EXHIBIT 99.2

MANAGEMENT’S
DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS

DECEMBER
31, 2004 AND 2003

GENERAL

The
following Management's Discussion and Analysis of Southwestern Resources Corp.
(the “Company” or “Southwestern”), dated as at March 14, 2005, should be read in
conjunction with the audited consolidated financial statements including the
notes thereto for the years ended December 31, 2004 and 2003. Southwestern is a
development stage mineral exploration company engaged in the identification,
acquisition, evaluation and exploration of mineral properties, especially with
the potential to host gold, silver and base metals, and is currently active in
China and Peru. The Company is a reporting issuer in British Columbia, Alberta,
Manitoba and Ontario and trades on the Toronto Stock Exchange under the symbol
SWG.

The
Company conducts its exploration independently as well as through joint venture
agreements with third parties whereby a third party earns an interest in the
Company’s property by fulfilling terms as outlined in the agreement. The
majority of joint venture agreements are structured in such a way as to allow an
interested party to earn an interest in a project by making certain expenditures
on the Company’s properties over a period of time. The Company is also involved
in exploration through option or earn-in agreements whereby it provides 100% of
the funding in order to earn a controlling interest in a project owned by a
third party.

Following
the retirement of George H. Plewes on August 1, 2004 the Company appointed W.
David Black, who has been a director of Southwestern since 2000, as Chairman of
the Board of Directors. Mr. Black brings a significant amount of depth and
experience as a result of his long and distinguished career both as a lawyer and
in his capacity as a director for numerous public companies.

The Board
of Directors and management is very grateful to George Plewes, as one of the
founders of Southwestern, for his contribution to the Company's success through
his dedication, insightful guidance and tireless efforts to ensure the financial
health of the Company over the past 14 years. Mr. Plewes will continue his
relationship with the Company as a financial consultant.

OVERALL
PERFORMANCE

During the
year ended December 31, 2004, the Company raised gross proceeds of $40.8 million
by issuing 2,300,000 common shares at a price of $17.75 per share and an
additional $3.3 million pursuant to the exercise of stock options. The funds
raised are being used to continue the extensive drilling program on the Boka
Gold Project, to fund the Company's projects in Peru, and for general working
capital.

In June
2004, the Company received shareholder and regulatory approval for a two-for-one
stock split. The shares commenced trading on a split basis on June 15, 2004.
Disclosure relating to common shares and stock options in the Management’s
Discussion and Analysis and financial statements is presented on a split basis.

The
Company's exploration programs on its three most active projects – the Boka Gold
Project in China and the Liam and Antay projects in Peru – all progressed well
during the year ended December 31, 2004.

Boka
Gold Project – China

The
Company's principal property is the Boka Gold Project in Yunnan Province, China,
which Southwestern acquired in late 2002 and where an extensive drilling program
is presently under way. The Boka Gold Project covers an area of 162.4 square
kilometres of exploration concessions and mining leases located about 150
kilometres north of the capital city of Kunming in northern Yunnan Province and
adjoins, along the southwest edge, the Dongchuan Copper Camp, which has been
mined continuously since the 1950's.

The
Company has earned a 90% interest in the joint venture company which holds the
Boka Gold Project by contributing a total of $4,010,000 to the joint venture
company and making a payment of US$1.7 million to Team 209of the Nuclear
Industry of Yunnan Province (“Team 209”), the joint venture partner. Team 209
retains a 10% carried interest in the joint venture company.



Southwestern
Resources Corp.


The cash
payment of US$1.7 million to Team 209 was made in January 2004 and as a result
Team 209 ceased its small scale mining operations on Boka 1. As at December 31,
2004, the Company had spent an aggregate of approximately $12.2 million
(includes $5.9 million in drilling costs) on the Project including the payment
to Team 209.

Exploration work
focused on drilling the Boka 1 Gold Zone on 100 metre by 50 metre spacing,
extensive soil sampling, structural mapping and follow-up trenching and
tunnelling on gold in soil anomalies.

To date,
81 drillholes have been completed, seven are in progress and the Company has
received assay results for 58 holes. Drill results at Boka 1 North and Boka 1
South have shown good lateral and downdip continuity of the mineralization and
high grade mineralization has been intersected in several holes including 77.45
metres of 10.2 grams per tonne gold in hole B04-49, 59.65 metres of 9.3 grams
per tonne gold in hole B04-53 and 52.25 metres of 7.3 grams per tonne gold in
hole B04-57. Drilling has now extended gold mineralization downdip over 300
metres. It is anticipated that a resource estimate will be available for the
Boka 1 Gold Zone by the end of 2005.

On the
regional soil program, over 9,000 samples have been collected to date on a 200
metre by 100 metre sampling grid. This survey has outlined several significant
gold in soil anomalies which are in the process of being followed up by
trenching and tunnelling. The most advanced follow-up work has been completed on
the Boka 7 Lower Zone anomaly where trenching and tunnelling results delineated
a new gold zone extending for at least 600 metres and up to 10 metres in
thickness. This area is slated for drilling in 2005. In the southwest corner of
the Boka Gold Project, an extensive gold in soil anomaly with values up to two
grams per tonne gold represents an important target for follow-up. This anomaly
is also consistent with broad elevated levels of copper and molybdenum.

Liam
Project – Peru

The
Company's main property in Peru, the Liam Gold-Silver Project, is located about
190 kilometres northwest of the city of Arequipa.

In
November 2003, the Company executed a formal joint venture agreement with
Newmont Peru Limited (“Newmont”) pursuant to which Newmont is earning a 50%
interest in the Company's 100% owned Liam Core Area covering 3,500 hectares by
spending US$5 million over a three year period, including a minimum expenditure
of US$1 million and 5,000 metres of drilling in each year. Newmont has the
option to earn an additional 10% by producing a positive feasibility study and a
further 10% by funding all costs to place the Property into commercial
production.

In
addition, Newmont and Southwestern executed the Liam Regional Joint Venture
Agreement under which both parties contributed exploration concessions covering
a total of 81,789 hectares. Southwestern is the operator of the Liam Regional
Joint Venture and each party is funding 50% of the initial US$5 million of
expenditures over a five year period. In the first year, Newmont spent
approximately US$1.6 million on the Liam Core Area and both partners spent a
combined total of US$1.4 million on Liam Regional during 2004.

An
aggressive program was completed in 2004 on both the Liam Core Zone and the Liam
Regional Zone. The Liam Regional Zone was expanded and now occupies 91,195
hectares of exploration concessions. On the Liam Core Zone, Newmont, as
operator, completed detailed sampling programs, geophysics, metallurgical
studies, diamond drilling and reverse circulation drilling. A total of over
8,000 metres of drilling has now been completed on the Cerro Crespo and Cerro
Queshca areas. The latest drilling has expanded the area of known mineralization
at Cerro Crespo a further 200 metres to the north. This Zone will be tested with
further drilling and Newmont is preparing a resource calculation for the Cerro
Crespo Zone. At Cerro Queshca, several holes intersected significant
mineralization including 24.55 metres of 6 grams per tonne gold and 67.6 grams
per tonne silver. Further drilling is required to determine the extent of this
mineralization.



Southwestern
Resources Corp.


Exploration within
the Liam Regional Zone resulted in the discovery of five gold-silver zones, four
of which are associated with high sulphidation epithermal alteration and the
fifth is located within a low sulphidation epither-mal system. The most
significant of these zones are Astana and Careli. Astana has undergone an
extensive surface channel sampling program over an area of 400 metres by 200
metres with the average of all samples indicating a grade of 0.8 grams per tonne
gold and 65 grams per tonne silver.

Careli is
located in the northeast portion of the Liam Regional Zone near the boundary of
Liam and Minaspata. The area is underlain by a northwest-southeast trending
domal feature extending for 700 metres in length and 200 metres wide in places.
Within the domal feature, altered outcrops of vuggy silica occur within a broad
area of overburden. Sampling of the outcrops indicates values generally between
0.2 grams per tonne to 0.5 grams per tonne gold with isolated areas containing
gold values above 3.0 grams per tonne.

Both the
Astana and Careli zones are slated for drilling in 2005.

Antay
Project – Peru

The Antay
Project, located in southern Peru, is comprised of 50,000 hectares of
exploration concessions owned 100% by Southwestern. On December 23, 2004, the
Company signed a letter agreement with Anglo American Exploration Peru S.A.
(“Anglo”) on the Antay Project. Under the terms of the agreement, Anglo can earn
55% of the Antay Project by funding US$5 million in exploration expenditures
over a five year period. Anglo has a further option to earn 70% of Antay by
funding 100% of a bankable feasibility study. In a separate transaction, Anglo
agreed to acquire US$5 million worth of Southwestern shares over a five year
period payable in US$1 million increments. The first and second year
subscriptions are a firm commitment. However, Anglo has the right to elect not
to subscribe in respect of the third, fourth and fifth year subscriptions.

An
aggressive exploration program was completed during the last quarter and
included collecting 327 rock chip samples, 81 stream sediments, induced
polarization geophysics and mapping of alteration. Results of this program have
conclusively shown that the Property is underlain by a series of mineralized
porphyries and an extensive oxide copper zone in the overlying quartzites. The
largest of the porphyries is Sayta, located in the northern portion of the
concessions with an exposed area of 1,000 metres by 500 metres. Sayta could be
more extensive as it is overlain by quartzites and younger volcanics to the west
and east. At Sayta, oxide copper near the contact with the underlying porphyry
is common and hosted by breccias or distributed as disseminations along bedding.
Sulphides are generally restricted to outcrops in the Livitaca River Valley, the
bottom of which is about 400 metres below the copper oxide zone in quartzites.
Although assay results in the porphyries are quite variable in places, copper
grades can exceed 2% with associated molybdenum and gold.

The Antay
Project has undergone a comprehensive surface exploration program including
extensive rock chip sampling, stream sediment sampling, geological mapping and
induced polarization geophysics. All of this work has shown that the Antay
Property is underlain by several porphyry copper systems. A number of priority
drill targets have been delineated.

Antay
represents a new porphyry copper discovery in Peru and is located in the same
structural belt controlling the Tintaya and Ferrobamba copper camps.

OTHER
PROJECTS

Accha-Yanque
Zinc Project – Peru

Ongoing
exploration within the Accha-Yanque Zinc Project resulted in the discovery of
several new oxide zinc zones within the Ferrobamba Limestone along a 30
kilometre northeast-southwest trending corridor on the western margin of the
Apurimac Batholith. Of these new discoveries, trenching at Azulcancha and
Capayocc exposed significant oxide zinc mineralization over good widths and
strike lengths. As a result of increasing zinc prices, theCompany has decided
to conduct a pre-feasibility study on the Accha-Yanque Project. The Accha
deposit, located in the northeast corner of the Project area, has undergone
scoping studies by Pasminco Limited and Savage Resources Ltd. The scoping study
concluded that Accha contained an indicated and inferred resource of nine
million tonnes grading 9% zinc (prepared pursuant to JORC Code, Australia Code
for Reporting of Mineral Resources and Ore Reserves) in the open pit category.
Underground resources were not included in this calculation. Extensive
metallurgical test work concluded that the Accha mineralization was amenable to
solvent extraction electro-winning (SX-EW) treatment to produce zinc cathode.
The above estimates are historical and are not considered a National Instrument
43-101 defined resource. The Company has not completed the work necessary to
verify the classification of the resource and as such any historical estimates
should not be relied upon.



Southwestern
Resources Corp.


An
aggressive drilling program is planned at Accha to upgrade resources to the
measured category and outline further resources at Azulcancha and Capayocc.

Poracota
Property – Peru

The
Poracota Property in Peru was optioned in 2002 to Compania de Minas Buenaventura
S.A.A. (“Buenaventura”) whereby the Company agreed to sell its 50% interest for
US$4.5 million payable in installments with the largest payment of US$3.9
million due by February 2006. To date, the Company has received US$600,000.
However, the Company has no assurance that the remaining payment of US$3.9
million will be received.

The
Company also holds equity interests in a number of junior mining companies
involved in gold, base metals and diamond exploration in Canada and China. The
aggregate market value of these investments at December 31, 2004 was $9.1
million. (See note 8, “Investments” in the notes to consolidated financial
statements.)

RESULTS OF
OPERATIONS

The
consolidated loss for the years ended December 31, 2004 and 2003 was $18.5
million or $0.44 per share and $8 million or $0.23 per share, respectively,
reflecting an increase of $10.5 million from the previous year.

The
increase arose due to stock-based compensation expense amounting to $12.4
million recorded as a result of grants totalling 1,793,000 stock options at a
weighted-average price of $17.35 to directors, officers, employees and
consultants in Canada, China and Peru.

Effective
January 1, 2004, the Company was required to record stock-based compensation
expense for all stock option grants during the year using a fair value based
method. The fair value computed using the Black-Scholes model is only an
estimate of the potential value of the individual options and does not affect
the Company's equity nor is the Company required to make any payments for such
transactions. (See “Critical Accounting Policies and Estimates.”)

General
and administrative expense increased by approximately $757,000 from the previous
year mainly due to an increase in salaries and consulting fees, shareholder
information expense, legal and accounting fees and general office overhead and
insurance costs.

General
exploration expense relates to expenditures of a general reconnaissance nature
along with some of the costs of maintaining the Company's foreign exploration
offices. General exploration expense was slightly higher in 2004 due to general
reconnaissance work conducted in China.

During the
year ended December 31, 2004, the Company wrote off $3.2 million in resource
property expenditures relating to various non-core properties in Peru ($1.5
million) and the Tecka Project in Argentina ($1.7 million). The Company
discontinued funding exploration on the Tecka Project in early 2003 after
conducting an initial exploration program. In comparison, $1.9 million was
written off in 2003.



Southwestern
Resources Corp.


Foreign
exchange gains and losses result primarily from the translation of US dollar
denominated monetary assets to Canadian dollars. The foreign exchange loss
recorded in 2004 reflects, on average, a strengthening of the Canadian dollar
since December 31, 2003.

Interest
and other income of $1,127,000 for the year ended December 31, 2004 is comprised
of interest earned on cash balances as well as management fees charged to
affiliated companies pursuant to administrative services agreements. The
increase is attributable to interest earned on higher cash balances resulting
from financings completed in late 2003 and early 2004.

The gain
on sale of investment of $108,000 (2003 – $40,000) relates to the sale of shares
of Consolidated Jaba Inc., an investment the Company had written off in 2002.

The
Company holds an equity interest in Aurora Platinum Corp. (“Aurora”) and
Superior Diamonds Inc. (“Superior”). During the year ended December 31, 2004,
the Company recorded a gain of $458,000 as its equity in the operations of
affiliated companies compared with losses of $1,280,000 during 2003. The net
gain recorded in 2004 relates to the Company's share of gains and losses
recorded by Aurora (gain of $597,000) and Superior (loss of $139,000) during the
year. The loss in 2003 was recorded as a result of the one time write off of
Canabrava Diamond Corporation's Brazilian operations. The Company also recorded
a deemed disposition gain of $537,000 (2003 – $174,000) as a result of share
issuances by Aurora and Superior.

Gains on
shares issued by affiliated companies arise when the ownership interest of the
Company in a significant-ly influenced or controlled company is diluted as a
result of share issuances of the investee company. The Company does not receive
any cash proceeds (nor is required to make any payments) from such transactions.

Equity in
operations of affiliated companies represents the Company's share of the net
gains or losses for the reporting period in a significantly influenced company.

ANNUAL
FINANCIAL INFORMATION

The
following selected consolidated financial data has been prepared in accordance
with Canadian generally accepted accounting principles and should be read in
conjunction with the Company's audited consolidated finan-cial statements. All
dollar amounts are in Canadian dollars.

FOR THE YEARS
      ENDED DECEMBER 31
    
    2004
    
    2003
    
    2002(All
      numbers are in thousands except per share amounts)FINANCIAL
      RESULTSINTEREST AND
      OTHER INCOME
    
    
    1,127
    
    
    445
    
    
    383NET
      LOSS
    
    
    (18,525
    )
    
    (8,049
    )
    
    (13,872
    )LOSS PER
      SHARE*
    
    
    (0.44
    )
    
    (0.23
    )
    
    (0.44
    )FINANCIAL
      POSITIONWORKING
      CAPITAL
    
    
    48,260
    
    
    23,414
    
    
    5,034MINERAL
      PROPERTIES
    
    
    23,587
    
    
    15,526
    
    
    12,241TOTAL
      ASSETS
    
    
    82,179
    
    
    45,264
    
    
    24,426SHARE
      CAPITAL
    
    
    149,476
    
    
    107,635
    
    
    80,879DEFICIT
    
    
    (83,800
    )
    
    (62,275
    )
    
    (57,226
    )NUMBER OF
      COMMON SHARES ISSUED AND OUTSTANDING
    
    
    42,786
    
    
    39,122
    
    
    33,096


*Loss per
share is calculated based on the weighted-average number of shares
outstanding.



Southwestern
Resources Corp.


As at
December 31, 2004, there were 2,702,000 stock options outstanding and
exercisable. There were no warrants outstanding.

QUARTERLY
FINANCIAL INFORMATION

2004 FISCAL
      QUARTER ENDED
    
    4th
      Quarter December 31,2004
    
    3rd
      Quarter September 30, 2004
    
    2nd
      Quarter June 30, 2004
    
    1st
      Quarter March 31, 2004(All
      numbers are in thousands except per share amounts)INTEREST AND
      OTHER INCOME
    
    
    342
    
    
    311
    
    
    280
    
    
    194NET
      LOSS
    
    
    (1,238
    )
    
    (1,375
    )
    
    (4,085
    )
    
    (11,827
    )LOSS PER
      SHARE*
    
    
    (0.02
    )
    
    (0.02
    )
    
    (0.10
    )
    
    (0.30
    )
2003 FISCAL
      QUARTER ENDED
    
    4th Quarter
      December 31,2003
    
    3rd Quarter
      September 30, 2003
    
    2nd Quarter
      June 30, 2003
    
    1st Quarter
      March 31, 2003INTEREST AND
      OTHER INCOME
    
    
    169
    
    
    100
    
    
    103
    
    
    73NET
      LOSS
    
    
    (996
    )
    
    (925
    )
    
    (3,240
    )
    
    (2,888
    )LOSS PER
      SHARE*
    
    
    (0.02
    )
    
    (0.02
    )
    
    (0.10
    )
    
    (0.09
    )


*Loss per share is
calculated based on the weighted-average number of shares outstanding.

An
analysis of the quarterly results over the last eight quarters reflects large
variations in the first and second quarters between 2004 and 2003. During the
first quarter of 2004, the increase was mainly due to stock-based compensation
while the increase in the second quarter was due to the write off of certain
non-core properties in Peru and Argentina.

FINANCIAL
CONDITION, LIQUIDITY AND CAPITAL RESOURCES

The
Company is not in commercial production on any of its mineral properties and,
accordingly, it does not generate cash from operations. The Company finances its
activities by raising capital through the equity markets. The Company is in
excellent financial condition with no long-term debt and working capital as at
December 31, 2004 of $48.3 million compared with $23.4 million as at December
31, 2003.

The
increase in working capital of $24.9 million is attributed to net proceeds of
$41.8 million from equity financings and the exercise of stock options which was
partially offset by mineral property and property, plant and equipment
expenditures of $11.5 million ($11 million on a cash basis), net increase in
investments due to share purchases of $1.4 million and operating expenditures of
$4.0 million.

In March
2004, the Company received gross proceeds of $40,825,000 through the issuance of
2,300,000 common shares at a price of $17.75 per share to a syndicate of
underwriters. The underwriters received a commission of 5% of gross proceeds.

The
carrying value of mineral properties increased by $8.0 million reflecting
exploration expenditures of $8.9 million incurred in China, mainly on the Boka
Gold Project, and $2.3 million in Peru. The expenditures are offset by mineral
property costs written off relating to projects in Peru and Argentina amounting
to $3.2 million.

In March
2004, the Company acquired 1.4 million shares of Maxy Gold Corp. pursuant to the
exercise of 1.4 million warrants at a price of $0.40 per share for $560,000 and
137,000 shares of Aurora pursuant to the exercise of 137,000 warrants at a price
of $2.50 per share for $342,500. The Company also acquired 1.5 million shares of
Superior at a price of $0.40 per share for $600,000.

As a
result of equity gains and share purchases, the total carrying value of
investments increased by $2.5 million.

The
Company has commitments totalling $187,546 over two years (2005 – $132,386; 2006
– $55,160) pertaining to its leasehold obligations. With respect to other
contractual obligations, there are no material changes during the current year
that are outside the ordinary course of the Company’s business.



Southwestern
Resources Corp.


CRITICAL
ACCOUNTING POLICIES AND ESTIMATES

Acquisition costs
of mineral properties together with direct exploration and development
expenditures are capitalized. When production is attained, these costs will be
amortized. When capitalized expenditures on individual properties exceed the
estimated net realizable value, the properties are written down to the estimated
value. Costs relating to properties abandoned are written off when the decision
to abandon is made.

Investments in
corporations in which the Company exercises significant influence are accounted
for using the equity method, whereby the investment is initially recorded at
cost and is adjusted to recognize the Company’s share of earnings or losses and
reduced by dividends and distributions received. Other investments are accounted
for using the cost method. Impairments in value, other than those that are
temporary in nature, are recorded as a charge to operations.

The
Company’s financial assets and liabilities are cash and cash equivalents,
exploration advances and other receivables, note receivable, investments and
accounts payable and accrued charges. The fair values of these financial
instruments are estimated to be their carrying values due to their short-term or
demand nature. Cash and cash equivalents includes those short-term money market
instruments which, on acquisition, have a term to maturity of three months or
less and expose the Company to minimal risk.

Effective
January 1, 2004, the Company adopted the amended recommendations of the Canadian
Institute of Chartered Accountants (the “CICA”) for accounting for “Stock-Based
Compensation and Other Stock-Based Payments.” Under the CICA's amended
recommendations, the fair value of all stock-based awards is estimated using the
Black-Scholes model at the date of grant and is expensed to operations over each
award's vesting period. Previously, the Company used the intrinsic value method
for valuing stock-based compensation awards granted to employees and directors
where compensation expense was recognized for the excess, if any, of the quoted
market price of the Company's common shares over the common share exercise price
on the day that the options were granted, and provided note disclosure of pro
forma net loss as if the fair value based method had been applied to stock
options granted after January 1, 2002. The amended recommendations applied
retroactively, with restatement of prior periods, and for the year ended
December 31, 2003, had the effect of increasing net loss by $321,000, and
increasing deficit and contributed surplus by $684,000. For the year ended
December 31, 2002, the effect was an increase in the Company’s net loss and
deficit by $363,000.

For the
year ended December 31, 2004, the total compensation expense related to the fair
value of stock options was $12,377,000 (2003 – $728,000). These fair values were
determined using the Black-Scholes options pricing model with the following
weighted-average assumptions: no dividends are to be paid; expected volatility
of 47% (2003 – 96%); risk-free interest rates of 5% (2003 – 5%) and expected
life of 3.5 years (2003 – 5 years).

With
respect to Asset Retirement Obligations, application of the new standard would
have no impact on the Company’s financial disclosure.

RELATED PARTY
TRANSACTIONS

During the
year ended December 31, 2004, the Company paid a total of $808,781 (2003 –
$520,573) in consulting and management fees to directors and companies
controlled by John Paterson, President and CEO, and Daniel Innes, Vice
President, Exploration. Fees paid to Mr. Paterson and Mr. Innes are charged on a
per diem basis while the former and current Chairman's compensation is based on
a monthly fee. The current Chairman, who is an independent director, receives a
monthly fee of $10,000 ($40,000 was paid in 2004), and two other independent
directors received fees totalling $41,250 in 2004. The Company received
management fees totalling $192,000 (2003 – $240,000) from Aurora ($8,000 per
month), Superior ($4,000 per month) and Lake Shore Gold Corp. ($4,000 per
month).



Southwestern
Resources Corp.


CORPORATE
GOVERNANCE

The
concept of corporate governance has become an integral part of every public
company's day-to-day existence. The Company's Board of Directors follows
recommended corporate guidelines for public companies to ensure transparency and
accountability to shareholders.

The
current Board of Directors is comprised of five individuals, three of whom are
neither officers or employees of the Company and are unrelated in that they are
independent of management. The audit committee is comprised of three directors
who are independent of management. Two of the three audit committee members are
professional accountants.

The Audit
Committee fulfills its role of ensuring the integrity of the reported
information through its review of the interim and audited annual financial
statements prior to their submission to the Board of Directors for approval. The
audit committee meets with management quarterly to review the financial
statements including the MD&A and to discuss other financial, operating and
internal control matters.

Management
is responsible for the preparation and integrity of the financial statements and
maintains appropriate information systems, procedures and controls to ensure
that information used internally and disclosed externally is complete and
reliable. The Company has also undertaken the task of evaluating the internal
controls and disclosure controls in order to comply with certification
requirements of Sections 404 and 302 of the Sarbanes-Oxley Act.

RISKS AND
UNCERTAINTIES

The
business of mineral deposit exploration and extraction involves a high degree of
risk. Few properties that are explored are ultimately developed. At present,
none of the Company's properties has a known body of commercial ore. Other risks
facing the Company include share price volatility, uncertainty of additional
financing, competition, title risks, political, environmental and insurance
risks, fluctuations in mineral prices and foreign currencies, risks relating to
statutory and regulatory compliance as well as political and economic
uncertainty in developing countries. The specifics of the Company's “risks” are
detailed in disclosures with the heading “Risk Factors” in the Company's
periodic filings with securities regulators.

OUTLOOK

The
Company expects to focus the majority of its exploration activities in China and
Peru and will continue to seek opportunities to form additional joint ventures
in order to reduce shareholder risk. As a mineral exploration company, the
future liquidity of Southwestern will be affected principally by the level of
exploration expenditures and by its ability to raise capital through the equity
markets. In management's view, the Company's cash position is more than
sufficient to fund planned exploration expenditures and meet ongoing obligations
as they become due.

ADDITIONAL
INFORMATION

Additional
information is provided in the Company's audited consolidated financial
statements for the years ended December 31, 2004 and 2003 and the Company's
Annual Information Form and Information Circular. These documents are available
on SEDAR at www.sedar.com.



Southwestern
Resources Corp.