1. Prepare an exploration program plan and have it approved by the appropriate Russian federal organizations (including environmental authorities) by December 30, 2004.
   
   
2. Initiation of the field geological survey within the license sector by not later than June 30, 2005.
   
   
3. Completion of the first phase, i.e., exploration for gold and silver deposits before December 31, 2007. The minimum work constituting:
   
   2005
   Drilling of exploration holes, not less than 2,000 m.
   Digging of trenches, not less than 10,000 m3.
   
   2006
   Drilling of exploration holes, not less than 1,500 m.
   Digging of trenches, not less than 4,000 m3.
   
   2007
   Drilling of evaluation drill holes, not less than 1,500 m.
   Digging of trenches, not less than 6,000 m3.
   
   Presentation to the Territorial Agency for Subsoil Use of the territories of the Republic of Sakha (Yakutia) ("YAKUTSKNEDRA") of a geological report on the results of the work, including calculation of forecast gold and silver Russian reserves of categories P1 and P2.
   
   
4. Completion of the second phase of the work. i.e., appraisal of gold and silver mineralization and deposits discovered, before September 1, 2009, with the kinds and minimum volume of said work constituting:
   
   2008
   Digging of trenches, not less than 10,000 m3.
   Collection of large samples from trenches and well cores for development of a technical plan for mineral extraction.
   
   2009
   Digging of trenches, not less than 10,000 m3.
   Estimation of Russian reserves of gold and silver of categories C2 and P1.
   
   
5. Presentation for state expert examination of a report on the results of geological exploration of the License Sector and documents on calculation of the reserves and forecast resources before August 31, 2009.

1. Observance of the established requirements for protection of the environment and subsoil;
2. By June 1, 2005, analysis of the state of the environment within the Mangazeisky License area prior to the commencement of the geological study in accordance with a program coordinated with and approved by YAKUTSKNEDRA;
3. Environmental monitoring within the Mangazeisky License sector and determination of the impact on it of the geological exploration, in a manner performed in compliance with a program coordinated and approved by YAKUTSKNEDRA by June 1, 2005;
4. Performance of necessary measures to reduce or prevent pollution caused by the execution of the exploratory work;
5. Prevention of water facility pollution and clogging, and observance of the regime of water protection zones;
6. Reclamation of land disturbed during exploratory work, restoring it to a state suitable for further use and in compliance with landscape and recreational specifics of the territory;
7. Timely payment of compensation for damages caused to hunting, agriculture, fisheries and forestry; and
8. Coordination with and approval by YAKUTSKNEDRA of the terms and types of work to be carried out within the water protection zones.

During 1952 and 1953 a more organized exploration effort was conducted on the Mangazeisky Project. Based on previously completed work, the program focused on two mineralized zones identified as the Mikhailovsky and Kuzminsky zones. The exploration was comprised of:

1. geological mapping at a scale of 1:50,000, which was completed;

   detailed trenching of outcrop mineralization. Within the trenches, systematic channel sampling was completed;

2. the shallow continuity of the mineralization was examined by driving two short (a total length of approximately 32 m) adits just below the trench data;

3. topographic surveys on a scale of 1:2,000 were generated and covered an area of 3 km2 within the immediate area of these two zones; and

4. additional exploration included an Induced Polarization (IP) geophysical survey on a scale of 1:5,000 over an area of 1.7 km2.

In 1989, a systematic prospecting and exploration program within the license area was resumed and has continued to the present.

During the period from 1991 to 2003, JSC Yangeologia ("Yangeologia") carried out additional trenching and mapping followed by magnetic surveys over the Kysil-Tas and Arkachan areas.

In 1991, exploration programs were also resumed in the Mangazeisky area. During the period from 1991 to 2003 Yangeologia completed 151,452 m3 of trenching, 10.2 line km of magnetic surveys, detailed geological mapping, soil geochemical surveys, and ten diamond drill holes totalling 1,303 m. This exploration work covered more than 15 principal vein systems.

ZAO Prognoz acquired the Mangazeisky License in September, 2004. On October 21, 2004 Silver Bear acquired 100% of ZAO Prognoz from National Resource Company ("NRC"). Limited work consisting of a couple of drill holes was conducted on the property in 2004.

During the second and third quarters of 2005, a diamond drilling program focused on exploring the Vasilievsky and Mikhailovsky zones. After limited success on the Vasilievsky and Mikhailovsky zones, Silver Bear refocused the diamond drilling activities in September, 2005 on exploring the thicker linear type

stockwork areas of the Sterzhnevoe and Nizhne-Endybalsky Zones. These zones are located south of the Vasilievsky and Mikhailovsky zones.

Silver Bear spent approximately $6.9 million (2004 – $0.1 million) on exploration activities in 2005 of which $4.6 million was spent on the Mangazeisky Project, $0.2 million on technical consultants and $0.7 million on Russian management costs. $1.4 million was spent on a property close to the Mangazeisky Project called the Arkachan property. Based on the early exploration results on the Arkachan property, Silver Bear terminated exploration activities on this property prior to fulfilling its 2005 exploration commitments and is currently in the process of surrendering the exploration license related to this property back to the Russian licensing authorities. See "Risk Factors"

2006 Exploration Program

Disappointing results were obtained during the 2005 drilling program and failed to confirm the continuation of the mineralized zones indicated by the results of the earlier exploration activity in the area. As a result, part of Silver Bear's focus for 2006 concentrated on gaining an understanding of the composition and structure of the Nizhne-Endybalsky, Vostochny and Sterzhnevoe mineralized system which was identified in 2005, with the objective of determining if it contained economic low grade silver mineralization. A field mapping and grab sampling program was completed at the Nizhne-Endybalsky zone in order to decipher the potential distribution and geometric shape of the bulk stockwork and vein mineralization.

The 2005 exploration program had also targeted the Vertikalny structure which is a large northwest-southeast trending vein that cross-cuts the sedimentary stratigraphy in an area referred to as the Vertikalnaya zone. The Vertikalny and several parallel structures and splays of the primary structure had been identified by previous exploration programs and Silver Bear had access to some of the earlier trench sampling results.

The restricted exploration program in 2006 focused on geological mapping, prospecting, modelling and surface sampling along the Vertikalny structure in order to validate the potential of the structure and identify targets for a 2007 drilling campaign.

Field work on the Vertikalny structure was comprised of access roads, trenching, grab sampling, and field mapping. The Vertikalny vein system was traced a total distance of 5.1 km and is composed of anastomizing quartz silicified breccia containing zones of massive galena, pyrite siderite galena and galena sphalerite antimonite mineralization. The structural setting and vein morphology of the Vertikalny structure appears to have similar silver and poly-metallic vein characteristics as the Prognoz silver deposit.

A total of 4,843 horizontal metres of trenching was completed in 18 trenches and 494 samples were taken. The total volume of trenching exceeded the 4,000 m3 minimum required by the terms of the license for 2006. The table below summarizes the significant trenching results from earlier exploration programs as well as Silver Bear's 2006 program on the Vertikalny vein.

Summary of the Historical and the 2006 Silver Bear's Vertikalny Trench Assay Results

Based on the results of Silver Bear's 2006 exploration program, a structural zone with a true vein texture containing silver mineralization was identified at the Vertikalnaya zone. The initial trench mapping and assay results appear to suggest that the entire 5.1 km strike distance along the Vertikalny vein contains silver mineralized zones.

In 2006, Silver Bear completed 732 m of drilling and 4,843 m3 of trenching and spent $2.0 million on exploration activities in connection with the Mangazeisky License.

On a cumulative basis Silver Bear had completed 4,028 m of drilling and 14,484 m3 of trenching in connection with the Mangazeisky License as of December 31, 2006.

Metallurgical Test Work and Recoverability

A report by Western Services (2004) (the "Western Services Report") mentions that metallurgical test work was conducted on two samples from the Mangazeisky Project.

The first sample was collected from the southern block of the Vasilievsky zone. This sample was composed of unoxidized primary silver mineralization and contained minor components of lead, zinc, and copper along with minor stibnite. The silver was found to be primarily concentrated within sulphosalts and present as native silver.

A number of recovery methods were examined for the first sample which included the following:

A single step flotation test resulted in recovering 95% of the contained silver into a concentrate. The concentrate grade was 48 kg/t of silver. Cyanidation of the flotation product recovered 99.1% of the silver

from the concentrate. The total recovery was projected to be in the order of 94% for the material contained in the southern block of the Vasilievsky zone.

A gravitational recovery circuit, was also investigated, in which 57% of the silver was recovered into a concentrate with an average grade of 20.15 kg/t silver. Cyanidation of the gravity concentrate recovered 99.2% of the silver from the concentrate. The total recovery for this process option was 57%.

The second metallurgical sample was collected from the silver-lead Granichny mineralized zone and consisted of partially oxidized mineralization composed mainly of galena, sphalerite and anglesite (0.1 to 2 to 3 mm in size). The silver occurred as freibergite, pyrargyrite and argentite (0.02 to 0.5 mm in size) as well as extremely fine grained native silver. The second sample weighed 17.1 kg with an average grade of 320 g/t silver, 12% lead and 1.4% zinc.

Based on the metallurgical testwork a single stage flotation circuit recovered 80.9% of the lead and 89.2% of the silver into a concentrate. Cyanidation results for the concentrate were not reported.

Although the metallurgical testwork is very preliminary in nature it appears to indicate that the mineralization in at least two of the zones is amenable to recovery by floatation which yields a high grade concentrate. Cyanidation of the concentrate in one case recovered 99% of the silver which may preclude the need to smelt the concentrate which will for the most part eliminate the concern regarding the presence of stibnite. In 2004, Robin Young stated in the Western Services Report of 2004 that "in addition, the test work documentation stated that the concentrate met the feed standards for Russian smelters and it has been deducted that the amount of stibnite must be limited."

Historical Estimate

There is an existing historical reserve estimate prepared according to the Russian classification system. This historical estimate was compiled by Yangeologia and is based entirely on chip samples from within trenches and outcrop exposures within the river banks. The exact date of the estimate is unrecorded. According to Silver Bear's Russian management team, the estimate pre-dates February 1, 2001. Most silver assays were established using the gamma-activation method with external control by fire assay. Lead, zinc, tin stibnite and copper were determined by using the X-ray radiometric method. The following description is partially quoted from the Western Services Report of 2004.

Using the analytical results, the Russians compiled a reserve estimate of the potential of the Mangazeisky Project using the following steps:

• An average silver composite grade within each trend was calculated using a length weighted averaging for the intervals assaying in excess of 150 g/t silver (4.8 oz per metric tonne). The total mineralized horizontal length and length weighted average grades for silver, gold (when present), lead, and zinc were calculated. If multiple intervals were present within a single trench, a combined length weighted grade and thickness was calculated for the total mineralized thickness.

• The composited trench results were plotted in plan view and the limits of the mineralization within and between the trenches were linked together. Based on the trenches contained within the mineralized intercept outline, an average mineralized thickness was determined. The average contained grade of the mineralization was calculated for all mineralized trenches and was also done on a length weighted basis. This provided the final average grade and the thickness for each discretely mineralized zone or sub-zone within a mineralized structure.

• Vertical longitudinal projections were then constructed for each zone. This included the plotting of the locations of the trenches and the related mineralized length and average grade within each trench. At the strike limits of the mineralization, a vertical line was projected downward to a constant datum. The projection distance downward was 100 m below the surface for almost all of the mineralized zones. The area contained between the topographic surface and the final constant datum was planimetered to define the contained area of the mineralization in the vertical longitudinal projections. (The depth of the projected trench values from the surface was based on the methodologies employed at the nearby Prognoz silver project which has drill results as well as a similar geological genesis mineralization type, and overall character.)

• Using the area defined on the vertical longitudinal projections and the average thickness of the mineralization as determined from the trench data, the mineralized cubic metres were determined. This volume was multiplied by one of several specific gravity values which were established from 56 samples collected from the major mineralized zones. These specific gravity values were determined by the Yakutsk Nuclear Physics Laboratory in 1992.

• The tonnage, average metal grades, and thickness for all discrete mineralized zones or subzones were then summarized into a tabular format for the final reporting of the estimated reserves. This reserve contained the mineralization located nearest the surface and was classified as a P1 reserve according to the Russian reserve classification system. This classification was selected as there was very little sub-surface sampling (drilling of underground exploration) available to establish the down dip continuity of the mineralization.

• The second portion of the resource estimate was then compiled and is referred to as a P2 reserve class. This was derived by projecting the mineralization approximately another 100 m below the P1 reserve lower datum limit. Typically this resulted in a doubling of the total reserve tonnage over that represented by the P1 reserves.

Using the procedures noted above, a total of 36 mineralized structures have been identified as including P1 and/or P2 Russian classified reserves. The table below summarizes the distribution of the Russian reserves by mineralized zone with the top 15 zones reported individually and the remaining zones combined.

The discussions related to the reserve estimates contained in this section refer to historical estimates only. The reserve estimates discussed in this section were conducted according to the accepted Russian reserve classification definitions for the period to which they relate. However, they do not comply with the current Canadian Institute of Mining, Metallurgy and Petroleum ("CIM") standards and definitions for estimating resources and reserves as required by NI 43-101 and as such should not be relied upon. The Russian historical reserves discussed below are for information purposes regarding the historical background of the Mangazeisky Project only.

In the discussion of Russian reserves in this Prospectus, the term "reserve" could be to a large extent interchangeable with the term "resources", as Russian "reserves" or "resources" do not have the very distinct meanings that are placed on those terms by CIM standards or other international reporting standards. Readers should be aware that P1, P2 and P3 reserves, may be reported by other sources with the term "resources".

Summary of the Russian Reserves by Mineralized Zone for the Mangazeisky Project

Original table from Western Services Report by R.J. Young, 2004.

*Note: Original Figures Corrected by Micon using figures from Appendix A of the Western Services Report by R.J. Young, 2004.

The following table summarizes the historical Russian reserves by category according to the Russian reserve classification standards.

Summary of the Russian P1 and P2 Reserves for the Mangazeisky Project

Table from Western Services Report by R.J. Young, 2004

*Note: Original Figures Corrected by Micon using figures from Appendix A of the Western Services Report by R.J. Young, 2004.

The potential for the Mangazeisky Project is based on reserve estimation procedures and standards established by various Russian state bodies. Whenever possible the criteria used to estimate a potential reserve is based on projects which have similar geological characteristics. Therefore the procedures which were used at the Mangazeisky Project were based on those implemented at the High River Gold Mines Ltd. (High River) Prognoz project, located approximately 160 km east that has been explored by trenching and drilling. At Prognoz the drilling has confirmed the continuity of the mineralization to depths of more than 300 m below the surface in one of the zones. According to the Russian classification system the historical reserves at the Prognoz project were 125 million ounces of silver classified as C1 and C2 reserves. In the case of Mangazeisky the Russian's limited the estimation of the potential reserves to within 200 m of surface.