and landing places will be for the priority use of THE COMPANY.  Port duties or fees which may be established for the use of said installations shall not be applied to THE COMPANY and its ships, nor to the ships belonging to or under the control of third parties rendering services for the purpose of the Agreement.  As soon as this Agreement concludes its life term pursuant to Clause Five, the previously mentioned port installations shall become property of THE STATE, which is to assume the responsibility o f its operation.

Notwithstanding the provisions of the foregoing paragraph, THE STATE reserves the right to allow the use of such port installations to other ships for purposes different to those considered under this Agreement.  In this event, THE COMPANY will reserve the right to collect from such ships the dockage rights it deems convenient and it can object the use of port installations by these ships if such use damages or interferes in any manner with the activities developed by THE COMPANY, its Affiliates, contactors or subcontractors.  In any event THE COMPANY may also collect rights or reasonable rates, for the use of cranes, pipelines, storage deposits and other services, installations and facilities that THE COMPANY provides or supplies or puts at the disposition of said ships.

14.

To organize, establish and provide piloting, towing, and repair services, mobilization in boats and in general, services that assist navigation.  It is understood that this capacity does not imply the obligation to do so, and therefore, its exercises is a discretionary liberty of THE COMPANY.  These services shall be rendered by capable personnel selected by THE COMPANY, protected by the licenses that to that effect are granted by THE STATE to said personnel.  The cost of these services shall be financed by the duties and tariffs that to the effect are established by THE STATE.  No duties or tariffs in favor of THE STATE shall be applied when the ships are the property of THE COMPANY or ships rendering services to THE COMPANY, or ships providing services related to activities provided for in this Agreement.  When THE COMPANY does not wish to continue providing any of the services referred to in this clause, it shall notify THE STATE, at least six (6) months in advance.  In this event, THE STATE shall provide the service charging the general applicable rates established, and the same shall be applied to THE COMPANY as well as to those who render services to THE COMPANY in relation to the activities pertaining to this Agreement, in this Agreement always giving priority to THE COMPANY for the provision of such services and activities.  Notwithstanding the foregoing, it is understood that THE STATE shall offer THE COMPANY the most favorable tariff which at the time is offered or may be offered to other users.

15.

To design, establish, build, maintain, renew and extend works, installations, annexes, works and auxiliary services that have to do with maritime, air or land activities and also to design, build maintain, renew and expand breakwaters, ports, helicopters, landing strips, communication towers, roads, bridges, highways, boulevards, dredges, canals and docks related to the activities taken into consideration in this Agreement or with the development of said activities and make use of similar installations without any costs, provided that this use complies with the stipulations of the law and the regulations related to construction, health, security, occupational hygiene and environment protection, that are in force and are of general application.

16.

It is understood that irremovable installations and transportation equipment in the Concession Area are included and are an integral part of THE PROJECT, and that THE COMPANY uses in relation to the activities established in the present Agreement,  as well as pipelines, aqueducts, ducts, rails, terminals and other installations destined for the transportation of ore or minerals, cargo and goods in general, or activities pertaining to the operation of THE COMPANY, when they have been built or are to be built with the objective of exercising the right of way pertaining to THE COMPANY.

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17.

To manage and operate THE PROJECT and assign totally of partially the pertinent rights regarding a portion or stage or phase of the Project or its totality, according to the stipulations of Clause Nine of this Agreement.   

18.

In addition to the aforementioned rights and authorizations, THE COMPANY shall have the right and the faculty to perform those acts or activities which it considers incidental or leading to the attainment of the objectives described in Clause One of this Agreement and to exercise the rights and powers provided by this Clause.

B.  OBLIGATIONS OF THE COMPANY

1.    The Preliminary Environmental Evaluation, Environment Examination and Environment Feasibility and its annexes, jointly named Environmental Report, required by the Environment Regulations of the Mining Sector, in force on the date of the enforcement of this Agreement, shall be an integral part of this Agreement and shall be of mandatory compliance to THE COMPANY. The General Direction of Mineral Resources shall evaluate the studies that form part of the Environmental Report in consultation with INRENARE.

2.

Before beginning the extraction period, THE COMPANY shall submit an Environment Feasibility Study specific to the Project Area in which the respective extradition will take place.  Said study shall be elaborated or revised by experts on the subject, previously approved by the General Direction of Mineral Resources of the Ministry of Commerce and Industries.  Said study shall be evaluated and its approval, modification or rejection shall be defined within a term of 45 days counted as of the date of its presentation to the General Direction of Mineral Resources. After the end of this term, if there is no statement from the General Direction of Mining Resources, the Environment Feasibility Study shall be considered approved so that THE COMPANY may proceed with the development of its activities according to the contents of said Study.

3.

At the beginning of each year, THE COMPANY shall submit a Work Plan comprising the projections and approximate costs for the respective year to the General Direction of Mineral Resources of the Ministry of Commerce and Industries.

4.

The COMPANY shall pay to THE STATE in cash, subject to the deductions established by Clause Thirteen of this Agreement, the following yearly surface canons per hectare on the Concession Area not defined as Area “ï” of the Project according to Clause Four of this Agreement.

Years

US$ per Hectare

1 to 2

0.50

3 to 4

1.00

5 and thereafter

1.50

5.

The COMPANY shall pay THE STATE in cash, subject to the deductions established by Clause Thirteen of this Agreement, surface canons per each hectare covering the zones identified as Areas(s) of the Project according to Clause Four of this Agreement, and annual royalties for extracted minerals according to the following table:

Type of	First 5	From the	11th year and	Royalty
Mineral	years	6th to the	thereafter
		10th year
I	B/. 0.75	B/. 1.25	B/. 2.00	2%
II	1.00	2.00	3.00	2%
III	1.00	2.00	3.00	4%
IV	1.00	2.50	3.50	2%
V	0.50	1.00	1.00	2%
VI	1.50	3.00	4.00	2%

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It is understood that the foregoing types of minerals shall have the following meanings:

Class

I:

Non-metallic minerals, excluding construction materials.

Class

II:

Metallic minerals except precious minerals.

Class

III:

Precious alluvial minerals

Class

IV:

Precious non-alluvial minerals

Class

V:

Energetic minerals, except hydrocarbons.

Class

VI:

Reserve minerals.

Surface canon payments shall be made in advanced annual payments and royalties at outstanding quarters in a sixty (60) day period started as of the outstanding date.  Surface canons shall be estimated based on the total surface held at the beginning of each year.

In this Clause, the royalty to be paid by THE COMPANY is expressed as a percentage of the Negotiable Net Production as defined in Clause Two of this Agreement.

6.

The COMPANY undertakes to annually present to the Ministry of Commerce and Industries the following detailed reports, and said Ministry shall be in charge of informing other governmental institutions and, as deemed convenient, to provide information on the case:

a)

The Operation Report, shall be part of the annual report, unless, through a previous sixty (60) day prior notice to THE COMPANY, the Ministry of Commerce and Industries requests that it be provided otherwise.  Said report shall include information regarding minerals extracted, transported and benefit rates applicable, the number and type of mining operations conducted during the period covered by the report, and the success of these operations, the procedures that have been applied to mining operations in accordance with good standards of operation, records of surveys, sampling, and topographical, geological and mineralogical data obtained, locations of drilling and study sites, maps, plans and geological sections and all other technical information obtained in the operation process, and data that has not been previously submitted, indicating whether minerals have been obtained in commercia l quantities, and if this is the case, an estimate of the date of commencement of extraction and magnitude of planned operations.

b)

Report on employment and training, which will form part of the annual report, unless THE STATE requires it be delivered in another form.  This report shall consist of a statement covering the previous fiscal year regarding the employment of Panamanians and foreigners and the development of training programs.

Each report shall include an affidavit of THE COMPANY or of the person authorized to act on its behalf.

7.

THE COMPANY shall allow THE STATE to examine the technical reports related to THE PROJECT and to perform routine inspections of all Project Installations during working days and hours, it being understood that THE STATE assumes all expenses and risks that might be caused by the abovementioned inspections.

8.

THE COMPANY shall allow THE STATE to have access and use of port installations and the complementary installations that THE COMPANY sets up subject to the provisions of Clause Three, Point A, Items 13 and 14 of the Agreement.

9.

Before the beginning of extraction activities, THE COMPANY shall create and participate in the administration of a scholarship fund for the total amount of TWO HUNDRED AND FIFTY THOUSAND US DOLLARS (US$250,000.00) which will be used to finance studies and training courses or professional training for the inhabitants of the communities neighboring THE PROJECT, located in the Provinces of Cocle and Colon. Said inhabitants will be selected by a committee integrated by the communities and THE COMPANY.

10.

THE COMPANY undertakes to provide due maintenance to all the mining and infrastructure works and services of THE PROJECT, always complying with the standards and regulations of general application in force that pertain to occupational safety, health and construction.  Likewise, THE COMPANY may abandon THE PROJECT, partially or totally, when it deems it necessary provided that it complies with all the obligations stipulated in this Agreement.

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CLAUSE FOUR

Areas of the Project and Initial Investment

1.

Under the terms of this Agreement, THE COMPANY, its Affiliates, contractors and subcontractors may at any time perform works and evaluation studies, feasibility and mining exploration in all or in part of the Concession Area, seeking the commercial exploitation of THE PROJECT or any Area of the PROJECT.

2.

THE COMPANY and its Affiliates shall have the option to return to THE STATE any part, section or portion of the Concession Area, adjusting if necessary to the stipulations of Clause Seven of this Agreement on the protection of the environment. Furthermore THE COMPANY performs a mineralization evaluation of the Concession Area, and defines one or more “Areas of the Project”. Once the Area of the Project has been defined, THE COMPANY shall initiate a feasibility study (“Feasibility Study”) said Project Area, which shall be submitted to the Ministry of Commerce and Industries.  THE COMPANY may divide the Concession Area into a plural Item of development zones as it deems convenient and may designate one or more of these zones as Project Area, it being understood that they may have any form or configuration.  Anyhow, THE COMPANY must submit to the Ministry of Commerce and Industries a feasib ility study regarding any of the Areas of the Concession defined as Project Area, no later than 18 months following the date of enactment of the Law by which this Agreement is approved, and said study shall comply with the requirements established in Annex II which is an integral part of this Agreement.

3.

Within a period of no more than sixty (60) months after the enforcement of this Agreement, THE COMPANY shall invest in exploration, infrastructure, roads and a feasibility study no less than TEN MILLION US (US$10,000,000.00)

CLAUSE FIVE

Life of the Agreement

This Agreement shall have a twenty (20) year life term as of the date of the enforcement of the law of approval.  If THE COMPANY has substantially and reasonably complied with the obligations undertaken in this Agreement, and if its termination by mutual agreement has not occurred before such term has elapsed, THE COMPANY can request and obtain up to two (2) consecutive renewals of the Agreement, it being understood that each one of  these renewals shall have a term of twenty (20) years. Taking into consideration the request submitted to the Ministry of Commerce and Industries within one hundred and twenty (120) days prior to the subsequent twenty (20) days at the end of each twenty (20) years term, the Ministry of Commerce and Industries shall grant each one of the respective renewals related to this Clause, it being understood that these renewals are granted if the Ministry of Commerce and Industries does no t make a statement on them within a period or sixty (60) days after the mentioned request has been presented to the Ministry of Commerce and Industries.

At the end of this Agreement, including its renewals, THE COMPANY may leave at its properties or freely remove from them, but with the due adherence to this Agreement and of the legal provisions and regulations of the Republic of Panama that are enforceable on the subject of demolitions, development and sanitation, all articles of its property, installations, improvements, accessories, annexes, equipment and all other property of whichever nature, be it private property or totally or partially connected to the real estate of THE COMPANY, without THE COMPANY having  to make any payment whatsoever to THE STATE due to such withdrawal or removal. Nevertheless, in the event of such occurrence, all docks, landfills, maritime and land works and installations built by THE COMPANY on lands or other assets property of THE STATE, shall become property of THE STATE at no cost.

CLAUSE SIX

Development and Investment Commitment

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In order for THE COMPANY to maintain the fiscal benefits that THE STATE grants through this Agreement and as a consideration of THE COMPANY towards THE STATE so that the latter will subscribe this Agreement, THE COMPANY undertakes the following:

1.

THE COMPANY, its AFFILIATES, Contractors or Subcontractors shall carry out a FEASIBILITY STUDY for the development of the copper mine in the CONCESSION AREA and for the processing of ore into concentrate. The cost of said FEASIBILITY STUDY shall not be less than SEVEN MILLION US DOLLARS (US$7,000,000.00), including the amounts that have been invested in said study before the date of this Agreement.  The preparation of said FEASIBILITY STUDY must adjust to the guidelines provided in Annex II of this Agreement. THE COMPANY undertakes to deliver a copy of the FEASIBILITY STUDY to the Ministry of Commerce and Industries in 18 months following the date of enactment of the law approving the present Agreement.   Likewise, THE COMPANY shall provide said Ministry with an Affidavit detailing the amounts invested in the preparation of said FEASIBILITY STUDY.

2.

In the three years following the date of delivery of the FEASIBILITY STUDY related to the foregoing numeral, to the Ministry of Commerce and Industries, THE COMPANY shall start the development of the copper mine and the construction of the necessary infrastructure for the operation of said mine pursuant to the program provided in Annex II of this Agreement. Notwithstanding the foregoing, THE COMPANY may delay the beginning of the development of the mine and of the construction of the corresponding infrastructure and, therefore, the period of time equivalent to the months elapsed since the delivery date of the aforementioned FEASIBILITY STUDY during which the average price of the pound of refined copper, according to quotes from London Metal Exchange is less than the amount resulting from the addition of (a) the price of copper used in the cited Feasibility Study showing a rate of return  that will permit obtaining t he necessary financing in the international capital markets plus (b) five (5%) percent of this.

PARAGRAPH:

   The delay due to the low prices mentioned in numeral 2 of this Clause may not be extended for more than five (5) years as of the date of the expiration of the original three (3) year term stipulated in this clause, without THE COMPANY notifying THE STATE of its decision to proceed with the corresponding investment for the development and construction of the aforementioned infrastructure and the initiation of said works.  If the delay was to take more than five (5) years, this Agreement shall be annulled and the Concession expired.  During the delay period, THE COMPANY can formulate proposals for the development of THE PROJECT in terms and conditions others than those agreed upon under this Agreement, and THE STATE agrees to consider in good faith said proposals.  Nevertheless, for the two (2) years following the expiration of the abovementioned five (5) year term, THE COMPANY shall enjoy the first option for the development of THE PROJECT in the event  that THE STATE receives from any third party (the “Third Bidder”) an offer (the “Offer”) for that purpose. If THE STATE receives an Offer that it considers accepting, it must inform and notify THE COMPANY in written, and the later will have ninety (90) days as of the date of the delivery of said communication to make us of its first option to perform the development of THE PROJET, in terms at least as advantageous for THE STATE as those proposed in said Offer.  If THE COMPANY communicates to THE STATE its decision not to exercise said first option or ceases to exercise the same after the ninety (90) days of the aforementioned communication and notification in writing, THE STATE may negotiate the agreement or agreements of the concession with the respective Third Bidder, provided that it (they) do not reflect a set of rights and obligations that are more  advantageous for the Third Bidder t han those contained in the respective offer.  This first option procedure shall apply to any Offer presented by a Third Bidder during the aforementioned two year period, in which THE COMPANY has not waived or ceased to exercise its first option.

3.

Before the beginning of the commercial production of copper, THE COMPANY jointly with its Affiliates, contractors and sub-contractors shall comply with the following commitments:

(a)

Invest no less than FOUR HUNDRED MILLION US DOLLARS (USS$400,000,000.00) in the development and construction of the mine and infrastructure in agreement with the provisions of the Feasibility Study mentioned above in Item 1 of this Clause on in any other Feasibility Study which is prepared later on or its modifications, approved by THE COMPANY, provided that copies of said study or modifications have been delivered to the Ministry of Commerce and Industries.

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(b)

Hire no less than 700 Panamanian workers for the development and the construction of the mine, preferably using labor from the Municipality or Municipalities where the Concession Area is located.

4.

Once a sustained production of copper concentrate in the Concession Area at the rates forecasted in the Feasibility Study is obtained, THE COMPANY, its Affiliates, contractors and subcontractors shall hire for the operation of THE PROJECT no less than 300 permanent Panamanian workers, it being understood that the total Item of said workers may fluctuate as a result ofthe changes in the market conditions and technological innovations.

5.

For the effects of what is provided in Item 2 of this Clause, the average adjusted price of refined copper in the London Metal Exchange for a determined month shall be equal to the average of the closing prices for one pound of refined copper on each day of said month during which the Exchange is open for the performance of mercantile activities, derived from the quotes published by said Exchange.

6.

In addition to any delays occurring in the development of the mine, permitted by Clause Twenty of this Agreement, THE COMPANY, in consultation with the Ministry of Commerce and Industries, may delay the beginning of said development or the termination thereof during proven economic instability periods in the country or at the international level causing unforeseen increase in the cost of materials, supplies or labor greater than those foreseen in the Feasibility Study referred to  in numeral one of this Clause, or when said proven instability periods does not permit obtainingof financing for THE PROJECT in the international financial markets under normal terms and conditions.  THE COMPANY shall immediately notify the Ministry of Commerce and Industries in the event that any of these events occurs and shall consult with said Ministry while the respective instability period lasts, with the p urpose of determining if conditions have changed or if a modification to the Feasibility Study is necessary with the purpose of being able to start the development or the continuation of said development.

CLAUSE SEVEN

Environment Protection

The COMPANY undertakes to carry out its activities maintaining at all times an adequate protection of the environment in the Concession Area, complying with the legal dispositions and regulations of general application in force in the Republic of Panama.  

The COMPANY shall be accountable for the damages caused to the environment due to its fault, fraud or negligence in the performance of its operations, and to that end THE COMPANY shall constitute a bond in favor of THE STATE in the amount of THREE MILLION US DOLLARS (US$3,000,000.00), in cash, cashiers check, insurance company policy, promissory note issued by a financial institution, letter of credit issued by a local bank, bank guaranties, or by any other means permitted by the laws in force.  Said bond shall be constituted at the beginning of the construction of the mine, and its totality or the portion not claimed by THE STATE shall be canceled or returned to THE COMPANY, as the case may be, no later than one year after the end of this Agreement.  The bond shall be issued to the order of the Ministry of Commerce and Industries and the Office of the General Comptroller of the Republic of Panama.  The a mount of this bond does not purport to establish a limit to the liability of THE COMPANY.  

In addition to the restoration obligations provided for in the Mineral Resources Code, THE COMPANY undertakes to finance a Reforestation Program for those areas of the concession in which THE COMPANY has caused any kind of deforestation, subject to the degree of deterioration caused to nature.  The program shall be carried out using species of trees native to the zone neighboring the Concession Area in consultation with the respective authorities, and with the possibility

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of planting species of a greater advantage for the population and the environment.

CLAUSE EIGHT

Hiring of Experts

THE COMPANY, its Affiliates, contractors and sub-contractors shall give preference to hiring national labor.  However, foreign personnel may be hired provided that the total Item of hired foreigners does not surpass twenty-five per cent (25%) of the total labor force of THE PROJECT.

Notwithstanding the foregoing, as from the enforcement of this Agreement and during the first five (5) years as ofthe beginning of the construction works referred to in this Agreement, a higher percentage of foreign specialists or technicians or workers with experience in the mining sector shall be allowed taking into consideration the requirements of THE COMPANY, its Affiliates, contractors and subcontractors, to whom THE STATE shall issue the working permits, licenses and visas required to that effect.

The COMPANY undertakes to comply with the transference of technology to Panamanian personnel in the event of hiring foreigners.  

For the effects of the application of the aforementioned percentages, the totality of the labor force of THE PROJECT shall be taken into account, which will consist of the workers hired by THE COMPANY, its Affiliates, contractors and sub-contractors.

CLAUSE NINE

Contract Assignment

THE COMPANY can totally or partially assign or transfer this Agreement without any alteration of its terms or conditions, as well as the totality or part of its Concession Area, provided that the assignee counts with the technical and financial capability, which could be a Panamanian corporation or a foreign corporation duly registered and empowered to perform business in the Republic of Panama.  Such assignment shall grant the assignee all the rights and obligations that THE COMPANY undertakes with this Agreement.

When the assignment or transfer mentioned in this Clause is on behalf of an Affiliate of THE COMPANY, the only requirement which THE COMPANY shall have to comply with to effect such assignment or transfer shall be to communicate it in written to the Ministry of Commerce and industries fifteen (15) days in advance. Once said notice has been provided the assignment or transfer shall be effective and the Ministry of Commerce and Industries shall issue an official recognition certifying such assignment or transfer within the next thirty (30) days.

When the assignment or transfer is to be made on behalf of third parties that are not Affiliates of THE COMPANY, prior authorization from the Ministry of Commerce and Industries is required, except in the cases referred to in the last paragraph of this Clause.  In the event of assignments or transfers to third parties, THE COMPANY must notify the the Ministry of Commerce and Industries which should make a statement within the thirty (30) days following the date of the respective notice.  If after the above mentioned thirty (30) days the Ministry of Commerce and Industries has not made a statement in relation to said assignment or transfer, it shall be considered that there is no objection to such assignment or transfer and that it has been approved, it being understood that the Ministry of Commerce and Industries shall certify said transfer or assignment.

In the event of total or partial assignment of the present Agreement, the assignee shall assume all the rights and obligations arising thereof, it being understood that THE COMPANY shall be free from any obligation resulting from facts or acts that take place after the date of the assignment with regards to the assigned, and in the case of partial assignment or transfer, the Assignee shall assume the corresponding proportion deriving from the contracting rights and obligations as stipulated in the respective assignment or transfer agreement.

The assignment or transfer, that it beit total or partial, shall not generate taxes, contributions, fees,nor liens of any nature, in favor of THE STATE.

It is understood that the mining concessions subject to this Contract may be totally or partially encumbered, with prior notification to the Ministry of Commerce and Industries, provided that the creditor is a financial institution of known and proved stability.  Additionally, notwithstanding the foregoing, the mortgagee may totally or partially assume the encumbered concession, and may in turn transfer or assign it to a third party, as long as any such third party is a Panamanian corporation or a foreign corporation duly registered in the Republic of Panama directly or through a subsidiary, witha renown technical and financial capability with a net consolidated shareholder’s equity which shall not be lower than at least THREE HUNDRED MILLION US DOLLARS (US$300,000,000.00), including its Affiliates.  Prior notification to the Ministry of Commerce and Industries will be satisfactory for t he said transfer or assignment to become effective.

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CLAUSE TEN

Energy

The COMPANY, directly or through third parties, may generate electric power for its own use and for that purposeit may build and operate hydroelectric installations and thermal plants, as well as other means of generating power both inside or outside the Concession Area, as THE COMPANY deems necessary, to develop the activities provided in this Agreement.  It is understood that THE COMPANY may sell and commercialize any surplus electric energy, as long as it complies with the rules and provisions in force.

CLAUSE ELEVEN

Obligations of the State

The STATE shall have the following obligations:

A.

To grant and procure THE COMPANY with the full, uninterrupted and pacific use of the Concession Area which is defined and described in Clause Two and in Annex 1 which are an integral part of the present Agreement.

B.

If THE COMPANY so requires, to have inside or outside the Concession Area, the services of firemen, police, customs, migration, health and any other public service that are not provided by THE STATE.  It is understood that the additional costs of these services as well as the necessary infrastructure to provide them shall be to the account of the THE COMPANY.  It is also understood that the necessary private property necessary to provide these services for which costs are on the account of THE COMPANY shall be the property of THE COMPANY.

C.

To provide THE COMPANY the licenses or permits, approvals and authorizations required by THE STATE or any of its departments, autonomous or semi-autonomous institutions and political subdivisions, in relation to the activities developed by THE COMPANY in compliance with this Agreement, it being understood that such licenses, authorization and approvals shall be granted at the general application tariffs in force prior compliance with the corresponding requirements as established by law.

CLAUSE TWELVE

Fiscal Exemptions

The STATE confers THE COMPANY and its Affiliates (and in the cases expressly mentioned, to its contractors and subcontractors), the following fiscal exemptions during the life of this Agreement:

A.

Exemption for THE COMPANY, its Affiliates, contractors and subcontractors, of any rights, or import tax, contribution, charges, consular rights, lien, duties or any other tax or contribution, or any denomination or class that are imposed on the introduction and import of equipment, machinery, materials, parts, diesel and Bunker C and other petroleum by-products, it is understood that they shall cause, nevertheless, when applicable, the protection tariff stipulated in Clause Twenty-two of Agreement No. 35f of September 15, 1992, approved through Law No. 31 of December 31, 1992, and regulated by Cabinet Decree No. 38 of September 9, 1992; raw material, lubricants, necessary work vehicles used for the efficient and economic development of the operations covered by this Agreement, ships, airships, appliances, spare parts and accessories exclusively destined  for the construction, development, operat ion, maintenance, infrastructure and activities of THE PROJECT.  It is understood by the parties that the exempted goods pursuant to this numeral shall only be used for the development of THE PROJECT.  Said goods shall not be sold or transferred to anybody without previous written authorization from THE STATE, but having elapsed at least two (2) years from the purchase date and always subject to the payment of the respective tax which shall be estimated based on their value at the time of the sale or transfer.  It is understood, however, that the goods may be transferred to any Affiliate of THE COMPANY, or any other natural person or body corporate benefiting from the introduction tax exemption that THE COMPANY has, complying with the legal provisions in force.

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In order to be covered by the exemptions of the Import Tax mentioned in Point  A of this Clause, THE COMPANY, it Affiliates, contractors and subcontractors shall notify the General Directorate of Mineral Resources of The Ministry of Commerce and Industries its intention of introducing the exonerated assets or product, and said Direction shall deliver, in a maximum period of thirty (30) days after receiving the notice, a document certifying the applicant is has the right to the respective exemption.  Said certification shall be accepted by the General Customs Direction of the Ministry of Finance and Treasury which shall give speed to the proceedings of the corresponding introductionof or duly exempted import

B.

Total transfer tax exemption for THE COMPANY, its affiliates, contractors and sub-contractors of movable goods on minerals, equipment, machinery, material, parts, accessories, raw material, cranes, work vehicle, ships, airships, appliances, diesel and lubricants and other petroleum derivatives, cargo and containers, destined for the operation, construction or maintenance of THE PROJECT, as well as those that are necessary for the development of the activities performed by THE COMPANY, or carried out for its benefit, in the Concession Area pursuant to what is established in this Agreement.

The exempted goods shall be used in activities related to THE PROJECT, and cannot  be soldnor transferred, until after two (2) years have elapsed as from the purchase date and always subject to the payment of the respective tax, which shall be estimated based at the value of the good at the moment of the sale or transfer.

It is understood that the goods may be transferred to an Affiliate of THE COMPANY, according to what is defined in this Agreement, or to any other natural person or body corporate that benefits from the introduction tax exemption that THE COMPANY has without any type of restrictions other than the previous notification of the transfer to the authorities of the Ministry of Commerce and Industries, and that these transfers shall not be subject to the payment of any type of tax or duties in favor of THE STATE.

C.

Tax exemption on income tax, applicable to remittances or transferences abroad, made to pay commissions, loans, royalties, returns, professional or administrative advice performed outside the national territory, discounts, payments referred to in Clause Sixteen of the Agreement, or for any other concept related to the activities of this Agreement.

D.

Exemption from the payment of duties pertaining to the cargo of mineral products and dockage of containers, stowage, break bulk, handling, sojourn operations, which may be applicable inside the port installations of THE COMPANY.

E.

Exemption from any tax, lien or contribution related to non-distributed profits of THE COMPANY and its Affiliates in any fiscal year.

F.

Exemption from the obligation to pay premiums and offers for exploitation rights of minerals in the Concession Area.

CLAUSE THIRTEEN

Fiscal Deductions 

1.

The COMPANY and its Affiliates shall have the right to include as operation expenses those that are deductibles, pursuant to the Income Tax laws in force.  Besides surface canons, royalties, taxes and depreciation charges, the following items may be deducted as operation expenses:

a)

Annual deduction in concept of exhaustion for each one of the mineral deposits pursuant to the stipulations of Point b, numeral 6 of this Clause.

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b)

The cost of excavations of subsidence, prospecting and galleries, open-cut excavations, perforation of wells and other similar operations,  that have been performed without finding minerals in amounts that would merit a commercial exploitation.

c)

Expenses for services and supplies, as well as other expenses made in relation to preliminary geological investigations, mining explorations, pre-extraction operations,  as well as expenses made for subsidence, prospecting and gallery excavations, open-cut excavations, perforation of wells and other similar operations performed with the purpose of extracting minerals.

Expenses for items for which deductions are allowed because of depreciation or for capital amortization cannot be included as operation costs.

2.

To determine operation deficits during a fiscal term, THE COMPANY shall deduct from the gross income attributable to mining operations all deductible amounts authorized by the Mineral Resources Code, this Agreement and other applicable laws, with the exception of deficits that have been differed from a previous fiscal year.

3.

Taxes, rights, duties, charges and other contributions and amounts paid to THE STATE, shall be considered as general deductible expenses, as well as inherent expenses, incurred in relation with the education or training of Panamanian citizens according to this Agreement. Likewise, municipal taxes payable by THE COMPANY to the municipalities of THE STATE shall be considered as deductible general expenses, to the point in which they have not been credited against the income tax payable by THE COMPANY, as stipulated in Point  (L), numeral (I) of Clause Fourteen of this Agreement.

4.

THE COMPANY shall establish depreciation accounts for depreciated assets that it acquires during the life of this Agreement, which shall be segregated according to the following categories of assets:

CATEGORY A:  Building and other permanent improvements built on lands, parking areas, railroads, tunnels, dams, bridges and roads, waste deposits, port installations, airport installations and landing strips.

CATEGORY B:  Other fixed assets, including machinery and equipment located on any real estate for its better use and other real estate by destination (excluding mobile equipment, ships and barges), elevators, electrical and plumbing systems, fixed structures and installations for the generation and transmission of electric power.

CATEGORY C:  Mobile equipment, ships and barges and mining equipment of any type or nature, including, but without limitation, tractors, buses, railroad engines and wagons, airplanes, loading and unloading facilities, cargo transportation equipment, any other type of equipment and mobile machinery not included in Category D below, telephone and general communication systems.

CATEGORY D:  Laboratory equipment, drilling equipment, assets used for the test or sampling and other of technological nature, including computer equipment, accessories and programs.

CATEGORY E:  Other capital assets that are not included in any other previously mentioned category.

The cost of each depreciated asset that the Company acquires, for which the Company will use the benefit of the depreciation, shall be included in the account corresponding to the Categorytowhere it belongs and, for each fiscal year, when calculating the respective taxable income,to THE COMPANY may use the depreciation for amounts equal to the percentages Itemed hereinafter, applied to the accumulated of (a) the original cost of the assets already included in the respective Categories at the beginning of the corresponding fiscal year and (b) fifty per cent (50%) of the cost of the assets added to said Categories during the referred fiscal year.

Category A:

7%

Category B:

15%

Category C:

25%

Category D:

33%

Category E:

20%

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However, it is understood that in regards to any of said Categories, amounts greater than the surplus resulting from subtracting the accumulated from the original acquisition cost of the assets included in the respective Category, the total amount of the depreciation previously deducted on said acquisition cost may not be deducted in concept of depreciation.

In any fiscal year in which the maximum deduction amount for permissible deduction in relation to assets under any Category is not used for determining the net accruable income corresponding to said fiscal year, the unused balance may be indefinitely deferred for its total or partial deduction in any future fiscal year, jointly with any other amount deductible in said future fiscal year, it being understood however that deductions for depreciation in a given fiscal year, in relation to assets under any Category, shall not exceed fifty per cent (50%) of the accumulated of the acquisition cost of the assets included in the respective Category at the end of the respective fiscal year, and it shall also be limited as stipulated in the paragraph immediately preceding this Item 4.

5.

Losses suffered by THE COMPANY in operations according to income tax estimates of the year in course and of previous years may be differed to the following terms, as long as they have not been deducted, but they shall not be deferred for more than five (5) years, counted as of the fiscal year during which they were originated. Once these five (5) years have elapsed, those losses cannot be deductible nor shall they cause any refund from the National Treasury.

6.

Among other deductions allowed the Mineral Resources Code at the date of the enforcement of this Agreement, THE COMPANY may make following deductions:  

a)

Expenses proved as duly incurred during a fiscal year in mining explorations related to the concession may be deducted from the surface canons payable to the Nation for that fiscal term to a maximum of seventy-five percent (75%)  of the total amount of said surface canons.  When these have been paid before the deduction authorization, THE COMPANY shall be allowed to credit the amounts already paid to the payment of surface canons payable in the following fiscal term.  There shall not be cash reimbursements for this concept.

b)

In the exploitation of mines, quarries and other non-renewable natural resource, THE COMPANY may include as operation expenses for calculation of taxable net income purposes of each fiscal year, deductions for depletion in function of the produced or extracted units. To that end, the probable content of such deposits as of the first day of the fiscal year              shall be calculated and added to units produced in the said year.  The relation of the previous amount and the units produced during the year, produce the rate of amortization for that year, and this rate shall be percentually applied to the value of the asset to obtain the deduction for depletion.  This same operation shall bemade in the following years until the mineral deposit is totally depleted.

For the purpose of this point b), the preceding paragraph will  be applied according to the following formula (as per their initials in Spanish):

DA

= Deduction due to Depletion

TA

= Depletion Percentage

RMI

= Mineral Reserves at Beginning of the Period

UP

= Units Extracted or Produced during the Period

RA

= Additional Units or Reserves during the Period

RMf

= Mineral Reserves at the End of Year

VA

= Asset Value

Pf

= Mean Value of the quarterly royalty statements

PR

= Recovery Percentage

TM

= Metric Tons

LEY (GRADE) = Metal contents of a rock or ore.

FORMULA TO BE APPLIED

Step 1:

TA = RMI + UP + RA

UP

Step 2:

RMf = RMI – UP + RA

Step 3:

VA = (RMf x UPf x RA) X PR

Step 4:

DA = TA x VA

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The value of the probable content of the deposit and the new confirmed referred to in this Point shall be certified by the General Direction of Mineral Resources of The Ministry of Commerce and Industries.

The deduction for mining amortization may not exceed fifty percent (50%) of the net income of THE COMPANY, after deducting all operation expenses from the gross income for the extraction, with the exception of the permitted mining amortization, it being understood that, for the calculation of net income to which this paragraph bears relation to, such operation expenses do not include the interests payable by THE COMPANY, nor the asset depreciation corresponding to the respective fiscal period.  This limitation shall be applied separately to each place or deposit where minerals are extracted or jointly to all deposits which are exploited by THE COMPANY in the same mill or grinder, as THE COMPANY deems convenient, and the gross extraction income and operation expenses shall be assigned to each place or jointly, as the case may be, according to the accepted accounting standards.

c)

Deductions for mining amortization shall be estimated independently for each one of the places where the mineral is extracted and according to the type of mineral.

Together with the sworn income tax statement for each fiscal term THE COMPANY shall prepare and present a chart summarizing the calculations made for mining amortization for each one of the mentioned sites.

CLAUSE FOURTEEN

Contributions in favor of THE STATE

1.

Without detriment to the exemptions or privileges that THE STATE grantsto THE COMPANY and its Affiliates pursuant to the stipulations of this Agreement, THE COMPANY and its Affiliates shall payto THE STATE the following taxes, rights, duties, contributions, charges or impositions mentioned as follows:

A.

Income Tax derived from the profits obtained by THE COMPANY, subject to the provisions of this Agreement.

B.

The following taxes, rights and registration fees:

(1) fifty percent (50%) of taxes, rights or duties caused by the registration of property titles that THE COMPANY or its Affiliates may constitute on their assets or rights;

(2) fifty percent (50%) of taxes, rights or duties caused by the registration of encumbrances that THE COMPANY of its Affiliates may constitute on their assets or rights;

(3) fifty percent (50%) of taxes, rights or dutiescaused by the registration of financial leasing contracts that THE COMPANY or its Affiliates may subscribe;

(4) Other rights or registration fees caused at the Public Registry.

C.

Notary fees

D.

A five percent (5%) tax on the transference of movable goods applied to the import or transference of movable goods, according to the legislation in force at the date of the enforcement of this Agreement, when it does not pertain to those mentioned in in which this Contract become in force, when the same are not mentioned in (A) and (B) of Clause Twelve, which will always be  exempted from said tax.

E.

Fifty percent (50%) of stamp taxes caused according to the legislation in force.

F.

Rights and duties for the use of public services provided that THE STATE or any of its subdivisions or dependencies provide to THE COMPANY and which are not those which THE COMPANY receives exoneration according to the stipulations of this Agreement.  In any event, rights and duties shall be payable at the current rates of general application.

G.

Contributions and employer quotas to Social Security,  professional risks premiums and others employer contributions of a social nature based on the employee payroll of THE COMPANY, which shall be payable at the current rates or tariffs of general application.

H.

Property Tax according to the legislation and tariffs of general application in force.  Notwithstanding the foregoing, Property Tax shall be paid up to a maximum of ONE HUNDRED THOUSAND US DOLLARS (US$100,000.00) per year, provided that the assets acquired or built by THE COMPANY or its Affiliates are to be used for the development of THE PROJECT and are located in a province of the Republic where THE COMPANY or its Affiliates would have invested not less than TEN MILLION US DOLLARS (US$10,000,000.00) in mineral processing plants, ports or transport and cargo handling installations.

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I.

Industrial or commercial license tax up to maximum of TWENTY THOUSAND US DOLLARS (US$20,000.00) per year.

J.

Surface canons and royalties, subject to the stipulations of Clause Three, point B, what items 4 and 5 of this Agreement.

K.

Fifteen percent (15-%) of the benefits received by THE STATE in concept of surface canons and royalties which THE COMPANY has to pay hereunder shall correspond to the municipality(ies) within which the CONCESSION AREA is located, amount which shall be directly paid by THE COMPANY to the corresponding municipality or municipalities.  THE STATE, through its pertinent entity, shall verify compliance with said obligation.

L.

Municipal Taxes.  The total of Municipal Taxes that are paid to whichever municipalities shall not exceed the sum to ONE HUNDRED THOUSAND US DOLLARS (US$100,000.00) per year.  Any additional amount which THE COMPANY must pay in concept of Municipal Taxes, above the aforementioned sums, shall be deductible by THE COMPANY as a fiscal credit against its Income Tax payment for the current year.  The maximum amount of the payable sum in concept of Municipal Taxes shall be adjusted in proportion to the variations on the wholesale price index of the total manufactures of the Office of the Comptroller General of the Republic of Panama for two-year periods.  The first adjustment shall be applied upon the fifth year of life of this Agreement, taking into account the changes occurred in the aforementioned price index during the two immediately previous years.  

Thereafter, the successive adjustments shall be made at the end of each two-year period.  In the event that said index was not available so that the adjustment provided in this Clause may not be made, THE STATE and THE COMPANY, by mutual agreement, shall apply another index or adjustment method.

M.

Any other taxes, rights, liens, duties, contributions, charges or impositions established or to be established in the future, and that are different to those for which THE COMPANY receives exemptions derived from this Agreement, and as long they are of general application, and that they are not contrary tonor exceed those established in the present Contract in this Agreement and in the legislation in force on the date on which this Agreement is enforced.  It is understood that taxes, rights, liens, duties, contributions, charges and impositions that are only applied to a specific industry or to a determined activity shall not be considered as of general application.

II.

Without detriment to what is previously provided for in this Clause and in other provisions of this Agreement and with the sole exception of the respective surface canons and royalties, as long as THE COMPANY has either not finished repaying the debt which THE COMPANY or its Affiliates acquire for the construction and development of the project, THE COMPANY, and its Affiliates shall be totally exempted from the payment of any type of tax, rights, duties, charges, liens, contribution or tariff that may be caused due to any reason related to the development of THE PROJECT, with the exception of municipal taxes.

CLAUSE FIFTEEN

Direct Investment and Infrastructure

The COMPANY, its Affiliates, contractors and sub-contractors shall have the right to the use of a fiscal credit which may be used to pay to THE STATE those taxes , duties, charges, contributions and rights established by the law in force and this Agreement.  Said fiscal credit shall be equal to the amounts invested by THE COMPANY its Affiliates, contractors and sub-contractors during the life of this Agreement in infrastructure pertaining to THE PROJECT of the following types or categories.

A.

Infrastructure and transportation equipment, including but without being limited to roads, railroads, bridges, energy generating plants, electric power transmission lines and telecommunication transmission lines.

B.

Facilities and installations for transportation, storage, treatment and removal of water, including, canals, dikes, aqueducts, sewage systems piping, tubing, dams, storage tanks and reservoir dams.

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C.

Maritime installations, ports, docks, piers, breakwaters, mobile and fixed installations for loading and unloading ships, facilities for loading of waste and cargo of barges.

D.

Housing or lodging for workers.

E.

Social type infrastructure, including hospitals and first aid stations, structures for social and recreational use of the community, streets, sidewalks, and ornamentation, built with prior authorization from THE STATE.

Paragraph 1:  The fiscal credit due to direct investment may be used in various fiscal years until covering 100% of the investment.

Paragraph 2:  In order to receive the benefit referred to in this Clause,, the corporation that has made an Investment shall present a request to the Ministry of Finance and Treasury, so that the later willto certify the investment in the corresponding fiscal year.

Adjoining this request should be, among others, the following documents::

1.

Copy of the work contracts, if any, regarding the pertinent investment.

2.

Payment vouchers of all costs and expenses performed.

3.

Copy of the plans of the work.

4.

Construction and occupation permits, and

5.

Certification issued by a Certified Public Accountant evidencing the amount of the investment.

Paragraph 3:  The General Directorate of Revenues of the Ministry of Finance and Treasury, previous analysis of the documents submitted by the corporation that executed the investment and inspection of the works built, shall issue, with due celerity, the corresponding fiscal credit.

Paragraph 4:  There is no possibility of receiving a credit in relation to cost of depreciable assets, in spite of the fact that they are part of the previously described infrastructure, if THE COMPANY or its AFFILIATES, contractors, or sub-contractors, according to the case, have decided to include the cost of said assets in the depreciation accounts established according to Clause Thirteen of this Agreement.

Paragraph 5:  In any fiscal year THE COMPANY, its AFFILIATES, contractors or sub-contractors may use the portion that it determines of the balance of the credits derived from investments in infrastructure not used in previous years, as a credit for the payment of those taxes that THE COMPANY selects, it being understood that said credit shall not be applied with the purpose of decreasing the amounts to be paid in concept of taxes or royalties in any year to less than half of what the Company would be otherwise obliged to pay.

Paragraph 6:  The General Direction of Revenues will maintain a registry of the amount of fiscal credits granted due to this Clause, as well as its use, assignment and favorable balances thereof.

CLAUSE SIXTEEN

Taxes on Moneylenders and Shareholders of THE COMPANY

Natural persons or body corporates and international agencies, that grant or guarantee financing in any manner or form acknowledged by THE COMPANY, or its Affiliates, contractors and subcontractors for the construction, operation and development of THE PROJECT, or any part thereof, shall be exempted from any type of taxes, rights, duties, charges, liens, contribution and imposition, including Income Tax, that might be caused by interest earned by said loans, discounts, commissions or other payable financial charges due to loans or guarantees, whatever the origin of the funds of those loans or guarantees, and whichever the development phase of THE PROJECT object of the respective credit or the manner in whichas said taxes are charged or collected, it being understood that THE COMPANY shall not be obliged to perform retentions of any nature regarding aforementioned financing.  These credits shall no t be subject to the provisions established in Article 2 of  Law 4, of 1935.

CLAUSE SEVENTEEN

Monetary Matters

The STATE shall allow THE COMPANY and its Affiliates to maintain amounts abroad in any currency and freely perform remittances of any nature including but without limited to remittances to repay advances and investments, to pay dividends, interests and profits coming from or related to THE PROJECT, exempted from any tax, and all retention impositions and obligations during the life of this Agreement.  Likewise THE COMPANY and its Affiliates may keep bank accounts outside the Republic of Panama.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 257

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CLAUSE EIGHTEEN

Registry of Concessions, Rights and Privileges

The STATE has issued and shall issue in favor of THE COMPANY, the adequate documents evidencing the specific concessions, rights and privileges arising from this Agreement and their assignments or transfers, of the same, and at all times shall comply with the administrative and legal requirements, in order for THE COMPANY to develop its activities, exercise its rights and enjoy its privileges, without the outcome of any interferencenor obstacles which would prevent its full enjoyment.  Only for advertising purposes, but without this being understood as a requirement or formality that affects the life or the effectiveness of the Concession, THE COMPANY may register free of charges the Concession under this Agreement in the Mining Registry of the General Direction of Mineral Resources.

CLAUSE NINETEEN

Notices

Notices and additional communications established by the provisions of this Agreement,   shall be done in writing andbe delivered personally at the following indicated addresses, according to the case, or sent to the address that the pertinent party indicates to the other by means of a written notice, with acknowledge of receipt, unless the parties agree otherwise.

1)

Ministry of Commerce and Industries

Edificio de la Loteria, Piso No. 21

Calle entre Avenida Cuba y Avenida Peru

Telephone:

227-4177

Fax:

227-5604

2)

Minera Petaquilla, S. A.

Swiss Bank Tower, Piso 13

Urbanizacion Marbella

Telephone: 223-5341

Fax:

223-3032

3)

Geo-Recursos Internacional, S. A.

Banco General Tower, Piso 45

Urbanización Marbella

Telephone:   223-5488

Fax:

223-8425

4)

Adrian Resources, S. A.

Banco General Tower, Piso 25

Urbanización Marbella

Telephone: 223-5488

Fax:

223-8425

CLAUSE TWENTY

Acts of God or Force Majeure

For the purposes of this Agreement,  the following events or circumstances among others, shall be considered as Acts of God:  epidemics, earthquakes, landslides, storms or other adverse meteorological conditions, explosions, fires, lightning, as well as any other cause,  that they are or not of the nature described, that is unpredictable or that is beyond the control of the affected party, and that to the point  that it delays, restricts or prevents the timely action of the affected party.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 258

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For the purposes of this Agreement,  the following events, acts or new circumstances, among others, shall be understood as force majeure, revolutions, insurrections, civil uprisings, blockages, commotions, embargoes, strikes and other labor conflicts which are not attributable to fault or negligence of the corresponding employer or of THE COMPANY or Affiliates or contractors or subcontractors,  orders or instructions of any Government in law or in fact, or entity or subdivision of the same, the price of minerals in the international market to a degree such that it renders the exploitation of THE PROJECT economically non-profitable, delay in the delivery of machinery, faults of the installations or machinery, wherever they happen, not attributable to the affected party, that adversely affects the operation of THE PROJECT and, in general, any event, occurrence or circumstance that is unpredictable or that out of the control of the affected party and to the point that it delays, restricts or prevents its timely action and is not attributable to its fault or negligence.

It is understood that, as long as they are not obligations consisting in money payments, if one of the parties ceases to comply with any of the obligations undertaken pursuant to this Agreement, ,such non-compliance shall not be considered a violation or non-compliance when the same is originated due to an act of God or force majeure.  If any activity, as long as it is not an activity pertaining to money payment, is delayed, restricted or precluded due to an Act of God or force majeure, both the established term to carry out the activity affected, as well as the terms of the present Agreement shall be extended for a term equal to the effective duration of the acts of God, force majeure or   their causes.  The investments that THE COMPANY undertakes to perform based on the Feasibility Study shall not be considered under any concept as obligations consisting in payment of money.

The party whose capacity to comply with its obligations is affected by an Act of God or force majeure shall notify, as soon as feasible, the other party in writing regarding the event, mentioning its causes and the parties will make all the reasonable possible efforts to overcome the event. Notwithstanding the foregoing, neither party shall be obliged to solve or end any conflict that it may have with third parties or with the labor force related to THE PROJECT, except in acceptable conditions or according to the decision of an arbitrator pronounced according to Clause Twenty three of this Agreement or an order from the competent judicial or administrative authority that has been duly executed or that in any other manner has a definite and coercive nature.

CLAUSE TWENTY ONE

Applicable Law

This Contract shall be the legal standard between the parties and shall be governed by the applicable laws that are currently in force in the Republic of Panama, except to the point that said laws or legal provisions that are contrary or inconsistent or incompatible with this Agreement are not of general application, it being understood that those laws that are only applicable to an industry or a determinate activity shall not be considered of general application. In the cases not foreseen in this Agreement, and as long as they are not inconsistent or incompatible with their provisions, the standards of the Mineral Resources Code shall apply to this Agreement in an auxiliary manner.

The COMPANY, its Affiliates, successors and assignees waiveany diplomatic claim in regards to the duties and rights deriving from this Agreement,  except in the case of denial of justice.  It is understood that it shall not be considered that denial of justice has occurred if THE COMPANY has not previously tried to make use of the arbitration right conferred by the present Agreement.

CLAUSE TWENTY TWO

Substantial Defaults

For the effects of the present Agreement, “Substantial Default” shall be understood as the default or delay in relation with the compliance with any of the obligations to which the parties are subject according to this Agreement when, if as a consequence of that default or delay, the value and the interests of the Agreement substantially decrease for the other party.  While the Substantial Default situation exists, the party affected by said default may deliver to the responsible party a written notice of its decision to, end the Agreement and in this event this Agreement shall terminate one hundred and eighty (180) calendar days after the receipt of said notice, unless the default or delay is not corrected before the end of said term.  In the event that said Substantial Default is of a nature that makes it necessary to have a term greater than one hundred and eighty (180) calendar days so it can be corrected, and the responsible party is diligently dedicated to correct the default or delay, there shall be no cause to end the Agreement at the end of the established term, unless later on further interruptions of those efforts, attributable to the party responsible for correcting the default or delay occur.  The parties agree that the right of the party affected to end the Agreement shall be suspended while the parties are in the process of solving any conflict related to the alleged Substantial Default as provided in Clause Twenty two or by means of any other method allowed by the laws in force and this Agreement and for a term of sixty (60) days after the date on which the existence of Substantial Default alleged by the party affected is determined.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 259

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The termination of this Agreement according to the stipulations of this Clause, shall not affect the following rights:

a)

The right of the damaged party to receive from the other party a monetary compensation for damages caused by the default or delay, and

b)

The rights of any of the parties issuing from and accrued according to the provisions of this agreement,  until the date on which the termination comes into effect.

CLAUSE TWENTY THREE

Arbitration

The parties declare their firm purpose of examining in the most objective and friendly manner all discrepancies that may arise between them regarding the present Agreement, with the intent of solving said divergences. All conflicts that arise regarding the present Agreement, and that cannot be solved in the before mentioned manner, shall be finally resolved through arbitration, according to the Procedure Regulations of the Interamerican Commission on Commercial Arbitration, in force on the date this Agreement, unless at the time of submitting to arbitration, the parties expressly agree to be governed by the regulations that may than be in force.

Controversies arising between the parties regarding the objective, application, execution or interpretation or the present Agreement shall be susceptible to arbitration as established in this Clause, as well as those related with its validity, compliance or termination, except for those controversies referring to the respect of the integrity of the Constitution.

The Arbitration shall be limited to the subject matter subject of the controversy and pending on the resolution, shall not have the effect of suspending or delaying compliance with the obligations issuing from this Agreement, with the exception of the events of force majeure or acts of God described in Clause Twenty of this Agreement or that the stipulations of Clause Twenty Two be applied with DA = Deduction due to Depletion. TA comes before. The parties agree that the execution of the decisions of the arbitrators will be pronounced by the courts of justice of the Republic of Panama or, in the event that execution is needed abroad, by the courts of justice of any State that is a part to international treaties recognizing said arbitrage decisions of which Panama is also a party. To that effect said arbitration decisions shall be considered as if they had been pronounced by Panamanian arbitration courts pursuant to the l egal provisions now in force.

CLAUSE TWENTY FOUR

Abandonment

In the event that THE COMPANY decides to partially or totally abandon THE PROJECT during the life of the Agreement, or due to its termination or expiration, whichever the cause may be, it undertakes to notify said decision to Ministry of Commerce and Industries two years in advance.  Jointly with such notice, a Restoration Plan for the affected area shall be submitted for the consideration and approval of the Ministry of Commerce and Industries.  Once said Plan is approved, it shall be of mandatory compliance for THE COMPANY.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 260

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CLAUSE TWENTY FIVE

Severability

In any Clause of the Agreement is annulled totally or partially, the validity of the rest of the Agreement shall not be affected.

CLAUSE TWENTY SIX

Compliance Guarantee

With the purpose of guaranteeing compliance with the present Agreement, THE COMPANY shall consign a guarantee of THREE MILLION US DOLLARS (US$3,000,000.00) in favor of THE STATE by means of cash, certified check, insurance policy from an insurance company, promissory note from a financial institution, letter of credit issued by a local bank, banking guarantees or by any means allowed by the laws in force.  Said bond shall be consigned by THE COMPANY within the one hundred and eighty (180) days following the date on which the law approving this Agreement is published in the Official Gazette and for the term of the Agreement. The same shall be drawn in favor of the Ministry of Commerce and Industries and the Office of the Comptroller General of the Republic of Panama.  Said bond shall be canceled and returned to THE COMPANY at the termination of this Agreement.

CLAUSE TWENTY SEVEN

Stamps Taxes

This Agreement shall be in force as of the date enactment of the law approving its subscription, and shall cause the payment o the amount of B/.1,000.00 in concept of stamp taxes.

CLAUSE TWENTY EIGHT

Subrogation

This Agreement, including its Annexes I, II, III and IV, constitutes the sole agreement between the parties in relation to its object matter.  Effective as of the date of enactment of the law approving this Agreement, Agreement No. 27-A of August 7, 1991 subscribed by THE STATE and GEORECURSOS and whichever other contracts, amendment, agreement or understanding between THE STATE and GEORECURSOS in relation to the CONCESSION AREA, as well as whichever claim or proceeding which the parties may have pertaining to or with occasion of the subscription, compliance or termination of such previous contracts or agreements.

By the law approving this Agreement and its Annexes, it shall be understood that Cabinet Decree number 267, of August 21, 1969 is totally annulled.

This Agreement including its Annexes, requires the approval of the Legislative Assembly of the Republic of Panama.  The minister of Commerce and Industries will submit to the Legislative Assembly of the Republic of Panama the draft bill whereby the present Agreement and its Annexes is approved within the fifteen (15) days following its subscription.

IN WITNESS WHEREOF, the parties subscribe the present, Agreement in two (2) copies, of the same tenor and effect, in the City of Panama, on the sixteenth day February of nineteen hundred ninety-six (1996)   

For THE STATE:

For THE COMPANY:

/sgd/

/sgd/

NITZIA R. DE VILLARRAL

RICHARD FIFER

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 261

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For GEORECURSOS:

For ADRIAN:

/sgd/  

/sgd/

RICHARD FIFER

RICHARD FIFER

Countersignature:

GUSTAVO PERZ

Comptroller General of the Republic

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 262

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ANNEX I

Description of the Concession Area

The Concession, as defined in this, Agreement has a total area of 13,600 Hs. and its description is as follows:

Zone No. 1:  Starting form Point No. 1, which geographical coordinates are 80°41’59,02” of western length and 8°51’25,11” of north latitude, a straight line is followed in eastern direction by a distance of 8,000 meters until finding Point No. 2, which geographical coordinates are 80°37’38.15” of western length and 8°51’25.11” north latitude; from there a straight line is followed in south direction by a distance of 5,000 meters until reaching Point No. 3, which geographical coordinates are 80°37’38.15” of west length and 8°48’42.07” of north latitude, from there a straight line is followed of west direction by a distance of 8,000 meters until reaching Point No. 4, which geographical coordinates are 80°41’59.02” of west length and 8°48’42.07”of north latitude; from there a straight line is followe d in north direction by a distance of 5,000 meters until finding the starting Point 1.

This zone has a total surface of four thousand (4,000) Hs. and it is located in the Jurisdiction of Northern Cocle and San Jose del General, Donoso District, Province of Colon.

Zone No. 2:  Starting from Point No. 1, which geographical coordinates are 80°45’14.67” of west length and 8°54’40.76” of north latitude, a straight line is followed in east direction by a distance of 6,000 meters until finding Point No. 2, which geographical coordinates are 80°41’59.02” of west length an 8°54’40.76” of north latitude, from there a straight line is followed in south direction by a distance of 11,000 meters until reaching Point No. 3, which geographical coordinates are 80°41’59.02” of west length and 8°48’42.07” of north latitude, from there a straight line is followed in western direction by a distance of 6,000 meters until reaching Point No. 4, which geographical coordinates are 80°45’14.67” of western length and 8°48’42.07” of north latitude, from where a straight line is follow ed in north direction until reaching Point 1 which is the starting point.  This zone has a total area of 6,000 Hs. It is located in the Jurisdiction of Northern Cocle, Donoso District, Province of Colon, and borders in the east with the Zone No. 1.

Zone No. 3:  Starting from Point N. 1, which geographical coordinates are 80°40’53.8” of west length and 8°48’42.07” of north latitude a straight line is followed in east direction by a distance of 6,000 meters until finding Point No. 2, which geographical coordinates are 80°37’38.15 of west length and 8°48’42.07” of north latitude, from there a straight lie is followed in south direction by a distance of 2,000 meters until reaching Point No. 3, which geographical coordinates are 8°47’36.85” of north latitude, from there a straight line is followed in western direction by distance of 6,000 meters until reaching Point No. 4, which geographical coordinates are 80°45’53.8” of western length and 8°47’36.85” of northern latitude, from there a straight line is followed in northern direction until finding point 1, which is the starting point.  This zone has a total area of 1,200 Hs., and it is located in the Jurisdiction of San Jose del General, Donoso District, Province of Colon, and adjoins on the north with the Zone No. 1 granted to GEO-RECURSOS INTERNACIONAL, S.A, according to Agreement No. 27-A of August 7, 1991.

Zone No. 4:  Starting from Point No. 1., which geographical coordinates are 80°37’38.15” of west length and 8°50’52.55” of north latitude a straight line is followed in east direction by a distance of 3,000 meters until reaching Point No. 2, which geographical coordinates are 80°36’0.48” of west length and 8°50’52.55” of north latitude; from there a straight line is followed in south direction at a distance of 6,000 meters until finding Point No. 3, which geographical coordinates are 80°36’0.48” of west length and 8°47’36.85” of north latitude, from there a straight line is followed in west direction by a distance of 3,000 meters until finding Point No 3., which geographical coordinates are 80°37’38.15” of west length and 8°47’36.85” of north latitude, from where a straight line is followed in nor th direction by a distance of 6,000 meters until finding point 1, which is starting point.  This zone has a total area of 1,800 Hs.  It is located in the Jurisdiction of San Jose del General, Donoso District, Province of Colon, Republic of Panama and adjoins on the west with the Zone No. 1 granted to the company, GEO-RECURSOS INTERNACIONAL, S.A, according to Agreement No. 27-A of August 7, 1991 and to the Zone No. 3 requested by the Company of the same name.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 263

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ANNEX II

DEFINITION OF THE FEASIBILITY STUDY – CERRO PETAQUILLA PROJECT BASE

The Feasibility Study, which shall include any necessary modifications at the time the economical aspects and financial costs are established, shall consist of a feasibility study that contains all information necessary to decide whether THE PROJECT shall be commercially exploited..

In the preparation of the Feasibility Study the following procedures shall be followed:

The tests in scale model have been completed in most parts and shall be supported by tests carried out in pilot plants, should the latter be necessary.  Specifications of the products shall be based on marketing research.  Several visits may be required to the place where the plant is installed.

Listings of equipment and designs shall be made, for their location backed by pipeline system drawings of pipelines of one sole strip and electric wiring.  Equipment specifications shall not be included and formal bids will not be required from suppliers however, written quotes should be obtained from at least  one supplier for each important item.  Installation costs of the machinery shall be determined, based on former experience, based on weight and percentage factors.  Installation costs of pipelines and electrical wiring may be based on approximations with regard to the extensions of electrical wiring and pipeline.  An estimate of the construction cost of the plant and camp shall be provided and estimates on designing costs may be more precise.  Income shall be estimated on the basis of estimates on plant performance and payment indicators coming from foundations and other buyers.

Data Required

It will be necessary to have available proper topographic and geotechnical data.  Written reports related to metallurgic works should be available.  Actual costs of labor available in the region shall be determined, and written quotations from basic material suppliers should be obtained, such as:  fuel, explosives, atomizers, reactives, etc., if deemed necessary.   Rates from companies providing public services should be obtained, such as water, light, gas, and telephone providing service to the region.  If necessary research should be made for obtaining permits and licenses from governmental agencies when required.  Regulations applicable to water and air pollution should be studied.

Training Required

The Feasibility Study shall be prepared under the supervision of a project engineer with knowledge of the mining industrial sector as referred to in this study.  Considering the existence of general design drawings, pipeline system drawings, electrical wiring and  placement of instrumentats, it will be possible to use the services of capable professional project specialists trained to make projections relating to electrical wiring, pipelines and instrumentation as well as experienced project specialists experience relating to the industry referred to in the study.

Use of Estimates

The overall factor of contingencies for the Feasibility Study shall be between 10% and 15%.  The percentages assigned to contingencies shall constitute estimating prices and should not be construed as an indication that estimates are necessarily precise within the margin of contingencies, nor as an implicit reference to any degree of precision.  In general, the Feasibility Study shall be adequate to determine the feasibility and assist the administration in the preparation of a budget for THE PROJECT.

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ANNEX III

Preliminary Investment Program

ENGINEERING AND ACQUISITIONS US$24,000,000.00

Requests and Construction Permits Authorizations

Detailed Engineering

Acquisitions

Agreements

Field Studies

CONSTRUCTION/MINING US$67,000,000.00

Pre-production (Phase I)

Waste Deposit (Initial)

Access Route (Llano Grande to Petaquilla)

PROCESSING INSTALLATIONS US$102,000,000.00

Crushing

Excavation and Backfill/Concrete

Retaining Wall-Reinforced Soil

Installation of Crushing Machine

Steel for Construction of Building and Enclosure

Machinery, Piping, Electrical Wiring and Instrumentation

Transports

Ore Piling and Restoration

Concentrator

Excavation, Concrete and Slab

Building, Internal Steel and Enclosure

Installation of Mills

Machinery, Piping, Electrical Wiring and Instrumentation

SITE AND GENERAL US$118,000,000.00

Clearing, Weed-cutting, Preliminary Grading

Roads, Fencing, Entry /Booth, Parkings

Storage, Water Provision and Distribution

Sewage Collection and Discarding

Reservoir for Settlement of Mine Wastes

Electricity Provision and Transmission

Main Substation Wiring and Additions

Communications

Fuel Storage and Distribution

BUILDING FOR SERVICE TO THE PROJECT US$9,000,000.00

Administration and Engineering Building

Rolling Equipment Workshop/Warehouse/Dry Explosive Warehouse

Testing Laboratory

WASTE AND RESTORATION SYSTEM US$28,000,000.00

INFRASTRUCTURE AND INSTALLATION US$13,000,000.00

Construction Camp

Aeronautic Installations

New Airdrome/Landing Strip

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PORT US$47,000,000.00

Conditioning of Site and Streets

Water System and Pipes

Generation of Electric Energy

Installations for Shipment of Concentrate and Supplies

Note:  The foregoing figures are subject to variation on the basis of final results of the Feasibility Study.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 266

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ANNEX IV

MINERA PETAQUILLA, S.A., duly represented by Eng. Richard Fifer, male, Panamanian, of legal age, engineer, bearer of personal identification card Item, 8-433-263, hereinafter  “MINERA”; and ADRIAN RESOURCES, S.A., duly represented by Juan Francisco Pardini, male, Panamanian, of legal age, bearer of personal identification card Item, 8-223-797, hereinafter “ADRIAN”, state that they agree to the following:

WHEREAS, MINERA together with THE STATE shall subscribe a Mining Concession Agreement (“AGREEMENT”) on the Concession Area as said term has been defined in the, Agreement and will receive determined specific rights according to same with respect to deposits located in the area of Cerro Petaquilla; and

WHEREAS, ADRIAN is holder of certain mining grants adjoining the aforementioned Concession Area identified as: Agreement No. 41 of July 12, 1994, Agreement No. 39-A of July 7, 1994, Agreement No. 39-B of July 7, 1994, Agreement No. 59 of December 29, 1994, all subscribed by and between the Ministry of Commerce and Industries and ADRIAN; and concession requests Nos. 93-92, 93-93 and 94-39, according to the records kept in the General Direction of Mineral Resources of the Ministry of Commerce and Industries of the Republic of Panama (hereinafter (“ADJACENT CONCESSIONS”); and

WHEREAS, MINERA and ADRIAN wish to acknowledge certain reciprocate rights and obligations regarding the use of easement rights and the use of the Area of the aforementioned  Concession and on areas corresponding to the Adjacent Concessions, as well as of construction and location and use of facilities and installations. In consideration of the foregoing , MINERA and ADRIAN state and agree as follows:

1.  THE COMPANY and its affiliates shall be entitled to the easement of use on the surface and subsoil of the Area identified as Adjacent Concessions and access to the area comprising the Adjacent Concessions for whatever reason or cause which, that according to THE COMPANY, is convenient for the proper exploration, construction, development or exploitation of THE PROJECT, including the right to, place, construct, build, operate, maintain and use in, or remove from, the Adjacent Concessions any type of facility or installation deemed convenient by THE COMPANY (hereinafter the “Adjacent Installations”).  It is understood that the rights of access and of easement of use referred to in this paragraph granted in favor of the Concession, shall go with, and be inseparable of, the lands comprising the Adjacent Concessions and that same shall outlive any sale, transfer, assignation or granting of any type of right or interest, including rights protected under any type of mining concession existing or which may exist on said adjacent estate.

2.   Without impairment to the above, before establishing or constructing any permanent or non movable installation or structure in the areas comprised by the Adjacent Concessions, THE COMPANY, or any affiliate or contractor or subcontractor of same, or any transferee or successor of part or the whole of the Concession, as defined in Annex 1 of the  Agreement should carry out all the geotechnical research, including drilling works for condemnation of specific areas and any other necessary to determine the environmental technical and economical viability of the site, in which it is proposed to construct or establish the permanent installations or structures and shall carry out an exploration of the area of the Adjacent Concession, to be covered by said installation or structure, to confirm that there does not exist actual or potential minerals sufficiently  near the surface of the proposed site so that its safe and econo mic extraction disabled or impaired by the presence of the permanent installation or structure it intends to establish, and shall provide the results of the mentioned research and exploitations to the holder of the Adjacent Concession(s) which may be affected.

Without impairment to provisions of item 1 of this Annex IV, THE COMPANY or the respective holder or beneficiary of the Concession, as the case may be, which has placed any movable structure or installation in the area known as the Adjacent Concessions, shall remove as soon as possible, at its own account and cost, said structure or installation or a portion of same if, according to the reasonable opinion of the holder of the affected Adjacent Concessions, its location is unfavorable for the mineral exploitation contemplated in said Adjacent Concession.

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Without impairment to provisions in item 1 of this Annex IV, THE COMPANY or the respective holder or beneficiary of the Concession, as the case may be, shall carry out its activities related to the construction, installation and operation of any structure or installation located in the area comprised by the Serving Concession carefully and according to the principles of good mining practices and the laws in effect in the Republic of Panama, and should indemnify the holder of the Adjacent Concession affected for any expense, action or demand against the later , resulting from the cited activities performed by THE COMPANY or the beneficiary holder of the Concession.

3.   If at any time any of the Adjacent Installations has a surplus capacity not necessary to carry out the existing or scheduled operations of THE COMPANY and it has not previously committed itself to third parties after having granted a first option to the holder of the respective Adjacent Concession, THE COMPANY shall make available to the holder of the Adjacent Concession where the respective installation is located, this surplus capacity, provided this holder is an Affiliate of THE COMPANY, in the understanding that it will be done in fair terms and always in conditions not more favorable to THE COMPANY than those applicable in the event of sale, license or other rights of use to third parties or affiliates of an installation similar to the Adjacent Installation.

4.   The parties state that any conflict or dispute arising between the same for reason of the execution or fulfillment of what has been covered in this agreement shall not affect in any way the respective obligations and commitments that entail MINERA, according to the Agreement and to ADRIAN with regard to the Adjacent Concessions in the face of THE STATE, unless the respective conflict or dispute be motivated or caused by any act or omission of THE STATE.

IN WITNESS WHEREOF, this document is entered into in two similar copies in Panama, December 5, 1995.

by ADRIAN RESOURCES, S.A.

by MINERA PETAQUILLA, S.A.

(signed)

(signed)

JUAN FRANCISCO PARDINI

RICHARD FIFER

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 268

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Article 2.  This Law shall enter into effect as of its promulgation; it annuls Cabinet Decree 267 of 1969 and any provision contrary to same.

LET IT BE NOTIFIED AND EXECUTED.

Approved in third debate, in the Justo Arosemena Palace, Panama City, on January 30, nineteen hundred ninety seven (1997).

CESAR A PARDIC

VICTOR M. DE GRACIA  M.

President

Secretary General

NATIONAL EXECUTIVE BODY.  MINISTRY OF THE PRESIDENCY

PANAMA, REPUBLIC OF PANAMA, FEBRUARY 26, 1997

ERNESTO PEREZ BALLADARES

RAUL ARANGO GASTEAZORO

President of the Republic

Ministry of Commerce and Industries

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 269

EXHIBIT 11.A

PETAQUILLA MINERALS LTD.

and its Principal Subsidiaries

(collectively,  “the Company" or “Petaquilla”)

CODE OF BUSINESS ETHICS AND CONDUCT

(“the Code”)

Acting with integrity, honesty and in good faith with respect to what is in the best interests of the Company's stakeholders is fundamental to the Company's reputation and ongoing success.  Petaquilla is committed to sustainable growth within the parameters of ensuring the safety and well-being of its employees, protecting the environment, and supporting the communities in which it operates.  The directors, officers and employees of the Company must be committed to upholding these responsibilities in all facets of the Company's day to day operations.

In addition, the directors, officers and employees of the Company and persons or companies related to or controlled by same are expected to act in accordance with applicable laws and with the highest standards of ethical and professional behaviour.  The Company's directors, officers and employees must understand and adhere to the Code and the Company’s other corporate policies.  By adopting and enforcing the Code and the other policies, the directors will provide an ethical environment to flow through the Company – “tone at the top” is created with clear communication of expectations from corporate executives, accompanied by congruent behavior throughout the Company.  These policies include, but are not limited to, the Company's (a) Corporate Disclosure Policy; (b) Electronic Communications Policy; (c) Whistle­-Blower Policy; (d) Anti-Fraud Policy, and (e) Health and Safety Policy, and with department al policies not included in this Code.

The Directors shall arrange for translation of the Code into Spanish and shall cause both the English and Spanish language versions to be posted on the Company’s intranet site for viewing by all directors, officers and employees of the Company.  It should also be posted in hard copy in all Company locations so that it is easily viewable by all staff.   

If clarification of this code is required, the VP Corp Affairs in Vancouver (English), or the Manager of Human Resources in Panama (Spanish), should be contacted.

The Directors shall also arrange for distribution of individual letters to all staff, in English or in Spanish as appropriate, notifying staff members of the existence of the Code and its existence in both hard and electronic copies.  Staff shall initial receipt of the letters to indicate that they have received, or have access to the Code.

Failure to comply with the Code, and the rules and procedures outlined in the Company's corporate policies may result in discipline, suspension or dismissal of any officer or employee of the Company.  The Company and, specifically, Corporate Counsel may also be required by law to report material violations of securities legislation to the relevant authorities.

For further information on discipline, suspension or dismissal, please refer to the Company’s Disciplinary Policy.

Standards of Conduct

1.

Conflicts of Interest

All directors, officers, and employees have a duty to act in the best interests of the Company.  A "conflict of interest" takes place when an individual's private interest improperly takes precedent over the interests of the Company or interferes, or appears to interfere, with the interests of the Company.  A conflict may arise when an individual takes actions or has private interests that impede his ability to perform his or her Company work objectively and effectively, in the best interests of the Company.  Directors, officers and employees should avoid conflicts of interest, and in no circumstances may use their position at the Company to obtain any improper personal benefit.

The Company respects the right of directors, officers, and employees to take part in business and other activities outside of their Company obligations.  These activities, however, must not conflict with their responsibilities as Company directors, officers, and employees.  The Company’s directors, officers, and employees must not serve as directors, officers, employees or consultants for a competitor, or an actual or potential business partner of the Company, without written approval of the Board of Directors.

Company directors, officers, and employees may not invest in or trade in shares of a competitor or an actual or potential business partner of the Company where such investment or trading may appear or tend to influence business decisions or compromise independent judgment.  This prohibition does not apply to shares of a publicly traded company where such investment or trading relates to less than five percent of its issued shares.  However, investing or trading in the Company's competitors or business partners remains subject to applicable laws and regulations regarding insider trading, including prohibitions against trading when in possession of material non-public information regarding such companies, whether such information is gained in the course of employment with the Company or otherwise.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 270

Acceptance by a director (or a member of his or her immediate family), officer (or a member of his or her immediate family), or employee (or a member of his or her immediate family) of gifts or entertainment of a value that may influence business decisions or compromise independent judgment is prohibited.

If a conflict of interest exists, and there is no failure of good faith on the part of the director, officer, or employee, the Company's policy generally will be to allow a reasonable amount of time for the director, officer, or employee to correct the situation in order to prevent undue hardship or loss.  However, all decisions in this regard will be at the discretion of the Board of Directors, whose primary concern in exercising such discretion will be the best interests of the Company.

If a director, officer, or employee is aware of a material transaction or relationship (including those involving family members) that could reasonably be expected to give rise to a conflict of interest, they should discuss the matter promptly with their immediate supervisor, department head, or the Board of Directors.

2.

Protection and Proper Use of Company Assets and Opportunities

All directors, officers, and employees should protect the Company’s assets and ensure their efficient use.  The Company’s assets must be protected from loss, damage, theft, misuse, and waste.  Company assets include time at work and work product, as well as the Company’s equipment and vehicles, computers and software, trading and bank accounts, Company information and the Company’s reputation, trademarks and name.  The Company’s telephone, email, voicemail and other electronic systems are primarily for business purposes.  Personal communications using these systems must be minimized.  directors, officers, and employees should exercise prudence in incurring and approving business expenses, in the service of the Company’s interests, ensuring they are reasonable in the circumstances.

3.

Information Systems

Use, duplication, or sale of proprietary software, except as described in the manufacturers/ owners licence agreement or conditions applying to use, is an infraction of copyright law and is strictly prohibited.  The Company's electronic communications systems are Company resources and all electronic communications are regarded as Company records.  Offensive material (e.g. pornography) is not permitted on the Company systems in any form.  The Company reserves the right to monitor employee use of its information systems.  Subject to Board of Director’s approval, the Company may access and disclose the contents of electronic messages and files.  The Company does not guarantee the privacy of electronic communications or information stored on Company systems.  This material may be accessed through activities such as the maintenance of mail systems and computer networks.

Directors, officers, and employees owe a duty to the Company to not act in any way contrary to the Company’s legitimate interests.  Directors, officers, and employees are prohibited from (a) taking for themselves personal opportunities that are discovered through the use of corporate property, information or position, unless the Board of Directors of the Company has already been offered the opportunity and declined it; (b) using corporate property, information, or position for personal gain without disclosure to and approval by the Board of Directors; and (c) without the knowledge and consent of the Board of Directors competing with the Company.

4.

Confidentiality

Directors, officers, and employees should maintain all confidential information in strict confidence, except when disclosure is authorized by the Company or legally mandated.  Confidential information includes, among other things, any non-public information concerning the Company, including its business, financial performance, results or prospects, and any non-public information provided by a third party with the expectation that the information will be kept confidential and used solely for the business purpose for which it was conveyed.  The obligation to safeguard the Company’s confidential information continues after the engagement or directorship with the Company has ended.  The Company’s policy on maintaining confidentiality is set forth in the Company’s Corporate Disclosure Policy.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 271

5.

Fair Dealing

Each director, officer, and employee should endeavor to deal fairly with the Company's counterparties, suppliers, competitors and employees.  No director, officers, or employee may take unfair personal advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other unfair-dealing practice.

6.

Employee Harassment or Discrimination

The Company is committed to fair employment practices and a workplace in which all individuals are treated with dignity and respect.  The Company will not tolerate or condone any type of discrimination prohibited by law.  The Company expects that all relationships among persons in the workplace will be professional and free of bias and harassment.  

7.

Public Disclosure

The Company, through news releases, website content, and filings with securities regulatory authorities, is committed to providing timely, factual and accurate disclosure of material information about the Company to its shareholders, the financial community and the public.  The Company's policy governing public disclosure is set forth in the Company’s Corporate Disclosure Policy.  Directors, officers and employees involved in the Company's disclosure process are responsible for acting in furtherance of such policies.  It is important that they thoroughly understand and comply with them.

8.

Compliance with Laws, Rules and Regulations

The Company is committed to compliance with all applicable laws, rules, and regulations in each jurisdiction in which it does business.  All directors, officers, and employees are expected to obey those laws, rules, and regulations in each jurisdiction.  Directors, officers, and employees should educate themselves on the laws, rules, and regulations that govern their work and, if uncertain, should seek the assistance of their supervisor or department head.

The Company, its directors, officers, and employees are subject to laws and regulations regarding insider trading.  Generally, Canadian and United States securities laws prohibit trading in the securities (including equity securities, convertible securities, options, bonds, and any stock index containing the security) of any company while in possession of material, non-public information regarding such company.  This prohibition applies to Company securities as well as to the securities of other companies.  The Company has adopted a policy on Corporate Disclosure in order to prevent improper trading in securities of the Company and the improper communication of undisclosed material information regarding the Company.

It is unlawful under the Foreign Corrupt Practices act to make payments to foreign officials for the purpose of obtaining or retaining business for, or with, or directing business to, any one person. The Company’s representatives may encounter particular pressure to make such payments in countries where extraordinary competition exists for mining opportunities and should be particularly vigilant not to be tempted by assertions that such practices are common or condoned in that country.  Examples of improper payments include gifts, tips or other monetary amounts not required by law, providing entertainment, and sponsoring government travel.  If an individual is uncertain that any conduct or proposed conduct is appropriate, they should discuss the matter with their supervisor or department head.

9.

Political Contributions and Activities

The Company must maintain a position of impartiality with respect to national, regional, or local politics.  As a result, the Company does not contribute funds to any political party, politician, or candidate for public office in any country.  The Company may contribute information to the public debate of policy issues that affect the Company in the countries in which it operates, such as discussing relevant issues with government officials or providing written advice about the likely impact of proposed policies on the Company.  At times, attendance at events hosted by a political party may be required for briefing purposes.  The Board of Directors must be consulted if in doubt about whether attendance at a function would compromise the Company’s impartiality.

10.

Environmental, Safety, and Occupational Health Practices

The Company believes that sound environmental, safety, and occupational health management practices are in the best interests of its business, its employees, its shareholders, and the communities in which it operates.  The Company is committed to conducting its business in accordance with recognized local industry environmental, safety, and occupational health practices and standards and to meeting or exceeding all applicable environmental and occupational health and safety laws and regulations.  This is the responsibility of all directors, officers, and employees.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 272

The Company's safety and occupational health policy is set forth in Petaquilla’s Health and Safety Policy.  It is important that directors, officers, and employees thoroughly understand and comply with such policy.

11.

Alcohol, Drug and Tobacco Use

The Company’s directors, officers, and employees are to take appropriate steps to prevent workplace injuries and illnesses and to contribute to a safe and healthy work environment.  This obligation includes responsible behaviour with respect to the use of alcohol, drugs and tobacco at work, when conducting Company business, and at Company-sponsored activities.  Alcohol and drug use can affect work performance, posing health and safety risks.  Directors, officers, and employees must not be impaired by any illegal or legal drugs, including alcohol, while at work or when conducting Company business.

In addition, the Company prohibits the possession, transfer, or use of illegal substances on Company premises, in conjunction with Company business, or at Company functions.

12.

Cultural Sensitivity

Employees who accept an international assignment are responsible for familiarizing themselves and their accompanying family members with the norms, laws and customs of the country in which they will be living and working.  To assist with this, it is the Company’s policy to arrange orientation training regarding local customs and business practices that will ensure the employee can effectively perform his or her job.  Where suitable, the Company will also provide assignees and accompanying family members with cultural training and information about living conditions that will help them to reside successfully in their host location.  It is impossible, however, for training to address all of the issues that may arise while living in a foreign environment. Therefore, it is the assignee's responsibility to ensure that they fully understand the cultural implications of their behaviour at all times and to seek advice from loca l management if they have questions about particular actions, words, customs or similar issue.

13.

Management Overrides

The Company acknowledges that, from time to time, extenuating circumstances may arise, in which Company policies or procedures cannot be fully followed.  Not every instance in which a policy is overridden or an exception to policy is taken, will constitute a breach of the Code. However, examples of inappropriate management overrides are requests for (a) unsupported payments to be made; (b) unauthorized purchases, (c) significant unsupported accounting entries, (d) significant unapproved information technology changes, and (e) hiring employees without appropriate authorizations.

In order to ensure that any decision to depart from Company policy is not inconsistent with the Code, any Manager or Supervisor who directs another employee to disregard the Code, or to depart from a Company policy, procedure or internal control, will report the matter directly to the Company’s Chief Financial Officer with a brief explanation as to why the Manager or Supervisor took the view that the departure from policy was considered warranted in the circumstances.  The Chief Financial Officer will maintain a log of all instances of override reported and provide a summary on a quarterly basis to the Audit Committee.

Any employee who is directed by a Manager or Supervisor to depart from a Company policy and believes that the direction might constitute a violation of the Company’s Code of Business Ethics and Conduct or who has concerns about accounting, internal controls and auditing matters should report the matter as a possible violation of the Code to the Chief Financial Officer.  Where it is inappropriate to report the matter to the Chief Financial Officer, or where confidentiality is required, the matter should be reported in accordance with the Whistle-Blower Policy.  The Whistle-Blower Policy outlines the procedures for reporting to the Whistleblower contact.

14.

Extension of Credit to Officers and Directors

It is unlawful for any issuer, directly or indirectly, including through any subisdiary, to extend or maintain credit, to arrange an extension of credit, in the form of a personal loan to, or for any director or excutive officer of the Company.  Therefore, the Company may not advance funds to directors and officers as per Section 402(2) of the Sarbanes-Oxley Act.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 273

Compliance and Reporting

All directors, officers, and employees are expected to take all responsible steps to prevent a violation of the Code; to identify and raise potential issues before they lead to problems; and to seek additional guidance when necessary.  If any director, officer, or employee has any questions regarding the best course of action in a particular situation, or if they suspect a possible violation of a law, of a regulation or of the Code, by any director, officer, or employee, they should follow the guidance provided in the Whistle-Blower Policy, as explained below.

In the case of accounting, internal accounting controls or auditing matters, the director, officer, or employee should promptly contact the Chief Financial Officer, the Audit Committee, or, if necessary, the Board of Directors.

If a director, officer, or employee prefers to report any suspected Code violations anonymously, including concerns regarding accounting, internal accounting controls, and other auditing matters, or if any of the persons to whom they have reported these circumstances has not, in their view, responded appropriately, the Company has established a Whistle-Blower Policy, which is available on both the Company's web site (www.petaquilla.com) and intranet site.  Alternatively, a copy of the Whistle-Blower Policy can be provided by submitting a request to the VP Corporate Affairs in Vancouver or to the Manager of Human Resources in Panama.

Waivers of the Code of Business Ethics and Conduct

Petaquilla may waive certain provisions of the Code.  Waivers may be granted only formally by the Board of Directors via Directors’ Resolution, and disclosed to shareholders, as appropriate.

This Code of Business Ethics and Conduct was adopted by the Board of Directors of Petaquilla Minerals Ltd. on the 31^st day of May, 2008.

By order of the Board of Directors

PETAQUILLA MINERALS LTD.

Date of Last Update:

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 274

EXHIBIT 11.B

PETAQUILLA MINERALS LTD.

and its Principal Subsidiaries

(collectively, the “Company” or “Petaquilla”)

WHISTLE-BLOWER POLICY

Petaquilla's Code of Business Ethics and Conduct as well as its Code of Ethics for Financial Reporting Officers provides an overview of Petaquilla's commitment to applying high ethical standards to its business practices.  However, they are not intended to be all-inclusive rule books. An English language copy of Petaquilla's Code of Business Ethics and Conducts and its Code of Ethics for Financial Reporting Officers can be viewed on Petaquilla's web site at www.petaquilla.com and both Spanish and English language versions are available on the Company’s intranet site.  

Many of the statements made therein are backed up by in depth policies and procedures. However, in the current working environment, formal policies and procedures cannot always keep up with new challenges or adequately deal with complex situations.  Therefore, please never hesitate to ask a question or report a concern.

Petaquilla has also adopted procedures to govern the receipt, retention, and treatment of complaints regarding accounting, internal control or auditing matters, including fraud.  The procedures are outlined in the Anti-Fraud Policy.

Your most immediate resource is your direct supervisor.  He or she may have the information you need, or may be able to refer the questions to another appropriate source.  There may, however, be times when you would prefer not to go to your supervisor.  You may want confidential advice about a business ethics dilemma facing you or a suspected wrongdoing.  You may want more information than your supervisor can give you or you may want to report an ethical concern about your supervisor's conduct.  Examples of such business ethics dilemmas/wrongdoings may include:

·

An unlawful act whether civil or criminal

·

Breach of or failure to implement or comply with approved policy

·

Knowingly breaching municipal, provincial, state, or federal laws or regulations

·

Unprofessional conduct or below recognized, established standards of practice

·

Questionable accounting or auditing practices

·

Dangerous practice likely to cause physical harm/damage to any person or property

·

Failure to rectify to take reasonable steps to report a matter likely to give rise to a significant and avoidable cost or loss to the Company

·

Abuse of power or authority for any unauthorized or ulterior purpose

·

Unfair discrimination in the course of the employment or provision of services

·

Any other similar acts

You can discuss these types of concerns with the Chairman of the Audit Committee or the Chief Financial Officer.  Alternatively, you can file a report, an anonymous report if you wish, with an independent third party, at the numbers listed below without fear of reprisal:

Do you have a question, a concern, or wish to file a report?

CALLS FROM CANADA AND THE UNITED STATES Call the Whistle-Blower Hotline controlled by an  independent third party at: 1-877-749-2924 OR CALLS FROM PANAMA Call the Whistle-Blower Hotline controlled  by an  independent third party using one of the two methods described below:
METHOD 1:  If you are dialing from a Company office or a Company owned mobile phone, please dial 1-877-749-2924.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 275

(you may remain anonymous if you choose to) METHOD 2:  If METHOD 1 fails or if you are calling from a non-Company, please dial the AT&T Access Code of 800-0109 and wait for the prompt, a voice recording followed by a “bong” or operator to dial the number.  Then please dial 1-877-749-2924.  If an operator has answered, please ask the operator to dial 1-877-749-2924 for you.
You will hear a pre-recorded greeting, select Spanish as your language.  You will then hear music while an Interview Specialist is connected to your call with an interpreter.
(you may remain anonymous if you choose to)

Your request for information or action will be handled promptly, discreetly, and professionally. The conversation will be kept in confidence to the extent appropriate or permitted by policy or law.  If you're reporting a concern, you will be informed as much as possible about the steps that will be taken to address your concern.

In no order of preference, the official contacts for reporting suspected fraudulent or other dishonest acts are any or all of the following:

(a)

The Company’s Chairman of the Audit Committee;

(b)

The Company’s Chief Financial Officer; and/or

(c)

The independent third party Whistle-Blower Hotline.

Employees, with a reasonable basis for believing such acts have occurred, have a responsibility to report it to their supervisor, to the Company’s Chairman of the Audit Committee, to its Chief Financial Officer and/or to the Whistle-Blower Hotline.  As mentioned above, employees have the option of forwarding their concern anonymously.

The official contacts, as noted above, will then determine if an investigation is warranted.  If it is determined that an investigation is warranted, they will investigate the suspected fraudulent or dishonest act and depending on the nature of the complaint, may consult the Company’s legal counsel or the Board of Directors.

Employees shall not confront the individual being investigated, or initiate independent investigations. In those instances where the investigation indicates criminal activity, the appropriate law enforcement agency will be informed.

Where possible, the official contacts may undertake the following process:

(a)

investigation by the Chairman of the Audit Committee and/or Chief Financial Officer

(b)

referral to the police or appropriate authorities

(c)

referral to the external auditor

(d)

an independent inquiry

In order to protect individuals and those accused of misdeeds or possible malpractice, initial inquiries will be made to decide whether an investigation is appropriate and, if so, what form it shall take.

The overriding principle with which the Company will act is the interest of the Company and its shareholders.

Some concerns may be resolved by agreed action without the need for investigation. If urgent action is required, this will be taken before any investigation is conducted.

Within fifteen (15) working days of a concern being raised, the responsible officer will write to you:

(a)

acknowledging that a concern has been received;

(b)

indicating how he/she proposes to deal with the matter;

(c)

giving an estimate of how long it will take to provide a final response

(d)

telling you whether any initial enquiries have been made; and

(e)

telling you whether further investigations will place and if not, why not.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 276

The amount of contact between the persons considering the issues and you will depend on the nature of the matter raised, the potential difficulties involved and the clarity of information provided.  If necessary, the Company will seek further information from you.

The Company will take steps to minimize any difficulties which you may experience as a result of raising a concern.  For instance, if you are required to give evidence in criminal or disciplinary proceedings the Company will arrange for you to receive advice about the procedure.

The Company accepts that you need to be assured that the matter has been properly addressed. Thus, subject to legal constraints, we will inform you of the outcomes of the investigation.

Concerns will be investigated as quickly as possible.  It should also be kept in mind that it may be necessary to refer a matter to an external agency and this result in an extension to the investigation process.  Also, the seriousness and complexity of any complaint may have an impact upon the time taken to investigate a matter.  A designated person will indicate at the outset the anticipated time scale for investigating the complaint.

If you raise a concern or report suspected wrongdoing by your supervisor, another employee, officer, member of the board of directors, and/or the Whistle-Blower hotline, Petaquilla will not take action against you even if, after investigation, there is no finding of wrongdoing, and will not tolerate retaliation or allow you to be victimized as long as (a) your report was made in good faith, (b) you believed it to be substantially true, (c) you were not maliciously making false allegations, and (d) you were not seeking any personal or financial gain.  

If you call one of the official contacts and choose to remain anonymous, your right to do so will be respected.  You should know, however, that it's normally easier to investigate concerns if you identify yourself and the others involved.  Please note that should you choose to email any of the official contacts, your e-mail address will show up on your message.

Petaquilla's legal counsel, corporate security and human resources personnel will be involved in the process, as appropriate.  We will always inform the appropriate human resources personnel of any suspected cases of unlawful discrimination or harassment.

Acting with integrity, honesty and in good faith with respect to what is in the best interests of the Company's stakeholders is fundamental to the Company's reputation and ongoing success. Petaquilla is committed to sustainable growth within the parameters of protecting the environment, ensuring the safety and well-being of its employees, and supporting the communities in which it operates.  The directors, officers, senior employees and consultants of the Company must be committed to upholding these responsibilities in all facets of the Company's day to day operations.

The Directors shall cause the entire "Whistle-Blower Policy” to be officially translated into Spanish and shall further cause both Spanish language and English language versions to be posted on the Company’s intranet site for viewing by all directors, officers and employees of the Company.  In addition, the “Whistle-Blower Policy” will be posted in hardcopy format for viewing in all Company locations.

The Board of Directors is responsible for approving any  updates or changes to the provisions of this Policy. Additionally, any updates or changes to the provisions of this Policy must be publicly disclosed in a prompt manner.

This Policy, pursuant to Section 301.4 of the Sarbanes-Oxley Act requiring audit committees to establish procedures for receiving and handling complaints related to accounting, internal accounting controls, or auditing matters; and the confidential, anonymous submission by employees of the issuer of concerns regarding questionable accounting or auditing matters, was amended by the Board of Directors of Petaquilla Minerals Ltd. on the 31^st day of May, 2008.

By order of the Board of Directors

PETAQUILLA MINERALS LTD.

Policy Approval Date:	2008 March 1
Last Revision Date:	2008 May 31

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 277

EXHIBIT 12.A

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT 2002

I, Joao Manuel , President and Chief Executive Officer of Petaquilla Minerals Ltd., certify that:

1.

I have reviewed this Amendment No. 2 to the annual report on Form 20-F of Petaquilla Minerals Ltd.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4.

The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5.

The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date:

November 6, 2009

By:

/s/ Joao Manuel                                 

Joao Manuel

President and Chief Executive Officer

(principal executive officer)

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 278

EXHIBIT 12.B

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT 2002

I, Bassam Moubarak, Chief Financial Officer of Petaquilla Minerals Ltd., certify that:

1.

I have reviewed this Amendment No. 2 to the annual report on Form 20-F of Petaquilla Minerals Ltd.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4.

The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5.

The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date:

November 6, 2009

By:

/s/ Bassam Moubarak                                

Bassam Moubarak

Chief Financial Officer

(principal financial officer)

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 279

EXHIBIT 13.A

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with Amendment No. 2 to the Annual Report of Petaquilla Minerals Ltd. (the “Company”) on Form 20-F for the transition period ended May 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joao Manuel , President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1.

The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

2.

The information contained in the Report fairly presents, in all materials respects, the financial condition and results of operations of the Company.

/s/ Joao Manuel

Joao Manuel

(principal executive officer)

Dated:  November 6, 2009

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 280

EXHIBIT 13.B

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with Amendment No. 2 to the Annual Report of Petaquilla Minerals Ltd. (the “Company”) on Form 20-F for the transition period ended May 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Bassam Moubarak, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1.

The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

2.

The information contained in the Report fairly presents, in all materials respects, the financial condition and results of operations of the Company.

/s/ Bassam Moubarak

Bassam Moubarak

(principal financial officer)

Dated:  November 6, 2009

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Form 20-F/A_Amendment No. 2_Transition Period Ended 2008 May 31 Page 281