---





ANNUAL INFORMATION FORM







PACIFIC RIM MINING CORP.Suite
410  625 Howe Street Vancouver, British Columbia V6C 2T6Telephone: (604) 689-1976 Facsimile: (604) 689-1978 
  E-Mail: info@pacrim-mining.com 
  Website: www.pacrim-mining.com



For the year ended April 30, 2006

Dated July 25, 2006

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TABLE OF CONTENTS

|                                          |                                                                                  | Page
|----------------------------------------- | -------------------------------------------------------------------------------- | ----
|PRELIMINARY NOTES                         | 1                                                                               
|                                          | Currency                                                                         | 1   
|                                          | Cautionary Statement Regarding
      Forward-Looking Statements                  | 1   
|GLOSSARY OF TECHNICAL TERMS               | 3                                                                               
|                                          | Cautionary Notes                                                                 | 5   
|CORPORATE STRUCTURE                       | 6                                                                               
|                                          | Name, Address and Incorporation                                                  | 6   
|                                          | Intercorporate Relationships                                                     | 7   
|GENERAL
      DEVELOPMENT OF THE BUSINESS | 8                                                                               
|                                          | Three Year History and Significant Acquisitions                                  | 8   
|DESCRIPTION OF THE BUSINESS               | 11                                                                              
|                                          | General                                                                          | 11  
|                                          | Risk Factors                                                                     | 11  
|                                          | History of Losses                                                                | 11  
|                                          | Financing Risks                                                                  | 12  
|                                          | Exploration Risks                                                                | 12  
|                                          | Uncertainty of Mineralization
      Estimates                                    | 13  
|                                          | Title to Properties                                                              | 14  
|                                          | Metal Price Volatility                                                           | 14  
|                                          | Government Law, Environmental and Other
      Regulatory Requirements            | 15  
|                                          | Forward Selling Activities                                                       | 16  
|                                          | Dependence on Management                                                         | 16  
|                                          | Conflicts of Interest                                                            | 16  
|                                          | Competition for Other Assets                                                     | 17  
|                                          | Currency Fluctuations May
      Affect the Costs of Doing Business               | 17  
|                                          | Insurance Coverage May Be Inadequate                                             | 17  
|                                          | Changes to the General Mining
      Law of 1872                                  | 17  
|                                          | Reclamation Risks at Denton-Rawhide                                              | 18  
|                                          | Increased Costs and Compliance
      Risks as a Result of Being a Public Company | 18  
|MINERAL PROJECTS                          | 19                                                                              
|                                          | El Salvador Properties                                                           | 19  
|                                          | Nevada Properties                                                                | 36  
|                                          | Argentina Properties                                                             | 39  
|                                          | Chile Properties                                                                 | 40  
|DIVIDENDS                                 | 42                                                                              
|DESCRIPTION OF CAPITAL STRUCTURE          | 42                                                                              
|MARKET FOR
      SECURITIES               | 43                                                                              
|                                          | Trading Price and Volume                                                         | 43  
|DIRECTORS
      AND OFFICERS              | 44                                                                              
|                                          | Name, Occupation and Security Holding                                            | 44  
|                                          | Cease Trade Orders, Bankruptcies,
      Penalties or Sanctions                   | 46  
|                                          | Conflicts of Interest                                                            | 47  
|AUDIT COMMITTEE
      INFORMATION         | 47                                                                              
|                                          | Audit Committee Charter                                                          | 47  
|                                          | Composition of the Audit
      Committee                                         | 51  
|                                          | Reliance on Certain Exemptions                                                   | 52  
|                                          | Audit Committee Oversight                                                        | 53  

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- 2 -

|                                                           | Pre-Approval Policies and Procedures        | 53
|---------------------------------------------------------- | ------------------------------------------- | --
|                                                           | External Auditor Service Fees (By Category) | 53
|LEGAL PROCEEDINGS                                          | 54                                         
|INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS | 54                                         
|TRANSFER AGENTS AND REGISTRARS                             | 54                                         
|MATERIAL CONTRACTS                                         | 54                                         
|INTERESTS OF EXPERTS                                       | 54                                         
|                                                           | Names of Experts                            | 54
|                                                           | Interests of Experts                        | 55
|                                                           | ADDITIONAL INFORMATION                      | 55

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- 1 -

PRELIMINARY NOTES

In this Annual Information Form, Pacific Rim Mining Corp. is
referred to as the "Company". All information contained herein is as at
April 30, 2006, unless otherwise specified.

Currency

All sums of money which are referred to in this Annual
Information Form are expressed in lawful money of the United States, unless
otherwise specified.

Cautionary Statement Regarding Forward-Looking Statements

This Annual Information Form contains forward-looking
statements concerning the Company's plans for its properties, operations and
other matters. These statements relate to analyses and other information that
are based on forecasts of future results, estimates of amounts not yet
determinable and assumptions of management.

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

- risks related to 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 Company'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 Company's history of
  losses;

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- 2 -

- 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 Information Form under
"Description of the Business  Risk Factors". Should one or more of these risks
and uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described in forward looking
statements. Forward looking statements are made based on management's beliefs,
estimates and opinions on the date the statements are made and the Company
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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- 3 -

GLOSSARY OF TECHNICAL TERMS

In this Annual Information Form, the following technical terms
have the following meanings:

|"AMEX"             | The American Stock Exchange.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|"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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|"NI 43-101"        | National Instrument 43-101 - Standards of Disclosure
      for Mineral Projects. An instrument developed by the Canadian
      Securities Administrators (an umbrella group of Canada's provincial and
      territorial securities regulators) that governs public disclosure by
      mining and mineral exploration issuers. The instrument establishes certain
      standards for all public disclosure of scientific and technical
      information concerning mineral projects.                                                                                                                                                                                                                                                                                  
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|"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"               | Specific gravity, a measurement of density.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|"tpd"              | Tonnes per day. One tonne equals 1.10231 tons.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|"TSX"              | The Toronto Stock Exchange.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

Conversion Factors

To Convert From
    To
    Multiply ByFeet
    Metres
    0.305Metres
    Feet
    3.281Miles
    Kilometres ("km")
    1.609Kilometres
    Miles
    0.6214Acres
    Hectares ("ha")
    0.405


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Hectares
    Acres
    2.471Grams
    Ounces (Troy)
    0.03215Grams/Tonnes
    Ounces (Troy)/Short Ton
    0.02917Tonnes (metric)
    Pounds
    2,205Tonnes (metric)
    Short Tons
    1.1023


Mineral Elements

Ag   
 Silver                                       
 Au     Gold

NI 43-101 Definitions

|"Mineral resource"           | Refers to a concentration or occurrence of natural,
      solid, inorganic or fossilized organic material in or on the Earth's crust
      in such form and quantity and of such a grade or quality that it has
      reasonable prospects for economic extraction. The location, quantity,
      grade, geological characteristics and continuity of a mineral resource are
      known, estimated or interpreted from specific geological evidence and
      knowledge.                                                                                                                                                                                                                                                         
|---------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                             | The terms "mineral resource", "measured mineral
      resource", "indicated mineral resource" and "inferred mineral resource"
      used in this Annual Information Form are Canadian mining terms as defined
      in accordance with NI 43-101 under the guidelines set out in the CIM
      Standards.                                                                                                                                                                                                                                                                                                                                                                                                                         
|                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|"Measured mineral resource"  | Refers to that part of a mineral resource for which
      quantity grade or quality, densities, shape and physical characteristics
      are so well established that they can be estimated with confidence
      sufficient to allow the appropriate application of technical and economic
      parameters, to support production planning and evaluation of the economic
      viability of the deposit. The estimate is based on detailed and reliable
      exploration, sampling and testing information gathered through appropriate
      techniques from locations such as outcrops, trenches, pits, workings and
      drill holes that are spaced closely enough to confirm both geological and
      grade continuity.
|                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|"Indicated mineral resource" | Refers to that part of a mineral resource for which
      quantity, grade or quality, densities, shape and physical characteristics
      can be estimated with a level of confidence sufficient to allow the
      appropriate application of technical and economic parameters, to support
      mine planning and evaluation of the economic viability of the deposit. The
      estimate is based on detailed and reliable exploration and testing
      information gathered through appropriate techniques from locations such as
      outcrops, trenches, pits, workings and drill holes that are spaced closely
      enough for geological and grade continuity to be reasonably assumed.                               
|                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|"Inferred mineral resource"  | Refers to that part of a mineral resource for which
      quantity and grade or quality can be estimated on the basis of geological
      evidence and limited sampling and reasonably assumed, but not verified,
      geological and grade continuity. The estimate is based on limited
      information and sampling gathered through appropriate techniques from
      locations such as outcrops, trenches, pits, workings and drill holes.                                                                                                                                                                                                                                                                                 

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- 5 -

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

Cautionary Notes

The terms measured resource, indicated resource and
inferred resource used in this document are Canadian mining terms as defined
in NI 43-101 and CIM Standards on Mineral Resources and Mineral Reserves.
Mineral resources that are not mineral reserves have not been demonstrated to be
economically and legally extractable. Mineral resource estimates do not account
for mineability, selectivity, mining loss and dilution. It should not be assumed
that all or any part of a resource will ever be converted to a reserve. These
mineral resource estimates include inferred mineral resources that are normally
considered too speculative geologically to have economic considerations applied
to them that would enable them to be categorized as mineral reserves. There is
also no certainty that these inferred resources will be converted to measured
and

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indicated resource categories through further drilling, or into
mineral reserves once economic considerations are applied.

The term bankable in reference to a feasibility study is
defined as a comprehensive analysis of a projects economics and is used by the
banking industry for financing purposes.

Cautionary Note to U.S. Investors concerning estimates of
resources and reserves: We advise U.S. Investors that 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, the U.S. Securities and Exchange Commission does not
recognize them. As such, information contained in this Annual Information Form
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 U.S. Securities and
Exchange Commission. "Inferred mineral resources" 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 a "mineral
resource" will ever be upgraded to a higher category. U.S. investors are
cautioned not to assume that any part or all of an "inferred mineral resource"
exists, or is economically or legally mineable. U.S. investors are also
cautioned not to assume that any part or all of the mineral deposits in the
"measured mineral resource" or "indicated mineral resource" categories will ever
be converted into reserves.

"Mineral reserves" have been calculated in accordance with NI
43-101 as required by Canadian securities regulatory authorities. For United
States reporting purposes, SEC Industry Guide 7 (as interpreted by the staff of
the U.S. Securities and Exchange Commission) applies different standards for the
disclosure of reserves. U.S. investors are cautioned that the reserves presented
in this Annual Information Form, while in compliance with Canadian standards and
regulations, do not meet the following requirements of reserve disclosure under
U.S. Securities and Exchange Commission guidelines: the Minita reserves are
based on a pre-feasibility level study (as allowed under Canadian regulations)
rather than a "final" or "bankable" level feasibility study as required by the
U.S. Securities and Exchange Commission; and, the Minita reserves are calculated
using gold and silver prices of $350 and $5.00, respectively (the industry
standard current at the time of the Minita reserve calculation), rather than the
historic three year average prices required by the U.S. Securities and Exchange
Commission (which as at January 21, 2005 would have been a $360.94 gold price
and $5.38 silver price).

CORPORATE STRUCTURE

Name, Address and Incorporation

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") on April 11, 2002 under the Company Act(British
Columbia).

Effective March 29, 2004, the British Columbia legislature
enacted the Business Corporations Act (British Columbia) (the "New
Act") and repealed the former Company Act(British Columbia) which
previously governed the Company. The New Act removed many of the restrictions
contained in the former act, including restrictions on the residency of
directors, the place of annual general meetings and limits on authorized share
capital. The New Act also uses new forms and terminology. Under the New Act,
every

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- 7 -

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

The Company is domiciled in British Columbia, Canada and is a
company organized under the New Act. The Company's principal place of business
is located at Suite 410, 625 Howe Street, Vancouver, British Columbia, V6C 2T6
and its registered and records office is located on the 10th Floor,
595 Howe Street, Vancouver, British Columbia, V6C 2T5. The Company through its
subsidiaries has administration offices in Argentina, Nevada and El Salvador.

Intercorporate Relationships

The Company has the following material subsidiary companies:

Name
    Jurisdiction of incorporation
      or organization
    Percent of voting shares owned by
      the CompanyPacific Rim Exploration Inc.
    Nevada, USA
    100% directly ownedDayton Mining (U.S.) Inc. (1)
    Nevada, USA
    100% directly ownedPacific Rim Cayman ("Pac Rim Cayman")
    Cayman Islands
    100% directly ownedPacific Rim El Salvador S.A. de C.V. (2)
    El Salvador
    100% indirectly owned through Pac Rim CaymanDorado Exploraciones SA de CV (3)
    El Salvador
    100% indirectly owned through Pac Rim CaymanPacific Rim Caribe III (4)
    Cayman Islands
    100% indirectly owned through Pac Rim CaymanCompañía Minera Pacific Rim Chile Limitada
    Chile
    99.99% indirectly owned through Pacific Rim
      Caribe III and 0.01% indirectly owned through Pacific Rim Mining Corp.International Pacific Rim, S.A.
    Argentina
    100% indirectly owned through Pacific Rim
      Caribe III


| | (1) | This subsidiary holds the Company's 49% interest in the
      Denton-Rawhide joint venture.
| | --- | -------------------------------------------------------------------------------------------

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| | (2) | This subsidiary holds the Company's interest in the El
      Dorado exploration concession that is under application for conversion to
      an exploitation license. 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                       
| | (3) | This subsidiary holds the Companys interests in the El
      Dorado exploration concessions, the Santa Rita project and the Zamora
      project, all in El Salvador.
| |     |                                                                                                                                                                       
| | (4) | This subsidiary indirectly holds the Companys interests
      in the Argentinian and Chilean exploration
projects.                                                   

Unless the context otherwise indicates, reference to the term
the "Company" in this Annual Information Form includes Pacific Rim Mining
Corp. and its subsidiaries.

GENERAL DEVELOPMENT OF THE BUSINESS

Three Year History and Significant Acquisitions

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

The Companys current principal activities are exploration
activities mainly focused in El Salvador. The Company continues to search for
exploration projects to acquire in the Americas that warrant drilling.

The Companys principal exploration property currently is the
El Dorado gold property (the "El Dorado Property") located in El
Salvador. Predecessor Dayton originally acquired two exploration licenses
comprising the El Dorado Property through the acquisition of Mirage Resource
Company, in April 2000. In September 2005, the Company was granted three new
exploration licenses that expanded the El Dorado Property to 144 square
kilometres, replacing the original property area of 75 square kilometres. In
accordance with El Salvadoran law, on December 22, 2004 the Company presented a
request for the conversion of a portion of the El Dorado exploration licenses to
an exploitation concession, which granting would provide the Company the
necessary permit to commence mining activities. The conversion process is
currently pending ministerial acceptance of the Company's Environmental Impact
Study and issuance of the environmental permits. El Salvadoran administrative
rules and procedures give the Company exclusive rights to the exploitation
concession area while the environmental permitting process is underway.

The Companys exploration emphasis during fiscal 2006 was to
expand the El Dorado project through the delineation of the South Minita gold
zone which was discovered during the previous fiscal year. The 18-month long
South Minita delineation drill program culminated in June 2006, subsequent to
the Companys 2006 fiscal year end, with the announcement of an updated resource
estimate for the El Dorado gold project. The impetus for the updated resource
estimate was primarily to quantify the gold and silver ounces at the South
Minita deposit. Highlights of the new resource estimate include:

- Total measured and indicated resources (including proven and probable
  reserves) at the El Dorado project of 1,222,000 gold equivalent ounces, plus a
  further 203,000 gold equivalent inferred resource ounces.
- Indicated resources at the South Minita deposit of 350,000 gold equivalent
  ounces plus a further 77,000 gold equivalent inferred resource ounces.

The economic impact of the South Minita deposit on the El
Dorado mine proposed in the January 2005 pre-feasibility study will be
determined in a full feasibility study expected to be completed during the
coming fiscal year. The Company believes that the increased El Dorado gold and
silver resources are of sufficient

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- 9 -

quantity to support an expansion of the operation proposed in
the January 2005 pre-feasibility study and that the economics of the El Dorado
mine proposed therein may be positively impacted.

In addition to drill defining the South Minita gold zone, the
Company conducted extensive surface exploration work at El Dorado during fiscal
2006, which resulted in the identification of a number of new high-priority
drill targets in the southern part of the El Dorado district. These targets were
discovered after the Companys geological team made several key breakthroughs
regarding the controls on, and most importantly timing of, the bonanza gold
mineralization in the El Dorado district.

In each of the 12 month periods ended April 30, 2004, April 30,
2005, and April 30, 2006, the Company spent approximately $4.8 million, $6.0
million and $5.9 million, respectively, on work programs to advance the El
Dorado Property.

In July 2005, the Company staked the Santa Rita gold property
  in El Salvador. The Santa Rita property consists of one exploration license
  totaling 48.6 square kilometres, contiguous with the neighbouring El Dorado
  Property and comprises an epithermal system in which very high grade gold is
  locally exposed in surface outcroppings of vein material. Geological indicators
  at Santa Rita suggest that the mineralization exposed in veins on surface represents
  high levels of the epithermal system and that the majority of the typically
  gold-enriched boiling zone may be preserved below ground. The Company submitted
  an Environmental Impact Statement for the Santa Rita property to the El Salvadoran
  ministry of the environment ("MARN") and in June 2006 received a permit
  from the El Salvadoran regulatory agencies to conduct a drill program on the
  property. The duration and extent of the drill program will be dictated by results.
  The Companys exploration activities outside of the El Dorado project and
  the Santa Rita property during the past fiscal year consisted of grassroots
  exploration at the Carrera and Colina gold projects in Chile and, during fiscal
  2006, acquiring the Zamora gold project in El Salvador (as described below),
  a grassroots project on which the Company conducted preliminary exploration
  mapping and sampling.

In February 2006 the Company signed an agreement to acquire a
100% interest in the Zamora gold project in El Salvador from a consortium of
private companies. Under the terms of the agreement the Company maintains an
option to purchase the Zamora exploration concession by making advance royalty
payments as follows: 50,000 shares upon regulatory approvals of the arrangement
(issued March 10, 2006): 50,000, 70,000, 100,000 and 150,000 shares on the first
through fourth anniversaries of the agreement, respectively and 200,000 shares
on the fifth and subsequent anniversaries of the agreement until the earlier of
termination of the option, commencement of production or expiry of the
exploration concessions. Title to 100% of the project will be transferred to the
Company at such time as a positive production decision is made by the Company.
Upon achievement of commercial production, the vendor will receive a 3% net
smelter royalty to a maximum purchase price of $10,000,000 (inclusive of the
value of the advance royalty payments made in shares).

Equipment used for exploration drilling is rented or contracted
as needed.

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

The Company has financed its exploration programs during the
past three years from cash flows derived from the sale of marketable securities
and non-core assets and net cash proceeds from its 49% interest share of gold

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- 10 -

and silver production at Denton-Rawhide. In each of the 12
month periods ended April 30, 2004, April 30, 2005 and April 30, 2006, revenues
from bullion (gold and silver) sales totaled $12.1 million, $11.9 million and
$8.0 million, respectively. The average price of gold received, per ounce, was
$385 in the 12 month period ended April 30, 2004, $412 in the 12 month period
ended April 30, 2005 and $497 in the 12 month period ended April 30, 2006.

In June 2005, the Company entered into a letter of intent to
sell 100% of the shares in its subsidiary companies that owned the Andacollo
gold mine located in central Chile, to Trend Mining Company (Trend) for
total consideration of $5.4 million. Between June and August 2005 payments
totaling $0.9 million were made to the Company by Trend to maintain its
exclusive right to conduct due diligence On September 21, 2005, a final
agreement was entered into and the sale of the Companys subsidiaries was
closed. The September 20, 2005 share purchase agreement between the Company and
Trend provides for the sale of 100% of the shares of DMC Cayman Inc.
("DMC"), a Cayman Island company, for total consideration of $5.4
million. DMC held 100% of the shares of Andacollo Gold Inc. and La Serena Inc.,
Cayman Island companies, which collectively held 100% of the issued shares of
Compania Minera Dayton, a Chilean sociedad contractual minera, which operated
the Andacollo Mine in Chile. Upon execution of the final Share Purchase
Agreement, the Company received a $2.1 million payment from the purchaser. The
agreement provides for further payments totaling $2.4 million to be made to the
Company ($1 million and $1.4 million by September 2006 and 2007 respectively)
that are secured by a promissory note and relieves the Company of any further
reclamation or environmental responsibilities at Andacollo. As security for the
payment of the balance of the purchase price, Trend provided a promissory note
in favour of the Company for $2.4 million, without interest, and a security
agreement, governed by the laws of the Cayman Islands, creating an equitable
charge in favour of the Company over the purchased assets. The share purchase
agreement contains provisions that the rights and obligations of Trend may be
transferred to a person or persons satisfactory to the Company in order for
Trend to finance the project. On December 2, 2005, Trend assigned its rights and
obligations under this agreement to Oro Chile LLC, a Colorado limited liability
company and various individual parties referred to as "the Russells". The
Company has agreed to release Trend from its obligations under the original
promissory note upon receipt of a promissory note from the Trend assignees.

The Andacollo mine, which was shut down in December 2000 by the
Companys predecessor company and had been on care and maintenance for the past
five years, was a non-core asset that warranted monetization. At the time of its
sale, CMD was in the process of reclaiming the mine site and disposing of the
mine assets.

Other than the ongoing drill programs in El Salvador, there are
no major capital expenditures or divestitures in progress. The Company
anticipates spending $8 million or more during the next year on exploration in
El Salvador, primarily to conduct drill programs at El Dorado and Santa Rita and
to undertake resource estimates and updated economic studies. Additional
expenditures may be incurred in the coming year, if warranted, on
pre-development and development activities at the El Dorado project. Any
significant expenditures above and beyond the Companys planned exploration
programs will require that the Company raise additional funds.

The Companys business model has been to utilize cash flow from
gold production at its 49%-owned Denton-Rawhide Mine in Nevada plus any cash it
receives from the sale of non-core assets to fund its exploration activities at
the El Dorado and other projects, including mapping, sampling, surveying,
drilling, resource definition and economical analysis, community relations
initiatives and project generation. In light of the advanced stage of
exploration at the El Dorado project and the development activities the Company
foresees undertaking there in the near future, as well as the numerous drill
targets generated recently at the El Dorado and Santa Rita projects, the Company
elected to conduct an equity financing during fiscal 2006 in order to augment
its funds available for exploration and development (see below). The Companys
available sources

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of cash and anticipated cash flow from production and the sale
of non-core assets are not intended, or sufficient, to fully fund underground
development or mine construction at El Dorado.

On March 1, 2006 the Company closed a short form prospectus
equity financing in which total gross proceeds of CDN $20,076,600 were raised
through the sale of 23,900,000 common shares of the Company at a price of
CDN$0.84 per share. The financing was undertaken through a syndicate of
underwriters led by BMO Nesbitt Burns Inc. and including Canaccord Capital
Corporation, Haywood Securities Inc. and Salman Partners Inc. (collectively, the
"Underwriters") In consideration for their services, the Underwriters received a
6% cash commission and 1,195,000 broker warrants entitling the Underwriters to
purchase up to 1,195,000 common shares of the Company at a price of CDN$0.84 per
common share on or before March 1, 2007.

DESCRIPTION OF THE BUSINESS

General

The Company is a British Columbia based mineral resource
corporation engaged, through its subsidiaries, in the acquisition, exploration
and, if warranted, development of precious metals properties, primarily gold and
silver. See "General Development of the Business  Three Year History and
Significant Acquisitions" and "Mineral Projects".

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:

History of Losses

The Company has a history of losses and may continue to incur
losses for the foreseeable future. The Company incurred losses during each of
the following periods:

- $0.6 million for the year ended April 30, 2006
- $4.6 million for the year ended April 30, 2005
- $6. 9 million for the year ended April 30, 2004

As of April 30, 2006, the Company had an accumulated deficit of
$53.3 million.

The Company's sole source of operating revenue is derived from
its interest in Denton-Rawhide, which provided revenues from bullion (gold and
silver) sales of $12.1 million, $11.9 million and $8.0 million provided in each
of the fiscal years ended April 30, 2004, April 30, 2005 and April 30, 2006
respectively. Production at Denton-Rawhide decreased during the past fiscal year
and is expected to continue to decline as the operation progresses through the
residual leach phase. Because of uncertainties as to the total amount of
recoverable gold on the Denton-Rawhide heap leach pile, the ultimate vs.
projected recovery rate and other factors beyond the Company's control, the
Company is unable to reliably estimate its share of gold production from
Denton-Rawhide for fiscal 2006. There can be no assurance that the Company will
realize revenue growth or achieve profitability.

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- 12 -

Financing Risks

The Company anticipates that expected cash generated from
leaching activities at Denton-Rawhide, together with funds derived from the sale
of non-core assets (see "General Development of the Business  Three Year
History and Significant Acquisitions" and "Mineral Projects  Chile Properties 
Andacollo Mine, Chile") and the sale of shares in conjunction with the Companys
March 2006 financing (see "General Development of the Business  Three Year
History and Significant Acquisitions"), will be sufficient to fund the Company's
cash requirements and current exploration activities through fiscal 2007 but may
not be sufficient to fund significant development activities such as the
construction of an underground access/haulage ramp at the El Dorado Property. In
each of the 12 month periods ended April 30, 2004, April 30, 2005 and April 30,
2006, the Company spent approximately $4.8 million, $6.0 million and $5.9
million, respectively, on work programs to advance the El Dorado Property in El
Salvador. There can be no assurance that the Company's exploration programs will
result in locating additional 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.

The Company has working capital of $16.3 million as of fiscal
year end April 30, 2006. There is no assurance that operating cash flow from
Denton-Rawhide will continue to be sufficient (see "Metal Price Volatility") or
that additional funding will be available to it to further planned 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.

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 "Mineral Projects", except for the
Denton-Rawhide mine, which has ceased production and is in a residual leaching
phase, and the El Dorado Property, which contains proven and probable reserves,
none of the Company's properties have a known body of ore and any proposed
exploration programs are an exploratory search for ore.

The Company's principal exploration property is 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
"Mineral Projects  El Salvador Properties  El Salvador Mining Regime." The
Company may acquire interests in properties in other North, Central and South
American countries that may place substantial restrictions on the Companys
exploratory and development activities. 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

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- 13 -

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

Uncertainty of Mineralization Estimates

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

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- 14 -

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, the Company has
investigated and believes it has good title to its properties. However, the
Company 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 in the
process of converting a portion of its El Dorado Property exploration licenses
to an exploitation concession and has made the necessary applications and
carried out the studies requested by the authorities, including an environmental
impact study. The approval of the El Dorado environmental impact study by the
environmental ministry is a requirement for approval of the exploitation
concession by the economic ministry. The Company cannot say with certainty when
or if the authorities in El Salvador will approve the El Dorado environmental
impact study or grant the Company an exploitation concession. El Salvadoran
administrative rules and procedures assure the Company exclusive rights to the
proposed exploitation concession area while the conversion process is underway.

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 April 30, 2006, the annual high and low prices for gold
per ounce for the 10:30 a.m. fixings on the London Bullion Market were $638.25
and $416.10, respectively. On July 25, 2006, the 10:30 a.m. fixing on the London
Bullion Market was $618.75and last spot market price of gold on the New
York Commodities Exchange was $627.50per 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;

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- 15 -

- 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 13% of the Company's sales revenues were derived from silver
during the 2006 fiscal year. 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.

Government Law, Environmental and Other Regulatory
Requirements

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

The management of the Company 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. Mine
closure and reclamation cost requirements could change from current estimates.
The Company strives to ensure, and to the best of the Company's knowledge, it is
operating in compliance with all applicable environmental and closing
regulations.

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- 16 -

Forward Selling 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 "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 between the latter part of 1996 and
August 1999 to the lowest price in twenty-one years, and until the spring of
2002 essentially remained near or below $300 per ounce. Since 2002, the gold
price has steadily increased, albeit with intermittent volatility and price
corrections, and is now trading at 25 year highs. Monthly prices over the past
financial year for gold have averaged from $416 to $638 per ounce. Silver prices
also have been volatile.

The Company may utilize forward selling to protect the selling
price of a portion of its gold production from the Denton-Rawhide mine. Silver
production is sold in the spot market. The market risk to the Companys cash
flow from forward selling activities 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 forward
sales 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.

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 "Directors and Officers" 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.

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 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 "Directors
and Officers".

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- 17 -

Competition for Other Assets

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

Currency Fluctuations May Affect the Costs of Doing
Business

The Company's activities and offices are currently located in
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.
In addition, the U.S. dollar is subject to fluctuation in value vis a vis the
Canadian dollar. The Company does not utilize hedging programs to any degree to
mitigate the effect of currency movements.

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

While where applicable the Company has purchased property,
business interruption (Denton-Rawhide only) 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.

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

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- 18 -

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 operations at Denton-Rawhide.

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 Reclamation 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 "Mineral Projects  Nevada Properties  Denton-Rawhide Mine, Nevada"
for additional information.

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

Legal, accounting and other expenses associated with public
company reporting requirements have increased significantly in the past few
years. The Company anticipates that costs may continue to increase with recently
adopted corporate governance requirements, including requirements under the
Sarbanes-Oxley Act of 2002, as well as new rules implemented by the
United States Securities and Exchange Commission, the AMEX and the TSX. The
Company expects these rules and regulations, in particular Section 404 of the
Sarbanes-Oxley Act of 2002, to significantly increase its legal
and financial compliance costs and to make some activities more time-consuming
and costly. Like many smaller public companies, the Company faces a significant
impact from required compliance with Section 404 of the Sarbanes-Oxley Act of
2002. Section 404 requires management of public companies to evaluate the
effectiveness of internal control over financial reporting and the independent
auditors to attest to the effectiveness of such internal controls and the
evaluation performed by management. The United States Securities and Exchange
Commission has adopted rules implementing Section 404 for public companies as
well as disclosure requirements. The Public Company Accounting Oversight Board,
or PCAOB, has adopted documentation and attestation standards that the
independent auditors must follow in conducting the attestation under Section
404. The Company is currently preparing for compliance with Section 404;
however, there can be no assurance that the Company will be able to effectively
meet all of the requirements of Section 404 in the required timeframe. Any
failure to effectively implement new or improved internal controls, or to
resolve difficulties encountered in their implementation, could harm the
Companys operating results, cause the Company to fail to meet reporting
obligations or result in

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- 19 -

management being required to give a qualified assessment of the
Companys internal controls over financial reporting or the Companys
independent auditors providing an adverse opinion regarding managements
assessment. Any such result could cause investors to lose confidence in the
Companys reported financial information, which could have a material adverse
effect on the Companys stock price.

The Company also expects these new rules and regulations may
make it more difficult and more expensive for it to obtain director and officer
liability insurance, and it may be required to accept reduced policy limits and
coverage or incur substantially higher costs to obtain the same or similar
coverage. As a result, it may be more difficult for the Company to attract and
retain qualified individuals to serve on its board of directors or as executive
officers.

If the Company fails to maintain the adequacy of its internal
controls, the Company's ability to provide accurate financial statements and
comply with the requirements of the Sarbanes-Oxley Act of 2002 could be
impaired, which could cause the Company's stock price to decrease.

MINERAL PROJECTS

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

The Companys principal activities are exploration activities
currently chiefly focused in El Salvador. The Company continues to search for
exploration projects to acquire in the Americas that warrant drilling.

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

El Salvador Properties

El Salvador Mining Regime

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

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

In mid-2001, the government of El Salvador enacted several
modifications to the Salvadoran Mining Law. The most significant of these
changes included an extension from five years to eight years for the time before
which the holder of an exploration license must convert the license into an
exploitation concession. This revision provided the Company an additional three
years in which to advance the El Dorado project to the

---

- 20 -

development stage and then apply to the government for an
exploitation concession. The application to convert an exploration license to a
30-year (or longer) exploitation concession must be accompanied by, among other
things, a feasibility study, a development work program and an approved
environmental impact study. Under the old laws the maximum size for exploitation
concession was ten square kilometres. This arbitrary size restriction has been
removed. Finally and importantly, the royalty levied on mineral production was
reduced to 2% from 4% of net smelter returns.

The Company is continuing exploration and has submitted the
technical documentation required to convert a portion of its exploration
licenses to an exploitation concession. In accordance with the environmental
law, there is a permitting procedure established that must be followed in the
development of the El Dorado Property. The Company hired an independent
contractor to prepare the environmental impact study for the project and work
began with field investigations and public meetings in February 2004. In April
2004, the Company formally entered the environmental impact study process with
the presentation of the necessary forms detailing the development and operation
of the proposed project. In July 2004, the Company received the Terms of
Reference for the environmental impact study from the Environmental and Natural
Resources Ministry ("MARN"). The completed study was presented to MARN in
September 2004 for approval. Earlier in 2004, the Company hired an independent
consulting company to prepare a pre-feasibility study to form the basis for the
feasibility study required for the conversion of the exploration licenses to an
exploitation concession which was completed January 2005; however, the Company
commissioned the translation of the October draft of the prefeasibility study in
order to have the documents required for the formal presentation of the
conversion request in December 2004. An original copy of the January 2005
pre-feasibility study (in english) was subsequently presented by the Company and
accepted by the El Salvadoran Division of Mines. The Company has undertaken the
steps necessary to have and has presented in a timely manner all of the required
documents for the conversion of a portion of the El Dorado exploration licenses
with the exception of the approved environmental impact study. In September
2005, the Company received formal notification from MARN that its environmental
impact study had passed the technical review process and should be submitted for
a public comment period. The environmental impact study was posted for public
comment according to El Salvadoran laws, which period ended in October 2005. In
March 2006, the Company received from MARN a list of issues raised during the
public comment period and was asked to amend the Environmental Impact Study
(EIS) to address these issues. The Company is currently preparing the
EIS for resubmission to MARN, following which it will await further instructions
or final acceptance of the EIS and granting of an environmental permit.

The Company has received assurances from the El Salvadoran
Division of Mines and Hydrocarbons (Ministry of Economy) that the Companys
rights for the conversion of the exploration licenses to an exploitation
concession will not be affected in waiting for approval of the EIS.

El Dorado Property, El Salvador

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

The following (except under the headings "Recent Exploration
and Drilling", June 2006 Updated Resource Estimate, "Environmental Impact
Study" and "Summary" below or as otherwise described) represents information
summarized or extracted from a pre-feasibility study (the "El Dorado
Report") commissioned by the Company dated January 21, 2005 entitled
"Pre-Feasibility Study, El Dorado Project, El Salvador"

---

- 21 -

prepared by SRK Consulting (US) Inc. of Colorado, an
independent geological and engineering consulting firm, pursuant to the
provisions of National Instrument 43-101 ("NI 43-101").

The information under "Property Description and Location"
summarized from the El Dorado Report has been updated by the Company to include
developments that have occurred since January 21, 2005, being the date of the El
Dorado Report.

William F. Tanaka is a Qualified Person and primary author of
the El Dorado Report within the meaning of NI 43-101. Mr. Tanaka is independent
of the Company applying all of the tests in section 1.4 of NI 43-101. Mr. Tanaka
is a member of the Society of Mining Engineers (SME) and the Australian
Institute of Mining and Metallurgy (mAUSIMM).

The information presented under the heading June 2006 Updated
Resource Estimate summarizes information prepared under the supervision of Mr.
Steve Ristorcelli, P.Geo., of Mine Development Associates. This information is
included in a report entitled Technical Report on the El Dorado Project Gold
and Silver Resources dated July 31, 2006 and co-authored by Mr. Ristorcelli and
Mr. Peter Ronning, P.Eng. each of whom are independent Qualified Persons as
defined in NI 43-101.

Predecessor Dayton upon its acquisition of Mirage Resource
Corp. in April 2000 acquired the El Dorado Property. Mirage initially acquired
the El Dorado Property by option agreement dated June 23, 1993 from Zinc Metal
Company ("ZMC") of Toronto, and its wholly owned subsidiary, New York and
El Salvador Mining Company. The option was exercised on August 25, 1994 in
accordance with its terms by payment of $175,000 to ZMC and by the parties
having incurred aggregate expenditures in excess of $800,000. Pursuant to the
terms of the option agreement, the El Dorado Property is subject to annual
advance minimum royalty payments, which 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 $4,000,000 ($1,000,000 for the first one-half
and $3,000,000 for the second one half) provided that at least one-half of the
royalty is acquired within six months of the commencement of commercial
production. In addition, the government of El Salvador is entitled to a 2% net
smelter return royalty.

By agreement dated March 29, 2006, the Company superseded an
  option agreement dated November 14, 2003 to acquire a parcel of land suitable
  for mineral exploitation activities within the El Dorado exploration licence
  area. Under the terms of the new agreement, the Company has prepaid an annual
  rental fee in the amount of $29,000 with the option to purchase the parcel for
  a payment of $971,000 at any time up to April 1, 2007.

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 (under U.S. Securities and Exchange
Commission Guide 7) and all work programs are exploratory searches for ore grade
mineralization.

Property Description and Location

The El Dorado Property is comprised of three exploration
licenses totaling 14,407 hectares with nominal expiry dates of September 28,
2013 (one license) and September 29, 2013 (two licenses), and the 1,275 hectare
area of the pending El Dorado Exploitation Concession, which underlying
exploration license has a nominal expiry date of January 1, 2005. The Company
continues to hold the 1,275 hectare pending Exploitation Concession area beyond
its expiry date as it has declared its intention to convert the land holding to
an Exploitation Concession, which will have a term of 30 years and may be
extended if warranted. See "El

---

- 22 -

Salvador Mining Regime". The cost to hold the licenses is a
rental of $300 per square kilometre, amounting to $47,046 per year. The Company
is up to date with the regulatory obligations required to maintain the licenses
in good standing and is awaiting final approval of the conversion of the
licenses to concessions.

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.

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

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

Accessibility, Climate, Local Resources, Infrastructure and
Physiography

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

The area has a large rural population and Sensuntepeque is a
moderate sized town of approximately 20,000 people. Unskilled labour and persons
with general business and technical skills should be readily available. El
Salvador does not have an indigenous mining industry, so personnel with
exploration and mining skills need to be trained or come from elsewhere.

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

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

History

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

---

- 23 -

Extensive exploration since 1993 has included surface
geological mapping, rock sampling and prospecting, campaigns of hand and
bulldozer trenching, core drilling, and minor reverse circulation drilling.

Geological Setting

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

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

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

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

Exploration

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

Geological mapping to varying levels of detail, done by the
Company and its predecessors, covers approximately 2,000 hectares of the 14,400
hectare property. Digital maps have been generated at scales ranging from
1:1,000 to 1:10,000. In addition, the project archives contain numerous
individual maps of trenches, veins and target areas at various scales.

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. The samples are variously described as channel
samples, chip channel samples, selected chips, random chips and grab samples.

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.

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- 24 -

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
kilometres. Systems of related veins are up to three kilometres long. In those
veins that have been mined or extensively drilled, mineralization has been
demonstrated to exist over vertical intervals of up to 300 metres. (In
considering vein lengths and vertical dimensions it is important to note that at
a detailed level mineralization in this type of system is highly variable).

Drilling

Several campaigns of drilling have been mounted on the El
Dorado Property throughout the last decade. As of July 25, 2006, the Companys
drill hole database contained records of 473 drill holes comprising 156,102.52
metres of drilling. Since becoming operator in mid-2002 up to the completion of
hole P06-473 the Company has drilled 271 of these holes comprising 108035.95
metres.

At present core drilling is done using HQ equipment that
produces 63.5 millimetre diameter core. If it is necessary to reduce to a
smaller diameter to overcome drilling difficulties, NQ equipment is used,
producing 47.625 millimetre diameter core. 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.

The foregoing disclosure under the heading "Drilling" has been
prepared by or under the supervision of William Gehlen, Certified Professional
Geologist, a Qualified Person for the purposes of NI 43-101. Mr. Gehlen is the
Vice-President of Exploration of the Company.

Sampling and Analysis

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

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

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

---

- 25 -

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

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

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

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

Security of Samples

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

Metallurgy

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

Recent Exploration and Drilling

From May 1, 2005 to date the Company released the results from
78 drill holes at the El Dorado project. This drilling comprises holes drilled
as part of the South Minita deposit delineation drilling program that was
initiated in November 2004. Drill results issued from May 1, 2005 to date are
tabulated below:

Hole No.
    Vein Tested
    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)P05-365
    South Minita
    300045 / 534503
    260 / 59
    No significant resultsP05-366
    South Minita
    300079 / 534334
    275 / 64
    286.35
    286.70
    0.35
    0.35
    8.91
    99P05-367
    South Minita
    300241 / 534387
    252 / 67
    289.35
    289.65
    0.30
    0.30
    17.88
    98356.20
    357.20
    1.00
    0.70
    16.76
    82P05-368
    South Minita
    300302 / 534426
    270 / 63
    264.35
    264.65
    0.30
    0.25
    9.37
    102P05-369
    South Minita
    300377 / 534328
    270 / 80
    216.00 247.45
    216.65 247.75
    0.65 0.30
    0.50 0.30
    9.30 7.98
    37 55


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- 26 -

Hole No.
    Vein Tested
    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)P05-370
    South Minita
    300449 / 534369
    265 / 67
    260.65 286.30 327.40 447.05
    261.15 286.55 329.60 447.80
    0.50 0.25 2.20 0.75
    0.50 0.20 2.20 0.75
    8.89 21.61 21.92 14.54
    75 137 167 227P05-371
    South Minita
    299904 / 534385
    258 / 63
    No sampling conductedP05-372
    South Minita
    300512 / 534395
    286 / 64
    219.20
    219.40
    0.20
    0.20
    31.20
    229P05-373
    South Minita
    300495 / 534440
    270 / 59
    143.75
    144.05
    0.30
    0.30
    13.55
    78338.95
    339.60
    0.65
    0.60
    21.16
    178P05-374B
    South Minita
    300641 / 534287
    275 / 78
    No significant resultsP05-375
    South Minita
    300377 / 534328
    279 / 60
    330.20
    333.40
    3.20
    2.75
    13.58335.70
    335.85
    0.15
    0.10
    23.78P05-376
    South Minita
    300640 / 534288
    261 / 51
    294.30
    294.70
    0.40
    0.40
    6.13P05-377
    South Minita
    300355 / 534279
    252 / 76
    No significant resultsP05-378
    South Minita
    300304 / 534298
    265 / 65
    276.32 318.00
    276.61 318.35
    0.29 0.35
    0.25 0.35
    32.69 55.10
    200 625P05-379
    South Minita
    300493 / 534296
    263 / 62
    266.80 280.55 281.90 284.55
    267.50 280.95 283.00 284.70
    0.70 0.40 1.10 0.15
    0.50 0.35 1.00 0.15
    10.39 15.01 10.97 30.60
    112 87 119P05-380
    South Minita
    300556 / 534309
    270 / 67
    324.30 347.20 385.75
    324.80 347.50 390.00
    0.50 0.30 4.25
    0.50 0.30 4.25
    26.60 10.35 5.76
    141 54 47P05-381
    South Minita
    300255 / 534243
    280 / 65
    No significant resultsP05-382
    South Minita
    300300 / 534384
    264 / 62 including
    306.30 337.45 423.10 427.85
    306.50 337.90 429.80 428.60
    0.20 0.45 6.70 0.75
    0.25 0.40 6.00 0.68
    21.07 31.22 4.10 10.49P05-383
    South Minita
    300240 / 534384
    264 / 62
    374.10 400.30
    374.85 407.30
    0.75 7.00
    0.75 5.50
    29.23 7.00P05-384
    South Minita
    300850 / 534391
    275 / 65
    No significant resultsP05-385
    South Minita
    300475 / 534446
    264 / 54
    374.60 438.35 448.55
    375.75 439.15 454.00
    1.15 0.80 5.45
    1.15 0.70 4.90
    6.14 21.79 3.17
    80 6 21P05-386
    South Minita
    300240 / 534351
    265 / 70 includes
    275.65 436.60 441.00
    278.15 442.10 442.10
    2.50 5.50 1.10
    2.35 4.00 0.80
    6.87 5.55 10.34
    162 23 67P05-387
    South Minita
    300250 / 534255
    393 / 55
    261.40 283.55
    262.30 286.95
    0.90 3.40
    0.75 3.20
    39.98 5.73
    325 30P05-388
    South Minita
    300924 / 534351
    260 / 54 includes
    204.55 205.40 379.50
    206.30 206.30 382.30
    1.75 0.90 2.80
    1.70 0.87 2.30
    14.14 20.07 9.51
    90 112 92P05-389
    South Minita
    300215 / 534283
    281 / 70
    No significant resultsP05-390
    South Minita
    300400 / 534135
    270 / 67
    177.85
    179.80
    1.95
    1.95
    4.54
    20P05-391
    South Minita
    300800 / 534458
    279 / 62 includes
    178.3 178.3
    180.65 179.40
    2.35 1.10
    1.35 1.00
    8.71 14.21
    81 149P05-392
    South Minita
    300275 / 534326
    267 / 60
    278.85
    279.60
    0.75
    0.75
    69.58
    693


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- 27 -

Hole No.
    Vein Tested
    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)P05-393
    South Minita
    300240 /534388
    244 / 76
    No significant resultsP05-394
    South Minita
    300827 / 534287
    260 / 58
    268.45
    269.8
    1.35
    1.10
    9.00
    53P05-395
    South Minita
    300824 / 534288
    282 / 61
    319.55
    321.7
    2.15
    1.15
    21.00
    206P05-396
    South Minita
    300378 / 534273
    270 / 57
    No significant resultsP05-397
    South Minita
    300357 / 534273
    270 / 57
    260.55
    261.95
    1.40
    1.30
    15.996P05-398
    South Minita
    300923 / 534353
    273 / 62
    No significant resultsP05-399
    South Minita
    300175 / 534434
    268 / 65
    No significant resultsP05-400
    South Minita
    300300 / 534420
    254 / 64
    435.45
    437.75
    2.30
    2.00
    20.425P05-401
    South Minita
    300800 / 534458
    270 / 62 includes includes
    83.20 174.10 174.10 176.3 176 3
      457.45
    83.45 175.1 174.7 177.15 176.55
      458.3
    0.25 1.00 0.60 0.85 0.25
      0.85
    0.25 0.80 0.48 0.70 0.20
      0.85
    8.40 14.45 20.41 10.10 16.83
      32.45
    7.9 139 204 85 142 255P05-402
    Minita vein extension
    299768 / 534435
    270 / 50
    No significant resultsP05-403
    South Minita
    300335 / 534277
    256 / 70
    86.7
    86.9
    0.20
    0.20
    17.58
    67P05-404
    Minita
    301460 / 533977
    112 / 67
    No significant resultsP05-405
    Minita vein extension
    299466 / 534399
    270 / 50
    No significant resultsP05-406
    South Minita
    300824 / 534287
    261 / 68
    203.9 271.05 324.85 343.2 377
      377.4
    205.65 271.15 325.9 345.8 377.3
      378.1
    1.75 0.10 1.05 2.60 0.30
      0.70
    1.55 0.10 0.75 2.20 0.30
      0.50
    8.99 8.46 7.09 8.34 9.12
      14.22
    62 1 33 28 84 161P05-407
    Minita
    301482 / 534057
    90 / 75
    247.00 256.40 265.75 345.70
      394.80
    248.55 256.60 266.70 351.25
      396.15
    1.55 0.20 0.95 5.55 1.35
    1.10 0.15 0.65 2.10 1.10
    44.98 20.20 6.75 6.42 6.68
    302 218 39 9 19P05-408
    South Minita
    300493 / 534304
    273 / 60 includes and
    30.3 257.25 257.25 257.65 305.4
    30.5 258.75 257.35 258.75 311.6
    0.20 1.50 0.10 1.10 6.20
    0.20 1.30 0.10 1.10 5.20
    7.57 8.36 16.95 9.70 30.60
    19.5 126 144 158 325P05-409
    South Minita
    300605 / 534336
    268 / 68
    168.4 368.2
    168.6 375.15
    0.20 6.95
    0.20 5.00
    11.70 5.38
    36P05-410
    Minita
    301727 / 533870
    90 / 68
    433.45
    434.45
    1.00
    0.65
    8.86
    114P05-411
    South Minita
    300527 / 534200
    269 / 71
    171.0
    173.55
    2.55
    1.50
    9.66
    117P05-412
    South Minita
    300514 / 534393
    273 / 60
    346.90 409.95 440.70
    347.25 410.45 441.00
    0.35 0.50 1.70
    0.30 0.40 1.10
    64.25 7.42 4.52
    414 42 20P05-413
    South Minita
    299975 / 534426
    270 / 53
    412.10 425.50
    413.10 426.75
    1.00 1.25
    1.00 1.05
    11.66 13.59
    66 106P06-414
    Minita
    301723 / 533869
    113 / 68
    No significant results


---

- 28 -

Hole No.
    Vein Tested
    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)P06-415
    South Minita
    300449 / 534294
    270 / 64
    204.20
    204.80
    0.60
    0.60
    14.77
    66P06-416
    South Minita
    300078 / 534335
    254 / 59
    390.20
    390.70
    0.50
    0.40
    13.86
    196P06-417
    South Minita
    300493 / 534300
    270 / 76 including and
    158.30 295.60 295.60 297.85
      393.95
    158.75 298.90 295.70 298.90
      394.25
    0.45 3.30 0.10 1.05 0.30
    0.40 3.00 0.10 0.90 0.30
    18.57 10.95 45.92 21.28 5.88
    72 84 395 172 53P06-418
    South Minita
    300813 / 534444
    260 / 58
    75.60 426.00 429.35 515.10
    76.35 426.70 430.30 515.55
    0.75 0.70 0.95 0.45
    0.75 0.65 0.80 0.40
    7.23 7.30 12.66 7.31
    99 44 88 102P06-419
    South Minita
    299972 / 534411
    271 / 60
    No significant resultsP06-420
    South Minita
    534309 / 300548
    266 / 61
    240.80 263.30 344.40
    241.40 264.10 345.40
    0.60 0.80 1.00
    0.60 0.80 0.80
    11.72 6.13 8.91
    n.a. 31 67P06-421
    South Minita
    300240 / 534388
    270 / 60
    295.95 361.00 364.40 374.25
    299.35 362.40 365.70 376.95
    3.40 1.40 1.30 2.70
    2.75 1.10 1.30 2.40
    19.26 7.01 5.56 8.69
    135 49 38 105P06-422
    South Minita
    299904 / 534384
    272 / 65
    No significant resultsP06-423
    South Minita
    300606 / 534331
    259 / 65
    183.65 393.10
    183.80 394.55
    0.15 1.45
    0.15 1.35
    29.62 27.87
    200 200P06-424
    South Minita
    300045 / 534503
    268 / 65
    No significant resultsP06-425
    South Minita
    300240 / 534388
    270 / 53 including
    291.50 292.80
    293.15 293.15
    1.65 0.35
    1.30 0.25
    15.62 59.62
    82 200P06-426
    South Minita
    300855 / 534392
    270 / 59
    429.20 433.95
    429.95 434.15
    0.75 0.20
    0.70 0.20
    7.68 9.07
    34 9P06-427
    South Minita
    300305 / 534425
    261 / 61
    238.05 316.45 409.20 409.80
      412.60 427.75
    238.25 316.65 409.35 409.95
      413.80 430.05
    0.20 0.20 0.15 0.15 1.20
      2.55
    0.20 0.20 0.15 0.15 1.00
      2.20
    6.28 10.97 7.33 14.56 6.29
      15.70
    68 166 43 121 18 106P06-428
    South Minita
    300212 / 534255
    260 / 65
    105.20 106.20 148.60 299.10
      306.40 312.40
    105.65 106.55 149.00 299.20
      306.80 312.50
    0.45 0.35 0.40 0.10 0.40
      0.10
    0.45 0.30 0.40 0.10 0.40
      0.10
    6.12 8.33 17.16 20.21 8.28
      10.36
    13 33 74 201 30 29P06-429
    South Minita
    300391 / 534259
    269 / 65
    238.80 262.10
    240.40 264.65
    1.60 2.55
    1.60 2.00
    7.37 14.22
    76 131P06-430
    South Minita
    300376 / 534329
    279 / 65
    147.70 319.25 344.80 350.35
    148.00 319.70 345.55 351.75
    0.30 0.45 0.75 1.40
    0.25 0.40 0.70 1.20
    20.21 9.17 7.28 9.82
    66 89 78 27


---

- 29 -

Hole No.
    Vein Tested
    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)P06-431
    South Minita
    300423 / 534303
    270 / 63 including and and
      and
    283.65 286.40 303.80 303.80
      304.45 309.15 312.95
    285.15 287.75 316.15 304.45
      304.85 309.90 316.15
    1.50 1.35 12.35 1.05 0.40
      0.75 3.20
    1.40 1.10 9.50 0.80 0.30
      0.70 3.00
    7.13 9.01 8.43 22.10 50.51
      18.81 15.50
    15 77 66 165 350 154 142P06-432
    South Minita
    300828 / 534378
    270 / 59
    97.80 215.40 261.35 332.45
      369.25 441.60
    98.30 215.60 263.85 332.63
      369.80 442.10
    0.50 0.20 2.50 0.18 0.55
      0.50
    0.40 0.15 2.40 0.15 0.50
      0.30
    9.96 10.90 10.80 7.15 8.50
      6.13
    90 132 90 106 30 17P06-433
    South Minita
    300423 / 534303
    270 / 72 including
      including and and and and and
      including
    141.25 164.10 306.00 333.85
      334.95 347.05 364.75 364.75 365.90 369.50
      372.35 375.40 378.40 382.45 387.25 387.25
      393.85
    141.60 164.50 306.35 336.90
      335.25 347.40 380.05 365.90 369.50 371.30
      372.80 375.80 380.05 382.60 388.95 387.55
      393.95
    0.35 0.40 0.35 3.05 0.30
      0.35 15.30 1.15 3.60 1.80 0.45 0.40 1.65
      0.15 1.70 0.30 0.10
    0.20 0.40 0.30 1.80 0.25
      0.20 9.90 0.50 2.70 1.35 0.34 0.30 1.65
      0.15 1.60 0.20 0.10
    7.31 10.56 6.86 23.10 35.64
      10.82 17.40 14.27 6.05 47.11 99.34 37.16
      38.28 66.54 28.43 148.40 306.30
    19 200 43 148 266 104
      125 124 65 332 796 401 308 575 173
      681 2810P06-434
    South Minita
    300305 / 534297
    270 / 47
    238.20 284.10
    238.40 288.24
    0.20 4.15
    0.20 3.80
    9.52 8.90
    124 60P06-435
    South Minita
    300491 / 534292
    267 / 56
    249.25 293.95
    251.15 294.55
    1.90 0.60
    1.70 0.50
    5.91 25.82
    60 181P06-436
    South Minita
    300643 / 53290
    270 / 68
    158.70 280.40 322.40 324.40
    158.80 280.55 322.50 324.70
    0.10 0.15 0.10 0.30
    0.10 0.10 0.10 0.25
    9.61 11.14 22.88 7.83
    42 85 65 37P06-437
    South Minita
    300921 / 534350
    270 / 60
    103.35 295.45 463.00 481.50
    103.45 295.65 464.40 481.70
    0.10 0.20 1.40 0.20
    0.10 0.20 1.20 0.20
    11.51 12.51 17.23 7.53
    98 139 188 166P06-438
    South Minita
    300877 / 534294
    270 / 61
    274.70 345.40 361.15 371.10
    275.20 345.55 361.45 371.50
    0.50 0.15 0.30 0.40
    0.40 0.10 0.15 0.25
    7.23 26.43 10.51 32.70
    83 200 111 166P06-439
    South Minita
    300357 / 534274
    257 / 56
    257.75
    259.25
    1.50
    1.50
    14.42
    n.a.


---

- 30 -

Hole No.
    Vein Tested
    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)P06-440
    South Minita
    300777 / 534327
    270 / 63
    234.2 310.60 339.55
    235.3 310.80 340.15
    1.10 0.20 0.60
    1.00 0.20 0.50
    5.41 7.43 13.27
    n.a. n.a. n.a.P06-441
    South Minita
    300903 / 534384
    270 / 63 including and
    154.00 290.10 373.65 464.40
      466.00 466.40
    154.90 291.25 374.10 467.50
      466.40 467.50
    0.90 1.15 0.45 3.10 0.40
      1.10
    0.80 0.90 0.40 3.10 0.30
      0.90
    9.41 6.52 6.22 8.42 17.70
      12.15
    n.a. n.a. n.a. n.a. n.a.
      n.a.P06-442
    South Minita
    300356 / 534274
    257 / 72
    174.25 244.90 257.45 267.60
      274.10 293.45
    174.60 245.00 257.75 267.75
      274.45 298.20
    0.35 0.10 0.30 0.15 0.35
      4.75
    0.30 0.10 0.20 0.15 0.30
      3.40
    16.80 7.28 8.93 11.19 19.02
      24.21
    n.a. n.a. n.a. n.a. n.a.
      n.a.


Concurrent with the South Minita delineation drill program
during fiscal 2006, the Company continued a surface mapping, sampling and target
generation program in the southern part of the El Dorado district that had
commenced during fiscal 2005. This exploration program benefited from a
scientific breakthrough made by the Company regarding the timing of the gold
mineralizing event at El Dorado relative to the volcanic sequence that dominates
the area. As a result, areas of the El Dorado project previously thought to be
lower priority geologically were re-evaluated with this surface exploration
program and a number of high priority gold-bearing targets were discovered.
These targets include: the untested 4 kilometer strike extent of the Minita
structure that continues south from the Minita and South Minita deposits; a
broad structural zone in the vicinity of the Nance Dulce vein (on which limited
drilling was conducted during fiscal 2005); the untested Hacienda structure (a
roughly 4 kilometer north-south striking structure geologically similar to, and
approximately 2 kilometers west of, the Minita structure); and the Gallardo
vein, on which there is located a colonial-era mine shaft. With the South Minita
delineation drill program completed, the Company intends to resume its
exploration drilling program at the El Dorado gold project during fiscal 2007
and will focus on testing these four high priority targets.

The foregoing disclosure under "Recent Exploration and
Drilling" has been prepared by or under the supervision of William Gehlen,
Certified Professional Geologist, a Qualified Person for the purposes of NI
43-101. Mr. Gehlen is the Vice-President of Exploration of the Company and
supervises the Company's exploration work on the El Dorado project. Mr. Gehlen
has verified that the drill results presented above have been accurately
summarized from the official assay certificates provided to the Company. The
Company's drill sampling procedures follow the Exploration Best Practices
Guidelines outlined by the Mining Standards Task Force and adopted by the TSX.
Samples have been assayed using fire assay with a gravimetric finish on a
30-gram split. Quality control measures, including check- and sample
standard-assaying, are being implemented. Samples were assayed by Inspectorate
America Corporation in Reno, Nevada, an ISO 9002 certified laboratory,
independent of the Company.

---

- 31 -

June 2006 Updated Resource Estimate

On June 19, 2006 the Company announced the results of an
updated resource estimate for the El Dorado project, in which the measured and
indicated resources on the project (inclusive of reserves) increased to 1.2
million gold equivalent ounces. The impetus for the updated resource estimate
was primarily to quantify the gold and silver ounces at the South Minita
deposit, the subject of an 18-month long definition drilling program at El
Dorado that was completed subsequent to the end of fiscal 2006. South Minita was
estimated in this resource tabulation to contain indicated resources of 350,000
gold equivalent ounces plus a further 77,000 gold equivalent ounces in the
inferred category.

The resources below are tabulated using a gold equivalent,
rather than a gold-only cutoff grade as was historically used at El Dorado, in
order to more realistically represent the combined gold and silver value of
these deposits. In the case of the Minita deposit, the estimate includes a small
number of new recently drilled holes. The Nance Dulce resource is based on the
holes drilled at that deposit to date and should be considered an interim
resource estimate as the deposit area has not yet been fully delineated. The
Coyotera and Nueva Esperanza deposits were re-tabulated using the
gold-equivalent cutoff.

El Dorado Project Resources (as of June 19,
      2006)Deposit
    Resource Category
    Tonnes
    Gold Grade (g
      Au/t)
    Gold Ounces
    Silver Grade (g
      Ag/t)
    Silver Ounces
    Gold Equivalent
      Grade (g AuEq/t)
    Gold Equivalent
      OuncesSouth Minita
    Indicated1,070,900
    9.25
    318,400
    63.99
    2,203,000
    10.16
    349,900Inferred
    302,800
    7.20
    70,100
    48.23
    470,000
    7.89
    76,800Minita
    Measured
    614,100
    12.23
    241,500
    80.59
    1,591,200
    13.39
    264,300Indicated
    1,175,100
    9.65
    364,400
    58.16
    2,197,300
    10.47
    395,700Total M&I
    1,789,200
    10.53
    605,900
    65.86
    3,788,500
    11.47
    660,000Inferred
    78,400
    10.39
    26,200
    67.44
    170,000
    11.39
    28,700Nance Dulce
    Inferred
    128,900
    19.56
    81,100
    121.98
    506,000
    21.30
    88,300Coyotera
    Measured
    166,000
    7.86
    42,100
    57.79
    309,000
    8.69
    46,500Indicated
    501,000
    7.15
    115,200
    58.68
    945,000
    7.99
    128,700Total M&I
    667,000
    7.34
    157,300
    58.48
    1,254,000
    8.17
    175,200Inferred
    19,000
    5.83
    3,600
    72.12
    44,000
    6.86
    4,200


---

- 32 -

El Dorado Project Resources (as of June 19,
      2006)Deposit
    Resource Category
    Tonnes
    Gold Grade (g
      Au/t)
    Gold Ounces
    Silver Grade (g
      Ag/t)
    Silver Ounces
    Gold Equivalent
      Grade (g AuEq/t)
    Gold Equivalent
      OuncesNueva Esperanza
    Indicated
    183,000
    5.77
    33,900
    30.47
    179,000
    6.20
    36,400Inferred
    29,000
    4.67
    4,300
    35.49
    33,000
    5.17
    4,800TOTAL MEASURED & INDICATED ALL
      DEPOSITS
    3,710,100
    9.35
    1,115,500
    62.24
    7,424,500
    10.24
    1,221,500TOTAL INFERRED ALL DEPOSITS
    558,100
    10.3
    185,300
    69.16
    1,223,000
    11.30
    202.0Notes:1) Resources based on a gold equivalent cut-off
      grade of 4.0 g AuEq/t2) Gold equivalents based upon a silver to gold
      ratio of 70:13) The Minita resource INCLUDES the reserves
      stated below


Mineral resource estimates presented above have been
calculated in accordance with National Instrument 43-101 as required by Canadian
securities regulatory authorities, which differ from standards of the U.S.
Securities and Exchange Commission (SEC). The resource estimates contained in
this discussion would not be permitted in reports of U.S. companies filed with
the SEC. Readers are referred to the Cautionary Note to U.S. Investors under
"Glossary of Technical Terms".

The resources above were estimated by interpreting drill
intercepts in cross section, coding samples, capping assays, compositing to vein
thicknesses, and estimating grades and thicknesses of each of the veins into a
three dimensional grade thickness model. Each of the three veins at the Minita
deposit and ten veins at the South Minita deposit were estimated separately.
Additional NI 43-101 disclosure regarding this resource estimate is provided in
Glossary of Technical Terms and the subsection Cautionary Notes.

A portion of the Minita resources was converted to proven and
probable reserves in a pre-feasibility study for the El Dorado deposit conducted
in January 2005 (details of the assumptions used in this reserve calculation are
available in the Companys fiscal 2005 regulatory filings). The following
reserve table outlines that portion of the Minita resource which has been
converted to reserves:

---

- 33 -

El Dorado Project Proven & Probable Reserves
        (as of January 21, 2005)ReserveCategory
    Tonnes
    Gold Grade(g Au/t)
    GoldOunces
    SilverGrade(g
      Ag/t)
    SilverOunces
    GoldEquivalentGrade(g AuEq/t)
    GoldEquivalentOuncesProven
    711,949
    10.09
    230,908
    68.30
    1,563,425
    11.06
    253,242Probable
    892,934
    9.05
    259,850
    54.85
    1,574,591
    9.84
    282,344Total
    1,604,883
    9.51
    490,758
    60.82
    3,138,016
    10.38
    535,586Notes:1) El Dorado Project proven and probable reserves
      at 5 g/t equivalent gold cut-off grade.2) Based upon US$350 gold and US$5.00/oz silver
      market price.3) Values shown in table are diluted and do
      account for mining recovery.


These reserves have been calculated in accordance with NI
43-101, which differs significantly from the requirements for reserve disclosure
under U.S. Securities and Exchange Commission Industry Guide 7. Industry Guide 7
requires a "final" or "bankable" feasibility study to make reserve disclosure.
The NI 43-101 Proven & Probable Reserves reported above are not considered
reserves under U.S. Securities and Exchange Commission Industry Guide 7. Readers
are referred to the Cautionary Note to U.S. Investors under "Glossary of
Technical Terms".

Economic highlights of a proposed operation at the El Dorado
project as presented in the January 2005 pre-feasibility study released during
fiscal 2005 include:

- Operating costs (including direct mining costs, mill processing and
  general and administrative costs and excluding royalties and refining charges)
  estimated to average $163 per gold equivalent ounce over the life of mine;
  including $140 and $137 per ounce operating cost in the first two years of
  production respectively.
- Average annual forecast gold equivalent production over a projected
  6.2-year mine life of approximately 80,000 ounces; including approximately
  87,000 and 99,000 gold equivalent ounces* in the first two years of production
  respectively.
- Total estimated capital costs of $66.9 million comprised of $47.9 million
  pre-production capital and $19.0 million on-going capital.
- An estimated $43.6 million in cash flow* over the life of the mine with a
  payback period of 3.5 years.
- Projected pre-tax Internal Rate of Return* (IRR) of 18.1%.

(*Gold equivalent ounces, projected cash flow and IRR are
based on gold and silver prices of $400 per ounce and $6.00 per ounce
respectively)

A full feasibility study based on the updated El Dorado
resource estimate and including aspects of the mine plan outlined in the January
2005 pre-feasibility study has been initiated to investigate the economics of
mining the El Dorado project at higher throughput rates. The Company Rim
believes that the resource ounces outlined above will support an expanded El
Dorado operation with annual gold production significantly higher than that
envisioned in the January 2005 pre-feasibility study, while maintaining
operating costs at or about $163 per ounce as estimated in the pre-feasibility
study. The full feasibility study is expected to be completed in late calendar
2006.

---

- 34 -

Environmental Impact Study

In September 2004, the Company submitted an Environmental
Impact Study ("EIS") to the El Salvadoran Environmental and Natural
Resources Ministry ("MARN") for a 750 tonne per day operation. In
September 2005, the finalized EIS (incorporating comments from MARN) was
resubmitted to MARN, which then granted technical approval of the EIS, and
instructed the Company to submit the EIS for public comment. The public comment
period ran for two weeks in October 2005. In March 2006, the Company received
from MARN a list of issues raised during the public comment period and was asked
to amend the EIS to address these issues. The Company is currently preparing the
EIS for resubmission to MARN, following which it will await further instructions
or final acceptance of the EIS and granting of an environmental permit.

Summary

The El Dorado project remains the cornerstone of the Company's
strategy for growth. Of the $6.2 million spent on exploration during the fiscal
year ended April 30, 2006, $5.9 million was expended on the El Dorado project,
primarily on the South Minita delineation drill program with minor expenditures
on pre-development activities and community relations initiatives.

Santa Rita Gold Project, El Salvador

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

The Santa Rita project is a 48.6 square kilometre (4,860
hectare) exploration license in central El Salvador granted to the Company on
July 8, 2005. Santa Rita, located roughly 15 km from the Minita deposit on the
Companys flagship El Dorado gold project, is an epithermal quartz-calcite vein
system that was discovered as a result of reconnaissance-style sampling of
float, sub-crop and outcrop. The southeast corner of the Santa Rita exploration
license is contiguous with the northwest corner of the Companys flagship El
Dorado project, though the two projects host separate epithermal systems.

Surface rock sampling in September 2005 at the Santa Rita gold
project has yielded high grade gold along a portion of the Trinidad vein, one of
two known vein structures on the project. The Trinidad vein has to date been
traced over a distance of 1400 metres in a northwest  southeast direction.
Seven rock samples collected during fiscal 2006 across the Trinidad vein over a
500 metre strike length at the southern end of its exposure yielded the
following results: 6.43 g/t gold over 1.5 metres; 14.59 g/t gold over 1.0 metre;
25.76 g/t gold over 1.5 metres; 118.29 g/t gold over 1.5 metres; 32.67 g/t gold
over 0.5 metres; 12.64 g/t gold over 2.0 metres; and 59.52 g/t gold over 1.5
metres. The northernmost 900 metres as well as a 200-metre segment of the vein
within the southern high-grade area (where it crosses a hill) are likely above
the productive interval of the Santa Rita epithermal system but surface sampling
results yielded assays up to 5 g/t gold over similar vein widths. The remainder
of the Trinidad vein as well as the 200-meter segment of the vein within the
high-grade area (where it crosses a hill) are likely above the productive
interval of the Santa Rita epithermal system, though surface sampling still
yielded assays up to 5 g/t gold over similar vein widths.

During fiscal 2006 the Company completed a baseline
environmental assessment of the Santa Rita project, which was submitted to MARN,
presented for public comment, amended based on public comments raised and
resubmitted to MARN. On June 12, 2006, the Company received a permit from MARN
to conduct a drill program on the Santa Rita gold project, paving the way for
the Company to finalize access agreements with local residents, upgrade and
construct access roads and then mobilize a drill rig to the site. The duration
and

---

- 35 -

extent of the Santa Rita drill program, expected to commence in
the first half of fiscal 2007, will be dictated by results.

The Santa Rita project provides excellent exploration
opportunities within El Salvador that will both complement and benefit from the
Companys on-going El Dorado exploration.

The foregoing disclosure under "Santa Rita Gold Project, El
Salvador" has been prepared by or under the supervision of David Ernst. Mr.
Ernst is a professional geologist licensed by the State of Washington, an
employee of the Company and a Qualified Person as defined in National Instrument
43-101. Mr. Ernst has verified that the assay results presented above have been
accurately summarized from the official assay certificates provided to the
Company. The Company's sampling procedures follow the Exploration Best Practices
Guidelines outlined by the Mining Standards Task Force and adopted by the TSX.
Samples have been analyzed using fire assay with a gravimetric finish on a
30-gram split. Quality control measures, including check- and sample
standard-assaying, are being implemented. Samples were assayed by Inspectorate
America Corporation in Reno, Nevada, an ISO 9002 certified laboratory,
independent of the Company.

Zamora Gold Project, El Salvador

In February 2006, the Company signed an agreement to acquire a
100% interest in the Zamora gold project in El Salvador from a consortium of
private companies. Under the terms of the agreement the Company maintains an
option to purchase the Zamora exploration concession by making advance royalty
payments as follows: 50,000 shares upon regulatory approvals of the arrangement
(issued March 10, 2006): 50,000, 70,000, 100,000 and 150,000 shares on the first
through fourth anniversaries of the agreement, respectively, and 200,000 shares
on the fifth and subsequent anniversaries of the agreement until the earlier of
termination of the option, commencement of production or expiry of the
exploration concessions. Title to 100% of the project will be transferred to the
Company at such time as a positive production decision is made by the Company.
Upon achievement of commercial production, the vendor will receive a 3% net
smelter royalty to a maximum purchase price of $10,000,000 (inclusive of the
value of the advance royalty payments made in shares).

The Zamora project comprises a 40 square kilometer land package
located 50 kilometers north of San Salvador, in El Salvador. The Zamora project
exposes high-level gold bearing veins of the adularia-sericite type of
epithermal system. The Company conducted limited grab sampling of vein outcrops
and float within a small portion of the Zamora project area during fiscal 2006,
which returned values of up to 16.6 g/t gold. The juxtaposition of both
high-grade gold-bearing veins and gold-bearing volcanic sinter deposits (ancient
geysers) at the Zamora project indicates strong potential for the preservation
from erosion of the productive boiling zone in this epithermal system.

A baseline environmental assessment of the Zamora project will
be undertaken during fiscal 2007 in preparation for obtaining a permit to
conduct a Phase 1 drill program.

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

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- 36 -

Nevada Properties

Denton-Rawhide Mine, Nevada

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% interest 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(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, 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 made 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 was paid on
      December 31, 2004, from general corporate cash
flows.

---

- 37 -

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

|(a) | Kennecott Rawhide holds a 51% interest in the
      Denton-Rawhide Mine;                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(b) | the Company holds a 49% interest in the Denton-Rawhide
      Mine;                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(c) | Kennecott Rawhide shall be the operator of the
      Denton-Rawhide Mine; and                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(d) | the operation of the Denton-Rawhide Mine shall be
      overseen by a coordinating committee 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. (See
      "Reclamation  Denton-Rawhide" below).

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 either the addition of zinc oxide or by absorption onto carbon.
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

The Companys share of production from the Denton-Rawhide
operation during the fiscal year ended April 30, 2006 was 15,117 ounces of gold
and 135,085 ounces of silver at a total cash production cost of $227 per ounce
of gold produced. As non-cash heap leach inventory drawdown costs were reduced
to nil in fiscal 2006, actual cash expended per ounce of gold produced in fiscal
2006 was also $227 per ounce. During fiscal 2005 and fiscal 2004, the Companys
share of production was 22,056 ounces of gold and 212,705 ounces of silver at
total cash production costs of $329 per ounce (actual cash cost, being the total
cash production costs less non-cash heap leach inventory drawdown costs, of $219
per ounce), and 29,687 ounces of gold and 238,124 ounces of silver at total cash
production costs of $372 per ounce (actual cash cost of $116 per ounce),
respectively. Gold prices rose markedly during fiscal 2006, from $427.90 per
ounce on May 3, 2005 (the first trading day in fiscal 2006) to $644.00 per ounce
at April 28, 2006 (the last trading day in fiscal 2006), on its way to a 25-year
high of $725.00 per ounce reached on May 12, 2006 subsequent to the end of the
Companys 2006 fiscal year.

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. The Company
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.

---

- 38 -

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

Unit Costs (in thousands of US dollars except gold
ounces and cost per ounce)

Fiscal 2005 (twelve months ended April 30,
      2005)
    Total Cash Production Cost
    Actual Cash Production CostOperating costs
    $8,963
    $8,963Silver credits realized
    $(1,706)
    $(1,706)Inventory change
    n/a
    $(2,430)Cost base for calculation
    $7,257
    $4,827Gold ounces produced
    22,056
    22,056Cost base per gold ounce produced
    $329
    $219


Fiscal 2006 (twelve months ended April 30,
      2006)
    Total Cash Production Cost
    Actual Cash Production CostOperating costs
    $4,480
    $4,480Silver credits realized
    $(1,043)
    $(1,043)Inventory change
    n/a
    $(12)Cost base for calculation
    $3,437
    $3,425Gold ounces produced
    15,117
    15,117Cost base per gold ounce produced
    $227
    $227


Fiscal 2006 gold production from Denton-Rawhide was
approximately 31% lower than in fiscal 2005. This decline in production
represents the natural slowdown in recovery that occurs in the residual leach
phase of a heap leach operation. Production was further affected by the
temporary closure of sections of the heap leach pile as the mine operators
continued re-contouring the pile in order to expose the leaching fluids to a
greater surface area. Although this re-contouring resulted in short term
increases in gold production at Denton-Rawhide, the effect was not great enough
to offset the slowdown in production which is typical of residual leach
operations. Gold production from Denton-Rawhide is anticipated to continue at
declining rates through the coming fiscal year. The Denton-Rawhide mine owners
are considering a number of options for continuing to maximize gold production,
which may result in future short term improvements in production. However,
recoveries are expected to continue to decline overall as the residual leaching
process continues. For the purposes of internal budgeting, the Companys
projections for Denton-Rawhide production look forward no more than six months
at a time.

Forward Selling

In order to lock in a certain amount of revenue that the
Company requires to fund its ongoing exploration activities, the Company has
instituted a short-term forward sales 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, 2005, the
Company had 3,000 ounces of gold sold forward at an average price of $442 per
ounce in contracts of 1,000 ounces per month with maturity dates extending to
July 2005. These contracts were delivered as scheduled and no further forward
sales were undertaken until April 2006 when a further 3,000 ounces of gold were
sold forward in contracts of 500 ounces per month with maturity dates extending
to October 2006 at prices ranging from $635 per ounce to $644 per ounce. At
April 30, 2006, these 3,000 ounces remained sold forward at an average price of
$639 per ounce. The Companys forward selling program is purely a cash
management strategy and does not represent a corporate commentary on the outlook
for gold.

---

- 39 -

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 which is under review. Reclamation and
closing activities have been proceeding for the past three years and the
Companys 49% share of the total funded reclamation and closure costs is
estimated at approximately $4.8 million of which the Company has paid
approximately $3.0 million. Between April 2000 and December 31, 2001, the
Company contributed $39,090 per month into a trust fund to meet its reclamation
and closure obligations. No monthly contributions have been required from the
Company 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, 2006 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.

Landfill Agreement

On October 28, 2004, the Company and Kennecott, Denton-Rawhide
  joint venture partners ("Rawhide Joint Venture"), signed a Property Purchase
  and Sale Agreement with Nevada Resource Recovery Group LLC ("NRRG") of
  Reno, NV to utilize the Denton-Rawhide open pits as a landfill for non-hazardous
  municipal waste in return for tipping fees, which are estimated will provide
  the Company with $103.6 million in cash over the 40+ year term of the agreement.
  The agreement includes a provision whereby NRRG can buy-out future tipping fees
  according to a net present value formula. Upon signing of the agreement, NRRG
  placed a security deposit of $0.5 million in trust and must make another payment
  of $1 million upon closing.

Closing of this agreement is subject to three key conditions:
the successful purchase by the Rawhide Joint Venture of a number of small
parcels of federal land contained within the proposed landfill site; the
securing of municipal waste contracts by NRRG; and, the approval by the State of
Nevada granting NRRG permission to use the site for municipal waste. NRRG is
required to reach certain time and tonnage disposal milestones. Redeveloping the
Denton-Rawhide mine as a municipal solid waste landfill is expected to provide a
number of jobs, local and state tax revenues and a local community host fee over
the 40+-year term of the agreement. There can be no assurance that all of the
conditions for the landfill will be satisfied in a timely manner, if at all.

The executed agreement provides the Rawhide Joint Venture the
right to continue to produce gold through residual leaching of the heap leach
pads at Denton-Rawhide, and restart mining activities, if warranted, on land
adjacent to the land conveyed to NRRG. The Rawhide Joint Venture will retain
certain obligations related to mining on the property conveyed to NRRG, whilst
NRRG will accept all obligations and liabilities related to the future impact of
the landfill.

Argentina Properties

San Francisco Property, Argentina

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.

---

- 40 -

During 1997 and 1998, the Company identified and acquired by
staking a project known as the San Francisco Project. The Company staked and
registered a 3,600 hectare claim block in the Province of Jujuy covering a 500
metre wide by 3,500 metre long alteration system that the Company believes is
related to a porphyry system. The 100% owned property is located five kilometres
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 metres 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 metres averaging 266 g/t Ag; SF-12 which intercepted a 21 metre
interval averaging 45 g/t Ag and 3.3% Zinc.

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.

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

Rosalito Copper Project, Argentina

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

The Rosalito project in Santa Cruz province, Argentina is a
10,000-hectare exploration claim staked by the Company during the fiscal year
ended April 30, 2005 to cover a potential supergene enrichment blanket related
to a porphyry copper system. Rosalito comprises iron oxide-stained, bleached
rhyolite tuffs and volcaniclastics that surround a leached sulfide breccia. This
porphyry copper-style alteration system occurs along the edge of a range front
with adjacent alluvial-covered areas. A 0.5 -metre wide sulfide vein that
crosscuts the breccia returned 9.57% zinc, 2.1% copper and 47 g/t silver.
Porphyry copper systems are known to occur in the same geological environments
as the epithermal gold systems the Company is seeking, and it is not uncommon to
find one in the search for the other. As the Company is focused on epithermal
gold systems, the Company plans to option or joint venture the Rosalito project
to a suitable partner.

The foregoing disclosure under "Rosalito Copper Project,
Argentina" has been prepared by or under the supervision of William Gehlen,
Certified Professional Geologist, a Qualified Person for the purposes of NI
43-101. Mr. Gehlen is the Vice-President of Exploration of the Company.

Chile Properties

Carrera and Colina Gold Projects, Chile

There are no known ore reserves on the Carrera and Colina
gold projects and all work programs on the property are exploratory searches for
ore grade mineralization.

---

- 41 -

During fiscal 2006 the Company staked two new properties
totalling 81 square kilometres in the XI Region in southern Chile. The Carrera
project (8 concessions totalling 23 square kilometres) and the Colina project
(20 concessions totalling 58 square kilometers) occur within an epithermal gold
belt that hosts Coeur dAlene Mines Corp.s Cerro Bayo gold mine. Both
properties expose the highest parts of an epithermal system, above the boiling
zone within which bonanza gold grades normally occur. The Company discovered
anomalous levels of gold mineralization in chalcedonic quartz veinlets, which
led to the staking of these claims. During fiscal 2006 the Company conducted
limited exploration work at the Carrera and Colina projects, including
regional-scale mapping, and intends to conduct additional early-stage
exploration work, including mapping, sampling, target generation and a Phase 1
drill program during fiscal 2007.

The foregoing disclosure under "Carrera and Colina Gold
Projects, Chile" has been prepared by or under the supervision of William
Gehlen, Certified Professional Geologist, a Qualified Person for the purposes of
NI 43-101. Mr. Gehlen is the Vice-President of Exploration of the Company.

Andacollo Mine, Chile

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 Compañía 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 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 and the plan was approved by the creditors and the courts
in Chile in May of 2001 and was to remain in effect until May 15, 2005. The plan
remained in effect until May 11, 2005, at which time a settlement was reached
with the creditors. At the time of the settlement, the balance of the unpaid
principal totalled $1,1657,248, based on the May 11, 2005 exchange rate of $1 =
Chilean Peso$573.66. The creditors agreed to accept a lump sum payment of
$1,300,000 and relinquished any rights (including the right to be paid annual
accrued interest on the unpaid principal) that they may have been granted by the
Creditors' Agreement. The settlement with the creditors was made with a
short-term line of credit secured by the reclamation fund. The Company's share
of the settlement totalled $463,856.

The holder of a 2% net smelter return royalty on the production
from the Andacollo Mine had 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 had become 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 over-ruled 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 continued to comply with the
terms of the terms of the royalty agreement and there is approximately $1.05
million of guaranteed royalty payments remaining.

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 had not been sold, no
reclamation activities were initiated in this area. CMD stopped adding cyanide
to the heap in February of 2005. As this marked the end of productive
operations, CMD requested and received permission from the Creditor's Oversight
Committee to begin drawing upon the resources of the closure fund. As of April
2005, the heap closure fund had a cash

---

- 42 -

balance of $1.7 million. In May 2005, CMD used these funds to
settle with the creditors and proposed to sell the mine and/or its assets.

In June 2005, the Company entered into a letter of intent to
  sell 100% of the shares in its subsidiary companies that owned the Andacollo
  mine to Trend Mining Company (Trend) for total consideration
  of $5.4 million. Between June and August 2005 payments totaling $0.9 million
  were made to the Company by Trend to maintain its exclusive right to conduct
  due diligence On September 21, 2005, a final agreement was entered into and
  the sale of the Companys subsidiaries was closed. The September 20, 2005
  share purchase agreement between the Company and Trend provides for the sale
  of 100% of the shares of DMC Cayman Inc. ("DMC"), a Cayman Island company,
  for total consideration of $5.4 million. DMC held 100% of the shares of Andacollo
  Gold Inc. and La Serena Inc., Cayman Island companies, which collectively held
  100% of the issued shares of Compania Minera Dayton, a Chilean sociedad contractual
  minera, which operated the Andacollo Mine in Chile. Upon execution of the final
  Share Purchase Agreement, the Company received a $2.1 million payment from the
  purchaser. The agreement provides for further payments totaling $2.4 million
  to be made to the Company ($1 million and $1.4 million by September 2006 and
  2007 respectively) that are secured by a promissory note, and relieves the Company
  any further reclamation or environmental responsibilities at Andacollo. As security
  for the payment of the balance of the purchase price, Trend provided a promissory
  note in favour of the Company for $2.4 million, without interest, and a security
  agreement, governed by the laws of the Cayman Islands, creating an equitable
  charge in favour of the Company over the purchased assets. The share purchase
  agreement contains provisions that the rights and obligations of Trend may be
  transferred to a person or persons satisfactory to the Company in order for
  Trend to finance the project. On December 2, 2005, Trend assigned its rights
  and obligations under this agreement to Oro Chile LLC, a Colorado limited liability
  company and various individual parties referred to as "the Russells". The Company
  has agreed to release Trend from its obligations under the original promissory
  note upon receipt of a promissory note from the Trend assignees.

DIVIDENDS

The Company has not paid any dividends on its common shares
since its incorporation. Any decision to pay dividends on common shares in the
future will be made by the board of directors on the basis of the earnings,
financial requirements and other conditions existing at such time.

DESCRIPTION OF CAPITAL STRUCTURE

The authorized capital of the Company consists of an unlimited
number of common shares without par value. As at July 25, 2006, 106,701,960,
common shares of the Company were issued and outstanding as fully paid and
non-assessable shares.

All of the authorized common shares of the Company are of the
same class and, once issued, rank equally as to dividends, voting powers and
participation in assets and in all other respects, on liquidation, dissolution
or winding up of the Company, whether voluntary or involuntary, or any other
distribution of the assets of the Company among its shareholders for the purpose
of winding up its affairs after the Company has paid out its liabilities. The
issued common shares are not subject to call or assessment rights or any
pre-emptive or conversion rights. There are no provisions for redemption,
purchase for cancellation, surrender or purchase funds.

---

- 43 -

All registered shareholders are entitled to receive a notice of
any general meeting to be convened by the Company. At any general meeting,
subject to the restrictions on joint registered owners of common shares, on a
show of hands every shareholder who is present in person and entitled to vote
has one vote and on a poll, every shareholder has one vote for each common share
of which he is the registered owner and may exercise such vote either in person
or by proxy.

In 2002, the Company adopted the 2002 Incentive Stock Option
and Bonus Plan (the "2002 Plan") to govern all post-amalgamation options.
The 2002 Plan is divided into two components: a stock option component 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 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 at July 25, 2006, options were outstanding under the 2002
Plan exercisable to purchase up to 4,767,500 common shares, representing
approximately 4.47%% of the Company's issued and outstanding share capital, at
prices ranging from $0.43 to $0.93 per share expiring between April 18, 2007 and
June 15, 2011.

Generally 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. Options granted to non-management outside directors are vested 100%
at the issue date. Of the total options outstanding, 650,000 are not vested as
at July 25, 2006.

MARKET FOR SECURITIES

Trading Price and Volume

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
also received advice that its common shares are listed and have traded on the
Berlin Stock Exchange under the symbol "PRM" since June 14, 2002 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.

During the period from May 1, 2005 to July 25, 2006, the
Company's common shares traded on the TSX as follows:

Period
    Volume
    High (Canadian Dollars)
    Low (Canadian Dollars)May 2005
    926,618
    $0.69
    $0.54June 2005
    524,249
    $0.82
    $0.67July 2005
    244,882
    $0.74
    $0.65August 2005
    360,596
    $0.81
    $0.65September 2005
    2,903,123
    $1.11
    $0.67October 2005
    1,869,211
    $1.13
    $0.87November 2005
    716,011
    $1.09
    $0.93


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- 44 -

Period
    Volume
    High(Canadian Dollars)
    Low(Canadian Dollars)December 2005
    1,848,462
    $1.08
    $0.80January 2006
    2,493,132
    $1.06
    $0.85February 2006
    2,681,645
    $0.91
    $0.82March 2006
    6,147,061
    $0.94
    $0.75April 2006
    3,607,515
    $0.96
    $0.84May 2006
    7,836,654
    $1.06
    $0.76June 2006
    2,696,687
    $0.89
    $0.68July 1, 2006 to July 25, 2006
    1,052,703
    $0.89
    $0.80


DIRECTORS AND OFFICERS

Name, Occupation and Security Holding

The name, province or state, country of residence, position or
office held with the Company and principal occupation during the past five years
of each director and executive officer of the Company are described below.

Name and Address(1)
    Office or PositionHeld
    Previous Service asa Director
    Principal Occupationduring past five years(1)Catherine McLeod-SeltzerBritish
      Columbia
    Chairman and Director
    Since April 11, 2002 (2)
    Director and officer of Pacific Rim Mining Corp. since
      1997. Director of Miramar Mining Corporation, Director and Chairman of
      Bear Creek Mining Corporation, Director and Chairman of Stornoway Diamond
      Corporation, Director of Kinross Gold Corporation and Director of Peru
      Copper Inc.Thomas Shrake(4)Nevada
    President, Chief Executive Officer and Director
    Since April 11, 2002(2)
    Director and officer of Pacific Rim Mining Corp. since
      1997.Anthony J.Petrina(4)(5)(6)British Columbia
    Director
    Since April 11, 2002(2)
    Retired. Chairman of Pacific Rim Mining Corp. from 1997
      to April 2002. Director of Bear Creek Mining Corporation and Miramar
      Mining Corporation.WilliamMyckatyn(3)(4)(6)British Columbia
    Lead Director
    Since April 11, 2002(2)
    Retired. Former Chief Executive Officer and current
      Chairman and Director of Quadra Mining Ltd., Former President, Chief
      Executive Officer and Chairman of Dayton Mining Corporation, and Director
      of First Point Minerals Ltd.


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- 45 -

|Name and Address(1)                             | Office or Position Held              | Previous Service as a Director | Principal Occupation during past
      five years(1)                                                                                                                                                                                                                            
|----------------------------------------------- | ------------------------------------ | ------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|David K. Fagin(3)(5)(6)
      Colorado          | Director                             | Since April 11, 2002(2)        | Investor. Director of Golden Star Resources Ltd.
      and Canyon Resource Corp. Director of all public mutual funds of T. Rowe
      Price Group (a mutual fund company).                                                                                                      
|Paul B. Sweeney(3)(5)(6)
      British Columbia | Director                             | Since July 2003                | Former Vice President and Chief Financial Officer
      of Canico Resource Corp., Director of Pan American Silver Corp., Director
      of Polaris Minerals Corporation, and Director of New Gold Inc.                                                                          
|F. John Norman 
      British Columbia          | Chief Financial Officer              | N/A                            | Chief Financial Officer of Pacific Rim Mining
      Corp. since August 2003, former Controller for Dayton Mining since 2000.                                                                                                                                                    
|J. Peter Neilans 
      British Columbia        | Chief Operating Officer              | N/A                            | Chief Operating Officer of Pacific Rim since June
      2006, Former President and Chief Executive Officer of Placer Dome US                                                                                                                                                    
|William Gehlen 
      Nevada                    | Vice-President of Exploration        | N/A                            | Vice-President of Exploration of Pacific Rim Mining
      Corp. since September 2005. Senior geologist of Pacific Rim Mining Corp.
      since 1997.                                                                                                                            
|Barbara Henderson 
      British Columbia       | Vice-President of Investor Relations | N/A                            | Vice-President of Investor Relations of Pacific
      Rim Mining Corp. since August 2002. Manager of Investor Relations of Pacific
      Rim Mining Corp. since 1998.                                                                                                           
|Ronda L. Fullerton 
      British Columbua\\ia  | Corporate Secretary                  | N/A                            | Corporate Secretary of Pacific Rim Mining Corp.
      since April 2006, former Corporate Paralegal for QLT Inc., former Legal
      Assistant and Corporate Secretary for La Mancha Resources Inc., former Legal
      Assistant for Leisure Canada Inc. and X-Tal Minerals Inc.

| | (1) | The information as to the jurisdiction of residence and
      principal occupation, not being within the knowledge of the Company, has
      been furnished by the respective individuals individually.                               
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                       
| | (2) | April 11, 2002 was the effective date of the amalgamation
      of Dayton and PacRim; Fagin, McLeod and Myckatyn were former directors of
      Dayton and McLeod, Myckatyn, Petrina and Shrake were former directors of
      PacRim.
| |     |                                                                                                                                                                                                                                       
| | (3) | Denotes member of Compensation Committee.                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                       
| | (4) | Denotes member of Environmental Committee.                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                       
| | (5) | Denotes member of Audit Committee                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                       
| | (6) | Denotes member of Nominating
Committee.                                                                                                                                                                                               

Each of the Companys directors is elected by the Companys
shareholders at an annual general meeting to serve until the next annual general
meeting of shareholders or until a successor is elected or appointed. The board
of directors appoints the Companys executive officers annually after each
annual general meeting, to

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- 46 -

serve at the discretion of the board of directors.

Based on information provided by such persons, as at July 25,
2006, the directors and executive officers of the Company as a group
beneficially owned, directly or indirectly, or exercised control or direction
over, an aggregate of 1,943,960 common shares of the Company, representing
approximately 1.82% of the issued and outstanding common shares of the Company.
In addition, the director and executive officers of the Company as a group held
stock options for the purchase of an aggregate of 3,890,000 common shares in the
capital of the Company, which options are exercisable at between $0.43 and $0.93
Canadian dollars per share and expire between April 18, 2007 and June 15, 2011.

Cease Trade Orders, Bankruptcies, Penalties or Sanctions

Anthony J. Petrina, one of the Companys directors, was a
director of Rea Gold Corporation from approximately June or July of 1997 to
December 1997. Rea Gold Corporation filed for bankruptcy in December 1997. In
November 1998, TRIAX Resource Limited Partnership commenced legal proceedings in
an Ontario Court against all of the former directors of Rea Gold Corporation
seeking damages for alleged negligence, and/or negligent misrepresentation and a
breach of fiduciary duty. The action commenced by TRIAX Resource Limited
Partnership has since been dismissed.

Mr. Petrina was also a director of Pegasus Gold Corporation
(Pegasus) until February 1999. Pegasus filed for bankruptcy on January
16, 1998 in Reno, Nevada,

Except as previously disclosed, no other Company directors or
executive officers or any shareholder holding a sufficient number of securities
of the Company to affect materially the control of the Company:

| | (a) | is, as at the date of this Annual Information Form or has
      been, within the ten years before the date of this Annual Information
      Form, a director or executive officer of any company, that while that
      person was acting in that capacity;                                                                                                                                                                
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (b) | has, within the ten years before the date of this Annual
      Information Form, become bankrupt, made a proposal under any legislation
      relating to bankruptcy or insolvency, or become subject to or instituted
      any proceedings, arrangement or compromise with creditors, or had a
      receiver, receiver manager or trustee appointed to hold the assets of the
      director, officer or shareholder; or

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- 47 -

| | (c) | has been subject to:
| | --- | --------------------
| |     |                     
| |     | (i)                 
| |     |                     
| |     | (ii)                

Conflicts of Interest

The directors of the Company are required by law to act
honestly and in good faith with a view to the best interest of the Company and
to disclose any interests which they may have in any project or opportunity of
the Company. If a conflict of interest arises at a meeting of the board of
directors, any director in a conflict will disclose his interest and abstain
from voting on such matter. In determining whether or not the Company will
participate in any project or opportunity, that director will primarily consider
the degree of risk to which the Company may be exposed and its financial
position at that time.

To the best of the Companys knowledge, there are no known
existing or potential conflicts of interest among the Company, its promoters,
directors, officers or other members of management of the Company as a result of
their outside business interests except that certain of the directors, officers,
promoters and other members of management serve as directors, officers,
promoters and members of management of other public companies, and therefore it
is possible that a conflict may arise between their duties as a director,
officer, promoter or member of management of such other companies.

The directors and officers of the Company are aware of the
existence of laws governing accountability of directors and officers for
corporate opportunity and requiring disclosures by directors of conflicts of
interest and the Company will rely upon such laws in respect of any directors
and officers conflicts of interest or in respect of any breaches of duty by any
of its directors or officers. Such directors or officers, in accordance with the
Business Corporations Act (British Columbia), will disclose all such
conflicts and they will govern themselves in respect thereof to the best of
their ability in accordance with the obligations imposed upon them by law.

AUDIT COMMITTEE INFORMATION

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.

---

- 48 -

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 (a) he or she is not an employee of the Company; (b) he or she
does not accept, directly or indirectly, any consulting, advisory or other
compensatory fee from the Company or its subsidiaries other than in connection
with serving on the Committee, any other Board committee or as a member of the
Board; (c) he or she is not an "affiliated person" of the Company or any Company
subsidiary as defined by applicable law and Listing Rules; and (d) he or she
meets all other requirements for independence imposed by law and the Listing
Rules from time to time and any requirements imposed by any Canadian or other
governmental body having jurisdiction over the Company

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

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

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

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

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

14.2      Terms of Reference

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

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

---

- 49 -

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.

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.

---

- 50 -

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

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

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

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

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

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

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

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

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

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

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

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

14.3      Regulations

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

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- 51 -

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

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

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

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

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

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

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

14.4 Limitation of Audit Committees Role

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

Composition of the Audit Committee

The members of the Audit Committee are David Fagin, Paul
Sweeney and Anthony Petrina. All of the members are financially literate and
independent for the purposes of Multilateral Instrument 52-110 ("MI
52-110").

Messrs. Fagin and Sweeney are financial experts, in that 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 ten years both as a
consultant and a bank

---

- 52 -

appraisal engineer (1958-68); President of a subsidiary of
Rosario Resources Corporation, a NYSE company (1968-75) and then Executive
Vice-President (1975-77) then President (1977-82) during which period he was
intimately involved in financial and accounting matters. In 1982, he founded
Fagin Exploration Company and worked closely with an accountant and auditors to
maintain the records. From 1986 to 1991, Mr. Fagin was the President and Chief
Operating Officer for Homestake Mining Corporation (NYSE), responsible for
producing operations in six countries and was involved in decisions for
corporate financial reporting. Between 1992 and 1996, Mr. Fagin was Executive
Chairman of Golden Star Resources (ASE and TSE) and managed all administrative
matters including annual reports, audits and registration in Canada and the U.S.
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 was 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
(1989-1991) 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 Canico Resource Corp. where he was responsible for all
finance, accounting and taxation matters.

The third member of the Company's audit committee, Anthony
Petrina, 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, Chief Executive Officer and Vice-Chairman, until his
retirement in 1992. Mr. Petrina has been a director of several other mining
companies since his retirement to date.

Reliance on Certain Exemptions

At no time since the commencement of the Company's most
recently completed financial year has the Company relied on the exemption in
Section 2.4 of MI 52-110 (De Minimis Non-audit Services), Section 3.2 of
MI 52-110 (Initial Public Offerings), Section 3.3(2) of MI 52-110
(Controlled Companies), Section 3.4 of MI 52-110 (Events Outside
Control of Member), Section 3.5 of MI 52-110 (Death, Disability or
Resignation of Audit Committee Member)or Section 3.6 of MI 52-110
(Temporary Exempion for Limited and Exceptional Circumstances)or Section
3.8 of MI 52-110(Acquisition of Financial Literacy), or an exemption
from MI 52-110, in whole or in part, granted under Part 8 of MI 52-110
(Exemptions).

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- 53 -

Audit Committee Oversight

At no time since the commencement of the Company's most
recently completed financial year was a recommendation of the Committee to
nominate or compensate an external auditor not adopted by the board of
directors.

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 the fiscal year ended April 30, 2005, fees paid to Staley, Okada
& Partners were approved pursuant to the de minimusexception for tax
services.

External Auditor Service Fees (By Category)

Staley, Okada & Partners, Chartered Accountants, serve as
the independent auditors for the Company and have acted as the Company's
independent auditor for the fiscal years ended April 30, 2005 and April 30,
2006. The chart below sets forth the total amount billed the Company by Staley,
Okada & Partners for services performed in the last two fiscal years and
breaks down these amounts by category of service (for audit fees, audit-related
fees, tax fees and all other fees) in Canadian dollars:

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

Financial Year Ended
    Audit Fees(1)
    Audit Related
      Fees(2)
    Tax Fees(3)
    All Other Fees(4)April 30, 2006
    Cdn.$78,602
    Cdn.$45,044
    Cdn.$22,595
    Cdn$NilApril 30, 2005
    Cdn.$113,461
    Cdn.$32,942
    Cdn.$10,680
    Cdn.$Nil


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

"Audit Fees" are the aggregate fees billed by 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.

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- 54 -

"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 2004
fiscal year are related to quarterly reviews.

LEGAL PROCEEDINGS

The Company is not a party to any legal proceedings and is not
aware of any such proceedings known to be contemplated.

INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

The directors, executive officers and principal shareholders of
the Company or any associate or affiliate of the foregoing have had no material
interest, direct or indirect, in any transactions in which the Company has
participated within the three most recently completed financial years prior to
the date of this Annual Information Form or in the current financial year, and
do not have any material interest in any proposed transaction, which has
materially affected or will materially affect the Company, except as set out
elsewhere in this Annual Information Form or as follows:

TRANSFER AGENTS AND REGISTRARS

The registrar and transfer agent for the common shares of the
Company in British Columbia and Ontario is Computershare Trust Company of
Canada, Vancouver, British Columbia.

MATERIAL CONTRACTS

Other than contracts entered into in the ordinary course of
business, as described in this Annual Information Form, the Company is not a
party to any material contracts entered into since January 1, 2002.

INTERESTS OF EXPERTS

Names of Experts

Information of an economic (including economic analysis),
scientific or technical nature in respect of the Company's El Dorado Property is
contained in this Annual Information Form based upon the Technical Report
entitled "Pre-Feasibility Study, El Dorado Project, El Salvador" dated January
21, 2005 which was prepared by William F. Tanaka, P.Eng. of SRK Consulting (US)
Inc. of Colorado, a member of the Society of Mining Engineers (SME) and the
Australian Institute of Mining and Metallurgy (mAUSIMM) who is a Qualified
Person independent of the Company for the purposes of NI 43-101; ; and
Technical Report on the El Dorado Project Gold and Silver Resources dated July
31, 2006 and co-authored by Mr. Steve Ristorcelli, P.Geo., of Mine Development
Associates and Mr. Peter Ronning, P.Eng., each of whom are independent Qualified
Persons as defined in NI 43-101..

William Gehlen, a Qualified Person as defined in NI 43-101, is
responsible for directing the Company's exploration programs on the El Dorado
project in El Salvador.

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David Ernst, a Qualified Person as defined in NI 43-101, is
responsible for work completed to date on the Company's exploration programs on
the Santa Rita project in El Salvador.

The audited financial statements of the Company are filed in
reliance upon the report of Staley, Okada & Partners, Chartered Accountants
and upon the authority of such firm as experts in accounting and auditing.

Interests of Experts

Based on information provided by the experts, other than as
described below, none of the experts named under "Names of Experts", when or
after they prepared the statement, report or valuation, has received any
registered or beneficial interests, direct or indirect, in any securities or
other property of the Company or of one of the Company's associates or
affiliates (based on information provided to the Company by the experts) or is
or is expected to be elected, appointed or employed as a director, officer or
employee of the Company or of any associate or affiliate of the Company.

William Gehlen is the Vice-President of Exploration of the
Company and David Ernst is an employee of the Company.

ADDITIONAL INFORMATION

Additional information relating to the Company may be found on
SEDAR at www.sedar.com.

Additional information, including directors' and officers'
remuneration and indebtedness, principal holders of the Company's securities,
and securities authorized for issuance under equity compensation plans, where
applicable, is contained in the Company's information circular for its most
recent annual general meeting of securityholders that involved the election of
directors.

Additional financial information is provided in the Company's
consolidated financial statements and management's discussion and analysis for
its most recently completed financial year.

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