inv metals inc. management’s discussion and analysis … · copper-silver property, located in...

INV METALS INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

INV METALS INC. MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE YEAR ENDED DECEMBER 31, 2012 AND 2011

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INTRODUCTION The following management’s discussion and analysis (“MD&A”) of the financial condition and results of operations of INV Metals Inc. (“INV Metals” or the “Company”) was prepared to enable the reader to assess material changes in the financial condition and results of operations of INV Metals as at and for the years ended December 31, 2012, in comparison to the corresponding period in the prior year. This MD&A is prepared as at March 13, 2013 and is intended to supplement and complement the annual consolidated financial statements of INV Metals for the years ended December 31, 2012 and 2011 (the “Financial Statements”), which are prepared in accordance with International Financial Reporting Standards (“IFRS”). This MD&A should be read in conjunction with the consolidated financial statements and the Annual Information Form (“AIF”) in respect of the 2012 year filed with the Canadian provincial securities regulatory authorities and available on SEDAR at www.sedar.com. This MD&A contains certain forward looking statements based on management’s current expectations (please see “Cautionary Note Regarding Forward Looking Statements” below). All references to dollars herein are in Canadian dollars unless otherwise specified. COMPANY DESCRIPTION AND HIGHLIGHTS INV Metals is an international mineral resource company focused on the acquisition, exploration and development of base and precious metals projects worldwide. The Company’s material property is the Quimsacocha gold project (“Quimsacocha”, “Project” or “Property”), located in Ecuador, with additional exploration projects in Brazil and Namibia. On June 21, 2012, and as amended on August 16, 2012, INV Metals entered into a definitive agreement with IAMGOLD Corporation (“IAMGOLD”) to acquire the Property, through the acquisition (the “Acquisition”) of all of the shares of IAMGOLD Ecuador S.A. ("Ecuador Subco"). The Acquisition closed on November 14, 2012 with the issuance of 221,280,903 common shares of the Company to IAMGOLD representing a 45% ownership of the issued and outstanding common shares of INV Metals. The Quimsacocha Property contains an indicated resource of approximately 3.3 million ounces of gold grading 3.2 g/t, 22.7 million ounces of silver grading 22 g/t and 143 million pounds of copper grading 0.2% copper. See “Quimsacocha Property Acquisition” for further details. On September 6, 2012 INV Metals closed the equity financing related to the Acquisition at a price of $0.10 per common share to raise gross proceeds of $20 million. See “Quimsacocha Property Acquisition” for further details. In June 2012, the Company earned a 50% indirect interest in the Rio Novo property, located in Brazil, from Teck Resources Limited (“Teck”) having met its $7 million exploration expenditure commitment. On October 15, 2012 INV Metals announced that the Company earned a 35% indirect interest in the Kaoko copper-silver property, located in Namibia. INV Metals will be carried for the next $6.1 million in exploration expenditures. OUTLOOK The Company's 2013 exploration and operating budget is estimated at $12.7 million, including planned exploration expenditures of $9.7 million at the Quimsacocha Property and a combined $239,000 in spending at its other properties. INV Metals has initiated a comprehensive review of all Quimsacocha previous exploration data in order to build an updated model and exploration plan for 2013. Preliminary indications indicate the presence of a number of targets to expand the known deposit, along with high priority targets outside of the known deposit. Drilling is expected to begin at the Property in March. The preliminary budget of $9.7 million relating to Quimsacocha in 2013 includes engineering, exploration, social development and administrative costs within Ecuador and at the Property.



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OUTLOOK (continued) Management is in discussions with engineering, metallurgical, environmental and water consultants previously engaged on the Quimsacocha Property to determine the appropriate actions necessary to update the pre-feasibility study issued by IAMGOLD in 2009. Also, a corporate sustainability and responsibility consultant has been engaged to advise management on community development issues. The Company and Teck jointly sold the northern portion of Rio Novo to a private Brazilian company on January 16, 2013 for a royalty and are currently in discussions on alternatives to advance the southern portion of the property, where the copper targets are located. At Kaoko, Teck is currently the operator on the property and is planning up to 4,000 metres of drilling in 2013. INV Metals expects to have minimal funding or management obligations in Brazil or Namibia for the next several years. QUIMSACOCHA PROPERTY ACQUISITION The completion of the Acquisition of the Quimsacocha Property in November 2012 is expected to transform INV Metals from a successful junior exploration company to an advanced stage development company with excellent exploration potential. This transaction was a transformational event for the Company and its shareholders and has the potential to enable the Company to become a gold producer in the shortest possible time frame. The Company is updating previous engineering, environmental and technical work carried out on the Project, which was in the pre-feasibility stage prior to the cessation of field work in 2009. The completion of engineering and other essential studies will allow the Company to develop a plan and timetable to bring the Property to the feasibility stage. The Quimsacocha Project is located approximately 30 km southwest of the city of Cuenca, Azuay Province, Ecuador. Access to the Property from Cuenca, the third-largest city in Ecuador, is by 40 km of paved road to the town of San Gerardo followed by 18 km of gravel road. The Property consists of three mining concessions, Cristal, Cerro Casco and Rio Falso, covering an aggregate area of approximately 8,030 hectares. In connection with the Acquisition, INV Metals retained Roscoe Postle Associates Inc. (“RPA”) to complete an updated mineral resource estimate and prepare a technical report in respect of the Project. The mineral resource estimate announced June 21, 2012 is compliant with National Instrument 43-101 ("NI 43-101"). INV Metals filed the technical report titled “Technical Report on the Quimsacocha Project, Azuay Province, Ecuador”, dated July 18, 2012, on SEDAR on July 18, 2012. The Indicated Mineral Resource is estimated at 3.3 million oz Au within 32.6 million tonnes grading 3.2 g/t Au, 22 g/t Ag and 0.2% Cu, with an Inferred Mineral Resource estimated at 0.2 million oz Au within 2.3 million tonnes grading 2.2 g/t Au, 27 g/t Ag and 0.22% Cu, both at an NSR cut-off value of US$22/tonne,equivalent to approximately a 0.4 g/t gold cut-off. Both the Indicated and Inferred Resources have a high grade zone which contains the majority of the gold resource. The table that follows summarizes the Mineral Resource estimates of the Quimsacocha Project. The effective date of the Mineral Resource estimate is March 31, 2012.



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QUIMSACOCHA PROPERTY ACQUISITION (continued)

Tonnes

(M) Grade

(g/t)Gold

(M Oz)Silver

(g/t)Silver (M oz)

Copper (%)

Copper (M lbs)

Indicated

High grade zone 10.3 6.3 2.1 36 11.9 0.41 92.7

Low grade zone 22.3 1.7 1.2 15 10.8 0.10 50.4

Total Indicated 32.6 3.2 3.3 22 22.7 0.20 143.1

Inferred

High grade zone 0.1 9.6 0.03 51 0.1 1.34 2.4

Low grade zone 2.2 1.9 0.1 26 1.9 0.18 8.8

Total Inferred 2.3 2.2 0.2 27 2.0 0.22 11.2

Notes: 1. CIM Definition Standards were followed for Mineral Resources. 2. Resources are constrained by a Whittle shell and reported at an NSR cut-off value of

US$22.00/tonne. 3. Mineral Resources are estimated using a long-term gold price of US$1,500 per ounce, silver price

of US$26.00 per ounce, and copper price of US$3.50/lb. 4. Numbers may not add due to rounding.

As part of the Mineral Resource estimate, RPA considered higher cut-off grade scenarios that may be applicable to a deposit to be mined by underground methods. This Indicated Mineral Resource is estimated at 2.7 million oz Au within 19.5 million tonnes grading 4.4 g/t Au, 30 g/t Ag and 0.29% Cu, with an Inferred Mineral Resource estimated at 0.1 million oz Au within 1.7 million tonnes grading 2.8 g/t Au, 37 g/t Ag and 0.29% Cu, both at a cut-off grade of US$61 per tonne NSR, equivalent to approximately a 1.2 g/t Au cut-off. This resource is hosted entirely within the current Mineral Resource as stated above. Exploration The Quimsacocha deposit is a high sulphidation epithermal gold-copper-silver deposit with a high grade core surrounded by a lower grade shell within Upper Miocene volcanic flows and volcaniclastics. The deposit is a flat lying, north-south striking, cigar shaped body which is considered to be amenable to both open pit and underground mining scenarios. The mineralized zone hosting the resource has a strike length of approximately 1,600 m north-south by 120 m to 400 m east-west and up to 60 m thick beginning approximately 120 m below surface. The alteration footprint at the Quimsacocha Project is extensive and covers an area of approximately 12 km by 6 km. Epithermal gold deposits similar to the Quimsacocha deposit tend to cluster within such large alteration zones and are also frequently associated with porphyry copper-gold type deposits. IAMGOLD identified multiple high priority, drill ready targets throughout the Property, however, following the discovery of the Quimsacocha deposit exploration efforts focused on delineating the deposit and only 68 holes weredrilled on the rest of the Property. INV Metals has committed to an exploration budget of $15 million over 18 months to aggressively explore the Property. The Company will focus its exploration efforts on theexpansion of the known deposit, the discovery of additional similar epithermal gold deposits within the large alteration system and on the discovery of possible related porphyry copper-gold deposits. The Transaction On November 14, 2012 completed the acquisition of the Quimsacocha Property pursuant to the share purchase agreement entered into with IAMGOLD on June 21, 2012 and as amended on August 16, 2012. The acquisition of the Quimsacocha property was deemed by management an asset acquisition under IAS 16, Property, plant and equipment and was completed by the acquisition of all of the shares of Ecuador Subco. Upon completion of the Acquisition, Ecuador Subco became a wholly owned subsidiary of INV Metals.



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QUIMSACOCHA PROPERTY ACQUISITION (continued) Qualified Person The Mineral Resource estimates were prepared in accordance with the 2010 CIM Definition Standards for Mineral Resources and Mineral Reserves as incorporated by reference in NI 43-101. The RPA Qualified Persons for the estimates are Mr. Wayne Valliant, P.Geo, Mr. John Postle, P. Eng. and Ms. Katharine Masun, P.Geo Mr. Robert Bell, P. Geo, of INV Metals is a “qualified person” as such term is defined in NI 43-101 and has reviewed and approved the technical information and data related to the Project included above. MINERAL PROPERTIES In the year ended December 31 2012 exploration expenditures decreased to $3,763,525, compared to $5,850,349 during the same period in 2011. 1) Rio Novo, Brazil

The Rio Novo property consists of four claims totaling approximately 29,000 hectares located in the Carajás region in the state of Pará, Brazil. The Carajás region is one of the premier iron ore mining camps in the world and also hosts one of the world’s largest known concentrations of large tonnage, open pittable iron oxide-copper-gold (“IOCG”) deposits. In addition, Carajás is host to the Serra Pelada gold-palladium-platinum deposit. In 2009, INV Metals entered into agreements with a subsidiary of Teck Resources Limited (“Teck”) which provided the Company the right to acquire a 50% indirect interest in the Rio Novo property. In 2012, the Company, through its subsidiary INV Mineração Ltda., earned a 50% interest in the Rio Novo property. INV Metals incurred an aggregate $7,000,000 in committed and optional expenditures before September 30, 2012. No field work occurred in the fourth quarter of 2012. INV Metals and Teck have jointly sold the northern portion of the property to a private Brazilian company in exchange for a royalty, and are currently in discussions to advance the southern portion of the property. A NI 43-101 compliant Technical Report entitled “Technical Report on the Rio Novo Copper-Iron-Gold-Platinum-Palladium Property in the Carajás District, Pará, Brazil” dated March 21, 2012 is filed on SEDAR. The focus of INV Metals’ exploration in 2012 was the Serra Pelada analogue gold-platinum-palladium target on the Rio Novo North claim. The Serra Pelada deposit is located approximately two km east of the eastern boundary of the Rio Novo North claim and the host rocks to Serra Pelada are interpreted to plunge westwards and trend onto the Rio Novo property at depth, providing a challenging but high-priority exploration target. Drilling at the target encountered incompetent rocks causing numerous drilling challenges resulting in a very slow advance rate, poor drill conditions and high drill costs. Although management concluded that the sequence of sedimentary rocks hosting Serra Pelada does occur on the property, drilling indicated that the target horizon was replaced by an ultramafic intrusion containing low grade precious metal values where drilling was conducted. The drilling intersected values ranging from nil to best intersections in hole PRN-72A with 43.0 m grading 0.18 g/t platinum plus palladium from 424.0 to 467.0 m, including 4.0 m grading 0.44 g/t from 427.0 to 431.0 m, and 6.0 m grading 0.3 g/t from 455.0 to 461.0 m. The anomalous precious metal values were hosted within a highly altered mafic-ultramafic rock and not the sequence of altered sediments hosting the Serra Pelada deposit. Weak precious metal values (up to 50 ppb gold) were intersected in Serra Pelada-like carbonaceous sediments in hole 73.



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MINERAL PROPERTIES (continued) 2) Itaporã, Brazil At claim NS-7 of the Company’s 100% owned Itaporã gold property, located in Pará state, Brazil, the Company completed the program comprised of two diamond drill holes totaling 461.6 m to test gold in soil geochemical anomalies. The best intersections in hole PIT-DD-10 were 1.0 metre grading 3.25 g/t gold from 64.2 m to 65.2 m, and 1.0 metre grading 2.25 g/t gold from 185.0 m to 186.0 m, while in hole PIT-DD-11 the best intersection was 1.8 m grading 1.01 g/t gold from 146.5 m to 148.3 m. The remainder of the drill assays returned values of trace to weakly anomalous gold. Management is considering its options to advance or monetize the Itaporã property, including considering expressions of interest from third parties. 3) Kaoko, Namibia The Kaoko property is located in the Kunene Region of northwest Namibia and comprises a roughly 8,728 km2 prospective land package in a belt geologically analogous and similar in size to the Zambian Copper Belt. On October 3, 2012 the Company entered into an agreement with Teck which amended various terms of the option agreement between INV Metals and Teck and provided that INV Metals, through its subsidiary INV Exploration Namibia (PTY) Ltd., earned a 35% indirect interest in the Kaoko property. INV Metals will be carried on any future exploration expenditures undertaken by Teck up to $6.1 million. A NI 43-101 compliant Technical Report entitled “Technical Report on the Kaoko Copper-Silver Property in Northwest Namibia” dated March 21, 2012, is filed on SEDAR. The 2012 exploration program described below included the completion of a sedimentary basin analysis, geological mapping, the continuation of the soil geochemical sampling survey, and a limited reverse circulation (RC) and rotary air blast (RAB) drill program. The results of nine reverse circulation drill holes totaling 1,457 m to further test the Omatapati copper-silver target were received in early 2012. The highlight of that phase two drilling was hole INVR-133, a vertical drill hole located 50 m to the west of INVD-14, that intersected 16 m grading 1.4% copper and 55 g/t silver from 74 m depth, including 5 m at 3.4% copper and 120 g/t silver. Other intersections include 8 m at 0.6% copper and 37.6 g/t silver, including 1 metre at 2.1% copper and 98.9 g/t silver in hole INVR-127; 12 m at 0.3% copper and 3.8 g/t silver in hole INVR-129; 2 m at 1.0% copper and 87.1 g/t silver in hole INVR-132; and 17 m at 0.5% copper and 4.6 g/t silver including 2 m at 1.1% copper and 3.2 g/t silver in hole INVR-135. The remainder of the drill assays returned values of trace to weakly anomalous copper. The Omatapati target is comprised of stockwork veins, veinlets, and disseminations of copper sulphides and oxides within an altered sequence of siltstones, dolostones, and evaporitic rocks. The mineralized zone appears to transition from a northeast-trending, cross-cutting and probably fault-controlled stockwork zone to a stratabound zone that follows a geological contact to the west. A number of surface copper-silver showings occur along this contact roughly 2 km to the west of the stockwork zone. The second phase reverse circulation drill program at Okozonduno consisted of eight holes and 1,208 m, the results of which were also received in early 2012. Hole INVR-136 returned the best intersection of 15 m at 0.2% copper and 3 g/t silver, including 1 metre at 5.3% copper. Reverse circulation drilling commenced in mid-January in order to complete the 2011 phase two drilling which had been suspended for the year-end holiday season. Holes INVR-141 and 143 at Okozonduno were deepened by a total of 65 m and an additional two holes (INVR-144, 145) were drilled at the Otjihorongo target for a total of 258 metres. The remainder of the drill assays returned values of trace to weakly anomalous copper.



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MINERAL PROPERTIES (continued)

3) Kaoko, Namibia (continued) INV Metals conducted an extensive soil geochemical program to evaluate the roughly 200 linear kilometres of the key geological horizon on the Kaoko property. Samples were collected at 50 m intervals along lines spaced 500 m apart. A total of approximately 24,752 samples were collected during this program. In some areas only every other sample was submitted for analysis, with the intervening samples being analyzed with a hand-held Niton XRF unit. In total, 16,502 were submitted for wet analysis, however, due to delays in passing through customs in South Africa and the USA, only 14,311 assays were actually completed. The Company announced the discovery of a new copper-silver prospect (the "NS Showing") as a result of following up copper in soil geochemical anomaly generated during this program. The mineralized zone occurs discontinuously in outcrop over a potential strike length of 1.2 km, up to 10 m wide. Twelve rock grab samples analyzed returned copper and silver values ranging from anomalous to 2.6% copper and 1.7 to 84.0 g/t silver. The copper mineralization consists of fine to coarse disseminated chalcocite, chalcopyrite and malachite within interbedded chloritic schists and dolomites. A sedimentary basin analysis investigation was completed and proved to be instrumental in focusing the 2012 exploration program based on:

newly identified stratigraphic correlations probable identification of a zoned alteration pattern outwards from the shale hosted stratabound

mineralization that is being targeted Identification of NW, N-S and ENE trending structures as important controls on the emplacement of

copper mineralization These criteria focused INV Metals’ main exploration efforts to the northwest sector of EPL3350 for the second quarter of 2012. In this area there appears to have been a merging of the Okohongo Horizon with similar stratigraphy along the Lower and Upper Omao contact zone (“LUO”) to form what is now referred to as the Otuani Horizon. As a result of this merging of stratigraphy the Lower Omao carbonates are not present which improves the opportunity to apply acid leaching on any potential deposits found in this area due to the lesser carbonate content. In addition, there is potential that the mineralized schist package may be thicker than elsewhere. As a result of the identification of the EPL3350 as a priority area, a 14 hole reverse circulation drill program was conducted in the Otuani target area. The results, which are encouraging and warrant further work, are tabulated in the table that follows.



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3) Kaoko, Namibia (continued)

Hole Depth

(m) Azimuth Dip

From (m)

To (m)

Width (m)

Copper (%)

Silver (g/t)

Lead (%)

Molybdenum (%)

INVR-146 120 260 -60 66 67 1 1.46 7.60 INVR-147 110 80 -60 19 20 1 0.29 4.40 0.10 0.002 44 86 42 0.55 6.55 0.04 0.009 inc 47 69 22 0.61 12.40 0.06 0.017 inc 47 52 5 1.14 8.42 0.13 0.045 inc 50 51 1 2.67 19.40 0.51 0.201 and 73 81 8 0.99 32.65 0.05 0.002 inc 77 80 3 2.07 70.00 0.09 0.004 INVR-148 105 90 -60 13 28 15 0.63 8.78 0.37 0.028 inc 16 19 4 1.31 14.73 1.26 0.099 inc 17 19 2 2.01 20.75 1.84 0.144 56 61 5 0.62 20.79 0.03 0.001 inc 56 57 1 0.95 23.60 0.04 0.002 and 59 60 1 1.81 69.40 0.08 0.002 76 77 1 1.85 46.6 0.16 0.005 INVR-149 129 90 -60 75 79 4 0.12 4.80 1.39 0.037 inc 76 77 1 0.17 15.00 5.21 0.137 93 94 1 0.34 6.80 INVR-150 174 150 -70 140 142 2 0.15 11.65 3.98 0.260 inc 140 141 1 0.20 19.30 7.09 0.472 164 165 1 0.21 3.70 INVR-151 215 150 -70 203 205 2 0.08 2.70 0.37 0.011 inc 203 204 1 0.05 3.40 0.66 0.019 INVR-154 117 230 -65 21 29 8 0.17 2.28 INVR-157 99 240 -75 87 88 1 0.40 0.15

A further 43 rotary air blast (“RAB”) holes totaling 365 m were completed at the Otuani prospect prior to the cessation of field activities in early July. These holes were designed to target areas for reverse circulation drilling follow-up and for this reason the samples were analyzed by hand held XRF. Two full exploration lines were completed, one 700 m north of Otuani and the second 1.3 km to the south. In the north anomalous results were intersected on the eastern limb of the Otuani anticline, while in the south a significant anomaly was intersected on the western limb of the anticline within the same stratigraphic unit as the Otuani mineralization. Two short RAB lines located 100 m north and 200 m south of the southern anomaly also returned anomalous copper values indicating a potential for 1.5 km of mineralized strike. The results from 1,836 regional soil samples from the Otuani area were returned. As with the RAB drilling above these soils show good continuity in anomalous copper values moving southwards away from the Otuani target area and suggest this zone of mineralization is continuous over a strike length of 4.2 km as defined by copper in soils in excess of 166 ppm. In addition, 1,085 soil samples from infill sampling at Okangura West (100 m line spacing by 50 m sample spacing) were returned with several excellent assay results for copper up to 0.24%. There are also several 200-300 m long anomalies of up to 117 ppm copper defined by single points along lines. The remainder of the assays returned values of trace to weakly anomalous copper. These require further follow-up to determine if drilling is warranted. Geologic mapping and associated rock chip sampling of targeted areas was completed with a total of 1,421 hectares of 1:1,000 scale mapping conducted at Omatapati, Otjite, Otjozongombe East and the NS prospect. A further 965 hectares of 1:5,000 scale mapping was completed at Otuani and an additional 8,060 hectares of 1:10,000 scale mapping completed at Okazewana. Results for 34 rock chip samples collected within EPL 3350 ranged from weakly anomalous to a highest value of 48.2% Cu and 785 g/t Ag, with no other associated elements, being returned from boulder floatalong the LUO contact zone to the south of Omao.



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3) Kaoko, Namibia (continued) Of the 34 samples collected, the values ranged from nil to weakly anomalous. The most impressive results were returned from chip channel sampling of trenches at Okatumba. There is a strong copper, silver, barium ± arsenic ± molybdenum ± lead ± vanadium association with the best values for each being 7% copper, 677 g/t silver, >1,000 ppm barium 178 ppm arsenic, 1,390 ppm molybdenum, 0.44% lead and 100 ppm vanadium. At this locality a 15 metre long chip channel sample through a trench returned 7% copper, 475 g/t silver, >1,000 ppm barium and 100 ppm vanadium. Teck had previously drilled this target but the chip sample results suggest a re-evaluation of this target area is warranted.

An interpretation of the soil geochemical assay data suggests that there is a strong correlation between silver and bismuth only anomalies and Nosib Formation contact mineralization. Copper-silver anomalies show the same affinity in the south of the area but become more prolific at the LUO contact in the central and northern portions of the license. Copper only anomalies are fairly widespread occurring at both the LUO and Nosib Formation contacts but are most laterally extensive along the LUO contact to the west of the Nosib sandstone inliers. Multi-element anomalies of copper-silver-lead-bismuth are much less common but show a concentration to the east of the Nosib inliers and to a lesser extent associated with the Epunguwe mineralization. Field activities ceased before a number of targets recommended for further work could be followed up, as the Company vested its 35% indirect interest and Teck assumed operatorship of the project.

Easting Northing Prospect Sample No. Length Cu_ppm Ag_ppm Ba_ppm As_ppm Bi_ppm Mo_ppm Pb_ppm V_ppm Zn_ppm

364261 7937301 Omao 10141 482000 785 125 5 9 5 187 63 33364430 7942640 Okatumba 10142 > 10000 44.8 246 855 565 123 4130 26 137364203 7943295 Okatumba 10143 3m 16200 166 > 1000 13 60 1 55 70 91364200 7943213 Okatumba 10144 15m 69900 475 > 1000 < 3 169 3 928 100 137364171 7943246 Okatumba 10145 8m 47900 132 > 1000 25 51 312 1200 82 117364186 7943050 Okatumba 10146 5m 55100 677 > 1000 178 94 1390 4360 31 190368970 7934362 Omao South 10147 3m 27000 4.3 221 4 26 12 185 54 28368157 7934936 Omao South 10148 4m 8860 0.9 98 < 3 < 2 1 52 32 13361948 7945931 Otw ani 10149 13700 4.7 > 1000 4 43 6 16 144 45357326 7944618 Otw ani 10150 57900 18.7 164 26 49 486 3260 24 252374609 7934609 Okangura West 10251 26400 3.7 489 < 3 < 2 14 45 157 52359809 7940282 Ondera East 10410 1210 0.6 > 1000 < 3 7 49 221 4 3359299 7940253 Ondera East 10411 76500 5.7 > 1000 < 3 47 14 80 61 38359281 7940860 Ondera East 10412 56900 26.8 > 1000 15 < 2 10 8 98 49362840 7939234 Omao 10415 7930 10.9 324 < 3 5 < 1 6 11 4362911 7939189 Omao 10416 43700 123 > 1000 < 3 2 5 24 45 11365353 7939175 Omao 10424 141000 64.5 > 1000 62 154 229 408 97 86354639 7949584 Otw ani 10501 76800 178 > 1000 7 < 2 407 2170 341 82359313 7940280 Onder East 10502 4m 7180 4.3 315 < 3 3 < 1 10 81 59359657 7939690 Onder East 10503 2m 3000 195 34 5 374 208 284000 32 10359518 7938937 Onder East 10504 4m 17200 0.9 38 < 3 44 148 1770 200 62359331 7940487 Onder East 10505 18000 8.7 > 1000 < 3 9 3 91 96 67354804 7939149 Ondera West 10506 0.5m 15900 3.7 537 11 28 5 6 89 179354842 7939242 Ondera West 10507 1m 29900 6.7 564 9 < 2 4 12 77 146355139 7937994 Ondera West 10508 1m 772 < 0.3 > 1000 4 < 2 2 12 71 103354989 7934488 Ondera West 10509 13500 7.4 110 205 10 442 4520 16 69355875 7934855 Ondera West 10510 16800 14.5 > 1000 < 3 < 2 4 14 70 49355515 7935004 Ondera West 10511 1470 2.3 489 < 3 2 < 1 7 53 109355703 7934989 Ondera West 10512 3m 4570 2.7 > 1000 4 < 2 < 1 < 3 117 87355726 7947681 Otw ani West 10253 2460 5.3 688 < 3 < 2 3 55 24 26357055 7945888 Otw ani West 10254 718 1.5 193 6 < 2 1 111 19 16361247 7942006 Camp Syncline 10256 1730 3.6 17 < 3 5 1 18 11 7360149 7945007 Camp Syncline 10257 2230 0.4 20 8 < 2 < 1 29 21 4



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QUALITY CONTROL AND QUALITY ASSURANCE PROCEDURES Please refer to INV Metals’ Technical Reports filed on SEDAR entitled “Technical Report on the Quimsacocha Project, Azuay Province, Ecuador”, “Technical Report on the Rio Novo Copper-Iron-Gold-Platinum-Palladium Property in the Carajás District, Pará, Brazil”, and "Technical Report on the Kaoko Copper-Silver Property in Northwest Namibia" for the Company’s current quality control and quality assurance procedures for its exploration programs. Other than Quimsaococha, all of the Company’s properties are early stage grassroots projects. Potential grade and quantity is conceptual in nature. The relationship between the mineralized intervals reported and true widths is unknown at this time. There has been insufficient exploration to define a mineral resource on any of these properties, with the exception of the Okohongo deposit, and it is uncertain if further exploration will result in any such targets being delineated as mineral resources or reserves. The scientific and technical data set forth herein has been reviewed and verified by Mr. Robert Bell, a Qualified Person as defined under NI-43-101 of the Canadian Securities Administrators.



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RESULTS OF OPERATIONS The following table presents the changes between INV Metals’ Consolidated Statement of Comprehensive Loss for the years ended December 31, 2012 and 2011.

For the years endedDecember 31,

2012December 31,

2011 Change

General and administrationShareholder and regulatory 102,567$ 82,955$ 19,612$

Travel expense 63,347 140,816 (77,469)

General exploration 34,973 37,269 (2,296)

Gain/loss on disposal of property, plant and equipment - (3,344) 3,344

Office 196,903 294,646 (97,743) Total general and administration 397,790 552,342 (154,552)

Compensation

Compensation 899,207 924,532 (25,325)

Stock-based compensation 44,394 341,939 (297,545)

Total compensation 943,601 1,266,471 (322,870)

Professional fees 350,119 424,806 (74,687) Write down of exploration properties net of gain on sale 981,514 3,574,237 (2,592,723) Fair value loss on investment 518,194 878,410 (360,216)

Foreign exchange loss 96,125 142,124 (45,999) Operating loss 3,287,343 6,838,390 (3,551,047)

Finance income (107,618) (174,677) 67,059

Total loss for the year before taxes 3,179,725$ 6,663,713$ (3,483,988)$

Deferred tax (recovery) expense (60,123) 102,635 (162,758)

Total loss for the year 3,119,602$ 6,766,348$ (3,646,746)$ Other comprehensive loss

Cumulative translation adjustment 99,342 - 99,342 Total comprehensive loss for the year 3,218,944$ 6,766,348$ (3,547,404)$

The Company recorded a total comprehensive loss of $3,218,944 or $0.03 per share in 2012, compared with a total comprehensive loss of $6,766,348 or $0.10 per share in 2011, a decrease of $3,547,404. The loss decreased compared to the the prior year primarily due to lower write downs in exploration properties, stock-based compensation and fair value losses on investments, partially offset by a cumulative translation adjustment resulting from the translation of Ecuador Subco into Canadian dollars. General and administrative expenses decreased from $552,342 in 2011 to $397,790 in 2012, a decrease of $154,552, mainly due to lower travel and office expenses in 2012. Shareholder information and regulatory compliance expenses totaled $102,567 for 2012, compared to $82,955 in 2011, resulting in an increase of $19,612. The increase for the year was primarily due to items related to the Acquisition. Travel expenses decreased by $77,469 from $140,816 in 2011 to $63,347 in 2012, mainly as a result of decreased travel to the Namibian and Brazilian properties.



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RESULTS OF OPERATIONS (continued) Compensation expense decreased from $924,532 in 2011 by $25,325 to $899,207 in 2012. The decrease was a result of decreased cash payments to directors of the Company. In 2012, stock-based compensation expense was $44,394, a decrease of $297,545 from $341,939 in 2011. The decrease was mainly a result of less expense relating to fewer and lower priced vesting options than in 2011. Professional fees decreased from $424,806 in 2011 to $350,119 in 2012, a decrease of $74,687, mainly as a result of less legal fees related to the Company’s subsidiaries and capitalized legal expenses relating to the Quimsacocha acquisition as business development costs. During 2012, the write down of exploration properties net of gain on sale was $981,514, a decrease of $2,592,723 from $3,574,237 in 2011, due to the write down of the Montcalm property and offset by a gain recorded on the sale of sale of the Fishtrap property sale in Q1/2012. The write downs of the Thorne Lake and Fishtrap properties comprised the write down of exploration properties in 2011. The fair value loss on investment decreased to $518,194 in 2012 from $878,410, a decrease of $360,216 compared to the prior year, mainly due to lower mark-to-market losses on marketable securities held as investments. The foreign exchange loss decreased in 2012 by $45,999 to $96,125, compared to $142,124 in 2011, due to decreases in the magnitude of foreign currency transactions at the Namibian and Brazilian properties. Interest income decreased by $67,059 from $174,677 in 2011 to $107,618 in 2012, due to a lower average cash balance in 2012. The Company’s cash is invested in low risk, fully liquid deposits at a major Canadian chartered bank. During 2012 the deferred tax was recovered by $162,758 to $60,123, compared to an expense of $102,635 in 2011, due to a temporary difference on translation of non-monetary assets in the Namibian legal entity. The cumulative translation adjustment totaled $99,342 from $nil in 2011, due to foreign currency translation of the assets and liabilities of the Ecuadorian legal entity, which was acquired in 2012. FOREIGN EXCHANGE INV Metals reports its financial results in Canadian dollars (“C$”). The Company’s expenses include costs incurred in the US dollar (“US$”), the Brazilian real (“R$”) and Namibian dollar (“N$”). The Canadian dollar increased relative to the US dollar during the year ended December 31, 2012 as the average rate was C$0.9996/US$ compared to C$0.9883/US$ in 2011. The Canadian dollar decreased relative to the Brazilian real during the year ended December 31, 2012 as the average rate was C$0.5131/R$ compared to C$0.5913/R$ in 2011. The Canadian dollar decreased relative to the Namibian dollar during December 31, 2012 as the average rate was C$0.1203/N$ compared to C$0.1350/N$ in 2011. The US Dollar was C$1.0265/US$ as at March 12, 2013. The Brazilian real was C$0.5232/R$ as at March 12, 2013. The Namibian dollar was C$0.1107/N$ as at March 12, 2013. FINANCIAL CONDITION AND LIQUIDITY Cash and cash flows The Company is not in commercial production on any of its resource properties and accordingly, it does not generate cash from operations. The Company finances its activities by raising capital through equity issues.



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FINANCIAL CONDITION AND LIQUIDITY (continued) As at December 31, 2012 the Company had cash of $25,302,923 (2011 - $12,733,403) and working capital of $25,316,514 (2011 - $12,368,463). Cash and cash flows (continued) Cash and working capital have increased from December 31, 2011 mainly as a result of the equity financing relating to the Quimsacocha Property Acquisition. The majority of the Company's financial liabilities have contractual maturities of less than 30 days and are subject to normal trade terms. Operating activities Cash flows used in operating activities for 2012 totaled $2,109,333 compared to $3,128,408 in 2011. Stock-based compensation expense, write down of exploration properties, fair value loss on investment and change in working capital comprise the principal amounts that reconcile the statement of loss to the statement of cash flows from operating activities. Financing activities In 2012, INV Metals closed the equity financing related to the Acquisition by way of private placement of 200,000,000 shares at a price of $0.10 to raise gross proceeds of $20 million. There were no financing activities in 2011. Investing activities Cash flows used in investing activities for year ended December 31, 2012 totaled $3,655,907 compared to $5,338,687 for the same period in 2011. Investing activities decreased mainly due to decreases in expenditures on the Rio Novo property in Brazil and the Kaoko property in Namibia and include expenditures on the Quimsacocha property following November 14, 2012. In management’s view, the Company has sufficient financial resources to fund currently planned exploration programs, business development and ongoing operating expenditures. The Company will continue to be dependent on raising equity capital as required unless it reaches the production stage and generates cash flow from operations. RELATED PARTY TRANSACTIONS Balances and transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed in this note. Disclosed below are details of the transactions between the Company and other related parties, including transactions with the Company’s officers and directors. The Company’s related parties include the following officers and directors as follows:

Robert Bell Officer and Director Jay Goldman Corporate Secretary James Clucas Director Parviz Farsangi Director Eric Klein Director Candace MacGibbon Officer Terry MacGibbon Director Robert Pollock Director



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RELATED PARTY TRANSACTIONS (continued) The remuneration of directors and officers during the years ended December 31, 2012 and 2011 was as follows:

December 31, December 31,2012 2011

Salaries of key management 500,000$ 500,000$ Director fees 63,040 131,938 Stock-based compensation* 25,430 289,391

588,470$ 921,329$

*Officers and directors also participate in the Company’s stock-option and restricted share unit programs. CONTRACTUAL OBLIGATIONS AND COMMITMENTS

TotalLess than one year

Between 1 - 5 years

More than 5 years

Exploration expenditures at Quimsacocha property 14,660,000$ -$ 14,660,000$ -$

Office and copier leases 521,635 110,835 410,800 - Term deposit 212,435$ 212,435$ -$ -$

The Company guaranteed expenditures on the Quimsacocha property of $15 million over 18 months. As at December 31, 2012, cash calls to Ecuador Subco totaled $340,000. INV Metals renewed its lease arrangement to lease office space effective December 31, 2012. The lease will remain in effect to December 31, 2017. INV Exploration Namibia (Pty) entered into a lease arrangement to lease office space effective February 1, 2010. The lease will remain in effect to February 1, 2013. During the year ended December 31, 2012 an amount of $310,433 was recognized in total comprehensive loss in respect of operating leases. Ecuador Subco holds a term deposit relating to its environmental management plan for ongoing expenditures related to environmental matters. CRITICAL JUDGEMENTS AND KEY SOURCES OF ESTIMATION The policies applied in the consolidated annual financial statements are based on International Financial Reporting Standards (“IFRS”) effective for the year ended December 31, 2012. The preparation of the consolidated annual financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed by management on an ongoing basis. The estimates and judgments include functional currency, impairment of non-financial assets, share-based payments and the assessment of asset acquisition accounting. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.



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CRITICAL JUDGEMENTS AND KEY SOURCES OF ESTIMATION (continued) The following discusses the most critical judgments that the Company has made in the preparation of the financial statements:

i) Functional currency

Management determined the US dollar is the functional currency of Ecuador Subco as the entity’s currency is that of the economic environment of Ecuador. The Canadian dollar is the functional currency of INV Metals and its remaining subsidiaries as the Company’s capital receipts are denominated in Canadian dollars, and INV Metals finances the Group's expenditures using Canadian dollars.

ii) Impairment of non-financial assets The Company evaluates its non-financial assets for impairment annually and whenever events or changes in circumstances indicate the carrying amount may not be recoverable. If there is any indication of impairment, the recoverable amount of the asset is estimated to determine the impairment loss, if any. To calculate the recoverable amount, estimates are made regarding fair value or the estimated future cash flows, if any. During the year, the estimates of recoverable amounts for exploration properties were determined based on management’s assessment of their recoverability based on the planned exploration program or management's intention.

iii) Share based payments The fair value of options and potential shares to be issued relating to milestone payments are estimated using an option pricing valuation model. This includes using assumptions related to the risk-free interest rate determined by the Government of Canada marketable three to five year average bond yields, the expected average option life based on management’s assumptions of member enrollment, estimated forfeitures based on historical activity of the plan members and the estimated volatility of the Company’s shares based on historical market prices. The fair value of restricted share units is recognized based on the market value of the Company’s common shares on the date prior to the date of the grant.

iv) Asset acquisition Management determined the acquisition of the Quimsacocha gold property to be an asset acquisition under IAS 16, Property, plant and equipment. The fair value of the group of assets and liabilities acquired was considered to approximate carrying value as at November 14, 2012, with the exception of property, plant and equipment and costs capitalized to exploration property. The difference between the value of the net assets acquired and the fair value of the consideration transferred, including common shares issued, transaction costs and the valuation of potential shares to be issued for milestone payments, was allocated to property, plant and equipment and exploration properties based on their relative fair values. FINANCIAL RISK FACTORS The Company’s activities expose it to a variety of financial risks, including credit risk, liquidity risk, commodity price risk, interest rate risk, other price risk and foreign exchange risk. The Company’s exposure to these risks and it methods of managing the risks remain consistent. There have been no changes in the risks from the previous period.

a) Credit risk Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet contractual obligations and arises principally from the Company’s other receivables. The carrying value of



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FINANCIAL RISK FACTORS (continued)

a) Credit risk (continued) the financial assets represents the maximum credit exposure. Financial instruments included in other receivables consist of receivables from unrelated companies. The Company has concentration of credit risk as the majority of cash is held at one banking institution. This risk is mitigated in that the Company holds its primary cash in deposit form in a major Chartered Canadian bank. The Company’s subsidiaries’ cash is held in deposit form in internationally recognized banks. The maximum exposure to credit risk for deposits approximates the amount recognized on the statement of financial position.

b) Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has a planning and budgeting process in place to help determine the funds required to support the Company’s normal operating requirements on an ongoing basis and its expansionary plans. The Company ensures that there are sufficient funds to meet its short-term requirements, taking into account its cash holdings.

c) Commodity price risk Commodity price risk arises from the possible adverse effect on the ability of the Company to develop its properties and the future profitability of the Company is directly related to these prices. The Company does not enter into any derivative financial instruments to manage exposures to price fluctuations.

d) Market risk

i. Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company monitors its exposure to interest rates and has not entered into any derivative financial instruments to manage this risk. The Company has a cash balance and no interest-bearing debt. The Company is sensitive to changes in the interest rates through interest income earned on its cash balance.

ii. Other price risk The Company is exposed to equity securities price risk on the investments held by the Company. Fluctuations in the investments in equity securities may, consequently, have an impact upon the reported comprehensive loss of the Company and may affect the value of the Company’s assets.

iii. Foreign exchange risk The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates. The Company's presentation currency is the Canadian dollar and major purchases are transacted in Canadian dollars, US dollars, Brazilian reais and Namibian dollars. The Company funds certain operations, exploration and administrative expenses on a cash call basis using Canadian dollar currency converted from its Canadian dollar bank accounts. The Company currently does not enter into financial instruments to manage foreign exchange risk. Fluctuations in the exchange rates may, consequently, have an impact upon the reported operations of the Company and may affect the value of the Company’s assets and liabilities.



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FINANCIAL RISK FACTORS (continued)

e) Sensitivity analysis Based on management’s knowledge and experience of the financial markets, the Company believes the following movements are “reasonably possible” over the year ended December 31, 2012. Cash is subject to floating interest rates. As at December 31, 2012 if interest rates had decreased by 0.25% or increased by 0.25%, respectively, with all other variables held constant, the comprehensive loss for the year would have been approximately $26,500 higher/lower, as a result of lower/higher interest income from cash deposits. Similarly, as at December 31, 2012 shareholders’ equity would have been approximately $26,500 lower/higher as a result of lower/higher interest income from cash due to a 0.25% decrease or a 0.25% increase in interest rates. Financial instruments denominated in US dollars, Brazilian reais and Namibian dollars are subject to foreign currency risk. As at December 31, 2012 had the US dollar, Brazilian real and Namibian dollar weakened/strengthened by 10% against the Canadian dollar, with all other variables held constant, the Company’s comprehensive loss for the year ended December 31, 2012 would have beenapproximately $37,400 higher/lower as a result of foreign exchange losses/gains on translation of non-Canadian dollar denominated financial instruments. Similarly, as at December 31, 2012 shareholders’ equity would have been approximately $37,400 higher/lower had the US dollar, Brazilian real and Namibian dollar weakened/strengthened by 10% as a result of foreign exchange losses/gains on translation of non-Canadian dollar denominated financial instruments. Equity securities are subject to fluctuations in market prices. As at December 31, 2012 if the market value of securities held by the Company had increased/decreased by 5%, the comprehensive loss for the year would have decreased/increased by approximately $23,500. Similarly, as at December 31, 2012 shareholders’ equity would have been approximately $23,500 higher/lower if the market value securities held by the Company had increased/decreased by 5%.



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SELECTED ANNUAL FINANCIAL INFORMATION The following selected data has been prepared in accordance with IFRS and should be read in conjunction with the Company’s audited consolidated financial statements for the years noted below:

December 31, December 31, December 31,For the years ended 2012 2011 2010

Financial results:Interest income 107,618$ 174,677$ 60,032$

Total comprehensive loss (3,218,944) (6,766,348) (2,940,195)

Loss per share* - basic and diluted (0.03) (0.10) (0.05)

December 31, December 31, December 31,As at 2012 2011 2010

Financial position:Working capital 25,326,514$ 12,368,463$ 20,062,157$

Mineral properties and deferred exploration 42,836,602 18,069,036 17,399,408

Total assets 70,036,287 31,919,090 38,997,731

Non-current liabilities 332,156 188,008 -

Common shares 107,047,075 67,490,596 67,399,596

Warrants 910,151 339,370 339,370

Contributed surplus 9,090,186 7,815,997 7,493,549

Deficit (47,554,177)$ (44,434,575)$ (37,668,227)$

Number of shares issued and outstanding 491,735,340 70,454,437 70,354,437

Interest income significantly increased since 2010 mainly due to increasing interest rates and the higher cash balance after the November 2010 financing. Since 2011, interest decreased mainly due to a lower cash balance, offset slightly by the completion of the equity financing in November 2012. The comprehensive loss increased in 2011 compared to 2010, primarily due to the write off of mineral properties, equity losses on investments and higher general exploration expenses. The comprehensive loss in 2012 decreased compared to 2011, primarily due to lower in write downs of mineral properties, equity losses on investments, and stock-based compensation expenses. The Company’s working capital increased in 2012 due to an increased cash balance on closing the equity financing in November 2012. Total assets increased in 2012 mainly due to completion of the Acquisition and related equity financing in November 2012. Total assets decreased in 2011 compared to 2010 primarily due to exploration expenditures at Rio Novo and Kaoko and the sale of various Ontario mineral properties. The increase in non-current liabilities in 2011 and 2012 is due to post-retirement benefits mandated by Ecuadorian law in 2012 and changes in deferred tax liabilities in 2011 and 2012. The increase in common shares in 2012 was due to the shares issued in the Acquisition, pursuant to which approximately 421 million shares were issued. The value of warrants has increased since 2011, due to the compensation warrants issued in the November 2012, partially offset by the expiry of the warrants issued in the December 2010 financings. Contributed surplus has increased since 2011 as a result of the expiration of warrants in 2012 and the vesting of stock options and the adoption of the restricted share unit plan in 2008.



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QUARTERLY FINANCIAL INFORMATION The following selected financial data has been derived from the Company’s unaudited interim consolidated financial statements prepared in accordance with IFRS.

For the period endedDecember 31,

2012September 30,

2012June 30,

2012March 31,

2012

Interest income 40,182$ 19,196$ 22,116$ 26,124$ Total comprehensive loss (458,365) (1,501,222) (959,344) (300,013) Basic and diluted loss per share* -$ (0.02)$ -$ (0.01)$

For the period endedDecember 31,

2011September 30,

2011June 30,

2011March 31,

2011

Interest income 29,860$ 35,152$ 44,875$ 64,790$

Total comprehensive loss (1,706,701) (3,968,489) (559,926) (531,232)

Basic and diluted loss per share* (0.02)$ (0.06)$ (0.01)$ (0.01)$

*Basic and diluted loss per share is calculated based on the weighted-average number of shares outstanding. The conversion of stock options, restricted share units and warrants is not included in the calculation of the diluted loss per share because the conversion would be anti-dilutive. The comprehensive loss decreased in Q4/2012, mainly due to the write down of the Montcalm property recorded in Q3/2012. In Q3/2012 the comprehensive loss increased compared to the prior quarter due to the write down of the Montcalm property. The comprehensive loss increased in Q2/2012 from Q1/2012, mainly due to increased mark-to-market losses and deferred tax expense. In Q1/2012 the comprehensive loss decreased compared to the prior quarter due to mark-to-market gains and deferred tax recoveries. In Q4/2011, comprehensive loss decreased mainly due to the write down of exploration properties recorded inQ3/2011, partially offset by a gain on sale of the Thorne Lake option of $22,500. In Q3/2011 the comprehensive loss increased relative to prior quarter primarily as a result of a mark-to-market loss on securities and a write down of exploration properties, partially offset by lower travel and stock based compensation expenses. In Q2/2011 the comprehensive loss increased compared to the prior quarter due to higher professional fees and increased compensation expenses, which were partially offset by lower travel and shareholder and regulatory expenses. In Q1/2011 the comprehensive loss decreased compared to the prior quarter. Higher marketing and travel expenses were offset primarily due to lower compensation expense as a result of 2010 employee bonuses that were awarded and recorded in 2010, which did not occur in the prior year as bonuses were typically awarded and recorded in March. OUTSTANDING SHARE DATA As at March 13, 2013 the Company had 491,735,340 common shares outstanding, as well as stock options to purchase 2,885,000 common shares at a weighted average price of $0.79 and 11,418,300 compensation warrants at an exercise price of $0.10 per share. OFF-BALANCE SHEET TRANSACTIONS During the year ended December 31, 2012 the Company was not involved in any off-balance-sheet transactions.



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RISKS AND UNCERTAINTIES An investment in the Company entails certain risk factors, which should be considered carefully, including but not limited to, those set out below. A discussion of these and other factors that may affect the Company’s actual results, performance, achievements or financial position is contained in “Risk Factors” and elsewhere in the Company’s AIF. Risks and uncertainties related to the interpretation of drill results, the geology, grade and continuity of mineral deposits and conclusions of economic evaluations. Risks that the results of scoping studies, pre-feasibility and feasibility studies, and the possibility that future exploration, development or mining results will not be consistent with the Company’s expectations. Risks related to the reliability of commercial laboratory’s analytical results, possible variations in reserves, grade, and changes in project parameters as plans continue to be refined. Exploration and potential future development risks, including risks related to the grant of access rights to the properties, accidents, equipment breakdowns, labour disputes (including work stoppages and strikes) or other unanticipated difficulties with or interruptions in exploration and development. The potential for delays in exploration or potential future development activities or the completion of feasibility studies. Risks related to market sentiment, commodity price and foreign exchange rate fluctuations. Risks related to the Company not having any reserves. All of INV Metals’ mineral properties are in the exploration or development stage and do not contain a known body of potentially economically extractible ore. It is not yet known if the inferred resources at the Company’s Quimsacocha or Okohongo deposits can be converted from a resource to a reserve. Risks related to the global economy. Recent market conditions, including disruptions in the international credit markets and other financial systems and the deterioration of the global economic conditions, could impede the Company’s access to capital. Risks related to failure to obtain adequate financing on a timely basis and on acceptable terms or delays in obtaining governmental approvals or in the completion of development or construction activities. Risks related to environmental regulation and liability. Risks of potential losses, liabilities and damages arising from the lack of insurance coverage related to the business that are uninsured or uninsurable. Risks related to the loss of the services of key executives, including the directors of the Company and a small number of highly skilled and experienced executives and personnel. Political, regulatory and taxation risks associated with conducting mineral exploration in Canada and foreign countries, including Ecuador, Namibia and Brazil. Risks related to the Quimsacocha Project, including that there may be a failure to realize anticipated benefits, unexpected costs or liabilities and a significant new shareholder. Other risks and uncertainties related to the Company’s prospects, properties and business strategy.



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CORPORATE GOVERNANCE Management and the Board of Directors (the “Board”) of INV Metals recognize the value of good corporate governance and the need to adopt best practices. The Company is committed to continuing to improve its corporate governance practices in light of its stage of development and evolving best practices and regulatory guidance. The Board has adopted a Board Mandate outlining its responsibilities and defining its duties. The Board has four committees (the Audit committee, the Compensation committee, the Safety, Health and Environment committee, and the Corporate Governance and Nominating committee). The Audit committee has an approved committee charter, which outlines the committees’ mandate, procedures for calling a meeting, and provides access to outside resources. The Company’s Safety, Health and Environmental committee has adopted a Safety, Health and Environmental Policy concerning the Company’s treatment of environmental and health and safety matters. The Board has also approved a Code of Ethics, which governs the ethical behavior of all employees, management and directors. Separate trading blackout and disclosure policies are also in place. For more details on INV Metals’ corporate governance practices, please refer to INV Metals’ website at www.invmetals.com. INV Metals’ directors have expertise in exploration, metallurgy, mining, accounting, banking, financing and the securities industry. The Board meets at least four times a year and Committees meet as required. While the Company is subject to Canadian regulatory provisions, the Board and management incorporate strong corporate governance practices in the belief that such practices provide protection for its investors and add value to the Company. DISCLOSURE CONTROLS AND INTERNAL CONTROLS OVER FINANCIAL REPORTING Disclosure Controls Disclosure controls and procedures (“Disclosure Controls”) are procedures designed to provide reasonable assurance that all relevant information required to be disclosed in documents filed with securities regulatory authorities is recorded, processed, summarized and reported on a timely basis, and is accumulated andcommunicated to the Company’s management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. Management, including the CEO and the CFO, does not expect that the Company’s Disclosure Controls will prevent or detect all error and all fraud. The inherent limitations in all control systems are such that they can provide only reasonable, not absolute, assurance that all control issues and instances of fraud or error, if any, within the Company have been detected. National Instrument 52-109, “Certification of Disclosure in Issuers’ Annual and Interim Filings”, issued by the Canadian Securities Administrators (“CSA”) requires the CEO and CFO to certify that they are responsible for establishing and maintaining Disclosure Controls for the issuer, that Disclosure Controls have beendesigned to provide reasonable assurance that material information relating to the issuer is made known to them, that they have evaluated the effectiveness of the issuer’s Disclosure Controls, and that theirconclusions about the effectiveness of those Disclosure Controls at the end of the period covered by the relevant annual filings have been disclosed by the issuer. INV Metals’ CEO and the CFO have evaluated the effectiveness of the Company’s Disclosure Controls as at December 31, 2012 and concluded that, subject to the inherent limitations noted above; those disclosure controls were effective for the period then ended.



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DISCLOSURE CONTROLS AND INTERNAL CONTROLS OVER FINANCIAL REPORTING (continued) Internal Controls over Financial Reporting National Instrument 52-109 also requires CEO’s and CFO’s to certify that they are responsible for conducting an evaluation of the effectiveness of internal controls over financial reporting (“ICFR”), as defined by the CSA, for the Company, that the ICFR have been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with Canadian GAAP, and that the Company has disclosed any changes in its ICFR during its’ most recent interim period that has materially affected, or is reasonably likely to materially affect, its’ financial reporting. As discussed above, the inherent limitations in all control systems are such that they can provide only reasonable, not absolute, assurance that all control issues and instances of fraud or error, if any, within the Company have been detected. Therefore, no matter how well designed, ICFR has inherent limitations and can provide only reasonable assurance with respect to financial statement preparation and may not prevent and detect all misstatements. Management conducted an assessment of the effectiveness of ICFR in place as of December 31, 2012 and concluded that such procedures are adequate and effective to ensure accurate and complete disclosures in annual filings. The board of directors assesses the integrity of the public financial disclosures through the oversight of the Audit Committee. No material changes in ICFR have been made as of December 31, 2012. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain statements in this document constitute “forward-looking statements” and are based on current expectations and involve risks and uncertainties, referred to above and/or in INV Metals’ AIF in respect to the year 2012, that could cause actual events or results to differ materially from estimated or anticipated events or results reflected in the forward-looking statements. Examples of such forward looking statements include statements regarding financial results and expectations for 2013, future anticipated results ofexploration programs (including, without limitations, with respect to the Quimsacocha, Rio Novo and Kaoko properties), including, but not limited to, interpretation of drill results, the geology, grade and continuity of mineral deposits and conclusions of economic evaluations, and the possibility that future exploration, development or mining results will not be consistent with the Company’s expectations, metal prices, demand for metals, currency exchange rates, political and operational risks inherent in mining or development activities, legislative factors relating to prices, taxes, royalties, land use, title and permits, importing and exporting of minerals, environmental protection, expenditures on property, plant and equipment, increases and decreases in reserves and/or resources and anticipated grades and recovery rates and are or may be based on assumptions and/or estimates related to future economic, market and other conditions. This list is not considered carefully by prospective investors, who should not place undue reliance on such forward-looking statements. Factors that could cause actual results, developments or events to differ materially from those anticipated include, among others, the factors described or referred to elsewhere herein including, without limitation, under the heading “Risks and Uncertainties” and/or the AIF, and include unanticipated and/or unusual events as well as actual results of planned exploration programs and exploration risk. Many of such factors are beyond INV Metals’ ability to control or predict. Actual results may differ materially from those anticipated. Readers of this MD&A are cautioned not to put undue reliance on forward looking statements due to their inherent uncertainty. Forward-looking statements are made based upon management’s beliefs, estimates and opinions on the date the statements are made, which management believes are reasonable, and the Company undertakes no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change, except as otherwise required by applicable law. These forward-looking statements should not be relied upon as representing management’s views as of any date subsequent to the date of this MD&A. Additional information, including interim and annual consolidated financial statements, the AIF, management information circulars and other disclosure documents, may also be examined and/or obtained through the Internet by accessing INV Metals’ website at www.invmetals.com or by accessing the Canadian System for Electronic Document Analysis and Retrieval (“SEDAR”) website at www.sedar.com.

inv metals inc. management’s discussion and analysis … · copper-silver property, located in...

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