<PAGE>

================================================================================

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 20-F

         (MARK ONE)

[ ]      REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
         SECURITIES EXCHANGE ACT OF 1934

                                       OR

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the fiscal year ended April 30, 2003
                                   --------------


                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

Commission file number                1-13812
                       ------------------------------------


                            PACIFIC RIM MINING CORP.
--------------------------------------------------------------------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


                            BRITISH COLUMBIA, CANADA
--------------------------------------------------------------------------------
                 (JURISDICTION OF INCORPORATION OR ORGANIZATION)


              SUITE 410 - 625 HOWE STREET, VANCOUVER, B.C. V6C 2T6
--------------------------------------------------------------------------------
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

TITLE OF EACH CLASS                    NAME OF EACH EXCHANGE ON WHICH REGISTERED
      NONE
-------------------                    -----------------------------------------

SECURITIES REGISTERED OR 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:

                                 NOT APPLICABLE
--------------------------------------------------------------------------------
                                (TITLE OF CLASS)

INDICATE THE NUMBER OF OUTSTANDING SHARES OF EACH OF THE ISSUER'S CLASSES OF
CAPITAL OF COMMON STOCK AS OF APRIL 30, 2003: 78,528,594 Common Shares

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 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 90 days. Yes [X] No [ ]

Indicate by check mark which financial statement item the registrant has elected
to follow.
                           Item 17 [X]    Item 18 [ ]

================================================================================

<PAGE>

                                TABLE OF CONTENTS

                                                                            Page


NOTE REGARDING FORWARD LOOKING STATEMENTS......................................1

GLOSSARY OF TERMS..............................................................2
ITEM 1:  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS.................4
ITEM 2:  OFFER STATISTICS AND EXPECTED TIMETABLE...............................4
ITEM 3:  KEY INFORMATION.......................................................4
ITEM 4:  INFORMATION ON THE COMPANY...........................................13
ITEM 5:  OPERATING AND FINANCIAL REVIEW AND PROSPECTS.........................39
ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES...........................44
ITEM 7:  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS....................52
ITEM 8:  FINANCIAL INFORMATION................................................53
ITEM 9:  THE OFFER AND LISTING................................................54
ITEM 10: ADDITIONAL INFORMATION...............................................55
ITEM 11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...........65
ITEM 12: DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES...............65
ITEM 13: DEFAULTS, DIVIDEND ARREARAGES AND DELIQUENCIES.......................66
ITEM 14: MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND
         USE OF PROCEEDS......................................................66
ITEM 15: CONTROLS AND PROCEDURES..............................................66
ITEM 16: [RESERVED]...........................................................66
ITEM 17. FINANCIAL STATEMENTS.................................................66
ITEM 18: FINANCIAL STATEMENTS.................................................90
ITEM 19: EXHIBITS.............................................................90
SIGNATURE.....................................................................92


<PAGE>

                                        1


                    NOTE REGARDING FORWARD LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934 concerning the Corporation's plans
for its properties, operations and other matters. These statements relate to
analyses and other information that are based on forecasts of future results,
estimates of amounts not yet determinable and assumptions of management.

Statements concerning reserves and mineral resource estimates may also be deemed
to constitute forward-looking statements to the extent that they involve
estimates of the mineralization that will be encountered if the property is
developed, and in the case of mineral reserves, such statements reflect the
conclusion based on certain assumptions that the mineral deposit can be
economically exploited. Any statements that express or involve discussions with
respect to predictions, expectations, beliefs, plans, projections, objectives,
assumptions or future events or performance (often, but not always, using words
or phrases such as "expects" or "does not expect", "is expected", "anticipates"
or "does not anticipate", "plans", "estimates" or "intends", or stating that
certain actions, events or results "may", "could", "would", "might" or "will" be
taken, occur or be achieved) are not statements of historical fact and may be
"forward-looking statements." Forward-looking statements are subject to a
variety of risks and uncertainties, which could cause actual events or results
to differ from those reflected in the forward-looking statements, including,
without limitation:

     o   risks related to gold price and other commodity price fluctuations;

     o   risks and uncertainties relating to the interpretation of drill
         results, the geology, grade and continuity of mineral deposits;

     o   risks related to the inherent uncertainty of production and cost
         estimates and the potential for unexpected costs and expenses;

     o   results of initial feasibility, prefeasibility and feasibility studies,
         and the possibility that future exploration, development or mining
         results will not be consistent with the Corporation's expectations;

     o   mining and development risks, including risks related to accidents,
         equipment breakdowns, labour disputes or other unanticipated
         difficulties with or interruptions in production;

     o   the potential for delays in exploration or development activities or
         the completion of feasibility studies;

     o   the uncertainty of profitability based upon the Corporation's history
         of losses;

     o   risks related to failure to obtain adequate financing on a timely basis
         and on acceptable terms;

     o   risks related to environmental regulation and liability;

     o   risks related to hedging activities;

     o   political and regulatory risks associated with mining and exploration;
         and

     o   other risks and uncertainties related to the Corporation's prospects,
         properties and business strategy.

Some of the important risks and uncertainties that could affect forward looking
statements are described in this Annual Report under Item 3.D - "Risk Factors".
Should one or more of these risks and uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described in forward-looking statements. Forward looking statements are
made based on management's beliefs, estimates and opinions on the date the
statements are made and the Corporation undertakes no obligation to update
forward-looking statements if these beliefs, estimates and opinions or other
circumstances should change. Investors are cautioned against attributing undue
certainty to forward-looking statements.

<PAGE>

                                        2


                                GLOSSARY OF TERMS

The following terms have the following meanings in this Annual Report on Form
20-F:

"Ag"                               Silver

"AMEX"                             The American Stock Exchange

"Au"                               Gold

"CIM"                              Canadian Institute of Mining, Metallurgy and
                                   Petroleum

"Dore"                             A compound containing gold and silver metal
                                   and various impurities.

"gpt"                              Grams per tonne. One gram per tonne equals
                                   0.02917 troy ounces per short ton.

"Indicated Mineral Resource"       An `Indicated Mineral Resource' is that part
                                   of a Mineral Resource for which quantity,
                                   grade or quality, densities, shape and
                                   physical characteristics, can be estimated
                                   with a level of confidence sufficient to
                                   allow the appropriate application of
                                   technical and economic parameters, to support
                                   mine planning and evaluation of the economic
                                   viability of the deposit. The estimate is
                                   based on detailed and reliable exploration
                                   and testing information gathered through
                                   appropriate techniques from locations such as
                                   outcrops, trenches, pits, workings and drill
                                   holes that are spaced closely enough for
                                   geological and grade continuity to be
                                   reasonably assumed.

"Inferred Mineral Resource"        An `Inferred Mineral Resource' is that part
                                   of a Mineral Resource for which quantity and
                                   grade or quality can be estimated on the
                                   basis of geological evidence and limited
                                   sampling and reasonably assumed, but not
                                   verified, geological and grade continuity.
                                   The estimate is based on limited information
                                   and sampling gathered through appropriate
                                   techniques from locations such as outcrops,
                                   trenches, pits, workings and drill holes.

"Measured Mineral Resource"        A `Measured Mineral Resource' is that part of
                                   Mineral Resource for which quantity, grade or
                                   quality, densities, shape, physical
                                   characteristics are so well established that
                                   they can be estimated with confidence
                                   sufficient to allow the appropriate
                                   application of technical and economic
                                   parameters, to support production planning
                                   and evaluation of the economic viability of
                                   the deposit. The estimate is based on
                                   detailed and reliable exploration, sampling
                                   and testing information gathered through
                                   appropriate techniques from locations such as
                                   outcrops, trenches, pits, workings and drill
                                   holes that are spaced closely enough to
                                   confirm both geological and grade continuity.

"Mineral Resource"                 A `Mineral Resource' is a concentration or
                                   occurrence of natural. Solid, inorganic or
                                   fossilized organic material in or on the
                                   Earth's crust in such form and quantity and
                                   of such a grade or quality that it has

<PAGE>

                                        3


                                   reasonable prospects from economic
                                   extraction. The location, quantity, grade,
                                   geological characteristics and continuity of
                                   a Mineral Resource are known, estimated or
                                   interpreted from specific geological evidence
                                   and knowledge.

                                   The terms "Mineral Resource", "Measured
                                   Mineral Resource", "Indicated Mineral
                                   Resource", "Inferred Mineral Resource" used
                                   in this Report are Canadian mining terms as
                                   defined in accordance with National
                                   Instrument 43-101 under the guidelines set
                                   out in the CIM Standards.

NOTE TO U.S. INVESTORS. While the terms "mineral resource," "measured mineral
resource," "indicated mineral resource," and "inferred mineral resource" are
recognized and required to be reported by Canadian regulations, they are not
defined terms under standards in the United States. As such, information
contained in this Report concerning descriptions of mineralization and resources
under Canadian standards may not be comparable to similar information made
public by U.S. companies subject to the reporting and disclosure requirements of
the Securities and Exchange Commission. "Indicated mineral resource" and
"inferred mineral resource" have a great amount of uncertainty as to their
existence and a great uncertainty as to their economic and legal feasibility. It
cannot be assumed that all or any part of an "indicated mineral resource" or
"inferred mineral resource" will ever be upgraded to a higher category.
Investors are cautioned not to assume that any part or all of mineral deposits
in these categories will ever be converted into reserves.

"NI 43-101"                        National Instrument 43-101 - Standards of
                                   Disclosure for Mineral Projects. A rule
                                   developed by the Canadian Securities
                                   Administrators (an umbrella group of Canada's
                                   provincial and territorial securities
                                   regulators) that governs public disclosure by
                                   mining and mineral exploration issuers. The
                                   rule establishes certain standards for all
                                   public disclosure of scientific and technical
                                   information concerning mineral projects.

"Ore"                              A natural aggregate of one or more minerals
                                   which, at a specified time and place, may be
                                   mined and sold at a profit, or from which
                                   some part may be profitably separated.

"Qualified Person"                 Conforms to that definition under NI 43-101
                                   for an individual (a) to be an engineer or
                                   geoscientist with at least five years
                                   experience in mineral exploration, mine
                                   development or operation or mineral project
                                   assessment, or any combination of these; (b)
                                   with experience relevant to the subject
                                   matter of the mineral project and the
                                   technical report and (c) is a member in good
                                   standing of a professional association that,
                                   among other things, is self-regulatory, has
                                   been given authority by statute, admits
                                   members based on their qualifications and
                                   experience, requires compliance with
                                   professional standards of competence and
                                   ethics and has disciplinary powers to suspend
                                   or expel a member.

"SG"                               Means specific gravity, a measurement of
                                   density.

"TSX"                              The Toronto Stock Exchange.

"tpd"                              Tonnes per day. One tonne equals 1.10231
                                   tons.

<PAGE>

                                        4


ITEM 1:     IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable.

ITEM 2:     OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable.

ITEM 3:     KEY INFORMATION

3A.     SELECTED FINANCIAL DATA

The following table sets forth selected historical data regarding the Company's
consolidated operating results and financial position. The data set forth below
is stated in thousands of U.S. dollars (except per share amounts). This selected
financial data has been prepared in accordance with Canadian generally accepted
accounting principles ("Canadian GAAP") which differs in many respects from
generally accepted accounting principles in the United States ("U.S. GAAP"). A
discussion of differences between Canadian GAAP and U.S. GAAP is contained in
Note 15 to the audited Consolidated Financial Statements. The following table
should be read in conjunction with Item 5 - "Operating and Financial Review and
Prospects", and the consolidated financial statements and notes thereto included
in Item 17 of this Annual Report.

<TABLE>
<CAPTION>
                                                           FOUR
                                        YEAR              MONTHS                 YEAR               YEAR
                                       ENDING             ENDING                ENDING             ENDING
                                       APRIL             APRIL 30,             DEC. 31,           DEC. 31,
                                      30, 2003              2002                 2001               2000
                                      --------           ---------             --------           --------
<S>                                <C>                 <C>                  <C>                <C>
INCOME STATEMENT DATA
Metal sales                        $    12,509         $     5,303          $    14,913        $    34,926
Interest income                            175                  62                  122                525
Gain on Sale of Mineral
  Properties                               922                  --                   --                 --
Net Income (Loss) from
  Operations                              (844)               (347)              (1,612)            (5,273)
Net Income (Loss)                       (2,800)             (1,601)              (3,371)           (31,388)
Loss per share - basic and
   diluted                               (0.04)              (0.03)               (0.11)             (1.17)

BALANCE SHEET DATA
Working capital                    $     7,633         $     8,616          $     7,683        $     9,865
Total assets                            21,447              25,330               24,540             28,563
Net assets                              14,960              17,729               16,998             20,369
Long-term debt                           1,640               1,849                1,849              1,849
Shareholders equity                     14,960              17,729               16,998             20,369
Capital stock                           56,173              56,142               53,810             53,810
  Outstanding shares                78,528,594          78,408,794           31,123,974         31,123,974
Dividends declared                          --                  --                   --                 --

<CAPTION>
                                        NINE               THREE
                                       MONTHS             MONTHS               YEAR
                                       ENDING             ENDING              ENDING
                                      DEC. 31,           MARCH 31,           DEC. 31,
                                        1999                1999               1998
                                      --------           ---------           --------
<S>                                <C>                  <C>                <C>
INCOME STATEMENT DATA
Metal sales                        $    26,320          $   10,182         $   29,971
Interest income                            218                  96              1,778
Gain on Sale of Mineral
  Properties                                --                  --                 --
Net Income (Loss) from
  Operations                               300               1,523                526
Net Income (Loss)                       (2,053)                410            (42,357)
Loss per share - basic and
   diluted                               (0.12)              (0.30)            (22.60)

BALANCE SHEET DATA
Working capital                    $     6,526          $   (1,236)        $    4,390
Total assets                            48,544              68,625             81,363
Net assets                              29,879              31,824             31,566
Long-term debt                           5,234              20,167             19,390
Shareholders equity                     29,879              31,824             31,566
Capital stock                           31,932              31,824             59,251
  Outstanding shares                17,567,839           2,042,839          2,042,839
Dividends declared                          --                  --                 --


</TABLE>


<PAGE>
                                       5


Had the Consolidated Financial Statements of the Company been prepared in
accordance with U.S. GAAP, certain selected financial data would have been
reported as follows, (in thousand of U.S. dollars except per share amounts):

<TABLE>
<CAPTION>
                                                  FOUR                                      NINE         THREE
                                     YEAR        MONTHS         YEAR           YEAR        MONTHS       MONTHS          YEAR
                                    ENDING       ENDING        ENDING         ENDING       ENDING       ENDING         ENDING
                                   APRIL 30,    APRIL 30,     DEC. 31,       DEC. 31,     DEC. 31,     MARCH 31,      DEC. 31,
                                     2003         2002          2001           2000         1999         1999           1998
                                   ---------    ---------     --------       --------     --------     ---------      --------
<S>                                  <C>          <C>          <C>          <C>            <C>          <C>          <C>
INCOME STATEMENT DATA
Net Income (Loss)                    $(2,800)     $(1,601)     $(3,433)     $(31,388)      $(1,826)     $   (515)    $(46,366)
Net Income (Loss)
  per share                            (0.04)       (0.03)       (0.11)        (1.17)        (0.20)        (0.20)      (22.40)

BALANCE SHEET DATA
Total assets                         $21,447      $25,402      $24,583      $ 28,563       $48,544      $ 56,169     $ 66,269
Shareholders' equity                  14,960       17,801       17,041        20,369        29,879       (39,749)     (39,234)
</TABLE>

Unless otherwise specified, all dollar amounts in this Annual Report are in U.S.
dollars; however, certain of the information included in this Report is
presented in Canadian dollars ("Cdn$"). The following table sets forth (i) the
rates of exchange for the Canadian dollar, expressed as Canadian dollars per
U.S. dollar, in effect at the end of each of the periods indicated, (ii) the
average of exchange rates in effect on the last day of each month during such
periods, and (iii) the high and low exchange rates during each period, in each
case based on the noon buying rate as reported by the Federal Reserve Bank of
New York:


<TABLE>
<CAPTION>
                FOR THE YEAR       FOR THE FOUR
                    ENDED          MONTHS ENDED               FOR THE YEARS ENDED DECEMBER 31,
                  APRIL 30,          APRIL 30,          ---------------------------------------------
                    2003               2002             2001         2000         1999          1998
                ------------       ------------         -----        -----        -----         -----
<S>                <C>                <C>               <C>          <C>          <C>           <C>
High               1.5963             1.6125            1.494        1.438        1.440         1.408
Low                1.4336             1.5632            1.602        1.557        1.530         1.577
Period End         1.4336             1.5681            1.593        1.500        1.440         1.531
Average            1.5335             1.5913            1.549        1.486        1.483         1.483
</TABLE>


The high and low exchange rates based on the noon buying rate in New York City
for cable transfer in Canadian dollars as certified for customer purposes by the
Federal Reserve Bank of New York for each month during the previous six months
are as follows:

<TABLE>
<CAPTION>
MONTH                                   HIGH                               LOW
-------------                          ------                             ------
<S>                                    <C>                                <C>
February 2003                          1.5315                             1.4880

March 2003                             1.4905                             1.4659

April 2003                             1.4843                             1.4336

May 2003                               1.4221                             1.3446

June 2003                              1.3768                             1.3348

July 2003                              1.4114                             1.3368
</TABLE>

<PAGE>
                                       6


On August 21, 2003, the noon buying rate in New York City for cable transfer in
Canadian dollars as certified for customer purposes by the Federal Reserve Bank
of New York was US$1.00 = Cdn$1.4067.

Except as otherwise provided, all dollar amounts are in United States dollars.

3B.     CAPITALIZATION AND INDEBTEDNESS

Not Applicable

3C.     REASONS FOR THE OFFER AND USE OF PROCEEDS

Not Applicable

3D.     RISK FACTORS

RISKS ASSOCIATED WITH MINING

An investment in the Common Shares of the Company involves a high degree of risk
and must be considered highly speculative due to the nature of the Company's
business and the present stage of exploration and development of its mineral
resource properties. In particular, the following risk factors apply:


(i) Metal Price Volatility

The Company's ability to generate profits from its mining operations is directly
related to the international price of gold, which is not within the control of
the Company. The gold price has a history of extreme volatility and there can be
significant upward or downward movements in price in a short period of time.
During the year ended December 31, 2002, the annual high and low prices for gold
per ounce for the 10:30 a.m. fixings on the London Bullion Market were $348.50
and $277.80, respectively. On August 20, 2003, the 10:30 a.m. fixing on the
London Bullion Market was $362.20 and last spot market price of gold on the New
York Commodities Exchange was $365.00 per ounce.

If the gold price declines below the cost of production at the Company's sole
producing mine, in which the Company has a 49% interest, the Company may be
required to reduce its estimate of reserves and it may determine that future
commercial production is not a viable alternative. The premature or unexpected
closure of a mining operation would significantly advance in time the estimated
reclamation and closure costs of that operation, and therefore restrict the cash
the Company has planned to utilize for other capital spending, exploration,
development, or acquisition activities.

Gold prices historically have fluctuated widely and are influenced by a number
of factors beyond the control or influence of the Company. Some factors that
affect the price of gold include:

o    industrial and jewelry demand;

o    central bank lending or purchases or sales of gold bullion;

o    forward or short sales of gold by producers and speculators;

o    future level of gold production; and

o    rapid short-term changes in supply and demand due to speculative or hedging
     activities by producers, individuals or funds.

<PAGE>
                                       7



Gold prices are also affected by macroeconomic factors including:

o    confidence in the global monetary system;

o    expectations of the future rate of inflation;

o    the availability and attractiveness of alternative investment vehicles;

o    the general level of interest rates;

o    the strength of, and confidence in the U.S. dollar, the currency in which
     the price of gold is generally quoted, and other major currencies;

o    global and regional political or economic events; and

o    costs of production of other gold producing companies whose costs are
     denominated in currencies other than the U.S. dollar.

All of the above factors can, through their interaction, affect the price of
gold by increasing or decreasing the demand for or supply of gold.

While gold production, sales and prices are by far the most significant factor
affecting the financial performance of the Company, approximately 10% of the
Company's sales revenues are derived from silver. Silver prices are determined
in the international marketplace through the interaction of supply and demand
for this metal. The Company has no influence over the price it receives from the
sale of silver.

(ii) Exploration and Development Risks

Resource exploration, development, and operations is a highly speculative
business, characterized by a number of significant risks including, among other
things, unprofitable efforts resulting not only from the failure to discover
mineral deposits but from finding mineral deposits which, though present, are
insufficient in quantity and quality to return a profit from production. Few
properties that are explored are ultimately developed into producing mines. AT
PRESENT, EXCEPT FOR THE DENTON-RAWHIDE MINE, WHICH IS IN ITS FINAL PHASE OF
PRODUCTION, NONE OF THE COMPANY'S PROPERTIES HAVE A KNOWN BODY OF ORE AND THE
PROPOSED EXPLORATION PROGRAMS ARE AN EXPLORATORY SEARCH FOR ORE.

Unusual or unexpected formations, formation pressures, fires, power outages,
labour disruptions, flooding, explosions, cave-ins, land slides and the
inability to obtain suitable or adequate machinery, equipment or labour are
other risks involved in the operation of mines and the conduct of exploration
programs. The Company has relied and may continue to rely upon consultants and
others for exploration, development, construction and operating expertise.
Substantial expenditures are required to establish ore reserves through
drilling, to develop metallurgical processes to extract the metal from the ore
and, in the case of new properties, to develop the mining and processing
facilities and infrastructure at any site chosen for mining. No assurance can be
given that minerals will be discovered in sufficient quantities to justify
commercial operations or that funds required for development can be obtained on
a timely basis.

The development of gold and other mineral properties is affected by many
factors, including the cost of operations, variations in the grade of ore mined,
fluctuations in metal markets, costs of processing equipment and such other
factors as government regulations, including regulations relating to taxes and
royalties, allowable production, importing and exporting of minerals and
environmental protection. Depending on the price of gold or other minerals
produced, the Company may determine that it is impractical to commence or, if
commenced, continue commercial production.

<PAGE>
                                       8


The Company's principal exploration properties are currently located in El
Salvador which imposes certain requirements and obligations on the owners of
exploratory properties including certain application requirements, periodic
reporting requirements, limited terms and certain fees and royalty payments. See
"Item 4. Business Overview - El Salvador Mining Regime." The Company may acquire
interests in properties in other Latin or North and Central American countries
which may place substantial restrictions on the Company's exploratory and
development activities. The Company believes it has and will continue to
carefully evaluate the political and economic environment in considering
properties for acquisition. There can be no assurance that additional
significant restrictions will not be placed on the Company's properties or its
operations. Such restrictions may have a materially adverse effect on the
Company's business and results of operation.


(iii) Mining and Production Risks

Mining operations generally involve a high degree of risk. Hazards such as
unusual or unexpected geological formations and other conditions may be
encountered in the mining process. The Company may become subject to liability
for pollution, accidents or injury to employees, cave-ins or hazards against
which it cannot insure or against which for economic reasons it may elect not to
insure. The payment of such liabilities may have a material adverse effect on
the Company's financial position. In addition, there are a number of
uncertainties inherent in any mining activity as to the location of economic ore
reserves, the development of appropriate metallurgical processes, the receipt of
necessary governmental permits, the construction of mining and processing
facilities, and the appropriate financing thereof. There can be no assurance
that the Company's exploration and acquisition programs will yield new reserves
to replace mined reserves or to expand current reserves. The development of the
Company's properties will require the commitment of substantial resources to
conduct the time-consuming exploration and development of properties. There can
be no assurance that the Company will generate any additional revenues or
achieve profitability.

Although ore reserve and mineral resource figures included in this Annual Report
have been carefully prepared by the Company, or, in some instances have been
prepared, reviewed or verified by independent mining experts, these amounts are
estimates only and no assurance can be given that any particular level of
recovery of gold and/or silver from ore reserves will in fact be realized or
that an identified mineral resource will ever qualify as a commercially mineable
(or viable) ore body which can be legally and economically exploited. Estimates
of reserves, mineral resources and production costs can also be affected by such
factors as environmental permitting regulations and requirements, weather,
environmental factors, unforeseen technical difficulties, unusual or unexpected
geological formations and work interruptions. In addition, the grade of ore
ultimately mined may differ from that indicated by drilling results. Short term
factors relating to ore reserves, such as the need for orderly development of
ore bodies or the processing of new or different grades, may also have an
adverse effect on mining operations and on the results of operations. There can
be no assurance that the percentage of gold recovered in small scale laboratory
tests will be duplicated in large scale tests under on-site conditions or in
production scale heap leaching. Material changes in ore reserves, grades,
stripping ratios or recovery rates may affect the economic viability of
projects. Ore reserves are reported as general indicators of mine life. Reserves
should not be interpreted as assurances of mine life or of the profitability of
current or future operations.

(iv) Currency Fluctuations May Affect the Costs of Doing Business

The Company's activities are located in five countries, Canada, the United
States, Argentina, El Salvador and Chile. Gold and silver are sold in
international markets at prices denominated in U.S. dollars. However, except for
the Denton-Rawhide Mine in Nevada, a significant portion of the costs associated
with the Company's activities in Canada, Chile and El Salvador are denominated
in currencies not


<PAGE>
                                       9


directly related to the price of the U.S. dollar. Any appreciation of these
currencies vis a vis the U.S. dollar could increase the Company's cost of doing
business in these countries. The Company does not utilize hedging programs to
any significant degree to mitigate the effect of currency movements.


(v) Financing Risks

The Company anticipates that its current cash reserves are sufficient to fund
the Company's cash requirements through April 30, 2004. Beyond April 30, 2004,
the Company intends to rely on accumulated cash reserves, if any; cash generated
from operations, if any; collaborative agreements, if any; and public and
private financing, all of which may be highly dependent on the results of the
Company's exploration programs. There can be no assurance that the Company's
exploration programs will result in locating commercially exploitable mineral
ores or that the Company's properties will be successfully developed. Further,
there can be no assurance that the underlying assumed levels of expenses will
prove to be accurate.

Pacific Rim has limited financial resources and there is no assurance that
operating cash flow from Denton-Rawhide will continue to be sufficient (See
"Metal Price Volatility and Production Risks"), or that additional funding will
be available to it to meet its capital spending obligations at its sole
producing mine, to further exploration and development of its projects or to
fulfill its obligations under any applicable agreements. Although the Company
has been successful in the past in obtaining financing through the sale of its
securities, there can be no assurance that it will be able to obtain adequate
financing in the future or that the terms of such financing will be favourable.
Failure to obtain such additional financing could result in delay or indefinite
postponement of further exploration and development of its projects with a
possible loss of such properties, or a restriction on future production at
Denton-Rawhide.


(vi) Government Law, Environmental and Other Regulatory Requirements

Denton-Rawhide's operations and the Company's exploration activities in El
Salvador are subject to a complex set of laws and regulations which govern the
protection of the environment, waste disposal, worker safety, mine development,
property tenure and the protection of endangered and protected species. There
may be costs and delays associated with compliance with these laws or
regulations that could prohibit the Company from the development or expansion of
a mine.

Mining operations have inherent risks and liabilities associated with possible
pollution of the environment and with the disposal of waste products occurring
as a result of mineral exploration or the production of metals from producing
mines. Laws and regulations involving the protection and remediation of the
environment and governmental policies and regulations for the implementation of
such laws and regulations are constantly changing and are, in general, becoming
more restrictive and more costly to abide by. Closure cost requirements could
change from current estimates.

Each jurisdiction in which the Company operates has its own set of laws and
regulations which govern mining and exploration activities. It is possible that
future changes in the laws governing the Company's operations, workforce,
taxation, and closure plans could have adverse material affects on the Company's
financial viability and ability to continue its business activities in that
jurisdiction. To the best of the Company's knowledge, the Company is operating
in compliance with all applicable environmental regulations.

<PAGE>
                                       10


(vii) The Company's Insurance Coverage May Be Inadequate

The mining industry is subject to significant risks that could result in:

o    damage to or destruction of property and facilities;

o    personal injury or death;

o    environmental damage and pollution;

o    delays in production; or

o    expropriation of assets and loss of title to mining claims.

While the Company has purchased property, business interruption and liability
insurance that it believes is appropriate for the level of risk incurred, it
does not carry insurance for political risk, nor environmental damage or
pollution because such coverage cannot be purchased at reasonable costs. This
lack of insurance coverage could result in material economic harm to the Company
if a significant claim against the Company should occur.

(viii) Competition for Other Assets

Significant and increasing competition exists for the limited number of gold
acquisition opportunities available in Canada, the U.S., Central and South
America and elsewhere. As a result of this competition, some of which is with
large established mining companies having substantial capabilities and
substantially greater financial and technical resources than the Company, the
Company may be unable to acquire future potential gold mining properties on
terms it considers acceptable. The Company also competes with other mining
companies in the recruitment and retention of qualified employees.

(ix) Hedging Activities

The Company's primary business is the acquisition and development of gold and
silver properties and its revenue to date has almost entirely been derived from
proceeds from, or related to, the sale of gold and silver. (See "Risk Factors -
Risks Associated with Mining - Metal Price Volatility"). Gold and silver prices
are subject to significant volatility and these changes, to the extent that the
Company's production is unhedged, can significantly affect the Company's
profitability and cash flow. Gold prices declined steadily since the latter part
of 1996, culminating in August 1999 with the lowest price in twenty-one years,
and until the spring of 2002 have essentially remained near or below $300 per
ounce. Although prices have reached the $316 to $385 per ounce range during the
past six months, gold prices may never reach historical highs again. Silver
prices also have been at levels considered low by historical standards.

The Company may utilize derivatives for other than trading purposes, to protect
the selling price of a portion of its gold production. Silver production is sold
in the spot market. The Company has in the past used a combination of fixed or
spot deferred forward sales, puts and calls, as part of this gold hedging
program. The proceeds derived from writing (selling) the calls have at times
paid for the puts, and at other times puts have been closed out and the proceeds
used to purchase additional puts. The market risk to the Company's cash flow
from each put instrument relates to the possible failure of the counter-parties
to honor their commitment to purchase the gold when the put price exceeds the
appropriate spot price at maturity. Counter-parties to any put contracts are
large international credit worthy institutions. The market risk to the Company
of any gold call option contracts would relate to the possibility that the
Company may not produce sufficient gold at the appropriate time to meet the call
obligations should they arise. The Company is currently not pursuing or adding
to hedge positions although that may change depending on management's view of
the gold market conditions.

<PAGE>
                                       11


(x) Dependence on Management

The success of the operations and activities of the Company is dependent to a
significant extent on the efforts and abilities of its management. Investors
must be willing to rely to a significant extent on their discretion and
judgment. The Company does not maintain key employee insurance on any of its
employees.

(xi) Conflicts of Interest

Certain of the directors and officers of the Company are also directors and/or
officers of other natural resource companies. Accordingly, these persons have
interests that may be in conflict with the interests of the Company. See "Item
6. Directors, Senior Management and Employees."

The Company's directors and officers may serve as directors or officers of other
companies or have significant shareholdings in other resource companies and, to
the extent that such other companies may participate in ventures in which the
Company may participate, the directors of the Company may have a conflict of
interest in negotiating and concluding terms respecting the extent of such
participation. In the event that such a conflict of interest arises at a meeting
of the Company's directors, a director who has such a conflict will abstain from
voting for or against the approval of such participation or such terms. From
time to time several companies may participate in the acquisition, exploration
and development of natural resource properties thereby allowing for their
participation in larger programs, permitting involvement in a greater number of
programs and reducing financial exposure in respect of any one program. It may
also occur that a particular company will assign all or a portion of its
interest in a particular program to another of these companies due to the
financial position of the company making the assignment. In accordance with the
laws of the British Columbia, the directors of the Company are required to act
honestly, in good faith and in the best interests of the Company. In determining
whether or not the Company will participate in a particular program and the
interest therein to be acquired by it, the directors will primarily consider the
degree of risk to which the Company may be exposed and its financial position at
that time.


SPECIFIC RISK FACTORS ASSOCIATED WITH THE ANDACOLLO GOLD MINE AND THE EL DORADO
PROPERTY

In addition to the risk factors discussed in "Risks Associated with Mining" and
"Specific Risk Factors Associated with the Denton-Rawhide Mine" investors should
also consider the following factors in evaluating the Company and its business:

(i) Risks Associated with Foreign Operations

The El Dorado, La Calera and Cerro Gaspar properties are located in El Salvador.
Mineral exploration and mining activities in foreign countries are subject to
risks normally associated with the conduct of business in foreign countries and
in addition its business activities may be affected in varying degrees by
political stability and government regulations as these evolve in sovereign
nations. These risks include foreign labour disputes, invalidation of
governmental orders, uncertain political and economic environments, war or civil
disturbances, changes in laws, changes in foreign exchange rates, regulations
and policies of governments, changes in foreign tax laws, delays in obtaining
necessary permits, limitations on the repatriation of earnings and original
investments and increased costs of and difficulty in obtaining financing.

The management of Pacific Rim uses its collective experience in international
mineral exploration and development to assess the complex risk/reward
relationships that exist in various countries. When determining whether or not
to proceed with an investment in a particular country, management compares the
potential benefits of a country's geological potential with the long-term
political and economic risks.


<PAGE>
                                       12


However, as with all other types of international business operations, currency
fluctuations, exchange controls, change to tax regimes and political action
could impair the value of the Company's assets in such foreign jurisdictions.

(ii) Title to Properties

The exploration properties in El Salvador may be subject to prior unregistered
agreements or transfers or local land claims and title may be affected by
undetected defects. As part of its investigations, Pacific Rim has investigated
and believes it has good title to its properties. However, Pacific Rim cannot
guarantee that adverse claims to title will not arise in the future, nor can it
express an opinion on how difficult the resolution of such claims would be under
the laws of El Salvador.

(iii) Solvency and Closure Risk at Andacollo

The Andacollo Mine in Chile was permanently closed in December 2000. In order to
facilitate this closure and the orderly disposal of all assets, the Company's
subsidiary Compania Minera Dayton Contractual Minera ("CMD"), which owns the
Andacollo Mine, applied to the courts for protection against its unsecured
creditors. This application to the courts has resulted in a loss of control over
the assets of CMD and as such the Company ceased consolidating the results of
CMD effective December 1, 2000. This application included a plan for paying off
all the unsecured creditors of the mine, including the Company, from the sale of
gold production and assets. This plan was approved by the creditors and the
courts in Chile in May of 2001. It remains in effect until May 2005, at which
time unpaid creditors may petition CMD into bankruptcy. As at April 30, 2002,
the Company was owed $1.7 million under this plan and $0.99 million at April 30,
2003. The amount due is not recorded as a receivable in the books of the Company
but is recorded as income as received due to the uncertainty of receiving
payment. The total amount owed to all unsecured creditors under this plan was
$5.1 million at April 30, 2002 and $3.06 million at April 30, 2003.

The holder of a 2% net smelter return royalty on the production from the
Andacollo Mine initiated an action against CMD in which it claims that due to
the insolvency of CMD an amount of $1.4 million in guaranteed royalty payments
have become accelerated and are immediately due with interest. CMD has
petitioned and made presentations to the Court rejecting the claims. If it is
ultimately determined that the royalty payments are to be accelerated, this
finding would have an adverse material impact on the ultimate proceeds from the
disposition of the assets of Andacollo available for distribution to the
creditors, including the Company.

Finally CMD expects to conclude the reclamation of the mine area (including
pits, dumps, ore stockpiles and the associated roads) in August of 2003. The
reclamation activities have been conducted in accordance with the closure plan
for the mine and crushing plant areas presented by CMD and approved by the
Chilean government on June 17, 2002. As the crushing plant has not been sold, no
reclamation activities have been initiated in this area. Engineering studies to
determine the most effective manner to close and reclaim the heap are expected
to conclude in September 2003. As of April 2003 the heap closure fund had a cash
balance of $2.05 million.


SPECIFIC RISK FACTORS ASSOCIATED WITH THE DENTON-RAWHIDE MINE

In addition to the risk factors discussed in "Risks Associated with Mining" and
"Specific Risk Factors Associated with the Andacollo Gold Mine and the El Dorado
Property" investors should also consider the following factors in evaluating
Pacific Rim and its business.

<PAGE>
                                       13


(i) Changes to the General Mining Law of 1872

The majority of the Denton-Rawhide Mine's mineral reserves and processing
activities are located on unpatented lode and millsite claims located on U.S.
federal public lands. The right to use such claims are granted under the General
Mining Law of 1872. Unpatented mining claims are unique property interests in
the United States, and are generally considered to be subject to greater title
risk than other real property interests because the validity of unpatented
mining claims is often uncertain. This uncertainty arises, in part, out of the
complex federal and state laws and regulations under the General Mining Law and
the interaction of the General Mining Law and other federal and state laws, such
as those enacted for the protection of the environment. Unpatented mining claims
are subject to possible challenges of third parties or contests by the federal
government. The validity of an unpatented mining claim, in terms of both its
location and maintenance, is dependent on strict compliance with a complex body
of federal and state statutory or decisional law. In addition, there are few
public records that definitively control the issues of validity and ownership of
unpatentable mining claims. In recent years, the U.S. Congress has considered a
number of proposed amendments to the General Mining Law. If adopted, such
legislation could, among other things:

o    impose a royalty on the production of metals or minerals from unpatented
     mining claims;

o    reduce or prohibit the ability of a mining company to expand its
     operations; and

o    require a material change in the method of exploiting the reserves located
     on unpatented mining claims.

All of the foregoing could adversely affect the economic and financial viability
of the Denton-Rawhide Mine.

(ii) Reclamation Risks

The Denton-Rawhide Mine is an open pit heap leach operation that ceased active
mining in October 2002. The final reclamation and closure plan for
Denton-Rawhide has been submitted to the Bureau of Land Management and the
Nevada Department of Environmental Protection for approval. The Coordinating
Committee of the Denton-Rawhide Mine has determined, for the purposes of the
Reclamation Trust, reclamation and severance costs for the Denton-Rawhide Mine
are $9.8 million of which 49% will be to the account of the Company. The
Company's share of the total reclamation and closure costs is estimated at
approximately $4.8 million. Between April 2000 and December 31, 2001 the Company
contributed $39,090 per month into a trust fund to meet its reclamation and
closure obligations. At April 30, 2003 the market value of the trust fund for
the Company's benefit was $3.7 million. This determination of reclamation and
severance costs is for the purposes of the Reclamation Trust only and may not be
a true reflection of actual reclamation and closure costs of the Denton-Rawhide
Mine.


ITEM 4:     INFORMATION ON THE COMPANY

4A.     HISTORY AND DEVELOPMENT OF THE COMPANY

The legal and commercial name of the Company is Pacific Rim Mining Corp.

The Company was formed by the amalgamation (the "Amalgamation") of Dayton Mining
Corporation ("Dayton") and Pacific Rim Mining Corp. ("PacRim") (together the
"Predecessor Companies") under the British Columbia Company Act ("Company Act")
on April 11, 2002, with the Registrar of Companies, British Columbia. The
Amalgamation received shareholder approval of both Dayton and PacRim on

<PAGE>
                                       14


April 3, 2002 and approval of the Supreme Court of British Columbia on April 10,
2002. Pursuant to the Amalgamation 23,498,600 common shares of PacRim were
exchanged on a one for one common share of the Company basis and 31,123,974
common shares of Dayton were exchanged on a one for 1.76 common shares of the
Company basis. Under the Company's memorandum its authorized capital is
1,000,000,000 common shares without par value.

The Company is domiciled in British Columbia, Canada and is a valid company in
good standing and operating under the British Columbia Company Act. The
Company's principal place of business is located at Suite 410, 625 Howe Street,
Vancouver, British Columbia, V6C 2T6, telephone (604) 689-1976. The Company
through its subsidiaries has administration offices in Argentina, Nevada, USA,
Chile and El Salvador.

Since May 1, 2002, the beginning of the Company's last full financial year to
July 31, 2003, the following important events have occurred in the development
of the Company's business.

     -   In May 2002 the Company signed a letter of intent with Minerales
         Entremares El Salvador, S.A. de C.V. to acquire the La Calera gold
         project, located approximately 8 kilometers west of the El Dorado gold
         deposit in El Salvador.

     -   In May 2002 the Company commenced a 20 hole, $1 million diamond drill
         program on the El Dorado gold project in El Salvador.

     -   In June 2002 the Company received 142,970 shares of Silver Standard
         Resources for the balance of the purchase price of $900,000 from the
         sale of predecessor Pac Rim's Diablillos property. The Company sold
         these shares prior to year end. A gain of $922,000 was recorded in the
         year.

     -   In August 2002 the Company optioned the Cerro Gaspar project in north
         east El Salvador from Brett Resources.

     -   In October 2002 the Board approved an additional $1 million budget to
         continue drilling on the Company's El Dorado projects in El Salvador.

     -   In January 2003 the Company commenced a drill program on the La Calera
         project and a program of geologic mapping and sampling on the Cerro
         Gaspar project.

     -   In July 2003 the Company formalized its Strategic Plan, which is
         summarized in Form 6-K filed with the SEC on August 7, 2003.

See Item 5 - Operating and Financial Review and Prospects for information on the
Company's principal capital expenditures and divestures during the past three
years and current capital expenditures. Other than the ongoing drill programs
there is no principal capital expenditures or divestitures in progress.

There has not been any indication of any public takeover offers by third parties
in respect of the Company's shares or by the Company in respect of other
companies shares during the last or current financial year.


4B.     BUSINESS OVERVIEW

The Company is a British Columbia based mineral resource corporation engaged,
both directly and indirectly through its subsidiaries, in the acquisition,
exploration and, if warranted, development of

<PAGE>
                                       15


precious metals properties. The Company's exploration activities are currently
focused in El Salvador. The Company continues to explore for projects in the
Americas, which warrant drilling. The Company will primarily be exploring for
gold and silver on any newly acquired projects.

The Company has a 49% interest in the Denton Rawhide Mine, Nevada, an open pit
gold-silver heap leach mine. Ore extraction at the mine ceased in May 2003 and
residual leaching of stockpiled ore is expected to continue for several years.
The Company also holds interests in exploration licences in El Salvador.

Predecessor Dayton acquired the 49% interest in the Denton-Rawhide property
through the issue of shares and acquired the El Dorado property in El Salvador
through the acquisition of Mirage Resource Corporation, in April 2000.
Predecessor PacRim acquired the Company's remaining exploration properties in
Argentina in 1997 by staking. Predecessor PacRim sold its interest in the
Diablillos property in Argentina by agreement dated December 14, 2001 for total
consideration of $3,400,000 by staged payments of cash or common shares. The
balance of the purchase price for Diablillos was received by the Company in
2002, after the Amalgamation. Under the purchase agreement certain
representations and warranties regarding normal course of business and conduct,
including title, filings and environmental matters in Argentina were made, which
representations and warranties survive the payment of the purchase price until
December 31, 2003.

In each of the periods December 31, 2001, April 30, 2002 (four months) and April
30, 2003, the Company has spent approximately $0.6 million, $0.2 million and
$3.2 million respectively on work programs to advance the El Dorado gold
prospect in El Salvador.

The Company has financed its exploration programs to date from its cash on hand
derived from the sale of marketable securities and net cash proceeds from its
49% interest in Denton Rawhide. In each of the periods December 31, 2001, April
30, 2002 (four months) and April 30, 2003, revenues from gold sales totalled
$14.9 million, $5.3 million and $12.5 million, respectively. The average price
of gold received was $271 per ounce in 2001, $287 per ounce in 2002 and $321 in
2003.

In the past, the Company has managed its exposure to reductions in the price of
gold by entering into both forward sales contracts and by selling call options
or by purchasing put options. At April 30, 2003, the Company had 6,000 ounces of
gold committed for delivery under spot deferred contracts maturing at various
dates from May 2003 to August 2003. The estimated fair value of these contracts
at the April 30, 2003 spot prices of gold of approximately $339 per ounce was
$0.2 million, which represents the fair value to the Company on the balance
sheet date if it were to settle these instruments prior to their maturity.

See Item 3D - Specific Risk Factors Associated with the Andacollo Gold Mine and
the El Dorado Property, in particular (i) Risks Associated with Foreign
Operations and (ii) Title to Properties.

See Item 4D - Property Plant and Equipment for an overview of the Company's
properties.

See Item 5 for an overview of the Company's financial position.

EL SALVADOR MINING REGIME

Under the laws of El Salvador, all mineral rights are owned by the government.
All uncultivated private and government-owned lands are open to exploration and
are available through application for an exploration and then an exploitation
permit if certain conditions are met. Land for which an exploration
<PAGE>
                                       16


permit is obtained is held by payment of an annual fee until converted to an
exploitation licence. El Salvadorian mining laws do not discriminate between
nationals and foreigners.

In mid 2001 the government of El Salvador enacted several modifications to the
Salvadorian Mining Law. The most significant of these changes included an
extension from 5 years to 8 years for the time before which a property holder
must convert an exploration licence into an exploitation licence. This revision
provided the Company an additional three years in which to advance the El Dorado
project to the development stage and then apply to the government for an
exploitation permit. The application to convert an exploration licence to a 30
year (or longer) exploitation licence must be accompanied by, among other
things, a feasibility study, a development work program and an environmental
impact study. Under the old laws the maximum size for exploitation concession
was 10 square kilometres. This arbitrary size restriction has been removed. A
final and important change was that the royalty levied on mineral production was
reduced to 2% from 4% of net smelter returns. Pacific Rim plans to continue
exploration efforts to enable it to submit the documentation required to convert
the exploration licence to an exploitation licence within the mandated time
frame. However, there can be no assurance that this will be accomplished.


4C.     ORGANIZATIONAL STRUCTURE

The following is a listing of the Company's significant subsidiaries including
name, country of incorporation or residence, the Company's respective proportion
of ownership interest and, if different, proportion of voting power held.

     (1)    Pacific Rim Exploration Inc., Nevada, USA, 100% owned by the
            Company.

     (2)    International Pacific Rim Mining Corp., Argentina, 100% owned by Pac
            Rim Caribe III. This subsidiary holds miscellaneous properties
            staked by the Company in Argentina.

     (3)    Pac Rim Caribe III, Caymans, 100% owned by Pac Rim Cayman.

     (4)    Pac Rim Cayman, Caymans, 100% owned by the Company.

     (5)    Dayton Mining (U.S.) Inc. 100% owned by the Company. This subsidiary
            holds the 49% interest in the Denton-Rawhide joint venture.

     (6)    Compania Minera Dayton, Chile, 99.5% owned by Andacollo Gold Ltd.
            and 0.5% owned by La Serena Inc. This subsidiary has been granted
            creditors' protection by the Court of Andacollo and is no longer
            under managerial control of the Company.

     (7)    Andacollo Gold Ltd. and La Serena Inc., Cayman Islands, each 100%
            owned by DMC Cayman Inc.

     (8)    DMC Cayman Inc., Cayman Islands, 100% owned by the Company.

     (9)    Pacific Rim El Salvador S.A. de C.V., El Salvador, owned as to 50%
            each by Dayton Acquisitions Inc. and 449200 B.C. Ltd., British
            Columbia corporations.

     (10)   Recursos Salvador Enos S.A. de C.V., El Salvador, owned as to 99% by
            Dayton Acquisitions Inc. and 1% by Pacific Rim El Salvador S.A. de
            C.V.

     (11)   449200 B.C. Ltd., British Columbia, 100% owned by Dayton
            Acquisitions Inc.

<PAGE>
                                       17


     (12)   Dayton Acquisitions Inc., British Columbia, 100% owned by the
            Company.

In this Annual Report, unless the context otherwise indicates, all references to
"the Company" include the Company and its subsidiaries.


4D.     PROPERTY, PLANT AND EQUIPMENT

The Company's operations are in one industry, the exploration and, if warranted,
the development of and production from gold and silver properties. The Company
does not own any significant plant or equipment for its wholly owned operations.
Equipment used for exploration or drilling is rented or contracted as needed.
The Company owns a 100% interest in various non-producing properties in South
and Central America and has a 49% joint-venture interest in one producing mine,
Denton-Rawhide. The following is a description of the Company's properties and
the nature of the Company's interests in such properties as at August 15, 2003.

DENTON-RAWHIDE MINE (49%)

The Company acquired its interest in the Denton-Rawhide Mine on April 6, 2000
pursuant to an acquisition agreement dated February 13, 2000 (the "Acquisition
Agreement") between Dayton, Kinross Gold Corporation ("Kinross"), Kinross
Rawhide Mining Company ("Kinross Rawhide") and Kinross Fallon Inc. ("Kinross
Fallon").

The Denton-Rawhide Mine is an open pit gold-silver heap leach mine, located in
west-central Nevada, approximately 190 kilometres south-east of Reno. The
Company holds a 49% interest in the mine and the operator, Kennecott Minerals
Company, owns the remaining 51%. The principal mineral properties consist of 55
patented and 842 unpatented mining claims, claim fractions and partial interest
claims owned or held under lease. Ore extraction and placement on heaps was
scheduled to cease in late 2002 and ultimately ceased in May of 2003. Residual
leaching of stockpiled ore is expected to continue for the next several years.
Production costs are dropping as active mining has ceased and the Company
anticipates cash flows from the operation will continue for the next few years.
See Note Regarding Forward Looking Statements.

The Acquisition Agreement was negotiated on an arm's length basis by Dayton and
Kinross, and provided, among other things, that:

(a)  Kinross Rawhide and Kinross Fallon assigned all of their 49% interest in
     the Denton-Rawhide Mine, including all of their rights under the Rawhide
     Joint Venture Agreement (as described below), to the Company in exchange
     for 7,235,500 Common Shares at a deemed price of Cdn $2.26 per share for a
     total acquisition price of Cdn $16,352,230.

(b)  Kinross Rawhide agreed to keep in place a $1,297,356 reclamation letter of
     credit posted by it in connection with the Denton-Rawhide Mine until March
     31, 2002. The Company agreed to pay to Kinross Rawhide a standby fee equal
     to the cost to Kinross Rawhide of the letter of credit plus a support fee
     equal to 1.75% per annum, payable on the first day of January, April, July
     and October in each year. In January 2001, the reclamation letter of credit
     was replaced on behalf of the joint venture by a surety provided by
     Kennecott Rawhide Mining Company ("Kennecott Rawhide"), an indirect
     wholly-owned subsidiary of Rio Tinto Plc.

(c)  Kinross Fallon and Kinross USA Inc. ("Kinross USA") agreed to keep in place
     a $1,246,780 surface management surety bond posted by them in connection
     with the Denton-Rawhide Mine


<PAGE>
                                       18


     until March 31, 2001. The Company agreed to pay to Kinross Fallon a standby
     fee equal to the cost to Kinross Fallon of the surety bond (which is
     currently 0.40%) plus a support fee equal to 1.75% per annum, payable on
     the first day of January, April, July and October in each year. In January
     2001, the surety bond described in (c) was replaced on behalf of the joint
     venture by a surety provided by Kennecott Rawhide Mining Company
     ("Kennecott Rawhide"), an indirect wholly-owned subsidiary of Rio Tinto
     Plc.

(d)  Kinross Fallon and Kinross Rawhide assigned all of their interest in the
     revocable reclamation and severance trust agreement dated effective January
     1, 1999 (the "Reclamation Trust Agreement") among Kennecott Rawhide Mining
     Company ("Kennecott Rawhide"), Kinross, Kinross Rawhide, Kinross USA and
     Bank of America, as trustee, to the Company for an amount equal to
     $2,118,403 (being the amount held in the trust created thereby for the
     benefit of Kinross Rawhide and Kinross Fallon). Pursuant to promissory
     notes dated April 6, 2000, the Company agreed to pay the amount held in the
     trust, by no later than December 31, 2004 provided that the Company shall
     make minimum annual prepayments on December 31st in each year equal to 25%
     of the net internal cash flow received by the Corporation from its 49%
     interest in the Denton-Rawhide Mine. As part of the final reconciliation of
     working capital amounts, the amount outstanding on the promissory note was
     reduced to $1,848,863.

The ownership, management and operation of the Denton-Rawhide Mine is governed
by a construction and post-construction operating agreement dated as of June 23,
1989, as amended by a first amendment agreement dated as of December 15, 1992,
(the "Rawhide Joint Venture Agreement") between Kennecott Rawhide and Dayton (as
assignee of interest from Kinross Rawhide and Kinross Fallon). The Rawhide Joint
Venture Agreement provides, among other things, that:

(a)  Kennecott Rawhide holds a 51% interest in the Denton-Rawhide Mine;

(b)  the Company holds a 49% interest in the Denton-Rawhide Mine;

(c)  Kennecott Rawhide shall be the operator of the Denton-Rawhide Mine; and

(d)  the operation of the Denton-Rawhide Mine shall be overseen by a
     coordinating committee (the "Coordinating Committee") comprised of three
     members nominated by Kennecott Rawhide and two members nominated by the
     Company, and the parties to the Rawhide Joint Venture Agreement are
     required to establish a trust as security for the payment of reclamation
     and severance costs resulting from the eventual closure of the
     Denton-Rawhide Mine (the "Reclamation Trust").

The Coordinating Committee of the Denton-Rawhide Mine has determined, for the
purposes of the Reclamation Trust, reclamation and severance costs for the
Denton-Rawhide Mine are $9.8 million of which 49% will be to the account of the
Company. As of April 30, 2003, a total of $3.4 million is held in the
Reclamation Trust for the benefit of the Company. See "Note Regarding Forward
Looking Statements". This determination of reclamation and severance costs is
for the purposes of the Reclamation Trust only and may not be a true reflection
of actual reclamation and closure costs of the Denton-Rawhide Mine.

The Denton-Rawhide Mine is an open pit heap leach operation that ceased active
mining in October 2002. Crushing and stacking of stockpile low grade ore
continued until May 2003, at which time the operation went into the residual
leach phase. Residual leaching is expected to continue for several years. All
raw materials, supplies and energy requirements are sourced domestically. A
leach solution is circulated through the heaps to dissolve the gold and silver.
These precious metals are then precipitated from the

<PAGE>
                                       19


solution with the addition of zinc oxide. Dore is produced on site and the dore
bars are then refined into gold and silver bullion at an independent refinery.
There was no significant capital spending at Denton-Rawhide in 2002, or 2003. As
at April 30, 2003 there were 87 full time employees at the mine, and as of July
31, 2003 there were 42 full time employees remaining. None of the employees are
the Company's. Access to the mine is via a paved road and a short gravel road.

The following table provides selected operating data for the Denton-Rawhide Mine
(49%):

<TABLE>
<CAPTION>
                                  Year Ended     Four Months                     Year Ended
                                  April 30,      Ended April 30,                 December 31,(1)
                                  2003           2002              2001          2000
                                  ----------     ---------------   ---------     ---------------
<S>                               <C>            <C>               <C>           <C>
Tonnes Crushed                    2,536,000      852,200           2,804,500     2,176,000
Gold Grade (g/t)                  0.77           1.1               0.96          0.85
Silver Grade (g/t)                12.6           14.4              16.35         12.1
Gold Produced (ozs)               35,731         14,605            49,366        37,706
Silver Produced (ozs)             302,383        126,420           356,277       283,796
Cash production Cost ($/oz)       $224           $230              $247          $234
</TABLE>

         (1)  Represents the Company's 49% interest since the interest in the
              mine was acquired on April 1, 2000.

Gold and silver mineralization in the Rawhide area is hosted within altered
Tertiary volcanics which cover several square kilometres in a large caldera
system. The Rawhide caldera is situated along an intersection between the
north-west trending Walker Lane Structural Zone and north-east trending Basin
and Range structures. All of the Rawhide deposits are structurally controlled,
volcanic hosted epithermal ore bodies. The Rawhide gold-silver deposits are
mid-Miocene in age and are hosted in a variety of volcanic rocks of early-to-mid
Miocene age.

Lithology plays a critical role in the style of mineralization. Primary
permeability amenable to disseminated mineralization is a characteristic of the
ashes and tuffs, volcanogenic sediments, and vent breccias. The andesitic flow
rocks are a tight, more brittle material which reacts to tectonics and
hydrostatic pressures by shattering and crackle brecciating to create a
secondary permeability. The andesite characteristically has more, and higher
grade, veins than the other host rocks. Rhyodacite is an important ore host
characterized by more intrusive and extrusive fracture controlled
mineralization.

RECLAMATION - DENTON-RAWHIDE

The final reclamation and closure plan for Denton-Rawhide has been submitted to
the Bureau of Land Management and the Nevada Department of Environmental
Protection for approval. The Company's share of the total reclamation and
closure costs is estimated at approximately $4.8 million. Between April 2000 and
December 31, 2001 the Company contributed $39,090 per month into a trust fund to
meet its reclamation and closure obligations. No monthly contributions have been
required from the Company in 2002 or 2003 as it was agreed the fund was adequate
and further reclamation costs would be provided from mine operating cash flow.
At April 30, 2003 the market value of the trust fund for the Company's benefit
was $3.7 million. The Company has spent $1.4 million and estimates its further
share of closure liabilities at April 30, 2003 to be $3.4 million. See "Note
Regarding Forward Looking Statements".

EL SALVADOR PROJECTS

The Company's most advanced property in El Salvador is the El Dorado Property
which consists of two exploration licences, which the Company, indirectly
through its wholly-owned subsidiaries, holds as to a


<PAGE>
                                       20


100% interest. In addition the Company has entered into an option to acquire a
100% interest in the La Calera project which is near to El Dorado.

ALTHOUGH THE EL DORADO PROPERTY CONTAINS GEOLOGICAL MINERAL RESOURCES, NONE OF
THE COMPANY'S PROPERTIES IN EL SALVADOR, INCLUDING THE EL DORADO PROPERTY,
CONTAIN KNOWN ORE RESERVES AND ALL WORK PROGRAMS ARE EXPLORATORY SEARCHES FOR
ORE GRADE MINERALIZATION.

The El Dorado Property was acquired by predecessor Dayton upon its acquisition
of Mirage. Mirage initially acquired the El Dorado Property by option agreement
dated June 23, 1993 from Zinc Metal Corporation ("ZMC") of Toronto, and its
wholly-owned subsidiary New York and El Salvador Mining Company ("NYESMC"). The
option was exercised on August 25, 1994 in accordance with its terms by payment
of US$175,000 to ZMC and by the parties having incurred aggregate expenditures
in excess of US$800,000. Pursuant to the terms of the option agreement the El
Dorado Property is subject to annual advance minimum royalty payments, which is
the greater of $50,000 per year or a 3% net smelter return royalty in favour of
ZMC. The Company has the right to purchase the royalty from ZMC for US$4,000,000
(US$1,000,000 for the first one-half and US$3,000,000 for the second one half)
provided that at least one-half of the royalty is acquired within six months of
the commencement of commercial production. In addition, the government of El
Salvador is entitled to a 2% net smelter return royalty.

Predecessor Dayton also acquired exploration licences for the Potonico and El
Paisnal properties from Mirage which the Company abandoned during the 2003
financial year.

NATIONAL INSTRUMENT 43-101

The Company has been adhering to NI 43-101 in all of its disclosure since the
rule was enacted in 2001.

Mr. William Gehlen supervises all of the Company's exploration work in El
Salvador. Mr. Gehlen is a Certified Professional Geologist with the AIPG (No.
10626), an employee of the Company and a Qualified Person as defined in NI
43-101.

Details of the El Dorado resource estimate are presented in a technical report
prepared for Dayton Mining Corporation by Mr. P. LaCroix, P.Eng (a Qualified
Person as defined in National Instrument 43-101) entitled "Resource Update Nueva
Esperenza & El Dorado Mine Area - El Dorado Project - El Salvador", dated
February 8, 2002. Mr. LaCroix's report is summarized below and is available on
SEDAR under Dayton filings.

A technical report entitled "Review of the Eldorado Project, El Salvador",
prepared by Mr. Peter Ronning, P.Eng., a Qualified Person independent of the
Company, is being filed with SEDAR, in conjunction with this filing. Mr.
Ronning's report summarizes the geology and work conducted on the El Dorado
project in El Salvador to the end of July 2003 and is summarized below. Mr.
Ronning's report supercedes Mr. LaCroix's report in all respects except for the
El Dorado resource estimate and related information.

A technical report entitled "Review of the La Calera Project, El Salvador",
prepared by Mr. Peter Ronning, P.Eng., a Qualified Person independent of the
Company, is being filed with SEDAR, in conjunction with this filing. This report
summarizes the geology and work conducted on the La Calera project in El
Salvador to the end of July 2003 and is summarized below.

<PAGE>
                                       21


REPORT OF MR. P. LACROIX

El Dorado's resources were determined in 2000 by Mr. P. Lacroix, P.Eng., an
independent consultant and Mr. C.S. Wallis P. Geo an independent consultant who
are Qualified persons under National Instrument 43-101. The following
information is summarized from Mr. Lacroix's report dated February 8, 2002
titled "Resource Update Nueva Esperenza & El Dorado Mine Area - El Dorado
Project - El Salvador" which report was filed under NI 43-101 on February 20,
2002 for Dayton.

Dayton acquired Mirage Resource Corporation and its underlying ownership in the
El Dorado Project in April 2000. A 13-hole core drilling program was conducted
in the El Dorado Mine Area from June through August 2000 to confirm the geometry
and continuity of the Minita, Minita 3 and Zancudo veins as well as extend the
existing resource both laterally and vertically. A total of 3,726.6 m of diamond
drilling (HQ core) was completed during the period. Following completion of the
drilling program, the geological model for the 3 veins was updated and a new
estimate of resources completed by Lacroix. The program was considered a
technical success, confirming both structural and grade continuity, however
overall estimates of quantities and grade did not vary materially from previous
estimates. The increase in drill intercept density did result in a modest
redistribution of resources from the inferred to indicated categories.

Including the most recent drilling program by Dayton, a total of 46,382 metres
of diamond core and reverse circulation (RC) drilling have been completed on the
El Dorado Project from 1993 to date. The majority of the work has focussed on
the delineation of the Nueva Esperanza, El Dorado and La Coyotera deposits,
however other mineral occurrences have also received attention.

All core-drilling services have been provided by Geotecnia, S.A. de C.V.
(Geotecnia), the Salvadoran division of Swissboring from Guatemala. Drilling
equipment employed included Longyear LY-38, LY-44 and Christianson CS-1000 drill
rigs.

Holes K93-1 through K93-4 utilized NQ (47.6 mm core diameter) while all
subsequent holes were HQ (63.5 mm core diameter). Several holes, particularly at
La Coyotera, were reduced from HQ to NQ because of poor drilling conditions in
the vein.

All holes prior to K96-151 were surveyed utilizing Tropari borehole survey
instruments. Azimuth and inclination are read every 50 m and, generally, at the
bottom of the hole. Beginning with K96-151 a single-shot camera was employed in
the down-hole surveys. Continued use of the Tropari instrument facilitated
control and tracking during drilling. After the drilling was complete, the
single-shot camera was employed to provide a more accurate location of the vein
intercept and provide photo negatives for future reference. All drill hole
collar locations have been surveyed. Surface and down-hole survey information is
recorded on the drill logs and summary sheets. As the holes were drilled, the
survey and geologic data was plotted on 1:1,000 sections. Once drilling was
completed on any given section the geologic information was digitized. Complete
sets of drill sections are maintained in the Sensuntepeque office.

A reverse circulation (RC) drill was utilized at El Dorado between mid-September
and mid-December, 1994. This method was initially employed to pre-collar core
holes to diminish both the hole cost and duration. RC drilling was also employed
at Nueva Esperanza, where the vein position was well established, and the San
Francisco area where broad targets existed from the surface downward. A RC drill
was also used in early-1998 as an exploration tool at several areas within the
Southern District.

<PAGE>
                                       22


During the pre-collaring program a number of technical problems became apparent,
the most serious of which related to down-hole contamination below the water
table. For this reason, sample data from RC drilling was not incorporated in
resource estimates.

The core is stored in the enclosed facilities in the El Dorado mine area. During
a drilling program, the core is delivered to the core storage facility at the El
Dorado mine site, and is logged by geologic staff. The logging procedure
consists of a written and graphic geologic description of rock type, including
structure, hydrothermal alteration, vein density and mineralogy (macroscopic),
core recovery data, rock-quality designation (RQD) data (after January, 1996),
sample intervals, sample numbers, down hole survey, collar coordinates, collar
elevation, and total depth. Gold and silver assays are added when results are
received from the laboratory in Denver, Colorado.

Sample intervals are determined and marked by the geologist prior to their
splitting. Before the Company's 2000 drilling program, the core was split by a
trained local employee utilizing a 254-mm hydraulic core splitter. Core from
D00-190 through D00-202 was cut with a 12-inch diameter diamond saw blade using
a table-mounted circular saw. After each sample is split or cut, it is bagged
and carried to the sample preparation facility where a 600-gram (g), 90% passing
10-mesh sample is prepared. This 600g sample is split once again creating two
identical 300-g samples. One 300-g sample is shipped to the U.S. for analysis;
the other remains on file in the El Dorado preparation facility. All coarse
reject is also stored at the El Dorado mine site.

From July 1993 until April 7, 1994, all gold and silver analyses were performed
by Skyline Labs (Skyline) of Wheatridge, Colorado, U.S.A. Subsequently, all work
was moved to Cone Geochemical, Inc. (Cone) in Lakewood, Colorado, U.S.A. who
continued to provide analytical services to the El Dorado project through
December 2000.

Geochemical analyses performed by Skyline included K93-1 through K94-37 and
samples 0 through approximately 1,100. The samples were analyzed by gravimetric
fire assaying. All core, reverse circulation cuttings, rock, and soil samples
collected since April 7, 1994, have been analyzed by Cone. Between April 7 and
September 20, 1994, primary reduction of sample volume was completed by Cone. In
brief, gold was determined by fire assay with an atomic absorption (AA) finish.
The detection limit is 0.001 ppm (1 ppb). Since September 20, 1994, all samples
have been dried, crushed (90% passing at 10 mesh) and split at the sample
preparation facility located at the El Dorado mine. All samples are split down
to a mass of approximately 600 g. This volume is split, with one half shipped to
Cone for analysis while the other half is stored at the El Dorado mine.

The results from several stages of check assay programs beginning in early-1994
have not revealed any obvious concerns regarding the process of sample
collection, sample preparation or with the assaying. Similar to many other
deposits in the same volcanic belt of Central America, the gold at El Dorado is
very fine grained and partially entrained and encapsulated within the banded
vein chalcedony and nugget effects caused by coarse gold should be minimal.

While Mr. Lacroix has visited the site on two occasions since the acquisition by
Dayton and inspected the core and preparation facilities, no independent
sampling of core or mineralized exposures or review of chain-of-custody
procedures was undertaken by Lacroix. Mr. Lacroix has however viewed the assay
and geological database in detail and performed a number of critical checks on
the data. As well, at the request of Lacroix, original assay values were
re-entered by site staff from assay certificates in an independent database.
This database was compared with the original data. Any problems or
inconsistencies, although few, were corrected prior to using the database for
resource estimation.

<PAGE>
                                       23


                 EL DORADO PROJECT - INDICATED MINERAL RESOURCES

<TABLE>
<CAPTION>
                                    CUTOFF       TONNES        GRADE (G/T)                             SG
                                                                                  CONTAINED KOZ
         AREA                     (AU G/T)    (X 1,000)      GOLD     SILVER      GOLD     SILVER
<S>                                  <C>        <C>          <C>         <C>       <C>      <C>       <C>
         EL DORADO
           Zancudo                       9         32.0      12.2        104        13        107     2.51
           Minita                        6        626.1      14.2        100       285      2,005     2.31
           Minita 3                      6        141.1      12.0         89        54        404     2.36
                                     9/6/6        799.2      13.7         98       353      2,516     2.32
                                                                                     -          -
         NUEVA ESPERANZA                 2        495.4       4.5         29        72        464     2.33

         LA COYOTERA
           Footwall zone                 2        583.6       3.7         35        69        664     2.47
           Hangingwall zone              2      1,140.5       6.8         51       248      1,882     2.47
                                         2      1,724.1       5.7         46       317      2,546     2.47

         TOTAL INDICATED                        3,018.6       7.6         57       742      5,526     2.41
</TABLE>

         NOTE: Cutoff for El Dorado and Nueva Esperanza is equivalent grade
         (62.8 grams Ag=1.0 grams Au). Cutoff for La Coyotera is gold grade
         only. Differences in totals due to round off.

                 EL DORADO PROJECT - INFERRED MINERAL RESOURCES

<TABLE>
<CAPTION>
                                    CUTOFF       TONNES        GRADE (G/T)                           SG
                                                                                  CONTAINED KOZ
         AREA                     (AU G/T)    (X 1,000)      GOLD     SILVER      GOLD     SILVER
<S>                                  <C>          <C>        <C>         <C>       <C>        <C>   <C>

         EL DORADO
           Zancudo                       9          4.2       9.6        67          1          9   2.53
           Minita                        6        103.1      10.9        78         36        257   2.45
           Minita 3                      6          3.3       8.6        70          1          7   2.08
                                     9/6/6        110.6      10.8        77         38        273   2.44
                                                                                     -          -
         NUEVA ESPERANZA                 2        395.3       3.0        16         39        201   2.33

         LA COYOTERA
           Footwall zone                 2        116.4       4.2        36         16        136   2.47
           Hangingwall zone              2        156.7       5.0        50         25        254   2.47
                                         2        273.1       4.7        44         41        390   2.47

         TOTAL INFERRED                           779.0       4.7        35        118        864   2.39
</TABLE>

         NOTE: Cutoff for El Dorado and Nueva Esperanza is equivalent grade
         (62.8 grams Ag=1.0 grams Au). Cutoff for La Coyotera is gold grade
         only. Differences in totals due to round-off.


REPORT OF MR. PETER RONNING

In June of 2003 the Company engaged Peter A. Ronning, P.Eng., a Qualified Person
as defined in National Instrument 43-101, to undertake an independent, technical
due diligence review of the El Dorado

<PAGE>
                                       24


Project. Mr. Ronning's review is described in his report entitled "Review of the
El Dorado Project, El Salvador" dated August 22, 2003. The report describes the
status of the El Dorado Project as of July 31, 2003. Mr. Ronning;'s report
references but does not update the current resource estimate for the El Dorado
Project calculated by Mr. P. LaCroix and referenced in his report filed under NI
43-101 on February 20, 2002 by Dayton. The following disclosure concerning the
El Dorado project is derived from Mr. Ronning's August 22, 2003 report.

PROPERTY DESCRIPTION AND LOCATION

Two Exploration Licenses, covering in total 7,499.96 hectares, make up the El
Dorado Property. The licenses have a nominal expiry date of January 1, 2004. The
Company can continue to hold the area beyond that date by declaring its
intention to convert the Exploration Licenses to Exploitation Concessions, which
have a term of 30 years and may be extended if warranted The cost to hold the
licenses is a rental of $300 per square kilometre, amounting to $22,500 per
year. The Company is up to date with the regulatory obligations required to
maintain the licenses in good standing.

In addition to its mineral rights, the Company owns approximately 69 hectares of
real estate in the central part of the property. Whether the Company-owned real
estate will be sufficient, should a mining operation be undertaken, would depend
on design decisions to be made at that time.

Part of the El Dorado License Area was the scene of mining by another company
between 1948 and 1953. The Company and its environmental consultants believe
that there are no existing environmental liabilities on the project related to
that earlier period of production nor to the exploration activities of the
Company and its predecessor companies.

The Exploration License Area contains many prospects and deposits. Their stage
of exploration and development ranges from recently discovered veins that have
never been drilled to three deposits that have each had up to five resource
estimates since 1995. The Company's permanent installations on the property at
the present time consist of a laboratory for crushing rock samples and a core
storage warehouse with facilities for describing and sampling drill core. None
of the mid-20th century mine workings are accessible at present, nor does the
Company use them.

In El Salvador there is an environmental permitting procedure established that
must be followed in the development of the El Dorado project. First, an
environmental formula or application must be presented to the Ministry of the
Environment that details the development and operation of the proposed project.
The Ministry will categorize the activity, work, or project according to its
span and to the nature of its potential impact and issue the Terms or Reference
or guidelines for an Environmental Impact Assessment. The Company's
environmental permits are up to date and the Company is currently working with
the authorities to ensure that its permitting stays current as the level of
exploration activity increases.

ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY

The El Dorado Project is in the Department of Cabanas, approximately 74
kilometers northeast of San Salvador, the capital city of the nation, and 10
kilometers southwest of the town of Sensuntepeque. By a paved road that crosses
the property, the travel time from the project site to downtown San Salvador is
approximately 1.5 hours, depending on traffic levels.

The area has a large rural population and Sensuntepeque is a moderate sized
town. Unskilled labour and persons with general business and technical skills
should be readily available. El Salvador does not have an indigenous mining
industry, so personnel with exploration and mining skills must come from
elsewhere.

<PAGE>
                                       25


The usual public utilities are available in Sensuntepeque. The communication
infrastructure, including telephone and internet, is serviceable. The existing
buildings on the project site are connected to the national electrical grid, but
the power supply is not considered reliable enough to service a mine.

The terrain in the El Dorado License area is one of moderate relief surrounded
by higher hills to the north, east, and west. Elevations range between 200 m and
800 m above sea level. A tropical climate prevails, with a pronounced wet season
from May to October and a dry season the remainder of the year. The project area
contains shallow topsoils and volcanic subsoils that are cultivated for seasonal
crops. Five perennial streams or rivers traverse the El Dorado License area.
Water levels vary with the seasons with good flows being maintained during the
wet season.

In a 2001 feasibility study, the Company's predecessor at El Dorado, Dayton
Mining, was able to identify appropriate sites for the necessary mine facilities
required for a 500 tonne per day operation. The Company's objective is to
explore for and find resources that will support a larger operation. The Company
may not follow the development plan of its predecessor, but the feasibility
study provided confidence that adequate sites for mine facilities exist.

HISTORY

The colonial Spanish discovered gold in the district in the early 1500's, and
there was sporadic, largely unrecorded small scale production until the late
1800's. In the period from 1948 to 1953, the New York and El Salvador Mining
Company operated an underground mine, producing approximately 270,000 tonnes of
ore yielding about 72,500 troy ounces (2,250 kilograms) of gold.

Extensive exploration since 1993 has included surface geological mapping, rock
sampling and prospecting, campaigns of hand and bulldozer trenching, core
drilling, and minor reverse circulation drilling. The exploration data base as
of the end of July 2003 included the results of 270 drill holes totaling about
68,400 meters, with analytical results for almost 9,500 samples from drilling.
Added to this are the results of nearly 3,600 surface rock samples of various
types, and results of some 5,300 underground assays gleaned from the records of
the 1948 - 1953 production period.

GEOLOGICAL SETTING

El Salvador can be divided into four morphological-geological units: Coastal
Plains, Coastal Ranges, Great Interior Valley, and the Northern Mountain Ranges.
El Dorado is situated in the Great Interior Valley, underlain by Eocene felsic
to mafic volcanic rocks; in other words, dark to light coloured volcanic rocks
in the order of 38 to 55 million years old.

Mineralization on the El Dorado Project consists of gold and silver bearing
quartz veins that are contained within the volcanic rocks. The gold- and
silver-bearing veins of the El Dorado district, of which at least 36 exceed 1 m
in width, occur over an area exceeding 50 square kilometers. Vein mineralization
is dominated by chalcedonic quartz and ranges in width between 1 m and 15 m in
surface exposures. The vein systems are up to 3 km in length, dip steeply, and
generally form ridges.

The mineralization fits the model of the low sulphidation epithermal type of
mineralization, also referred to as the adularia-sericite type. A number of
deposits around the world that belong to this type are being profitably mined.

In terms of its structure and mineral deposits the Exploration License Area can
be divided into 3 districts, Central, Northern, and Southern. The three
districts are separated from each other by northwest trending

<PAGE>
                                       26


regional scale faults whose primary displacement was lateral. Within each
district, deposits are contained within quartz veins that formed along fractures
that opened under tension. The mineralized veins are for the most part within
about 30 degrees of vertical and trend generally north-south, but there is
considerable variation both within and between districts.

EXPLORATION

The decade-long history of recent exploration on the El Dorado project includes
extensive mapping of mineralized structures, lithogeochemical sampling,
trenching and drilling. There have been numerous ancillary studies including
environmental base line work.

Geological mapping to varying levels of detail, done by the Company and its
predecessors, covers approximately 2,000 hectares of the 7,500 hectare property.
Digital maps have been generated at scales ranging from 1:1,000 to 1:10,000. In
addition, the project archives contain numerous individual maps of trenches,
veins and target areas at various scales.

The geological mapping is continuing, along with lithogeochemical sampling and
prospecting.

The geological mapping is accompanied by frequent sampling of the rocks on the
surface. As of July 31, 2003 the surface geochemical data base for the El Dorado
project contained results for 3,581 rock samples collected from within the El
Dorado License Area. The Company geologists collected approximately 1,240 of
those samples in 2002 and 2003. The Company's predecessor operators collected
the remainder. The samples are variously described as channel samples, chip
channel samples, selected chips, random chips and grab samples.

The geological and geochemical work was done by geologists in the employ of the
Company or its predecessors, with the assistance of local labourers hired on an
as-needed basis. The sample data are well recorded and considered reliable.

MINERALIZATION

The El Dorado License area contains many deposits, prospects and occurrences in
veins, hot spring deposits and hydrothermal breccias. They are found in three
districts, north, central and south, that are distinguished from each other by
the dominant vein orientations and the level of the hydrothermal system that is
exposed on the present-day surface. The veins have complex, multi-stage
histories of formation. In a 1999 "Summary of Exploration Activities",
geologists working for Mirage Resource Corp. organized their descriptions of the
deposits and zones into 33 targets, many of which comprise multiple veins. In
terms of their exploration and development status, the veins range from
newly-discovered, untested prospects to three deposits sufficiently advanced
that their contained resources can be estimated. The dimensions of mineralized
veins are as varied as their exploration status, ranging from those known only
in single outcrops to those that have been traced on the surface over lengths of
between one and two kilometers. Systems of related veins are up to three
kilometers long. In those veins that have been mined or extensively drilled,
mineralization has been demonstrated to exist over vertical intervals of up to
300 meters. (In considering vein lengths and vertical dimensions it is important
to note that at a detailed level mineralization in this type of system is highly
variable).

DRILLING

Several campaigns of drilling have been mounted on the El Dorado project
throughout the last decade. As of July 31, 2003 the drill hole data base
contained records of 270 drill holes comprising 68,420 meters

<PAGE>
                                       27


of drilling. Since becoming operator in mid 2002 up to the completion of hole
P03-256 in July 2003, the Company had drilled 55 holes comprising 20,828 meters.

At present core drilling is done using HQ equipment that produces 63.5
millimeter diameter core. If it is necessary to reduce to a smaller diameter to
overcome drilling difficulties, NQ equipment is used, producing 47.625
millimeter diameter core. The direction and inclination of drill holes is
measured approximately every 50 meters using a down-hole instrument. Until
recently, drill collar locations were surveyed by local contractors. The Company
has recently obtained a differential GPS for surveying collar locations. Core
recovery is measured at the drill site and loaded core boxes are trucked to the
Company's core logging, sampling and storage facility on the property. Core is
logged by Company geologists and split for sampling using a rock saw.

Drilling on the project ranges from resource delineation and step-out drilling
in the vicinity of the old mine to pure exploration drilling on veins that have
as yet received little or no exploration.

             PACIFIC RIM DRILL RESULTS IN THE EL DORADO PROJECT AREA
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------
    HOLE_ID           FROM             TO          INTERCEPT        TRUE WIDTH          GOLD         SILVER
                                                    METERS             METERS         AVG PPM        AVG PPM
----------------------------------------------------------------------------------------------------------------
<S>                    <C>           <C>              <C>             <C>                <C>           <C>
P02-205                373.10        384.15           11.05           9.75               9.06          56.06
----------------------------------------------------------------------------------------------------------------
P02-206                142.05        143.40            1.35           1.10              55.50         159.44
----------------------------------------------------------------------------------------------------------------
P02-208                172.25        172.90            0.65           0.5                9.19          40.40
----------------------------------------------------------------------------------------------------------------
P02-208                237.50        238.35            0.85           0.33              37.47          65.30
----------------------------------------------------------------------------------------------------------------
P02-212                124.85        125.3             0.45           0.3                7.7           12.3
----------------------------------------------------------------------------------------------------------------
P02-213                320.00        320.75            0.75                              5.84          24.40
----------------------------------------------------------------------------------------------------------------
P02-216                318.0         318.85            0.85           0.7                3.5           48.0
----------------------------------------------------------------------------------------------------------------
P02-231                 75.30         75.65            0.35           0.27               7.98          21.70
----------------------------------------------------------------------------------------------------------------
P02-231                109.10        109.75            0.65           0.60               7.28          35.30
----------------------------------------------------------------------------------------------------------------
P02-231                304.25        304.45            0.20           0.20               7.36          45.00
----------------------------------------------------------------------------------------------------------------
P02-231                310.55        311.00            0.45                              4.04          17.60
----------------------------------------------------------------------------------------------------------------
P03-245                221.45        225.05            3.60           1.8                9.49          70.13
----------------------------------------------------------------------------------------------------------------
P03-245                228.50        229.45            0.95                              5.34          37.00
----------------------------------------------------------------------------------------------------------------
P03-245                286.80        289.15            2.35           1.66               5.71          52.92
----------------------------------------------------------------------------------------------------------------
P03-246                366.45        367.55            1.10                              5.95          20.60
----------------------------------------------------------------------------------------------------------------
P03-246                398.05        404.95            6.90           4.44              10.09          53.92
----------------------------------------------------------------------------------------------------------------
P03-247                334.10        339.15            5.05           3.41               7.76          35.45
----------------------------------------------------------------------------------------------------------------
P03-248                217.45        218.10            0.65           0.37               4.77          30.50
----------------------------------------------------------------------------------------------------------------
P03-248                306.20        307.35            1.15           0.66               6.38          33.10
----------------------------------------------------------------------------------------------------------------
P03-248                319.35        320.05            0.70                              5.86          88.00
----------------------------------------------------------------------------------------------------------------
P03-249                186.70        189.40            2.70           1.91               9.15          28.46
----------------------------------------------------------------------------------------------------------------
P03-251                159.55        159.70            0.15                              6.75
----------------------------------------------------------------------------------------------------------------
P03-251                369.35        383.45           14.10           7.05              12.29
----------------------------------------------------------------------------------------------------------------
</TABLE>

Notes:   Intervals and grades may differ slightly from those reported in the
         Company's news releases, due to different selection of cut off grade
         and compositing interval. Where true width is not shown, it is not
         known to Ronning.


<PAGE>
                                       28


        SUMMARY OF SELECTED PACIFIC RIM DRILLING RESULTS AT COYOTERA VEIN

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
HOLE_ID        FROM          TO        INTERCEPT      TRUE       GOLD AVG    SILVER AVG
                                                      WIDTH         PPM          PPM
---------------------------------------------------------------------------------------
<S>            <C>          <C>          <C>          <C>          <C>          <C>
P03-236        373.000      373.750      0.750                     6.032        31.3
---------------------------------------------------------------------------------------
P03-241        242.1        244.1        2.0          1.53         7.51         124.8
---------------------------------------------------------------------------------------
P03-242        260.4        265.7        5.3          3.41         6.23         65.9
---------------------------------------------------------------------------------------
P03-243        306.05       307.15       1.100        0.71         7.62         22.2
---------------------------------------------------------------------------------------
P03-244        312.35       315.35       3.0                       12.5         35.6
---------------------------------------------------------------------------------------
P03-244        320.35       321.85       1.5                       15.92        88.7
---------------------------------------------------------------------------------------
P03-244        320.350      327.95       7.6          4.9          7.39         54.0
---------------------------------------------------------------------------------------
</TABLE>

Notes:   Cut off of 6 g Au/tonne used. Internal low grade intercepts allowed.
         Where true widths are not shown, Ronning does not know what they are.


Since the Lacroix resource estimate, Pacific Rim has drilled an additional four
holes at Nueva Esperanza, P02-219, P02-223, P02-225 and P02-228. Holes P02-219
and P02-225 contained the significant mineralized intercepts tabulated below.
The other two holes did not have significant intercepts.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
HOLE_ID                FROM           TO             INTERCEPT     TRUE WIDTH        GOLD        SILVER
                                                     METERS          METERS         AVG PPM      AVG PPM
--------------------------------------------------------------------------------------------------------
<S>                   <C>            <C>              <C>             <C>            <C>           <C>
P02-219               214.100        217.730          3.630           3.48           6.94          66.6
--------------------------------------------------------------------------------------------------------
P02-225               301.800        302.500          0.700           0.67           7.08          37.2
--------------------------------------------------------------------------------------------------------
</TABLE>

Notes:   Intervals and grades may differ slightly from those reported in the
         Company's news releases, due to the subsequent availability of
         re-analyses, different selection of cut off grade and compositing
         interval.


           SELECTED PACIFIC RIM DRILL RESULTS IN THE MORENO VEIN AREA
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
HOLE_ID                FROM           TO            INTERCEPT     TRUE WIDTH        GOLD          SILVER
                                                     METERS         METERS         AVG PPM       AVG PPM
--------------------------------------------------------------------------------------------------------
<S>                    <C>           <C>               <C>         <C>               <C>           <C>
P02-204                341.6         341.85            0.25        Unknown           26.78         183
--------------------------------------------------------------------------------------------------------
                       345.65        346.2             0.55        Unknown            9.39          57
--------------------------------------------------------------------------------------------------------
P02-210                203.45        204.4             0.95           0.75            3.5            7.3
--------------------------------------------------------------------------------------------------------
                       315.5         316.4             0.9            0.38            4.6            5.6
--------------------------------------------------------------------------------------------------------
P02-214                237.95        238.3             0.35           0.31            4.0           37.3
--------------------------------------------------------------------------------------------------------
P02-226                127.65        130.4             2.75           2.1             7.33          49.0
--------------------------------------------------------------------------------------------------------
                       153.2         153.6             0.4            0.37           15.1          123
--------------------------------------------------------------------------------------------------------
                       159.95        160.25            0.3            0.25            8.94          10.9
--------------------------------------------------------------------------------------------------------
                       185.65        186.8             1.15           1.04            7.47          27.3
--------------------------------------------------------------------------------------------------------
</TABLE>

Notes:   Intervals and grades may differ slightly from those reported in the
         Company's news releases, due to different selection of cut off grade
         and compositing interval. Where true width is not shown, it is not
         known to Ronning.

<PAGE>
                                       29


       SELECTED PACIFIC RIM DRILL RESULTS IN THE ROSARIO VETA GRANDE AREA

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
HOLE_ID        FROM METERS      TO METERS         LENGTH          TRUE          GOLD         SILVER
                                                  METERS          WIDTH      G AU/TONNE    G AG/TONNE
-----------------------------------------------------------------------------------------------------
<S>              <C>             <C>               <C>            <C>         <C>            <C>
P02-203           34.50           36.80            2.30           1.89         6.808           6.554
-----------------------------------------------------------------------------------------------------
P02-203           96.15           97.60            1.45           1.19        28.325         257.159
-----------------------------------------------------------------------------------------------------
P02-203          104.80          105.95            1.15           0.94        24.839         162.522
-----------------------------------------------------------------------------------------------------
P02-207            9.20           11.85            2.65           2.03         2.4             6.4
-----------------------------------------------------------------------------------------------------
P02-207          246.7           248.2             1.50           1.47         2.2            14.7
-----------------------------------------------------------------------------------------------------
P02-222          176.05          176.90            0.85           0.55        12.7            72.0
-----------------------------------------------------------------------------------------------------
P02-222          243.85          244.10            0.25           0.25         6.24           36.5
-----------------------------------------------------------------------------------------------------
P02-224          327.90          328.85            0.95           0.84         6.23           39.0
-----------------------------------------------------------------------------------------------------
P02-230           84.55           84.80            0.25           0.18        39.99          200.0
-----------------------------------------------------------------------------------------------------
P02-232          160.85          161.30            0.45           0.29         7.86            8.2
-----------------------------------------------------------------------------------------------------
P03-234          119.05          119.35            0.30           0.17         7.24           36.9
-----------------------------------------------------------------------------------------------------
P03-234          139.35          140.80            1.45           0.51         6.87           44.9
-----------------------------------------------------------------------------------------------------
P03-234          139.35          140.15            0.80           0.28         8.93           58.0
-----------------------------------------------------------------------------------------------------
P03-234          142.70          143.45            0.75           0.38         7.72           17.2
-----------------------------------------------------------------------------------------------------
</TABLE>

Notes:   Intervals and grades may differ slightly from those reported in the
         Company's news releases, due to different selection of cut off grade
         and compositing interval. Where true width is not shown, it is not
         known to Ronning.

<PAGE>
                                       30



       SELECTED PACIFIC RIM DRILL RESULTS IN THE POTRERO & GUADALUPE AREAS

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
HOLE_ID        FROM METERS      TO METERS        LENGTH         TRUE        GOLD          SILVER
                                                 METERS        WIDTH     G AU/TONNE     G AG/TONNE
--------------------------------------------------------------------------------------------------
<S>               <C>             <C>             <C>           <C>         <C>            <C>
P02-209           379.65          380.0           0.35          0.20         5.7            94.0
--------------------------------------------------------------------------------------------------
                  391.05          391.3           0.25          0.23         4.8            22.5
--------------------------------------------------------------------------------------------------
P02-211            63.8            65.65          1.85          1.64         3.4            20.1
--------------------------------------------------------------------------------------------------
P02-218           340.0           340.56          0.56          0.43        24.82           50.0
--------------------------------------------------------------------------------------------------
P02-220           114.6           115.2           0.60          0.52        13.43           60.0
--------------------------------------------------------------------------------------------------
                  207.25          207.45          0.20          0.19         8.55           71.0
--------------------------------------------------------------------------------------------------
                  275.4           276.4           1.0           0.97        10.12           80.0
--------------------------------------------------------------------------------------------------
                  371.65          372.55          0.90          0.85        13.55           70.0
--------------------------------------------------------------------------------------------------
P02-229           177.25          177.8           0.55          0.52         7.00           32.3
--------------------------------------------------------------------------------------------------
                  374.90          375.70          0.80          0.69        14.18           80.0
--------------------------------------------------------------------------------------------------
P03-233            62.45           62.70          0.25          0.23        14.6           158.0
--------------------------------------------------------------------------------------------------
P03-233           127.00          127.55          0.55          0.42         6.42           45.0
--------------------------------------------------------------------------------------------------
P03-235           311.10          311.70          0.60          0.55        12.62          140.0
--------------------------------------------------------------------------------------------------
P03-235           316.30          316.75          0.45          0.22        14.32           76.0
--------------------------------------------------------------------------------------------------
</TABLE>

Notes:   Intervals and grades may differ slightly from those reported in the
         Company's news releases, due to different selection of cut off grade
         and compositing interval. Where true width is not shown, it is not
         known to Ronning.


SAMPLING AND ANALYSIS

The sampling method used by the Company field personnel varies with the purpose
of the sample. Geologists doing initial reconnaissance or prospecting may
collect selected grab samples from new discoveries. Such samples would be
intended only to determine if minerals of interest are present, not to estimate
grades for any volume of material.

For more systematic sampling, outcrops are cleaned off and in some cases shallow
hand trenches are dug. Continuous chip samples are collected over intervals
selected by a geologist. In many cases local labourers do the sampling, under a
geologist's supervision. The manner of sampling is recorded in field notes and
is entered into the digital data base of surface samples.

Intervals from drill core to be sampled are selected by the geologist logging
the core. All vein material and visibly mineralized material is sampled, with
enough immediately adjacent, apparently unmineralized material sampled to make
sure that all intervals are adequately tested. Sampling is done after logging is
complete. The core is sawn in half along its axis. The Company's immediate
predecessor as operator, Dayton, also used a rock saw for sampling core from 13
holes it drilled in 2000. Operators prior to Dayton used a percussion core
splitter.

Core recovery, which affects the degree to which samples are representative, is
very good in the current drilling. In mineralized intervals it averages better
than 98%. In past drilling, prior to the Company becoming operator, resource
estimators found local problems with core recovery, finding that it averaged as
low as 76% in some mineralized veins.

The Company collected a large quantity of unmineralized material from a site in
the region. This material is used as sample "blanks" that are inserted into the
sample stream at a rate of one into every batch of 25 samples, as a quality
control measure.

<PAGE>
                                       31


All of the Company's samples are analyzed at the laboratory of Inspectorate
America in Sparks, Nevada. About 25% of the samples are analyzed in duplicate by
selecting a batch of material already pulverized by Inspectorate and sending it
to another lab, American Assay. Once the results of the re-analysis are
received, about 15% to 20% of the duplicated samples are selected for
re-analysis starting with the coarse reject material.

All samples which return gold results exceeding 3 g Au/tonne in the initial
analysis are analyzed again using a fire assay preparation with a gravimetric
finish.

SECURITY OF SAMPLES

All sampling is done by the Company's employees, either geologists or labourers
supervised by geologists. Once collected, samples are kept at the Company's
on-site facility until they are picked up by employees of Inspectorate America's
Guatemalan affiliate. They are transported by road to the Guatemalan laboratory,
where they are prepared and trans-shipped to Nevada for analysis. Some of the
samples may, from time to time, be opened and inspected by border officials at
the border crossing from El Salvador to Guatemala.

MINERAL RESOURCE ESTIMATES

Three of the deposits in the El Dorado License area have each had as many as
five resource estimates since 1995. The most current estimate for each of the
three is listed below:


                      SUMMARY OF RECENT RESOURCE ESTIMATES
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
DEPOSIT OR                RESOURCE         CUT-OFF                TONNES          GOLD           SILVER             ESTIMATOR
AREA                      CATEGORY          GRADE                                GRADE,          GRADE,
                                          G AU TONNE                           G AU TONNE      G AG TONNE
------------------------------------------------------------------------------------------------------------------------------------
<S>                       <C>             <C>                    <C>              <C>              <C>          <C>
El Dorado Mine Area       indicated       6 to 9, by vein*       799,200          13.70            97.9         LaCroix, 2000
------------------------------------------------------------------------------------------------------------------------------------
El Dorado Mine Area       inferred        6 to 9, by vein        110,600          10.80            76.94        LaCroix, 2000
------------------------------------------------------------------------------------------------------------------------------------
Nueva Esperanza           indicated       0                      539,100           4.26            27.63        LaCroix, 2000
------------------------------------------------------------------------------------------------------------------------------------
Nueva Esperanza           inferred        0                      905,400           2.03             9.43        LaCroix, 2000
------------------------------------------------------------------------------------------------------------------------------------
Coyotera                  indicated       4                      932,725           8.57            76.0         Kinross Staff, 2000
------------------------------------------------------------------------------------------------------------------------------------
Coyotera                  indicated       4                      326,368           4.67            55.12        Kinross Staff, 2000
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Notes:   Cut-off grades at El Dorado Mine Area use a gold equivalent, calculated
         using 62.8 grams silver per gram gold ($5/oz Ag, R=85%; $290/oz Au,
         R=92%). Nueva Esperanza resource assumes open pitting. Estimates were
         done before the formal implementation of National Instrument 43-101
         with the requirement to follow the CIM Standards on Mineral Resources
         and Reserves of August 2000. Ronning believes that the estimators used
         the terms resource, indicated and inferred in a manner consistent with
         the CIM Standards. LaCroix is an independent Qualified Person. Kinross
         Gold Corp., through a subsidiary, was a previous operator of the
         project.

<PAGE>
                                       32


All of the above estimates are to varying degrees out of date, in that the
Company's work in 2002 and 2003 has produced results that are expected to
enhance the resources. The Company has commissioned new resource estimates that
will be available in the latter part of 2003.

MINING OPERATIONS

There are no present mining operations on the project.

EXPLORATION AND DEVELOPMENT

The Company is pursuing a program of continued delineation and exploration
drilling.

LA CALERA, EL SALVADOR

The Company and Minerales Entremares El Salvador have entered into a letter of
intent for a joint venture and option to purchase, dated May 17, 2002, wherein
the Company can acquire a 100% interest in the La Calera gold project. Total
commitments by the Company are option payments totalling $300,000 (of which
$40,000 has been paid to date) and exploration expenditures of $375,000 to May
17, 2006 (all incurred to date). See Note 7 a) of the attached financial
statements for a breakdown of the payments and exploration commitments of the
Company. The La Calera property covers an area of 35 square kilometres and is
located in the Municipality of Ilobasco, Department of Cabanas, El Salvador,
approximately eight kilometres west of the Company's El Dorado gold deposit in
El Salvador.

The Company is conducting an exploration program on the La Calera project of
reconnaissance scale mapping and defining and drilling potential targets.

THERE ARE NO KNOWN ORE RESERVES ON THE LA CALERA PROJECT AND ALL WORK PROGRAMS
ON THE PROPERTY ARE EXPLORATORY SEARCHES FOR ORE GRADE MINERALIZATION.

REPORT OF PETER RONNING

In June of 2003 the Company engaged Peter A. Ronning, P.Eng., a Qualified Person
as defined in National Instrument 43-101, to undertake an independent, technical
due diligence review of the La Calera Project. Mr. Ronning's review is described
in his report entitled "Review of the La Calera Project, El Salvador" dated
August 22, 2003. The report describes the status of the La Calera Project as of
July 31, 2003. The following disclosure concerning the La Calera project is
derived from Mr. Ronning's report.

PROPERTY DESCRIPTION AND LOCATION

The La Calera Project in El Salvador is based on one exploration license area
that covers 3,500 hectares. It is located in the Departments of Cabanas and San
Vicente, approximately 45 kilometers northeast of San Salvador, the capital city
of El Salvador, and 8 kilometers southeast of the town of Ilobasco.

The Company controls the La Calera license under the terms of an option
agreement with Minerales Entremares El Salvador.

The nominal expiration date of the La Calera exploration license is 17 October
2004. The exploration license can be extended for one more year beyond that,
after which the mineral rights to the area can be maintained by converting the
exploration license to an exploitation concession. The annual rental cost to
maintain the exploration license is $300 per square kilometre, for a total of
$10,500 per year.

<PAGE>
                                       33


No known environmental liabilities encumber the property.

All of the mineralization known to date is situated within about 150 hectares in
the central part of the 3,500 hectare property. The project is at an early stage
of exploration, so no studies as to possible sites for mine facilities have been
done. There appears to be ample terrain suitable for the construction of
facilities.

For a description of environmental permitting in El Salvador, see the preceding
section describing the El Dorado Project.

ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY

The paved highway that connects the towns of Ilobasco and Sensuntepeque skirts
the northern boundary of the La Calera license area. To reach the part of the
license area on which exploration is focused at present, one turns south off the
paved road at the locality of El Molino and follows an unpaved road southwards
for five to five and half kilometers. This road and its various branches serve
the community of San Francisco Iraheta and the outlying farms.

Local communities are connected to the national electrical grid, though outlying
farms are not. It is unlikely that the existing power grid in the area could
serve the needs of an industrial scale mining operation. Any such operation
would have to generate its own power.

Other utilities are absent in the immediate exploration area.

The area has a large rural population, and is less than an hour by road from
urban centers. Unskilled labour and persons with general business and technical
skills should be readily available. El Salvador does not have an indigenous
mining industry, so personnel with exploration and mining skills must come from
elsewhere.

El Salvador has a tropical climate with pronounced wet (May to October) and dry
seasons. Average annual rainfall at Sensuntepeque, about 25 kilometers northeast
of La Calera, is about 2,000 mm.

At the present early stage of the La Calera project, the Company has not
acquired any surface rights in the Exploration License Area.

HISTORY

The name "Calera" derives from a lime quarry that once operated on what is now
the La Calera license. Aside from that quarry, the known exploration and mining
history of the project area is very brief:


October 1997           La Calera license is granted to Minerales Entremares El
                       Salvador S.A. de C.V.

Sept - Oct 1997        Entremares undertook a program of geological mapping and
                       sampling.

August 2002            La Calera License transferred from Minerales Entremares
                       to Kinross El Salvador S.A. de C.V.

March 2003             The name of Kinross El Salvador S.A. de C.V. is formally
                       changed to Pacific Rim El Salvador S.A. de C.V.

The present exploration program by the Company is the first such program on the
property.

<PAGE>
                                       34


GEOLOGICAL SETTING

El Salvador can be divided into four morphological-geological units: Coastal
Plains, Coastal Ranges, Great Interior Valley, and the Northern Mountain Ranges.
La Calera is situated in the Great Interior Valley. The immediate region of La
Calera is dominated by geologically young intermediate to felsic volcanic flow
rocks. Overlying those are even younger fragmental volcanic rocks.

The geological structure of El Salvador is characterized by several
regional-scale fault systems, one trending east-west, one northwest and one
northeast.

Mineralization on the La Calera Project consists of gold and silver bearing
quartz veins that are contained within the volcanic rocks. The mineralization
fits the model of the low sulphidation epithermal type of mineralization, also
referred to as the adularia-sericite type. A number of deposits around the world
that belong to this type are being profitably mined.

EXPLORATION

Since acquiring its option on the La Calera property, the Company has prospected
and mapped approximately 150 hectares of the 3,500 hectare property. The mapping
has focused primarily on delineating the mineralized veins.

In addition to the geological mapping, the Company has done a program of surface
rock sampling and analysis. As of July 31, 2003 the surface geochemical data
base for the property contained descriptions and results for 373 rock chip
samples, 177 of which were collected from trenches excavated for the purpose.
365 of the samples were representative chip samples collected over measured
lengths.

The rock samples are distributed throughout the mapped area of approximately 150
hectares, but are concentrated along veins or other sites where hydrothermal
silica is present. The program has delineated three main systems called the Rosa
Vein, Rosa West and El Calichal.

As part of mapping and sampling the mineralized structures, some 34 trenches
with an aggregate length of about 270 meters have been excavated Most trenches
are shallow, less than about 2 meters deep.

All the work has been done by geologists employed by the Company, or local
labourers under the supervision of geologists.

The results of surface sampling are sufficient to demonstrate that a significant
mineralized system is present at La Calera. In this tropical environment,
samples collected on the surface may not be a reliable indicator of grades in
the subsurface, due to near-surface weathering.

MINERALIZATION

To date, exploration of the La Calera property has focused on an area of roughly
100 hectares, extending northward from the Rio (river) Titihuapa for about 1 1/2
kilometers. This area may be within an erosional window where overlying volcanic
rocks have been eroded away to expose a system of quartz veins. Silicified rocks
with local pyrite (an iron-sulphur mineral that in many instances is associated
with mineralization) partially envelop the veins. The volcanic wall rocks are
andesites that exhibit alteration varying amongst propylitization, argillization
and silicification. (These terms refer to different types of chemical and
mineralogical changes in the rocks, sometimes caused by the same processes that
cause mineralization).

<PAGE>
                                       35


Silica pyrite altered andesites are spatially associated with other epithermal
manifestations including quartz-calcite veins and clay-pyrite alteration in the
Rosa area, and opal float, advanced argillic alteration, and felsic explosion
breccias, flows and tuffs in the El Tablon area. El Tablon is immediately to the
southwest of the area being explored at present.

There is silicification associated with a northeast trending fault that appears
to truncate the Rosa vein set. The veins are exposed on prominent ridges that
trend between 140(Degree) and 160(Degree). The two main vein systems are the
Rosa, and the Rosa West system. The latter consists of two principal veins about
100 meters and 200 meters west of the Rosa. The smaller El Calichal vein system
is about 300 meters west of the Rosa. The longest of the known veins is the
Rosa, which can be traced on the surface for about 1,100 meters in a north
northwest direction. In aggregate the vein system has to date been traced for
about 1,700 meters in the north northwest direction.

Giving equal weight to all samples regardless of length, the average grade of
gold in surface rock samples from the Rosa Vein is 4.62 g Au/t, in the Rosa West
veins 12.1 g Au/t and the El Calichal veins 2.37 g Au/t.

DRILLING

The drilling procedures used at La Calera are similar to those described for the
El Dorado project. The initial target model at La Calera was and continues to be
a vein deposit with sufficient grade and continuity to support selective mining
methods. In the context of that model, the following table lists the results
available as of 31 July 2003, with intervals composited using a cut off of 6
grams gold per tonne.


             SUMMARY OF LA CALERA DRILL RESULTS AT 6 G AU/T CUT OFF

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
                                                                         TRUE
DRILL HOLE        VEIN TESTED     FROM       TO METERS      INTERCEPT    WIDTH       GOLD      SILVER
                                  METERS                    METERS       METERS       G/T      G/T
------------------------------------------------------------------------------------------------------
<S>               <C>             <C>        <C>            <C>          <C>         <C>       <C>
PLC03-001         Rosa West       No         Significant    Results
------------------------------------------------------------------------------------------------------
PLC03-002         Rosa West       62.95      64.85          1.9          1.9         10.07     8.7
------------------------------------------------------------------------------------------------------
PLC03-003         Rosa West       119.8      120.35         0.55         0.51        7.47      2.2
------------------------------------------------------------------------------------------------------
PLC03-004         Rosa West       36.6       37.0           0.4          0.35        9.24      19.4
------------------------------------------------------------------------------------------------------
PLC03-005         Rosa West       36.45      43.15          6.7          2.83        8.67      *5.0
------------------------------------------------------------------------------------------------------
                                  66.25      67.55          1.3          1.13        8.30      3.2
------------------------------------------------------------------------------------------------------
                                  69.1       70.05          0.95         0.82        6.30      2.7
------------------------------------------------------------------------------------------------------
                                  71.75      72.80          1.05         0.65        7.42      7.3
------------------------------------------------------------------------------------------------------
                                  98.7       101.3          2.6          2.36        19.99     8.12
------------------------------------------------------------------------------------------------------
                                  104.0      105.0          1.0          0.87        10.8      5.1
------------------------------------------------------------------------------------------------------
PLC03-006         Rosa            no significant high grade intercepts;
------------------------------------------------------------------------------------------------------
PLC03-007         Rosa            no significant high grade intercepts;
------------------------------------------------------------------------------------------------------
PLC03-008         Rosa            17.05      20.5           3.45         2.6         6.22      3.0
------------------------------------------------------------------------------------------------------
PLC03-009         Rosa West       87.95      89.3           1.35         1.2         12.81     9.0
------------------------------------------------------------------------------------------------------
PLC03-010         Rosa West       no significant high grade intercepts
------------------------------------------------------------------------------------------------------
PLC03-011         Rosa West       122.7      126.6          3.9          3.8         6.45      8.2
------------------------------------------------------------------------------------------------------
                  Rosa West       130.9      131.8          0.9          0.4         7.12      2.4
------------------------------------------------------------------------------------------------------
PLC03-012         Rosa West       1.35       3.00           1.65         1.65        11.27     20.6
------------------------------------------------------------------------------------------------------
PLC03-013         Rosa            89.4       90.55          1.15         1.00        8.20      3.6
------------------------------------------------------------------------------------------------------
PLC03-014         El Calichal     36.0       36.95          0.95         0.54        31.51     73.0
------------------------------------------------------------------------------------------------------
                  El Calichal     66.70      66.95          0.25         0.14        39.65     33.4
------------------------------------------------------------------------------------------------------
PLC03-015         Rosa            no significant high grade intercepts;
------------------------------------------------------------------------------------------------------
PLC03-016         Rosa West       39.55      40.15          0.6          0.4         17.03     9.2
------------------------------------------------------------------------------------------------------
PLC03-017         Rosa West       36.0       36.85          0.85                     10.9      9.8
------------------------------------------------------------------------------------------------------
                                  85.5       86.9           1.4                      8.7       3.5
------------------------------------------------------------------------------------------------------
PLC03-020                         84.25      86.25          2.0                      9.0       pending
------------------------------------------------------------------------------------------------------
PLC03-023                         7.25       7.65           0.4                      26.9      41.4
------------------------------------------------------------------------------------------------------
                                  103.95     104.8          0.85                     9.3       pending
------------------------------------------------------------------------------------------------------
PLC03-024                         131.75     132.55         0.80                     7.3       pending
------------------------------------------------------------------------------------------------------
</TABLE>

Notes:   Results up to PLC03-16 are from the Company's news releases, checked
         against the drill data base by Ronning. Values reported may differ
         slightly from news releases due to current availability of more check
         analyses. Intercepts are down hole length. True widths, where shown,
         are from the Company's news releases.

<PAGE>
                                       36



The drill results listed in the above table demonstrate that the selectively
mineable vein model is a viable target at La Calera.

The new information generated by exploration has demonstrated that a second
model for an exploitable target needs to be considered. In the vicinity of the
veins there are zones of stringer mineralization. They have, in aggregate,
considerably lower grade than the discrete veins. However, if sufficient volume
of stringer mineralization with sufficient grade were to be found, there might
be an opportunity for bulk mining by way of an open pit, at grades lower than
can be mined using selective methods.

The Company has analyzed some sections of drill core that had previously not
been analyzed because they were outside the higher grade veins. The following
table, derived from a Company news release, re-states the results for some holes
using additional analyses not previously available and a cut off of 0.62 grams
gold per tonne.

            SUMMARY OF LA CALERA DRILL RESULTS AT 0.62 G AU/T CUT OFF

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
DRILL HOLE        VEIN TESTED         FROM        TO          INTERCEPT      GOLD G/T     SILVER G/T
                                      METERS      METERS        METERS
----------------------------------------------------------------------------------------------------
<S>               <C>                <C>          <C>           <C>            <C>        <C>
PLC03-005         Rosa West           36.45        45.9          9.45          6.84           4.1
----------------------------------------------------------------------------------------------------
                                      65.9         72.8          6.9           4.58           2.6
----------------------------------------------------------------------------------------------------
                                      90.25       105.0         14.75          6.67           8.3
----------------------------------------------------------------------------------------------------
PLC03-006         Rosa                54.55        65.55        11.0           1.24           1.3
----------------------------------------------------------------------------------------------------
PLC03-007         Rosa                37.6         62.55        24.95          2.38           1.0
----------------------------------------------------------------------------------------------------
PLC03-008         Rosa                15.3         21.9          6.6           4.26           2.8
----------------------------------------------------------------------------------------------------
PLC03-009         no significant low grade intercepts
----------------------------------------------------------------------------------------------------
PLC03-010         no significant low grade intercepts
----------------------------------------------------------------------------------------------------
PLC03-011         Rosa West          122.7        151.05        28.35          2.33           2.2
----------------------------------------------------------------------------------------------------
PLC03-012         no significant low grade intercepts
----------------------------------------------------------------------------------------------------
PLC03-013         Rosa                79.0         98.15        19.15          2.22       pending
----------------------------------------------------------------------------------------------------
PLC03-014         no significant low grade intercepts
----------------------------------------------------------------------------------------------------
PLC03-015         Rosa               175.05       183.0          7.95          1.44       pending
----------------------------------------------------------------------------------------------------
PLC03-016         no significant low grade intercepts
----------------------------------------------------------------------------------------------------
</TABLE>

The drill results to date have confirmed that the low sulphidation epithermal
system at La Calera contains gold and silver mineralization whose grades, if
present in a sufficient volume of rock with a configuration amenable to mining,
might be exploited profitably. The project is still at an early stage of
exploration.
<PAGE>
                                       37


SAMPLING AND ANALYSIS

The procedures for sampling and analysis of material from La Calera are similar
to those procedures described for the El Dorado Project.

SECURITY OF SAMPLES

The handling and security of samples from the La Calera Project is similar to
that for El Dorado.

MINERAL RESOURCES AND RESERVE ESTIMATES

La Calera is an early stage exploration project, not sufficiently advanced to
warrant resource or reserve estimates.

MINING OPERATION

There are no mining operations on the La Calera Project.

EXPLORATION AND DEVELOPMENT

The Company expects to continue with the kind of exploration work already in
progress on the La Calera Project. Future work may include reconnaissance work
beyond the 150 hectare area of known mineralization. Moving away from the known
area, veins may be hidden under younger cover rocks. It may be necessary to
employ geophysical exploration techniques in addition to surface geological work
and drilling.

CERRO GASPAR, EL SALVADOR

The Company entered into an agreement dated August 1, 2002, to form a joint
venture with Brett Resources Inc. on the Cerro Gaspar Project, northeastern El
Salvador. The Cerro Gaspar project is approximately 100 kilometers east of the
Company's El Dorado gold project. Cerro Gaspar is a high-level adularia-sericite
epithermal system with a known strike length of 5 kilometers. At the south end
of the system, a series of shallow old workings expose a banded quartz vein.

Under the terms of the agreement, the Company had the right to earn a 60%
interest in the project by making staged exploration expenditures totalling $1.5
million over five years.

The Company conducted a surface sampling and geologic mapping program to
identify drill targets. The Company has decided not to pursue the option and is
notifying Brett that it is terminating the option.

THERE ARE NO KNOWN ORE RESERVES ON THE CERRO GASPAR PROJECT AND ALL WORK
PROGRAMS ON THE PROPERTY ARE EXPLORATORY SEARCHES FOR ORE GRADE MINERALIZATION.


PROPERTIES IN ARGENTINA

During 1997 and 1998, the Company evaluated a large number of alteration systems
in northern Argentina through its reconnaissance generative program making use
of a proprietary database that includes satellite imagery, a regional geologic
compilation, regional geochemistry and in-house structural interpretations.
During this evaluation the Company identified and acquired by staking two
projects known as the Prometedora and San Francisco Projects.


<PAGE>
                                       38



PROMETEDORA PROJECT

THERE ARE NO KNOWN ORE RESERVES ON THE PROMETEDORA PROJECT AND ALL WORK PROGRAMS
ON THE PROPERTY ARE EXPLORATORY SEARCHES FOR ORE GRADE MINERALIZATION.

The Company has staked and filed a 3,500 hectare claim in the Province of Salta
covering an alteration system measuring 3.5 by 1.5 kilometers and striking to
the northwest.

Work to date has included detailed geological mapping and sampling which has
identified a large semicircular gold anomaly related to a porphyry system. Gold
mineralization is generally without copper and coincides with the hydrous
phyllic alteration halo. The Company is looking for a partner to drill this
prospect.

SAN FRANCISCO PROPERTY

THERE ARE NO KNOWN ORE RESERVES ON THE SAN FRANCISCO PROPERTY AND ALL WORK
PROGRAMS ON THE PROPERTY ARE EXPLORATORY SEARCHES FOR ORE GRADE MINERALIZATION.

The Company has staked and registered a 3,600 hectare claim block in the
Province of Jujuy covering a 500 meter wide by 3,500 meter long alteration
system that the Company believes is related to a low-sulphidation type
epithermal system. The 100% owned property is located five kilometers from a
major highway.

Surface rock sampling, ground geophysics, geologic mapping and 13 reverse
circulation drill holes have been completed to date. The quartz-pyrite cap was
intercepted in a number of holes and is approximately 30 to 40 meters thick and
contains 0.3-0.4 g/t gold mineralization. Deeper RC drill holes intersected
narrow but rich vein intervals including: SF-6 which intercepted two meters
averaging 266 g/t Ag; SF-12 which intercepted a 21 meter interval averaging 45
g/t Ag and 3.3% Zn.

The Company believes that additional drilling is warranted as these type of
targets are generally small tonnage making them tough to hit but very high grade
which makes them worth the effort. The Company does not have a further drilling
program planned at this time. The Company is looking for a partner to explore
this property further.

ANDACOLLO MINE, CHILE

The Andacollo Mine is closed and to facilitate its closure the Chilean courts
approved a plan to protect it from its creditors while the assets are being
disposed of. CMD, the owner of the mine, is not subject to managerial control of
the Company. This mine was an 18,000 tonne per day heap leach operation. It
operated from 1996 to October 2000. The creditor plan contemplates paying off
all of the creditors, including the Company from the proceeds of the sale of the
plant and ancillary equipment and from proceeds of production from the residual
leaching of the heap leach pads.

A final closure plan for the Andacollo Mine was approved by representatives of
the Chilean government. As part of the creditors plan, minesite personnel are
completing final reclamation of the open pits and waste dumps and contributing
cash to a reclamation fund. This fund contained $2.05 million at April 30, 2003.
See Item 3D - Risk Factors - (iii) Solvency and Closure Risk at Andacollo.

<PAGE>
                                       39


ITEM 5:     OPERATING AND FINANCIAL REVIEW AND PROSPECTS

This Item 5 should be read in conjunction with and is qualified by the audited
financial statements and the related notes that have been prepared in accordance
with accounting principles generally accepted in Canada. Reference should be
made to Note 15 of such financial statements for reconciliation of Canadian and
United States generally accepted accounting principles. Also see Item 3 - Risk
Factors and "Note Regarding Forward Looking Statements".

The Company was formed on April 11, 2002 by the amalgamation of Dayton Mining
Corporation ("Dayton") and Pacific Rim Mining Corp. ("PacRim") as approved by
the shareholders of both Dayton and PacRim on April 3, 2002 and by the Supreme
Court of British Columbia on April 10, 2002. Each Dayton shareholder received
1.76 common shares of the Company in exchange for each Dayton common share held
and each PacRim shareholder received one common share of the Company in exchange
for each PacRim common share held. The financial year end of Dayton was December
31 and the financial year end of PacRim was April 30. The year end of the
Company is April 30. Reference should be made to Note 1 c. of the financial
statements for details on how the amalgamation has been accounted for.

FINANCIAL REVIEW

The Company's principal source of revenue is the sale of its share of gold from
the Denton-Rawhide mine, and its main use of funds is in exploration on its El
Salvador projects. The Company is financially dependent on production rates at
Denton-Rawhide, and the price the Company receives per ounce of gold sold. The
Company has limited financial resources and there is no assurance that operating
cash flow from Denton-Rawhide will be sufficient, or that additional funding
will be available in the future, for it to conduct further exploration or make
future acquisitions.

- Revenue

Revenue, consisting of the sale of gold from the Denton-Rawhide mine, was $12.5
million in the fiscal year ended April 30, 2003 ("Fiscal 2003"), $5.3 million in
the four month period ending April 30, 2002 and $14.9 million in the fiscal year
ended December 31, 2001. The lower-than-expected gold production in 2003 was
largely offset by higher gold prices during the period, resulting in a slight
decline in sales in 2003.

Mine operating costs were $9.0 million in Fiscal 2003, compared to $4.5 million
in the four month period ended April 30, 2002 and $13.5 million in the fiscal
year ended December 31, 2001. The decrease in monthly operating costs is largely
attributable to the cessation of active mining at the Denton-Rawhide mine in
October 2002. Crushing and stacking of the stockpiled ore continued through the
remainder of Fiscal 2003. Offsetting the improved operating costs was a
write-down during Fiscal 2003 of $1.3 million, representing a reduction in the
carrying value of the Company's 49% interest in the Denton-Rawhide mine
(referred to in Note 7 of the financial statements). Operating results, while
still reflecting a loss, have nonetheless improved steadily to a loss of $0.8
million in Fiscal 2003, compared to $0.4 million in the four month period ending
April 30, 2002 and $1.6 million in fiscal year ended December 31, 2001. Before
the $1.3 million write-down of Denton-Rawhide's carrying value, operating
profits of approximately $0.3 million were realized.

- Expenses

Net non-operating expenses increased during Fiscal 2003 to $2.5 million,
compared to $1.2 million in the four month period ended April 30, 2002 and $1.8
million in fiscal year ended December 31, 2001. Fiscal 2003 expenses reflect
significantly increased exploration expenditures of $3.3 million (versus $0.3

<PAGE>
                                       40


million in the four month period ended April 30, 2002 and $0.7 million in fiscal
year ended December 31, 2001), offset by a gain of $0.9 million from the sale of
PacRim's Diablillos project in 2001 and a gain of $1.0 million from the sale of
Silver Standard Resources stock received in payment for Diablillos. Expenses
totaling $1.2 million for the four month period ended April 30, 2002 included
$0.7 million in amalgamation costs for that period, with no comparable item for
either fiscal year ended December 31, 2001 or Fiscal 2003. General and
administrative costs have improved to $0.9 million in Fiscal 2003, compared to
$0.4 million in the four month period ended April 30, 2002 and $1.1 million in
fiscal year ended December 31, 2001. The Company received $0.5 million in
creditor payments from CMD related to the sale of a portion of CMD's Andacollo
assets during Fiscal 2003.

LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION

- Cash Flow

During Fiscal 2003, cash and cash equivalents decreased by $1.5 million, from
$2.6 million at April 30, 2002 to $1.1 million at April 30, 2003. This reflects
cash outlays of $3.3 million in exploration expenditures, $0.9 million in
general and administrative costs and $0.2 million in miscellaneous expenditures,
offset in part by proceeds from the sale of Silver Standard stock totaling $2.6
million and creditor repayments from CMD of $0.5 million.

Cash flow used for operating activities increased to $4.0 million in Fiscal
2003, compared to $0.6 million in fiscal four month period ended April 30, 2002
and $2.4 million in fiscal year ended December 31, 2001. The 2003 increase is
primarily due to a build up in heap leach inventories at the Denton-Rawhide
mine, increased closure costs at Denton-Rawhide and severance payments related
to the Dayton-PacRim amalgamation.

Cash flow provided by investing activities was negative $0.02 million in Fiscal
2003, compared to $1.3 million in fiscal four month period ended April 30, 2002
and negative $0.5 million in fiscal period ended December 31, 2001. The four
month period ended April 30, 2002 figure includes $1.5 million in cash acquired
through the amalgamation, for which there is no comparable item in either Fiscal
2003 or fiscal year ended December 31, 2001.

Cash flow from financing activities increased to $2.6 million in Fiscal 2003,
from $0.2 million in the four month period ended April 30, 2002 and $0.03
million in the fiscal year ended December 31, 2001. This significant increase in
Fiscal 2003 is due to $2.6 million in proceeds from the sale of Silver Standard
stock received on the sale of PacRim's Diablillos project.

- ASSETS

The Company's assets consist primarily of cash and cash equivalents, its 49%
interest in the Denton-Rawhide mine (including heap leach inventories and the
closure fund), and the El Salvador projects (refer to Notes 4, 5, 6 and 8 of the
financial statements). At April 30, 2003, the Company's total current assets
were $10.6 million, down from $12.6 million the year prior. This decrease is
primarily due to a decrease in both cash and investments from $2.6 million and
$0.8 million respectively at April 30, 2002 to $1.1 million and nil respectively
at April 30, 2003. Total inventories increased from $9.2 million at April 30,
2002 to $11.4 million at April 30, 2003. A portion of the inventories were
reclassified as long term assets during fiscal 2003 to reflect that portion of
recoverable gold inventories in the heap leach process that will not be
recovered in the coming fiscal year.

The net book value of property, plant and equipment decreased to $5.5 million at
April 30, 2003 from $9.5 million at April 30, 2002. This $4.0 million reduction
in the carrying value of property, plant and equipment reflects the $1.3 million
write-down of mining interests noted in the review of operations above, as well
as depreciation charges of $2.7 million.


<PAGE>
                                       41



At April 30, 2003, the book value of the Company's total assets stood at $21.4
million, down from $25.3 million reported at April 30, 2002.

The Company, as a creditor of CMD, was repaid $0.5 million during Fiscal 2003.
The Company is owed a further $0.7 million by CMD and believes this amount, or
more, will be recovered from the sale of assets associated with the Andacollo
mine, including plant and mining equipment, tax losses and water rights. The
eventual recovery of such amounts is uncertain and therefore has not been
recorded as a receivable of the Company as at April 30, 2003.

- Liabilities

The Company's liabilities consist of normal course trade payables and a loan
obligation to a related company that is fully repayable by December 31, 2004,
with a provision for prepayments of the loan out of 25% of the net cash flow
from the Denton-Rawhide mine. Current liabilities as of April 30, 2003 were $2.9
million, including $0.2 million of estimated Rawhide cash flow prepayment due to
the related party in the coming year (refer to Note 14 of the financial
statements). Current liabilities also include $1.5 million in closure costs to
be incurred during fiscal 2004.

- Working Capital

The Company's working capital at April 30, 2003 was $7.6 million, compared to
$8.6 million at April 30, 2002, a decrease due to the reduction of cash and cash
equivalents and the reclassification of a portion of inventories at
Denton-Rawhide from current to long term assets.

- Shareholders' Equity

Shareholders' equity was $15.0 million at April 30, 2003, reduced from $17.7
million at April 30, 2002. This decline is due to the Company's increased
deficit, itself a function of the net loss of $2.8 million realized during
fiscal 2003.

ENVIRONMENTAL AND SOCIAL RESPONSIBILITY

The Company is committed to the principal of sustainability. The Company is
currently conducting base line environmental studies at the El Dorado and La
Calera projects in El Salvador in the event that either project achieves future
production, and conducts its exploration programs so as to minimize the impact
on the environment.

The Company has established a closure fund of $3.4 million (fair market value of
$3.7 million) as of April 30, 2003, to fund its portion of the reclamation costs
associated with closure of the Denton-Rawhide mine. Current reclamation work is
being funded from operating cash flows. $1.5 million in reclamation expenditures
(the Company's portion) are anticipated to be spent at Denton-Rawhide in the
coming fiscal year, with no further trust funding required. A closure plan for
the Denton-Rawhide mine has been submitted to the appropriate agencies for
approval.

As part of the Andacollo closure plan, CMD has deposited $2.1 million into a
trust to provide funding for future expenditures related to closure of the mine.
These funds were derived from the sale of the Andacollo mine assets and from the
sale of gold produced in the mine's final stages of releaching. The reclamation
plan at the Andacollo mine in Chile conforms to North American practices.

<PAGE>
                                       42


The Company considers itself a guest in the jurisdictions in which it conducts
exploration and strives to operate in a culturally sensitive, fair, and mutually
beneficial manner. Wherever possible, local residents are hired for both labour
and skilled positions. The Company has implemented health and safety programs
for its employees in Canada, the US, Chile and El Salvador.

RISKS AND UNCERTAINTIES

The Company's sole operating asset is its 49% non-operating interest in the
Denton-Rawhide mine in Nevada. The Company's profitability and capacity to
generate positive cash flow is directly related to the prevailing market price
for gold and silver, the Company's share of production from this operation and
the ability of the Denton-Rawhide mine operator to control the costs of
production.

The Company's revenues are closely linked to the price of gold, which is
affected by numerous factors beyond the Company's control, including: the
exchange rate of the US dollar relative to other major currencies; global
political and economic conditions; central bank sales; and other factors. The
Company currently has no hedge contracts in place to mitigate fluctuations in
the gold price.

Kennecott Minerals Company, 51% owner and operator of the Denton-Rawhide mine,
is currently modifying the official mine plan, in part because of production
shortfalls experienced at the mine during Fiscal 2003. Consequently, the Company
is not able at this time to reliably estimate its share of production from the
Denton-Rawhide gold mine for fiscal 2004. Kennecott has conservatively estimated
that the Denton-Rawhide heap leach pad contains a total inventory of 80,259
ounces of gold and 806,717 ounces of silver as at April 30, 2003.

The Company expects to incur considerable exploration expenditures during the
coming fiscal year (ended April 30, 2004) advancing its flagship El Dorado and
La Calera gold projects in El Salvador. The Company's ability to conduct this
exploration depends on free cash flow generated by the Denton-Rawhide gold mine.
The results of ongoing drilling at these projects may warrant additional
expenditures and there can be no assurance that the Company will be able to
secure adequate financing, under favorable terms, to advance the project.
Failure to obtain such additional financing could result in the delay or
indefinite postponement of further exploration and development of the El Dorado
and La Calera projects.

Mining operations are generally subject to a number of risks and potential
hazards, including operating accidents, labour disputes, and unanticipated
environmental occurrences. The Denton-Rawhide joint venture is insured against
typical mining-related risks that are economically insurable, however, there are
no assurances that this insurance will provide adequate coverage under all
circumstances.

The Company's mining operations and exploration and development projects are
subject to various laws and regulations. The Company believes it is in
compliance with the laws and regulations in all of the jurisdictions in which it
operates. The Company is not aware of any changes to these laws or regulations
that would have a material impact on the financial condition of the Company.

OUTLOOK

The Company anticipates continued gold production from the Denton-Rawhide mine
through fiscal 2004 and beyond. A substantial decrease in operating costs at the
Denton-Rawhide Mine is expected during fiscal 2004, as the operation moves into
the residual leaching phase of the mine life and cash costs are limited to the
pumping and processing of leaching solutions. This is anticipated to positively
benefit the Company's cash flow during the coming years.

<PAGE>
                                       43


Funds will continue to be expended predominantly on El Salvador exploration,
including continued drilling to define and expand the resources on the El Dorado
and La Calera projects. An updated resource estimate for the El Dorado project
is expected in the fall of 2003. The Company anticipates calculating a first
ever resource estimate for the La Calera project sometime during fiscal 2004.

The Company does not conduct research and development, nor does it hold patents
and licenses in its business.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with Canadian generally
accepted accounting principles requires the Company to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. The Company evaluates its estimates on an
ongoing basis and bases them on various assumptions that are believed to be
reasonable under the circumstances.

The Company's estimates form the basis for making judgments about the carrying
value of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different
assumptions or conditions.

The consolidated financial statements have been prepared on a going concern
basis in accordance with Canadian generally accepted accounting principles,
which assumes that the Company will continue in operation for the foreseeable
future and be able to realize its assets and discharge its liabilities and
commitments in the normal course of business.

The ability of the Company to continue as a going concern and the recoverability
of amounts shown in the consolidated financial statements for mineral properties
is dependent on the ability of the Company to obtain the necessary financing to
meet the Company's commitments and liabilities as they become payable, to
discover economically recoverable reserves and on the future profitable
production, or proceeds from disposition, of the Company's mineral properties.
The Company is in the process of exploring its mineral properties, except for
the Denton-Rawhide property, and has not yet determined whether the properties
contain mineral reserves that are economically recoverable. Development of any
property may take years to complete and the amount of resulting income, if any,
is difficult to determine with any certainty. The sales value of any
mineralization discovered by the Company is largely dependent upon factors
beyond the Company's control, such as the market value of the gold recovered.

The Company believes that it has the ability to obtain the necessary financing
to meet commitments and liabilities as they become payable and that economically
recoverable reserves will be discovered. As such, the financial statements do
not reflect adjustments that would be necessary if the Company is unable to
continue as a going concern. If the going concern assumption is not appropriate
for the financial statements, then adjustments would be necessary in the
carrying value of assets and liabilities, the reported net losses, and the
balance sheet classifications used.

While the Company believes that economically recoverable reserves will be
identified, there is no assurance that this will occur. Failure to discover
economically recoverable reserves will require the Company to write-off costs
capitalized to date and will result in further reported losses.


<PAGE>
                                       44

Environmental expenditures that relate to ongoing environmental and reclamation
programs are charged against earnings as incurred or capitalized and amortized
depending on their future economic benefits. Estimated future removal and site
restoration costs, when the ultimate liability is reasonably determinable, are
charged against earnings over the estimated remaining life of the operation, net
of expected recoveries. The Company's share of estimated closure costs
associated with the Denton-Rawhide Mine at the time of acquisition was
recognized in full as part of the acquisition cost. Increases in estimates of
closure liabilities subsequent to the acquisition of Denton-Rawhide are accrued
on a unit of production basis over expected future recoverable ounces of
production.

EFFECT OF INFLATION

In the Company's view, at no time during any of the last three fiscal years have
inflation or changing prices had a material impact on the Company's sales,
earnings or losses from operations, or net earnings, other than the price of
gold.

See Item 3D "Risk Factors" and Item 4 "Information on the Company" and "Business
Overview" for additional risk and trend information

ITEM 6.    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

6A.     DIRECTORS AND SENIOR MANAGEMENT

Each of the Company's directors is elected by the Company's shareholders at an
annual general meeting to serve until the next annual general meeting of
shareholders, scheduled to be held October 8, 2003, or until a successor is
elected or appointed. The current members of the Board have been nominated for
reelection at the next annual general meeting by management. The Board of
Directors appoints the Company's executive officers annually after each annual
general meeting, to serve at the discretion of the Board of Directors.

The following table discloses the name, age and function with the Company (and
the Predecessor Companies) of its directors and executive officers as of July
31, 2003, together with business experience, principal business activities
performed outside of the Company (including in the case of directors other
principal directorships).

THOMAS C. SHRAKE (49) - Chief Executive Officer and Director of PacRim since
1997. Member of the Environmental Committee. Master of Science (Economic
Geology) and Bachelor of Arts (Geology) . From 1993 to 1996 Vice President,
Exploration for Gibraltar Mines Limited and from 1990 to 1993 Exploration
Manager with Placer Dome Inc., both publicly traded mining companies.

CATHERINE MCLEOD-SELTZER (43) - President and Director of PacRim since 1997.
Business Degree. From 1993 to 1996 President, Chief Executive Officer and
Director of Arequipa Resources Ltd., a publicly traded mining company. From 1985
to 1993 employed by Yorkton Securities Inc., a Canadian investment dealer,
initially as an institution trader followed by three years as a broker.
Currently also a director of Corriente Resources Inc. since November 1996;
director of Francisco Gold Corp. from July 1993 to June 2002, director of
Madison Enterprises Inc. since April 1997, director of Bear Creek Mining
Corporation (formerly Eveolution Ventures Inc.) since April 2000 and Miramar
Mining Corp. since 2001. Director of Silver Standard Resources Inc. since March
2002.

ANTHONY J. PETRINA, P.ENG. (68) - Director of PacRim since 1997. Member of the
Audit and Environmental Committees. Bachelor of Science (Mining Engineering).
From 1960 to 1992 employed by Placer Dome Inc., a publicly traded mining
company, most recently President, Chief Executive Officer and Vice-Chairman
until his retirement in 1992. Currently also a director of Miramar Mining Corp.
since January 1995, TimberWest Forest Corp. since June 1997 and Bear Creek
Mining Corporation since April 2003.

<PAGE>
                                       45


WILLIAM H. MYCKATYN, P.ENG. (53) -Director of PacRim since 1998. Director and
Chairman of the Company since April 2002. Member of the Compensation and
Environmental Committees. Bachelor of Applied Science (Mineral Engineering).
From 1993 to 1996 President and Chief Executive Officer and from 1991 to 1993
Mine Manager for Gibraltar Mines Limited, a publicly traded mining company. From
1997 to 1998 President and Chief Executive Officer of Princeton Mining
Corporation. From June of 1998 to April 2002, director, Chairman and Chief
Executive Officer of Dayton.

ROBERT M. BUCHAN, P.ENG. (58) - Director of Dayton since 2000 (as a Kinross
nominee). Director of the Company and member of the Compensation Committee- From
1993 to present Chairman and Chief Executive Officer of Kinross Gold Corporation
(a public mining company).

DAVID K. FAGIN, P.ENG. (65 ) - Director of the Company and member of the Audit
Committee and the Compensation Committee. Investor. Formerly President of
Homestake Mining Company. Director of Golden Star Resources Ltd. from 1992 to
present. Director of Canyon Resources Corporation from 2000 to present. Director
of the public mutual funds of T.Rowe Price Group (a mutual fund company) 1987 to
present. Former director and Chairman of Western Exploration and Development
Ltd. 1997 to 2000.

PAUL B. SWEENEY, CA (53) - Director of the Company since July 2003. Vice
President and Chief Financial Officer of Canico Resource Corp. since February
2002. Chief Financial Officer and Corporate Secretary of Manhattan Minerals
Corp. from 1999 to May 2001. Vice President Finance and Chief Financial Officer
of Sutton Resources Ltd. from 1998 to 1999.

F. JOHN NORMAN, CA (64) - Controller of Dayton since 2000. Chief Financial
Officer of the Company since August 2003.

KATHRYN A. CHURCH (48) - Corporate Secretary and Vice-President of
Administration of PacRim since 1997. From 1994 to 1996 Corporate Administrator
for Eldorado Gold Corporation and HRC Development Corporation, publicly traded
mining companies. From 1987 to 1994 securities legal assistant with prominent
Vancouver law firm.

BARBARA HENDERSON (38) - Master of Science (Geology). Vice President Investor
Relations of the Company since August 2002. Manager of Investor Relations for
Pac Rim since 1998. Investor Relations Manager for Zen International Resources
Ltd. from 1998 to 1998, for Baramundi Gold Ltd. in 1997 and Noble Peak Resources
Ltd. from 1996 to 1997.

There are no family relationships between any of the above. Neither is there any
arrangement or understanding with major shareholders, customers, suppliers or
others, pursuant to which any person referred to above was selected as a
director or member of senior management.

6B.     COMPENSATION OF DIRECTORS AND OFFICERS

SUMMARY COMPENSATION TABLE

Effective April 11, 2002 Dayton Mining Corporation ("Dayton") and Pacific Rim
Mining Corp. (PacRim") (Dayton and PacRim collectively referred to as the
"Predecessor Companies") amalgamated to form the Issuer. Each shareholder of
Dayton received 1.76 shares of the Issuer for each share held and each
shareholder of PacRim received one share of the Issuer for each share held.
Outstanding stock

<PAGE>
                                       46


options were converted on the same basis. For the three most recently completed
financial years ended April 30, 2003, April 30, 2002 (four months), December 31,
2001 and December 31, 2000, in respect of the Chief Executive Officer ("CEO")
and for each of the Issuer's four most highly compensated executive officers as
at April 30, 2003 (other than the CEO), whose total salary and bonus exceeds
Cdn$100,000, and any other additional individuals for whom disclosure would have
been provided but for the fact that the individual was no longer an executive
officer as at April 30, 2003 (the "Named Executive Officers"), the annual and
long-term compensation and bonus is set out below. (NOTE: ALL DOLLAR AMOUNTS ARE
IN CANADIAN CURRENCY AND US AMOUNTS HAVE BEEN CONVERTED ON THE BASIS OF $1.52
CANADIAN FOR $1 US). The amounts include amounts paid by Predecessor Companies.
Stock options granted by Dayton are shown as options of the Company converted on
the basis of 1.76 for each option granted.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
                                       Annual Compensation                          Long Term Compensation
---------------------------------------------------------------------------------------------------------------------------
                                                                                  Awards               Payouts
---------------------------------------------------------------------------------------------------------------------------
                                                                                       Restricted
                                                           Other         Securities     Shares or                    All
                                                           Annual           under      Restricted                   Other
        Name and                                         Compensa-         Options        Share          LTIP     Compensa-
       Principal                    Salary     Bonus        tion           granted        Units        Payouts     tion(1)
        Position           Year    (Cdn.$)      ($)         ($)              (#)           ($)           ($)       (Cdn.$)
---------------------------------------------------------------------------------------------------------------------------
<S>                        <C>     <C>          <C>         <C>            <C>            <C>            <C>        <C>
SHRAKE(2), Thomas          2003    $190,000     Nil         Nil                Nil        Nil            Nil         Nil
Chief Executive            2002     $63,333     Nil         Nil            420,000        Nil            Nil         Nil
Officer and                2001    $190,000     Nil         Nil            387,000        Nil            Nil         Nil
Director                   2000    $190,000     Nil         Nil                Nil        Nil            Nil         Nil
---------------------------------------------------------------------------------------------------------------------------
MCLEOD-SELTZER(3),         2003    $132,383     Nil         Nil                Nil        Nil            Nil        $5,884
Catherine                  2002     $47,000     Nil         Nil            420,000        Nil            Nil         $235
President and              2001    $141,000     Nil         Nil            441,000        Nil            Nil         Nil
Director                   2000    $141,000     Nil         Nil             35,200        Nil            Nil         Nil
---------------------------------------------------------------------------------------------------------------------------
NORMAN, F. John            2003    $127,083     Nil         Nil                Nil        Nil            Nil        $6,595
Chief Financial            2002     $40,000     Nil         Nil            130,000        Nil            Nil        $3,576
Officer(4)                 2001    $100,833     Nil         Nil                Nil        Nil            Nil        $7,554
                           2000     $61,870     Nil         Nil             79,200        Nil            Nil         $540
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

     (1) These amounts include benefits and contributions made by the Company on
         behalf of the Named Executive Officers to a retirement compensation
         arrangement and/or a group or individual RSP.

     (2) CEO and Director of PacRim since 1997.

     (3) President and Director of PacRim since 1997.

     (4) Controller of Dayton since 2000 and Chief Financial Officer of Pacific
         Rim Mining Corp. since August of 2002.

<PAGE>
                                       47


             OPTIONS GRANTED IN FINANCIAL YEAR ENDED APRIL 30, 2003

None of the Named Executive Officers were granted stock options during the most
recently completed financial year.

             AGGREGATED OPTION EXERCISES IN LAST FINANCIAL YEAR AND
                        FINANCIAL YEAR-END OPTION VALUES

The following table sets forth details of all exercises of stock options during
the most recently completed financial year ended April 30, 2003, if any, by the
Named Executive Officers and the financial year-end value of unexercised options
on an aggregated basis:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                                                                Unexercised Options        Value of Unexercised
                                                                   at Financial            In-the-Money Options
                         Securities          Aggregate               Year-End              at Financial Year-End
                        Acquired on            Value                    (#)                     (Cdn.$)(2)
                          Exercise           Realized              Exercisable/                Exercisable/
        Name               (#)(1)             (Cdn.$)              Unexercisable               Unexercisable
----------------------------------------------------------------------------------------------------------------
<S>                         <C>                 <C>               <C>                         <C>
Thomas Shrake               Nil                 Nil               738,000/269,000             $29,670/$14,835
----------------------------------------------------------------------------------------------------------------
Catherine                   Nil                 Nil               897,200/287,000             $33,810/$16,905
McLeod-Seltzer
----------------------------------------------------------------------------------------------------------------
F. John Norman              Nil                 Nil               165,867/43,333                   $0/$0
----------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Value of unexercised in-the-money options calculated using the closing
     price of common shares of the Company on The Toronto Stock Exchange (the
     "TSX") on April 30, 2003 of Cdn.$0.405 less the exercise price of any
     in-the-money stock options.

DEFINED BENEFIT OR ACTUARIAL PLAN DISCLOSURE

The Company does not provide retirement benefits for Directors and executive
officers.

TERMINATION OF EMPLOYMENT, CHANGE IN RESPONSIBILITIES AND EMPLOYMENT CONTRACTS

Mr. Thomas Shrake, Chief Executive Officer, has employment agreements dated
February 14, 1997 with the Company and one of its wholly owned subsidiaries
respecting his employment, pursuant to which Mr. Shrake receives an annual
salary of $125,000 and regular benefits. The agreements provide that in the
event that Mr. Shrake's employment is terminated for reasons other than just
cause, Mr. Shrake will be entitled to receive a severance package comprising a
payment equal to 12 months salary plus one month's salary for each year of
completed service after one year to a maximum total of 24 months salary,
together with benefits for the severance period. In addition Mr. Shrake would be
entitled to exercise all incentive stock options held by him up to the close of
business on the 30th day following termination.

Ms. Catherine McLeod-Seltzer, President of the Company, has an employment
agreement with the Company dated September 15, 1997, as amended, pursuant to
which she receives an annual salary of Cdn$141,000 plus reimbursement of general
expenses not to exceed Cdn$2,000 per month and regular benefits. The agreement
provides that in the event the Company terminates Ms. McLeod-Seltzer's

<PAGE>
                                       48


employment for reasons other than just cause, Ms. McLeod-Seltzer will be
entitled to receive a severance package comprising a payment equal to 18 months
salary plus one month's salary for each year of completed service after August
1, 1997 to a maximum total of 24 months salary, together with benefits for the
severance period. In addition, Ms. McLeod-Seltzer would be entitled to exercise
all incentive stock options held by her at the time of such termination up to
the last day of the last day of business of the term of any share option
agreement.

Mr. F. John Norman, Chief Financial Officer of the Company, has an employment
agreement with the Company dated August 15, 2002, pursuant to which he receives
an annual salary of Cdn$130,000 and regular benefits. Under the terms of the
agreement Mr. Norman will be granted an additional 40,800 stock options under
the Company's 2002 Option Plan. The agreement provides that in the event the
Company terminates Mr. Norman's employment for reasons other than just cause he
will be entitled to a severance package comprising a payment equal to 12 months
salary on a change of control or six months salary for any other termination
event, together with benefits or an amount equal to the value of the benefits
for the severance period. Mr. Norman will have 30 days from the date of
termination to exercise any vested incentive stock options held by him at the
time of termination.

6C.     BOARD PRACTICES

The Company's Board of Directors is currently comprised of seven persons, six of
whom were elected at the annual general meeting of shareholders on October 10,
2002 and one of whom was appointed as an additional director by the Board in
accordance with the Articles of the Company. The current term of office for all
the directors will expire at the next annual general meeting. The Company has
scheduled the next annual general meeting to be held October 8, 2003, at which
time all seven of the current directors will be nominated for re-election. The
position of Chairman of the Board of the Company is separate from that of the
CEO. The incumbent Chairman is not a member of the Company's management. See
Item 6A Directors and Senior Management.

The Board holds meetings on a regular basis to review the Company's business
plans and strategy as well as to consider and approve particular matters. In
addition routine matters are approved by consent resolutions in writing which
require unanimous consent of all directors. All matters of strategic importance
require prior review and approval of the Board as well as any material
expenditures or legal commitments, debt or equity financings, acquisitions and
divestitures, financial statements and major disclosure documents.

There are no service contracts between the Company or any of its directors for
benefits upon termination of employment, except as disclosed in Item 6B above
with respect to the employment contracts of Mr. Shrake, CEO, and Ms.
McLeod-Seltzer, President.

BOARD COMMITTEES

The only committees of the Board presently consist of an Audit Committee, a
Compensation Committee and an Environmental Committee. The TSX guidelines
recommend that board committees be composed exclusively of outside directors
(non-management directors) the majority of which are unrelated Directors. AMEX
rules require all committee members to be outside directors. Where possible,
given the size of the Company's Board, the Company endeavours to comply with all
governing rules and regulations. All of the Company's committees have Board
approved Terms of Reference which set out the duties of the respective
committees.

<PAGE>
                                       49


- Audit Committee

The Audit Committee is currently composed of three outside directors, Fagin
(Chair), Sweeney and Petrina, none of which are employees or officers and all of
whom are unrelated. All members of the Audit Committee are financially literate.
The Audit Committee is authorized to review and approve the financial statements
of the Company and the overall scope and results of the audit and internal
financial controls of the Company. The Audit Committee communicates with the
external auditors and meets with them at least once a year. The Audit Committee
meets at least four times a year.

- Compensation Committee

The Compensation Committee is composed of Messrs. Myckatyn (Chair), Buchan and
Fagin, three outside directors the majority of which are unrelated. The overall
purpose of the Compensation Committee is to make recommendations to the Board
for human resources and compensation policies and to implement and oversee same
if the Board approves the recommendations for the Company.

- The Environmental Committee

The Environmental Committee is composed of Messrs. Shrake, Myckatyn (Chair) and
Petrina, a majority of outside directors, and has the responsibility for
reviewing the Company's' environmental policy and for ensuring the Company's
operations are operated in a manner consistent with the environmental policy and
also for ensuring the Company's operations are run in a manner that does not
unduly expose its employees to unnecessary risk of accident or death.

- Other

The Board may from time to time appoint a special committee of one or more
directors which committee may engage an outside advisor at the Company's expense
in order to assist the committee in fulfilling its responsibilities.

6D.     EMPLOYEES

As at June 30, 2003 the Company had five full time employees in Canada, four
full time employees in Reno, 51 full time employees in El Salvador. There were
55 employees at the Andacollo Mine in Chile. The employees at Denton-Rawhide are
not employees of the Company. The Company may employ additional part-time
employees or consultants as required to assist with its ongoing exploratory work
program in El Salvador or work on other acquired properties. The Company is not
subject to any collective bargaining agreements and believes its relationship
with employees to be good.

6E.     SHARE OWNERSHIP

As at July 31, 2003 the share ownership in the Company of those persons listed
in Item 6B above is as follows: Thomas Shrake, 77,100 shares; Catherine
McLeod-Seltzer, 658,100 shares; Anthony Petrina, nil; William Myckatyn, 54,360
shares; Robert Buchan, nil; David Fagin, nil; Paul Sweeney, nil; John Norman,
nil; Kathryn Church 300 shares and Barbara Henderson, 6,000. Details of options
on the Company's shares held by those persons are set out below. The shares held
by the directors and management total 795,860 common shares representing 1.01%
of the Company's issued and outstanding shares.


<PAGE>
                                       50


Stock Option Plans

In connection with the amalgamation approved by shareholders of the Predecessor
Companies on April 3, 2002, the TSX approved the rolling over of an aggregate
2,130,800 options of PacRim and 2,008,000 options of Dayton such options to be
governed by the plan under which they were originally granted ("Pre-Amalgamation
Options"). The TSX ruled that any Pre-Amalgamation Options that were
surrendered, terminated or expired without exercise would not be available for
the grant of new options. There are Pre-Amalgamation Options outstanding
exercisable to purchase up to 4,517,480 common shares, representing 5.8% of the
Company's issued and outstanding share capital of 78,528,594 common shares, at
prices ranging between $1.49 and $0.29 and expiring between 2003 and 2006.

Those persons listed in Item 6B above and other employees of the Company hold
Pre-Amalgamation Options to purchase Common Shares of the Company, as at July
31, 2003, as follows:

<TABLE>
<CAPTION>
                                                         EXERCISE
                                   NUMBER OF               PRICE
                                    COMMON              PER COMMON             EXPIRY DATE
OPTIONEES                           SHARES            SHARE CDN.$(1)           OF OPTION
---------                          ---------          --------------           -----------
<S>                                <C>                     <C>                 <C>
McLeod-Seltzer, Catherine            200,000               $0.88               November 4, 2003
                                      88,000               $1.36               April 27, 2004
                                      35,200               $0.54               May 28, 2005
                                     441,000               $0.29               July 4, 2006

Shrake, Thomas                       200,000               $0.88               November 4, 2003
                                     387,000               $0.29               July 4, 2006

Petrina, Anthony                      60,000               $0.88               November 4, 2003
                                     109,000               $0.29               July 4, 2006

Myckatyn, William                     60,000               $0.88               November 4, 2003
                                     880,000               $1.36               April 27, 2004
                                     330,000               $1.06               June 29, 2004
                                     616,000               $0.54               May 28, 2005
                                     111,000               $0.29               July 4, 2006

Buchan, Robert                        88,000               $1.36               April 27, 2004

Fagin, David                          88,000               $1.36               April 27, 2004
                                      35,200               $0.54               May 28, 2005

Norman, John                          79,200               $0.54               May 28, 2005

Church, Kathryn                        6,000               $0.88               November 4, 2003
                                      53,000               $0.29               July 4, 2006

Henderson, Barbara                    25,000               $0.88               November 4, 2003
                                      46,800               $0.29               July 4, 2006

Employees/Others                      23,000               $0.88               Nov. 4, 2003
                                       4,000               $1.49               Feb. 4, 2004
                                     132,000               $1.36               Apr. 27, 2004
                                      36,080               $1.36               June 29, 2004
                                      29,000               $1.30               Sept. 24, 2004
                                     220,000               $0.54               May 28, 2005
                                     135,000               $0.29               July 4, 2006

        TOTAL:                     4,517,480
</TABLE>

     (1) Exercise prices were determined by the board of directors of the
         respective Predecessor Companies in accordance with the rules and
         policies of the TSX. All options were granted for a five year term and
         vested as to one-third of the options on the day of grant and one-third
         on each of the two subsequent anniversaries. All of the
         Pre-Amalgamation Options are vested as of July 31, 2003.
<PAGE>
                                       51


In 2002 the Compensation Committee of the Company reviewed and recommended to
the Board of Directors adoption of a new stock option plan to govern all
post-amalgamation options, which the Board approved subject to shareholder
approval. The 2002 Incentive Stock Option and Bonus Plan (the "2002 Plan") is
substantially the same as predecessor Dayton's Plan. It is divided into two
components: a stock option component ("Option Plan"), under which up to
6,000,000 common shares are reserved for grant to eligible persons at the
discretion of the directors from time to time, and a stock bonus component
("Bonus Plan") under which up to 367,000 common shares are reserved for grant to
eligible persons at the discretion of the directors from time to time. Under the
terms of the 2002 Plan the exercise price of options is fixed as the closing
price of the Company's shares on the TSX on the day prior to grant. The
shareholders approved the 2002 Plan on October 10, 2002, and ratified the grant
by the board under the 2002 Plan of incentive stock options entitling optionees
to acquire up to an aggregate 2,325,000 common shares at Cdn.$0.62 each for a
five year period expiring April 18, 2007.

As of July 31, 2003, 2,150,800 options are outstanding under the 2002 Plan as
follows:

<TABLE>
<CAPTION>
                                                         EXERCISE
                                   NUMBER OF               PRICE
                                     COMMON              PER COMMON            EXPIRY DATE
OPTIONEES                            SHARES            SHARE CDN.$(1)          OF OPTION
---------                          ---------           --------------          ---------
<S>                                <C>                     <C>                 <C>
McLeod-Seltzer, Catherine            420,000               $0.62               April 18, 2007
Shrake, Thomas                       420,000               $0.62               April 18, 2007
Petrina, Anthony                     130,000               $0.62               April 18, 2007
Myckatyn, William                    130,000               $0.62               April 18, 2007
Sweeney, Paul B.                     130,000               $0.43               July 23, 2008
Fagin, David                         130,000               $0.62               April 18, 2007
Norman, John                         130,000               $0.62               April 18, 2007
                                      40,800               $0.43               July 23, 2008
Church, Kathryn                       65,000               $0.62               April 18, 2007
Henderson, Barbara                    65,000               $0.62               April 18, 2007
Employees/Others                     490,000               $0.62               April 18, 2007

        TOTAL:                     2,150,800
</TABLE>

The options vest cumulatively as to one-third on the grant date and one-third
upon each of the following two anniversaries of the grant date.

<PAGE>
                                       52


ITEM 7:     MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7A.     MAJOR SHAREHOLDERS

To the best of the knowledge and belief of the directors and senior officers of
the Company, there are no persons or companies who beneficially own, directly or
indirectly or exercise control or direction over shares carrying more than 5% of
the voting rights attached to all outstanding shares of the Company as at July
31, 2003, except as follows:

<TABLE>
<CAPTION>
      Title of Class                 Identity of                      Amount             Percent of
                                   Person or Group                     Owned                Class
      --------------          ---------------------------           ----------           ----------
<S>                           <C>                                   <C>                     <C>
      Common Shares            Kinross Gold Corporation             17,606,049              22.4%
      Common Shares           Dundee Precious Metals Inc.            7,827,258              9.96%
</TABLE>

There has been no significant change in the percentage ownership held by the
major shareholders during the past three years. The major shareholders do not
have any different voting rights from other shareholders of the Company.

As of July 31, 2003, Computershare reported that there were 78,528,594 common
shares issued and outstanding. Of those common shares issued 10,594,777 shares
were registered to United States residents to 152 holders of record.

To the best of management's knowledge the Company is not directly or indirectly
owned or controlled by another corporation, by any foreign government or by any
other natural or legal person. There are no arrangements known the operation of
which may at a subsequent date result in a change of control of the Company.

7B.     RELATED PARTY TRANSACTIONS

The directors, senior officers and principal shareholders of the Company and
associates or affiliates of the foregoing have had no material interest, direct
or indirect, in any transactions in which the Company has participated within
the three year period prior to the date hereof which will materially affect the
Company or any of its subsidiaries, except as stated elsewhere in this Annual
Report or as indicated below. Also see Items 4B, 6B and 6C.

There are no outstanding loans or guarantees made by the Company to or for the
benefit of any of the directors or senior officers of the Company, any member
beneficially owning shares carrying more than 10% of the voting rights attached
to the shares of the Company nor an associate or affiliate of any of the
foregoing persons, or any other persons, other than as specifically stated
elsewhere in this document.

Mr. Robert Buchan, a director, of the Company, is also a director and officer of
Kinross Gold Corporation. In April 2000, Kinross sold to the Company a 49%
interest in the Denton-Rawhide Mine, its 53.8% shareholding in Mirage and
certain shareholder loans made by Kinross to Mirage in exchange for a total
consideration of 9,042,049 Common Shares of the Company at an effective price of
(Cdn) $2.26 per share. Kinross also acquired 909,091 Common Shares of the
Company at a price of Cdn $2.20 per common share in a special warrant financing
which closed in June of 2000 bringing its total shareholding to 10,003,437
common shares. Under the Acquisition Agreement the parties agreed to enter into

<PAGE>
                                       53


a Qualification and Standstill Agreement wherein Dayton agreed to nominate two
nominees of Kinross to the Company's Board so long as Kinross and its affiliates
hold greater than 15% of the Company's shares, on a non-diluted basis, and one
nominee for less than 15% or greater than 5%. Kinross and its affiliates agreed
that for a period that is the earlier of five years from closing and the date
they hold less than 20% of the Company's shares they will not sell, assign,
transfer or otherwise dispose of the shares acquired under the Acquisition
Agreement pursuant to an offer to acquire, where its holdings together with the
offeror's securities, constitute 15% or more of the outstanding shares of the
Company at the date of completion of the sale, subject to certain restrictions
including a formal bid made to all members, or an amalgamation or business
combination. By amendment dated February 21, 2002 Kinross agreed to require the
nomination of one director. The current nominee is Robert Buchan. See Items 4D
and 6A.

In connection with the amalgamation completed April 11, 2002, Ms. McLeod-Seltzer
was a director of Dayton and a director and officer of PacRim and Mr. Myckatyn
was a director of PacRim and a director and officer of Dayton. Mr. Myckatyn
received a severance package totalling $0.56 million in accordance with his
employment agreement, upon termination of his employment as President and CEO
resulting from the amalgamation.

7C.     Not applicable.

ITEM 8:     FINANCIAL INFORMATION

8A:     CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

See "Item 17" for details of the Company's consolidated financial statements
which have been prepared by independent auditors and are accompanied by audit
reports, including comparative financial statements for the latest three
financial years audited in accordance with a comprehensive body of auditing
standards.

In the audited statements, the April 11, 2002 amalgamation of Dayton and PacRim
has been accounted for as a reverse takeover using the purchase method of
accounting with Dayton identified as the acquirer. For financial statement
purposes the Company is a continuation of Dayton. The comparative balance sheet
as at December 31, 2001 reports only Dayton assets and liabilities while the
April 30, 2002 and 2003 balance sheet reflects total assets and liabilities of
the Company. The April 30, 2002 statements of loss and cash flows reflect
amalgamated results from April 11, 2002 to April 30, 2002 with results for the
period from January 1, 2002 to April 10, 2002 being solely Dayton results. The
2001 comparative figures are solely Dayton. The financial year end of the
Company is now April 30.

Also see Item 5 Operating and Financial Review and Prospects.

The Company has not paid any dividends on its common shares since its
incorporation. The Company has no present intention of paying dividends on its
common shares as it anticipates that all available funds will be invested to
finance the growth of its business.

8B:     SIGNIFICANT CHANGES

No significant changes have occurred since the date of the financial statements
included in this Annual Report.

<PAGE>
                                       54


ITEM 9:     THE OFFER AND LISTING

9A.     OFFER AND LISTING DETAILS

The Company's post-amalgamation shares were called for trading on the TSX and
AMEX on April 15, 2002 as "PMU". Prior to April 15, 2002 Dayton's shares traded
as "DAY" on the TSX and AMEX and PacRim's shares traded as "PFG" on the TSX. The
price range of the Company's Common Shares and prior to April 11, 2002, Dayton's
common shares on the TSX and the AMEX during the periods indicated below were as
follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
FINANCIAL
YEAR             FINANCIAL                  TSX (2)                AMEX (2)
ENDED            PERIOD (1)                 (CDN$)                  (US$)
--------------------------------------------------------------------------------
                                       HIGH        LOW         HIGH       LOW
--------------------------------------------------------------------------------
<S>              <C>                   <C>         <C>         <C>         <C>
Dec.1998         Annual                6.20        0.57           --         --
Dec.1999         Annual                8.00        1.60        40.00       3.80
Dec.2000         Annual                2.30         .23         6.20       1.00
Dec.2001         Annual                 .68         .21         1.78        .125
Apr. 2002        Four Months (3)       1.40         .37          .48        .125
Apr. 2003        Annual                1.46         .40          .99        .26
Dec. 2001        First Quarter          .68         .21          .48        .125
                 Second Quarter         .65         .31          .43        .21
                 Third Quarter          .60         .41          .40        .26
                 Fourth Quarter         .65         .36          .43        .23
Apr. 2003        First Quarter         1.46         .46          .99        .26
                 Second Quarter        1.00         .53          .64        .34
                 Third Quarter          .88         .54          .59        .35
                 Fourth Quarter         .77         .40          .47        .28
Feb. 2003        Month                  .71         .55          .47        .36
Mar. 2003        Month                  .62         .42          .43        .28
Apr. 2003        Month                  .49         .40          .34        .28
May 2003         Month                  .54         .36          .39        .26
June 2003        Month                  .52         .415         .38        .30
July 2003        Month                  .62         .41          .45        .29
--------------------------------------------------------------------------------
</TABLE>

     (1) The fiscal year end of the Company was changed from December 31 to
         April 30 in 2002.

     (2) The trading prices for shares of Predecessor Company DAY are shown as
         the historical figures based on Dayton's historical year end of
         December 31.

     (3) The shares of the Company were called for trading under the new symbol
         "PMU" on April 15, 2002. Historical prices are for Predecessor Company
         DAY.

     (4) The shares of the Company were called for trading on the TSX under the
         new symbol on April 15, 2002 and "PMU-WI" on AMEX.

9B.     PLAN OF DISTRIBUTION

Not Applicable

9C.     MARKETS

The Company's Common Shares are listed and traded in Canada on the TSX under the
symbol "PMU". In addition, the Common Shares are listed and traded in the United
States on the AMEX under the symbol "PMU". The Company has received advice that
its shares are listed and have traded since June 14, 2002

<PAGE>
                                       55


on the Berlin Stock Exchange under the symbol PRM, German Cusip Number 577332
and in the Regulated Unofficial Market (Freiverkehr) on the Frankfurt Stock
Exchange on Xetra, the Deutsche Borse AG electronic trading system since May 31,
2002.

ITEM 10:     ADDITIONAL INFORMATION

10A.     SHARE CAPITAL

Not applicable for Annual Report.


10B.     MEMORANDUM AND ARTICLES OF ASSOCIATION

The Company was formed on April 11, 2002 (#645547) upon the amalgamation of
Dayton and PacRim under the laws of the Province of British Columbia, Canada, by
Memorandum and Articles of Incorporation approved by the Registrar of Companies
on January 8, 2002. The Company may issue up to 1,000,000,000 common shares
without par value. The company's objects and purposes are unrestricted.

Directors have unlimited power to borrow funds for the general good of the
Company. There is no mandatory retirement age nor must directors own any common
stock in the Company to become eligible to be a director. Directors are entitled
to set their own compensation by passing an ordinary resolution establishing the
same. Directors may not vote on any matter in which they are materially
interested. There must be a majority of directors who are ordinarily resident in
Canada.

General Meetings are to be held annually. To hold such a meeting, a quorum
consisting of two persons holding individually or by proxy at least 5% of the
shares entitled to vote must be present. All Directors are subject to
re-election at each annual general meeting.

All common shareholders share equally in the profits of the Company.

Any member of the Company may view any document that requires ratification or
execution by visiting the principal office of the Company.

10C.     MATERIAL CONTRACTS

Other than contracts described elsewhere in this Annual Report there are no
contracts that may be regarded as presently material.


10D.     EXCHANGE CONTROLS

Other than as provided in the Investment Canada Act (Canada) (the "Investment
Act"), there are currently no limitations imposed by Canadian laws, decrees or
regulations that restrict the import or export of capital, including foreign
exchange controls, or that affect the remittance of dividends to nonresident
holders of the Company's securities. However, any such remittances of dividends
paid to United States residents are subject to withholding tax at a rate equal
to a maximum of 15% of the amount paid (see Item 10E - "Taxation").

The following discussion summarizes the material features of the Investment Act,
in its present form, for a non resident of Canada who proposes to acquire Common
Shares of the Company.

<PAGE>
                                       56


The Investment Act regulates the acquisition of control of a Canadian business
by a "non-Canadian" as defined under the Investment Act. With respect to the
Company, an acquisition of control is considered to be the acquisition of the
majority of its Common Shares. However, if a non-Canadian acquires more than
one-third of the voting shares of the Company, but less than a majority, there
is a presumed acquisition of control unless it can be established that the
Company is not controlled in fact by the acquirer. All acquisitions of control
of a Canadian business are notifiable (which requires that a notification form
be submitted to Investment Canada within thirty days after the implementation of
the investment) unless the investment is reviewable. If the investment is
reviewable, the investment may not be implemented until the Minister responsible
for the Investment Act is, or has been deemed to be, satisfied that the
investment is likely to be of net benefit to Canada.

Where either the acquirer is, or the Company is presently controlled by, a WTO
investor (as that term is defined in the Investment Act), a direct acquisition
of control of the Company will only be reviewable if the value of the Company's
assets, as shown on its audited financial statements for the most recently
completed fiscal year, is equal to or greater than (Cdn) $223 million. This
amount varies each year based on the rate of growth in Canadian gross domestic
product. Other direct acquisitions of control are reviewable if the value of the
assets of the Company, as calculated above, is equal to or greater than (Cdn) $5
million. The (Cdn) $5 million threshold for review also applies with respect to
the acquisition of control of any Canadian business that provides any financial
services or transportation services, is a cultural business, or is engaged in
the production of uranium and owns an interest in or producing uranium property
in Canada.

Indirect acquisitions of control (acquisitions of control of an entity which in
turn controls the Company) are not reviewable under the Investment Act if the
acquirer is a WTO investor or if the Company is controlled by a WTO investor.
Otherwise, an indirect acquisition will be reviewable if the value of the
Company's assets is $50 million or more, or if the value of the Company's assets
acquired in the total transaction is in Canada or the acquisition is not
effected through the acquisition of control of a foreign corporation.

Certain types of transactions are exempt from application of the Investment Act
including acquisitions of control of the Company:

(a)  by the acquisition of voting shares or the voting interests by any person
     in the ordinary course of that person's business as a trader or dealer in
     securities;

(b)  in connection with the realization of security granted for a loan or other
     financial assistance and not for any purpose related to the Investment Act;

(c)  for facilitating its financing and not for any purpose related to the
     Investment Act on the condition that the acquirer divest control within two
     years after control was acquired; and

(d)  by reason of an amalgamation, merger, consolidation or corporate
     reorganization following which the ultimate or indirect control in fact of
     the Company through the ownership of voting interests remains unchanged.

There are currently no limitations on the right of foreign or non-resident
owners of Common Shares to hold or vote such securities imposed by Canadian law
or the Company's charter or other constituent documents.

There are no family relationships between any of the directors and executive
officers of the Company.

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10E.     TAXATION

CERTAIN CANADIAN FEDERAL INCOME TAX CONSEQUENCES

The discussion under this heading summarizes the material Canadian federal
income tax consequences of acquiring, holding and disposing of Common Shares of
the Company for a shareholder of the Company who is not resident in Canada but
is resident in the United States and who will acquire and hold Common Shares of
the Company as capital property for the purpose of the Income Tax Act (Canada)
(the "Tax Act"). This summary does not apply to a shareholder who carries on
business in Canada through a "permanent establishment" situated in Canada or
performs independent personal services in Canada through a fixed base in Canada
if the shareholder's holding in the Company is effectively connected with such
permanent establishment or fixed base.

This summary is based on the provisions of the Tax Act and the regulations
thereunder and on the Company's understanding of the administrative practices of
Canada Customs and Revenue Agency and takes into account all specific proposals
to amend the Tax Act or regulations made by the Minister of Finance of Canada to
December 31, 2001. It has been assumed that there will be no other relevant
amendment of any governing law although no assurance can be given in this
respect. This discussion is general only and is not a substitute for independent
advice from a shareholder's own Canadian and U.S. tax advisors.

The provisions of the Tax Act are subject to income tax treaties to which Canada
is a party, including the Canada-United States Income Tax Convention (1980) (the
"Convention") and the Protocols to the Convention.

DIVIDENDS ON COMMON SHARES

Under the Tax Act, a non-resident of Canada is generally subject to Canadian
withholding tax at the rate of 25% on dividends paid or deemed to have been paid
to him by a corporation resident in Canada. The Convention limits the rate to
15% if the shareholder is resident in the United States and the dividends are
beneficially owned by and paid to him, and to 5% if the shareholder is a
corporation that beneficially owns at least 10% of the voting shares of the
payor corporation.

The Convention generally exempts from Canadian income tax dividends paid to a
religious, scientific, literary, educational or charitable organization or to an
organization constituted and operated exclusively to administer a pension,
retirement or employee benefit fund or plan, if the organization is resident in
the United States and is exempt from income tax under the laws of the United
States.

The tax payable on dividends is to be withheld at source by the company or
personnel acting on its behalf. The Company is liable for the amount of the tax
if it fails to so withhold. The taxpayer is liable in any event if the Company
fails to withhold.

DISPOSITION OF COMMON SHARES

Under the Tax Act, a taxpayer's capital gain or capital loss from a disposition
of Common Shares of the Company is the amount, if any, by which his proceeds of
disposition exceed (or are exceeded by, respectively) the aggregate of his
adjusted cost base of the share and reasonable expenses of disposition. One-half
of a capital gain (the "taxable capital gain") is included in income, and
one-half of a capital loss in a year (the "allowable capital loss") is
deductible from taxable capital gains realized in the same year. The amount by
which a shareholder's allowable capital loss exceeds the taxable capital gain in
a year may

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be deducted from a taxable capital gain realized by the shareholder in the year
or in the three previous or any subsequent year, subject to certain restrictions
in the case of a corporate shareholder.

In the case of a shareholder that is a corporation, the amount of any capital
loss otherwise determined may be reduced, in certain circumstances, by the
amount of dividends previously received in respect of the shares disposed of,
unless the corporation owned the shares for at least 365 days prior to
sustaining the loss and (together with corporations, persons and other entities
with whom the corporation was not dealing at arm's length) did not, at the time
the dividends were received, own more than 5% of the shares of any class of the
capital stock of the corporation from which the dividend was received. These
loss limitation rules may also apply where a corporation is a member of a
partnership or a beneficiary of a trust that owned the shares disposed of.

A nonresident of Canada is not subject to tax under the Tax Act in respect of a
capital gain realized upon the disposition of shares unless the shares represent
"taxable Canadian property". Common Shares of the Company will not generally
constitute taxable Canadian property. Common Shares of the Company will
constitute taxable Canadian property of a shareholder at a particular time if
the shareholder holds the shares as "capital property" and used the shares in
carrying on a business in Canada, or if at any time in the five years
immediately preceding the disposition the shareholder owned, either alone or
with persons with whom the shareholder did not deal at arm's length, 25% or more
of the issued shares of any class of the capital stock of the Company.

Where a United States resident realizes a capital gain on a disposition of
shares that constitute "taxable Canadian property", the Convention relieves the
United States resident from liability for Canadian tax on such capital gains
unless:

(a)  the value of the shares is derived principally from "real property" in
     Canada, including the right to explore for or exploit natural resources and
     rights to amounts computed by reference to production,

(b)  the shareholder was resident in Canada for 120 months during any period of
     20 consecutive years preceding the disposition, was resident in Canada at
     any time during the 10 years immediately preceding the disposition and the
     shares were owned by him when he ceased to be resident in Canada, or

(c)  the shares formed part of the business property of a "permanent
     establishment" or pertained to a fixed base used for the purpose of
     performing independent personal services that the shareholder has or had in
     Canada within the 12 months preceding the disposition.

At the present time the value of the Common Shares of the Company is not derived
principally from real property in Canada.

Notwithstanding the potential exemption from Canadian tax provided under the
Convention, where a nonresident of Canada disposes of shares of Common Shares of
the Company that are "taxable Canadian property", the non-resident is required
to file a Canadian income tax return in respect of any such dispositions.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following is a general discussion of certain possible U.S. federal income
tax consequences, under current law, generally applicable to a U.S. Holder (as
hereinafter defined) of common shares of the Company. This discussion is of a
general nature only and does not take into account the particular facts and

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circumstances, with respect to U.S. federal income tax issues, of any particular
U.S. Holder. In addition, this discussion does not cover any state, local or
foreign tax consequences. (See "Taxation--Canadian Federal Income Tax
Consequences" above).

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
and which are subject to differing interpretations. This discussion does not
consider the potential effects, both adverse and beneficial, of any proposed
legislation which, if enacted, could be applied, possibly on a retroactive
basis, at any time.

THIS DISCUSSION IS FOR GENERAL INFORMATION ONLY AND IT IS NOT INTENDED TO BE,
NOR SHOULD IT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY U.S. HOLDER OR
PROSPECTIVE U.S. HOLDER OF COMMON SHARES OF THE COMPANY, AND NO OPINION OR
REPRESENTATION WITH RESPECT TO THE U.S. FEDERAL INCOME TAX CONSEQUENCES TO ANY
SUCH U.S. HOLDER OR PROSPECTIVE U.S. HOLDER IS MADE. ACCORDINGLY, U.S. HOLDERS
AND PROSPECTIVE U.S. HOLDERS OF COMMON SHARES OF THE COMPANY SHOULD CONSULT
THEIR OWN FINANCIAL ADVISOR, LEGAL COUNSEL OR ACCOUNTANT REGARDING THE U.S.
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" means a holder of common shares of the Company
who is (i) a citizen or individual resident of the U.S., (ii) a corporation
created or organized in or under the laws of the U.S. or of any political
subdivision thereof, (iii) an estate whose income is taxable in the U.S.
irrespective of source or (iv) a trust subject to the primary supervision of a
court within the U.S. and control of a U.S. fiduciary as described Section
7701(a)(30) of the Code. If a partnership or other "pass-through" entity treated
as a partnership for U.S. federal income tax purposes holds common shares of the
Company, the U.S. federal income tax treatment of the partners or owners of such
partnership or other pass-through entity generally will depend on the status of
such partners or owners and the activities of such partnership or pass-through
entity.

PERSONS NOT COVERED

This summary does not address the U.S. federal income tax consequences to
persons (including persons who are U.S. Holders) subject to special provisions
of U.S. federal income tax law, including (i) persons who are tax-exempt
organizations, qualified retirement plans, individual retirement accounts and
other tax-deferred accounts, financial institutions, insurance companies, real
estate investment trusts, regulated investment companies, or brokers, dealers or
traders in securities, (ii) persons who have a "functional currency" other than
the U.S. dollar, (iii) persons subject to the alternative minimum tax, (xi)
persons who own their common shares of the Company as part of a straddle,
hedging, conversion transaction, constructive sale or other arrangement
involving more than one position, (iv) persons who acquired their common shares
of the Company through the exercise of employee stock options or otherwise as
compensation for services, (v) persons that own an interest in an entity that
owns common shares of the Company, (vi) persons who own, exercise or dispose of
any options, warrants or other rights to acquire common shares of the Company,
(vii) persons who are partners or owners of partnerships or other pass-through
entities or (viii) persons who own their common shares of the Company other than
as a capital asset within the meaning of Section 1221 of the Code.

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                                       60


DISTRIBUTION ON COMMON SHARES OF THE COMPANY

U.S. Holders receiving distributions (including constructive distributions) with
respect to common shares of the Company are required to include in gross income
as a dividend for U.S. federal income tax purposes the gross amount of such
distributions (without reduction for any Canadian income tax withheld from such
distributions), equal to the U.S. dollar value of such distributions on the date
of receipt (based on the exchange rate on such date), to the extent that the
Company has current or accumulated earnings and profits. For taxable years
beginning after December 31, 2002 and before January 1, 2009, dividends received
by U.S. Holders that are individuals, estates or trusts from "qualified foreign
corporations," as defined in Section 1(h)(11) of the Code, generally are taxed
at the same preferential tax rates applicable to long-term capital gains.
Although not free from doubt, it appears that the Company constitutes a
"qualified foreign corporation," as defined in Section 1(h)(11) of the Code.
However, if the Company qualifies as a "Foreign Personal Holding Company, a
"Foreign Investment Company" or a "Passive Foreign Investment Company," each as
defined below, for its taxable year during which it pays a dividend, or for its
immediately preceding taxable year, the Company generally will not be treated as
a "qualifying foreign corporation" and dividends received by U.S. Holders that
are individuals, estates or trusts generally will be subject to U.S. federal
income tax at ordinary income tax rates (and not at the preferential tax rates
applicable to long-term capital gains). THE DIVIDEND RULES ARE VERY COMPLICATED
AND U.S. HOLDERS OF COMMON SHARES OF THE COMPANY SHOULD CONSULT THEIR OWN
FINANCIAL ADVISOR, LEGAL COUNSEL OR ACCOUNTANT REGARDING THE DIVIDEND RULES AND
HOW THESE RULES MAY IMPACT THEIR U.S. FEDERAL INCOME TAX SITUATION. To the
extent that distributions from the Company exceed current or accumulated
earnings and profits of the Company, such distributions will be treated first as
a return of capital, to the extent of the U.S. Holder's adjusted basis in the
common shares, and thereafter as gain from the sale or exchange of the common
shares of the Company. (See more detailed discussion at "Disposition of Common
Shares of the Company" below).

In the case of a foreign currency received as a distribution that is not
converted by the recipient into U.S. dollars on the date of receipt, a U.S.
Holder will have a tax basis in the foreign currency equal to its U.S. dollar
value on the date of receipt. Generally any gain or loss recognized upon a
subsequent sale or other disposition of the foreign currency, including the
exchange for U.S. dollars, will be ordinary income or loss. However, an
individual whose realized gain does not exceed $200 will not recognize that
gain, to the extent that there are no expenses associated with the transaction
that meet the requirements for deductibility as a trade or business expense
(other than travel expenses in connection with a business trip) or as an expense
for the production of income.

Dividends paid on the common shares of the Company generally will not be
eligible for the "dividends received deduction" allowed to corporate
shareholders receiving dividends from certain U.S. corporations. Under certain
circumstances, a U.S. Holder that is a corporation and that owns shares
representing at least 10% of the total voting power and the total value of the
Company's outstanding shares may be entitled to a 70% deduction of the "U.S.
source" portion of dividends received from the Company (unless the Company
qualifies as a "Foreign Personal Holding Company" as defined below"). The
availability of the dividends received deduction is subject to several complex
limitations which are beyond the scope of this discussion, and U.S. Holders of
common shares of the Company should consult their own financial advisor, legal
counsel or accountant regarding the dividends received deduction.

INFORMATION REPORTING: BACKUP WITHHOLDING

Certain information reporting and backup withholding rules may apply with
respect to certain payments related to the Company's common shares. In
particular, a payor or middleman within the U.S., or in certain cases outside
the U.S., will be required to withhold 28% (which rate is scheduled for periodic
adjustment) of any payments to a U.S. Holder of the Company's common shares of
dividends on, or

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                                       61


proceeds from the sale of, such common shares within the U.S., if a U.S. Holder
fails to furnish its correct taxpayer identification number (generally on Form
W-9) or otherwise fails to comply with, or establish an exemption from, the
backup withholding tax requirements. Any amounts withheld under the U.S. backup
withholding tax rules will be allowed as a refund or a credit against the U.S.
Holder's U.S. federal income tax liability, provided the required information is
furnished to the IRS. U.S. HOLDERS SHOULD CONSULT THEIR OWN FINANCIAL ADVISOR,
LEGAL COUNSEL OR ACCOUNTANT REGARDING THE INFORMATION REPORTING AND BACKUP
WITHHOLDING RULES APPLICABLE TO THE COMPANY'S COMMON SHARES.

FOREIGN TAX CREDIT

A U.S. Holder who pays (or has withheld from distributions) Canadian or other
foreign 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 receive a deduction
or a tax credit for U.S. federal income tax purposes with respect to such
foreign tax paid or withheld. Generally, it will be more advantageous to claim a
credit because a credit reduces U.S. federal income taxes on a dollar-for-dollar
basis, while a deduction merely reduces the taxpayer's income subject to U.S.
federal income tax. This election is made on a year-by-year basis and applies to
all foreign taxes paid by (or withheld from distributions to) the U.S. Holder
during that year.

There are significant and complex limitations that apply to the foreign tax
credit, among which is the general limitation that the credit cannot exceed the
proportionate share of the U.S. Holder's U.S. income tax liability that the U.S.
Holder's "foreign source" income bears to his or its worldwide taxable income.
In applying this limitation, the various items of income and deduction must be
classified as either "foreign source" or "U.S. source." Complex rules govern
this classification process. In addition, this limitation is calculated
separately with respect to specific classes of income such as "passive income,"
"high withholding tax interest," "financial services income," "shipping income,"
and certain other classifications of income. Dividends distributed by the
Company will generally constitute "foreign source" income, and will be
classified as "passive income" or, in the case of certain U.S. Holders,
"financial services income" for these purposes.

In addition, U.S. Holders that are corporations and that own 10% or more of the
voting stock of the Company may be entitled to an "indirect" foreign tax credit
under Section 902 of the Code with respect to the payment of dividends by the
Company under certain circumstances and subject to complex rules and
limitations. THE AVAILABILITY OF THE FOREIGN TAX CREDIT AND THE APPLICATION OF
THE LIMITATIONS WITH RESPECT TO THE FOREIGN TAX CREDIT ARE FACT SPECIFIC, AND
EACH U.S. HOLDER OF COMMON SHARES OF THE COMPANY SHOULD CONSULT THEIR OWN
FINANCIAL ADVISOR, LEGAL COUNSEL OR ACCOUNTANT REGARDING THE FOREIGN TAX CREDIT
RULES.

DISPOSITION OF COMMON SHARES OF THE COMPANY

A U.S. Holder will recognize gain or loss upon the sale or other taxable
disposition 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
a capital asset in the hands of the U.S. Holder, which will be long-term capital
gain or loss if the common shares of the Company are held for more than one
year.

Preferential tax rates apply to long-term capital gains of U.S. Holders that are
individuals, estates or trusts. There are currently no preferential tax rates
for long-term capital gains for a U.S. Holder that is a corporation (other than
a corporation subject to Subchapter S of the Code). Deductions for net capital
losses are subject to significant limitations. For U.S. Holders that are not
corporations, 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 that are corporations (other than corporations subject to
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Subchapter S of the Code), an unused net capital loss may be carried back three
years 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 FOR U.S. HOLDERS

In the following circumstances, the above sections of this discussion may not
describe the U.S. federal income tax consequences to U.S. Holders resulting from
the ownership and disposition of common shares of the Company:

Foreign Personal Holding Company

If at any time during a taxable year (a) more than 50% of the total voting power
or the total value of the Company's outstanding shares is owned, directly or
indirectly, by five or fewer individuals who are citizens or residents of the
U.S. and (b) 60% (or 50% in certain cases) or more of the Company's gross income
for such year is "foreign personal holding company income" as defined in Section
553 of the Code (e.g., dividends, interest, royalties, certain gains from the
sale of stock and securities, and certain gains from commodities transactions),
the Company may be treated as a "Foreign Personal Holding Company" ("FPHC") In
that event, U.S. Holders of common shares of the Company would be required to
include in gross income for such year their allocable portions of such "foreign
personal holding company income" to the extent the Company does not actually
distribute such income.

The Company does not believe that it currently qualifies as a FPHC. However,
there can be no assurance that the Company will not be considered a FPHC for the
current or any future taxable year.

Foreign Investment Company

If (a) 50% or more of the total voting power or the total value of the Company's
outstanding shares is owned, directly or indirectly, by citizens or residents of
the U.S., U.S. partnerships or corporations, or U.S. estates or trusts (as
defined by the Code Section 7701(a)(30)), and (b) the Company is found to be
engaged primarily in the business of investing, reinvesting, or trading in
securities, commodities, or any interest therein, the Company may be treated as
a "Foreign Investment Company" ("FIC") 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 gain.

The Company does not believe that it currently qualifies as a FIC. However,
there can be no assurance that the Company will not be considered a FIC for the
current or any future taxable year.

Controlled Foreign Corporation

If more than 50% of the total voting power or the total value of the Company's
outstanding shares is owned, directly or indirectly, by citizens or residents of
the U.S., U.S. partnerships or corporations, or U.S. estates or trusts (as
defined by the Code Section 7701(a)(30)), each of which own, directly or
indirectly, 10% or more of the total voting power of the Company's outstanding
shares (each a "10% Shareholder"), the Company could be treated as a "Controlled
Foreign Corporation" ("CFC") under Section 957 of the Code.

The classification of the Company as a CFC would effect many complex results,
including that 10% Shareholders of the Company would generally (i) be treated as
having received a current distribution of the Company's "Subpart F income" and
(ii) would also be subject to current U.S. federal income tax on their pro rata
shares of the Company's earnings invested in "U.S. property." The foreign tax
credit may reduce the U.S. federal income tax on these amounts for such 10%
Shareholders (See more detailed

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                                       63


discussion at "Foreign Tax Credit" above). In addition, under Section 1248 of
the Code, gain from the sale or other taxable disposition of common shares of
the Company by a U.S. Holder that is or was a 10% Shareholder at any time during
the five-year period ending with the sale is treated as a dividend to the extent
of earnings and profits of the Company attributable to the common shares sold or
exchanged.

If the Company is classified as both a Passive Foreign Investment Company as
described below and a CFC, the Company generally will not be treated as a
Passive Foreign Investment Company with respect to 10% Shareholders. This rule
generally will be effective for taxable years of 10% Shareholders beginning
after 1997 and for taxable years of the Company ending with or within such
taxable years of 10% Shareholders.

The Company does not believe that it currently qualifies as a CFC. However,
there can be no assurance that the Company will not be considered a CFC for the
current or any future taxable year. THE CFC RULES ARE VERY COMPLICATED, AND U.S.
HOLDERS SHOULD CONSULT THEIR OWN FINANCIAL ADVISOR, LEGAL COUNSEL OR ACCOUNTANT
REGARDING THE CFC RULES AND HOW THESE RULES MAY IMPACT THEIR U.S. FEDERAL INCOME
TAX SITUATION.

Passive Foreign Investment Company

Certain U.S. income tax legislation contains rules governing "Passive Foreign
Investment Companies" ("PFIC") which can have significant tax effects on U.S.
Holders of foreign corporations. Section 1297 of the Code defines a PFIC as a
corporation that is not formed in the U.S. and, for any taxable year, either (a)
75% or more of its gross income is "passive income" or (b) the average
percentage, by fair market value (or, if the corporation is not publicly traded
and either 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. "Passive income" includes, for example,
dividends, interest, certain rents and royalties, certain gains from the sale of
stock and securities, and certain gains from commodities transactions. However,
gains resulting from commodities transactions are generally excluded from the
definition of passive income if "substantially all" of a merchant's, producer's
or handler's business is as an active merchant, producer or handler of such
commodities.

For purposes of the PFIC income test and the assets test, if a foreign
corporation owns (directly or indirectly) at least 25% by value of the stock of
another corporation, such foreign corporation shall be treated as if it (a) held
a proportionate share of the assets of such other corporation, and (b) received
directly its proportionate share of the income of such other corporation. Also,
for purposes of such PFIC tests, passive income does not include any interest,
dividends, rents or royalties that are received or accrued from a "related"
person to the extent such amount is properly allocable to the income of such
related person which is not passive income. For these purposes, a person is
related with respect to a foreign corporation if such person "controls" the
foreign corporation or is controlled by the foreign corporation or by the same
persons that control the foreign corporation. For these purposes, "control"
means ownership, directly or indirectly, of stock possessing more than 50% of
the total voting power of all classes of stock entitled to vote or of the total
value of stock of a corporation.

U.S. Holders owning common shares of a PFIC are subject to the highest rate of
tax on ordinary income in effect for the applicable taxable year and to an
interest charge based on the value of deferral of tax for the period during
which the common shares of the PFIC are owned with respect to certain "excess
distributions" on and dispositions of PFIC stock under Section 1291 of the Code.
However, if the U.S. Holder makes a timely election to treat a PFIC as a
qualified electing fund ("QEF") with respect to such shareholder's interest
therein, the above-described rules generally will not apply. Instead, the
electing U.S. Holder would include annually in his gross income his pro rata
share of the PFIC's ordinary earnings and net capital gain regardless of whether
such income or gain was actually distributed. A U.S. Holder of a QEF can,

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however, elect to defer the payment of U.S. federal income tax on such income
inclusions. In addition, subject to certain limitations, U.S. Holders owning,
actually or constructively, marketable (as specifically defined) stock in a PFIC
will be permitted to elect to mark that stock to market annually, rather than be
subject to the tax regime of Section 1291 of Code as described above. Amounts
included in or deducted from income under this alternative (and actual gains and
losses realized upon disposition, subject to certain limitations) will be
treated as ordinary gains or losses.

The Company believes that it did not qualify as a PFIC for its fiscal year ended
April 30, 2003. However, there can be no assurance that the Company will not be
considered a PFIC for the current or any future taxable year. There can be no
assurance that the Company's determination concerning its PFIC status will not
be challenged by the IRS, or that it will be able to satisfy record keeping
requirements that will be imposed on QEFs in the event that it qualifies as a
PFIC.

THE PFIC RULES ARE VERY COMPLICATED, AND U.S. HOLDERS SHOULD CONSULT THEIR OWN
FINANCIAL ADVISOR, LEGAL COUNSEL OR ACCOUNTANT REGARDING THE PFIC RULES AND HOW
THESE RULES MAY IMPACT THEIR U.S. FEDERAL INCOME TAX SITUATION.


10F.     DIVIDENDS AND PAYING AGENTS

Not applicable.

10G.     STATEMENT BY EXPERTS

Not applicable.

10H.     DOCUMENTS ON DISPLAY

The Company is a reporting company under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and is a "foreign private issuer" as defined in the
Exchange Act. A foreign private issuer is exempt from the provisions of the
Exchange Act which prescribe the furnishing and content of proxy statements to
shareholders and relating to short swing profits reporting and liability.
Readers may review a copy of the Company's filings with the U.S. Securities and
Exchange Commission ("the "SEC"), including exhibits and schedules filed with
it, at the SEC's public reference facilities in Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549. Readers may also obtain copies of
such materials from the Public Reference Section of the SEC, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. Readers may call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. The SEC maintains a Web site (http://www.sec.gov) that
contains reports, submissions and other information regarding registrants that
file electronically with the SEC. The Company has only recently become subject
to the requirement to file electronically through the EDGAR system most of its
securities documents, including registration statements under the Securities Act
of 1933, as amended and registration statements, reports and other documents
under the Securities Exchange Act of 1934, as amended.

The Company is required to file financial statements and other information with
the Securities Commissions in the Provinces of Alberta, British Columbia,
Manitoba, New Brunswick, Newfoundland, Ontario, Prince Edward Island, and
Saskatchewan, electronically through the Canadian System for Electronic Document
Analysis and Retrieval (SEDAR) which can be viewed at www.sedar.com.

<PAGE>
                                       65


Copies of any documents referred to in this annual report and filed with the SEC
can be viewed at the Company's head office during normal business hours by
giving 48 hours notice to the Corporate Secretary.

10I.     SUBSIDIARY INFORMATION

Not required.

ITEM 11:     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

GOLD PRICE

The Company's primary business is the acquisition and development of gold
properties and its revenue to date has almost entirely been derived from
proceeds from, or related, to the sale of gold. See "Risk Factors - Metal Price
Volatility". Gold prices are subject to significant volatility and these
changes, to the extent that the Company's production is unhedged, can
significantly affect the Company's profitability and cash flow. Gold prices
declined steadily since the latter part of 1996, culminating in August 1999 with
the lowest price in twenty years, and until spring of 2002 essentially remained
below $300 per ounce. A ten percent change in the price of gold from $270 per
ounce will change revenue by $1.8 million and a ten percent change in the price
of silver from $4.25 per ounce will change revenue by $167,000. Over the past
year the price of gold has averaged $328 per ounce.

The Company may utilize commodity instruments for other than trading purposes to
protect the selling price of a portion of its gold production. The Company has
historically used a combination of puts and calls, as part of this hedging
program. The proceeds derived from writing (selling) the calls have at times
paid for the puts, and at other times puts have been closed out and the proceeds
used to purchase further puts. The market risk to the Company's cash flow of the
put instruments relates to the possible failure of the counter-parties to honour
their commitment to purchase the gold when the put price exceeds the appropriate
spot price at maturity. The counter-parties to the Company's put contracts are,
however, large international credit worthy institutions. The market risk to the
Company of its gold call contracts relate to the possibility that the Company
may not produce sufficient gold at the appropriate time to meet the call
obligations should they arise. Currently, there are no puts or calls
outstanding.

INTEREST RATE

The Company's only material variable interest rate obligations relate to its
investment of cash balances including those amounts included as current assets
and the principal amounts residing in the reclamation trust fund.

FOREIGN CURRENCY

The Company's revenue and most of its operating costs are derived in, or based
on, U.S. dollar amounts. Only the Company's corporate general and administration
costs are denominated in a currency other than the U.S. dollar and therefore the
effect of a change in the Canadian/U.S. dollar exchange rate would be small.

ITEM 12:     DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable

<PAGE>
                                       66


ITEM 13:     DEFAULTS, DIVIDEND ARREARAGES AND DELIQUENCIES

Not applicable.

ITEM 14:     MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
             PROCEEDS

Not applicable.

ITEM 15:     CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Company's Chief Executive
Officer and Chief Financial Officer have evaluated the effectiveness of the
Company's disclosure controls and procedures (as such term is defined in Rules
13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) as of the end of the period covered by this annual report (the
"Evaluation Date"). Based on such evaluation, such officers have concluded that,
as of the Evaluation Date, the Company's disclosure controls and procedures are
effective in alerting them on a timely basis to material information relating to
the Company required to be included in our reports filed or submitted under the
Exchange Act.

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING. During the most recent
fiscal quarter, there have not been any significant changes in the Company's
internal controls over financial reporting or in other factors that have
materially affected, or are reasonably likely to materially affect, our internal
controls over financial reporting.


ITEM 16:     [RESERVED]



                                    PART III


ITEM 17.     FINANCIAL STATEMENTS

The Financial Statements were prepared in accordance with Canadian GAAP and are
presented in U.S. dollars. There are differences between United States and
Canadian GAAP. A reconciliation of the financial statements to United States
GAAP is set forth in Note 15 to the Consolidated Financial Statements forming
part hereof.

The following financial statements and related schedules are included in this
Item and form part of this Annual Report:

(a)      Financial Statements for the financial period ended April 30, 2003,
         containing:

         Auditors' Report for the years April 30, 2003 and April 30, 2002;
         Consolidated Balance Sheet as at April 30, 2003 and April 30,2002;
         Consolidated Statements of Loss for the year ended April 30, 2003, four
         month period ended April 30, 2002, and years ended December 31, 2001
         and 2000;
         Consolidated Statements of Shareholders' Equity for the year ended
         April 30, 2003, four month period ended April 30, 2002, and years ended
         December 31, 2001 and 2000;
         Consolidated Statements of Cash Flow for the year ended April 30, 2003,
         four months ended April 30, 2002 and years ended December 31, 2001 and
         2000; and
         Notes to Consolidated Financial Statements; and

(b)      Auditors' Report for the years December 31, 2001 and 2000.
<PAGE>

                                       67










                            PACIFIC RIM MINING CORP.

                      (Formerly Dayton Mining Corporation)

                        CONSOLIDATED FINANCIAL STATEMENTS

                             APRIL 30, 2003 AND 2002
























                            STALEY, OKADA & PARTNERS

                              Chartered Accountants


<PAGE>

                                       68



MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
--------------------------------------------------------------------------------

TO THE SHAREHOLDERS OF PACIFIC RIM MINING CORP.:

The accompanying consolidated financial statements of the Company were prepared
by management in accordance with accounting principles generally accepted in
Canada, and within the framework of the summary of significant accounting
policies noted in these consolidated financial statements. Management is
responsible for all information in the annual report. All financial and
operating data in the annual report is consistent, where appropriate, with that
contained in the consolidated financial statements.

A system of internal accounting control is maintained in order to provide
reasonable assurance that assets are safeguarded and that transactions are
properly recorded and executed in accordance with management's authorization.
This system includes established policies and procedures, the selection and
training of qualified personnel and an organization providing for appropriate
delegation of authority and, where possible, segregation of responsibilities.

The Board of Directors discharges its responsibilities for the consolidated
financial statements primarily through activities of its Audit Committee
composed of three directors, none of whom are members of management. This
Committee meets with management to assure that it is performing its
responsibility to maintain financial controls and systems and to approve the
annual audited consolidated financial statements of the Company. The Audit
Committee also meets with the independent auditors to discuss the scope and the
results of their audit and audit report prior to submitting the consolidated
financial statements to the Board of Directors for approval.

The consolidated financial statements have been audited on behalf of the
shareholders by the Company's independent auditors, Staley, Okada & Partners, in
accordance with Canadian and United States generally accepted auditing
standards. The auditors' report outlines the scope of their audit and their
opinion on the consolidated financial statements.



John Norman                                                     Thomas C. Shrake
Chief Financial Officer                                  Chief Executive Officer

--------------------------------------------------------------------------------

<PAGE>
                                       69



INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------

TO THE SHAREHOLDERS OF PACIFIC RIM MINING CORP.:

We have audited the consolidated balance sheets of Pacific Rim Mining Corp.
(formerly Dayton Mining Corporation) as at April 30, 2003 and 2002 and the
consolidated statements of loss, shareholders' equity and cash flows for the
periods ended April 30, 2003 and 2002. 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 auditing standards generally accepted
in Canada and the United States. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at April 30, 2003
and 2002 and the results of its operations and its cash flows for the periods
ended April 30, 2003 and 2002 in accordance with Canadian generally accepted
accounting principles.

The prior years figures, for the years ended December 31, 2000 and 2001, which
are presented for comparative purposes, were audited by another firm of
Chartered Accountants, who issued an unqualified audit opinion dated January 11,
2002.



Surrey, B.C.                                            STALEY, OKADA & PARTNERS
May 16, 2003                                               CHARTERED ACCOUNTANTS

--------------------------------------------------------------------------------

<PAGE>

                                       70



                                                                     Statement 1

PACIFIC RIM MINING CORP.
(Formerly Dayton Mining Corporation)
CONSOLIDATED BALANCE SHEETS
In thousands of U.S. dollars

<TABLE>
<CAPTION>
                                                                      AS AT            As at
                                                                  APRIL 30,        April 30,
                                                                       2003             2002
                                                                  ---------        ---------
<S>                                                               <C>             <C>
ASSETS
CURRENT ASSETS
     Cash and cash equivalents                                    $  1,107          $  2,564
     Investments in marketable securities (Note 4)                      --               818
     Receivables                                                        50                76
     Inventories (Note 5)                                            9,423             9,155
                                                                  --------          --------
                                                                    10,580            12,613
INVENTORIES - LONG TERM PORTION (Note 5)                             2,002                --
PROPERTY, PLANT AND EQUIPMENT (Note 6)                               5,455             9,450
CLOSURE FUND (Note 8)                                                3,410             3,267
                                                                  --------          --------
                                                                  $ 21,447          $ 25,330
                                                                  ========          ========


LIABILITIES
CURRENT LIABILITIES
     Accounts payable and accrued liabilities                     $  1,228          $  1,366
     Due to related parties (Note 14a)                                 231               681
     Accrued closure costs - current portion (Note 8)                1,488             1,950
                                                                  --------          --------
                                                                     2,947             3,997
LOAN PAYABLE TO A RELATED PARTY (Note 8)                             1,640             1,849
ACCRUED CLOSURE COSTS (Note 8)                                       1,900             1,755
                                                                  --------          --------
                                                                     6,487             7,601
                                                                  --------          --------
SHAREHOLDERS' EQUITY
SHARE CAPITAL - Statement 3 (Note 9)
     Authorized:
       1,000,000,000 common shares without par value
     Issued and fully paid:
          78,528,594 (2002 - 78,408,794) shares outstanding         56,173            56,142
DEFICIT - Statement 3                                              (41,213)          (38,413)
                                                                  --------          --------
                                                                    14,960            17,729
                                                                  --------          --------
                                                                  $ 21,447          $ 25,330
                                                                  ========          ========
</TABLE>

Approved by the Board of Directors:

/s/ David K. Fagin, Director
-------------------

/s/ Thomas C. Shrake, Director
---------------------

                           - See Accompanying Notes -

<PAGE>

                                       71



                                                                     Statement 2

PACIFIC RIM MINING CORP.
CONSOLIDATED STATEMENTS OF LOSS
In thousands of U.S. dollars, except for per share amounts


<TABLE>
<CAPTION>
                                                          YEAR     Four Months            Year            Year
                                                         ENDED           Ended           Ended           Ended
                                                     APRIL 30,       April 30,    December 31,    December 31,
                                                          2003            2002            2001            2000
                                                     ---------     -----------    ------------    ------------
<S>                                                   <C>             <C>             <C>             <C>
REVENUE
   Sales                                              $ 12,509        $  5,303        $ 14,913        $ 34,926
                                                      --------        --------        --------        --------
COST OF SALES
   Operating costs                                       8,999           4,454          13,545          33,720
   Depreciation, depletion and amortization              3,092           1,196           2,980           6,479
   Write-down of mining interest (Note 7b)               1,262              --              --              --
                                                      --------        --------        --------        --------
                                                        13,353           5,650          16,525          40,199
                                                      --------        --------        --------        --------
  Mine operating (loss)                                   (844)           (347)         (1,612)         (5,273)
                                                      --------        --------        --------        --------
EXPENSES (INCOME)
   Exploration                                           3,346             250             700           1,766
   General and administrative                              937             437           1,131           1,546
   Write-down of marketable securities (Note 4)            275              --              70              --
   Interest expense                                         78              28              15             930
   Amalgamation costs                                       --             683              --              --
   Foreign exchange                                        (28)            (29)             66            (324)
   Interest income                                        (175)            (62)           (122)           (525)
   Gain on sale of mineral properties                     (922)             --              --              --
   Gain on sale of marketable securities (Note 4)       (1,047)            (59)            (11)             --
                                                      --------        --------        --------        --------
                                                         2,464           1,248           1,849           3,393
                                                      --------        --------        --------        --------
NET LOSS BEFORE UNUSUAL ITEM                            (3,308)         (1,595)         (3,461)         (8,666)
RECOVERY (WRITE OFF) OF INVESTMENT IN
   ANDACOLLO MINE (Note 1b)                                508              (6)             90         (22,722)
                                                      --------        --------        --------        --------
NET LOSS FOR THE PERIOD                               $ (2,800)       $ (1,601)       $ (3,371)       $(31,388)
                                                      ========        ========        ========        ========
LOSS PER SHARE - BASIC AND DILUTED                    $  (0.04)       $  (0.03)       $  (0.11)       $  (1.17)
                                                      ========        ========        ========        ========
</TABLE>

                           - See Accompanying Notes -


<PAGE>

                                       72



                                                                     Statement 3

PACIFIC RIM MINING CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
In thousands of U.S. dollars

<TABLE>
<CAPTION>
                                                                 Share Capital
                                                          ---------------------------
                                                                                         Accumulated
                                                                Number         Amount        Deficit           Total
                                                          ------------        -------    -----------        --------
<S>                                                       <C>                 <C>           <C>             <C>
Balance - December 31, 1999                                351,356,779        $31,932       $ (2,053)       $ 29,879
   Common shares issued for cash                               255,000             21             --              21
   Common shares issued for acquisitions                   189,049,606         16,036             --          16,036
   Share consolidation 1 for 20                           (513,628,316)            --             --              --
   Common shares issued for special warrants                 4,090,905          5,821             --           5,821
   Net loss for the year                                            --             --        (31,388)        (31,388)
                                                          ------------        -------       --------        --------
Balance - December 31, 2000                                 31,123,974         53,810        (33,441)         20,369
  Net loss for the year                                             --             --         (3,371)         (3,371)
                                                          ------------        -------       --------        --------
Balance - December 31, 2001                                 31,123,974         53,810        (36,812)         16,998
  Common shares issued for amalgamation
     conversion for Dayton shareholders (1.76
     for 1) (Note 1c)                                       23,654,220             --             --              --
  Common shares issued for acquisition of PRMC
     (Note 1c)                                              23,498,600          2,287             --           2,287
  Common shares issued for cash                                132,000             45             --              45
  Net loss for the four months ended April 30, 2002                 --             --         (1,601)         (1,601)
                                                          ------------        -------       --------        --------
Balance - April 30, 2002                                    78,408,794         56,142        (38,413)         17,729
  Common shares issued for cash                                119,800             31             --              31
  Net loss for the year                                             --             --         (2,800)         (2,800)
                                                          ------------        -------       --------        --------
Balance - April 30, 2003                                    78,528,594        $56,173       $(41,213)       $ 14,960
                                                          ============        =======       ========        ========
</TABLE>


                           - See Accompanying Notes -

<PAGE>

                                       73



                                                                     Statement 4

PACIFIC RIM MINING CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands of U.S. dollars

<TABLE>
<CAPTION>
                                                         YEAR       Four Months              Year              Year
                                                        ENDED             Ended             Ended             Ended
                                                    APRIL 30,         April 30,      December 31,      December 31,
                                                         2003              2002              2001              2000
                                                    ---------       -----------      ------------      ------------
<S>                                                  <C>              <C>               <C>               <C>
OPERATING ACTIVITIES
  Net loss for the period                            $ (2,800)         $ (1,601)         $ (3,371)         $(31,388)
     Adjustment to reconcile net loss to
      cash flow provided by operations:
      Depletion, depreciation and
      amortization                                      2,717             1,035             2,980             6,479
     Accrued closure costs                                375               161               (22)              567
     Foreign exchange                                     (28)              (29)               59               (82)
     Net interest earned on sinking fund                 (143)              (50)             (153)              (40)
     Adjustment of sinking fund value                      --                --                57                --
     Amortization of other assets                          --                --                --                30
     Write-off of investment in subsidiary                 --                --                --            22,722
     General and administration costs
      covered by issuance of shares                        --                --                --                21
     Gain on sale of marketable securities             (1,047)              (59)              (11)               --
     Gain on sale of mineral properties                  (922)               --                --                --
     Write-down of marketable securities                  275                --                70                --
     Write-down of mining interest                      1,262                --                --                --
                                                     --------          --------          --------          --------
                                                         (311)             (543)             (391)           (1,691)
     Accounts payable and accrued
      liabilities                                        (138)             (439)             (698)           (1,203)
     Bullion settlements receivable                        --                --                --             1,143
     Cash lost on deconsolidation                          --                --                --              (103)
     Closure cost expenditures                           (692)              (83)             (118)           (1,149)
     Due to related parties                              (659)              484               197                --
     Inventories                                       (2,270)             (144)           (1,335)               72
     Receivables                                           26               163               (28)              705
                                                     --------          --------          --------          --------
CASH FLOW USED FOR OPERATING ACTIVITIES                (4,044)             (562)           (2,373)           (2,226)
                                                     --------          --------          --------          --------
INVESTING ACTIVITIES
  Capitalized acquisition costs                            --                --                --              (617)
  Cash acquired on amalgamation                            --             1,483                --                --
  Deferred stripping                                       --                --                --              (750)
  Purchases of property, plant and equipment              (79)             (138)             (104)             (390)
  Proceeds of disposition of property,
    plant and equipment                                    56                --                --                --
  Reclamation sinking fund contributions                   --                --              (352)             (470)
                                                     --------          --------          --------          --------
CASH FLOW PROVIDED BY (USED FOR) INVESTING
   ACTIVITIES                                             (23)            1,345              (456)           (2,227)
                                                     --------          --------          --------          --------
FINANCING ACTIVITIES
  Capital lease obligation repayments                      --                --                --            (1,122)
  Issuance of share capital                                31                45                --             5,821
  Operating line of credit                                 --                --                --               399
  Principal repayments of bank loan                        --                --                --            (1,667)
  Proceeds on sale of marketable securities             2,551               170                29                --
  Restricted cash released                                 --                --                --             1,667
                                                     --------          --------          --------          --------
CASH FLOW PROVIDED BY FINANCING ACTIVITIES              2,582               215                29             5,098
                                                     --------          --------          --------          --------
FOREIGN EXCHANGE                                           28                29               (59)               82
                                                     --------          --------          --------          --------
NET INCREASE (DECREASE) IN CASH AND CASH
   EQUIVALENTS                                         (1,457)            1,027            (2,859)              727
  Cash and cash equivalents - Beginning of
    period                                              2,564             1,537             4,396             3,669
                                                     --------          --------          --------          --------
CASH AND CASH EQUIVALENTS - END OF PERIOD            $  1,107          $  2,564          $  1,537          $  4,396
                                                     ========          ========          ========          ========

INTEREST PAID DURING THE PERIOD                      $     79          $     --          $    141          $    789
                                                     ========          ========          ========          ========
SUPPLEMENTARY SCHEDULE OF NON-CASH
   TRANSACTIONS:
  Shares issued for business combination             $     --          $  2,287          $     --          $ 16,036
  Shares issued for general and
     administrative expenses                         $     --          $     --          $     --          $     21
  Loans from related parties                         $     --          $     --          $     --          $  1,849
  Marketable securities received for
     mineral properties                              $    900          $  1,000          $     --          $     --
                                                     ========          ========          ========          ========
</TABLE>


                           - See Accompanying Notes -

<PAGE>

                                       74



PACIFIC RIM MINING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2003 AND 2002
In thousands of U.S. dollars

--------------------------------------------------------------------------------

1.   NATURE OF OPERATIONS AND BASIS OF PRESENTATION

     The Company is involved in the exploration, development and operation of
     gold properties. The Company owns a 49% interest in the Denton-Rawhide
     Mine, located near Fallon, Nevada, U.S.A. and a 100% interest in certain
     exploration licence areas, known as El Dorado, located in El Salvador.

     BASIS OF PRESENTATION

     The consolidated financial statements are presented in accordance with
     generally accepted accounting principles ("GAAP") applicable in Canada and
     have been reconciled as to significant differences in measurement to
     generally accepted accounting principles applicable in the United States as
     disclosed in Note 15.

     Certain of comparative figures have been reclassified to conform to the
     current year's presentation.

     These consolidated financial statements include the accounts of the
     Company's wholly-owned subsidiaries, Dayton Mining (US) Inc., DMC Cayman
     Inc., Andacollo Gold Inc., La Serena Inc., Dayton Chile Exploraciones
     Mineras Limitada, Compania Minera Dayton (to December 1, 2000), Dayton
     Acquisition Inc., 449200 B.C. Ltd., Pacific Rim El Salvador S.A. De C.V.
     and Recursos Salvadorenos S.A. de C.V. Also included in these consolidated
     financial statements are the Company's wholly-owned subsidiaries, Pac Rim
     Cayman, Pac Rim Caribe III and International Pacific Rim S.A. from the date
     of acquisition of April 11, 2002.

     The 49% joint venture interest in Denton-Rawhide is accounted for on the
     proportionate consolidation basis.

     a)  REPORTING CURRENCY

         The United States dollar is the Company's principal reporting currency
         and the currency of measurement for all financial transactions reported
         in these consolidated financial statements.

     b)  SHUT DOWN OF ANDACOLLO MINE

         The carrying values of the assets and liabilities of the Chilean
         operating subsidiary that owned the Andacollo Mine have been written
         off effective December 1, 2000 with a corresponding charge to income to
         reflect permanent closure of this mine and the estimated realizable
         value of capital assets after all liabilities have been liquidated.

         The statements of loss and cash flow for the year ended December 31,
         2000 reflect the operating results of the Andacollo Mine for the 11
         months of operation prior to closure.

         Creditor distribution proceeds received from the "written off"
         subsidiary are credited to current year's income.


<PAGE>

                                       75



PACIFIC RIM MINING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2003 AND 2002
In thousands of U.S. dollars

--------------------------------------------------------------------------------

1.   NATURE OF OPERATIONS AND BASIS OF PRESENTATION - Continued

     c)  AMALGAMATION OF DAYTON MINING CORPORATION AND PACIFIC RIM MINING CORP.

         On April 11, 2002 statutory approval was received from the Province of
         British Columbia Registrar of Companies for the amalgamation of Dayton
         Mining Corporation ("Dayton") and Pacific Rim Mining Corp. ("PRMC")
         under the name of Pacific Rim Mining Corp. (the "Company") as approved
         by the shareholders of each of the amalgamated companies on April 3,
         2002. Dayton shareholders received 1.76 common shares of the Company in
         exchange for each common share of Dayton held and PRMC shareholders
         received 1.0 common shares of the Company in exchange for each common
         share of PRMC held, resulting in Dayton and PRMC shareholders
         comprising 70% and 30% respectively of the Company. The amalgamation
         has been accounted for as a reverse takeover using the purchase method
         of accounting with Dayton identified as the acquirer. For financial
         statement purposes the Company is a continuation of Dayton. The shares
         issued as consideration by Dayton to acquire PRMC are recorded at the
         fair value of the net assets of PRMC, which has been determined to be
         the net book value of PRMC. The April 30, 2002 statements of loss and
         cash flows reflect amalgamated results from April 11, 2002 to April 30,
         2002 with results for the period from January 1, 2002 to April 10, 2002
         being solely Dayton results. The comparative figures for the years
         ended December 31, 2001 and 2000 are solely Dayton.

         Details of the net book value of PRMC as at April 11, 2002 are as
         follows:

<TABLE>
<S>                                                                <C>
         Cash, short-term investments and receivables              $ 2,341
         Property, plant and equipment                                  43
         Accounts payable and accruals                                 (97)
                                                                   -------
         Net Assets Acquired                                       $ 2,287
                                                                   -------
         Value attributed to common shares issued                  $ 2,287
                                                                   -------
</TABLE>

2.   SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING CHANGES

     CASH AND CASH EQUIVALENTS

     Cash and cash equivalents includes cash on hand, demand deposits, and short
     term highly liquid investments with a term to maturity of less than three
     months from inception which are readily convertible to known amounts of
     cash and which, in the opinion of management, are subject to an
     insignificant risk of changes in values.

     MARKETABLE SECURITIES

     Marketable securities are carried at the lower of cost and estimated fair
     market value.

     INVENTORIES

     Inventories, comprised of ore on leach pads and gold in process, bullion at
     the refiners and mine operating supplies are valued at the lower of cost
     and net realizable value.


<PAGE>

                                       76



PACIFIC RIM MINING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2003 AND 2002
In thousands of U.S. dollars

--------------------------------------------------------------------------------

2.   SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING CHANGES - Continued

     PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment is stated at estimated fair value as at the
     date of acquisition less accumulated depreciation and accumulated
     write-downs. Mining property, plant and equipment is depreciated using the
     unit of production method over estimated recoverable ounces.

     Annually, reviews are undertaken to evaluate the carrying values of
     operating mines and development properties. If it is determined that the
     estimated net recoverable amount is significantly less than the carrying
     value and the impairment in value is likely to be permanent, a write-down
     to the net recoverable amount is made by a charge to earnings.

     All exploration expenditures are expensed as incurred. Significant property
     acquisition payments for active exploration properties are capitalized. If
     no mineable ore body is discovered, previously capitalized costs are
     expensed in the period the property is abandoned. Expenditures for the
     development of new mines, to define further mineralization in existing ore
     bodies, and to expand the capacity of operating mines, are capitalized and
     amortized on a units of production basis over estimated recoverable
     reserves.

     ENVIRONMENTAL EXPENDITURES AND CLOSURE COSTS

     The operations of the Company may in the future be affected from time to
     time by changes in environmental regulations, including those for future
     removal and site restoration costs. Both the likelihood of new regulations
     and their overall effect upon the Company vary greatly and are not
     predictable. The Company's policy is to meet standards set by relevant
     legislation, by application of technically proven and economically feasible
     measures.

     Environmental expenditures that relate to ongoing environmental and
     reclamation programs are charged against earnings as incurred or
     capitalized and amortized depending on their future economic benefits.
     Estimated future removal and site restoration costs, when the ultimate
     liability is reasonably determinable, are charged against earnings over the
     estimated remaining life of the operation, net of expected recoveries.

     The Company's share of estimated closure costs associated with the
     Denton-Rawhide Mine at the time of acquisition was recognized in full as
     part of the acquisition cost. Increases in estimates of closure liabilities
     subsequent to the acquisition of Denton-Rawhide are accrued on a unit of
     production basis over expected future recoverable ounces of production.

     INCOME TAXES

     The Company uses the asset and liability method to account for income
     taxes. Under this method, current income taxes are recognized for the
     estimated income taxes payable for the current period. Future income tax
     assets and liabilities are recognized for temporary differences between the
     tax and accounting basis of assets and liabilities as well as for the
     benefit of losses available to be carried forward to future years for tax
     purposes that are likely to be realized.


<PAGE>

                                       77



PACIFIC RIM MINING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2003 AND 2002
In thousands of U.S. dollars

--------------------------------------------------------------------------------

2.   SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING CHANGES - Continued

     SHARE CAPITAL

     i)  The proceeds from the exercise of stock options, warrants and escrow
         shares are recorded as share capital in the amount for which the
         option, warrant or escrow share enabled the holder to purchase a share
         in the Company.

     ii) Share capital issued for non-monetary consideration is recorded at an
         amount based on fair market value reduced by an estimate of transaction
         costs normally incurred when issuing shares for cash, as determined by
         the board of directors of the Company.

     STOCK-BASED COMPENSATION

     The Company has adopted the new recommendations of CICA Handbook Section
     3870, Stock-based compensation and other stock-based payments. It is
     applied on a prospective basis and applies to all awards granted on or
     after January 1, 2002. This Section establishes standards for the
     recognition, measurement and disclosure of stock-based compensation and
     other stock-based payments made in exchange for goods and services.

     i)  Non-employees

         The standard requires that all stock-based awards made to non-employees
         be measured and recognized using a fair value based method.

     ii) Employees

         The standard encourages the use of a fair value based method for all
         awards granted to employees, but only requires the use of a fair value
         based method for direct awards of stock, stock appreciation rights, and
         awards that call for settlement in cash or other assets. Awards that a
         company has the ability to settle in stock are recorded as equity,
         whereas awards that the entity is required to or has a practice of
         settling in cash are recorded as liabilities. The company has elected
         to account for employee stock options by measuring compensation cost
         for options as the excess, if any, of the quoted market price of the
         Company's common shares at the date of grant over the amount an
         employee must pay to acquire the common shares. As required for the
         employee stock options, the Company will disclose pro-forma income
         (loss) and pro-forma earnings (loss) per share using a fair value based
         method.

     REVENUE RECOGNITION

     Revenues from the sale of all precious metal bullion are recognized when
     title to the bullion passes to the buyer.

     LOSS PER SHARE

     Basic earnings per share is computed by dividing income available to common
     shareholders by the weighted average number of common shares outstanding
     during the period. The computation of diluted earnings per share assumes
     the conversion, exercise or contingent issuance of securities only when
     such conversion, exercise or issuances would have a dilutive effect on
     earnings per share. The dilutive effect of convertible securities is
     reflected in diluted earnings per share by application of the "if
     converted" method. The dilutive effect of outstanding options and warrants
     and their equivalents is reflected in diluted earnings per share by
     application of the treasury stock method.


<PAGE>

                                       78



PACIFIC RIM MINING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2003 AND 2002
In thousands of U.S. dollars

--------------------------------------------------------------------------------

2.   SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING CHANGES - Continued

     DERIVATIVE TRANSACTIONS

     The Company may enter into gold hedging contracts to manage its exposure to
     fluctuations in the market price of gold and to establish minimum prices
     for certain of its future production. The Company's entire hedging activity
     is considered normal course sales requiring settlements through physical
     delivery. Gains or losses on these contracts are included in sales revenue
     when product is delivered against the contract.

     FOREIGN EXCHANGE

     Transaction amounts denominated in other currencies are translated into
     their United States dollar equivalents at exchange rates prevailing at the
     transaction date. Carrying values of monetary assets and liabilities are
     adjusted at each balance sheet date to reflect exchange rates prevailing at
     that date. Gains and losses arising from restatement of foreign currency
     monetary assets and liabilities at each year-end are included in earnings.

     USE OF ESTIMATES

     The preparation of financial statements in conformity with Canadian
     generally accepted accounting principles requires management to make
     estimates and assumptions that affect the reported amounts of assets and
     liabilities and disclosures of contingent assets and liabilities at the
     date of the financial statements and the reported amounts of revenues and
     expenses during the reporting period. Actual results could differ from
     those estimates.


3.   FINANCIAL INSTRUMENTS

     The Company's financial instruments consist of cash and cash equivalents,
     receivables, closure fund, accounts payable, amounts due to related parties
     and accrued closure costs. Unless otherwise noted, it is management's
     opinion that the Company is not exposed to significant interest, currency
     or credit risks arising from the financial instruments. The fair value of
     these financial instruments approximates their carrying value due to their
     short-term maturity or capacity of prompt liquidation.


4.   INVESTMENTS IN MARKETABLE SECURITIES

     Details are as follows:

<TABLE>
<CAPTION>
                                           APRIL 30,     April 30,
                                                2003          2002
                                           ---------     ---------
<S>                                          <C>           <C>
         Carrying value                      $ --          $ 818
         Market value                        $ --          $ 890
</TABLE>

     During the year, all marketable securities were sold for a gain on sale of
     marketable securities of $1,047. Of this gain, $1,044 represents the sale
     of shares of a company with a director in common. On an interim basis, a
     $275 write-down was taken on the same shares during the year.


<PAGE>

                                       79



PACIFIC RIM MINING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2003 AND 2002
In thousands of U.S. dollars

--------------------------------------------------------------------------------

5.   INVENTORIES

     Details are as follows:

<TABLE>
<CAPTION>
                                                          APRIL 30,    April 30,
                                                               2003         2002
                                                           --------     --------
<S>                                                        <C>          <C>
     Production inventory                                  $ 10,290     $  8,191
     Unsold bullion at refiners                                 595          204
     Supplies inventory                                         540          760
                                                           --------     --------
                                                             11,425        9,155
     Less:  Long term portion of production inventory        (2,002)          --
                                                           --------     --------
                                                           $  9,423     $  9,155
                                                           ========     ========
</TABLE>



     The estimated value of inventory that will not be recovered within the next
     fiscal year has been reclassified as long term.


6.   PROPERTY, PLANT AND EQUIPMENT

     Details are as follows:

<TABLE>
<CAPTION>
                                                      APRIL 30,       April 30,
                                                           2003            2002
                                                      ---------       ---------
<S>                                                    <C>             <C>
     Cost                                              $ 10,652        $ 12,409
     Accumulated depreciation and write-downs            (5,197)         (2,959)
                                                       --------        --------
                                                       $  5,455        $  9,450
                                                       ========        ========
</TABLE>

7.   MINERAL PROPERTIES

     a)  EL SALVADOR PROPERTIES

         i)   The Company holds a 100% interest in four exploration licence
              areas in El Salvador, known as El Dorado (two licences), Potonico
              and El Paisnal. Annual advance minimum royalty payments are
              required on the El Dorado property, which are the greater of $50
              per year or a 3% net smelter return royalty ("NSR"). The Company
              has the right to purchase the NSR for $4,000 ($1,000 for 1.5% and
              $3,000 for the remainder) provided that the royalty is at least
              partially acquired within six months of commercial production.

              All licences are subject to a 2% NSR held by the government of El
              Salvador.


<PAGE>

                                       80



PACIFIC RIM MINING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2003 AND 2002
In thousands of U.S. dollars

--------------------------------------------------------------------------------

7.   MINERAL PROPERTIES - Continued

     a)  EL SALVADOR PROPERTIES - Continued

         ii)  By letter of intent dated May 17, 2002, the Company agreed to
              acquire a 100% interest in the La Calera gold project, located
              near the El Dorado property. Under the letter of intent the
              Company, at its option, must make the following payments and
              exploration expenditures:

<TABLE>
<CAPTION>
                                                                                         Minimum
                                                                         Option      Exploration
                                                                       Payments     Expenditures
                                                                       --------     ------------
<S>                                                                      <C>              <C>
              Upon signing (paid)                                        $    5           $   --
              Upon completion of a two month due diligence (paid)            15               --
              On or before May 17, 2003 (paid and incurred)                  20               25
              On or before May 17, 2004 (incurred)                           35               50
              On or before May 17, 2005 (incurred)                           75              100
              On or before May 17, 2006                                     150              200
                                                                         ------           ------
                                                                         $  300           $  375
                                                                         ------           ------
</TABLE>

              The property is subject to a 0.5% NSR which can be purchased by
              the Company for $200,000 if purchased within six months from the
              start of commercial production.

     b)  DENTON-RAWHIDE JOINT VENTURE

         The Company owns a 49% interest in the Denton-Rawhide Mine. The
         Company's 49% interest in the joint venture is summarized as follows:

<TABLE>
<CAPTION>
                                             APRIL 30,      April 30,   December 31,
                                                  2003           2002           2001
                                             ---------      ---------   ------------
<S>                                           <C>            <C>               <C>
          Cash working capital                $  8,838       $  9,036          8,651
          Inventories - long-term portion        2,002             --             --
          Property, plant and equipment          1,219          5,213          6,262
          Closure fund                           3,410          3,267          3,217
          Current liabilities                   (2,510)        (2,164)        (2,681)
          Long-term liabilities                 (1,900)        (2,596)        (2,518)
                                              --------       --------         ------
          Net assets                          $ 11,059       $ 12,756         12,931
                                              --------       --------         ------
</TABLE>


<TABLE>
<CAPTION>
                                           YEAR      Four Months             Year
                                          ENDED            Ended            Ended
                                      APRIL 30,        April 30,     December 31,
                                           2003             2002             2001
                                      ---------      -----------     ------------
<S>                                    <C>              <C>                <C>
          Sales                        $ 12,509         $  5,303           14,913
          Costs and expenses            (13,348)          (5,763)         (16,639)
                                       --------         --------           ------
          Net loss before taxes        $   (839)        $   (460)          (1,726)
                                       --------         --------           ------
</TABLE>

         During the year ended April 30, 2003, the Denton-Rawhide Mine
         experienced unexpected production shortfalls due to slower than
         expected heap leach recoveries. A review of the carrying value of the
         Denton-Rawhide investment indicates that the fair value of this
         investment has been impaired, therefore a $1,262 reduction in carrying
         value has been charged to the current year's operating income.


<PAGE>

                                       81



PACIFIC RIM MINING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2003 AND 2002
In thousands of U.S. dollars

--------------------------------------------------------------------------------

7.   MINERAL PROPERTIES - Continued

     c)  AGREEMENT WITH SILVER STANDARD RESOURCES INC. ("SSO")

         By agreement dated December 14, 2001, PRMC agreed to sell its 100%
         interest in certain subsidiaries that held the Diablillos mineral
         property located in Argentina. As consideration, SSO paid $3,400 in
         cash and treasury shares. PRMC received $1,500 in cash during the year
         ended December 31, 2001 and 383,025 common shares of SSO with a fair
         market value of $1,000 prior to the amalgamation date of April 11,
         2002. During the fiscal year 2003, the Company received 142,970 shares
         of SSO, which had a fair market value of $900, thus completing the
         terms of the agreement. All amounts received from SSO are treated as a
         recovery of acquisition and deferred exploration costs on the
         Diablillos property and any recovery over the cost has been treated as
         a gain, once received. The amount of the gain recorded during the year
         ended April 30, 2003 was $922.


8.   CLOSURE FUND, ACCRUED CLOSURE COSTS AND LOAN PAYABLE TO A RELATED PARTY

     The Company, as part of the Denton-Rawhide acquisition, agreed to reimburse
     Kinross Gold Corporation ("Kinross"), who is a major shareholder of the
     Company and has a director in common, a principal amount of $2,118 for
     Kinross' interest in the reclamation and severance trust funds ("Closure
     Fund") held for the benefit of the Denton-Rawhide operation. The principal
     amount is repayable to Kinross, on an annual basis, from 25% of the net
     internal cash flow from the Denton-Rawhide Mine. Interest is payable
     annually at rates equivalent to those earned by the Closure Fund trust
     accounts. As a result of adjustments to working capital accounts at the
     time of purchase, the principal amount owing to Kinross was reduced to the
     outstanding amount of $1,849 of which $209 (plus accrued interest) is due
     and payable at December 31, 2003 and the balance of $1,640 is payable at
     December 31, 2004.

     The funds are held in a trust managed by a Trustee that is a large North
     American banking institution. The trust funds are invested in mutual funds
     composed of U.S. Government guaranteed fixed income securities with
     maturities of one to five years. The fair market value of the funds at
     April 30, 2003 was approximately $3,700 (2002 - $3,400).

     The Company estimates its share of closure liabilities at the
     Denton-Rawhide Mine to be $3,388 of which $1,900 is long term. The closure
     trust funds are provided as security to the mine operator for the estimated
     closure liabilities.


<PAGE>

                                       82



PACIFIC RIM MINING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2003 AND 2002
In thousands of U.S. dollars

--------------------------------------------------------------------------------

9.   SHARE CAPITAL

     STOCK OPTIONS

     Upon amalgamation stock options outstanding under the plans of Dayton and
     PRMC were rolled over, provided that upon surrender, termination or expiry
     without exercise the shares are not available for the grant of new options.

     In October 2002 shareholders approved a new stock option and bonus plan
     under which up to 6,000,000 common shares are reserved for the grant of
     stock options and up to 367,000 common shares are reserved for the grant of
     bonus shares to directors, employees or consultants ("eligible parties").

     Stock options or bonus shares may be granted under the 2002 Plan, by the
     Board of Directors, to eligible parties, for a term of up to 10 years, at
     the closing price on the TSX on the date prior to the grant, and on
     conditions as may be determined by the Board of Directors.

<TABLE>
<CAPTION>
                                                       Number of Options
                                                 -------------------------------
                                                         Pre-            October      Weighted Average          Year
                                                 Amalgamation               2002        Exercise Price            Of
                                                        Plans               Plan            (in Cdn $)        Expiry
                                                 ------------          ---------      ----------------     ---------
<S>                                                 <C>                <C>                    <C>          <C>
     Options at April 11, 2002 amalgamation         5,664,880                 --              $   0.72     2002-2006
     April 11 to April 30, 2002 - expired            (176,000)                --              $   1.08          2002
                                - exercised          (132,000)                --              $   0.54          2002
                                                    ---------          ---------              --------     ---------
     Options outstanding at April 30, 2002          5,356,880                 --              $   0.71     2003-2006
     Year ended April 30, 2003 - granted                   --          2,130,000              $   0.62          2007
                               - expire              (719,660)           (20,000)             $   0.73     2002-2003
                               - exercised           (119,800)                --              $   0.40     2002-2003
                                                    ---------          ---------              --------     ---------
     Options outstanding at April 30, 2003          4,517,480          2,110,000              $   0.68     2003-2007
                                                    ---------          ---------              --------     ---------
     Vested as at April 30, 2003                    4,089,880          1,406,667              $   0.78     2003-2007
                                                    ---------          ---------              --------     ---------
</TABLE>



     The following table summarizes information about stock options outstanding
     to directors, former directors and employees as at April 30, 2003.

<TABLE>
<CAPTION>
                              Exercise Price           Number           Number
            Expiry Date           (in Cdn $)      Outstanding           Vested
     ------------------       --------------      -----------       ----------
<S>                               <C>               <C>              <C>
       November 4, 2003           $ 0.88              574,000          574,000
       February 4, 2004           $ 1.49                4,000            4,000
         April 27, 2004           $ 1.36            1,188,000        1,188,000
          June 29, 2004           $ 1.06              330,000          330,000
          June 29, 2004           $ 1.36               36,080           36,080
     September 24, 2004           $ 1.30               29,000           29,000
           May 28, 2005           $ 0.54            1,073,600        1,073,600
           July 4, 2006           $ 0.29            1,282,800          855,200
         April 18, 2007           $ 0.62            2,110,000        1,406,667
                                                    ---------        ---------
                                                    6,627,480        5,496,547
                                                    ---------        ---------
</TABLE>


<PAGE>

                                       83



PACIFIC RIM MINING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2003 AND 2002
In thousands of U.S. dollars

--------------------------------------------------------------------------------

9.   SHARE CAPITAL - Continued

     STOCK OPTIONS - Continued

     If the Company had accounted for stock options granted to directors and
     employees using the fair value method, the pro-forma effect on net loss and
     loss per share for the year ended April 30, 2003 would be as follows:

<TABLE>
<S>                                                                  <C>
     Net Loss for the Year
          As reported                                                $(2,800)
          Stock option compensation expense                             (473)
                                                                     -------
          Pro-forma net loss for the year                            $(3,273)
                                                                     -------
     Loss Per Share - Basic and Diluted (in U.S. dollars)
          As reported                                                $ (0.04)
          Pro-forma                                                  $ (0.04)
</TABLE>

     The fair value of the options used in the pro-forma information above has
     been estimated using the Black-Scholes Option Pricing Model with the
     following assumptions: an average risk free interest rate of 4.31%, an
     average expected life of 4.0 years, an expected stock volatility, based on
     past trading history, of 89.46% and no expectation of dividend payments
     during the life of the options.

     The Black-Scholes Option Pricing Model was created for use in estimating
     the fair value of freely tradable, fully transferable options. The
     Company's employee stock options have characteristics significantly
     different from those of traded options, and because changes in the highly
     subjective input assumptions can materially effect the calculated values,
     management believes that the accepted Black-Scholes model does not
     necessarily provide a reliable measure of the fair value of the Company's
     stock option awards.


10.  GOLD SALES CONTRACTS

     (Metals prices in U.S. dollars)

     At April 30, 2003, the Company's gold hedging program consisted of 6,000
     ounces (2002 - 10,000) of forward sales contracts for future delivery of
     gold at various dates from May 15, 2003 to August 15, 2003 (2002 - May to
     September 2002) at an average price of $368 (2002 - $292) per ounce. At
     April 30, 2003 the Company had no financial exposure to market risks
     related to the settlement of outstanding hedges as gold spot prices were
     approximately $339 (2002 - $308) per ounce at that date. The estimated fair
     value of these contracts at the April 30, 2003 spot prices was $174 (2002 -
     $[165]) which represents the fair value to the Company on the balance sheet
     date if it were to settle these instruments prior to their maturity.

     The credit risk exposure related to the Company's gold hedging activities
     is limited to the unrealized gains (losses) on outstanding contracts based
     on current market prices. The Company's gold hedging contract counter
     parties are large international credit-worthy institutions.


<PAGE>

                                       84



PACIFIC RIM MINING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2003 AND 2002
In thousands of U.S. dollars

--------------------------------------------------------------------------------

11.  INCOME TAXES

     The Company has incurred certain mineral property related expenditures of
     approximately $9,664 in Canada and $1,667 in Argentina. For tax purposes,
     these expenditures may be carried forward indefinitely to reduce prescribed
     taxable income in future years.

     The Company and its subsidiaries have combined non-capital losses for tax
     purposes of approximately $15,106 in the listed jurisdictions which may be
     carried forward and expire as follows:

<TABLE>
<CAPTION>
                             USA            Canada         Argentina
                          ------            ------         ---------
<S>                       <C>               <C>               <C>
     2004                 $   75            $  119            $  535
     2005                    150               133               115
     2006                     58             1,169                98
     2007                    241             1,849               135
     2008                     31               448               156
     2009                     45               607                --
     2010                    223               849                --
     2011-2023             8,070                --                --
                          ------            ------            ------
                          $8,893            $5,174            $1,039
                          ======            ======            ======
</TABLE>

     The Company also has Alternative Minimum Tax loss carry-forwards in the
     United States of $7,187 expiring in various years up to 2023.


12.  LEASE COMMITMENTS

     The Company has entered into operating leases for office premises and a
     photocopier. Minimum lease payments are as follows:

<TABLE>
<CAPTION>
                       Office
     Year        (i) Premises        Photocopier        Total
     ----        ------------        -----------        -----
<S>                  <C>               <C>              <C>
     2004            $ 31              $ 3.6            $34.6
     2005            $ 31              $ 3.6            $34.6
     2006            $ 31              $ 3.6            $34.6
     2007            $ 31              $ 3.6            $34.6
     2008            $ 23              $ 3.6            $26.6
</TABLE>

     (i) In addition to the basic rent, the Company is responsible for its
         proportionate share of property taxes and operating costs.


<PAGE>

                                       85



PACIFIC RIM MINING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2003 AND 2002
In thousands of U.S. dollars

--------------------------------------------------------------------------------

13.  SEGMENTED INFORMATION

     Details are as follows:

<TABLE>
<CAPTION>

                                                         YEAR      Four Months             Year             Year
                                                        ENDED            Ended            Ended            Ended
                                                    APRIL 30,        April 30,     December 31,     December 31,
                                                         2003             2002             2001             2000
                                                    ---------        ---------     ------------     ------------
<S>                                                  <C>              <C>              <C>              <C>
     Total Assets
          Canada                                     $     99         $  2,682         $  1,064         $  4,231
          USA                                          17,094           18,445           19,275           20,131
          El Salvador                                   4,252            4,184            4,184            4,184
          Chile                                             2               19               17               17
                                                     --------         --------         --------         --------
          Total                                      $ 21,447         $ 25,330         $ 24,540         $ 28,563
                                                     ========         ========         ========         ========
     Total Property, Plant and Equipment
          Canada                                     $      8         $     11         $      2         $     --
          USA                                           1,263            5,238            6,262            9,157
          El Salvador                                   4,184            4,184            4,184            4,184
          Chile                                            --               17               17               --
                                                     --------         --------         --------         --------
          Total                                      $  5,455         $  9,450         $ 10,465         $ 13,341
                                                     ========         ========         ========         ========
     Revenue, Excluding Interest Income
          Canada                                     $     --         $     --         $     --         $    674
          USA                                          12,509            5,303           14,913           11,159
          El Salvador                                      --               --               --               --
          Chile                                            --               --               --           23,093
                                                     --------         --------         --------         --------
          Total                                      $ 12,509         $  5,303         $ 14,913         $ 34,926
                                                     ========         ========         ========         ========
     Depreciation, Depletion and Amortization
          Canada                                     $      4         $      1         $      6         $     --
          USA                                           3,088            1,195            2,974            2,644
          El Salvador                                      --               --               --               --
          Chile                                            --               --               --            3,835
                                                     --------         --------         --------         --------
          Total                                      $  3,092         $  1,196         $  2,980         $  6,479
                                                     ========         ========         ========         ========
     Net Income (Loss)
          Canada                                     $    847         $   (969)        $ (1,021)        $   (607)
          USA                                          (1,004)            (401)          (1,770)          (1,493)
          El Salvador                                  (3,151)            (231)            (580)            (959)
          Chile                                           508               --               --          (28,329)
                                                     --------         --------         --------         --------
          Total                                      $ (2,800)        $ (1,601)        $ (3,371)        $(31,388)
                                                     ========         ========         ========         ========
</TABLE>

<PAGE>

                                       86



PACIFIC RIM MINING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2003 AND 2002
In thousands of U.S. dollars

--------------------------------------------------------------------------------

14.  RELATED PARTY TRANSACTIONS

     Except as noted elsewhere in these consolidated financial statements,
     related party transactions are as follows:

     a)  Amounts due to related parties are required to be paid within 12 months
         and have accordingly been recorded in these financial statements as
         current liabilities.

         Details are as follows:

<TABLE>
<CAPTION>
                                                               APRIL 30,      April 30,
                                                                    2003           2002
                                                               ---------      ---------
<S>                                                                 <C>            <C>
         Severances payable to former directors and officers        $ --           $653
         Loan interest due to Kinross                                 22             28
         Loan payable to Kinross - current portion (Note 8)          209             --
                                                                    ----           ----
                                                                    $231           $681
                                                                    ----           ----
</TABLE>

     b)  During the period ended April 30, 2003, wages and benefits of $381
         (2002 - $11, 2001 - $1,217) were paid to directors and officers and
         have been included in general and administrative expenses. Severance
         costs totalling $567 were included in amalgamation costs in the period
         ended April 30, 2002.


15.  UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("US GAAP")

     The effect of the measurement differences between Canadian GAAP and US GAAP
     are summarized below.

     Under US GAAP, securities that are available-for-sale are recorded at fair
     value and unrealized gains or losses are excluded from earnings and
     recorded as a separate component of shareholders' equity. Declines in fair
     value that are other than temporary are written off. Under Canadian GAAP,
     investments in marketable securities are carried at the lower of cost and
     estimated fair market value.

     The significant change in the consolidated financial statements relative to
     US GAAP were as follows:

     STATEMENTS OF LOSS (in thousands of US dollars, except for per share
     amounts)


<TABLE>
<CAPTION>
                                                            YEAR      Four Months             Year             Year
                                                           ENDED            Ended            Ended            Ended
                                                       APRIL 30,        April 30,     December 31,     December 31,
                                                            2003             2002             2001             2000
                                                       ---------      -----------     ------------     ------------
<S>                                                     <C>              <C>              <C>              <C>
     Net loss following Canadian GAAP                   $ (2,800)        $ (1,601)        $ (3,371)        $(31,388)
     Loss on write-down of marketable securities              --               --              (62)              --
                                                        --------         --------         --------         --------
     Net loss following US GAAP                           (2,800)          (1,601)          (3,433)         (31,388)
     Unrealized holding gain on marketable
         securities                                           --               72               43               --
     Loss on write-down of marketable securities              --               --               62               --
                                                        --------         --------         --------         --------
     Comprehensive loss, following US GAAP                (2,800)          (1,529)          (3,328)         (31,388)
     Weighted average number of common shares,
         computed under US GAAP (thousands of
         shares)                                          78,450           58,707           31,124           26,715
                                                        --------         --------         --------         --------
     Loss per share, following US GAAP                  $  (0.04)        $  (0.03)        $  (0.11)        $  (1.17)
                                                        ========         ========         ========         ========
</TABLE>


<PAGE>

                                       87



PACIFIC RIM MINING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2003 AND 2002
In thousands of U.S. dollars

--------------------------------------------------------------------------------

15.  UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES - Continued

     BALANCE SHEETS (in thousands of US dollars)

<TABLE>
<CAPTION>
                                                                           APRIL 30,        April 30,
                                                                                2003             2002
                                                                           ---------        ---------
<S>                                                                         <C>              <C>
     Deficit
         Adjusted deficit, beginning of period per US GAAP                  $(38,475)        $(36,874)
         Net loss per US GAAP                                                 (2,800)          (1,601)
                                                                            --------         --------
         Adjusted deficit, end of period per US GAAP                        $(41,275)        $(38,475)
                                                                            --------         --------

     Accumulated Other Comprehensive Loss
         Beginning of period per US GAAP                                    $    (50)        $   (122)
         Other comprehensive gain                                                 --               72
                                                                            --------         --------
     Accumulated other comprehensive loss, end of period per US GAAP        $    (50)        $    (50)
                                                                            --------         --------
</TABLE>

     As the Company delivers gold against outstanding forward sales contracts,
     it has determined that there is no impact from the adoption of SFAS No.
     133, Accounting For Derivative Instruments and Hedging Activities.

     RECENTLY ADOPTED U.S. ACCOUNTING STANDARDS

     In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
     No. 141, "Business Combinations". SFAS No. 141 mandates the purchase method
     of accounting for all business combinations initiated after 30 June 2001.
     In addition, SFAS No. 141 addresses the accounting for intangible assets
     and goodwill acquired in business combinations completed after 30 June
     2001. The Company adopted SFAS No. 141, as required, with no material
     impact on its financial statements.

     In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
     Assets", which revises the accounting for purchased goodwill and other
     intangible assets. Under SFAS No. 142, goodwill and other intangible assets
     with indefinite lives will no longer be systematically amortized into
     operating results. Instead, each of these assets will be tested, in the
     absence of an indicator of possible impairment, at least annually, and upon
     an indicator of possible impairment, immediately. The Company adopted SFAS
     No. 142, as required, on 1 January 2002 with no material impact on its
     financial statements.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
     Impairment or Disposal of Long-lived Assets". SFAS No. 144 was issued to
     resolve certain implementation issues that had arisen under SFAS No. 121.
     Under SFAS No. 144, a single uniform accounting model is required to be
     used for long-lived assets to be disposed of by sale, whether previously
     held and used or newly acquired, and certain additional disclosures are
     required. The Company adopted SFAS No. 144, as required, with no material
     impact on its financial statements.

<PAGE>

                                       88



PACIFIC RIM MINING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2003 AND 2002
In thousands of U.S. dollars

--------------------------------------------------------------------------------

15.  UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES - Continued

     RECENTLY ADOPTED U.S. ACCOUNTING STANDARDS - Continued

     In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
     Nos. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
     Corrections". SFAS No. 145 updates, clarifies and simplifies existing
     accounting pronouncements, by rescinding SFAS No. 4, which required all
     gains and losses from extinguishment of debt to be aggregated and, if
     material, classified as an extraordinary item, net of related income tax
     effect. As a result, the criteria in APB No. 30 will now be used to
     classify those gains and losses. Additionally, SFAS No. 145 amends SFAS No.
     13 to require that certain lease modifications that have economic effects
     similar to sale-leaseback transactions be accounted for in the same manner
     as sale-leaseback transactions. Finally, SFAS No. 145 also makes technical
     corrections to existing pronouncements. While those corrections are not
     substantive in nature, in some instances, they may change accounting
     practice. The Company adopted the provisions of SFAS No. 145 that amended
     SFAS No. 13, as required, on 15 May 2002 for transactions occurring after
     such date with no material impact on its financial statements. The Company
     will adopt the remaining provisions of SFAS No. 145, as required, on 1 May
     2003 with no material impact on its financial statements.

     RECENTLY ISSUED U.S. ACCOUNTING STANDARDS NOT YET ADOPTED

     In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
     Retirement Obligations". SFAS No. 143 requires entities to record the fair
     value of a liability for an asset retirement obligation in the period in
     which it is a cost by increasing the carrying amount of the related
     long-lived asset. Over time, the liability is accreted to its present value
     each period, and the capitalized cost is depreciated over the useful life
     of the related obligation for its recorded amount or incurs a gain or loss
     upon settlement. The Company will adopt SFAS No. 143, as required, on 1 May
     2003.

     In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
     Associated with Exit or Disposal Activities". SFAS No. 146 was issued to
     address the financial accounting and reporting for costs associated with
     exit or disposal activities, unless specifically excluded. SFAS No. 146
     requires that a liability for a cost associated with a covered exit or
     disposal activity be recognized and measured initially at its fair value in
     the period in which the liability is incurred, except for a liability for
     one-time termination benefits that is incurred over time. If employees are
     not required to render service until they are terminated in order to
     receive the one-time termination benefits or if employees will not be
     retained to render service beyond the minimum retention period (as dictated
     by existing law, statute or contract, or in the absence thereof, 60 days),
     a liability for the termination benefits shall be recognized and measured
     at its fair value at the communication date. If employees are required to
     render service until they are terminated in order to receive the one-time
     termination benefits and will be retained to render service beyond the
     minimum retention period, a liability for the termination benefits shall be
     measured initially at the communication date based on the fair value of the
     liability as of the termination date. The liability shall be recognized
     ratably over the future service period. SFAS No. 146 also dictates that a
     liability for costs to terminate an operating lease or other contract
     before the end of its term shall be recognized and measured at its fair
     value when the entity terminates the contract in accordance with the
     contract terms. A liability for costs that will continue to be incurred
     under a contract for its remaining term without economic benefit to the
     entity is to be recognized and measured at its fair value when the entity
     ceases using the right conveyed by the contract. SFAS No. 146 further
     dictates that a liability for other covered costs associated with an exit
     or disposal activity be recognized and measured at its fair value in the
     period in which the liability is incurred. The Company will adopt SFAS No.
     146, as required, on 1 May 2003.


<PAGE>

                                       89



PACIFIC RIM MINING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2003 AND 2002
In thousands of U.S. dollars

--------------------------------------------------------------------------------

15.  UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES - Continued

     RECENTLY ISSUED U.S. ACCOUNTING STANDARDS NOT YET ADOPTED - Continued

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
     Compensation -- Transition and Disclosure". SFAS 148 amends SFAS No. 123,
     to provide alternative methods of transition for a voluntary change to the
     fair value based method of accounting for stock-based employee
     compensation. In addition, SFAS 148 amends the disclosure requirements of
     SFAS 123 to require prominent disclosures in both annual and interim
     financial statements about the method of accounting for stock-based
     employee compensation and the effect of the method used on reported
     results. SFAS 148 is effective for fiscal years beginning after 15 December
     2002. The interim disclosure provisions are effective for financial reports
     containing financial statements for interim periods beginning after 15
     December 2002. The Company will adopt SFAS No. 148, as required, on 1 May
     2003 with no material impact on its financial statements.
<PAGE>

                                       90


AUDITORS' REPORT

TO THE SHAREHOLDERS OF DAYTON MINING CORPORATION

We have audited the consolidated statements of income, shareholders' equity and
cash flows of Dayton Mining Corporation for the years ended December 31, 2001
and 2000. These consolidated 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 auditing standards generally accepted
in Canada and the United States. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the results of the company's operations and its cash flows
for the years ended December 31, 2001 and 2000 in accordance with Canadian
generally accepted accounting principles.


/s/ PricewaterhouseCoopers LLP

CHARTERED ACCOUNTANTS
Vancouver, B.C., Canada
January 11, 2002






<PAGE>

                                       91


ITEM 18:     FINANCIAL STATEMENTS

Not applicable. See Item 17 above.


ITEM 19:     EXHIBITS

Exhibits as follows:

EXHIBIT
NUMBER                            EXHIBIT DESCRIPTION
-------     --------------------------------------------------------------------

1.1(1)      Articles of the Company approved January 8, 2002.

4.1(2)      Assignment Agreement dated for reference as of April 6, 2000 between
            Kinross Rawhide Mining Company, Kinross Fallon Inc. and Dayton
            Mining Corporation

4.2(2)      Construction and Post-Construction Operating Agreement dated as of
            June 23, 1989 among Kennecott Explorations (Australia) Ltd. (as
            assigned to Kennecott Rawhide) and Kiewit Mining Group Inc. (as
            assigned (i) in part to Plexus, Inc. which in turn assigned its
            interest to Plexus Rawhide Mining Company which changed its name to
            Kinross Rawhide and (ii) in part to Kiewit Rawhide Corp. which
            changed its name to Kinross Fallon) as amended by the First
            Amendment to Operating Agreement;

4.3(2)      Agreement and First Amendment to Construction and Post-Construction
            Operating Agreement dated as of December 15, 1992 made among
            Kennecott Rawhide, Kiewit Mining Group Inc., Plexus Inc. and Plexus
            Rawhide Mining Company

4.4(2)      Participation Agreement dated as of June 23, 1989 made between
            Plexus Inc. (as assigned to Plexus Rawhide Minng Company which
            changed its name to Kinross Rawhide) and Kiewit Mining Group Inc.
            (as assigned to Kiewit Rawhide Corp. which changed its name to
            Kinross Fallon).

4.5(2)      Option and Royalty Agreement among Mirage Resource Corporation, Zinc
            Metal Corporation and New York and El Salvador Mining Co. Inc. dated
            June 25, 1993

4.6(2)      Promissory Notes dated April 6, 2000 between Kinross Fallon Inc.,
            and Kinross Rawhide Mining Company and Dayton (US) Inc.

4.7(2)      Prospectus Qualification and Standstill Agreement dated April 6,
            2000

4.8(2)      Purchase Agreement among Silver Standard Resources Inc. and Pacific
            Rim Mining Corp, and others, dated November 1, 2001

<PAGE>
                                       92


EXHIBIT
NUMBER                            EXHIBIT DESCRIPTION
-------     --------------------------------------------------------------------

4.10(3)     Assignment of Standstill Agreement dated February 21, 2002 between
            Dayton Mining Corporation, Kinross Gold Corporation, Kinross Rawhide
            Mining Company and Kinross Fallon Inc.

12.1        Certification of Chief Executive Officer pursuant to s.302 of the
            Sarbanes-Oxley Act of 2002

12.2        Certification of Chief Financial Officer pursuant to s.302 of the
            Sarbanes-Oxley Act of 2002

13.1        Certification of Chief Executive Officer pursuant to s.906 of the
            Sarbanes-Oxley Act of 2002

13.2        Certification of Chief Financial Officer pursuant to s.906 of the
            Sarbanes-Oxley Act of 2002

14.1        Consent of Peter Ronning, P.Eng.

14.2        Consent of Staley & Okada & Partners


(1)  Incorporated by reference to exhibits filed as part of the Company's Form
     8-A Registration Statement filed with the Securities and Exchange
     Commission on May 6, 2002.

(2)  Incorporated by reference to exhibits filed as part of the 20F of the
     Company dated August 26, 2002.

(3)  Incorporated by reference to exhibits filed as part of the 20F of Dayton
     dated February 26, 2002.

<PAGE>
                                       93



                                    SIGNATURE

Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Company certifies that it meets all of the requirements for filing on
Form 20-F and has duly caused this Annual Report to be signed on its behalf by
the undersigned, thereunto duly authorized.



                                                 PACIFIC RIM MINING CORP.


Date:  August 27, 2003                           /s/ "Thomas C. Shrake"
                                                 ----------------------------
                                                 Thomas C. Shrake
                                                 Its: Chief Executive Officer


<PAGE>
                                       94



                                  EXHIBIT INDEX


                                                                       EXHIBIT
                                                                     APPEARS AT
                                                                    SEQUENTIALLY
EXHIBIT                                                                NUMBERED
NUMBER                EXHIBIT DESCRIPTION                                PAGE
-------     ----------------------------------------------------    ------------

1.1(1)      Articles of the Company approved January 8, 2002.

4.1(2)      Assignment Agreement dated for reference as of April
            6, 2000 between Kinross Rawhide Mining Company,
            Kinross Fallon Inc. and Dayton Mining Corporation

4.2(2)      Construction and Post-Construction Operating
            Agreement dated as of June 23, 1989 among Kennecott
            Explorations (Australia) Ltd. (as assigned to
            Kennecott Rawhide) and Kiewit Mining Group Inc. (as
            assigned (i) in part to Plexus, Inc. which in turn
            assigned its interest to Plexus Rawhide Mining
            Company which changed its name to Kinross Rawhide and
            (ii) in part to Kiewit Rawhide Corp. which changed
            its name to Kinross Fallon) as amended by the First
            Amendment to Operating Agreement;

4.3(2)      Agreement and First Amendment to Construction and
            Post-Construction Operating Agreement dated as of
            December 15, 1992 made among Kennecott Rawhide,
            Kiewit Mining Group Inc., Plexus Inc. and Plexus
            Rawhide Mining Company

4.4(2)      Participation Agreement dated as of June 23, 1989
            made between Plexus Inc. (as assigned to Plexus
            Rawhide Minng Company which changed its name to
            Kinross Rawhide) and Kiewit Mining Group Inc. (as
            assigned to Kiewit Rawhide Corp. which changed its
            name to Kinross Fallon).

4.5(2)      Option and Royalty Agreement among Mirage Resource
            Corporation, Zinc Metal Corporation and New York and
            El Salvador Mining Co. Inc. dated June 25, 1993

4.6(2)      Promissory Notes dated April 6, 2000 between Kinross
            Fallon Inc., and Kinross Rawhide Mining Company and
            Dayton (US) Inc.

4.7(2)      Prospectus Qualification and Standstill Agreement
            dated April 6, 2000

4.8(2)      Purchase Agreement among Silver Standard Resources
            Inc. and Pacific Rim Mining Corp, and others, dated
            November 1, 2001

4.10(2)     Assignment of Standstill Agreement dated February 21,
            2002 between Dayton Mining Corporation, Kinross Gold
            Corporation, Kinross Rawhide Mining Company and
            Kinross Fallon Inc.

12.1        Certification of Chief Executive Officer pursuant to
            s.302 of the Sarbanes-Oxley Act of 2002

12.2        Certification of Chief Financial Officer pursuant to
            s.302 of the Sarbanes-Oxley Act of 2002


<PAGE>
                                       95


                                                                       EXHIBIT
                                                                     APPEARS AT
                                                                    SEQUENTIALLY
EXHIBIT                                                                NUMBERED
NUMBER                EXHIBIT DESCRIPTION                                PAGE
-------     ----------------------------------------------------    ------------

13.1        Certification of Chief Executive Officer pursuant to
            s.906 of the Sarbanes-Oxley Act of 2002

13.2        Certification of Chief Financial Officer pursuant to
            s.906 of the Sarbanes-Oxley Act of 2002

14.1        Consent of Peter Ronning, P.Eng.

14.2        Consent of Staley Okada & Partners


(1)  Incorporated by reference to exhibits filed as part of the Company's Form
     8-A Registration Statement filed with the Securities and Exchange
     Commission on May 6, 2002.

(2)  Incorporated by reference to exhibits filed as part of the Company's 20F
     dated August 26, 2002.

(3)  Incorporated by reference to exhibits filed as part of the 20F of Dayton
     dated February 26, 2002.