---

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

FORM 20-F

(Mark One)

 ̈ REGISTRATION
  STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF
  1934 
  OR x ANNUAL REPORT PURSUANT TO SECTION
  13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
  For the fiscal year ended April 30, 2004
  OR ̈ TRANSITION REPORT PURSUANT TO
  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-13812

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

British Columbia, Canada(Jurisdiction of incorporation or organization)

Suite 410 - 625 Howe Street, Vancouver, B.C. V6C 2T6(Address of principal executive offices)

Securities registered or to be registered pursuant to Section
  12(b) of the Act:

|Title of each Class              | Name of each exchange on which registered
|-------------------------------- | -----------------------------------------
|Common Shares, Without Par Value | American Stock Exchange                  
|                                 | Toronto Stock Exchange                   

Securities registered or to be registered pursuant to Section
  12(g) of the Act:

Common Shares, Without Par Value
  (Title of Class)

Securities for which there is a reporting obligation pursuant
  to Section 15(d) of the Act:

Not Applicable (Title of Class)

Indicate the number of outstanding shares of each of the
  issuers classes of capital of common stock as of April 30, 2004:
  80,483,994 Common Shares

Indicate by check mark whether the registrant (1) has filed
  all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
  Act of 1934 during the preceding 12 months (or for such shorter period that
  the registrant was required to file such reports), and (2) has been subject
  to such filing requirements for the past 90 days. Yes x
  No  ̈

Indicate by check mark which financial statement item the registrant
  has elected to follow.

Item 17 x Item
  18  ̈

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TABLE OF CONTENTS

|                                          |                                                                                                   | Page | 
|----------------------------------------- | ------------------------------------------------------------------------------------------------- | ---- | 
|                                          |                                                                                                   |      | 
|NOTE REGARDING FORWARD LOOKING STATEMENTS | 1                                                                                                 |     
|GLOSSARY OF TERMS                         | 2                                                                                                 |     
|ITEM 1:                                   | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                                             | 4    | 
|ITEM 2:                                   | OFFER STATISTICS AND EXPECTED TIMETABLE                                                           | 4    | 
|ITEM 3:                                   | KEY INFORMATION                                                                                   | 4    | 
|ITEM 4:                                   | INFORMATION ON THE COMPANY                                                                        | 12   | 
|ITEM 5:                                   | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                                      | 37   | 
|ITEM 6:                                   | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                                        | 42   | 
|ITEM 7:                                   | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                                                 | 51   | 
|ITEM 8:                                   | FINANCIAL INFORMATION                                                                             | 52   | 
|ITEM 9:                                   | THE OFFER AND LISTING                                                                             | 52   | 
|ITEM 10:                                  | ADDITIONAL INFORMATION                                                                            | 54   | 
|ITEM 11:                                  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK                                  | 66   | 
|ITEM 12:                                  | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                                            | 67   | 
|ITEM 13:                                  | DEFAULTS, DIVIDEND ARREARAGES AND DELIQUENCIES                                                    | 67   | 
|ITEM 14:                                  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
      AND USE OF PROCEEDS                | 67   | 
|ITEM 15:                                  | CONTROLS AND PROCEDURES                                                                           | 67   | 
|ITEM 16:                                  | AUDIT COMMITTEE FINANCIAL EXPERT, CODE
      OF ETHICS AND PRINCIPAL ACCOUNTANT FEES AND SERVICES | 67   | 
|ITEM 17:                                  | FINANCIAL STATEMENTS                                                                              | 74   | 
|ITEM 18:                                  | FINANCIAL STATEMENTS                                                                              | 75   | 
|ITEM 19:                                  | EXHIBITS                                                                                          | 75   | 
|SIGNATURE                                 | 77                                                                                                |     

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1

NOTE REGARDING FORWARD LOOKING STATEMENTS

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

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

- risks related to gold price and other commodity price fluctuations;
- risks and uncertainties relating to the interpretation of drill results, the
    geology, grade and continuity of mineral deposits;
- risks related to the inherent uncertainty of production and cost estimates
    and the potential for unexpected costs and expenses;
- results of initial feasibility, prefeasibility and feasibility studies, and
    the possibility that future exploration, development or mining results will
    not be consistent with the Corporations expectations;
- mining and development risks, including risks related to accidents, equipment
    breakdowns, labour disputes or other unanticipated difficulties with or interruptions
    in production;
- the potential for delays in exploration or development activities or the completion
    of feasibility studies;
- the uncertainty of profitability based upon the Corporations history
    of losses;
- risks related to failure to obtain adequate financing on a timely basis and
    on acceptable terms;
- risks related to environmental regulation and liability;
- risks related to hedging activities;
- political and regulatory risks associated with mining and exploration; and
- other risks and uncertainties related to the Corporations prospects,
    properties and business strategy.

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

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2

GLOSSARY OF TERMS

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

|Ag                         | Silver                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|---------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|AMEX                       | The American Stock Exchange                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Au                         | Gold                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|CIM                        | Canadian Institute of Mining, Metallurgy and Petroleum                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Dore                       | A compound containing gold and silver metal and various impurities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|gpt                        | Grams per tonne. One gram per tonne equals 0.02917 troy ounces per short
      ton.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Indicated Mineral Resource | An Indicated Mineral Resource is that
        part of a Mineral Resource for which quantity, grade or quality, densities,
        shape and physical characteristics, can be estimated with a level of confidence
        sufficient to allow the appropriate application of technical and economic
        parameters, to support mine planning and evaluation of the economic viability
        of the deposit. The estimate is based on detailed and reliable exploration
        and testing information gathered through appropriate techniques from locations
        such as outcrops, trenches, pits, workings and drill holes that are spaced
        closely enough for geological and grade continuity to be reasonably assumed.                          
|                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Inferred Mineral Resource  | An Inferred Mineral Resource is that
        part of a Mineral Resource for which quantity and grade or quality can
        be estimated on the basis of geological evidence and limited sampling
        and reasonably assumed, but not verified, geological and grade continuity.
        The estimate is based on limited information and sampling gathered through
        appropriate techniques from locations such as outcrops, trenches, pits,
        workings and drill holes.                                                                                                                                                                                                                                                                            
|                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Measured Mineral Resource  | A Measured Mineral Resource is that part
        of Mineral Resource for which quantity, grade or quality, densities, shape,
        physical characteristics are so well established that they can be estimated
        with confidence sufficient to allow the appropriate application of technical
        and economic parameters, to support production planning and evaluation
        of the economic viability of the deposit. The estimate is based on detailed
        and reliable exploration, sampling and testing information gathered through
        appropriate techniques from locations such as outcrops, trenches, pits,
        workings and drill holes that are spaced closely enough to confirm both
        geological and grade continuity.
|                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Mineral Resource           | A Mineral Resource is a concentration
        or occurrence of natural, solid, inorganic or fossilized organic material
        in or on the Earths crust in such form and quantity and of such
        a grade or quality that it has reasonable prospects from economic extraction.
        The location,                                                                                                                                                                                                                                                                                                                                                                                                                                                         

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3

| | quantity, grade, geological characteristics and continuity
        of a Mineral Resource are known, estimated or interpreted from specific
        geological evidence and knowledge.                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                               
| | The terms Mineral Resource, Measured
        Mineral Resource, Indicated Mineral Resource, Inferred
        Mineral Resource used in this Report are Canadian mining terms as
        defined in accordance with National Instrument 43-101 under the guidelines
        set out in the CIM Standards.

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

|NI 43-101        | National Instrument 43-101 - Standards of Disclosure
        for Mineral Projects. A rule developed by the Canadian Securities Administrators
        (an umbrella group of Canadas provincial and territorial securities
        regulators) that governs public disclosure by mining and mineral exploration
        issuers. The rule establishes certain standards for all public disclosure
        of scientific and technical information concerning mineral projects.                                                                                                                                                                                                                                                                                                            
|------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Ore              | A natural aggregate of one or more minerals which,
        at a specified time and place, may be mined and sold at a profit, or from
        which some part may be profitably separated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Qualified Person | Conforms to that definition under NI 43-101 for an
        individual (a) to be an engineer or geoscientist with at least five years
        experience in mineral exploration, mine development or operation or mineral
        project assessment, or any combination of these; (b) with experience relevant
        to the subject matter of the mineral project and the technical report
        and (c) is a member in good standing of a professional association that,
        among other things, is self-regulatory, has been given authority by statute,
        admits members based on their qualifications and experience, requires
        compliance with professional standards of competence and ethics and has
        disciplinary powers to suspend or expel a member.
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|SG               | Means specific gravity, a measurement of density.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|TSX              | The Toronto Stock Exchange.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|tpd              | Tonnes per day. One tonne equals 1.10231 tons.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

---

4

ITEM 1:     IDENTITY OF DIRECTORS, SENIOR MANAGEMENT
  AND ADVISERS

Not Applicable.

ITEM 2:     OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable.

ITEM 3:     KEY INFORMATION

3 A.     SELECTED FINANCIAL DATA

The following table sets forth selected historical data regarding
  the Companys consolidated operating results and financial position. The
  data set forth below is stated in thousands of U.S. dollars (except per share
  amounts). This selected financial data has been prepared in accordance with
  Canadian generally accepted accounting principles (Canadian GAAP)
  which differs in many respects from generally accepted accounting principles
  in the United States (U.S. GAAP). A discussion of differences between
  Canadian GAAP and U.S. GAAP is contained in Note 14 to the audited Consolidated
  Financial Statements. The following table should be read in conjunction with
  Item 5 - Operating and Financial Review and Prospects, and the consolidated
  financial statements and notes thereto included in Item 17 of this Annual Report.

|                        |   |            |   |   |            |   |   | Four       |   |   |            |   |   |            |   |   | Nine       |   |   | Three     |  
|----------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | - | - | --------- | -
|                        |   | Year       |   |   | Year       |   |   | Months     |   |   | Year       |   |   | Year       |   |   | Months     |   |   | Months    |  
|In 000s, except share |   | Ending     |   |   | Ending     |   |   | Ending     |   |   | Ending     |   |   | Ending     |   |   | ending     |   |   | Ending    |  
|amounts:                |   | April 30,  |   |   | April      |   |   | April 30,  |   |   | Dec. 31,   |   |   | Dec. 31,   |   |   | Dec. 31,   |   |   | March 31, |  
|                        |   | 2004       |   |   | 30, 2003   |   |   | 2002       |   |   | 2001       |   |   | 2000       |   |   | 1999       |   |   | 1999      |  
|Income Statement        |   |            |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |   |   |           |  
|Data                    |   |            |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |   |   |           |  
|Metal sales             | $ | 12,140     |   | $ | 12,509     |   | $ | 5,303      |   | $ | 14,913     |   | $ | 34,926     |   | $ | 26,320     |   | $ | 10,182    |  
|Interest income         |   | 182        |   |   | 175        |   |   | 62         |   |   | 122        |   |   | 525        |   |   | 218        |   |   | 96        |  
|Gain on Sale of Mineral |   |            |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |   |   |           |  
|Properties              |   | -          |   |   | 922        |   |   | -          |   |   | -          |   |   | -          |   |   | -          |   |   | -         |  
|Net Income (Loss) from  |   |            |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |   |   |           |  
|Operations              |   | (1,058     | ) |   | (844       | ) |   | (347       | ) |   | (1,612     | ) |   | (5,273     | ) |   | 300        |   |   | 1,523     |  
|Net Income (Loss)       |   | (6,859     | ) |   | (2,800     | ) |   | (1,601     | ) |   | (3,371     | ) |   | (31,388    | ) |   | (2,053     | ) |   | 410       |  
|Loss per share  basic  |   |            |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |   |   |           |  
|and diluted             |   | (0.09      | ) |   | (0.04      | ) |   | (0.03      | ) |   | (0.11      | ) |   | (1.17      | ) |   | (0.12      | ) |   | (0.30     | )
|                        |   |            |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |   |   |           |  
|Balance Sheet Data      |   |            |   |   |            |   |   |            |   |   |            |   |   |            |   |   |            |   |   |           |  
|Working capital         | $ | 3,033      |   | $ | 7,633      |   | $ | 8,616      |   | $ | 7,683      |   | $ | 9,865      |   | $ | 6,526      |   | $ | (1,236    | )
|Total assets            |   | 14,033     |   |   | 21,447     |   |   | 25,330     |   |   | 24,540     |   |   | 28,563     |   |   | 48,544     |   |   | 68,625    |  
|Net assets              |   | 9,618      |   |   | 14,960     |   |   | 17,729     |   |   | 16,998     |   |   | 20,369     |   |   | 29,879     |   |   | 31,824    |  
|Long-term debt          |   | -          |   |   | 1,640      |   |   | 1,849      |   |   | 1,849      |   |   | 1,849      |   |   | 5,234      |   |   | 20,167    |  
|Shareholders equity     |   | 9,618      |   |   | 14,960     |   |   | 17,729     |   |   | 16,998     |   |   | 20,369     |   |   | 29,879     |   |   | 31,824    |  
|Capital stock           |   | 57,690     |   |   | 56,173     |   |   | 56,142     |   |   | 53,810     |   |   | 53,810     |   |   | 31,932     |   |   | 31,824    |  
|Outstanding shares      |   | 80,483,994 |   |   | 78,528,594 |   |   | 78,408,794 |   |   | 31,123,974 |   |   | 31,123,974 |   |   | 17,567,839 |   |   | 2,042,839 |  
|Dividends declared      |   |            |   |   | -          |   |   | -          |   |   | -          |   |   | -          |   |   | -          |   |   | -         |  

---

5

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

|                      |   |           |   |   |           |   |   | Four      |   |   |          |   |   |          |   |   | Nine     |   |   | Three    |  
|--------------------- | - | --------- | - | - | --------- | - | - | --------- | - | - | -------- | - | - | -------- | - | - | -------- | - | - | -------- | -
|                      |   | Year      |   |   | Year      |   |   | Months    |   |   | Year     |   |   | Year     |   |   | Months   |   |   | Months   |  
|                      |   | Ending    |   |   | Ending    |   |   | Ending    |   |   | Ending   |   |   | Ending   |   |   | Ending   |   |   | Ending   |  
|                      |   | April 30, |   |   | April 30, |   |   | April 30, |   |   | Dec. 31, |   |   | Dec. 31, |   |   | Dec. 31, |   |   | March    |  
|                      |   | 2004      |   |   | 2003      |   |   | 2002      |   |   | 2001     |   |   | 2000     |   |   | 1999     |   |   | 31, 1999 |  
|Income Statement Data |   |           |   |   |           |   |   |           |   |   |          |   |   |          |   |   |          |   |   |          |  
|Net Income (Loss)     | $ | (6,859    | ) | $ | (2,800    | ) | $ | (1,601    | ) | $ | (3,433   | ) | $ | (31,388  | ) | $ | (1,826   | ) | $ | (515     | )
|Net Income (Loss)     |   |           |   |   |           |   |   |           |   |   |          |   |   |          |   |   |          |   |   |          |  
|per share             |   | (0.09     | ) |   | (0.04     | ) |   | (0.03     | ) |   | (0.11    | ) |   | (1.17    | ) |   | (0.20    | ) |   | (0.20    | )
|                      |   |           |   |   |           |   |   |           |   |   |          |   |   |          |   |   |          |   |   |          |  
|Balance Sheet Data    |   |           |   |   |           |   |   |           |   |   |          |   |   |          |   |   |          |   |   |          |  
|Total assets          | $ | 14,033    |   | $ | 21,447    |   | $ | 25,402    |   | $ | 24,583   |   | $ | 28,563   |   | $ | 48,544   |   | $ | 56,169   |  
|Shareholders equity  |   | 9,618     |   |   | 14,960    |   |   | 17,801    |   |   | 17,041   |   |   | 20,369   |   |   | 29,879   |   |   | (39,749  | )

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

|           | For the Year |  | For the Year |  | For the Four |  |                                  |  |       |  |       | 
|---------- | ------------ |  | ------------ |  | ------------ |  | -------------------------------- |  | ----- |  | ----- | 
|           | Ended April  |  | Ended April  |  | Months Ended |  | For the Years Ended December 31, | 
|           | 30           |  | 30           |  | April 30,    |  |                                  |  |       |  |       | 
|           | 2004         |  | 2003         |  | 2002         |  | 2001                             |  | 2000  |  | 1999  | 
|High       | 1.4221       |  | 1.5963       |  | 1.6125       |  | 1.494                            |  | 1.438 |  | 1.440 | 
|Low        | 1.2923       |  | 1.4336       |  | 1.5632       |  | 1.602                            |  | 1.557 |  | 1.530 | 
|Period End | 1.3711       |  | 1.4336       |  | 1.5681       |  | 1.593                            |  | 1.500 |  | 1.440 | 
|Average    | 1.3439       |  | 1.5335       |  | 1.5913       |  | 1.549                            |  | 1.486 |  | 1.483 | 

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

|Month         | High   | Low   
|------------- | ------ | ------
|February 2004 | 1.3442 | 1.3148
|March 2004    | 1.348  | 1.308 
|April 2004    | 1.3711 | 1.3095
|May 2004      | 1.397  | 1.358 
|June 2004     | 1.3772 | 1.343 
|July 2004     | 1.3353 | 1.3082

---

6

On July 30, 2004, the noon buying rate in New York City for
  cable transfer in Canadian dollars as certified for customer purposes by the
  Federal Reserve Bank of New York was US$1.00 = Cdn$1.3296.

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

3 B.     CAPITALIZATION AND INDEBTEDNESS

Not Applicable

3 C.     REASONS FOR THE OFFER AND USE OF PROCEEDS

Not Applicable

3 D.     RISK FACTORS

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

(i) Financing Risks

The Company anticipates that its current cash reserves and
  expected cash generated from leaching activities at Denton-Rawhide are sufficient
  to fund the Companys cash requirements and exploration activities through
  December 31, 2004. See Item 5 for particulars of liquidity, capital resources
  and financial condition. Beyond December 31, 2004, the Company intends to rely
  on accumulated cash reserves, if any; cash generated from operations, if any;
  collaborative agreements, if any; a reduction in exploration activities as necessary,
  and public and private financing, which may be highly dependent on the results
  of the Companys exploration programs. There can be no assurance that the
  Companys exploration programs will result in locating commercially exploitable
  mineral ores or that the Companys properties will be successfully developed.
  Further, there can be no assurance that the underlying assumed levels of expenses
  will prove to be accurate.

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

(ii) Exploration Risks

Resource exploration, development, and operations is a highly
  speculative business, characterized by a number of significant risks including,
  among other things, unprofitable efforts resulting not only from the failure
  to discover mineral deposits but from finding mineral deposits which, though
  present, are insufficient in quantity and quality to return a profit from production.
  Few properties that are explored are ultimately developed into producing mines.
  As described under Item 4, except for the Denton-Rawhide Mine, which has
  ceased production and is in a residual leaching phase and the El Dorado Property
  which contains geological mineral resources, none of the Companys properties
  have a known body of ore and any proposed exploration programs are an exploratory
  search for ore.

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7

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

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

Although mineral resource figures included in this Annual
  Report have been carefully prepared by the Company, or, in some instances, have
  been prepared, reviewed or verified by independent mining experts who are Qualified
  Persons, these amounts are estimates only and no assurance can be given that
  any particular level of recovery of gold and/or silver from mineral resources
  will in fact be realized or that an identified mineral resource will ever qualify
  as a commercially mineable (or viable) ore body which can be legally and economically
  exploited. Estimates of mineral resources and production costs can also be affected
  by such factors as environmental permitting regulations and requirements, weather,
  environmental factors, unforeseen technical difficulties, unusual or unexpected
  geological formations and work interruptions. In addition, the grade of ore
  ultimately mined may differ from that indicated by drilling results. There can
  be no assurance that the percentage of gold recovered in small scale laboratory
  tests will be duplicated in large scale tests under on-site conditions or in
  production scale heap leaching.

(iii) Title to Properties

The Companys exploration properties may be subject to
  prior unregistered agreements or transfers or local land claims and title may
  be affected by undetected defects. As part of its investigations, Pacific Rim
  has investigated and believes it has good title to its properties. However,
  Pacific Rim cannot guarantee that adverse claims to title will not arise in
  the future, nor can it express an opinion on how difficult the resolution of
  such claims would be under the laws of foreign jurisdictions. The Company is
  undergoing the process of converting its exploration licenses in El Salvador
  to exploitation concessions and is making the necessary applications to and
  carrying out the studies requested by the authorities. The Company cannot say
  with certainty when or if the conversion will be approved by the authorities
  in El Salvador.

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(iv) Metal Price Volatility

The Companys ability to generate profits from its residual
  leach operations at Denton-Rawhide or any future mining operations is directly
  related to the international price of gold, which is not within the control
  of the Company. The gold price has a history of extreme volatility and there
  can be significant upward or downward movements in price in a short period of
  time. During the year ended December 31, 2003, the annual high and low prices
  for gold per ounce for the 10:30 a.m. fixings on the London Bullion Market were
  $417.25 and $319.75, respectively. On August 6, 2004, the 10:30 a.m. fixing
  on the London Bullion Market was $392.25 and last spot market price of gold
  on the New York Commodities Exchange was $399.80 per ounce.

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

- industrial and jewelry demand;
- central bank lending or purchases or sales of gold bullion;
- forward or short sales of gold by producers and speculators;
- future level of gold production; and
- rapid short-term changes in supply and demand due to speculative or hedging
    activities by producers, individuals or funds.

Gold prices are also affected by macroeconomic factors including:

- confidence in the global monetary system;
- expectations of the future rate of inflation;
- the availability and attractiveness of alternative investment vehicles;
- the general level of interest rates;
- the strength of, and confidence in the U.S. dollar, the currency in which the price of gold is generally quoted, and other major currencies;
- global and regional political or economic events; and
- costs of production of other gold producing companies whose costs are denominated
    in currencies other than the U.S. dollar.

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

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

(v) Government Law, Environmental and Other Regulatory Requirements

The El Dorado and La Calera properties are located in El Salvador.
  Mineral exploration and mining activities in foreign countries are subject to
  risks normally associated with the conduct of business in foreign countries
  and in addition its business activities may be affected in varying degrees by
  political stability and government regulations as these evolve in sovereign
  nations. These risks may include

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9

foreign labour disputes, invalidation of governmental orders,
  uncertain political and economic environments, war or civil disturbances, changes
  in laws, changes in foreign exchange rates, regulations and policies of governments,
  changes in foreign tax laws, delays in obtaining necessary permits, limitations
  on the repatriation of earnings and original investments and increased costs
  of and difficulty in obtaining financing.

The management of Pacific Rim uses its collective experience
  in international mineral exploration and development to assess the risks that
  exist in various countries. When determining whether or not to proceed with
  an investment in a particular country, management compares the potential benefits
  of a countrys geological potential with the long-term political and economic
  risks. However, as with all other types of international business operations,
  currency fluctuations, exchange controls, change to tax regimes and political
  action could impair the value of the Companys assets in such foreign jurisdictions.

Mining operations have inherent risks and liabilities associated
  with possible pollution of the environment and with the disposal of waste products
  occurring as a result of mineral exploration or the production of metals from
  producing mines. Laws and regulations involving the protection and remediation
  of the environment and governmental policies and regulations for the implementation
  of such laws and regulations are constantly changing and are, in general, becoming
  more restrictive and more costly to abide by. There may be costs and delays
  associated with compliance with these laws or regulations that could prohibit
  the Company from the development or expansion of a mine. Closure cost requirements
  could change from current estimates. To the best of the Companys knowledge,
  the Company is operating in compliance with all applicable environmental and
  closing regulations.

(vi) Hedging Activities

The Companys primary business is the acquisition, exploration
  and development of gold and silver properties and its revenue to date has almost
  entirely been derived from proceeds from, or related to, the sale of gold and
  silver. (See Risk Factors  Risks Associated with Mining  Metal
  Price Volatility). Gold and silver prices are subject to significant volatility
  and these changes, to the extent that the Companys production is unhedged,
  can significantly affect the Companys profitability and cash flow. Gold
  prices declined steadily since the latter part of 1996, culminating in August
  1999 with the lowest price in twenty-one years, and until the spring of 2002
  essentially remained near or below $300 per ounce. Monthly prices over the past
  financial year for gold have averaged from $350 to $407 per ounce. Silver prices
  also have been volatile and at levels considered low by historical standards.

The Company may utilize forward selling (hedging)
  to protect the selling price of a portion of its gold production. Silver production
  is sold in the spot market. The market risk to the Companys cash flow
  from hedging relates to the possible failure of the counter-parties to honor
  their commitment to purchase the gold when the price exceeds the appropriate
  spot price at maturity. Counter-parties to any hedge contracts are large international
  credit worthy institutions. The market risk to the Company of any gold forward
  sale contracts would relate to the possibility that the Company may not produce
  sufficient gold at the appropriate time to meet the obligations as they arise.

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(vii) Dependence on Management

The success of the operations and activities of the Company
  is dependent to a significant extent on the efforts and abilities of its management
  team. See Item 6 for details of Companys current management. Investors
  must be willing to rely to a significant extent on their discretion and judgment.
  The Company does not maintain key employee insurance on any of its employees.

(viii) Conflicts of Interest

The Companys directors and officers may serve as directors
  or officers of other resource companies or have significant shareholdings in
  other resource companies and, to the extent that such other companies may participate
  in ventures in which the Company may participate, the directors of the Company
  may have a conflict of interest in negotiating and concluding terms respecting
  the extent of such participation. In the event that such a conflict of interest
  arises at a meeting of the Companys directors, a director who has such
  a conflict will abstain from voting for or against the approval of such participation
  or such terms. From time to time several companies may participate in the acquisition,
  exploration and development of natural resource properties thereby allowing
  for their participation in larger programs, permitting involvement in a greater
  number of programs and reducing financial exposure in respect of any one program.
  It may also occur that a particular company will assign all or a portion of
  its interest in a particular program to another of these companies due to the
  financial position of the company making the assignment. In accordance with
  the laws of the British Columbia, the directors of the Company are required
  to act honestly, in good faith and in the best interests of the Company. In
  determining whether or not the Company will participate in a particular program
  and the interest therein to be acquired by it, the directors will primarily
  consider the degree of risk to which the Company may be exposed and its financial
  position at that time. See Item 6. Directors, Senior Management and Employees.

(ix) Competition for Other Assets

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

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

The Companys activities are currently located in five
  countries, Canada, the United States, Argentina, El Salvador and Chile. Gold
  and silver are sold in international markets at prices denominated in U.S. dollars.
  However, some of the costs associated with the Companys activities in
  Canada, Chile and El Salvador may be denominated in currencies not directly
  related to the price of the U.S. dollar. Any appreciation of these currencies
  vis a vis the U.S. dollar could increase the Companys cost of doing business
  in these countries. The Company does not utilize hedging programs to any degree
  to mitigate the effect of currency movements.

(xi) The Companys Insurance Coverage May Be Inadequate

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

- damage to or destruction of property and facilities;
- personal injury or death;
- environmental damage and pollution;

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11

- delays in production; or
- expropriation of assets and loss of title to mining claims.

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

(xii) Changes to the General Mining Law of 1872

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

- impose a royalty on the production of metals or minerals from unpatented mining claims;
- reduce or prohibit the ability of a mining company to expand its operations; and
- require a material change in the method of exploiting the reserves located
    on unpatented mining claims.

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

(xiii) Reclamation Risks at Denton-Rawhide

The Denton-Rawhide Mine is an open pit heap leach operation
  that ceased active mining in October 2002. The final reclamation and closure
  plan for Denton-Rawhide has been submitted to the Bureau of Land Management
  and the Nevada Department of Environmental Protection for approval. The Coordinating
  Committee of the Denton-Rawhide Mine determined, for the purposes of the Reclamation
  Trust, total reclamation and severance costs for the Denton-Rawhide Mine at
  $9.8 million of which 49% are to the account of the Company, and contributed
  to the Trust. This determination of reclamation and severance costs is for the
  purposes of the Reclamation Trust only and although believed to be sufficient
  to handle all remaining closing costs may not be a true reflection of actual
  reclamation and closure costs of the Denton-Rawhide Mine. See Item 4 - Other
  Properties  Denton-Rawhide for additional information.

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ITEM 4:     INFORMATION ON THE COMPANY

4 A.     HISTORY AND DEVELOPMENT OF THE COMPANY

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

The Company was formed by the amalgamation (the Amalgamation)
  of Dayton Mining Corporation (Dayton) and Pacific Rim Mining Corp.
  (PacRim) (together the Predecessor Companies) under
  the British Columbia Company Act (Company Act) on April 11, 2002,
  with the Registrar of Companies, British Columbia. The Amalgamation received
  shareholder approval of both Dayton and PacRim on April 3, 2002 and approval
  of the Supreme Court of British Columbia on April 10, 2002. Pursuant to the
  Amalgamation 23,498,600 common shares of PacRim were exchanged on a one for
  one common share of the Company basis and 31,123,974 common shares of Dayton
  were exchanged on a one for 1.76 common shares of the Company basis. Under the
  Companys memorandum its authorized capital is 1,000,000,000 common shares
  without par value.

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

Important events in the development of the Companys
  business for fiscal 2004 are as follows:

» The expansion of the El Dorado resource
  to 821,000 ounces of gold in the measured and indicated category. Updated
  resource estimates reflecting new drilling information were made for the Minita,
  Coyotera and Nueva Esperanza vein systems on the El Dorado gold project in October
  2003. Minita, which hosts the bulk of the current El Dorado gold resource, grew
  by 67% to 1.6 million tonnes at an average grade of 11.4 g/t gold and 70.3 g/t
  silver, for a total contained measured and indicated resource of 585,200 ounces
  of gold and 3.6 million ounces of silver.

» The commencement of a pre-feasibility study
  on the El Dorado gold project. In March 2004 the Company contracted SRK
  Consulting to complete a pre-feasibility study of the potential economics of
  underground mining of the Minita vein system on the El Dorado gold project in
  El Salvador. The study will be based on exploiting the current Minita resource
  with a 1,000 tonne per day operation, and its completion is expected during
  the second quarter of fiscal 2005 (September / October 2004).

» The discovery of both high-grade vein hosted gold
  mineralization and lower-grade stockwork-hosted gold mineralization in the La
  Calera gold project. Thirty-one core holes were drilled during fiscal 2004
  at La Calera, leading to the discovery of potentially bulk-mineable gold mineralization
  in the Rosa and Rosa West vein systems. A ground geophysics survey conducted
  in March 2004 succeeded in tracing this system further along strike and identifying
  new, potentially related structures. A reverse circulation drill program to
  test these new and extended structures commenced in late April 2004 and is ongoing.gold
  project. Thirty-one core holes were drilled during fiscal 2004 at La Calera,
  leading to the discovery of potentially bulk-mineable gold mineralization in
  the Rosa and Rosa West vein systems. A ground geophysics survey conducted in
  March 2004 succeeded in tracing this system further along strike and identifying
  new, potentially related structures. A reverse circulation drill program to
  test these new and extended structures commenced in late April 2004 and is ongoing.

» The commencement of closure-related activities
  at the Denton-Rawhide gold mine.The crushing and stacking of low-grade
  stockpiled ore at the Denton-Rawhide gold mine ceased in May 2003 (following
  the cessation of mining in October 2002). During fiscal 2004, commencement of
  the residual leaching phase, the sale of surplus equipment, and reclamation
  activities occurred at the Denton-Rawhide mine.

» The acquisition of the Aurora and Surefire
  gold projects.These early-stage gold projects are located in Nevada; the
  Aurora project borders Metallic Ventures Esmeralda gold mine in the historic
  Aurora District of the Walker Lane gold belt, and the Surefire project, staked
  by the Company, is located along

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13

the Northern Nevada rift. The Company has commenced grassroots
  exploration, including the generation of drill targets, on the Aurora project
  and intends to initiate a Phase 1 drill program during fiscal 2005.

» The appointment of Paul Sweeney to, and
  resignation of Robert Buchan from, the Companys board of directors.Paul
  Sweeney was appointed in July 2003 to the Companys board. Mr. Sweeney
  is a senior financial executive with over 30 years of mining-related experience
  in finance, accounting and strategic planning. In December 2003 Robert Buchan,
  President and CEO of Kinross Gold Corporation, resigned from the Companys
  board.

See Item 5  Operating and Financial Review and Prospects
  for important events that have occurred in the development of the Companys
  business during the last full financial year from May 1, 2003 to April 30, 2004.
  Also see Item 5 for information on the Companys principal capital expenditures
  and divestures during the past three years and current capital expenditures.
  Other than the ongoing drill programs and studies required for the conversion
  of exploration claims to exploitation concessions in El Salvador, there is no
  principal capital expenditures or divestitures in progress.

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

4 B.     BUSINESS OVERVIEW

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

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

The Companys principal properties are the El Dorado
  gold property (El Dorado Property) and the La Calera gold project
  (La Calera Project) located in El Salvador. The Eldorado Property
  and the La Calera Project are collectively referred to as the Companys
  El Salvador Project. Predecessor Dayton acquired the two exploration licenses
  comprising the El Dorado Property through the acquisition of Mirage Resource
  Company, in April 2000. In May 2002, the Company entered into an agreement with
  Minerales Entremares El Salvador for a joint venture and option to purchase
  a 100% interest in the La Calera Project.

The Company, through its wholly owned subsidiary, Dayton Mining
  (U.S.) Inc., also has a 49% interest in the Denton Rawhide Mine, Nevada, an
  open pit gold-silver heap leach mine. Ore extraction at the mine ceased in May
  2003 and residual leaching of stockpiled ore is expected to continue for several
  years. Dayton acquired the 49% interest in the Denton-Rawhide property through
  the issue of shares in 2000.

Predecessor PacRim acquired exploration properties in Argentina
  in 1997 by staking and sold its Diablillos property in Argentina by agreement
  dated December 14, 2001 for total consideration of $3,400,000 in staged payments
  of cash or common shares. The balance of the purchase price for Diablillos was
  received by the Company in 2002, after the Amalgamation.

In 2003, the Company staked and optioned claims in Nevada,
  USA for exploration.

The Company does not own any significant plant or equipment
  for its wholly owned operations. Equipment used for exploration or drilling
  is rented or contracted as needed.

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In each of the periods December 31, 2001, April 30, 2002 (four
  months), April 30, 2003 and April 30, 2004, the Company has spent approximately
  $0.6 million, $0.2 million, $3.2 million and $4.5 million respectively on work
  programs to advance the El Dorado gold prospect in El Salvador.

The Company has financed its exploration programs to date
  from its cash on hand derived from the sale of marketable securities and net
  cash proceeds from its 49% interest in Denton Rawhide. In each of the periods
  December 31, 2001, April 30, 2002 (four months), April 30, 2003 and April 30,
  2004, revenues from bullion (gold and silver) sales totalled $14.9 million,
  $5.3 million, $12.5 million and $12.1 million, respectively. The average price
  of gold received was $271 per ounce in 2001, $287 per ounce in 2002, $321 in
  2003 and $385 in 2004.

See Item 3D  in particular (i) Risks Associated with Foreign Operations
  and (ii) Title to Properties.

See Item 4D  Property Plant and Equipment, for an overview of the Companys
  properties.

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

El Salvador Mining Regime

Under the laws of El Salvador, all mineral rights are owned
  by the government. All uncultivated private and government-owned lands are open
  to exploration and are available through application for an exploration and
  then an exploitation permit if certain conditions are met. Land for which an
  exploration permit is obtained is held by payment of an annual fee until converted
  to an exploitation licence. El Salvadorian mining laws do not discriminate between
  nationals and foreigners.

In mid 2001 the government of El Salvador enacted several
  modifications to the Salvadorian Mining Law. The most significant of these changes
  included an extension from 5 years to 8 years for the time before which a property
  holder must convert an exploration licence into an exploitation concession.
  This revision provided the Company an additional three years in which to advance
  the El Dorado project to the development stage and then apply to the government
  for an exploitation permit. The application to convert an exploration licence
  to a 30 year (or longer) exploitation concession must be accompanied by, among
  other things, a feasibility study, a development work program and an environmental
  impact study. Under the old laws the maximum size for exploitation concession
  was 10 square kilometres. This arbitrary size restriction has been removed.
  A final and important change was that the royalty levied on mineral production
  was reduced to 2% from 4% of net smelter returns.

Pacific Rim is continuing exploration and is in the process
  of preparing for submission the technical documentation required to convert
  its exploration licences to exploitation concessions. The Eldorado North and
  South exploration licences are valid until December 10, 2004. In accordance
  with the environmental law, there is a permitting procedure established that
  must be followed in the development of the El Dorado Property. Pacific Rim presented
  the necessary forms detailing the development and operation of the proposed
  project to formally enter the environmental impact study process. In July of
  2004 the Company received the Terms of Reference for the study from the Ministry.
  Pacific Rim has hired an independent contractor to prepare the environmental
  impact study for the project and is expected to present the completed study
  to the El Salvadoran environmental and natural resources Ministry in the latter
  half of August 2004 for approval. Earlier in 2004 the Company also hired an
  independent consulting company which is in the process of preparing a pre-feasibility
  study to form the basis for the feasibility study required for the conversion
  of the exploration licenses to an exploitation concession. The pre-feasibility
  study is expected to be completed in the latter half of September 2004. Pacific
  Rim has undertaken the steps necessary to have all of the required documents
  for the conversion of the licences; however, there can be no assurance that
  the approval of the environmental impact study will be received

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15

prior to the expiration of the exploration licenses. Pacific
  Rim has received assurances from the El Salvadoran Division of Mines and Hydrocarbons
  (Ministry of Economy) that the conversion of the exploration licenses to an
  exploitation concession will not be jeopardized by lack of timely approval of
  the environmental impact study.

4 C.     ORGANIZATIONAL STRUCTURE

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

| | (1) | Pacific Rim Exploration Inc., Nevada, USA, 100% directly
      owned by the Company.                                                                                                                                                                                                 
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                      
| | (2) | Dayton Mining (U.S.) Inc. 100% directly
        owned by the Company. This subsidiary holds the 49% interest in the Denton-Rawhide
        joint venture. This subsidiary holds the Surefire staked claims in Nevada
        and is party to the option to acquire the Aurora claims.
| |     |                                                                                                                                                                                                                                                                                      
| | (3) | Pacific Rim El Salvador S.A. de C.V.,
        El Salvador. This subsidiary holds the Companys interest in the
        El Salvador properties.                                                                                                                                       

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

4 D.     PROPERTY, PLANT AND EQUIPMENT

The following is a description of the Companys properties and the nature of the Companys interests in such properties.

[Figure 1 follows:]





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El Salvador Project

The Companys most advanced property in El Salvador is
  the El Dorado Property, which consists of two exploration licences, which the
  Company, indirectly through its wholly owned subsidiaries, holds as to a 100%
  interest. In addition, the Company has entered into an option to acquire a 100%
  interest in the La Calera Project that is near to El Dorado. See Figure 1 above

El Dorado Property, El Salvador

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

The Company has entered into a two year lease with option
  to purchase agreement dated April 2, 2004 to acquire approximately 100 hectares
  of land near the El Dorado Property, for total consideration of US$1,000,000
  of which US$14,391 has been paid as the initial lease payment, and US$14,391
  is due April 1, 2005. The Company may exercise the option to purchase the property
  by giving six months prior written notice before the end of the two year term,
  the balance will then be due and payable. In addition the Company has agreed
  to drill two water wells on the property and construct an access bridge across
  the San Francisco River. The Company is acquiring additional smaller tracts
  of lands in the area for the purpose of access at nominal amounts.

Although the El Dorado Property contains geological mineral
  resources, none of the Companys properties in El Salvador, including the
  El Dorado Property, contain known ore reserves and all work programs are exploratory
  searches for ore grade mineralization.

Property Description and Location

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

In addition to its mineral rights, the Company owns approximately
  69 hectares of real estate in the central part of the El Dorado Property and
  an option to acquire an additional 100 hectares.

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

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18

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

The El Dorado Property is in the Department of Cabañas,
  approximately 74 kilometers northeast of San Salvador, the capital city of the
  nation, and 10 kilometers southwest of the town of Sensuntepeque. See Figure
  1.

Accessibility, Climate, Local Resources, Infrastructure and Physiography

The El Dorado Property is accessible by a paved road that
  crosses the El Dorado Property. The travel time from the project site to downtown
  San Salvador is approximately 1.5 hours, depending on traffic levels.

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

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

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

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

History

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

Extensive exploration since 1993 has included surface geological
  mapping, rock sampling and prospecting, campaigns of hand and bulldozer trenching,
  core drilling, and minor reverse circulation drilling. The exploration data
  base as of the end of July 2003 included the results of 270 drill holes totalling
  about 68,400 meters, with analytical results for almost 9,500 samples from drilling.
  Added to

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19

this are the results of nearly 3,600 surface rock samples
  of various types, and results of some 5,300 underground assays gleaned from
  the records of the 1948  1953 production period.

Geological Setting

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

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

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

In terms of its structure and mineral deposits the Exploration
  License Area can be divided into 3 districts, Central, Northern, and Southern.
  The three districts are separated from each other by northwest trending regional
  scale faults whose primary displacement was lateral. Within each district, deposits
  are contained within quartz veins that formed along fractures that opened under
  tension. The mineralized veins are for the most part within about 30 degrees
  of vertical and trend generally north-south, but there is considerable variation
  both within and between districts.

Exploration

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

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

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

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

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20

Mineralization

The El Dorado License area contains many deposits, prospects
  and occurrences in veins, hot spring deposits and hydrothermal breccias. They
  are found in three districts, north, central and south, that are distinguished
  from each other by the dominant vein orientations and the level of the hydrothermal
  system that is exposed on the present-day surface. The veins have complex, multi-stage
  histories of formation.

In a 1999 Summary of Exploration Activities, geologists
  working for Mirage Resource Corp. organized their descriptions of the deposits
  and zones into 33 targets, many of which comprise multiple veins. In terms of
  their exploration and development status, the veins range from newly discovered,
  untested prospects to three deposits sufficiently advanced that their contained
  resources can be estimated. The dimensions of mineralized veins are as varied
  as their exploration status, ranging from those known only in single outcrops
  to those that have been traced on the surface over lengths of between one and
  two kilometers. Systems of related veins are up to three kilometers long. In
  those veins that have been mined or extensively drilled, mineralization has
  been demonstrated to exist over vertical intervals of up to 300 meters. (In
  considering vein lengths and vertical dimensions it is important to note that
  at a detailed level mineralization in this type of system is highly variable).

Drilling

Several campaigns of drilling have been mounted on the El
  Dorado Property throughout the last decade. As reported in an independent report
  prepared by an independent Qualified Person, as of July 31, 2003 the drill hole
  database contained records of 270 drill holes comprising 68,420 meters of drilling.
  Since becoming operator in mid 2002 up to the completion of hole P03-256 in
  July 2003, the Company had drilled 55 holes comprising 20,828 meters.

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

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

Sampling and Analysis

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

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

Intervals from drill core to be sampled are selected by the
  geologist logging the core. All vein material and visibly mineralized material
  is sampled, with enough immediately adjacent, apparently unmineralized

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21

material sampled to make sure that all intervals are adequately
  tested. Sampling is done after logging is complete. The core is sawn in half
  along its axis. The Companys immediate predecessor as operator, Dayton,
  also used a rock saw for sampling core from 13 holes it drilled in 2000. Operators
  prior to Dayton used a percussion core splitter.

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

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

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

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

Security of Samples

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

2003 Resource Report

In the summer of 2003 the Company engaged an independent technical
  company to complete a project wide updated resource estimate of the El Dorado
  Property and compile a technical report in compliance with Canadian National
  Instrument 43-101. The report is entitled Technical Report on the Eldorado
  Project Gold and Silver Resources, Department of Cabanas, Republic of El Salvador
  dated November 26, 2003 and emphasizes the El Dorado resources. The Resource
  Report describes the data, procedures, results, conclusions, risks and upsides
  of the El Dorado gold and silver resources and just-completed resource estimates.
  The following section regarding resources is extracted from the Resource Report.

Exploration

Exploration work completed at El Dorado includes geological
  mapping, geochemical sampling (over 3,600 rock samples), hand trenching (over
  500 samples), and drilling. Several campaigns of drilling have been completed
  on the El Dorado Property throughout the last decade. One is ongoing as of this
  writing. The majority of the holes drilled on the El Dorado Property are core
  holes. There are 275 drill holes with ~10,500 samples with gold and silver assays
  in 71,130 m of drilling. Reverse circulation drilling was employed to pre-collar
  some core holes, but was used for the entirety of seven holes at Nueva Esperanza
  in earlier drill campaigns. Core recovery has been an issue at El Dorado, mainly
  at Coyotera, even though overall the recovery is quite good. A detailed study
  was made of this and, rather than factor

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22

grades and specific gravities by core recovery, has either
  eliminated the few poor-recovery samples from resource estimation or modified
  resource classification when low recovery samples were used.

Metallurgy

Metallurgical test work has shown the El Dorado mineralization
  responds well to milling and cyanide leaching. Recoveries of over 90% for gold
  and over 80% for silver are expected. Historic recoveries during past production
  ranged from 87% to 91.5% for gold and 77.7% for silver. Four batches of metallurgical
  test have been completed in the past eight years all indicating recoveries similar
  or better than historic levels. Additional metallurgical test work is still
  needed to refine the recovery data.

Resources

Estimates of the El Dorado resources were done relying heavily
  on geology and building models on cross sections. Three dimensional block models
  were made for La Coyotera and Nueva Esperanza resource estimates and two-dimensional
  (long section) models were made for the El Dorado mine area vein resources.
  Estimation used kriging and inverse distance methods. Capping levels varied
  depending upon the zone, the deposit and the area. Specific gravity values used
  ranged from 2.42 g/cm3 for veins to 2.62 g/cm3 for wallrock.

The resource is classified in order of increasing geological
  and quantitative confidence, into Inferred, Indicated and Measured categories
  in accordance with the Canadian Institute of Mining, Metallurgy and Petroleums
  (CIM) definitions adopted by CIM Council August 20, 2000 and therefore also
  in accordance with Canadian National Instrument 43-101. The El Dorado resources
  are classified by a combination of distance to the nearest sample, the number
  of samples used to estimate a block, the confidence in certain drill intercepts
  and the core recovery. The undiluted resources are given in Tables 1.1 through
  1.4. Table 1.5 is the reported undiluted resource.

The Resource Report notes it is likely that additional mineralization
  will be encountered within and around the principle resource veins as well as
  in veins immediately to the east, in the Portillo-Rosario area. Furthermore,
  throughout the district there are numerous veins, often with gold and silver
  mineralization and sometimes with very significant grades. This is a rather
  mixed blessing for Pacific Rim in that any one of those veins could host deposits
  similar to the El Dorado mine area on the one hand, but on the other hand, each
  one deserves to be explored to some degree. When compared to previous estimates,
  the new resource estimates either increased or decreased, depending on the area.
  The dominant cause of increases in the El Dorado mine area were extension of
  modeled veins on strike and down dip while only a small amount (~5%) was caused
  by the different specific gravity. Decreases at La Coyotera and Nueva Esperanza
  probably result from more restricted zone boundaries.

The El Dorado Property merits additional exploration around
  the El Dorado mine area, metallurgical test work, and a phased feasibility study
  with an emphasis on defining infrastructure and mine development options.

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23

Table 1.1 El Dorado Property Measured Resources

Total Measured

|Cutoff   | Tonnes    | Grade    | Ounces  | Grade    | Ounces    | Grade      | Ounces 
|-------- | --------- | -------- | ------- | -------- | --------- | ---------- | -------
|(g Au/t) |           | (g Au/t) | (Au)    | (g Ag/t) | (Ag)      | (g AuEq/t) | (AuEq) 
|1.0      | 1,016,200 | 9.49     | 310,100 | 64.18    | 2,096,900 | 10.42      | 340,500
|4.0      | 766,600   | 11.92    | 293,900 | 79.45    | 1,958,200 | 13.05      | 321,700
|5.0      | 721,700   | 12.38    | 287,300 | 82.70    | 1,918,900 | 13.56      | 314,700
|6.0      | 673,900   | 12.85    | 278,400 | 85.96    | 1,862,500 | 14.08      | 305,100
|7.0      | 608,700   | 13.53    | 264,800 | 89.66    | 1,754,700 | 14.79      | 289,400
|8.0      | 548,000   | 14.20    | 250,100 | 93.39    | 1,645,400 | 15.53      | 273,600
|9.0      | 479,200   | 15.03    | 231,500 | 98.90    | 1,523,700 | 16.42      | 253,000

Table 1.2 El Dorado Property Indicated Resources

Total Indicated

|Cutoff   | Tonnes    | Grade    | Ounces  | Grade    | Ounces    | Grade      | Ounces 
|-------- | --------- | -------- | ------- | -------- | --------- | ---------- | -------
|(g Au/t) |           | (g Au/t) | (Au)    | (g Ag/t) | (Ag)      | (g AuEq/t) | (AuEq) 
|1.0      | 3,621,900 | 5.26     | 612,500 | 35.26    | 4,105,500 | 5.77       | 671,700
|4.0      | 1,691,200 | 9.23     | 501,600 | 58.50    | 3,180,700 | 10.05      | 546,700
|5.0      | 1,503,500 | 9.82     | 474,900 | 62.42    | 3,017,500 | 10.72      | 518,200
|6.0      | 1,322,600 | 10.40    | 442,400 | 66.08    | 2,810,100 | 11.34      | 482,200
|7.0      | 1,053,500 | 11.42    | 386,900 | 72.21    | 2,445,800 | 12.47      | 422,500
|8.0      | 819,200   | 12.46    | 328,300 | 77.43    | 2,039,400 | 13.56      | 357,100
|9.0      | 649,300   | 13.47    | 281,100 | 83.01    | 1,732,900 | 14.64      | 305,600

Table 1.3 El Dorado Property Measured and Indicated Resources

Total Measured and Indicated

|Cutoff   | Tonnes    | Grade    | Ounces  | Grade    | Ounces    | Grade      | Ounces   
|-------- | --------- | -------- | ------- | -------- | --------- | ---------- | ---------
|(g Au/t) |           | (g Au/t) | (Au)    | (g Ag/t) | (Ag)      | (g AuEq/t) | (AuEq)   
|1.0      | 4,638,100 | 6.19     | 922,600 | 41.59    | 6,202,400 | 6.79       | 1,012,200
|4.0      | 2,457,800 | 10.07    | 795,500 | 65.03    | 5,138,900 | 10.99      | 868,400  
|5.0      | 2,225,200 | 10.65    | 762,200 | 69.00    | 4,936,400 | 11.64      | 832,900  
|6.0      | 1,996,500 | 11.23    | 720,800 | 72.79    | 4,672,600 | 12.27      | 787,300  
|7.0      | 1,662,200 | 12.19    | 651,700 | 78.60    | 4,200,500 | 13.32      | 711,900  
|8.0      | 1,367,200 | 13.16    | 578,400 | 83.83    | 3,684,800 | 14.35      | 630,700  
|9.0      | 1,128,500 | 14.13    | 512,600 | 89.76    | 3,256,600 | 15.40      | 558,600  

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Table 1.4 El Dorado Property Inferred Resources

Total Inferred

|Cutoff   | Tonnes  | Grade    | Ounces | Grade    | Ounces  | Grade      | Ounces
|-------- | ------- | -------- | ------ | -------- | ------- | ---------- | ------
|(g Au/t) |         | (g Au/t) | (Au)   | (g Ag/t) | (Ag)    | (g AuEq/t) | (AuEq)
|1.0      | 723,200 | 3.35     | 77,800 | 24.39    | 567,100 | 3.72       | 86,400
|4.0      | 170,200 | 8.39     | 45,900 | 57.86    | 316,600 | 9.21       | 50,400
|5.0      | 137,500 | 9.41     | 41,600 | 64.54    | 285,300 | 10.41      | 46,000
|6.0      | 108,100 | 10.44    | 36,300 | 73.28    | 254,700 | 11.60      | 40,300
|7.0      | 85,200  | 11.46    | 31,400 | 79.69    | 218,300 | 12.49      | 34,200
|8.0      | 72,600  | 12.34    | 28,800 | 85.68    | 200,000 | 13.45      | 31,400
|9.0      | 65,400  | 12.65    | 26,600 | 87.41    | 183,800 | 13.89      | 29,200

Table 1.5 El Dorado Property Reported Resources-Summary

|Measured and Indicated
      Resource
|-------------------------------------
|Cutoff                               
|(g Au/t)                             
|Minita                               
|5.0                                  
|Minita 3                             
|5.0                                  
|Zancudo                              
|5.0                                  
|La Coyotera                          
|5.0                                  
|Nueva Esperanza                      
|0.8                                  
|Total                                
|Variable                             
|Inferred Resource                    
|Cutoff                               
|(g Au/t)                             
|Minita                               
|5.0                                  
|Minita 3                             
|5.0                                  
|Zancudo                              
|5.0                                  
|La Coyotera                          
|5.0                                  
|Nueva Esperanza                      
|0.8                                  
|Total                                
|Variable                             

Mining Operations

There are no present mining operations on the project.

Exploration and Development

In March 2004, Pacific Rim contracted SRK Consulting of Denver,
  Colorado to complete a pre-feasibility study of the potential economics of underground
  mining of the Minita vein system. The study is expected to be completed early
  in the Companys second quarter of fiscal 2005 (September / October 2004)
  and will be based on exploiting the current Minita resource with a 1,000 tonne
  per day operation. The Company also expects to submit an environmental impact
  study for a 1,000 tonne per day operation to El Salvadoran regulatory agencies
  in September / October 2004 and, upon regulatory approval in

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25

El Salvador, commence the permitting process for the construction
  of an access / haulage ramp. The ramp will provide access to the Minita vein
  system for underground definition drilling required for a full feasibility study,
  and for production haulage.

In December 2003 the Company identified Gonso a new gold mineralized
  structure approximately 1.2 kilometres east of the Minita vein. Subsequently
  erratic results were encountered in scout drilling designed to follow up on
  results from hole P03-268, the first drill hole to have tested this area of
  the project as reported in NR #03-13 dated December 8, 2003. Several vein intercepts
  in the Gonso area contain gold values above the 5.0 g/t cutoff grade, as outlined
  in the table below. However, this target area was found to be geologically and
  structurally complicated, with poor continuity between drill holes. Holes P03-270,
  272, 273, 276, 277 and 279-283 drilled in the Gonso vein area encountered no
  significant mineralization. Drill holes along the San Matias vein in the North
  District (P03-269, 271, 274, 278 and 284), did not encounter bonanza grades
  and this area has also been given a lower priority for future drilling.

|Hole No. | Vein or | UTM              | Drill hole   | From       | To      | Inter-   | True     | Gold  | Silver
|-------- | ------- | ---------------- | ------------ | ---------- | ------- | -------- | -------- | ----- | ------
|         | System  | Northing/Easting | azimuth /dip | (meters    | (meters | section  | Width    | (g/t) | (g/t) 
|         | Tested  |                  | (degrees)    | down hole) | down    | (meters) | (meters) |       |       
|         |         |                  |              |            | hole)   |          |          |       |       
|PO3-268  | Gonso   | 301463 / 535622  | 301/50       | 394.2      | 396.1   | 1.9      | 1.35     | 11.07 | 118.1 
|P04-275  | Gonso   | 301554 / 535481  | 300/65       | 159.45     | 169.85  | 10.4     | 7.7      | 5.4   | 31    
|         |         |                  | includes:    | 160.65     | 163.8   | 3.15     | 2.6      | 9.8   | 54    
|         |         |                  | and          | 167.1      | 168.9   | 1.8      | 1.2      | 7.5   | 51    
|P04-276  | Gonso   | 301554 / 535480  | 267/50       | 110.55     | 111.8   | 1.25     | 0.7      | 6.6   | 52    
|P04-277  | Gonso   | 301096 / 535061  | 070/50       | 239.1      | 239.6   | 0.5      | 0.4      | 6.2   | 48    
|         |         |                  |              | 242.55     | 243.5   | 0.95     | 0.7      | 9.2   | 96    
|         |         |                  |              | 252.2      | 253.2   | 1.0      | 0.86     | 5.4   | 13    
|         |         |                  |              | 265.6      | 265.95  | 0.35     | 0.3      | 9.1   | 27    

In May of 2004, two new areas of gold mineralization at the
  El Dorado project in El Salvador were announced. High grade gold was discovered
  in previously untested areas of the South Minita vein in the Central District
  and the Nance Dulce vein in the South District. Pacific Rims first drill
  hole in the South District, P04-301, intercepted two significant veins along
  the northwest-striking Nance Dulce vein system. The first intercept returned
  21.1 g/t gold over a true width of 1.64 meters and the second intercept, located
  a further 97 meters down-hole, returned 22.86 g/t gold over a true width of
  1.17 meters. Silver assays are pending. P04-301 was drilled 800 meters to the
  northwest of a very high-grade outcrop of the Nance Dulce vein, the site of
  the highest-grade sample ever taken in the El Dorado District (a grab sample
  that assayed 956.9 g/t gold).

Drill hole P04-299 was drilled 500 meters to the south of
  the Minita resource area and encountered a 7.0 meter wide vein averaging 12.08
  g/t gold and 102.4 g/t silver. This intercept occurs within the Minita vein
  structure, which, through surface mapping, has now been traced for 5 kilometers
  to the south of the current 585,000 ounce Minita resource area. Hole P04-297
  is located 100 meters to the north of hole 299 and intercepted a 0.4 meter wide
  vein averaging 8.37 g/t gold. Five holes (P04-293, 295, 296, 298 and 300) were
  drilled to the north of the Minita resource area and encountered only narrow
  veins. Two holes (P04-286 and 290) intersected the Portillo vein, a north-northwest
  striking structure located just east and south of the Minita resource area.
  These intercepts were very narrow (0.1 meters). The final results for the scout
  drilling in the North District (P04-287, 289 and 291) and the Hacienda Vieja/Gonso
  area (P04-285 and 288) failed to encounter significant gold mineralization.

---

26

On August 10, 2004, the results of additional drill results
  outlined continued high-grade gold mineralization in follow-up holes in the
  South Minita and Nance Dulce zones for over 500 meters in strike length, with
  high-grade gold mineralization encountered in every hole to have tested this
  zone to date, including hole P04-318 that intersected 40.58 g/t gold over 0.85
  meters. The Nance Dulce vein is filling a fault zone that can be traced a further
  600 meters to the southeast, where outcrop of the vein has returned the highest
  grades ever encountered in the district. The vein can be traced to the northwest
  for another 500 meters. The vertical extent of the mineralization has not yet
  been determined. The South Minita gold zone discovered with drill hole P04-299
  narrowed as the drill pattern proceeded south but opened up again with drill
  holes P04-310 and 315 (14.77 g/t gold over 1.80 meters). These two drill holes
  and an additional hole recently completed 150 meters to the south of 315 (assays
  pending) indicate an open-ended potential mineralized zone over 400 meters in
  strike length. The vertical dimension will be determined with additional drilling.

The following is a table of the complete results, announced by the Company in May and August 2004, from its ongoing drill program:

|Hole No. | Vein or System
      Tested | UTM
      Northing/Easting | Drill hole
      azimuth /dip
      (degrees) | From
      (meters
      down
      hole)                                | To
      (meters
      down
      hole)                    | Inter-
      section
      (meters)              | True
      Width
      (meters)                 | Gold
      (g/t)                                        | Silver
      (g/t)                                  
|-------- | --------------------------- | -------------------------- | --------------------------------------------- | ------------------------------------------------------------------------ | ---------------------------------------------------------- | ------------------------------------------------ | ----------------------------------------------- | ------------------------------------------------------- | ----------------------------------------------------
|P04-285  | Hacienda Vieja              | 301054/ 535333             | 90/55                                         | No significant intercepts                                               
|P04-286  | Portillo                    | 301553/ 534435             | 270/55                                        | 308.25                                                                   | 308.45                                                     | 0.2                                              | 0.1                                             | 10.22                                                   | 82                                                  
|P04-287  | San Matias                  | 307509/ 532805             | 128/55                                        | No significant intercepts                                               
|P04-288  | Hacienda Vieja              | 301468 / 535216            | 250/50                                        | No significant intercepts                                               
|P04-289  | San Matias                  | 306894 / 532808            | 128/55                                        | No significant intercepts                                               
|P04-290  | Portillo                    | 301638 / 534430            | 270/57                                        | 103.0                                                                    | 103.1                                                      | 0.1                                              | 0.1                                             | 23.67                                                   | n.a.                                                
|P04-291  | La Huerta                   | 305318 / 533631            | 350/50                                        | No significant intercepts                                               
|P04-292  | Portillo                    | 301710 / 534426            | 270/50                                        | No significant intercepts                                               
|P04-293  | Minita north                | 301900 / 533990            | 90/55                                         | No significant intercepts                                               
|P04-294  | Minita south                | 301031 / 534345            | 270/50                                        | 10.65
      266.05
      357.6                                           | 11.2
      266.5
      357.75                              | 0.55
      0.45
      0.15                       | 0.5
      0.3
      0.1                         | 9.09
      7.16
      10.97                             | 30.1
      n.a
      n.a.                           
|P04-295  | Minita north                | 301994 / 533932            | 90/60                                         | No significant intercepts                                               
|P04-296  | Minita north                | 301902 / 534086            | 90/50                                         | 151.8                                                                    | 153.05                                                     | 1.25                                             | 1.0                                             | 6.85                                                    | n.a.                                                
|P04-297  | Minita south                | 300924 / 534351            | 276/60                                        | 298.7                                                                    | 299.25                                                     | 0.55                                             | 0.4                                             | 8.37                                                    | n.a.                                                
|P04-298  | Minita north                | 302031 / 534018            | 90/55                                         | 301.9                                                                    | 302.9                                                      | 1.0                                              | 0.9                                             | 8.74                                                    | n.a.                                                
|P04-299  | Minita south                | 300856 / 534391            | 259/50                                        | 121.7
      284.65
      361.35
      381.2 
      includes:
      381.2 | 122.45
      285.55
      362.4
      388.85 
      384.05 | 0.75
      0.9
      1.05
      7.65 
      2.85 | 0.65
      0.85
      0.95
      7.0 
      2.6 | 13.01
      15.36 
      10.17
      12.08 
      20.63 | n.a.
      n.a.
      n.a. 
      102.4 
      172.4
|P04-300  | Minita north                | 302193 / 533946            | 90/55                                         | No significant intercepts                                               
|P04-301  | Nance Dulce                 | 297743 / 533306            | 212/50                                        | 85.65
      182.15
      184.05
      207.0                              | 87.4
      183.4
      184.5
      207.3                   | 1.75
      1.25
      0.45
      0.3             | 1.64
      1.17
      0.38
      0.25           | 21.1
      22.86
      13.95
      11.5                 | n.a.
      n.a.
      n.a.
      n.a.               
|P04-302  | South Minita                | 300740 / 534350            | 260/50                                        | 258.45                                                                   | 258.7                                                      | 0.25                                             | 0.2                                             | 6.72                                                    | 17                                                  
|P04-303  | PDLM                        | 297799 / 533436            | 90/50                                         | No Significant Intercepts                                               
|P04-304  | South Minita                | 300828 / 534280            | 275/50                                        | 245.35                                                                   | 245.6                                                      | 0.25                                             | 0.2                                             | 7.21                                                    | 12                                                  
|P04-305  | PDLM                        | 297257 / 533695            | 270/50                                        | No Significant Intercepts                                               

---

27

|Hole No. | Vein or System
      Tested | UTM
      Northing/Easting | Drill hole
      azimuth /dip
      (degrees) | From
      (meters
      down
      hole)                           | To
      (meters
      down
      hole)                            | Inter-
      section
      (meters)                         | True
      Width
      (meters)                       | Gold
      (g/t)                                              | Silver
      (g/t)                             
|-------- | --------------------------- | -------------------------- | --------------------------------------------- | ------------------------------------------------------------------- | ------------------------------------------------------------------ | ----------------------------------------------------------- | ----------------------------------------------------- | ------------------------------------------------------------- | -----------------------------------------------
|P04-306  | South Minita                | 300742 / 534339            | 275/54                                        | 253.95                                                              | 254.15                                                             | 0.2                                                         | 0.2                                                   | 12.08                                                         | 77                                             
|P04-307  | Nance Dulce                 | 297756 / 533331            | 232/55                                        | 112.95
      135.6                                                  | 113.45
      135.75                                                | 0.5
      0.15                                              | 0.45
      0.1                                        | 39.32
      8.36                                              | n.a.
      58                                  
|P04-308  | South Minita                | 300641 / 534287            | 270/50                                        | 66.1                                                                | 67.05                                                              | 0.95                                                        | 0.9                                                   | 9.45                                                          | n.a.                                           
|P04-309  | Nance Dulce                 | 297668 / 533369            | 232/50                                        | 80.8
      94.55
      188.0                                        | 82.25
      95.05
      188.3                                      | 1.45
      0.5
      0.3                                    | 1.3
      0.3
      0.2                               | 9.41
      6.51
      50.02                                   | 89
      81
      199                          
|P04-310  | South Minita                | 300493 / 534304            | 270/50                                        | 14.65
      15.6 
      16.5
      238.65                           | 14.85
      16.1
      16.6
      239.65                           | 0.20
      0.50
      0.10
      1.00                       | 0.15
      0.45
      0.10
      0.95                 | 6.36
      12.04
      10.08
      15.75                      | n.a.
      n.a.
      n.a.
      n.a.          
|P04-311  | Nance Dulce                 | 297813 / 533232            | 232/50                                        | 70.95
      160.4
      176.35
      260.8                          | 71.15
      161.5
      176.65
      260.95                        | 0.20
      1.10
      0.30
      0.15                       | 0.15
      1.00
      0.25
      0.10                 | 70.80
      20.70
      28.28
      36.39                     | n.a.
      177
      158
      92              
|P04-312  | South Minita                | 300825 / 533980            | 160/50                                        | No Significant Intercepts                                          
|P04-313  | Nance Dulce                 | 297883 / 533158            | 232/50
      includes                         | 45.9
      156.7
      159.3 
      159.95
      193.25
      287.4 | 46.3
      156.85
      160.3
      160.3
      139.4
      287.65 | 0.15
      0.15
      1.00
      0.35
      0.15
      0.25 | 0.1
      0.1
      0.9
      0.3
      0.1
      0.2 | 7.52
      7.14
      6.77
      16.69
      10.47
      9.95 | 55
      61
      38
      87
      31
      47
|P04-314  | Nance Dulce                 | 298023 / 533153            | 232/50                                        | 98.85                                                               | 99.05                                                              | 0.20                                                        | 0.15                                                  | 21.28                                                         | n.a.                                           
|P04-315  | South Minita                | 300280 / 534325            | 270/50                                        | 284.97                                                              | 287.05                                                             | 2.08                                                        | 1.80                                                  | 14.77                                                         | n.a.                                           
|P04-316  | Nance Dulce                 | 297962 / 533075            | 232/50                                        | 167.67                                                              | 168.05                                                             | 0.38                                                        | 0.3                                                   | 9.22                                                          | n.a.                                           
|P04-317  | South Minita                | 300280 / 534330            | 90/50                                         | No Significant Intercepts                                          
|P04-318  | Nance Dulce                 | 297574 / 533438            | 232/50                                        | 149.05                                                              | 150.05                                                             | 1.00                                                        | 0.85                                                  | 40.58                                                         | n.a                                            

The Company believes that the South Minita zone looks very
  similar to the Minita resource area, located directly to the north, which is
  believed to be connected to the Nance Dulce mineralized zone, 4 km to the south,
  by the north-south trending Minita structure. Pacific Rim is continuing its
  exploration drill program at El Dorado to further delineate the South Minita
  and Nance Dulce gold zones and to test the Minita structure for additional gold
  mineralization, with the goal of enlarging the 585,000 measured and indicated
  Minita resource further.

La Calera Project, El Salvador

The Company and Minerales Entremares El Salvador have entered
  into a letter of intent for a joint venture and option to purchase, dated May
  17, 2002, wherein the Company can acquire a 100% interest in the La Calera Project.
  Total commitments by the Company are option payments totalling $300,000 (of
  which $40,000 has been paid to date) and exploration expenditures of $375,000
  to May 17, 2006 (all incurred to date). See Note 7 a) of the 2004 financial
  statements for a breakdown of the payments and exploration commitments of the
  Company. The La Calera Project covers an area of 35 square kilometres and is
  located in the Municipality of Ilobasco, Department of Cabanas, El Salvador,
  approximately eight kilometres west of the Companys El Dorado gold deposit
  in El Salvador. The Company is conducting an exploration program on the La Calera
  Project of reconnaissance scale mapping and defining and drilling potential
  targets.

There are no known ore reserves on the La Calera Project
  and all work programs on the property are exploratory searches for ore grade
  mineralization.

---

28

Independent Technical Report

In June of 2003 an independent, technical due diligence review
  was undertaken of the La Calera Project and is described in report entitled
  Review of the La Calera Project, El Salvador dated August 22, 2003.
  The report describes the status of the La Calera Project as of July 31, 2003.
  The following disclosure concerning the La Calera Project is derived from the
  report.

Property Description and Location

The La Calera Project in El Salvador is based on one exploration
  license area that covers 3,500 hectares. It is located in the Departments of
  Cabañas and San Vicente, approximately 45 kilometers northeast of San
  Salvador, the capital city of El Salvador, and 8 kilometers southeast of the
  town of Ilobasco. See Figure 1.

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

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

No known environmental liabilities encumber the property.

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

Accessibility, Climate, Local Resources, Infrastructure and Physiography

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

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

Other utilities are absent in the immediate exploration area.

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

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

---

29

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

History

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

|October 1997    | La Calera license is granted to Minerales Entremares El Salvador S.A.
      de C.V.                           
|--------------- | --------------------------------------------------------------------------------------------------------------
|Sept  Oct 1997 | Entremares undertook a program of geological mapping and sampling.                                            
|August 2002     | La Calera License transferred from Minerales Entremares to Kinross El
      Salvador S.A. de C.V.             
|March 2003      | The name of Kinross El Salvador S.A. de C.V. is formally changed to Pacific
      Rim El Salvador S.A. de C.V.

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

Geological Setting

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

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

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

Exploration

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

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

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

---

30

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

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

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

Mineralization

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

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

There is silicification associated with a northeast trending
  fault that appears to truncate the Rosa vein set.

The veins are exposed on prominent ridges that trend between
  140 and 160 . The two main vein systems are the Rosa,
  and the Rosa West system. The latter consists of two principal veins about 100
  meters and 200 meters west of the Rosa. The smaller El Calichal vein system
  is about 300 meters west of the Rosa. The longest of the known veins is the
  Rosa, which can be traced on the surface for about 1,100 meters in a north northwest
  direction. In aggregate the vein system has to date been traced for about 1,700
  meters in the north northwest direction.

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

Drilling

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

The new information generated by exploration demonstrated
  that a second model for an exploitable target needed to be considered. In the
  vicinity of the veins there are zones of stringer mineralization. They have,
  in aggregate, considerably lower grade than the discrete veins. However, if
  sufficient volume of stringer mineralization with sufficient grade were to be
  found, there might be an opportunity for bulk

---

31

mining by way of an open pit, at grades lower than can be
  mined using selective methods. The Company has analyzed some sections of drill
  core that had previously not been analyzed because they were outside the higher
  grade veins.

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

Sampling and Analysis

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

Security of Samples

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

Mineral Resources and Reserve Estimates

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

Mining Operation

There are no mining operations on the La Calera Project.

Ongoing Exploration

A Phase 1 core drill program to test the La Calera system
  was in progress at the start of fiscal 2004. Twenty-nine additional holes were
  reported on during fiscal 2004. Following the completion of the Phase 1 program,
  a geophysical survey was conducted to follow the mineralized structures beneath
  younger rocks that obscure the exposed vein system along strike and to the east
  and west. This ground magnetic survey was successful not only in identifying
  strike extensions of the previously tested veins, but also locating other hidden
  structures in the vicinity. Results from the last 9 holes of the La Calera Phase
  1 drilling program (holes PLC03-026 through 034) included: hole PLC03-026 returned
  6.45 meters grading 1.44 g/t gold, and hole PLC03-027 returned 4.0 meters grading
  0.71 g/t gold, based on a 0.62 g/t cutoff grade. The remaining scout holes tested
  primarily blind targets and contained no significant intercepts. Pacific Rim
  laid out a Phase 2, 30-hole reverse circulation program to drill test new targets
  identified by its ground magnetic survey on the La Calera project to follow
  the mineralized structures beneath the volcanic ash, and potentially identify
  other covered targets. In April 2004 the Company commenced the Phase 2 reverse
  circulation drill program to test the roughly 5 km of new targets identified
  by the geophysical survey. This program continues to date. Future exploration
  of the La Calera project will be dependent on results from the Phase 2 drilling
  program.

---

32

Other Properties

Nevada, USA

Denton-Rawhide Mine (49%)

The Company acquired its interest in the Denton-Rawhide Mine
  on April 6, 2000 pursuant to an acquisition agreement dated February 13, 2000
  (the Acquisition Agreement) between Dayton, Kinross Gold Company
  (Kinross), Kinross Rawhide Mining Company (Kinross Rawhide)
  and Kinross Fallon Inc. (Kinross Fallon). The Company holds a 49%
  interest and Kennecott Minerals Company, owns the remaining 51% and is the operator.

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

|(a) | Kinross Rawhide and Kinross Fallon assigned
        all of their 49% interest in the Denton-Rawhide Mine, including all of
        their rights under the Rawhide Joint Venture Agreement (as described below),
        to the Company in exchange for 7,235,500 common shares at a deemed price
        of Cdn $2.26 per share for a total acquisition price of Cdn $16,352,230.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(b) | Kinross Rawhide agreed to keep in place
        a $1,297,356 reclamation letter of credit posted by it in connection with
        the Denton-Rawhide Mine until March 31, 2002. The Company agreed to pay
        to Kinross Rawhide a standby fee equal to the cost to Kinross Rawhide
        of the letter of credit plus a support fee equal to 1.75% per annum, payable
        on the first day of January, April, July and October in each year. In
        January 2001, the reclamation letter of credit was replaced on behalf
        of the joint venture by a surety provided by Kennecott Rawhide Mining
        Company (Kennecott Rawhide), an indirect whollyowned
        subsidiary of Rio Tinto Plc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(c) | Kinross Fallon and Kinross USA Inc.
        (Kinross USA) agreed to keep in place a $1,246,780 surface
        management surety bond posted by them in connection with the Denton-Rawhide
        Mine until March 31, 2001. The Company agreed to pay to Kinross Fallon
        a standby fee equal to the cost to Kinross Fallon of the surety bond (which
        is currently 0.40%) plus a support fee equal to 1.75% per annum, payable
        on the first day of January, April, July and October in each year. In
        January 2001, the surety bond described in (c) was replaced on behalf
        of the joint venture by a surety provided by Kennecott Rawhide Mining
        Company (Kennecott Rawhide), an indirect whollyowned
        subsidiary of Rio Tinto Plc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(d) | Kinross Fallon and Kinross Rawhide assigned
        all of their interest in the revocable reclamation and severance trust
        agreement dated effective January 1, 1999 (the Reclamation Trust
        Agreement) among Kennecott Rawhide Mining Company (Kennecott
        Rawhide), Kinross, Kinross Rawhide, Kinross USA and Bank of America,
        as trustee, to the Company for an amount equal to $2,118,403 (being the
        amount held in the trust created thereby for the benefit of Kinross Rawhide
        and Kinross Fallon). Pursuant to promissory notes dated April 6, 2000,
        the Company agreed to pay to Kinross an amount equal to the amount held
        in the trust at that time, by no later than December 31, 2004, provided
        that the Company shall make minimum annual prepayments on December 31st
        in each year equal to 25% of the net internal cash flow received by the
        Company from its 49% interest in the Denton-Rawhide Mine. As part of the
        final reconciliation of working capital amounts, the amount outstanding
        on the promissory note was reduced to $1,848,863. An amount of $1,021,000
        was repaid on December 31, 2003 and the balance of $0.828 million is payable
        on December 31, 2004 from general corporate cash flows.

The ownership, management and operation of the Denton-Rawhide
  Mine is governed by a construction and post-construction operating agreement
  dated as of June 23, 1989, as amended by a first amendment agreement dated as
  of December 15, 1992, (the Rawhide Joint Venture Agreement) between
  Kennecott

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33

Rawhide and Dayton (as assignee of interest from Kinross Rawhide
  and Kinross Fallon). The Rawhide Joint Venture Agreement provides, among other
  things, that:

|(a) | Kennecott Rawhide holds a 51% interest in the Denton-Rawhide
      Mine;                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(b) | the Company holds a 49% interest in the Denton-Rawhide Mine;                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(c) | Kennecott Rawhide shall be the operator of the Denton-Rawhide
      Mine; and                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(d) | the operation of the Denton-Rawhide
        Mine shall be overseen by a coordinating committee (the Coordinating
        Committee) comprised of three members nominated by Kennecott Rawhide
        and two members nominated by the Company, and the parties to the Rawhide
        Joint Venture Agreement are required to establish a trust as security
        for the payment of reclamation and severance costs resulting from the
        eventual closure of the Denton-Rawhide Mine (the Reclamation Trust).

The Coordinating Committee of the Denton-Rawhide Mine determined
  that, for the purposes of the Reclamation Trust, reclamation and severance costs
  for the Denton-Rawhide Mine are $9.8 million of which 49%, approximately $4.8
  million, will be to the account of the Company. As of April 30, 2004, a total
  of $3.1 million was held in the Reclamation Trust for the benefit of the Company
  and the Company had spent an additional $3.0 million in reclamation to date.
  The determination of reclamation and severance costs is for the purposes of
  the Reclamation Trust only and may not be a true reflection of actual reclamation
  and closure costs of the Denton-Rawhide Mine.

Operations

A leach solution is circulated through the heaps to dissolve
  the gold and silver. These precious metals are then precipitated from the solution
  with the addition of zinc oxide. Dore is produced on site and the dore bars
  are then refined into gold and silver bullion at an independent refinery.

Gold and Silver Production

Pacific Rims share of production from the Denton-Rawhide
  mine during fiscal 2004 was 29,687 ounces of gold and 238,124 ounces of silver
  at a total cash production cost (as calculated using industry standards) of
  $362 per ounce of gold produced. This includes $250 per ounce of non-cash heap
  leach inventory drawdown costs. Actual cash expended per ounce
  of gold produced in fiscal 2004 was $106 per ounce. During fiscal 2003 and the
  four months of fiscal 2002, Pacific Rims share of production was 35,731
  ounces of gold and 302,383 ounces of silver at total cash production costs of
  $209 per ounce (actual cash cost of $268 per ounce), and 14,605 ounces of gold
  and 126,615 ounces of silver at total cash production costs of $266 per ounce
  (actual cash cost of $312 per ounce), respectively. Gold prices improved during
  fiscal 2004, from $341.20 per ounce at the beginning of the period to $388.50
  per ounce at April 30, 2004, reaching a high of $427.25 per ounce on April 1,
  2004.

The Company uses certain non-GAAP performance measures including
  total cash production costs and actual cash production costs
  that do not have any standardized meaning prescribed by GAAP and may not be
  comparable to similar measures presented by other companies. Pacific Rim believes
  that these measures are commonly used, in conjunction with conventional GAAP
  measures, by certain investors to enhance their understanding of the Companys
  performance. The Companys use of these non-GAAP measures is intended to
  provide additional information that should not be considered in isolation or
  as a substitute for performance measures prepared in accordance with GAAP.

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

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34

|                                |            |            | Four Months |             |          
|------------------------------- | ---------- | ---------- | ----------- | ----------- | ---------
|                                | Year Ended | Year Ended | Ended April | Year Ended 
|                                | April 30,  | April 30,  | 30          | December 31
|                                | 2004       | 2003       | 2002        | 2001        | 2000(1)  
|Tonnes Crushed                  | -(2)       | 2,536,000  | 852,200     | 2,804,500   | 2,176,000
|Gold Grade (g/t)                | -(2)       | 0.77       | 1.1         | 0.96        | 0.85     
|Silver Grade (g/t)              | -(2)       | 12.6       | 14.4        | 16.35       | 12.1     
|Gold Produced (ozs)             | 29,687     | 35,731     | 14,605      | 49,366      | 37,706   
|Silver Produced (ozs)           | 238,124    | 302,383    | 126,420     | 356,277     | 283,796  
|Cash production Cost ($/oz) (3) | $106       | $209       | $266        | $247        | $234     

|(1) | Represents the Companys 49% interest since the interest
      in the mine was acquired on April 1, 2000.
|--- | ---------------------------------------------------------------------------------------------------------
|(2) | Crushing and stacking of ore ceased on April 30, 2003.                                                   
|(3) | Total cash production cost less non-cash heap leach
      inventory drawdown cost.                   

Fiscal 2004 production from Denton-Rawhide was roughly 17%
  lower than in fiscal 2003. This slowdown in production represents the natural
  decline in recovery that occurs in the residual leach phase of a heap leach
  operation. Production is anticipated to continue through fiscal 2005, although
  recoveries are expected to decline further as the residual leaching process
  continues. For the purposes of internal budgeting, the Companys projections
  for Denton-Rawhide production look forward in roughly 6-month increments. The
  Company is unable to quantify with any degree of certainty the rate of production
  decline as work is underway to reshape the leach pad surface. After the slopes
  are reshaped the irrigation equipment is reset on the surface before leaching
  can continue which process affects daily production.

Hedging

In order to lock in a certain amount of revenue that Pacific
  Rim requires to fund its ongoing exploration activities, the Company has a short-term
  hedging program, where, from time to time, it will sell forward up to 50% of
  its estimated gold production from Denton-Rawhide in monthly contracts for future
  periods of up to six months. At May 1, 2003, Pacific Rim had 6,000 ounces of
  gold sold forward at an average price of $368 per ounce. A further 11,500 ounces
  of gold were sold forward during the course of fiscal 2004 at prices ranging
  from $390 per ounce to $427 per ounce. At April 30, 2004, 6,000 ounces remain
  sold forward at an average price of $411 per ounce in contracts of 1,000 ounces
  per month with maturity dates extending to October 2004. Pacific Rims
  hedging program is purely a cash management strategy.

Reclamation  Denton-Rawhide

The final reclamation and closure plan for Denton-Rawhide
  has been submitted to the Bureau of Land Management and the Nevada Department
  of Environmental Protection for approval. The Companys 49% share of the
  total reclamation and closure costs is estimated at approximately $4.8 million
  of which the Company has paid approximately $2.7 million to date. Between April
  2000 and December 31, 2001 the Company contributed $39,090 per month into a
  trust fund to meet its reclamation and closure obligations. No monthly contributions
  have been required from the Company since 2002 as it was agreed the fund was
  adequate and further reclamation costs would be provided from mine operating
  cash flow. The closure trust funds are held in a trust managed by a Trustee
  that is a large North American banking institution. The trust funds are invested
  in mutual funds composed of U.S. Government guaranteed fixed income securities
  with maturities of one to five years. The fair market value of the funds at
  April 30, 2004 was approximately $3.3 million (cost $3.1 million). The closure
  trust funds are provided as security to the mine operator for the estimated
  closure liabilities.

Aurora Project

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

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35

The Aurora property is being acquired under a Mining Lease
  and Option to Purchase Agreement dated effective December 15, 2003 between the
  Company and Anthony L. Eng and Ellen OMalley Eng the Owners, who are at
  arms-length to the Company. The term of the lease is 20 years from the effective
  date with the option to extend for additional one year terms and the option
  to acquire the property from the Owners for an aggregate US$850,000. The cash
  consideration for the option is US$25,000 upon signing (paid), $35,000 on the
  first anniversary; $40,000 on the second anniversary; $60,000 on the third anniversary
  and $75,000 on the fourth and subsequent anniversaries to a total of US$850,000.
  A 3% NSR was granted to the owners, 2% of which can be bought out for US$2 million.

The Aurora project consists of 81 claims in the historic Aurora
  District, Nevada.

The Aurora District has reserves and historic production of
  1.8 million ounces of gold in high grade bonanza veins and is located along
  the prolific Walker Lane gold belt.

The Company has commenced a mapping and target generation
  program and intends to drill test the project, once permits are received, in
  the coming year.

Surefire Project

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

The Company has staked the Surefire project located along
  the Northern Nevada rift in Crescent Valley, Nevada. The Surefire project consists
  of 191 claims staked along the rift structures that control the Fire Creek Mine
  and the Mule Canyon Mine. The claims are 100% owned by the Company.

The Company intends to commence exploration at Surefire during the coming year.

Argentina

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

Prometedora Project

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

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

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

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36

San Francisco Property

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

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

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

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

Chile

Andacollo Mine

The Andacollo Mine is closed and to facilitate its closure
  the Chilean courts approved a plan to protect it from its creditors while the
  assets are being disposed of. This mine was an 18,000 tonne per day heap leach
  operation. It operated from 1996 to October 2000. The creditor plan contemplates
  paying off all of the creditors, including the Company from the proceeds of
  the sale of the plant and ancillary equipment and from proceeds of production
  from the residual leaching of the heap leach pads by 2005. A final closure plan
  for the Andacollo Mine was approved by representatives of the Chilean government
  and has been substantially completed by minesite personnel.

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37

The Andacollo Mine in Chile was permanently closed in December
  2000. In order to facilitate this closure and the orderly disposal of all assets,
  the Companys subsidiary Compañia Minera Dayton Contractual Minera
  (CMD), which owns the Andacollo Mine, applied to the courts for
  protection against its unsecured creditors. This application to the courts has
  resulted in a loss of control over the assets of CMD and as such the Company
  ceased consolidating the results of CMD effective December 1, 2000. This application
  included a plan for paying off all the unsecured creditors of the mine, including
  the Company, from the sale of gold production and assets. This plan was approved
  by the creditors and the courts in Chile in May of 2001. It remains in effect
  until May 2005, at which time unpaid creditors may petition CMD into bankruptcy.
  The holder of a 2% net smelter return royalty on the production from the Andacollo
  Mine initiated an action against CMD in which it claimed that due to the insolvency
  of CMD an amount of $1.4 million in guaranteed royalty payments have become
  accelerated and are immediately due with interest. CMD petitioned and made presentations
  to the Court rejecting the claims. The Court of La Serena issued a resolution
  in June of 2004 concluding I) the holder was not admitted as a party to the
  plan as it did not exercise its rights to intervene at the proper time; ii)
  the injunction was overruled so equipment can be disposed of; and iii) the request
  to exclude assets from the creditors agreement or pay the holder as a preferred
  creditor are denied. CMD has completed reclamation of the mine area (including
  pits, dumps, ore stockpiles (excluding leach pads) and the associated roads).
  The reclamation activities have been conducted in accordance with the closure
  plan for the mine and crushing plant areas presented by CMD and approved by
  the Chilean government on June 17, 2002. As the crushing plant has not been
  sold, no reclamation activities have been initiated in this area. As of April
  2004 the heap closure fund had a cash balance of $2.1 million which is believed
  to be sufficient for the balance of the closure.

ITEM 5:     OPERATING AND FINANCIAL
  REVIEW AND PROSPECTS

Results of operations

For the year ended April 30, 2004, Pacific Rim recorded a
  net loss of $6.9 million or $0.09 per share, compared to a loss of $2.8 million
  or $0.04 per share for the twelve months ended April 30, 2003 and $1.6 million
  or $0.03 per share for the four months ended April 30, 2002. The increase in
  net loss for fiscal 2004 compared to previous fiscal periods is a result of
  substantially greater expenses of $6.2 million for 2004 compared to $2.5 million
  for 2003 and $1.2 million for 2002. Net loss before unusual items was $7.3 million
  in 2004, $3.3 million in 2003 and $1.6 million in 2002. The Company received
  $0.4 million in creditor repayments from CMD related to residual leach activities
  and the sale of a portion of CMDs Andacollo assets for each of fiscal
  2004 and 2003.

- RevenueRevenue, consisting of the sale of gold from the Denton-Rawhide mine, was
  $12.1 million in fiscal 2004, compared to $12.5 million in fiscal 2003 and $5.3
  million in the four months of fiscal 2002. Revenue for 2004 was essentially
  unchanged from 2003, despite lower production from the Denton-Rawhide mine (29,687
  ounces in fiscal 2004 compared to 35,731 ounces in fiscal 2003) due to a higher
  realized gold price for the current year ($385 per ounce in 2004 compared to
  $321 per ounce in 2003).

Mine operating costs were $11.9 million in fiscal 2004, compared
  to $9.0 million in fiscal 2003 and $4.5 million in the four-month period of
  fiscal 2002. The increase in operating costs is a result of increased inventory
  drawdown costs in 2004, offset by decreased mining and processing
  costs in 2004, all of which are a result of the cessation of mining, crushing
  and stacking of ore during fiscal 2003. Offsetting the increase in mine operating
  costs were lower depreciation, depletion and amortization costs of $1.3 million
  for fiscal 2004 compared to $3.1 million for fiscal 2003 and $1.2 million for
  fiscal 2002, as Denton-Rawhide nears the end of its projected life and the value
  of its assets diminishes, and no write-down in fiscal 2004 that is comparable
  to the fiscal 2003 write-down of $1.3 million in Denton-Rawhides carrying
  value. As a result, the mine operating loss was only marginally higher for the
  current

---

38

year (a loss of $1.0 million for the twelve months ended April
  30, 2004, compared to a loss of $0.8 million for the twelve months ended April
  30, 2003 and a loss of $0.3 million for the four months ended April 30, 2002).

- ExpensesNet non-operating expenses increased substantially during fiscal 2004 to
  $6.2 million, compared to $2.5 million for the twelve months of fiscal 2003
  and $1.2 million for the four months of fiscal 2002. The current years
  expenses reflect significantly higher exploration expenditures ($5.2 million
  in 2004 compared to $3.3 million in 2003 and $0.3 million in 2002) the bulk
  of which relates to the Companys increased exploration activities and
  development on its El Dorado gold project (approximately $4.5 million) as well
  as its undertaking of a drill program on the La Calera project (approximately
  $0.5 million) and concerted efforts toward generating and acquiring new projects.
  The Company has prospectively adopted the recommendations of CICA Handbook Section
  3870 Stock-based Compensation and Other Stock-based Payments
  for stock options granted to directors, officers and employees effective May
  1, 2003, and booked a $0.3 million general and administrative stock-based compensation
  expense during fiscal 2004 for which there is no comparable item in fiscal 2003
  or fiscal 2002. See Note 9 in the financial statements for an explanation of
  the calculation and assumptions used. In addition, the Company realized a gain
  on the sale of mineral properties of $0.9 million in 2003, and a gain on the
  sale or marketable securities of $1.0 million in 2003, for which there are no
  comparable items in 2004. The Company anticipates administrative costs will
  rise in the 2005 financial year due to the continually changing regulatory climate
  and the expert advice required to ensure compliance with new guidelines and
  policies.

Summary of quarterly results and fourth quarter review

|2004                                            | 4thQuarter |        | 3rdQuarter |   | 2ndQuarter |   | 1stQuarter |       
|----------------------------------------------- | ---------- | ------ | ---------- | - | ---------- | - | ---------- | ------
|Revenue                                         | $          | 2,237  |            | $ | 3,318      |   | $          | 3,562 
|Net income (loss)                               | $          | (2,451 | )          | $ | (1,336     | ) | $          | (1,743
|Net income (loss) per share - basic and diluted | $          | (0.03  | )          | $ | (0.02      | ) | $          | (0.02 

|2003                                            | 4thQuarter |        | 3rdQuarter |   | 2ndQuarter |   | 1stQuarter |       
|----------------------------------------------- | ---------- | ------ | ---------- | - | ---------- | - | ---------- | ------
|Revenue                                         | $          | 2,589  |            | $ | 3,720      |   | $          | 2,974 
|Net income (loss)                               | $          | (1,995 | )          | $ | (337       | ) | $          | (1,312
|Net income (loss) per share - basic and diluted | $          | (0.03  | )          | $ | (0.00      | ) | $          | (0.02 

- TrendsThere are no obvious trends in quarterly results for Pacific Rim, nor does
  the Company experience any seasonality in its revenues. Revenues are a function
  of production levels from the Denton-Rawhide gold mine, which have generally
  declined over the last eight quarters, and the price of gold, which has generally
  risen, albeit with volatility, over the past eight quarters. Net income (loss)
  has been relatively stable, although exploration expenditures have trended higher
  over the past eight quarters. Variability in net income (loss) is otherwise
  a function of unusual or extraordinary events and expenses within the quarter.

During the fourth quarter of fiscal 2004, the Companys
  exploration expenditures increased in relation to increased drilling activity
  and the commencement of the pre-feasibility study at the El Dorado project.

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39

Coupled with the continued slow decline in Denton-Rawhide production and hence
  revenues, this led to a greater net loss in the fourth quarter of fiscal 2004
  than in previous quarters of the current year.

Liquidity, capital resources and financial condition

- Liquidity
  During fiscal 2004 Pacific Rims cash and cash equivalents increased by
  $0.4 million, from $1.1 million at April 30, 2003 to $1.5 million at April 30,
  2004. This reflects net cash flow from Denton-Rawhide of $4.0 million ($12.1
  million in revenues less $7.1 million in mine expenditures and $1.0 million
  in loan repayments), plus proceeds from the exercise of stock options totaling
  $1.2 million and recoupment of funds from CMD of $0.4 million, offset by cash
  outlays totaling $5.2 million ($4.6 million in exploration expenditures and
  $0.6 million in general and administrative costs).

- Cash flow (used for) operating activitiesCash flow (used for) operating activities was $(0.6) million in the four
  months of fiscal 2002, $(4.0) million in the twelve-month period of 2003, and
  decreased to $(1.1) million in 2004. This significant decrease, despite a substantially
  higher net loss for the 2004 fiscal year, is primarily due to increased cash
  flows from the Denton-Rawhide gold mine during 2004 (related to the decrease
  in expenditures for mining and processing activities at the mine) partially
  offset by increased exploration expenditures in 2004 and the partial repayment
  to Kinross Gold Corporation of a loan related to the deposit of funds for Denton-Rawhide
  reclamation.

- Cash Flow Provided by Investing ActivitiesCash flow provided by investing activities was $0.3 million during fiscal
  2004, compared to nil in 2003 and $1.3 million in 2002. This reflects a $0.5
  million investment by Pacific Rim in a new carbon plant at Denton-Rawhide during
  fiscal 2004, offset in part by $0.3 million in proceeds from the sale of surplus
  equipment at Denton-Rawhide as the mine winds down, and withdrawals from the
  reclamation sinking fund of $0.5 million. The gain in fiscal 2002 relates primarily
  to $1.5 million in cash acquired on amalgamation of Pacific Rims predecessor
  companies.

- Cash Flow Provided by Financing ActivitiesDuring fiscal 2004, cash flow provided by financing activities totaled $1.2
  million related to the issuance of 1.9 million shares upon the exercise of stock
  options (at an average price of $0.60 per share). This compares to $2.6 million
  from financing activities during fiscal 2003 (primarily from the proceeds on
  the sale of marketable securities related to the sale of the Companys
  Diablillos property) and $0.2 million during fiscal 2002.

-Capital Resources and Financial ConditionPacific Rims cash, cash equivalents and bullion (in the Companys
  view, bullion is closely equivalent to cash, being immediately available to
  cover short-term cash requirements) increased from $1.7 million at April 30,
  2003 to $2.8 million at April 30, 2004. Heap leach inventories, comprised mainly
  of the cost to place gold on the heap leach pile, were substantially reduced,
  to $2.9 million at April 30, 2004, from $10.8 million ($8.8 million short term
  and $2.0 million long term) at April 30, 2003, as gold was recovered from the
  heap leach pile over the course of the year. At April 30, 2004, the book value
  of Pacific Rims total assets stood at $14.0 million, compared to $21.4
  million at April 30, 2003. This decrease is primarily due to the reduction in
  both short-and long-term heap leach inventories.

At year-end 2004, Pacific Rim had current liabilities of $2.8
  million, compared to $2.9 million at year-end 2003. Fiscal 2004 current liabilities
  include a $0.8 million loan payable (due December 31, 2004) to Kinross Gold
  Corporation related to the Companys purchase of 49% of the Denton-Rawhide
  mine. Currently, Pacific Rim has no long-term debt.

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40

A $5.9 million reduction in inventories, offset in part by
  a $1.3 million decrease in current closure cost liabilities, was the main contributor
  to the $4.4 million decline in working capital, from $7.6 million at the end
  of fiscal 2003, to $3.0 million at the end of fiscal 2004. Pacific Rim is unable
  to accurately forecast production levels, revenue or cash flow from the Denton-Rawhide
  gold mine, due to the variability in recoveries that are inherent in a residual
  heap leach operation, and the volatility in gold price. Exploration expenditures
  have increased during fiscal 2004, particularly in the last quarter due to pre-feasibility
  activities that are one-time events that are not expected to continue throughout
  fiscal 2005. For the purposes of internal exploration budgeting, Pacific Rim
  forecasts cash flow from Denton-Rawhide for no more than 6 months in advance.
  The Company believes it has sufficient working capital, and anticipates having
  sufficient cash flow during the first half of fiscal 2005, to continue its exploration
  programs if there are no significant capital outlays related to development
  of the El Dorado project. If the Company decides to commence construction of
  an access / haulage ramp at El Dorado during the coming fiscal year as expected,
  additional financing will be required.

Off-balance sheet arrangements 
  The Company, as a creditor of CMD, was repaid $0.4 million during fiscal 2004.
  This compares to a $0.5 million repayment during fiscal 2003. The Company is
  owed a further $0.2 million by CMD under its creditors plan, and believes
  this amount, or more, may be recovered from the sale of CMDs assets. The
  eventual recovery of such amounts is, however, uncertain and therefore this
  off-balance sheet arrangement has not been recorded as a receivable of the Company
  as at April 30, 2004. In March of 2004, the Company agreed to the sale of the
  shares of the subsidiary which owns the shares of CMD to an unrelated party
  for $5 million and 4,000,000 shares of the purchaser over four years. The proposed
  purchaser requested an extension to the date to complete to October 2004, which
  is subject to receipt of formal documentation.

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

Critical Accounting Policies 
  The details of Pacific Rims accounting policies are presented in Note
  2 to the consolidated financial statements. The following policies are considered
  by management to be essential to understanding the processes and reasoning that
  go into the preparation of the Companys financial statements and the uncertainties
  that could have a bearing on its financial results:

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. Reviews are undertaken
  annually to evaluate the carrying values of operating mines and exploration
  and development properties. Pacific Rim capitalizes costs incurred on mineral
  properties only after it has been established that the property contains mineral
  reserves. Expenditures on exploration properties, including those with mineral
  resources, are expensed as incurred.

During fiscal 2004, Pacific Rim adopted the Canadian Institute
  of Charter Accountants (CICA) standard 3063 Impairment of
  Long-Lived Assets, which requires that an impairment loss be recognized
  if the carrying value of a long-lived asset exceeds its fair market value. An
  estimate of fair market value is undertaken annually and the impairment loss,
  if any, is recorded. There were no impairment losses recorded during fiscal
  2004. Managements estimates of resources, inventories and reclamation
  costs are subject to risks and uncertainties that may affect its assessment
  of the recoverability of mineral property costs.

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41

Environmental Expenditures and Closure Costs:During
  fiscal 2004 Pacific Rim adopted CICA standard 3110 Asset Retirement Obligations,
  whereby the Company prospectively recognizes the fair market value of asset
  retirement obligations in the period in which they are incurred.

Stock-based Compensation: For fiscal 2004, Pacific
  Rim prospectively adopted CICA standard 3870 Stock-based Compensation
  and Other Stock-based Payments, which requires fair value accounting for
  all stock options issued during the year.

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

Use of Estimates:The preparation of financial statements
  in conformity with Canadian GAAP 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 utilizes the following key estimates in the preparation
  of its consolidated financial statements:

Resources:The carrying value of the El Dorado property
  reflects its acquisition cost, which was based on an estimate of the propertys
  resources at the time of the acquisition. The resource estimate was filed as
  a National Instrument 43-101 (NI 43-101)-compliant technical report
  in February 2002. It has been superseded by the Companys October 2003
  resource estimate (see NI 43-101 disclosure).

Inventories:The current and long-term inventories
  recorded in Pacific Rims consolidated financial statements represent the
  Companys portion of heap leach inventories at the Denton-Rawhide
  gold mine. The value of these heap-leach inventories was estimated
  by Pacific Rims joint venture partner and Denton-Rawhide mine operator,
  Kennecott Minerals Company (Kennecott). The inventory estimate is
  based on the tonnage and grade of ore placed on the heap leach pile less the
  amount of gold already recovered from the heap leach pile all at estimated recovery
  rates based on historical results.

Closure costs:Closure costs associated with the Denton-Rawhide
  gold mine are estimated by Kennecott and based on standard reclamation procedures
  employed at comparable sites and under comparable conditions. Closure costs
  are addressed in Note 8 to the consolidated financial statements.

Effect of Inflation

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

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

Tabular disclosure of contractual obligations

The Company is committed to payments under operating leases
  for office premises and a photocopier. through to 2009 and 2008 respectively,
  of approximately $40 thousand and $3.6 thousand per year as set

---

42

out in note 12a to the financial statements. The following
  table lists as of April 30, 2004, information with respect to the Companys
  known contractual obligations.

|                                                                                                                              | Payments due by period
|----------------------------------------------------------------------------------------------------------------------------- | ----------------------
|Contractual Obligations                                                                                                       | Total                 
|Long-Term Debt Obligations                                                                                                    | $828                  
|Capital (Finance) Lease Obligations                                                                                           | $nil                  
|Operating Lease Obligations                                                                                                   | $203.5                
|Purchase Obligations                                                                                                          | $1761                 
|Other Long-Term Liabilities Reflected on the Company's Balance Sheet under
      the GAAP of The primary financial statements | $1826                 
|Total                                                                                                                         | $4818.5               

Safe Harbor

Certain statements contained in the foregoing Results of Operations
  and elsewhere in this Form 20-F constitute forward-looking statements. Such
  forward-looking statements involve a number of known and unknown risks, uncertainties
  and other factors which may cause the actual results, performance or achievements
  of the Company to be materially different from any future results, performance
  or achievements expressed or implied by such forward-looking statements. Readers
  are cautioned not to place undue reliance on these forward-looking statements,
  which speak only as of the date the statements were made and readers are advised
  to consider such forward-looking statements in light of the risks set forth
  below.

Risk factors that could affect the Company's future results
  include, but are not limited to, risks inherent in mineral exploration activities
  and other operating and development risks, competition, environmental regulations,
  changes to reclamation requirements, volatility and sensitivity to market prices
  for base metals the impact of changes in foreign currencies' exchange rates,
  political risk, changes in government regulation and policies including trade
  laws and policies, demand for base metals, replacement of reserves and production,
  receipt of permits and approvals from governmental authorities.

ITEM 6.      DIRECTORS, SENIOR
  MANAGEMENT AND EMPLOYEES

A.      DIRECTORS AND SENIOR MANAGEMENT

Each of the Companys directors is elected by the Companys
  shareholders at an annual general meeting to serve until the next annual general
  meeting of shareholders, scheduled to be held September 22, 2004, or until a
  successor is elected or appointed. The current members of the Board have been
  nominated for reelection at the next annual general meeting by management. The
  Board of Directors appoints the Companys executive officers annually after
  each annual general meeting, to serve at the discretion of the Board of Directors.

The following table discloses the name, age and function with
  the Company (and the Predecessor Companies) of its directors and executive officers
  as of July 31, 2004, together with business experience, principal business activities
  performed outside of the Company (including in the case of directors other principal
  directorships).

---

43

Thomas C. Shrake (50) - Chief Executive Officer and
  Director of PacRim since 1997. Member of the Environmental Committee. Master
  of Science (Economic Geology) and Bachelor of Arts (Geology) . From 1993 to
  1996 Vice President, Exploration for Gibraltar Mines Limited and from 1990 to
  1993 Exploration Manager with Placer Dome Inc., both publicly traded mining
  companies.

Catherine McLeod-Seltzer (44) - President and Director
  of PacRim since 1997. Business Degree. From 1993 to 1996 President, Chief Executive
  Officer and Director of Arequipa Resources Ltd., a publicly traded mining company.
  From 1985 to 1993 employed by Yorkton Securities Inc., a Canadian investment
  dealer, initially as an institution trader followed by three years as a broker.
  Previously a director of Corriente Resources Inc. from November 1996 to June
  2003 and director of Francisco Gold Corp. from July 1993 to June 2002; Currently
  also a director of Silver Standard Resources Inc. since March 2002 , director
  of Madison Enterprises Inc. since April 1997, director of Bear Creek Mining
  Corporation (formerly Eveolution Ventures Inc.) since April 2000, Miramar Mining
  Corp. since 2001 and director of Stornoway Ventures Ltd. since 2001.

Anthony J. Petrina, P.Eng.(69) - Director of PacRim
  since 1997. Member of the Audit and Environmental Committees. Bachelor of Science
  (Mining Engineering). From 1960 to 1992 employed by Placer Dome Inc., a publicly
  traded mining company, most recently President, Chief Executive Officer and
  Vice-Chairman until his retirement in 1992. Currently also a director of Miramar
  Mining Corp. since January 1995, TimberWest Forest Corp. since June 1997 and
  Bear Creek Mining Corporation since April 2003.

William H. Myckatyn, P.Eng. (54) Director of
  PacRim since 1998. Director and Chairman of the Company since April 2002. Member
  of the Compensation and Environmental Committees. Bachelor of Applied Science
  (Mineral Engineering). From 1993 to 1996 President and Chief Executive Officer
  and from 1991 to 1993 Mine Manager for Gibraltar Mines Limited, a publicly traded
  mining company. From 1997 to 1998 President and Chief Executive Officer of Princeton
  Mining Corporation. From June of 1998 to April 2002, director, Chairman and
  Chief Executive Officer of Dayton. From April 2002 to date, director and Chief
  Executive Officer of Quadra Mining Ltd., a private company which became a publicly
  traded mining company in April of 2004.

David K. Fagin, P.Eng. (66 )  Director of the
  Company and member of the Audit Committee and the Compensation Committee. Investor.
  Formerly President of Homestake Mining Company. Director of Golden Star Resources
  Ltd. from 1992 to present. Director of Canyon Resources Corporation from 2000
  to present. Director of all public mutual funds of T.Rowe Price Group (a mutual
  fund company) 1987 to present. Former director and Chairman of Western Exploration
  and Development Ltd. 1997 to 2000.

Paul B. Sweeney, CGA (54) - Director of the Company
  since July 2003. Vice President and Chief Financial Officer of Canico Resource
  Corp. since February 2002. Chief Financial Officer and Corporate Secretary of
  Manhattan Minerals Corp. from 1999 to May 2001. Vice President Finance and Chief
  Financial Officer of Sutton Resources Ltd. from 1998 to 1999.

F. John Norman, CA(65)  Master of Applied Science
  (Geology U of T). Controller of Dayton since 2000. Chief Financial Officer of
  the Company since August 2003.

Kathryn A. Church (49) - Corporate Secretary and Vice-President
  of Administration of PacRim since 1997. From 1994 to 1996 Corporate Administrator
  for Eldorado Gold Corporation and HRC Development Corporation, publicly traded
  mining companies. From 1987 to 1994 securities legal assistant with prominent
  Vancouver law firm.

---

44

Barbara Henderson (39)  Master of Science (Geology).
  Vice President Investor Relations of the Company since August 2002. Manager
  of Investor Relations for Pac Rim since 1998. Investor Relations Manager for
  Zen International Resources Ltd. from 1998 to 1998, for Baramundi Gold Ltd.
  in 1997 and Noble Peak Resources Ltd. from 1996 to 1997.

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

6 B.      COMPENSATION OF DIRECTORS
  AND OFFICERS

Summary Compensation Table

For the three most recently completed financial years ended
  April 30, 2004, April 30, 2003, April 30, 2002 (four months) and December 31,
  2001, in respect of the Chief Executive Officer (CEO), the Chief
  Financial Officer (CFO) and for each of the Companys three
  most highly compensated executive officers as at April 30, 2004 (other than
  the CEO and CFO), whose total salary and bonus exceeds Cdn.$150,000, and any
  other additional individuals for whom disclosure would have been provided but
  for the fact that the individual was no longer an executive officer as at April
  30, 2004 (the "Named Executive Officers" or NEO), the annual and
  long-term compensation and bonus is set out below. Effective April 11, 2002
  Dayton Mining Corporation (Dayton) and Pacific Rim Mining Corp.
  (PacRim) (Dayton and PacRim collectively referred to as the Predecessor
  Companies) amalgamated to form the Company. Each shareholder of Dayton
  received 1.76 shares of the Company for each share held and each shareholder
  of PacRim received one share of the Company for each share held. Outstanding
  stock options were converted on the same basis. The amounts include amounts
  paid by Predecessor Companies. Stock options granted by Dayton are shown as
  options of the Company converted on the basis of 1.76 for each option granted.
  The Company changed its financial year end from December 31 to April 30 in the
  2002 year. (Note: All dollar amounts are in Canadian currency and US amounts
  have been converted on the basis of $1.34 Canadian for $1 US).

---

45

|                                                                     |                                       | Annual Compensation                                  | Long Term Compensation            |                                             |                                              
|-------------------------------------------------------------------- | ------------------------------------- | ---------------------------------------------------- | --------------------------------- | ------------------------------------------- | ---------------------------------------------
|Awards                                                               | Payouts                               |                                                     
|NEO Name and Principal Position                                      | Year                                  | Salary
      (Cdn.$)                                 | Bonus
      ($)                   | Other Annual Compen-
      sation
      ($) | Securities under Options granted
      (#)   
|SHRAKE(2), Thomas 
      Chief Executive Officer 
      and Director | 2004
      2003
      2002
      2001 | $180,200
      $190,000
      $63,333
      $190,000 | Nil
      Nil
      Nil
      Nil | Nil
      Nil
      Nil
      Nil           | 200,000
      Nil
      420,000
      387,000
|MCLEOD-SELTZER(3), Catherine
      President and Director            | 2004
      2003
      2002
      2001 | $Nil(5)$132,383
      $47,000
      $141,000         | Nil
      Nil
      Nil
      Nil | Nil
      Nil
      Nil
      Nil           | 200,000
      Nil
      420,000
      441,000
|NORMAN, F.John
      Chief Financial Officer(4)                      | 2004
      2003
      2002
      2001 | $130,000
      $127,083
      $40,000
      $100,833 | Nil
      Nil
      Nil
      Nil | Nil
      Nil
      Nil
      Nil           | 60,800
      Nil
      130,000
      Nil     

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

(2) CEO and Director of PacRim since 1997.

(3) President and Director of PacRim since 1997.

(4) Controller of Dayton from 2000 to 2002 and Chief Financial Officer of
  the Company since August of 2002.

(5) Ms. McLeod-Seltzer is a NEO except that during the last completed financial
  year she was on maternity leave and not paid a salary. She continued to receive
  benefits. Her employment contract is described below.

Options Granted in Financial Year Ended April 30, 2004

The following stock options were granted to Named Executive
  Officers during the most recently completed financial year:

---

46

|NEOName                  | SecuritiesUnderOptionsGranted(#) | % of TotalOptionsGranted toEmployees inFinancialYear(1) | Exercise Price($/Security) | Market Value ofSecuritiesUnderlyingOptions on theDate of Grant($/Security) | ExpirationDate                 
|------------------------ | -------------------------------- | ------------------------------------------------------- | -------------------------- | -------------------------------------------------------------------------- | -------------------------------
|Thomas Shrake, CEO       | 200,000                          | 20%                                                     | $0.85                      | $0.83                                                                      | Oct. 08/2008                   
|Catherine McLeod-Seltzer | 200,000                          | 20%                                                     | $0.85                      | $0.83                                                                      | Oct. 08/2008                   
|F. John Norman, CFO      | 40,800
      20,000              | 4%
      2%                                             | $0.43
      $0.85          | $0.46
      $0.83                                                          | July 23/2008
      Oct. 08/2008

(1) Total includes options issued to directors and officers who are also employees.

Aggregated Option Exercises in Last Financial Year and Financial Year-End
  Option Values

The following table sets forth details of all exercises of stock options during
  the most recently completed financial year ended April 30, 2004, if any, by
  the Named Executive Officers and the financial year-end value of unexercised
  options on an aggregated basis:

|Name                     | Securities
      Acquired
      on
      Exercise
      (#) | Aggregate
      Value
      Realized
      (Cdn.$)(1) | Unexercised
      Options
      at Financial
      Year-End
      (#)
      Exercisable/
      Unexercisable | Value of Unexercised
      In-the-Money
      Options
      at Financial Year-
      End
      (Cdn.$)(1)
      Exercisable/
      Unexercisable
|------------------------ | ----------------------------------------------------------- | ----------------------------------------------------- | ------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------
|Thomas Shrake, CEO       | 200,000                                                     | $22,000                                               | 873,666/133,334                                                                                              | $418,160/$16,000                                                                                                                                
|Catherine McLeod-Seltzer | 288,000                                                     | $31,680                                               | 962,866/133,334                                                                                              | $470,016/16,000                                                                                                                                 
|F. John Norman, CFO      | Nil                                                         | Nil                                                   | 229,467/40,533                                                                                               | $102,388/$1600                                                                                                                                  

(1) The value of exercised and unexercised in-the-money options is calculated
  using the closing price of common shares of the Company on The Toronto Stock
  Exchange (the TSX) on the exercise or financial year end date respectively,
  less the exercise price.

Defined Benefit or Actuarial Plan Disclosure

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

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47

Termination of Employment, Change in Responsibilities and Employment
  Contracts

Mr. Thomas Shrake, Chief Executive Officer, has employment
  agreements dated February 14, 1997 with the Company and one of its wholly owned
  subsidiaries respecting his employment, pursuant to which Mr. Shrake receives
  an annual salary of $141,250 and regular benefits. The agreements provide that
  in the event that Mr. Shrakes employment is terminated for reasons other
  than just cause, Mr. Shrake will be entitled to receive a severance package
  comprising a payment equal to 12 months salary plus one months salary
  for each year of completed service after one year to a maximum total of 24 months
  salary, together with benefits for the severance period. In addition Mr. Shrake
  would be entitled to exercise all incentive stock options held by him up to
  the close of business on the 30th day following termination.

Ms. Catherine McLeod-Seltzer, President of the Company, has
  an employment agreement with the Company dated September 15, 1997, as amended,
  pursuant to which she receives an annual salary of Cdn$159,330, plus reimbursement
  of general expenses not to exceed Cdn$2,000 per month and regular benefits.
  The agreement provides that in the event the Company terminates Ms. McLeod-Seltzers
  employment for reasons other than just cause, Ms. McLeod-Seltzer will be entitled
  to receive a severance package comprising a payment equal to 18 months salary
  plus one months salary for each year of completed service after August
  1, 1997 to a maximum total of 24 months salary, together with benefits for the
  severance period. In addition, Ms. McLeod-Seltzer would be entitled to exercise
  all incentive stock options held by her at the time of such termination up to
  the last day of the last day of business of the term of any share option agreement.

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

6 C.      BOARD PRACTICES

The Companys Board of Directors is currently comprised
  of six persons, all of whom were elected at the annual general meeting of shareholders
  on October 8, 2003. The current term of office for all the directors will expire
  at the next annual general meeting. The Company has scheduled the next annual
  general meeting to be held September 22, 2004, at which time all six of the
  current directors will be nominated for re-election. The position of Chairman
  of the Board of the Company is separate from that of the CEO. The incumbent
  Chairman is not a member of the Companys management. See Item 6A Directors
  and Senior Management.

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

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

---

48

Board Committees

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

- Audit Committee 
  The Audit Committee is currently composed of three outside directors, Fagin
  (Chair), Sweeney and Petrina, none of which are employees or officers and all
  of whom are independent. All members of the Audit Committee are financially
  literate. The Audit Committee is authorized to review and approve the financial
  statements of the Company and the overall scope and results of the audit and
  internal financial controls of the Company. The Audit Committee communicates
  with the external auditors and meets with them at least once a year. The Audit
  Committee meets at least four times a year. The terms of reference of the Audit
  Committee are set out in their entirety under Item 16A  Audit Committee
  Financial Expert.

- Compensation Committee 
  The Compensation Committee is currently composed of Messrs. Myckatyn (Chair)
  and Fagin, two directors one of whom is independent under AMEX guidelines. There
  is currently a vacancy in the Committee due to the resignation of one of the
  Companys outside directors who was a member of the Committee. The overall
  purpose of the Compensation Committee is to make recommendations to the Board
  for executive compensation, human resources and compensation policies and to
  implement and oversee same if the Board approves the recommendations for the
  Company.

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

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

6 D.      EMPLOYEES

As at June 30, 2004 the Company had five full time employees
  in Canada, four full time employees in Reno, 64 full time and 16 part time employees
  in El Salvador. There were 45 full time employees at the Andacollo Mine in Chile.
  The employees at Denton-Rawhide are not employees of the Company. The Company
  may employ additional part-time employees or consultants as required to assist
  with its ongoing exploratory work program in El Salvador or work on other acquired
  properties. The Company is not subject to any collective bargaining agreements
  and believes its relationship with employees to be good.

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49

6 E.      SHARE OWNERSHIP

As at July 31, 2004 the share ownership in the Company of
  those persons listed in Item 6B above is as follows: Thomas Shrake, 77,100 shares;
  Catherine McLeod-Seltzer, 623,000 shares; Anthony Petrina, nil; William Myckatyn,
  49,660 shares; David Fagin, 50,000; Paul Sweeney, nil; John Norman, nil; Kathryn
  Church 300 shares and Barbara Henderson, 9,000. The shares held by the directors
  and management total 809,060 common shares representing 1.05% of the Companys
  issued and outstanding shares. Details of options on the Companys shares
  held by each of the aforenamed persons are set out below. The aggregate number
  of options held represents approximately 2% of the Companys share capital
  on a fully diluted basis.

Stock Option Plans

In connection with the amalgamation approved by shareholders
  of the Predecessor Companies on April 3, 2002, the TSX approved the rolling
  over of an aggregate 2,130,800 options of PacRim and 2,008,000 options of Dayton
  such options to be governed by the plan under which they were originally granted
  (Pre-Amalgamation Options). The TSX ruled that any Pre-Amalgamation
  Options that were surrendered, terminated or expired without exercise would
  not be available for the grant of new options. There are Pre-Amalgamation Options
  outstanding exercisable to purchase up to 1,768,300 common shares, representing
  less than 1% of the Companys issued and outstanding share capital, at
  prices ranging between $1.30 and $0.29 and expiring between September 2004 and
  July 2006.

Those persons listed in Item 6B above and other employees
  of the Company hold Pre-Amalgamation Options to purchase Common Shares of the
  Company, as at July 31, 2004, as follows:

|Optionees                 | Number ofCommonShares |  | Exercise Priceper CommonShare Cdn.$(1) |  | Expiry Dateof Option
|------------------------- | --------------------- |  | -------------------------------------- |  | --------------------
|                          |                       |  |                                        |  |                     
|McLeod-Seltzer, Catherine | 35,200                |  | $0.54                                  |  | May 28, 2005        
|                          | 441,000               |  | $0.29                                  |  | July 4, 2006        
|                          |                       |  |                                        |  |                     
|Shrake, Thomas            | 387,000               |  | $0.29                                  |  | July 4, 2006        
|                          |                       |  |                                        |  |                     
|Myckatyn, William         | 428,900               |  | $0.54                                  |  | May 28, 2005        
|                          |                       |  |                                        |  |                     
|Norman, John              | 79,200                |  | $0.54                                  |  | May 28, 2005        
|                          |                       |  |                                        |  |                     
|Church, Kathryn           | 13,000                |  | $0.29                                  |  | July 4, 2006        
|                          |                       |  |                                        |  |                     
|Henderson, Barbara        | 10,000                |  | $0.29                                  |  | July 4, 2006        
|                          |                       |  |                                        |  |                     
|Employees/Others          | 29,000                |  | $1.30                                  |  | Sept. 24, 2004      
|                          | 220,000               |  | $0.54                                  |  | May 28, 2005        
|                          | 125,000               |  | $0.29                                  |  | July 4, 2006        
|TOTAL:                    | 1,768,300             |  |                                        |  |                     

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

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50

In 2002 the Compensation Committee of the Company reviewed and recommended
  to the Board of Directors adoption of the 2002 Incentive Stock Option and Bonus
  Plan (the 2002 Plan) a new plan to govern all post-amalgamation
  options, which the Board approved. The shareholders subsequently approved the
  2002 Plan on October 10, 2002. The 2002 Plan is divided into two components:
  a stock option component (Option Plan), under which up to 6,000,000
  common shares are reserved for grant to eligible persons at the discretion of
  the directors from time to time, and a stock bonus component (Bonus Plan)
  under which up to 367,000 common shares are reserved for grant to eligible persons
  at the discretion of the directors from time to time. Under the terms of the
  2002 Plan the exercise price of options is fixed as the closing price of the
  Companys shares on the TSX on the day prior to grant

As of July 31, 2004, 3,210,800options are outstanding under the 2002
  Plan as follows:

|                          | Number of |  | Exercise Price |  |               
|------------------------- | --------- |  | -------------- |  | --------------
|                          | Common    |  | per Common     |  | Expiry Date   
|Optionees                 | Shares    |  | Share Cdn.$(1) |  | Of Option     
|                          |           |  |                |  |               
|McLeod-Seltzer, Catherine | 420,000   |  | $0.62          |  | April 18, 2007
|                          | 200,000   |  | $0.85          |  | Oct. 08, 2008 
|Shrake, Thomas            | 420,000   |  | $0.62          |  | April 18, 2007
|                          | 200,000   |  | $0.85          |  | Oct. 08, 2008 
|Petrina, Anthony          | 130,000   |  | $0.62          |  | April 18, 2007
|                          | 75,000    |  | $0.85          |  | Oct. 08, 2008 
|Myckatyn, William         | 130,000   |  | $0.62          |  | April 18, 2007
|                          | 75,000    |  | $0.85          |  | Oct. 08, 2008 
|Sweeney, Paul B.          | 130,000   |  | $0.43          |  | July 23, 2008 
|                          | 75,000    |  | $0.85          |  | Oct. 08, 2008 
|Fagin, David              | 50,000    |  | $0.85          |  | Oct. 08, 2008 
|Norman, John              | 130,000   |  | $0.62          |  | April 18, 2007
|                          | 40,800    |  | $0.43          |  | July 23, 2008 
|                          | 20,000    |  | $0.85          |  | Oct. 08, 2008 
|Church, Kathryn           | 65,000    |  | $0.62          |  | April 18, 2007
|                          | 40,000    |  | $0.85          |  | Oct. 08, 2008 
|Henderson, Barbara        | 65,000    |  | $0.62          |  | April 18, 2007
|                          | 40,000    |  | $0.85          |  | Oct. 08, 2008 
|Employees/Others          | 450,000   |  | $0.62          |  | April 18, 2007
|                          | 455,000   |  | $0.85          |  | Oct. 08, 2008 
|TOTAL:                    | 3,210,800 |  |                |  |               

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

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51

ITEM 7:      MAJOR SHAREHOLDERS AND RELATED PARTY
  TRANSACTIONS

7 A.      MAJOR SHAREHOLDERS

To the best of the knowledge and belief of the directors and
  senior officers of the Company, no persons or companies beneficially own, directly
  or indirectly or exercise control or direction over shares carrying more than
  5% of the voting rights attached to all outstanding shares of the Company as
  at July 31, 2004.

There has been no significant change in the percentage ownership
  held by the major shareholders during the past three years, except that (a)
  in or about December of 2003 Kinross Gold Corporation holding approximately
  17,606,049 common shares, representing approximately 22.4% of the issued and
  outstanding shares announced it had arranged to divest itself of its shareholding
  and subsequently sold all of its shareholdings; and (b) in or about May of 2004
  Dundee Precious Metals Inc. reduced its holdings of approximately 7,827,258
  common shares representing approximately 9% of the Companys issued and
  outstanding shares. Major shareholders of the Company do not have any different
  voting rights from other shareholders of the Company.

As of July 31, 2004, Computershare reported that there were
  80,483,994 common shares issued and outstanding. Of those common shares issued,
  10,931,728 shares were registered to United States residents to 370 holders
  of record.

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

7 B.      RELATED PARTY TRANSACTIONS

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

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

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

7C Not applicable.

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ITEM 8:      FINANCIAL INFORMATION

8A:      Consolidated Statements and Other Financial
  Information

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

In the audited statements, the April 11, 2002 amalgamation
  of Dayton and PacRim was accounted for as a reverse takeover using the purchase
  method of accounting with Dayton identified as the acquirer. For financial statement
  purposes the Company is a continuation of Dayton. The April 30, 2002 statements
  of loss and cash flows reflect amalgamated results from April 11, 2002 to April
  30, 2002 with results for the period from January 1, 2002 to April 10, 2002
  being solely Dayton results. The 2001 comparative figures are solely Dayton.
  The financial year end of the Company is now April 30.

Also see Item 5 Operating and Financial Review and Prospects.

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

8B:      Significant Changes

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

ITEM 9:      THE OFFER AND LISTING

9 A.      OFFER AND LISTING DETAILS

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

|Financial |                 |           |           
|--------- | --------------- | --------- | ----------
|Year      | Financial       | TSX(2)(3) | AMEX(2)(3)
|Ended     | Period(1)       | (Cdn$)    | (US$)     
|          |                 | High      | Low       
|          |                 |           |           
|Dec.1999  | Annual          | 8.00      | 1.60      
|Dec.2000  | Annual          | 2.30      | .23       
|Dec.2001  | Annual          | .68       | .21       
|Apr. 2002 | Four Months (3) | 1.40      | .37       
|Apr. 2003 | Annual          | 1.46      | .40       
|Apr. 2003 | First Quarter   | 1.46      | .46       
|          | Second Quarter  | 1.00      | .53       
|          | Third Quarter   | .88       | .54       
|          | Fourth Quarter  | .77       | .40       
|Apr. 2004 | Annual          | 2.39      | 0.36      
|Apr. 2004 | First Quarter   | 0.62      | 0.36      
|          | Second Quarter  | 1.15      | 0.58      
|          | Third Quarter   | 2.39      | 0.88      
|          | Fourth Quarter  | 1.75      | 0.95      
|Feb. 2004 | Month           | 1.73      | 1.40      
|Mar. 2004 | Month           | 1.70      | 1.42      
|Apr. 2004 | Month           | 1.75      | 0.95      
|May 2004  | Month           | 1.08      | 0.80      
|June 2004 | Month           | 1.07      | 0.79      
|July 2004 | Month           | 0.98      | 0.72      

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53

| | (1) | The fiscal year end of the Company was changed from December
      31 to April 30 in 2002.                                                                    
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | The trading prices for shares of Predecessor Company DAY
      are shown as the historical figures based on Daytons historical year
      end of December 31.
| | (3) | The shares of the Company were called for trading under the
      new symbol PMU on April 15, 2002. Historical prices are for
      Predecessor Company DAY.
| | (4) | The shares of the Company were called for trading on the
      TSX under the new symbol on April 15, 2002 and PMU-WI on AMEX.                               

Amex Corporate Governance

Section 110 of the AMEX company guide permits AMEX to consider
  the laws, customs and practices of foreign issuers in relaxing certain AMEX
  listing criteria, and to grant exemptions from AMEX listing criteria based on
  these considerations. A company seeking relief under these provisions is required
  to provide written certification from independent local counsel that the non-complying
  practice is not prohibited by home country law. A description of the significant
  ways in which the Companys governance practices differ from those followed
  by domestic companies pursuant to AMEX standards is as follows:

Shareholder Meeting Quorum Requirement:
  The AMEX minimum quorum requirement for a shareholder meeting is one-third of
  the outstanding shares of common stock. In addition, a company listed on AMEX
  is required to state its quorum requirement in its bylaws. The Companys
  quorum requirement is set forth in its Memorandum and Articles. A quorum for
  a meeting of members of the Company is two persons present and being, or representing
  by proxy, members holding not less than 5% of the issued shares entitled to
  be voted at such meeting.

Proxy Delivery Requirement:
  AMEX requires the solicitation of proxies and delivery of proxy statements for
  all shareholder meetings, and requires that these proxies shall be solicited
  pursuant to a proxy statement that conforms to SEC proxy rules. The Company
  is a foreign private issuer as defined in Rule 3b-4 under the 1934
  Act, and the equity securities of the Company are accordingly exempt from the
  proxy rules set forth in Sections 14(a), 14(b), 14(c) and 14(f) of the Securities
  Exchange Act of 1934, as amended. The Company solicits proxies in accordance
  with applicable rules and regulations in Canada.

The foregoing are consistent with the laws, customs and practices
  in Canada.

9 B.      PLAN OF DISTRIBUTION

Not Applicable

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54

9 C.      MARKETS

The Companys Common Shares are listed and traded in
  Canada on the TSX under the symbol PMU. In addition, the Common
  Shares are listed and traded in the United States on the AMEX under the symbol
  PMU. The Company has received advice that its shares are listed
  and have traded since June 14, 2002 on the Berlin Stock Exchange under the symbol
  PRM, German Cusip Number 577332 and in the Regulated Unofficial Market (Freiverkehr)
  on the Frankfurt Stock Exchange on Xetra, the Deutsche Borse AG electronic trading
  system since May 31, 2002.

ITEM 10:      ADDITIONAL INFORMATION

10 A.      SHARE CAPITAL

Not applicable for Annual Report.

10 B.      MEMORANDUM AND ARTICLES
  OF ASSOCIATION

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

On March 29, 2004, the British Columbia legislature enacted
  the Business Corporations Act (the New Act) and repealed
  the Company Act (the Former Act), which previously governed
  the Company. The New Act removes many of the restrictions contained in the Former
  Act, including restrictions on the residency of directors, the place of annual
  general meetings and limits on authorized share capital. The New Act also uses
  new forms and terminology.

Under the New Act, every company incorporated, amalgamated
  or continued under the Former Act must complete a mandatory transition rollover
  under the New Act to substitute a Notice of Articles for its Memorandum within
  two years of March 29, 2004. The only information contained in the Notice of
  Articles is the authorized share structure of the company, the name of the company,
  the address of the registered and records office of the company and the names
  and addresses of the directors of the company. A company cannot alter its current
  articles to take advantage of many of the new provisions contained in the New
  Act until it completes the mandatory transition rollover. The New Act permits
  the directors of the Company to approve and complete this mandatory transition
  rollover. The Companys board accordingly approved the transition rollover
  and it became effective July 26, 2004.

The Company has scheduled its annual meeting of shareholders
  for September 22, 2004 (the AGM). At the AGM the Company will seek
  shareholder approval to remove pre-existing company provisions that apply to
  the Company that relate to restrictions contained in the Former Act and that
  are no longer required under the New Act, and of certain amendments to its Notice
  of Articles and to its current authorized share capital. In addition, the Company
  will also seek shareholder approval to the replacement of the Companys
  current articles with new articles (the New Articles) that will
  incorporate some of the more flexible provisions of the New Act. In order to
  be effective, the proposed special resolutions must be approved by a three-quarter
  majority vote cast by those shareholders of the Company who, being entitled
  to do so, vote in person or by proxy at the Meeting in respect of such resolutions.

Directors have unlimited power to borrow funds for the general
  good of the Company. There is no mandatory retirement age nor must directors
  own any common stock in the Company to become eligible to be a director. Directors
  are entitled to set their own compensation by passing an ordinary resolution

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55

establishing the same. Directors may not vote on any matter
  in which they are materially interested. There must be a majority of directors
  who are ordinarily resident in Canada.

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

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

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

10 C.      MATERIAL CONTRACTS

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

10 D.      EXCHANGE CONTROLS

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

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

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

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

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56

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

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

|(a) | by the acquisition of voting shares
        or the voting interests by any person in the ordinary course of that persons
        business as a trader or dealer in securities;                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | in connection with the realization of
        security granted for a loan or other financial assistance and not for
        any purpose related to the Investment Act;                                                                      
|(c) | for facilitating its financing and not
        for any purpose related to the Investment Act on the condition that the
        acquirer divest control within two years after control was acquired; and                                     
|(d) | by reason of an amalgamation, merger,
        consolidation or corporate reorganization following which the ultimate
        or indirect control in fact of the Company through the ownership of voting
        interests remains unchanged.

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

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

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57

10 E.      TAXATION

Certain Canadian Federal Income Tax Consequences

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

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

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

Dividends on Common Shares

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

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

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

Disposition of Common Shares

Under the Tax Act, a taxpayers capital gain or capital
  loss from a disposition of Common Shares of the Company is the amount, if any,
  by which his proceeds of disposition exceed (or are exceeded by, respectively)
  the aggregate of his adjusted cost base of the share and reasonable expenses
  of disposition. One-half of a capital gain (the taxable capital gain)
  is included in income, and one-half of a capital loss in a year (the allowable
  capital loss) is deductible from taxable capital gains realized in the
  same year. The amount by which a shareholders allowable capital loss exceeds
  the taxable capital gain in a year may be deducted from a taxable capital gain
  realized by the shareholder in the year or in the three previous or any subsequent
  year, subject to certain restrictions in the case of a corporate shareholder.

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58

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

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

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

|(a) | the value of the shares is derived principally
        from real property in Canada, including the right to explore
        for or exploit natural resources and rights to amounts computed by reference
        to production,                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | the shareholder was resident in Canada
        for 120 months during any period of 20 consecutive years preceding the
        disposition, was resident in Canada at any time during the 10 years immediately
        preceding the disposition and the shares were owned by him when he ceased
        to be resident in Canada, or
|(c) | the shares formed part of the business
        property of a permanent establishment or pertained to a fixed
        base used for the purpose of performing independent personal services
        that the shareholder has or had in Canada within the 12 months preceding
        the disposition.                              

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

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

U.S. Federal Income Tax Consequences

The following is a summary of the anticipated material U.S.
  federal income tax consequences to a U.S. Holder (as defined below) arising
  from and relating to the acquisition, ownership, and disposition of Common Shares.

This summary is for general information purposes only and
  does not purport to be a complete analysis or listing of all potential U.S.
  federal income tax consequences that may apply to a U.S. Holder as a result
  of

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59

the acquisition, ownership, and disposition of Common Shares.
  In addition, this summary does not take into account the individual facts and
  circumstances of any particular U.S. Holder that may affect the U.S. federal
  income tax consequences of the acquisition, ownership, and disposition of Common
  Shares. Accordingly, this summary is not intended to be, and should not be construed
  as, legal or U.S. federal income tax advice with respect to any U.S. Holder.
  Each U.S. Holder should consult its own financial advisor, legal counsel, or
  accountant regarding the U.S. federal, U.S. state and local, and foreign tax
  consequences of the acquisition, ownership, and disposition of Common Shares.

Scope of this Disclosure

Authorities

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

U.S. Holders

For purposes of this summary, a U.S. Holder is
  a beneficial owner of Common Shares that, for U.S. federal income tax purposes,
  is (a) an individual who is a citizen or resident of the U.S., (b) a corporation,
  or other entity classified as a corporation for U.S. federal income tax purposes,
  that is created or organized in or under the laws of the U.S. or any state in
  the U.S., including the District of Columbia, (c) an estate if the income of
  such estate is subject to U.S. federal income tax regardless of the source of
  such income, or (d) a trust if (i) such trust has validly elected to be treated
  as a U.S. person for U.S. federal income tax purposes or (ii) a U.S. court is
  able to exercise primary supervision over the administration of such trust and
  one or more U.S. persons have the authority to control all substantial decisions
  of such trust.

Non-U.S. Holders

A non-U.S. Holder is a beneficial owner of Common
  Shares other than a U.S. Holder. This summary does not address the U.S. federal
  income tax consequences of the acquisition, ownership, and disposition of Common
  Shares to non-U.S. Holders. Accordingly, a non-U.S. Holder should consult its
  own financial advisor, legal counsel, or accountant regarding the U.S. federal,
  U.S. state and local, and foreign tax consequences (including the potential
  application of and operation of any tax treaties) of the acquisition, ownership,
  and disposition of Common Shares.

U.S. Holders Subject to Special U.S. Federal Income Tax
  Rules Not Addressed

This summary does not address the U.S. federal income tax
  consequences of the acquisition, ownership, and disposition of Common Shares
  to U.S. Holders that are subject to special provisions under the Code, including
  the following U.S. Holders: (a) U.S. Holders that are tax-exempt organizations,
  qualified retirement plans, individual retirement accounts, or other tax-deferred
  accounts; (b) U.S. Holders that are financial institutions, insurance companies,
  real estate investment trusts, or regulated investment companies or that are
  broker-dealers or dealers in securities; (c) U.S. Holders that have a functional
  currency other than the U.S. dollar; (d) U.S. Holders that are subject
  to the alternative minimum tax provisions of the Code; (e) U.S. Holders that
  own Common Shares as part of a straddle, hedging

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60

transaction, conversion transaction, constructive sale, or
  other arrangement involving more than one position; (f) U.S. Holders that acquired
  Common Shares in connection with the exercise of employee stock options or otherwise
  as compensation for services; (g) partners of partnerships that hold Common
  Shares or owners of other entities classified as partnerships or pass-through
  entities for U.S. federal income tax purposes that hold Common Shares, (h) U.S.
  Holders that hold Common Shares other than as a capital asset within the meaning
  of Section 1221 of the Code. U.S. Holders that are subject to special provisions
  under the Code, including U.S. Holders described immediately above, should consult
  their own financial advisor, legal counsel or accountant regarding the U.S.
  federal, U.S. state and local, and foreign tax consequences of the acquisition,
  ownership, and disposition of Common Shares.

Tax Consequences Other than U.S. Federal Income Tax Consequences
  Not Addressed

This summary does not address the U.S. state and local or
  foreign tax consequences to U.S. Holders of the acquisition, ownership, and
  disposition of Common Shares. Each U.S. Holder should consult its own financial
  advisor, legal counsel, or accountant regarding the U.S. state and local and
  foreign tax consequences of the acquisition, ownership, and disposition of Common
  Shares. (See TaxationCanadian Federal Income Tax Consequences
  above).

Treaty Application to Certain Individual U.S. Holders

An individual U.S. Holders who does not maintain a substantial
  presence, permanent home, or habitual abode in the U.S., or whose personal and
  economic relations are not closer to the U.S. than to any other country (other
  than Canada), may be unable to benefit from the provisions of the Canada-U.S.
  Tax Convention. An individual U.S. Holder described immediately above should
  consult its own financial advisor, legal counsel, or accountant regarding the
  availability of benefits under the Canada-U.S. Tax Convention.

U.S. Federal Income Tax Consequences of the Acquisition,
  Ownership, and Disposition of Common Shares

Distributions on Common Shares

General Taxation of Distributions

A U.S. Holder that receives a distribution, including a constructive
  distribution, with respect to the Common Shares will be required to include
  the amount of such distribution in gross income as a dividend (without reduction
  for any Canadian income tax withheld from such distribution) to the extent of
  the current or accumulated earnings and profits of the Company.
  To the extent that a distribution exceeds the current and accumulated earnings
  and profits of the Company, such distribution will be treated (a) first,
  as a tax-free return of capital to the extent of a U.S. Holders tax basis
  in the Common Shares and, (b) thereafter, as gain from the sale or exchange
  of such Common Shares. (See more detailed discussion at Disposition of
  Common Shares below).

Reduced Tax Rates for Certain Dividends

For taxable years beginning after December 31, 2002 and before
  January 1, 2009, a dividend paid by the Company generally will be taxed at the
  preferential tax rates applicable to long-term capital gains if (a) the Company
  is a qualified foreign corporation (as defined below), (b) the U.S.
  Holder receiving such dividend is an individual, estate, or trust, and (c) such
  dividend is paid on Common Shares that have been held by such U.S. Holder for
  at least 61 days during the 121-day period beginning 60 days before the ex-dividend
  date (i.e., the first date that a purchaser of such Common Shares will
  not be entitled to receive such dividend).

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The Company generally will be a qualified foreign corporation
  under Section 1(h)(11) of the Code (a QFC) if (a) the Company is
  incorporated in a possession of the U.S., (b) the Company is eligible for the
  benefits of the Canada-U.S. Tax Convention, or (c) the Common Shares are readily
  tradable on an established securities market in the U.S. However, even if the
  Company satisfies one or more of such requirements, the Company will not be
  treated as a QFC if the Company is a foreign personal holding company,
  a foreign investment company, or a passive foreign investment
  company (each as defined below) for the taxable year during which the
  Company pays a dividend or for the preceding taxable year.

As discussed below, the Company believes that it is not a
  foreign personal holding company, a foreign investment company,
  or a passive foreign investment company (See more detailed discussion
  at Additional Rules that May Apply to U.S. Holders below). Accordingly,
  the Company believes that it should be a QFC. There can be no assurance, however,
  that the IRS will not challenge the determination made by the Company concerning
  its QFC status or that the Company will be a QFC for the current or any future
  taxable year. If the Company is not a QFC, a dividend paid by the Company to
  a U.S. Holder, including a U.S. Holder that is an individual, estate, or trust,
  generally will be taxed at ordinary income tax rates (and not at the preferential
  tax rates applicable to long-term capital gains). The dividend rules are complex
  and each U.S. Holder should consult its own financial advisor, legal counsel,
  or accountant regarding the dividend rules.

Distributions Paid in Foreign Currency

The amount of a distribution paid to a U.S. Holder in foreign
  currency generally will be equal to the U.S. dollar value of such distribution
  based on the exchange rate applicable on the date of receipt. A U.S. Holder
  that does not convert foreign currency received as a distribution into U.S.
  dollars on the date of receipt generally will have a tax basis in such foreign
  currency equal to the U.S. dollar value of such foreign currency on the date
  of receipt. Such a U.S. Holder generally will recognize ordinary income or loss
  on the subsequent sale or other taxable disposition of such foreign currency
  (including an exchange for U.S. dollars). However, an individual U.S. Holder
  whose realized gain upon such subsequent sale or other taxable disposition of
  such foreign currency does not exceed U.S.$200 will not recognize such gain
  to the extent that there are no expenses associated with the transaction that
  meet the requirements for deductibility as a trade or business expense or as
  an expense for the production of income.

Dividends Received Deduction

Dividends paid on the Common Shares generally will not be
  eligible for the dividends received deduction. The availability
  of the dividends received deduction is subject to complex limitations that are
  beyond the scope of this discussion, and a U.S. Holder that is a corporation
  should consult its own financial advisor, legal counsel, or accountant regarding
  the dividends received deduction.

Disposition of Common Shares

A U.S. Holder will recognize gain or loss on the sale or other
  taxable disposition of Common Shares in an amount equal to the difference, if
  any, between (a) the amount of cash plus the fair market value of any property
  received and (b) such U.S. Holders tax basis in the Common Shares sold
  or otherwise disposed of. Any such gain or loss generally will be capital gain
  or loss, which will be long-term capital gain or loss if the Common Shares are
  held for more than one year.

Preferential tax rates apply to long-term capital gains of
  a U.S. Holder that is an individual, estate, or trust. There are currently no
  preferential tax rates for long-term capital gains of a U.S. Holder that is
  a corporation. Deductions for capital losses and net capital losses are subject
  to complex limitations. For a U.S. Holder that is an individual, estate, or
  trust, capital losses may be used to offset capital gains and up to U.S.$3,000
  of ordinary income. An unused capital loss of a U.S. Holder that is an individual,
  estate, or

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trust generally may be carried forward to subsequent taxable
  years, until such net capital loss is exhausted. For a U.S. Holder that is a
  corporation, capital losses may be used to offset capital gains, and an unused
  capital loss generally may be carried back three years and carried forward five
  years from the year in which such net capital loss is recognized.

Foreign Tax Credit

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

Complex limitations apply to the foreign tax credit, including
  the general limitation that the credit cannot exceed the proportionate share
  of a U.S. Holders U.S. federal income tax liability that such U.S. Holders
  foreign source taxable income bears to such U.S. Holders worldwide
  taxable income. In applying this limitation, a U.S. Holders various items
  of income and deduction must be classified, under complex rules, as either foreign
  source or U.S. source. In addition, this limitation is calculated
  separately with respect to specific categories of income (including passive
  income, high withholding tax interest, financial services
  income, shipping income, and certain other categories of income).
  Dividends paid by the Company generally will constitute foreign source
  income and generally will be classified as passive income or, in
  the case of certain U.S. Holders, financial services income. In
  addition, a U.S. Holder that is a corporation and that owns 10% or more of the
  voting stock of the Company may, subject to complex limitations, be entitled
  to an indirect foreign tax credit under Section 902 of the Code
  with respect to dividends paid by the Company. The foreign tax credit rules
  are complex, and each U.S. Holder should consult its own financial advisor,
  legal counsel, or accountant regarding the foreign tax credit rules.

Information Reporting; Backup Withholding Tax

Payments made within the U.S. of dividends on, and proceeds
  arising from certain sales or other taxable dispositions of, Common Shares generally
  will be subject to information reporting and backup withholding tax, at the
  rate of 28%, if a U.S. Holder (a) fails to furnish such U.S. Holders correct
  U.S. taxpayer identification number (generally on Form W-9), (b) furnishes an
  incorrect U.S. taxpayer identification number, (c) is notified by the IRS that
  such U.S. Holder has previously failed to properly report items subject to backup
  withholding tax, or (d) fails to certify, under penalty of perjury, that such
  U.S. Holder has furnished its correct U.S. taxpayer identification number and
  that the IRS has not notified such U.S. Holder that it is subject to backup
  withholding tax. However, U.S. Holders that are corporations generally are excluded
  from these information reporting and backup withholding tax rules. Any amounts
  withheld under the U.S. backup withholding tax rules will be allowed as a credit
  against a U.S. Holders U.S. federal income tax liability, if any, or will
  be refunded, if such U.S. Holder furnishes required information to the IRS.
  Each U.S. Holder should consult its own financial advisor, legal counsel, or
  accountant regarding the information reporting and backup withholding tax rules.

Additional Rules that May Apply to U.S. Holders

If the Company is a foreign personal holding company,
  a foreign investment company, a controlled foreign corporation,
  or a passive foreign investment company (each as defined below),
  the preceding sections of this summary may not describe the U.S. federal income
  tax consequences to U.S. Holders of the acquisition, ownership, and disposition
  of Common Shares.

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Foreign Personal Holding Company

The Company generally will be a foreign personal holding
  company under Section 552 of the Code (a FPHC) if (a) at any
  time during a taxable year, more than 50% of the total voting power or the total
  value of the outstanding shares of the Company is owned, directly or indirectly,
  by five or fewer individuals who are citizens or residents of the U.S. and (b)
  60% (or 50% in certain cases) or more of the gross income of the Company for
  such taxable year is foreign personal holding company income. Foreign
  personal holding company income includes, for example, dividends, interest,
  certain rents and royalties, certain gains from the sale of stock and securities,
  and certain gains from commodities transactions.

If the Company is a FPHC, a U.S. Holder generally will be
  required to include in gross income such U.S. Holders allocable portion
  of the undistributed foreign personal holding company income (as
  defined in Section 556 of the Code) of the Company. The Company does not believe
  that it has previously been, or currently is, a FPHC. However, there can be
  no assurance that the Company will not be a FPHC for the current or any future
  taxable year.

Foreign Investment Company

The Company generally will be a foreign investment company
  under Section 1246 of the Code (a FIC) if (a) 50% or more of the
  total voting power or the total value of the outstanding shares of the Company
  is owned, directly or indirectly, by citizens or residents of the U.S., domestic
  partnerships, domestic corporations, domestic estates, or domestic trusts (each
  as defined in Section 7701(a)(30) of the Code) and (b) the Company is (i) registered
  under the U.S. Investment Company Act of 1940, as amended, as a management
  company or a unit investment trust or (ii) engaged primarily
  in the business of investing, reinvesting, or trading in securities, commodities,
  or any interest in securities or commodities.

If the Company is a FIC, all or part of any gain recognized
  by a U.S. Holder on the sale or other taxable disposition of Common Shares will
  be treated as ordinary income (rather than as capital gain). The Company does
  not believe that it has previously been, or currently is, a FIC. However, there
  can be no assurance that the Company will not be a FIC for the current or any
  future taxable year.

Controlled Foreign Corporation

The Company generally will be a controlled foreign corporation
  under Section 957 of the Code (a CFC) if more than 50% of the total
  voting power or the total value of the outstanding shares of the Company is
  owned, directly or indirectly, by citizens or residents of the U.S., domestic
  partnerships, domestic corporations, domestic estates, or domestic trusts (each
  as defined in Section 7701(a)(30) of the Code), each of which own, directly
  or indirectly, 10% or more of the total voting power of the outstanding shares
  of the Company (a 10% Shareholder).

If the Company is a CFC, a 10% Shareholder generally will
  be subject to current U.S. federal income tax with respect to (a) such 10% Shareholders
  pro rata share of the subpart F income (as defined in Section 952
  of the Code) of the Company and (b) such 10% Shareholders pro rata share
  of the earnings of the Company invested in United States property
  (as defined in Section 956 of the Code). In addition, under Section 1248 of
  the Code, any gain recognized on the sale or other taxable disposition of Common
  Shares by a U.S. Holder that was a 10% Shareholder at any time during the five-year
  period ending with such sale or other taxable disposition generally will be
  treated as a dividend to the extent of the earnings and profits
  of the Company that are attributable to such Common Shares. If the Company is
  both a CFC and a passive foreign investment company (as defined
  below), the Company generally will be treated as a CFC (and not as a passive
  foreign investment company) with respect to any 10% Shareholder.

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The Company does not believe that it has previously been,
  or currently is, a CFC. However, there can be no assurance that the Company
  will not be a CFC for the current or any future taxable year.

Passive Foreign Investment Company

The Company generally will be a passive foreign investment
  company under Section 1297 of the Code (a PFIC) if, for a
  taxable year, (a) 75% or more of the gross income of the Company for such taxable
  year is passive income or (b) 50% or more of the assets held by the Company
  either produce passive income or are held for the production of passive income,
  based on the fair market value of such assets (or on the adjusted tax basis
  of such assets, if the Company is not publicly traded and either is a controlled
  foreign corporation or makes an election). Passive income
  includes, for example, dividends, interest, certain rents and royalties, certain
  gains from the sale of stock and securities, and certain gains from commodities
  transactions. However, gains arising from the sale of commodities generally
  are excluded from passive income if (a) a foreign corporation holds the commodities
  directly (and not through an agent or independent contractor) as inventory or
  similar property or as dealer property, (b) such foreign corporation incurs
  substantial expenses related to the production, processing, transportation,
  handling, or storage of the commodities, and (c) gross receipts from sales of
  commodities that satisfy the requirements of clauses (a) and (b) constitute
  at least 85% of the total gross receipts of such foreign corporation.

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

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

Under Section 1291 of the Code, any gain recognized on the
  sale or other taxable disposition of Common Shares, and any excess distribution
  (as defined in Section 1291(b) of the Code) paid on the Common Shares, must
  be ratably allocated to each day in a Non-Electing U.S. Holders holding
  period for the Common Shares. The amount of any such gain or excess distribution
  allocated to prior years of such Non-Electing U.S. Holders holding period
  for the Common Shares generally will be subject to U.S. federal income tax at
  the highest tax applicable to ordinary income in each such prior year. A Non-Electing
  U.S. Holder will be required to pay interest on the resulting tax liability
  for each such prior year, calculated as if such tax liability had been due in
  each such prior year.

A U.S. Holder that makes a QEF Election generally will not
  be subject to the rules of Section 1291 of the Code discussed above. However,
  a U.S. Holder that makes a QEF Election generally will be subject to U.S. federal
  income tax on such U.S. Holders pro rata share of (a) the net capital
  gain of the Company, which will be taxed as long-term capital gain to
  such U.S. Holder, and (b) and the ordinary earnings of the Company,
  which will be taxed as ordinary income to such U.S. Holder. A U.S. Holder that
  makes a QEF Election will be subject to U.S. federal income tax on such amounts
  for each taxable year in which

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65

the Company is a PFIC, regardless of whether such amounts
  are actually distributed to such U.S. Holder by the Company.

A U.S. Holder that makes a Mark-to-Market Election generally
  will not be subject to the rules of Section 1291 of the Code discussed above.
  A U.S. Holder may make a Mark-to-Market Election only if the Common Shares are
  marketable stock (as defined in Section 1296(e) of the Code). A
  U.S. Holder that makes a Mark-to-Market Election will include in gross income,
  for each taxable year in which the Company is a PFIC, an amount equal to the
  excess, if any, of (a) the fair market value of the Common Shares as of the
  close of such taxable year over (b) such U.S. Holders tax basis in such
  Common Shares. A U.S. Holder that makes a Mark-to-Market Election will, subject
  to certain limitations, be allowed a deduction in an amount equal to the excess,
  if any, of (a) such U.S. Holders adjusted tax basis in the Common Shares
  over (b) the fair market value of such Common Shares as of the close of such
  taxable year.

The Company does not believe that it was a PFIC for the taxable
  year ended April 30, 2004 and does not expect that it will be a PFIC for the
  taxable year ending April 5, 2005. There can be no assurance, however, that
  the IRS will not challenge the determination made by the Company concerning
  its PFIC status or that the Company will not be a PFIC for the current or any
  future taxable year.

The PFIC rules are complex, and each U.S. Holder should consult
  its own financial advisor, legal counsel, or accountant regarding the PFIC rules
  and how the PFIC rules may affect the U.S. federal income tax consequences of
  the acquisition, ownership, and disposition of Common Shares.

10 F.      DIVIDENDS AND PAYING
  AGENTS

Not applicable.

10 G.      STATEMENT BY EXPERTS

Not applicable.

10H.      DOCUMENTS ON DISPLAY

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

The Company is required to file financial statements and other information
  with the Securities Commissions in the Provinces of Alberta, British Columbia,
  Manitoba, New Brunswick, Newfoundland,

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66

Ontario, Prince Edward Island, and Saskatchewan,electronically
  through the Canadian System for Electronic Document Analysis and Retrieval (SEDAR)
  which can be viewed at www.sedar.com.

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

10I.      SUBSIDIARY INFORMATION

Not required.

ITEM 11:QUANTITATIVE
  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Gold Price

The Companys primary business is the acquisition and
  development of gold properties and its revenue to date has almost entirely been
  derived from proceeds from, or related, to the sale of gold. See Risk
  Factors - Metal Price Volatility. Gold prices are subject to significant
  volatility and these changes, to the extent that the Companys production
  is unhedged, can significantly affect the Companys profitability and cash
  flow. Gold prices declined steadily since the latter part of 1996, culminating
  in August 1999 with the lowest price in twenty years, and until spring of 2002
  essentially remained below $300 per ounce. Each ten percent change in the price
  of gold from a current gold price of approximately $390 per ounce will change
  projected current annual revenues by $760,500, and, each ten percent change
  in the current price of silver from approximately $6.50 per ounce will change
  projected current annual revenues by $84,500. Over the past financial year the
  monthly averaged price of gold has ranged between $350 and $407 per ounce.

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

Interest Rate

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

Foreign Currency

Other than the proceeds derived from the exercise of stock
  options which are received in Canadian dollars, the Companys revenue and
  most of its operating costs are derived in, or based on, U.S. dollar amounts.
  Only the Companys Canadian head office corporate general and administration
  costs are denominated in a currency other than the U.S. dollar and therefore
  the effect of a change in the Canadian/U.S. dollar exchange rate would be immaterial.

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ITEM 12:      DESCRIPTION OF SECURITIES OTHER
  THAN EQUITY SECURITIES

Not applicable

ITEM 13:      DEFAULTS, DIVIDEND ARREARAGES AND
  DELIQUENCIES

Not applicable.

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

Not applicable

ITEM 15:      CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. The
  Company maintains a small head office staff which because of its size precludes
  the functioning of all internal controls, most notably division of duties. To
  compensate for this situation management through its Chief Financial Officer
  and Disclosure Policy performs a thorough review of any and all financial information
  disclosed to the public markets. In addition, the Companys audit committee
  reviews and recommends to the Board approval of any and all financial information
  reviewed and referred to it by management for disclosure to the public markets.
  The Companys Chief Executive Officer and Chief Financial Officer have
  evaluated the effectiveness of the Companys disclosure controls and procedures
  (as such term is defined in Rules 13a-15 and 15d-15 under the Securities Exchange
  Act of 1934, as amended (the Exchange Act)) as of the end of the
  period covered by this annual report (the Evaluation Date). Based
  on such evaluation, such officers have concluded that, as of the Evaluation
  Date, the Companys disclosure controls and procedures are effective in
  alerting them on a timely basis to material information relating to the Company
  required to be included in our reports filed or submitted under the Exchange
  Act.

Changes in Internal Controls over Financial Reporting.
  During the most recent fiscal year, there have not been any significant changes
  in the Companys internal controls over financial reporting or in other
  factors that have materially affected, or are reasonably likely to materially
  affect, our internal controls over financial reporting.

ITEM 16:      AUDIT COMMITTEE
  FINANCIAL EXPERT, CODE OF ETHICS AND PRINCIPAL ACCOUNTANT FEES AND SERVICES

16A.      AUDIT COMMITTEE FINANCIAL
  EXPERT

Messrs. David Fagin and Paul Sweeney are both financial experts.
  As financial experts they have an understanding of generally accepted accounting
  principles and financial statements; are able to assess the general application
  of accounting principles in connection with the accounting for estimates, accruals
  and reserves; have experience preparing, auditing, analyzing or evaluating financial
  statements that entail accounting issues of equal complexity to the Companys
  financial statements (or actively supervising another person who did so); have
  an understanding of internal controls and procedures for financial reporting
  and an understanding of audit committee functions.

Mr. Fagin does not have an accounting designation; instead
  his expertise is derived from his high level involvement in the financial matters
  of public corporations almost continuously for at least 35 years. Mr. Fagin
  was involved in the valuation of oil and gas companies for 10 years both as
  a consultant and a bank appraisal engineer (1958-68); President of a subsidiary
  of Rosario Resources Corporation, a NYSE company (1968-75) and then Executive
  Vice-President (75-77) then President (77-82) during
  which period he was intimately involved in financial and accounting matters.
  In 1982 he founded Fagin

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Exploration Company and worked closely with an accountant
  and auditors to maintain the records. From 1986 to 1991 Mr. Fagin was the President
  and Chief Operating Officer for Homestake Mining Corporation (NYSE), responsible
  for producing operations in six countries and was involved in decisions for
  corporate financial reporting. Between 1992 and 1996, Mr. Fagin was Executive
  Chairman of Golden Star Resources (ASE and TSE) and managed all administrative
  matters including annual reports, audits and registration in Canada and the
  US. Since 1987 Mr. Fagin has served on Boards and Audit Committees of several
  public companies including T. Rowe Price Mutual Funds, Golden Star, Canyon Resource
  Corporation, Dayton Mining Corp. and the Company, where he is currently either
  Chairman or a member of each audit committee.

Mr. Sweeney is a Certified General Accountant with the Association
  of Certified General Accountants of British Columbia since 1988. Mr. Sweeney
  has a solid background in accounting and financial management starting his accounting
  career in 1972. From 1987 to 1993 he worked with Placer Dome Inc. as Chief Financial
  Officer (1987-1989) of an Australian subsidiary operating five mines in Australia
  and Papua New Guinea. Mr. Sweeney was responsible for all accounting, financial
  and marketing requirements; then Assistant Treasurer (1989 to 1991) at Vancouver
  head office where he was responsible for the review of financial needs for all
  members of the Placer Dome group worldwide risk management and debt administration;
  and director, development planning (1991-1993) where he was responsible for
  the development of plans relating to the existing assets and cash flow by the
  group worldwide. Since 1994 Mr. Sweeney has served as the Chief Financial Officer
  of several public companies including Princeton Mining Corporation, Sutton Resources
  Ltd., Manhattan Minerals Corp. and currently Canico Resource Corp. where he
  is responsible for all finance, accounting and taxation matters.

The third member of the Companys audit committee, Anthony
  Petrina, although not a financial expert is financially literate
  in that he has the ability to read and understand a set of financial statements
  that present a breadth and level of complexity of accounting issues that are
  generally comparable to the breadth and complexity of the issues that can reasonably
  be expected to be raised by the Companys financial statements. Mr. Petrina
  worked for Placer Dome for 32 years, serving as President, CEO and Vice-Chairman,
  until his retirement in 1992. Mr. Petrina has been a director of several other
  mining companies since his retirement to date.

Audit Committee Charter

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

(Amended and Restated effective July 29, 2004) The primary function of the Audit Committee is to assist the Board in fulfilling
  its oversight responsibilities, primarily through overseeing managements
  conduct of the Companys accounting and financial reporting process and
  systems of internal accounting and financial controls; selecting, retaining
  and monitoring the independence and performance of the Companys outside
  auditors, including overseeing the audits of the Companys financial statements,
  and approving any non audit services; and providing an avenue of communication
  among the outside auditors, management and the Board.

14.1      Composition of the Audit Committee:

|a) | Shall consist of a minimum of three directors
        at all times, all of whom must be independent as required by applicable
        law and applicable stock exchange listing rules (the Listing Rules).
        A member of the Committee shall be considered independent if he or she
        is not an employee of the Company; (b) he or she does not accept, directly
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|   | or indirectly, any consulting, advisory or other
        compensatory fee from the Company or its subsidiaries other than in connection
        with serving on the Committee, any other Board committee or as a member
        of the Board; (c) he or she is not an affiliated person of
        the Company or any Company subsidiary as defined by applicable law and
        Listing Rules; and (d) he or she meets all other requirements for independence
        imposed by law and the Listing Rules from time to time and any requirements
        imposed by any Canadian or other governmental body having jurisdiction
        over the Company                                                                                                                                                                                                                                                                                                           
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|b) | All members of the Committee shall have a practical
        knowledge of finance and accounting and be able to read and understand
        fundamental financial statements from the time of their respective appointments
        to the Committee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|c) | At least one member of the Committee shall be
        a financial expert as defined by Item 401(h) of Regulation
        S-K, unless otherwise determined by the Board, and at least one member
        shall meet the financial sophistication standards under the Listing Rules.
        The designation or identification of a member of the Committee as an audit
        committee financial expert does not impose on such person any duties,
        obligations, or liability that are greater than the duties, obligations,
        and liability imposed on such person as a member of the Committee and
        Board of Directors in the absence of such designation or identification;
        and (ii) the designation or identification of a member of the Committee
        as an audit committee financial expert does not affect the
        duties, obligations, or liability of any other member of the Committee
        or Board of Directors
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|d) | Each member of the Committee shall be appointed
        by the Board and shall serve until the earlier to occur of the date on
        which he or she shall be replaced by the Board, resigns from the Committee,
        or resigns from the Board.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|e) | Shall meet no less than four times annually and
        at least quarterly, on such dates that the Chair of the Audit Committee
        determine. Notice of meetings shall be given by letter, facsimile or other
        means of recorded electronic communication or by telephone not less than
        24 hours before the time fixed for the meeting. Members may waive notice
        of any meetings before or after the holding thereof. A majority of the
        members present at a meeting will constitute a quorum.                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|f) | The Chair of the Audit Committee shall be appointed
        by the Board following the recommendation of the Chair of the Board, who
        will prepare and / or approve an agenda in advance of each meeting and
        shall preside over meetings of the Committee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

14.2      Terms of Reference

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

|a) | Review and recommend for Board approval the annual
        and quarterly financial statements of the Company, including Managements
        Discussion and Analysis, and determine whether they are complete and consistent
        with the information known to committee members. Determine that the auditors
        are satisfied that the financial
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

70

|   | statements have been prepared in accordance with
        applicable generally accepted accounting principles.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|b) | Make regular reports to the Board.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|c) | Have the sole authority to appoint or replace
        the independent auditor (subject, if applicable, to shareholder ratification).
        The independent auditor shall report directly to the Audit Committee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|d) | Review the scope of the audit to be conducted
        by the external auditor of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|e) | Be directly responsible for the compensation and
        oversight of the work of the independent auditor (including resolution
        of disagreements between management and the independent auditor regarding
        financial reporting) for the purpose of preparing or issuing an audit
        report or related work.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|f) | Review and pre-approve all auditing services, internal
        control related services and permitted non-audit services (including the
        terms thereof) to be performed for the Company by its independent auditor,
        subject to the de minimus exceptions for non-audit services described
        in Section 10A(i)(1)(B) of the Securities Exchange Act of 1934, as amended,
        which are approved by the Audit Committee prior to completion of the audit.
        The Audit Committee may form and delegate authority to subcommittees
        consisting of one or more members when appropriate, including the authority
        to grant pre-approvals of audit and permitted non-audit services, provided
        that decisions of such subcommittee to grant pre-approvals shall be presented
        to the full Audit Committee at this next scheduled meeting.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|g) | Pre-approve all engagement letters for all auditing
        and non-audit services to be provided to the Company or its subsidiaries,
        before and after completion of work and assess the performance of external
        and internal auditors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|h) | Review and determine the compensation to be paid
        to the independent auditor for all auditing services, internal control
        related services and permitted non-audit services. The Company
        shall provide appropriate funding, as determined by the Audit Committee,
        for payment of compensation to the independent auditor for the purpose
        of rendering or issuing an audit report and to advisors employed by the
        Audit Committee.                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|i) | Review all public disclosure documents containing
        audited or unaudited financial information before release, including but
        not limited to prospectus, annual report, annual information form and
        managements discussion and analysis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|j) | Review, at least semi-annually, all expenses paid
        by the Company to or in behalf of the CEO and the President and any other
        financial arrangements or transactions with them and their affiliates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|k) | Review all post-audit or management letters containing
        the recommendations of the external auditor and managements response/follow-ups
        of any identified weakness.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

---

71

|l) | Have the right, for the
        purpose of performing their duties, of inspecting all of the books and
        records of the Company and its affiliates and of discussing such accounts
        and records and any matters relating to the financial position or condition
        of the Company with the officers and auditors of the Company and its affiliates.                                                                                                                                                                                                                                                                                                                 
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|m) | Review any transaction
        involving the Company and a related party at least once a year or upon
        any significant change in the transaction or relationship.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|n) | Review and discuss with
        the independent auditors and management (including the senior internal
        audit executive) any significant matters regarding the Companys
        internal controls and procedures over financial reporting that have come
        to the attention of the independent auditor during the conduct of their
        annual audit, and review whether internal control recommendations made
        by the auditors have been implemented by management and review any special
        steps adopted in light of material control deficiencies and the adequacy
        of disclosures about changes in internal control over financial reporting.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|o) | Review major risk exposures
        (whether financial, operating or otherwise) and the guidelines and policies
        that management has put in place to govern the process of monitoring,
        controlling and reporting such exposures (including any hedging).                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|p) | Review and discuss reports
        from the independent auditors on:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|q) | Discuss with management
        and the independent auditors the Companys use of non-GAAP information
        in any report, earnings release or other publicly disseminated document
        and any off-balance sheet structures and the effect of regulatory and
        accounting initiatives on the Company.                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|r) | Review annually managements
        report on internal controls and any auditors attestation regarding
        managements assessment of internal controls, required by law or
        Listing Rules and review whether internal control recommendations made
        by the auditors have been implemented by management.                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|s) | Establish procedures
        for: (a) the receipt, retention and treatment of complaints received by
        the Company regarding accounting, internal accounting controls or auditing
        matters; and (b) the confidential, anonymous submission by employees of
        the Company of concerns regarding questionable business conduct, accounting
        or auditing matters.                                                                                                                                                                                                                                                                                              

---

72

|t) | Have such other duties, powers and authorities,
        consistent with the provisions of applicable laws and Listing Rules, or
        as the Board may by resolution delegate to the Audit Committee from time
        to time.                                                          
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                            
|u) | At the Companys expense, retain independent
        counsel, accountants or other experts for such purposes as the Committee,
        in its sole discretion, determines to be appropriate to carry out its
        responsibilities, and set the compensation to be paid to such experts.
|   |                                                                                                                                                                                                                                                                                            
|v) | Review on an annual basis and if necessary update
        this Charter and have changes approved by the Board.                                                                                                                                                                             

14.3      Regulations

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

|a) | The business of the Audit Committee shall be transacted
        either at meetings thereof or by conference telephone or other communications
        facilities that permit all persons participating in the meeting to hear
        each other, or by resolution in writing. All questions at a meeting shall
        be decided in accordance with the vote of a majority of those present
        and the Chair of the meeting shall not have a second or casting vote.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|b) | A resolution in writing signed by all members
        of the Audit Committee entitled to vote on that resolution at a meeting
        of the Audit Committee shall be as valid as if it had been passed at a
        duly called and constituted meeting. Such resolutions in writing may be
        in one or more counterparts, all of which, when taken together, shall
        be deemed to constitute one resolution.                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|c) | The auditor of the Company shall, at the expense
        of the Company, be entitled to attend and be heard at or may be invited
        to any meeting of the Audit Committee, except for portions of meetings
        in which their work, fees and performance may be discussed.                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|d) | The Audit Committee Chair shall regularly report
        on the activities of the Audit Committee, to the Board of Directors.                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|e) | The external auditor and senior management shall
        have the opportunity or may be invited to meet separately with the Audit
        Committee.                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|f) | The minutes of the proceedings of the Audit Committee
        and any resolutions in writing shall be kept in a book provided for that
        purpose which shall always be open for inspection by any director of the
        Company.                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|g) | Subject to the foregoing, the calling, holding
        and procedure at meetings of the Audit Committee shall be determined by
        the Audit Committee Chair.                                                                                                                                                                                                                                                                                                          

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73

14.4      Limitation
  of Audit Committees Role

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

Item 16B.      Code of Ethics

The Company adopted a code of ethics consistent with SEC rules
  and regulations. The Code of ethics governs the actions of and is applicable
  to all of the directors and officers of the Company and its subsidiaries, and
  their affiliates. The code of ethics deals with the following issues:

- compliance with all the laws and regulations identified in the code of ethics;
- corporate opportunities and conflicts of interest;
- the quality of the public disclosures;
- the protection and appropriate use of the Companys properties;
- the protection of confidential information and property;
- fair behavior; and
- compliance with insider trading and corrupt practices legislation.

A copy of the code of ethics is posted on and available for
  review on the Companys website www.pacrim-mining.com.
  There have been no waivers granted to a provision of the code of ethics in fiscal
  2004 to any of the Companys principal officers..

Item 16C.      Principal Accountant
  Fees and Services

At the annual meeting held on October 8, 2003, the shareholders
  appointed Staley, Okada & Partners, Chartered Accountants (Staley,
  Okada & Partners), to serve as the independent auditors for the 2003
  fiscal year. Staley, Okada & Partners acted as the Companys independent
  auditor for the fiscal years ended April 30, 2004 and 2003. The chart below
  sets forth the total amount billed the Company by Staley, Okada & Partners
  for services performed in the fiscal years 2003 and 2004, and breaks down these
  amounts by category of service in CDN$.

"Audit Fees" are the aggregate fees billed by Staley, Okada
  & Partners for the audit of the Companys consolidated annual financial
  statements, reviews of interim financial statements and attestation services
  that are provided in connection with statutory and regulatory filings or engagements.

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

"Tax Fees" are fees for professional services rendered by
  Staley, Okada & Partners for tax compliance, tax advice on actual or contemplated
  transactions.

Fees disclosed under the category "All Other Fees" for the
  2003 fiscal year are related to corporate reorganization consulting and for
  the 2004 fiscal year are related to quarterly reviews.

---

74

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

|Financial Year Ending | Audit Fees (1) | Audit Related Fees (2) | Tax Fees (3) | All Other Fees (4)
|--------------------- | -------------- | ---------------------- | ------------ | ------------------
|April 30, 2004        | Cdn.$70,000    | Cdn.$4,641             | Cdn.$8,520   | Cdn.$6,248        
|April 30, 2003        | Cdn.$47,400    | Cdn.$985               | Cdn.$5,500   | Cdn.$7,375        

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

Audit Committee's pre-approval policies and procedures

The Audit Committee nominates and engages the independent auditors to audit
  the financial statements, and approves all audit, audit-related services, tax
  services and other services provided by Staley, Okada & Partners. Any services
  provided by Staley, Okada & Partners that are not specifically included
  within the scope of the audit must be pre-approved by the audit committee prior
  to any engagement. The audit committee is permitted to approve certain fees
  for audit-related services, tax services and other services pursuant to a de
  minimusexception before the completion of the engagement. In fiscal 2004,
  fees paid to Staley, Okada & Partners were approved pursuant to the de
  minimusexception for tax services.

Item 16D.      Exemptions from the Listing Standards
  for Audit Committees.

Not Applicable

Item 16E.      Purchases of Equity Securities
  by the Issuer and Affiliated Purchasers.

None

PART III

ITEM 17.      FINANCIAL STATEMENTS

The Financial Statements were prepared in accordance with Canadian GAAP and
  are presented in U.S. dollars. There are differences between United States and
  Canadian GAAP. A reconciliation of the financial statements to United States
  GAAP is set forth in Note 14 to the Consolidated Financial Statements forming
  part hereof.

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

|(a) | Financial Statements for the financial period ended April 30, 2004, containing:
|--- | -------------------------------------------------------------------------------

Auditors Report for the years April 30, 2004 and April 30, 2003; 
    Consolidated Balance Sheet as at April 30, 2004 and April 30,2003;
    Consolidated Statements of Loss for the year ended April 30, 2004, April 30,
    2003, four month period ended April 30, 2002, and year ended December 31,
    2001;
    Consolidated Statements of Shareholders Equity for the year ended April
    30, 2004, April 30, 2003, four month period ended April 30, 2002, and year
    ended December 31, 2001; 
    Consolidated Statements of Cash Flow for the year ended April 30, 2004, April
    30, 2003, four months ended April 30, 2002 and year ended December 31, 2001;
    and 
    Notes to Consolidated Financial Statements.


---

PACIFIC RIM MINING CORP.

(Formerly Dayton Mining Corporation)

CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2004 and 2003

Expressed in US Funds



F-1

---

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

---

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

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

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

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

|"F. John Norman"        |  | "Thomas C. Shrake"     
|----------------------- |  | -----------------------
|Chief Financial Officer |  | Chief Executive Officer
|                        |  |                        

F-2

---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

---

We have audited the accompanying consolidated balance sheets
  of Pacific Rim Mining Corp. (formerly Dayton Mining Corporation) as of April
  30, 2004 and 2003, and the related consolidated statements of loss, shareholders'
  equity, and cash flows for the years ended April 30, 2004 and 2003 and for the
  four months ended April 30, 2002. These financial statements are the responsibility
  of the Company's management. Our responsibility is to express an opinion on
  these financial statements based on our audits.

We conducted our audits in accordance with 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 audit to obtain reasonable assurance about whether the financial statements
  are free of material misstatement. An audit includes examining, on a test basis,
  evidence supporting the amounts and disclosures in the financial statements.
  An audit also includes assessing the accounting principles used and significant
  estimates made by management, as well as evaluating the overall financial statement
  presentation. 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, 2004 and 2003, and the results of its operations and its cash
  flows for the years ended April 30, 2004 and 2003 and for the four months ended
  April 30, 2002, in conformity with Canadian generally accepted accounting principles.

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

|Vancouver, B.C. |  | STALEY, OKADA & PARTNERS
|--------------- |  | ------------------------
|May 28, 2004    |  | CHARTERED ACCOUNTANTS   
|                |  |                         

F-3

---

|Pacific Rim Mining Corp.             |  | Statement 1
|------------------------------------ |  | -----------
|(Formerly Dayton Mining Corporation) |  |            
|Consolidated Balance Sheets          |  |            
|In thousands of U.S. dollars         |  |            

|                                                        |   | As at     |   |   | As at     |  
|------------------------------------------------------- | - | --------- | - | - | --------- | -
|                                                        |   | April 30, |   |   | April 30, |  
|ASSETS                                                  |   | 2004      |   |   | 2003      |  
|                                                        |   |           |   |   |           |  
|Current Assets                                          |   |           |   |   |           |  
|Cash, cash equivalents and bullion
      (Note 1b)      |   |           |   |   |           |  
|Cash
      and cash equivalents                         | $ | 1,463     |   | $ | 1,107     |  
|Bullion
      (Note 1b and 4)                           |   | 1,301     |   |   | 594       |  
|                                                        |   | 2,764     |   |   | 1,701     |  
|Receivables                                             |   | 118       |   |   | 50        |  
|Inventories (Note 5)                                    |   | 2,930     |   |   | 8,829     |  
|                                                        |   | 5,812     |   |   | 10,580    |  
|Inventories - Long-Term Portion(Note 5)                 |   | -         |   |   | 2,002     |  
|Property, Plant and Equipment(Note 6)                   |   | 5,102     |   |   | 5,455     |  
|Closure Fund(Note 8b)                                   |   | 3,119     |   |   | 3,410     |  
|                                                        | $ | 14,033    |   | $ | 21,447    |  
|                                                        |   |           |   |   |           |  
|                                                        |   |           |   |   |           |  
|LIABILITIES                                             |   |           |   |   |           |  
|Current Liabilities                                     |   |           |   |   |           |  
|Accounts payable and accrued liabilities                | $ | 1,761     |   | $ | 1,228     |  
|Loans payable / due to related
      party (Note 8a)    |   | 828       |   |   | 231       |  
|Accrued closure costs - current
      portion (Note 8c) |   | 190       |   |   | 1,488     |  
|                                                        |   | 2,779     |   |   | 2,947     |  
|Loan Payable to a Related Party(Note 8a)                |   | -         |   |   | 1,640     |  
|Accrued Closure Costs(Note 8c)                          |   | 1,636     |   |   | 1,900     |  
|                                                        |   | 4,415     |   |   | 6,487     |  
|                                                        |   |           |   |   |           |  
|                                                        |   |           |   |   |           |  
|SHAREHOLDERS' EQUITY                                    |   |           |   |   |           |  
|Share Capital-Statement 3 (Note 9)                      |   |           |   |   |           |  
|Authorized:                                             |   |           |   |   |           |  
|1,000,000,000
      common shares without par value     |   |           |   |   |           |  
|Issued and fully paid:                                  |   |           |   |   |           |  
|80,483,994
      (2003 - 78,528,594) shares outstanding |   | 57,690    |   |   | 56,173    |  
|Deficit- Statement 3                                    |   | (48,072   | ) |   | (41,213   | )
|                                                        |   | 9,618     |   |   | 14,960    |  
|                                                        | $ | 14,033    |   | $ | 21,447    |  

APPROVED BY THE BOARD OF DIRECTORS:

"David K. Fagin", Director

"Thomas C. Shrake", Director

- See Accompanying Notes -

F-4

---

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

|                                              |   | Year      |   |   | Year      |   |   | Four Months |   |   | Year         |  
|--------------------------------------------- | - | --------- | - | - | --------- | - | - | ----------- | - | - | ------------ | -
|                                              |   | Ended     |   |   | Ended     |   |   | Ended       |   |   | Ended        |  
|                                              |   | April 30, |   |   | April 30, |   |   | April 30,   |   |   | December 31, |  
|                                              |   | 2004      |   |   | 2003      |   |   | 2002        |   |   | 2001         |  
|Revenue                                       |   |           |   |   |           |   |   |             |   |   |              |  
|Sales                                         | $ | 12,140    |   | $ | 12,509    |   | $ | 5,303       |   | $ | 14,913       |  
|                                              |   |           |   |   |           |   |   |             |   |   |              |  
|Cost of Sales                                 |   |           |   |   |           |   |   |             |   |   |              |  
|Operating costs                               |   | 11,903    |   |   | 8,999     |   |   | 4,454       |   |   | 13,545       |  
|Depreciation, depletion and amortization      |   | 1,295     |   |   | 3,092     |   |   | 1,196       |   |   | 2,980        |  
|Write-down of mining interest (Note
      7b) |   | -         |   |   | 1,262     |   |   | -           |   |   | -            |  
|                                              |   | 13,198    |   |   | 13,353    |   |   | 5,650       |   |   | 16,525       |  
|Mine Operating (Loss)                         |   | (1,058    | ) |   | (844      | ) |   | (347        | ) |   | (1,612       | )
|                                              |   |           |   |   |           |   |   |             |   |   |              |  
|Expenses (Income)                             |   |           |   |   |           |   |   |             |   |   |              |  
|Exploration                                   |   |           |   |   |           |   |   |             |   |   |              |  
|-
      direct                                |   | 5,144     |   |   | 3,346     |   |   | 250         |   |   | 700          |  
|- stock-based
      compensation (Note 9)     |   | 20        |   |   | -         |   |   | -           |   |   | -            |  
|General and administrative                    |   |           |   |   |           |   |   |             |   |   |              |  
|-
      direct                                |   | 878       |   |   | 937       |   |   | 437         |   |   | 1,131        |  
|-
      stock-based compensation (Note 9)     |   | 316       |   |   | -         |   |   | -           |   |   | -            |  
|Write-down of marketable securities           |   | -         |   |   | 275       |   |   | -           |   |   | 70           |  
|Interest expense                              |   | 47        |   |   | 78        |   |   | 28          |   |   | 15           |  
|Amalgamation costs                            |   | -         |   |   | -         |   |   | 683         |   |   | -            |  
|Foreign exchange                              |   | 26        |   |   | (28       | ) |   | (29         | ) |   | 66           |  
|Interest income                               |   | (182      | ) |   | (175      | ) |   | (62         | ) |   | (122         | )
|Gain on sale of mineral properties            |   | -         |   |   | (922      | ) |   | -           |   |   | -            |  
|Gain on sale of marketable securities         |   | -         |   |   | (1,047    | ) |   | (59         | ) |   | (11          | )
|                                              |   | 6,249     |   |   | 2,464     |   |   | 1,248       |   |   | 1,849        |  
|Loss Before Unusual Item                      |   | (7,307    | ) |   | (3,308    | ) |   | (1,595      | ) |   | (3,461       | )
|                                              |   |           |   |   |           |   |   |             |   |   |              |  
|Recovery (Write Off) of Investment In         |   |           |   |   |           |   |   |             |   |   |              |  
|Andacollo Mine(Note
      1c)                 |   | 448       |   |   | 508       |   |   | (6          | ) |   | 90           |  
|                                              |   |           |   |   |           |   |   |             |   |   |              |  
|Loss for the Period                           | $ | (6,859    | ) | $ | (2,800    | ) | $ | (1,601      | ) | $ | (3,371       | )
|                                              |   |           |   |   |           |   |   |             |   |   |              |  
|Loss Per Share - Basic and Diluted            | $ | (0.09     | ) | $ | (0.04     | ) | $ | (0.03       | ) | $ | (0.11        | )

- See Accompanying Notes -

F-5

---

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

|                                                      | Share Capital  Common Shares |  |   |        |  |   |             |  
|----------------------------------------------------- | ----------------------------- |  | - | ------ |  | - | ----------- | -
|                                                      |                               |  |   |        |  |   | Accumulated |  
|                                                      | Number                        |  |   | Amount |  |   | Deficit     |  
|                                                      |                               |  |   |        |  |   |             |  
|Balance - December 31, 2001                           | 31,123,974                    |  | $ | 53,810 |  | $ | (36,812     | )
|Shares issued for amalgamation
      conversion for   |                               |  |   |        |  |   |             |  
|Dayton
      shareholders (1.76 for 1) (Note 1d)      | 23,654,220                    |  |   | -      |  |   | -           |  
|Shares issued for acquisition
      of PRMC (Note 1d) | 23,498,600                    |  |   | 2,287  |  |   | -           |  
|Shares issued for cash                                | 132,000                       |  |   | 45     |  |   | -           |  
|Loss for the four months ended
      April 30, 2002   | -                             |  |   | -      |  |   | (1,601      | )
|                                                      |                               |  |   |        |  |   |             |  
|Balance - April 30, 2002                              | 78,408,794                    |  |   | 56,142 |  |   | (38,413     | )
|Shares issued for cash                                | 119,800                       |  |   | 31     |  |   |             |  
|Loss for the year                                     | -                             |  |   | -      |  |   | (2,800      | )
|                                                      |                               |  |   |        |  |   |             |  
|Balance - April 30, 2003                              | 78,528,594                    |  |   | 56,173 |  |   | (41,213     | )
|Shares issued for cash  options
      exercised      | 1,955,400                     |  |   | 1,181  |  |   | -           |  
|Stock option costs - stock-based
      compensation   | -                             |  |   | 336    |  |   | -           |  
|Loss for the year                                     | -                             |  |   | -      |  |   | (6,859      | )
|                                                      |                               |  |   |        |  |   |             |  
|Balance  April 30, 2004                              | 80,483,994                    |  | $ | 57,690 |  | $ | (48,072     | )

- See Accompanying Notes -

F-6

---

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

|                                                     |   | Year      |   |   | Year      |   |   | Four Months |   |   | Year         |  
|---------------------------------------------------- | - | --------- | - | - | --------- | - | - | ----------- | - | - | ------------ | -
|                                                     |   | Ended     |   |   | Ended     |   |   | Ended       |   |   | Ended        |  
|                                                     |   | April 30, |   |   | April 30, |   |   | April 30,   |   |   | December 31, |  
|                                                     |   | 2004      |   |   | 2003      |   |   | 2002        |   |   | 2001         |  
|Operating Activities                                 |   |           |   |   |           |   |   |             |   |   |              |  
|Loss for the period                                  | $ | (6,859    | ) | $ | (2,800    | ) | $ | (1,601      | ) | $ | (3,371       | )
|Adjustment
      to reconcile loss to cash flow      |   |           |   |   |           |   |   |             |   |   |              |  
|provided by operations:                              |   |           |   |   |           |   |   |             |   |   |              |  
|Depletion,
      depreciation and amortization       |   | 800       |   |   | 2,717     |   |   | 1,035       |   |   | 2,980        |  
|Accrued
      closure costs                          |   | 495       |   |   | 375       |   |   | 161         |   |   | (22          | )
|Stock-based
      compensation                       |   | 336       |   |   | -         |   |   | -           |   |   | -            |  
|Foreign
      exchange                               |   | 26        |   |   | (28       | ) |   | (29         | ) |   | 59           |  
|Net
      interest earned on sinking fund            |   | (174      | ) |   | (143      | ) |   | (50         | ) |   | (153         | )
|Adjustment
      of sinking fund value               |   | -         |   |   | -         |   |   | -           |   |   | 57           |  
|Gain
      on sale of marketable securities          |   | -         |   |   | (1,047    | ) |   | (59         | ) |   | (11          | )
|Gain
      on sale of mineral properties             |   | -         |   |   | (922      | ) |   | -           |   |   | -            |  
|Gain
      on sale of property, plant and            |   |           |   |   |           |   |   |             |   |   |              |  
|equipment included in operating costs                |   | (290      | ) |   | -         |   |   | -           |   |   | -            |  
|Write-down
      of marketable securities            |   | -         |   |   | 275       |   |   | -           |   |   | 70           |  
|Write-down
      of mining interest                  |   | -         |   |   | 1,262     |   |   | -           |   |   | -            |  
|                                                     |   | (5,666    | ) |   | (311      | ) |   | (543        | ) |   | (391         | )
|Accounts
      payable and accrued liabilities       |   | 533       |   |   | (138      | ) |   | (439        | ) |   | (698         | )
|Closure
      cost expenditures                      |   | (2,057    | ) |   | (692      | ) |   | (83         | ) |   | (118         | )
|Due
      to related parties                         |   | (1,043    | ) |   | (659      | ) |   | 484         |   |   | 197          |  
|Inventories                                          |   | 7,194     |   |   | (2,270    | ) |   | (144        | ) |   | (1,335       | )
|Receivables                                          |   | (68       | ) |   | 26        |   |   | 163         |   |   | (28          | )
|Cash Flow Used for Operating Activities              |   | (1,107    | ) |   | (4,044    | ) |   | (562        | ) |   | (2,373       | )
|                                                     |   |           |   |   |           |   |   |             |   |   |              |  
|Investing Activities                                 |   |           |   |   |           |   |   |             |   |   |              |  
|Cash acquired on amalgamation                        |   | -         |   |   | -         |   |   | 1,483       |   |   | -            |  
|Purchases of property, plant and
      equipment     |   | (461      | ) |   | (79       | ) |   | (138        | ) |   | (104         | )
|Proceeds of disposition
      of property, plant and |   |           |   |   |           |   |   |             |   |   |              |  
|equipment                                            |   | 304       |   |   | 56        |   |   | -           |   |   | -            |  
|Reclamation sinking fund withdrawals                 |   |           |   |   |           |   |   |             |   |   |              |  
|(contributions)                                      |   | 465       |   |   | -         |   |   | -           |   |   | (352         | )
|Cash Flow Provided By (Used for) Investing           |   |           |   |   |           |   |   |             |   |   |              |  
|Activities                                           |   | 308       |   |   | (23       | ) |   | 1,345       |   |   | (456         | )
|                                                     |   |           |   |   |           |   |   |             |   |   |              |  
|Financing Activities                                 |   |           |   |   |           |   |   |             |   |   |              |  
|Issuance of share capital                            |   | 1,181     |   |   | 31        |   |   | 45          |   |   | -            |  
|Proceeds on sale of marketable
      securities      |   | -         |   |   | 2,551     |   |   | 170         |   |   | 29           |  
|Cash Flow Provided By Financing Activities           |   | 1,181     |   |   | 2,582     |   |   | 215         |   |   | 29           |  
|                                                     |   |           |   |   |           |   |   |             |   |   |              |  
|Foreign Exchange                                     |   | (26       | ) |   | 28        |   |   | 29          |   |   | (59          | )
|Net Increase (Decrease) in Cash and Cash             |   |           |   |   |           |   |   |             |   |   |              |  
|Equivalents                                          |   | 356       |   |   | (1,457    | ) |   | 1,027       |   |   | (2,859       | )
|Cash and cash equivalents - Beginning
      of       |   |           |   |   |           |   |   |             |   |   |              |  
|period                                               |   | 1,107     |   |   | 2,564     |   |   | 1,537       |   |   | 4,396        |  
|                                                     |   |           |   |   |           |   |   |             |   |   |              |  
|Cash and Cash Equivalents - End of Period            | $ | 1,463     |   | $ | 1,107     |   | $ | 2,564       |   | $ | 1,537        |  
|                                                     |   |           |   |   |           |   |   |             |   |   |              |  
|Supplementary Schedule of Cash                       |   |           |   |   |           |   |   |             |   |   |              |  
|Transactions:                                        |   |           |   |   |           |   |   |             |   |   |              |  
|Interest paid during the period                      | $ | 61        |   | $ | 79        |   | $ | -           |   | $ | 141          |  
|Income taxes paid during the period                  | $ | -         |   | $ | -         |   | $ | -           |   | $ | -            |  
|                                                     |   |           |   |   |           |   |   |             |   |   |              |  
|Supplementary Schedule of Non-cash                   |   |           |   |   |           |   |   |             |   |   |              |  
|Transactions:                                        |   |           |   |   |           |   |   |             |   |   |              |  
|Shares issued for business combination               | $ | -         |   | $ | -         |   | $ | 2,287       |   | $ | -            |  
|Marketable securities received
      for mineral     |   |           |   |   |           |   |   |             |   |   |              |  
|properties                                           | $ | -         |   | $ | 900       |   | $ | 1,000       |   | $ | -            |  
|Stock-based compensation                             | $ | 336       |   | $ | -         |   | $ | -           |   | $ | -            |  
|Accrued closure costs capitalized
      as           |   |           |   |   |           |   |   |             |   |   |              |  
|property, plant and
      equipment                  | $ | 495       |   | $ | -         |   | $ | -           |   | $ | -            |  

- See Accompanying Notes -

F-7

---

|Pacific Rim Mining Corp. Notes to Consolidated Financial Statements
      April 30, 2004 and 2003In 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 exploration licence areas, known as El Dorado and
        La Calera, located in El Salvador and exploration interests in mineral
        claims in the United States.                                                                                                                                                                                                                                                    
|  
|   | 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 14.                                                                                                                                                                                                                                                                                                             
|  
|   | Certain of the comparative figures have
        been reclassified to conform to the current year's presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|   | These consolidated financial statements
        include the accounts of the Company's wholly-owned subsidiaries, Dayton
        Mining (US) Inc., DMC Cayman Inc., Andacollo Gold Inc., La Serena Inc.,
        Dayton Chile Exploraciones Mineras Limitada, Dayton Acquisition Inc.,
        449200 B.C. Ltd., Pacific Rim El Salvador S.A. De C.V. and Recursos Salvadorenos
        S.A. de C.V. Also included in these consolidated financial statements
        are the accounts of the Company's wholly-owned subsidiaries, Pac Rim Cayman,
        Pac Rim Caribe III and International Pacific Rim S.A. from the date of
        acquisition of April 11, 2002.
|  
|   | The 49% joint venture interest in Denton-Rawhide
        is accounted for on the proportionate consolidation basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

F-8

---

|Pacific Rim Mining Corp. Notes to Consolidated Financial Statements
      April 30, 2004 and 2003In thousands of U.S. dollars
|-----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                             

|1. | Nature of Operations and Basis of Presentation- Continued
|-- | ---------------------------------------------------------
|  
|   | d)                                                       
|  
|   |                                                          
|  
|   |                                                          

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



|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.
|  
|   | Bullion                                                                                                                                                                                                                                                                                                                                                          
|  
|   | Gold and silver bullion is valued at the lower of
        cost and estimated fair market value.                                                                                                                                                                                                                                                                  
|  
|   | Inventories                                                                                                                                                                                                                                                                                                                                                      
|  
|   | Inventories, comprised of ore on leach pads, gold
        in process and mine operating supplies are valued at the lower of cost
        and net realizable value.                                                                                                                                                                                               

F-9

---

|Pacific Rim Mining Corp. Notes to Consolidated Financial Statements
      April 30, 2004 and 2003In thousands of U.S. dollars
|-----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                             

|2. | Significant Accounting Policies and Accounting
        Changes- Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | Property, Plant and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   | Property, plant and equipment is stated at estimated
        fair value as at the date of acquisition less accumulated depreciation
        and accumulated write-downs. Mining property, plant and equipment is depreciated
        using the unit of production method over estimated recoverable ounces.                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   | Annually, reviews are undertaken to evaluate the
        carrying values of operating mines and development properties. If it is
        determined that the estimated net recoverable amount is significantly
        less than the carrying value and the impairment in value is likely to
        be permanent, a write-down to the net recoverable amount is made by a
        charge to earnings.                                                                                                                                                                                                                                                                                                                                           
|  
|   | All exploration expenditures are expensed as incurred.
        Significant property acquisition payments for active exploration properties
        are capitalized. If no mineable ore body is discovered, previously capitalized
        costs are expensed in the period the property is abandoned. Expenditures
        for the development of new mines, to define further mineralization in
        existing ore bodies, and to expand the capacity of operating mines, are
        capitalized and amortized on a units of production basis over estimated
        recoverable reserves.                                                                                                                                                   
|  
|   | Effective May 1, 2003, the Company prospectively
        adopted the Canadian Institute of Charter Accountants ("CICA") Handbook
        Section 3063 "Impairment of Long-Lived Assets", which requires that an
        impairment loss be recognized if the carrying value of a long-lived asset
        exceeds its fair market value. An estimate of fair market value is undertaken
        annually and the impairment loss, if any, is recorded. There were no impairment
        losses recorded during fiscal 2004. Management's estimates of resources,
        inventories and reclamation costs are subject to risks and uncertainties
        that may affect its assessment of the recoverability of mineral property
        costs.
|  
|   | 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.                                                                                                                                                                                                                                                        
|  
|   | 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.                                                                                                                                                                                                                                                                    

F-10

---

|Pacific Rim Mining Corp. Notes to Consolidated Financial Statements
      April 30, 2004 and 2003In thousands of U.S. dollars
|-----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                             

|2. | Significant Accounting Policies and
        Accounting Changes- Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | Environmental Expenditures and Closure
        Costs- Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   | 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. 146 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 $ 0.5 million 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 likely to be realized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   | Share Capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   | i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   | ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   | Stock-based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   | Effective May 1, 2003, the Company has
        prospectively adopted the new recommendations of CICA Handbook Section
        3870 " Stock-based Compensation and Other Stock-based Payments"
        which requires fair value accounting for all stock options issued during
        the year. This change in accounting treatment increased expenses by $336
        in the current fiscal year. The prior years stock-based compensation expense
        was only recognized when stock-based compensation awards were made to
        non-employees, while pro forma disclosure was acceptable for awards made
        to employees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   | Revenue Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   | Revenues from the sale of all precious
        metal bullion are recognized when title to the bullion passes to the buyer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

F-11

---

|Pacific Rim Mining Corp. Notes to Consolidated Financial Statements
      April 30, 2004 and 2003In thousands of U.S. dollars
|-----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                             

|2. | Significant Accounting Policies and Accounting
        Changes- Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | 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 hedging contracts
        to manage its exposure to fluctuations in the market price of gold and
        to establish minimum prices for certain of its future production. The
        Company's entire hedging activity is considered normal course sales requiring
        settlements through physical delivery. Gains or losses on these contracts
        are included in sales revenue when product is delivered against the contract.                                                                                                                                                         
|  
|   | Foreign Exchange                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   | Transaction amounts denominated in other currencies
        are translated into their United States dollar equivalents at exchange
        rates prevailing at the transaction date. Carrying values of monetary
        assets and liabilities are adjusted at each balance sheet date to reflect
        exchange rates prevailing at that date. Gains and losses arising from
        restatement of foreign currency monetary assets and liabilities at each
        year-end are included in earnings.                                                                                                                          
|  
|   | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   | The preparation of financial statements in conformity
        with Canadian generally accepted accounting principles requires management
        to make estimates and assumptions that affect the reported amounts of
        assets and liabilities and disclosures of contingent assets and liabilities
        at the date of the financial statements and the reported amounts of revenues
        and expenses during the reporting period. Actual results could differ
        from those estimates.                                                                                                                          
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|3. | Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   | The Company's financial instruments consist of cash
        and cash equivalents, bullion (Note 10)receivables, closure fund,
        accounts payable, amounts due to related parties and accrued closure costs.
        Unless otherwise noted, it is management's opinion that the Company is
        not exposed to significant interest, currency or credit risks arising
        from the financial instruments. The fair value of these financial instruments
        approximates their carrying value due to their short-term maturity or
        capacity of prompt liquidation.                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

F-12

---

|Pacific Rim Mining Corp. Notes to Consolidated Financial Statements
      April 30, 2004 and 2003In thousands of U.S. dollars
|-----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                             

|4. | Bullion                
|-- | -----------------------
|   |                        
|   | Details are as follows:

| |                                | April 30, 2004 |  | April 30, 2003 | 
| | ------------------------------ | -------------- |  | -------------- | 
| |                                | Gold           |  | Silver         | 
| | Ounces at Refinery             | 2,727          |  | 39,600         | 
| | Market value per ounce ($/oz.) | $390.00        |  | $6.00          | 
| | Market Value                   | $1,064         |  | $237           | 
| | Total market value             | $1,301         |  | $594           | 

|   |                        
|-- | -----------------------
|   |                        
|5. | Inventories            
|   |                        
|   | Details are as follows:

| |                                                 |   | April 30, |  |   | April 30, |  
| | ----------------------------------------------- | - | --------- |  | - | --------- | -
| |                                                 |   | 2004      |  |   | 2003      |  
| | Production inventory                            | $ | 2,696     |  | $ | 10,291    |  
| | Supplies inventory                              |   | 234       |  |   | 540       |  
| |                                                 |   | 2,930     |  |   | 10,831    |  
| | Less: Long term portion of production inventory |   | -         |  |   | (2,002    | )
| |                                                 | $ | 2,930     |  | $ | 8,829     |  

|   | The estimated value of inventory that will not be recovered within the
      next fiscal year has been reclassified as long term.
|-- | ---------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                  
|   |                                                                                                                                  
|6. | Property, Plant and Equipment                                                                                                    
|   |                                                                                                                                  
|   | Details are as follows:                                                                                                          

| |                                          |   | April 30, |   |   | April 30, |  
| | ---------------------------------------- | - | --------- | - | - | --------- | -
| |                                          |   | 2004      |   |   | 2003      |  
| | Cost                                     | $ | 10,320    |   | $ | 10,652    |  
| | Accumulated depreciation and write-downs |   | (5,218    | ) |   | (5,197    | )
| |                                          | $ | 5,102     |   | $ | 5,455     |  
| |                                          |   |           |   |   |           |  

F-13

---

|Pacific Rim Mining Corp. Notes to Consolidated Financial Statements
      April 30, 2004 and 2003In thousands of U.S. dollars
|-----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                             

|7. | Mineral Properties
|-- | ------------------
|  
|   | a)                
|  
|   |                   
|  
|   |                   
|  
|   |                   
|  
|   |                   

| |                                                           |   |          |  |   | Minimum      | 
| | --------------------------------------------------------- | - | -------- |  | - | ------------ | 
| |                                                           |   | Option   |  |   | Exploration  | 
| |                                                           |   | Payments |  |   | Expenditures | 
| | Upon signing (paid)                                       | $ | 5        |  | $ | -            | 
| | Upon completion of a two month due diligence (paid)       |   | 15       |  |   | -            | 
| | On or before September 10, 2003 (paid
      and incurred) |   | 20       |  |   | 25           | 
| | On or before September 10, 2004 (paid subsequent to       |   |          |  |   |              | 
| | year end and incurred)                                    |   | 35       |  |   | 50           | 
| | On or before September 10, 2005 (incurred)                |   | 75       |  |   | 100          | 
| | On or before September 10, 2006 (incurred)                |   | 150      |  |   | 200          | 
| |                                                           | $ | 300      |  | $ | 375          | 

| |  |      | The property is subject to a 0.5% NSR which can
        be purchased by the Company for $200 if purchased within six months from
        the start of commercial production.                                                                                                                                                                         
| |  | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |      | This property is also subject to an El Salvador
        governmental NSR of 2%.                                                                                                                                                                                                                                                                      
|
| |  | iii) | By agreement dated November 14, 2003, the Company
        has agreed to an option to acquire a parcel of land near the El Dorado
        property. To exercise its option, the Company has to pay $14 on or before
        May 14, 2004 (paid subsequent to year end), $14 on or before May 14, 2005
        and $971 on or before November 14, 2005.

F-14

---

|Pacific Rim Mining Corp. Notes to Consolidated Financial Statements
      April 30, 2004 and 2003In thousands of U.S. dollars
|-----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                             

|7. | Mineral Properties- Continued
|-- | -----------------------------
|  
|   | b)                           
|  
|   |                              

| |  |                                                                                      |                                 |   | April 30, |   |   | April 30, |  
| |  | ------------------------------------------------------------------------------------ | ------------------------------- | - | --------- | - | - | --------- | -
| |  |                                                                                      |                                 |   | 2004      |   |   | 2003      |  
| |  |                                                                                      | Current assets                  | $ | 4,434     |   | $ | 9,516     |  
| |  |                                                                                      | Inventories - long-term portion |   | -         |   |   | 2,002     |  
| |  |                                                                                      | Property, plant and equipment   |   | 878       |   |   | 1,219     |  
| |  |                                                                                      | Closure fund                    |   | 3,119     |   |   | 3,410     |  
| |  |                                                                                      | Current liabilities             |   | (2,061    | ) |   | (4,359    | )
| |  |                                                                                      | Long-term liabilities           |   | (1,636    | ) |   | (1,900    | )
| |  |                                                                                      | Net assets                      | $ | 4,734     |   | $ | 9,888     |  
| |  |                                                                                      |                                 |   |           |   |   |           |  
| |  | The condensed statements of loss of the Company's 49% interest
      are as follows: |                                

| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                |   |   |                |   |   | Four Months    |   |   | Year Ended   |  
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | -------------- | - | - | -------------- | - | - | -------------- | - | - | ------------ | -
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | Year Ended     |   |   | Year Ended     |   |   | Ended          |   |   | December 31, |  
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | April 30, 2004 |   |   | April 30, 2003 |   |   | April 30, 2002 |   |   | 2001         |  
| |  | Sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | $ | 12,140         |   | $ | 12,509         |   | $ | 5,303          |   | $ | 14,913       |  
| |  | Costs and expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | (13,193        | ) |   | (13,348        | ) |   | (5,763         | ) |   | (16,639      | )
| |  | Net loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | $ | (1,053         | ) | $ | (839           | ) | $ | (460           | ) | $ | (1,726       | )
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                |   |   |                |   |   |                |   |   |              |  
| |  | During the year ended April 30, 2003,
        the Denton-Rawhide Mine experienced unexpected production shortfalls due
        to slower than expected heap leach recoveries. A review of the carrying
        value of the Denton-Rawhide investment indicated that the fair value of
        this investment had been impaired; therefore a $1,262 reduction in carrying
        value was recorded and charged to that year's operations.
      The condensed statements of cash flows of the Company's
        49% interest are as follows:

| |  |                                      |   |                |   |   |                |   |   | Four Months    |   |   | Year Ended   |  
| |  | ------------------------------------ | - | -------------- | - | - | -------------- | - | - | -------------- | - | - | ------------ | -
| |  |                                      |   | Year Ended     |   |   | Year Ended     |   |   | Ended          |   |   | December 31, |  
| |  |                                      |   | April 30, 2004 |   |   | April 30, 2003 |   |   | April 30, 2002 |   |   | 2001         |  
| |  | Cash flows provided by (used for)    |   |                |   |   |                |   |   |                |   |   |              |  
| |  | operations                           | $ | 5,160          |   | $ | 549            |   | $ | 310            |   | $ | (595         | )
| |  | Cash flows provided by (used for)    |   |                |   |   |                |   |   |                |   |   |              |  
| |  | investment activities                |   | (150           | ) |   | (23            | ) |   | (138           | ) |   | (104         | )
| |  | Cash flows from financing activities |   | (1,021         | ) |   | -              |   |   | -              |   |   | -            |  
| |  |                                      |   |                |   |   |                |   |   |                |   |   |              |  
| |  | Net cash flow                        | $ | 3,989          |   | $ | 526            |   | $ | 172            |   | $ | (699         | )

F-15

---

|Pacific Rim Mining Corp. Notes to Consolidated Financial Statements
      April 30, 2004 and 2003In thousands of U.S. dollars
|-----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                             

|7. | Mineral Properties Continued                                                      
|-- | -----------------------------------------------------------------------------------
|  
|   | c)                                                                                 
|  
|   |                                                                                    
|  
|   |                                                                                    
|  
|   |                                                                                    
|  
|   |                                                                                    
|  
|   | d)                                                                                 
|  
|   |                                                                                    
|  
|8. | Closure Fund, Accrued Closure Costs
        and Loan Payable/Due to a Related Party
|  
|   | a)                                                                                 
|  
|   |                                                                                    

F-16

---

|Pacific Rim Mining Corp. Notes to Consolidated Financial Statements
      April 30, 2004 and 2003In thousands of U.S. dollars
|-----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                             

|8. | Closure Fund, Accrued Closure Costs
        and Loan Payable/Due to a Related Party- Continued                                                                                                                                                                                                                                        
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | a)                                                                                                                                                                                                                                                                                                                                    
|  
|   |                                                                                                                                                                                                                                                                                                                                       
|  
|   | b)                                                                                                                                                                                                                                                                                                                                    
|  
|   |                                                                                                                                                                                                                                                                                                                                       
|  
|   | c)                                                                                                                                                                                                                                                                                                                                    
|  
|   |                                                                                                                                                                                                                                                                                                                                       
|  
|   |                                                                                                                                                                                                                                                                                                                                       
|9. | Share Capital                                                                                                                                                                                                                                                                                                                         
|  
|   | Stock Options                                                                                                                                                                                                                                                                                                                         
|  
|   | Upon amalgamation, stock options outstanding
        under the plans of Dayton and PRMC were rolled over, provided that upon
        surrender, termination or expiry without exercise the shares would not
        be available for the grant of new options.                                                                        
|  
|   | In October 2002 shareholders approved
        a new stock option and bonus plan under which, up to 6,000,000 common
        shares are reserved for the grant of stock options and up to 367,000 common
        shares are reserved for the grant of bonus shares to directors, employees
        or consultants ("eligible parties").

F-17

---

|Pacific Rim Mining Corp. Notes to Consolidated Financial Statements
      April 30, 2004 and 2003In thousands of U.S. dollars
|-----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                             

|9. | Share Capital- Continued                                                                                                                                                                                                                                                                                                                 
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | Stock Options Continued                                                                                                                                                                                                                                                                                                                 
|  
|   | Stock options or bonus shares may be granted under
        the 2002 Plan, by the Board of Directors, to eligible parties, for a term
        of up to 10 years, at the closing price on the TSX on the date prior to
        the grant, and on conditions as may be determined by the Board of Directors.
        Details are as follows:

| |                                                                                                                                   | Number of Options |   |           |   |                 
| | --------------------------------------------------------------------------------------------------------------------------------- | ----------------- | - | --------- | - | ----------------
| |                                                                                                                                   | Pre-              |   | October   |   | Weighted Average
| |                                                                                                                                   | Amalgamation      |   | 2002      |   | Exercise Price  
| |                                                                                                                                   | Plans             |   | Plan      |   | (in Cdn $)      
| | Options outstanding at April 30, 2002                                                                                             | 5,356,880         |   | -         |   | $0.71           
| | Year ended April 30, 2003          
      - granted                                                                               | -                 |   | 2,130,000 |   | $0.62           
| | - expired/cancelled                                                                                                               | (719,600          | ) | (20,000   | ) | $0.73           
| | - exercised                                                                                                                       | (119,800          | ) | -         |   | $0.40           
| | Options outstanding at April 30, 2003                                                                                             | 4,517,480         |   | 2,110,000 |   | $0.73           
| | Year ended April 30, 2004          
      - 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           
| | Vested as at April 30, 2004                                                                                                       | 1,804,380         |   | 2,260,266 |   | $0.56           
| |                                                                                                                                   |                   |   |           |   |                 
| | The following table summarizes information about
      stock options outstanding to directors and employees as at April 30, 2004.

| |                    |  | Exercise Price |  | Number      |  | Number   
| | ------------------ |  | -------------- |  | ----------- |  | ---------
| | Expiry Date        |  | (in Cdn $)     |  | Outstanding |  | Vested   
| | June 29, 2004      |  | $1.36          |  | 36,080      |  | 36,080   
| | September 24, 2004 |  | $1.30          |  | 29,000      |  | 29,000   
| | May 28, 2005       |  | $0.54          |  | 763,300     |  | 763,300  
| | July 4, 2006       |  | $0.29          |  | 976,000     |  | 976,000  
| | April 18, 2007     |  | $0.62          |  | 1,810,000   |  | 1,810,000
| | July 23, 2008      |  | $0.43          |  | 170,800     |  | 56,933   
| | October 8, 2008    |  | $0.85          |  | 1,230,000   |  | 393,333  
| |                    |  |                |  | 5,015,180   |  | 4,064,646

---

|Pacific Rim Mining Corp. Notes to Consolidated Financial Statements
      April 30, 2004 and 2003In thousands of U.S. dollars
|-----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                             

|9. | Share Capital- Continued                                                                                                                                                                                                                      
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | Stock Options- Continued                                                                                                                                                                                                                      
|  
|   | TheCompany has prospectively adopted the
        recommendations of CICA Handbook Section 3870                                                                                                                                                
|  
|   | "Stock-based Compensation and Other Stock-based
        Payments" for stock options granted to directors, officers and employees
        effective May 1, 2003. Comparative figures have been shown on a pro forma
        basis, as required.

| | Stock-based compensation expense relating to:            |   | 2004(i) |   |   | 2003(ii) |  
| | -------------------------------------------------------- | - | ------- | - | - | -------- | -
| | Administrative
      costs                               | $ | 316     |   | $ | 473      |  
| | Exploration costs                                        |   | 20      |   |   | -        |  
| | Total stock-based compensation                           | $ | 336     |   | $ | 473      |  
| |                                                          |   |         |   |   |          |  
| | Loss for the year  as reported                          | $ | (6,859  | ) | $ | (2,800   | )
| | Loss for the year  pro forma                            | $ | N/A     |   | $ | (3,273   | )
| | Loss Per Share - Basic and Diluted
      (in US dollars) |   |         |   |   |          |  
| | As reported                                              | $ | (0.09   | ) | $ | (0.04    | )
| | Pro-forma                                                | $ | N/A     |   | $ | (0.04    | )

| | (i)                                                                                                                                                                                                                 | Recorded as an expense with the offsetting
        entry to share capital.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------
| | (ii)                                                                                                                                                                                                                | Disclosed as an expense on a pro forma
        basis only.                
| |                                                                                                                                                                                                                     |                                                                           
| | No stock-based compensation
        was reported in the fiscal periods ended April 30, 2002 and December 31,
        2001.                                                                                         
| |                                                                                                                                                                                                                     |                                                                           
| | 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:

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | April 30, 2004 |  | April 30,2003 | 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------- |  | ------------- | 
| | Average risk free interest rate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 3.85%          |  | 4.31%         | 
| | Average expected option life                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 4 years        |  | 4 years       | 
| | Stock volatility  based on
      trading history                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 82.31%         |  | 89.46%        | 
| | Dividend payments during life of option                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Nil            |  | Nil           | 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                |  |               | 
| | 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.

F-18

---

|Pacific Rim Mining Corp. Notes to Consolidated Financial Statements
      April 30, 2004 and 2003In thousands of U.S. dollars
|-----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                             

|10. | Gold Sales Contracts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | At April 30, 2004, the Company's gold hedging position
        consisted of 6,000 ounces (2003 - 6,000) of forward sales contracts for
        future delivery of gold at various dates from May 2004 to October 2004
        (2003 - May to August 2003) at an average price of US$411 (2003 - US$368)
        per ounce. At April 30, 2004 the Company had no financial exposure to
        market risks related to the settlement of outstanding hedges as gold spot
        prices were approximately US$390 (2003 - US$339) per ounce at that date.
        The estimated fair value of these contracts at the April 30, 2004 spot
        prices was $126 (2003 - $174), which represents the fair value to the
        Company on the balance sheet date if it were to settle these instruments
        prior to their maturity.
|   
|    | The credit risk exposure related to the Company's
        gold hedging activities is limited to the unrealized gains (losses) on
        outstanding contracts based on current market prices. The Company's gold
        hedging contract counter parties are large international credit-worthy
        institutions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|11. | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|    | As at April 30, 2004 the Company has the following
        tax loss carry forwards:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

| | Country       |  | Category                                  |  |   | Amount |  | Expiry   
| | ------------- |  | ----------------------------------------- |  | - | ------ |  | ---------
| | Argentina     |  | Operating losses                          |  | $ | 2,376  |  | 2005-2009
| | Canada        |  | Non-capital losses                        |  | $ | 5,812  |  | 2005-2011
| |               |  | Net capital losses                        |  | $ | 2,380  |  | N/A      
| |               |  | Mineral expenditures                      |  | $ | 10,096 |  | N/A      
| | El Salvador   |  | Mineral expenditures                      |  | $ | 12,665 |  | (i)      
| | United States |  | Operating  Regular tax                   |  | $ | 11,863 |  | 2005-2024
| |               |  | Operating  Alternative minimum
      tax |  | $ | 7,063  |  | 2008-2024

| | (i) | These expenditures expire when they are written-off for local
      accounting purposes.                                                                                                                                        
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                 
| |     | Future income tax assets are not recorded for the above tax
      loss carry forwards due to the significant uncertainty of their recovery.
      The tax losses may be subject to audit and adjustment by local tax authorities

F-19

---

|Pacific Rim Mining Corp. Notes to Consolidated Financial Statements
      April 30, 2004 and 2003In thousands of U.S. dollars
|-----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                             

|12. | Commitments
|--- | -----------
|   
|    | a)         
|   
|    |            



| |  |      |  |     | Office   |  |   |             |  |   |      
| |  | ---- |  | --- | -------- |  | - | ----------- |  | - | -----
| |  |      |  | (i) | Premises |  |   | Photocopier |  |   | Total
| |  | 2005 |  | $   | 64.7     |  | $ | 3.6         |  | $ | 68.3 
| |  | 2006 |  |     | 43.9     |  |   | 3.6         |  |   | 47.5 
| |  | 2007 |  |     | 39.7     |  |   | 3.6         |  |   | 43.3 
| |  | 2008 |  |     | 33.6     |  |   | 3.6         |  |   | 37.2 
| |  | 2009 |  |     | 7.2      |  |   | -           |  |   | 7.2  
| |  |      |  | $   | 189.1    |  | $ | 14.4        |  | $ | 203.5



|   | (i)                                                                                                                                                                                                                                                                                                                                                                                                                  | In addition to the basic rent, the Company is responsible
        for its proportionate share of property taxes and operating costs.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------
|  
|b) | Proposed Sale of Subsidiaries                                                                                                                                                                                                                                                                                                                                                                                       
|  
|   | On March 31, 2004, the Company signed
        a Proposal for Acquisition Agreement in which it agreed to sell to an
        unrelated party 100% of the shares of its wholly owned subsidiaries Andacollo
        Gold Inc., La Serena Inc., Dayton Chile Exploraciones Mineras Limitada
        and Compania Minera Dayton ("CMD") for $5,000 cash and 4,000,000 common
        shares of the purchaser as follows:

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | Cash  |  | Shares   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ----- |  | ---------
| | Upon closing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | $ | 1,000 |  | 3,000,000
| | On or before December 31, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 1,000 |  | 1,000,000
| | On or before December 31, 2005                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 1,000 |  | -        
| | On or before December 31, 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 1,000 |  | -        
| | On or before December 31, 2007                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 1,000 |  | -        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | $ | 5,000 |  | 4,000,000
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |       |  |          
| | The closing of the transaction is subject
        to (i) a satisfactory completion of due diligence by the purchaser, (ii)
        approval of the transaction by the board of directors of the purchaser,
        (iii) regulatory approval of the transaction, and (iv) reduction of CMD's
        debt from approximately US $2,700, to US $2,000 or less. CMD's primary
        holding is the Andacollo gold mine property in Chile which the Company
        officially shut down in December 2000.

F-20

---

|Pacific Rim Mining Corp. Notes to Consolidated Financial Statements
      April 30, 2004 and 2003In thousands of U.S. dollars
|-----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                             

|13. | Segmented Information  
|--- | -----------------------
|    |                        
|    | Details are as follows:

| |                                          |   | Year      |   |   | Year      |   |   | Four Months |   |   | Year         |  
| | ---------------------------------------- | - | --------- | - | - | --------- | - | - | ----------- | - | - | ------------ | -
| |                                          |   | Ended     |   |   | Ended     |   |   | Ended       |   |   | Ended        |  
| |                                          |   | April 30, |   |   | April 30, |   |   | April 30,   |   |   | December 31, |  
| |                                          |   | 2004      |   |   | 2003      |   |   | 2002        |   |   | 2001         |  
| |                                          |   |           |   |   |           |   |   |             |   |   |              |  
| | Total Assets                             |   |           |   |   |           |   |   |             |   |   |              |  
| | Canada                                   | $ | 1,017     |   | $ | 99        |   | $ | 2,682       |   | $ | 1,064        |  
| | USA                                      |   | 8,556     |   |   | 17,094    |   |   | 18,445      |   |   | 19,275       |  
| | El Salvador                              |   | 4,457     |   |   | 4,252     |   |   | 4,184       |   |   | 4,184        |  
| | Chile                                    |   | 3         |   |   | 2         |   |   | 19          |   |   | 17           |  
| |                                          |   |           |   |   |           |   |   |             |   |   |              |  
| | Total                                    | $ | 14,033    |   | $ | 21,447    |   | $ | 25,330      |   | $ | 24,540       |  
| |                                          |   |           |   |   |           |   |   |             |   |   |              |  
| | Total Property, Plant and Equipment      |   |           |   |   |           |   |   |             |   |   |              |  
| | Canada                                   | $ | 9         |   | $ | 8         |   | $ | 11          |   | $ | 2            |  
| | USA                                      |   | 909       |   |   | 1,263     |   |   | 5,238       |   |   | 6,262        |  
| | El Salvador                              |   | 4,184     |   |   | 4,184     |   |   | 4,184       |   |   | 4,184        |  
| | Chile                                    |   | -         |   |   | -         |   |   | 17          |   |   | 17           |  
| |                                          |   |           |   |   |           |   |   |             |   |   |              |  
| | Total                                    | $ | 5,102     |   | $ | 5,455     |   | $ | 9,450       |   | $ | 10,465       |  
| |                                          |   |           |   |   |           |   |   |             |   |   |              |  
| | Revenue, Excluding Interest Income       |   |           |   |   |           |   |   |             |   |   |              |  
| | Canada                                   | $ | -         |   | $ | -         |   | $ | -           |   | $ | -            |  
| | USA                                      |   | 12,140    |   |   | 12,509    |   |   | 5,303       |   |   | 14,913       |  
| | El Salvador                              |   | -         |   |   | -         |   |   | -           |   |   | -            |  
| | Chile                                    |   | -         |   |   | -         |   |   | -           |   |   | -            |  
| |                                          |   |           |   |   |           |   |   |             |   |   |              |  
| | Total                                    | $ | 12,140    |   | $ | 12,509    |   | $ | 5,303       |   | $ | 14,913       |  
| |                                          |   |           |   |   |           |   |   |             |   |   |              |  
| | Depreciation, Depletion and Amortization |   |           |   |   |           |   |   |             |   |   |              |  
| | Canada                                   | $ | 5         |   | $ | 4         |   | $ | 1           |   | $ | 6            |  
| | USA                                      |   | 1,290     |   |   | 3,088     |   |   | 1,195       |   |   | 2,974        |  
| | El Salvador                              |   | -         |   |   | -         |   |   | -           |   |   | -            |  
| | Chile                                    |   | -         |   |   | -         |   |   | -           |   |   | -            |  
| |                                          |   |           |   |   |           |   |   |             |   |   |              |  
| | Total                                    | $ | 1,295     |   | $ | 3,092     |   | $ | 1,196       |   | $ | 2,980        |  
| |                                          |   |           |   |   |           |   |   |             |   |   |              |  
| | Net Income (Loss)                        |   |           |   |   |           |   |   |             |   |   |              |  
| | Canada                                   | $ | (1,010    | ) | $ | 847       |   | $ | (969        | ) | $ | (1,021       | )
| | USA                                      |   | (1,475    | ) |   | (1,004    | ) |   | (401        | ) |   | (1,770       | )
| | El Salvador                              |   | (4,822    | ) |   | (3,151    | ) |   | (231        | ) |   | (580         | )
| | Chile                                    |   | 448       |   |   | 508       |   |   | -           |   |   | -            |  
| |                                          |   |           |   |   |           |   |   |             |   |   |              |  
| | Total                                    | $ | (6,859    | ) | $ | (2,800    | ) | $ | (1,601      | ) | $ | (3,371       | )

F-21

---

|Pacific Rim Mining Corp. Notes to Consolidated Financial Statements
      April 30, 2004 and 2003In thousands of U.S. dollars
|-----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                             

|14. | United States Generally Accepted Accounting Principles
        ("US GAAP")
      The effect of the measurement differences between Canadian
        GAAP and US GAAP are summarized below.
      Under US GAAP, securities that are available-for-sale
        are recorded at fair value and unrealized gains or losses are excluded
        from earnings and recorded as a separate component of shareholders' equity.
        Declines in fair value that are other than temporary are written off.
        Under Canadian GAAP, investments in marketable securities are carried
        at the lower of cost and estimated fair market value. The significant
        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      |   |   | Four Months |   |   | Year         |  
| | ------------------------------------------- | - | --------- | - | - | --------- | - | - | ----------- | - | - | ------------ | -
| |                                             |   | Ended     |   |   | Ended     |   |   | Ended       |   |   | Ended        |  
| |                                             |   | April 30, |   |   | April 30, |   |   | April 30,   |   |   | December 31, |  
| |                                             |   | 2004      |   |   | 2003      |   |   | 2002        |   |   | 2001         |  
| |                                             |   |           |   |   |           |   |   |             |   |   |              |  
| | Net loss following Canadian GAAP            | $ | (6,859    | ) | $ | (2,800    | ) | $ | (1,601      | ) | $ | (3,371       | )
| | Loss on write-down of marketable securities |   | -         |   |   | -         |   |   | -           |   |   | (62          | )
| |                                             |   |           |   |   |           |   |   |             |   |   |              |  
| | Net loss following US GAAP                  |   | (6,859    | ) |   | (2,800    | ) |   | (1,601      | ) |   | (3,433       | )
| | Unrealized holding gain on marketable       |   |           |   |   |           |   |   |             |   |   |              |  
| | securities                                  |   | -         |   |   | 50        |   |   | 72          |   |   | 43           |  
| | Loss on write-down of marketable securities |   | -         |   |   | -         |   |   | -           |   |   | 62           |  
| |                                             |   |           |   |   |           |   |   |             |   |   |              |  
| | Comprehensive loss, following US GAAP       |   | (6,859    | ) |   | (2,750    | ) |   | (1,529      | ) |   | (3,328       | )
| | Weighted average number of common shares,   |   |           |   |   |           |   |   |             |   |   |              |  
| | computed under US GAAP (thousands of        |   |           |   |   |           |   |   |             |   |   |              |  
| | shares)                                     |   | 79,146    |   |   | 78,450    |   |   | 58,707      |   |   | 31,124       |  
| |                                             |   |           |   |   |           |   |   |             |   |   |              |  
| | Loss per share, following US GAAP           | $ | (0.09     | ) | $ | (0.04     | ) | $ | (0.03       | ) | $ | (0.11        | )

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

| |                                                                  |   | April 30, |   |   | April 30, |  
| | ---------------------------------------------------------------- | - | --------- | - | - | --------- | -
| |                                                                  |   | 2004      |   |   | 2003      |  
| | Deficit                                                          |   |           |   |   |           |  
| | Adjusted deficit,
      beginning of period per US GAAP          | $ | (41,275   | ) | $ | (38,475   | )
| | Net
      loss per US GAAP                                       |   | (6,859    | ) |   | (2,800    | )
| | Adjusted deficit,
      end of period per US GAAP                | $ | (48,134   | ) | $ | (41,275   | )
| |                                                                  |   |           |   |   |           |  
| | Accumulated Other Comprehensive Gain (Loss)                      |   |           |   |   |           |  
| | Beginning
      of period per US GAAP                            | $ | -         |   | $ | (50       | )
| | Current year other
      comprehensive gain (loss)               |   | -         |   |   | 50        |  
| | Accumulated other comprehensive gain
      (loss), end of period |   |           |   |   |           |  
| | per US GAAP                                                      | $ | -         |   | $ | -         |  

| | 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.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-22

---

|Pacific Rim Mining Corp. Notes to Consolidated Financial Statements
      April 30, 2004 and 2003In thousands of U.S. dollars
|-----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                             

|14. | United States Generally Accepted Accounting Principles- Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | Recent U.S. Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|    | In June 2001, the Financial Accounting Standards
        Board ("FASB") issued SFAS No. 141, " Business Combinations".
        SFAS No. 141 mandates the purchase method of accounting for all business
        combinations initiated after June 30, 2001. In addition, SFAS No. 141
        addresses the accounting for intangible assets and goodwill acquired in
        business combinations completed after June 30, 2001. The Company adopted
        SFAS No. 141, as required, with no material impact on its financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    | In June 2001, the FASB issued SFAS No. 142, " Goodwill
        and Other Intangible Assets", which revises the accounting for purchased
        goodwill and other intangible assets. Under SFAS No. 142, goodwill and
        other intangible assets with indefinite lives will no longer be systematically
        amortized into operating results. Instead, each of these assets will be
        tested, in the absence of an indicator of possible impairment, at least
        annually, and upon an indicator of possible impairment, immediately. The
        Company adopted SFAS No. 142, as required, on January 1, 2002 with no
        material impact on its financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|    | In August 2001, the FASB issued SFAS No. 143, "Accounting
        for Asset Retirement Obligations". SFAS No. 143 requires entities
        to record the fair value of a liability for an asset retirement obligation
        in the period in which it is a cost by increasing the carrying amount
        of the related long-lived asset. Over time, the liability is accreted
        to its present value each period, and the capitalized cost is depreciated
        over the useful life of the related obligation for its recorded amount
        or incurs a gain or loss upon settlement. The Company adopted SFAS No.
        143, as required, on May 1, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|    | In August 2001, the FASB issued SFAS No. 144, "
        Accounting for the Impairment or Disposal of Long- lived Assets".
        SFAS No. 144 was issued to resolve certain implementation issues that
        had arisen under SFAS No. 121. Under SFAS No. 144, a single uniform accounting
        model is required to be used for long-lived assets to be disposed of by
        sale, whether previously held and used or newly acquired, and certain
        additional disclosures are required. The Company adopted SFAS No. 144,
        as required, with no material impact on its financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|    | In April 2002, the FASB issued SFAS No. 145, " Rescission
        of FASB Statements Nos. 4, 44, and 64, Amendment of FASB Statement No.
        13, and Technical Corrections". SFAS No. 145 updates, clarifies and
        simplifies existing accounting pronouncements, by rescinding SFAS No.
        4, which required all gains and losses from extinguishment of debt to
        be aggregated and, if material, classified as an extraordinary item, net
        of related income tax effect. As a result, the criteria in APB No. 30
        will now be used to classify those gains and losses. Additionally, SFAS
        No. 145 amends SFAS No. 13 to require that certain lease modifications
        that have economic effects similar to sale-leaseback transactions be accounted
        for in the same manner as sale-leaseback transactions. Finally, SFAS No.
        145 also makes technical corrections to existing pronouncements. While
        those corrections are not substantive in nature, in some instances, they
        may change accounting practice. The Company adopted the provisions of
        SFAS No. 145 that amended SFAS No. 13, as required, on May 15, 2002 for
        transactions occurring after such date with no material impact on its
        financial statements. The Company adopted the remaining provisions of
        SFAS No. 145, as required, on May 1, 2003 with no material impact on its
        financial statements.

F-23

---

|Pacific Rim Mining Corp. Notes to Consolidated Financial Statements
      April 30, 2004 and 2003In thousands of U.S. dollars
|-----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                             

|14. | United States Generally Accepted Accounting Principles- Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | Recent U.S. Accounting Pronouncements- Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|    | In June 2002, the FASB issued SFAS No. 146, " Accounting
        for Costs Associated with Exit or Disposal Activities". SFAS No.
        146 was issued to address the financial accounting and reporting for costs
        associated with exit or disposal activities, unless specifically excluded.
        SFAS No. 146 requires that a liability for costs associated with an exit
        or disposal activity be recognized and measured at its fair value in the
        period in which the liability is incurred. The Company adopted SFAS No.
        146, as required, on May 1, 2003 with the result that the carrying value
        of the Rawhide Mine and the corresponding asset retirement obligation
        was increased by $0.5 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    | In December 2002, the FASB issued SFAS No. 148, "Accounting for
          Stock-Based Compensation -- Transition and Disclosure". SFAS 148
          amends SFAS No. 123, to provide alternative methods of transition for
          a voluntary change to the fair value based method of accounting for
          stock-based employee compensation. In addition, SFAS 148 amends the
          disclosure requirements of SFAS 123 to require prominent disclosures
          in both annual and interim financial statements about the method of
          accounting for stock-based employee compensation and the effect of the
          method used on reported results. SFAS 148 is effective for fiscal years
          beginning after December 15, 2002. The interim disclosure provisions
          are effective for financial reports containing financial statements
          for interim periods beginning after December 15, 2002. The Company adopted
          SFAS No. 148, on May 1, 2003. This change in accounting treatment increased
          expenses by $336 in the current fiscal year (Note 9).
        In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
          " Consolidation of Variable Interest Entities, an Interpretation
          of ARB No. 51."FIN 46 requires certain variable interest entities
          to be consolidated by the primary beneficiary of the entity, if the
          equity investors in the entity do not have the characteristics of a
          controlling financial interest or do not have sufficient equity at risk
          for the entity to finance its activities without additional subordinated
          financial support from other parties. FIN 46 is effective for all new
          variable interest entities created or acquired after January 31, 2003.
          For variable interest entities created or acquired prior to February
          1, 2003, the provisions of FIN 46 must be applied for the first interim
          or annual period beginning after June 15, 2003. However, in December
          2003, the FASB published a revision to FIN 46 to clarify some of the
          provisions of FIN 46, and to exempt certain entities from its requirements.
          Under the new guidance, there are new effective dates for companies
          that have interests in structures that are commonly referred to as special-purpose
          entities. The rules are effective in financial statements for periods
          ending after March 15, 2004. The adoption did not have any impact on
          the Company's financial statements.
|   
|    | On April 30, 2003, the FASB issued SFAS No. 149,
        "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". SFAS No. 149 amends and clarifies accounting for derivative instruments,
        including certain derivative instruments embedded in other contracts,
        and for hedging activities under SFAS No. 133. The new guidance amends
        SFAS No. 133 for decisions made as part of the Derivatives Implementation
        Group ( "DIG") process that effectively required amendments to
        SFAS No. 133, and decisions made in connection with other FASB projects
        dealing with financial instruments and in connection with implementation
        issues raised in relation to the application of the definition of a derivative
        and characteristics of a derivative that contains financing components.
        In addition, it clarifies when a derivative contains a financing component
        that warrants special reporting in the statement of cash flows. SFAS No.
        149 is effective for contracts entered into or modified after June 30,
        2003 and for hedging relationships designated after June 30, 2003. The
        Company adopted SFAS 149, as required, on July 1, 2003, with no material
        impact on its financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

F-24

---

|Pacific Rim Mining Corp. Notes to Consolidated Financial Statements
      April 30, 2004 and 2003In thousands of U.S. dollars
|-----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                             

|14. | United States Generally Accepted Accounting Principles- Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | Recent U.S. Accounting Pronouncements- Continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|    | In May 2003, the FASB issued SFAS 150, "Accounting
        for Certain Financial Instruments with Characteristics of both Liabilities
        and Equity". SFAS No. 150 establishes standards for classifying and
        measuring as liabilities certain financial instruments that embody obligations
        of the issuer and have characteristics of both liabilities and equity.
        SFAS No. 150 is effective for all financial instruments created or modified
        after May 31, 2003 and otherwise is effective at the beginning of the
        first interim period beginning after June 15, 2003. The Company adopted
        SFAS 150, as required, on August 1, 2003, with no material impact on its
        financial statements.
|   
|    | In December 2003, the Securities and Exchange Commission
        ("SEC") issued Staff Accounting Bulletin ("SAB") No. 104, Revenue Recognition.
        SAB 104 revises or rescinds portions of the interpretive guidance included
        in Topic 13 of the codification of staff accounting bulletins in order
        to make this interpretive guidance consistent with current authoritative
        accounting and auditing guidance and SEC rules and regulations. The adoption
        of SAB 104 did not have a material effect on the Company's financial statements.                                                                                                                                                                        

F-25

---

75

ITEM 18:      FINANCIAL
  STATEMENTS

Not applicable. See Item 17 above.

ITEM 19:      EXHIBITS

Exhibits as follows:

|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |  | Exhibit Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|1.1(1)  |  | Articles of the Company approved January 8, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.1(2)  |  | Assignment Agreement dated for reference as of April
        6, 2000 between Kinross Rawhide Mining Company, Kinross Fallon Inc. and
        Dayton Mining Corporation                                                                                                                                                                                                                                                                                                                                                                             
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.2(2)  |  | Construction and Post-Construction Operating Agreement
        dated as of June 23, 1989 among Kennecott Explorations (Australia) Ltd.
        (as assigned to Kennecott Rawhide) and Kiewit Mining Group Inc. (as assigned
        (i) in part to Plexus, Inc. which in turn assigned its interest to Plexus
        Rawhide Mining Company which changed its name to Kinross Rawhide and (ii)
        in part to Kiewit Rawhide Corp. which changed its name to Kinross Fallon)
        as amended by the First Amendment to Operating Agreement;
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.3(2)  |  | Agreement and First Amendment to Construction and
        Post- Construction Operating Agreement dated as of December 15, 1992 made
        among Kennecott Rawhide, Kiewit Mining Group Inc., Plexus Inc. and Plexus
        Rawhide Mining Company                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.4(2)  |  | Participation Agreement dated as of June 23, 1989
        made between Plexus Inc. (as assigned to Plexus Rawhide Minng Company
        which changed its name to Kinross Rawhide) and Kiewit Mining Group Inc.
        (as assigned to Kiewit Rawhide Corp. which changed its name to Kinross
        Fallon).                                                                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.5(2)  |  | Option and Royalty Agreement among Mirage Resource
        Corporation, Zinc Metal Corporation and New York and El Salvador Mining
        Co. Inc. dated June 25, 1993                                                                                                                                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.6(2)  |  | Promissory Notes dated April 6, 2000 between Kinross
        Fallon Inc., and Kinross Rawhide Mining Company and Dayton (US) Inc.                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|12.1    |  | Certification of Chief Executive Officer pursuant
      to s.302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|12.2    |  | Certification of Chief Financial Officer pursuant
      to s.302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

---

76

|Exhibit |  |                                                                                                   
|------- |  | --------------------------------------------------------------------------------------------------
|Number  |  | Exhibit Description                                                                               
|        |  |                                                                                                   
|13.1    |  | Certification of Chief Executive Officer pursuant
      to s.906 of the Sarbanes-Oxley Act of 2002
|        |  |                                                                                                   
|13.2    |  | Certification of Chief Financial Officer pursuant
      to s.906 of the Sarbanes-Oxley Act of 2002
|        |  |                                                                                                   
|14.1    |  | Consent of Staley & Okada & Partners                                                              

|(1) | Incorporated by reference to exhibits
        filed as part of the Companys Form 8-A Registration Statement filed
        with the Securities and Exchange Commission on May 6, 2002.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Incorporated by reference to exhibits filed as part of the
      20F of the Company dated August 26, 2002.                                                                            
|(3) | Incorporated by reference to exhibits filed as part of the
      20F of Dayton dated February 26, 2002                                                                                

---

77

SIGNATURE

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

PACIFIC RIM MINING CORP.

|Date: August 18, 2004 | //s// Thomas C. Shrake 
      Thomas C. Shrake
      Its: Chief Executive Officer
|--------------------- | -----------------------------------------------------------------------------------

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78

EXHIBITINDEX

|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |  | Exhibit Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|1.1(1)  |  | Articles of the Company approved January 8, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.1(2)  |  | Assignment Agreement dated for reference as of April
        6, 2000 between Kinross Rawhide Mining Company, Kinross Fallon Inc. and
        Dayton Mining Corporation                                                                                                                                                                                                                                                                                                                                                                             
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.2(2)  |  | Construction and Post-Construction Operating Agreement
        dated as of June 23, 1989 among Kennecott Explorations (Australia) Ltd.
        (as assigned to Kennecott Rawhide) and Kiewit Mining Group Inc. (as assigned
        (i) in part to Plexus, Inc. which in turn assigned its interest to Plexus
        Rawhide Mining Company which changed its name to Kinross Rawhide and (ii)
        in part to Kiewit Rawhide Corp. which changed its name to Kinross Fallon)
        as amended by the First Amendment to Operating Agreement;
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.3(2)  |  | Agreement and First Amendment to Construction and
        Post- Construction Operating Agreement dated as of December 15, 1992 made
        among Kennecott Rawhide, Kiewit Mining Group Inc., Plexus Inc. and Plexus
        Rawhide Mining Company                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.4(2)  |  | Participation Agreement dated as of June 23, 1989
        made between Plexus Inc. (as assigned to Plexus Rawhide Minng Company
        which changed its name to Kinross Rawhide) and Kiewit Mining Group Inc.
        (as assigned to Kiewit Rawhide Corp. which changed its name to Kinross
        Fallon).                                                                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.5(2)  |  | Option and Royalty Agreement among Mirage Resource
        Corporation, Zinc Metal Corporation and New York and El Salvador Mining
        Co. Inc. dated June 25, 1993                                                                                                                                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.6(2)  |  | Promissory Notes dated April 6, 2000 between Kinross
        Fallon Inc., and Kinross Rawhide Mining Company and Dayton (US) Inc.                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|12.1    |  | Certification of Chief Executive Officer pursuant
      to s.302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|12.2    |  | Certification of Chief Financial Officer pursuant
      to s.302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|13.1    |  | Certification of Chief Executive Officer pursuant
      to s.906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|13.2    |  | Certification of Chief Financial Officer pursuant
      to s.906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|14.1    |  | Consent of Staley & Okada & Partners                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

---

79

|(1) | Incorporated by reference to exhibits
        filed as part of the Companys Form 8-A Registration Statement filed
        with the Securities and Exchange Commission on May 6, 2002.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Incorporated by reference to exhibits filed as part of the
      Companys 20F dated August 26, 2002.                                                                                 
|(3) | Incorporated by reference to exhibits filed as part of the
      20F of Dayton dated February 26, 2002                                                                                

---