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Overview

The primary business of the Company is the evaluation, acquisition, exploration and development of silver properties in the Russian Federation. The exploration strategy of the Company is to focus on the discovery of silver and precious metal deposits in Russia. The Company has not yet earned revenue and is considered to be in the exploration stage. The Company's principal asset is the Mangazeisky Project, located approximately 400 kms north of Yakutsk in the Republic of Sakha, Yakutia, Russia. The Company was granted the exploration license for the Mangazeisky Project in September 2004 for an initial term of five years.

Silver Bear's corporate strategy is to identify and develop silver opportunities in Russia by exploration, acquisition, joint venture or otherwise. Silver Bear is focused on further delineating the high grade silver mineralization discovered in the Vertikalny vein of the Mangazeisky Project and the exploration of the 15 other known silver mineralized zones on the property. Based on the encouraging results from the drilling program concluded in September 2007, Silver Bear believes the Mangazeisky Project has the potential to become a world class silver deposit.
    Silver Bear has targeted the following key milestones for Silver Bear to achieve its strategy:

  • Complete further exploration on the Mangazeisky Project by the end of 2008.
  • Define a CIM compliant Inferred resource on a portion of the Vertikalny vein of up to 150 Moz of silver(1) by the end of 2008.
  • Complete exploration on the known extensions of the Vertikalny vein to demonstrate a potential of 200 to 250 Moz of silver(1) by the end of 2008.
  • Complete exploration on the known extensions of the Vertikalny vein to define a CIM compliant resource of 200 to 250 Moz of silver(1) by the end of 2009.
  • Complete a scoping study by the end of 2009.
  • Initiate a feasibility study for the Mangazeisky Project by the beginning of 2010.

    Silver Bear believes it can successfully implement its corporate strategy because of its unique strengths. These strengths include:

  • Its current projects are located in highly prospective regions. The Mangazeisky Project is located in the Republic of Sakha, Yakutia, in the Russian Federation, 160 kilometres from High River Gold's high grade Prognoz silver deposit. The Avlayakan Project is located approximately 500 kilometres north of the City of Khabarovsk in far eastern Russia and is situated on the southern extension of the Magadan gold belt.
  • Encouraging exploration results at the Mangazeisky Project indicative of the potential for a high grade silver deposit.
  • Existing NI 43-101 compliant gold resource base at the Avlayakan Project.
  • Extensive management experience. Silver Bear's management team has considerable mining industry experience and is supported by an experienced technical and mining operations team, some of whom have had prior operating experience in Russia. See "Directors and Officers."

The Mangazeisky Project

The Mangazeisky Project consists of one exploration license covering 570 square kilometres which was acquired in September, 2004 for an initial term of five years. Upon discovering C1 and C2 Russian reserves and undertaking certain other steps as required by Russian law, a production license may be applied for and issued for the production life of the deposit based on technical and economic substantiation of the development of the deposit.

To date, the Company has completed 7,199 metres of drilling and 18,594 cubic metres of trenching on the Mangazeisky Project. The Mangazeisky license requirements are outlined in details under "The Mangazeisky Project - Property Description and Location".

In 2006, the Company was able to identify several potential targets within the license area for a further drilling program in 2007. The Vertikalny vein structure was of particular interest, with trench mapping and assay results suggesting that the entire 5.1 km strike of the Vertikalny vein contains anomalous silver grades. The Company's original plan was for 6,000 cubic metres of trenching and 2,500 metres of drilling at a projected cost of $3.2 million. However, as a result of successful early exploration results, Silver Bear increased its trenching target to 8,000 cubic metres and engaged Boart Longyear as a contract driller to complement its own resources and expanding the drilling program to 4,000 metres. The cost of the increased 2007 program is approximately $4.7 million.

The objective of the 2007 program was to identify a resource along 1,200 to 1,500 metres of the 5.1 when Vertikalny vein and to investigate the continuity of the structural zone with step out drilling over the 5.1 km strike length.

The 2007 drill program completed 19 drill holes, totalling 3,172 metres of drilling. The drill rigs tested approximately 1,500 metres of the strike length of the Vertikalny vein to depths of approximately 200 metres below the surface.

___________
  1.   The reader is cautioned that the targets expressed above and elsewhere in this prospectus are based on Silver Bear's assessment of the geological data currently available and are conceptual in nature. There has been insufficient exploration with respect to these targets to define any estimates of quantities. There is no guarantee that the targeted estimates will be delineated through additional exploration. These are objectives set by the Company and they are not estimates of quantities as contemplated by section 2.3 of NI 43 101. There is no assurance that these objectives will materialize.


Highlights of the drill results as at the date of the Mangazeisky Technical Report include:
  • Hole V07-006
    • 8,887.1 g/t silver / 6.0 m (1.9 m horizontal width). This interval was re-assayed using pulp duplicates and results confirmed the original assays.
  • Hole V07-014
    • 299.8 g/t silver / 10.0 m (5.0 m horizontal width) - visual logging identified native silver (wire silver), silver sulfosalts and tetrahedrite.
  • Hole V07-015
    • 735.7 g/t silver / 4.1 m (1.3 m horizontal width).
  • Hole V07-013
    • 596.2 g/t silver / 4.4 m (1.5 m horizontal width).
  • Hole V07-001
    • 382.5 g/t silver / 5.8 m (1.4 m horizontal width).


As of the date of the Mangazeisky Technical Report (as defined herein) the Vertikalny vein has been intersected by 12 surface trenches and 15 drill holes providing 27 sample intervals across the Vertikalny vein. The total explored strike length is 1,500 metres. Drilling has tested the Vertikalny vein to a maximum depth of 200 metres from surface.

The weight averaged grade of the 27 sample intervals is 655.4 g/t silver over a horizontal width of 3.98 metres. Excluding the results from hole V07-006 (8,887.1 g/t silver over 6.0 m) the weight averaged grade of the remaining 26 sample intervals is 511.1 g/t silver over a horizontal width of 3.92 m.

The current drill results have validated the presence of potential bonanza style silver mineralization within the Vertikalny vein. The most significant intercept was intersected by hole V07-006 returning 8,887.1 g/t silver over a 6.0 metre core interval, approximately 100 metres from surface. Hole V07-014, 100 metres to the southeast and 200 metres from surface, intersected 299.8 g/t silver over a 10.0 metre core interval which included native silver. The high grade mineralization in hole V07-006 could represent an ore shoot plunging to the northwest, a direction that remains untested as the onset of winter conditions prevented follow up drilling along this trend. To the southeast, immediately below the original surface trenches that identified the silver mineralization at the Vertikalny vein, hole V07-013 intersected 596.2 g/t silver over a 4.4 metre core interval at a depth of 100 metres from surface. Approximately 300 metres to the southeast, hole V07-015 intersected 735.7 g/t silver over a core length of 4.1 metres at a depth of 100 metres from surface. Both holes returned silver grades and thicknesses consistent with those encountered in the surface trenches which tested the Vertikalny vein along a 250 metre strike length and a 150 metre vertical exposure.

Silver Bear intends to conduct a two phase exploration program on the Mangazeisky Project comprised of the following work and goals:

Phase 1
  • Complete further exploration of the Mangazeisky Project by the end of 2008.

  • Define a CIM compliant Inferred Resource on a portion of the Vertikalny vein of up to 150 Moz of silver(1) by the end of 2008.

  • Complete exploration on the known extensions of the Vertikalny vein to demonstrate a potential of 200 to 250 Moz of silver(1) by the end of 2008.

  • Complete surface trenching and limited drilling at other prospective silver targets within the current land position.
Phase 2
  • Complete exploration on the known extensions of the Vertikalny vein to define a CIM compliant resource of 200 to 250 Moz of silver(1) by the end of 2009.
___________
  1.   The reader is cautioned that the targets expressed above and elsewhere in this prospectus are based on Silver Bear's assessment of the geological data currently available and are conceptual in nature. There has been insufficient exploration with respect to these targets to define any estimates of quantities. There is no guarantee that the targeted estimates will be delineated through additional exploration. These are objectives set by the Company and they are not estimates of quantities as contemplated by section 2.3 of NI 43 101. There is no assurance that these objectives will materialize.
    • Complete a scoping study by the end of 2009.


The cost of the two phase program is estimated at $26.0 million, $14.9 million in Phase 1 (2008) and $11.1 million in Phase 2 (2009), which Silver Bear intends to finance from the proceeds of the Offering. Furthermore, as part of the Company's corporate strategy, the Company expects to initiate a feasibility study for the Mangazeisky Property by the beginning of 2010.

As of the date hereof, surface trenching is continuing over the 5.1 km strike length of the Vertikalny vein to search for additional high grade zones along the main structure. See "The Mangazeisky Project".

The Avlayakan Project

Silver Bear holds a 70% interest in a gold property called the Avlayakan Project. On June 1, 2006, Silver Bear entered into a definitive agreement on purchase of equity interest and a definitive framework financing agreement with Vostok Gold Mining Artel ("Vostok") of Khabarovsk in the Russian Federation pursuant to which Silver Bear acquired a 70% equity interest in a company newly formed for the purposes of the transaction, called Mine Avlayakan LLC ("Avlayakan"). Avlayakan now holds the licenses in the Avlayakan, Kirankan, Mayvachan Kundumi license areas in the Khabarovsk region. In June, 2006, Silver Bear paid U.S.$1.0 million as the first part of the purchase price for the 70% interest. The second part of the purchase price of U.S.$4.1 million was paid in March 2007. The third and final part of the purchase price of U.S.$1.1 million will be paid if and when commercial production is achieved on the Mayvachan Kundumi area. Silver Bear also agreed to fund exploration activities and feasibility study costs for Avlayakan in the aggregate amount of U.S.$3.0 million. Costs above that limit are to be funded by the Company and Vostok in proportion to their respective equity interests, subject to normal anti-dilution provisions. As at September 30, 2007 the Company had incurred expenses in excess of U.S.$3.0 million on the Avlayakan Project. Silver Bear has defined a mineral resource on the Avlayakan Project of 179,000 tonnes in indicated resource grading 17.3 g/t Au and 106.61 g/t Ag and 1,104,000 tonnes in inferred resource grading 8.9 g/t Au and 58.53 g/t Ag. Silver Bear intends to use $1.785 million from the proceeds of the Offering to conduct further exploration and studies to estimate the economic viability of the project. Silver Bear is also considering all available strategic options regarding the Avlayakan Project, which may include the sale of Silver Bear's interest therein. See "The Avlayakan Project."

Competitive Conditions

The Company's mineral exploration and development business is competitive with other entities engaged in the same business. The Company competes with a number of other entities in the search for and the acquisition of mineral properties. As a result of this competition, the majority of which is with companies with greater financial resources than the Company, the Company may be unable to acquire attractive properties in the future on terms it considers acceptable. The Company also competes for financing with other resource companies, many of whom have greater resources and/or more advanced properties. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, the terms of such financing will be favourable to the Company.

Environmental Protection

The current and future operations of the Company, including exploration activities on its properties or areas in which it has an interest, are subject to laws and regulations governing exploration, development, tenure, production, taxes, labour standards, occupational health, waste disposal, protection and remediation of the environment, reclamation, mine safety, toxic substances and other matters.

Employees

As at September 30, 2007, the Company had 55 employees, 9 of whom share their time working with Western Goldfields Inc ("Western Goldfields"). Silver Bear entered into a cost-sharing agreement with Western Goldfields in March 2006 under which the Company's office overhead costs are shared equally with Western Goldfields and salary and benefits are shared on the basis of the expected time commitment of the staff involved. All such costs are incurred by the Company and reimbursed by Western Goldfields. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Directors and Officers".  

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