pembrook mining corp. management’s discussion and analysis ...€¦ · pembrook mining corp....

Pembrook Mining Corp. Management’s Discussion and Analysis For the three months ended March 31, 2012

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Overview

The following Management’s Discussion and Analysis (“MD&A”), reviews Pembrook Mining Corp.’s (the “Company” or “Pembrook”) financial condition and results of operations for the three months ended March 31, 2012 prepared in accordance with IAS 34 – Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB”). This discussion provides management’s analysis of the Company’s historical financial and operating results and provides estimates of the Company’s future financial and operating performance based on information that is currently available. This MD&A contains forward-looking statements that involve certain risks and uncertainties. There can be no assurance that these statements will prove to be accurate and actual results and future events could differ materially. Please refer to the cautionary language regarding forward-looking statements at the end of this MD&A. This MD&A is dated May 22, 2012 and should be read in conjunction with the Company’s condensed consolidated interim financial statements for the three months ended March 31, 2012, together with the notes thereto, prepared by management in accordance with International Financial Reporting Standards (“IFRS”). All dollar figures are in Canadian dollars, unless otherwise noted. Company Background

Pembrook is a mineral exploration company engaged in the identification, acquisition, evaluation and advancement of mineral properties in Peru and Mexico. The Company is exploring for copper (“Cu”), molybdenum (“Mo”), gold (“Au”), silver (“Ag”), nickel (“Ni”) and other metals including iron (“Fe”), platinum group elements (“PGE”), lead (“Pb”) and zinc (“Zn”). At present, none of the Company’s mineral properties are at a commercial development or production stage. The Company’s objective is to discover mineral deposits and either sell, option, joint venture or otherwise participate in their development. The Company operates in Peru through its subsidiary, Compaňia de Exploraciones Orion S.A.C. (“Orion”) and in Mexico through its subsidiary, Paget Southern Resources S. de R.L. de C.V. Highlights The Company’s objectives for 2012 are to continue to drill its key projects in Peru and Mexico. The following is a summary of key activities during the first quarter of 2012. Peru Drilling in Peru is contingent on the timely receipt of drilling permits, commencing in May.

Sumaq (Cu-Au)

• Drilling was initiated in April 2012. • Six high-grade copper-gold skarns identified on the property have been channel sampled. • Geological mapping, rock chip sampling, a ground magnetic survey and environmental studies

completed. • Minasmoccha skarn channel samples range from 3.5-19.8% Cu, 0.4-5.6 g/t Au and 14.0-195.0 g/t

Ag.


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• A strong (700 metre by 1,200 metre) magnetic anomaly (porphyry target) occurs in a topographic low containing quartz stockwork porphyry and adjacent to three of the main skarn occurrences on the property.

Mila (Cu) • Channel sampling immediately east of the claim boundary returned 24 metres @1.73% Cu. • The copper enriched blanket remains open in all directions. • Trenching, float mapping and IP/resistivity geophysics suggest the horizon can be traced for 1.4

kilometres west of the Cantoral Pit and is up to 400 metres wide. • A second target is located 2 kilometres to the east of the Cantoral Pit is silica opaline breccias and

represents an excellent gold target.

New Projects Leila (Au)

• The Company acquired the Leila gold porphyry property located north of Lima and 2.5 kilometres south of the Viento property.

• Gold mineralization is associated with quartz-sericite/clay altered porphyry with pyrite. • Geophysics suggest the presence of a ring-like chargeability target. • Drilling is planned to commence in the third quarter of 2012.

Mexico Dionicio (Au)

• Located next to and between the Mulatos gold mine owned by Alamos Gold Inc. and the La India gold deposit owned by Agnico-Eagle Mines Limited.

• Covers a series of epithermal veins along a strike length of 600 metres that carry gold grades up to 12.0 g/t Au over five metres.

• Drilling was initiated in the second quarter of 2012.

Cuarentas (Au-Ag) • Four target areas with gold mineralized quartz veining have been identified on the west half of the

property on strike from the Mercedes gold mine owned by Yamana Gold Inc. • Santa Rosalia vein system returned 9.4 g/t Au over 2.5 metres and the Esperanza vein returned

assays of 2.7 g/t Au over 3 metres.

La Cruz (Ag) • A series of Ag-rich veins near an abandoned historic mine returned significant assays up to 1,000

g/t Ag.

Joint Venture of Assets Rio Sonora (Cu)

• Vale S.A. (“Vale”) has completed a Z Axis Tipper Electromagnetic System (“ZTEM”) airborne geophysical survey which has identified 4 porphyry targets. Under the terms of an option agreement, Vale can earn up to a 60% interest in the Rio Sonora project by incurring expenditures of US$7 million and making cash payments totaling US$400,000 over five years.


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Disposal of Non-Core Assets On March 29, 2012, the Company settled its compensation claim on the Fernie project with the B.C. government. In return for cash compensation of $550,000, the Company relinquished its title to the Fernie mineral claims and its rights to pursue any further legal action regarding those claims. Outlook In 2012, the Company plans to continue drilling its key projects in Peru and Mexico. If permits are received on schedule, initial diamond drill programs are planned for Sumaq, Mila and Tambo in the second and third quarters. Drilling is planned to resume at Lidia and Viento in the third quarter, once outstanding drilling permits are received as anticipated in the third quarter. The Company will also continue to maintain a pipeline of high quality new projects in Peru and Mexico. In 2012, the Company plans to complete the following: Peru Viento (Cu-Mo-Ag)

• Resume drilling at this breccia/porphyry project in the third quarter, focus on assessing the potential for the high-grade breccias and continuing to explore for a higher grade phase of the porphyry system in the PasTan – Paylacocha area.

Lidia (Cu-Au) • Continue drilling in the third quarter at the Main Zone to locate the high-grade areas within the

mineralized structure. • Additional sampling and geological mapping will be completed on new copper occurrences on

the north and south sections of the property to develop additional drill targets.

Sumaq (Cu-Au) • Diamond drilling of the known high-grade copper-gold skarns and the porphyry target identified

from the magnetic survey will be completed in the second quarter. • Geological mapping and sampling will continue on the newly acquired ground contiguous and to

the south of the property.

Mila (Cu) • A Phase 1 drill program is planned to evaluate the size potential of the newly discovered high-

grade copper mineralization and to locate the source porphyry. Drilling is planned to commence in the second quarter.

Hurricane (Ni-Cu-PGE-Ag)

• In the second quarter, ground follow-up of airborne electromagnetic (“AEM”) conductors at Ocobamba, Coquimbo and Jantunpuma to identify the nature of the conductivity and to develop drill targets.

Huiniccasa (Cu-Zn-Ag-Mo-Fe) • Drilling will resume once the drilling permit has been received (anticipated in the second half of

2012). • The drilling will focus on testing the three geophysical targets interpreted to be potentially

reflecting a porphyry.


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• The strike extension of the skarn to the south will also be evaluated.

Tambo (Au) • A gold breccia zone of quartz-specularite, tourmaline chalcopyrite and pyrite that returned

channel sample assays up to 1.0 g/t Au over 20 metres and multiple individual channels with 5.0 g/t to 30.3 g/t Au is planned for drill testing.

• Two high-level epithermal gold targets have been identified at the top of the system and are planned for drilling in the third quarter.

Mexico Cuarentas (Au-Ag)

• Additional geological mapping and sampling along the strike extension of the Mercedes Mine structure will continue in the first half of 2012.

• A drill program will be initiated in the fourth quarter.

Dionicio (Au-Ag) • The drilling program was initiated in the second quarter to test the potential of the epithermal vein

system. Rio Sonora (Cu)

• A Titan 24 IP geophysical survey is planned by Vale for the second quarter of 2012 which will further define Z Axis Tipper Electromagnetic System (“ZTEM”) airborne anomalies for diamond drill testing in the third quarter of 2012.

Project Details: Peru Drilling programs on the Peru projects in 2011 are detailed below. No new drilling was completed in Peru during the first quarter of 2012 as drill permits remained pending. Viento (Cu, Mo, Ag) In 2011, phase 1 drilling was completed at the Viento project located 120 kilometres north of Lima for a total of 21 holes and 10,168 metres drilled. Viento is within a large metal district and lies along a northwest regional trend which contains Chinalco’s Toromocho porphyry-copper deposit, Buenaventura’s Uchuchaqua silver deposit and Glencore’s Iscaycruz lead-zinc-silver deposit. The Viento district covers a 15 kilometre by 20 kilometre area, within which the Company has a land position of 9,863 hectares. The Viento district is characterized by silver-lead-zinc vein systems on the outer margins with a central area of high-grade breccia and multiple porphyries. The district is developed within intermediate volcanic and volcaniclastic rocks which are underlain, and/or cut, by both older batholithic granodiorite and younger dacitic to tonalitic porphyry bodies. Previous exploration by Minera Carolina (Gubbins Group) in the mid-1990s resulted in the discovery of multiple high-grade copper-molybdenum-silver breccia pipes. Rock chip sampling and 2011 drilling by the Company has verified these results with Pembrook’s initial drilling returning the following results (as previously reported): VIE-1 La Trinchera Breccia 318 metres @ 0.60% Cu; 0.25% Mo; 15.1 g/t Ag VIE-3 La Mina Breccia 89 metres @ 0.39% Cu; 0.62% Mo; 7.1 g/t Ag VIE-4 Parag Oeste Breccia 96 metres @ 1.00% Cu; 0.19% Mo; 10.3 g/t Ag


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VIE-18 Parag Oeste Breccia 70 metres @ 0.26% Cu; 0.36% Mo; 7.8 g/t Ag VIE-20 La Trichera Breccia 118 metres @ 0.68% Cu; 0.13% Mo; 10.7 g/t Ag Six distinct breccia bodies are found within an east-west trending zone measuring 1,200 metres by 1,500 metres. The breccias have surface expressions up to 120 metres by 150 metres across (Paylacocha I breccia) and appear to form vertical pipe-like bodies. The breccias are polymictic, hydrothermal breccias with a matrix of pyrite, chalcopyrite, molybdenite and locally with variable calcite, quartz, magnetite, sphalerite and galena. Within the breccias, grades can reach up to 8.17% Mo, 6.9% Cu and 191.0 g/t Ag. The breccias provide an excellent target for delineation of a modest size but high-grade molybdenum-copper-silver deposit. In addition to the known breccia bodies, exploration by the Company in 2011 outlined other targets. Immediately east of the La Trinchera breccia, mapping and sampling identified the Viento Porphyry which is characterized by a dacitic porphyry with sericitic alteration at the surface. This porphyry is cut by quartz and pyrite veinlets and is found over an area of at least one kilometre by one kilometre. Within the area, channel rock chip samples taken from road cuts which crisscross this zone have returned 1,000 metres of 0.10% copper attesting to the large copper anomaly associated with this part of the porphyry system. In addition to the mineralization within the breccias, previously reported results from 2011 drill tests at the Viento porphyry returned the following exceptionally large (+1 billion tonnes) low-grade copper intervals: Hole VIE-5 254 metres @ 0.09% Cu Hole VIE-6 268 metres @ 0.09% Cu Hole VIE-7 516 metres @ 0.11% Cu Hole VIE-8 380 metres @ 0.11% Cu Hole VIE-12 262 metres @ 0.13% Cu Logging of core through the porphyry indicates extensive sodic-calcic alteration indicative of deeper and lower levels of a porphyry system. Exploration is now focussed on vectoring toward higher level porphyry bodies at higher elevations or in faulted blocks toward the PasTan-Paylacocha area. All results from 2011 drilling have been returned and complete new results are presented as follows:

HOLE FROM (metres)

TO (metres)

LENGTH (metres)

Cu % Mo % Ag g/t

VIE-01 0.0 317.8 317.8 0.60 0.25 15.00 VIE-02 0.0 166.0 166.0 0.16 - 1.67 VIE-03 0.7 96.0 89.0 0.39 0.62 7.05 VIE-04 0.0 96.0 96.0 1.00 0.19 10.29 VIE-05 72.0 194.0 122.0 0.10 - 1.25 VIE-05 232.0 392.0 160.0 0.11 - 1.10 VIE-05 430.0 450.0 20.0 0.14 - 1.20 VIE-06 22.0 290.0 268.0 0.09 - 1.73 VIE-07 0.0 516.0 516.0 0.11 - 1.30 including 233.0 413.0 180.0 0.16 - 1.30 VIE-08 2.0 382.0 380.0 0.11 - 1.10 including 200.0 224.0 24.0 0.20 - 2.10 VIE-09 3.0 63.0 60.0 0.27 0.09 3.81 VIE-09 175.0 201.0 26.0 - 0.07 - VIE-10 6.0 150.0 146.0 0.21 - 2.00 VIE-10 182.0 238.0 56.0 0.15 0.02 2.10


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VIE-10 276.0 432.0 156.0 0.23 0.04 2.30 including 328.0 382.0 54.0 0.38 0.06 3.40 VIE-11 11.0 398.0 387.0 0.12 - 2.60 including 346.0 398.0 42.0 0.15 - 9.90 VIE-12 63.0 325.0 262.0 0.13 - 1.16 VIE-13 32.0 62.0 30.0 0.13 - 3.47 VIE-13 218.0 222.0 4.0 - 0.08 - VIE-13 284.0 290.0 6.0 0.21 - 1.50 VIE-13 340.0 370.0 30.0 0.12 - 1.30 VIE-14 0.0 34.0 34.0 0.19 0.02 1.82 VIE-14 48.0 86.0 38.0 0.12 - 1.18 VIE-14 170.0 256.0 86.0 - 0.08 - including 210.0 256.0 46.0 - 0.10 - VIE-14 300.0 304.0 4.0 - 0.11 - VIE-15 480.0 484.0 4.0 0.14 - 1.20 VIE-16 60.0 66.0 6.0 0.10 - 12.90 VIE-17 173.0 185.0 12.0 0.14 - 1.40 VIE-17 201.0 257.0 56.0 0.17 0.05 4.10 VIE-17 283.0 299.0 16.0 0.89 0.08 13.50 VIE-17 351.0 455.0 104.0 0.21 0.03 2.60 VIE-18 0.0 164.0 164.0 0.19 0.18 6.50 including 0.0 70.0 70.0 0.26 0.36 7.80 including 0.0 14.0 14.0 0.37 0.69 12.10 including 134.0 144.0 10.0 0.13 0.07 2.30 VIE-18 194.0 232.0 38.0 0.12 0.06 1.10 VIE-19 101.0 103.0 2.0 0.05 - 46.30 VIE-20 23.0 57.0 34.0 0.11 0.01 1.10 VIE-20 115.0 233.0 118.0 0.68 0.13 10.70 including 121.0 175.0 54.0 1.04 0.23 15.00 including 137.0 175.0 38.0 1.33 0.28 19.80 VIE-21 25.0 48.0 23.0 0.48 0.07 4.50 including 21.0 43.0 12.0 0.63 0.09 6.10 VIE-21 48.0 76.0 28.0 0.04 - 1.90 VIE-21 201.0 240.0 136.0 0.20 0.03 4.40 including 112.0 128.0 16.0 0.48 0.04 11.20 VIE-21 282.0 324.0 42.0 0.10 0.01 1.40 These results (VIE-13 through VIE-21) are from holes designed to test for extensions of the known breccia bodies. High-grade copper and molybdenum mineralization was intersected as noted at Parag Oeste (VIE-17 reporting 16 metres at 0.89% Cu and 0.08% Mo; VIE-18 reporting 24 metres at 0.21% Cu and 0.59% Mo) and La Trichera where VIE-20 intersected 118 metres at 0.68% Cu and 0.13% Mo. These results suggest the breccias are metal-rich and occur as both narrow, near-vertical bodies with long vertical extent (La Trichera) and as bodies which flare near the surface and have less vertical range (La Bola). A model to provide an initial estimate of the size of the breccia pipes is in progress. Exploration at Viento in 2011 has identified a large mineralized system for testing in 2012 to locate a higher-grade phase of the porphyry. Results from the breccias have confirmed historical drill results and an inventory and geologic model, which is in progress, will guide future plans for these zones. The drill permit for +100 holes has been submitted and approval is anticipated in mid-2012.


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Lidia (Cu-Au) At Lidia, two drills completed 26 holes, for a total of 12,691 metres drilled in 2011. The drilling was designed to test for extensions to mineralization at the Lidia Main Zone and to complete phase 1 drilling on targets including Puru Puru, Tejene and Ichocollo. In addition, a structural study is being completed to enhance the understanding of the district and the controls to mineralization. In May 2011, the Company acquired a 100% interest in additional claims along strike of the Lagunillas fault, thereby expanding the Lidia project by 1,500 hectares. The Company plans to advance this new copper and gold discovery with one drill to further test favourable targets in the third quarter of 2012. Significant mineralization has been discovered by the Company in previous drilling and results include such drill intercepts as: LID-1: 32 metres @ 0.90 g/t Au LID-1: 185 metres @ 0.45% Cu LID-4: 135 metres @ 0.52% Cu LID-10: 100 metres @ 0.37% Cu and 0.51 g/t Au LID-16: 72 metres @ 0.21% Cu and 0.44 g/t Au LID-20: 94 metres @ 0.26% Cu and 0.24 g/t Au These results indicate the first discovery of an IOCG (iron oxide copper gold) occurrence in the Altiplano of Peru and also within tertiary rocks in Peru. Though this is a poorly understood deposit type, many large deposits such as Candelaria and Manto Verde in Chile, and Marcona, Mina Justa and Pampa de Pongo in Peru are examples of this type of occurrence. The Company has built a large land position in this new district and now controls 33,500 hectares of which 29,300 hectares are titled and the remaining 4,200 hectares are subject to the new “previous consultation” law which requires community approval prior to granting of title. The current drill program is designed to test for extensions, continuity and higher-grade mineralization within the mineralized “Lidia Main Zone Corridor” and to test for new centres of mineralization elsewhere within the district. During the fourth quarter of 2011, the Company drilled fifteen holes for 6,759 metres. The 2011 drill program was designed to test for extensions both along strike and at depth of the Lidia Main mineralized zone and to test several of the new district prospects. Results from the district exploration targets returned narrow, anomalous to low-grade copper-gold mineralization at Tejene and Puru Puru. These holes were targeted to test strong, surface, copper and gold geochemical anomalies coincident with strong chargeability signatures. Evaluation of these results and the core will continue to determine how to use this information as a guide to future exploration. Hole LID-33 cuts strongly altered favourable andesite and through the entire hole contained anomalous copper (0.23% Cu over 106 metres). Drilling in the fourth quarter of 2011 focused along the Lidia Corridor with two drills. The Lidia Corridor is a N70E trending, 150 metre to 250 metre wide zone which can be traced for at least two kilometres. The zone is bound by the Mantilla fault to the north and the Lidia fault to the south and is the host for all significant mineralization detected by drilling to-date. The presence of interesting drill intercepts over this large area suggests potential for the discovery of a significant copper and gold deposit within this corridor. Within the Lidia Corridor, mineralization has a strong lithologic control and is preferentially developed within the “middle andesite,” a coarsely porphyritic, massive andesite. This horizon can be up to 230 metres thick and the entire stratigraphic sequence has been rotated to a steep dip complicating geologic correlations. The mineralized andesite has strong iron alteration as specularite and hematite (locally with iron concentrations to +30% Fe) along with variable proportions of sericite and feldspar, and with dolomite as fine stringers. Mineralization occurs as chalcopyrite as disseminations replacing mafic phenocrysts, as microfracture fillings and as massive veinlets. In addition, secondary


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copper minerals are present within near-surface oxidized zones. Gold is found with chalcopyrite and also as free gold within fine specularite veinlets. Drilling was designed at 100 metre spacing to establish continuity and controls of the Cu-Au mineralization and to search for high-grade portions along the structure. LID-33 is the first hole drilled in this effort and though long runs of anomalous to low-grade mineralization were encountered within the favourable andesite, higher-grade mineralization was not intersected. LID-34, 35 and 36 also penetrated the favourable andesite, and locally chalcopyrite was noted. Drilling in 2012 will be focused on vectoring to higher-grade areas along the structure. Sumaq (Cu–Au) The Sumaq prospect is located in the departments of Apurimac and Cusco within southeastern Peru. The prospect lies within the metal-rich Yauri – Andahuaylas Skarn-Porphyry belt, which hosts several major deposits including Xstrata’s Las Bambas, Tintaya and Antapaccay, La Haquira, Las Chancas and the Constancia porphyry copper deposits. The Sumaq property is well located with the Ferrobamba deposit, the largest deposit within the Las Bambas district, located just 8 kilometres to the northwest. The Sumaq property consists of 11,600 hectares, of which 7,700 hectares comprises the Gema 4-6 & 9, Zoila 1 & 2, and Carancas 3-5 claims acquired from Minera del Suroeste S.A.C. in October 2011. For additional information on the acquisition of these claims, please refer to the Corporate Transactions section below. To-date the Company has identified multiple gold-bearing and copper-bearing skarns. These bodies occur at the contact of the Ferrobamba Limestone, which is the host for nearly all skarn deposits within the region, and granodioritic to monzonitic intrusive bodies. High-grade copper mineralization with several samples containing up to 19.8% Cu and high-grade gold and silver up to 30.1 g/t Au and 195 g/t Ag is found within highly-oxidized, magnetite and garnet-bearing skarns. Six distinct skarns have been identified on the project and measure up to 300 metres by 50 metres. Exploration activities including geologic mapping, rock chip sampling, a ground magnetics survey and environmental studies were carried out and are in progress. The magnetic survey has outlined a strong magnetic feature that measures 700 metres by 1,200 metres (which is similar in size to the Ferrobamba and Chalcobamba deposits in the Las Bambas district). This anomaly is centered in a topographic low adjacent to the three main copper-gold skarn occurrences. The magnetic signature is indicative of an extensive magnetite skarn, or the magnetic central portion (potassic zone) of a porphyry system. The phase 1 drill program consisting of 20 holes was initiated in May 2012. Mila (Cu) Mila is located in south-central Peru approximately 400 kilometres southeast of Lima. Previous “informal” mining from a small (60 metres by 120 metres) open pit located immediately adjacent to the Company’s holdings, extracted high-grade copper (+5% Cu) from a horizontal blanket measuring two metres to five metres thick. Sampling by Pembrook returned multiple channel samples containing 2.2% to 16.8% Cu through this secondary blanket characterized by chalcocite, malachite, chrysocolla and native copper. Immediately west of this pit, the Company controls a large land position measuring 1,000 metres by 3,000 metres that is characterized by intense “acid” alteration including abundant breccia, granular silica, clay and native sulphur. This alteration is common of the highest barren portions of a gold-rich, high-sulphidation system such as Yanacocha and Pierina or in the uppermost levels of a copper porphyry system. Thus, potential exists for a discovery of a high-grade, near-surface, secondary-enriched copper deposit and its deeper source, a copper porphyry or gold and copper epithermal deposit.


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During the fourth quarter of 2011, the Company expanded its land position through the acquisition of a key 500 hectare block surrounding the open pit to the north, east and south. The Company will acquire a 100% interest in this property through a series of phased cash payments at project milestones including completion of a community agreement and approval of the environmental permit for drilling. The Company now controls 12,000 hectares at the Mila prospect including 1,000 hectares in which the Company has title with the remaining 11,000 hectares subject to the new “previous consultation” law and thus subject to community approval prior to granting of title. The primary targets lie within the titled ground and can quickly be advanced to drilling. The Company initiated exploration activities including rock chip and drainage sampling, geophysics (magnetics and IP/resistivity) and geologic mapping. In addition to the zone immediately west of the small open pit which is characterized by strong silica and clay alteration and abundant breccia, the Company has identified several targets in the area east of the open pit and on the property. Three, distinct, opaline and chalcedonic silica, breccia bodies with variable amounts of iron oxide and pyrite are present in this zone and suggest the Mila system is highly dynamic (explosive) and covers a larger area than previously noted. The breccia bodies are found within a sequence of layered volcanic rocks and the presence of chalcedonic and opaline silica within these multi-phase bodies suggests potential exists for the discovery of gold mineralization within permeable, favourable horizons at depth. These “eastern breccias” are found over an area of 300 metres by 300 metres and provide additional drill targets within the project. Geophysical surveys are in progress with a magnetic survey completed (70 line kilometres) and an IP/resistivity survey ongoing (44 of 72 line kilometres completed). Though data collection and processing is incomplete, initial data suggests the presence of a strong, east-west trending resistor terminating in the open pit and extending west across Pembrook ground for a distance of one kilometre. This body is mostly flat-lying, has a thickness of 30 to 80 metres and a width up to 100 metres, and the high resistivity likely represents strong silicification within a volcanic tuff. This body is underlain by an extremely conductive manto which could be the extension of the supergene copper blanket. In addition to this strong geophysical anomaly, other resistivity and chargeability features are present and may provide drill targets. Mapping, sampling and geophysics continued in the first quarter of 2012. It is anticipated that the permit to allow drilling should be approved in the second quarter. The drill program will consist of 10-15 holes and 2,500 metres. In summary, Mila provides the Company with an excellent, high-grade, near-surface copper target along with potential for discovery of a copper porphyry or epithermal gold-copper mineralization at depth. Hurricane Magmatic (Ni-Cu-PGE-Ag) At the Hurricane project in southeastern Peru, work during the third quarter of 2011 consisted of two main activities: a helicopter-supported reconnaissance of anomalies generated by the integration of results from the 2010 airborne geophysical survey (electromagnetics and magnetics) with the regional geochemical data base, and the restart of the airborne geophysical survey to complete the remainder of the originally planned survey curtailed by bad weather in 2010. Within the project area, the Company controls 96,845 hectares with 61,945 hectares titled, and the remaining 34,900 hectares subject to the “previous consultation” process managed by the government and requiring approval by the local communities prior to granting of title. In 2010 the Company initiated an airborne geophysical survey of the Hurricane region to enhance the potential for discovery. A total of 3,290 line kilometres of a planned 6,640 line kilometres were flown with an additional 706 line kilometres flown in 2011. The 2010 survey identified twelve distinct EM anomaly clusters of which the


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Ocobamba AEM-magnetic anomalies coincided with a strong stream geochemical anomaly with elevated nickel-copper-cobalt-silver and platinum values. A total of four of the anomaly clusters were followed up with helicopter-supported reconnaissance. At Ocobamba, a small ultramafic stock measuring at least 300 metres by 400 metres across was identified in close proximity to the AEM conductor and remains a priority target for drilling. Results of the follow-up work at the other anomalies were similar with discovery of ultramafic rock in highly-vegetated terrain also in proximity to AEM conductors. The Phase 2 electromagnetics-magnetics survey began in mid-August 2011. Twenty-one percent of the planned 2011 survey (706 of 3,320 line kilometres) was completed by the end of 2011. The area still to be flown will not be completed in 2012 as work will focus on ground follow-up including trenching and sampling over high-priority AEM conductors. Huiniccasa (Cu,Zn,Ag,Mo,Fe) At Huiniccasa, located in southeastern Peru, non-geologic work has continued through the first quarter of 2012, with the primary activity the advance of the detailed archaeological study required prior to additional drilling. The study is a joint Pembrook and Peru Cultural Ministry effort and encompasses a 90 hectare area, nearly all of which is outside of, and above, the main skarn zone. The study was completed at the end of the fourth quarter of 2011 and once approval is obtained from the Cultural Ministry the Company can begin construction of drill access trails and platforms under the supervision of an archaeologist from the Cultural Ministry. It is anticipated this work will begin following cessation of the rainy season and require three months for completion, with drilling ready to commence mid-to-late 2012. In addition to the archaeological study, the Company has continued work with the local communities in order to maintain positive relations and complete required obligations. The focus of this work has been maintenance and modification of the over 20 kilometre access road to lessen the impact of erosion within this steep, exposed terrain. Tambo (Au) Tambo is a large metal district measuring 8 kilometres by 12 kilometres consisting of 27,500 hectares for which the Company has title. The district lies at the structural intersection of the Southern Peru Copper Porphyry Belt, which contains the Toquepala, Quellaveco, Cuajone and Tia Maria Cu porphyry deposits, with a northeast-trending structure that projects into the epithermal terrane in the altiplano hosting such gold and silver deposits as Aruntani, Ares and Orcopampa. Within the Tambo project there are three distinct target types within the system. At the highest levels, large silica caps (siliceous sinters) covering up to 1 kilometre by 3 kilometres are present. These bodies contain strong trace element geochemistry with highly-enriched antimony (including stibnite), arsenic and mercury. A large number of silica boulders are found in the drainages of this target and multiple values up to +1.0 g/t Au are reported. It is likely that these gold-bearing blocks were derived from the silica caps. In the lowest levels of the system, gold (and copper) is associated with breccia and fracture fillings containing quartz + specularite + tourmaline + chalcopyrite + pyrite. Channel samples through these zones have returned intervals including 18 metres @ 0.73 g/t Au and 20 metres @ 0.99 g/t Au, with multiple high-grade gold samples (up to 30.3 g/t Au) within separate structures. Breccias are found within a topographic low area measuring at least 200 metres by 200 metres and potential exists for better continuity and more voluminous gold-bearing breccias at depth. In addition, this zone lies within a large circular feature with many similarities to a covered porphyry system. Thus potential exists for the discovery of a porphyry beneath the breccia zone. Drilling is scheduled to begin in the third quarter of 2012, pending receipt of the drill permit.


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Santos (Au-Ag) Preliminary geological mapping and sampling has been initiated at the Santos prospect located in southwestern Peru, 65 kilometres east of Nazca. Santos is a large, epithermal system covering an 8 kilometre by 18 kilometre area containing at least five altered and mineralized zones including both high-sulphidation (disseminated sulphide related) and low-sulphidation (vein) targets. The property comprises 3,300 hectares within the district which includes two of the largest high-sulphidation systems in the area. The Apacheta zone (southern target) measures 3.5 kilometres by 1.5 kilometres and the Huamanripa target (northern target) covering 2 kilometres by 2 kilometres. Reconnaissance sampling indicated numerous anomalous gold with one sample from a “vuggy” silica zone returning 0.7 g/t Au. In addition, trace element geochemistry including arsenic and mercury are locally anomalous within the zones. Both systems appear to contain clay-dominant alteration with multiple silica ribs and small, silica breccia bodies scattered through the altered andesitic rocks. During 2011, the Company signed an agreement with Teck Mining Company (“Teck”) to gain access to their technical data from the project area. In return Teck retains the right to have the claims transferred to them should Pembrook decide to abandon the property in the future. This right does not apply should Pembrook transfer or sell the claims, but only in the event Pembrook abandons the claims. Inchilihuay (Pb-Zn-Ag) The Inchilihuay prospect is located in central Peru just east the Central Peru Mineral Belt and 40 kilometres from the Cerro de Pasco Mine. Reconnaissance exploration identified high-grade lead-zinc-silver mineralization within limestone surrounded by granodiorite. Initial sampling returned multiple +5% combined lead and zinc, and some channel samples with very high-grade assays from the South Inchilihuay area including: 1.5 metres @ 18.9% combined Pb + Zn; 45.0g/t Ag 1.0 metres @ 23.2% combined Pb + Zn; 95.1g/t Ag 1.5 metres @ 29.8% combined Pb + Zn; 62.6g/t Ag The Company also finalized an agreement with Hochschild Mining Company (“Hochschild”) in which the Company acquired a 100% interest in Hochschild’s Lorena claims (2,400 hectares – titled) contiguous to the Inchilihuay concessions. The Company now holds 7,700 hectares within the Inchilihuay prospect. Geological mapping and sampling has now focused on the north end of the Inchilihuay Corridor, a north-south trending, 150 metre by 800 metre wide zone which hosts the high-grade lead-zinc-silver mineralization. Within this zone, limestone and sandstone are found as pendants or fault wedges within a large granodiorite. The limestone has been marbleized and recrystallized and locally skarn is present. Mineralization is found within the skarn zones as massive and disseminated sphalerite and galena. Sampling at the north end indicates system zoning as this portion contains only zinc with values from 1%-10% zinc from the altered limestone. Mineralization at the north end of the corridor is confined to a 40 metre by 50 metre zone. To the south, mineralization includes lead-zinc-silver as mineralized blocks measuring tens of metres across. Viruna (Au-Cu) At the Viruna project, drilling was carried out in the second quarter of 2011 consisting of five holes for a total of 2,272 metres. This program focussed on testing extensions of the first hole drilled at Viruna in 2010 that returned 0.47 g/t gold over 240 metres. These assay results, combined with evaluation of core, indicate the presence of a large porphyry system with low-grade to anomalous gold mineralization. Mineralization in VIR-8 is an offset to VIR-1 and examination of core suggests mineralization in these two holes is related to a structural zone cut by a high


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density of pyrite stringers and quartz-sulphide breccias. Potential exists to expand this zone but it appears mineralization will be low-grade. Results from the 2011 drill program indicate the central zone of this porphyry system has been tested and additional review will be conducted to determine if targets along the margin of the system are associated with “vein-type” high-grade gold and copper mineralization. Project Details: Mexico

Activities during the first quarter of 2012 include the phase 2 drilling of the Japonesas Norte and Batamote projects. In addition, mapping and sampling was completed at the Dionicio and Cuarentas projects. Exploration activity will focus on gold, silver and copper exploration, largely in Sonora.

Japonesas Norte and Batamote (Au-Ag)

These two adjoining claim groups were optioned in May 2011 and April 2011 respectively. The combined 3,200 hectare project covers numerous gold showings in rhyolite and sedimentary rocks. Extensive mapping, rock and soil sampling have defined a broad area with northwest-trending structural zones containing anomalous to high-grade gold. Gold occurs in three settings, as high-grade polymetallic epithermal veins, disseminated and fracture controlled oxide mineralization in rhyolite and as silicification with quartz stockwork. A phase 1 drill program consisting of 4,102 metres in 24 holes of drilling on seven different targets areas was completed in 2011. The phase 2 drill program completed in the first quarter of 2012 followed up on the favourable intersections from 2011 drilling in the Batamote, Japonesas and Rincon areas of the properties. The results were considered negative and the options on the Batamote and Japonesas Norte properties were terminated in May 2012. The Company will write off approximately $1.8 million for amounts capitalized for work done on these properties in the second quarter of 2012. Intersections from the 2011-2012 drilling program include:

HOLE FROM TO LENGTH (metres)

Au g/t Ag g/t

CC-001 27.0 31.5 4.5 0.7 89.7 CC-002 105.0 111.4 6.3 0.2 6.2 CC-002 136.5 141.2 7.5 0.8 5.5 including 138.9 141.2 2.3 2.6 11.2 CC-003 58.2 68.3 10.2 0.5 20.6 CC-005 5.5 32.5 27.0 0.5 1.6 including 22.0 23.5 1.5 6.5 4.3 CC-006 48.0 52.5 4.5 0.7 0.8 CC-006 126.0 148.5 22.5 0.2 0.1 including 139.5 145.5 6.0 0.4 37.3 CC-008 85.5 87.0 1.5 0.4 0.5 including 96.0 97.5 1.5 0.3 0.5 CC-009 117.6 144.0 26.4 0.2 10.0 CC-010 28.5 35.3 6.8 0.4 2.9 CC-011 23.5 51.0 27.5 0.3 55.8 including 28.5 46.5 18.0 0.5 58.9 including 30.2 32.7 2.5 2.3 364.0 CC-011 122.1 132.0 9.9 1.6 1.4 including 124.4 129.0 4.6 3.0 1.9 CC-012 46.1 49.5 3.4 1.3 14.5 including 48.0 49.5 1.5 2.5 15.5 CC-012 106.3 127.0 20.7 0.3 5.6


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including 108.6 110.7 2.1 1.3 35.4 CC-013 47.7 84.5 36.9 0.2 3.0 CC-014 0.0 31.5 31.5 1.2 2.1 including 13.5 16.5 3.0 6.1 7.1 CC-015 0.0 37.5 37.5 0.4 2.5 including 3.0 12.0 9.0 0.9 0.3 CC-016 4.1 64.6 60.5 0.2 1.1 CC-018 25.5 33.0 7.5 0.3 6.9 CC-019 99.8 136.0 36.2 0.2 5.3 CC-020 0.0 30.0 30.0 0.3 4.9 including 22.5 30.0 7.5 0.7 17.4 CC-021 0.0 146.0 146.0 0.3 0.8 including 0.0 34.5 34.5 0.6 2.8 CC-021 113.0 131.0 18.0 0.8 0.3 CC-022 98.0 154.0 56.0 0.2 0.3 including 127.0 130.0 3.0 0.8 0.3 including 133.0 136.0 3.0 0.6 0.3 including 139.0 142.0 3.0 0.7 0.3 CC-023 30.0 43.2 13.2 0.3 3.2 including 70.0 82.5 12.5 0.4 0.3 CC-024 0.0 3.0 3.0 1.3 0.3 CC-024 30.0 43.2 13.2 0.3 3.2 CC-024 54.7 66.0 11.3 0.5 2.2 CC-025 25.8 42.0 16.2 0.4 37.0 including 33.0 40.5 7.5 0.7 58.1 CC-025 119.7 125.0 5.3 0.4 11.4 CC-026 93.0 96.0 3.0 0.7 0.6 CC-027 40.5 52.5 12.0 0.2 2.1 CC-028 4.5 96.0 91.5 0.2 7.6 including 4.5 55.5 51.0 0.3 11.2 including 19.5 22.5 3.0 1.4 117.5 CC-029 0.0 110.5 110.5 0.3 3.3 including 20.5 39.4 18.9 0.7 6.4 including 23.5 24.2 0.7 5.6 38.3 CC-030 32.3 50.5 18.2 0.5 4.4 CC-032 0.0 60.5 60.5 0.4 1.1 including 54.5 59.0 4.5 2.1 2.6 CC-033 0.0 40.0 40.0 0.2 5.8 including 0.0 19.0 19.0 0.3 10.9 * Drill holes CC-004, CC-007 and CC-017 did not intersect any significant mineralization. Assays are pending for drill hole CC-031.

Cuarentas (Au-Ag)

An intensive program of silt sampling and prospecting on the western half of this claim was undertaken to evaluate the potential for gold mineralization associated with a mineralized corridor extending northeast from Mercedes Mine owned by Yamana Gold Inc. This program has identified several drainages with very strong gold responses, discovered several new mineralized structures with anomalous gold and silver and identified a zone of strong copper-silver skarn. Title to the claims was formally granted in November 2011. Surface exploration work in the first quarter of 2012 identified four discrete areas with auriferous gold veining. The Santa Rosalia east area has yielded samples of up to 9.4 g/t Au over 2.5 metres from a wide shallow dipping vein. Sampling in the Esperanza area has yielded numerous veins with 1.0-4.0 g/t Au with the best results to date of 2.7 g/t Au over 3 metres and 3.6 g/t Au over 0.5 metres. Sampling in


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the northeast part of the claim has identified silicification in favourable limestone beds and quartz veining. Most samples of the veins are greater than 1.0 g/t Au with one sample assayed at 7.3 g/t Au over 3 metres. Silicification in the limestone is highly anomalous in Ag, arsenic (“As”), antimony (“Sb”) and Zn suggesting good potential for discovery of auriferous replacement mineralization in limestone. Work is ongoing with results pending from recent sampling of veining and silicification in the Azulitos area. Further exploration work is planned, leading to the definition of drill targets in the third quarter of 2012.

Dionicio (Au) The 150 hectare Dionicio property is located adjacent to and between the Mulatos Mine owned and operated by Alamos Gold Inc. and the La India project owned by Agnico-Eagle Mines Limited. The property covers numerous epithermal veins with excellent high-level epithermal textures and lattice textured quartz. The veins locally reach widths greater than 5 metres and average 1 metre to 2.5 metres. All veins carry anomalous gold and one vein consistently ranges from 5.0 g/t Au to 12.0 g/t Au over 1.0‐4.3 metres along a 300 metre strike length of the vein. The same vein also extends for a further 600 metres with similar widths and textures. Drilling was initiated in the second quarter of 2012.

Rio Sonora (Cu)

This project consists of 42,179 hectares in two blocks located between the world class copper-molybdenum porphyry deposits at Cananea and Caridad. In October 2011, Pembrook entered into an option agreement with Vale whereby Vale can earn up to a 60% interest in the property. For additional information on the option agreement, please see the Corporate Transactions section below. An airborne ZTEM was flown over the property. Targets identified by the survey will be followed up with a ground Titan 24 IP system to identify diamond drill targets.

La Cruz (Ag)

This 480 hectare project was acquired from the Servicio Geologico Mexicano in 2010 and is located in Sonora, 280 kilometres southwest of Hermosillo. Preliminary results from sampling work in 2011 returned significant soil anomalies in copper and some areas with strong silver assays (up to 1,000 g/t Ag) from veins. Drilling is planned for the second quarter of 2012.

Guadalcazar (Au-Ag)

Mapping and rock and soil sampling on this project defined a skarn zone of silver-gold mineralization with good silver results (average of 69 rock chip samples was 0.34 g/t Au and 183 g/t Ag in a zone 150 metres wide). The Company is endeavouring to obtain local community approval to begin drilling in 2012.

Ramard (Au-Ag)

This 4,624 hectare property is located in Sonora roughly 80 kilometres north of Hermosillo. The claims cover a gold and polymetallic stream sediment anomaly as well as a known epithermal stockwork vein showing. Reconnaissance mapping and sampling on this concession in late November 2011 successfully delineated an area of gold mineralization. Two silt samples assayed 0.15 g/t and 0.35 g/t Au while rocks assayed up to 2.2 g/t Au from veinlets and up to 0.4 g/t Au from silicification and breccia. The best results are from near the north boundary of the claim and the holdings will be expanded a further 2,000 metres to the north. Follow-up work will be completed in the second quarter of 2012.


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Buenavista del Cubo (Ag-Au)

This project comprises 1,187 hectares covering a number of poorly-exposed epithermal veins located in Guanajuato. Planned work on this project in 2011 was deferred due to higher exploration priorities in Mexico.Corporate Transactions

On March 22, 2012, Pembrook signed an option agreement to acquire a 100% interest in the 800 hectare Leila property located southwest of the Viento property in Peru, subject to a 1.5% NSR, by making payments totalling US$2,650,000 over four years. For additional information on the Leila project, please refer to note 5 of the March 31, 2012 condensed consolidated interim financial statements.

On March 29, 2012, the Company settled its compensation claim on the Fernie project with the B.C. government. In return for cash compensation of $550,000, the Company relinquished its title to the Fernie mineral claims and its rights to pursue any further legal action regarding those claims.

On April 13, 2012, Pembrook signed an option agreement to sell its 100% interests in the Sambalay, Chappara and Yauca projects located in Peru, subject to a 1.5% NSR to Wild Acre Minerals Limited (“Wild Acre”). Under the terms of the agreement, Wild Acre paid US$100,000 and issued 600,000 common shares to the Company upon execution of the agreement and must pay an additional US$100,000 and issue an additional 900,000 common shares to the Company on the one year anniversary in order to exercise its option.

Additional Property Disclosure

The capitalized exploration expenditures of the Company by mineral property are provided in Note 15 to Pembrook’s condensed consolidated interim financial statements for the three months ended March 31, 2012.

Information Concerning Financial Performance

The Company is an exploration stage company and engages principally in the acquisition, exploration and advancement of mineral properties. The Company’s current properties are in the early stages of exploration, and none of the Company’s properties are in production. Mineral exploration expenditures are capitalized and financial losses are incurred as a result of general exploration and administrative expenses relating to the operation of the Company’s business. Consequently, the Company’s net income is not a meaningful measure of its performance or potential. The Company capitalizes all acquisition and exploration costs until the property to which those costs are related is placed into production, sold, abandoned or determined by management to be impaired. The decision to abandon a property is largely determined based on exploration results, the Company’s view of future prospects, and whether the property may be of interest to other exploration or mining companies. The key performance drivers for the Company include securing the best geological expertise it can, and acquiring and successfully exploring high potential mineral properties. By hiring highly qualified staff and acquiring and exploring projects of superior technical merit, the Company increases its chances of finding and advancing an economic deposit.


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Selected Financial Information

Selected quarterly financial information for operations of the Company for the last eight quarters ending March 31, 2012 is presented below. Changes in income or expense items from period to period are not necessarily representative of trends or potential future changes.

Unaudited Quarterly Selected Financial Information (figures are in thousands of Canadian dollars, except per share information):

Quarter ended Revenues Loss before Other Items

Net Loss Basic and Diluted Loss per Share

Total Assets

Total Current

Liabilities 1st Quarter ended Mar 31, 2012 Nil $1,394 $1,436 $0.01 $75,245 $405 4th Quarter ended Dec 31, 2011 Nil $3,567 $4,094 $0.03 $75,478 $835 3rd Quarter ended Sept 30, 2011 Nil $1,402 $1,431 $0.01 $79,503 $808 2nd Quarter ended June 30, 2011 Nil $2,494 $2,521 $0.02 $79,566 $1,413 1st Quarter ended Mar 31, 2011 Nil $1,213 $1,178 $0.01 $42,641 $405 4th Quarter ended Dec 31, 2010 Nil $2,671 $2,822 $0.03 $44,740 $932 3rd Quarter ended Sept 30, 2010 Nil $2,733 $2,905 $0.02 $46,943 $415 2nd Quarter ended June 30, 2010 Nil $1,537 $1,451 $0.01 $50,212 $1,190

Results of Operations

For the three months ended March 31, 2012 compared with the three months ended March 31, 2011

The Company’s net loss for the three months ended March 31, 2012 (the “current quarter”) was $1,436,259 or $0.01 per share compared with a loss of $1,177,784 or $0.01 per share for the three months ended March 31, 2011 (the “comparable quarter”). The main reasons for the increase in the net loss were higher general and administration expense, higher write-off of mineral properties and lower gain on sale of mineral properties, partially offset by higher recovery of mineral property costs in the three months ended March 31, 2012 compared with the three months ended March 31, 2011.

Significant operating income and expenditures were as follows:

• General and administration expense increased by $393,482 or 40% to $1,368,985 for the three months ended March 31, 2012 primarily due to increased stock based payments expense reflecting the 2,310,000 stock options granted on December 1, 2011. Excluding the stock based payments expense, general and administration expense only increased by 1.8% in the current quarter compared with the comparable quarter.

• Write-off of mineral property costs for the three months ended March 31, 2012 was $230,810 compared with $13,291 in the comparable quarter. In the current quarter, the Company agreed to a settlement of $550,000 with the B.C. government as compensation for the Fernie project claims. As a result, the Company wrote off the total of $230,810 capitalized for historical work completed on the Fernie project. In the three months ended March 31, 2011, the Company determined that further exploration work on the Pinalito property in Mexico was not warranted and wrote off $13,291.

• There was no gain on sale of mineral properties in the current quarter compared with a gain of $209,133 in the comparable quarter. In the three months ended March 31, 2011, the Company realized a gain of $209,133 on the sale of the Schaft Creek North property to Copper Fox Metals Inc.

• Recovery of mineral property costs was $550,000 in the three months ended March 31, 2012 compared with nil in the comparable quarter. In the current quarter, the Company finalized an agreement with the B.C. government for compensation totalling $550,000 for its Fernie property claims located in B.C. The Company received the $550,000 on April 12, 2012.


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• Share of loss of associate and gain on dilution of associate were $79,272 and $161,943 respectively in the three months ended March 31, 2011. There were no equivalent amounts in the current quarter as a result of the change in accounting for the Company’s investment in Paget due to the cessation of significant influence over Paget by the Company effective November 30, 2011. Pembrook was accounting for its investment in Paget as an investment in an associate until November 30, 2011 due to having two common officers, one common director and a shared services agreement. Effective November 30, 2011, the common officers and director resigned from Paget and services provided under the shared services agreement were terminated. Effective December 1, 2011, the Company commenced accounting for its investment in Paget as an available-for-sale financial asset.

Liquidity and Capital Resources:

Selected financial information pertaining to liquidity and capital resources during the three months ended March 31, 2012 and March 31, 2011 is presented below:

On March 31, 2012, the Company had cash and cash equivalents of $37,589,711 and working capital of $38,690,666 compared with $40,979,707 and $40,811,623 respectively as at December 31, 2011.

Cash utilized in operating activities during the three months ended March 31, 2012 was $1,824,036 compared with $1,271,387 in the three months ended March 31, 2011. The increase of $552,649 is primarily due to movements in working capital reflecting the impact on cash of a decrease in accounts receivable, deposits and prepaids in the comparable quarter compared with an increase in those account balances in the current quarter. In the current quarter, the Company used cash for advances and deposits relating to exploration drilling contracts in Mexico and the increase in field exploration activity in Peru upon the end of the rainy season.

Cash utilized in investing activities during the current quarter was $1,405,562 compared with $1,029,842 in the comparable quarter. The increase was primarily attributable to proceeds received on the sale of the Schaft Creek North property in the three months ending March 31, 2011 for which there was no equivalent transaction in the current quarter and slightly higher capitalized exploration costs, partially offset by higher interest income in the current quarter. The higher level of capitalized exploration reflects exploration activities in Mexico on the Japonesas Norte and Batamote properties acquired in the second quarter of 2011. Higher finance income reflects higher cash balances in the current quarter due to the private placement that closed in May 2011.

Cash used for financing activities was $1,610 for the three months ended March 31, 2012 compared with $1,516 for the three months ended March 31, 2011. The amounts represent payments for office equipment under a finance lease.

At March 31, 2012, share capital was $102,005,127 comprising 133,562,889 shares which is unchanged from December 31, 2011. Share-based payment reserve, which arises from the recognition of the estimated fair value of stock options vesting during the period, was $8,143,793 at March 31, 2012 (December 31, 2011 - $7,643,168) reflecting the vesting of stock options granted on December 1, 2011. Cumulative translation reserve, which arises from the translation of subsidiaries from local currency to functional currency, was $(293,929) at March 31, 2012 (December 31, 2011 - $301,253). Available-for-sale reserve, which arises from re-stating financial assets classified as available-for-sale to fair value at each period-end date, was $1,777,250 at March 31, 2012 (December 31, 2010 - $49,750). The available-for-sale reserve relates to the Company’s investments in Zincore Metals Inc. (“Zincore”) and Paget.


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As a result of the net loss of $1,436,259 for the three months ended March 31, 2012 (December 31, 2011 - $9,224,113), the deficit increased to $36,880,619 at March 31, 2012 (December 31, 2011 - $35,444,360).

At present, the Company’s operations do not generate cash inflows and its financial success is dependent on the Company’s ability to raise financing, discover economically recoverable mineral deposits and sell, joint venture or otherwise participate in the development of those projects. The Company currently has sufficient capital resources to meet its planned exploration expenditures, administrative overhead expenses and other costs for at least the next year.

Transactions with Related Parties

Statement of Financial Position The following amounts were due to/from companies that have directors or management in common with the Company or have a partner who is a director of the Company:

March 31, 2012 December 31, 2011 $ $ Included in trade and other receivables 11,721 11,674 Included in trade and other payables 20,450 140,201

Statements of Loss and Comprehensive Loss Transactions with related parties in the normal course of operations have been measured at the exchange amount, which is the consideration agreed to by the parties.

Three months ended March 31, Transaction Nature of Relationship 2012 2011

$ $ Expenses included in general and administration on the Statement of Loss Legal fees Partner is an officer 14,901 14,071 Management/consulting Director and management in common 148,301 117,419 Recoveries included in general and administration on the Statement of Loss Recovery of administrative expenses Paget Minerals Corp. - 103,047

Up to November 30, 2011, the Company recovered rent and related costs for shared office space with Paget and provided administrative and geological services to Paget under an intercompany common services and cost allocation agreement.

Proposed Transactions

There are no proposed transactions.

Other MD&A Requirements

Additional information relating to the Company may be found in the Company’s condensed consolidated interim financial statements and related notes for the three months ended March 31, 2012.

Commitments


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The following table is a summary of the commitments of the Company as at each of the following dates: (in thousands of Canadian dollars)

Office and Warehouse

Management

Services

Geological Services

Drilling, Helicopter and Geophysical

Total $ $ $ $ $ Within one year 174 147 115 376 812 One to two years 28 180 126 - 334 Two to three years - 179 - - 179 202 506 241 376 1,325

The table does not include cash payments or exploration expenditures required to maintain property option agreements in good standing with vendors, as those payments and expenditures are conditional on the Company electing to continue with the individual option agreements. If the Company chooses to terminate an option agreement, no further payments or exploration expenditures are required and the related capitalized costs will be written off.

Other Subsequent Events

There have not been any material events subsequent to March 31, 2012 that are not disclosed elsewhere in this MD&A.

Change in Accounting Policies including Initial Adoption and Recent Pronouncements

The Company has reviewed new and revised accounting pronouncements that have been issued but are not yet effective. The Company has not early adopted any of these standards and is currently evaluating the impact, if any, that these standards might have on its consolidated financial statements.

Accounting standards issued and effective January 1, 2012

Financial instruments disclosure In October 2010, the IASB issued amendments to IFRS 7 - Financial Instruments: Disclosures that enhance the disclosure requirements in relation to transferred financial assets. The amendments are effective for annual periods beginning on or after July 1, 2011, with earlier application permitted. The Company does not anticipate this amendment to have a significant impact on its financial statements. Income taxes In December 2010, the IASB issued an amendment to IAS 12 - Income Taxes that provides a practical solution to determining the recovery of investment properties as it relates to the accounting for deferred income taxes. This amendment is effective for annual periods beginning on or after January 1, 2012, with earlier application permitted. The Company does not anticipate this amendment to have a significant impact on its financial statements. Accounting standards issued and effective January 1, 2013

Consolidation In May 2011, the IASB issued IFRS 10 - Consolidated Financial Statements (“IFRS 10”), which supersedes SIC 12 and the requirements relating to consolidated financial statements in IAS 27 - Consolidated and Separate Financial Statements (“IAS 27”). IFRS 10 is effective for annual periods beginning on or after January 1, 2013, with earlier application permitted under certain circumstances. IFRS 10 establishes control as the basis for an investor to consolidate its investees; and defines control as


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an investor’s power over an investee with exposure, or rights, to variable returns from the investee and the ability to affect the investor’s returns through its power over the investee. In addition, the IASB issued IFRS 12 - Disclosure of Interests in Other Entities (“IFRS 12”) which combines and enhances the disclosure requirements for the Company’s subsidiaries, joint arrangements, associates and unconsolidated structured entities. The requirements of IFRS 12 include reporting of the nature of risks associated with the Company’s interests in other entities, and the effects of those interests on the Company’s consolidated financial statements. Concurrently with the issuance of IFRS 10, IAS 27 and IAS 28 - Investments in Associates (“IAS 28”) were revised and reissued as IAS 27 - Separate Financial Statements and IAS 28 - Investments in Associates and Joint Ventures to align with the new consolidation guidance. The Company is currently evaluating the impact that the above standards are expected to have on its consolidated financial statements. Joint arrangements In May 2011, the IASB issued IFRS 11 - Joint Arrangements (“IFRS 11”), which supersedes IAS 31 - Interests in Joint Ventures and SIC-13 - Jointly Controlled Entities - Non-Monetary Contributions by Venturers. IFRS 11 is effective for annual periods beginning on or after January 1, 2013, with earlier application permitted under certain circumstances. Under IFRS 11, joint arrangements are classified as joint operations or joint ventures based on the rights and obligations of the parties to the joint arrangements. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement (“joint operators”) have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement (“joint venturers”) have rights to the net assets of the arrangement. IFRS 11 requires that a joint operator recognize its portion of assets, liabilities, revenues and expenses of a joint arrangement, while a joint venturer recognizes its investment in a joint arrangement using the equity method. The Company is currently evaluating the impact that IFRS 11 is expected to have on its consolidated financial statements. Fair value measurement In May 2011, as a result of the convergence project undertaken by the IASB and the US Financial Accounting Standards Board, to develop common requirements for measuring fair value and for disclosing information about fair value measurements, the IASB issued IFRS 13 - Fair Value Measurement (“IFRS 13”). IFRS 13 is effective for annual periods beginning on or after January 1, 2013, with earlier application permitted. IFRS 13 defines fair value and sets out a single framework for measuring fair value which is applicable to all IFRSs that require or permit fair value measurements or disclosures about fair value measurements. IFRS 13 requires that when using a valuation technique to measure fair value, the use of relevant observable inputs should be maximized while unobservable inputs should be minimized. The Company does not anticipate the application of IFRS 13 to have a material impact on its consolidated financial statements. Financial statement presentation In June 2011, the IASB issued amendments to IAS 1 - Presentation of Financial Statements (“IAS 1”) that require an entity to group items presented in the Statement of Comprehensive Income on the basis of whether they may be reclassified to earnings subsequent to initial recognition. For those items presented before taxes, the amendments to IAS 1 also require that the taxes related to the two separate groups be presented separately. The amendments are effective for annual periods beginning on or after July 1, 2012, with earlier adoption permitted. The Company does not anticipate the application of the amendments to IAS 1 to have a material impact on its consolidated financial statements.

Accounting Standards anticipated to be effective January 1, 2015


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Financial instruments The IASB intends to replace IAS 39 - Financial Instruments: Recognition and Measurement (“IAS 39”) in its entirety with IFRS 9 - Financial Instruments (“IFRS 9”) in three main phases. IFRS 9 will be the new standard for the financial reporting of financial instruments that is principles-based and less complex than IAS 39. In November 2009 and October 2010, phase 1 of IFRS 9 was issued and amended, respectively, which addressed the classification and measurement of financial assets and financial liabilities. IFRS 9 requires that all financial assets be classified as subsequently measured at amortized cost or at fair value based on the Company’s business model for managing financial assets and the contractual cash flow characteristics of the financial assets. Financial liabilities are classified as subsequently measured at amortized cost except for financial liabilities classified as at FVTPL, financial guarantees and certain other exceptions. The complete IFRS 9 is anticipated to be issued during the second half of 2011. On July 22, 2011, the IASB tentatively agreed to defer the mandatory effective date of IFRS 9 from annual periods beginning on or after January 1, 2013 (with earlier application permitted) to annual periods beginning on or after January 1, 2015 (with earlier application still permitted). The IASB has proposed the deferral of IFRS 9 in an exposure draft with a 60 day comment period ended on October 21, 2011. The Company is currently evaluating the impact the final standard is expected to have on its consolidated financial statements.

Off-Balance Sheet Arrangements

The Company is not party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on the Company’s financial position, revenues, expenses, results of operations, liquidity, capital expenditures or future cash flows.

Financial Instruments

The Company’s financial instruments are exposed to certain financial risks, the elements of which are discussed more fully in Note 12 to the Company’s March 31, 2012 condensed consolidated interim financial statements. The fair values of the Company’s trade and other receivables, deposits and trade and other payables approximate their carrying values due to their short-term nature. The Company’s investments in Zincore and Paget are carried at fair value using a level 1 fair value measurement. Obligations under capital lease are carried at amortized cost.

Critical Accounting Estimates

The March 31, 2012 condensed consolidated interim financial statements have been prepared on a going concern basis which assumes Pembrook will continue to operate for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. The Company’s ability to continue to operate for the foreseeable future is conditional upon its ability to secure additional financing, divest assets or generate cash flow from operations in the future, none of which is assured. The Company has incurred operating losses since inception and has no source of operating cash flow. Due to market fluctuations and the inherent risks in the exploration industry as well as uncertainty surrounding the political environment in Peru, there can be no assurance that management will be able to continue to successfully raise financing in the future.

An inability to raise financing may impact the future assessment of Pembrook as a going concern. If the going concern assumption becomes inappropriate for these financial statements, then adjustments would be necessary in the carrying values of assets, liabilities and expenses and the balance sheet classifications used. Such adjustments could be material.


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The March 31, 2012 condensed consolidated interim financial statements have been prepared on a historical cost basis except for financial instruments classified as available-for-sale, which have been measured at fair value. In addition, these condensed consolidated interim financial statements have been prepared on an accrual basis of accounting, except for cash flow information.

The preparation of the March 31, 2012 condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. These consolidated financial statements are prepared in accordance with IFRS. The policies applied in these consolidated financial statements are based on IFRS issued and outstanding at May 22, 2012, the date the Board of Directors approved these condensed consolidated interim financial statements for issue.

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

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

• the inputs used in calculating the provisions for environmental rehabilitation that are included in the consolidated statements of financial position;

• the provision for income taxes which is included in the consolidated statements of loss and comprehensive loss and composition of deferred income tax assets and liabilities included in the condensed consolidated interim statements of financial position;

• the inputs used in accounting for share-based payment expense in the consolidated statements of loss and comprehensive loss.

The critical judgments that the Company’s management has made in the process of applying the Company’s accounting policies, apart from those involving estimations noted above, that have the most significant effect on the amounts recognized in the Company’s consolidated financial statements are related to the economic recoverability of the mineral properties, functional currency determination for the Company and its subsidiaries and assumption of going concern.

The Company is in the exploration stage with respect to its investment in mineral properties and follows the practice of capitalizing all costs relating to the acquisition of, exploration for and development of mineral claims and crediting all revenues received against the cost of the related claims. Such costs include, but are not limited to, staking and claims management, options payments, geological, geophysical studies, sampling and drilling. At such time that commercial production commences, these costs will be charged to operations on a unit-of-production method based on proven and probable reserves. The aggregate costs related to abandoned mineral claims are charged to operations at the time of any abandonment or when it has been determined that there is evidence of a permanent impairment.


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• Exploration and evaluation (“E&E”) assets are assessed for impairment when the facts and circumstances suggest that the carrying amount of an E&E asset may exceed its recoverable amount and when the Company has sufficient information to reach a conclusion about technical feasibility and commercial viability.

Industry specific indicators of the existence of a potential impairment typically include the absence of plans to incur substantive expenditure on further exploration over a reasonable time horizon, conditions where title is compromised, adverse changes in the taxation, regulatory or political environment and adverse changes in currencies, commodity prices and markets. Once technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, E&E assets attributable to that area of interest are first tested for impairment and then reclassified to mining property and development assets within property, plant and equipment. Recoverability of the carrying amount of any E&E asset is dependent on successful development and commercial exploration, or alternatively, sale of the respective areas of interest.

• Income taxes are recognized in the statement of loss, except where they relate to items recognized

in other comprehensive income or directly in equity, in which case the related income taxes are recognized in other comprehensive income or equity. Current taxes receivable or payable are estimated on taxable income for the current year at the statutory tax rates enacted or substantively enacted.

Deferred income tax assets and liabilities are recognized based on the difference between the tax and accounting values of assets and liabilities and are calculated using substantively enacted tax rates for the periods in which the differences are expected to reverse. The effect of tax rate changes is recognized in earnings or equity, as the case may be, in the period of substantive enactment. Deferred tax assets are recognized only to the extent that it is probable that future taxable profits will be available against which the assets can be utilized. Deferred tax liabilities are recognized for taxable temporary differences arising on investments in joint ventures and associates. However, such deferred tax liabilities are not recognized where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. As an exception, deferred tax assets and liabilities are not recognized if the temporary differences arise from the initial recognition of goodwill or an asset or liability in a transaction (other than in a business combination) that affects neither accounting profit nor taxable profit.

• The share option plan allows the Company’s employees and consultants to acquire shares of the Company. The fair value of the options granted is recognized as a share-based payment expense with a corresponding increase in equity. The fair value is measured at grant date and each tranche is recognized on a graded-vesting basis over a period during which the options vest. The fair value of the options granted is measured using the Black-Scholes option pricing model taking into account the terms and conditions upon which the options were granted.

• The presentation currency of the Company and each of its subsidiaries is the Canadian dollar.

The functional currency of Pembrook Mining Corp. is the Canadian dollar. The functional currency of its wholly-owned subsidiaries Compaňia de Exploraciones Orion S.A.C. (Peru), Paget Mexico Holding Corp. and Paget Southern Resources S. de R.L. de C.V. (Mexico) is the


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United States dollar. The functional currency determinations were conducted through an analysis of the consideration factors identified in IAS 21-The Effects of Changes in Foreign Currency Rates (“IAS 21”).

These consolidated financial statements have been translated to the Canadian dollar in accordance with IAS 21. This standard requires that the assets and liabilities of entities with a functional currency other than Canadian dollars are converted from functional currency to presentation currency at the exchange rate in effect at the balance sheet date and revenue and expense items are translated at the average exchange rate for the period and exchange differences arising are recognized directly in equity. Transactions in currencies other than the functional currency are recorded at the exchange rates prevailing on the dates of the transactions. At each financial position reporting date, the monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at the date of the statement of financial position. Non-monetary assets and liabilities are translated at historical exchange rates, unless such items are carried at market, in which case they are translated at the exchange rate in effect at the balance sheet date. Revenue and expense items are translated at the average exchange rate in effect in the period in which they occur.

Disclosure of Outstanding Share Data

The table below provides information concerning the designation and number of each class of equity securities for which there are securities outstanding as of the dates noted below:

Type of Security

May 22, 2012

March 31, 2012

December 31, 2011

September 30, 2011

June 30, 2011

March 31, 2011

Common shares 133,562,889 133,562,889 133,562,889 133,562,889 133,342,889 117,782,889 Options 9,474,250 9,479,250 9,013,414 9,013,414 9,053,000 10,341,743 Total 143,037,139 143,042,139 142,576,303 142,576,303 142,395,889 128,124,632

Risk Factors

Exploration Stage Company Pembrook is engaged in the business of acquiring and developing mineral properties to locate economic deposits of minerals. All of it properties are in the early stages of exploration and are without defined mineral bodies. Advancement of Pembrook’s properties will only occur after obtaining satisfactory exploration results. There can be no assurance that Pembrook’s existing or future exploration programs will result in the discovery of economically recoverable mineral deposits. Further, there can be no assurance that even if an economic deposit of minerals is identified, it can be commercially mined. No Source of Operating Revenue At present, the Company’s operations do not generate cash inflows and the Company’s continued existence depends on management’s ability to raise additional equity financing, discover recoverable mineral deposits and sell or otherwise participate in the development of those projects. Many factors influence the Company’s ability to raise funds, including the health of the commodity resource market, the climate for mineral exploration investment, the Company’s track record, and the experience and calibre of its management. Actual funding requirements may vary from those planned due to a number of factors, including the progress of exploration activities. Management believes it will be able to raise equity capital as required over time, but recognizes there are risks involved that may be beyond its


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control. If those risks fully materialize, the Company may not be able to raise adequate funds to continue its operations.

Minerals Exploration and Advancement

The exploration and development of minerals is highly speculative in nature and involves a high degree of financial and other risks over a significant period of time which even a combination of careful evaluation, experience and knowledge may not eliminate. While discovery of a mineral deposit or ore body may result in significant rewards, few properties which are explored are ultimately advanced into producing mines. Substantial expenses are required to establish ore reserves by drilling, sampling and other techniques and to design and construct mining and processing facilities. Whether a mineral deposit will be commercially viable depends on a number of factors, including the particular attributes of the deposit (e.g. size, grade, access and proximity to infrastructure), financing costs, the cyclical nature of commodity prices and government regulations (including those relating to prices, taxes, currency controls, royalties, land tenure, land use, importing and exporting of minerals and environmental protection). The effect of these factors, or a combination thereof, cannot be accurately predicted but could have a significant adverse impact on the Company.

Minerals Exploration Activities

Mineral exploration activities generally involve a high degree of risk. Pembrook’s operations are subject to all of the hazards and risks normally encountered in mineral exploration and advancement. Such risks include unusual and unexpected geological formations, seismic activity, rock bursts, flowing and other conditions involved in the drilling and removal of material, drilling or transportation accidents, environmental issues including chemical spills or environmental degradation, industrial accidents, periodic interruptions due to adverse weather conditions, labour disputes, community relationship issues and political, community or interest group unrest. The occurrence of any of the foregoing could result in damage to, or destruction of, mineral properties or interests, personal injury, damage to life or property, environmental damage, delays or interruption of operations, increases in costs, monetary losses, legal liability, adverse government action, and a loss in the value of Pembrook’s properties. Pembrook does not currently carry insurance against all these risks and there is no assurance that such insurance will be available in the future, or if available, at economically feasible premiums or acceptable terms. The potential costs associated with liabilities not covered by insurance or excess insurance coverage may cause substantial delays and require significant capital outlays. Such damages, if uninsured, could under certain circumstances, be greater than the financial capacity of the Company to pay for them.

No Operating History and Financial Resources

Pembrook has a short operating history and no operating revenue, and is unlikely to generate revenues from operating activities sufficient to fund operations in the near future. If the Company’s exploration program is successful, additional funds will be required for further exploration to prove economic deposits and to bring such deposits to production. Additional funds may also be required for Pembrook to acquire and explore other mineral interests. Pembrook has limited financial resources and there is no assurance that sufficient additional funding will be available to fulfill its obligations or to further explore and advance its properties on acceptable terms or on any terms at all. Failure to obtain additional funding on a timely basis could result in delay or indefinite postponement of further exploration and property advancement activities and could cause Pembrook to forfeit its interests in some or all of its properties, or to reduce or terminate its operations.

Political or economic instability in countries where Pembrook operates


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Certain of our properties are located in countries, provinces and states which may be subject to political and economic instability, or unexpected legislative change which may delay or prevent exploration of our properties. Exploration of our properties could be adversely affected by:

• political instability and violence; • war and civil disturbance; • labour unrest or community relation issues; • permitting issues • expropriation or nationalization; • changing fiscal regimes and uncertain regulatory environments; • changes to royalty and tax regimes; • underdeveloped industrial and economic infrastructure; and • the unenforceability of contractual rights and judgments.

Competition

The mineral exploration and mining business is competitive in all of its phases. Pembrook competes with numerous other companies in the search for and the acquisition of attractive mineral properties and individuals, including competitors with greater financial, technical and other resources. Pembrook’s ability to acquire properties in the future will depend not only on its ability to advance is present properties, but also on its ability to select and acquire suitable prospects for mineral exploration or advancement. There is no assurance that Pembrook will be able to compete successfully with others in acquiring such prospects. In addition, there is a limited supply of good geological talent and drilling crews and equipment. There is no assurance that Pembrook will be able to acquire the supply of geological talent or drillers, executives or other employees or contractors that are required to complete our exploration work in planned time frames.

Title to Property

Pembrook has taken precautions to ensure that legal titles to its property interests are properly recorded. There can be no assurance that Pembrook will be able to secure the grant or the renewal of exploration permits or other tenures on terms satisfactory to it, or that governments in the jurisdictions in which the properties are situated will not revoke or significantly alter such permits or other tenures or that such permits and tenures will not be challenged or impugned. In addition, some of Pembrook’s properties are held in the names of others. Third parties may have valid claims underlying portions of Pembrook’s interests and the permits or tenures may be subject to prior unregistered agreements or transfers or native land claims and title may be affected by undetected defects. If a title defect exists, it is possible that Pembrook may lose all or part of its interest in the properties to which such defects relate. In addition, Pembrook may fail, due to error, omission, or technological issues to renew its claims in a timely manner, potentially resulting in the loss of valuable claims to property.

Reliance on Third Parties for Critical Services

Pembrook contracts certain activities critical to its operations to third parties. These include drilling owners/operators, expediters, helicopter and other transport providers, surveyors, experts for 43-101 reports and assay providers. Any failure to secure such contractors, or errors on their part, could result in significant disruption to Pembrook’s operations, or in accidents which could cause safety issues, environmental damage or liabilities to them and to Pembrook. Pembrook cannot currently insure against all these risks.

Environmental Risks and Hazards


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All phases of Pembrook’s operations are subject to environmental regulation in the jurisdictions in which the property is located. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation, provide for restrictions and prohibitions on spills, releases or emissions of various substances produced in association with certain exploration activities and operations. They also set forth limitations on the generation, transportation, storage and disposal of hazardous waste. A breach of such regulation may result in the imposition of fines and penalties. In addition, certain types of mining operations require the submission and approval of environmental impact assessments. Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. The cost of compliance with changes in governmental regulations has a potential to reduce the viability or profitability of operations. Environmental hazards may exist on the properties in which Pembrook holds interests or on properties that will be acquired which are unknown to Pembrook at present and which have been caused by previous or existing owners or operators of the properties.

Commodity Prices

The price of Pembrook’s securities, its financial results, and exploration, advancement and mining activities may in the future be significantly adversely affected by declines in the price of precious or base minerals. Precious or base minerals prices fluctuate widely and are affected by numerous factors beyond Pembrook’s control such as the sale or purchase of precious or base metal by various dealers, central banks and financial institutions, interest rates, exchange rates, inflation or deflation, currency exchange fluctuation, global and regional supply and demand; production and consumption patterns, speculative activities, increased production due to improved mining and production methods, government regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals, environmental protection and international political and economic trends, conditions and events and specific demand from emerging countries. The price of precious or base metals has fluctuated widely in recent years, and price declines could cause continued advancement of Pembrook’s properties to be impracticable.

In addition to adversely affecting reserve estimates and its financial condition, declining commodity prices can impact operations by requiring a reassessment of the feasibility of a particular project. Such a reassessment may be the result of a management decision or may be required under financing arrangements related to a particular project. Even if the project is ultimately determined to be economically viable, the need to conduct such a reassessment may cause substantial delays or may interrupt operations until the reassessment can be completed.

Price Volatility and Lack of Active Market

Since 2008, the securities markets in Canada and elsewhere have experienced a high level of price and volume volatility, and the market price of securities of many public companies have experienced significant fluctuations. Some of these fluctuations may not necessarily have been related to the operating performance, underlying asset values or prospects of such companies. Any future market for Pembrook’s securities may be subject to such market trends, and the value of such securities may be affected accordingly. There is currently no market through which the securities of Pembrook can be sold and there can be no assurance that one will develop or be sustained. If an active market does not develop, the liquidity of the investment may be limited and the market price of such securities may decline below the subscription price.

Risk Associated with Joint Venture Agreements

Pembrook may, in the future, enter into joint venture arrangements whereby it agrees to co-develop a property with another mining or mineral exploration company. Such agreements may require significant


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up-front payments or investments over time by Pembrook. These agreements may also be difficult to enforce, could result in significant differences of interpretation with the joint venture partner or could result in the joint venture partner failing to carry out its responsibilities under the contract. This could cause delays, significant diversion of management time and attention, excess costs, litigation, and the eventual dissolution of the joint venture with unsatisfactory results. All of these could delay or hinder ongoing Pembrook projects, or could result in significant financial damage to Pembrook and its shareholders.

Key Executives

Pembrook is and will be dependent on the services of key executives and a small number of highly skilled and experienced geologists, consultants and personnel, whose contributions to the immediate future operations of Pembrook are likely to be of great importance. Locating mineral deposits depends on a number of factors, not the least of which is the technical skill of the exploration personnel involved. Advancing those projects via joint exploration agreement and operating an organization of increasing scale also require certain specialized skills which are in high demand and difficult to acquire. Due to the relatively small size of Pembrook’s staff, the loss of key personnel or Pembrook’s inability to attract and retain additional highly skilled employees and consultants may adversely affect its business and future operations. In addition, some officers of Pembrook may be hired on a part-time or consultant basis and may therefore not devote all their time solely to Pembrook’s affairs. This could slow or hinder our corporate development.

Potential Conflicts of Interest

Certain directors and officers of the Company are and may continue to be involved in the mining and minerals exploration industry through their direct and indirect participation in corporations, partnerships or joint ventures which are or could become potential competitors of the Company. Situations may arise in connection with potential acquisitions or investments where the other interests of these directors and officers may conflict with the interests of the Company. Directors and officers of the Company with conflicts of interest are subject to the procedures set out in applicable corporate and securities legislation, regulation, rules, policies and Pembrook’s Code of Ethics.


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Litigation

Pembrook does not currently have any claims against it, nor does it have any outstanding claims against others. However, in its normal course of business or due to issues which may arise, Pembrook could face legal action in the future. Such actions could result in significant costs of defense, absorption of management time and focus away from the main activities of the business, and potentially significant settlements or payments by the company. Such settlements or payments may, under certain circumstances, result in losses greater than the Company’s ability to pay.

Objectives May Not Be Fulfilled

As a result of the foregoing factors, as well as other factors, Pembrook’s objective of discovering mineral deposits and economic ore-grade mineral bodies may never be realized. If this occurs, the value of Pembrook’s shares may fall.

Dilution

As the Company does not generate operating cash flow and has no current plans to do so, it will need to raise additional funds over a period of time to continue its operations. As a result, shareholders may incur dilution of their percentage holding in the Company.

Nature of the Securities

The purchase of the Company’s securities involves a high degree of risk and should be undertaken only by investors whose financial resources are sufficient to enable them to assume such risks. The Company’s securities should not be purchased by persons who cannot afford the possible loss of their entire investment.

Investment Risk

The Company currently holds its cash and investments with a major Canadian banks and financial institutions. Canadian banks have recently been ranked among the safest in the world by the World Economic Forum. Due to volatility in credit markets and to several international bank failures, the possibility of bank failures in Canada cannot be entirely ruled out. If a bank with which the Company holds deposits or investments fails, and if the Canadian government does not step in to protect the bank, its depositors or creditors, the Company could lose that portion of its cash and investments. Due to the nature of interest-bearing investments, changes in interest rates can significantly affect the return on the investment, if the investment is redeemed before maturity.

Forward-Looking Statements

Some of the statements in this MD&A constitute “forward-looking statements” within the meaning of Canadian securities legislation. These forward-looking statements are made as of the date of this MD&A, or in the case of documents incorporated by reference herein, as of the date of such documents and the Company does not intend and does not assume any obligation to update these forward-looking statements. These forward-looking statements represent management’s best judgment based on facts and assumptions that management considers reasonable, including that exploration plans could be disrupted by issues such as weather, community relations issues, disruptions in access to exploration properties, labour disturbances, delayed or refused permits, environmental issues, political issues, mechanical failures of equipment and availability of financing when needed. Management currently is not aware of any material


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events that may disrupt exploration plans or budgets. The Company makes no representation that reasonable business people in possession of the same information would reach the same conclusions. Forward-looking statements include, but are not limited to, statements with respect to the future price of minerals, the timing of exploration plans, timing of drill results, success of exploration activities, permitting time lines, currency fluctuations, government regulation of exploration operations, environmental risks, unanticipated reclamation expenses, prospects for equity financing activities, title or claims disputes and completion of acquisitions and their potential impact on the Company. In certain cases, forward-looking statements can be identified by the use of words such as “plans,” “expects” or “does not expect,” “is expected,” “budget,” “scheduled,” “estimates,” “forecasts,” “intends,” “anticipates” or “does not anticipate,” or “believes,” or variations of such words and phrases or statements that certain actions, events or results “may,” “could,” “would,” “might” or “will” be taken, “occur” or “be achieved”. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, risks related to: the inherent uncertainties in minerals exploration and development activities; fluctuations in the price of minerals or in currency markets; the uncertainty of mineral resource and reserve estimates; the uncertainty of financing being available when needed; the uncertainty of mining licences or governmental approvals being granted in a timely manner; changes in regulatory requirements; hiring and retaining personnel with the necessary expertise; the failure of equipment or processes to operate as anticipated; material unanticipated variations in budgeted costs; contractors not completing projects according to schedule; accidents, labour disputes and other risks of the mineral exploration industry; as well as other factors discussed in the section entitled “Risk Factors” in this MD&A. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

Additional Information

Additional information relating to Pembrook is available by contacting: Pembrook Mining Corp. Suite 1160 - 1040 West Georgia Street Vancouver, BC, Canada V6E 4H1 Office (778) 327-6540 Fax (778) 327-6546 General Inquiries: [email protected] Website: www.pembrookmining.com /s/ “Brian Booth” /s/ “April Hashimoto” Brian Booth April Hashimoto Chief Executive Officer Chief Financial Officer

mailto:[email protected]

http://www.pembrookmining.com/

pembrook mining corp. management’s discussion and analysis ...€¦ · pembrook mining corp....

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