---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 20-F

[   ] 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, 2012

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

OR

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

Date of event require this shell company report:

For the transition period from ____ to _____

Commission file number: 001-31328



PACIFIC RIM MINING
CORP.(Exact name of Registrant as specified in its
charter)

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

625 Howe Street, Suite 1050, Vancouver, British Columbia,
Canada V6E 2T6(Address of principal executive offices

Barbara Henderson625 Howe Street, Suite 1050,
Vancouver, British Columbia, Canada V6E 2T6 Tel: (604) 689-1976
E-mail: bhenderson@pacrim-mining.com(Name,
Telephone, E-mail and or/Facsimile number and Address of Company Contact
Person)

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:
|----------------------------------- | ------------------------------------------------
|**Common Shares, no par
    value** | **None**                                        

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

Indicate the number of outstanding shares of each of the
issuer's classes of capital or common stock as of the close of the period
covered by the annual report: 168,601,708

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.[ 
]  Yes   [x]  No

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- 2 -

If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934. [   ]
Yes    [x] No

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 if such shorter period that the
registrant was required to file such report(s), and (2) has been subject to such
filing requirements for the past 90 days.  [x] Yes   [ 
] No

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was require to submit and post such files)
[   ] Yes    [   ]  No

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of accelerated filer and large accelerated filer in Rule 12b-2 of
the Exchange Act. (Check one):

|Large accelerated filer [   ] | Accelerated Filer [   ] | Non-accelerated filer [x]
|----------------------------- | ----------------------- | -------------------------

Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:

|US GAAP [   ] | International Reporting Standards as issued
      [x] | Other [   ]
|------------- | ----------------------------------------------------- | -----------
|              | By the International Accounting Standards
      Board |            

If Other has been checked in response to the previous
question, indicate by check mark which financial statement item the registrant
has elected to follow: Item 17 [   ]    Item 18
[   ]

If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[   ]  Yes     [x]   No

---

TABLE OF CONTENTS

|CAUTIONARY
      NOTE TO US INVESTORS REGARDING RESOURCE AND RESERVE ESTIMATES | 2                                                                                                
|------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------
|GLOSSARY
      OF TECHNICAL TERMS                                              | 3                                                                                                
|CAUTIONARY
      STATEMENT REGARDING FORWARD-LOOKING STATEMENTS                | 5                                                                                                
|PART
      I                                                                   | 6                                                                                                
|                                                                               | ITEM
      1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS                              
|                                                                               | ITEM
      2. OFFER STATISTICS AND EXPECTED TIMETABLE                                            
|                                                                               | ITEM
      3. KEY INFORMATION                                                                    
|                                                                               | ITEM
      4. INFORMATION ON THE COMPANY                                                         
|                                                                               | ITEM
      4A. UNRESOLVED STAFF COMMENTS                                                         
|                                                                               | ITEM
      5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                       
|                                                                               | ITEM
      6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                         
|                                                                               | ITEM
      7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                                  
|                                                                               | ITEM
      8. FINANCIAL INFORMATION                                                              
|                                                                               | ITEM
      9. THE OFFER AND LISTING                                                              
|                                                                               | ITEM
      10. ADDITIONAL INFORMATION                                                            
|                                                                               | ITEM
      11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK                         
|                                                                               | ITEM
      12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                            
|PART
      II                                                                  | 75                                                                                               
|                                                                               | ITEM
      13. DEFAULTS, DIVIDENT ARREARAGES AND DELINQUENCIES                                   
|                                                                               | ITEM
      14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
      PROCEEDS
|                                                                               | ITEM
      15. CONTROLS AND PROCEDURES                                                           
|                                                                               | ITEM
      16. [RESERVED]                                                                        
|                                                                               | ITEM
      16A. AUDIT COMMITTEE FINANCIAL EXPERT                                                 
|                                                                               | ITEM
      16B. CODE OF ETHICS                                                                   
|                                                                               | ITEM
      16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES                                           
|                                                                               | ITEM
      16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                       
|                                                                               | ITEM
      16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
      PURCHASERS     
|                                                                               | ITEM
      16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT                                     
|                                                                               | ITEM
      16G. CORPORATE GOVERNANCE                                                             
|                                                                               | ITEM
      16H. MINE SAFETY DISCLOSURE                                                           
|PART
      III                                                                 | 79                                                                                               
|                                                                               | ITEM
      17. FINANCIAL STATEMENTS                                                              
|                                                                               | ITEM
      18. FINANCIAL STATEMENTS                                                              
|                                                                               | ITEM
      19. EXHIBITS                                                                          

---

- 2 -

CAUTIONARY NOTE TO US INVESTORS REGARDING RESOURCE AND
RESERVE ESTIMATES

This Annual Report on Form 20-F has been prepared in accordance
with the requirements of the securities laws in effect in Canada, which differ
from the requirements of the United States securities laws. The terms mineral
reserve, proven mineral reserve and probable mineral reserve are Canadian
mining terms as defined in accordance with Canadian National Instrument 43-101 
Standards of Disclosure for Mineral Projects(NI 43-101) and the
Canadian Institute of Mining, Metallurgy and Petroleum (the CIM)  CIM
Definition Standards on Mineral Resources and Mineral Reserves, adopted by
the CIM Council, as amended. These definitions differ from the definitions in
the United States Securities and Exchange Commission (SEC) Industry Guide 7
under the United States Securities Act of 1933, as amended (the Securities
Act). Under SEC Industry Guide 7 standards, a final or bankable feasibility
study is required to report reserves, the three-year historical average price is
used in any reserve or cash flow analysis to designate reserves and the primary
environmental analysis or report must be filed with the appropriate governmental
authority.

In addition, the terms mineral resource, measured resource,
indicated resource and inferred resource are defined in and required to be
disclosed by NI 43-101; however, these terms are not defined terms under SEC
Industry Guide 7 and are normally not permitted to be used in reports and
registration statements filed with the SEC. Investors are cautioned not to
assume that any part of or all of mineral deposits in these categories will ever
be converted into reserves. Inferred mineral resources have a great amount of
uncertainty as to their existence, and great uncertainty as to their economic
and legal feasibility. It cannot be assumed that all or any part of an inferred
mineral resource will ever be upgraded to a higher category. Under Canadian
rules, estimates of inferred mineral resources may not form the basis of
feasibility or pre-feasibility studies, except in rare cases. Investors are
cautioned not to assume that all or any part of an inferred mineral resource
exists or is economically or legally mineable. Disclosure of contained ounces
in a resource is permitted disclosure under Canadian regulations; however the
SEC normally only permits issuers to report mineralization that does not
constitute reserves by SEC Industry Guide 7 standards as in place tonnage and
grade without reference to unit measures.

Accordingly, information contained in this Annual Report on
Form 20-F and the documents incorporated by reference herein contain
descriptions of our mineral deposits that may not be comparable to similar
information made public by US companies subject to the reporting and disclosure
requirements under the United States federal securities laws and the rules and
regulations thereunder.

NI 43-101 Definitions

|Mineral resource   | Refers to 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
      reasonable prospects for 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 and inferred mineral resource
      used in this annual Form 20-F are Canadian mining terms as defined in
      accordance with NI 43-101 under the guidelines set out in the CIM
      Standards.                                                                                                                                                                                                                                                                                                                                                                                                                                
|                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Measured resource  | Refers to that part of a mineral resource for which
      quantity grade or quality, densities, shape and 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.
|                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Indicated resource | Refers to 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.                               

---

- 3 -

NI 43-101 Definitions

|Inferred resource | Refers to 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Mineral reserve   | Refers to the economically mineable part of a measured or
      indicated mineral resource demonstrated by at least a preliminary
      feasibility study. The study must include adequate information on mining,
      processing, metallurgical, economic, and other relevant factors that
      demonstrate, at the time of reporting, that economic extraction can be
      justified. A mineral reserve includes diluting materials and allowances
      for losses that might occur when the material is mined.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                    | Mineral reserves are categorized as follows on the basis
      of the degree of confidence in the estimate of the quantity and grade of
      the deposit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Proven reserve    | Means, in accordance with CIM Standards, for the part of
      a deposit which is being mined, or which is being developed and for which
      there is a detailed mining plan, the estimated quantity and grade or
      quality of that part of a measured mineral resource for which the size,
      configuration and grade or quality and distribution of values are so well
      established, and for which economic viability has been demonstrated by
      adequate information on engineering, operating, economic and other
      relevant factors, so that there is the highest degree of confidence in the
      estimate. This definition differs from the standards in the United States,
      where proven or measured reserves are defined as reserves which (a)
      quantity is computed from dimensions revealed in outcrops, trenches,
      workings or drill holes; (b) grade and/or quality are computed from the
      results of detailed sampling and (c) the sites for inspection, sampling
      and measurement are spaced so closely and the geographic character is so
      well defined that size, shape, depth and mineral content of reserves are
      well established.
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Probable reserve  | Means, in accordance with CIM Standards, the estimated
      quantity and grade or quality of that part of an indicated mineral
      resource for which economic viability has been demonstrated by adequate
      information on engineering, operating, economic and other relevant
      factors, at a confidence level which would serve as a basis for decisions
      on major expenditures. This definition differs from the standards in the
      United States, where probable mineral reserves are defined as reserves for
      which quantity and grade and/or quality are computed from information
      similar to that of proven reserves (under United States standards), but
      the sites for inspection, sampling, and measurement are further apart or
      are otherwise less adequately spaced, and the degree of assurance,
      although lower than that for proven mineral reserves, is high enough to
      assume continuity between points of observation. The degree of assurance,
      although lower than that for proven mineral reserves, is high enough to
      assume continuity between points of observation.                                                     

GLOSSARY OF TECHNICAL TERMS

In this annual report on Form 20-F, the following terms and
acronyms have the following meanings:

|Arbitration | The arbitration claim initiated by Pac Rim
      Cayman, LLC, a Nevada, US-based wholly-owned subsidiary of the Company in
      respect of the El Dorado property, El Salvador
|------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              |                                                                                                                                                                                
|BLM         | the United States Bureau of Land Management                                                                                                                                    
|              |                                                                                                                                                                                
|CAFTA       | The Dominican Republic-United States-Central
      America Free Trade Agreement                                                                                                
|              |                                                                                                                                                                                
|CIM         | Canadian Institute of Mining, Metallurgy and
      Petroleum                                                                                                                   
|              |                                                                                                                                                                                
|Dore        | A compound containing gold and silver metal and
      various impurities                                                                                                       

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- 4 -

|Definitive Agreement | The Hog Ranch agreement finalizing the terms of the Hog
      Ranch letter of intent, which grants the Company, through its US
      subsidiary Pacific Rim Exploration Ltd. the optionto acquire a 65%
      interest in the Hog Ranch Property located in Washoe County, Nevada (see
      Item 4B  Business Overview).                                                                                                                                                                                                                                                                                                                                                                                                                                             
|---------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|EIS                  | Environmental Impact Study                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Evergreen Plan       | The Companys Evergreen Incentive Stock Option Plan,
      originally established in 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Final Agreement      | A proposed agreement that would finalize the terms of the
      Remance property letter of intent (see Item 4B  Business Overview). The
      Remance Final Agreement has not been signed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|GOES                 | The Government of El Salvador                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|g/t or gpt         | Grams per tonne. One gram per tonne equals 0.02917 troy
      ounces per short ton                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|NI 43-101            | National Instrument 43-101 - Standards of Disclosure
      for Mineral Projects. An instrument 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 instrument establishes certain
      standards for all public disclosure of scientific and technical
      information concerning mineral projects                                                                                                                                                                                                                                                                                   
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|ICSID                | The International Center for the Settlement of Investment
      Disputes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Investment Law       | The Investment Law of El Salvador                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|LOI                  | Letter of Intent                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|OTCQX                | The United States-based OTCQX trading platform                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|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
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|SEC                  | The United States Securities and Exchange
    Commission                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|SG                   | Specific gravity, a measurement of density                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|tpd                  | Tonnes per day. One tonne equals 1.10231 tons                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Tribunal             | The three-member panel of experts at the International
      Center for the Settlement of Investment Disputes  tasked with
      overseeing and ruling on Pac Rim Cayman, LLCs Arbitration claim                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                      
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|TSX                  | The Toronto Stock Exchange                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|US                   | The United States of America                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

Conversion Factors

To Convert From
    To
    Multiply ByFeet
    Metres
    0.305Metres
    Feet
    3.281Miles
    Kilometres (km)
    1.609


---

- 5 -

To Convert From
    To
    Multiply ByKilometres
    Miles
    0.6214Acres
    Hectares (ha)
    0.405Hectares
    Acres
    2.471Grams
    Ounces (Troy)
    0.03215Grams/Tonnes
    Ounces (Troy)/Short Ton
    0.02917Tonnes (metric)
    Pounds
    2,205Tonnes (metric)
    Short Tons
    1.1023


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS

This Annual Report on Form 20-F and exhibits attached hereto
contain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 and Canadian securities laws. Such
forward-looking statements concern the Company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
estimates of mineral resources and reserves 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:

- risks related to the outcome of legal proceedings;
- risks related to failure to obtain adequate financing on a timely basis and
  on acceptable terms and the Companys ability to remain a going concern;
- political and regulatory risks associated with mining and exploration;
- technical risks associated with mining and exploration;
- risks related to the maintenance of exchange listings;
- risks related to environmental regulation and liability;
- the potential for delays in exploration or development activities;
- the uncertainty of profitability based upon the Companys history of
  losses;
- risks and uncertainties relating to the interpretation of drill results,
  the geology, grade and continuity of mineral deposits;
- risks related to the inherent uncertainty of production and cost estimates
  and the potential for unexpected costs and expenses;
- results of prefeasibility and feasibility studies, and the possibility that
  future exploration, development or mining results will not be consistent with
  the Companys expectations;
- risks related to gold price and other commodity price fluctuations;
- risks related to the Companys responsibilities to Canadian and US
  securities commissions and costs associated with being a publicly traded
  company; and
- risks related to global market events and conditions

This list is not exhaustive of the factors that may affect our
forward-looking statements. Some of the important risks and uncertainties that
could affect forward-looking statements are described in this Annual Report on
Form 20-F under Description of the Business 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. Investors are cautioned against attributing undue certainty to
forward-looking statements.

---

- 6 -

PART I

In this document, references to we, our, us, the
Company or Pacific Rim mean Pacific Rim Mining Corp. and its US subsidiaries
(Pac Rim Cayman LLC (PacRim), Pacific Rim Exploration Inc.
(PREx), and Dayton Mining (U.S.) Inc.); and Salvadoran subsidiaries
(Pacific Rim El Salvador, S.A. de C.V. (PRES) and Dorado Exploraciones,
S.A. de C.V. (DOREX)), inclusive, unless the context of the sentence
clearly suggests otherwise.

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISORS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

A. Selected Financial Data

The selected consolidated financial information set forth below
for each of the two years ended April 30, 2012 and 2011, which is expressed in
United States dollars (the Company prepares its financial statements in United
States dollars), has been derived from the Company's audited consolidated
financial statements as at and for the financial years ended April 30, 2012 and
2011 filed as part of this Form 20-F. These consolidated financial statements
have been prepared in accordance with International Financial Reporting
Standards ("IFRS") as issued by the International Accounting Standards
Board (IASB). The selected financial data presented below is qualified in its
entirety by, and should be read in conjunction with, the audited consolidated
financial statements and notes thereto as well as managements discussion and
analysis of results of operations, and the discussion in Item 5 of this Form
20-F. Historical results from any prior period are not necessarily indicative of
results to be expected for any future period.

(in thousands of US dollars, except per share
amounts)

2012
    2011IFRS
    IFRSRevenue
    $Nil
    $NilOperating Loss
    $(3,859)
    $(4,168)Other income: Unrealized gains on derivative liability
    $2,051
    $232Net Loss and Comprehensive Loss for the year
    $(1,834)
    $(3,771)Loss per share (basic and diluted)
    $(0.01)
    $(0.03)Current assets
    $1,400
    $1,195Total assets
    $6,942
    $6,681Total liabilities
    $1,846
    $3,291Net Assets
    $5,096
    $3,390Share capital
    $90,058
    $86,955Shareholders' equity
    $5,096
    $3,390Weighted average number of common shares issued and
      outstanding (basic and diluted)
    168,414,549
    141,631,705


The selected consolidated financial information in the IFRS
chart above should not be compared to the information in the Canadian GAAP or
United States GAAP charts below as the information was prepared using different
financial reporting standards.

The selected consolidated financial information set forth in
the first table below for each of the three years ended April 30, 2010, 2009 and
2008, which is expressed in United States dollars (the Company prepares its
financial statements in United States dollars), has been derived from the
Company's audited consolidated financial statements as at and for the financial
years ended April 30, 2010, 2009 and 2008. These consolidated financial
statements were prepared in accordance with generally accepted accounting
principles in Canada ("Canadian GAAP"), which differ in certain respects
from the principles the Company would have followed had its consolidated
financial statements been prepared in accordance with United States GAAP.
Historical results from any prior period are not necessarily indicative of
results to be expected for any future period.

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- 7 -

*(in thousands of US dollars, except per share amounts)*

2010 Canadian GAAP
    2009 Canadian GAAP
    2008 Canadian GAAPRevenue
    $Nil
    $Nil
    $NilOperating Loss
    $(5,005)
    $(9,433)
    $(15,657)Other income: Unrealized gains on derivative
      liabilityNet Loss and Comprehensive Loss for the year
    $(4,967)
    $(6,276)
    $(12,734)Loss per share (basic and diluted)
    $(0.04)
    $(0.08)
    $(0.13)Current assets
    $1,414
    $2,615
    $7,666Total assets
    $6,927
    $8,187
    $18,270Total liabilities
    $2,626
    $1,679
    $6,109Net Assets
    $4,301
    $6,508
    $12,161Share capital
    $84,133
    $82,914
    $82,649Shareholders' equity
    $4,301
    $6,508
    $12,161Weighted average number of common shares issued and
      outstanding (basic and diluted)
    121,608,522
    117,151,350
    111,122,976


If the Company had followed United States GAAP in respect of
the three years ended April 30, 2010, 2009 and 2008, certain items in the
consolidated financial statements would have been reported as set forth in the
second table below.

(in thousands of US dollars, except per share
amounts)

2010 US GAAP
    2009 US GAAP
    2008 US GAAPRevenue
    $Nil
    $Nil
    $NilOperating Loss
    $(3,874)
    $(9,443)
    $(15,657)Other income: Unrealized gains on derivative liabilityNet Loss and Comprehensive Loss for the year
    $(3,836)
    $(6,276)
    $(12,734)Loss per share (basic and diluted)
    $(0.03)
    $(0.08)
    $(0.13)Current assets
    $1,414
    $2,615
    $7,666Total assets
    $6,927
    $8,187
    $18,270Total liabilities
    $4,230
    $1,679
    $6,109Net Assets
    $2,697
    $6,508
    $12,161Share capital
    $84,133
    $82,914
    $82,649Shareholders' equity
    $2,697
    $6,508
    $12,161Weighted average number of common shares issued and
      outstanding (basic and diluted)
    121,608,522
    117,151,350
    111,122,976


Outstanding Share Data

The following table outlines the common shares outstanding at
and subsequent to the year end to:

Number of Common Shares
    Number of Options
    Number of WarrantsBalance on April 30, 2012
    168,601,708
    12,800,000
    33,164,100Issued May 1 to July 23, 2012
    200,000
    nil
    nilForfeited or expired May 1 to July 23, 2012
    nil
    nil
    nilBalance on July 23, 2012
    168,801,708
    12,800,000
    33,164,100


Currency and Exchange Rates

Unless otherwise indicated, all dollar amounts in this annual
report on Form 20-F are in United States dollars. The exchange rate of Canadian
dollars into United States dollars, on July 12, 2012, based on the noon
rate of exchange as quoted by the Bank of Canada was US $1.00 = CDN
$1.02.

Exchange Rates ($1 US = $X CDN) for Previous
      Six MonthsFor the Month ended
    High
    LowApril 2012
    $1.0039
    $0.9807March 2012
    $1.0015
    $0.9849


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- 8 -

February 2012
    $1.0016
    $0.9866January 2012
    $1.0272
    $0.9986December 2011
    $1.0406
    $1.0105November 2011
    $1.0487
    $1.0126


Exchange Rates ($1 US = $X CDN) for Previous
      Five Financial Years ended December 31For the Year Ended
    AverageDecember 31, 2011
    $0.9891December 31, 2010
    $1.0299December 31, 2009
    $1.1420December 31, 2008
    $1.0660December 31, 2007
    $1.0748


B.      Capitalization and
indebtedness

Not applicable.

C.      Reason for the offer and use
of proceeds

Not applicable.

D.      Risk Factors

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.

Failure to successfully address the risks and uncertainties
described below could have a material adverse effect on the Companys business,
financial condition and/or results of operations, and the trading price of the
Companys shares may decline and investors may lose all or part of their
investment.

The principal activity of the Company is mineral exploration,
which is inherently risky. Exploration is also capital intensive, and the
Company currently has no source of income. The risk factors that could affect
the Companys future results include, but are not limited to, those items
discussed below. Descriptions of the Companys exploration properties, including
details of an ongoing legal action pertaining to the El Dorado property, are
described in Item 4D  Property, Plant and Equipment.

In particular, the following risk factors apply:

Financing Risks

The Company has no source of revenue and is reliant on its cash
and short term investments in order to finance its exploration activities,
general and administrative and legal expenses. While the Company currently has
negative working capital and its ability to continue operations and exploration
activities as a going concern is dependent upon its ability to obtain financing.
The Company will need to raise additional funds during fiscal 2013 to support
exploration and administration expenses as well as its costs under PacRims
Arbitration action (see Item 4B  Business Overview). Furthermore the
Company does not have the funds in place to conduct mine development activities
at the El Dorado property should the Company receive the permits allowing it to
undertake these activities.

While the Company has been successful in obtaining its required
funding in the past, there is no assurance that sufficient funds will be
available to the Company in the future, or be available on favourable terms.
Factors that could affect the availability of financing include fluctuations in
the Companys share price, the state of international debt and equity markets,
investor perceptions and expectations, global financial and metals markets,
progress on any of the Companys exploration properties, and developments, if
any, on the El Dorado project permitting application. Additional financing will
require, but may not be limited to, the issuance of additional equity. The
Company is also exploring various alternative financing opportunities to fund
the legal costs associated with the Arbitration while minimizing dilution to its
current share structure.

Failure to obtain additional financing (either or both of
equity financing through the issuance of shares in the Company and/or
contingency financing earmarked for the Arbitration) could result in the
Companys failure to remain a going concern, the Companys inability to continue
to fund the Arbitration action, or could cause the delay or indefinite
postponement of further exploration and development of its projects with a
possible loss of some properties.

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- 9 -

Going Concern

The Companys financial statements have been prepared on the
basis that the Company will continue as a going concern, which assumes that the
Company will be able to meet its commitments, continue operations, realize its
assets and discharge its liabilities in the normal course of business for the
foreseeable future. There are events and conditions that cast substantial doubt
on the validity of that assumption. The Company will require additional
financing to continue to conduct ongoing exploration programs and to meet future
property commitments, for administrative purposes and for legal expenses related
to the Arbitration. The costs for this legal action are substantial and are
anticipated to increase as the case proceeds to through the final, merits-based
phase. Factors that could affect the availability of financing include
fluctuations in the Companys share price, the state of international debt and
equity markets, investor perceptions and expectations, global financial and
metals markets, progress on any of the Companys exploration properties, and
developments, if any, on the El Dorado project permitting application. The
Company believes it will be able to obtain the necessary financing to meet its
requirements on an ongoing basis; however, there can be no assurance that the
necessary financing will be obtained, and such financing, if available, may be
dilutive to the Companys shares and shareholders. As it has in the past, the
Company plans to obtain additional financing through, but not limited to, the
issuance of additional equity.

The consolidated financial statements do not reflect
adjustments in the carrying values of the assets and liabilities, the reported
revenues and expenses, and the balance sheet classifications used, that would be
necessary if the company were unable to realize its assets and settle its
liabilities.

History of Losses

The Company has a history of losses and may continue to incur
losses for the foreseeable future. As of April 30, 2012, the Company had an
accumulated deficit of $89.8 million. The Company currently has no source of
revenue and there can be no assurance that the Company will realize revenue
growth or achieve profitability in the future.

Maintenance of Exchange Listings

The Companys shares currently trade on the TSX in Canada and
on the OTCQX platform in the US. The Company remains SEC-registered in the US.
The Companys ability to maintain its TSX listing will be dependent on meeting
the exchanges ongoing listing maintenance standards including provisions for
minimum exploration work expenditures. While the Company did not meet the TSXs
exploration work expenditure standard during fiscal 2011, it did satisfy this
ongoing listing maintenance item during fiscal 2012 as a result of exploration
work on the Hog Ranch property. Nonetheless, the TSX may elect at any time to
undertake a formal listing review of the Company, which could result in the
Companys shares being subject to delisting from the TSX, in which event the
Company would seek a listing on the TSX Venture Exchange. However, there is no
assurance that the Company would be successful in obtaining such a listing.

Exploration, Development and Operating Risks

Resource exploration, development, and operation is a highly
speculative business that involves significant risks, which even a combination
of careful evaluation, experience and knowledge may not eliminate. While the
discovery of precious metals and other minerals may result in substantial
rewards, few properties that are explored are ultimately developed into
producing mines. Major expenses may be required to locate and establish
economically viable mineral deposits, to develop metallurgical processes and to
construct mining and processing facilities at a particular site. It is
impossible to ensure that the exploration or development programs planned by the
Company will result in a profitable commercial mining operation. The potential
for any project to eventually become an economically viable operation depends on
numerous factors including: the quantity and quality of the minerals discovered
if any, the proximity to infrastructure, metal and mineral prices (which vary
considerably over time) and government regulations. The exact effect these
factors can have on any given exploration property cannot accurately be
predicted but the effect can be materially adverse.

Except for the El Dorado Project, on which a pre-feasibility
study was completed in 2005, none of the Company's properties have a known body
of ore and the Companys proposed exploration programs are an exploratory search
for ore.

Although mineral resource estimates included in this document
(and/or in previous regulatory documents filed by the Company) have been
carefully calculated, prepared, reviewed and/or verified by independent mining
experts who are Qualified Persons, and have been reviewed by the Company, these
amounts are estimates only and no assurance can be given that any particular
level of recovery of gold and/or silver from mineral resources or previously
disclosed 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 mineral resources and
reserves, production and capital 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. 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 ore recovery.

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- 10 -

The Companys exploration properties are located in El Salvador
and Nevada, USA. The Company may commence exploration programs in other
jurisdictions during fiscal 2013. As with most jurisdictions, El Salvador and
Nevada impose certain requirements and obligations on the owners of exploratory
properties including application requirements, periodic reporting requirements,
limited terms and certain fees and royalty payments. The Company may acquire
interests in properties in other North, Central and South American countries
that may place substantial restrictions on the Companys exploratory and
development activities. There can be no assurance that additional significant
restrictions will not be placed on the Company's existing or future properties
or its operations. Such restrictions may have a materially adverse effect on the
Company's business and results of operation.

Mining operations generally involve a high degree of risk. The
Companys operations are subject to all of the physical hazards and risks
normally encountered in the exploration, development and production of precious
metals and other minerals including unusual or unexpected geological formations,
seismic activity, rock bursts, cave-ins, flooding and other conditions involved
in the drilling and removal of material, any of which could result in damage to
or destruction of documents, samples or drill core, damage to life or property,
environmental damage and possible legal liability. It may not be possible to
insure against these risks, or for economic reasons the Company may elect not to
insure against these risks. The payment of liabilities as a result of the
occurrence of any of these hazards may have a material adverse effect on the
Companys financial position.

There can be no assurance that the Companys exploration and
acquisition programs will yield new reserves to expand current resources. The
development of the Companys properties will require the commitment of
substantial financial resources to conduct the time-consuming exploration and
development of properties. There can be no assurance that the Company will
generate any revenues or achieve profitability.

Reliability of Mineralization Estimates

Although the Company has assessed the mineral resource
estimates presented herein and mineral resource and reserve estimates documented
in other regulatory filings, and believes that the methods used to estimate such
mineral reserves and mineral resources are appropriate, such figures are
estimates. As well, estimates of mineral reserves and mineral resources are
inherently imprecise and depend to some extent on statistical inferences drawn
from limited drilling, which may prove unreliable. Furthermore, no assurances
can be given that the indicated level of recovery of gold or other minerals will
be realized. Market price fluctuations of gold or other minerals may render
reserves and deposits containing relatively lower grades of mineralization
uneconomic. Moreover, short-term operating factors relating to the mineral
reserves, such as the need for orderly development of the deposits or the
processing of new or different grades, may cause mining operations to be
unprofitable in any particular period.

Definitional standards for reporting mineralized material
differ between United States reporting standards and the Canadian standards use
in this Annual Report on Form 20-F.

We use the terms measured resources, indicated resources
and inferred resources in this Annual Report on Form 20-F to comply with
reporting standards in Canada. We advise US investors that while those terms are
recognized and required by Canadian regulations, the SEC does not recognize
them. While we have converted a portion of these resources to proven and
probable reserves, US investors are cautioned not to assume that any part or all
of the additional mineral deposits in these categories will ever be converted
into mineral reserves. Mineral resources have a great amount of uncertainty as
to their existence, and great uncertainty as to their economic and legal
feasibility. It cannot be assumed that all or any part of measured mineral
resources, indicated mineral resources, or inferred mineral resource will ever
be upgraded to a higher category. In accordance with Canadian rules, estimates
of inferred mineral resources cannot form the basis of a feasibility study or
other economic evaluations. Investors are cautioned not to assume that any part
of the reported measured mineral resource, indicated mineral resource, or
inferred mineral resource in this Annual Report is economically or legally
mineable. See Cautionary Note to US Investors Regarding Resource and Reserve
Estimates above.

Title to Properties

PRES, a subsidiary of PacRim, has applied for an exploitation
concession over a portion of its El Dorado Project exploration licence area and
has carried out the studies required by the authorities for this concession,
including an EIS. The approval of the El Dorado EIS by the Salvadoran Ministry
of Natural Resources and the Environment is a requirement for approval of the
exploitation concession by the Ministry of Economy. The Company cannot say with
certainty if or when the authorities in El Salvador will approve the El Dorado
EIS or grant PRES an exploitation concession. The exploitation concession
application area covers ground protected by an exploration licence granted to
PRES that nominally expired in January 2005. Legal opinions secured by the
Company indicate that El Salvadoran administrative laws and procedures assure
PRES exclusive rights to the proposed exploitation concession area while the
application is in process, despite the underlying exploration licence having
expired. There can be no assurance however that this opinion will not be
challenged by regulatory authorities or other third parties and that PRESs
legal rights to explore within the exploitation concession application area will
be upheld indefinitely pending the outcome of the application process.

The Company conducted significant due diligence on the Hog
Ranch property in Nevada prior to signing the Hog Ranch LOI, and the subsequent
Definitive Agreement, granting the Company the option to acquire a 65% joint
venture interest in Hog Ranch, including securing legal opinions on the title and underlying agreements
and underlying obligations of the Hog Ranch claims. The Company is of the
opinion that the Hog Ranch claims are in good standing and that title to the
project lies with the property vendors. However, the Hog Ranch property may be
subject to prior unregistered agreements or transfers or local land claims and
title may be affected by undetected defects.

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- 11 -

The Company conducted significant due diligence on the Remance
Project in Panama prior to signing a letter of intent to acquire the project
from Minera Clifton, including securing legal opinions on the title and tenure
of the Remance exploitation concession. The Company is of the opinion that that
title to the Remance project lies with Minera Clifton. However, the Remance
property, as well as the Company's other exploration properties, may be subject
to prior unregistered agreements or transfers or local land claims and title may
be affected by undetected defects.

The expiry date of the initial term of the Remance exploitation
concession has passed. Minera Cliftons application for an extension of the
Remance exploitation concession (as is provided for under Panamanian law) was
recently denied by the Panamanian ministry responsible for mining, a decision
which Minera Clifton is now appealing. The Companys decision to sign a Final
Agreement on the acquisition of this project is dependent on Minera Clifton
winning its appeal and receiving an extension to the term of the Remance mining
concession. There can be no assurance at this time that the ministrys decision
will be overturned and that the Remance exploitation concession extension will
ultimately be granted. Although the Company intends to keep the Remance LOI in
place (as there is no cost in doing so), the Companys acquisition of the
Remance project cannot be guaranteed.

The Company has investigated and believes it has good title to
its properties. However, there is no guarantee that adverse claims to title will
not arise in the future, nor can the Company express an opinion on how difficult
the resolution of such claims would be under the laws of foreign
jurisdictions.

Government Law, Environmental and Other Regulatory
Requirements

The Company's current exploration projects are located in the
US and El Salvador, and the Company may acquire exploration properties in other
North, Central and South American countries. 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 may
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. Currency fluctuations, exchange controls,
change to tax regimes and political action could impair the value of the
Company's assets in the foreign jurisdictions in which the Company operates.

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. 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. Mine
closure and reclamation cost requirements could change from current estimates.

PRES has experienced significant delays in the processing of
its El Dorado EIS and exploitation concession application, and as a result
PacRim initiated an Arbitration action against the GOES at the International
Center for the Settlement of Investment Disputes (ICSID) in Washington, DC.
There can be no assurance that PRES will be successful in either obtaining its
sought-after El Dorado exploitation concession, or that any legal challenges
PacRim has undertaken or that the Company or its subsidiaries may choose to
undertake in the future to resolve this issue will be successful.

The Nevada Division of Wildlife, under the authority of the
BLM, recently commenced research into the habitat of the Greater Sage-grouse, a
species of concern in the State of Nevada. Results of this undertaking may
result in future restriction or prohibition of certain activities, including
mineral exploration and mining, in areas that are determined to be key mating
habitat for the Sage-grouse if the bird becomes listed as a threatened or
endangered species under the Federal Endangered Species Act. Preliminary state
and federal habitat characterization maps show the area in the vicinity of the
Hog Ranch Project as potential Sage-grouse habitat. The Company has actively
participated in BLM's public scoping process for the environmental impact study
report being prepared by the agency to evaluate land management alternatives to
address Sage-grouse habitat conservation. Pacific Rim has provided these
agencies with documentation that the area does not comprise Sage-grouse habitat
due to the surface disturbances associated with the previous mining and mineral
exploration activities and ongoing ranching, hunting, and wild horse grazing in
the project area.

A final report outlining key Sage Grouse habitat areas is
expected to be filed by the BLM by the end of calendar 2012. Until the final
environmental report is filed, it is uncertain whether the Hog Ranch property
area or any part thereof will be deemed to comprise critical Sage-grouse habitat
area. The Company does not expect its planned exploration activities or future
ability to conduct mining activities, if warranted, will be impacted by the Sage-grouse
management alternatives currently being considered if in fact the property is
deemed to comprise Sage-grouse habitat. However, there are no guarantees the
Companys Hog Ranch property will be exempt from Sage Grouse-related
restrictions or prohibitions in the future.

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- 12 -

Foreign Operations

The Company and its subsidiaries operate in certain parts of
the world that have experienced social unrest, political and economic
instability and resulting governmental corruption and may operate its business
in manners that are contrary to the regulations imposed in the United States and
Canada. While the Company has policies in place to ensure adequate monitoring of
its activities and compliance with Canadian, United States and local laws and
regulations in the countries in which it operates, there can be no assurance
that the Companys internal control policies and procedures will always protect
it from reckless or negligent acts committed by its employees or agents. Such
employees or agents may undertake actions that would result in a violation of
law, including but not limited to, tax laws, customs laws, environmental laws,
labour laws, permitting laws and regulations, industry laws or international
anti-corruption and anti-bribery laws, including Canadian anti-corruption laws
and the US Foreign Corrupt Practices Act. Violations of these laws, or
allegations of such violations, could disrupt the Companys business and result
in a material adverse effect on its business and operations.

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 a small number
of skilled and experienced executives and personnel. Due to the small size of
the Company, the loss of any of these key persons or the inability of the
Company to attract and retain additional highly-skilled employees may adversely
affect its business and future operations. The Company does not maintain key
employee insurance on any of its employees.

Conflicts of Interest

The Company's directors and officers may serve as directors or
officers of other resource 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, directors who have such a
conflict will declare their potential conflict and 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 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.

Competition for Other Assets

Significant and increasing competition exists for the limited
number of gold acquisition opportunities available worldwide. 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.

Effect of Increased Costs on Financial Condition

Costs at projects that the Company currently or in the future
may explore or develop could be subject to variation from one year to the next
due to a number of factors, such as changing ore grade, metallurgy and revisions
to mine plans, if any, in response to the physical shape and location of the ore
body. In addition, costs are affected by the price of commodities such as fuel,
rubber and electricity. Such commodities are at times subject to volatile price
movements, including increases that could make production at certain operations
less profitable. A material increase in costs at any significant location could
have a significant effect on the Companys financial condition and
profitability.

Currency Fluctuations May Affect the Costs of Doing
Business

The Company's offices and primary activities are currently
located in Canada, the United States, and El Salvador. Gold and silver are sold
in international markets at prices denominated in US dollars. However, some of
the costs associated with the Company's activities in Canada may be denominated in currencies other
than the US dollar. Any appreciation of these currencies vis a vis the US dollar
could increase the Company's cost of doing business in these countries. In
addition, the US dollar is subject to fluctuation in value vis a vis the
Canadian dollar. The Company does not utilize hedging programs to mitigate the
effect of currency movements.

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- 13 -

Adequacy of Insurance Coverage

The Company has purchased liability insurance that it believes
is appropriate for the level of risk incurred, however there are no guarantees
that the level of coverage of existing policies can or will be maintained.
Furthermore, the Company 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.

Reclamation Risks at Denton-Rawhide

During fiscal 2009 the Company sold the assets it held through
its 49% interest in the Denton-Rawhide joint venture to its 51% partner
Kennecott. Subsequently, in late calendar 2010, Kennecott sold its 100% interest
in the Denton-Rawhide Joint Venture to a third party. According to the terms of
Kennecott's 2010 sale, reclamation obligations at the Denton-Rawhide operation
were separated such that Kennecott remains responsible for reclamation
expenditures due to any disturbances created prior to the sale, and the
purchaser becomes responsible for undertaking reclamation related to any
disturbances created after the sale. As part of the sale of its interest in
Denton-Rawhide to Kennecott, the Company had provided a guarantee on 49% of any
reclamation and closure costs in the event that these expenditures (limited to
those related to disturbances made up to the point the Company sold it's
interest in the operation) were to exceed $7.0 million. In other words, the
Company's obligations are limited to pre-sale property conditions. The
Coordinating Committee of the Denton-Rawhide mine estimates total reclamation
and severance costs for the Denton-Rawhide mine will be $9.8 million. $4.5
million in reclamation and severance costs have already been incurred on behalf
of the Company and Kennecott as previous joint venture partners, leaving an
estimated $5.3 million allocated for future reclamation costs related to
disturbances made at the operation prior to Kennecotts 2010 sale of the
property.

This estimate may not be a true reflection of actual
reclamation and closure costs of the Denton-Rawhide mine for which the Company
is jointly responsible, and the Company recognizes a potential future
reclamation liability, as per the terms of its sale as described above, should
actual reclamation and closure costs exceed $7.0 million in excess of
reclamation and severance costs incurred prior to the date of the sale (October
30, 2008).

Environmental Risks and Hazards

The Companys exploration activities are subject to
environmental regulation in the various jurisdictions in which it operates.
These regulations mandate, among other things, the maintenance of air and water
quality standards and land reclamation. They also set forth limitations on the
generation, transportation, storage and disposal of solid and hazardous waste.
Environmental legislation is evolving in a manner that will require stricter
standards and enforcement, increased fines and penalties for non-compliance,
more stringent environmental assessments of proposed projects and a heightened
degree of responsibility for companies and their officers, directors and
employees. There is no assurance that future changes in environmental
regulation, if any, will not adversely affect the Companys operations.
Environmental hazards may also exist on the Companys properties that are
currently unknown to the Company and that have been caused by previous or
existing owners or operators of the properties.

Environmental approvals and permits are currently, and may in
the future, be required in connection with the operations of the Company. To the
extent that such approvals are required and not obtained, the Company may be
curtailed or prohibited from continuing in its exploration, development or
mining activities or from proceeding with its exploration or development plans
for current properties.

Failure to comply with applicable laws, regulations and
permitting requirements may result in enforcement actions that cause
exploration, development or mining activities to cease or be curtailed and may
include corrective measures requiring capital expenditures or remedial actions.
In such an event, the Company could be required to compensate those suffering
loss or damage by reason of the Companys activities and may have civil or
criminal fines or penalties imposed for violations of applicable laws or
regulations.

Amendments to existing environmental laws and regulations
governing exploration, development and mining activities of mining companies, or
more stringent application of current laws and regulations could have a material
adverse impact on the Company causing increases in exploration expenses, capital
expenditures or production costs, or a reduction in production levels at
producing operations, or require abandonment or delays in development of new
mining properties.

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- 14 -

Costs and Compliance Risks as a Result of Being a Public
Company

Legal, accounting and other expenses associated with public
company reporting requirements have increased significantly in the past decade.
The Company anticipates that general and administrative costs associated with
regulatory compliance will continue to increase alongside corporate governance
requirements, including rules and requirements of the SEC, Canadian Securities
Administrators, the TSX and the OTCQX. The Company expects these rules and
regulations to continue to result in significant legal and financial compliance
costs and to make some activities more time-consuming and costly. There can be
no assurance that the Company will continue to effectively meet all of the
requirements of the regulations to which it must comply, including various
sections of the Sarbanes-Oxley Act of 2002and National Instrument
52-109, Certification of Disclosure in Issuers Annual and Interim Filings(NI 52-109). Any failure to effectively implement new or improved internal
controls, or to resolve difficulties encountered in their implementation, could
harm the Companys operating results, and could cause the Company to fail to
meet reporting obligations or result in management being required to give a
qualified assessment of the Companys internal controls over financial
reporting. Any such result could cause investors to lose confidence in the
Companys reported financial information, which could have a material adverse
effect on the Companys stock price. The Company also expects these rules and
regulations may make it more difficult and more expensive for it to obtain
director and officer liability insurance, and it may be required to accept
reduced policy limits and coverage or incur substantially higher costs to obtain
the same or similar coverage. As a result, it may be more difficult for the
Company to attract and retain qualified individuals to serve on its board of
directors or as executive officers. If the Company fails to maintain the
adequacy of its internal controls, the Company's ability to provide accurate
financial statements and comply with the requirements of the Sarbanes-Oxley
Act of 2002and/or NI 52-109 could be impaired, which could cause the
Company's stock price to decrease.

Future Sales of Common Shares by Existing Shareholders

The sale of a large number of common shares of the Company in
the public markets, or the potential for such sales, could decrease the trading
price of the Companys common shares and could negatively impact the Companys
ability to raise capital through future sales of common shares.

Foreign Private Issuer Status

The Company is required to determine its foreign private
issuer status (as defined in Rule 3b-4(c) under the US Securities and Exchange
Act of 1934 (as amended) (the Exchange Act) for the purposes of US securities
law), annually at the end of its second fiscal quarter. Although more than 50%
of its voting securities were held by US residents as of the last business day
of its most recently completed second fiscal quarter, the Company is still
considered a foreign private issuer as it met the following conditions: (i) a
majority of its executive officers and directors, taken separately, are non-US
citizens or residents, (ii) more than 50% of its assets are located outside the
US, and (iii) the business of the Company is principally administered outside
the US. The Company may in the future lose its foreign private issuer status if
it fails to meet any of the aforementioned criteria.

The regulatory and compliance costs to the Company under US
securities laws as a US domestic issuer may be significantly more than the costs
the Company incurs as a Canadian foreign private issuer eligible to use the
multijurisdictional disclosure system. If the Company is not a foreign private
issuer it would be required to file periodic and current reports and
registration statements on US domestic issuer forms with the SEC, which are more
detailed and extensive than the forms available to a foreign private issuer.
This could have a materially adverse impact on the Companys corporate overhead
costs and its ability to raise future financing.

You may be unable to enforce US judgments against the
Company or its officers and Directors

The Company is incorporated under the laws of the Province of
British Columbia, Canada. The majority of its Directors are resident in Canada.
Consequently, it may be difficult for US investors to affect service of process
within the United States upon us or upon those Directors or officers who are not
residents of the United States, or to realize in the United States upon
judgments. Judgments of United States courts predicated upon civil liabilities
may be enforceable in Canada by a Canadian court if the US court in which the
judgment was obtained had jurisdiction, as determined by the Canadian court, in
the matter. There is substantial doubt whether an original action could be
brought successfully in Canada against any of such persons or the Company
predicted solely upon such civil liabilities.

Market events and conditions

In recent years the US credit markets have experienced serious
disruption due to a deterioration in residential property values, defaults and
delinquencies in the residential mortgage market (particularly, sub-prime and
non-prime mortgages) and a decline in the credit quality of mortgage backed
securities. These problems led to a slow-down in residential housing market
transactions, declining housing prices, delinquencies in non-mortgage consumer
credit and a general decline in consumer confidence. These conditions have
caused a loss of confidence in the broader US and global credit and financial
markets and resulting in the collapse of, and government intervention in, major
banks, financial institutions and insurers and creating a climate of greater
volatility, less liquidity, widening of credit spreads, a lack of price
transparency, increased credit losses and tighter credit conditions.
Notwithstanding various actions by the US and foreign governments, concerns about the general condition of the
capital markets, financial instruments, banks, investment banks, insurers and
other financial institutions caused the broader credit markets to further
deteriorate and stock markets to decline substantially. In addition, general
economic indicators have deteriorated, including declining consumer sentiment,
increased unemployment and declining economic growth and uncertainty about
corporate earnings.

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- 15 -

These disruptions in the credit and financial markets have had
a significant material adverse impact on a number of financial institutions and
have limited access to capital and credit for many companies. These disruptions
could, among other things, make it more difficult for us to obtain, or increase
our cost of obtaining, capital and financing for operations. The Companys
access to additional capital may not be available on terms acceptable to it or
at all.

General economic conditions

Ongoing volatility in global financial markets has had a
profound impact on the global economy. Many industries, including the gold and
base metal mining industry, are impacted by these market conditions. Some of the
key impacts of the current financial market turmoil include contraction in
credit markets resulting in a widening of credit risk, devaluations and high
volatility in global equity, commodity, foreign exchange and precious metal
markets, and a lack of market liquidity. A continued or worsened slowdown in the
financial markets or other economic conditions, including but not limited to,
consumer spending, employment rates, business conditions, inflation, fuel and
energy costs, consumer debt levels, lack of available credit, the state of the
financial markets, interest rates, and tax rates may adversely affect our growth
and profitability. Specifically:

- the global credit/liquidity crisis could impact the cost and availability
  of financing and our overall liquidity;
- the volatility of the gold price may impact our future revenues, profits
  and cash flow;
- volatile energy prices, commodity and consumables prices and currency
  exchange rates impact potential production costs; and
- the devaluation and volatility of global stock markets impacts the
  valuation of our equity securities, which may impact our ability to raise
  funds through the issuance of equity.

These factors could have a material adverse effect on our
financial condition and results of operations.

ITEM 4. INFORMATION ON THE COMPANY

A. 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 of Dayton Mining
Corporation (Dayton) and Pacific Rim Mining Corp. (Pacific Rim) on April 11,
2002 under the former Company Act(British Columbia).

Effective March 29, 2004, the British Columbia legislature
enacted the Business Corporations Act(British Columbia) (the New Act)
and repealed the former Company Act(British Columbia) which previously
governed the Company. The New Act removed many of the restrictions contained in
the former act, including restrictions on the residency of directors, the place
of annual general meetings and limits on authorized share capital. The New Act
also uses new forms and terminology. Under the New Act, every company
incorporated, amalgamated or continued under the former act must complete a
mandatory transition rollover under the New Act to substitute a Notice of
Articles for its Memorandum within two years of March 29, 2004, after which
existing articles may be altered to take advantage of new provisions contained
in the New Act. Under the New Act, the directors of the Company were permitted
to approve and complete this mandatory transition rollover and, accordingly, the
Company filed a transition application with the British Columbia Registrar of
Companies effective July 26, 2004. At the annual general meeting held on
September 22, 2004, the Companys shareholders approved the removal of
pre-existing company provisions that applied to the Company relating to
restrictions in the former act and no longer required under the New Act. In
addition, the shareholders approved new articles to bring the Companys charter
documents into line with the New Act and, as permitted by the New Act, altered
the authorized capital of the Company from 1,000,000,000 common shares without
par value to an unlimited number of common shares without par value and the
alteration of the Notice of Articles. The changes were effected and the British
Columbia Registrar of Companies issued a new Notice of Articles on January 20,
2005.

The Company is domiciled in British Columbia, Canada and is a
company organized under the New Act. The Companys principal place of business
is located at Suite #1050, 625 Howe Street, Vancouver, British Columbia, V6C 2T6
and its registered and records office is located on the 10thFloor,
595 Howe Street, Vancouver, British Columbia, V6C 2T5. The Company, through its
subsidiaries, has administration offices in Nevada and El Salvador. The
Companys US agent is Dorsey & Whitney LLP, located at 1400 Wewatta Street,
Suite 400, Denver, Colorado 80202-5549, USA.

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- 16 -

Additional sources of information regarding Pacific Rim Mining
Corp. include: information available on SEDAR (www.sedar.com) including
the Companys unaudited interim financial statements published quarterly; the
Companys 20-F filing (available at www.sec.gov); and, the Companys
corporate website www.pacrim-mining.com and Spanish-language
informational website (www.pacificrim.com.sv).

The Companys only capital expenditure over the past three
fiscal years (the twelve months ended April 30, 2012, 2011 and 2010) is the
payment to ICN Resources Ltd. of 200,000 common shares of the company on July
14, 2011 in respect of the Hog Ranch Definitive Agreement (see Item 4D 
Mineral Properties  Other Properties). The Company made no capital
divestures during the past three fiscal years.

B.     Business overview

Pacific Rim is an environmentally and socially responsible
exploration company whose business plans and management talent focus on high
grade, environmentally clean gold deposits in the Americas. Pacific Rims most
advanced asset is the vein-hosted El Dorado gold project in El Salvador, where
the Company also owns several grassroots gold projects. The Company holds a
joint venture option on the Hog Ranch epithermal gold project in Nevada and is
actively pursuing additional exploration opportunities elsewhere in the
Americas.

The El Dorado gold project in El Salvador was the focus of
virtually all of the Companys exploration work between 2002 and 2008, when
efforts to advance its El Salvador projects, including El Dorado, ceased as a
result of the Government of El Salvadors (GOES) passive refusal to issue a
decision on the Companys application for environmental and mining permits for
the El Dorado project. The El Dorado project is now the subject of an
arbitration claim (the Arbitration) being heard at the International Center
for the Settlement of Investment Disputes (ICSID) in Washington, DC. Initiated
in 2009 by the Companys subsidiary and owner of the El Dorado project, PacRim,
the Arbitration claim was originally filed, under the Dominican Republic-United
States-Central America Free Trade Agreement (CAFTA) and the Investment Law of
El Salvador (the Investment Law). The Arbitration was recently given
permission by ICSID to proceed, under the Investment Law, to its final phase
wherein the merits of the claim will finally be addressed. Notwithstanding the
ongoing legal action, the Company continues to seek a negotiated resolution to
the El Dorado permitting impasse and to resuming its advancement of the El
Dorado project.

While the El Dorado project awaits resolution, Pacific Rim has
turned its exploration focus to other jurisdictions and has resumed active
exploration initiatives. In early fiscal 2012 the Company acquired an option to
earn a 65% interest in the Hog Ranch gold property in Nevada and commenced field
exploration of this project shortly thereafter. The Company also has the
opportunity (by virtue of a Letter of Intent signed during fiscal 2011) to
acquire a 100% interest in the Remance property in Panama. The Companys focus
is currently on evaluating the results of its recent field surveys at the Hog
Ranch project in preparation for a Phase 1 drill program, on continuing efforts
to secure the El Dorado mining permit while PacRims arbitration action
proceeds, and on the continued search for additional project acquisitions.

Pacific Rims shares trade under the symbol PMU on the Toronto
Stock Exchange (TSX) and on the OTCQX market in the US under the symbol
PFRMF.

Significant Events During Fiscal 2012

Significant technical and corporate events that occurred during
and subsequent to the twelve months ended April 30, 2012 include:

- In May 2011 the Company closed a private placement financing in which a
  total of 17.6 million Units at a price of CDN $0.21 per Unit were issued to
  subscribers for gross proceeds of CDN $3,696,000. Each Unit consists of one
  common share of the Company and one half of one non-transferable share
  purchase warrant.
- In early May 2011 the ICSID Tribunal held hearings in Washington, DC to
  hear argument and witness testimony related to objections (the Jurisdiction
  Objection) filed by the Government of El Salvador (GOES) in August 2010 in
  connection with the Arbitration. In the Jurisdiction Objection the GOES
  asserted that ICSID does not have jurisdiction to hear PacRim's claims under
  CAFTA or the Investment Law of El Salvador, based largely on issues of timing
  and nationality.
- In June 2011, the Company, through its US subsidiary Pacific Rim
  Exploration Ltd. (PREx), signed a Definitive Agreement (the Hog Ranch
  Agreement) with ICN Resources Ltd. (ICN) and Washoe Gold Inc. (WGI)
  (collectively with the Company and PREx, the Hog Ranch Parties) to acquire a
  65% interest in the Hog Ranch Property located in Washoe County, Nevada. The
  Hog Ranch Agreement grants PREx an option to acquire a 65% interest in the Hog
  Ranch Property through the expenditure of an aggregate of $8 million in
  exploration expenditures and the issuance of an aggregate of 1 million common
  shares of Pacific Rim.

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- 17 -

- In March 2012 the Company announced the retirement of Mr. Anthony Petrina
  from the Companys Board of Directors, and the appointment of Mr. Tim Baker as
  an Independent Non-Executive Director. Mr. Petrina was an integral and
  insightful member of the Companys Board since 1996. Mr. Baker is a geologist
  with extensive operational and production experience at mines located in Latin
  America and worldwide.
- In June 2012 the ICSID Tribunal issued its ruling on the Jurisdiction
  Objections and determined that PacRims Arbitration claim will proceed. The
  Tribunal confirmed ICSID (at the World Bank) has jurisdiction to hear PacRims
  claims under the Salvadoran Investment Law, but not under CAFTA. Accordingly,
  the Arbitration claim can and will proceed under the Investment Law alone.
  ICSID, a branch of the World Bank, will continue to adjudicate the case at its
  headquarters in Washington, DC.

Important corporate and technical issues facing the Company in
the coming fiscal year (and beyond) include: the Companys ability to secure
adequate financing for exploration expenses including the planned Hog Ranch
drill program, maintenance of the El Salvador and Nevada properties and general
working capital purposes; the Companys ability to secure financing for the
continuation of PacRims Arbitration action; developments related to the
Arbitration action; the execution and outcome of the Companys Phase 1 drill
program at the Hog Ranch property; developments related to the potential signing
of a formal option agreement to acquire the Remance project and the subsequent
undertaking of an exploration and drilling program at Remance if, as, and when
it is formally acquired; and, the continued search for additional exploration
project opportunities. The Company has been successful in raising funds through
equity financing in the past but there can be no assurance that such financing
will be available in the future, or if so, available under favourable terms, or
that alternatively, financing through means other than the issuance of equity
can be achieved. Readers are strongly encouraged to review the Risk Factors in
Item 3.D above.

Current Market Status

The business of mining and exploration involves a high degree
of risk. The Company is entirely reliant on its current cash and cash
equivalents and future financings and/or financial arrangements in order to fund
legal, exploration and administration expenses. There can be no assurance that
such financing will be available now or in the future, or be available on
favourable terms. Additional funding will be required in the future to maintain
its ongoing exploration programs and property commitments, to continue the
Arbitration claim, and for administrative purposes.

El Dorado Gold Project, El Salvador

The Companys principal exploration property and sole material
property is the El Dorado gold project, located in El Salvador approximately 65
kilometres northeast of the capital city San Salvador. The El Dorado gold
project, is Pacific Rims most advanced-stage exploration property. Pacific Rim,
through PacRim and PRES, owns 100% of the El Dorado project. The El Dorado
project comprises a 144 square kilometre area covered by three exploration
licences with nominal expiry dates of September 28, 2013 (one licence) and
September 29, 2013 (two licences) and a 12.75 square kilometre area pending
conversion to an exploitation concession, which underlying exploration licence
has a nominal expiry date of January 1, 2005. In accordance with Salvadoran Law,
PRES presented a request for the conversion of this 12.75 square kilometre
portion of the El Dorado exploration licences to an exploitation concession in
December 2004. The conversion process is currently pending ministerial
acceptance of PRESs Environmental Impact Study and issuance of the
environmental permits. Salvadoran administrative laws and procedures give PRES
exclusive rights to the exploitation concession area while the permitting
process is underway. However, as a result of restricted access to documents in
El Salvador due to the ongoing arbitration action, the Company has not had the
ability to confirm or renew its existing Salvadoran exploration licences during
fiscal 2012.

El Dorado is subject to a royalty of 3% of net smelter returns
in favour of a previous property owner. Pacific Rim has the right to buy back
the royalty for $1 million for the first 1.5% and $3 million for the second
1.5%, provided that at least one half of the royalty is acquired within six
months of the commencement of commercial production.

The El Dorado gold project is Pacific Rims most advanced
exploration project. El Dorado has current estimated resources of 1.4 million
gold equivalent ounces in the Measured and Indicated categories combined, plus a
further 0.3 million gold equivalent ounces in the Inferred category (readers are
referred to the Companys March 2008 El Dorado Technical Report filed on SEDAR
www.sedar.com for additional important information regarding the El
Dorado resources). Because the average grade of these resources (approximately
10.5 gold equivalent grams per tonne) is relatively high, the underground mine
planned for the El Dorado deposits is expected to have low unit operating costs.
Importantly, the El Dorado deposits are inherently environmentally clean and the
production and processing is expected to have a negligible impact on the local
environment. The El Dorado project has delivered many technical successes;
however its path forward to development and operation has been hampered by
excessively lengthy delays in the permitting process on the part of the GOES.
The El Dorado project is currently the subject of an Arbitration action under
the auspices of the Investment Law of El Salvador, as discussed below.

In July 2008 the Company suspended all drilling activity at the
El Dorado project. This difficult decision was made in order to preserve capital and substantially reduce Pacific Rims El
Salvador investment activity while the El Dorado permitting issue remains
unresolved. The Company did not conduct any significant exploration work to
further advance the El Dorado project during fiscal 2012. Exploration activities
undertaken by the Company at the El Dorado project during fiscal 2012 were
restricted to care and maintenance responsibilities, baseline environmental data
collection and community consultations. The Company also participated in several
GOES administrative and legislative initiatives and studies focused on mining in
El Salvador.

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- 18 -

Arbitration Claim Initiated

In April 2009, PacRim, a Nevada corporation and a wholly-owned
subsidiary of Pacific Rim filed international arbitration proceedings against
the GOES under CAFTA and the Investment Law of El Salvador in its own name and
on behalf of PRES and DOREX (collectively the Enterprises). A Notice of Intent
to commence international arbitration proceedings had previously been filed by
PacRim in December 2008. PacRim has retained the Washington, DC-based
international law firms Crowell & Moring LLP and Weil, Gotshal & Manges
LLP to represent it in the arbitration.

Arbitration developments during the
twelve months ended April 30, 2012

In late 2010, the GOES filed the Jurisdiction Objection wherein
they asserted that ICSID does not have jurisdiction to hear PacRim's claims
under CAFTA or the Investment Law based largely on timing and nationality
issues. During fiscal 2012 (from May 2 - 4, 2011) hearings were held at ICSID
headquarters in Washington, DC in order for the Tribunal to hear argument and
witness testimony regarding the Jurisdiction Objection.

Subsequent to the end of fiscal 2012, (in early June 2012) the
ICSID Tribunal overseeing the Arbitration action issued its ruling on the
Jurisdiction Objections. The Tribunal determined ICSID (at the World Bank) has
jurisdiction and will hear PacRims claims under the Salvadoran Investment Law,
but not under CAFTA. Accordingly, the Arbitration claim can and will proceed
under the Investment Law alone. ICSID, a branch of the World Bank, will continue
to oversee this case at its headquarters in Washington, DC.

Additional details regarding the El Dorado property and the
legal arbitration action pertaining to it are provided in Item 4D Property,
Plant and Equipment below.

Other Properties

Hog Ranch Property,
Nevada

In June 2011, Pacific Rim, through its US subsidiary Pacific
Rim Exploration Inc. signed a Definitive Agreement with ICN Resources Ltd.
(ICN) and Washoe Gold Inc. (WGI) (collectively with the Company and PREx,
the Hog Ranch Parties) providing the Company with the option to acquire a
majority joint venture interest in the Hog Ranch Property located in Washoe
County, Nevada, approximately 180 km north of Reno.

As per the Definitive Agreement (the Effective Date of which is
July 8, 2011), PREx has been granted the option to acquire a 65% interest (the
Interest) in the Hog Ranch Property through the expenditure of an aggregate of
$8 million in exploration expenditures and the issuance of an aggregate of 1
million common shares of Pacific Rim, with annual extensions dependent on
results of exploration. Pacific Rim, through PREx, is the operator of the Hog
Ranch Property. Upon PREx earning the Interest, PREx and WGI agree to
participate in a joint venture for the further exploration and development of
Hog Ranch.

During fiscal 2012 the Company undertook a Phase 1 exploration
program on the Hog Ranch property, which included detailed geological and
structural mapping, detailed soil sampling, evaluating past drilling and
geophysical results from previous operators of the Hog Ranch project, and
formulating a geologic model for Hog Ranch. Most recently, the Companys field
results were being compiled and integrated with existing data to fine tune a
geological model for Hog Ranch, the results of which were used to target drill
hole locations. The Company recently submitted a drill permit application for a
10-15-hole drill program at Hog Ranch, which is expected to commence during
fiscal 2013 (subject to future financing, the receipt of drilling permits, and
sourcing of drill contractors).

Additional details regarding the Hog Ranch property are
provided in Item 4D  Property, Plant and Equipment below.

Remance Gold Project,
Panama

During fiscal 2011, the Company signed a letter of intent with
Compania Minera Clifton S.A. (Minera Clifton) (collectively with the Company,
the Remance Parties) to acquire a 100% interest in the Remance project located
in Panama, Central America.

The Remance Parties have agreed to sign a formal option
agreement (the Formal Agreement) granting the Company the exclusive right and
option (the "Option") to acquire 100% of Minera Clifton's right, title and
interest in the Remance project as soon as practicable. Signing of the Formal
Agreement has not been concluded at this time and is currently highly uncertain.
Minera Cliftons application for an extension to the Remance concession term, as
provided by Panamanian law, was recently denied; a decision which is currently
being appealed by Minera Clifton. While the Company is keeping the Remance LOI
in effect during Minera Cliftons appeal, the outcome of this process, and hence
the Companys final acquisition of the Remance project, is highly uncertain. If
signed, the Formal Agreement will be subject to all required regulatory
approvals, including the approval of the TSX. The option to acquire Remance may
be exercised by the Company by paying an aggregate of $200,000 in four equal
tranches plus 5 million common shares of Pacific Rim to Minera Clifton,
conducting a specified exploration program during the Option Period (as defined
in the LOI) and paying $5 million in cash or common shares to Minera Clifton at
the end of the Option Period.

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- 19 -

Additional details regarding the Remance property are provided
in Item 4D  Property, Plant and Equipment below.

Santa Rita and Zamora-Cerro
Colorado Gold Projects, El Salvador

The Companys Santa Rita and Zamora-Cerro Colorado projects
cover low-sulfidation epithermal gold districts in El Salvador. The Santa Rita
gold project is located in central El Salvador, immediately northwest of the El
Dorado project and is 100% claimed by the Company through staking. During fiscal
2010, the Santa Rita exploration licence expired and was immediately re-staked
by the Companys subsidiary DOREX. DOREX is currently awaiting approval of the
new Santa Rita exploration licence. The Zamora-Cerro Colorado project comprises
certain claims that are subject to an option agreement with a third party and
additional claims that were staked and are 100% owned by the Company. The Santa
Rita and Zamora-Cerro Colorado projects occur along a regional gold belt that
the Company believes stretches from its El Dorado system in El Salvador to a
number of million-plus ounce gold systems in Guatemala.

Exploration activities were curtailed at both the Santa Rita
and Zamora-Cerro Colorado projects in July 2008, concurrent with cessation of
drilling at the El Dorado project, in keeping with the Companys decision to
significantly reduce its investment in El Salvador until such time as the El
Dorado environmental permit is received and the exploitation concession is
granted. No material developments occurred on the Santa Rita or Zamora-Cerro
Colorado since that time. The Company intends to maintain the Zamora-Cerro
Colorado licences during fiscal 2012 and beyond, and awaits approval of the
re-staked Santa Rita licence. During fiscal 2010 an amendment to the
Zamora-Cerro Colorado option agreement was signed by the Company and the
property vendors Nycon Resources, Inc. and Cerro Colorado S.A. de C.V.
(together, the Optionor). Under the terms of the amended agreement, the
Company will retain its 100% option on the claims comprising the Zamora-Cerro
Colorado property but will defer further option payments to the Optionor until
the earlier of February 11, 2015 or such time as the Company receives an
approved mining permit for the El Dorado project (being a clear signal of the
GOESs support of the mining industry in El Salvador). All other aspects of the
option agreement remain unchanged.

Additional details regarding the Santa Rita and Zamora-Cerro
Colorado properties and the detailed terms of the Zamora-Cerro Colorado option
agreement are provided in Item 4D - Property, Plant and Equipment below
..

Competition

The mineral property exploration and development business, in
general, is intensively competitive and there is not any assurance that even if
commercial quantities of ore are discovered, a ready market will exist for sale
of same. Numerous factors beyond our control may affect the marketability of any
substances discovered. These factors include market fluctuations; the proximity
and capacity of natural resource markets and processing equipment; and
government regulations, including regulations relating to prices, taxes,
royalties, land tenure, land use, importing and exporting of mineral and
environmental protection. The exact effect of these factors cannot be accurately
predicted, but the combination of these factors may make it difficult for us to
receive an adequate return on investment.

We compete with many companies possessing greater financial
resources and technical facilities for the acquisition of mineral concessions,
claims, leases and other mineral interests as well as for the recruitment and
retention of qualified employees.

Seasonality

There are no seasonal effects on our mineral properties.

C.      Organizational Structure

The Company has the following material subsidiary
companies:

Name
    Jurisdiction of incorporation 
      or
      organization
    Percent of voting shares owned by the
      
    CompanyPac Rim Cayman LLC
    Nevada, USA
    100% directly owned


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Name
    Jurisdiction of incorporation 
      or
      organization
    Percent of voting shares owned by the
      
    CompanyDayton Mining (U.S.) Inc. (1)
    Nevada, USA
    100% directly ownedPacific Rim Exploration Inc.
    Nevada, USA
    100% indirectly owned through Pac Rim
      Cayman LLCPacific Rim El Salvador S.A. de C.V. (2)
    El Salvador
    100% indirectly owned through Pac Rim
      Cayman LLCDorado Exploraciones S.A. de C.V. (3)
    El Salvador
    100% indirectly owned through Pac Rim
      Cayman LLCPacrimco, S.A. (4)
    Costa Rica
    100% indirectly owned through Pac Rim
      Cayman LLC


|(1) | This subsidiary held the Companys 49% interest in the
      Denton-Rawhide joint venture.                                                                                                                                                                                                                             
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | This subsidiary holds the Companys interest in the El
      Dorado exploration licence that is under application for conversion to an
      exploitation concession.                                                                                                                                                  
|(3) | This subsidiary holds the Companys interests in the El
      Dorado exploration licences, and the Zamora-Cerro Colorado project claims
      not included in the Zamora-Cerro Colorado option agreement, and has
      applied for new exploration licences to cover the Santa Rita project, all
      in El Salvador.
|(4) | This subsidiary was created in 2008 to hold potential
      Costa Rican exploration property acquisitions.                                                                                                                                                                                                             

Unless the context otherwise indicates, reference to the term
the Company in this Annual Report on Form 20-F includes Pacific Rim Mining
Corp. and its subsidiaries.

D.      Property, Plant and
Equipment

Mineral Properties

The Company is a British Columbia based mineral resource
corporation engaged, through its subsidiaries, in the acquisition, exploration
and, if warranted, development of precious metals properties, primarily gold and
silver.

The Company is principally involved in the exploration for
high-grade epithermal gold and silver deposits in the Americas. The Companys
only advanced material project is the El Dorado gold property in El Salvador and
the Company continues to search for exploration projects to acquire in the
Americas that meet its exploration focus.

El Salvador Properties

El Salvador Mining Regime

The following is based on the Companys understanding of the El
Salvador mining regime.

Under the laws of El Salvador, the government owns all mineral
rights. All private and government-owned lands that have not been declared areas
of protection for reasons of national sovereignty, areas of cultural or social
interest, areas of ecological or environmental protection or areas of capitation
of surface or underground waters for potable water supply; zones occupied by
public service facilities; or areas that are within the urban limit of cities or
towns are open to exploration and are available through application for an
exploration license, which can subsequently be converted to an exploitation
concession upon compliance with certain conditions. An exploration license is
held by payment of an annual fee, compliance with the environmental laws of the
country and fulfilment of the technical exploration program, which may be
modified on an annual basis. El Salvadorian mining laws do not discriminate
between nationals and foreigners.

El Salvadors current mining law, which was enacted in 1996 and
last amended in 2001, governs the provisions for granting of exploration
licences and exploitation concessions. By granting an exploitation concession,
the El Salvadoran Ministry of Economys Department of Hydrocarbons and Mines
confers upon the applicant the right to produce and sell valuable commodities
recovered from the natural resources within the area of the concession. To be
granted an exploitation concession, which is a necessary step to commencing
mining extraction activities, an environmental permit based on an Environmental
Impact Study (EIS) must first be approved by the Salvadoran Ministry of
Environment and Natural Resources (MARN). The applicant must also satisfy a
number of other conditions. Once granted, the concession requires that
development activities commence within 12 months of the date of the final
concession agreement and that the mine and associated facilities be built and
operated in accordance with the conditions of the environmental permit.

El Dorado Property, El Salvador

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The Companys most advanced property in El Salvador is the El
Dorado Property, which consists of three exploration licenses (contiguous to and
completely surrounding the pending exploitation concession area), which the
Company, indirectly through its wholly-owned subsidiaries, holds as to a 100%
interest.

The information presented below summarizes information prepared
under the supervision of Mr. Steven Ristorcelli, P.Geo., of Mine Development
Associates. This information is included in a report entitled Technical Report
Update on the El Dorado Project Gold and Silver Resources dated March 3, 2008
co-authored by Mr. Ristorcelli and Mr. Peter Ronning, P.Eng., each of whom are
independent Qualified Persons as defined in NI 43-101. Information presented
under the headings Recent Developments, January 2008 Updated Resource
Estimate, Environmental Impact Study and Mining Permit CAFTA Action and
Summary has been updated by the Company to reflect developments that have
occurred since March 3, 2008, being the date of the most recent El Dorado
Technical Report.

Predecessor Dayton upon its acquisition of Mirage Resource
Corp. in April 2000 acquired the El Dorado Property. Mirage initially acquired
the El Dorado Property by option agreement dated June 23, 1993 from Zinc Metal
Company (ZMC) of Toronto, and its wholly-owned subsidiary, New York and El
Salvador Mining Company. The option was exercised on August 25, 1994 in
accordance with its terms by payment of $175,000 to ZMC and by the parties
having incurred aggregate expenditures in excess of $800,000. Pursuant to the
terms of the option agreement, the El Dorado Property is subject to annual
advance minimum royalty payments, which are 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 $4,000,000 ($1,000,000 for the first one-half
and $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.

By agreement dated March 29, 2006, the Company superseded an
option agreement dated November 14, 2003 to acquire a parcel of land suitable
for mineral exploitation activities within the El Dorado exploration licence
area. Under the terms of the new agreement, the Company has prepaid an annual
rental fee in the amount of $29,000 with the option to purchase the parcel for a
payment of $971,000 at any time up to April 1, 2007. During fiscal 2007 the
Company commenced the process of exercising its option to purchase one of the
larger parcels of land over which it holds a purchase option agreement
(negotiated during fiscal 2004), and advanced to the property owner $0.3 million
of the $1.0 million total negotiated option payment. During fiscal 2008, upon
transfer of title in the parcel of land to the Company, the final $0.7 million
was paid. 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 (as defined under the SECs Industry
Guide 7) and all work programs are exploratory searches for ore grade
mineralization.

Property Description and
Location

The El Dorado Property (see Figures 1 and 2 below) is comprised
of three exploration licenses totalling 14,407 hectares with nominal expiry
dates of September 28, 2013 (one license) and September 29, 2013 (two licenses),
and the 1,275 hectare area of the pending Exploitation Concession, which
underlying exploration license has a nominal expiry date of January 1, 2005. The
Company continues to hold the 1,275 hectare pending Exploitation Concession area
beyond its expiry date as it has declared its intention to convert the land
holding to an Exploitation Concession, which will have a term of 30 years and
may be extended if warranted. See El Salvador Mining Regime above. The
cost to hold the licenses is a rental of $300 per square kilometre, amounting to
$47,046 per year. The Company is up to date with the regulatory obligations
required to maintain the licenses in good standing and is awaiting final
approval of the pending exploitation concession.

In addition to its mineral rights, the Company owns
approximately 765,000 square metres of real estate in the central part of the El
Dorado Property.

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 several prospects and
deposits. Their stage of exploration and development ranges from recently
discovered veins that have never been drilled to deposits that have resource
estimates. The Companys permanent installations on the property at the present
time consist of a laboratory for crushing rock samples and core storage
warehouses with facilities for describing and sampling drill core. None of the
mid-20thcentury mine workings are accessible at present.

The El Dorado Property is in the Department of Cabañas,
approximately 74 kilometres northeast of San Salvador, the capital city of the
nation, and 10 kilometres southwest of the town of Sensuntepeque.

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- 22 -



Figure 1: Location of the El Dorado property in El Salvador.

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- 23 -



Figure 2: El Dorado property licence area.

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- 24 -

Accessibility, Climate, Local
Resources, Infrastructure and Physiography

The El Dorado Property is accessible by a paved road that
crosses the El Dorado Property. The travel time from the project site to San
Salvador is approximately two and one-half hours, depending on traffic
levels.

The area has a large rural population and Sensuntepeque is a
moderate sized town of approximately 20,000 people. 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 need to be trained or come from elsewhere.

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 Property 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.

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.

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 Property 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 kilometres. Vein
mineralization is dominated by quartz and calcite 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 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 long history of recent exploration on the El Dorado
Property 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 14,400
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.

Geological mapping has been accompanied by frequent sampling of
the rocks on the surface. The samples are variously described as channel
samples, chip channel samples, selected chips, random chips and grab
samples.

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- 25 -

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.

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
kilometres. Systems of related veins are up to three kilometres long. In those
veins that have been mined or extensively drilled, mineralization has been
demonstrated to exist over vertical intervals of up to 300 metres. (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).

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 database 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.

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.

Metallurgy

Metallurgical test work has shown the El Dorado mineralization
responds well to milling and cyanide leaching. Recoveries of over 92% for gold
and over 88% for silver are expected. Historic recoveries during past production
ranged from 87% to 91.5% for gold and 77.7% for silver.

January 2008 Resource
Estimate

On January 17, 2008 the Company released the results of an
updated resource estimate for the El Dorado gold project, in which 1.4 million
gold equivalent ounces were tabulated in the Measured and Indicated resource
categories combined and a further 0.3 million gold equivalent ounces were
tabulated in the Inferred category. Full details of the 2008 El Dorado resource
estimate, by deposit and resource category, are presented below.

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- 26 -

El Dorado Project Resources (as of January 17,
      2008)Deposit
    Resource Category
    Tonnes
    Gold Grade (g
      Au/t)
    Gold Ounces
    Silver Grade (g
      Ag/t)
    Silver Ounces
    Gold Equivalent
      Grade (g AuEq/t)
    Gold **Equivalent**
      OuncesBalsamo
    Indicated
    566,700
    9.86
    179,600
    112.95
    2,058,000
    11.47
    209,000Inferred
    281,200
    7.71
    69,700
    76.29
    690,000
    8.80
    79,600Minita
    Measured
    614,100
    12.23
    241,500
    80.59
    1,591,200
    13.39
    264,300Indicated
    1,175,100
    9.65
    364,400
    58.16
    2,197,300
    10.47
    395,700Total M&I
    1,789,200
    10.53
    605,900
    65.86
    3,788,500
    11.47
    660,000Inferred
    78,400
    10.39
    26,200
    67.44
    170,000
    11.39
    28,700South Minita
    Indicated
    1,070,900
    9.25
    318,400
    63.99
    2,203,000
    10.16
    349,900Inferred
    302,800
    7.20
    70,100
    48.23
    470,000
    7.89
    76,800Nance Dulce
    Inferred
    128,900
    19.56
    81,100
    121.98
    506,000
    21.30
    88,300Coyotera
    Measured
    166,000
    7.86
    42,100
    57.79
    309,000
    8.69
    46,500Indicated
    501,000
    7.15
    115,200
    58.68
    945,000
    7.99
    128,700Total M&I
    667,000
    7.34
    157,300
    58.48
    1,254,000
    8.17
    175,200Inferred
    19,000
    5.83
    3,600
    72.12
    44,000
    6.86
    4,200Nueva Esperanza
    Indicated
    183,000
    5.77
    33,900
    30.47
    179,000
    6.20
    36,400Inferred
    29,000
    4.67
    4,300
    35.49
    33,000
    5.17
    4,800TOTAL MEASURED ALL DEPOSITS
    780,100
    11.31
    283,600
    75.76
    1,900,200
    12.39
    310,800TOTAL INDICATED ALL DEPOSITS
    3,496,700
    9.00
    1,011,500
    67.45
    7,582,300
    9.96
    1,119,700TOTAL MEASURED & INDICATED ALL
      DEPOSITS
    4,276,800
    9.42
    1,295,100
    68.96
    9,482,500
    10.40
    1,430,500TOTAL INFERRED ALL DEPOSITS
    839,300
    9.45
    255,000
    70.89
    1,913,000
    10.47
    282,400Notes:1) Resources based on a gold equivalent cut-off
      grade of 4.0 g AuEq/t and greater than a grade-times-thickness of 4 (g
      AuEq/t x meters)2) Gold equivalents based upon a silver to gold
      ratio of 70:13) Resources for the Minita, South Minita, Nance
      Dulce, Coyotera and Nueva Esperanza deposits are unchanged from the July
      2006 El Dorado Resource Estimate (see NI 43-101 disclosure)


The mineral resource estimates presented above have been
calculated in accordance with National Instrument 43-101 as required by Canadian
securities regulatory authorities, which differs from standards of the SEC. The
resource estimates contained in this discussion would not be permitted in
reports of US Companies filed with the SEC. See Cautionary Note to US Investors
Regarding Resource and Reserve Estimates above.

The resources were estimated by interpreting drill intercepts
in cross section, coding samples, capping assays, compositing to vein
thicknesses, and estimating grades and thicknesses of each of the veins into
three dimensional grade thickness models. Each of the three veins comprising the
Minita resource, ten veins comprising the South Minita resource, and five veins
comprising the Balsamo resource were estimated separately. The 4.0 g/t cut-off
grade (wherein gold equivalents are based on a silver to gold ratio of 70:1 and
greater than a grade-times-thickness of 4 (g AuEq/t x metres))
is predicated on estimated operating costs of $49.68 per tonne, estimated gold
recovery of 90% and a gold price of $400 per ounce. These parameters stem from
the Companys 2005 El Dorado prefeasibility study, the results of which are
based on various input estimates related to costs and commodity prices that were
current at the time of its publication. Readers are cautioned that significant
changes have occurred in a number of the inputs used in the January 2005 El
Dorado prefeasibility study since its publication in January 2005. However, the
Company and its consultants elected to maintain the 4.0 g/t gold equivalent
cut-off grade for the 2008 El Dorado resource estimate in order to facilitate
comparisons between the current resource estimate and the 2006 resource
estimate. Full technical reports related to the 2008 El Dorado resource
estimate, the 2006 El Dorado resource estimate and the 2005 El Dorado
pre-feasibility study are publicly available on SEDAR at www.sedar.com.

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- 27 -

The foregoing disclosure under January 2008 Updated Resource
Estimate is based on information prepared under the supervision of Mr. Steven
Ristorcelli, P.Geo., of Mine Development Associates, contained in a report
entitled Technical Report Update on the El Dorado Project Gold and Silver
Resources dated March 3, 2008 co-authored by Mr. Ristorcelli and Mr. Peter
Ronning, P.Eng. each of whom are independent Qualified Persons. This information
has further been reviewed and verified by Mr. William Gehlen, Certified
Professional Geologist and a Qualified Person. Mr. Gehlen is the Vice-President
of Exploration of the Company and supervised the Companys exploration work on
the El Salvador properties. The Companys sampling procedures follow the
Exploration Best Practices Guidelines outlined by the Mining Standards Task
Force and adopted by the TSX. Samples have been assayed using fire assay with a
gravimetric finish on a 30-gram split. Quality control measures, including
check- and sample standard-assaying, are being implemented. Samples were assayed
by Inspectorate America Corporation in Reno, Nevada, an ISO 9002 certified
laboratory, independent of the Company.

Recent Developments

In July 2008, the Company suspended all drilling activity at
the El Dorado project. This decision was made in order to preserve capital and
substantially reduce Pacific Rims El Salvador investment activity while the El
Dorado permitting issue remains unresolved. See Environmental Impact Study
and Mining Permitbelow.The Company did not conduct any significant
exploration work to further advance the El Dorado project during fiscal 2012.
Exploration activities undertaken by the Company at the El Dorado project during
fiscal 2012 were restricted to care and maintenance responsibilities, baseline
environmental data collection and community consultations. The Company also
participated in several GOES administrative and legislative initiatives and
studies focused on mining in El Salvador.

Environmental Impact Study and
Mining Permit

In September 2004, PRES submitted an Environmental Impact Study
(EIS) to Salvadoran Ministry of Environment and Natural Resources (MARN) for
a 750 tonne per day operation based on producing precious metals from the Minita
deposit alone. In September 2005, the finalized EIS, which incorporated initial
comments from MARN, was resubmitted to MARN. MARN then conveyed its technical
approval of the EIS, and instructed PRES to submit the EIS for public comment,
which was carried out in October 2005. In March 2006, PRES received from MARN a
list of issues raised during the public comment period and was asked to amend
the EIS to address these and a number of other issues. In October 2006, the
amended EIS, which included the requested clarification on a number of items,
was resubmitted to MARN. Finally, in December 2006, PRES submitted a proposal
for a water treatment plant in response to additional comments by MARN.

Well over five years have passed since the El Dorado EIS was
submitted in its final form to MARN, during which time MARN has failed to take
action on approval of the EIS. This in turn is preventing a resolution to PRESs
exploitation concession application.

Arbitration Claim

In April 2009, PacRim, a Nevada corporation and a wholly-owned
subsidiary of Pacific Rim filed international arbitration proceedings against
the GOES under CAFTA and the Investment Law of El Salvador in its own name and
on behalf of PRES and DOREX (collectively the Enterprises). A Notice of Intent
to commence international arbitration proceedings had previously been filed by
PacRim in December 2008. PacRim has retained the Washington, DC-based
international law firms Crowell & Moring LLP and Weil, Gotshal & Manges
LLP to represent it in the arbitration.

Since PacRim initiated the Arbitration claim in 2009, the GOES
has filed two objections to the action (the Preliminary Objections and the
Jurisdiction Objections) in an attempt to terminate the Arbitration. On both
occasions the Tribunal disagreed and ruled that the action could proceed.
Additional details are provided below.

Basis of Claim

Since acquiring the El Dorado project in El Salvador in 2002,
PacRim and the Enterprises have operated in full compliance with Salvadoran law,
including the countrys environmental, mining and foreign investment laws, and
have met or exceeded all applicable standards while conducting business in El Salvador. Ample
evidence, however, demonstrates that the GOES has failed to fulfill its
obligations.

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- 28 -

PacRims claims are based on the GOESs breaches of
international and Salvadoran law arising out of the GOESs improper failure to
finalize the permitting process in accordance with Salvadoran law. This conduct
by the GOES has resulted in a significant loss to PacRim, the shareholders of
Pacific Rim and to the local communities, and has unnecessarily delayed normal
development of these valuable deposits.

Pacific Rims mandate to its shareholders is to build a gold
mining company that explores and develops gold deposits in an environmentally
responsible manner. The El Dorado Mine, as designed and submitted to the GOES
six years ago, would set new precedents for environmental protection in all of
the Americas and exceeds current Canadian and US environmental standards.
Preservation of water quality and quantity is a key component the
industry-leading El Dorado mine design. The Company owns, or has negotiated
rights to work on all surface lands needed by the operation. The Company has met
or exceeded all the legal requirements necessary for a mining permit according
to El Salvadors mining, environmental and foreign investment laws. Despite
strong local support and the inclusion of carefully engineered and reliable
environmental protections for the proposed El Dorado Mine, the GOES has not met
its responsibility to approve the permits necessary to advance the project to
the final step of full production.

Fiscal 2012 and Subsequent
Developments

In late 2010, the GOES filed the Jurisdiction Objection wherein
they asserted that ICSID does not have jurisdiction to hear PacRim's claims
under CAFTA or the Investment Law based largely on timing and nationality
issues. During fiscal 2012 (from May 2 - 4, 2011) hearings were held at ICSID
headquarters in Washington, DC in order for the Tribunal to hear argument and
witness testimony regarding the Jurisdiction Objection.

Subsequent to the end of fiscal 2012, (in early June 2012) the
ICSID Tribunal overseeing the Arbitration action issued its ruling on the
Jurisdiction Objections. The Tribunal determined ICSID (at the World Bank) has
jurisdiction and will hear PacRims claims under the Salvadoran Investment Law,
but not under CAFTA. Accordingly, the Arbitration claim can and will proceed
under the Investment Law alone. ICSID, a branch of the World Bank, will continue
to oversee this case at its headquarters in Washington, DC.

In its decision, the Tribunal rejected the GOESs allegations
that ICSID does not have jurisdiction over PacRims claims under the Investment
Law. The Tribunal also rejected most of the GOESs objections to the Tribunal's
CAFTA jurisdiction (including rejecting the GOESs assertion that the case
constituted an abuse of process). However, while ruling that PacRim is in fact
a US company and is part of a group of companies that has substantial business
activities in the United States, the Tribunal concluded that the specific
subsidiary that filed the claim does not have sufficiently substantial
business activities in the US to allow the investment protections under CAFTA.

The Arbitration claim can now proceed to the final phase,
wherein the merits of PacRim's claims will finally be addressed. In the final
phase, the Tribunal will determine whether El Salvador has breached Salvadoran
and international law by refusing to issue the necessary mining licenses for the
El Dorado Mine. They will also determine El Salvador's monetary liability for
breaching the investment protections owed to a foreign investor as per in its
own laws.

PacRim and its legal counsel will immediately begin to prepare
for the final phase of the Arbitration. The Company will be exploring various
alternative financing opportunities, now more available, to help minimize
dilution to its current share structure.

Summary

The El Dorado gold project is Pacific Rims most advanced
exploration project. El Dorado has current estimated resources of 1.4 million
gold equivalent ounces in the Measured and Indicated categories combined, plus a
further 0.3 million gold equivalent ounces in the Inferred category (readers are
referred to the Companys March 2008 El Dorado Technical Report filed on SEDAR
www.sedar.com for additional important information regarding the El
Dorado resources). Because the average grade of these resources (approximately
10.5 gold equivalent grams per tonne) is relatively high, the underground mine
planned for the El Dorado deposits is expected to have low unit operating costs.
Importantly, the El Dorado deposits are inherently environmentally clean and the
production and processing is expected to have a negligible impact on the local
environment. The El Dorado project has delivered many technical successes;
however its path forward to development and operation has been hampered by
excessively lengthy delays in the permitting process on the part of the GOES.
The El Dorado project is currently the subject of an Arbitration action under
the auspices of the Investment Law of El Salvador, as discussed above.

The Company drastically reduced its Salvadoran exploration
expenditures during fiscal 2009, which primarily affected exploration work at
the El Dorado project. The Company does not intend to contemplate resuming
significant exploration work designed to advance the El Dorado project further
until such time as the environmental permit is received and the exploitation
concession is granted. The Company intends to continue exploration activities
and make expenditures required to keep the El Dorado property in good standing
during fiscal 2013 and for the foreseeable future.

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- 29 -

Santa Rita Gold Project, El Salvador

There are no known ore reserves on the Santa Rita property
and all work programs on the property are exploratory searches for ore grade
mineralization.

The Santa Rita gold project is located in central El Salvador,
immediately northwest of the El Dorado project. The Santa Rita exploration
licence was staked by the Companys subsidiary PRES in July 2005 after its
regional reconnaissance program in El Salvador resulted in the discovery of
gold-bearing quartz-calcite boulders. During fiscal 2010, the Santa Rita
exploration licence expired and was immediately re-staked by the Companys
subsidiary DOREX. DOREX is currently awaiting approval of the new Santa Rita
exploration licence.

PRES discovered an epithermal quartz-calcite vein system at
Santa Rita in fiscal 2006. Two distinct veins were originally discovered and
surface rock channel samples collected from along the length of one of these,
the 2+ kilometre long Trinidad vein, which returned anomalous gold (between 6.4
g/t gold and 118.3 g/t over vein widths of 1 to 2 meters) at various localities
along its length. In late fiscal 2006 PRES received a permit from MARN to
conduct a drill program on the Santa Rita gold project. However, during fiscal
2007 the Company stepped back from exploration work at Santa Rita when the
project became the target of anti-mining protests. Exploration work at Santa
Rita resumed during fiscal 2008 and continued into early fiscal 2009.

Notwithstanding the excellent exploration potential
demonstrated to date at the Santa Rita project, exploration activities were
curtailed in July 2008 in keeping with the Companys decision to significantly
reduce its investment in El Salvador until such time as the El Dorado
environmental permit is received and the exploitation concession is granted.
DOREX is currently awaiting receipt of approval of its application for the new
Santa Rita exploration licence.

The foregoing disclosure has been prepared by or under the
supervision of William Gehlen, Certified Professional Geologist, a Qualified
Person for the purposes of NI 43-101. Mr. Gehlen is the Vice-President of
Exploration of the Company. The Companys sampling procedures follow the
Exploration Best Practices Guidelines outlined by the Mining Standards Task
Force and adopted by the TSX. Samples have been assayed using fire assay with a
gravimetric finish on a 30-gram split. Quality control measures, including
check- and sample standard-assaying, are being implemented. Samples were assayed
by Inspectorate America Corporation in Reno, Nevada, an ISO 9002 certified
laboratory, independent of the Company.

Zamora-Cerro Colorado Gold Project, El Salvador

There are no known ore reserves on the Zamora-Cerro Colorado
property and all work programs on the property are exploratory searches for ore
grade mineralization.

During fiscal 2006 Pacific Rim signed an agreement to acquire a
100% interest in the Zamora gold project in El Salvador from a consortium of
private companies, which was amended in fiscal 2007 to include additional
exploration licences known as Cerro Colorado.

On February 11, 2010, an amendment to the Zamora-Cerro Colorado
option agreement was signed by the Company and the property vendors Nycon
Resources, Inc. and Cerro Colorado S.A. de C.V. (collectively, the Optionor).
Under the terms of the amended agreement, the Company will retain is 100% option
on the claims comprising the Zamora-Cerro Colorado property but will defer all
further and remaining option payments to the Optionor until the earlier of
February 11, 2015, or such time as the Company receives an approved mining
permit for the El Dorado project (being a clear signal of the GOES support of
the mining industry in El Salvador). All other aspects of the option agreement
remain unchanged.

The schedule of advanced royalty payments required to maintain
the Companys option to purchase the Zamora-Cerro Colorado property, as per the
amended agreement is:

|Upon TSX approval of the amended agreement: | 100,000 shares plus 100,000 warrants of
      the Company (shares issued)                                                    
|------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------
|Yearly advanced royalty payments:           | The greater of:                                                                                                              
|                                            | First
      anniversary                                                                                                      
|                                            | Second
      anniversary                                                                                                     
|                                            | Third
      anniversary                                                                                                      
|                                            | Fourth
      payment - Payment date is earlier of the date the Company receives
      confirmation that the Government of the

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- 30 -

| | Republic of El Salvador has granted a mining
      exploitation concession for the El Dorado Project and February 11, 2015        |  |                                                                                                
| | --------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------
| | Fifth
      payment  due on anniversary of fourth payment per February 2010 amended
      agreement and subsequent anniversaries |  | 400,000 shares or $400,000 in shares of the Company
      (option payment deferred  see above)

The above advanced royalty payment schedule applies to both the
Zamora and Cerro Colorado exploration license options and supersedes the
original agreement terms. As per the terms of the revised agreement, advanced
royalty payments as outlined above will continue until production is achieved or
the exploration concessions expire. Title to 100% of the Cerro Colorado and
Zamora exploration licenses is to be transferred to Pacific Rim at such time as
a positive production decision is made by the Company. Upon achievement of
commercial production from the Cerro Colorado or Zamora claims, the sellers are
entitled to receive a 3% net smelter royalty to a maximum of $10 million
(inclusive of the dollar value of the advanced royalty payments made).

The Zamora and Cerro Colorado claims comprise a 125 square
kilometre land package located 50 kilometres north of San Salvador, in El
Salvador. The Company has staked additional ground between the Cerro Colorado
and Zamora licences it optioned in order to cover what the Company believes is a
large gold-bearing epithermal system situated on the same regional gold belt
that hosts PRESs El Dorado and Santa Rita gold systems in El Salvador and a
number of million-plus ounce gold systems in Guatemala. The Company has not yet
received confirmation that the licences it staked in fiscal 2008 and early
fiscal 2009 have been formally granted.

Despite the positive exploration results the Company has
generated to date on the Zamora-Cerro Colorado project, further exploration
activities were curtailed in July 2008 in keeping with the Companys decision to
significantly reduce its investment in El Salvador until such time as the El
Dorado environmental permit is received and the exploitation concession is
granted. The Company intends to continue exploration activities required to keep
the Zamora-Cerro Colorado licences in good standing during fiscal 2012.

The foregoing disclosure has been prepared by or under the
supervision of William Gehlen, Certified Professional Geologist, Qualified
Person for the purposes of NI 43-101. Mr. Gehlen is the Vice-President of
Exploration of the Company. The Companys sampling procedures follow the
Exploration Best Practices Guidelines outlined by the Mining Standards Task
Force and adopted by the TSX. Samples have been assayed using fire assay with a
gravimetric finish on a 30-gram split. Quality control measures, including
check- and sample standard-assaying, are being implemented. Samples were assayed
by Inspectorate America Corporation in Reno, Nevada, an ISO 9002 certified
laboratory, independent of the Company.

Other Properties

Hog Ranch Property, Nevada

In June 2011, Pacific Rim, through its US subsidiary Pacific
Rim Exploration Inc. (PREx) signed a Definitive Agreement with ICN Resources
Ltd. (ICN) and Washoe Gold Inc. (WGI) (collectively with the Company and
PREx, the Hog Ranch Parties) providing the Company with the option to acquire
a 65% joint venture interest in the Hog Ranch Property located in Washoe County,
Nevada, approximately 180 km north of Reno.

As per the terms of the Definitive Agreement, PREx has been
granted the option to acquire a 65% interest (the Interest) in the Hog Ranch
Property through the expenditure of an aggregate of $8 million in exploration
expenditures and the issuance of an aggregate of 1 million common shares of
Pacific Rim, with annual extensions dependent on results of exploration,
according to the following schedule:

|Exploration expenditures with
      respect to the property of up to $8.0 million as follows:
|---------------------------------------------------------------------------------------------
|(i)                                                                                          
|(ii)                                                                                         
|(iii)                                                                                        
|(iv)                                                                                         
|(v)                                                                                          

Share payments of up to 1.0 million shares as follows:

(i) 200,000 common shares of Pacific Rim within five business
days of receipt of approval of the Definitive Agreement by the applicable stock
exchanges (completed); and (ii) 200,000 common shares of Pacific Rim
on or before each of the second (completed), third, fourth and fifth
anniversaries of the July 8, 2011 effective date.

Pacific Rim, through PREx, is the operator of the Hog Ranch
Property. Upon PREx earning the Interest, PREx and WGI agree to participate in a joint venture for the further exploration and
development of Hog Ranch.

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- 31 -

Hog Ranch consists of 463 unpatented claims and 239 hectares of
fee lands. Approximately 200,000 ounces of gold were produced at the property
from a small heap leach mine operated by Western Goldfields and subsequently
Western Mining in the late 1980s and early 1990s. These low-grade ores were
extracted from the uppermost parts of a low-sulfidation epithermal system.
Western Mining reclaimed the mine site to regulatory approved conditions,
including partially backfilling the pits. Several companies have explored for
low-grade gold mineralization and conducted limited exploration in the deeper
parts of the Hog Ranch epithermal system where higher grade feeder veins are
likely to reside. Pacific Rims primary focus is high-grade banded epithermal
veins recoverable in an underground operation. PREx will take its usual approach
of detailed geology with special attention to the structural geology to identify
these deeper drill targets.

During fiscal 2012 the Company undertook a Phase 1 exploration
program on the Hog Ranch property, which included detailed geological and
structural mapping, detailed soil sampling, evaluating past drilling and
geophysical results from previous operators of the Hog Ranch project, and
formulating a geologic model for Hog Ranch. Most recently, the Companys field
results were being compiled and integrated with existing data to fine tune a
geological model for Hog Ranch, the results of which were used to target drill
hole locations. The Company recently submitted a drill permit application for a
10-15-hole drill program at Hog Ranch, which is expected to commence during
fiscal 2013 (subject to future financing, the receipt of drilling permits, and
sourcing of drill contractors).

Remance Property, Panama

During fiscal 2011, the Company, through its Panamanian
subsidiary Minera Verde, signed a letter of intent with Compania Minera Clifton
S.A. (Minera Clifton) (collectively with the Company and Minera Verde, the
Remance Parties) to acquire a 100% interest in the Remance project located in
Panama, Central America.

The Remance Parties have agreed to sign a formal option
agreement (the Formal Agreement) granting Minera Verde the exclusive right and
option (the "Option") to acquire 100% of Minera Clifton's right, title and
interest in the Remance project as soon as practicable. Signing of the Formal
Agreement has not been concluded at this time and is currently highly uncertain.
Minera Cliftons application for an extension to the Remance concession term, as
provided by Panamanian law, was recently denied; a decision which is currently
being appealed by Minera Clifton. While the Company is keeping the Remance LOI
in effect during Minera Cliftons appeal, the outcome of this process, and hence
the Companys final acquisition of the Remance project, is highly uncertain. If
signed, the Formal Agreement will be subject to all required regulatory
approvals, including the approval of the Toronto Stock Exchange (the TSX). The
option to acquire Remance may be exercised by the Company by completing the
following terms:

1. paying to Minera Clifton the sum of
$200,000 (the "Cash Payment"), payable as follows:

On the date of execution of the Formal Agreement by the
      Parties:
    $50,000On the date which is 3 months after the date of execution
      of the Formal Agreement:
    $50,000On the date which is 6 months after the date of execution
      of the Formal Agreement:
    $50,000On the date which is 10 months after the date of execution
      of the Formal Agreement:
    $50,000


2. on the
date of execution of the Formal Agreement, issuing to Minera Clifton a total of
5 million common shares of Pacific Rim (the "Acquisition Shares");

3. within
the Option Period (as defined below), conducting a drilling program on the
Concession of at least 10,000 metres, and initiating environmental and
metallurgical studies on the Remance project (collectively, the "Drilling
Program"). The Option Period is the period which begins on the date on which
Pacific Rim has received all required permissions and approvals of the
Panamanian government to begin the Drilling Program, and which ends on the date
which is 12 months thereafter; and

4. on or
before the date which is 10 days after the last day of the Option Period, giving
written notice to Minera Clifton that it intends to exercise the Option, in
consideration of which Pacific Rim will pay to Minera Clifton, as soon as
practicable thereafter, the sum of $5,000,000, payable, at the election of
Minera Clifton, in cash or common shares of Pacific Rim (the "Additional
Shares").

As noted above, the Remance project acquisition has not
currently been completed and is highly uncertain at this time. The Company
believes that Minera Cliftons application for extension of the Remance
concession term, normally a routine process permitted under Panamanian mining
law, was sidelined by bureaucratic irregularities and issues within the ministry
responsible for mining. If the Remance extension is ultimately granted to Minera
Clifton, the Company intends to proceed with its acquisition of the Remance
Project by signing the Formal Agreement.

The Companys current knowledge of the Remance project suggests
a thorough and systematic drill program is warranted to test the depth extent of
the known near-surface gold mineralization (the Company would be obliged, as per
the terms of the Remance, to conduct a 10,000 meter drill program on Remance in the first
year of the Option Period as described above). A first phase exploration
program, including environmental and metallurgical studies as well as drilling,
is expected to cost approximately $1 million. The Company would require
additional financing to complete its Remance exploration obligations.

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- 32 -

Generative Program

Pacific Rims project generation initiatives focus on acquiring
projects the Company believes have good exploration potential without incurring
onerous costs. The Company focuses solely on low-sulfidation epithermal gold
systems, which are environmentally clean, high grade, and have potentially low
cost production, and continuously evaluates and seeks to acquire new project
opportunities that fit its exploration criteria and meet its high standards.

In July 2008 the Company shifted the focus of its grassroots
exploration initiatives out of El Salvador to other jurisdictions that have
similarly prospective mineral potential but a more robust appreciation of the
economic benefits of the mining industry. Using its unique understanding of
epithermal gold systems in the Central American Gold Belt, particularly within
El Salvador, Pacific Rim has been very successful in locating new, high grade
gold-bearing systems in the past and is ideally equipped to apply this formula
for discovery to neighbouring jurisdictions and elsewhere along the Pacific Rim.
While the Company continues to seek additional high quality projects that fit
its exploration focus, there are no guarantees that any project evaluation or
due diligence work currently underway will result in a positive outcome or that
the Company will be successful in acquiring any of the projects it is currently
evaluating.

Environmental Matters

Reclamation  US Interests

The Companys US operations are subject to federal, state and
local environmental laws and regulations. The Companys US interests consist of
the Hog Ranch property (an early-stage exploration property) and its prior
ownership of the Denton-Rawhide operation. The Companys exploration programs
are designed according to industry best practices to have minimal to no impact
on flora, fauna and surface or underground water sources. Temporary disturbances
(temporary access roads, drill pads, mud pits, trenches) are reclaimed. Using
the same methods required for structural studies at dam sites and large
construction sites, drill holes are reclaimed to regulatory guidelines. The
temporary access trails, drill pads and mud sumps are reclaimed by filling in
ruts, holes and pits, re-contouring any banks or steep cuts, building water
diversion ditches to control runoff and planting fast growing, native grasses to
stabilize the ground. Trenches are refilled and replanted in a like manner, and
fence barriers are occasionally built to control livestock movement around
reclaimed areas. Permanent or long term disturbances such as roads, buildings,
wells, walls, fences, gates, etc. are constructed with erosion controls and
stability measures including, as necessary, waterbars, rock retaining walls,
water diversion ditches, drain pipes and/or stabilizing vegetation, and are
constructed to regulatory guidelines. All areas of reclamation and construction
are subject to regulatory approval and monitored on an annual basis and
remediation is done if required Contractors to the Company are required to use
certified, non-polluting, non-toxic additives in drilling programs and comply
with OSHA work and safety standards and procedures. These issues are routinely
monitored by Company employees.

Hog Ranch

As a result of the Companys due diligence investigation prior
to acquisition of the Hog Ranch property, the Company does not believe it has or
will inherit any significant reclamation liability on the property stemming from
prior operations. Gold mining operations were conducted on the Hog Ranch
property in the 1990s. However, previous operators reclaimed all prior workings
to regulatory-approved conditions including partially backfilling the open pits.
The terms of the Hog Ranch Definitive Agreement preclude any environmental
liability for Pacific Rim stemming from these prior operations. Environmental
risks associated with exploration programs the Company intends to undertake at
Hog Ranch relate primarily to the construction of drill roads and sites,
drilling, and the handling and storage of fuel.

The US Bureau of Land Management (BLM) is playing a leading
role in developing and implementing land management actions to conserve habitat
for the Greater Sage-grouse on 47 million acres of land in the Western United
States, with the objective of avoiding a listing of the Greater Sage-grouse as a
threatened or endangered species. All public use activities, including mineral
exploration and mining, may in the future be restricted in areas that are
determined to be high-priority Sage-grouse habitat if the bird becomes listed as
a threatened or endangered species under the Federal Endangered Species Act.

Preliminary state and federal habitat characterization maps
show the area in the vicinity of the Hog Ranch Project as potential Sage-grouse
habitat. Pacific Rim has provided these agencies with documentation that the
area does not comprise Sage-grouse habitat due to the surface disturbances
associated with the previous mining and mineral exploration activities and
ongoing ranching, hunting, and wild horse grazing in the project area. The
Company has actively participated in BLM's public scoping process for the
environmental impact study report being prepared by the agency to evaluate land
management alternatives to address Sage-grouse habitat conservation. At this
time, the Company does not expect its planned exploration activities or future
ability to conduct mining activities, if warranted, will be impacted by the
Sage-grouse management alternatives currently being considered by the federal
and state agencies responsible for Sage-grouse management.

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- 33 -

The Hog Ranch property is open to mineral development managed
by the BLM and the State of Nevada. Our exploration activities will comply with
environmental regulations and guidelines set forth by the BLM and the State of
Nevada.

The Bureau of Mining Regulation and Reclamation (BMRR), in
cooperation with other state, federal and local agencies regulates mining
activities in Nevada under regulations adopted in 1989. The Nevada
Administrative Code (NAC) 445A.350-NAC 445A.447 and (NAC) 519A.010 - NAC
519A.415 were developed to implement the requirements of the Nevada Revised
Statutes (NRS) 445A.300-NRS 445A.730 and (NRS) 519A.010 - NRS 519A.290. BMRR is
composed of three distinct technical branches: regulation, closure and
reclamation. It is the mission of BMRR to ensure that Nevada's waters are not
degraded by mining operations and that the lands disturbed by mining operations
are reclaimed to safe and stable conditions to ensure a productive post-mining
land use. These laws and regulations are the primary pieces of legislation
governing the Companys reclamation obligations.

The Regulation Branch of the BMRR has responsibility for
protecting waters of the State under the water pollution control regulations.
The branch consists of the permitting and inspection sections. The permitting
section issues Water Pollution Control Permits to ensure that the qualities of
Nevadas water resources are not impacted by mining activity. The inspection
section conducts regular inspections during the life of a mining facility to
confirm that operations are in compliance with permit requirements. The Closure
Branch of the BMRR also has the responsibility of protecting waters of the state
under the water pollution control regulations. This branch works with facilities
at the cessation of operations to ensure that all components are left chemically
stable for the long term. The Closure Branch issues water pollution control
permits and conducts inspections to ensure that the mine site, in the closure
and post-closure period, will not degrade waters of the State.

The Reclamation Branch of the BMRR regulates exploration and
mining operations in Nevada on both private and public lands. The Branch issues
permits to exploration and mining operations to reclaim the disturbance created
to a safe and stable condition to ensure a productive post-mining land use. An
operator must obtain a reclamation permit prior to construction of any
exploration, mining or milling activity that proposes to create disturbance over
5 acres or remove in excess of 36,500 tons of material from the earth. In
addition to obtaining a reclamation permit, an operator must file a surety bond
with the Division or federal land manager to ensure that reclamation will be
completed, should an operator default on the project.

In summary, BMRR works with industry and the public to ensure
that mining operations in the state, from initial design through reclamation, do
not negatively impact the environment and that the land will be returned to a
productive post-mining use.

Denton-Rawhide

During fiscal 2009 the Company sold its 49% interest in the
Denton-Rawhide operation to its joint venture partner, Kennecott-Rawhide Mining
Company ("Kennecott"). Subsequently, in late calendar 2010, Kennecott sold its
100% interest in the Denton-Rawhide Joint Venture to a third party. According to
the terms of Kennecott's 2010 sale, reclamation obligations at the
Denton-Rawhide operation were separated such that Kennecott remains responsible
for reclamation expenditures due to any disturbances created prior to the sale,
and the purchaser becomes responsible for undertaking reclamation related to any
disturbances created after the sale. As part of the sale of its interest in
Denton-Rawhide to Kennecott, the Company had provided a guarantee on 49% of any
reclamation and closure costs in the event that these expenditures (limited to
those related to disturbances made up to the point the Company sold its interest
in the operation) were to exceed $7.0 million. In other words, the Company's
obligations are limited to pre-sale property conditions.

A reclamation and closure plan for Denton-Rawhide, covering the
period ending with the Companys sale of its 49% interest in the operation to
Kennecott, has been submitted to the Bureau of Land Management and the Nevada
Department of Environmental Protection and is currently awaiting approval.
Kennecott has estimated a total of $4.9 million in reclamation and closure costs
under the proposed plan. Kennecott, on behalf of the Rawhide Joint Venture, has
posted surety bonds as required for compliance with state and local closure,
reclamation and environmental obligations. Estimated future reclamation and
property closure costs for Denton-Rawhide are based on current legal and
regulatory requirements. Actual costs incurred for reclamation activities in
future periods could differ from the amounts estimated. Additionally, future
changes to environmental laws and regulations could affect the extent of
reclamation and remediation work required to be performed by the Company. Any
such changes in future costs could materially impact the amounts charged to
operations for reclamation and remediation.

International Properties

The Companys international exploration properties, currently
located in El Salvador, are governed by existing local environmental laws,
though the Company elects in certain circumstances to exceed its obligations
under local environmental law and comply with internationally accepted
environmental standards.

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- 34 -

The Companys exploration programs are designed according to
industry best practices to have minimal to no impact on flora, fauna and surface
or underground water sources. Temporary disturbances (temporary access roads,
drill pads, mud pits, hand dug trenches, impacts on existing infrastructure) are
reclaimed and repaired. Using the same methods required for structural studies
at dam site and large construction sites, drill holes are capped with either a
50 meter grout cap or are completely filled with grout, depending on the
geologic environment. The temporary access trails, drill pads and mud sumps are
reclaimed by filling in ruts, holes and pits, re-contouring any banks or steep
cuts, building water diversion ditches to control runoff and planting fast
growing, native grasses to stabilize the ground. Trenches are refilled and
replanted in a like manner, and fence barriers are occasionally built to control
livestock movement around reclaimed areas. Permanent or long term disturbances
such as roads, buildings, wells, walls and fences, gates, etc. are constructed
with erosion controls and stability measures including, as necessary, "badenes",
rock retaining walls, water diversion ditches, drain pipes and/or stabilizing
vegetation, and are constructed to standards exceeding local regulation. Often,
local tree varieties are harvested then replanted in the disturbed areas when it
does not conflict with normal local usage. All areas of reclamation and
construction are monitored on an annual basis. If additional repair is required
because of the initial construction, it is repaired until the area gains
stability. The Companys professional environmental staff has volunteered and
assisted the local authorities in evaluating other arms-length environmental,
geologic, hydrologic, disaster sites around the immediate communities by
conducting land slide analysis, ground water studies, surface water studies,
land fill site studies, helping to evaluate other industrial waste sites, fire
prevention, disease control, disaster relief preparedness and first aid.

Contractors to the Company are required to use certified,
non-polluting, non-toxic additives in drilling programs and comply with
international work and safety standards and procedures. These issues are
routinely monitored by Company employees under the direction of the local
environmental and safety managers. Environmental compliance and risk are
regularly assessed by third party contractors specializing in mining and
exploration risk management. In addition, the Company has established showcase
programs for environmental protection, waste management and reforestation in
order to educate workers and local populace on common best practice measures for
a healthier, cleaner and safer living and working environment.

Ongoing reclamation activities associated with the Companys
exploration stage properties are expensed as exploration in the period
incurred.

Proposed Transactions

Pacific Rim is continually reviewing potential project
acquisitions and other opportunities that could enhance shareholder value.

Other than the Hog Ranch joint venture option, which involves
future payments of shares, and the potential Remance project acquisition, which
if completed, will involve payments of cash and shares, there are currently no
transactions in process that would affect the financial condition, results of
operations or cash flows of the Company.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Critical Accounting Estimates

The preparation of the consolidated financial statements
requires estimates and assumptions that affect the amounts reported in the
consolidated financial statements. Significant areas where judgment is applied
include, going concern assumption and assessment of whether there are any
indicators of impairment over mineral property interests. Significant areas
where estimates are applied include the recoverability of mineral property
costs, valuation of warrant derivatives, and estimates with respect to
recognition of potential obligations and liabilities. Actual results could
differ from our estimates.

The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognized in the period in
which the estimate is revised if the revision affects only that period or in the
period of the revision and further periods if the review affects both current
and future periods.

Resource Property Costs

The Company capitalizes the direct costs of acquiring mineral
property interests including option payments, until such time as the property is
put into production or the property is disposed of, either through sale or
abandonment or becomes impaired. If a mineral property is put into production
the costs of acquisition are expensed over the life of the property based on
estimated economic reserves. Proceeds received from the sale of any interest in
a property will be credited against the carrying value of the property with any
difference recognized in the statement of loss and comprehensive loss. If a
property is abandoned, the acquisition costs will be written off to the statement of loss and comprehensive
loss.

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- 35 -

Exploration and evaluation costs are charged to operations in
the period incurred until such time as it has been determined that a property
has economically recoverable reserves, in which case subsequent exploration and
development costs are capitalized. Exploration costs include value-added taxes
because the recoverability of these amounts is uncertain.

Ownership in mineral properties involves certain inherent risks
due to the difficulties of determining and obtaining clear title to claims as
well as the potential for problems arising from the frequently ambiguous
conveyance history characteristics of many mineral properties. The Company has
investigated ownership of its mineral properties and, to the best of its
knowledge, ownership of its interests are in good standing.

Asset carrying values and impairment
assessment

The Companys activities in El Salvador are subject to the
effects of changes in legal, tax and regulatory regimes, national and local
political issues, labour and economic developments and government bureaucracy.
The Company has experienced lengthy delays in the GOESs processing of the El
Dorado exploitation concession application with no resolution to date, which,
along with other factors beyond the control of the Company, could adversely
impact operations in El Salvador or result in the impairment of the El Dorado
property in the future; such impairment could be material.

The Companys US subsidiary, PacRim, commenced an Arbitration
claim at ICSID, a branch of the World Bank in Washington, DC. If the Company is
unsuccessful in obtaining a permit for El Dorado or in the Arbitration, or if
other factors beyond the control of the Company come to pass, such developments
could adversely impact existing or future operations in El Salvador or result in
the impairment of the El Dorado property in the future. Such impairment could be
material. As at April 30, 2012, management of the Company determined that
impairment indicators existed on its El Dorado project and completed an
impairment assessment on this project. The current economic environment, the
decline in the Companys stock price and the difficulty in obtaining a permit
were considered as impairment indicators. As part of their impairment
evaluation, management considered a number of factors, including the Companys
share price at April 30, 2012 and current gold prices along with the Companys
2005 pre-feasibility study. Based on this impairment evaluation no impairment of
the El Dorado project was identified as of April 30, 2012. To date, the
Companys discussions with its legal counsel representing the Company in the
Arbitration have not resulted in a determination of any material impairment in
the carrying value of the Company concessions.

The Company re-evaluates the carrying values of property, plant
and equipment when events or changes in circumstance indicate that carrying
values may not be recoverable. If it is determined that the estimated net
recoverable amount based on non-discounted cash flows is less than the carrying
value, a write-down to the estimated fair value is made by a charge to
earnings.

Determination of the fair value of
stock-based compensation and derivative financial instruments

The Company makes significant assumptions and estimates in
determining the fair market value of stock-based compensation granted to
employees and non-employees and the value attributed to various warrants and
broker warrants issued on financings, which have an effect on the stock-based
compensation expense recognized and the contributed surplus and share capital
balances on the Companys balance sheet. Using the Black-Scholes Option Pricing
Model, management has made estimates of the life of stock options and warrants,
the expected volatility and the expected dividend yields that could materially
affect the fair market value of these securities. The estimates were chosen
after reviewing the historical life of the Companys options and analyzing share
price history to determine volatility.

Derivative instruments, including embedded derivatives, are
recorded at fair value through profit or loss (FVTPL) and accordingly are
recorded on the balance sheet at fair value. Gains and losses on re-measurement
to fair value of these derivatives are classified separately in these
consolidated financial statements as gain on derivative liability. Fair values
for derivative instruments are determined using valuation techniques, using
assumptions based on market conditions existing at the balance sheet date.
Derivatives embedded in non-derivative contracts are recognized separately
unless they are closely related to the host contract.

Warrants issued in a private placement that have an exercise
price denominated in a currency other than the Companys functional currency
meet the definition of a derivative liability and are recorded as a financial
liability and are marked-to-market each period, its fair value determined using
the Black-Scholes valuation model. Subsequent changes in the fair value of the
warrants are recognized as gains or losses in the Statement of Income (Loss) and
Comprehensive Income (Loss) until they are fully exercised. Warrants that have
been issued to agents for services provided for a capital raising transaction
are accounted for under IFRS 2. These warrants are not derivatives and are not
subject to IAS 32.

Functional currency

The functional currency is the currency of the primary economic
environment in which the entity operates. The functional currency of the Company and of all of its subsidiaries is the United States
(US) Dollar. The functional currency determinations were conducted through an
analysis of the consideration factors identified in IAS 21, The Effects of
Changes in Foreign Exchange Rates (IAS 21).

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- 36 -

The consolidated financial statements have been presented in US
dollars. Transactions in foreign currencies are translated to the functional
currency of the entity at the exchange rate in existence at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies
at the balance sheet date are translated at the period end date exchange rates.
Non-monetary items which are measured using historical cost in a foreign
currency are translated using the exchange rate at the date of the transaction.

The Companys presentation currency is the US dollar.

Contingent reclamation
liabilities

As part of the sale of its interest in Denton-Rawhide (readers
are referred to the Companys 2009 Management Discussion and Analysis), the
Company has provided a guarantee on 49% of any reclamation and closure costs in
the event that reclamation and closure costs were to exceed $7.0 million.
Kennecott has estimated a total of $4.9 million for these expenditures under the
proposed plan.

Mineral Properties and Exploration
Costs

The Company capitalizes the direct costs of acquiring mineral
property interests. Option payments are considered acquisition costs.

Exploration and evaluation costs are charged to operations in
the period incurred until such time as it has been determined that a property
has economically recoverable reserves, in which case subsequent exploration and
development costs are capitalized. Exploration costs include value-added taxes
because the recoverability of these amounts is uncertain.

Ownership in mineral properties involves certain inherent risks
due to the difficulties of determining and obtaining clear title to claims as
well as the potential for problems arising from the frequently ambiguous
conveyance history characteristics of many mineral properties. The Company has
investigated ownership of its mineral properties and, to the best of its
knowledge, ownership of its interests are in good standing.

Impairment of Non-financial
Assets

The carrying amounts of non-financial assets are reviewed for
impairment whenever facts and circumstances suggest that the carrying amounts
may not be recoverable. If there are indicators of impairment, the recoverable
amount of the asset is estimated in order to determine the extent of any
impairment. For the purpose of measuring recoverable amounts, assets are grouped
at the lowest levels for which there are separately identifiable cash flows
(cash-generating units or CGUs). The recoverable amount is the higher of an
assets fair value less costs to sell and value in use (being the present value
of the expected future cash flows of the relevant asset or CGU). An impairment
loss is recognized for the amount by which the assets carrying amount exceeds
its recoverable amount.

Non-financial assets that have been impaired in prior periods
are tested for possible reversal of impairment whenever events or changes in
circumstances indicate that the impairment has reversed. If the impairment has
reversed, the carrying amount of the asset is increased to its recoverable
amount but not beyond the carrying amount that would have been determined had no
impairment loss been recognized for the asset in the prior periods. A reversal
of an impairment loss is recognized in the statement of loss.

Readers are referred to Notes 2, 3, 4 and 15 to the 2012
audited consolidated financial statements for additional information about
Accounting Estimates and Policies.

Conversion to International Financial Reporting Standards
(IFRS)

The Canadian Accounting Standards Board (AcSB) has announced
its decision to replace Canadian GAAP with International Financial Reporting
Standards (IFRS) for all Canadian Publicly Accountable Enterprises (PAEs).
The effective changeover date for the Company was May 1, 2011, at which time
Canadian GAAP ceased to apply for Pacific Rim and was replaced by IFRS.
Following this timeline, the Company issued its first set of interim financial
statements prepared under IFRS in the first quarter of 2012 ending July 31, 2011
including comparative IFRS financial results and an opening balance sheet as at
May 1, 2010.

The Companys audited consolidated financial statements for
fiscal 2012 (the year ended April 30, 2012) are its first annual IFRS
consolidated financial statements, and were prepared with comparatives for the
year ended April 30, 2011.

IFRS 1 First-time Adoption of International Financial Reporting
Standards sets forth guidance for the initial adoption of IFRS. Under IFRS 1 the
standards are applied retrospectively at the transitional statement of financial
position date with all adjustments to assets and liabilities taken to retained
earnings unless certain exemptions are applied. The Company has applied the
following exemptions to its opening statement of financial position dated May 1,
2010:

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- 37 -

IFRS 3 - Business
Combinations

IFRS 1 indicates that a first-time adopter may elect not to
apply IFRS 3 Business Combinations retrospectively to business combinations that
occurred before the date of transition to IFRS. The Company has taken advantage
of this election and will apply IFRS 3 only to business combinations that occur
on or after May 1, 2010.

IFRS 2 - Share-based
Payments

IFRS 1 permits, but does not require first-time adopters to
apply IFRS 2 Share-based Payments to equity instruments that were granted on or
before November 7, 2002, or equity instruments that were granted subsequent to
November 7, 2002 that had vested by the transition date. The Company has elected
to apply IFRS 2 only to awards granted after November 7, 2002 that vest after
May 1, 2010.

A reconciliation of assets, liabilities and equity as at May 1,
2010 and April 30, 2011 and net loss for the year ended April 30, 2011, from
those reported under Canadian GAAP is as follows:

|(all amounts in
      thousands of US dollars)                |   |           |   |   |        |  
|------------------------------------------------------------- | - | --------- | - | - | ------ | -
|                                                              |   | April 30, |   |   | May 1, |  
|                                                              |   | 2011      |   |   | 2010   |  
|Total Assets under Canadian GAAP and IFRS                     | $ | 6,681     |   | $ | 6,927  |  
|                                                              |   |           |   |   |        |  
|Total Liabilities Under Canadian
      GAAP                   | $ | 2,688     |   | $ | 2,626  |  
|Adjustments                                                   |   |           |   |   |        |  
|Deferred income tax recorded on
      acquisition of an asset |   | (1,046    | ) |   | (1,046 | )
|Derivative
      Liability                                    |   | 1,649     |   |   | 1,482  |  
|Total Liabilities Under IFRS                                  | $ | 3,291     |   | $ | 3,062  |  
|                                                              |   |           |   |   |        |  
|                                                              |   |           |   |   |        |  
|Total Equity Under Canadian GAAP                              | $ | 3,993     |   | $ | 4,301  |  
|Adjustments                                                   |   |           |   |   |        |  
|Deferred income tax recorded on acquisition of an
      asset |   | 1,046     |   |   | 1,046  |  
|Derivative liability                                          |   | (1,649    | ) |   | (1,482 | )
|Total
      Equity Under IFRS                                 | $ | 3,390     |   | $ | 3,865  |  

|                                                                |   | For the Year Ended |  
|--------------------------------------------------------------- | - | ------------------ | -
|                                                                |   | April 30,          |  
|                                                                |   | 2011               |  
|Total Net Loss and Comprehensive Loss
      Under Canadian GAAP | $ | 4,002              |  
|Adjustment                                                      |   |                    |  
|Derivative liability                                            |   | (232               | )
|Total Net Loss
      and Comprehensive Loss Under IFRS          | $ | 3,770              |  

Derivative Liability

Under Canadian GAAP, warrants are accounted for at their
carrying value within shareholders equity. Under IFRS, these warrants that have
an exercise price denominated in a currency other than the Companys functional
currency meet the definition of a derivative liability and are recorded as a
financial liability and are marked-to-market each period. The warrants issued in
January 2010 and October 2010 private placement have an exercise price
denominated in Canadian dollars, which is not the Companys functional currency.
As a result, the warrants do not meet the definition of an equity instrument and
will be recorded at fair value as a derivative liability, with the difference
between the fair value and the carrying value, upon transition, being recognized
in equity. Subsequent changes in the fair value of the warrants will be
recognized as gains or losses in the Statement of Income (Loss) and
Comprehensive Income (Loss) until they are fully exercised.

On transition to IFRS, as at May 1, 2010, the Company recorded
a reclassification adjustment to record the warrant liability, net of derivative
issuance costs of $1,482 thousand, decreased the contributed surplus by $2,324
thousand and decreased the deficit at transition by $842 thousand.

During the year ended April 30, 2011, the Company recorded a
gain of $248 thousand resulting from the measurement to fair value of this
derivative liability and also reclassified issuance costs of $17 relating to
these warrants to the statement of loss and comprehensive loss from equity.

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- 38 -

As at April 30, 2011, the Company recorded a reclassification
adjustment to record the warrant liability of $1,649 thousand, decreased the
contributed surplus by $2,722 thousand and decreased the deficit by $1,073
thousand.

Taxes

A deferred tax asset is recognized to the extent that it is
probable that future taxable profits will be available against which the asset
can be utilized. To the extent that the Company does not consider it probable
that a future tax asset will be recovered, it provides a valuation allowance
against the excess.

Under IFRS, temporary differences resulting from the initial
recognition of assets or liabilities that do not affect accounting or taxable
profit do not result in a deferred tax asset or liability. As of the date of
transition, the Company has therefore derecognized the impact of future income
tax liabilities which had previously been recognized on the asset acquisition of
the El Dorado project.

As at May 1, 2010, there was a decrease in the deferred tax
liability from $1,046 thousand to $Nil, a decrease of $1,046 thousand and a
corresponding decrease in the deficit.

There are no material differences between the cash flow
statements presented under IFRS and Canadian GAAP.

Recent accounting pronouncements not yet adopted

Certain new standards, interpretations, amendments and
improvements to existing standards were issued by the International Accounting
Standards Board (IASB) or International Financial Reporting Interpretations
Committee (IFRIC). The Standards impacted that are applicable to the Company
are as follows:

- IFRS 9, Financial Instruments (IFRS 9) was issued by IASB in November
  2009. This standard addresses classification and measurement of financial
  assets and replaces the multiple category and measurement models in
  International Accounting Standard (IAS) 39 for debt instruments with a new
  mixed measurement model having only two categories: amortized cost and fair
  value through profit or loss. IFRS 9 also replaces the models for measuring
  equity instruments with recognition at fair value through profit or loss or at
  fair value through other comprehensive earnings.IFRS 9 is effective for
  annual years beginning on or after January 1, 2015. The Company is currently
  assessing the impact of this standard on the financial statements.
- IFRS 10, Consolidated Financial Statements (IFRS 10), was issued in May
  2011 and will supersede the consolidation requirements in SIC-12,
  Consolidation  Special Purpose Entities (SIC-12), and IAS 27, Consolidated
  and Separate Financial Statements (IAS 27), effective for annual periods
  beginning on or after January 1, 2013, with early application permitted. IFRS
  10 builds on existing principles by identifying the concept of control as a
  determining factor in whether an entity should be included within the
  consolidated financial statements of the parent company. The standard also
  provides additional guidance to assist in the determination of control where
  this is difficult to assess. The company has not yet determined the impact
  this new standard may have on its consolidated financial statements.
- IFRS 11, Joint Arrangements (IFRS 11), was issued in May 2011 and will
  supersede existing IAS 31, Joint Ventures (IAS 31) effective for annual
  periods beginning on or after January 1, 2013, with early application
  permitted. IFRS 11 provides for the accounting of joint arrangements by
  focusing on the rights and obligations of the arrangement, rather than its
  legal form (as is currently the case). The Standard also eliminates the option
  to account for jointly controlled entities using the proportionate
  consolidation method. This standard will impact the accounting treatment for
  the Companys joint venture arrangement for further exploration and
  development of Hog Ranch, once the Company has earned its interest in the Hog
  Ranch property.
- IFRS 12, Disclosure of Interests in Other Entities (IFRS 12), was issued
  in May 2011 and is a new and comprehensive standard on disclosure requirements
  for all forms of interest in other entities, including subsidiaries, joint
  arrangements, associates and unconsolidated structured entities. IFRS 12 is
  effective for annual periods beginning on or after January 1, 2013 with
  earlier application permitted. The company has not yet determined the impact
  this new standard may have on its consolidated financial statements.
- IFRS 13, Fair Value Measurements (IFRS 13) was issued in May 2011 and
  sets out, in a single IFRS, a framework for measuring fair value. IFRS 13
  defines fair value as the price that would be received to sell an asset or
  paid to transfer a liability in an orderly transaction between market
  participants at the measurement date. This definition of fair value emphasizes
  that fair value is a market-based measurement, not an entity specific
  measurement. In addition, IFRS 13 also requires specific disclosures about fair value
  measurement. IFRS 13 is effective for annual periods beginning on or after
  January 1, 2013, with earlier application permitted. The Company is currently
  assessing the impact of this Standard.

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- 39 -

- IAS 1, Presentation of Items of Other Comprehensive Income (OCI) (IAS
  1), was revised in June 2011 to change the disclosure of items presented in
  OCI, including a requirement to separate items presented in OCI into two
  groups based on whether or not they may be recycled to profit or loss in the
  future. The revision is effective for annual periods beginning on or after
  July 1, 2012 with early application permitted. The standard is not expected to
  have an impact on the Company in its current form.

A. Operating Results

For the fiscal year ended April 30, 2012, Pacific Rim recorded
a loss of $(1.8) million or $(0.01) per share, compared to a loss of $(3.8)
million or $(0.03) per share for the fiscal year ended April 30, 2011. The
decrease in net loss for fiscal 2012 compared to fiscal 2011, despite increased
exploration and general and administrative expenses, is primarily related to
substantially increased gains on the Companys derivative liability in fiscal
2012 compared to fiscal 2011, as well as a decrease in costs related to the
Arbitration year over year.

Expenses

Due to the commencement of exploration at the Hog Ranch
property in late fiscal 2011, exploration expenditures were higher in fiscal
2012 than in fiscal 2011 ($1.8 million and $1.2 million, respectively).

General and administrative expenses also increased slightly,
from $1.0 million in fiscal 2011 to $1.1 million in fiscal 2012 due to the
slightly higher level of business activity undertaken by the Company during the
current year.

Arbitration-related expenses totalled $0.5 million during
fiscal 2012 compared to $0.3 million during fiscal 2011, a slight increase
attributable to costs associated with the Jurisdiction Objection hearings held
in early fiscal 2012.

The Company booked a small foreign exchange loss of $0.1
million during fiscal 2012 compared to a foreign exchange gain of $0.1 million
during fiscal 2011, primarily reflecting the impact of the US-Canadian dollar
exchange rate on the Companys Canadian dollar-denominated investments on
hand.

Unusual Items

There were no unusual items in either of fiscal 2012 or fiscal
2011.

Summary

As a result of increased exploration expenditures, general and
administrative costs and Arbitration-related expenses, offset by substantially
increased gains on the Companys derivative liability, the Companys loss for
fiscal 2012 was reduced to $(1.8) million or $(0.01) per share from $(3.8)
million or $(0.03) per share for fiscal 2011.

Summary of Quarterly Results

Summary of Quarterly Results (unaudited)(all amounts in
thousands of US dollars, except per share amounts)

Fiscal 2012
    Fiscal 2011Q4 2012
    Q3 2012
    Q2 2012
    Q1 2012
    Q4 2011
    Q3 2011
    Q2 2011
    Q1 2011*Revenue from Continuing Operations
    $nil
    $nil
    $nil
    $nil
    $nil
    $nil
    $nil
    $nilIncome (Loss) and Comprehensive Income (Loss)
    $(343)
    $(920)
    $(783)
    $212
    $(296)
    $(1,343)
    $(1,287)
    $(845)Income (Loss) per share  basic and diluted
    $(0.00)
    $(0.01)
    $(0.00)
    $0.00
    $(0.00)
    $(0.01)
    $(0.01)
    $(0.01)


* IFRS transition began on May 1, 2010 (the first day of Q1
2011).

The Company typically incurs a net quarterly loss. During each
of the four quarters of fiscal 2011 exploration expenses generally decreased as
the Company significantly reduced exploration in El Salvador commencing in July
2008. This trend was reversed during Q1 2012 when the Company initiated
exploration activities at the Hog Ranch project, and exploration expenses have
marginally increased during each of the past four quarters. Legal expenses
related to the Arbitration action, which commenced in early fiscal 2010, are
periodically higher in relation to the level of activity related to the action.
Consequently expenses, which impact net loss and comprehensive loss, have occasionally spiked during certain of
the last eight quarters including Q2 and Q3 2011 when preparations for the
Jurisdiction Objection were underway. During each of the last four quarters, the
Company booked unrealized gains on its derivative liability, which in Q1 2012
was substantial enough to offset expenses and result in income for the period.
The results of operations for each of the past eight quarterly periods shows no
discernible trend or seasonality, and is largely a function of the relative
impact of exploration, general and administrative and Arbitration action
expenses realized during each quarter as well as unrealized gains or losses on
the Companys derivative liability.

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- 40 -

Fourth Quarter Fiscal 2012

Total loss for the three months ended April 30, 2012 was $0.3
million compared to $0.3 million in the three month period ended April 30,
2011.

Despite increased general and administrative and exploration
expenses, related to exploration activity at the Hog Ranch property, the
Companys loss for the fourth quarter of fiscal 2012 was less than most of the
fiscal 2012 and fiscal 2011 quarterly periods (with the exception of Q1 2012 and
Q4 2011), primarily because of unrealized gains on the Companys derivative
liability (related to the value of warrants issued in conjunction with recent
private placements) and lower levels of Arbitration-related activity.

The Companys fiscal 2012 fourth quarter results presented
above are based on unaudited interim consolidated financial statements that have
been prepared in accordance with IFRS. The Companys transition to IFRS began on
May 1, 2010 (the first day of Q1 2011). The Companys reporting currency is the
US dollar and all monetary amounts are stated in US dollars unless otherwise
noted.

Impact on Operations as a Result of Governmental
Factors

The Companys operations are primarily focused on the
exploration for gold and silver and its sole material project, the El Dorado
property, is located in El Salvador. The Company has experienced significant
delays in the receipt of environmental and mining permits necessary to advance
the El Dorado project further. See Item 4D  Property, Plant and
Equipment, and specifically El Salvador Mining Regimeand El
Dorado Property  Arbitration Claimfor information related to El
Salvadors mining law, the Companys actions to date to comply with this law and
an Arbitration claim that the Companys US subsidiary, Pac Rim Cayman LLC, has
commenced with the International Center for the Settlement of Investment
Disputes in Washington, DC. The receipt of necessary permits, or lack thereof,
could have a material impact on the Companys operations.

B. Liquidity and capital resources

Liquidity

During fiscal 2012 the Companys cash increased by $0.5 million
from $0.3 million at April 30, 2011 to $0.8 million at April 30, 2012.
Short-term investments decreased year over year from $0.8 million at April 30,
2011 to $0.5 million at April 30, 2012. As a result of the increase in cash and
the decrease in short-term investments, current assets increased by $0.2 million
year over year from $1.2 million at April 30, 2011 to $1.4 million at April 30,
2012. This modest increase reflects the proceeds of a private placement equity
financing that closed during fiscal 2012, less cash spent on exploration
expenses and project generation efforts, general and administrative costs
associated with maintaining a public company, and expenditures related to the
Arbitration.

The Companys financial statements have been prepared on the
basis that the Company will continue as a going concern, which assumes that the
Company will be able to meet its commitments, continue operations, realize its
assets and discharge its liabilities in the normal course of business for the
foreseeable future. There are events and conditions that cast substantial doubt
on the validity of that assumption. The Company will require additional
financing to continue to conduct ongoing exploration programs and to meet future
property commitments, for administrative purposes and for legal expenses related
to the Arbitration. The costs for this legal action are substantial and are
anticipated to increase as the case proceeds to through the final, merits-based
phase. Factors that could affect the availability of financing include
fluctuations in the Companys share price, the state of international debt and
equity markets, investor perceptions and expectations, global financial and
metals markets, progress on any of the Companys exploration properties, and
developments, if any, on the El Dorado project permitting application. The
Company believes it will be able to obtain the necessary financing to meet its
requirements on an ongoing basis; however, there can be no assurance that the
necessary financing will be obtained, and such financing, if available, may be
dilutive to the Companys shares and shareholders. As it has in the past, the
Company plans to obtain additional financing through, but not limited to, the
issuance of additional equity.

Cash Flow Used For Operating Activities

The Companys loss from continuing operations was $(1.8)
million in fiscal 2012 compared to $(3.8) million in fiscal 2011. These losses
were offset by a number of non-cash items including, notably: stock-based
compensation of $0.5 million in fiscal 2012 compared to $0.3 million in fiscal
2011; unrealized gains from the Companys derivative liability of $(2.1) million
in fiscal 2012 compared to $(0.2) million in fiscal 2011; and a marginal
decrease in accounts payable and accrued liabilities in fiscal 2012 compared
to $0.1 million in fiscal 2011. Although the fiscal 2012 loss
from continuing operations was substantially lower than in fiscal 2011,
unrealized gains from the Companys derivative liability, a non-cash item, were
substantially higher year over year. As a result, cash flow used for operating
activities during fiscal 2012 was only $0.4 million lower than in fiscal 2011
($(3.3) million and $(3.7) million, respectively).

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- 41 -

Cash Flow Provided by (Used for) Investing
Activities

During fiscal 2012 the Company made net purchases of short term
investments of $(1.6) million compared to $(1.0) million during fiscal 2011.
Redemption of short term investments added $1.9 million to cash during fiscal
2012 compared to $0.3 million during fiscal 2011. Negligible purchases of
property plant and equipment were made in fiscal 2012 compared to $nil in fiscal
2011. As a result, cash flow provided by (used for) investing activities was
$0.2 million during fiscal 2012 compared to $(0.7) million during fiscal
2011.

Cash Flow Provided by Financing Activities

The Company realized $3.7 million in cash flow from financing
activities during fiscal 2012, compared to $3.3 million during fiscal 2011. The
fiscal 2012 and fiscal 2011 financing cash flow amounts are related to the
issuance of common shares of the Company under two private placement equity
financings that closed in May 2011 and October 2010 respectively (details
below).

During fiscal 2012, the Company closed a private placement
financing (previously announced in late fiscal 2011) in which gross proceeds of
CDN $3,696,000 were raised through the issuance of 17,600,000 Units at a price
of CDN $0.21 per Unit. Each Unit issued in the fiscal 2012 financing consists of
one common share in the Company and one half of one share purchase warrant that
entitles the holder to acquire one additional common share of the Company at a
price of CDN $0.30 for a period of 24 months following the closing of the
financing. Pacific Rim reserves the right to accelerate the exercise period of
the fiscal 2012 financing warrants should its common stock trade above CDN $0.50
for 20 consecutive trading days. The Company also issued 233,400 Units to
certain finders in connection with the private placement, in payment of a
finders fee of 6% of the proceeds raised from subscribers introduced by the
finders, and issued 716,400 warrants to finders representing 6% of the total
number of Units sold to purchasers introduced by the finders.

During fiscal 2011, the Company announced and closed a private
placement financing in which a total of CDN $3,332,000 was raised through the
issuance of 19,600,000 Units. Each Unit issued in the fiscal 2011 financing
consists of one common share in the Company and one half of one share purchase
warrant that entitles the holder to acquire one additional common share of the
Company at a price of CDN $0.30 for a period of 24 months following the closing
of the financing, which occurred on October 8, 2010. Pacific Rim reserves the
right to accelerate the exercise period of the fiscal 2011 financing warrants
should its common stock trade above CDN $0.50 for 20 consecutive trading days.
The Company also issued 660,000 Units to certain finders in connection with the
private placement, in payment of a finders fee of 6% of the proceeds raised
from subscribers introduced by the finders, and issued 660,000 warrants to
finders representing 6% of the total number of Units sold to purchasers
introduced by the finders.

Capital Resources and Financial Condition

Working Capital

At April 30, 2012, the Company had current assets of $1.4
million, compared to $1.2 million at April 30, 2011, an increase of $0.2
million. The slight increase in current assets is primarily a result of cash
raised through a private placement financing in early fiscal 2012 and subsequent
expenditures of cash on exploration, general and administrative and
Arbitration-related expenses. Resource property balances at April 30, 2012 were
marginally higher than the April 30, 2011 balances ($5.49 million $5.45 million
respectively).

At both April 30, 2012 and April 30, 2011 the Company had
current liabilities of $1.64 million. Of the accounts payable and accrued
liability balances, $1.4 million at April 30, 2012 (compared to $1.4 million at
April 30, 2011) is due to one vendor associated with the Arbitration.

The $0.2 million increase in current assets combined with no
change in current liabilities, resulted in a $0.2 million improvement in working
capital from $(0.4) million at the end of fiscal 2011 to $(0.2) at the end of
fiscal 2012.

Financial Condition

The Company does not intend to resume significant exploration
programs in El Salvador until such time as the El Dorado environmental permit
and exploitation concession are received. The Company cannot judge if or when
the required permits will be received and is not currently planning any
exploration programs for its El Dorado, Santa Rita and Zamora-Cerro Colorado
properties for the immediate future beyond what is necessary to keep all of its
exploration licences in good standing. Should the required permits be granted, the Company will evaluate its options for resuming
full scale exploration work designed to advance its El Salvador projects.

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- 42 -

The Company has completed an initial program of surface
exploration at the Hog Ranch property, including geological and structural
mapping, soil sampling, and data analysis and has used this information in the
selection and prioritization of drill targets. The Company recently submitted a
drill permit application for a 10-15-hole Phase 1 drill program at Hog Ranch,
which is expected may commence in fiscal 2013, subject to future financing, the
receipt of drilling permits, and sourcing of drill contractors. Acquisition of
the Remance project is in doubt and therefore, no exploration plans for Remance
are being contemplated at this time. However, if a final acquisition agreement
on Remance is signed, as per the terms of the Remance LOI the Company will be
responsible for undertaking a $1 million exploration program in the first year
of the option period. The Company intends to continue its project generation
initiatives with the aim of evaluating and possibly acquiring new exploration
properties of merit that fit its exploration focus.

The Company anticipates that the Hog Ranch drill program and
associated exploration will cost approximately $1.5 million, with a further $1
million required in the event the Remance property is acquired. Minimal
expenditures are anticipated for generative exploration work. The Company will
require additional financing in order to carry out the planned Hog Ranch drill
program, as well as any other future exploration work of a substantive
nature.

The Companys general and administrative costs are expected to
remain stable during fiscal 2013. Expenditures related to PacRims Arbitration
claim are expected to increase substantially as the case proceeds through the
final phase. The Company has currently accumulated a liability of approximately
$1.4 million related to the Arbitration and is currently discussing
vendor-specific alternative financing opportunities aimed at reducing this
accounts payable position. Although the Company believes it has sufficient cash
and short term investments to fund its immediate general and administrative and
legal obligations, additional working capital (likely through equity financing)
will be required to fund ongoing general and administrative costs. Additionally,
the costs associated with the final phase of the Arbitration action are expected
to be high. The Company is currently exploring various alternative financing
opportunities to fund the legal costs associated with the Arbitration while
minimizing dilution to its current share structure. In this regard the Company
has received encouraging feedback from potential sources of non-equity
financing.

The business of mining and exploration involves a high degree
of risk and there can be no assurance that any of the Companys current
exploration projects will result in profitable mining operations. The Company
has no source of revenue, and will require additional cash to continue to fund
legal, exploration and administration expenses. As at April 30, 2012, the
Company has working capital deficit of $(0.2) million, has incurred losses since
inception and has an accumulated deficit of $89.8 million. The Companys ability
to continue operations and exploration activities as a going concern is
dependent upon its ability to obtain future financing. The Company will need to
raise additional funds during fiscal 2013 to support exploration and
administration expenses as well as its costs under PacRims Arbitration action.
While the Company has been successful in obtaining its required funding in the
past, there is no assurance that sufficient funds will be available to the
Company, or be available on favourable terms. Factors that could affect the
availability of financing include fluctuations in the Companys share price, the
state of international debt and equity markets, investor perceptions and
expectations, global financial and metals markets, progress on any of the
Companys exploration properties, and developments, if any, on the El Dorado
project permitting application. Additional financing will require, but may not
be limited to, the issuance of additional equity.

Outlook

Exploration

The Company has completed a Phase 1 exploration program on the
Hog Ranch property, which included detailed geological and structural mapping,
detailed soil sampling, evaluating past drilling and geophysical results from
previous operators of the Hog Ranch project, formulating a geologic model for
Hog Ranch, and the staking of additional claims. Most recently, the Companys
field results were compiled and integrated with existing data to fine tune a
geological model for Hog Ranch, the results of which were used to target
drill-hole locations. The Company recently submitted a drill permit application
for a 10-15-hole drill program at Hog Ranch, which is expected to commence
during fiscal 2013 (subject to future financing, the receipt of drilling
permits, and sourcing of drill contractors).

The Companys acquisition of the Remance property is on hold
and highly uncertain at this time, pending the vendors legal appeal of the
Government of Panamas recent decision to deny extension of the Remance
concession term. While the Company is keeping the Remance LOI in effect during
Minera Cliftons appeal, it does not intend to sign a final agreement to acquire
the Remance project unless the term of the concession is extended.

The Company will continue to curtail its exploration programs
and expenditures in El Salvador until such time as PRES receives the El Dorado
environmental permit and exploitation concession. The Company remains hopeful
that it will either receive the El Dorado permit and mining concession or that
it will be appropriately compensated. The Company will continue to seek
opportunities for dialogue with the GOES aimed at resolving its permitting issues
in El Salvador including receipt of the environmental and mining permits for the
El Dorado project as well as re-establishing the exploration licence for Santa
Rita.

---

- 43 -

The Company continues to seek new project opportunities in
North and Central America.

The Phase 1 Hog Ranch exploration and drilling program is
expected to cost approximately $1.5 million and will constitute the Companys
primary exploration initiative planned for fiscal 2013, and is dependent on
additional financing, the receipt of necessary permits and procurement of drill
contractors. If the Remance project is acquired, the Company will require
additional financing to undertake an exploration program, as per the terms of
its Remance letter of intent, that is anticipated to cost approximately $1.0
million. Additional exploration work required to keep all of its El Salvador
projects in good standing, and exploration expenses related to the Companys
generative programs, will continue through fiscal 2013 and for the foreseeable
future.

General and Administrative and
Legal

The Companys general and administrative costs are expected to
remain stable during fiscal 2013. Expenditures related to PacRims Arbitration
claim are expected to increase substantially as the case proceeds through the
final phase. The Company is currently exploring various alternative financing
opportunities to fund the legal costs associated with the Arbitration while
minimizing dilution to its current share structure.

The Company will continue to seek opportunities for dialogue
with the GOES aimed at resolving the El Dorado permitting situation. The Company
and its subsidiaries have a well-documented history of supporting local
inhabitants and building relationships with all stakeholders. This is a key
component of the Companys approach to exploration and development, and will
continue in all jurisdictions in which it and its subsidiaries operate.

Unless these diplomatic efforts are successful, the Arbitration
action is expected to proceed during fiscal 2013 and beyond. The Company and its
legal team are currently preparing for the final phase of the Arbitration in
which the merits of the claim will finally be heard by the ICSID Tribunal
overseeing the case. During this final phase, the Tribunal will determine
whether El Salvador has breached Salvadoran and international law by refusing to
issue the necessary mining licenses for the El Dorado Mine. They will also
determine El Salvador's monetary liability for breaching the investment
protections owed to a foreign investor as per in its own laws. The Company is
seeking alternative, non-dilutive, financing arrangements specifically
ear-marked for legal expenses related to the Arbitration.

Key Issues

Important corporate and technical issues facing the Company in
the coming fiscal year (and beyond) include: the Companys ability to secure
adequate financing for exploration expenses including the planned Hog Ranch
drill program, maintenance of the El Salvador and Nevada properties and general
working capital purposes; the Companys ability to secure financing for the
continuation of PacRims Arbitration action; developments related to the
Arbitration action; the execution and outcome of the Companys Phase 1 drill
program at the Hog Ranch property; developments related to the potential signing
of a formal option agreement to acquire the Remance project and the subsequent
undertaking of an exploration and drilling program at Remance if, as, and when
it is formally acquired; and, the continued search for additional exploration
project opportunities. The Company has been successful in raising funds through
equity financing in the past but there can be no assurance that such financing
will be available in the future, or if so, available under favourable terms, or
that alternatively, financing through means other than the issuance of equity
can be achieved.

C.      Research and Development,
Patents and Licenses, etc. None

D.      Trend Information

While the Company does not have any producing mines, it is
directly affected by trends in the metal industry. The Companys principal
assets are its gold exploration properties, one of which comprises several known
gold deposits. The global economic and credit crisis has affected all
industries, including mining, and has resulted in additional pressure on the
ability and costs of obtaining project capital financing. Global metal prices,
driven by rising global demand, climbed dramatically and approached historic
highs over the past several years but are volatile and subject to periodic
corrections. The effect of high metal prices had a significant positive impact
on the ability to raise equity capital, which has resulted in increases in
global exploration projects and in turn has caused the procurement of
exploration services and skilled employees to be increasingly difficult.

Overall market prices for securities in the mineral resources
sector and factors affecting such prices, including base metal prices, political
trends in the countries such companies operate, and general economic conditions,
may have an effect on the terms on which financing is available to the Company,
if at all.

---

- 44 -

Refer to Risk Factors for further information on uncertainty
or items affecting the business or nature of business of the Company.

E.      Off-Balance Sheet
Arrangements

The Company has no material off-balance sheet arrangements such
as guarantee contracts, contingent interest in assets transferred to an entity,
derivative instrument obligations and any obligations that trigger financing,
liquidity, market or credit risk to the Company.

F.      Tabular Disclosure of
Contractual Obligations

The Company is committed to payments under operating leases for
office premises. The following table lists as of April 30, 2012, information
with respect to the Companys known contractual obligations.

Contractual Obligations (all amounts in thousands of US
dollars)

Payments due by periodTotal
    < 1 year
    1- 3 years
    4  5 years
    > 5 yearsOperating Lease Obligations
    $65
    $47
    $18
    -
    -Accounts Payable and Accrued Liabilities
    $1,636
    $1,636
    -
    -
    -Total
    $1,701
    $1,683
    $18
    -
    -


G.      Safe Harbor

See Note regarding Forward-Looking Statements.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.      Directors and Senior
Management

The following table set out the names of the members of the
Companys board of directors (Board of Directors or Board) and/or senior
officers as at April 30, 2012, the province or state and country in which each
is ordinarily a resident, all offices of the Company now held by each of them,
their principal occupations, the period of time for which each has been a
director (Director) and/or officer of the Company and the number of shares
owned by each Director and/or officer.

Name and Jurisdiction of
      Residence(1)
    Principal
      Occupation, Business or
      Employment(1)
    Service as a
      Director or officer of the Company
    Number of
      Shares(2)Catherine McLeod- Seltzer British
      Columbia, Canada
    Chairman and Director of the
      Company, Director and Chairman of Bear Creek Mining Corporation,
      Director of Kinross Gold Corporation, Director of Troon Ventures Ltd.
      and Director of Major Drilling Group International Inc.
    Since April 11, 2002(3)
    3,672,800Thomas Shrake(5)Nevada, US
    President, CEO and Director of
      the Company
    Since April 11, 2002(3)
    509,100(8)William Myckatyn(4)(5)(6)(7)British
      Columbia, Canada
    Corporate Director. Lead Director
      of the Company, Director of First Point Minerals Corp., Director
      of San Marco Resources Inc and. Director of OceanaGold Corporation
    Since April 11, 2002(3)
    287,660David K. Fagin(4)(6)Colorado, US
    Corporate Director. Director of
      the Company, and Director of Atna Resources Ltd.
    Since April 11, 2002(3)
    223,000Timothy C. Baker(5)(6)(7)Ontario,
      Canada
    Corporate Director. Director of
      the Company, Director of Eldorado Gold Corp., Director of Augusta
      Resource Corporation, Director, Director of Antofagasta Plc.
    Since March 5, 2012
    0Steven Krause British Columbia, Canada
    President of Avisar Chartered
      Accountants. CFO of the Company
    Since December, 2008
    120,000William Gehlen Nevada, US
    Vice President Exploration of the
      Company
    Since March, 1997
    78,200


---

- 45 -

Name and Jurisdiction of
      Residence(1)
    Principal Occupation,
      Business or Employment(1)
    Service as a
      Director or officer of the Company
    Number of
      Shares(2)Barbara Henderson 
      British Columbia, Canada
    Vice President Investor Relations and
      
      Corporate Secretary of the Company
    Since July, 1998
    12,000


(1) The information as to the province or state of residence
and principal occupation, not being within the knowledge of the Company, has
been furnished by the respective Directors and/or officers individually.

(2) The information as to shares beneficially owned or over
which a Director and/or officer exercises control or direction, not being within
the knowledge of the Company, has been furnished by the respective Directors
and/or officers individually.

(3) April 11, 2002 was the effective date of the amalgamation
of Dayton Mining Corporation (Dayton) and the Company; Fagin, McLeod-Seltzer
and Myckatyn were former directors of Dayton and McLeod-Seltzer, Myckatyn and
Shrake were Directors of the Company prior to the amalgamation with Dayton.

(4) Denotes member of Compensation Committee.

(5) Denotes member of Health, Safety and Environmental
Committee. (6) Denotes member of Audit Committee.

(7) Denotes member of Nominating Committee.

(8) 50,000 of these shares are owned jointly with Anne B.
Shrake in the Tom and Anne Shrake Family Trust.

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 or until a successor is elected or appointed. 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.

B.      Compensation

During the fiscal year ended April 30, 2012, the Company had
three Named Executive Officers (for the purposes of Canadian securities
legislation), namely:

Thomas Shrake, President and Chief Executive Officer Steven
Krause, Chief Financial Officer; and William Gehlen, VP Exploration

The following table (presented in accordance with National
Instrument Form 51-102F6 (Form 51-102F6)) sets forth all annual and
long term compensation for services in all capacities to the Company (to the
extent required by Form 51-102F6) for the three most recently completed
financial years of the Company, being the years ended April 30, 2010, April 30,
2011 and April 30, 2012, in respect of each Chief Executive Officer and Chief
Financial Officer who acted in such capacity for all or any portion of the most
recently completed financial year, and each of the other three most highly
compensated executive officers of the Company, or the three most highly
compensated individuals acting in a similar capacity (other than the Chief
Executive Officer and the Chief Financial Officer), as at April 30, 2012, whose
total compensation, for the most recently completed financial year,
individually, exceeded CDN$150,000, and any individual who would have satisfied
these criteria but for the fact that individual was neither an executive officer
of the Company, nor acting in a similar capacity, at the end of the most
recently completed financial year (collectively the Named Executive
Officers or NEOs).

Name and
      Principal Position
    Year
      Ended April 30
    Salary
      US($)
    Share-
      Based Awards US($)
    Option-
      Based Awards
      US($)(1)
    Non-Equity Incentive
      Plan Compensation***($)***
    Pension
      Value US($)
    All Other
      CompensationUS($)
    Total
      ***Compensation*** US($)Annual
      Incentive Plans
    Long-term
      Incentive PlansThomas Shrake CEO
    2010 2011 2012
    180,000(2)180,000(2)180,000(2)
    Nil Nil Nil
    54,240 65,835 91,236
    Nil Nil Nil
    Nil Nil Nil
    Nil Nil Nil
    Nil Nil Nil
    234,240 245,835 271,236Steven Krause (3)
    2010 2011
    Nil Nil
    Nil Nil
    33,900 65,835
    Nil Nil
    Nil Nil
    Nil Nil
    Nil Nil
    33,900 65,835


---

- 46 -

Name and
      Principal Position
    Year
      Ended April 30
    Salary
      US($)
    Share-
      Based Awards US($)
    Option-
      Based Awards
      US($)(1)
    Non-Equity Incentive
      Plan Compensation
    Pension
      Value US($)
    All Other
      CompensationUS($)
    Total
      ***Compensation*** US($)Annual
      Incentive Plans
    ($) Long-term
      Incentive PlansCFO
    2012
    Nil
    Nil
    28,366
    Nil
    Nil
    Nil
    Nil
    28,366William Gehlen VP Exploration
    2010 2011 2012
    120,000 120,000 120,000
    Nil Nil Nil
    27,120 39,501 34,039
    Nil Nil Nil
    Nil Nil Nil
    Nil Nil Nil
    Nil Nil Nil
    147,120 159,501 154,039


|(1) | The Company used the Black-Scholes model as the
      methodology to calculate the grant date fair value, and relied on the
      following the key assumptions and estimates for each calculation: expected
      dividend yield 0%, expected stock price volatility 102 and 105%, risk free
      interest rate 1.28 and 1.49%, and expected life of options of between 4.3
      and 5 years. The Company chose this methodology as it is the standard for
      exploration companies in Canada and has been consistently applied by the
      Company for valuing option-based awards since 2003. The stock-based awards
      are determined in Canadian funds and then translated into US funds at the
      2011 average foreign currency exchange rate of $1.00US/$1.03CDN
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(2) | Mr. Shrakes official annual salary is US$250,000 per
      year. Since November 2008, in light of economic and market conditions,
      Thomas Shrake has voluntarily taken only US$180,000 in salary per year,
      representing 72% of his official salary.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(3) | Mr. Krause, as CFO, was not an employee of the Company.
      He is employed by Avisar Chartered Accountants (Avisar). The portion of
      the compensation paid to Mr. Krause by Avisar during the fiscal period
      ended April 30, 2012 and 2011 and which Avisar attributed to the CFO
      services provided by Mr. Krause to the Company (based on Avisars revenue
      received from the Company as per its service agreement (see below) as a
      percentage of its total revenues) was $13,284 and $11,331, respectively.
      During the 2012 fiscal year, Avisar charged the Company CDN$136,950 for
      accounting, tax and financial consulting services.                                                                                                

Mr. Shrake is employed by the Company under an employment
agreement. Mr. Krause is engaged by the Company under a consulting agreement for
his services as CFO, and a company in which Mr. Krause is a principal is engaged
by the Company under a separate service agreement for the provision of
accounting and tax services. Mr. Gehlen is employed by a subsidiary of the
Company under an employment agreement. These employment and consulting
agreements are more thoroughly described below under the heading
Termination and Change of Control Benefits for NEOs.

None of the options granted to Messrs Shrake, Krause or Gehlen
were re-priced during the current fiscal year.

Incentive Plan Awards - Outstanding Share-Based Awards and
Option-Based Awards

The following table sets forth information concerning all
awards outstanding under incentive plans of the Company pursuant to which
compensation that depends on achieving certain performance goals or similar
conditions within a specified period, at the end of the most recently completed
financial year, including awards granted before the most recently completed
financial year, to each of the NEOs:

---

- 47 -

Option-Based Awards
    
    Share-Based Awards***Name***
    ***Number of***
      Securities Underlying
      Unexercised Options
      (#)
    Option Exercise
      Price US($)(2)
    Option Expiration
      Date
    ***Value of***
      Unexercised In-The-Money
      Options(1,2)
      US($)
    Number of Shares or
      Units of Shares That Have Not
      Vested (#)
    Market or Payout
      Value of Share-Based Awards
      That Have Not Vested
      US($)Thomas Shrake CEO
    300,000 500,000 400,000 500,000
      800,000
    1.19 0.17 0.21 0.21 0.16
    03/09/2013 12/29/2013 01/26/2015
      12/16/2015 09/28/2016
    Nil Nil Nil Nil Nil
    N/A N/A N/A N/A N/A
    N/A N/A N/A N/A N/ASteven Krause CFO
    250,000 250,000 250,000 250,000
      250,000
    0.17 0.21 0.20 0.21 0.16
    12/29/2013 01/26/2015 06/10/2015
      12/16/2015 09/28/2016
    Nil Nil Nil Nil Nil
    N/A N/A N/A N/A N/A
    N/A N/A N/A N/A N/AWilliam Gehlen VP Exploration
    125,000 200,000 200,000 300,000
      300,000
    1.19 0.17 0.21 0.21 0.16
    03/09/2013 12/29/2013 01/26/2015
      12/16/2015 09/28/2016
    Nil Nil Nil Nil Nil
    N/A N/A N/A N/A N/A
    N/A N/A N/A N/A N/A


|(1) | This amount is calculated based on the difference between
      the market value of the securities underlying the options at the end of
      the most recently completed financial year, which was CDN$0.10 per share,
      and the exercise or base price of the option. If the exercise price of the
      option is lower than the year-end market value of the securities
      underlying the options, options are not in-the-money and their value is
      Nil.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(2) | The Companys options are set with an exercise price in
      CDN dollars and were converted to US dollars at the April 30, 2012 foreign
      currency exchange rate of $1.00 US = $0.9884 CDN or $1.00 CDN = $1.0117
      US. The value of the unexercised in- the-money options is determined in
      Canadian funds and then translated into US funds at the exchange rate
      quoted above.                                                                    

Value Vested Or Earned During The Year

The value vested or earned during the most recently completed
financial year of incentive plan awards granted to NEOs is as follows:

NEO Name
    Option-Based Awards 
      Value Vested During The Year(1) US($)
    Share-Based Awards -
      Value Vested During The Year
      US($)
    Non-Equity Incentive Plan
      Compensation - Value Earned
      During The Year US($)Thomas Shrake CEO
    1,349
    Nil
    NilSteven Krause CFO
    427
    Nil
    NilWilliam Gehlen VP Exploration
    506
    Nil
    Nil


|(1) | This amount is the dollar value that would have been
      realized had the newly vested options been exercised on the vesting date,
      computed by obtaining the difference between the market price of the
      underlying securities at exercise and the exercise price of the options
      under the option-based award on the vesting date. As the Companys stock
      options and share price are quoted in $CDN, the value was computed in $CDN
      and converted to $US at the April 30, 2012 foreign currency exchange rate
      of $1.00 US = $0.9884 CDN or $1.00 CDN = $1.0117
US.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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- 48 -

The Companys stock option awards normally vest as follows: 1/3
upon the date of grant; 1/3 upon the first anniversary of the grant date; and
1/3 upon the second anniversary of the grant date. During the period from May 1,
2011 to April 30, 2012, the following options vested: the last third of options
granted on to the NEOs on January 27, 2010; the second third of options granted
on December 17, 2010; and the first third of options granted on September 29,
2011 vested.

Pension Plan Benefits

The Company does not have a pension plan that provides for
payments or benefits to the Named Executive Officers at, following, or in
connection with retirement.

Termination and Change of Control Benefits

Thomas Shrake, President and CEO

The Company has a current employment agreement with Thomas
Shrake, President and CEO, which includes termination and change of control
benefits.

In Mr. Shrakes employment agreement, change of control is
defined as any change in the effective control or direction of the Company and
includes:

| | (a) | an acquisition of 20% or more of the voting rights
      attached to all outstanding shares of the Company by a person or
      combination of persons acting in concert by virtue of an agreement,
      arrangement, commitment or understanding; or
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                       
| | (b) | a change in the Companys officers or Directors, which
      alters the effective control or direction of the
Company.                                                                                                                                

An event of termination is defined in the employment
agreement as the occurrence of any of the following events at any time after a
change of control, without the executives written consent:

| | (a) | a change (other than changes that are clearly and
      exclusively consistent with a promotion) in the executives position or
      duties (including any position or duties as a Director of the Company),
      responsibilities (including, without limitation, the person(s) to whom the
      executive reports, and who report to the executive), title or office in
      effect immediately prior to the change of control, which includes any
      removal of the executive from or any failure to re-elect or re-appoint the
      executive to any such positions or offices;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (b) | any failure by the Company to increase the executives
      remuneration in a manner consistent (both as to frequency and as to
      percentage increase) with increases granted generally to the Companys
      other senior personnel;                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (c) | the Company permanently relocating the executive to any
      place other than the location at which he reported to work on a regular
      basis immediately prior to the change of control;                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (d) | the Company taking any action to deprive the executive of
      any material fringe benefits enjoyed by him immediately prior to the
      change of control or the Company failing to increase or improve such
      material fringe benefits on a basis consistent with increases or
      improvements granted to the Companys other senior personnel;                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (e) | any breach of the Company of any provision of the
      employment agreement;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (f) | the good faith determination by the executive that, as a
      result of the change of control or any action or event thereafter, the
      executives status or responsibility in the Company has been diminished or
      the executive is effectively being prevented from carrying out his duties
      and responsibilities as they existed immediately prior to the change of
      control; or                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (g) | failure by the Company to obtain, in a form satisfactory
      to the executive, an effective assumption of its obligations hereunder by
      a successor to the Company, including a successor to a material portion of
      its business.                                                                                                                                                                                                                                                                                                                                              

If, as a result of a change of control of the Company, Mr.
Shrake experiences an event of termination as described above, Mr. Shrake is
entitled to a severance payment of 24 months salary (based on his official
annual salary of US$250,000) and is able to exercise any stock options
previously granted within 45 business days in the event of termination after a
change of control. In addition, the estimated incremental value of his
non-vested stock options that would vest assuming a triggering event took place
on the last day of the most recently completed financial year would have been
$Nil as the Companys closing share price on April 30, 2012 was CDN $0.10, lower
than the exercise price of all vested and non-vested stock options granted to
Mr. Shrake.

Steven Krause, CFO

Steven Krause has a consulting agreement with the Company which
includes a change of control clause. In this consulting agreement, change of
control means the acquisition by any person or by any person and joint actor,
whether directly or indirectly, of voting securities as defined in the
Securities Actof British Columbia, as amended from time to time (the
BC Securities Act), which, when added to all other voting securities of
the Company at the time held by such person or by such person and a person
acting jointly or in concert with another person as that phrase is interpreted
by the BC Securities Act, totals for the first time not less than fifty percent
(50%) of the outstanding voting securities of the Company or the votes attached
to those securities are sufficient, if exercised, to elect a majority of the
Board of Directors.

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- 49 -

Should a change of control occur, all outstanding stock
options held by Mr. Krause will become fully vested in accordance with the terms
of the Amended Evergreen Plan whereupon such options may be exercised in whole
or in part by Mr. Krause. In addition, the estimated incremental value of his
non-vested stock options that would vest assuming a triggering event took place
on the last day of the most recently completed financial year would have been
$Nil as the Companys closing share price on April 30, 2012 was CDN $0.10, lower
than the exercise price of all vested and non-vested stock options granted to
Mr. Krause.

William Gehlen, Vice President Exploration

William Gehlen has an employment agreement with a subsidiary of
the Company that includes termination and change of control conditions which are
the same as those in Mr. Shrakes employment agreement described above. If, as a
result of a change of control of the Company, Mr. Gehlen experiences an event
of termination as defined above, Mr. Gehlen is entitled to a severance payment
of 12 months salary, plus one months salary per year of service after one
year, up to a maximum of 24 months salary, and is able to exercise any stock
options previously granted within 30 calendar days in the event of termination
after a change of control. In addition, the estimated incremental value of his
non-vested stock options that would vest assuming a triggering event took place
on the last day of the most recently completed financial year would have been
$Nil as the Companys closing share price on April 30, 2012 was CDN $0.10, lower
than the exercise price of all vested and non-vested stock options granted to
Mr. Gehlen.

Other than as set forth above, neither the Company nor its
subsidiaries has a contract, agreement, plan or arrangement that provides for
payments to a Named Executive Officer following or in connection with any
termination (whether voluntary, involuntary or constructive), resignation,
retirement, a change of control of the Company or its subsidiaries, or a change
in responsibilities of the Named Executive Officer following a change in
control.

Estimated Incremental Payment on Change of Control

Under the terms of Thomas Shrakes employment agreement, the
estimated incremental payment to Mr. Shrake upon termination by the Company on a
change of control of the Company would be approximately US $500,000 (calculated
as at April 30, 2012) based upon an amount equal to 24 months salary, plus any
amounts owed in respect of accrued vacation and the accelerated option value of
his existing stock options.

There are no provisions in Steven Krauses consulting agreement
that would require the Company to make any payments to Mr. Krause upon a change
of control of the Company.

Under the terms of William Gehlens employment agreement, the
estimated incremental payment to Mr. Gehlen upon termination by the Companys
subsidiary on a change of control of the Company would be approximately US
$240,000 (calculated as at April 30, 2012) based upon an amount equal to 12
months salary plus one months salary for every year of service beyond one year
to a maximum of 24 months salary, plus any amounts owed in respect of accrued
vacation and the accelerated option value of his existing stock options.

Director Compensation

The following table sets forth all amounts of compensation
provided to the Directors, who are not also Named Executive Officers, for the
Companys most recently completed financial year:

Director Name(1)
    Fees Earned
      US($)
    Share- Based
      Awards US($)
    Option- Based
      Awards
      US($)(2)
    Non-Equity
      Incentive Plan
      Compensatio n US($)
    Pension Value
      US($)
    All Other
      Compensatio n US($)
    Total US($)William Myckatyn
    10,099
    Nil
    16,310
    Nil
    Nil
    Nil
    26,409David Fagin
    10,099
    Nil
    16,310
    Nil
    Nil
    Nil
    26,409Catherine McLeod-Seltzer
    Nil
    Nil
    57,023
    Nil
    Nil
    Nil
    57,023Anthony Petrina(3)
    10,099
    Nil
    16,310
    Nil
    Nil
    Nil
    26,409Tim Baker(4)
    Nil
    Nil
    19,702
    Nil
    Nil
    Nil
    19,702


---

- 50 -

(1) Relevant disclosure has been
provided in the Summary Compensation Table above, for Mr. Shrake, a Director who
is also a Named Executive Officer. Mr. Shrakes total compensation is related to
his role as CEO, and he receives no compensation for his services as a
Director.

(2) The Company used the Black-Scholes
model as the methodology to calculate the grant date fair value, and relied on
the following the key assumptions and estimates for each calculation: expected
dividend yield 0%, expected stock price volatility 102 and 105%, risk free
interest rate 1.28 and 1.49%, and expected life of options of between 4.3 and 5
years. The Company chose this methodology as it is the standard for exploration
companies in Canada and has been consistently applied by the Company for valuing
option-based awards since 2003. The stock-based awards are determined in
Canadian funds and then translated into US funds at the 2011 average foreign
currency exchange rate of $1.00US/ $1.03CDN.

(3) Mr. Petrina retired as a Director
of the Company effective March 2, 2012.

(4) Mr. Baker became a Director of the
Company effective March 5, 2012

The Company has no arrangements, standard or otherwise,
pursuant to which Directors are compensated by the Company or its subsidiaries
for their services in their capacity as Directors, or for committee
participation, involvement in special assignments, or for services as a
consultant or expert during the most recently completed financial year or
subsequently, up to and including the date of this Information Circular, except
as follows:

- The Companys three independent Directors (Messrs Myckatyn, Fagin and
  Baker) are each entitled to receive an annual fee of CDN$10,000 to be paid
  upon his election or re-election to the Board at the annual general meeting of
  the Company.
- Each independent Director is currently entitled to receive a grant of
  100,000 stock options upon his election or re-election at the Companys annual
  general meeting under the Evergreen Plan, which options immediately vest in
  full.
- Directors are reimbursed for individual travel and other ancillary expenses
  incurred in connection with attending Board and committee meetings.

The Evergreen Plan allows for the granting of incentive stock
options to the officers, employees and Directors. The purpose of granting such
options is to assist the Company in compensating, attracting, retaining and
motivating the Directors of the Company and to closely align the personal
interests of such persons to that of the Shareholders.

Incentive Plan Awards - Outstanding Share-Based Awards and
Option-Based Awards

The following table sets forth information concerning all
awards outstanding at the end of the most recently completed financial year,
including awards granted before the most recently completed financial year, to
each of the Directors who are not Named Executive Officers:

Option-Based Awards
    Share-Based Awards***Director
Name***
    ***Number of***
      Securities Underlying
      Unexercised Options
      (#)
    Option Exercise PriceUS($)
    Option
      ***Expiration*** Date
    ***Value of***
      Unexercised In-The-
      Money Options(1,2)
    US($)
    Number of Shares
      Or Units Of Shares ThatHave Not Vested
      (#)
    Market or Payout
      Value Of Share- ***Based
      Awards*** That Have Not
      Vested US($)William Myckatyn
    75,000 15,000 125,000 75,000
      75,000 50,000 75,000 50,000 75,000 50,000
    0.97 1.19 0.17 0.17 0.21
      0.21 0.17 0.21 0.19 0.16
    08/27/2012 03/09/2013 12/29/2013
      12/29/2013 08/25/2014 01/26/2015 08/25/2015 12/16/2015
      09/18/2016 09/28/2016
    Nil Nil Nil Nil Nil Nil
      Nil Nil Nil Nil
    N/A N/A N/A N/A N/A N/A
      N/A N/A N/A N/A
    N/A N/A N/A N/A N/A N/A
      N/A N/A N/A N/ADavid Fagin
    75,000
    0.97
    08/27/2012
    Nil
    N/A
    N/A


---

- 51
-

|                    | Option-Based Awards                                                       | Share-Based
      Awards  
|------------------- | ------------------------------------------------------------------------- | --------------------------
|***Director Name*** | Number of
      Securities Underlying
      Unexercised Options
      (#) | Option Exercise PriceUS($)
|                    | 125,000                                                                   | 0.17                      
|                    | 75,000                                                                    | 0.17                      
|                    | 75,000                                                                    | 0.21                      
|                    | 50,000                                                                    | 0.21                      
|                    | 75,000                                                                    | 0.17                      
|                    | 50,000                                                                    | 0.21                      
|                    | 75,000                                                                    | 0.19                      
|                    | 50,000                                                                    | 0.16                      
|Catherine           | 125,000                                                                   | 1.19                      
|McLeod-Seltzer      | 300,000                                                                   | 0.17                      
|                    | 200,000                                                                   | 0.21                      
|                    | 300,000                                                                   | 0.21                      
|                    | 75,000                                                                    | 0.19                      
|                    | 50,000                                                                    | 0.16                      
|Anthony Petrina(3)  | 75,000                                                                    | 0.97                      
|                    | 125,000                                                                   | 0.17                      
|                    | 75,000                                                                    | 0.17                      
|                    | 75,000                                                                    | 0.21                      
|                    | 50,000                                                                    | 0.21                      
|                    | 75,000                                                                    | 0.17                      
|                    | 50,000                                                                    | 0.21                      
|                    | 75,000                                                                    | 0.19                      
|                    | 50,000                                                                    | 0.16                      
|Tim Baker (4)       | 200,000                                                                   | 0.13                      

|(1) | This amount is calculated based on the difference between
      the market value of the securities underlying the options at the end of
      the most recently completed financial year, which was CDN$0.10 per share,
      and the exercise or base price of the option. If the exercise price of the
      option is lower than the year-end market value of the securities
      underlying the options, options are not In-the-Money and their value is
      Nil.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(2) | The Companys options are set with an exercise price in
      CDN dollars and were converted to US dollars at the April 30, 2012 foreign
      currency exchange rate of $1.00 US = $0.9884 CDN or $1.00 CDN = $1.0117
      US. The value of the unexercised in-the-money options is determined in
      Canadian funds and then translated into US funds at the exchange rate
      quoted above.                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(3) | Mr. Petrina retired as a Director of the Company
      effective March 2, 2012. In acknowledgement of Mr. Petrinas lengthy
      service to the Company, with the approval of the Directors (absent Mr.
      Petrina) and the Toronto Stock Exchange, the Company extended the expiry
      date of all of Mr. Petrinas vested options to the earlier of their
      original expiry date or March 2, 2014.                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(4) | Mr. Baker became a Director of the Company effective
      March 5, 2012.                                                                                                                                                                                                                                                                                                                                                                                               

---

- 52 -

Incentive Plan Awards - Value Vested Or Earned During The
Year

The value vested or earned during the most recently completed
financial year of incentive plan awards granted to Directors who are not Named
Executive Officers is as follows:

Director Name
    Option-Based Awards -
      Value Vested During The Year(1) US($)
    Share-Based Awards -
      Value Vested During The Year
      US($)
    Non-Equity Incentive
      Plan Compensation - Value Earned
      During The Year US($)William Myckatyn
    84
    N/A
    N/ADavid Fagin
    84
    N/A
    N/ACatherine McLeod-Seltzer
    840
    N/A
    N/AAnthony Petrina
    84
    N/A
    N/ATim Baker
    Nil
    N/A
    N/A


|(1) | This amount is the dollar value that would have been
      realized had the newly vested options been exercised on the vesting date,
      computed by obtaining the difference between the market price of the
      underlying securities at exercise and the exercise price of the options
      under the option-based award on the vesting date. As the Companys stock
      options and share price are quoted in $CDN, the value was computed in $CDN
      and converted to $US at the April 30, 2012 foreign currency exchange rate
      of $1.00 US = $0.9884 CDN or $1.00 CDN = $1.0117 US.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(2) | Mr. Petrina retired as a Director of the Company
      effective March 2, 2012.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(3) | Mr. Baker became a Director of the Company effective
      March 5, 2012.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

Securities Authorized for Issuance Under Equity Compensation
Plans

Plan Category
    Number of Securities to be
      issued upon exercise of outstanding
      options, warrants and rights
    Weighted average
      exercise price of outstanding options,
      warrants and rights CDN($)
    Number of securities
      remaining available for future issuance
      under equity compensation plans
      (excluding securities reflected in column
      (a))Equity compensation plans approved by securityholders
    12,800,000
    0.27
    4,060,170Equity compensation plans not approved by securityholders
    Nil
    N/A
    N/ATotal:
    12,800,000
    0.28
    4,060,170


Details of the Companys Evergreen Plan are set out above under
the heading Description of Incentive Plan.

C.     Board Practices

Corporate governance relates to the activities of the Companys
Board of Directors, the members of which are elected by and are accountable to
the Shareholders, and takes into account the role of the individual members of
management who are appointed by the Board and who are charged with the
day-to-day management of the Company. The Board is committed to sound corporate
governance practices which are both in the interests of the Shareholders and
contribute to effective and efficient decision making.

National Policy 58-201, Corporate Governance Guidelines,
establishes corporate governance guidelines which apply to all public companies.
The Company has reviewed its own corporate governance practices in light of
these guidelines. In certain cases, the Companys practices comply with the
guidelines; however, the Board considers that some of the guidelines are not
suitable for the Company at its current stage of development and level of
activity and therefore these guidelines have not been adopted. National Instrument 58-101, Disclosure of Corporate Governance
Practices, mandates disclosure of corporate governance practices, which
disclosure is set out below.

---

- 53 -

Independence of Members of Board and Management Supervision
by Board

The Board currently consists of five Directors, a majority of
whom are independent based upon the tests for independence set forth in NI
52-110. Assuming each of the nominated Directors is elected by Shareholders at
the Meeting on September 6, 2012, the Board will include three (3) independent
Directors: Messrs Myckatyn, Fagin and Baker. Mr. Shrake and Ms. McLeod-Seltzer
are not considered independent as they are the President and Chief Executive
Officer, and Board Chairman, respectively, of the Company.

The Board facilitates the exercise of independent judgement in
carrying out its responsibilities, by the effective supervision of management by
the independent Directors on an informal basis, through active and regular
involvement in reviewing and supervising the operations of the Company and
through regular and full access to management. Further independent supervision
is performed through the Audit Committee which is composed entirely of
independent Directors who meet regularly with the Companys auditors without
management being in attendance. The independent Directors hold meetings without
the presence of non-independent Directors on a quarterly basis and are also
encouraged to meet at any time they consider necessary without any members of
management, including the non-independent Directors, being present. The
Companys auditors, legal counsel and certain employees may be invited to
attend. During the Companys most recently completed financial year, the
independent Directors met a total of four (4) times.

Leadership is provided for the Boards independent Directors
through access to management and the independent operation of the Audit
Committee, as discussed above, and through its Lead Director, Mr. Myckatyn. As
Lead Director, Mr. Myckatyns role and responsibilities are to:

| | a. | assist the Chairman to manage the Board and its
      committees in a manner that ensures that these relationships are effective
      and efficient and further the best interests of the Company;
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                    
| | b. | oversee the process of evaluation of the Board, its
      committees and individual Directors;                                                                                                     
| |    |                                                                                                                                                                                                    
| | c. | act as the principal sounding board and counsellor for
      the Chairman;                                                                                                                         
| |    |                                                                                                                                                                                                    
| | d. | ensure that the Chairman is aware of concerns of the
      independent Directors, Shareholders and other stakeholders;                                                                             
| |    |                                                                                                                                                                                                    
| | e. | work with the Chairman to assist the Chairman in
      fulfilling her responsibilities in managing the Board;                                                                                      
| |    |                                                                                                                                                                                                    
| | f. | work with the Chairman to co-ordinate the agenda for
      Board meetings;                                                                                                                         
| |    |                                                                                                                                                                                                    
| | g. | chair and manage all meetings for the independent
      Directors;                                                                                                                                 
| |    |                                                                                                                                                                                                    
| | h. | attend committee meetings when it is appropriate to do
      so; and                                                                                                                               
| |    |                                                                                                                                                                                                    
| | i. | meet, from time to time, with the Chairman and the
      President and Chief Executive Officer to convey and discuss concerns of
      the independent Directors.                                  

Participation of Directors in Other Reporting
Issuers

The following table sets forth directors of the Company that
are also a director of any other issuer that is a reporting issuer (or
equivalent) in a jurisdiction or foreign jurisdiction.

Name of Director
    Name of Other Public CompanyCatherine McLeod-Seltzer
    Bear Creek Mining Corporation, Kinross Gold Corporation,
      Troon Ventures Ltd. and Major Drilling Group International, Inc.William Myckatyn
    First Point Minerals Corp., San Marco Resources Inc. and
      OceanaGold CorporationDavid K. Fagin
    Atna Resources Ltd.Tim Baker
    Eldorado Gold Corp., Augusta Resource Corporation,
      Antofagasta Plc.


---

- 54 -

Participation of Directors in Board Meetings

The Board meets at least once every quarter to review, among
other things, the performance of the Company. The Board also holds a meeting
each year to review and assess the Companys financial forecasts and business
plan for the ensuing year and its overall strategic objectives. Other meetings
of the Board are called to deal with special matters as circumstances require.
During the Companys most recently completed financial year, four (4) Board
meetings were held. The attendance record of each Director for the Board
meetings held is as follows:

Name of Director
    No. of Board Meetings Attended in the
      Most Recently Completed Financial YearCatherine McLeod-Seltzer
    4Thomas Shrake
    4Anthony J. Petrina (1)
    4William Myckatyn
    3David K. Fagin
    4Tim Baker (2)
    1


(1) Mr. Petrina retired as a Director
of the Company effective March 2, 2012. (2) Mr. Baker became a Director of
the Company effective March 5, 2012 and only one Board meeting was held since
the date of his appointment.

Board Mandate

The mandate of the Board is to manage or supervise the
management of the business and affairs of the Company and to act with a view to
the best interests of the Company. The Board sets long-term goals and objectives
for the Company, formulates the plans and strategies necessary to achieve those
objectives and goals, and to supervises and offers guidance to the Companys
senior management in their implementation. Although the Board has delegated to
senior management personnel the responsibility for managing the day-to-day
affairs of the Company, the Board is ultimately responsible for all matters
relating to the Company and its business. In fulfilling its mandate, the Board,
among other matters, is responsible for reviewing and approving the Companys
overall business strategies and its annual business plan; reviewing and
approving the quarterly corporate and cash flow forecasts; reviewing and
approving significant capital investments; reviewing major strategic initiatives
to ensure that the Companys proposed actions accord with Shareholder
objectives; reviewing succession planning; assessing managements performance
against approved business plans and industry standards; reviewing and approving
the reports and other disclosure issued to Shareholders; ensuring the effective
operation of the Board; and safeguarding Shareholders equity interests through
the optimum utilization of the Companys capital resources.

The Board expects management to efficiently implement its
strategic plans for the Company in a professional, competent and ethical manner,
to keep the Board fully apprised of its progress in doing so and to be fully
accountable to the Board in respect to all matters for which it has been
assigned responsibility. In addition to matters which must by law or pursuant to
the constating documents of the Company be approved by the Board, all matters of
strategic importance to the Company are referred to the Board for prior review
and approval. Any material expenditures or legal commitments, including without
limitation debt or equity financings, acquisitions and divestitures by the
Company, financial statements and major disclosure documents, are subject to
prior approval by the Board. The Board holds meetings on a regular basis to
review the Companys strategy as well as to consider and approve particular
matters. One of the Boards responsibilities is to review and, if thought fit,
to approve opportunities as presented by management and to provide guidance to
management. The Board expects management to operate the business of the Company
in a manner that enhances Shareholder value and is consistent with the highest
level of integrity. Management is expected to execute the Companys business
plan and to meet performance goals and objectives.

The Board oversees the management of the Companys affairs
directly and through its committees. The Board also meets to plan for the future
growth of the Company; to identify risks of the Companys business, thus
ensuring the implementation of appropriate systems to manage these risks; to
monitor senior management; and to ensure timely disclosure of material
transactions. The frequency of Board meetings as well as the nature of agenda
items, change, depending upon the state of the Companys affairs and in light of
opportunities or risks that the Company faces. When necessary and appropriate,
issues may be approved and adopted by the Board by way of written resolutions in
accordance with applicable corporate law.

Position Descriptions

The Board has developed written position descriptions for the
Chairman, the President and CEO and for the Directors at large. On a quarterly
basis, the Board approves the operating and capital forecasts, and the Chairman
and President and CEO are required to ensure the Company operates within those guidelines. Material
departures must be approved by the Board. The Board is of the view that the
respective corporate governance roles of the Board and management, as
represented by the Chairman and President and CEO, are clear, and that the
limits to managements responsibility and authority are well defined.

---

- 55 -

The Board has not developed written position descriptions for
the Chair of each Board committee. The Chairs of the Audit Committee, the
Nominating Committee, the Compensation Committee, and the Health, Safety and
Environmental Committee are responsible for calling the meetings of each
Committee, establishing meeting agenda with input from management, and
supervising the conduct of the meetings.

Orientation and Continuing Education

New Directors are provided with a Board Manual, as reviewed and
adopted by the Board, which contains comprehensive information and guidelines on
the duties of the Board, and members of management, terms of reference for
committees and policies adopted by the Board. New Directors are given a detailed
briefing by the Chairman of the Board and by the President and CEO on the
Company and its business, and the legal duties and obligations of Directors. The
President and CEO reports at each Board meeting on the Companys activities and
provides Directors with a monthly written report. All Directors are encouraged
to contact senior management for updates at any time.

The Board currently does not provide continuing education for
its Directors. By using a Board composed of experienced professionals with a
wide range of financial, legal, exploration and mining expertise, the Company
ensures that the Board operates effectively and efficiently.

Board members are encouraged to communicate with management,
legal counsel and, where applicable, auditors and technical consultants of the
Company; to keep themselves current with industry trends and developments and
changes in legislation with managements assistance; and to attend related
industry seminars and visit the Companys operations. Board members have full
access to the Companys records.

Ethical Business Conduct

The Board has adopted a written Code of Conduct and Ethics and
a Whistleblower Policy by which it and all officers and employees of the Company
abide. The Whistleblower Policy outlines a confidential and anonymous process in
which to report any accounting concerns while the Code of Conduct helps define
and establish a standard of professional behaviour and responsibility,
acceptable to the Company, for all employees. A copy of the Code of Conduct and
Ethics and the Whistleblower Policy is available for review on the Companys
website and on SEDAR at www.sedar.com. In addition, the Board, through
its meetings with management and other informal discussions with management,
monitors in compliance with the Code of Conduct and Ethics and encourages a
culture of ethical business conduct. The Companys high calibre management team
promotes a culture of ethical business conduct throughout the Companys
operations and is expected to monitor the activities of the Companys employees,
consultants and agents in that regard. The Board encourages any concerns
regarding ethical conduct in respect of the Companys operations to be raised,
on an anonymous basis, with the President and CEO, the Chairman, or another
Board member as appropriate.

It is a requirement of applicable corporate law that Directors
and senior officers who have an interest in a transaction or agreement with the
Company promptly disclose that interest at any meeting of the Board at which the
transaction or agreement will be discussed and, in the case of Directors,
abstain from discussions and voting in respect to same if the interest is
material. These requirements are also contained in the Companys Articles, which
are made available to the Directors and senior officers of the Company.

Audit Committee

Audit Committee Charter

The following is the text of the Audit Committees Charter:

(Amended and Restated effective July 29,
2004)

The primary function of the Audit Committee is to assist the
Board in fulfilling its oversight responsibilities, primarily through overseeing
managements conduct of the Companys accounting and financial reporting process
and systems of internal accounting and financial controls; selecting, retaining
and monitoring the independence and performance of the Companys outside
auditors, including overseeing the audits of the Companys financial statements,
and approving any non audit services; and providing an avenue of communication
among the outside auditors, management and the Board.

14.1    Composition of the Audit
Committee:

---

- 56 -

a)      Shall consist of a minimum
of three directors at all times, all of whom must be independent as required by
applicable law and applicable stock exchange listing rules (the
Listing Rules). A member of the Committee shall be
considered independent if (a) he or she is not an employee of the Company; (b)
he or she does not accept, directly or indirectly, any consulting, advisory or
other compensatory fee from the Company or its subsidiaries other than in
connection with serving on the Committee, any other Board committee or as a
member of the Board; (c) he or she is not an affiliated person of the Company
or any Company subsidiary as defined by applicable law and Listing Rules; and
(d) he or she meets all other requirements for independence imposed by law and
the Listing Rules from time to time and any requirements imposed by any Canadian
or other governmental body having jurisdiction over the Company

b)     All members of the Committee
shall have a practical knowledge of finance and accounting and be able to read
and understand fundamental financial statements from the time of their
respective appointments to the Committee.

c)      At least one member of the
Committee shall be a financial expert as defined by Item 401(h) of Regulation
S-K, unless otherwise determined by the Board, and at least one member shall
meet the financial sophistication standards under the Listing Rules. The
designation or identification of a member of the Committee as an audit
committee financial expert does not impose on such person any duties,
obligations, or liability that are greater than the duties, obligations, and
liability imposed on such person as a member of the Committee and Board of
Directors in the absence of such designation or identification; and (ii) the
designation or identification of a member of the Committee as an audit
committee financial expert does not affect the duties, obligations, or
liability of any other member of the Committee or Board of Directors

d)      Each member of the
Committee shall be appointed by the Board and shall serve until the earlier to
occur of the date on which he or she shall be replaced by the Board, resigns
from the Committee, or resigns from the Board.

e)      Shall meet no less than
four times annually and at least quarterly, on such dates that the Chair of the
Audit Committee determine. Notice of meetings shall be given by letter,
facsimile or other means of recorded electronic communication or by telephone
not less than 24 hours before the time fixed for the meeting. Members may waive
notice of any meetings before or after the holding thereof. A majority of the
members present at a meeting will constitute a quorum.

f)      The Chair of the Audit
Committee shall be appointed by the Board following the recommendation of the
Chair of the Board, who will prepare and / or approve an agenda in advance of
each meeting and shall preside over meetings of the Committee.

14.2      Terms of
Reference

The responsibilities and duties of the Audit Committee shall
be to:

a)      Review and recommend for
Board approval the annual and quarterly financial statements of the Company,
including Managements Discussion and Analysis, and determine whether they are
complete and consistent with the information known to committee members.
Determine that the auditors are satisfied that the financial statements have
been prepared in accordance with applicable generally accepted accounting
principles.

b)      Make regular reports to the
Board.

c)      Have the sole authority to
appoint or replace the independent auditor (subject, if applicable, to
shareholder ratification). The independent auditor shall report directly to the
Audit Committee.

d)      Review the scope of the
audit to be conducted by the external auditor of the Company.

e)      Be directly responsible for
the compensation and oversight of the work of the independent auditor (including
resolution of disagreements between management and the independent auditor
regarding financial reporting) for the purpose of preparing or issuing an audit
report or related work.

f)      Review and pre-approve all
auditing services, internal control related services and permitted non-audit
services (including the terms thereof) to be performed for the Company by its
independent auditor, subject to the de minimus exceptions for non-audit services
described in Section 10A(i)(1)(B) of the Securities Exchange Act of 1934, as
amended, which are approved by the Audit Committee prior to completion of the
audit. The Audit Committee may form and delegate authority to subcommittees
consisting of one or more members when appropriate, including the authority to
grant pre-approvals of audit and permitted non-audit services, provided that
decisions of such subcommittee to grant pre-approvals shall be presented to the
full Audit Committee at this next scheduled meeting.

g)      Pre-approve all engagement
letters for all auditing and non-audit services to be provided to the Company or
its subsidiaries, before and after completion of work and assess the performance
of external and internal auditors.

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h)      Review and determine the
compensation to be paid to the independent auditor for all auditing services,
internal control related services and permitted non-audit services. The Company
shall provide appropriate funding, as determined by the Audit Committee, for
payment of compensation to the independent auditor for the purpose of rendering
or issuing an audit report and to advisors employed by the Audit
Committee.

i)      Review all public
disclosure documents containing audited or unaudited financial information
before release, including but not limited to prospectus, annual report, annual
information form and managements discussion and analysis.

j)      Review, at least
semi-annually, all expenses paid by the Company to or in behalf of the CEO and
the President and any other financial arrangements or transactions with them and
their affiliates.

k)      Review all post-audit or
management letters containing the recommendations of the external auditor and
managements response/follow-ups of any identified weakness.

l)      Have the right, for the
purpose of performing their duties, of inspecting all of the books and records
of the Company and its affiliates and of discussing such accounts and records
and any matters relating to the financial position or condition of the Company
with the officers and auditors of the Company and its affiliates.

m)      Review any transaction
involving the Company and a related party at least once a year or upon any
significant change in the transaction or relationship.

n)      Review and discuss with the
independent auditors and management (including the senior internal audit
executive) any significant matters regarding the Companys internal controls and
procedures over financial reporting that have come to the attention of the
independent auditor during the conduct of their annual audit, and review whether
internal control recommendations made by the auditors have been implemented by
management and review any special steps adopted in light of material control
deficiencies and the adequacy of disclosures about changes in internal control
over financial reporting.

o)      Review major risk exposures
(whether financial, operating or otherwise) and the guidelines and policies that
management has put in place to govern the process of monitoring, controlling and
reporting such exposures (including any hedging).

p)      Review and discuss reports
from the independent auditors on:

(i)     
all critical accounting policies and practices used in preparation of the
Companys financial statements;

(ii)     
all alternative treatments of financial information within generally accepted
accounting principles that have been discussed with management, ramifications of
the use of such alternative disclosures and treatments and the treatment
preferred by the independent auditors; and

(iii)     
other material written communications between the independent auditor and
management, such as management letters or schedules of adjusted
differences.

q)       Discuss with
management and the independent auditors the Companys use of non-GAAP
information in any report, earnings release or other publicly disseminated
document and any off-balance sheet structures and the effect of regulatory and
accounting initiatives on the Company.

r)      Review annually
managements report on internal controls and any auditors attestation regarding
managements assessment of internal controls, required by law or Listing Rules
and review whether internal control recommendations made by the auditors have
been implemented by management.

s)      Establish procedures for:
(a) the receipt, retention and treatment of complaints received by the Company
regarding accounting, internal accounting controls or auditing matters; and (b)
the confidential, anonymous submission by employees of the Company of concerns
regarding questionable business conduct, accounting or auditing matters.

t)       Have such other
duties, powers and authorities, consistent with the provisions of applicable
laws and Listing Rules, or as the Board may by resolution delegate to the Audit
Committee from time to time.

u)      At the Companys expense,
retain independent counsel, accountants or other experts for such purposes as
the Committee, in its sole discretion, determines to be appropriate to carry out
its responsibilities, and set the compensation to be paid to such
experts.

v)      Review on an annual basis
and if necessary update this Charter and have changes approved by the
Board.

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14.3 Regulations

The following regulations shall apply to the proceedings of
the Audit Committee.

a)      The business of the Audit
Committee shall be transacted either at meetings thereof or by conference
telephone or other communications facilities that permit all persons
participating in the meeting to hear each other, or by resolution in writing.
All questions at a meeting shall be decided in accordance with the vote of a
majority of those present and the Chair of the meeting shall not have a second
or casting vote.

b)      A resolution in writing
signed by all members of the Audit Committee entitled to vote on that resolution
at a meeting of the Audit Committee shall be as valid as if it had been passed
at a duly called and constituted meeting. Such resolutions in writing may be in
one or more counterparts, all of which, when taken together, shall be deemed to
constitute one resolution.

c)      The auditor of the Company
shall, at the expense of the Company, be entitled to attend and be heard at or
may be invited to any meeting of the Audit Committee, except for portions of
meetings in which their work, fees and performance may be discussed.

d)      The Audit Committee Chair
shall regularly report on the activities of the Audit Committee, to the Board of
Directors.

e)      The external auditor and
senior management shall have the opportunity or may be invited to meet
separately with the Audit Committee.

f)      The minutes of the
proceedings of the Audit Committee and any resolutions in writing shall be kept
in a book provided for that purpose which shall always be open for inspection by
any director of the Company.

g)      Subject to the
foregoing, the calling, holding and procedure at meetings of the Audit Committee
shall be determined by the Audit Committee Chair.

14.4      Limitation of Audit
Committees Role

While the Audit Committee has the responsibilities and
powers set forth in this Charter, it is not the duty of the Audit Committee to
plan or conduct audits or to determine if the Companys financial statements or
disclosures are complete and accurate and are in accordance with GAAP and
applicable rules and regulations. These are responsibilities of management and
the independent auditors.

Composition of the Audit Committee

The members of the Audit Committee are David Fagin, William
Myckatyn and Tim Baker. All of the members are financially literate and
independent for the purposes of National Instrument 52-110 (NI
52-110).

Mr. Fagin is a financial expert, in that he has an
understanding of International Financial Reporting Standards and financial
statements; is able to assess the general application of accounting principles
in connection with the accounting for estimates, accruals and reserves; has
experience preparing, auditing, analyzing or evaluating financial statements
that entail accounting issues of equal complexity to the Companys financial
statements (or actively supervising another person who did so); has an
understanding of internal controls and procedures for financial reporting and an
understanding of audit committee functions.

Mr. Fagin does not have an accounting designation; instead his
expertise is derived from his high level involvement in the financial matters of
public corporations almost continuously for at least 35 years. Mr. Fagin was
involved in the valuation of oil and gas companies for ten years both as a
consultant and a bank appraisal engineer (1958-68); President of a subsidiary of
Rosario Resources Corporation, a NYSE company (1968-75), Executive
Vice-President (1975-77) then President (1977-82) during which period he was
intimately involved in financial and accounting matters. In 1982, he founded
Fagin Exploration Company and worked closely with an accountant and auditors to
maintain the records. From 1986 to 1991, Mr. Fagin was the President and Chief
Operating Officer for Homestake Mining Corporation (NYSE), responsible for
producing operations in six countries and was involved in decisions for
corporate financial reporting. Between 1992 and 1996, Mr. Fagin was Executive
Chairman of Golden Star Resources Ltd. (ASE and TSE) and managed all
administrative matters including annual reports, audits and registration in
Canada and the US. Since 1987, Mr. Fagin has served on boards and audit
committees of several public companies including T. Rowe Price Mutual Funds,
Golden Star Resources Ltd., Canyon Resources Corp. (recently acquired by Atna
Resources Ltd.), Dayton Mining Corp. and the Company, where he was either
Chairman or a member of each audit committee. He currently remains a director of
Atna Resources Ltd.

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Mr. Myckatyn does not have an accounting designation. However,
Mr. Myckatyn is financially literate in that he has the ability to read and
understand a set of financial statements that present a breadth and level of
complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can
reasonably be expected to be raised by the Companys financial statements. Mr.
Myckatyn has over 30 years experience in the mining industry. Mr. Myckatyn was
the co-founder and CEO of Quadra Mining from 2002 to 2006 and was the Chairman,
President and Chief Executive Officer of Dayton Mining Corporation from 1998 to
April, 2002 during which time he oversaw the restructuring of Dayton and its
subsequent merger with the Company. Prior to 1998, Mr. Myckatyn was the
President and CEO of Princeton Mining Corporation, overseeing completion in 1997
of the construction of the Huckleberry open-pit copper mine in British Columbia
and the 1998 merger of the company with Imperial Metals Corporation. Mr.
Myckatyn worked for Gibraltar Mines Limited from 1991 to 1996, initially as Mine
Manager and ultimately as President and CEO as the company transitioned from
being controlled by Placer Dome Inc. into an independent growth oriented public
company, and through its acquisition by Westmin Resources Inc. in 1996. For over
ten years prior to that, Mr. Myckatyn worked for various operations controlled
by Placer Dome Inc. and its associated and predecessor companies including four
separate mines in Australia and the Philippines.

Mr. Myckatyn is a director of First Point Minerals Corporation,
San Marco Resources Inc. and OceanaGold Corporation. Mr. Myckatyn received his
Bachelor of Applied Science in Mining Engineering from the University of British
Columbia in 1972 and is a registered member of the British Columbia Association
of Professional Engineers and Geoscientists.

The third member of the Companys audit committee, Tim Baker,
is financially literate in that he has the ability to read and understand a set
of financial statements that present a breadth and level of complexity of
accounting issues that are generally comparable to the breadth and complexity of
the issues that can reasonably be expected to be raised by the Companys
financial statements. Mr. Baker has worked in a senior executive capacity for
several senior mining companies including Placer Dome and Kinross. Since his
retirement in 2011, Mr. Baker has joined the boards of several other mining
companies.

Nomination of Directors

The Nominating Committee is composed of two Directors, Messrs
Baker (Chair) and Myckatyn, each of whom is independent based upon the tests for
independence set forth in NI 52-110. The Nominating Committee has the
responsibility for recommending to the Board the nominees to fill vacancies on
the Board or to be proposed by any member of the Board as candidates for
election as Directors at the annual general meeting. The Nominating Committee
also recommends to the Board a desirable balance of expertise among the Board
members, seeks out possible candidates to fill Board positions and aids in
attracting qualified candidates to the Board. In addition, the Nominating
Committees responsibilities include reviewing and monitoring the orientation of
new Board members; reviewing and approving officers directorships in other
companies and reviewing Directors relationships with outside entities with
regard to potential conflicts of interest.

Compensation Committee

The Compensation Committee is composed of Messrs Fagin (Chair)
and Myckatyn, each of whom is independent based upon the tests for independence
set forth in NI 52-110. 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 Compensation Committee is responsible for reviewing all
overall compensation strategy, objectives and policies; annually reviewing and
assessing the performance of the executive officers; recommending to the Board
the compensation of the executive officers; reviewing executive appointments;
and reviewing the adequacy and form of Directors compensation.

To determine compensation payable, the Compensation Committee
reviews compensation paid for Directors and officers of companies of a similar
size and stage of development in the mineral exploration industry and determines
an appropriate compensation reflecting the need to provide incentive and
compensation for the time and effort expended by the Directors and senior
management, while taking into account the financial and other resources of the
Company. The Board of Directors does not benchmark its executive compensation
program, but from time to time does review compensation practices of companies
of similar size and stage of development to ensure the compensation paid is
competitive within the Company's industry and geographic location while taking
into account the financial and other resources of the Company. See also
Statement of Executive Compensation above.

No compensation consultant or advisor has, at any time since
the beginning of the Companys most recently completed financial year, been
retained to assist in determining compensation for any of the Companys
Directors or officers.

Other Committees

Committees of the Board are an integral part of the Companys
governance structure. In addition to the Compensation and Nominating Committees
(described above), the Boards committees presently consist of an Audit
Committee and a Health, Safety and Environmental Committee. The Boards
committees have been established to devote the necessary expertise and resources
to particular areas, and to enhance the quality of discussion at Board meetings.
The Committees facilitate effective Board decision making by providing
recommendations to the Board on matters within their respective
responsibilities. The Board believes that the Committees assist in the effective functioning of the Board and that the composition of
the Committees should ensure that the views of the independent Directors are
effectively represented.

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- 60 -

The Companys Health, Safety and Environmental Committee is
composed of Messrs Myckatyn (Chair), Shrake and Baker, a majority of whom are
considered independent based upon the tests for independence set forth in NI
52-110. The Health, Safety and Environmental Committee has the responsibility
for reviewing the Companys environmental policy and for ensuring that the
Companys operations are conducted in a manner consistent with the environmental
policy and in a manner that does not unduly expose its employees to unnecessary
risk of accident or death.

The Board has determined that, at this stage of the Companys
development, it is not necessary for the Board to have additional standing
committees. 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.

Assessments

The Board annually, and at such other times as it deems
appropriate, reviews the performance and effectiveness of the Board, the
Directors and its committees to determine whether changes in size, personnel or
responsibilities are warranted. To assist in its review, the Board conducts
informal surveys of its Directors respecting its own effectiveness. In addition,
the Board satisfies itself that the Board, its committees, and its individual
Directors are performing effectively through frequent discussions between
management and individual Board members. There are also discussions among the
independent Directors with resulting comments to the Board. If appropriate, the
Board then considers whether procedural or substantive changes are necessary to
increase the effectiveness of the Board and its committees.

Shareholder Feedback and Concerns

The Company is dedicated to the maintenance of good Shareholder
relations and attempts to deal with any expressed concerns of Shareholders in an
effective and timely manner. The Company employs a Vice-President of Investor
Relations to monitor and promptly address Shareholder concerns in an expeditious
and informal manner. If any material issues of concern arise, the Board of
Directors is informed and provides direction for action as needed. The Company
has a Disclosure Policy which is followed and is available for review on the
Companys website.

D.      Employees

As at April 30, 2012, the Company (including its subsidiaries)
had one employee in Canada, five employees in the US and 29 employees in El
Salvador. None of the Companys employees are represented by labor unions.

E.      Share Ownership

See Item 6A. Directors and Senior Management and Item 6B.
Compensation for details as to share ownership on an individual basis.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS

A.      Major Shareholders

According to registered shareholder information provided by the
Companys transfer agent, the following are the only shareholders of the Company
that beneficially own, directly or indirectly, or exercise control over, shares
carrying more than 5% of the outstanding voting rights attached to the Companys
common shares as at June 30, 2012:

Name of Shareholder
    No. of Shares
    % of Issued SharesCDS & Co.
    145,457,580
    86.27%CEDE & Co.
    16,580,983
    9.83%


Voting Rights

The Companys major shareholders do not have different voting
rights from other shareholders.

Change of Control

To the best of the Companys knowledge, there are no
arrangements of which may result in a change in control of the Company.

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Geographic Breakdown

According to registered shareholder information provided by the
Companys transfer agent, as at July 3, 2012, there were 175 US registered
holders owning 20,362,117 (or 12.1%) of the Companys outstanding shares.

The Company is a publicly owned Canadian corporation, the
shares of which are owned by Canadian residents, US residents, and residents of
other countries.

B.      Related party transactions

The Company received accounting and tax preparation services
from an accounting firm in which an Officer of the Company is a partner. The
total accounting fees paid during fiscal 2012 were $135,000 compared to $117,000
in fiscal 2011.

C.      Interests of Experts and
counsel

Not applicable.

ITEM 8. FINANCIAL INFORMATION

A.      Consolidated Statements and
Other Financial Information

The consolidated financial statements required to be filed as a
part of this annual report on Form 20-F are included in Exhibit 99.1
incorporated herein by reference. These consolidated financial statements are
the first filing by the Company with the SEC of consolidated financial
statements prepared in accordance with IFRS as issued by the IASB.

Legal

In April 2009, PacRim, a Nevada corporation and a wholly-owned
subsidiary of Pacific Rim filed international arbitration proceedings against
the GOES under CAFTA and the Investment Law of El Salvador in its own name and
on behalf of PRES and DOREX (collectively the Enterprises). A Notice of Intent
to commence international arbitration proceedings had previously been filed by
PacRim in December 2008. PacRim has retained the Washington, DC-based
international law firms Crowell & Moring LLP and Weil, Gotshal & Manges
LLP to represent it in the arbitration.

Since PacRim initiated the Arbitration claim in 2009, the GOES
has filed two objections to the action (the Preliminary Objections and the
Jurisdiction Objections) in an attempt to terminate the Arbitration. On both
occasions the Tribunal disagreed and ruled that the action could proceed.
Additional details are provided below.

Since acquiring the El Dorado project in El Salvador in 2002,
PacRim and the Enterprises have operated in full compliance with Salvadoran law,
including the countrys environmental, mining and foreign investment laws, and
have met or exceeded all applicable standards while conducting business in El
Salvador. Ample evidence, however, demonstrates that the GOES has failed to
fulfill its obligations.

PacRims claims are based on the GOESs breaches of
international and Salvadoran law arising out of the GOESs improper failure to
finalize the permitting process in accordance with Salvadoran law. This conduct
by the GOES has resulted in a significant loss to PacRim, the shareholders of
Pacific Rim and to the local communities, and has unnecessarily delayed normal
development of these valuable deposits.

Pacific Rims mandate to its shareholders is to build a gold
mining company that explores and develops gold deposits in an environmentally
responsible manner. The El Dorado Mine, as designed and submitted to the GOES
six years ago, would set new precedents for environmental protection in all of
the Americas and exceeds current Canadian and US environmental standards.
Preservation of water quality and quantity is a key component of the
industry-leading El Dorado mine design. The Company owns, or has negotiated
rights to work on all surface lands needed by the operation. The Company has met
or exceeded all the legal requirements necessary for a mining permit according
to El Salvadors mining, environmental and foreign investment laws. Despite
strong local support and the inclusion of carefully engineered and reliable
environmental protections for the proposed El Dorado Mine, the GOES has not met
its responsibility to approve the permits necessary to advance the project to
the final step of full production.

In late 2010, the GOES filed the Jurisdiction Objection wherein
they asserted that ICSID does not have jurisdiction to hear PacRim's claims
under CAFTA or the Investment Law based largely on timing and nationality
issues. During fiscal 2012 (from May 2 - 4, 2011) hearings were held at ICSID
headquarters in Washington, DC in order for the Tribunal to hear argument and
witness testimony regarding the Jurisdiction Objection.

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- 62 -

Subsequent to the end of fiscal 2012, (in early June 2012) the
ICSID Tribunal overseeing the Arbitration action issued its ruling on the
Jurisdiction Objections. The Tribunal determined ICSID (at the World Bank) has
jurisdiction and will hear PacRims claims under the Salvadoran Investment Law,
but not under CAFTA. Accordingly, the Arbitration claim can and will proceed
under the Investment Law alone. ICSID, a branch of the World Bank, will continue
to oversee this case at its headquarters in Washington, DC.

In its decision, the Tribunal rejected the GOESs allegations
that ICSID does not have jurisdiction over PacRims claims under the Investment
Law. The Tribunal also rejected most of the GOESs objections to the Tribunal's
CAFTA jurisdiction (including rejecting the GOESs assertion that the case
constituted an abuse of process). However, while ruling that PacRim is in fact
a US company and is part of a group of companies that has substantial business
activities in the United States, the Tribunal concluded that the specific
subsidiary that filed the claim does not have sufficiently substantial
business activities in the US to allow the investment protections under CAFTA.

The Arbitration claim can now proceed to the final phase,
wherein the merits of PacRim's claims will finally be addressed. In the final
phase, the Tribunal will determine whether El Salvador has breached Salvadoran
and international law by refusing to issue the necessary mining licenses for the
El Dorado Mine. They will also determine El Salvador's monetary liability for
breaching the investment protections owed to a foreign investor as per in its
own laws.

PacRim and its legal counsel will immediately begin to prepare
for the final phase of the Arbitration. The Company will be exploring various
alternative financing opportunities, now more available, to help minimize
dilution to its current share structure.

Copies of all written testimony and filings made in connection
with PacRims Arbitration action, on behalf of both the claimant and respondent,
are available at ICSIDs website www.icsid.worldbank.org.

Dividend Policy

The Company does not have any intention of paying cash
dividends in the foreseeable future. In particular, there can be no assurance
that our Board of Directors will ever declare cash dividends, which action is
completely within their discretion.

B.      Significant Changes

There have been no significant changes since April 30, 2011
that are not disclosed herein.

ITEM 9. THE OFFER AND LISTING

A.      Offer and Listing Details

The Companys post-amalgamation shares were called for trading
on the TSX and the NYSE MKT (formerly the NYSE Amex), on April 15, 2002 under
the symbol PMU. In September 2010 the Company delisted from NYSE Amex and the
TSX is the only exchange on which the Companys shares are listed. The Companys
shares additionally trade on the OTCQX platform in the US. Prior to April 15,
2002 Daytons shares traded as DAY on the TSX and the NYSE MKT (the American
Stock Exchange, at the time, prior to its takeover by NYSE MKT) and the
Companys shares traded as PFG on the TSX.

The following table sets forth the annual high and low closing
prices of the common shares traded on the TSX and the OTCQX for the five most
recent financial years.

Fiscal Period Ended
    TSX CDN($)
    OTCQX (1)US($)High
    Low
    High
    LowApril 30, 2012
    0.23
    0.075
    0.248
    0.062April 30, 2011
    0.35
    0.155
    0.35
    0.16April 30, 2010
    0.40
    0.16
    0.36
    0.165April 30, 2009
    0.99
    0.09
    0.99
    0.08April 30, 2008
    1.25
    0.83
    1.39
    0.83


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

Fiscal Financial Quarter Ended
    TSX 
      CDN($)
    OTCQX (1)
      US($)High
    Low
    High
    LowApril 30, 2012
    0.155
    0.075
    0.161
    0.062


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Fiscal Financial Quarter Ended
    TSX 
      CDN($)
    OTCQX (1)
    US($)High
    Low
    High
    LowJanuary 31, 2012
    0.17
    0.115
    0.163
    0.11October 31, 2011
    0.195
    0.13
    0.191
    0.125July 31, 2011
    0.23
    0.15
    0.248
    0.153April 30, 2011
    0.35
    0.185
    0.35
    0.23January 31, 2011
    0.25
    0.18
    0.23
    0.02October 31, 2010
    0.22
    0.165
    0.22
    0.15July 31, 2010
    0.26
    0.155
    0.26
    0.16


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

Month
    TSX 
      CDN($)
    OTCQX (1)
    US($)High
    Low
    High
    LowJune 2012
    0.14
    0.065
    0.129
    0.053May 2012
    0.13
    0.06
    0.131
    0.064April 2012
    0.13
    0.075
    0.14
    0.062March 2012
    0.14
    0.115
    0.152
    0.10February 2012
    0.155
    0.125
    0.161
    0.12January 2012
    0.16
    0.115
    0.16
    0.118


(1) Share prices listed under the OTCQX heading above, from
dates prior to September 9, 2010, were taken from the Companys listing on the
NYSE MKT.

B.      Plan of Distribution

Not Applicable.

C.      Markets

The Companys common shares are listed and trade on the TSX
under the symbol PMU and additionally trade on the OTCQX platform under the
symbol PFRMF. The Company has received advice that its shares are listed and
have traded since June 14, 2002 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 the Xetra, the Deutsche Borse
AG electronic trading system since May 31, 2002.

D.      Selling Shareholders

Not Applicable.

E.      Dilution

Not Applicable.

F.      Expenses of the issue

Not Applicable.

ITEM 10. ADDITIONAL INFORMATION

A.      Share Capital

Not applicable.

B.      Memorandum and Articles of
Association

| | 1. | The Company, was formed on April 11, 2002 by the
      amalgamation of Dayton and Pacific Rim under the former Company Act
      (British Columbia). Now existing under the Business Corporations Act,
      S.B.C. 2002, c. 57 (British Columbia) (the
New Act), as amended, the Company, is permitted to conduct
      any lawful business that it is not restricted from conducting by its
      Notice of Articles and Articles, neither of which contain any restriction
on the business the Company may conduct.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | 2. | A director who has a disclosable interest in a proposed
      contract or transaction with the Company shall be liable to account to the
      Company for any profits that accrue to the director under or as a result
      of the contract or transaction unless disclosure is made thereof and the
      contract or transaction is approved in accordance with the provisions of
      the New Act. A director who holds a disclosable interest in a contract or
      transaction into which the Company has entered or proposes to enter into
      is not entitled to vote on any directors resolution to approve that
      contract or transaction, unless all the directors have a disclosable
      interest in that contract or transaction, in which case any or all of
      those directors may vote on such resolutions. The Articles of the Company
      permit an interested director to be counted in the quorum at the meeting
      whether or not the director votes on any or all of the resolutions
      considered at the meeting. The Company, if authorized by the board of
      directors, may borrow money, issue debt obligations and charge the assets
      of the Company, provided only that such power is exercised bona fide and
      in the best interests of the Company. There is no mandatory retirement age
      for directors. A director is not required to hold shares of the
      Company.                                                                                                                                                                                                                  
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 3. | The Company has only one class of common shares, without
      any special rights or restrictions. The dividend entitlement of a
      shareholder of record is fixed at the time of declaration by the board of
      directors. A vested dividend entitlement does not lapse, but unclaimed
      dividends are subject to a statutory six year contract debts limitation.
      Each common share is entitled to one vote on the election of each
      director. There are no cumulative voting rights, in consequence of which a
      simple majority of votes at the annual meeting can elect all the directors
      of the Company. Each common share carries with it the right to share
      equally with every other common share in dividends declared and in any
      distribution of surplus assets of the Company after payment to creditors
      on any winding up, liquidation or dissolution. There are no redemption or
      sinking fund provisions. All common shares must be fully paid prior to
      issue and are thereafter subject to no further capital calls by the
      Company. There exists no discriminatory provision affecting any existing
      or prospective holder of common shares as a result of such shareholder
      owning a substantial number of shares.                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 4. | Pursuant to the New Act and the Articles of the Company,
      the rights of shareholders may be changed only by the shareholders passing
      a special resolution approved by two-thirds (2/3) of the votes cast at a
      general meeting of the Company, the notice of which is accompanied by a
      circular describing the proposed action and its effect on the
      shareholders. Certain special resolutions provide that a shareholder may
      dissent in respect of the resolution, by sending a notice of dissent to
      the Company and otherwise complying with the provisions of the New Act. A
      shareholder who validly exercises such right of dissent in accordance with
      the New Act may have the shares that are subject of the notice of dissent
      purchased by the Company at their fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 5. | The board of directors must call an annual general
      meeting once in each calendar year and not later than 15 months after the
      last such meeting. The board may call an extraordinary general meeting at
      any time. Notice of such meetings must be accompanied by information
      circular describing the proposed business to be dealt with and making the
      required disclosure regarding the Company and the matters to be considered
      at the meeting. A shareholder or shareholders holding in the aggregate of
      5% of the issued shares of the Company may requisition a meeting and the
      board is required to hold such meeting within four months of such
      requisition. Admission to such meetings is open to registered shareholders
      and their duly appointed proxy holders. Others may be admitted with the
      consent of the meeting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 6. | The constating documents of the Company contain no
      limitations on the rights of non-resident or foreign shareholders to hold
      or exercise rights on the shares of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 7. | There are no provisions in the Companys constating
      documents that would have an effect of delaying, deferring or preventing a
      change in control of the Company and that would operate only with respect
      to a merger, acquisition or corporate restructuring involving the Company
      or any of its subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 8. | There are no provisions in the Companys constating
      documents that govern the ownership threshold above which shareholder
      ownership must be disclosed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 9. | There is no limitation at law upon the right of a
      non-resident to hold shares in a Canadian company. However, the Investment
      Canada Act (Canada) (the Investment Act) requires certain non-Canadian
      individuals, governments, corporations, agencies or entities who wish to
      acquire a Canadian business or to establish a new Canadian business as
      those terms are defined in the Investment Act, to file a notification or
      an application for review with Investment Canada, a Canadian federal
      governmental agency. The Investment Act requires that certain acquisitions
      of control of a Canadian business by a non-Canadian must be reviewed by
      the Minister responsible for the Investment Act and approved on the basis
      that the Minister is satisfied that the acquisition is likely to be of net
      benefit to Canada, having regard to the criteria set forth in the
      Investment Act. The Investment Act makes the acquisition of control a
      reviewable event. The Investment Act sets out detailed rules for
      determining whether control has been acquired. The acquisition of
      one-third or more of the voting shares of a corporation may, in some circumstances, be deemed to
      constitute acquisition of control. A reviewable acquisition of control may
      not be implemented before being approved by the Minister. If not
      ultimately approved, a reviewable acquisition that has been completed may
      be subject to an order to divest, enforceable by injunction or a court
      order directing disposition of assets or shares.

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- 65 -

| | 10. | There are no provisions in the Companys constating
      documents that govern changes in capital that are more stringent that
      required by law.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------

C.      Material contracts

In June 2011, Pacific Rim, through its US subsidiary Pacific
Rim Exploration Inc. signed a Definitive Agreement with ICN Resources Ltd. and
Washoe Gold Inc. providing the Company with the option to acquire a 65% joint
venture interest in the Hog Ranch Property located in Washoe County, Nevada,
approximately 180 km north of Reno.

As per the Definitive Agreement, PREx has been granted the
option to acquire a 65% interest in the Hog Ranch Property through the
expenditure of an aggregate of $8 million in exploration expenditures and the
issuance of an aggregate of 1 million common shares of Pacific Rim, with annual
extensions dependent on results of exploration. See Item 4D  Property Plant
and Equipment, specifically Other Properties for a schedule of the Hog Ranch
option payments.

During fiscal 2011, the Company signed an LOI with Compania
Minera Clifton S.A. (Minera Clifton) (collectively with the Company, the
Remance Parties) to acquire a 100% interest in the Remance project located in
Panama, Central America.

The Remance Parties have agreed to sign a Formal Agreement
granting the Company the exclusive right and option to acquire 100% of Minera
Clifton's right, title and interest in the Remance project as soon as
practicable. Signing of the Formal Agreement has not been concluded at this time
and is currently highly uncertain. Minera Cliftons application for an extension
to the Remance concession term, as provided by Panamanian law, was recently
denied; a decision which is currently being appealed by Minera Clifton. While
the Company is keeping the Remance LOI in effect during Minera Cliftons appeal,
the outcome of this process, and hence the Companys final acquisition of the
Remance project, is highly uncertain. If signed, the Formal Agreement will be
subject to all required regulatory approvals, including the approval of the
Toronto Stock Exchange (the TSX). The option to acquire Remance may be
exercised by the Company by paying an aggregate of $200,000 in four equal
tranches plus 5 million common shares of Pacific Rim to Minera Clifton,
conducting a specified exploration program during the Option Period (as defined
in the LOI) and paying $5 million in cash or common shares to Minera Clifton at
the end of the Option Period.

As noted above, the Remance project acquisition has not
currently been completed and is highly uncertain at this time. The Company
believes that Minera Cliftons application for extension of the Remance
concession term, normally a routine process permitted under Panamanian mining
law, was sidelined by bureaucratic irregularities and issues within the ministry
responsible for mining. If the Remance extension is ultimately granted to Minera
Clifton, the Company intends to proceed with its acquisition of the Remance
Project by signing the Formal Agreement. See Item 4D  Property Plant and
Equipment, specifically Other Properties.

D.      Exchange controls

There are currently no governmental laws, decrees, regulations
or other legislation of Canada which affect the import or export of capital,
including the availability of cash and cash equivalents for use by the
Company.

E.      Taxation

Although not free from doubt, the Company believes it was
classified as a "passive foreign investment company" during the tax year ended
April 30, 2012, and may be classified as a passive foreign investment company
in future tax years. If the Company is a passive foreign investment company
for a tax year, such classification will likely have adverse US federal income
tax consequences for US shareholders.

US investors in our Common Shares should be aware that the
Company believes it was classified as a passive foreign investment company
(PFIC) during the tax year ended April 30, 2012 and may be classified as a
PFIC for future tax years. If the Company is a PFIC for any year during a US
shareholders holding period, then such US shareholder generally will be
required to treat any gain realized upon a disposition of Common Shares, or any
so-called excess distribution received on its Common Shares, as ordinary
income, and to pay an interest charge on a portion of such gain or
distributions, unless the shareholder makes a timely and effective "qualified
electing fund" election (QEF Election) or a "mark-to-market" election with
respect to the Common Shares. A US shareholder who makes a QEF Election
generally must report on a current basis its share of the Company's net capital
gain and ordinary earnings for any year in which the Company is a PFIC, whether
or not the Company distributes any amounts to its shareholders. However, US
shareholders should be aware that there can be no assurance that the Company
will satisfy record keeping requirements that apply to a qualified electing
fund, or that the Company will supply US shareholders with information that such
US shareholders require to report under the QEF rules, in the event that the Company a
PFIC and a US shareholder wishes to make a QEF Election. Thus, US shareholders
may not be able to make a QEF Election with respect to their Common Shares. A US
shareholder who makes the mark-to-market election generally must include as
ordinary income each year the excess of the fair market value of the Common
Shares over the taxpayers basis therein. This paragraph is qualified in its
entirety by the discussion below under the heading Certain United States
Federal Income Tax Considerations. Each US shareholder should consult its own
tax advisor regarding the US federal, US federal alternative minimum, US federal
estate and gift, US state and local, and foreign tax consequences of the PFIC
rules and the acquisition, ownership, and disposition of our Common Shares.

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- 66 -

CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS

The following is a general summary of certain material US
federal income tax considerations applicable to a US Holder (as defined below)
arising from and relating to the acquisition, ownership, and disposition of
Common Shares.

This summary is for general information purposes only and does
not purport to be a complete analysis or listing of all potential US federal
income tax considerations that may apply to a US Holder arising from and
relating to the acquisition, ownership, and disposition of Common Shares. In
addition, this summary does not take into account the individual facts and
circumstances of any particular US Holder that may affect the US federal income
tax consequences to such US Holder, including specific tax consequences to a US
Holder under an applicable tax treaty. Accordingly, this summary is not intended
to be, and should not be construed as, legal or US federal income tax advice
with respect to any US Holder. Each US Holder should consult its own tax advisor
regarding the US federal, US federal alternative minimum, US federal estate and
gift, US state and local, and foreign tax consequences relating to the
acquisition, ownership and disposition of Common Shares.

No legal opinion from US legal counsel or ruling from the
Internal Revenue Service (the IRS) has been requested, or will be obtained,
regarding the US federal income tax consequences of the acquisition, ownership,
and disposition of Common Shares. This summary is not binding on the IRS, and
the IRS is not precluded from taking a position that is different from, and
contrary to, the positions taken in this summary. In addition, because the
authorities on which this summary is based are subject to various
interpretations, the IRS and the US courts could disagree with one or more of
the positions taken in this summary.

Scope of this Summary

Authorities

This summary is based on the Internal Revenue Code of 1986, as
amended (the Code), Treasury Regulations (whether final, temporary, or
proposed), published rulings of the IRS, published administrative positions of
the IRS, US court decisions, the Convention Between Canada and the United States
of America with Respect to Taxes on Income and on Capital, signed September 26,
1980, as amended (the Canada-US Tax Convention), and US court decisions that
are applicable and, in each case, as in effect and available, as of the date of
this document. Any of the authorities on which this summary is based could be
changed in a material and adverse manner at any time, and any such change could
be applied on a retroactive or prospective basis which could affect the US
federal income tax considerations described in this summary. This summary does
not discuss the potential effects, whether adverse or beneficial, of any
proposed legislation that, if enacted, could be applied on a retroactive or
prospective basis.

US Holders

For purposes of this summary, the term "US Holder" means a
beneficial owner of Common Shares that is for US federal income tax
purposes:

- an individual who is a citizen or resident of the US;
- a corporation (or other entity taxable as a corporation for US federal
  income tax purposes) organized under the laws of the Us, any state thereof or
  the District of Columbia;
- an estate whose income is subject to US federal income taxation regardless
  of its source; or
- a trust that (a) is subject to the primary supervision of a court within
  the US and the control of one or more US persons for all substantial decisions
  or (b) has a valid election in effect under applicable Treasury regulations to
  be treated as a US person.

Non-US Holders

For purposes of this summary, a non-US Holder is a beneficial
owner of Common Shares that is not a US Holder. This summary does not address
the US federal income tax consequences to non-US Holders arising from and
relating to the acquisition, ownership, and disposition of Common Shares.
Accordingly, a non-US Holder should consult its own tax advisor regarding the US
federal, US federal alternative minimum, US federal estate and gift, US state and
local, and foreign tax consequences (including the potential application of and
operation of any income tax treaties) relating to the acquisition, ownership,
and disposition of Common Shares.

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- 67 -

US Holders Subject to Special US Federal Income Tax Rules
Not Addressed

This summary does not address the US federal income tax
considerations applicable to US Holders that are subject to special provisions
under the Code, including the following US Holders: (a) US Holders that are
tax-exempt organizations, qualified retirement plans, individual retirement
accounts, or other tax-deferred accounts; (b) US Holders that are financial
institutions, underwriters, insurance companies, real estate investment trusts,
or regulated investment companies; (c) US Holders that are dealers in securities
or currencies or US Holders that are traders in securities that elect to apply a
mark-to-market accounting method; (d) US Holders that have a functional
currency other than the US dollar; (e) US Holders that own Common Shares as
part of a straddle, hedging transaction, conversion transaction, constructive
sale, or other arrangement involving more than one position; (f) US Holders that
acquired Common Shares in connection with the exercise of employee stock options
or otherwise as compensation for services; (g) US Holders that hold Common
Shares other than as a capital asset within the meaning of Section 1221 of the
Code (generally, property held for investment purposes); (h) partnerships and
other pass-through entities (and investors in such partnerships and entities);
or (i) US Holders that own or have owned (directly, indirectly, or by
attribution) 10% or more of the total combined voting power of the outstanding
shares of the Company. This summary also does not address the US federal income
tax considerations applicable to US Holders who are (a) US expatriates or former
long-term residents of the US, (b) persons that have been, are, or will be a
resident or deemed to be a resident in Canada for purposes of the Income Tax Act
(Canada) (the Tax Act); (c) persons that use or hold, will use or hold, or
that are or will be deemed to use or hold Common Shares in connection with
carrying on a business in Canada; (d) persons whose Common Shares constitute
taxable Canadian property under the Tax Act; or (e) persons that have a
permanent establishment in Canada for the purposes of the Canada-US Tax
Convention. US Holders that are subject to special provisions under the Code,
including US Holders described immediately above, should consult their own tax
advisor regarding the US federal, US federal alternative minimum, US federal
estate and gift, US state and local, and foreign tax consequences relating to
the acquisition, ownership and disposition of Common Shares.

If an entity that is classified as a partnership (or
pass-through entity) for US federal income tax purposes holds Common Shares,
the US federal income tax consequences to such partnership and the partners of
such partnership generally will depend on the activities of the partnership and
the status of such partners. This summary does not address the tax consequences
to any such partner. Partners of entities that are classified as partnerships
for US federal income tax purposes should consult their own tax advisor
regarding the US federal income tax consequences arising from and relating to
the acquisition, ownership, and disposition of Common Shares.

Tax Consequences Not Addressed

This summary does not address the US federal, US federal
alternative minimum, US federal estate and gift, US state and local, and foreign
tax consequences to US Holders of the acquisition, ownership, and disposition of
Common Shares. Each US Holder should consult its own tax advisor regarding the
US federal, US federal alternative minimum, US federal estate and gift, US state
and local, and foreign tax consequences of the acquisition, ownership, and
disposition of Common Shares.

Passive Foreign Investment Company Rules

If the Company were to constitute a passive foreign investment
company under the meaning of Section 1297 of the Code (a PFIC, as defined
below) for any year during a US Holders holding period, then certain different
and potentially adverse rules will affect the US federal income tax consequences
to a US Holder resulting from the acquisition, ownership and disposition of
Common Shares.

Recently enacted U.S. legislation requires each U.S. person who
directly or indirectly owns an interest in a PFIC to file an annual report with
the IRS, and failure to file such report could result in the imposition of
penalties on such U.S. person and in the extension of the statute of limitations
with respect to federal income tax returns filed by such U.S. person. However,
this reporting requirement has been temporarily suspended. Filings will
eventually be required with respect to any year in which the requirement was
suspended.

The PFIC rules are complex, and each U.S. Holder should consult
an independent tax adviser regarding the PFIC rules, including the potential
effect of this legislation on such U.S. Holders filing requirements and the
advisability of making a QEF election or, if applicable, a mark-to-market
election, with respect to each PFIC.

PFIC Status of the Company

The Company generally will be a PFIC if, for a tax year, (a)
75% or more of the gross income of the Company for such tax year is passive
income (the income test) or (b) 50% or more of the value of the Companys
assets either produce passive income or are held for the production of passive
income, based on the quarterly average of the fair market value of such assets
(the asset test). Gross income generally includes all sales revenues less
the cost of goods sold, plus income from investments and form incidental or
outside operations or sources, and passive income generally includes, for
example, dividends, interest, certain rents and royalties, certain gains from
the sale of stock and securities, and certain gains from commodities
transactions.

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- 68 -

Active business gains arising from the sale of commodities
generally are excluded from passive income if substantially all (85% or more) of
a foreign corporations commodities are stock in trade of such foreign
corporation or other property of a kind which would properly be included in
inventory of such foreign corporation, or property held by such foreign
corporation primarily for sale to customers in the ordinary course of business
and certain other requirements are satisfied.

For purposes of the PFIC income test and asset test described
above, if the Company owns, directly or indirectly, 25% or more of the total
value of the outstanding shares of another corporation, the Company will be
treated as if it (a) held a proportionate share of the assets of such other
corporation and (b) received directly a proportionate share of the income of
such other corporation. In addition, for purposes of the PFIC income test and
asset test described above, passive income does not include any interest,
dividends, rents, or royalties that are received or accrued by the Company from
a related person (as defined in Section 954(d)(3) of the Code), to the extent
such items are properly allocable to the income of such related person that is
not passive income.

In addition, under certain attribution rules, if the Company is
a PFIC, US Holders will be deemed to own their proportionate share of any
subsidiary of the Company which is also a PFIC (a Subsidiary PFIC), and will
be subject to US federal income tax on their proportionate share of (a) a
distribution on the shares of a Subsidiary PFIC and (b) a disposition or deemed
disposition of shares of a Subsidiary PFIC, both as if such US Holders directly
held the shares of such Subsidiary PFIC.

The Company believes that it was classified as a PFIC during
the tax year ended April 30, 2012 and may be classified as a PFIC for current
and future tax years. The determination of whether any corporation was, or will
be, a PFIC for a tax year depends, in part, on the application of complex US
federal income tax rules, which are subject to differing interpretations. In
addition, whether any corporation will be a PFIC for any tax year depends on the
assets and income of such corporation over the course of each such tax year and,
as a result, cannot be predicted with certainty as of the date of this document.
Accordingly, there can be no assurance that the IRS will not challenge any
determination made by the Company (or a Subsidiary PFIC) concerning its PFIC
status or that the Company (and each Subsidiary PFIC) was not, or will not be, a
PFIC for any tax year. Each US Holder should consult its own tax advisor
regarding the PFIC status of the Company and each Subsidiary PFIC.

Default PFIC Rules Under Section 1291 of the Code

If the Company is a PFIC, the US federal income tax
consequences to a US Holder of the acquisition, ownership, and disposition of
Common Shares will depend on whether such US Holder makes an election to treat
the Company and any Subsidiary PFICs as a qualified electing fund or QEF
under Section 1295 of the Code (a QEF Election) or a mark-to-market election
under Section 1296 of the Code (a Mark-to-Market Election). A US Holder that
does not make either a QEF Election or a Mark-to-Market Election will be
referred to in this summary as a Non-Electing US Holder.

A Non-Electing US Holder will be subject to the rules of
Section 1291 of the Code with respect to (a) any gain recognized on the sale or
other taxable disposition of Common Shares and (b) any excess distribution
received on the Common Shares. A distribution generally will be an excess
distribution to the extent that such distribution (together with all other
distributions received in the current tax year) exceeds 125% of the average
distributions received during the three preceding tax years (or during a US
Holders holding period for the Common Shares, if shorter).

Under Section 1291 of the Code, any gain recognized on the sale
or other taxable disposition of Common Shares, and any excess distribution
received on Common Shares, must be ratably allocated to each day in a
Non-Electing US Holders holding period for the respective Common Shares. The
amount of any such gain or excess distribution allocated to the tax year of
disposition or distribution of the excess distribution and to years before the
entity became a PFIC, if any, would be taxed as ordinary income. The amounts
allocated to any other tax year would be subject to US federal income tax at the
highest tax applicable to ordinary income in each such year, and an interest
charge would be imposed on the tax liability for each such year, calculated as
if such tax liability had been due in each such year. A Non-Electing US Holder
that is not a corporation must treat any such interest paid as personal
interest, which is not deductible.

If the Company is a PFIC for any tax year during which a
Non-Electing US Holder holds Common Shares, the Company will continue to be
treated as a PFIC with respect to such Non-Electing US Holder, regardless of
whether the Company ceases to be a PFIC in one or more subsequent tax years. A
Non-Electing US Holder may terminate this deemed PFIC status by electing to
recognize gain (which will be taxed under the rules of Section 1291 of the Code
discussed above) as if such Common Shares were sold on the last day of the last
tax year for which the Company was a PFIC.

QEF Election

A US Holder that makes a QEF Election for the first tax year in
which its holding period of its Common Shares begins, generally, will not be
subject to the rules of Section 1291 of the Code discussed above with respect to
its Common Shares. However, a US. Holder that makes a QEF Election will be
subject to US federal income tax on such US Holders pro rata share of (a) the
net capital gain of the Company, which will be taxed as long-term capital gain
to such US Holder, and (b) the ordinary earnings of the Company, which will be taxed as ordinary income to such US Holder. Generally,
net capital gain is the excess of (a) net long-term capital gain over (b) net
short-term capital loss, and ordinary earnings are the excess of (a) earnings
and profits over (b) net capital gain. A US Holder that makes a QEF Election
will be subject to US federal income tax on such amounts for each tax year in
which the Company is a PFIC, regardless of whether such amounts are actually
distributed to such US Holder by the Company. However, for any tax year in which
the Company is a PFIC and has no net income or gain, US Holders that have made a
QEF Election would not have any income inclusions as a result of the QEF
Election. If a US Holder that made a QEF Election has an income inclusion, such
a US Holder may, subject to certain limitations, elect to defer payment of
current US federal income tax on such amounts, subject to an interest charge. If
such US Holder is not a corporation, any such interest paid will be treated as
personal interest, which is not deductible.

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- 69 -

A US Holder that makes a QEF Election generally (a) may receive
a tax-free distribution from the Company to the extent that such distribution
represents earnings and profits of the Company that were previously included
in income by the US Holder because of such QEF Election and (b) will adjust such
US Holders tax basis in the Common Shares to reflect the amount included in
income or allowed as a tax-free distribution because of such QEF Election. In
addition, a US Holder that makes a QEF Election generally will recognize capital
gain or loss on the sale or other taxable disposition of Common Shares.

The procedure for making a QEF Election, and the US federal
income tax consequences of making a QEF Election, will depend on whether such
QEF Election is timely. A QEF Election will be treated as timely if such QEF
Election is made for the first year in the US Holders holding period for the
Common Shares in which the Company was a PFIC. A US Holder may make a timely QEF
Election by filing the appropriate QEF Election documents at the time such US
Holder files a US federal income tax return for such year.

A QEF Election will apply to the tax year for which such QEF
Election is made and to all subsequent tax years, unless such QEF Election is
invalidated or terminated or the IRS consents to revocation of such QEF
Election. If a US Holder makes a QEF Election and, in a subsequent tax year, the
Company ceases to be a PFIC, the QEF Election will remain in effect (although it
will not be applicable) during those tax years in which the Company is not a
PFIC. Accordingly, if the Company becomes a PFIC in another subsequent tax year,
the QEF Election will be effective and the US Holder will be subject to the QEF
rules described above during any subsequent tax year in which the Company
qualifies as a PFIC.

US Holders should be aware that there can be no assurances that
the Company will satisfy the record keeping requirements that apply to a QEF, or
that the Company will supply US Holders with information that such US Holders
require to report under the QEF rules, in the event that the Company is a PFIC
and a US Holder wishes to make a QEF Election. Thus, US Holders may not be able
to make a QEF Election with respect to their Common Shares. Each US Holder
should consult its own tax advisor regarding the availability of, and procedure
for making, a QEF Election.

Mark-to-Market Election

A US Holder may make a Mark-to-Market Election only if the
Common Shares are marketable stock. The Common Shares generally will be
marketable stock if the Common Shares are regularly traded on (a) a national
securities exchange that is registered with the Securities and Exchange
Commission, (b) the national market system established pursuant to section 11A
of the Exchange Act, or (c) a foreign securities exchange that is regulated or
supervised by a governmental authority of the country in which the market is
located, provided that (i) such foreign exchange has trading volume, listing,
financial disclosure, and other requirements and the laws of the country in
which such foreign exchange is located, together with the rules of such foreign
exchange, ensure that such requirements are actually enforced and (ii) the rules
of such foreign exchange ensure active trading of listed stocks. If such stock
is traded on such a qualified exchange or other market, such stock generally
will be regularly traded for any calendar year during which such stock is
traded, other than in de minimis quantities, on at least 15 days during each
calendar quarter.

A US Holder that makes a Mark-to-Market Election with respect
to its Common Shares generally will not be subject to the rules of Section 1291
of the Code discussed above with respect to such Common Shares. However, if a US
Holder does not make a Mark-to-Market Election beginning in the first tax year
of such US Holders holding period for the Common Shares or such US Holder has
not made a timely QEF Election, the rules of Section 1291 of the Code discussed
above will apply to certain dispositions of, and distributions on, the Common
Shares.

A US Holder that makes a Mark-to-Market Election will include
in ordinary income, for each tax year in which the Company is a PFIC, an amount
equal to the excess, if any, of (a) the fair market value of the Common Shares,
as of the close of such tax year over (b) such US Holders tax basis in such
Common Shares. A US Holder that makes a Mark-to-Market Election will be allowed
a deduction in an amount equal to the excess, if any, of (a) such US Holders
adjusted tax basis in the Common Shares, over (b) the fair market value of such
Common Shares (but only to the extent of the net amount of previously included
income as a result of the Mark-to-Market Election for prior tax years).

A US Holder that makes a Mark-to-Market Election generally also
will adjust such US Holders tax basis in the Common Shares to reflect the amount included in gross income or allowed as a
deduction because of such Mark-to-Market Election. In addition, upon a sale or
other taxable disposition of Common Shares, a US Holder that makes a
Mark-to-Market Election will recognize ordinary income or ordinary loss (not to
exceed the excess, if any, of (a) the amount included in ordinary income because
of such Mark-to-Market Election for prior tax years over (b) the amount allowed
as a deduction because of such Mark-to-Market Election for prior tax years).

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- 70 -

A Mark-to-Market Election applies to the tax year in which such
Mark-to-Market Election is made and to each subsequent tax year, unless the
Common Shares cease to be marketable stock or the IRS consents to revocation
of such election. Each US Holder should consult its own tax advisor regarding
the availability of, and procedure for making, a Mark-to-Market Election.

Although a US Holder may be eligible to make a Mark-to-Market
Election with respect to the Common Shares, no such election may be made with
respect to the stock of any Subsidiary PFIC that a US Holder is treated as
owning, because such stock is not marketable. Hence, the Mark-to-Market Election
will not be effective to eliminate the interest charge described above with
respect to deemed dispositions of Subsidiary PFIC stock or distributions from a
Subsidiary PFIC.

Other PFIC Rules

Under Section 1291(f) of the Code, the IRS has issued proposed
Treasury Regulations that, subject to certain exceptions, would cause a US
Holder that had not made a timely QEF Election to recognize gain (but not loss)
upon certain transfers of Common Shares that would otherwise be tax-deferred
(e.g., gifts and exchanges pursuant to corporate reorganizations). However, the
specific US federal income tax consequences to a US Holder may vary based on the
manner in which Common Shares are transferred.

Certain additional adverse rules will apply with respect to a
US Holder if the Company is a PFIC, regardless of whether such US Holder makes a
QEF Election. For example under Section 1298(b)(6) of the Code, a US Holder that
uses Common Shares as security for a loan will, except as may be provided in
Treasury Regulations, be treated as having made a taxable disposition of such
Common Shares.

Special rules also apply to the amount of foreign tax credit
that a US Holder may claim on a distribution from a PFIC. Subject to such
special rules, foreign taxes paid with respect to any distribution in respect of
stock in a PFIC are generally eligible for the foreign tax credit. The rules
relating to distributions by a PFIC and their eligibility for the foreign tax
credit are complicated, and a US Holder should consult with their own tax
advisor regarding the availability of the foreign tax credit with respect to
distributions by a PFIC.

The PFIC rules are complex, and each US Holder should consult
its own tax advisor regarding the PFIC rules and how the PFIC rules may affect
the US federal income tax consequences of the acquisition, ownership, and
disposition of Common Shares.

US Federal Income Tax Consequences of the Acquisition,
Ownership, and Disposition of Common Shares

The following discussion is subject to the rules described
above under the heading Passive Foreign Investment Company Rules.

Distributions on Common Shares

Subject to the PFIC rules discussed above, a US Holder that
receives a distribution, including a constructive distribution, with respect to
a Common Share will be required to include the amount of such distribution in
gross income as a dividend (without reduction for any Canadian income tax
withheld from such distribution) to the extent of the current or accumulated
earnings and profits of the Company, as computed for US federal income tax
purposes. A dividend generally will be taxed to a US Holder at ordinary income
tax rates. To the extent that a distribution exceeds the current and accumulated
earnings and profits of the Company, such distribution will be treated first
as a tax-free return of capital to the extent of a US Holder's tax basis in the
Common Shares and thereafter as gain from the sale or exchange of such Common
Shares. (See  Sale or Other Taxable Disposition of Common Shares below).
However, the Company may not maintain the calculations of earnings and profits
in accordance with US federal income tax principles, and each US Holder should
therefore assume that any distribution by the Company with respect to the Common
Shares will constitute ordinary dividend income. Dividends received on Common
Shares generally will not be eligible for the dividends received deduction. In
addition, the Company does not anticipate that its distributions will be
eligible for the preferential tax rates applicable to long-term capital gains.
The dividend rules are complex, and each US Holder should consult its own tax
advisor regarding the application of such rules.

Sale or Other Taxable Disposition of Common Shares

Subject to the PFIC rules discussed above, upon the sale or
other taxable disposition of Common Shares, a US Holder generally will recognize
capital gain or loss in an amount equal to the difference between the amount of
cash plus the fair market value of any property received and such US Holder's
tax basis in such Common Shares sold or otherwise disposed of. Subject to the
PFIC rules discussed above, gain or loss recognized on such sale or other
disposition generally will be long-term capital gain or loss if, at the time of
the sale or other disposition, the Common Shares have been held for more than
one year.

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- 71 -

Gain or loss recognized by a US Holder on the sale or other
taxable disposition of Common Shares generally will be treated as US source
for purposes of applying the US foreign tax credit rules unless the gain is
subject to tax in Canada and is resourced as foreign source under the
Canada-US Tax Convention and such US Holder elects to treat such gain or loss as
foreign source.

Preferential tax rates apply to long-term capital gain of a US
Holder that is an individual, estate, or trust. There are currently no
preferential tax rates for long-term capital gain of a US Holder that is a
corporation. Deductions for capital losses are subject to significant
limitations under the Code.

Additional Tax on Passive Income

Newly enacted legislation requires certain US Holders who are
individuals, estates or trusts to pay up to an additional 3.8% tax on, among
other things, dividends and capital gains for tax years beginning after December
31, 2012. US Holders should consult their tax advisors regarding the effect, if
any, of this tax on their ownership and disposition of Common Shares.

Additional Considerations

Receipt of Foreign Currency

The amount of any distribution paid to a US Holder in foreign
currency, or on the sale, exchange or other taxable disposition of Common
Shares, generally will be equal to the US dollar value of such foreign currency
based on the exchange rate applicable on the date of receipt (regardless of
whether such foreign currency is converted into US dollars at that time). If the
foreign currency received is not converted into US dollars on the date of
receipt, a US Holder will have a basis in the foreign currency equal to its US
dollar value on the date of receipt. Any US Holder who receives payment in
foreign currency and engages in a subsequent conversion or other disposition of
the foreign currency may have a foreign currency exchange gain or loss that
would be treated as ordinary income or loss, and generally will be US source
income or loss for foreign tax credit purposes. Each US Holder should consult
its own US tax advisor regarding the US federal income tax consequences of
receiving, owning, and disposing of foreign currency.

Foreign Tax Credit

Subject to the PFIC rules discussed above, a US Holder that
pays (whether directly or through withholding) Canadian income tax with respect
to dividends paid on the Common Shares generally will be entitled, at the
election of such US Holder, to receive either a deduction or a credit for such
Canadian income tax paid. Generally, a credit will reduce a US Holders US
federal income tax liability on a dollar-for-dollar basis, whereas a deduction
will reduce a US Holders income subject to US federal income tax. This election
is made on a year-by-year basis and applies to all foreign taxes paid (whether
directly or through withholding) by a US Holder during a year.

Complex limitations apply to the foreign tax credit, including
the general limitation that the credit cannot exceed the proportionate share of
a US Holders US federal income tax liability that such US Holders foreign
source taxable income bears to such US Holders worldwide taxable income. In
applying this limitation, a US Holders various items of income and deduction
must be classified, under complex rules, as either foreign source or US
source. Generally, dividends paid by a foreign corporation should be treated as
foreign source for this purpose, and gains recognized on the sale of stock of a
foreign corporation by a US Holder should be treated as US source for this
purpose, except as otherwise provided in an applicable income tax treaty, and if
an election is properly made under the Code. However, the amount of a
distribution with respect to the Common Shares that is treated as a dividend
may be lower for US federal income tax purposes than it is for Canadian federal
income tax purposes, resulting in a reduced foreign tax credit allowance to a US
Holder. In addition, this limitation is calculated separately with respect to
specific categories of income. The foreign tax credit rules are complex, and
each US Holder should consult its own US tax advisor regarding the foreign tax
credit rules.

Backup Withholding and Information Reporting

Under US federal income tax law and Treasury regulations,
certain categories of US Holders must file information returns with respect to
their investment in, or involvement in, a foreign corporation. For example, US
return disclosure obligations (and related penalties) are imposed on US Holders
that hold certain specified foreign financial assets in excess of $50,000. The
definition of specified foreign financial assets includes not only financial
accounts maintained in foreign financial institutions, but also, unless held in
accounts maintained by a financial institution, any stock or security issued by
a non-US person, any financial instrument or contract held for investment that
has an issuer or counterparty other than a US person and any interest in a
foreign entity. US Holders may be subject to these reporting requirements unless
their Common Shares are held in an account at a domestic financial institution.
Penalties for failure to file certain of these information returns are
substantial. US Holders should consult with their own tax advisors regarding the
requirements of filing information returns.

Payments made within the US or by a US payor or US middleman,
of dividends on, and proceeds arising from the sale or other taxable disposition
of, Common Shares generally may be subject to information reporting and backup
withholding tax, at the rate of 28% (and increasing to 31% for payments made after December 31, 2012),
if a US Holder (a) fails to furnish such US Holders correct US taxpayer
identification number (generally on Form W-9), (b) furnishes an incorrect US
taxpayer identification number, (c) is notified by the IRS that such US Holder
has previously failed to properly report items subject to backup withholding
tax, or (d) fails to certify, under penalty of perjury, that such US Holder has
furnished its correct US taxpayer identification number and that the IRS has not
notified such US Holder that it is subject to backup withholding tax. However,
certain exempt persons, such as corporations, generally are excluded from these
information reporting and backup withholding rules. Any amounts withheld under
the US backup withholding tax rules will be allowed as a credit against a US
Holders US federal income tax liability, if any, or will be refunded, if such
US Holder furnishes required information to the IRS in a timely manner. Each US
Holder should consult its own tax advisor regarding the information reporting
and backup withholding rules.

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- 72 -

F.       Dividends and paying
agents

Not applicable

G.      Statement by experts

Not applicable.

H.      Documents on display

We are subject to the informational requirements of the
Exchange Act and file reports and other information with SEC. Reports and other
information which we file with the SEC, including this annual report on Form
20-F, may be inspected and copied at the public reference facilities of the
Securities and Exchange Commission at:

100 F
Street, NE           Washington
D.C. 20549

You can also obtain copies of this material by mail from the
Public Reference Section of the Securities and Exchange Commission, 100 F
Street, NE, Washington, D.C. 20549, at prescribed rates. Additionally, copies of
this material may also be obtained from the Securities and Exchange Commission's
internet site at http://www.sec.gov. The
Commission's telephone number is 1-800-SEC-0330.

All documents referred to in this annual report on Form 20-F
are also available for inspection at the office of the Company, listed below,
during normal office hours:

Pacific Rim Mining Corp. Suite 1050, 625 Howe Street
Vancouver, British Columbia V6C 2T6 Canada

I.       Subsidiary
Information

Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK

A.      Quantitative Information about
Market Risk

The Company holds its cash and cash equivalents primarily in US
dollar and Canadian dollar denominated accounts and its expenses are primarily
incurred in US dollars. At April 30, 2012 the amount of cash held was $816
thousand, the amount of short term investments was $455 thousand, the amount of
accounts receivable was $129 thousand and the amount of accounts payable and
accrued liabilities was $1,636 thousand. Based on these net exposures at April
30, 2012, the impact of a 10% depreciation or appreciation of the US dollar
against the Canadian dollar would result in an increase or decrease of $0.06
million in the Companys net earnings.

The following table summarizes the remaining contractual
maturities of the Companys financial liabilities and operating and capital
commitments at April 30, 2012 for the following fiscal years (years ended April
30):

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- 73 -

2016
      and2013
    
    
    2014
    
    
    2015
    
    
    later
    
    
    Total**$**
    
    
    **$**
    
    
    **$**
    
    
    **$**
    
    
    **$**Accounts payable
    
    1,636
    
    
    -
    
    
    -
    
    
    -
    
    
    1,636Operating leases
    
    47
    
    
    11
    
    
    7
    
    
    -
    
    
    65Totals
    
    1,683
    
    
    11
    
    
    7
    
    
    -
    
    
    1,701


The exposure of the Companys financial instruments to interest
risk continues to be limited.

B.      Qualitative Information about
Market Risk

The Companys objectives when managing capital and risk
are:

- To maintain adequate capital to operate its business and safeguard its
  ability to continue as a going concern; and
- To minimize the use of debt prior to the commencement of development
  activities

The Company continuously assesses its capital structure in
light of economic conditions, debt and equity markets and changes in the
Companys short-term and long-term plans. The Company is not subject to
externally imposed capital requirements.

The primary financial instruments currently affecting the
Companys financial condition and results of operations are cash and cash
equivalents, receivables and deposits. The following describes the types of risk
associated with these instruments and the way in which such exposure is
managed.

Credit Risk

Credit risk is the risk that the counterparty to a financial
instrument will cause a financial loss for the Company by failing to discharge
its obligations. The Companys exposure to credit risk is primarily attributable
to its liquid financial assets and the maximum credit risk the Company is
exposed to is 100% of cash and receivables. The Company limits its exposure to
credit risk by depositing its cash and cash equivalents with major international
financial institutions. The Company does not have financial assets that are
invested in asset backed commercial paper.

Foreign Currency Risk

The Companys exposure to foreign currency risk is primarily
related to Canadian dollar-denominated transactions. The Company does not enter
into foreign exchange contracts to manage this exposure. At April 30, 2012 the
impact of a 10% depreciation or appreciation of the US dollar against the
Canadian dollar would result in an increase or decrease of $0.06 million in the
Companys net earnings. The Company has not entered into any derivative
contracts to manage foreign exchange risk at this time.

Liquidity Risk

Liquidity risk is the risk that the Company will encounter
difficulty in meeting obligations associated with financial liabilities that are
settled by delivering cash or another financial asset.

The Company does not presently have sufficient working capital
to meet its accounts payable and accrued liabilities in addition to its
anticipated exploration and general and administrative expenses or the estimated
costs of pursuing the Arbitration action during fiscal 2013. The Company will
require financing during fiscal 2013 to meet these expenses and obligations.

The Company seeks to manage liquidity by maintaining adequate
cash and cash equivalent balances to meet its short term commitments and by
raising equity or debt financing as required to meet long term commitments. Tthe
Company has no assurance that such financing will be available or be available
on favourable terms. Factors that could affect the availability of financing
include fluctuations in the Companys share price, the state of international
debt and equity markets, investor perceptions and expectations, global financial
and metals markets, progress on any of the Companys exploration properties, and
developments, if any, on the El Dorado project permitting application.

Fair Values

Financial instruments measured at fair value are classified
into one of three levels in the fair value hierarchy according to the relative
reliability of the inputs used to estimate the fair values. The three levels of
the fair value hierarchy are:

Level 1  Unadjusted quoted prices in
active markets for identical assets and liabilitiesLevel 2  Inputs other
than quoted prices that are directly or indirectly observable for the asset or
liability; and

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- 74 -

Level 3  Inputs that are not based on
observable market data.

The carrying values of receivables, and accounts payable and
accrued liabilities approximate their fair value because of the short-term
nature of these instruments. The derivative warrant liabilities are recognized
at fair value each reporting period and are considered level 3 financial
instruments.

Interest Rate Risk

Interest rate risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The risk that the Company will realize a loss as a result of a
decline in the fair value of the investments included in cash and cash
equivalents is limited because these investments are generally held to maturity.
Based on the amount of cash and cash equivalents invested as at April 30, 2012
and assuming that all other variables remain constant, a 0.5% change in the
applicable interest rate would not be significant.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY
SECURITIES

Not Applicable.

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- 75 -

PART II

ITEM 13. DEFAULTS, DIVIDENT ARREARAGES AND
DELINQUENCIES

Not Applicable.

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

A-D.

None.

E.      Use of Proceeds

Not Applicable.

ITEM 15. CONTROLS AND PROCEDURES

A.      Disclosure controls and
procedures

The Company's management, with the participation of the Chief
Executive Officer and Chief Financial Officer, conducted an evaluation, pursuant
to Rule 13a-15 promulgated under the Securities Act of 1934, as amended (the
"Exchange Act"), of the effectiveness of its disclosure controls and procedures
as of April 30, 2012. Based on this evaluation, and as a result of the material
weakness in the Companys internal control over financial reporting discussed
below under Managements annual report on internal control over financial
reporting, the Chief Executive Officer and Chief Financial Officer also
concluded that the disclosure controls and procedures were not effective as of
April 30, 2012.

Disclosure controls and procedures means controls and other
procedures that are designed to ensure that information required to be disclosed
by us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
Commission's rules and forms and that such information required to be disclosed
by us in the reports that we file or submit under the Exchange Act is
accumulated and communicated to our management, including our principal
executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosures.

B.      Managements annual report on
internal control over financial reporting

The Companys management, including its Chief Executive Officer
and Chief Financial Officer, is responsible for establishing and maintaining
adequate internal control over financial reporting, as defined in Rule 13a-15(f)
under the Exchange Act.

A Companys internal control over financial reporting includes
those policies and procedures that (i) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a
material effect on the financial statements.

Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Projections of any
evaluation of effectiveness to future periods are subject to the risks that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies and procedures may deteriorate.

The Companys management, including the CEO and CFO, have
evaluated the effectiveness of the Companys internal control over financial
reporting as at April 30, 2012. This evaluation was based on the framework in
Internal ControlIntegrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.

Based on that assessment, management concluded that the
Companys internal control over financial reporting was not effective as of
April 30, 2012.

C.      Material Weakness

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- 76 -

A material weakness is a deficiency (as defined in PCAOB
Auditing Standard No. 5), or a combination of deficiencies, such that there is a
reasonable possibility that a material misstatement of the annual or interim
financial statements will not be prevented or detected on a timely basis.

As of April 30, 2012, the Company identified the following
material weakness that applies to both disclosure controls and procedures and
internal controls over financial reporting:

The company does not maintain adequate segregation of duties
necessary to ensure complete and accurate financial reporting. Specifically, the
Companys Chief Financial Officer is responsible for preparing, authorizing, and
reviewing information that is integral to the preparation of financial reports.
He is also responsible for preparing and reviewing the resulting financial
reports. The weakness has the potential to result in material misstatements in
the Companys consolidated financial statements that would not be prevented or
detected, and as such has been determined to be a material weakness in internal
controls over financial reporting which also impacts the companys disclosure
controls and procedures.

As of the date of this Annual Report on form 20-F management
has not yet developed a plan to remediate the material weakness. Management has
concluded that taking into account the present stage of the Companys
development the Company does not have sufficient size and scale to warrant
hiring of additional staff that would be required to correct the weakness at
this time.

D.      Attestation Report of the
Registered Public Accounting Firm

This annual report on Form 20-F does not include an attestation
report of the Companys registered public accounting firm regarding internal
control over financial reporting. Managements report was not subject to
attestation by the Companys registered public accounting firm pursuant to the
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which permits
the Company to provide only managements report in this annual report. The
Dodd-Frank Act permits a non-accelerated filer to provide only managements
report on internal control over financial reporting in an annual report and omit
an attestation report of the Companys registered public accounting firm
regarding managements report on internal control over financial reporting.

E.      Changes in internal control
over financial reporting

During the period covered by this annual report on Form 20-F,
there has been no change to the Companys internal controls over financial
reporting that has materially affected, or is reasonably likely to materially
affect, its internal control over financing reporting.

ITEM 16 [RESERVED]

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

David Fagin is a financial expert, in that he has an
understanding of International Financial Reporting Standards and financial
statements; is able to assess the general application of accounting principles
in connection with the accounting for estimates, accruals and reserves; has
experience preparing, auditing, analyzing or evaluating financial statements
that entail accounting issues of equal complexity to the Companys financial
statements (or actively supervising another person who did so); has an
understanding of internal controls and procedures for financial reporting and an
understanding of audit committee functions.

Mr. Fagin does not have an accounting designation; instead his
expertise is derived from his high level involvement in the financial matters of
public corporations almost continuously for at least 35 years. Mr. Fagin was
involved in the valuation of oil and gas companies for ten years both as a
consultant and a bank appraisal engineer (1958-68); President of a subsidiary of
Rosario Resources Corporation, a NYSE company (1968-75) and then Executive
Vice-President (1975-77) then President (1977-82) during which period he was
intimately involved in financial and accounting matters. In 1982, he founded
Fagin Exploration Company and worked closely with an accountant and auditors to
maintain the records. From 1986 to 1991, Mr. Fagin was the President and Chief
Operating Officer for Homestake Mining Corporation (NYSE), responsible for
producing operations in six countries and was involved in decisions for
corporate financial reporting. Between 1992 and 1996, Mr. Fagin was Executive
Chairman of Golden Star Resources Ltd. (ASE and TSE) and managed all
administrative matters including annual reports, audits and registration in
Canada and the US. Since 1987, Mr. Fagin has served on boards and audit
committees of several public companies including T. Rowe Price Mutual Funds,
Golden Star Resources Ltd., Canyon Resources Corp. (recently acquired by Atna
Resources Ltd.), Dayton Mining Corp. and the Company, where he was either
Chairman or a member of each audit committee. He currently remains a director of
Atna Resources Ltd.

Mr. Fagin is considered an independent director according to
Canadian securities regulations (Multilateral Instrument 52-110), Toronto Stock
Exchange guidelines and the NYSE Company Guide.

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- 77 -

ITEM 16B. CODE OF ETHICS

The Company has had in place, since 2002, a Code of Conduct and
Ethics (the Code) that applies to all Directors, officers and employees. A
revised Code was approved by the Board of Directors of the Company on December
17, 2002. A copy of the Code can be found on the Companys website at
http://www.pacrim-mining.com/s/CorporateGovernance.asp.

There have never been any departures or material waivers of the
Code since its inception.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

PricewaterhouseCoopers LLP acted at the Companys independent
auditor for the fiscal years ended April 30, 2010, 2011 and 2012. The chart
below sets forth the total amount billed to the Company by
PricewaterhouseCoopers LLP for services performed in the last two fiscal years
and breaks down these amounts by category of service (for audit fees,
audit-related fees, tax fees and all other fees) in Canadian dollars.

External Auditor Service Fees (By Category), (in Canadian
Dollars)

Financial Year Ended
    Audit Fees(1)
    Audit Related
      Fees(2)
    Tax Fees(3)
    All Other Fees(4)April 30, 2012
    $65,000
    $2,500
    Nil
    NilApril 30, 2011
    $40,000
    Nil
    Nil
    Nil


|(1) | The aggregate audit fees billed.                                                                                                                                                                                                                  
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The aggregate fees billed for assurance and related
      services that are reasonably related to the performance of the audit or
      review of the Companys financial statements, which are not included under
      the heading Audit Fees.
|(3) | The aggregate fees billed for professional services
      rendered for tax compliance, tax advice and tax planning.                                                                                                                               
|(4) | The aggregate fees billed for products and services other
      than as set out under the heading Audit Fees, Audit Related Fees and
      Tax Fees.                                                                                        

Audit Fees are the aggregate fees billed by
PricewaterhouseCoopers LLP for the audit of the Companys consolidated annual
financial statements and attestation services that are provided in connection
with statutory and regulatory filings or engagements.

Audit-Related Fees are the fees billed by
PricewaterhouseCoopers LLP for assurance and related services that are
reasonably related to the performance of the audit or review of the Companys
financial statements and are not reported under Audit Fees. This category
comprises fees billed for independent accountant review of the interim financial
statements and Management Discussion and Analysis, as well as advisory services
associated with the Companys financial reporting.

Tax Fees are the fees billed for professional services
rendered by PricewaterhouseCoopers LLP for tax compliance, tax advice, and tax
planning.

Pre-Approval Policies and Procedures

The Audit Committee nominates and engages the independent
auditors to audit the financial statements, and approves all audit,
audit-related services, tax services and other services provided by independent
auditors. Any services provided by the independent auditors that are not
specifically included within the scope of the audit must be pre-approved by the
Audit Committee prior to any engagement. The Audit Committee is permitted to
approve certain fees for audit-related services, tax services and other services
pursuant to a de minimusexception before the completion of the
engagement.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
COMMITTEES

None.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND
AFFILIATED PURCHASERS

None.

ITEM 16F. CHANGE IN REGISTRANTS CERTIFYING
ACCOUNTANT

None.

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- 78 -

ITEM 16G. CORPORATE GOVERNANCE

The only stock exchange on which the Companys common shares
trade is the TSX. The Companys common shares are not listed on a US exchange,
but do trade on the OTCQX platform in the US. The Companys Corporate Governance
practices are described in detail in its fiscal 2012 Information Circular dated
July 23, 2012 and furnished to the SEC on Form 6k.

ITEM 16H. MINE SAFETY DISCLOSURE

Pursuant to Section 1503(a) of the recently enacted Dodd-Frank
Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act),
issuers that are operators (or that have operations), or that have a subsidiary
that is an operator (or that has operations), of a coal or other mine in the
United States are required to disclose in their periodic reports filed with the
SEC information regarding specified health and safety violations, orders and
citations, related assessments and legal actions, and mining-related fatalities.
During the fiscal year ended April 30, 2012, the Company had no such specified
health and safety violations, orders or citations, related assessments or legal
actions, mining-related fatalities, or similar events in relation to the
Companys United States operations requiring disclosure pursuant to Section
1503(a) of the Dodd-Frank Act.

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PART III

ITEM 17. FINANCIAL STATEMENTS

The Company has provided financial statements pursuant to Item
18.

ITEM 18. FINANCIAL STATEMENTS

Audited Annual Financial Statements

The audited consolidated financial statements of the Company
for the years ended April 30, 2012 and 2011, including the report of the
independent auditor with respect thereto, are filed as Exhibit 99.1 and
incorporated by reference in this Annual Report on Form 20-F.

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ITEM 19 EXHIBITS

EXHIBITS

|99.1 | The following audited consolidated financial statements of the Company, are exhibits to and form a part of this Report:
|---- | -----------------------------------------------------------------------------------------------------------------------
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CERTIFICATIONS

|99.2 | Certificate of Chief Executive
      Officer Pursuant to Rule 13a-14(a) of the Exchange Act                                                                
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                            
|99.3 | Certificate of Chief Financial
      Officer Pursuant to Rule 13a-14(a) of the Exchange Act                                                                
|     |                                                                                                                                                            
|99.4 | Certificate of Chief Executive
      Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002
|     |                                                                                                                                                            
|99.5 | Certificate of Chief Financial
      Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002

CONSENTS

|99.6 | Consent of
      PricewaterhouseCoopers LLP, Chartered Accountants
|---- | ------------------------------------------------------------------
|     |                                                                   
|99.7 | Consent of William Gehlen,
      Certified Professional Geologist 

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SIGNATURES

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

| | PACIFIC RIM MINING CORP.
| | ------------------------
| |                         
| |                         
| | By: Thomas C. Shrake  
| | Name:                   
| | Title:                  

Date: July 23, 2012

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