PACIFIC RIM MINING CORP.

(an exploration stage enterprise)

CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2011 and 2010

Expressed in US Funds

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING

Management is responsible for the integrity and fair presentation of the financial information contained in this annual report. Where appropriate, the financial information, including financial statements, reflects amounts based the best estimates and judgments of management. The financial statements have been prepared in accordance with accounting principles generally accepted in Canada and reconciled to accounting principles generally accepted in the United States as set out in note 13.

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Any system of internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Management has a process in place to evaluate internal control over financial reporting based on the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework.

The Board of Directors oversees management’s responsibility for financial reporting and internal control systems through an Audit Committee, which is composed entirely of independent directors. The Audit Committee reviews the financial statements and recommends their approval to the Board of Directors. The Company’s independent auditors have full access to the Audit Committee, with and without management being present. The Audit Committee meets periodically with management and the independent auditors to review the financial statements and related financial reporting and internal control matters before the financial statements are approved by the Board of Directors and submitted to the shareholders.

Management has evaluated the effectiveness of the Company’s disclosure controls and procedures and has assessed the design and operating effectiveness of the Company’s internal control over financial reporting as at April 30, 2011. The Company has not changed its internal controls over financial reporting during the twelve months ended April 30, 2011 in a manner that has materially affected, or is reasonably likely to materially affect, its control over disclosures or its control over financial reporting. Based on our assessment, management has concluded that, as at April 30, 2011, the Company’s internal control over financial reporting was not effective due to the existence of a material weakness. A material weakness existed in the design of internal control over financial reporting caused by a lack of adequate segregation of duties in the financial close process. The Chief Financial Officer is responsible for preparing, authorizing, and reviewing information that is key to the preparation of financial reports. He is also responsible for preparing and reviewing the resulting financial reports. This weakness has the potential to result in material misstatements in the Company’s financial statements, and should also be considered a material weakness in its disclosure controls and procedures.

Management has concluded, and the audit committee has agreed that taking into account the present stage of the Company/s development, the Company does not have sufficient size and scale to warrant the hiring of additional staff to correct the weakness at this time.

The effectiveness of the Company’s internal control over financial reporting has not been audited by the independent auditors as it was not a legal requirement for the year ended April 30, 2011.

PricewaterhouseCoopers LLP, our independent auditors, appointed by the shareholders, have audited our financial statements in accordance with Canadian generally accepted auditing standards and their report follows.

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Independent Auditor’s Report

To the Shareholders
of Pacific Rim Mining Corp

We have audited the accompanying consolidated financial statements of Pacific Rim Mining Corp. which comprise the consolidated balance sheets as at April 30, 2011 and April 30, 2010 and the consolidated statements of loss, shareholders’ equity, cash flows and comprehensive loss for each of the years in the three year period ended April 30, 2011, and the related notes including a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Canadian generally accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. Canadian generally accepted auditing standards require that we comply with ethical requirements.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. We were not engaged to perform an audit of the company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Pacific Rim Mining Corp. as at April 30, 2011 and 2010 and the results of its operations and its cash flows for each of the years in the three year period ended April 30, 2011 in accordance with Canadian generally accepted accounting principles.

Emphasis of matter
Without qualifying our opinion, we draw attention to Note 1 in the consolidated financial statements which discloses conditions and matters that indicate the existence of a material uncertainty that may cast significant doubt about Pacific Rim Mining Corp.’s ability to continue as a going concern.

(signed) PricewaterhouseCoopers LLP

Chartered Accountants
Vancouver, B.C., Canada
July 27, 2011

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“Thomas Shrake”, Director

“David Fagin”, Director

- The accompanying notes are an integral part of these consolidated financial statements -

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- The accompanying notes are an integral part of these consolidated financial statements -

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- The accompanying notes are an integral part of these consolidated financial statements -

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- The accompanying notes are an integral part of these consolidated financial statements -

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a) Consolidation

These consolidated financial statements are presented in accordance with generally accepted accounting principles (“GAAP”) applicable in Canada and have been reconciled to significant differences in measurement to generally accepted accounting principles applicable in the United States as disclosed in Note 13.

These consolidated financial statements include the accounts of the Company’s wholly-owned subsidiaries, Dayton Mining (U.S.) Inc., Pacific Rim Exploration Inc., Pacific Rim Cayman, Pacific Rim El Salvador S.A. de C.V., Dorado Exploraciones S.A. de C.V., Minera Verde S.A., Pacrimco S.A., Pac Rim Caribe III and its wholly-owned subsidiaries International Pacific Rim S.A and Pacific Rim Chile Limitada.

b) Cash and Cash Equivalents

Cash and cash equivalents consist of cash on deposit with banks and short-term interest-bearing investments with maturities of three months or less at the purchase date. Cash and cash equivalents are designated as held for trading and are recorded at fair value with unrealized gains and losses recorded in the statement of loss.

c) Short Term Investments

Short term investments are comprised of interest-bearing deposits with a term to maturity from inception of greater than three months and less than one year. These investments are designated as held for trading and are recorded at fair value with unrealized gains and losses recorded in the statement of loss.

d) Property, Plant and Equipment

Property, plant and equipment are stated at cost as at the date of acquisition less accumulated depreciation and accumulated write-downs. The Company provides for amortization on equipment using the straight-line method over their useful lives as follows:

e) Mineral Properties

The Company is in the process of exploring various mineral properties. All exploration expenditures are expensed as incurred. Property acquisition payments for active exploration properties are capitalized. If no mineable ore body is discovered, previously capitalized costs are expensed in the period the property is abandoned, sold or determined to be impaired.

Management reviews and evaluates the carrying value of its mineral properties for impairment when events or changes in circumstances indicate that the carrying amount of the related asset may not be recoverable. If the total estimated future operating cash flows on an undiscounted basis are less than the carrying amount of the asset, an impairment loss is recognized and assets are written down to fair value which is normally determined using the discounted value of future cash flows. Where estimates of future net cash flows are not available and where other conditions suggest impairment, management assesses whether carrying value can be recovered by considering alternative methods of determining fair value. When it is determined that a mineral property is impaired it is written down to its estimated fair value.

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

f) Asset Impairment

Reviews are undertaken to evaluate the carrying values of property, plant and equipment and mineral properties when events or changes in circumstances indicate that carrying values may not be recoverable. When information is available and conditions suggest a potential impairment, estimated future net cash flows for the mine or property are calculated using estimated future prices, mineral resources and operating, capital and reclamation costs on an undiscounted basis. When estimated future cash flows are less than the carrying value, the project is considered impaired. Reductions in the carrying value of the mine or property are recorded to the extent the net book value exceeds fair value, estimated using the discounted future cash flows, through a charge to earnings.

g) Asset Retirement Obligations

The Company recognizes asset retirement obligations at fair value in the period in which the liability is incurred. Fair value is determined based on the estimated future cash flows required to settle the liability discounted at the Company’s credit adjusted risk free interest rate. The liability is adjusted for changes in the expected amounts and timing of cash flows required to discharge the liability and accreted over time to its full value. The associated asset retirement costs are capitalized as part of the carrying amount of the related long-lived asset and amortized over the expected useful life of the asset.

h) Income Taxes

Current income taxes are recorded based on estimated income taxes payable for the current year. Future income tax assets and liabilities are recognized for temporary differences between the tax and accounting bases for assets and liabilities using substantively enacted tax rates for the periods in which the differences are expected to reverse. The amount of future income tax assets recognized is limited to the amount that is more likely than not to be realized.

i) Share Capital

Share capital issued as non-monetary consideration is recorded at an amount based on fair market value of the shares issued.

The proceeds from the issue of units is allocated between common shares and common share purchase warrants on a pro-rated basis on a relative fair value as follows: the fair value of common shares is based on the price at market close on the date the units are issued and the fair value of the common share purchase warrants is determined using a Black-Scholes pricing model.

j) Stock-based Compensation

All stock-based awards made to employees and non-employees are measured and recognized using the Black-Scholes fair value based method. For employees, the Company recognizes stock based compensation expense based on the estimated fair value of the options on the date of the grant. For non-employees, the fair value of the options is measured on the earlier of the date at which the counterparty performance is complete or the date the performance commitment is reached or the date at which the equity instruments are granted if they are fully vested and non-forfeitable. The fair value of the options is recognized over the vesting period of the options granted as stock based compensation expense and corresponding adjustment to contributed surplus. The number of options expected to vest is periodically reviewed and the estimated option forfeiture rate is adjusted as required throughout the life of the option. Upon exercise these amounts are transferred to share capital.

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k) Earnings (Loss) per Share

Basic earnings (loss) per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding during the period. The dilutive effect of outstanding options and warrants and their equivalents is reflected in diluted earnings per share by application of the treasury stock method. In periods where a loss is incurred, the conversion, exercise or contingent issuance of securities has not been included in the calculation as increasing the number of shares outstanding would be anti-dilutive.

l) Foreign Currency Translation

The Company’s functional and reporting currency is the United States dollar. Transactions denominated in other currencies are translated into their United States dollar equivalents at exchange rates prevailing at the transaction date. Carrying values of monetary assets and liabilities denominated in foreign currencies are adjusted at each balance sheet date to reflect exchange rates prevailing at that date. Gains and losses on translation are included in determining net income for the period.

The accounts of the Company’s foreign subsidiaries, all of which are considered to be integrated foreign operations, are translated into the functional currency using the temporal method as follows:

m) Use of Estimates

The preparation of financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions that affect the reported amounts in these financial statements and accompanying notes. Significant areas of estimation relate to the assessment of impairment of mineral claim interests, stock-based compensation, future site restoration costs, and the future income tax asset valuation allowance. Actual results could differ from these estimates. By their nature, these estimates are subject to a degree of uncertainty, and the impact on the financial statements of future changes in such estimates could be material.

n) Financial Instruments

Financial assets and financial liabilities are recognized on the balance sheet when the Company becomes a party to contractual provisions of the financial instrument. All financial instruments are measured at fair value on initial recognition. Measurement in subsequent periods depends on whether the financial instrument has been classified as held-for-trading, available-for-sale, held-to-maturity, loans and receivables or other liabilities.

Financial assets and financial liabilities held-for-trading are measured at fair value with gains and losses recognized in the Company’s loss for the year. Financial assets held-to-maturity, loans and receivables and financial liabilities, other than those held-for-trading, are measured at amortized cost using the effective interest method of amortization. Available-for-sale financial assets are measured at fair value with unrealized gains and losses including changes in foreign exchange rates being recognized in other comprehensive income (“OCI”) upon adoption.

The Company has classified each of its significant categories of financial instruments as follows:

Amounts due to and from related parties are carried at cost.

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a) Business combinations

In January 2009, the CICA issued Handbook Section 1582, Business Combinations, which establishes new standards for accounting for business combinations. This is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2011. Early adoption is permitted. The Company has elected to early adopt this standard effective May 1, 2010. The adoption of this standard did not have any impact on the Company’s financial position, earnings or cash flows.

b) Non-controlling interest

In January 2009, the CICA issued Handbook Section 1602, Non-controlling Interests, to provide guidance on accounting for non-controlling interests in a subsidiary in consolidated financial statements subsequent to a business combination. The section is effective for fiscal years beginning on or after January 2011. Early adoption is permitted. The Company has elected to early adopt this standard effective May 1, 2010. The adoption of this standard did not have any impact on the Company’s financial position, earnings or cash flows.

a) Fair value

The Company’s financial instruments consist of cash and cash equivalents, restricted cash, short-term investments, receivables, deposits, and accounts payable and accrued liabilities. Cash and cash equivalents, short-term investments andrestricted cash are carried at fair value using a level 2 fair value measurement. The carrying value of the receivables, deposits and prepaids and accounts payable and accrued liabilities approximate their fair value because of the short term nature of these instruments. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, price or credit risks arising from its financial instruments.

b) Management of financial risk

(i) Market Risks

Commodity Price Risk

The Company is subject to price risk from fluctuations in the market price of gold which in turn is affected by numerous factors including central bank policies, producer hedging activities, the value of the US dollar relative to other major currencies, global demand and supply and global political and economic conditions. The Company closely monitors commodity prices to determine the appropriate course of action to be taken by the Company. The carrying value of the Company’s mineral property costs could be adversely affected by any reductions in the long term prices of gold.

Foreign Currency Risk

The Company’s exposure to foreign currency risk is primarily related to Canadian dollar-denominated transactions. The Company does not enter into foreign exchange contracts to manage this exposure. At April 30, 2011 the impact of a 10% depreciation or appreciation of the US dollar against the Canadian dollar would result in an increase or decrease of $102 in the Company’s net earnings.

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(ii) Liquidity Risk

Liquidity risk is the risk that the Company will encounter difficulty in raising funds to meet its operating commitments. The Company seeks to manage liquidity by maintaining adequate cash and cash equivalent balances to meet its short term commitments and by raising equity or debt financing as required to meet long term commitments. As disclosed in note 1, the Company has no assurance that such financing will be available or be available on favourable terms. Factors that could affect the availability of financing include Pacific Rim’s performance as measured by various factors including the progress and permitting of the El Dorado project, the state of international debt and equity markets, investor perceptions and expectations and the global financial and metals markets.

The following table summarizes the remaining contractual maturities of the Company’s financial liabilities and operating and capital commitments at April 30, 2011:

(iii) Interest Rate Risk

The Company does not have significant interest rate risk as all short term investments are held in instruments with guaranteed interest rates.

(iv) Credit risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The maximum credit risk the Company is exposed to is 100% of cash, short term investments, and receivables and deposits.

Properties

a) El Dorado

The Company holds a 100% interest in certain mineral properties in El Salvador known as El Dorado. El Dorado is subject to a 3% net smelter return royalty. Pacific Rim has the right to buy back the royalty for $1 million for the first 1.5% and $3 million for the second 1.5%, provided that at least one half of the royalty is acquired within six months of the commencement of commercial production.

An Environmental Impact Study has been submitted to governmental authorities for their consideration and requires approval before the exploration licence can be converted to an exploitation concession which is required to carry out mining in the licence area.

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In meeting its responsibilities, a mine design for the Company’s El Dorado gold project was submitted to the Government of El Salvador in its final form in October 2006. The issuance of the permit remains outstanding and consequently the Company has concluded it must seek a legal remedy to secure its right to develop the El Dorado project.

On April 30, 2009 Pac Rim Cayman LLC, a Nevada corporation and a wholly-owned subsidiary of Pacific Rim Mining Corp. filed international arbitration proceedings against the Government of El Salvador under the Central America-Dominican Republic-United States of America Free Trade Agreement ("CAFTA") in its own name and on behalf of its three wholly-owned El Salvadoran enterprises, Pacific Rim El Salvador, Sociedad Anónima de Capital Variable and Dorado Exploraciones, Sociedad Anónima de Capital Variable.

The arbitration will be administered under the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States and under the Rules of Procedure for Arbitration Proceedings of the International Centre for Settlement of Investment Disputes ("ICSID"). ICSID is an affiliate of the World Bank and is headquartered in Washington, D.C.

On May 31, and June 1, 2010, hearings on a preliminary objection filed by the GOES, which sought to dispose of nearly all of the claims brought by PacRim against GOES under CAFTA and the Investment Law of El Salvador, were held. On August 2, 2010 the ICSID tribunal panel that is hearing the investment claims of PacRim against the GOES, and that presided over the Preliminary Objection hearings, ruled in favour of PacRim, rejecting all of the arguments made by the GOES in its Preliminary Objection.

Between May 2 and 4, 2011, hearings on a jurisdiction objection filed by the GOES in relation to PacRim’s action under CAFTA and the Investment Law of El Salvador took place at the ICSID headquarters in Washington, DC. The purpose of these objection hearings was for the ICSID Tribunal to hear objections filed by the GOES in August 2010 wherein the GOES asserts that ICSID does not have jurisdiction to hear PacRim's claims under CAFTA or the Investment Law based largely on timing and nationality issues. A ruling on the Jurisdiction Objection is not expected until late calendar 2011.

The Company is unable to determine an outcome of the jurisdiction objection and is also unable to determine the outcome of its international arbitration proceedings against the GOES under CAFTA. As at April 30, 2011, the Company has now incurred $3.8 million in preliminary objections relating to its arbitration proceedings.

Measurement uncertainty:

The Company’s activities in El Salvador are subject to the effects of changes in legal, tax and regulatory regimes, national and local political issues, labour and economic developments and government bureaucracy. The Company has experienced lengthy delays in the processing of the El Dorado exploitation concession application and has commenced a legal claim under CAFTA as noted above. In addition, because of CAFTA, the Company has not had the ability to confirm or renew its exploration licences as a result of the claims that are under the CAFTA arbitration. If the Company is unsuccessful in obtaining a permit for El Dorado or in its CAFTA claim, or is impacted by other factors beyond the control of the Company, this would adversely impact operations in El Salvador or result in the impairment of the El Dorado property in the future; such impairment could be material.

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b) Other El Salvador Properties

By agreement dated February 6, 2006, the Company agreed to acquire from a consortium of private companies a 100% interest in an El Salvador exploration concession to be known as the Zamora property. Upon TSX approval of the original agreement, the Company was required to make a payment of 50,000 shares. The agreement was amended in September 2006 to include the acquisition of a 100% interest in the Cerro Colorado claims while maintaining the provisions in the agreement for the Company’s acquisition of the Zamora claims. The agreement was amended in February 2010 to adjust the fourth anniversary payment date to be the earlier of the date the Company receives confirmation that the Government of the Republic of El Salvador has granted a mining exploitation concession for the El Dorado Project and February 11, 2015. Under the terms of the amended agreement, the Company maintains an option to purchase the exploration concessions by making advance royalty payments as follows:

The advance royalty payments will continue until production is achieved or the exploration concessions expire. Title to 100% of the Cerro Colorado and Zamora claims will be transferred to the Company at such time as a positive production decision is made by the Company. Upon achievement of commercial production from the Cerro Colorado or Zamora claims, the vendor will receive a 3% net smelter royalty to a maximum purchase price of $10,000 (inclusive of the value of the advance royalty payments made).

Upon TSX approval of the original agreement, 50,000 shares were issued on March 8, 2006. Upon TSX approval of the 2006 amended agreement, 100,000 shares and 100,000 warrants of the Company were issued on November 8, 2006. On February 13, 2007, February 11, 2008, and February 12, 2009 100,000 and 140,000, and 1,118,182 common shares respectively were issued pursuant to the first, second and third anniversary payments.

c) Panama

During the year, the Company, through its Panamanian subsidiary Minera Verde S.A. (“Minera Verde”), has signed a binding Letter of Intent with Compania Minera Clifton S.A. (“Minera Clifton”) to acquire a 100% interest in the Remance project located in Panama, Central America. The Formal Agreement, once executed, will grant Minera Verde the exclusive right and option (the “Option”) to acquire Minera Clifton’s right, title and interest in the Remance project. The Company is currently seeking comfort from the government of Panama that the exploitation concession will be renewed before executing the formal agreement.

The Option may be exercised by the Company by completing the following terms:

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d) Nevada, USA

During the year, the Company, through its US subsidiary Pacific Rim Exploration Ltd. (“PREx”), has signed a Letter of Intent with ICN Resources Ltd. (“ICN”) and Washoe Gold Inc. (“WGI”) to acquire a 65% interest in the Hog Ranch Property located in Washoe County, Nevada.

The Company is required to spend an aggregate of $8 million in exploration expenditures and to issue an aggregate of 1 million common shares of Pacific Rim according to the following schedule:

Share payments of up to 1.0 million shares as follows:

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

Sale of Denton-Rawhide Joint-Venture

On October 28 2008, the Company sold its 49% interest in the Denton Rawhide mine and its interest in the agreement with the Nevada Resource Recovery Group LLC (“NRRG”) to Kennecott Rawhide Mining Company for cash proceeds of $3.1 million.

In addition, the Company had the right to a 49% interest in all dore produced and shipped from the Rawhide Mine on or before December 31, 2008 and was responsible to fund its proportionate 49% share of all cash calls for normal operating costs up to and including December 31, 2008. This contingent consideration was received and recorded in the year ended April 30, 2009.

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Pursuant to the terms of the sale agreement, and subsequent to December 31, 2008, the Company is responsible for its proportionate share of reclamation and environmental closure costs exceeding $7 million related to the Denton Rawhide mine. The Company has not accrued any closure costs for amounts greater than $7 million as at April 30, 2011. The Company estimates total reclamation and environmental closure costs to be $4.9 million. The Company believes the contingent liability relating to the reclamation and environmental closure costs exceeding $7 million is unlikely. Therefore no amount has been recorded as a liability for these costs.

Also as a result of the sale, in the fiscal year ending April 30, 2009, an unrealized gain of $197 from the mine closure fund previously recognized as other comprehensive income was reclassified as part of the gain on disposal in the statement of loss as the mine closure fund was part of the assets disposed of.

The Company realized a gain on sale of net assets and the results of operations for the year ended April 30, 2009 of $1,239, net of tax as follows:

In addition to the net gain on disposal of $1,239, the Company recorded operating results for discontinued operations as follows:

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Common Shares

Authorized: Unlimited number of common shares

Private Placement Financing

During the year ended April 30, 2011, the Company closed a private placement with the issuance of 19,600,000 Units at a price of Cdn$0.17 per Unit for gross proceeds of $3,287 (Cdn$3,332). The Company allocated $2,872 to the common shares and $415 to the share purchase warrants based upon the relative fair values. Each Unit is comprised of one common share and one half of one common share purchase warrant. Each warrant will entitle the holder to acquire one common share of the Company for a period of two years from the closing date at a price of Cdn$0.30.

The finders were issued a total of 660,000 Units. The Company allocated $97 to the common shares and $14 to the share purchase warrants based upon the relative fair values. The finders were also issued 660,000 warrants, the warrants having the same terms as the warrants issued under the Units and having a fair value of $32.

During the prior year ended April 30, 2010, the Company closed a private placement with the issuance of 11,775,000 Units at a price of Cdn$0.20 per Unit for gross proceeds of $2,271 (Cdn $2,355). The Company allocated $1,331 to the common shares and $940 to the share purchase warrants based upon the relative fair values. Each Unit is comprised of one common share and one common share purchase warrant. Each warrant will entitle the holder to acquire one common share of the Company for a period of three years from the closing date at a price of Cdn$0.30

The finders were issued a total of 483,000 Units with these Units having the same terms as the Units issued to the placees. The Company allocate $54 to the common shares and $39 to the share purchase warrants based upon the relative fair values. The finders were also issued 483,000 warrants, the warrants having the same terms as the warrants issued under the Units and having a fair value of $66.

The allocation of fair value of the units and warrants issued during the current year and prior year was estimated using the Black-Scholes option pricing model with the following weighted average assumptions:

Warrants

A summary of the Company’s warrants is as follows:

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At April 30, 2011, there were 23,531,000 (April 30, 2010 – 19,802,350) warrants outstanding with a weighted average exercise price of Cdn$0.30.

* Exercise of these warrants can be accelerated should the Company’s stock trade above a weighted average price of Cdn$0.40 for 20 consecutive days and the Company receives an approved environmental permit for its El Dorado property in El Salvador.

** Exercise of these warrants can be accelerated should the Company’s stock trade above a weighted average price of Cdn$0.50 for 20 consecutive days.

The 7,061,350 warrants were modified in the prior year to have an expiry date of August 29, 2010 instead of August 29, 2009. These extended warrants were allocated an incremental fair value of $213 with a weighted-average fair value of $0.03 and the cost was recorded as financing cost.

The allocation of fair value of the warrant extension in the prior year and the fair value of units and warrants issued during the current year and prior year was estimated using the Black-Scholes option pricing model with the following weighted average assumptions:

Option pricing models require the input of subjective assumptions including the expected price volatility. Changes in the assumptions can materially affect the fair value estimate.

Stock Options

In April 2002 Dayton Mining Corporation and Pacific Rim Mining Corporation were amalgamated. The stock option plans existing at that date were combined.

In October 2002 shareholders approved a stock option and bonus plan (“2002 Plan”) under which, up to 6,000,000 common shares were reserved for the grant of stock options and up to 367,000 common shares were reserved for the grant of bonus shares to directors, employees or consultants (“eligible parties”).

On August 29, 2006, shareholders adopted an evergreen incentive stock option plan (“2006 Plan”) whereby the maximum number of shares reserved for grant to Eligible Parties under the 2006 Plan is equal to 10% of the number of shares outstanding at the time of the grant, including all outstanding options granted under the 2002 Plan.

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Current option details are as follows:

The total stock-based compensation recognized during the year ended April 30, 2011 was $335 (2010 - $358; 2009 - $555) with the offsetting entry to contributed surplus.

The 3,125,000 options granted during the year ended April 30, 2011 have been allocated a total fair value of $410 with a weighted average fair value of $0.13. The 2,535,000 options granted during the year ended April 30, 2010 have been allocated a total fair value of $354 with a weighted-average fair value of $0.15. The allocation of fair value was estimated using the Black-Scholes option pricing model, with the following weighted average assumptions:

Option pricing models require the input of subjective assumptions including the expected price volatility. Changes in the assumptions can materially affect the fair value estimate.

The following represents the details of related party transactions paid or accrued during the year ended April 30, 2011:

Included in accounts payable is $8 (2010 - $7) of amounts due to related parties, which are unsecured, non-interest bearing and payable on demand.

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Related party transactions are in the normal course of business and occur on terms similar to transactions with non-related parties, and therefore are measured at the exchange amount.

The tax effects of temporary differences that give rise to significant portions of the future tax assets and future tax liabilities at April 30, 2011 and April 30, 2010 are presented below:

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In addition, the Company has incurred over $38 million in exploration expenditures in El Salvador that are not recognized because there is uncertainty surrounding mining tax legislation in El Salvador.

A full valuation allowance has been recorded against the majority of the potential future income tax assets associated with the Canadian loss carry-forwards and the exploration expenditures in El Salvador as their utilization is not considered more likely than not at this time.

The Company has entered into an operating lease agreement, commencing February 1, 2008 to January 30, 2013. The minimum monthly lease payments are $4 (Cdn$3).

The Company defines its capital as shareholders’ equity as the Company has no debt.

The Company’s objectives when managing capital are:

• To maintain adequate capital to operate its business and safeguard its ability to continue as a going concern (Note 1); and

• To minimize the use of debt prior to the commencement of development activities.

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

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The Company’s consolidated financial statements have been prepared according to Canadian GAAP which differs in certain respects from those principles that the Company would have followed had the consolidated financial statements been prepared in accordance with US GAAP. The significant differences between Canadian GAAP and US GAAP and their effect on the consolidated financial statements are detailed on the next page.

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Consolidated Balance Sheets

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The following table reconciles the consolidated net loss and consolidated comprehensive loss as reported under Canadian GAAP with that which would have been reported under US GAAP.

In 2011, 2010 and 2009, under US GAAP, there would be no changes to cash flows for operating activities, investing activities or financing activities.

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On May 3, 2011, the Company completed a private placement with gross proceeds of $3,897 (Cdn$3,696) through the issuance of 17,600,000 units. Each unit consisted of one share and one-half of one share purchase warrant. The Company also issued 233,400 Finder’s units and 716,400 Finder’s warrants in connection with the private placement.

On July 8, 2011, the Company signed a Definitive Agreement with ICN and WGI to acquire a 65% interest in the Hog Ranch Property located in Washoe County, Nevada.

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