BACANORA MINERALS LTD.

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE YEAR ENDED JUNE 30, 2011

DATE – OCTOBER 28, 2011

The following Management’s Discussion and Analysis ("MD&A") should be read in

conjunction with Bacanora Minerals Ltd. ("Bacanora" or the "Company") audited consolidated
financial statements for the year ended June 30, 2011, together with the accompanying notes.
The following discussion and analysis provides information that management believes is
relevant to the assessment and understanding of the Company’s results of operations and
financial position. In the opinion of management, all adjustments consisting of normal
recurring adjustments, considered necessary for a fair presentation of the Company's financial
position, results of operations and funds flow, have been included. Additional information
relating to Bacanora is available on SEDAR at www.sedar.com.

THE COMPANY

The Company is a development stage public company engaged in exploration for mineral
deposits in Mexico. The Company is in the exploration stage with respect to all of its
properties. On July 20, 2009, the Company announced that it had entered into a binding
letter of agreement dated July 17, 2009 regarding the acquisition of Mineramex Limited
(“Mineramex”), a British Virgin Islands company whose sole assets consist of 99.9% of the
issued and outstanding shares of Minera Sonora Borax, S.A. de C.V. ("MSB") and 60% of the
issued and outstanding shares of Minerales Industriales Tubutama, S.A. de C.V. ("MIT").
MSB and MIT are two Mexican corporations that are holding certain exploration and
development stage borate and other mining claims in the Magdalena and Tubutama regions in
the northern Sonora State of Mexico. On April 9, 2010, The Company completed its qualifying
transaction by a way of reverse takeover of Mineramex. The Company was listed on the
Exchange as a Tier 2 issuer and the trading of the Company’s shares under the revised
symbol, "BCN" commenced on April 20, 2010.

The following diagram illustrates the corporate legal relationships after the qualifying
transaction.

Bacanora Minerals Ltd.

(Canada)
100%

Mineramex Limited
(BVI)

99.9% 60%
Minerales Industriales
Minera Sonora Borax,
S.A. de C.V. (Mexico) Tubutama S.A. de
C.V.(Mexico)

MINERAL PROPERTIES

As a result of the reverse takeover of Mineramex, the Company indirectly holds the assets of
MIT and MSB, including borate mining claims in the Magdalena and Tubutama regions in the
northern Sonora State of Mexico. In addition, the Company holds certain lithium claims in the
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 BACANORA MINERALS LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2011

Sonora State, which it acquired in August 2010. The specific descriptions of such claims are
as follows:

Tubutama Borate

Originally referred to as the Carlos Project, Tubutama Borate project consists of six mining
concessions with a total area of 1,661 hectares. The concessions are located 15 kilometers
from the town of Tubutama, and they are 100% owned by MIT.

Magdalena Borate

Originally referred to as San Francisco and El Represo projects, the Magdalena Borate project
consists of seven concessions, with a total area of 15,508 hectares. The concessions are
located 15 kilometers from the city of Magdalena and the city of Santa Ana, and are 100%
owned by MSB

Sonora Lithium

The Company through its subsidiary MSB acquired all rights, title and interests in certain
lithium claims from related parties. As consideration for the assets, the Company issued
600,000 common shares at an ascribed price of $0.25 per share. In addition, the Company
paid cash payments of US$40,000 to reimburse the vendors for acquisition and preliminary
assessment costs. The property consists of four exploration licenses, covering approximately
4,050 hectares in the Sonora State of Mexico. The Lithium property is subject to a 3% gross
overriding royalty payable to a director of the Company on sales of products produced from
this property.

At June 30, 2011, the lithium concession titles were held in trust by the vendors and are
currently being transferred to MSB. The Company expects that the titles will be received by
MSB in due course. Any changes in management’s estimate of this asset will be recognized
in the period of determination and the change in estimate may be significant.

This asset was recorded in the Company’s mineral properties based on the vendor’s carrying
value of $43,610, as independent evidence of the exchange amount was not available.
Accordingly, the difference of $150,000 between the exchange amount and the carrying
amount has been recognized as a charge to deficit.

RESULTS OF OPERATIONS AND EXPLORATION ACTIVITIES

The Company is in the exploration stage with respect to all of its properties, and has not
commenced generating any cash flows from said properties.

Shortly after acquiring the Mineramex assets, the Company initiated its borate drilling program
in May of 2010. To date, the Company has drilled 3,483 metres in 25 holes at the Magdalena
and Represo basins. Numerous intervals of borate mineralization were discovered.
Approximately 1,033 core samples were taken in total and are currently being analyzed.
Assay results will be published as soon as they become available. Three main borate zones
have been located on the Magdalena project area: Cajon, Bellota and Pozo Nuevo. Of the
main borate zones, the Cajon deposit is the most advanced, with a total of 28 holes drilled,
identifying 3 separate colemanite horizons. The Cajon deposit is estimated to include a total
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 BACANORA MINERALS LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2011

inferred resource of 7.3 million tonnes for unit A averaging 9.3% borate (B2O3), and 11 million
tonnes indicated resource for Units B and C averaging 9.9% borate (B2O3).

During the second quarter of 2010, the Company also conducted its first drilling campaign on
the La Ventana concession within the Sonora Lithium project. The drilling provided an initial
test of a 400 by 200 metre section of the southernmost portion of a 3,000 by 300 metre target
area. The four hole, 458.4 metre, NQWL diamond drill program was designed to test a
Tertiary age volcano-sedimentary sequence. All of the drillholes intersected lithium-bearing
clays (hectorite) including zones with lithium enrichment. Other elements such as Cesium,
Boron, Potassium, Magnesium, etc. are considered highly anomalous as well. The samples
were analyzed by ALS Chemex Lab. The results of the drilling are described and summarized
below.

• Drillhole LV-01: A section of 30.48 metres reported a weighted average value of

2,075 ppm Li (1.11% Li2CO3) over all of the samples, including a zone of 9.83 metres
with 3,704 ppm Li (1.97% Li2CO3) using a minimum value of 2,000 Li ppm.

• Drillhole LV-02: A section of 31.09 metres reported a weighted average value of

1,734 ppm Li (0.92% Li2CO3) over all of the samples, including a zone of 7.01 metres
with 3,722 ppm Li (1.98% Li2CO3) using a minimum value of 2,000 Li ppm.

• Drillhole LV-03: This hole reported the lowest values but includes a section of 10.67
metres with 955 ppm Li (0.51% Li2CO3) over all of the samples.

• Drillhole LV-04: This hole reported the highest values with a thick section of 54.25
metres averaging 2,713 ppm Li (1.45% Li2CO3) over all of the samples, including two
zones of 10.85 metres with 3,562 ppm (1.89% Li2CO3) using a minimum of 2,000
ppm Li and another zone with 19.2 metres with 5,080 ppm Li (2.71% Li2CO3) using a
minimum of 2,800 ppm Li.

Summary of Mineralized Drill Intercepts in La Ventana Target

HOLE_ID East North From (m) To (m) Thickness (m) Li (ppm) Li2CO3 %*
LV-01 678732 3287009 7.32 37.8 30.48 2075 1.11
Including 24.74 34.57 9.83 3704 1.97
LV-02 678824 3287034 78.94 110.03 31.09 1734 0.92
Including 99.97 106.98 7.01 3722 1.98
LV-03 678890 3287000 126.49 137.16 10.67 955 0.51
LV-04 678788 3287228 91.44 145.69 54.25 2713 1.45
Including 98.27 109.12 10.85 3562 1.89
Including 126.49 145.69 19.2 5080 2.71

*Li2CO3 equivalency with respect to Li is determined using a factor of 0.0005329 times Li ppm.
Additional processing is required to convert the lithium minerals on the Company's project to
lithium carbonate and there is no guarantee that such a process will be able to convert 100% of
the Li to Li2CO3. The economics of that process have not been established.

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 BACANORA MINERALS LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2011

Along with the drilling on La Ventana, exploration activities (mapping and systematic
sampling) continue on other concessions (El Sauz, Buenavista and San Gabriel), which are
owned 100% by Bacanora and make up the Sierra Madre Lithium Project. Currently, the
Company is carrying out metallurgical tests on the samples before planning the next stage of
the drilling programme.

The Company capitalizes all exploration costs related to the projects in Mexico to mineral
properties. Below is a summary of expenditures made for the year ended June 30, 2011 and
2010.

Tubutama Magdalena Sonora

Borate Borate Lithium Total
Balance, June 30, 2009 $ 850,886 $ 30,991 $- $ 881,877
Additions:
Concession tax 1,518 100,773 - 102,291
Acquisition - - - -
Exploration 177,509 4,777 - 182,286
Drilling - 134,013 - 134,013
Analysis and assays 2,949 404 - 3,353
Field transportation 7,968 2,391 - 10,359
Technical services 25,445 321 - 25,766
Travel 5,369 1,446 - 6,815
Amortization 8,792 24 - 8,816
Office and miscellaneous 10,795 17,176 - 27,971
Total additions $ 240,345 $ 261,325 - $ 501,670
Balance, June 30, 2010 $ 1,091,231 $ 292,316 $- $ 1,383,547
Additions:
Concession tax $ 6,606 $ 143,080 $ 5,111 $ 154,797
Acquisition - - 16,380 16,380
Exploration - 235,220 31,870 267,090
Drilling - 461,445 29,000 490,445
Analysis and assays - 12,430 4,609 17,039
Field transportation 1,875 10,204 4,226 16,305
Technical services - 100,690 - 100,690
Travel 48 51,700 8,236 59,984
Amortization 728 8,337 4,629 13,694
Office and miscellaneous 21,471 68,757 45,101 135,329
Total additions $ 30,728 $ 1,091,863 $ 149,162 $ 1,271,753
Balance, June 30, 2011 $ 1,121,959 $1,384,179 $ 149,162 $ 2,655,300

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 BACANORA MINERALS LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2011

OUTLOOK

The Company continues to focus on the development of its borate deposits in Sonora,
Mexico. To support the continued evaluation of the projects in a technically disciplined and
measured manner, a number of activities are underway or planned for 2011/2012:

• Second round of infill drilling on the Cajon deposit – completed

• Analysis of assay results
• Preliminary economic analysis
• Metallurgical test work
• Development of the pilot plant flow-sheet
• Procurement of pilot plant components and construction
• Pilot plant operations

In addition to the work being completed on the borate deposits, work has been undertaken on
the Company’s lithium deposits including:

• Initiation of the lithium drilling program on La Ventana

• Analysis of assay results
• Geological mapping and sampling on the El Sauz property

The Company expects that cash raised in recent equity financings will fully fund the
contemplated programs and general operations.

LIQUIDITY AND CAPITAL MANAGEMENT

Working Capital

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. As at June 30, 2011, the Company had a working
capital surplus of $6,340,655 (2010 – $1,348,100). The current working capital is dedicated
towards the completion of the Mexican exploration program started in May. At June 30, 2011,
the Company does not have any bank debt and does not plan on securing any long-term debt.
The Company intends on meeting its financial commitments through further equity financings.

Capital structure

The Company's objectives in managing capital are to safeguard its ability to operate as a
going concern while pursuing opportunities for growth through identifying and evaluating
potential acquisitions or businesses. The Company defines capital as the Company's
shareholders equity excluding contributed surplus, of $8,570,011at June 30, 2011 (2010 -
$2,770,635), and the Company’s working capital of $6,340,655 (2010 - $1,348,100). The
Company sets the amount of capital in proportion to risk and corporate growth objectives. The
Company manages capital structure and makes adjustments to it in light of changes in
economic conditions and the risk characteristics of the underlying assets. The Company is
not subject to any externally imposed capital requirements other than as described in Note 1

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 BACANORA MINERALS LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2011

to the Company’s annual consolidated financial statements. The Company does not expect to
enter into any debt financing at this time. The Board of Directors does not establish a
quantitative return on capital criteria for management; but rather promotes year over year
sustainable profitable growth. The Company will be meeting its objective of managing capital
through its detailed review and preparation of both short-term and long-term cash flow
analysis and monthly review of financial results.

Equity instruments

On May 18, 2011, the Company completed a private placement financing, pursuant to which it
has issued an aggregate of 14,113,760 units of the Company at a price of $0.50 per unit for
aggregate gross proceeds of $7,056,880. Each unit consists of one common share and one-
half of one common share purchase warrant, with each whole warrant being exercisable into
one common share at a price of $0.80 for a period of 18 months. The Company has paid
compensation consisting of approximately $510,174 in legal and commission fees and the
issuance of 705,688 compensation warrants to eligible parties. Each compensation warrant is
exercisable into one common share at a price of $0.80 for a period of 24 months. All of the
securities issued pursuant to the private placement are subject to a 4-month hold period in
accordance with applicable securities laws and regulatory policies.

The following tables summarize the outstanding securities issued by the Company as at June
30, 2011 and as of the date of this MD&A.

October 28, 2011 June 30, 2011

Common shares 51,432,145 51,432,145
Stock options 2,900,000 1,900,000
Warrants 7,762,568 7,762,568
Total equity instruments outstanding 62,094,713 61,094,713

The following table summarizes the outstanding options as at June 30, 2011.

Weighted
Number Average Number
Outstanding Remaining Exercisable
at June 30, Exercise Contractual Date of at June 30,
Date of Grant 2011 Price Life (Years) Expiry 2011
May 1, 2009 400,000 $ 0.20 2.8 May 1, 2014 400,000
December 8, 2010 1,050,000 0.24 4.4 Dec. 8, 2015 1,050,000
March 25, 2011 100,000 0.50 4.7 Mar. 25, 2016 100,000
June 19, 2011 350,000 0.44 5.0 Jun. 19, 2016 350,000
1,900,000 1,900,000

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 BACANORA MINERALS LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2011

SELECTED ANNUAL INFORMATION

For the year For the year For the year

ended June 30, ended June 30, ended June 30,
($, except shares amounts) 2011 2010 2009
Interest income (expense) 4,689 2,350 (2,096)
Total expenses 860,338 76,746 64,635
Comprehensive loss 1,053,245 25,316 42,466
Comprehensive loss per share –
basic and diluted 0.03 0.00 0.00
Funds provided (used) in operations (795,179) (44,611) (49,848)
Total assets 9,424,176 3,039,446 958,501
Total liabilities 383,608 229,166 1,346,987
Exploration costs 1,271,753 501,670 126,847
General and administrative costs 546,545 74,958 64,635

SUMMARY OF QUARTERLY RESULTS

Comprehensive
Comprehensive earnings/(loss) per basic
Three months period ended earnings/(loss) ($) and diluted share ($)
June 30, 2011 (848,179) (0.03)
March 31, 2011 (67,282) (0.00)
December 31, 2010 (137,817) 0.00
September 30, 2010 33 0.00
June 30, 2010 35,859 0.00
March 31, 2010 (73,165) (0.01)
December 31, 2009 55,859 0.01
September 30, 2009 (43,869) (0.01)

The quarterly results shown above prior to the reverse takeover of Mineramex on April 9, 2010
are that of Mineramex only. Consolidated quarterly results are only for the quarters after the
June 30, 2010 quarter end.

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 BACANORA MINERALS LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2011

SEGMENTED INFORMATION

The Company currently operates in one operating segment, the exploration and development
of mineral properties in Mexico. Management of the Company makes decisions about
allocating resources based on the one operating segment. A geographic summary of profit
and loss and identifiable assets by country is as follows:

Mexico Canada Consolidated

June 30, June 30, June 30, June 30, June 30, June 30,
2011 2010 2011 2010 2011 2010
Interest income 4,268 526 421 1,824 4,689 2,350
Amortization 2,056 1,788 - - 2,056 1,788
Net loss 86,236 18,640 (1,177,406) (34,949) (1,091,170) (16,309)
Property and
equipment 47,014 36,802 - - 47,014 36,802
Mineral property 2,655,300 1,378,303 - 5,244 2,655,300 1,383,547

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

This note presents information about the Company’s exposure to credit, liquidity and market
risks arising from its use of financial instruments and the Company’s objectives, policies and
processes for measuring and managing such risks.

(a) Credit risk

Credit risk arises from the potential that a counter party will fail to perform is obligations.
Financial instruments that potentially subject the Company to concentrations of credit risk
consist of accounts receivable. The carrying amount of accounts receivable represents the
maximum credit exposure.

The Company’s cash is held in major Canadian and Mexican banks, and as such the
Company is exposed to the risks of those financial institutions. The Company has no sales,
therefore the Company is only exposed to the risks associated with changes in foreign
exchange rates.

The Board of Directors monitors the exposure to credit risk on an ongoing basis and does not
consider such risk significant at this time. The Company considers all of its receivables fully
collectible.

(b) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as
they are due. The Company's approach to managing liquidity is to ensure, as far as possible,
that it will have sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses. The carrying value of accounts
payable and accrued liabilities approximates its fair value due to their relatively short period to

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 BACANORA MINERALS LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2011

maturity. All of the Company’s accounts payable and accrued liabilities of $273,608 are due
within 90 days or less.

(c) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates,
commodity prices, and interest rates will affect the Company’s operations, net earnings or the
value of financial instruments. The objective of market risk management is to manage and
control market risk exposures within acceptable limits, while maximizing long-term returns.

The Company’s cash is held in a major Canadian and Mexican chartered bank, all of the
Company’s transactions are in Canadian dollars, and the Company has no sales, therefore
the Company is not exposed to any of the market risks.

(d) Sensitivity analysis

Based on management’s knowledge and experience of the financial markets, the Company
believes that movements in interest rates that are reasonably possible over the next twelve
months will not have a significant impact on the Company.

The Company conducts exploration projects in Mexico. As a result, a portion of the

Company’s expenditures, accounts receivables, accounts payables and accrued liabilities are
denominated in US dollars and Mexican pesos and are therefore subject to fluctuation in
exchange rates. A 1% change in the exchange rate between the Canadian dollar, Mexican
peso and US dollar would have an approximate $54,000 change to the Company’s net loss

(e) Fair values

The fair value of the Company’s financial instruments at June 30, 2010 and 2009 is
summarized as follows:

June 30, 2011 June 30, 2010

Carrying Fair Carrying Fair
Amount Value Amount Value
Financial assets
Held for trading
Cash $ 6,411,975 $ 6,411,975 $ 1,491,942 $ 1,491,942
Loans and receivables
Accounts receivable $ 202,288 $ 202,288 $ 85,324 $ 85,324
Related party receivable $ 107,599 $ 107,599 - -
Financial liabilities
Other liabilities
Accounts payable and accrued
liabilities $ 173,290 $ 173,290 $ 229,166 $ 229,166
Due to related parties $ 100,318 $ 100,318 - -

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 BACANORA MINERALS LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2011

ADDITIONAL DISCLOSURE FOR ISSUERS WITHOUT SIGNIFICANT REVENUES

General and administrative (“G&A”) expenses for the years ended June 30, 2011 and 2010
were as follows:

June 30, 2011 June 30, 2010

Management fees $ 112,650 $ -
Legal and accounting fees 208,740 42,965
Engineering fees 47,540 -
Office expenses 81,337 29,412
Shareholders services 88,465 -
Miscellaneous 7,813 2,581
Total $ 546,545 $ 74,958

The large increase in the G&A expenses can be attributed to the Company’s higher level of
business activity as well as the addition of its Mexican operations. Both of these factors have
contributed significantly to all of the G&A costs categories. During the year ended June 30,
2011, the Company also engaged two investor relations service providers.

RELATED PARTY TRANSACTIONS

In addition to transactions mentioned elsewhere in these notes, the Company incurred the
following related party transactions during the year ended June 30, 2011.

Management fees and expenses of $381,125 (2010 - $24,039) were incurred by directors and
officers of the Company. Of this amount, $158,800 was capitalized to mineral properties,
$40,070 were recorded as share issue costs, and $182,255 was expenses as general and
administration costs. Of the total amount paid as management fees and expenses, $20,845
(2010 - $NIL) remains in accounts payable and accrued liabilities

A Company with common directors and shareholders made payment on behalf of the
Company with respect of an office sublease and other general and administrative expenses in
the amount of $100,318 (2010 - $NIL) The advances are non-interest bearing, unsecured
with no specific terms of repayment.

The Company made payments on behalf of $107,599 (2010 - $NIL) to a company with
common directors and officers. This amount remains in accounts receivables. The advances
are non-interest bearing, unsecured with no specific terms of repayment.

These transactions are measured at the agreed to exchange amount, which is the amount of
consideration established and agreed to by the related parties.

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 BACANORA MINERALS LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2011

COMMITMENTS AND CONTINGENCIES

During 2009, the Company entered into an office space lease agreement for a term of three
years, commencing April 1, 2010 and expiring March 31, 2013. The Company also has
commitments for lease payments for field office and camp with no specific expiry dates. The
total annual financial commitment resulting from these agreements is $40,860.

SUBSEQUENT EVENTS

On July 19, 2011, the Company announced that a total of 900,000 stock options to purchase
common shares of the Company have been granted to an officer, and a consultant. The
options are exercisable at a price of $0.50 and expire on July 19, 2016.

Effective September 1, 2011, the Company engaged an investor relations service provider.
The Company entered into an agreement for a 12 month term at $5,000 per month. The
Company also granted 100,000 stock options, which vest quarterly and are exercisable into
common shares at a price of $0.50 for a period of one year.

Subsequent to June 30, 2011, a further 2,567,856 shares were released from escrow. The
number of shares remaining in escrow is 7,583,572.

CHANGES IN ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS

Change in accounting policies

Prior to fiscal 2010, the consolidated financial statements of Mineramex were prepared in
accordance with Mexican Financial Accounting Standards. In 2010, the Company adopted
Canadian generally accepted accounting principles (“GAAP”) and restated the 2009
consolidated financial statements to conform with Canadian GAAP (Note 16).

Adoption of new accounting policies

INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRS”)

In February 2008, the CICA Accounting Standards Board (“AcSB”) announced that 2011 is
the changeover date for publicly accountable profit-oriented enterprises to use IFRS, replacing
Canadian GAAP for interim and annual financial statements relating to fiscal years beginning
on or after January 1, 2011. Enterprises are required to provide IFRS comparative
information for the previous fiscal year. Accordingly, the Company will report interim and
annual consolidated financial statements under IFRS beginning with the quarter ended
September 30, 2011 which will contain IFRS-compliant disclosure on a comparative basis and
reconciliations for the interim and annual periods and as at the July 1, 2011 transition date.

IFRS uses a conceptual framework similar to Canadian GAAP, however there are significant
differences in recognition, measurement, and both qualitative and quantitative disclosure. The
Company continues to evaluate the full accounting effects of adopting IFRS.

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 BACANORA MINERALS LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2011

IFRS 1: First-Time Adoption of IFRS ("IFRS 1") provides the framework for the first-time
adoption of IFRS and specifies that an entity shall apply the principles under IFRS
retrospectively. Certain optional exemptions and mandatory exceptions to retrospective
application are provided under IFRS. The Company expects to rely on exemptions to this
retrospective application for certain items, as described in further detail below.

The Company has developed an IFRS convergence plan ("IFRS Plan") which includes:

• Training (initial and ongoing) of key personnel in IFRS;

• Review and assessment of all relevant IFRS standards to identify differences from
current accounting policies and practices;

• Design of IFRS accounting policies including accounting policy alternatives and

optional exemptions; and

• Evaluation of changes required to its financial information systems and processes to

enable it to maintain data required to report its 2010 financial information under IFRS
for comparative purposes;

• Implementation of changes to affected accounting policies and practices, business

processes, systems and internal controls.

The Company has completed a review and assessment of the relevant IFRS standards and is
in the process of designing IFRS accounting policies. The more significant accounting policy
changes include the methodology for impairment testing of mineral properties and deferred
costs, future income taxes, accounting for stock compensation, disclosure and presentation,
and the provisions related to the initial adoption of IFRS under IFRS 1. The following
accounting policies are believed to have the most significant disclosure impact in the transition
to IFRS:

Impairment of long lived Assets

Impairment testing of long-term assets is based on a two-step approach under current

Canadian GAAP, first comparing asset carrying values with undiscounted future cash flows to
determine whether impairment exists, and then measuring any impairment by comparing
asset carrying values with fair values.

International Accounting Standards 36, Impairment of Assets ("IAS 36") uses a one-step
approach testing for and measurement of impairment, with asset carrying values compared
directly with the higher of fair value, less costs to sell, and value in use (which uses
discounted future cash flows).

This may potentially result in more write-downs where carrying values of assets were
previously supported under Canadian GAAP on an undiscounted cash flow basis, but could
not be supported on a discounted cash flow basis. However, the extent of any new write-
downs may be partially offset by the requirement under IAS 36 to reverse any previous
impairment losses where circumstances have changed such that the impairments have been
reduced. Canadian GAAP prohibits reversal of impairment losses. The Company will adopt
IAS 36 requirements on the transition to IFRS.
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 BACANORA MINERALS LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2011

Future Income Taxes

Under Canadian GAAP, deferred income taxes are determined using the liability method for
temporary differences at the balance sheet date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes and by applying expected
tax rates applicable to such temporary differences. There are no changes under IFRS for
deferred income taxes. IFRS prohibits recognition where deferred income taxes arise from
the initial recognition of an asset or liability in a transaction that, at the time of the transaction,
neither affects accounting nor taxable net earnings. The Company expects the impact of
implementing the IAS 12, Income Taxes may be material, impacting the resource properties
and deferred exploration and future income tax balances.

Share Based Payments - Stock Compensation

The guidance provided by IFRS 2, Share Based Payments ("IFRS 2") is largely consistent
with Canadian GAAP and requires estimates of the fair value of stock options to be made at
the date of the grant and recognition of the related expense in income as the options vest.
The use of the Black-Scholes model is an acceptable method to estimate the fair value of the
options at the date of grant, and is consistent with the Company's current practice.

IFRS 2 requires the use of the attribution method for stock options subject to vesting period.
Vested stock options are treated as a separate share option grant with a different fair value.
Unlike Canadian GAAP, IFRS 2 does not include the straight line method as an alternative to
the attribution method for awards with a service condition and graded-vesting features. The
Company will need to account for its awards using the attribution method.

The Company currently records stock option forfeitures as they occur. Upon transition to
IFRS, the Company will be required to make an estimate of the forfeiture rates for use in the
determination of the total share based compensation expense.

These changes will result in a difference in valuation of the stock based awards and timing
differences for the recognition of compensation expenses. IFRS 2 is applicable for stock
compensation expense issued on or after January 1, 2005; earlier adoption is permitted. The
Company expects to recognize under IFRS 2 all share-based awards that were recognized
under Canadian GAAP. The Company expects to utilize the exemption under IFRS 1 which
allows the prospective application of IFRS 2 for stock options granted on or after November 7,
2002.

Resource Properties and Deferred Expenditures

Similar to Canadian GAAP, IFRS allows the choice of capitalizing or expensing exploration
costs. The Company's policy under Canadian GAAP has been to capitalize all exploration
expenditures and expects to follow the same policy under IFRS.

Unlike Canadian GAAP, IFRS does not allow the capitalization of expenditures incurred prior
to obtaining the exploration license. The Company is in the process of identifying any such
costs capitalized; costs identified will be recorded in the opening deficit on transition.

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 BACANORA MINERALS LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2011

Transaction Costs

IFRS requires that financing and transaction costs relating to financial assets and liabilities,
except for held for trading financial instruments, to be capitalized and amortized to earnings
using the effective interest rate method. The Company's current accounting policy is to
expense transaction costs in the period in which they occur.

ADVISORY REGARDING FORWARD LOOKING STATEMENTS

This discussion includes certain statements that may be deemed "forward-looking

statements". All statements in this discussion other than statements of historical facts, that
address future acquisitions and events or developments that the Company expects are
forward-looking statements. Although the Company believes the expectations expressed in
such forward-looking statements are based on reasonable assumptions, such statements are
not guarantees of future performance and actual results or developments may differ materially
from those in the forward-looking statements. Factors that could cause actual results to differ
materially from those in forward-looking statements include market prices, continued
availability of capital and financing and general economic, market or business conditions.
Investors are cautioned that any such statements are not guarantees of future performance
and that actual results or developments may differ materially from those projected in the
forward-looking statements. Except as required by applicable securities laws, the Corporation
does not undertake any obligation to publicly update or revise any forward looking statements.

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