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**UNITED STATES
  SECURITIES AND EXCHANGE COMMISSION**
  Washington, D.C. 20549

FORM 20-F

ANNUAL REPORT 
  FISCAL ENDED 2005 JANUARY 31, 2005

 ̈ REGISTRATION
  STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF
  1934
  ORx ANNUAL REPORT PURSUANT TO SECTION
  13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
  For the fiscal period ended **January 31, 2005** 
  OR  ̈ TRANSITION REPORT PURSUANT TO
  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission file number 0-18701

POLYMET MINING CORP.(Formerly Fleck Resources Ltd.) 
  (Exact name of Registrant as specified in its charter)

**British Columbia, Canada** 
  (Jurisdiction of incorporation or organization)

**Suite 2350 – 1177 West Hastings St., Vancouver,
  British Columbia V6E 2K3** 
  (Address of principal executive offices)

Securities to be registered pursuant to Section 12(b) of
  the Act: 
  None

Securities to be registered pursuant to Section 12(g) of
  the Act: Common Shares, without par value 
  (Title of Class)

Securities for which there is a reporting obligation pursuant
  to Section 15(d) of the Act: 
  None

Indicate the number of outstanding shares of each of the issuer's
  classes of capital or common shares 
  as of the close of the period covered by the Annual Report.         57,128,587

Indicate by check mark whether the registrant (1) has filed
  all reports required to be filed by Section 12 or 15 (d) of the Securities Exchange
  Act of 1934 during the preceding 12 months (or for such shorter period that
  the registrant was required to file such reports), and (2) has been subject
  to such filing requirements for the past ninety days. Yes x
  No  ̈

Indicate by check mark which financial statement item the registrant
  has elected to follow: 
  Item 17 x Item 18  ̈

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TABLE OF CONTENTS

|ITEM 1.    | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT
      AND ADVISORS                       | **3** 
|---------- | --------------------------------------------------------------------------------- | ------
|ITEM 2.    | OFFER STATISTICS AND EXPECTED TIMETABLE                                           | **3** 
|ITEM 3.    | KEY INFORMATION                                                                   | **4** 
|ITEM 4.    | INFORMATION ON THE COMPANY                                                        | **7** 
|ITEM 5.    | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                      | **13**
|ITEM 6.    | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                        | **18**
|ITEM 7.    | MAJOR SHAREHOLDERS AND RELATED PARTY
      TRANSACTIONS                           | **25**
|ITEM 8.    | FINANCIAL INFORMATION                                                             | **25**
|ITEM 9.    | THE OFFER AND LISTING                                                             | **26**
|ITEM 10.   | ADDITIONAL INFORMATION                                                            | **27**
|ITEM 11.   | QUANTITATIVE AND QUALITATIVE DISCLOSURE
      ABOUT MARKET RISK                   | **33**
|ITEM 12.   | DESCRIPTION OF SECURITIES OTHER THAN
      EQUITY SECURITIES                      | **34**
|ITEM 13.   | DEFAULT, DIVIDEND ARREARAGES AND DELINQUENCIES                                    | **34**
|ITEM 14.   | MATERIAL MODIFICATIONS TO THE RIGHT
      OF SECURITY HOLDERS AND USE OF PROCEEDS | **34**
|ITEM 15.   | CONTROLS AND PROCEDURES                                                           | **34**
|ITEM 16A.  | AUDIT COMMITTEE FINANCIAL EXPERT                                                  | **35**
|ITEM 16B.  | CODE OF ETHICS                                                                    | **35**
|ITEM 17.   | FINANCIAL STATEMENTS                                                              | **37**
|ITEM 18.   | FINANCIAL STATEMENTS                                                              | **37**
|ITEM 19.   | EXHIBITS                                                                          | **37**
|SIGNATURES | **38**                                                                           

2

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This Annual Report on Form 20-F contains statements that constitute
  "forward-looking statements" within the meaning of Section 27A of the Securities
  Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange
  Act”). These statements appear in a number of different places in this
  Annual Report and can be identified by words such as "estimates", "projects",
  "expects", "intends", "believes", "plans", or their negatives or other comparable
  words. Such forward-looking statements involve known and unknown risks, uncertainties
  and other factors which may cause our actual results, performance or achievements
  to be materially different from any future results, performance or achievements
  that may expressed or implied by such forward-looking statements. The statements,
  including the statements contained in Item 3D “Risk Factors”, Item
  4B “Business Overview”, Item 5 “Operating and Financial Review
  and Prospects” and Item 11 “Quantitative and Qualitative Disclosures
  About Market Risk”, are inherently subject to a variety of risks and uncertainties
  that could cause actual results, performance or achievements to differ significantly.
  Forward-looking statements include statements regarding the outlook for our
  future operations, plans and timing for our exploration programs, statements
  about future market conditions, supply and demand conditions, forecasts of future
  costs and expenditures, the outcome of legal proceedings, and other expectations,
  intentions and plans that are not historical fact. You are cautioned that any
  such forward-looking statements are not guarantees and may involve risks and
  uncertainties. Our actual results may differ materially from those in the forward-looking
  statements due to risks facing us or due to actual facts differing from the
  assumptions underlying our predictions. Some of these risks and assumptions
  include:

|- | general economic and business conditions,
        including changes in interest rates;                                                    
|- | ------------------------------------------------------------------------------------------------------------------------------------------
|- | prices of natural resources, costs associated
        with mineral exploration and other economic conditions;                             
|- | natural phenomena;                                                                                                                        
|- | actions by government authorities, including
        changes in government regulation;                                                    
|- | uncertainties associated with legal proceedings;                                                                                          
|- | changes in the resources market;                                                                                                          
|- | future decisions by management in response
        to changing conditions;                                                                
|- | our ability to execute prospective business
        plans; and misjudgments in the course of preparing forward-looking
        statements.

We advise you that these cautionary remarks expressly qualify
  in their entirety all forward-looking statements attributable to us or persons
  acting on our behalf. We assume no obligation to update our forward-looking
  statements to reflect actual results, changes in assumptions or changes in other
  factors affecting such statements. You should carefully review the cautionary
  statements and risk factors contained in this and other documents that we file
  from time to time with the Securities and Exchange Commission.

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not required

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE –

Not required

3

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ITEM 3. KEY INFORMATION

A. Selected Financial Data

The following table presents selected financial information.
  The Company's financial statements are stated in United States Dollars and are
  prepared in accordance with Canadian Generally Accepted Accounting Principles
  (GAAP); the application of which, in the case of the Company, conforms in all
  material respects for the periods presented with US GAAP, except as disclosed
  in footnotes to the financial statements.

Selected Financial Data 
  (US$ in 000’s)

|                                     | Year
      Ended
      1/31/05 | Year
      Ended
      1/31/04 | Year
      Ended
      1/31/03 | Year
      Ended
      1/31/02 | Year
      Ended
      1/31/01
|------------------------------------ | ------------------------------ | ------------------------------ | ------------------------------ | ------------------------------ | ------------------------------
|Revenue                              | $0                             | $0                             | $0                             | $0                             | $0                            
|Net Income (Loss)                    | ($3,776)                       | ($147)                         | ($472)                         | ($1156)                        | ($3,314)                      
|(Loss) Per Share                     | ($0.07)                        | ($0.00)                        | ($0.01)                        | ($0.04)                        | ($0.12)                       
|Dividends Per Share                  | $0.00                          | $0.00                          | $0.00                          | $0.00                          | $0.00                         
|Wtg. Avg. Shares (000)               | 51,946                         | 35,452                         | 32,658                         | 31,925                         | 27,041                        
|Working Capital                      | $1,274                         | $424                           | ($73                           | $322                           | $1,181                        
|Long-Term Debt                       | $0                             | $0                             | $0                             | $0                             | $0                            
|Shareholders’ Equity                 | $2,019                         | $926                           | 31                             | $441                           | $1,319                        
|Total Assets                         | $2,350                         | $1,025                         | $52                            | $504                           | $1,741                        
|                                     |                                |                                |                                |                                |                               
|US GAAP Net Loss((1)                 | ($3,776)                       | ($147)                         | ($469)                         | ($1,226)                       | ($3,303)                      
|US GAAP LPS                          | ($0.07)                        | ($0)                           | (0.01)                         | ($0.04)                        | ($.12)                        
|US GAAP Mineral Prop.                | $0                             | $0                             | $0                             | $0                             | $0                            
|US GAAP Shareholders’  
      Equity | $2,019                         | $926                           | ($ 29                          | $441                           | $1,319                        
|US GAAP Total Assets                 | $2,350                         | $1,025                         | $52                            | $504                           | $1,741                        

| | Under US GAAP and SEC regulations, the Company would have expensed
        all mineral property acquisition/exploration costs in the period incurred.
      Under US GAAP, long-term investments would be written down to market
        value on an individual basis and charged to a contra-equity account for
        unrealized losses on investments.
      Under US GAAP, contingently-cancelable (and escrowed) common shares
        would not have been included in the calculation of weighted-average-number-of-shares
        used to determine EPS.
      The rate of exchange was 1.21260 on July 15, 2005.
      All monetary amounts are expressed in United States dollars except otherwise
        indicated. The following table sets forth the rate of exchange for the
        Canadian Dollar at the end of each of the previous six months and the
        five most recent fiscal years ended January 31st, the average rates for
        each year and the range of high and low rates for month end period and
        each year. For purposes of this table, the rate of exchange means the
        noon buying rate in New York City for cable transfers in foreign currencies
        as certified for customs purposes by the Federal Reserve Bank of New York.
        The table sets forth the number of Canadian Dollars required under that
        formula to buy one US Dollar. The average rate means the average of the
        exchange rates on the last day of each month during the year.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|For the month end | High   | Low   
|----------------- | ------ | ------
|                  |        |       
|June 30, 2005     | 1.2630 | 1.2230
|May 31, 2005      | 1.2732 | 1.2353
|April 30, 2005    | 1.2617 | 1.2061
|March 31, 2005    | 1.2492 | 1.1976
|February 28, 2005 | 1.2581 | 1.2230
|January 31, 2005  | 1.2468 | 1.1944

|For the year ended | Average | High | Low 
|------------------ | ------- | ---- | ----
|1/31/05            | 1.29    | 1.40 | 1.17
|1/31/04            | 1.38    | 1.53 | 1.27
|1/31/03            | 1.56    | 1.61 | 1.50
|1/31/02            | 1.56    | 1.61 | 1.52
|1/31/01            | 1.48    | 1.45 | 1.45

B.      Capitalization and indebtedness

> Not applicable.

C.      Reason for the offer and use of proceeds.

> Not applicable.

D.      Risk Factors

An investment in our common shares is highly speculative and
  subject to a number of risks. Only those persons who can bear the risk of the
  entire loss of their investment should participate. An investor should carefully
  consider the risks described below and the other information that we file with
  the Securities and Exchange Commission and with Canadian securities regulators
  before investing in our common shares. The risks described below are not the
  only ones faced. Additional risks that we are aware of or that we currently
  believe are immaterial may become important factors that affect our business.
  If any of the following risks occur, or if others occur, our business, operating
  results and financial condition could be seriously harmed and the investor may
  lose all of their investment.

Exploration and Development

Mineral exploration is a speculative business and involves
  a high degree of risk. There is no known body of commercial ore on the NorthMet
  Project and there is no certainty that the expenditures to be made by us in
  the exploration or completion of a Definitive Feasibility Study or otherwise
  will result in discoveries of commercial quantities of minerals. The exploration
  for and development of mineral deposits involves significant risks, which even
  a combination of careful evaluation, experience and knowledge may not eliminate.
  Although the discovery of an ore body may result in substantial rewards, few
  properties explored are ultimately developed into producing mines. Significant
  expenditures may be required to locate and establish ore reserves, to develop
  metallurgical processes and to construct mining and processing facilities at
  a particular site. It is impossible to ensure that the current exploration programs
  planned by PolyMet will result in a profitable commercial mining operation.
  Significant capital investment is required to achieve commercial production
  from successful exploration efforts.

The commercial viability of a mineral deposit is dependent
  upon a number of factors. These include deposit attributes such as size, grade
  and proximity to infrastructure, current and future metal prices (which can
  be cyclical), and government regulations, including those relating to prices,
  taxes, royalties, land tenure, land use, importing and exporting of minerals
  and necessary supplies and environmental protection. The complete effect of
  these factors, either alone or in combination, cannot be entirely predicted,
  and their impact may result in PolyMet not receiving an adequate return on invested
  capital.

5

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The figures for mineral resources stated in this Annual Report
  are estimates and no assurance can be given that the anticipated tonnages and
  grades will be achieved or that the indicated level of recovery will be realized.
  Market fluctuations and the prices of metals may render resources uneconomic.
  Moreover, short-term operating factors relating to the mineral deposits, such
  as the need for orderly development of the deposits or the processing of new
  or different grades of ore, may cause a mining operation to be unprofitable
  in any particular accounting period.

There is no assurance that any of our mineral resources
  will ever be classified as reserves under the disclosure standards of the Securities
  and Exchange Commission.

Item 4.D of this Annual Report discusses our mineral resources
  in accordance with Canadian National Instrument 43-101. Resources are classified
  as “measured resources”, “indicated resources” and “inferred
  resources” under NI 43-101. However, U.S. investors are cautioned that
  the United States Securities and Exchange Commission does not recognize these
  resource classifications. There is no assurance that any of our mineral resources
  will be converted into reserves under the disclosure standards of the United
  States Securities and Exchange Commission.

Conflicts of Interest 
  Certain directors, officers or promoters of the Company are directors, officers,
  significant shareholders or promoters of other publicly listed companies. As
  a result, potential conflicts of interest may arise with respect to the exercise
  by such persons of their respective duties for the Company. In the event that
  such a conflict of interest arises at a meeting of the directors of the Company,
  a director who has such a conflict will abstain from voting for or against the
  approval of such participation or such terms. In the appropriate cases, the
  Company will establish a special committee of independent directors to review
  a matter in which several directors, or management, may have a conflict. Other
  than as indicated, the Company has no other procedures or mechanisms to deal
  with conflicts of interest.

Absence of Dividends 
  The Company has never declared or paid cash dividends on its Common Shares and
  does not anticipate doing so in the foreseeable future. There can be no assurance
  that the Company's board of directors will ever declare cash dividends, which
  action is exclusively within its discretion. Investors cannot expect to receive
  a dividend on the Company's Common Shares in the foreseeable future, if at all.

Dilution 
  The Company may in the future grant to some or all of its own and its subsidiaries'
  directors, officers, insiders and key employees options to purchase the Company's
  Common Shares as non-cash incentives to those employees. Such options may be
  granted at exercise prices equal to market prices at time when the public market
  is depressed. To the extent that significant numbers of such options may be
  granted and exercised, the interests of the then existing shareholders of the
  Company may be subject to additional dilution.

The Company is currently without a source of revenue and will
  most likely be required to issue additional securities to finance its operation
  and may also issue substantial additional securities to finance the development
  of any or all of its projects.

Volatility of Common Share Price and Volume 
  The Company's Common Shares are listed for trading on the TSX Venture Exchange.
  Shareholders of the Company may be unable to sell significant quantities of
  the Common Shares into the public trading markets without a significant reduction
  in the price of the shares, if at all. The market price of the Common Shares
  may be affected significantly by factors such as changes in the Company's operating
  results, the availability of financings, fluctuations in the price of metals,
  the interest of investors, traders and others in small exploration stage public
  companies such as the Company and general market conditions. In recent years
  the securities markets have experienced a high level of price and volume volatility,
  and the market price of securities of many companies, particularly small capitalization
  exploration companies similar to the Company, have experienced wide fluctuations,
  which have not necessarily been related to the operating performances, underlying
  asset values or future prospects of such companies. There can be no assurance
  that future fluctuations in the price of the Company's shares will not occur.

6

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Adverse Tax Consequences to U.S. Shareholders Resulting
  From the Company's PFIC Status

The Company believes that it is qualified as a passive foreign
  investment company ("PFIC") for the fiscal year ended January 31, 2005 and may
  qualify as a PFIC in the future with respect to U.S. Holders of the Company's
  common shares because the only source of income is interest, a passive source
  of income under the PFIC rules.

See Item 10 Additional Information - Taxation - United States
  Federal Income Tax

Consequences for a more detailed discussion of material United
  States federal income tax consequences for U.S. Shareholders.

ITEM 4. INFORMATION ON THE COMPANY

A.      History and Development of the Company

The Company was incorporated in British Columbia, Canada on
  March 4, 1981 under the name Fleck Resources Ltd. The Company changed its name
  from Fleck Resources to PolyMet Mining Corp. on June 10, 1998.

The Company’s head office is situated at Suite 2350
  –1177 West Hastings Street, Vancouver, B.C. V6E 2K3. Its registered and
  records office is the Company’s legal counsels offices situated at 1040
  – 999 West Hastings Street, Vancouver, B.C. V6C 2W2. The Company is a
  reporting issuer in each of the provinces of Albert, British Columbia and Ontario.
  The Company’s shares have been listed on the TSX Venture Exchange (TSX
  V) since April 13, 1984 with the symbol "POM" and on the Over the Counter Bulletin
  Board (“OTCBB”) under the symbol “POMGF” in the United
  States.

The principal expenditures of the Company are related to its NorthMet Project located in Minnesota, USA.  During the years ended January 31, 2005, January 31, 2004, and 2003 expenditures totaling $2,556,237.

The Company relies principally on equity financing to fund its projects and expenditures.

B.      Business Overview

PolyMet Mining Corp. (hereinafter referred to as the "Company"
  or "Registrant") is engaged in the exploration and development, when warranted,
  of natural resource properties. The Company’s primary mineral property
  is the NorthMet Project, a polymetallic project in northeastern Minnesota, USA.

In the years ended January 31, 2005, 2004 and 2003, the Company
  did not have any active operations that generated revenues.

On March 17, 2003, the Company incurred a change of management.
  As a result the Company’s officers and directors resigned and a new President,
  Secretary, Chief Financial Officer and three board members were appointed. Subsequently,
  the Company moved is head offices from Denver, Colorado to Vancouver, British
  Columbia as noted hereinabove.

Management’s primary focus for the year ended 2005 was
  to continue to advance its NorthMet Project with its environmental and permitting
  needs, commencement of a large diameter core drill program and continued negotiations
  with off take partnership agreements. Some of the highlights for the year included:

- An agreement dated February 14, 2004, has granted the Company an option
    to acquire certain property, plant and equipment from Cleveland Cliffs of
    Cleveland, Ohio (“Cliffs”) located near the Company’s NorthMet
    project. The Company paid a US$500,000 option payment during the year
    ended January 31, 2004 and issued 1,000,000 common shares on March 30, 2004
    at a deemed price of CDN$0.30 per share to Cliffs.

7

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- We retained Bateman Engineering Pty. of Brisbane, Australia
      to complete a review of the Scoping Study for the Northmet Project and to
      lead the Definitive Feasibility Study (DFS) as coordinating consultant.
      Bateman will complete the process design (including the design and supervision
      of a third pilot plant campaign) and the detail engineering and estimates
      for the plant and infrastructure. Other important elements of the DFS that
      will be fully integrated with Bateman’s work include:

| |  | Environmental permitting
        Geo-statistical sign-off on the ore body.
        Mine planning and scheduling of ore and waste, and;
        Marketing of metals.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

- On January 11, 2005, we announced the submission to
      the State of Minnesota regulators of the necessary information to advance
      the state’s environmental review process. The filings will lead to
      production of an Environmental Impact Statement (EIS) on the NorthMet Project.
      The NorthMet Project is adjacent to existing taconite mining operations
      and will reuse the former LTV Steel Mining Company plant and infrastructure,
      now called Cliffs- Erie. hawse have also submitted the information necessary
      for the Minnesota Department of Natural Resources to prepare a Draft Scoping
      Environmental Assessment Worksheet (EAW). Our data provides detailed answers
      to a series of project related questions.
      Preparation of the Draft Scoping EAW and related Draft Scoping Decision
      will set the stage for subsequent third-party preparation of an exhaustive
      EIS that will involve public participation. The EAW documents will also
      become publicly available when fully compiled by the state. Submittal of
      the EAW follows a public information meeting held November 3 (what year?)
      in Hoyt Lakes, Minnesota by the Minnesota Department of Natural Resources,
      the lead state agency responsible for the environmental review process and
      granting our Permit to Mine.
- On March 14, 2005 we reached an agreement among federal
      and state regulators to cooperate in preparing a single Environmental Impact
      Statement (EIS) on the NorthMet Project.
- We completed 42,000 feet of large diameter core drilling
      at the NorthMet Project. The drilling, which is part of a much larger drilling
      program scheduled for this year, provides metallurgical sample material
      for pilot-plant metallurgical test work at SGS Lakefield commencing in August
      2005. The drill program, which totals 90,000 feet is integral to the completion
      of a definitive feasibility study and will allow resource definition, detailed
      mine planning, waste rock characterization and other important aspects for
      the environmental permitting program. The pilot plant is intended to demonstrate
      the process, provide product sample for off-take agreements and to allow
      the engineer Bateman to provide process guarantees. The metallurgical results
      of the pilot plant will add new information to our ongoing bankable feasibility
      study that is aimed at commercial development of the NorthMet deposit.
- We deployed a second drilling contractor at the NorthMet
      project. Diamond drilling equipment was used to produce NTW core for in-fill
      drilling that will help further define the NorthMet resource.
- We commissioned two additional 43-101 technical reports,
      to complete a revised resource model based on a geological and drill hole
      database, which has been updated and contains over 17,000, validated assayed
      intervals. The database will continue to be expanded during 2005 as the
      results of the current in-fill and metallurgical-sample drill programs are
      added on completion.

C.        Organizational Structure

As at January 31, 2005 we had two (2) wholly owned subsidiaries, Fleck Minerals
  Inc., incorporated in Ontario, and PolyMet Mining Inc., incorporated in Minnesota,
  USA.

8

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D.      Property, plant and equipment

NorthMet Project, Minnesota, USA

Cautionary Note to U.S. Investors

The Company is incorporated under the laws of British Columbia
  in Canada. The mineral reserves and resources described in this Annual Report
  are estimates and have been prepared in compliance with NI 43-101. The definitions
  of proven and probable reserves used in NI 43-101 differ from the definitions
  in SEC Industry Guide 7. In addition, the terms "mineral resources", "measured
  mineral resource", "indicated mineral resource" and "inferred mineral resource"
  are defined in and required to be, disclosed by NI 43-101; however, these terms
  are not defined terms under SEC Industry Guide 7 and normally are not permitted
  to be used in reports and registration statements filed with the SEC. Accordingly,
  information, contained in this Annual Report containing descriptions of the
  Company's mineral deposits may not be comparable to similar information made
  public by U.S. companies subject to the reporting and disclosure requirements
  under the United States federal securities laws and the rules and regulations
  thereunder. For clarification, we have no properties that contain “reserves”
  as defined by the SEC and we have provided the following property information
  in accordance with National Instrument 43-101.

(a)      History

The NorthMet Project was discovered by US Steel Corp (“USX”)
  in 1969. Originally, it was thought to be a high-grade, underground copper-nickel
  resource. Drilling in the 1970’s demonstrated that it was in fact a high
  tonnage, low-grade deposit, amenable to open pit mining. The grade improved
  at depth. The inability to produce separate clean nickel or copper concentrates
  led to further process evaluation and development. At that time there was no
  recognition of any contained PGM’s.

The Minnesota Department of Natural Resources (“DNR”)
  subsequently discovered that PGM’s were associated with the nickel and
  copper in the resource. In 1989, we acquired a 20-year renewable mining lease
  over the property from USX and commenced an investigation into the potential
  for mining and recovering copper, nickel and PGM’s. We re-assayed pulps
  and rejects from previous drilling to obtain data on PGM’s. The encouraging
  potential to produce extra revenue attracted joint venture partners (Nerco and
  Argosy Mining) who assisted in identifying and quantifying the PGM values. However
  these companies were not able to develop a metallurgical process that could
  economically produce separate acceptable concentrates for sale to a smelter,
  or economically extract the contained metals from a bulk concentrate.

In the mid-90’s, we began investigating the use of hydrometallurgical
  processes, including bio-leaching and pressure oxidation, to determine the benefit
  to the Project. In 1998 we focused on a hydrometallurgical extractive technology,
  which led to the development of the PlatSolTM Process. The operating conditions
  of the PlatSolTM Process are such that the copper, nickel, cobalt and precious
  metals are all placed in solution in a single operation. Since the initial PlatSolTM
  testwork, the process has evolved and testwork on concentrates other deposits
  around the world led to improved recoveries of PGMs from the 92% level to 97%.

In July 2000, we entered into a joint venture arrangement
  with North Limited (“North”), a major Australian mining company,
  to progress the NorthMet Project to commercial production. Under the joint venture
  arrangement, North had the opportunity to ultimately earn an 87.5% interest
  in the PolyMet Project through funding and production of a Feasibility Study
  and funding 100% of the total capital costs to develop the project.

In August 2000, Rio Tinto Limited (“Rio Tinto”)
  completed an on-market takeover of North. Subsequently, Rio Tinto decided not
  to proceed with the NorthMet project and we exercised our 30-day pre-emptive
  right, under a “change of control” clause, to terminate the joint
  venture arrangement. Consequently, we regained a 100% interest in the NorthMet
  Project.

9

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Following completion of the metallurgical pilot plant work
  in November 2000, we commissioned a Pre-Feasibility Study on the project in
  November 2000, based on the PlatSol process. This study was completed in April
  2001. The Pre-Feasibility Study was for a 50,000tpd operation. The economics
  of this project were found to be unacceptably low and required a high up front
  capital expenditure. No further work was done until March 2003, when new management
  took over the company and commenced a detailed review of the project.

To we have expended $6,236,016 on the Project. These expenditures
  supported drilling, sampling, assaying, environmental, metallurgical testing
  and the pre-feasibility studies.

The following diagrams illustrate the location of the NorthMet
  Project.

Figure No. 1 
  NorthMet Project Map




(b)      Location/Access/Climate

The NorthMet Project land position covers 4,162 acres or 6.5
  square miles of patented mineral rights. The property is located in St. Louis
  County in the Mesabi Range District about 60 miles north of Duluth, Minnesota.
  The Project is easily accessible via state and county roads. A 12-mile all-season
  gravel road links the NorthMet Project to the nearby town of Babbitt. A private
  railroad crosses the property immediately south of the deposit. Two other railway
  lines are located within ten miles and connect with three ports on Lake Superior.
  There is ready access to industrial electric power. The property is zoned for
  patented mineral rights.

(c)      Claims and ownership

| | (i) | NorthMet Lease                                                                                                                                                                                                                                                                                                                                                 
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     | Pursuant to an Agreement dated January 4, 1989, we entered into a lease
      agreement with USX Corporation on certain lands in St. Louis County, Minnesota.
      The property is characterized as being mineralized with nickel, copper,
      platinum, palladium and gold. The term of the lease is 20 years, with annual
      lease payments as follows:
|
| |     | US$10,000 paid on execution of the lease US$10,000 paid on the
      first anniversary                                                                                                                                                                                                                                                                         
|
| |     | US$25,000 paid on the second and third anniversary US$40,000
      paid on the fourth and fifth anniversary US$50,000 paid on the sixth
      through ninth anniversary US$75,000 paid on the tenth through sixteenth
      anniversary                                                                                                                        
|
| |     | US$150,000 paid on the seventeenth anniversary and each year thereafter.                                                                                                                                                                                                                                                                                       

10

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| |      | Due to the financial difficulties experienced during
        2002, we obtained approval from US Steel to make the annual lease payment
        on the NorthMet property on a quarterly basis. US Steel has agreed to
        payment of the $75,000 owing 4 January 2003 as to $18,750 on 31
        January 2003, $18,750 on 9 March 2003 and $37,500 on 18 June 2003.                                                                                                                                                                                                                                                                                                                       
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |      | We can, at our option, terminate the lease at any
        time by giving written notice to the lessor not less than 90 days prior
        to the effective termination date or can extend the 20-year term by continuing
        to make annual lease payments. The lease payments are considered advance
        royalty payments and shall be deducted from future production royalties
        payable to the lessor, which range from 3% to 5% based on the net smelter
        return per ton of ore mined. Our recovery of the advance royalty payments
        is subject to the lessor receiving an amount not less than the amount
        of the annual lease payment for that year.
|
| | (ii) | State of Minnesota Minerals Leases (USA).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |      | During fiscal 2002, we successfully bid on 16 State
        of Minnesota minerals leases covering 4,363.41 acres. These leases are
        in proximity of proposed mining and waste disposal sites associated with
        the Project. The strategic location of these leases should facilitate
        Project economics and viability over the long term. Total cost of these
        three-year leases was US$16,784.67 paid in advance.                                                                                                                                                                                                                                                 

(e)      Permitting and Environmental

The environmental review process in Minnesota is reasonably
  well defined. Various permits from state and federal authorities will be necessary.
  An environmental impact Statement (EIS) will be required, with the Minnesota
  Department of National Resources as the lead agency.

Two winter wildlife studies, wetland and plant species evaluations,
  and preliminary geohydrology and rock geochemistry studies were completed in
  1999, 2000 and 2001. These environmental studies are important to future permitting
  efforts.

Based on the Pre-feasibility Study, permitting of the NorthMet
  project will require substantial investment of both time and funds. The estimated
  permitting time frame is 3 to 3.5 years at an estimated cost of $6 million
  to $6.5 million. The timetable for the NorthMet project to move from pre-feasibility
  through permitting and construction to full operation is estimated to be six
  years. This estimate incorporates the 3 to 3.5 years for permitting and 1.5
  years for plant construction.

As both EIS and permitting of the project will be subject
  to the arrangements of a land swap, we believe that this land swap with US Forest
  Service should be completed in conjunction with the feasibility study. PolyMet
  anticipates that negotiations with US Forest Service take approximately 2 years
  from the commencement of a feasibility study and will cost approximately $3.5
  million to complete. We have no assurance that the land swap will be completed
  and that it will do so in this time frame or cost.

In the event that the Company acquires the facilities, under
  option with Cliffs Erie, we believe that the permitting requirements will be
  reduced substantially by utilizing the permits already in place for the Cliffs
  facility. There is no assurance at this time that we will meet our option requirements
  and therefore use of permits currently in place with Cliffs is speculative.

11

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(f)      History of Exploration

During September 1999 to February 2000, and again in the fourth
  quarter of Fiscal 2001, we completed diamond core and reverse circulation drilling
  programs. These programs were designed with two-fold purposes: 1) in-fill drilling
  for estimated resource calculations, and 2) collect mineralized material for
  a mini-continuous pilot-plant testing program. We have drilled 87 of the 201
  drill holes now in the In addition, with the assistance of Minnesota’s
  Natural Resources Research Institute, we assayed previously unassayed sections
  of the USX drill core. The assays were conducted by Chemex Labs in Reno, Nevada
  and Acme Analytical in Vancouver, B.C. ran the check assays. We have incorporated
  the drill results into the calculations included in the pre-feasibility study
  completed in April 2001.

The only on-site project work during 2002 was associated with
  environmental mitigation. Buckets of drill cuttings from previous drilling campaigns
  were collected and subsequently disposed of in a manner specified by appropriate
  state and federal environmental personnel. Also, all drill holes were plugged
  in accordance with State of Minnesota regulations and appropriate paperwork
  filed.

| | (i)       Drilling                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | The NorthMet Project is a large, low-grade, polymetallic
      disseminated magmatic sulfide deposit  containing copper, nickel, palladium,
      platinum, cobalt, gold and silver.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | The NorthMet Project has been extensively drilled.
      To date, 201 holes have been drilled over a  4.5 km open ended strike
      length of the area for a total drilled length of 55,800 metres.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Cautionary Note to United States Investors Concerning
      Estimates of Measured, Indicated  and Inferred Resources                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | This section uses the terms ”measured resources”,
      ”indicated resources” and ”inferred  resources”.
      We advise United States investors that while these terms are recognized
      and  required by Canadian regulations (under National Instrument 43-101
      Standards of Disclosure for  Mineral Projects), the United States Securities
      and Exchange Commission does not recognize  them. United States
      investors are cautioned not to assume that any part or all of the 
      mineral deposits in these categories will ever be converted to reserves.In addition, ”inferred  resources” have a great amount
      of uncertainty as to their existence and economic and legal  feasibility.
      It cannot be assumed that all or any part of an Inferred Mineral Resource
      will ever be  upgraded to a higher category. Under Canadian Rules,
      estimates of Inferred Mineral Resources  may not form the basis of
      Feasibility or Pre-Feasibility Studies, or economic studies except for a 
      Preliminary Assessment as defined under 43-101. United States investors
      are cautioned not  to assume that part or all of an inferred
      resource exists, or is economically or legally  mineable.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | The resource estimates included in the Pre-feasibility
      Study of April 2001 and prepared by  Independent Mining Consultants
      Inc. of Tucson (“IMC”) are shown in the table below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

|Geological Resource Above $7.42
      cuttoff | Ktonnes Above Cutoff | %     | Average Grades
|--------------------------------------------- | -------------------- | ----- | --------------
|Of                                            | NSR                  | CuEq  | Cu            
|Total                                         | US$/t                | %     | %             
|Measured                                      | 201,653              | 46.8% | 11.97         
|Indicated                                     | 133,853              | 31.0% | 12.41         
|Inferred                                      | 95,653               | 22.2% | 12.74         
|Total                                         | 431,159              |       | 12.27         

The drilling to date has been adequate to complete the pre-feasibility level
  work (conceptual) required for mine planning.

12

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(i)      Future Exploration

In addition to the ongoing environmental and permitting work
  we completed 42,000 feet of large diameter core drilling at the NorthMet Project.
  The drilling, which is part of a much larger drilling program scheduled for
  this year, provides metallurgical sample material for pilot-plant metallurgical
  test work at SGS Lakefield commencing in August 2005. The drill program, which
  totals 90,000 feet is integral to the completion of the definitive feasibility
  study and will allow resource definition, detailed mine planning, waste rock
  characterization and other important aspects for the environmental permitting
  program. The pilot plant planned for August 2005 is intended to demonstrate
  the process, provide product sample for off-take agreements and to allow the
  engineer Bateman to provide process guarantees. The metallurgical results of
  the pilot plant will add new information to our ongoing bankable feasibility
  study that is aimed at commercial development of the NorthMet deposit in 2007.

Regulations and Government Rules 
  The mining industry has been subject to increasing government controls and regulations
  in recent years. We have obtained all necessary permits for exploration work
  performed to date and anticipates no material problems obtaining the necessary
  permits to proceed with further development.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

This discussion and analysis should be read in conjunction
  with the Company's consolidated financial statements. Our reporting currency
  is the United States dollar and our financial statements are prepared in accordance
  with Canadian Generally Accepted Accounting Principles (GAAP); however, there
  are no material differences between U.S. GAAP and Canadian GAAP regarding the
  financial statements. All amounts in this discussion and in the consolidated
  financial statements are expressed in United States dollars, unless identified
  otherwise.

(a)      Operating Results

Summary of Financial Results

We recorded a loss in 2005 of $3,776,337 ($0.07 per
  share) compared to a loss of $146,800 ($0.00 per share) in 2004 and
  a loss of $471,679 ($0.01 per share) in 2003. The loss in 2005 was attributed
  to a non-cash stock based compensation expense of $992,658 and pre-feasibility
  costs of $1,622,983.

During 2005 we expended $1,228,970 (net of stock based
  compensation expense of $992,658) in general and administrative costs compared
  to $233,658 (net of stock based compensation expense of $55,048) in
  2004 and $331,886 in 2003. During 2005 we also expended $1,622,983 in
  exploration, pre-feasibility and lease payments compared to $91,616 in 2004
  and $112,318 in 2003. The substantial increase was a result of our direct
  participation in the environmental and permitting advancement at the NorthMet
  Project.

Change in Accounting Policy

We adopted the recommendations of CICA Handbook Section 3870,
  Stock-Based Compensation and Other Stock-Based Payments, effective for all awards
  granted on or after 1 February 2003. This established standards for the recognition,
  measurement and disclosure of stock-based compensation and other stock-based
  payments made in exchange for goods and services.

As encouraged by CICA Handbook Section 3870, the we enacted
  prospectively early adoption of the fair value based method of accounting for
  awards issued to employees for the fiscal year beginning 1 February 2003.

The new standard requires that all stock-based awards made
  to employees and non-employees be measured and recognized using a fair value
  based method. In prior years, stock-based compensation expense was only recognized
  when stock-based compensation awards were made to non-employees, while pro-forma
  disclosure was acceptable for awards made to employees.

13

---

During fiscal year 2003, we changed our accounting policy
  with respect to accounting for exploration expenditures. In 2002 and prior periods,
  acquisition and exploration expenditures were capitalized to mineral properties.
  Under the new policy, exploration expenditures (including lease/option payments)
  are expensed while acquisition expenditures continue to be capitalized. This
  change has been applied retroactively and has increased the deficit as at January
  31, 2000 by $2,876,565 and increased the loss for the year ended 2002 by
  $606,162.

Summary of Operating Results

As at January 31, 2005, the Company operated in one segment,
  the exploration of the base and precious metals at its NorthMet Project in Minnesota,
  United States. Other reconciling adjustments comprise general and administrative
  costs, stock based compensation expense, financing expenses, foreign exchange
  interest income, assets, purchase of property, plant and equipment and amortization
  reported by the Canadian head office.

|                                        |   | NorthMet   |   | Other       |   |             
|--------------------------------------- | - | ---------- | - | ----------- | - | ------------
|                                        |   | Project in |   | reconciling |   |             
|2005                                    |   | U.S.       |   | adjustments |   | Consolidated
|Segment operating loss                  | $ | 1,855,631  | $ | 1,920,706   | $ | 3,776,337   
|Purchase property, plant and equipment  | $ | 12,028     | $ | 3,810       | $ | 15,838      
|Other assets                            | $ | 729,320    | $ | -           | $ | 729,320     
|Identifiable assets                     | $ | 986,065    | $ | 1,364,099   | $ | 2,350,164   
|2004                                    |   |            |   |             |   |             
|Segment operating loss                  | $ | 124,473    | $ | 22,327      |   | 146,800     
|Purchase property, plant and            |   |            |   |             |   |             
|equipment                               | $ | -          | $ | 2,061       |   | 2,061       
|Other assets                            | $ | 500,000    | $ | -           |   | 500,000     
|Proceeds on sale of resource property   | $ | -          | $ | 219,925     |   | 219,925     
|Proceeds on disposal of property, plant |   |            |   |             |   |             
|and equipment                           | $ | 33,331     | $ | -           |   | 33,331      
|Identifiable assets                     | $ | 505,500    | $ | 519,437     |   | 1,024,937   
|2003                                    |   |            |   |             |   |             
|Segment operating loss                  | $ | 376,462    | $ | 95,217      |   | 471,679     
|Purchase property, plant and            |   |            |   |             |   |             
|equipment                               | $ | -          | $ | -           |   | -           
|Proceeds on disposal of property, plant |   |            |   |             |   |             
|and equipment                           | $ | 48,301     | $ | -           |   | 48,301      
|Identifiable assets                     | $ | 11,626     | $ | 40,001      |   | 51,627      

Fiscal 2005 versus Fiscal 2004

Our focus for the current year was to further advance the
  environmental and permitting process and to commence a diameter core drill program
  at the NorthMet project. We expanded our operations in Minnesota by retaining
  several key consultants to assist in the completion of the environmental study
  and permitting requirements of the project. In addition we initiated negotiations
  to secure off take partnership agreements.

14

---

Fiscal 2004 versus Fiscal 2003

Our primary objective for 2004 was to achieve certain milestones
  with respect to the NorthMet project. We were successful in obtaining the option
  to acquire the Cliffs-Erie facility, which if exercised will significantly reduce
  the capital costs for the project. In addition an independent scoping study
  on the NorthMet project was completed integrating the Cliffs-Erie facility and
  its impact on the overall pre-feasibility capital costs. Expenditures of $500,000
  were made to obtain the option to acquire the Cliffs-Erie facility. During March
  2004, upon receipt of regulatory approval of the option agreement, the Company
  issued 1,000,000 common shares to maintain the exclusive rights under the option
  to June 30, 2006.

With our focus on the NorthMet project, we reached an agreement
  for the sale of Marathon leases and related land for proceeds of $250,000.

Fiscal 2003 versus Fiscal 2002

Fiscal 2003 focused on our survivability during very difficult
  economic conditions. Management continued its efforts to attract a strategic
  partner for the NorthMet Project, as well as to solicit investment equity capital.
  Subsequent to the 2003 year-end we completed a private placement for net proceeds
  of $73,410.

The only work performed on-site at the NorthMet Project consisted
  of environmental mitigation of drill holes and the disposal of drill cuttings
  from previous drilling campaigns. All such work has now been completed.

Liquidity And Capital Resources

Working Capital

As at January 31, 2005, we had working capital of $1,273,660,
  with approximately $510,871 in cash and restricted cash, $807,200 in
  term deposits and $286,601 in miscellaneous receivables and prepaid expenses
  and accounts payable of $331,012. In addition we had $229,320 in other
  assets and 15,838 in property, plant and equipment expenditures.

We rely principally on equity financing to fund our projects
  and expenditures. We have no internal source of funding and thus we depend on
  our ability to finance by raising funds by the sale of shares.

Planned Exploration Activities

Our current available cash and working capital will be adequate
  to maintain our property lease, summarized in Item 4, of this Annual Report,
  and administrative costs for the next 12 months. In order to advance the NorthMet
  project further additional funding will be required and there are no assurances
  that we will be able to complete the necessary financings or obtain a joint
  venture in order to carry out any further work. See Risk Factors.

15

---

Operating Cash Flow

For the year ended January 31, 2005, net cash inflows of $3,414,090
  exceeded cash outflows of $3,398,770 resulting in a positive cash flow of
  $15,320, which when combined with the $495,551 cash balance from year
  end 2004 results in an ending cash position of $510,871. The cash inflows
  were a result of two private placements for a total of 2,800,000 shares at CDN
  $0.80 per share for proceeds of $1,733,894. Cash outflows comprised
  principally of general and administrative costs of $1,228,970 (net non-cash
  stock based compensation expense) and pre-feasibility costs of $1,622,983.

Financing Activities

The following outlines our financing activities for the period ended January 31, 2005 included:

|**•**                                                      | In June 2004 we arranged a
        non-brokered private placement for a total of 1,550,000 units at CDN 
        $0.80 per unit for cash in the amount of CDN$1,240,000. Each Unit
        consists of one common share  and one-half of one non-transferable
        share purchase warrant, One full share purchase warrant  entitles
        the holder to purchase one additional common share for a period of 18
        months from the  closing of the private placement at CDN$1.20
        per share. A finder's fee in the amount of 7.5% of the  gross proceeds
        with respect to the placement of 825,000 units was paid in the form of
        61,875 shares  in the capital stock at a deemed price of CDN$0.80
        per share.             
|---------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                          
|**•**                                                      | In September 2004 we arranged
        a non-brokered private placement for a total of 1,250,000 units at 
        CDN$0.80 per unit for cash in the amount of CDN$1,000,000. Each
        unit consists of one common  share and one-half of one non-transferable
        share purchase warrant. One full share purchase warrant  entitles
        the holder to purchase one additional common share for a period of 18
        months from the  closing of the private placement at CDN$1.20
        per share. A finder's fee in the amount of 7.5% of the  gross proceeds
        with respect to the placement of 1,250,000 units has been paid in the
        form of 93,750  shares in the capital stock at a deemed price of
        cdn$0.80 per share.  
|                                                          
|**•**                                                      | During the year 5,277,574 share
        purchase warrants were exercised at exercise prices between  CDN$0.10
        - CDN$0.25 per share for proceeds of $828,554.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                          
|**•**                                                      | During the year, stock options
        in the amount of 1,088,400 were exercised at a prices between  CDN$0.08
        - CDN$0.13 per share for proceeds of $81,383.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                          
|**•**                                                      | Subsequent to year-end, a private
        placement for 9,000,000 units at CDN$0.55 per unit for net  proceeds
        of $3,831,795 was completed of which $762,804 was deposited prior
        to January 31, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                          
|During 2004 the following
      financings were completed:
|                                                          
|**•**                                                      | In March 2003, we arranged
        a private placement of 1,904,760 units at CDN $0.0525 per unit for
        cash  in the amount of CDN$67,507. Each unit consists of one
        common share and one share purchase  warrant to purchase one common
        share at CDN $0.10 for one year. Two directors subscribed for 
        190,476 units.                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                          
|**•**                                                      | In September 2003, we arranged
        a private placement of 2,746,892 units at CDN $0.10 for cash in the 
        amount of CDN$247,158. Each unit consists one common share and one
        share purchase warrant to  purchase an additional common share at
        CDN $0.15 in year one and CDN $0.17 in year two.                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                          
|**•**                                                      | In January 2004, we completed
        a private placement of 6,996,666 units at CDN$0.15 for cash in the 
        amount of CDN$1,049,499. Each unit consists of one common share and
        one-half of one share  purchase warrant. One full share purchase
        warrant entitles the holder to purchase one additional  common share
        for a period of 24 months at a price of CDN$0.25 per share provided
        that should the  Company’s shares trade on the TSX Venture
        Exchange at over CDN$0.50 per share for over 25  consecutive
        trading days, the warrants will terminate 30 days thereafter. A finders’
        fee of  CDN$50,000 cash and 60,000 common shares at a deemed
        price of CDN$0.15 per share was paid.
|                                                          
|**•**                                                      | During the year, 486,610 share
        purchase warrants were exercised at an exercise price of CDN$0.10 
        per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

16

---

|**•** | During the year ended stock options in the amount of 89,600 were exercised
      at a price of CDN$0.08 per share.
|----- | ------------------------------------------------------------------------------------------------------------------

There were no shares or financing activities for the fiscal period ended January
  31, 2003.

Requirements of Financing

Development of the NorthMet project to feasibility will require
  additional equity and possible debt financing, which involve significant risks
  some of which have been referred to previously in this document. As we are in
  the exploration stage, we do not have revenues from operations and, except for
  income from cash and cash equivalents, we rely on equity funding for our continuing
  financial liquidity. We do not have any arrangements or commitments in place
  for any additional financing.

(c)      Research and Development,
  Patents and Licenses, Etc.

Not applicable. See Item 4, Information on the Company, D.
  Property, Plant and Equipment, for a review of our exploration activities.

(d)      Trend Information

There are no trends, commitments, events or uncertainties
  presently known to management that are reasonably expected to have a material
  effect on our business, financial condition or results of operation other than
  uncertainty as to the speculative nature of the business (Refer to the heading
  entitled “Risk Factors”).

(e)      Off-Balance Sheet Arrangements

Not applicable.

(f)      Tabular Disclosure of Contractual Obligations

Payments due PeriodLess than 1 Year
      1 –3 Years
      3 – 5 Years
      More  than Five 
        yearsLease  
        Obligations
      -
      $150,000 -  $450,000
      $150,000 -  $450,000
      $150,000 per 
        annum


By an agreement dated January 4, 1989 and a subsequent amendment,
  we entered into a lease agreement with USX Corporation (“USX”) on
  certain lands in St. Louis County, Minnesota. The term of the lease is 20 years
  and calls for total annual lease payments of $1,475,000. All lease payments
  have been paid or accrued to January 31, 2005. The agreement requires future
  annual lease payments of $150,000 from January 4, 2006 to 2009.

We can, at our option, terminate the lease at any time by
  giving written notice to the lessor not less than 90 days prior to the effective
  termination date or can extend the 20-year term by continuing to make $150,000
  annual lease payments on each successive anniversary date.

The lease payments are considered advance royalty payments
  and shall be deducted from future production royalties payable to the lessor,
  which range from 3% to 5% based on the net smelter return received. Our recovery
  of the advance royalty payments is subject to the lessor receiving an amount
  not less than the amount of the annual lease payment due for that year.

During the year ended January 31, 2005, USX assigned the lease
  to RGGS Land & Minerals Ltd., L.P.

(g)      Safe Harbour

17

---

Not applicable.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management

Each Director serves until the next annual general meeting
  or until his/her successor is duly elected, unless his/her office is vacated
  in accordance with the Articles of the Company. The laws/regulations of British
  Columbia require that a majority of the members of the Board of Directors consist
  of Canadian residents.

Casual vacancies on the Board of Directors are filled by election
  from nominees by the remaining Directors and the persons filling those vacancies
  hold office until the next Annual General Meeting, at which time they may be
  re-elected or replaced.

The following table sets out the name of the directors as
  at July 15, 2005, the country in which each is ordinarily a resident, all offices
  of the Company now held by each of them, their principal occupations, the period
  of time for which each has been a director of the Company, and the number of
  common shares of the Company beneficially owned by each, directly or indirectly,
  or over which control or direction is exercised, as at the date hereof.

|Name and municipality of  residence and position                             | Business Experience for the past five years                                                                                                                                                                                                                                | Previous service as a director or officer
|---------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------
|William F. Murray, P.Eng(2) Canada                                           | Mining Executive, director and officer of a private 
      engineering and management firm, director of  several public resource
      companies; Director,  President and CEO of the Company wherein 85%
      of  his time was dedicated to the affairs of the  Company. | March 17, 2003                           
|George Molyviatis(1)(3), Geneva                                              | Financier, Banker, President of an international  lumber
      company; Director of the Company                                                                                                                                                                            | March 17, 2003                           
|Ian Forrest(1)(3),Geneva                                                     | Chartered Accountant, director of several public  resource
      companies, Director of the Company                                                                                                                                                                        | Oct. 3, 2003                             
|Dr. David Dreisinger(1)(2)(3) 
      
      Ph.D., a professor of the Canada | Faculty of Applied Science, Department of Metal  and Materials Engineering
      at University of British  Columbia, Director of the Company                                                                                                                               | Oct. 3, 2003                             
|James Swearingen(1)(2),  United States                                       | Co-chair of Governor’s Committee on Minnesota’s 
      Mining Future, Director of the Company                                                                                                                                                                              | Jan. 14, 2005                            
|Terese J. Gieselman  Canada                                                  | Mining Executive, director and officer of private  consulting
      management firm, officer of several  public resource companies; Chief
      Financial Officer  of the Company wherein 50% of her time was 
      
      dedicated to the affairs of the Company.       | October 3, 2003                          

|1  | Member of the Audit Committee           
|-- | ----------------------------------------
|2. | Member of the Compensation Committee    
|3. | Member of Corporate Governance Committee

18

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STATEMENT OF EXECUTIVE COMPENSATION

During the fiscal year ended January 31, 2005, the Company had two Named Executive
  Officers (for the purposes of applicable securities legislation), namely:

|(a) | William Murray, President and Chief Executive Officer
|--- | -----------------------------------------------------
|(b) | Terese J. Gieselman, Chief Financial Officer         

The Chief Executive Officer is a shareholder in a private British
  Columbia company which is entitled under a management agreement to receive compensation
  of CDN$192,000 per year. The following table sets forth, for the periods
  indicated, the compensation of the Named Executive Officers.

Summary Compensation Table

|Name & Principal Position                                | Year               | Annual Compensation          | Long Term Compensation                 
|-------------------------------------------------------- | ------------------ | ---------------------------- | ---------------------------------------
|Salary  
      ($)                                       | Bonus  
      ($)  | Other ($)                    | Awards                                 
|                                                         |                    |                              | Securities   Under   Option 
       (#)
|William Murray(2) President/CEO                          | 2005   2004   2003 | US$141,270   US$45,810   N/A | US$93,519(1)   Nil   N/A               
|Dr. Donald W.   Gentry(2)   Former 
       President/CEO | 2005   2004   2003 | Nil   NIL   US$103,288       | Nil   Nil   Nil                        
|Terese J. Gieselman   CFO                                | 2005   2004   2003 | US$12,781   US$5,820   N/A   | Nil   Nil   N/A                        

|(1) | Pursuant to the Bonus Share Incentive Plan 600,000
        common shares were accrued at a deemed price of CDN$0.19 (US$93,519).
        The Shares were issued subsequent to year-end on March 15, 2005. See Other
        Remuneration.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) | Effective March 17, 2003, Mr. Donald W. Gentry resigned
        and William F. Murray was appointed President and CEO.                                                                                                                   

Long Term Incentive Plan (LTIP) Awards

We do not have a LTIP, pursuant to which cash or non-cash
  compensation intended to serve as an incentive for performance (whereby performance
  is measured by reference to financial performance or the price of the Company’s
  securities) was paid or distributed to the Named Executive Officer during the
  most recently completed financial year.

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Option/Stock Appreciation Rights (“SAR”) GrantsDuring the Most Recently Completed Financial Year

|Name                       | Securities  Under  Option/SARs 
      Granted  (#) | % of Total Options/SARs Granted
      to Employees in Financial Year | Exercise or  Base Price  ($/Security) | Market Value  of Securities  Underlying  Options/SARs  on the Date
      of  Grant  ($/Security) | Expiration  Date
|-------------------------- | -------------------------------------------------- | -------------------------------------------------------------------- | ------------------------------------- | ------------------------------------------------------------------------------------------------ | ----------------
|William Murray             | 100,000                                            | 0.03%                                                                | CDN $0.66                             | CDN$0.66                                                                                         | July 5, 2009    
|Terese J. 
      Gieselman | 60,000                                             | 0.02%                                                                | CDN $0.40                             | CDN$0.51(1)                                                                                      | March 1, 2009   

|(i) | Options were granted at the allowable Discounted Market Price as defined
      in the TSX-VE Policy 1.1.
|--- | --------------------------------------------------------------------------------------------------------

Aggregated Options/SAR Exercises in Last Financial Yearand Financial Year-End Option/SAR Values

The following table (presented in accordance with the Rules)
  sets forth details of all exercises of stock options during the most recently
  completed financial year by each of the Named Executive Officers and the number
  of unexercised options held by the Named Executive Officers.

|Name                 | Securities   Acquired on  
      Exercise   (#) | Aggregate Value  
      Realized   ($) | Unexercised   Options/ SARs at  
      Fiscal Year-End  
      ($)   Exercisable/   Unexercisable | Value of  
      Unexercised In- 
      the-Money  
      Options/ SARs at  
      Fiscal Year-End  
      ($)  
      Exercisable/  
      Unexercisable
|-------------------- | ----------------------------------------------- | -------------------------------------- | ------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|William F. Murray    | Nil                                             | Nil                                    | 1,056,600                                                                                         | 421,470                                                                                                                                                  
|Terese J.  Gieselman | Nil                                             | Nil                                    | 60,000                                                                                            | 8,400                                                                                                                                                    

Defined Benefit or Actuarial Plan Disclosure

There is no pension plan or retirement benefit plan that has
  been instituted and none are proposed at this time.

Termination of Employment, Change in Responsibilities
  and Employment Contracts

The Company and its subsidiaries do not have a compensatory
  plan, contract or arrangement where a Named Executive Officer is entitled to
  receive more than $100,000 to compensate such executive officers in the
  event of resignation, retirement or other termination, a change of control of
  the Company or a change in responsibilities following a change of control except
  pursuant to an agreement dated March 17, 2004 whereby in the event of a take
  over bid as defined in Section 13 of the Securities Act(British Columbia),
  and where it shall require that the offeror takes up and pays for more than
  50% of the issued shares of the Company, Mr. William Murray shall have the right
  to receive a severance allowance. The severance allowance shall be based on
  the implied market capitalization of the Company under the take-over-bid, calculated
  multiplying the price actually paid under the take-over-bid by the number of
  issued shares of the Company on a fully diluted basis at the time of the take-over-bid
  (“Severance Allowance”, as follows:

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| |  | (a) | if the implied market capitalization is at least Cdn$50,000,000 but
      less than CDN$75,000,000, Optimum shall receive a Severance Allowance
      of CDN$200,000;                
| |  | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | (b) | if the implied market capitalization is at least CDN$75,000,000 but
      less than CDN$100,000,000, Optimum shall receive a Severance Allowance
      of CDN$400,000; and thereafter
|
| |  | (c) | for every increase in the implied market capitalization of CDN$25,000,000,
      the Severance Allowance shall increase by an additional CDN$600,000.                                

Notwithstanding the aforementioned, if the Company terminates
  the agreement with Mr. Murray for any reason other than cause, under the terms
  of the agreement, Mr. Murray will be entitled to receive 200% of all compensation
  to be paid for the remaining balance of the term of the agreement which expires
  on March 17, 2006.

Compensation Committee

The Compensation Committee, consisting of William Murray,
  James Swearingen and David Dreisinger, recommends the compensation of the executive
  officers of the Company. See “Report on Executive Compensation”
  for further details.

Compensation of Directors

We have no arrangements, standard or otherwise, pursuant to
  which Directors other than the Named Executive Officer (See “Report on
  Executive Compensation”) are compensated by the Company or its subsidiaries
  for their services in their capacity as Directors, or for committee participation,
  involvement in special assignments or for services as consultant or expert during
  the most recently completed financial year or subsequently, up to and including
  the date of this Annual Report with the exception of the following:

|Name of Director  | Consulting Fees
|----------------- | ---------------
|P. Terry O’Kane   | $46,799(1)     
|George Molyviatis | $46,799(1)     
|W. Ian L. Forrest | $46,799(1)     
|David Dreisinger  | $33,083(2)     

| | (1) | Pursuant to the Bonus Plan 300,000 common shares
        were accrued at January 31, 2005 to each Director at a deemed price of
        CDN$0.19 (US$46,799). The Shares were issued subsequent to year-end
        on March 15, 2005. See Other Remuneration.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) | Consulting fees paid in connection with the Company’s
        NorthMet Project, $31,754 to January 31, 2005 and $1,329 as at
        May 12, 2005.                                                                                                            

The Company has formalized stock option plan for the granting of incentive stock options to the officers, employees and Directors. The purpose of granting such options is to assist the Company in compensating, attracting, retaining and motivating
the Directors of the Company and to closely align the personal interests of such persons to that of the shareholders.

The following stock options were granted to directors of the Company during the most recently completed financial year:

|             | Number of           | Exercise Price |             
|------------ | ------------------- | -------------- | ------------
|Date Granted | Shares under Option | Per Share      | Expiry Date 
|            
|July 5, 2004 | 750,000             | CDN $0.66      | July 5, 2009

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Other Remuneration

On November 5, 2003 we adopted a bonus share incentive plan
  (the “Bonus Plan”) for our directors and key employees. The Bonus
  Plan was initially approved at our Annual General and Special Meeting held on
  May 28, 2004. Thereafter the Bonus Plan was submitted in a revised form in response
  to comments received from the TSX-VE and approved thereafter by the Company’s
  shareholders at its Extra Ordinary General Meeting held on November 4, 2004.

The issuance of bonus shares is seen to be a true incentive
  to key members of the management team as opposed to the granting of more conventional
  stock options. If the milestones are not accomplished, the bonus shares are
  not granted.

We have determined to limit the aggregate number of shares
  that may be issued under the Bonus Plan and our incentive stock option plan
  to not more than 20% of the Company’s issued shares from time to time.
  Accordingly, we received approval for the issuance of up to a total of 2,890,000
  shares of the Company with respect to Milestones 1 and 2 as per the following:

Milestone 1: Execution of an option agreement with
  Cleveland Cliffs for the use or purchase of what is referred to as the Cliffs-Erie
  Facility. This consists of real property located near Hoyt Lakes, Minnesota
  (the “Erie Site”), on which are located various ore processing facilities
  formerly operating by LTV Steel Mining Company as part of that company’s
  taconite mining and processing operations (the “Property”). The
  Property will be used to process mineral products from our NorthMet property,
  in nearby Babbitt, Minnesota. This Milestone was negotiated in September 2003
  and a final agreement was signed in February 2004. Accordingly, the number of
  shares issuable was 1,590,000 shares of which 1,500,000 were designated to the
  following directors:

|Name of Director  | No. of Common Shares
|----------------- | --------------------
|William Murray    | 600,000             
|P. Terry O’Kane   | 300,000             
|George Molyviatis | 300,000             
|W. Ian L. Forrest | 300,000             

As at January 31, 2005 the Bonus Shares were accrued and subsequently
  issued on March 15, 2005 (See “Directors Compensation”).

Milestone 2:Negotiation and completion of an off-take
  agreement with one or more senior metals producers for the purchase of the nickel
  hydroxide concentrate produced from the NorthMet Property, and/or an equity
  investment in the Company by such a producer or producers.

Upon achievement of the Milestone, 1,300,000 shares will be
  issued, of which 900,000 have been designated to the following directors:

|Name of Director  | No. of Common Shares
|----------------- | --------------------
|William Murray    | 300,000             
|James Swearingen  | 150,000             
|George Molyviatis | 150,000             
|W. Ian L. Forrest | 150,000             
|David Dreisinger  | 150,000             

As at the date of this Annual Report the Bonus Shares under
  Milestone 2 have been allotted but have not been issued.

We received approval of Milestones 3 and 4 of the Bonus Plan
  at the Company’s Annual and Special Meeting held on June 24, 2005 which
  provides for the issuance of up to a total of 5,990,000 shares as outlined below:

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Milestone 3: Completion of a bankable feasibility study
  which indicates that production from the Northmet Property is commercially feasible.

Upon the achievement of Milestone 3, 1,500,000 shares will
  be issued to the Directors as a group, as more fully set forth below:

|Name of Director  | Number of Shares
|----------------- | ----------------
|William Murray    | 500,000         
|George Molyviatis | 250,000         
|James Swearingen  | 250,000         
|Ian Forrest       | 250,000         
|Dave Dreisinger   | 250,000         
|TOTAL             | 1,500,000       

and an additional 850,000 shares will be issued to certain Key Employees as more fully set forth below:

|Name of Employee  | Number of Shares
|----------------- | ----------------
|Gaston Reymenants | 400,000         
|Warren Hudelson   | 125,000         
|Jim Scott         | 125,000         
|Don Hunter        | 200,000         
|TOTAL             | 850,000         

Gaston Reymenants has been retained as a specialist in metal
  sales to assist with off-take negotiations and project financing.

Warren Hudelson is a director of the Company’s U.S.
  Subsidiary, PolyMet Mining, Inc. and will be involved in the permitting process.

Jim Scott is responsible for the permitting process and involved
  in the project environmental statement.

Don Hunter is the project manager for the NorthMet Project
  and responsible for the overall completion of the bankable feasibility study.

Milestone 4: Commencement of Commercial Production
  of the Northmet Property.

Upon the achievement of Milestone 4, 2,400,000 shares will
  be issued to the Directors as a group and an additional 2,400,000 shares will
  be issued to the Key Employees.

|Name of Director  | Number of Shares
|----------------- | ----------------
|William Murray    | 800,000         
|George Molyviatis | 400,000         
|James Swearingen  | 400,000         
|Ian Forrest       | 400,000         
|Dave Dreisinger   | 400,000         
|TOTAL             | 2,400,000       

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| | and an additional 1,240,000 shares will be issued
      to certain Key Employees as more fully set  forth below:
| | ----------------------------------------------------------------------------------------------------------------

|Name of Employee  | Number of Shares
|----------------- | ----------------
|Gaston Reymenants | 400,000         
|Warren Hudelson   | 240,000         
|Jim Scott         | 200,000         
|Don Hunter        | 400,000         
|TOTAL             | 1,240,000       

As at the date of this Annual Report the Bonus Shares under
  Milestone 3 and 4 have been allotted but have not been issued.

Report on Executive Compensation

As part of its responsibilities, the Compensation Committee
  reviews our overall compensation plan and the policies pertaining thereto to
  ensure that they are consistent with our goals of attracting and retaining the
  best available people, align the employee’s interests with those of the
  Company, and pay for performance. In establishing levels of remuneration and
  in granting stock options, the executive’s performance, level of expertise,
  responsibilities, length of service to the Company and comparable levels of
  remuneration paid to executives of other companies of comparable size and development
  within the industry are taken into consideration.

See “Report on Executive Compensation Table” for
  more information on remuneration of the Named Executive Officers.

STATEMENT OF CORPORATE GOVERNANCE PRACTICES

Corporate governance relates to the activities of the Board,
  the members of which are elected by and are accountable to the shareholders,
  and takes into account the role of the individual members of management who
  are appointed by the Board and who are charged with the day-to-day management
  of the Company. The Board is committed to sound corporate governance practices,
  which are both in the interest of its shareholders and contribute to effective
  and efficient decision making. As a Tier 1 company listed on the TSX-V, we are
  required to comply with the guidelines for improved corporate governance in
  Canada adopted by the TSX (the “Exchange Guidelines”). Our approach
  to corporate governance in the context of 14 specific Exchange Guidelines is
  set out in the attached Exhibit 7

AUDIT COMMITTEE

Audit Committee Charter

Our audit committee Charter is attached as Appendix 1 of the attached Exhibit "7" to this Annual Report.

Composition of the Audit Committee

The following are the members of the Committee:

|Ian Forrest       | Independent (1) | Financially literate (1)
|----------------- | --------------- | ------------------------
|George Molyviatis | Independent (1) | Financially literate (1)
|David Dreisinger  | Independent (1) | Financially literate (1)
|James Swearingen  | Independent (1) | Financially literate (1)

(1) As defined by Multilateral Instrument 52-110 ("MI 52-110").

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D.      Employees

As at January 31, 2005 we had one employee. From August 2002
  to March 17, 2003, the Company utilized the services of a consultant for the
  majority of the administrative and all financial/accounting activities, during
  this relatively dormant period. None of our employees are covered by a collective
  bargaining agreement. Subsequent to the change of management the President was
  paid as a consultant along with an independent consultant for administrative
  and accounting activities. From January 2002 to the end of July 2002, we had
  one employee.

E.      Share Ownership

See B. Compensation.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.      Major Shareholders

To the best of the knowledge of the directors and senior officers
  of the Company there were no shareholders of the Company that beneficially owned,
  directly or indirectly, or exercises control over, shares carrying more than
  5% of the outstanding voting rights attached to the Company's Common Shares
  as at July 18, 2005.

As at July 18, 2005, there were 384 holders of record of the
  Company's Common Shares of which 287 were U.S. residents owning 10,449,178 (15.53%)
  of the Company's outstanding shares.

The Registrant is a publicly owned Canadian corporation, the
  shares of which are owned by Canadian residents, US residents, and residents
  of other countries. The Registrant is not owned or controlled directly or indirectly
  by another corporation or any foreign government. There are no arrangements,
  known to the Company, the operation of which may at a subsequent date result
  in a change of control of the Company.

B.      Related Party Transactions

We have conducted transactions with officers, directors and persons or companies related to directors as follows:

Paid or accrued amounts as follows:

|                          |   | 2005    |   | 2004  
|------------------------- | - | ------- | - | ------
|Management fees and wages | $ | 141,270 | $ | 52,388
|Consulting fees           |   | 336,448 |   | -     
|Legal fees                |   | 59,700  |   | -     
|Office facilities         |   | 23,070  |   | -     
|                          |   | 560,488 |   | 52,388

C.      Interest of experts and counsel

Not applicable.

ITEM 8. FINANCIAL INFORMATION

25

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A.      Consolidated Statements and Other Financial
  Information See Item 17 Legal Proceedings

We do not know of any material active or pending legal proceedings
  against us; nor are we involved as a plaintiff in any material proceeding or
  pending litigation. We know of no active or pending proceedings against anyone
  that might materially adversely affect an interest of the Company.

Dividend Policy

Since its incorporation, we have not declared or paid, and
  have no present intention to declare or to pay in the foreseeable future, any
  cash dividends with respect to our Common Shares. Earnings will be retained
  to finance further growth and development of our business. However, if the Board
  of Directors declares dividends, all Common Shares will participate equally
  in the dividends, and, in the event of liquidation, in the net assets, of the
  Company.

B.      Significant Changes

Subsequent to January 31, 2005:

We completed a private placement for 9,000,000 units at a
  price of CDN$0.55 per unit for total proceeds of CDN$4,950,000 ($3,945,978).
  Each unit consists of one common share and one-half of one share purchase warrant
  at a price of CDN$0.70 for two years from closing, provided that if the
  closing price of the Company’s shares as traded on the Exchange exceeds
  CDN$1.00 per share for 30 consecutive trading days, the warrants will terminate
  30 days thereafter. The Company issued 444,950 common shares and paid CDN$124,
  823 in cash ($99,209) in relation to a finders’ fee on a portion of
  the financing.

We issued 341,052 common shares pursuant to the exercise of
  stock options at a price of CDN$0.10 for total proceeds of approximately
  of $27,107.

We issued 40,000 common shares pursuant to the exercise of
  stock options at a price of CDN$0.40 for total proceeds of approximately
  $13,120.

On March 30, 2005 we granted 765,000 stock options to various
  directors, officers and consultants at a price of CDN$0.65.

ITEM 9. THE OFFER AND LISTING

A.      The Offer and Listing Details

The following table outlines the annual high and low market prices for the five most recent fiscal periods:

|Fiscal Period      | High     | Low      | 
|------------------ | -------- | -------- | 
|                   |          |         
|January  31,  2005 | CDN$1.20 | CDN$0.27
|January  31,  2004 | CDN$0.30 | CDN$0.25
|January  31,  2003 | CDN$0.12 | CDN$0.04
|January  31,  2002 | CDN$0.66 | CDN$0.10
|January  31,  2001 | CDN$1.25 | CDN$0.42

The following table outlines the high and low market prices for each fiscal
  financial quarter for the two most recent fiscal periods and any subsequent
  period:

26

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|Fiscal Quarter     | High     | Low      | 
|------------------ | -------- | -------- | 
|                  
|April 30, 2005     | CDN$0.85 | CDN$0.51
|January  31,  2005 | CDN$0.73 | CDN$0.55
|October  31,  2004 | CDN$0.92 | CDN$0.66
|July 31, 2004      | CDN$1.20 | CDN$0.25
|April 30, 2004     | CDN$0.89 | CDN$0.82
|January  31,  2004 | CDN$0.30 | CDN$0.25
|October  31,  2003 | CDN$0.17 | CDN$0.14
|July 31, 2003      | CDN$0.09 | CDN$0.08

The following table outlines the high and low market prices for each of the most recent six months:

|Month             | High     | Low      | 
|----------------- | -------- | -------- | 
|                 
|June 30, 2005     | CDN$1.02 | CDN$0.92
|May 31, 2005      | CDN$1.02 | CDN$0.85
|April 30, 2005    | CDN$0.85 | CDN$0.63
|March 31, 2005    | CDN$0.74 | CDN$0.64
|February 28, 2005 | CDN$0.71 | CDN$0.51
|January 31, 2005  | CDN$0.72 | CDN$0.51

B.      Plan of Distribution

Not applicable.

C.      Markets

Our common shares trade on the TSX Venture Exchange in British
  Columbia, Canada under the symbol "POM”. Our common shares commenced trading
  in April 1984. In August 2000, we listed on the OTCBB under the symbol “POMGF”.

D.      Selling Shareholders

Not applicable.

E.      Dilution

Not applicable.

F.      Expense of the issue

Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A.      Share Capital

Not applicable.

B.      Memorandum and articles of association

Our Certificate of Incorporation and Articles/By-Laws are Incorporated by Reference to Form 20-FR. We confirm no changes have been made our Articles/By-Laws.

C.      Material Contracts

We have not entered into any material contracts for the past two fiscal periods
  ending January 31, 2005 and January 31, 2004 other than those contracts entered
  into in the ordinary course of business.

27

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D.      Exchange Controls

There are currently no governmental laws, decrees, regulations
  or other legislation of Canada, which affects the import or export of capital,
  including the availability of cash and cash equivalents for use by the Company.
  For a general discussion of the remittance of dividends, interest or other payments
  to non-resident holders of the Common Shares. See "E. Taxation".

E.      Taxation

The following summary of the material Canadian federal income
  tax considerations generally applicable in respect of the common shares reflects
  the Company’s opinion. The tax consequences to any particular holder of
  common shares will vary according to the status of that holder as an individual,
  trust, corporation or member of a partnership, the jurisdiction in which that
  holder is subject to taxation, the place where that holder is resident and,
  generally, according to that holder’s particular circumstances. This summary
  is applicable only to holders who are resident in the United States, have never
  been resident in Canada, deal at arm’s length with the Company, hold their
  common shares as capital property and who will not use or hold the common shares
  in carrying on business in Canada. Special rules, which are not discussed in
  this summary, may apply to a United States holder that is an issuer that carries
  on business in Canada and elsewhere.

This summary is based upon the provisions of the Income Tax
  Act of Canada and the regulations thereunder (collectively, the “Tax Act,
  or ITA”) and the Canada-United States Tax Convention as amended by the
  Protocols thereto (the “Tax Convention”) as at the date of the Annual
  Report and the current administrative practices of Revenue Canada, Customs,
  Excise and Taxation. This summary does not take into account Canadian provincial
  income tax consequences.

This summary is not exhaustive of all possible income tax
  consequences. It is not intended as legal or tax advice to any particular holder
  of common stock and should not be so construed. Each holder should consult his
  own tax advisor with respect to the income tax consequences applicable to him
  in his own particular circumstances.

28

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North American Free Trade Agreement (Canada) - The
  Investment Act was amended with the North American Free Trade Agreement (NAFTA)
  to provide for special review thresholds for Americans (including “American-controlled
  “entities” as defined in the Investment Act). Under the Investment
  Act, as amended, an investment in the Registrant’s common shares by an
  American would be review able only if it was an investment to acquire control
  of the Registrant and the value of the assets of the Registrant was equal to
  or greater than a specified amount (the “Review Threshold”), which
  increases in stages. The Review Threshold is currently $150 million.

Disposition of Common Shares - If a non-resident were
  to dispose of common shares of the Company to another Canadian corporation which
  deals or is deemed to deal on a non-arm’s length basis with the nonresident
  and that, immediately after the disposition, is connected with the Company (i.e.,
  which holds shares representing more than 10% of the voting power and more than
  10% of the market value of all issued and outstanding shares of the Company),
  the amount by which the fair market value of any consideration (other than any
  shares of the purchaser corporation) exceeds the paid-up capital of the common
  shares sold will be deemed to be taxable as a dividend paid by the purchasing
  corporation, either immediately or eventually by means of a deduction in computing
  the paid-up capital of the purchasing corporation, and subject to withholding
  taxes as described below.

Under the Tax Act, a gain from the sale of common shares by
  a non-resident will not be subject to Canadian tax, provided the shareholder
  (and/or persons who do not deal at arm’s length with the shareholder)
  have not held a “substantial interest” in the Company (25% or more
  of the shares of any class of the Company’s stock) at any time in the
  five years preceding the disposition. Generally, the Tax Convention will exempt
  from Canadian taxation any capital gain realized by a resident of the United
  States, provided that the value of the common shares is not derived principally
  from real property situated in Canada.

Dividend - In the case of any dividends paid to non-residents,
  the Canadian tax is withheld by the Company, which remits only the net amount
  to the shareholder. By virtue of Article X of the Tax Convention, the rate of
  tax on dividends paid to residents of the United States is generally limited
  to 15% of the gross dividend (or 5% in the case of certain corporate shareholders
  owning at least 10% of the Company’s voting shares upon ratification of
  the Protocol amending the treaty. In the absence of the Tax Convention provisions,
  the rate of Canadian withholding tax imposed on non-residents is 25% of the
  gross dividend. Stock dividends received by non-residents from the Company are
  taxable by Canada as ordinary dividends and therefore the withholding tax rates
  will be applicable.

Where a holder disposes of common shares to the Company (unless
  the Company acquired the common shares in the open market in the manner in which
  shares would normally be purchased by any member of the public), this will result
  in a deemed dividend to the U.S. holder equal to the amount by which the consideration
  paid by the Company exceeds the paid-up capital of such stock. The amount of
  such dividend will be subject to withholding tax as described above.

Capital Gains - A non-resident of Canada is not subject
  to tax under the ITA in respect of a capital gain realized upon the disposition
  of a share of a class that is listed on a prescribed stock exchange unless the
  share represents “taxable Canadian property” to the holder thereof.
  A common share of the Company will be taxable Canadian property to a non-resident
  holder if, at any time during the period of five years immediately preceding
  the disposition, the non-resident holder, persons with whom the nonresident
  holder did not deal at arm’s length, or the non-resident holder and persons
  with whom he/she did not deal at arm’s length owned 25% or more of the
  issued shares of any class or series of the Company. In the case of a non-resident
  holder to whom shares of the Company represent taxable Canadian property and
  who is resident in the United States, no Canadian tax will be payable on a capital
  gain realized on such shares by reason of the Tax Convention unless the value
  of such shares is derived principally from real property situated in Canada
  or the non-resident holder previously held the shares while resident in Canada.
  The Company believes that the value of its common shares is not derived from
  real property situated inside Canada.

29

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Certain United States Federal Income Tax Consequences
  - The following is a discussion of certain possible United States Federal income
  tax consequences, under the law, generally applicable to a U.S. Holder (as defined
  below) of common shares of the Company. This discussion does not address all
  potentially relevant Federal income tax matters and it does not address consequences
  peculiar to persons subject to special provisions of Federal income tax law,
  such as those described below as excluded from the definition of a U.S. Holder.
  In addition, this discussion does not cover any state, local or foreign tax
  consequences.

The following discussion is based upon the sections of the
  Internal Revenue Code of 1986, as amended (“the Code”), Treasury
  Regulations, published Internal Revenue Service (“IRS”) rulings,
  published administrative positions of the IRS and court decisions that are currently
  applicable, any or all of which could be materially and adversely changed, possibly
  on a retroactive basis, at any time. In addition, the discussion does not consider
  the potential effects, both adverse and beneficial, of possible legislation
  which, if enacted, could be applied, possibly on a retroactive basis, at any
  time. The following discussion is for general information only and is not intended
  to be, nor should it be construed to be, legal or tax advice to any holder or
  prospective holder of common shares of the Company and no opinion or representation
  with respect to the United States Federal income tax consequences to any such
  holder or prospective holder is made. Accordingly, holders and prospective holders
  of common shares of the Company should consult their own tax advisors about
  the federal, state, local, and foreign tax consequences of purchasing, owning
  and disposing of common shares of the Company.

U.S. Holders - As used herein, a (“U.S. Holder”)
  includes a holder of common shares of the Company who is a citizen or resident
  of the United States, a corporation created or organized in or under the laws
  of the United States or of any political subdivision thereof and any other person
  or entity whose ownership of common shares of the Company is effectively connected
  with the conduct of a trade or business in the United States. A U.S. Holder
  does not include persons subject to special provisions of Federal income tax
  law, such as tax-exempt organizations, qualified retirement plans, financial
  institutions, insurance companies, real estate investment trusts, regulated
  investment companies, broker-dealers, non-resident alien individuals or foreign
  corporations whose ownership of common shares of the Company is not effectively
  connected with the conduct of a trade or business in the United States and shareholders
  who acquired their stock through the exercise of employee stock options or otherwise
  as compensation.

Distributions on Common Shares of the Company - U.S.
  Holders receiving dividend distributions (including constructive dividends)
  with respect to common shares of the Company are required to include in gross
  income for United States Federal income tax purposes the gross amount of such
  distributions to the extent that the Company has current or accumulated earnings
  and profits, without reduction for any Canadian income tax withheld from such
  distributions. Such Canadian tax withheld may be credited, subject to certain
  limitations, against the U.S. Holder’s United States Federal Income tax
  liability or, alternatively, may be deducted in computing the U.S. Holder’s
  United States Federal taxable income by those who itemize deductions. (See more
  detailed discussion at “Foreign Tax Credit” below). To the extent
  that distributions exceed current or accumulated earnings and profits of the
  Company, they will be treated first as a return of capital up to the U.S. Holder’s
  adjusted basis in the common shares and thereafter as gain from the sale or
  exchange of the common shares. Preferential tax rates for long-term capital
  gains are applicable to a U.S. Holder which is an individual, estate or trust.
  There are currently no preferential tax rates for long-term capital gains for
  a U.S. Holder, which is a corporation.

Dividends paid on the common shares of the Company will not
  generally be eligible for the dividends received deduction provided to corporations
  receiving dividends from certain United States corporations. A U.S. Holder which
  is a corporation may, under certain circumstances, be entitled to a 70% deduction
  of the United States source portion of dividends received from the Company (unless
  the Company qualifies as a “foreign personal holding company” or
  a “passive foreign investment company”, as defined below) if such
  U.S. Holder owns shares representing at least 10% of the voting power and value
  of the Company. The availability of this deduction is subject to several complex
  limitations, which are beyond the scope of this discussion.

30

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Foreign Tax Credit - A U.S. Holder who pays (or has
  withheld from distributions) Canadian income tax with respect to the ownership
  of common shares of the Company may be entitled, at the option of the U.S. Holder,
  to either a deduction or a tax credit for such foreign tax paid or withheld.
  Generally, it will be more advantageous to claim a credit because a credit reduces
  United States Federal income taxes on a dollar-for-dollar basis, while a deduction
  merely reduces the taxpayer’s income subject to tax. This election is
  made on year-by-year basis and applies to all foreign income taxes (or taxes
  in lieu of income tax) paid by (or withheld from) the U.S. Holder during the
  year. There are significant and complex limitations which apply to the credit,
  among which is the general limitation that the credit cannot exceed the proportionate
  share of the U.S. Holder’s United States income tax liability that the
  U.S. Holder’s foreign source income bears to his/her or its worldwide
  taxable income. In the determination of the application of this limitation,
  the various items of income and deduction must be classified into foreign and
  domestic sources. Complex rules govern this classification process. There are
  further limitations on the foreign tax credit for certain types of income such
  as “passive income”, “high withholding tax interest”,
  “financial services income”, “shipping income”, and
  certain other classifications of income. The availability of the foreign tax
  credit and the application of the limitations on the credit are fact specific
  and holders and prospective holders of common shares of the Company should consult
  their own tax advisors regarding their individual circumstances.

Disposition of Common Shares of the Company - A U.S.
  Holder will recognize gain or loss upon the sale of common shares of the Company
  equal to the difference, if any, between (i) the amount of cash plus the fair
  market value of any property received, and (ii) the shareholder’s tax
  basis in the common shares of the Company. This gain or loss will be capital
  gain or loss if the common shares are capital asset in the hands of the U.S.
  Holder, which will be a short-term or long-term capital gain or loss depending
  upon the holding period of the U.S. Holder. Gains and losses are netted and
  combined according to special rules in arriving at the overall capital gain
  or loss for a particular tax year. Deductions for net capital losses are subject
  to significant limitations. For U.S. Holders, which are individuals, any unused
  portion of such net capital loss may be carried over to be used in later tax
  years until such net capital loss is thereby exhausted. For U.S. Holders, which
  are corporations (other than corporations subject to Subchapter S of the Code),
  an unused net capital loss may be carried back three years from the loss year
  and carried forward five years from the loss year to be offset against capital
  gains until such net capital loss is thereby exhausted.

Other Considerations - In the following four circumstances,
  the above sections of the discussion may not describe the United States Federal
  income tax consequences resulting from the holding and disposition of common
  shares of the Company. However, on the basis of (a) the number of shareholders
  of its common shares, (b) the majority ownership of its shares by Canadian residents,
  and c) the majority of its assets are actively managed (not passively held),
  the Company believes that its is neither a “Foreign Personal Holding Company”,
  “Foreign Investment Company”, “Passive Foreign Investment
  Company”, nor a “Controlled Foreign Corporation”.

Foreign Personal Holding Company - If at any time during
  a taxable year more than 50% of the total combined voting power or the total
  value of the Company outstanding shares is owned, actually or constructively,
  by five or fewer individuals who are citizens or residents of the United States
  and 50% or more of the Company’s gross income for such year was derived
  from certain passive sources (e.g. from dividends received from its subsidiaries),
  the Company would be treated as a “foreign personal holding company”.
  In that event, U.S. Holders that hold common shares of the Company would be
  required to include in gross income for such year their allowable portions of
  such passive income to the extent the Company does not actually distribute such
  income.

31

---

Foreign Investment Company - If 50% or more of the
  combined voting power or total value of the Company outstanding shares are held,
  actually or constructively, by citizens or residents of the United States, United
  States domestic partnerships or corporations, or estates or trusts other than
  foreign estates or trusts (as defined by the Code Section 7701(a)(31)), and
  the Company is found to be engaged primarily in the business of investing, reinvesting,
  or trading in securities, commodities, or any interest therein, it is possible
  that the Company might be treated as a “foreign investment company”
  as defined in Section 1246 of the Code, causing all or part of any gain realized
  by a U.S. Holder selling or exchanging common shares of the Company to be treated
  as ordinary income rather than capital gains.

Passive Foreign Investment Company - As a foreign corporation
  with U.S. Holders, the Company could potentially be treated as a passive foreign
  investment company (“PFIC”), as defined in Section 1297 of the Code,
  depending upon the percentage of the Company’s income which is passive,
  or the percentage of the Company’s assets which is held for the purpose
  of producing passive income. Certain United States income tax legislation contains
  rules governing PFICs, which can have significant tax effects on U.S. shareholders
  of foreign corporations. These rules do not apply to non-U.S. shareholders.
  Section 1297(a) of the Code defines a PFIC as a corporation that is not formed
  in the United States and, for any taxable year, either (i) 75% or more of its
  gross income is “passive income”, which includes interest, dividends
  and certain rents and royalties or (ii) the average percentage, by fair market
  value (or, if the company is a controlled foreign corporation or makes an election,
  by adjusted tax basis), of its assets that produce or are held for the production
  of “passive income” is 50% or more. The taxation of a US shareholder
  who owns stock in a PFIC is extremely complex and is therefore beyond the scope
  of this discussion. US persons should consult with their own tax advisors with
  regards to the impact of these rules.

Controlled Foreign Corporation - If more than 50% of
  the voting power of all classes of stock or the total value of the stock of
  the Company is owned, directly or indirectly, by citizens or residents of the
  United States, United States domestic partnerships and corporations or estates
  or trusts other than foreign estates or trusts, each of whom own 10% or more
  of the total combined voting power of all classes of stock of the Company or
  the total value of the stock of (“United States shareholder”), the
  Company could be treated as a controlled foreign corporation” under Subpart
  F of the Code.

This classification would effect many complex results including
  the required inclusion by such United States shareholders in income of their
  pro rata share: of “Subpart F Income” (as specially defined by the
  Code) of the Company; of the Company’s earnings invested in U.S. property;
  and of earnings invested “excess passive assets” (as specifically
  defined by the Code). The Company, in addition, under Section 1248 of the Code,
  gain from the sale or exchange of common shares of the Company by a U.S. person
  who is or was a United States shareholder (as defined in the Code) at any time
  during the five years period ending with the sale or exchange is treated as
  ordinary dividend income to the extent of earnings and profits of the Company
  attributable to the stock sold or exchanged. Because of the complexity of Subpart
  F, and because it is not clear that the Company is a controlled foreign corporation,
  a more detailed review of these rules is outside of the scope of this discussion.

F.      Dividends and Paying Agents

Not applicable.

G.      Statements by Experts

Not applicable

32

---

H.      Documents on Display

All documents referred to in this Form 20-F are available for inspection at our office, listed below, during normal office hours.

> Polymet Mining Corp. 
>       #2350 - 1177 West Hastings Street 
>       Vancouver, British Columbia 
>       V6E 2K3 Canada

We are subject to the informational requirements of the Securities
  Exchange Act of 1934, as amended, and we file reports, registration statements
  and other information with the Securities and Exchange Commission (the "SEC").

Our reports, registration statements and other information
  can be inspected on the SEC's website at www.sec.gov, and such information can
  be inspected and copies ordered at the public reference facilities maintained
  by the SEC at the following locations:

|Judiciary Plaza   Room 1024  
      Washington, DC 20549 | 500 West Madison  Suite 1400  
      Chicago, IL 60661
|-------------------------------------------------------- | ------------------------------------------------------

I.      Subsidiary Information

Not Applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We are exposed to market risk from changes in foreign currency
  exchange, although the exposure is not considered sufficient to have a material
  effect on our results of operations and financial condition. Our only means
  of funding is by way of equity financing, which would be completed in Canadian
  Funds. The result of which exposes us to foreign currency exchange rate risk
  as our reporting currency is the U.S. dollar. We hold financial instruments
  in Canadian dollars. A depreciation of the Canadian dollar against the United
  States dollar will decrease the fair value and an appreciation of the Canadian
  dollar against the U.S. dollar will increase the fair value of such financial
  instruments.

We have no publicly or privately traded securities or market
  instruments aside from our own equity. The only publicly traded securities are
  the Common Shares of the Company, which trade on the TSX Venture Exchange. We
  have no debt instruments subject to interest payments, sales contracts, swaps,
  derivatives, or forward agreements or contracts, or inventory.

We have no currency or commodity contracts, and the we do
  not trade in such instruments.

We have no cash flow or revenue from operations, we do not
  have currency or other market exposure to operating activities.

We have no debt instruments, which are subject to interest
  payments.

We periodically access the capital markets with the issuance
  of new shares to fund operating expenses, and we do not maintain significant
  cash reserves over periods of time that could be materially affected by fluctuations
  in interest rates or foreign exchange rates.

33

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ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not Applicable.

ITEM 13. DEFAULT, DIVIDEND ARREARAGES AND DELINQUENCIES –

None

ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHT OF SECURITY HOLDERS AND USE OFPROCEEDS

Option Re-pricing

On May 5, 2003, consent resolutions were approved to re-price
  the 541,052 previously granted options from CDN $0.25 to CDN $0.10 per
  share and to amend the expiry date to March 17, 2007 as at the date of this
  Annual Report all of these options have been exercised.

Shareholder Rights Plan

Effective December 4, 2003, we adopted a Shareholder Rights
  Plan (“Rights Plan”), subject to the ratification by our shareholders
  at a meeting to be held within six months of the date of the Rights Plan, such
  approval was received on May 28, 2004. All common shares issued by the Company
  during the term of the Rights Plan will have one right represented by the certificates
  representing the common shares of the Company. The term of the Rights Plan is
  10 years, unless the rights are earlier redeemed or exchanged. The Rights issued
  under the Rights Plan become exercisable only if a party acquires 20% or more
  of the Company's common shares without complying with the Rights Plan or without
  the approval of the Board of Directors of the Company.

Each Right entitles the registered holder thereof to purchase
  from the Company on the occurrence of certain events, one common share of the
  Company at the price of CDN$50 per share, subject to adjustment (the “Exercise
  Price”). However, if a Flip-in Event (as defined in the Rights Plan) occurs,
  each Right would then entitle the registered holder to receive, upon payment
  of the Exercise Price, that number of common shares that have a market value
  at the date of that occurrence equal to twice the Exercise Price. The Rights
  are not exercisable until the Separation Time as defined in the Rights Plan.

ITEM 15. CONTROLS AND PROCEDURES

A. Evaluation of Disclosure Controls and Procedures

An evaluation was performed under the supervision and with
  the participation of our management, including the chief executive officer and
  chief financial officer, of the effectiveness of the design and operation of
  our disclosure controls and procedures (as defined in Rule 13a-15 of the Exchange
  Act, as amended) as of the end of the period covered by the Annual Report on
  20-F. Based on that evaluation, our management, including the chief executive
  officer and chief financial officer, concluded that our disclosure controls
  and procedures were effective as of the end of the period covered by this Annual
  Report to provide reasonable assurance that information required to be disclosed
  by us in the reports that we file or submit under the Exchange Act, as amended,
  is recorded, processed, summarized and reported with the time period specified
  in the U.S. Securities and Exchange Commission rules and forms.

34

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B.      Changes in Internal Controls

Our management, which includes the chief executive officer
  and chief financial officer, identified no change in our internal control over
  financial reporting that occurred during the fiscal year ended January 31, 2005,
  and that has materially affected, or is reasonably likely to materially affect,
  our internal control over financial reporting.

The term “internal control over financial reporting”
  is defined as a process designed by, or under the supervision of, the registrant's
  principal executive and principal financial officers, or persons performing
  similar functions, and effected by the registrant's board of directors, management
  and other personnel, to provide reasonable assurance regarding the reliability
  of financial reporting and the preparation of financial statements for external
  purposes in accordance with generally accepted accounting principles and includes
  those policies and procedures that:

| | (1) | Pertain to the maintenance of records that in reasonable
        detail accurately and fairly reflect the transactions and dispositions
        of the assets of the registrant;                                                                                                                                                                                                 
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) | Provide reasonable assurance that transactions are
        recorded as necessary to permit preparation of financial statements in
        accordance with generally accepted accounting principles, and that receipts
        and expenditures of the registrant are being made only in accordance with
        authorizations of management and directors of the registrant; and
|
| | (3) | Provide reasonable assurance regarding prevention
        or timely detection of unauthorized acquisition, use or disposition of
        the registrant's assets that could have a material effect on the financial
        statements.                                                                                                                                          

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

As at the Company’s financial year ended January 31,
  2005, the audit committee consisted of four directors, two of whom would be
  determined as a financial expert:

Ian Forrest

Mr. Forrest is a Chartered Accountant practicing in Geneva
  and specializing in finance, banking and tax consulting. He is a director of
  two Canadian public companies, Caledonian Mining Corporation and Mengold Resources
  Inc.

James Swearingen

Mr. Swearingen formerly managed the largest mining operation
  in North America, United States Steel’s Minntac mine and plant along Minnesota’s
  Mesabi Iron Range, serving as General Manager of Minnesota Ore Operations. Mr.
  Swearingen has extensive professional training and experience in business administration,
  mathematics and accounting. He currently serves as co-chair of the Governor’s
  Committee on Minnesota’s Mining Future. The Committee, at the behest of
  the Minnesota Governor Tim Pawlenty, has prepared a comprehensive set of public
  policy recommendations to sustain and advance Minnesota’s robust mining
  industry. Mr. Swearingen is also active with other groups to bring new technology
  to northeastern Minnesota for copper, nickel and platinum group metals mining
  and steel making. He is also an active advisor to the University of Minnesota’s
  Natural Resources Research Institute based in Duluth, Minnesota.

ITEM 16B. CODE OF ETHICS

During our current fiscal year the Board of Directors adopted
  a Corporate Governance Policy with included the Corporate Governance Mandate,
  Audit Committee Mandate, Compensation Committee Mandate and a Code of Ethics,
  in accordance with the requirements of this Annual Report.

We recently created a new and more informative website and
  are in the process of updating it to include our Corporate Governance Policy,
  Mandates and Code of Ethics.

35

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ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following outlines the expenditures for accounting fees for the last two fiscal periods ended:

|Financial Year
      Ending | Audit Fees | Audit Related
      Fees | Tax Fees | All Other Fees
|--------------------------- | ---------- | ------------------------ | -------- | --------------
|2005                        | $18,200    | $450                     | $800     | Nil           
|2004                        | $18,200    | Nil                      | $800     | Nil           

36

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PART III

ITEM 17. FINANCIAL STATEMENTS

Our financial statements are stated in United States Dollars
  (US$) and are prepared in accordance with Canadian Generally Accepted Accounting
  Principles (GAAP); the application of which, in the case of the Company, conforms
  in all material respects for the periods presented with US GAAP, except as disclosed
  in footnotes to the financial statements.

The following financial statements and notes thereto required
  under ITEM #17 are attached hereto and found immediately preceding the signature
  page of this Form 20-F Annual Report.

Audited Financial Statements for Fiscal 2005/2004/2003 ended
  January 31st.

ITEM 18. FINANCIAL STATEMENTS

Not Applicable

ITEM 19. EXHIBITS

|1.   | Certificate of Incorporation and Articles/By-Laws -- Incorporated by
      Reference to Form 20-FR, Form 20-F Annual Reports, and Form 6-K's --
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------
|    
|2.   | Instruments defining the rights of holders of equity or debt securities
      being registered. -Refer to Exhibit No. 1 --                     
|    
|3.   | Material Contracts: -- Incorporated by Reference to Form 20-FR, Form
      20-F Annual Reports, and Form 6-K's --                              
|    
|4.   | Foreign Patents: Not Applicable                                                                                                                
|    
|5.   | Diagram of Parent and Subsidiaries -- Incorporated by Reference to Form
      20-FR, Form 20-F Annual Reports, and Form 6-K's –                
|    
|6.   | Code of Ethics -- Incorporated by Reference to Form 20-FR, Form 20-F
      Annual Reports, and Form 6-K's –                                    
|    
|7.   | Statement of Corporate Governance Practices                                                                                                    
|    
|8.   | Other Exhibits: -- Incorporated by Reference to Form 20-FR, Form 20-F
      Annual Reports, and Form 6-K's –                                   
|    
|12.1 | Section 302 Certificate of CEO                                                                                                                 
|    
|12.2 | Section 302 Certificate of CFO                                                                                                                 
|    
|13.1 | Section 906 Certificate of CEO                                                                                                                 
|    
|13.2 | Section 906 Certificate of CFO                                                                                                                 

37

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POLYMET MINING CORP.

CONSOLIDATED FINANCIAL STATEMENTS

31 JANUARY 2005

U.S. Funds

F-1

---

|Report of Independent Registered Public
      Accounting Firm
|-------------------------------------------------------------
|                                                             

To the Shareholders of PolyMet Mining Corp.:

We have audited the accompanying consolidated balance sheets
  of PolyMet Mining Corp. (the “Company”) as at 31 January 2005 and
  2004 and the related consolidated statements of shareholders' equity, loss and
  cash flows for the years ended 31 January 2005, 2004 and 2003. These financial
  statements are the responsibility of the Company's management. Our responsibility
  is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the Canadian generally
  accepted auditing standards and with the standards of the Public Company Accounting
  Oversight Board (United States). Those standards require that we plan and perform
  the audits to obtain reasonable assurance about whether the financial statements
  are free of material misstatement. The Company is not required to have, nor
  were we engaged to perform an audit of its internal control over financial reporting.
  Our audits included consideration of internal control over financial reporting
  as a basis for designing audit procedures that are appropriate in the circumstances,
  but not for the purpose of expressing an opinion on the effectiveness of the
  Company’s internal control over financial reporting. Accordingly, we express
  no such opinion. An audit also includes examining, on a test basis, evidence
  supporting the amounts and disclosures in the financial statements, assessing
  the accounting principles used and significant estimates made by management,
  as well as evaluating the overall financial statement presentation. We believe
  that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred
  to above present fairly, in all material respects, the financial position of
  the Company as at 31 January 2005 and 2004, and the results of its operations
  and its cash flows for the years ended 31 January 2005, 2004 and 2003, in accordance
  with Canadian generally accepted accounting principles.

|Vancouver, B.C.                                                                   | STALEY, OKADA & PARTNERS
|--------------------------------------------------------------------------------- | ------------------------
|18 March 2005                                                                     | CHARTERED ACCOUNTANTS   
|                                                                                 
|                                                                                 
|Comments
      By Auditors For U.S. Readers On Canada - U.S. Reporting Difference
|                                                                                 

In the United States, reporting standards for auditors require
  the addition of an explanatory paragraph (following the opinion paragraph) when
  financial statements are affected by future events, the outcome of which is
  indeterminable. As discussed in Note 1, the Company’s continued existence
  as a going concern is dependent upon the future economic success of its exploration
  and development activities, the Company’s ability to continue to secure
  adequate financing and the Company achieving a positive cash flow and profitable
  operations. Our report to the shareholders dated 18 March 2005, is expressed
  in accordance with Canadian reporting standards, which do not require a reference
  to such going concern considerations in the auditors’ report when the
  situation is adequately disclosed in the financial statements.

|Vancouver, B.C. | STALEY, OKADA & PARTNERS
|--------------- | ------------------------
|18 March 2005   | CHARTERED ACCOUNTANTS   
|               

F-2

---

|PolyMet Mining Corp.       | Statement 1
|-------------------------- | -----------
|Consolidated Balance Sheet |            
|As at 31 January           |            
|U.S. Funds                 |            

|ASSETS                                                     |   | 2005        |   |   | 2004        |  
|---------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|Current                                                    |   |             |   |   |             |  
|Cash and restricted
      cash                             | $ | 510,871     |   | $ | 495,551     |  
|Term
      deposit                                         |   | 807,200     |   |   | -           |  
|Miscellaneous receivables                                  |   | 45,005      |   |   | 21,881      |  
|Prepaid
      expenses                                     |   | 241,596     |   |   | 5,466       |  
|                                                           |   | 1,604,672   |   |   | 522,898     |  
|Investments(Note 4)                                        |   | 253         |   |   | 253         |  
|Other Assets(Note 5 b)                                     |   | 729,320     |   |   | 500,000     |  
|Property, Plant and Equipment(Note
      6)                |   | 15,919      |   |   | 1,786       |  
|                                                           | $ | 2,350,164   |   | $ | 1,024,937   |  
|                                                           |   |             |   |   |             |  
|                                                           |   |             |   |   |             |  
|LIABILITIES                                                |   |             |   |   |             |  
|Current                                                    |   |             |   |   |             |  
|Accounts
      payable                                     | $ | 331,012     |   | $ | 99,372      |  
|                                                           |   |             |   |   |             |  
|Continued Operations(Note 1)                               |   |             |   |   |             |  
|Contingent Liabilitiesand Commitments (Note 13)            |   |             |   |   |             |  
|                                                           |   |             |   |   |             |  
|                                                           |   |             |   |   |             |  
|SHAREHOLDERS’ EQUITY                                       |   |             |   |   |             |  
|Share Capital- Statement 2 (Note 7)                        |   | 18,388,194  |   |   | 15,231,768  |  
|Share Subscriptions Received- Statement 2 (Note
      12a) |   | 762,804     |   |   | -           |  
|Contributed Surplus- Statement 2 (Note 7e)                 |   | 1,005,742   |   |   | 55,048      |  
|Deficit- Statement 2                                       |   | (18,137,588 | ) |   | (14,361,251 | )
|                                                           |   | 2,019,152   |   |   | 925,565     |  
|                                                           | $ | 2,350,164   |   | $ | 1,024,937   |  

ON BEHALF OF THE BOARD:

|“William
      Murray”   | , Director
|------------------------ | ----------
|                         |           
|                         |           
|“David
      Dreisinger” | , Director

- See Accompanying Notes -

F-3

---

|PolyMet Mining Corp.                          | Statement 2
|--------------------------------------------- | -----------
|Consolidated Statement ofShareholders’ Equity |            
|U.S. Funds                                    |            

|                                                             | Common Shares |  |            |  |   |            |   |  
|------------------------------------------------------------ | ------------- |  | ---------- |  | - | ---------- | - | -
|                                                             |               |  |            |  |   |            |   |  
|                                                             | Authorized    |  |            |  |   |            |   |  
|                                                             | Shares        |  | Shares     |  |   | Amount     |   |  
|Balance - 31 January 2003                                    | 1,000,000,000 |  | 32,657,526 |  | $ | 14,183,450 |   | $
|Loss for the year - Statement
      3                        | -             |  | -          |  |   | -          |   |  
|Shares issued for cash:                                      |               |  |            |  |   |            |   |  
|Private
      placements                                     | -             |  | 11,648,318 |  |   | 1,035,071  |   |  
|Share
      issuance costs                                   | -             |  | -          |  |   | (42,946    | ) |  
|Exercise
      of warrants                                   | -             |  | 486,610    |  |   | 40,808     |   |  
|Exercise
      of options                                    | -             |  | 89,600     |  |   | 5,210      |   |  
|Shares issued to settle debt                                 | -             |  | 50,000     |  |   | 3,634      |   |  
|Shares issued for finders’
      fee                         | -             |  | 60,000     |  |   | 6,541      |   |  
|Stock-based compensation                                     | -             |  | -          |  |   | -          |   |  
|Balance - 31 January 2004                                    | 1,000,000,000 |  | 44,992,054 |  |   | 15,231,768 |   |  
|Loss for the year - Statement 3                              | -             |  | -          |  |   | -          |   |  
|Shares issued for cash:                                      |               |  |            |  |   |            |   |  
|Private
      placements                                     | -             |  | 2,800,000  |  |   | 1,733,984  |   |  
|Share
      subscriptions received (Note 12a)                | -             |  | -          |  |   | -          |   |  
|Share
      issuance costs                                   | -             |  | -          |  |   | (115,127   | ) |  
|Exercise
      of warrants                                   | -             |  | 5,277,573  |  |   | 828,554    |   |  
|Exercise
      of options                                    | -             |  | 1,088,400  |  |   | 81,383     |   |  
|Shares issued for finders’
      fee (Note 7b)               | -             |  | 155,626    |  |   | 96,375     |   |  
|Shares issued for property (Note
      5b)                   | -             |  | 1,000,000  |  |   | 229,320    |   |  
|Stock-based compensation (Note
      7d)                     | -             |  | -          |  |   | -          |   |  
|Fair value of stock options exercised                        | -             |  | -          |  |   | 41,964     |   |  
|Balance – 31 January 2005 - Shares issued                    | Unlimited     |  | 55,313,653 |  |   | 18,128,221 |   |  
|Shares allotted for exercise of
      warrants (Note 7f)     | -             |  | 224,925    |  |   | 26,117     |   |  
|Shares allotted for bonus (Note
      13a)                   | -             |  | 1,590,000  |  |   | 233,856    |   |  
|Balance – 31 January 2005 -
      Shares issued and allotted | Unlimited     |  | 57,128,578 |  | $ | 18,388,194 |   | $

See Accompanying Notes -

F-4

---

|PolyMet Mining Corp.           | Statement 3
|------------------------------ | -----------
|Consolidated Statement of Loss |            
|For the Years Ended 31 January |            
|U.S. Funds                     |            

|                                                           |   | 2005       |   |   | 2004       |   |   | 2003       |  
|---------------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | -
|General and Administrative                                 |   |            |   |   |            |   |   |            |  
|Stock-based compensation
      expense (Note 7d)           | $ | 992,658    |   | $ | 55,048     |   | $ | -          |  
|Consulting fees                                            |   | 370,815    |   |   | 21,278     |   |   | 27,267     |  
|Travel and automotive                                      |   | 220,530    |   |   | 25,278     |   |   | 10,074     |  
|Management fees                                            |   | 141,270    |   |   | 52,388     |   |   | -          |  
|Administration fees
      and wages                        |   | 105,449    |   |   | 32,120     |   |   | 143,146    |  
|Professional fees                                          |   | 98,624     |   |   | 58,806     |   |   | 27,358     |  
|Investor relations
      and financing                     |   | 95,669     |   |   | -          |   |   | 955        |  
|Rent                                                       |   | 58,713     |   |   | 8,767      |   |   | 26,158     |  
|Office and telephone                                       |   | 47,175     |   |   | 9,106      |   |   | 51,942     |  
|Shareholders’
      information                            |   | 35,277     |   |   | 5,032      |   |   | 14,880     |  
|Insurance                                                  |   | 31,199     |   |   | -          |   |   | -          |  
|Transfer agent and
      filing fees                       |   | 24,765     |   |   | 20,221     |   |   | 7,205      |  
|Amortization                                               |   | 1,705      |   |   | 275        |   |   | 5,606      |  
|Licenses, dues and
      taxes                             |   | -          |   |   | -          |   |   | 1,882      |  
|Interest expense (income),
      net                       |   | (2,221     | ) |   | 380        |   |   | 589        |  
|Loss Before the Undernoted                                 |   | 2,221,628  |   |   | 288,699    |   |   | 317,062    |  
|                                                           |   |            |   |   |            |   |   |            |  
|Other Expenses (Income)                                    |   |            |   |   |            |   |   |            |  
|Pre-feasibility costs
      - Schedule 1                   |   | 1,622,983  |   |   | 91,616     |   |   | 112,318    |  
|Loss (gain) on disposal
      of investments               |   | -          |   |   | -          |   |   | 5,717      |  
|Loss (gain) on foreign
      exchange conversion           |   | (68,274    | ) |   | (22,230    | ) |   | 14,824     |  
|Loss (gain) on sale
      of resource properties           |   | -          |   |   | (219,925   | ) |   | -          |  
|Loss (gain) on sale
      of property, plant and equipment |   | -          |   |   | 8,640      |   |   | 21,758     |  
|                                                           |   | 1,554,709  |   |   | (141,899   | ) |   | 154,617    |  
|Loss for the Year                                          | $ | 3,776,337  |   | $ | 146,800    |   | $ | 471,679    |  
|                                                           |   |            |   |   |            |   |   |            |  
|                                                           |   |            |   |   |            |   |   |            |  
|Loss per Share                                             | $ | (0.07      | ) | $ | (0.00      | ) | $ | (0.01      | )
|                                                           |   |            |   |   |            |   |   |            |  
|Weighted Average Number of Shares                          |   | 51,946,290 |   |   | 35,452,260 |   |   | 32,657,526 |  

- See Accompanying Notes -

F-5

---

|PolyMet Mining Corp.                 | Statement 4
|------------------------------------ | -----------
|Consolidated Statement of Cash Flows |            
|For the Years Ended 31 January       |            
|U.S. Funds                           |            

|                                                                         |   | 2005       |   |   | 2004      |   |   | 2003     |  
|------------------------------------------------------------------------ | - | ---------- | - | - | --------- | - | - | -------- | -
|Operating Activities                                                     |   |            |   |   |           |   |   |          |  
|Loss for the year                                                        | $ | (3,776,337 | ) | $ | (146,800  | ) | $ | (471,679 | )
|Adjustments to reconcile
      loss to net cash                          |   |            |   |   |           |   |   |          |  
|Consulting - bonus shares                                                |   | 233,856    |   |   | -         |   |   | -        |  
|Amortization                                                             |   | 1,705      |   |   | 275       |   |   | 6,321    |  
|Stock-based compensation expense                                         |   | 992,658    |   |   | 55,048    |   |   | -        |  
|Loss (gain) on disposal of investments                                   |   | -          |   |   | -         |   |   | 5,717    |  
|Loss (gain) on sale of resource properties                               |   | -          |   |   | (219,925  | ) |   | -        |  
|Loss (gain) on sale of property, plant and equipment                     |   | -          |   |   | 8,640     |   |   | 21,758   |  
|Changes in current
      assets and liabilities                          |   |            |   |   |           |   |   |          |  
|Term deposit                                                             |   | (807,200   | ) |   | -         |   |   | -        |  
|Miscellaneous receivables                                                |   | (23,124    | ) |   | (15,665   | ) |   | 16,021   |  
|Prepaid expenses                                                         |   | (236,130   | ) |   | (5,466    | ) |   | 18,649   |  
|Accounts payable                                                         |   | 231,640    |   |   | 20,378    |   |   | 19,583   |  
|Net cash used in operating
      activities                              |   | (3,382,932 | ) |   | (303,515  | ) |   | (383,630 | )
|                                                                         |   |            |   |   |           |   |   |          |  
|Investing Activities                                                     |   |            |   |   |           |   |   |          |  
|Option payment for
      resource property                               |   | -          |   |   | (500,000  | ) |   |          |  
|Purchase of property,
      plant and equipment                          |   | (15,838    | ) |   | (2,061    | ) |   | -        |  
|Proceeds on disposal
      of property, plant and equipment              |   | -          |   |   | 33,331    |   |   | 48,301   |  
|Proceeds on disposal
      of investments                                |   | -          |   |   | -         |   |   | 15,908   |  
|Proceeds on sale of
      resource property                              |   | -          |   |   | 219,925   |   |   | -        |  
|Net cash provided
      by (used in) investing activities                |   | (15,838    | ) |   | (248,805  | ) |   | 64,209   |  
|                                                                         |   |            |   |   |           |   |   |          |  
|Financing Activities                                                     |   |            |   |   |           |   |   |          |  
|Share capital - for
      cash                                           |   | 2,651,286  |   |   | 1,044,684 |   |   | -        |  
|Share subscriptions
      received                                       |   | 762,804    |   |   | -         |   |   | -        |  
|Net cash provided
      by financing activities                          |   | 3,414,090  |   |   | 1,044,684 |   |   | -        |  
|                                                                         |   |            |   |   |           |   |   |          |  
|Net Increase (Decrease) in Cash Position                                 |   | 15,320     |   |   | 492,364   |   |   | (319,421 | )
|Cash Position - Beginning
      of year                                  |   | 495,551    |   |   | 3,187     |   |   | 322,608  |  
|Cash Position - End of Year                                              | $ | 510,871    |   | $ | 495,551   |   | $ | 3,187    |  
|                                                                         |   |            |   |   |           |   |   |          |  
|Cash Position Consists of :                                              |   |            |   |   |           |   |   |          |  
|Cash on deposit                                                          | $ | -          |   | $ | 495,551   |   | $ | 3,187    |  
|Bank overdraft covered
      by term deposit                             |   | (251,933   | ) |   | -         |   |   | -        |  
|Restricted cash from
      share subscriptions received                  |   | 762,804    |   |   | -         |   |   | -        |  
|                                                                         | $ | 510,871    |   | $ | 495,551   |   | $ | 3,187    |  
|                                                                         |   |            |   |   |           |   |   |          |  
|Schedule of Non-Cash Investing and Financing Activities                  |   |            |   |   |           |   |   |          |  
|Shares issued for
      debt settlement                                  | $ | -          |   | $ | 3,634     |   | $ | -        |  
|Shares issued for
      an option on property, plant and equipment       | $ | 229,320    |   | $ | -         |   | $ | -        |  
|Fair value of stock
      options exercised transferred to share capital | $ | 41,964     |   | $ | -         |   | $ | -        |  
|Shares issued for
      finders’ fee                                     | $ | 96,375     |   | $ | 6,541     |   | $ | -        |  
|Bonus shares allotted for consulting services                            | $ | 233,856    |   | $ | -         |   | $ | -        |  

- See Accompanying Notes -

F-6

---

|PolyMet Mining Corp.                          | Schedule 1
|--------------------------------------------- | ----------
|Consolidated Schedule of Pre-FeasibilityCosts |           
|For the Years Ended 31 January                |           
|U.S. Funds                                    |           

|                                     |   | 2005      |  |   | 2004   |  |   | 2003   
|------------------------------------ | - | --------- |  | - | ------ |  | - | -------
|Direct                               |   |           |  |   |        |  |   |        
|Amortization                         | $ | -         |  | $ | -      |  | $ | 715    
|Camp and general                     |   | 5,337     |  |   | 4,750  |  |   | 6,745  
|Consulting fees                      |   | 336,770   |  |   | -      |  |   | -      
|Cost recovery                        |   | -         |  |   | -      |  |   | -      
|Drilling                             |   | 441       |  |   | -      |  |   | 20,726 
|Engineering                          |   | 220,729   |  |   | -      |  |   | -      
|Environmental                        |   | 406,524   |  |   | -      |  |   | -      
|Field transportation                 |   | -         |  |   | -      |  |   | 3,963  
|Geological and geophysical           |   | 172,675   |  |   | -      |  |   | -      
|Land lease, taxes
      and licenses |   | 1,940     |  |   | 1,154  |  |   | 1,851  
|Metallurgical                        |   | 66,984    |  |   | 10,712 |  |   | 1,545  
|Mine planning                        |   | 48,769    |  |   | -      |  |   | -      
|Permitting                           |   | 181,751   |  |   | -      |  |   | -      
|Scoping study                        |   | 104,398   |  |   | -      |  |   | -      
|Periodic cash option
      payments  |   | 76,665    |  |   | 75,000 |  |   | 76,773 
|                                     |   |           |  |   |        |  |   |        
|Total Costs for the Year             | $ | 1,622,983 |  | $ | 91,616 |  | $ | 112,318

- See Accompanying Notes -

F-7

---

|PolyMet Mining Corp.                      
|------------------------------------------
|Notes to Consolidated Financial Statements
|As at 31 January                          
|U.S. Funds                                
|                                          
|                                          

|1. | Continued Operations                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | These consolidated financial statements
        have been prepared on the basis of accounting principles applicable to
        a “going concern”, which assumes that the Company will continue
        in operation for the foreseeable future and will be able to realize its
        assets and discharge its liabilities in the normal course of operations.                                                                                
|  
|   | The Company has incurred significant operating
        losses over the past several fiscal years, has an accumulated deficit
        of $18,137,588, has significant expenditure requirements to continue
        its exploration and development activities on the NorthMet property and
        has significant cash requirements to complete its option agreement on
        the Cleveland Cliffs property, plant and equipment.            
|  
|   | These consolidated financial statements
        do not reflect adjustments that would be necessary if the going concern
        assumption were not appropriate because management believes that the actions
        already taken or planned, will mitigate the adverse conditions and events
        which raise doubts about the validity of the going concern assumption
        used in preparing these consolidated financial statements.
|  
|   | If the going concern assumption were not
        appropriate for these consolidated financial statements, then adjustments
        would be necessary to the carrying value of the assets and liabilities,
        the reported revenue and expenses and the balance sheet classifications
        used.                                                                                                                                       
|  
|  
|2. | Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                

F-8

---

|PolyMet Mining Corp.                      
|------------------------------------------
|Notes to Consolidated Financial Statements
|As at 31 January                          
|U.S. Funds                                
|                                          
|                                          

|2. | Significant Accounting Policies-
        Continued
|-- | --------------------------------------------------
|  
|   | c)                                                
|  
|   |                                                   
|  
|   |                                                   
|  
|   | d)                                                
|  
|   |                                                   
|  
|   | e)                                                
|  
|   |                                                   
|  
|   | f)                                                
|  
|   |                                                   
|  
|   |                                                   
|   |                                                   
|   |                                                   
|  
|   |                                                   
|  
|   | g)                                                
|  
|   |                                                   

F-9

---

|PolyMet Mining Corp.                      
|------------------------------------------
|Notes to Consolidated Financial Statements
|As at 31 January                          
|U.S. Funds                                
|                                          
|                                          

|2. | Significant Accounting Policies-
        Continued
|-- | --------------------------------------------------
|  
|   | h)                                                
|  
|   |                                                   
|  
|   | i)                                                
|  
|   |                                                   
|  
|   |                                                   
|  
|   | j)                                                
|  
|   |                                                   
|  
|   | k)                                                
|  
|   |                                                   
|  
|   |                                                   
|  
|   |                                                   

F-10

---

|PolyMet Mining Corp.                      
|------------------------------------------
|Notes to Consolidated Financial Statements
|As at 31 January                          
|U.S. Funds                                
|                                          
|                                          

|2. | Significant Accounting Policies-
        Continued                                                                                                                                                                                                                       
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | l)                                                                                                                                                                                                                                                                       
|  
|   |                                                                                                                                                                                                                                                                          
|  
|   | m)                                                                                                                                                                                                                                                                       
|  
|   |                                                                                                                                                                                                                                                                          
|  
|   |                                                                                                                                                                                                                                                                          
|  
|  
|3. | Fair Value of Financial Instruments                                                                                                                                                                                                                                      
|  
|   | The carrying value of cash and restricted
        cash, miscellaneous receivable, investments (Note 4)and accounts
        payable approximates the fair value of these financial instruments due
        to their short-term maturity or capacity of prompt liquidation.
|  
|  
|4. | Investments                                                                                                                                                                                                                                                              
|  
|   | Details are as follows:                                                                                                                                                                                                                                                  

| |                        |   | Market Value |  |   | 2005 |  |   | 2004
| | ---------------------- | - | ------------ |  | - | ---- |  | - | ----
| | American Platinum Inc. | $ | -            |  | $ | 1    |  | $ | 1   
| | Aloak Corp.            |   | 25           |  |   | 252  |  |   | 252 
| |                        | $ | 25           |  | $ | 253  |  | $ | 253 

| | These investments represent minority interests of
        less than 10% in the respective companies.
| | ----------------------------------------------------------------------------------------------------
|

F-11

---

|PolyMet Mining Corp.                      
|------------------------------------------
|Notes to Consolidated Financial Statements
|As at 31 January                          
|U.S. Funds                                
|                                          
|                                          

|5. | Resource Property Agreements                                               
|-- | ---------------------------------------------------------------------------
|  
|   | The Company’s material resource
        property agreements are as follows:
|  
|   | a)                                                                         
|  
|   |                                                                            
|  
|   |                                                                            
|  
|   |                                                                            
|  
|   |                                                                            
|  
|   | b)                                                                         
|  
|   |                                                                            
|  
|   |                                                                            
|  
|   |                                                                            
|  
|   |                                                                            
|  
|   |                                                                            
|  

F-12

---

|PolyMet Mining Corp.                      
|------------------------------------------
|Notes to Consolidated Financial Statements
|As at 31 January                          
|U.S. Funds                                
|                                          
|                                          

|6. | Property, Plant and Equipment
|-- | -----------------------------
|  
|   | Details are as follows:      

| |                         |   |        |  |   |              |  |   | 2005     |  |   | 2004    
| | ----------------------- | - | ------ |  | - | ------------ |  | - | -------- |  | - | --------
| |                         |   |        |  |   | Accumulated  |  |   | Net Book |  |   | Net Book
| |                         |   | Cost   |  |   | Amortization |  |   | Value    |  |   | Value   
| | Furniture and equipment | $ | 1,888  |  | $ | 172          |  | $ | 1,716    |  | $ | 1,786   
| | Computers               |   | 15,908 |  |   | 1,705        |  |   | 14,203   |  |   | -       
| |                         | $ | 17,796 |  | $ | 1,877        |  | $ | 15,919   |  | $ | 1,786   

|  
|--
|  
|7.
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  

F-13

---

|PolyMet Mining Corp.                      
|------------------------------------------
|Notes to Consolidated Financial Statements
|As at 31 January                          
|U.S. Funds                                
|                                          
|                                          

|7. | Share Capital- Continued
|-- | ------------------------
|  
|   | c)                      
|  
|   |                         

| |  |                                                | 2005       |   | 2004      |  
| |  | ---------------------------------------------- | ---------- | - | --------- | -
| |  |                                                | Options    |   | Options   |  
| |  | Outstanding - Beginning of year                | 3,542,952  |   | 1,851,052 |  
| |  | Granted                                        | 2,545,000  |   | 2,591,500 |  
| |  | Re-priced and extended expiry                  | -          |   | 541,052   |  
| |  | Cancelled options for re-pricing and extension | -          |   | (541,052  | )
| |  | Forfeited or expired                           | -          |   | (810,000  | )
| |  | Exercised                                      | (1,088,400 | ) | (89,600   | )
| |  | Outstanding - End of year                      | 4,999,552  |   | 3,542,952 |  

| |  | As at 31 January 2005, the following director, former
        director and employee share purchase options were outstanding:
| |  | ----------------------------------------------------------------------------------------------------------------------------

| |  |                   | Exercise Price |          
| |  | ----------------- | -------------- | ---------
| |  | Expiry Date       | (CDN)          | Number   
| |  | 17  March 2007    | $0.10          | 241,052  
| |  | 17  March 2007    | $0.10          | 100,000  
| |  | 18  July 2008     | $0.10          | 1,313,500
| |  | 3 October 2008    | $0.13          | 800,000  
| |  | 12  February 2006 | $0.21          | 500,000  
| |  | 9 March 2009      | $0.40          | 620,000  
| |  | 28  April 2009    | $0.75          | 200,000  
| |  | 5 July 2009       | $0.66          | 1,175,000
| |  | 18  October 2009  | $0.79          | 50,000   
| |  |                   |                | 4,999,552

| |    | As at 31 January 2005 all options had
        vested and were exercisable.
| | -- | --------------------------------------------------------------------------
|
| | d) | Stock-Based Compensation                                                  
|
| |    | i)                                                                        
|

| |  |  | Risk-free interest rate         | 3.25%
| |  |  | ------------------------------- | -----
| |  |  | Expected dividend yield         | Nil  
| |  |  | Expected stock price volatility | 143% 
| |  |  | Expected option life in years   | 4.78 

F-14

---

|PolyMet Mining Corp.                      
|------------------------------------------
|Notes to Consolidated Financial Statements
|As at 31 January                          
|U.S. Funds                                
|                                          
|                                          

|7. | Share Capital- Continued
|-- | ------------------------
|  
|   | d)                      
|  
|   |                         

| |  |  | Risk-free interest rate         | 2.68% 
| |  |  | ------------------------------- | ------
| |  |  | Expected dividend yield         | Nil   
| |  |  | Expected stock price volatility | 103%  
| |  |  | Expected option life in years   | 4 to 5

| | e) | Contributed Surplus                                                                                                                           
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------
|
| |    | Contributed surplus represents accumulated stock-based
        compensation expense, reduced by the fair value of the stock options exercised.
|
| |    | Details are as follows:                                                                                                                       

| |  |                                                                 |   | 2005      |   |   | 2004  
| |  | --------------------------------------------------------------- | - | --------- | - | - | ------
| |  |                                                                 |   |           |   |   |       
| |  | Balance – Beginning of year                                     | $ | 55,048    |   | $ | -     
| |  | Current year fair value of stock-based compensation             |   | 992,658   |   |   | 55,048
| |  | Fair value of stock options exercised during
      the year and |   |           |   |   |       
| |  | transferred to share capital                                    |   | (41,964   | ) |   | -     
| |  | Balance – End of year                                           | $ | 1,005,742 |   | $ | 55,048

| | f) | Share Purchase Warrants                                  
| | -- | ---------------------------------------------------------
|
| |    | Details of stock purchase warrant activity is as follows:

| |  |                                 | 2005       |   | 2004      |  
| |  | ------------------------------- | ---------- | - | --------- | -
| |  |                                 | Warrants   |   | Warrants  |  
| |  | Outstanding - Beginning of year | 9,718,853  |   | 3,428,923 |  
| |  | Issued                          | 1,400,000  |   | 6,776,540 |  
| |  | Exercised                       | (5,277,575 | ) | (486,610  | )
| |  | Outstanding - End of year       | 5,841,278  |   | 9,718,853 |  

F-15

---

|PolyMet Mining Corp.                      
|------------------------------------------
|Notes to Consolidated Financial Statements
|As at 31 January                          
|U.S. Funds                                
|                                          
|                                          

|7. | Share Capital- Continued
|-- | ------------------------
|  
|   | f)                      
|  
|   |                         

| |  |                       | Per Common     |             |            
| |  | --------------------- | -------------- | ----------- | -----------
| |  |                       | Share          |             | Common     
| |  |                       | Exercise Price | Warrants    | Share      
| |  | Expiry Date           | (CDN)          | Outstanding | Entitlement
| |  | 16 November 2006      | $0.20          | 3,428,923   | 3,428,923  
| |  | 24 September 2005 (i) | $0.17          | 1,012,355   | 1,012,355  
| |  | 17 December 2005 (ii) | $1.20          | 775,000     | 775,000    
| |  | 1 March 2006(iii)     | $1.20          | 625,000     | 625,000    
| |  |                       |                | 5,841,278   | 5,841,278  

| |  | (i)   | During the year ended 31 January 2005, the Company
        received proceeds of $26,117 on the exercise of 224,925 share purchase
        warrants. The shares were allotted at 31 January 2005 and issued subsequent
        to year-end.                                                                                                                                                                                                                                                                                                
| |  | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | (ii)  | Effective 17 June 2004 the Company completed a non-brokered
        private placement for a total of 1,550,000 Units (the "Units"), each Unit
        is comprised of one common share and one-half of one non-transferable
        share purchase warrant, in the capital stock of the Company at $0.80
        per unit. One full share purchase warrant entitles the investors to purchase
        one additional common share of the Company for a period of 18 months from
        the closing at $1.20 per share, 17 December 2005. 
|
| |  | (iii) | Effective 1 September 2004 the Company completed
        a non-brokered private placement for a total of 1,250,000 Units (the "Units"),
        each Unit is comprised of one common share and one- half of one non-transferable
        share purchase warrant, in the capital stock of the Company at $0.80
        per unit. One full share purchase warrant entitles the investors to purchase
        one additional common share of the Company for a period of 18 months from
        the closing at $1.20 per share, 1 March 2006.

| | g) | Shareholder Rights Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    | Effective 4 December 2003, the Company adopted a
        Shareholder Rights Plan (“Rights Plan”), which was approved
        by the Company’s shareholders’ on 27 May 2004. Under the Rights
        Plan, the Company has issued one right for no consideration in respect
        of each outstanding common share of the Company to all holders of record
        of common shares on 4 December 2003. All common shares issued by the Company
        during the term of the Rights Plan will have one right represented by
        the certificates representing the common shares of the Company. The term
        of the Rights Plan is 10 years, unless the rights are earlier redeemed
        or exchanged. The Rights issued under the Rights Plan become exercisable
        only if a party acquires 20% or more of the Company's common shares without
        complying with the Rights Plan or without the approval of the Board of
        Directors of the Company.
|
| |    | Each Right entitles the registered holder thereof
        to purchase from the Company on the occurrence of certain events, one
        common share of the Company at the price of CDN$50 per share, subject
        to adjustment (the “Exercise Price”). However, if a Flip-in
        Event (as defined in the Rights Plan) occurs, each Right would then entitle
        the registered holder to receive, upon payment of the Exercise Price,
        that number of common shares that have a market value at the date of that
        occurrence equal to twice the Exercise Price. The Rights are not exercisable
        until the Separation Time as defined in the Rights Plan.                                                                                                                                                                                                                                                                                          
|

F-16

---

|PolyMet Mining Corp.                      
|------------------------------------------
|Notes to Consolidated Financial Statements
|As at 31 January                          
|U.S. Funds                                
|                                          
|                                          

|8. | Related Party Transactions                                                                                                                                                                                                      
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | In addition to transactions disclosed
        elsewhere in these financial statements, the Company has conducted transactions
        with officers, directors and persons or companies related to directors
        as follows:
|  
|   | a)                                                                                                                                                                                                                              

| |  |                           |   | 2005    |  |   | 2004   |  |   | 2003   
| |  | ------------------------- | - | ------- |  | - | ------ |  | - | -------
| |  |                           |   |         |  |   |        |  |   |        
| |  | Management fees and wages | $ | 141,270 |  | $ | 52,388 |  | $ | 103,288
| |  | Consulting fees           |   | 336,448 |  |   | -      |  |   | -      
| |  | Legal fees                |   | 59,700  |  |   | -      |  |   | -      
| |  | Office facilities         |   | 23,070  |  |   | -      |  |   | -      
| |  |                           | $ | 560,488 |  | $ | 52,388 |  | $ | 103,288

| | b) | Issued nil (2,143,906 – 2004) shares and nil
        (1,881,476 – 2004) warrants to directors and officers on private
        placements during the year ended 31 January 2005 for cash in the amount
        of $nil ($99,925 – 2004).
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|  
|--
|  
|9.
|  
|  
|  
|  

| |  |      |   | Parent Company |  |   | U.S. Subsidiary
| |  | ---- | - | -------------- |  | - | ---------------
| |  | Year |   | Amount (CDN)   |  |   | Amount         
| |  | 2006 | $ | -              |  | $ | 14,500         
| |  | 2007 |   | 729,000        |  |   | 17,300         
| |  | 2008 |   | 481,000        |  |   | 20,100         
| |  | 2009 |   | 436,000        |  |   | 23,100         
| |  | 2010 |   | 252,000        |  |   | 26,500         
| |  | 2011 |   | 311,000        |  |   | 27,900         
| |  | 2012 |   | 983,000        |  |   | 30,000         
| |  | 2018 |   | -              |  |   | 217,600        
| |  | 2019 |   | -              |  |   | 392,500        
| |  | 2020 |   | -              |  |   | 496,700        
| |  | 2021 |   | -              |  |   | 414,400        
| |  | 2022 |   | -              |  |   | 367,400        
| |  | 2023 |   | -              |  |   | 247,400        
| |  | 2024 |   | -              |  |   | 124,500        
| |  | 2025 |   | -              |  |   | 231,700        
| |  |      | $ | 3,192,000      |  | $ | 2,651,600      

F-17

---

|PolyMet Mining Corp.                      
|------------------------------------------
|Notes to Consolidated Financial Statements
|As at 31 January                          
|U.S. Funds                                
|                                          
|                                          

|10. | Differences Between Canadian and United
        States Generally Accepted Accounting Principles                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | These consolidated financial statements
        are prepared in accordance with Canadian generally accepted accounting
        principles (“GAAP”). The U.S. Securities and Exchange Commission
        requires that financial statements of foreign companies contain a reconciliation
        presenting the statements on the basis of accounting principles generally
        accepted in the U.S. Any differences in accounting principles as they
        pertain to the accompanying consolidated financial statements are not
        material except as follows:
|   
|    | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|    | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

| |  | Investments:                                               |   | 2005       |   |   | 2004       |   |   | 2003       |  
| |  | ---------------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | -
| |  | Investments – Canadian GAAP basis                          | $ | 253        |   | $ | 253        |   | $ | 253        |  
| |  | Adjustment to market                                       |   | (228       | ) |   | (228       | ) |   | (228       | )
| |  | Investments – U.S. GAAP basis                              | $ | 25         |   | $ | 25         |   | $ | 25         |  
| |  |                                                            |   |            |   |   |            |   |   |            |  
| |  | Accumulated Comprehensive Loss:                            |   |            |   |   |            |   |   |            |  
| |  | Contra-equity account for unrealized gains (losses) on     |   |            |   |   |            |   |   |            |  
| |  | investments                                                |   |            |   |   |            |   |   |            |  
| |  | - Canadian GAAP basis                                      |   | $ -        |   | $ | -          |   | $ | -          |  
| |  | Unrealized holding gain (loss) on investments              |   |            |   |   |            |   |   |            |  
| |  | - Prior years                                              |   | (228       | ) |   | (228       | ) |   | (2,545     | )
| |  | - Current year                                             |   | -          |   |   | -          |   |   | 2,317      |  
| |  | Contra-equity account for unrealized gains (losses) on     |   |            |   |   |            |   |   |            |  
| |  | investments - U.S. GAAP
      basis                        | $ | (228       | ) | $ | (228       | ) | $ | (228       | )
| |  |                                                            |   |            |   |   |            |   |   |            |  
| |  | Net Loss and Comprehensive Loss:                           |   |            |   |   |            |   |   |            |  
| |  | Net loss - Canadian and U.S. GAAP basis                    | $ | 3,776,337  |   | $ | 146,800    |   | $ | 471,679    |  
| |  | Adjustment of portfolio investments to market              |   | -          |   |   | -          |   |   | (2,317     | )
| |  | Net loss and comprehensive loss - U.S. GAAP basis          | $ | 3,776,337  |   | $ | 146,800    |   | $ | 469,362    |  
| |  |                                                            |   |            |   |   |            |   |   |            |  
| |  | Weighted average number of shares computed under U.S. GAAP |   | 53,784,877 |   |   | 38,452,260 |   |   | 32,657,526 |  
| |  | Loss per share following U.S. GAAP                         | $ | (0.07      | ) | $ | (0.00      | ) | $ | (0.01      | )

F-18

---

|PolyMet Mining Corp.                      
|------------------------------------------
|Notes to Consolidated Financial Statements
|As at 31 January                          
|U.S. Funds                                
|                                          
|                                          

|10. | Differences Between Canadian and United States Generally
      Accepted Accounting Principles
|--- | ---------------------------------------------------------------------------------------------
|   
|    | c)                                                                                           
|   
|    |                                                                                              
|   
|    |                                                                                              
|   
|    |                                                                                              
|   

F-19

---

|PolyMet Mining Corp.                      
|------------------------------------------
|Notes to Consolidated Financial Statements
|As at 31 January                          
|U.S. Funds                                
|                                          
|                                          

|11. | Segmented Information                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | The Company is in the pre-feasibility stage of developing
        its mineral properties in the U.S. and provides for its financing and
        administrative functions at the head office located in Canada. Segmented
        information on a geographic basis is as follows:

| |                                              |   | NorthMet   |  |   | Other       |  |   |             
| | -------------------------------------------- | - | ---------- |  | - | ----------- |  | - | ------------
| |                                              |   | Project in |  |   | reconciling |  |   |             
| | 2005                                         |   | U.S.       |  |   | adjustments |  |   | Consolidated
| |                                              |   |            |  |   |             |  |   |             
| | Segment operating
      loss                 | $ | 1,855,631  |  | $ | 1,920,706   |  | $ | 3,776,337   
| |                                              |   |            |  |   |             |  |   |             
| | Purchase property,
      plant and equipment | $ | 12,028     |  | $ | 3,810       |  | $ | 15,838      
| |                                              |   |            |  |   |             |  |   |             
| | Other Assets                                 | $ | 729,320    |  | $ |            |  | $ | 729,320     
| |                                              |   |            |  |   |             |  |   |             
| | Identifiable assets                          | $ | 986,065    |  | $ | 1,364,099   |  | $ | 2,350,164   
| |                                              |   |            |  |   |             |  |   |             
| |                                              |   |            |  |   |             |  |   |             
| | 2004                                         |   |            |  |   |             |  |   |             
| | Segment operating loss                       | $ | 124,473    |  | $ | 22,327      |  | $ | 146,800     
| | Purchase property, plant and                 |   |            |  |   |             |  |   |             
| | equipment                                    | $ |           |  | $ | 2,061       |  | $ | 2,061       
| | Other Assets                                 | $ | 500,000    |  | $ |            |  | $ | 500,000     
| |                                              |   |            |  |   |             |  |   |             
| | Proceeds on sale of resource property        | $ |           |  | $ | 219,925     |  | $ | 219,925     
| | Proceeds on disposal of property, plant      |   |            |  |   |             |  |   |             
| | and equipment                                | $ | 33,331     |  | $ |            |  | $ | 33,331      
| | Identifiable assets                          | $ | 505,500    |  | $ | 519,437     |  | $ | 1,024,937   
| |                                              |   |            |  |   |             |  |   |             
|

F-20

---

|PolyMet Mining Corp.                      
|------------------------------------------
|Notes to Consolidated Financial Statements
|As at 31 January                          
|U.S. Funds                                
|                                          
|                                          

|12. | Subsequent Events                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | In addition to items disclosed elsewhere
        in these financial statements, the Company conducted the following transactions
        after 31 January 2005:
|   
|    | a)                                                                                                                                                             
|   
|    | b)                                                                                                                                                             
|   
|   
|13. | Contingent Liabilities and Commitments                                                                                                                         
|   
|    | a)                                                                                                                                                             
|   
|    |                                                                                                                                                                
|   
|    |                                                                                                                                                                

| |  |             | Bonus Shares |                           
| |  | ----------- | ------------ | --------------------------
| |  | Milestone 1 | 1,590,000    | (i) allotted – Statement 2
| |  | Milestone 2 | 1,300,000    | (ii)                      
| |  | Milestone 3 | 2,400,000    | (iii)                     
| |  | Milestone 4 | 3,240,000    | (iv)                      

| |  | (i)   | Milestone 1 –Completion of an agreement with
        Cliffs-Erie LLC for the option to purchase of Cliffs-Erie facility to
        be used as a part of mining and processing operations for the NorthMet
        property. This milestone was achieved on 16 February 2004 and therefore,
        during the year the Company accrued a CDN$302,100 (US$233,856)
        bonus as consulting fees and allotted 1,590,000 shares. These shares were
        issued subsequent to year-end.
| |  | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | (ii)  | Milestone 2 – Negotiation and completion of
        an off-take agreement with a senior metals producer for the purchase raw
        materials to be produced from the NorthMet property.                                                                                                                                                                                                                                                                                                 
|
| |  | (iii) | Milestone 3 –Completion of a “bankable
        feasibility study” which indicates that commercial production from
        the NorthMet property is viable.                                                                                                                                                                                                                                                                                                                                
|
| |  | (iv)  | Milestone 4 – Commencement of commercial production
        at the NorthMet property at a time when the company has not less than
        50% ownership interest.                                                                                                                                                                                                                                                                                                                         

F-21

---

|PolyMet Mining Corp.                      
|------------------------------------------
|Notes to Consolidated Financial Statements
|As at 31 January                          
|U.S. Funds                                
|                                          
|                                          

|13. | Contingent Liabilities and Commitments- Continued
|--- | -------------------------------------------------
|   
|    | b)                                               
|   
|    |                                                  

| |  | Market Capitalization                 | Total Severance Payments
      Required
| |  | ------------------------------------- | ---------------------------------------
| |  |                                       |                                        
| |  | Less than CDN $50 million             |                                        
| |  | Between CDN $ 50 and CDN $75 million  |                                        
| |  | Between CDN $ 75 and CDN $100 million |                                        

| |    | Thereafter severance payments increase by $600,000
        for every additional $25 million of implied market capitalization,
        with no maximum.                                                                                                                                                                
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | c) | Pursuant to the Company’s option agreement
        with Cliffs (Note 5 b), for as long as Cliffs owns 1% or more of
        the Company’s issued shares, the Company has committed to allow
        Cliffs to participate in any future Company financings to maintain a 2.17%
        equity interest in the Company.
|
|

|14. | Comparative Figures                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------
|   
|    | Certain of the comparative figures have been reclassified
        to conform with the current year’s presentation.
|   

F-22

---

**SIGNATURES**

The Registrant hereby certifies that it meets all of the requirements
  for filing on Form 20-F and has duly caused and authorized the undersigned to
  sign this Annual Report on its behalf.

Dated: July 22, 2005

| | POLYMET MINING CORP.          
| | ------------------------------
| |                               
| |                               
| | /s/ William Murray            
| | Name: William Murray          
| | Title: Chief Executive Officer

38

---