BACANORA MINERALS LTD. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2010

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1 DATE NOVEMBER 1, 2010 BACANORA MINERALS LTD. 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, 2010, 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 THE COMPANY The Company is a development stage public company engaged in exploration for mineral deposits in Mexico. The Company is in the early exploration stage with respect to all of its properties. On July 20, 2009, the Company announced that it entered into a binding letter 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, Upon closing of the qualifying transaction, Bacanora acquired all of the issued and outstanding shares of Mineramex, for an aggregate purchase price of $5,250,000, consisting of a cash payment of $250,000 and the issuance of 21,739,130 common shares in the capital of the Company at an ascribed price of $0.23 per share. Bacanora granted a 3% royalty in respect of all minerals that are produced from the lands held by MSB and MIT. Concurrent with the completion of the qualifying transaction, the Company completed a private placement of 8,045,110 common shares, issued at a price of $0.25 for aggregate gross proceeds of $2,011,278. The proceeds from this financing are expected to be used for Phase I of the recommended work program on the borate mining claims. As a result of the acquisition of Mineramex, control of the Company passed to the former shareholders of Mineramex. According to the Canadian accounting rules, this type of transaction is considered to be a reverse takeover transaction. Legally, the Company is the parent of Mineramex and its subsidiaries, for financial reporting purposes the Company is deemed the acquired entity and Mineramex is the acquirer. Therefore, the June 30, 2010 consolidated financial statements are a continuation of Mineramex, which has been consolidated with the Company s figures. The comparative figures as at June 30, 2009 and for the year then ended are of Mineramex. The capital stock represents the authorized and issued share capital of Bacanora and the dollar amount of shareholder s equity is that of Mineramex. In addition, the Company s retained earnings, share capital amount and contributed surplus have been eliminated upon consolidation.

2 The following diagram illustrates the corporate legal relationships after the qualifying transaction. Bacanora Minerals Ltd. (Canada) 100% Mineramex Limited (BVI) Minera Sonora Borax, S.A. de C.V. (Mexico) 99.9% 60% Minerales Industriales Tubutama (Mexico) MINERAL PROPERTIES As a result of the reverse takeover of Mineramex, the Company indirectly holds all of the assets of MIT and MSB, including borate mining claims in the Magdalena and Tubutama regions in the northern Sonora State of Mexico. The specific descriptions of such claims are as follows: Carlos project Carlos Project consists of six mining concessions: Carlos, Carlos I, Carlos II, Carlos III, Carlos IV, and Carlos V 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. San Francisco project San Francisco Project consists of six mining concessions: San Francisco 1, 2, 3, 5, Fraction 1, and Fraction 2, with a total area of 11,060 hectares. The concessions are located 15 kilometers from the city of Magdalena, and they are 100% owned by MSB. El Represo project El Represo Project consists of one concession with a total area of 4, hectares. It is located 15 kilometers from the city of Santa Ana, and it is 100% owned by MSB. RESULTS OF OPERATIONS AND EXPLORATION ACTIVITIES The Company is in the early exploration stage with respect to all of its properties, and has not commenced generating any cash flows from said properties. During the quarter ended June 30, 2010, the Company concentrated its efforts on completing the qualifying transaction, and initiating the exploration program. Shortly after acquiring the Mineramex assets, the Company initiated its borate drilling program in May of 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.

3 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. The Company capitalizes all exploration costs related to the projects in Mexico to mineral properties. Below is summary of expenditures for the years ended June 30, 2010 and Investment at June 30, 2010 Additions for the year ended June 30, 2010 Investment at June 30, 2009 Additions for the year ended June 30, 2009 Property Carlos project: Concession tax $ 26,747 $ 7,339 $ 19,408 $ 3,020 Costs of exploration 1,033, , ,488 61,846 1,060, , ,896 64,866 San Francisco project: Concession tax 100, , Costs of exploration 192, ,967 30,990 30, , ,740 30,991 30,991 El Represo project: Costs of exploration 29,575 (1,415) 30,990 30,990 Total mineral properties $ 1,383,547 $ 501,670 $ 881,877 $ 126,847 LITHIUM ASSETS On August 23, 2010, the Company completed the acquisition of four exploration licenses in respect of Lithium claims in the Sonora State of Mexico, covering approximately 4,050 hectares. The total consideration paid consisted of cash payment of approximately $59,000 and the issuance of 600,000 common shares. The Company plans on completing detail mapping and systematic sampling followed by target prioritization on three of the four claims. On the fourth claim, the Company plans on conducting a drilling program consisting of roughly 1,500 metres of drilling in 18 drillholes. 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, 2010, the Company had a working capital surplus of $1,348,100 (2009 ($1,280,415)). The current working capital is dedicated towards the completion of the Mexican exploration program started in May. At June 30, 2010, 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 and through further equity financings.

4 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 $2,770,635 at June 30, 2010 ( $388,486), and the Company s working capital of $1,348,100 ( ($1,280,415)). 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. 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 The following tables summarize the outstanding securities issued by the Company as at June 30, June 30, 2010 Common shares 34,578,665 Stock options 400,000 Agent s stock options 145,915 Total equity instruments outstanding 35,124,580 The following table summarizes the outstanding options as at June 30, Weighted Average Remaining Contractual Life (Years) Number Exercisabl e at June 30, 2010 Date of Grant Number Outstanding at June 30, 2010 Exercis e Price Date of Expiry May 1, ,000 $ May 1, ,000 May 7, ,915 $ May 7, , , ,915 Subsequent to June 30, 2010 the Company issued 600,000 common shares. As of the date of this MD&A the Company has 35,178,665 common shares and 545,915 stock options outstanding.

5 SELECTED ANNUAL INFORMATION For the year ended June 30, 2010 For the year ended June 30, 2009 For the year ended June 30, 2008 ($, except shares amounts) Other income (loss) 2,350 (2,096) 56,616 Total expenses 76,746 64, ,257 Comprehensive loss 25,316 42,466 23,361 Comprehensive loss per share basic and diluted Funds provided (used) in operations (44,611) (49,848) (2,323) Total assets 3,039, , ,772 Total liabilities 229,166 1,346,987 1,120,483 Exploration costs 501, , ,569 General and administrative costs 74,958 64, ,257 SUMMARY OF QUARTERLY RESULTS Comprehensive Three months period ended Comprehensive earnings/(loss) ($) earnings/(loss) per basic and diluted share ($) June 30, , March 31, 2010 (73,165) (0.01) December 31, , September 30, 2009 (43,869) (0.01) June 30, , March 31, 2009 (29,648) (0.00) December 31, 2008 (3,946) (0.00) September 30, 2008 (51,980) (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 quarter ended June 30, 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:

6 June 30, 2010 Mexico Canada Consolidated June June 30, June 30, 30, June 30, June 30, 2009 Interest income (loss) 526 (2,096) 1,824-2,350 (2,096) Depreciation expense 1, ,788 - Net income (loss) 18,640 (64,364) (34,949) - (16,309) (64,364) Property and equipment 36,802 10, ,802 10,052 Mineral property 1,378, ,887 5,244-1,383, ,877 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 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 maturity. All of the Company s accounts payable and accrued liabilities of $229,166 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.

7 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 and Mexican peso would have an approximate $2,500 change to the Company s net income. (e) Fair values The fair value of the Company s financial instruments at June 30, 2010 and 2009 is summarized as follows: Financial assets Held for trading Cash June 30, 2010 June 30, 2009 Fair Carrying Value Amount Carrying Amount $ 1,491,942 Fair Value $ 1,491,942 $ 21,893 $ 21,893 Loans and receivable Accounts receivable $ 85,324 $ 85,324 $ 44,679 $44,679 Financial liabilities Other liabilities Accounts payable and accrued liabilities $ 229,166 $ 229,166 $ 85,636 $ 85,636 Related party debt - -(a) $ 1,261,351 (a) (a) Fair value is not reasonably estimable as the debt is unsecured, non-interest bearing and has no specific repayment terms. ADDITIONAL DISCLOSURE FOR ISSUERS WITHOUT SIGNIFICANT REVENUES General and administrative expenses for the years ended June 30, 2010 and 2009 were as follows:

8 June 30, 2010 June 30, 2009 Legal and accounting fees $ 42,965 $ 37,049 Office expenses 29,412 20,218 Miscellaneous 2,581 7,368 Depreciation 1,788 - Total $ 76,646 $ 64,635 RELATED PARTY TRANSACTIONS During the year, fees and expenses of $57,258 (2009 -$nil) were incurred by directors and officers on behalf of the Company in pursuit of its proposed Qualifying Transaction as well as the Company s exploration program. Of this amount, $39,791 ( $nil) remains in accounts payable and accrued liabilities at June 30, The transactions were made in the normal course of business and are measured at the exchange amount. During the year, Mineramex received advances of $131,892 (2009 $269,683) from its former director and former controlling shareholder. These were eliminated as a result of the reverse takeover ( $80,192 repaid). Debts payable to related parties do not bear any interest, are unsecured and have no specific terms of repayment. The transactions were made in the normal course of business and are measured at the exchange amount. During the year, the Company accrued general and administrative expenses of $24,039 ( $nil) to a company with common directors and shareholders in respect of an office sublease. The transaction was in the normal course of operations and measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. COMMITMENTS AND CONTINGENCIES During 2009, the Company entered into an office space lease agreement for a term of three years, commencing January 1, 2010 and expiring March 31, 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 approximately $50,273. SUBSEQUENT EVENTS On August 20, 2010, the Company issued 600,000 common shares together with a payment in the amount of US $25,000, representing the balance owing of reimbursable expenses contemplated under the agreement. The consideration paid was to acquire exploration licenses in respect of lithium claims in the Sonora State of Mexico. All of the foregoing common shares are subject to four-month hold periods in accordance with applicable securities laws. Subsequent to June 30, 2010, a further 9,575,933 shares were released from escrow. The number of shares remaining in escrow is 12,564,284.

9 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 a) Business combinations In January 2009, the AcSB issued CICA Handbook Section 1582, Business Combinations which replaces previous guidance on business combinations. This Section applies to Business Combinations entered into on or after January 1, 2011 with earlier adoption permitted. The Company has elected to adopt the standards effective July 1, 2009, and they do not have a material impact on the Company s consolidated financial statements. b) Consolidated financial statements In January 2009, the AcSB issued CICA Handbook Section 1601, Consolidations and 1602 Non-controlling Interests. Section 1601 carries forward the requirements of Section 1600, Consolidated Financial Statements, other than those relating to non-controlling interests which would be covered in Section These standards are effective for annual and interim periods beginning on or after January 1, 2011 with earlier adoption permitted. The Company has elected to adopt the standards effective July 1, 2009, and they do not have a material impact on the Company s consolidated financial statements. INTERNATIONAL FINANCIAL REPORTING STANDARDS ( IFRS ) In January 2006, the CICA Accounting Standards Board ( AcSB ) adopted a strategic plan for the direction of accounting standards in Canada. As part of that plan, accounting standards in Canada for public companies are expected to converge with IFRS by Although the Company has not yet completed the development of an IFRS changeover plan, it anticipates completing its project scoping during the second quarter of While an analysis will be required for all current accounting policies, the initial key areas of assessment will include: - Exploration and development expenditures, - Capital assets (measurement and valuation), - Provisions, including asset retirement obligations, - Stock-based compensation, - Accounting for income taxes, and - First-time adoption of IFRS (IFRS 1) As the analysis of each of the key areas progresses, other elements of the Company s IFRS implementation plan will also be addressed, including: the implication of changes to

10 accounting policies and processes for financial statement note disclosures, information technology, internal controls, contractual arrangements, and employee training. 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.