Arian Silver Corporation Announces Second Quarter 2006 Results

August 30th, 2006

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Management’s Discussion and Analysis
Of the Financial Condition and Results of Operations
For the Six Months and Three Months Ended June 30, 2006
(in US Dollars)

ANTHONY J. WILLIAMS, Chairman and Director

JAMES T. WILLIAMS, Chief Executive Officer and Director

JAMES S. CABLE, Chief Financial Officer and Director



DAVID W. COHEN, Director

GRAHAM A. POTTS, Corporate Secretary

43 North Audley Street
London W1K 6WH
Telephone: +44 (0) 20 7529 7511
Facsimile: +44 (0) 20 7491 2244

Palm Grove House
P.O. Box 3190
Road Town, Tortola
British Virgin Islands

Chartered Accountants
Farringdon Place, 20 Farringdon Street
London EC1M 3AP

The AIM Market of the London Stock Exchange
TSX Venture Exchange

AIM: AGQ (stock is quoted in Pounds Sterling)
TSXV AGQ (stock is quoted in Canadian Dollars)


This discussion and analysis (“MD&A”) has been prepared based on information available to Arian Silver Corporation (“ASC” or the “Company”) as at August 25, 2006. This MD&A should be read in conjunction with the Company’s interim consolidated financial statements and the related notes for the six months ended June 30, 2006. The Company’s consolidated financial information at June 30, 2006 and the related notes have been prepared in accordance with UK Generally Accepted Accounting Principles (“UK GAAP”) and has been reconciled to Canadian GAAP in note 12.


The Consolidated Financial Statements of the Company for the three and six months ended June 30, 2006 have been prepared by management in accordance with UK Generally Accepted Accounting Principles (“UK GAAP”) and have been approved by the Company’s board of directors (the “Board”). The integrity and objectivity of these Consolidated Financial Statements are the responsibility of management. In addition, management is responsible for ensuring that the information contained in this MD&A is consistent, where appropriate, with the information contained in the Consolidated Financial Statements.

In support of this responsibility, the Company’s management maintains a system of internal accounting and administrative controls to provide reasonable assurance that the financial information is relevant, reliable and accurate and that the Company’s assets are appropriately accounted for and adequately safeguarded. When alternative accounting methods exist, management has chosen those methods it deems most appropriate in the circumstances. The Consolidated Financial Statements may contain certain amounts based on estimates and judgements. Management has determined such amounts on a reasonable basis to ensure that the Consolidated Financial Statements are presented fairly in all material respects.

The Board is responsible for ensuring that management fulfils its responsibilities for financial reporting and internal control. The Board carries out this responsibility principally through its audit committee. The audit committee is appointed by the Board and has several financial experts who are not involved in the Company’s daily operations. The audit committee meets periodically with management and the external auditor to discuss internal controls over the financial reporting process, auditing matters and financial reporting issues, to satisfy itself that each party is properly discharging its responsibilities and to review the Consolidated Financial Statements with the external auditors.


Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management, including the Company’s Chief Executive Officer and Chief Financial Officer, on a timely basis so that appropriate decisions can be made regarding public disclosure. As at the end of the period covered by this MD&A, management of the Company, with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as required by Canadian securities laws. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, as of the end of the period covered by this MD&A, the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the Company’s annual filings and interim filings (as such terms are defined under Multilateral Instrument 52-109—- Certification of Disclosure in Issuers’ Annual and Interim Filings of the Canadian Securities Administrators) and other reports filed or submitted under Canadian securities laws is recorded, processed, summarized and reported within the time periods specified by those laws and that material information is accumulated and communicated to management of the Company, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.


The following discussion is management’s assessment and analysis of the results and financial condition of the Company (formerly Hard Assets Inc.) and should be read in conjunction with the accompanying unaudited consolidated financial statements for the three and six month period ended June 30, 2006, which are available on SEDAR at The Consolidated Financial Statements have been prepared in accordance with UK GAAP and have been reconciled to Canadian GAAP in note 12 of the financial statements. The functional currency of the business is the US dollar (“USD”). All monetary values are expressed in USD unless otherwise indicated.

The Company was incorporated in the province of British Columbia, Canada, on May 4, 2004. On July 14, 2004, the Company was admitted to trading on the AIM Market of the London Stock Exchange,. On May 24, 2006 the Company was continued to the British Virgin Islands in connection with the merger transaction referred to below. On July 21, 2006 the Company’s common shares were listed and commenced trading on the TSX Venture Exchange.

The Company is engaged in the acquisition and exploitation of mineral resource properties.

Merger Transaction

On March 9, 2006, the Company entered into an agreement with Arian Silver Corporation Limited (“ASCL”) to acquire all of the outstanding shares of ASCL in consideration for the issuance of common shares of the Company (the “Merger”). The Merger was subject to the approval of shareholders of both the Company and ASCL. On May 24, 2006, the Merger was completed and the Company changed its name to Arian Silver Corporation. On May 25, 2006 the Company’s shares were re-admitted to trading on AIM.

The Merger has been accounted for in accordance with the reverse take over method of accounting. Under this method, ASCL has been identified as the acquirer and accordingly the consolidated entity is considered to be a continuation of ASCL.

Overview of Operations

During the reporting period, exploration work was carried out at the Calicanto, San Celso and Donovan properties in the Zacatecas State of Mexico. In addition, the Company negotiated an option to acquire the Tepal project in Michoacan State, Mexico and acquired a new concession named “Missie” adjacent to the Calicanto concessions in order to increase the land tenure of the property. Several tailings projects and new hard rock properties were also investigated.


Prospecting work at Calicanto commenced and the first phase of sampling was completed, with assay results obtained from laboratories in Mexico and Canada. Underground mining work continued along strike of the vein. Chip channel sampling and surveying of the decline and tunnel accessing the Calicanto workings was undertaken taken on a regular basis as the tunnelling advanced. The tunnel itself is approximately 4-5 m high and 5-6 m wide. Several bulk samples were taken from the ramp material for metallurgical studies and were treated at an independent recovery plant in Zacatecas. Surveying of the project is ongoing in preparation for the phase 1 drilling campaign. Two proposals by separate drilling contractors have been submitted. Environmental work has been carried out in order to obtain the environmental permit required for drilling.