---







PACIFIC RIM MINING CORP.

CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2006 and 2005

Expressed in US Funds

---

| | 
| | 





|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
      FIRM
|-------------------------------------------------------------
|                                                             

To the Shareholders of Pacific Rim Mining Corp.:

We have audited the accompanying consolidated balance sheets of
Pacific Rim Mining Corp. as of April 30, 2006 and 2005, and the related
consolidated statements of loss, shareholders equity, and cash flows for the
years ended April 30, 2006, 2005 and 2004. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of April 30, 2006 and 2005, and the results of its operations and its cash
flows for the years ended April 30, 2006, 2005 and 2004, in conformity with
Canadian generally accepted accounting principles.

|                | Staley, Okada & Partners
|--------------- | --------------------------
|                |                           
|                |                           
|                |                           
|Vancouver, B.C. | STALEY, OKADA & PARTNERS  
|June 6, 2006    | CHARTERED ACCOUNTANTS     



---

|Pacific Rim Mining Corp.     | Statement 1
|---------------------------- | -----------
|Consolidated Balance Sheets  |            
|In thousands of U.S. dollars |            

|                                                         |   | As at     |   |   | As at     |  
|-------------------------------------------------------- | - | --------- | - | - | --------- | -
|                                                         |   | April 30, |   |   | April 30, |  
|ASSETS                                                   |   | 2006      |   |   | 2005      |  
|Current Assets                                           |   |           |   |   |           |  
|Cash and cash equivalents                                | $ | 1,757     |   | $ | 436       |  
|Temporary
      investments (Note 4)                     |   | 14,620    |   |   | 358       |  
|Bullion (Note 1c & 5)                                    |   | 533       |   |   | 21        |  
|Receivables                                              |   | 166       |   |   | 116       |  
|Production inventory                                     |   | 278       |   |   | 266       |  
|                                                         |   | 17,354    |   |   | 1,197     |  
|Property, Plant and Equipment(Note 6)                    |   | 4,307     |   |   | 4,299     |  
|Closure Fund(Note 7)                                     |   | 3,248     |   |   | 3,122     |  
|                                                         | $ | 24,909    |   | $ | 8,618     |  
|                                                         |   |           |   |   |           |  
|                                                         |   |           |   |   |           |  
|LIABILITIES                                              |   |           |   |   |           |  
|Current Liabilities                                      |   |           |   |   |           |  
|Accounts payable
      and accrued liabilities           | $ | 882       |   | $ | 1,214     |  
|Accrued closure costs - current
      portion (Note 9)   |   | 143       |   |   | 118       |  
|                                                         |   | 1,025     |   |   | 1,332     |  
|Accrued Closure Costs(Note 9)                            |   | 1,849     |   |   | 1,747     |  
|                                                         |   | 2,874     |   |   | 3,079     |  
|                                                         |   |           |   |   |           |  
|                                                         |   |           |   |   |           |  
|SHAREHOLDERS
      EQUITY                               |   |           |   |   |           |  
|Share Capital-Statement
      3 (Note 10)                |   |           |   |   |           |  
|Authorized:                                              |   |           |   |   |           |  
|unlimited common shares without par value                |   |           |   |   |           |  
|Issued and fully paid:                                   |   |           |   |   |           |  
|105,590,960 (2005  80,642,194) shares
      outstanding |   | 74,178    |   |   | 57,435    |  
|Contributed Surplus- Statement 3                         |   | 1,181     |   |   | 810       |  
|Deficit- Statement 3                                     |   | (53,324   | ) |   | (52,706   | )
|                                                         |   | 22,035    |   |   | 5,539     |  
|                                                         | $ | 24,909    |   | $ | 8,618     |  

APPROVED BY THE BOARD OF DIRECTORS:

__________________________________, Director

__________________________________, Director

- See Accompanying Notes -

---

|Pacific Rim Mining Corp.                                         | Statement 2
|---------------------------------------------------------------- | -----------
|Consolidated Statements of Loss                                  |            
|In thousands of U.S. dollars, except for per share
      amounts |            

|                                                    |   | Year      |   |   | Year      |   |   | Year      |  
|--------------------------------------------------- | - | --------- | - | - | --------- | - | - | --------- | -
|                                                    |   | Ended     |   |   | Ended     |   |   | Ended     |  
|                                                    |   | April 30, |   |   | April 30, |   |   | April 30, |  
|                                                    |   | 2006      |   |   | 2005      |   |   | 2004      |  
|Revenue                                             |   |           |   |   |           |   |   |           |  
|Sales                                               | $ | 8,024     |   | $ | 11,868    |   | $ | 12,140    |  
|                                                    |   |           |   |   |           |   |   |           |  
|Cost of Sales                                       |   |           |   |   |           |   |   |           |  
|Operating costs                                     |   | 4,480     |   |   | 8,963     |   |   | 12,193    |  
|Depreciation, depletion and
      amortization      |   | 19        |   |   | 878       |   |   | 1,295     |  
|                                                    |   | 4,499     |   |   | 9,841     |   |   | 13,488    |  
|Mine Operating Income (Loss)                        |   | 3,525     |   |   | 2,027     |   |   | (1,348    | )
|                                                    |   |           |   |   |           |   |   |           |  
|Expenses (Income)                                   |   |           |   |   |           |   |   |           |  
|Exploration                                         |   |           |   |   |           |   |   |           |  
|- direct                                            |   | 6,237     |   |   | 6,351     |   |   | 5,144     |  
|-
      stock-based compensation (Note 10)          |   | 52        |   |   | 73        |   |   | 20        |  
|General and administrative                          |   |           |   |   |           |   |   |           |  
|-
      direct                                      |   | 1,504     |   |   | 1,149     |   |   | 878       |  
|- stock-based
      compensation (Note 10)          |   | 166       |   |   | 411       |   |   | 316       |  
|Interest expense                                    |   | -         |   |   | 18        |   |   | 47        |  
|Foreign exchange                                    |   | (264      | ) |   | (108      | ) |   | 26        |  
|Interest income                                     |   | (251      | ) |   | (120      | ) |   | (182      | )
|Gain on sale of property, plant
      and equipment |   | (11       | ) |   | (848      | ) |   | (290      | )
|                                                    |   | 7,433     |   |   | 6,926     |   |   | 5,959     |  
|Loss Before Unusual Item                            |   | (3,908    | ) |   | (4,899    | ) |   | (7,307    | )
|                                                    |   |           |   |   |           |   |   |           |  
|Recovery of Investment In Andacollo Mine(Note 1d )  |   | 3,349     |   |   | 284       |   |   | 448       |  
|Loss for the Year Before
      Taxes                |   | (559      | ) |   | (4,615    | ) |   | (6,859    | )
|Income Taxes                                        |   | (59       | ) |   | (19       | ) |   | -         |  
|Loss for the Year                                   | $ | (618      | ) | $ | (4,634    | ) | $ | (6,859    | )
|                                                    |   |           |   |   |           |   |   |           |  
|                                                    |   |           |   |   |           |   |   |           |  
|Loss Per Share - Basic and Diluted                  | $ | (0.01     | ) | $ | (0.06     | ) | $ | (0.09     | )
|                                                    |   |           |   |   |           |   |   |           |  
|                                                    |   |           |   |   |           |   |   |           |  
|Weighted Average Shares Outstanding (thousands)     |   | 82,528    |   |   | 80,514    |   |   | 79,146    |  

- See Accompanying Notes -

---

|Pacific Rim Mining Corp.                        | Statement 3
|----------------------------------------------- | -----------
|Consolidated Statements of Shareholders' Equity |            
|In thousands of U.S. dollars                    |            

Share Capital - Common
      SharesContributed
    
    
    Accumulated
    
    
    TotalNumber
    
    
    Amount
    
    
    Surplus
    
    
    Deficit
    
    
    EquityBalance  April 30,
      2003
    
    78,528,594
    
    $
    56,173
    
    $
    -
    
    $
    (41,213
    )
    $
    14,960Shares issued for cash options exercised
    
    1,955,400
    
    
    1,181
    
    
    -
    
    
    -
    
    
    1,181Stock-based
      compensation
    
    -
    
    
    -
    
    
    336
    
    
    -
    
    
    336Loss for the
      year
    
    -
    
    
    -
    
    
    -
    
    
    (6,859
    )
    
    (6,859
    )Balance - April 30,
      2004
    
    80,483,994
    
    $
    57,354
    
    $
    336
    
    $
    (48,072
    )
    $
    9,618Shares issued for cash options exercised
    
    158,200
    
    
    71
    
    
    -
    
    
    -
    
    
    71Stock-based
      compensation
    
    -
    
    
    -
    
    
    484
    
    
    -
    
    
    484Fair value of optionsexercised
    
    -
    
    
    10
    
    
    (10
    )
    
    -
    
    
    -Loss for the
      year
    
    -
    
    
    -
    
    
    -
    
    
    (4,634
    )
    
    (4,634
    )Balance - April 30, 2005
    
    80,642,194
    
    $
    57,435
    
    $
    810
    
    $
    (52,706
    )
    $
    5,539Shares issued
      for cash, net ofcosts
    
    23,900,000
    
    
    16,361
    
    
    -
    
    
    -
    
    
    16,361Shares issued
      for cash options exercised
    
    783,766
    
    
    347
    
    
    -
    
    
    -
    
    
    347Shares issued
      for propertyoption payment
    
    50,000
    
    
    38
    
    
    -
    
    
    -
    
    
    38Shares issued
      for services(Note 10)
    
    215,000
    
    
    150
    
    
    -
    
    
    -
    
    
    150Warrants issue cost
    
    -
    
    
    (168
    )
    
    168
    
    
    -
    
    
    -Stock-based compensation
    
    -
    
    
    -
    
    
    218
    
    
    -
    
    
    218Fair value of
      optionsexercised
    
    -
    
    
    15
    
    
    (15
    )
    
    -
    
    
    -Loss for the year
    
    -
    
    
    -
    
    
    -
    
    
    (618
    )
    
    (618
    )Balance  April 30, 2006
    
    105,590,960
    
    $
    74,178
    
    $
    1,181
    
    $
    (53,324
    )
    $
    22,035


- See Accompanying Notes -

---

|Pacific Rim Mining Corp.              | Statement 4
|------------------------------------- | -----------
|Consolidated Statements of Cash Flows |            
|In thousands of U.S. dollars          |            

|                                                               |   | Year      |   |   | Year      |   |   | Year      |  
|-------------------------------------------------------------- | - | --------- | - | - | --------- | - | - | --------- | -
|                                                               |   | Ended     |   |   | Ended     |   |   | Ended     |  
|                                                               |   | April 30, |   |   | April 30, |   |   | April 30, |  
|                                                               |   | 2006      |   |   | 2005      |   |   | 2004      |  
|Operating Activities                                           |   |           |   |   |           |   |   |           |  
|Loss for the year                                              | $ | (618      | ) | $ | (4,634    | ) | $ | (6,859    | )
|Items not
      involving cash:                                |   |           |   |   |           |   |   |           |  
|Depletion,
      depreciation and amortization                 |   | 38        |   |   | 869       |   |   | 800       |  
|Accrued closure and pension costs                              |   | 237       |   |   | 343       |   |   | 495       |  
|Shares issued for
      property option payment                |   | 38        |   |   | -         |   |   | -         |  
|Shares issued for services                                     |   | 150       |   |   | -         |   |   | -         |  
|Stock based
      compensation                                 |   | 218       |   |   | 484       |   |   | 336       |  
|Net interest earned on closure sinking fund                    |   | (126      | ) |   | (91       | ) |   | (174      | )
|Gain on sale of
      property, plant and equipment            |   | (11       | ) |   | (848      | ) |   | (290      | )
|Loss on sale of supplies inventory                             |   | -         |   |   | 37        |   |   | -         |  
|Write-down of
      supplies inventory                         |   | -         |   |   | 165       |   |   | -         |  
|                                                               |   | (74       | ) |   | (3,675    | ) |   | (5,692    | )
|Changes in non-cash working
      capital items:               |   |           |   |   |           |   |   |           |  
|Accounts payable and accrued liabilities                       |   | (332      | ) |   | (547      | ) |   | 533       |  
|Closure cost
      expenditures                                |   | (110      | ) |   | (304      | ) |   | (2,057    | )
|Loans payable                                                  |   | -         |   |   | (828      | ) |   | (1,043    | )
|Inventories                                                    |   | (524      | ) |   | 3,710     |   |   | 7,194     |  
|Receivables                                                    |   | (50       | ) |   | 2         |   |   | (68       | )
|Proceeds of
      disposition of supplies inventory            |   | -         |   |   | 32        |   |   | -         |  
|Cash Flow Used for
      Operating Activities                  |   | (1,090    | ) |   | (1,610    | ) |   | (1,133    | )
|Investing Activities                                           |   |           |   |   |           |   |   |           |  
|Temporary
      investments                                    |   | (14,262   | ) |   | (358      | ) |   | -         |  
|Purchases of property, plant and
      equipment               |   | (46       | ) |   | (86       | ) |   | (461      | )
|Proceeds of
      disposition of property, plant and equipment |   | 11        |   |   | 848       |   |   | 304       |  
|Reclamation sinking fund
      withdrawals                     |   | -         |   |   | 108       |   |   | 465       |  
|Cash Flow Provided By
      (Used for) Investing Activities    |   | (14,297   | ) |   | 512       |   |   | 308       |  
|Financing Activities                                           |   |           |   |   |           |   |   |           |  
|Shares issued
      for cash net of issuance costs             |   | 16,708    |   |   | 71        |   |   | 1,181     |  
|Cash Flow Provided By Financing
      Activities               |   | 16,708    |   |   | 71        |   |   | 1,181     |  
|Net Increase (Decrease) in
      Cash and Cash Equivalents     |   | 1,321     |   |   | (1,027    | ) |   | 356       |  
|Cash and cash equivalents -
      Beginning of year            |   | 436       |   |   | 1,463     |   |   | 1,107     |  
|Cash and Cash Equivalents - End of Year                        | $ | 1,757     |   | $ | 436       |   | $ | 1,463     |  
|                                                               |   |           |   |   |           |   |   |           |  
|Supplementary Schedule of
      Cash Transactions:             |   |           |   |   |           |   |   |           |  
|Interest paid during the period                                | $ | -         |   | $ | 25        |   | $ | 61        |  
|Income taxes paid during the period                            | $ | 59        |   | $ | 19        |   | $ | -         |  
|                                                               |   |           |   |   |           |   |   |           |  
|                                                               |   |           |   |   |           |   |   |           |  
|Supplementary Schedule of Non-cash
      Transactions:         |   |           |   |   |           |   |   |           |  
|Shares issued
      for property option payment                | $ | 38        |   | $ | -         |   | $ | -         |  
|Shares issued for services                                     | $ | 150       |   | $ | -         |   | $ | -         |  
|Stock-based
      compensation                                 | $ | 218       |   | $ | 484       |   | $ | 336       |  
|Warrant issue costs (Note 10)                                  | $ | 168       |   | $ | -         |   | $ | -         |  
|Accrued closure costs capitalized as property                  | $ | -         |   | $ | -         |   | $ | 495       |  

---

|Pacific Rim Mining Corp.                  
|------------------------------------------
|Notes to Consolidated Financial Statements
|April 30, 2006, 2005 and 2004             
|In thousands of U.S. dollars              
|                                          
|                                          

|1. | Nature of Operations and Basis of
    Presentation                                                                                                                                                                                                                                                                                                                                                                   
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | The Company is involved in the exploration, development
      and operation of gold properties. The Company owns a 49% interest in the
      Denton-Rawhide Mine, located near Fallon, Nevada, U.S.A., a 100% interest
      in certain mineral properties, known as El Dorado, located in El Salvador
      and exploration interests in mineral claims in Chile and
  Argentina.                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | These consolidated financial statements are presented in
      accordance with generally accepted accounting principles (GAAP)
      applicable in Canada and have been reconciled as to significant
      differences in measurement to generally accepted accounting principles
      applicable in the United States as disclosed in Note 15.                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | These consolidated financial statements include the
      accounts of the Companys wholly-owned active subsidiaries, Dayton Mining
      (US) Inc., Pacific Rim Exploration Inc., Pacific Rim Cayman, Pacific Rim
      El Salvador S.A. de C.V., Dorado Exploraciones S.A. de C.V., Pac Rim
      Caribe III and its wholly- owned subsidiaries International Pacific Rim
      S.A and Pacific Rim Chile Limitada.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | The 49% joint venture interest in Denton-Rawhide is
      accounted for on the proportionate consolidation basis.                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | d)                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                      

---

|Pacific Rim Mining Corp.                  
|------------------------------------------
|Notes to Consolidated Financial Statements
|April 30, 2006, 2005 and 2004             
|In thousands of U.S. dollars              
|                                          
|                                          

|2. | Significant Accounting Policies and Accounting
      Changes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Cash and cash equivalents includes cash on hand, demand
      deposits, and short term highly liquid investments with a term to maturity
      of three months or less from inception which are readily convertible to
      known amounts of cash and which, in the opinion of management, are subject
      to an insignificant risk of loss in values.                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Temporary Investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Term investments with a term to maturity from inception
      of greater than three months which are readily convertible to known
      amounts of cash and which, in the opinion of management, are subject to
      insignificant risks of loss in value are classified as temporary
      investments.                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Bullion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Gold and silver bullion is valued at the lower of cost
      and estimated fair market value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Production Inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Production inventory, comprised of gold in process is
      valued at the lower of cost and net realizable value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Property, Plant and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Property, plant and equipment is stated at estimated fair
      value as at the date of acquisition less accumulated depreciation and
      accumulated write-downs. Mining property, plant and equipment is
      depreciated using the unit of production method over estimated recoverable
      ounces.                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Annually, reviews are undertaken to evaluate the carrying
      values of operating mines and development properties. If it is determined
      that the estimated net recoverable amount is less than the carrying value
      and the impairment in value is likely to be permanent, a write-down to the
      net recoverable amount is made by a charge to earnings.                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | All exploration expenditures are expensed as incurred.
      Significant property acquisition payments for active exploration
      properties are capitalized. If no mineable ore body is discovered,
      previously capitalized costs are expensed in the period the property is
      abandoned. Expenditures for the development of new mines, to define
      further mineralization in existing ore bodies, and to expand the capacity
      of operating mines, will be capitalized as incurred and amortized on a
      units of production basis over estimated recoverable reserves.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Environmental Expenditures and Closure
  Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The operations of the Company may in the future be
      affected by changes in environmental regulations, including those for
      future removal and site restoration costs. Both the likelihood of new
      regulations and their overall effect upon the Company vary greatly and are
      not predictable. The Company's policy is to meet standards set by relevant
      legislation by application of technically proven and economically feasible
      measures.                                                                                                                   

---

|Pacific Rim Mining Corp.                  
|------------------------------------------
|Notes to Consolidated Financial Statements
|April 30, 2006, 2005 and 2004             
|In thousands of U.S. dollars              
|                                          
|                                          

|2. | Significant Accounting Policies and Accounting Changes- Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Environmental Expenditures and Closure Costs -Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Environmental expenditures that relate to ongoing
      environmental and reclamation programs are charged against earnings as
      incurred or capitalized and amortized depending on their future economic
      benefits. Estimated future removal and site restoration costs, when the
      ultimate liability is reasonably determinable, are charged against
      earnings over the estimated remaining life of the operation, net of
      expected recoveries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The Companys share of estimated closure costs associated
      with the Denton-Rawhide Mine at the time of acquisition was recognized in
      full as part of the acquisition cost. Increases in estimates of closure
      liabilities subsequent to the acquisition of Denton-Rawhide are accounted
      for in accordance with CICA 3110 Asset Retirement Obligations
      which conforms in all material respects to FASB (Financial Accounting
      Standards Board) Statement No. 143 as required under United States GAAP
      requirements for the reporting of asset retirement obligations. Effective
      May 1, 2003, the Company elected early implementation of CICA 3110,
      whereby the Company prospectively recognizes asset retirement obligations
      in the period in which they are incurred, if a reasonable estimate of fair
      market value can be made. The asset retirement costs are capitalized as
      part of the carrying amount of the long term asset to be amortized over
      the estimated remaining useful life of the asset and the associated
      liability is accreted over the estimated future ounces of gold production
      until settlement of the obligation. As a result of the adoption of this
      accounting standard, the carrying value of the Rawhide Mine and the
      corresponding asset retirement obligation was increased by $500 during the
      year ended April 30, 2004.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The Company uses the asset and liability method of
      accounting for future income taxes. Under this method, current income
      taxes are recognized for the estimated income taxes payable for the
      current period. Future income tax assets and liabilities are recognized
      for temporary differences between the tax and accounting basis of assets
      and liabilities as well as for the benefit of losses available to be
      carried forward to future years for tax purposes, which are more likely
      than not to be realized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Share Capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

---

|Pacific Rim Mining Corp.                  
|------------------------------------------
|Notes to Consolidated Financial Statements
|April 30, 2006, 2005 and 2004             
|In thousands of U.S. dollars              
|                                          
|                                          

|2. | Significant Accounting Policies and Accounting Changes- Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Revenue Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Revenues from the sale of all precious metal bullion are
      recognized when title to the bullion passes to the buyer, an arrangement
      exists, the price is fixed and determinable, and collection is reasonably
      assured.                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Earnings (Loss) per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Basic earnings (loss) per share is computed by dividing
      income available to common shareholders by the weighted average number of
      common shares outstanding during the period. The computation of diluted
      earnings per share assumes the conversion, exercise or contingent issuance
      of securities only when such conversion, exercise or issuances would have
      a dilutive effect on earnings per share. The dilutive effect of
      outstanding options and warrants and their equivalents is reflected in
      diluted earnings per share by application of the treasury stock
    method.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Derivative Transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The Company may enter into gold forward sales contracts
      to manage its exposure to fluctuations in the market price of gold and to
      establish minimum prices for a portion of its future production. The
      Companys entire forward sales activity is considered normal course sales
      requiring settlements through physical delivery. Gains or losses on these
      contracts are included in sales revenue when product is delivered against
      the contract.                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Foreign Currency Translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The Companys functional and reporting currency is the
      United States dollar. Transactions denominated in other currencies are
      translated into their United States dollar equivalents at exchange rates
      prevailing at the transaction date. Carrying values of monetary assets and
      liabilities denominated in foreign currencies are adjusted at each balance
      sheet date to reflect exchange rates prevailing at that date.                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Integrated foreign operations are translated into the
      functional currency using the temporal method as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Gains and losses on translation are included in
      determining net income for the period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The preparation of financial statements in conformity
      with Canadian generally accepted accounting principles requires management
      to make estimates and assumptions that affect the reported amounts of
      assets and liabilities and disclosures of contingent assets and
      liabilities at the date of the financial statements and the reported
      amounts of revenues and expenses during the reporting period. Actual
      results could differ from those estimates.                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

---

|Pacific Rim Mining Corp.                  
|------------------------------------------
|Notes to Consolidated Financial Statements
|April 30, 2006, 2005 and 2004             
|In thousands of U.S. dollars              
|                                          
|                                          

|3. | Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The Companys financial instruments consist of cash and
      cash equivalents, temporary investments, bullion (Note 1c, 5 & 11),receivables and, accounts payable. Unless otherwise noted, it is
      managements opinion that the Company is not exposed to significant
      interest, currency or credit risks arising from the financial instruments.
      The fair value of these financial instruments approximates their carrying
      value due to their short-term maturity or capacity of prompt
      liquidation.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|4. | Temporary Investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

| |                                     |   | April
      30, 2006 |  |   | April
      30, 2005 | 
| | ----------------------------------- | - | -------------------- |  | - | -------------------- | 
| | Guaranteed Investment Certificate * | $ | 14,620               |  | $ | 358                  | 
| | Maturity date                       |   | April 3, 2007        |  |   | August 24, 2005      | 
| | Interest rate per annum             |   | 3.6 %                |  |   | 1.8 %                | 

|   | * The guaranteed investment certificates, guaranteed by a
      large North American banking institution are callable on demand and pay
      interest on all amounts invested for more than thirty days.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                          
|   |                                                                                                                                                                                                          
|5. | Bullion                                                                                                                                                                                                  

| |                                      |   | April 30, 2006 |  |   | April 30, 2005 | 
| | ------------------------------------ | - | -------------- |  | - | -------------- | 
| |                                      |   | Gold           |  |   | Silver         | 
| | Ounces at refinery                   |   | 1,200          |  |   | 11,929         | 
| | Market value per ounce ($/oz.)       | $ | 652            |  | $ | 13.50          | 
| | Market value                         | $ | 782            |  | $ | 161            | 
| | Total market value                   | $ | 943            |  |   |                | 
| | Valuation  lower of cost and market | $ | 533            |  |   |                | 

|   |                              
|-- | -----------------------------
|6. | Property, Plant and
Equipment

| |                                                       |   | April 30, |   |   | April 30, |  
| | ----------------------------------------------------- | - | --------- | - | - | --------- | -
| |                                                       |   | 2006      |   |   | 2005      |  
| | Office Equipment and Vehicles                         | $ | 207       |   | $ | 170       |  
| | Accumulated Depreciation                              |   | (190      | ) |   | (150      | )
| |                                                       |   | 17        |   |   | 20        |  
| | Rawhide Mining Facility                               |   | 24,135    |   |   | 24,153    |  
| | Accumulated depreciation and amortization             |   | (24,093   | ) |   | (24,107   | )
| |                                                       |   | 42        |   |   | 46        |  
| | Mining Property Acquisition Costs  El
      Salvador |   | 4,248     |   |   | 4,233     |  
| |                                                       | $ | 4,307     |   | $ | 4,299     |  
| |                                                       |   |           |   |   |           |  

---

|Pacific Rim Mining Corp.                  
|------------------------------------------
|Notes to Consolidated Financial Statements
|April 30, 2006, 2005 and 2004             
|In thousands of U.S. dollars              
|                                          
|                                          

|7. | Closure Fund
|-- | ------------

The Denton-Rawhide Closure Fund
investments of $3,248 (2005 - $3,122) are held in a trust managed by a Trustee
that is a large North American banking institution. The trust funds are invested
in mutual funds composed of U.S. Government guaranteed fixed income securities
with maturities of one to five years. The fair market value of the funds at
April 30, 2006 was approximately $3,276 (2005 - $3,261). During the year ended
April 30, 2006, no funds (2005 - $108) were drawn from the trust to pay
severances owed to Denton-Rawhide employees due to the cessation of mining and
processing activities and the related reduction of the workforce. These
severances paid were part of the accrued closure costs. At April 30, 2006,
closure trust funding is in excess of estimated total closure cost liabilities.
The Company will not have access to any excess funding of these funds until all
related closure liabilities are satisfied and reclamation work is deemed
complete by the Denton-Rawhide joint venture operator. Completion date of the
reclamation work cannot be reasonably estimated at this time.

|   |                   
|-- | ------------------
|8. | Mineral Properties
|   |                   
|   | a)                
|   |                   
|   |                   
|   |                   
|   |                   
|   |                   
|   |                   
|   |                   
|   |                   
|   |                   
|   |                   

---

|Pacific Rim Mining Corp.                  
|------------------------------------------
|Notes to Consolidated Financial Statements
|April 30, 2006, 2005 and 2004             
|In thousands of U.S. dollars              
|                                          
|                                          

|8. | Mineral Properties- Continued
|-- | -----------------------------
|   |                              
|   | a)                           
|   |                              
|   |                              
|   |                              
|   | b)                           
|   |                              
|   |                              

| |                               |   | April 30, |   |   | April 30, |  
| | ----------------------------- | - | --------- | - | - | --------- | -
| |                               |   | 2006      |   |   | 2005      |  
| | Current assets                | $ | 814       |   | $ | 412       |  
| | Property, plant and equipment |   | 42        |   |   | 46        |  
| | Closure fund                  |   | 3,248     |   |   | 3,122     |  
| | Current liabilities           |   | (415      | ) |   | (560      | )
| | Long-term liabilities         |   | (1,849    | ) |   | (1,747    | )
| | Net assets                    | $ | 1,840     |   | $ | 1,273     |  

The condensed statements of operating
income (loss) of the Companys 49% interest are as follows:

| |                                     |   |           |   |   | Year
      Ended |   |   |           |  
| | ----------------------------------- | - | --------- | - | - | ---------------- | - | - | --------- | -
| |                                     |   | April 30, |   |   | April 30,        |   |   | April 30, |  
| |                                     |   | 2006      |   |   | 2005             |   |   | 2004      |  
| | Sales                               | $ | 8,024     |   | $ | 11,868           |   | $ | 12,140    |  
| | Gain on sale of property, plant and |   |           |   |   |                  |   |   |           |  
| | equipment                           |   | -         |   |   | 848              |   |   | 290       |  
| | Costs and expenses                  |   | (4,619    | ) |   | (9,841           | ) |   | (13,483   | )
| | Net income (loss)                   | $ | 3,405     |   | $ | 2,875            |   | $ | (1,053    | )

---

|Pacific Rim Mining Corp.                  
|------------------------------------------
|Notes to Consolidated Financial Statements
|April 30, 2006, 2005 and 2004             
|In thousands of U.S. dollars              
|                                          
|                                          

|8. | Mineral Properties-
  Continued
|-- | -------------------------------

| | b) | Denton-Rawhide Joint Venture-
    Continued
| | -- | -------------------------------------------

The condensed statements of cash flows
of the Companys 49% interest are as follows:

| |                                   |   |           |   |   | Year
      Ended |   |   |           |  
| | --------------------------------- | - | --------- | - | - | ---------------- | - | - | --------- | -
| |                                   |   | April 30, |   |   | April 30,        |   |   | April 30, |  
| |                                   |   | 2006      |   |   | 2005             |   |   | 2004      |  
| | Cash flows provided by operations | $ | 2,862     |   | $ | 6,624            |   | $ | 5,160     |  
| | Cash flows provided by (used for) |   |           |   |   |                  |   |   |           |  
| | investment activities             |   | (3        | ) |   | 812              |   |   | (150      | )
| | Cash flows provided by (used for) |   |           |   |   |                  |   |   |           |  
| | financing activities              |   | -         |   |   | (828             | ) |   | (1,021    | )
| | Net cash flow                     | $ | 2,859     |   | $ | 6,608            |   | $ | 3,989     |  

| | ii) | By agreement dated October 28, 2004 between the Company
      and Kennecott Rawhide Mining Company (the Denton-Rawhide joint venture
      partners  Rawhide) and Nevada Resource Recovery Group LLC (NRRG),
      Rawhide has agreed to the transfer of certain properties and assets
      required for an approved landfill business. The landfill will be operated
      and permitted by NRRG, utilizing the existing mine open pits as landfill
      sites, to dispose of permitted non-hazardous municipal wastes. As
      consideration for certain real property, including access and water
      rights, NRRG will pay $1,500. $500 of the amount has been paid into trust
      to fund additional activities needed to close the transaction, including
      the acquisition of title to additional lands within the area of interest
      to perfect the title of lands required for the operation. Should Rawhide
      complete these items and NRRG does not or is not able to complete their
      undertakings, any unspent balance in the trust will be released to
      Rawhide. The $1,000 balance of the consideration is to be paid on the
      closing date. Upon closing Rawhide and NRRG will sign a royalty payment
      agreement based on tipping fees generated by the landfill operation.
      Additional consideration, still to be determined, for certain buildings
      and other property required for the operation, will be paid to Rawhide on
      closing. The $500 received from NRRG has not been reflected in these
      financial statements as Rawhide has not yet removed the conditions for
      release from escrow.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c) | Other Exploration Properties                                                                                                     
| | -- | ---------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                  
| |    | The Company holds exploration rights on mineral claims in
      Argentina and Chile which are largely unexplored and
undeveloped.
| |    |                                                                                                                                  

---

|Pacific Rim Mining Corp.                  
|------------------------------------------
|Notes to Consolidated Financial Statements
|April 30, 2006, 2005 and 2004             
|In thousands of U.S. dollars              
|                                          
|                                          

|9. | Accrued Closure Costs                                                                                                                                                                                                                                                                                                                                                                           
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The Company estimates its share of closure liabilities at
      the Denton-Rawhide Mine to be $1,992 at April 30, 2006 (2005 - $1,865) of
      which $1,849 (2005- $1,747) is long-term and $143 (2005 - $118) is
      current. The closure fund (Note 7), held in trust, is provided as
      security to the mine operator for the Companys portion of estimated
      closure liabilities.
|   |                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Estimated closure liabilities are as
  follows:                                                                                                                                                                                                                                                                                                                                                 

| | Accrued closure costs  April 30, 2005            |   |       |  |   |       |  
| | ------------------------------------------------- | - | ----- |  | - | ----- | -
| | Current                                           | $ | 118   |  |   |       |  
| | Long-term                                         |   | 1,747 |  | $ | 1,865 |  
| | Add: Pension and reclamation liability accruals * |   |       |  |   | 237   |  
| | Less: Expenditures during the year                |   |       |  |   | (110  | )
| | Accrued closure costs  April 30, 2006            |   |       |  |   |       |  
| | Current               -
      (< 1 year)          | $ | 143   |  |   |       |  
| | Long-term          - (1
       3 years)          |   | 697   |  |   |       |  
| | - (3  5 years)                                   |   | 996   |  |   |       |  
| | -
      (> 5 years)                               |   | 156   |  | $ | 1,992 |  

* During the year the Company booked
additional reclamation liabilities and post-retirement benefit liabilities
relating to the Rawhide Joint Venture. The current and long-term portions of
these estimated liabilities has been recognized as part of the accrued closure
costs with a corresponding charge to mine operating income.

|    |                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10. | Share Capital                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                        
|    | Common Shares                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                        
|    | The Company filed a Notice of Alteration of Articles,
      under the new Business Corporations Act (British Columbia) which,
      effective January 20, 2005 altered its authorized share structure from
      1,000,000,000 common shares to an unlimited number of common
  shares.
|    |                                                                                                                                                                                                                                                                                        
|    | Stock and Warrant Issues                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                        
|    | i)                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                        

---

|Pacific Rim Mining Corp.                  
|------------------------------------------
|Notes to Consolidated Financial Statements
|April 30, 2006, 2005 and 2004             
|In thousands of U.S. dollars              
|                                          
|                                          

|10. | Share Capital Continued            
|--- | ------------------------------------
|    |                                     
|    | Stock and Warrant Issue
  Continued
|    |                                     
|    | ii)                                 

Proceeds from the issue are being used
for further exploration and development of the El Dorado gold project as well as
exploration on other El Salvador gold properties and for general corporate
purposes.

Stock Options

In April 2002 Dayton Mining Corporation
and Pacific Rim Mining Corporation were amalgamated. The stock options
outstanding at that date were combined, provided that upon surrender,
termination or expiry without exercise the shares would not be available for the
grant of new options.

In October 2002 shareholders approved a
stock option and bonus plan under which, up to 6,000,000 common shares were
reserved for the grant of stock options and up to 367,000 common shares were
reserved for the grant of bonus shares to directors, employees or consultants
(eligible parties). Stock options or bonus shares may be granted under the
2002 Plan, by the Board of Directors, to eligible parties, with the options to
have a term of up to 10 years, at the closing price on the TSX on the date prior
to the grant, and on conditions as may be determined by the Board of Directors.
Details are as follows:

| |                                       |  | Number of Options |   |  |           |   |                  | 
| | ------------------------------------- |  | ----------------- | - |  | --------- | - | ---------------- | 
| |                                       |  | Pre-              |   |  | October   |   | Weighted Average | 
| |                                       |  | Amalgamation      |   |  | 2002 Plan |   | Exercise Price   | 
| |                                       |  | Plans             |   |  |           |   | (in Cdn $)       | 
| | Options outstanding at April 30, 2003 |  | 4,517,480         |   |  | 2,110,000 |   | $ 0.73           | 
| | Year ended April 30, 2005 - granted   |  | -                 |   |  | 1,425,800 |   | $ 0.80           | 
| | -
      expired/cancelled             |  | (952,700          | ) |  | (130,000  | ) | $ 1.27           | 
| | - exercised                           |  | (1,760,400        | ) |  | (195,000  | ) | $ 0.80           | 
| | Options outstanding at April 30, 2004 |  | 1,804,380         |   |  | 3,210,800 |   | $ 0.60           | 
| | Year ended April 30, 2005 - granted   |  | -                 |   |  | 1,330,000 |   | $ 0.75           | 
| | -
      expired/cancelled             |  | (65,080           | ) |  | -         |   | $ 1.33           | 
| | - exercised                           |  | (138,200          | ) |  | (20,000   | ) | $ 0.55           | 
| | Options outstanding at April 30, 2005 |  | 1,601,100         |   |  | 4,520,800 |   | $ 0.63           | 
| | Year ended April 30, 2006 - granted   |  | -                 |   |  | 12,500    |   | $ 0.93           | 
| | - expired/cancelled                   |  | (30,800           | ) |  | (93,334   | ) | $ 0.73           | 
| | - exercised                           |  | (611,300          | ) |  | (172,466  | ) | $ 0.55           | 
| | Options outstanding at April 30, 2006 |  | 959,000           |   |  | 4,267,500 |   | $ 0.63           | 
| | Vested as at April 30, 2006           |  | 959,000           |   |  | 3,950,833 |   | $ 0.60           | 

---

|Pacific Rim Mining Corp.                  
|------------------------------------------
|Notes to Consolidated Financial Statements
|April 30, 2006, 2005 and 2004             
|In thousands of U.S. dollars              
|                                          
|                                          

|10. | Share Capital -Continued                                                                                                                            
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                     
|    | Stock Options- Continued                                                                                                                            
|    |                                                                                                                                                     
|    | The following table summarizes information about stock
      options outstanding to directors, employees and consultants as at April
      30, 2006.

Exercise Price
    Number
    NumberExpiry Date
    (in
      Cdn $)
    Outstanding
    VestedJuly 4, 2006
    $ 0.29
    959,000
    959,000April 18, 2007
    $ 0.62
    1,685,000
    1,685,000January 26, 2008
    $0.93
    12,500
    12,500July 23, 2008
    $ 0.43
    130,000
    130,000October 8, 2008
    $ 0.85
    1,190,000
    1,190,000February 18, 2010
    $ 0.75
    1,250,000
    933,3335,226,500
    4,909,833


On January 26, 2006, the Company
granted an additional 12,500 incentive stock options under its stock option plan
at an exercise price of CDN$0.93 per share. These options issued to consultants
vested 100% upon grant and expire on January 26, 2008.

During the year stock-based
compensation expense has been recorded as follows:

2006
    
    
    2005
    
    
    2004Administrative
      costs
    $
    166
    
    $
    411
    
    
    316Exploration costs
    
    52
    
    
    73
    
    
    20Total stock-based compensation
    $
    218
    
    $
    484
    
    
    336


The fair value of the options used in
the information above has been estimated at the date of grant of options using
the Black-Scholes Option Pricing Model with the following assumptions for each
option issue.

Options GrantedJanuary
    February
    October
    July 23,
    April26,
      2006
    18,
      2005
    8, 2003
    2003
    18,2002Risk free interest rate
    3.85 %
    3.46 %
    3.85 %
    3.67 %
    4.31 %Expected Option life (years)
    4
    4
    4
    4
    4Stock volatility  based on trading history
    87.73 %
    87.39 %
    88.30 %
    87.74 %
    89.46 %Dividend payments during life of option
    none
    none
    none
    none
    noneTotal fair value of option granted
    $ 4
    $ 530
    $ 517
    $ 33
    $ 493


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

---

---

|Pacific Rim Mining Corp.                  
|------------------------------------------
|Notes to Consolidated Financial Statements
|April 30, 2006, 2005 and 2004             
|In thousands of U.S. dollars              
|                                          
|                                          

|11. | Gold Forward Sales Contracts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | (Metal prices in U.S. Dollars)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | At April 30, 2006, the Companys gold forward sales
      contract position consisted of 3,000 ounces (2005 - 3,000) for future
      delivery of gold at various dates from May 2006 to October 2006 (2005 -
      May to July 2005) at an average price of US$639 (2005 - US$442) per ounce.
      At April 30, 2006 the Company had a financial exposure to market risks
      related to the settlement of outstanding forward sales as gold spot prices
      were approximately US$652 (2005 - US$434) per ounce at that date. The
      estimated fair value of these contracts at the April 30, 2006 spot prices
      was $(39) (2005 - $24), which represents the fair value to the Company on
      the balance sheet date if it were to settle these instruments prior to
      their maturity.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The credit risk exposure related to the Companys gold
      forward sales activity is limited to the unrealized gains (losses) on
      outstanding contracts based on current market prices. The Companys gold
      forward sales contract counter parties are large international
      credit-worthy institutions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|12. | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The Company operates in several tax jurisdictions and is
      subject to varying rates of taxation. In addition, the Company has various
      non-capital losses and deferred exploration expenditures that are
      available for carry forward to reduce taxable income of the current and
      future years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | As at April 30, 2006 the Company has the following tax
      loss carry forwards:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

| | Country       | Category                                         |   | Amount |  |  | Expiry    | 
| | ------------- | ------------------------------------------------ | - | ------ |  |  | --------- | 
| | Argentina     | Operating losses                                 | $ | 2,399  |  |  | 2007-2011 | 
| | Canada        | Non-capital losses                               | $ | 9,024  |  |  | 2007-2015 | 
| |               | Net capital losses                               | $ | 52,442 |  |  | N/A       | 
| |               | Mineral expenditures                             | $ | 11,653 |  |  | N/A       | 
| | El Salvador   | Mineral expenditures                             | $ | 21,228 |  |  | (i)       | 
| | United States | Operating losses  Regular tax                   | $ | 9,021  |  |  | 2007-2026 | 
| |               | Operating losses  Alternative
      minimum tax | $ | 7,132  |  |  | 2007-2026 | 

(i) These expenditures expire when they
are written-off for local accounting purposes. The Company has deferred
write-off of these expenditures for tax purposes on the reasoning that the local
taxing authority, as is common in many jurisdictions, will allow future
deduction of these costs against future taxable revenues that these expenditures
give rise to.

Future income tax assets are not
recorded for the above tax loss carry forwards due to complete uncertainty of
their recovery. The tax losses may be subject to audit and adjustment by local
tax authorities as well as other local regulations. Significant components of
the Companys future income tax assets, after applying enacted corporate income
tax rates are as follows:

| |                            |   | April 30, 2006 |   |   | April
      30, 2005 |  
| | -------------------------- | - | -------------- | - | - | -------------------- | -
| | Non-capital losses         | $ | 6,885          |   | $ | 8,304                |  
| | Net capital losses         |   | 17,306         |   |   | 882                  |  
| | Exploration expenditures   |   | 9,854          |   |   | 8,676                |  
| |                            |   | 34,045         |   |   | 17,862               |  
| | Less: Valuation allowances |   | (34,045        | ) |   | (17,862              | )
| |                            | $ | -              |   | $ | -                    |  

---

---

|Pacific Rim Mining Corp.                  
|------------------------------------------
|Notes to Consolidated Financial Statements
|April 30, 2006, 2005 and 2004             
|In thousands of U.S. dollars              
|                                          
|                                          

|13. | Commitments                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                     
|    | Operating Leases                                                                                                                                    
|    |                                                                                                                                                     
|    | The Company has entered into operating leases for office
      premises, office equipment and vehicles. Minimum lease payments are as
      follows:

| |      |   | Office       |  |   | Office    |  |   |         |  |   |       | 
| | ---- | - | ------------ |  | - | --------- |  | - | ------- |  | - | ----- | 
| |      |   | Premises (i) |  |   | Equipment |  |   | Vehicle |  |   | Total | 
| | 2007 | $ | 59           |  | $ | 5         |  | $ | 58      |  | $ | 122   | 
| | 2008 |   | 45           |  |   | 4         |  |   | 35      |  |   | 84    | 
| | 2009 |   | -            |  |   | 1         |  |   | 24      |  |   | 25    | 
| | 2010 |   | -            |  |   | -         |  |   | 3       |  |   | 3     | 
| |      | $ | 104          |  | $ | 10        |  | $ | 120     |  | $ | 234   | 

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

---

|Pacific Rim Mining Corp.                  
|------------------------------------------
|Notes to Consolidated Financial Statements
|April 30, 2006, 2005 and 2004             
|In thousands of U.S. dollars              
|                                          
|                                          

|14. | Segmented Information  
|--- | -----------------------
|    |                        
|    | Details are as follows:

| |                                          |   | Year      |   |   | Year      |   |   | Year      |  
| | ---------------------------------------- | - | --------- | - | - | --------- | - | - | --------- | -
| |                                          |   | Ended     |   |   | Ended     |   |   | Ended     |  
| |                                          |   | April 30, |   |   | April 30, |   |   | April 30, |  
| |                                          |   | 2006      |   |   | 2005      |   |   | 2004      |  
| | Total Assets                             |   |           |   |   |           |   |   |           |  
| | Canada                                   | $ | 16,392    |   | $ | 807       |   | $ | 1,130     |  
| | USA                                      |   | 4,146     |   |   | 3,443     |   |   | 8,443     |  
| | El Salvador                              |   | 4,347     |   |   | 4,354     |   |   | 4,457     |  
| | Argentina                                |   | 24        |   |   | 11        |   |   | -         |  
| | Chile                                    |   | -         |   |   | 3         |   |   | 3         |  
| | Total                                    | $ | 24,909    |   | $ | 8,618     |   | $ | 14,033    |  
| | Total Property, Plant and Equipment      |   |           |   |   |           |   |   |           |  
| | Canada                                   | $ | 15        |   | $ | 5         |   | $ | 9         |  
| | USA                                      |   | 44        |   |   | 60        |   |   | 909       |  
| | El
      Salvador                        |   | 4,248     |   |   | 4,234     |   |   | 4,184     |  
| | Argentina                                |   | -         |   |   | -         |   |   | -         |  
| | Chile                                    |   | -         |   |   | -         |   |   | -         |  
| | Total                                    | $ | 4,307     |   | $ | 4,299     |   | $ | 5,102     |  
| | Revenue, Excluding Interest
      Income |   |           |   |   |           |   |   |           |  
| | Canada                                   | $ | -         |   | $ | -         |   | $ | -         |  
| | USA                                      |   | 8,024     |   |   | 11,868    |   |   | 12,140    |  
| | El Salvador                              |   | -         |   |   | -         |   |   | -         |  
| | Argentina                                |   | -         |   |   | -         |   |   | -         |  
| | Chile                                    |   | -         |   |   | -         |   |   | -         |  
| | Total                                    | $ | 8,024     |   | $ | 11,868    |   | $ | 12,140    |  
| | Depreciation, Depletion and Amortization |   |           |   |   |           |   |   |           |  
| | Canada                                   | $ | 6         |   | $ | 4         |   | $ | 5         |  
| | USA                                      |   | 13        |   |   | 874       |   |   | 1,290     |  
| | El
      Salvador                        |   | -         |   |   | -         |   |   | -         |  
| | Argentina                                |   |           |   |   | -         |   |   | -         |  
| | Chile                                    |   | -         |   |   | -         |   |   | -         |  
| | Total                                    | $ | 19        |   | $ | 878       |   | $ | 1,295     |  
| | Net Income (Loss)                        |   |           |   |   |           |   |   |           |  
| | Canada                                   | $ | (956      | ) | $ | (1,045    | ) | $ | (971      | )
| | USA                                      |   | 3,061     |   |   | 2,352     |   |   | (1,475    | )
| | El Salvador                              |   | (5,896    | ) |   | (6,047    | ) |   | (4,822    | )
| | Argentina                                |   | (149      | ) |   | (116      | ) |   | (39       | )
| | Chile                                    |   | 3,322     |   |   | 222       |   |   | 448       |  
| | Total                                    | $ | (618      | ) | $ | (4,634    | ) | $ | (6,859    | )
| |                                          |   |           |   |   |           |   |   |           |  

---

|Pacific Rim Mining Corp.                  
|------------------------------------------
|Notes to Consolidated Financial Statements
|April 30, 2006, 2005 and 2004             
|In thousands of U.S. dollars              
|                                          
|                                          

|15. | United States Generally Accepted Accounting Principles
      (US GAAP)                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The effect of the measurement differences between
      Canadian GAAP and US GAAP are summarized below.                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Under US GAAP, securities that are available-for-sale are
      recorded at fair value and unrealized gains or losses are excluded from
      earnings and recorded as a separate component of shareholders equity.
      Declines in fair value that are other than temporary are written off.
      Under Canadian GAAP, investments in marketable securities are carried at
      the lower of cost and estimated fair market value.                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Under US GAAP, adjustments arising from foreign currency
      translations are deferred until realization and are included as a separate
      component of shareholders equity as a component of comprehensive income
      or loss. Therefore, translation adjustments are not included in
      determining net income but reported as other comprehensive income. Under
      Canadian GAAP, translation adjustments are included in net income. There
      is no comprehensive income category in Canada.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The significant changes in the consolidated financial
      statements relative to US GAAP are as follows:                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | Statements of Loss(in thousands of US dollars,
      except for per share amounts)                                                                                                                                                                                                                                                                                                                                                                                                                               

| |                                                    |   | Year      |   |   | Year      |   |   | Year      |  
| | -------------------------------------------------- | - | --------- | - | - | --------- | - | - | --------- | -
| |                                                    |   | Ended     |   |   | Ended     |   |   | Ended     |  
| |                                                    |   | April 30, |   |   | April 30, |   |   | April 30, |  
| |                                                    |   | 2006      |   |   | 2005      |   |   | 2004      |  
| | Net loss following Canadian
      GAAP             | $ | (618      | ) | $ | (4,634    | ) | $ | (6,859    | )
| | Adjustments to create US GAAP                      |   | -         |   |   | -         |   |   | -         |  
| | Net loss following US GAAP                         |   | (618      | ) |   | (4,634    | ) |   | (6,859    | )
| | Foreign exchange adjustment                        |   | (264      | ) |   | (108      | ) |   | 26        |  
| | Comprehensive loss, following
      US GAAP        |   | (882      | ) |   | (4,742    | ) |   | (6,833    | )
| | Weighted average number of common shares,          |   |           |   |   |           |   |   |           |  
| | computed
      under US GAAP (thousands of shares) |   | 82,528    |   |   | 80,514    |   |   | 79,146    |  
| | Loss per share, following US GAAP                  | $ | (0.01     | ) | $ | (0.06     | ) | $ | (0.09     | )

Deficit and Comprehensive Gain (Loss)(in thousands of US dollars)

| |                                                             |   | April 30, |   |   | April 30, |   |   | April 30, |  
| | ----------------------------------------------------------- | - | --------- | - | - | --------- | - | - | --------- | -
| |                                                             |   | 2006      |   |   | 2005      |   |   | 2004      |  
| |                                                             |   |           |   |   |           |   |   |           |  
| | Deficit                                                     |   |           |   |   |           |   |   |           |  
| | Adjusted
      deficit, beginning of year per US GAAP       | $ | (52,828   | ) | $ | (48,086   | ) | $ | (41,253   | )
| | Net loss per US GAAP                                        |   | (882      | ) |   | (4,742    | ) |   | (6,833    | )
| | Adjusted
      deficit, end of year per US GAAP             | $ | (53,710   | ) | $ | (52,828   | ) | $ | (48,086   | )
| |                                                             |   |           |   |   |           |   |   |           |  
| | Accumulated Other
      Comprehensive Gain                  |   |           |   |   |           |   |   |           |  
| | Beginning of year per US GAAP                               | $ | 110       |   | $ | 2         |   | $ | 28        |  
| | Current year
      other comprehensive gain (loss)          |   | 264       |   |   | 108       |   |   | (26       | )
| | Accumulated other comprehensive gain, end of
      year per |   |           |   |   |           |   |   |           |  
| | US GAAP                                                     | $ | 374       |   | $ | 110       |   | $ | 2         |  

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

---

|Pacific Rim Mining Corp.                  
|------------------------------------------
|Notes to Consolidated Financial Statements
|April 30, 2006, 2005 and 2004             
|In thousands of U.S. dollars              
|                                          
|                                          

|15. | United States Generally Accepted Accounting Principles- Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Recent U.S. Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | In May 2005, the FASB issued SFAS 154, Accounting
      Changes and Error Corrections, which replaces APB Opinion No. 20,
      Accounting Changes, and supersedes FASB Statement No. 3, Reporting
      Accounting Changes in Interim Financial Statements  an amendment of APB
      Opinion No. 28.  SFAS 154 requires retrospective application to prior
      periods financial statements of changes in accounting principle, unless
      it is impracticable to determine either the period-specific effects or the
      cumulative effect of the change. When it is impracticable to determine the
      period-specific effects of an accounting change on one or more individual
      prior periods presented, SFAS 154 requires that the new accounting
      principle be applied to the balances of assets and liabilities as of the
      beginning of the earliest period for which retrospective application is
      practicable and that a corresponding adjustment be made to the opening
      balance of retained earnings for that period rather than being reported in
      an income statement. When it is impracticable to determine the cumulative
      effect of applying a change in accounting principle to all prior periods,
      SFAS 154 requires that the new accounting principle be applied as if it
      were adopted prospectively from the earliest date practicable. SFAS 154
      shall be effective for accounting changes and corrections of errors made
      in fiscal years beginning after December 15, 2005. The Company does not
      expect the provisions of SFAS 154 will have a significant impact on its
      results of operations.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | In February 2006, the FASB issued SFAS No. 155,
      Accounting for Certain Hybrid Financial Instruments, an amendment of FASB
      Statements No. 133 and 140. This statement permits fair value
      re-measurement for any hybrid financial instrument that contains an
      embedded derivative that otherwise would require bifurcation. It
      establishes a requirement to evaluate interests in securitized financial
      assets to identify interests that are freestanding derivatives or that are
      hybrid financial instruments that contain an embedded derivative requiring
      bifurcation. In addition, SFAS 155 clarifies which interest-only strips
      and principal-only strips are not subject to the requirements of Statement
      133. It also clarifies that concentrations of credit risk in the form of
      subordination are not embedded derivatives. SFAS 155 amends Statement
      140 to eliminate the prohibition on a qualifying special- purpose entity
      from holding a derivative financial instrument that pertains to a
      beneficial interest other than another derivative financial instrument.
      This Statement is effective for all financial instruments acquired or
      issued after the beginning of an entitys first fiscal year that begins
      after September 15, 2006. The adoption of this standard is not expected to
      have a material effect on the Companys results of operations or financial
      position.                                                                                                                                                                                          

---

|Pacific Rim Mining Corp.                  
|------------------------------------------
|Notes to Consolidated Financial Statements
|April 30, 2006, 2005 and 2004             
|In thousands of U.S. dollars              
|                                          
|                                          

|15. | United States Generally Accepted Accounting Principles- Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Recent U.S. Accounting Pronouncements-
      Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | In March 2006, the FASB issued SFAS 156, Accounting for
      Servicing of Financial Assetsan amendment of FASB Statement No. 140.
      This statement amends FASB Statement No. 140, Accounting for Transfers
      and Servicing of Financial Assets and Extinguishments of Liabilities,
      with respect to the accounting for separately recognized servicing assets
      and servicing liabilities. This statement: (1) requires an entity to
      recognize a servicing asset or servicing liability each time it undertakes
      an obligation to service a financial asset by entering into a servicing
      contract in any of the following situations: (a) a transfer of the
      servicers financial assets that meets the requirements for sale
      accounting, (b) a transfer of the servicers financial assets to a
      qualifying special-purpose entity in a guaranteed mortgage securitization
      in which the transferor retains all of the resulting securities and
      classifies them as either available-for-sale securities or trading
      securities in accordance with FASB Statement No. 115, Accounting for
      Certain Investments in Debt and Equity Securities, (c) an acquisition or
      assumption of an obligation to service a financial asset that does not
      relate to financial assets of the servicer or its consolidated affiliates;
      (2) requires all separately recognized servicing assets and servicing
      liabilities to be initially measured at fair value, if practicable; (3)
      permits an entity to choose either of the following subsequent measurement
      methods for each class of separately recognized servicing assets and
      servicing liabilities: (a) Amortization methodAmortize servicing assets
      or servicing liabilities in proportion to and over the period of estimated
      net servicing income or net servicing loss and assess servicing assets or
      servicing liabilities for impairment or increased obligation based on fair
      value at each reporting date, or (b) Fair value measurement method
      Measure servicing assets or servicing liabilities at fair value at each
      reporting date and report changes in fair value in earnings in the period
      in which the changes occur; (4) at its initial adoption, permits a
      one-time reclassification of available-for-sale securities to trading
      securities by entities with recognized servicing rights, without calling
      into question the treatment of other available-for-sale securities under
      Statement 115, provided that the available-for-sale securities are
      identified in some manner as offsetting the entitys exposure to changes
      in fair value of servicing assets or servicing liabilities that a servicer
      elects to subsequently measure at fair value; and (5) requires separate
      presentation of servicing assets and servicing liabilities subsequently
      measured at fair value in the statement of financial position and
      additional disclosures for all separately recognized servicing assets and
      servicing liabilities. An entity should adopt this statement as of the
      beginning of its first fiscal year that begins after September 15, 2006.
      Earlier adoption is permitted as of the beginning of an entitys fiscal
      year, provided the entity has not yet issued financial statements,
      including interim financial statements, for any period of that fiscal
      year. The effective date of this Statement is the date an entity adopts
      the requirements of this statement.

---

---