Corporate Profile

Glamis Gold Ltd. is a premier intermediate gold producer with low-cost production, large reserves and a strong, consistent growth profile. The Company’s near-term strategic goal is to produce 700,000 ounces of gold annually at a total cash cost below $150 per ounce. Glamis currently has proven and probable reserves of 6.3 million ounces of gold and 38.5 million ounces of silver.

The Company is moving rapidly to achieve its near-term production goal. The El Sauzal mine in Mexico commenced production late in 2004, the most recent expansion phase at the Marigold mine in Nevada has been completed and the Marlin project in Guatemala is expected to reach commercial production in the fourth quarter of 2005.

For nearly 30 years, Glamis has successfully developed and operated mines in the Americas. The Company’s business model emphasizes steady growth with proven methods and technologies that are highly productive and maximize long-term shareholder value, while supporting and sustaining the communities in which it operates.

Glamis is well positioned to continue its exceptional growth profile. The Company maintains an excellent balance sheet and its new mines and development projects will be strong cash flow generators. Glamis’ gold production remains totally unhedged. This provides 100 percent of the gold price upside to its shareholders while protecting against downside risk with low operating costs.

Common shares of Glamis Gold Ltd. trade under the symbol GLG on the New York and Toronto Stock Exchanges.

Table of Contents

Cover Photo: Initial gold pour at Glamis’ El Sauzal mine in Mexico, November 30, 2004.

Glamis Gold Ltd. 2004 Annual Report^©
Design: Creative Spirit Communications Inc., Vancouver, B.C.

Financial Highlights

1

President’s Message

Dan Rovig — Chairman of the Board and
Kevin McArthur — President and CEO

“We are focused on the Americas...
on pure gold and solid growth.”

To Our Shareholders

The past year was one of the most important in Glamis’ history. The Company accomplished a great deal in 2004, especially towards the realization of its strategic goal of achieving an annual production rate of 700,000 gold ounces at a total cash cost below $150 per ounce by 2007. Our new generation of mines is rapidly coming on stream. Glamis has already secured its position as a leading intermediate producer of gold and is setting the stage to take the next step in its corporate development.

There were many highlights in 2004, but none more important than the completion of our low-cost El Sauzal mine in Mexico that commenced commercial production in the fourth quarter. Overcoming the logistical challenges of the terrain and the remote location of the minesite is a tribute to the skill and perseverance of Glamis’ development team. We also accelerated the development of Marlin project in Guatemala, now scheduled to reach commercial production in the fourth quarter of 2005. In Nevada, we have completed the most recent expansion phase at our Marigold mine in our goal to grow production to over 200,000 gold ounces annually. San Martin mine in Honduras exceeded its 100,000 ounce goal for the year and continues its role in providing cash flow for building our new mines.

We are focused on the Americas...on pure gold and solid growth. Our four showplace mines were acquired at the bottom of the gold price cycle, poising Glamis for outstanding performance as gold and silver prices continue their strong advance. Our key mining properties and development projects include large land positions where we have significantly expanded our exploration programs. As we enhance our production growth story we have also succeeded in growing gold reserves over the last five years. Thus, Glamis represents true gold leverage.

Growth in Operations

Our El Sauzal mine had its first gold pour on November 30, 2004 and achieved commercial production shortly thereafter in December. The mine produced slightly more than 25,000 ounces of gold before year end and is on track to produce 170,000 ounces in 2005. Production is expected to increase only marginally in 2006 but will rise above 200,000 ounces per annum in subsequent years. Originally, we projected a ten-year mine life but we now believe that there are significant opportunities to increase the current two-million ounce reserve base. The relatively recent

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3

2004 Highlights

2005 Goals

The discovery in March 2004 of high-grade gold and silver mineralization at the La Hamaca prospect three kilometers north of the Marlin project strongly supports our belief that there is ample opportunity for continued good news. Glamis has a 100-percent interest in a large land position surrounding the Marlin main zone and our geological staff has identified many promising mineral occurrences within easy trucking distance of current facilities. It has always been our contention that the Marlin area will become a new gold-producing district, 100 percent controlled by Glamis.

Growth by Acquisition

Glamis has successfully completed a number of well-timed, well-executed acquisitions, all of which have substantially enhanced shareholder value. With the rise in gold prices, it has become a challenge to identify and complete value added transactions of this nature. We did identify one such opportunity in Goldcorp Inc. late last year. Ultimately, after a long process, we chose not to continue with this acquisition. The asking price rose to a level which would not be accretive to Glamis shareholders. We are confident that there will be other opportunities, and we will continue to employ the same disciplined approach as in all of our prior activities.

Intensive Exploration

A strong and sustained emphasis on exploration is central to Glamis’ future growth strategy. Over the past three years, carefully planned, disciplined exploration programs in and around our existing mines and projects have led to numerous discoveries that have enabled the Company to steadily add to reserves and resources. At the Marlin project alone, ongoing exploration has added more than 40 percent to proven and probable gold reserves since initial feasibility work. The success of these efforts has led Glamis to significantly expand exploration spending to approximately $15 million in 2005 compared to $10.8 million in the prior year. The bulk of this amount will be spent in Guatemala, Nevada and Mexico.

4

“We plan to increase gold production by more than 70 percent in 2005
and an additional 50 percent in 2006.”

Enhancing Shareholder Value and the Challenge of Further Growth

As we have done so successfully over the past several years, Glamis will continue to acquire, permit and build low-cost gold mines. This strategy has paid off dramatically, as developments have led to a growth profile second to none in our industry. We plan to increase gold production by more than 70 percent in 2005 and an additional 50 percent in 2006. However, it’s not all about growth, as rising gold production costs are troubling the industry. Our decreasing cash cost profile, coupled with increasing production, is the engine driving us forward.

We have developed the reserves, mine plans and budgets to ensure robust earnings and cash flows from our new mines. Furthermore, the success of our recent exploration programs provides confidence in the continuation of this growth trend.

Another key component of our future is access to capital markets. Glamis has reached a measure of prosperity and the critical size to take on a small measure of debt or leverage for the Marlin project. Our future cash flows will easily repay this debt, which avoids dilution to our current shareholders. This is a very competitive industry, but the Glamis team is extremely well positioned to continue delivering superior shareholder value.

On behalf of management and the Board of Directors, I would like to thank all the employees of Glamis Gold, whose collective and individual efforts have made our Company a success. The past year has been a most memorable one for the Company and 2005 promises to be just as exciting.

Kevin McArthur
President, Chief Executive Officer
and Director

5

El Sauzal Mine

El Sauzal is projected to become the Company’s largest and lowest cost source of gold production during 2005. Glamis’ 100-percent owned El Sauzal mine is located 250 kilometers southwest of Chihuahua City and approximately 65 kilometers northeast of the city of Choix, the nearest major population center. El Sauzal made the successful transition from development project to producing mine when it poured its first ounce of gold on November 30th, 2004 and achieved commercial production early in December.

Both events took place well ahead of the mine’s original feasibility schedule. A supreme effort on the part of El Sauzal’s workforce throughout 2004 enabled the rapid completion of the access road from Choix to the mine site, mine construction and installation of the mill and other processing facilities. Gold production amounted to 25,053 ounces by year end. Target production for 2005, the first full year of operation, is 170,000 ounces of gold. This amount is projected to rise to more than 200,000 ounces of gold annually for the years 2007 and beyond.

6

mexico

El Sauzal is projected to become the Company’s largest
and lowest cost source of gold production during 2005.

El Sauzal is a conventional open pit, oxide milling operation, with ore transported by truck to the mill. The start-up phase progressed smoothly and the only modifications of any significance were made to the filtration circuit for dry stack tailings where a fourth filter press will be added shortly. The current mine plan calls for the processing of 5,500 tonnes of ore per day at an average grade of 3.4 grams of gold per tonne. Glamis projects that annual production will average 190,000 ounces of gold at an estimated total cash cost of $110 per ounce over a 10-year mine life. El Sauzal’s internal rate of return, based on a $300 per ounce gold price, exceeds 25 percent.

As of year end, proven and probable gold reserves totaled approximately two million ounces. Glamis controls seven exploration concessions surrounding the El Sauzal deposit comprising an area of more than 100 square kilometers. Although a number of promising regional targets had been identified, it was only recently after completion of the mine that the Company was able to drill test mineralized areas adjacent to the main deposit. The most promising of these would appear to be the Trini zone, described in more detail in the exploration section. Even with the limited work to date, there are indications of significant opportunities to increase current reserves.

7

Marigold Mine

The Marigold mine is located in Humboldt County near the community of Valmy, approximately 40 miles southeast of the town of Winnemucca. The mine itself is situated in the northwest-oriented Battle Mountain trend, which continues to be one of the most important gold producing regions in Nevada.

Marigold is a conventional, run-of-mine heap leach operation that has produced nearly 1.4 million ounces since it first commenced production in 1988. Glamis acquired its 66.7-percent operating interest in the more than 30-square-mile property in 1999. The Company then utilized the considerable experience and ingenuity of the Marigold employees to transform the mine from a modest, conventional milling operation into a large and extremely efficient heap leach mine. This transition significantly enhanced the economic returns from the property as the total re-engineering of Marigold led to a substantial reduction in unit costs, which in turn, allowed Glamis to significantly lower the cut-off grade. Combined with an intensive and ongoing exploration effort, Glamis has been able to

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usa

Glamis has been able to delineate a proven and probable gold reserve
of more than two million ounces on a 100 percent basis at Marigold.

delineate a proven and probable gold reserve of more than two million ounces on a 100 percent basis at Marigold.

In 2004, Glamis’ two-thirds share of gold production from the Marigold mine amounted to 94,209 ounces at a total cash cost of $195 per ounce, little changed from the record production of 94,796 ounces in the previous year. Total cash costs were somewhat higher due mainly to increases in both fuel and reagent costs. The latest expansion at Marigold in now fully phased in, although approximately three months behind the initial schedule due to delays in permitting a leach pad-expansion, a critical component of the mine’s ongoing program.

Marigold achieved its target rate in the fourth quarter of 2004 when gold production for the three-month period rose to over 46,300 ounces. Glamis is projecting that its two-thirds share of gold production will rise to approximately 135,000 ounces in 2005.

The Company’s exploration program at Marigold achieved its primary objective in the past year in more than replacing reserves mined. Furthermore, a number of prospective targets were identified for more detailed exploration in the current year and the program to convert more resources to proven and probable reserves will also be accelerated. At year end, Glamis’ two-thirds share of proven and probable reserves increased to nearly 1.5 million ounces.

9

San Martin Mine

The San Martin mine is located 70 kilometers north of Tegucigalpa, the capital city of Honduras. Since its initial gold pour in December 2000, the mine has been Glamis’ largest gold producer although it will be surpassed by both El Sauzal and Marigold in 2005. Most of the mine’s labor force is drawn from the town of San Ignacio, the nearest community, which is approximately five kilometers away.

The San Martin mine is a conventional open pit, heap leach operation, in which the ore is either crushed and agglomerated or hauled directly to the leach pad as run-of-mine material, depending on the ore’s physical characteristics. Two separate mineralized zones make up the San Martin deposit. They were developed into the Rosa and Palo Alto pits. Mining first took place at the Rosa pit, where ore grades and recovery rates were higher and the stripping ratio was lower. During 2004, mining transitioned almost entirely to the Palo Alto pit, and concurrent reclamation of the Rosa pit is well underway.

10

honduras

Future capital requirements are expected to be minimal
and the mine will continue to generate free cash flows
for reinvestment in Glamis’ growth strategy.

Throughout its mine life to date, San Martin has produced in excess of 100,000 ounces of gold per year, with peak production of more than 129,000 ounces in 2002. In 2004, gold production was 102,152 ounces at a total cash cost of $191 per ounce. For the remainder of its six-year mine life, production is expected to decline and total cash costs to rise. However, future capital requirements are expected to be minimal and the mine will continue to generate free cash flows for reinvestment in Glamis’ growth strategy.

Glamis is continuing exploration around the mine site and a 15-hole drill program is planned for 2005 to extend mineralization at depth and adjacent to the Palo Alto pit.

Gold production in 2005 is forecast at 85,000 ounces. As of January 1, 2005, proven and probable gold reserves stood at 507,000 ounces.

The San Martin mine was the Company’s first commercial venture outside of the United States and its success has been a major step forward for Glamis. The Company applied to San Martin the high productivity and low-cost mining methods it had developed at the Picacho and Rand mines and achieved a similarly efficient result. It was also in Honduras that Glamis developed its successful formula to work closely with local communities and seek their involvement in all phases of project development. This experience-based knowledge has served the Company well in the subsequent development of its El Sauzal mine in Mexico and Marlin project in Guatemala.

11

Marlin Project

The 100-percent owned Marlin project is located in the western highlands of Guatemala, 48 kilometers southwest of the city of Huehuetenango, which in turn, is approximately 300 kilometers by road northwest of the capital, Guatemala City. The project lies within a highly prospective land package of approximately 100,000 hectares in Western Guatemala that encompasses the main Marlin deposit and other important mineralized zones.

Construction of the Marlin project commenced early in 2004, following approval of the updated Marlin feasibility study, the Guatemalan government’s issuance of environmental permits and the key exploitation license. These approvals followed extensive communication and involvement with all levels of government and the local community.

Marlin is being developed as a conventional milling project that will employ a combination of open pit and underground mining. The feasibility study called for average annual production of 217,000 ounces of gold and 3.3 million ounces of silver over a 10-year mine life. Total cash costs are estimated to be $93 per ounce, net of silver by-product credits. Mill capacity is designed at 5,000 tonnes per day. This current plan would see the annual production rate to commence at 250,000 ounces of gold and 3.8 million ounces of silver at projected total cash costs of less than $90 per ounce.

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guatemala

Once Marlin achieves target production rates, it is expected to surpass
El Sauzal as the Company’s largest and most profitable gold asset.

Initially, mill feed will come from the open pit, but underground operations will be phased in as early as 2006. Metallurgical test work has indicated excellent recovery rates of greater than 90 percent for gold and 80 percent for silver.

In the second quarter of 2004, the Board increased the original development budget from $120 million to $140 million to incorporate additional capacity and reflect the increased costs of construction materials. Mill capacity has been expanded by more than 20 percent to 5,000 tonnes per day and the Company is developing plans to increase annual gold and silver production.

The Company has now advanced construction to the point that concrete foundations have been poured, steel work is nearing completion and all major equipment for both surface and underground mining has arrived on site. In addition, the access ramp to the underground ore body had reached its 800-meter target by year-end and ventilation work is well underway. While the feasibility study assumed the purchase of new equipment, the Company opted for existing mill and processing components to enable an earlier startup date. Commercial production had originally been slated for the first half of 2006, while it is now scheduled for the fourth quarter of 2005. Once Marlin achieves target production rates, it is expected to surpass El Sauzal as the Company’s largest and most profitable gold asset.

Glamis has continued its exploration program on the large, highly prospective land package surrounding Marlin. Ongoing drilling programs succeeded in substantially increased proven and probable reserves to the current 2.3 million ounces of gold and 36.3 million ounces of silver. Drilling at the La Hamaca prospect, located about three kilometers north of the Marlin main zone, has already identified a high-grade resource of 405,000 gold equivalent ounces and the structure remains open at depth. La Hamaca is the northernmost of five targets within a six-kilometer radius of Marlin’s main zone.

Glamis has proceeded at a measured pace in the Marlin area, securing strong local and public support before advancing to mine construction. In addition, the federal government of Guatemala strongly supports the mine and new mining investment in the country.

13

Cerro Blanco Project

Preliminary test work indicates more than
90 percent gold recovery with conventional milling.

Over the past two years, exploration work at the Company’s Cerro Blanco project in southeastern Guatemala identified a number of parallel to sub parallel quartz vein structures containing high-grade gold mineralization. In 2004, Glamis completed almost 7,000 meters of drilling to provide in-fill data and to extend these veins mainly to the north. To date, an inferred gold resource of 873,000 ounces grading 22 grams per tonne has been established in veins of mine-able width and grade, assuming a cut-off grade of eight grams per tonne. The veins are still open ended and more drilling is planned for 2005. Preliminary test work indicates more than 90 percent gold recovery with conventional milling.

The Company plans to commence a feasibility study in 2005. More than $4 million has been budgeted for the year’s activities, which will include commencement of a 1,500-meter underground decline and additional drilling from underground platforms to better assess the extent and orientation of the veins. Baseline environmental studies and permitting activities have already commenced. The objective is to establish a proven and probable gold reserve and then to develop Cerro Blanco into an underground mine. Depending on the eventual size of the deposit, it will either operate as a satellite to the Marlin mine or as a stand-alone operation.

14

exploration

Glamis is in the fortunate position of controlling very large and
prospective land positions around its most important gold assets.

Although Glamis intends to continue its pursuit of value-added acquisitions, rising gold prices have made it much more difficult to identify transactions that would significantly enhance shareholder value. As a result, the Company plans to concentrate more on exploration programs at its existing exploration properties and areas around its current mines and development projects. Consequently, Glamis has increased its exploration budget from $10.8 million in 2004 to approximately $15 million in 2005. Glamis is in the fortunate position of controlling very large and prospective land positions around its most important gold assets and is now implementing regional programs in addition to local mine and project site exploration. Where 2004 saw a strong push to complete construction of the El Sauzal mine and to accelerate construction of the Marlin mine, 2005 will see a renewed emphasis on exploration. The priority will be on the Marlin, Cerro Blanco, El Sauzal, and Marigold properties.

The Company has focused mainly on the Marlin district for the past two years and this is expected to continue throughout 2005 as well. Last year, the gold equivalent resource at La Hamaca, the first major step out from the Main zone, reached 405,000 gold equivalent ounces at an average gold equivalent grade of 17.8 grams per tonne using a 5 gram per tonne cut-off. La Hamaca is still open at depth. The current program will also focus on the Vero and Cancil zones to the south of the Main zone which

15

exploration

commenced late last year. Then Glamis plans to move on to the Coral zone, approximately one kilometer north of Marlin, which is possibly the most prospective target yet identified in the Marlin camp.

At the Company’s Cerro Blanco project in southeastern Guatemala, there are excellent opportunities to increase the recently defined gold resource of 873,000 gold equivalent ounces. However, due to the terrain and the orientation of the veins, this would be best accomplished through a decline and underground drill stations. Efforts will focus on extending previously delineated veins and the discovery of additional high-grade vein structures.

During 2004, the Company continued the highly productive Marigold exploration program, which has significantly extended mineralization around current and former pit areas and expanded previously discovered deeper oxide zones such as Terry Zone North. This will continue in 2005. In addition, some high-grade oxide ore intersections were encountered in the Section 30 area and these will also be followed up in the current year. The Company accomplished its main objective at Marigold last year by more than replacing reserves mined and the program to convert more resources to proven and probable gold reserves is continuing.

At El Sauzal in Mexico, recent exploration has provided solid indications that there is a far greater potential for reserve growth than originally thought. A drilling program commenced in September of last year with very encouraging results from the Trini zone, one of the five target areas located in close proximity to current mine operations. The Trini zone lies within the 700 meter long West Lip target located immediately west of the current mine area. Follow-up drilling will continue on these near surface targets and the regional program will commence this year as well. A number of other silicified zones have been identified within the El Sauzal property package, some of which bear a close resemblance to the El Sauzal deposit itself.

Most of the past exploration in Honduras has been confined to the San Martin mine site. This will continue in 2005 with a particular focus on high-grade intercepts previously encountered adjacent to the current Palo Alto pit.

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environment

The Company’s activities, including mining, development
and exploration, are carefully designed and implemented
to minimize environmental impacts.

Environmental Commitment

Glamis has been widely recognized by regulatory agencies and its peers for its dedication to environmental excellence. The guiding principals of our environmental and reclamation programs are to minimize the impact of mining on the local surroundings and to perform concurrent reclamation programs to ensure a timely and sustainable return of mine sites to their future intended use. This takes preparation and all of the Company’s activities, including mining, development and exploration, are carefully designed and implemented to minimize environmental impacts. To achieve this, concurrent and final reclamation plans are an essential component of all mine operations as well as the design of new projects.

In addition to strict compliance to the highest standards and regulations, the Company has pioneered many innovations and reclamation techniques. Originally developed specifically for Nevada and southern California, many of these techniques have proven to be readily adaptable to a variety of settings, including our San Martin mine in Honduras. The Company has since refined and further developed a successful formula that ensures that its high standards are applied equally to all operations.

The formula includes:

Glamis’ objectives in 2004 included progress towards final closure at its Daisy and Dee mines in Nevada and its Rand mine in California. This has been accomplished at Daisy and only limited work is required to achieve site closure at Dee in 2005. At the Rand mine, gold is still being recovered from the last active heap leach but final reclamation has been completed in all other areas. Closure of the Rand heap is anticipated in late 2005.

Glamis continues its program to concurrently reclaim disturbed areas and waste rock stockpiles at its Marigold mine in Nevada. Additionally, reclamation of the mined-out Rosa pit at the San Martin mine in Honduras has been extremely successful.

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health and safety

Glamis designs its safety programs in the belief that one accident
is too many and conducts its operations accordingly.

Glamis firmly believes that the health and safety of its employees is a major component of overall productivity. The Company is committed to developing the safest and most environmentally sound working conditions at each of our mine sites and development projects for the benefit of our employees, local communities and our shareholders. In its goal to continue to reduce unit costs and maximize operating efficiencies, Glamis believes that the health and safety of employees and the adoption of sound environmental practices should come first.

The ultimate goal of our safety programs is not to reduce accidents to a so-called acceptable level. Glamis designs its safety programs in the belief that one accident is too many and conducts its operations accordingly. In order to achieve this, Glamis has developed the following guidelines that are incorporated into all of its formal training and safety programs.

Glamis is committed to its pledge to provide safe and healthy workplaces for all of its employees. The Company’s most important asset is a healthy, productive workforce, essential to its continued success.

18

community

At all of its mines and development projects, Glamis strives to
support local communities and their needs wherever possible.

Community Relations

Expanding beyond North America to the development of its San Martin mine in Honduras, Glamis’ first priority was the formulation of policies to consult regularly with local residents and keep them as fully informed as possible at all stages of a project. At the same time, Glamis sought to work closely with all levels of government to ensure total compliance with all rules and regulations.

At all of its mines and development projects, Glamis strives to support local communities and their needs wherever possible. This includes involving local communities in the planning process during and after construction. Also, the Company participates in constructing and upgrading local medical facilities and funds schools and other community projects directly or through foundations established for this purpose. We partner with local organizations to provide further community support in training, microfinance, and sustainable development initiatives.

Although every situation and project is unique, guidelines and procedures developed at San Martin have been invaluable in the construction of Glamis’ new El Sauzal mine in Mexico and the development of the Marlin project in Guatemala. Glamis takes great pride in its support of local communities.

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Proven & Probable Reserves

Measured, Indicated and Inferred Resources

December 31, 2004

Reserves (which use a $350 gold price) are a subset of these Measured and Indicated Resources. That is, reserves are included in these M&I numbers.

Inferred Resources are in addition to Measured & Indicated Resources.

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glamis gold ltd. 2004       management’s discussion and analysis

Management’s Discussion and Analysis

This management’s discussion and analysis of the financial results of the Company’s operations for the years 2002 through 2004 is dated March 11, 2005 and should be read in conjunction with, and is qualified by, the consolidated financial statements and notes thereto (the “financial statements”) which form a part of this report. This financial information, which is expressed in United States dollars unless otherwise stated, was prepared in accordance with accounting principles generally accepted in Canada. Reference should be made to Note 16 of the financial statements for a reconciliation of Canadian and U.S. generally accepted accounting principles. Additional information, including the Company’s Annual Information Form (“AIF”) can be found on SEDAR at www.sedar.com and the Form 40-F filed in the United States on EDGAR at www.sec.gov.

The following discussion contains statements that are not historical facts, and by their nature are considered “forward looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995. See also “Forward Looking Statements” at the end of this discussion.

OVERVIEW

The highlight of 2004 was the completion of construction of the El Sauzal Mine in Mexico and its first production late in the year. More good news came as the team at the Marlin Project in Guatemala accelerated construction with a goal of bringing in the first production from Marlin in the fourth quarter of 2005. The Company produced 234,433 ounces of gold and sold 227,700 ounces. The Company had a record fourth quarter of production of 84,506 ounces of gold. The El Sauzal Mine produced 25,053 ounces of gold in the quarter, the Marigold Mine increased production to 30,926 ounces of gold for the Company’s account, and the San Martin Mine production increased to 26,823 ounces of gold. The Rand Mine continued to produce a small amount of gold (1,704 ounces) in its last quarter of production.

The Company’s unhedged position allowed it to take advantage of realized gold prices that averaged 13.0% higher in 2004 than in 2003.

Under a Share Purchase Agreement effective February 12, 2003, the Company sold its 50% interest in the Cerro San Pedro Project to Metallica Resources Inc. (“Metallica”) for proceeds of $13.0 million, plus additional payments of $5.0 million contingent on the project being put into commercial production and a net smelter return royalty of up to 2%, depending on the price of gold. The Company received $2.0 million on closing of this transaction, $5.0 million on August 12, 2003 and $6.0 million on February 12, 2004. On March 24, 2004, the Company sold the royalty to Metallica for $2.25 million and received the $5.0 million contingent payments due under the Share Purchase Agreement, the total $7.25 million was included in other income in 2004.

On December 16, 2004, the Company announced an offer to acquire all of the shares of Goldcorp Inc. (“Goldcorp”), a Canadian public mining company. The proposed transaction was subject to several conditions, the most significant of which were that Goldcorp’s proposed transaction with Wheaton River Minerals Ltd. (“Wheaton River”) did not get approved by the shareholders of Goldcorp and not less than two-thirds of the outstanding Goldcorp common shares were validly deposited under the offer and not withdrawn at the expiry time. At an extraordinary shareholders meeting of Goldcorp on February 10, 2005, more than 50% of the Goldcorp shareholders approved Goldcorp’s proposed plan of arrangement with Wheaton River. Accordingly, the Company announced that it was allowing its offer for Goldcorp to expire. The deferred take-over bid costs associated with this transaction will be written off as a charge to operations in the first quarter of 2005.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

SELECTED ANNUAL INFORMATION

SUMMARY

The Company continued its profitable performance in 2004 with net earnings of $20.9 million, or $0.16 per share. For 2003, the Company had net earnings of $18.2 million, or $0.14 per share, and in 2002, net earnings of $13.8 million, or $0.14 per share.

All of the Company’s mining operations were profitable in 2004 and generated earnings from mining operations of $29.7 million, compared to $22.7 million in 2003 and $19.6 million in 2002. The new, low-cost production from the El Sauzal mine combined with the 13.0% increase in the realized price of gold was the primary reason for the increase in 2004 compared to 2003. A stronger gold price also drove the increase in earnings between 2002 and 2003.

The Company continues to generate positive cash flows from operations. Cash flows from operations (before changes in non-cash working capital and reclamation expenditures) were $37.4 million for 2004 compared to $33.9 million for 2003 and $33.8 million in 2002. The Company’s working capital was $27.4 million at December 31, 2004 including $27.0 million in cash and equivalents compared to $145.4 million at December 31, 2003, including cash and equivalents of $126.1 million. Working capital at December 31, 2002 was $169.1 million, including cash and equivalents of $160.0 mil-

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glamis gold ltd. 2004       management’s discussion and analysis

lion. In 2004, the Company spent $191.4 million in capital expenditures for mineral property, plant and equipment. Exploration expense was $4.1 million. The expenditures were funded from cash on hand, cash flow from operations and $30.0 million in long-term debt from International Finance Corp. Capital expenditures and exploration expense for 2005 are budgeted at $103.6 million.

Summary of Quarterly Results

The Company’s quarterly information for the last eight quarters is shown below:

Refer to the discussions in this document as well as the quarterly Management’s Discussion and Analyses for additional information.

Gold Production and Costs Per Ounce

The Company produced 234,433 ounces of gold during 2004, as compared to 230,294 ounces of gold during 2003, and 251,919 ounces of gold in 2002. Production in 2002 and 2003 was from the San Martin, Marigold and Rand Mines. In 2004, these same three mines produced 209,380 ounces of gold, plus initial production from El Sauzal added another 25,053 ounces. The Company expects to produce approximately 400,000 ounces of gold in 2005 from four mines: San Martin, Marigold, El Sauzal, and Marlin, which is scheduled to start operations during the fourth quarter of 2005.

Note: Cash cost and total cost per ounce are non-GAAP financial measures and are discussed further under “Costs of Production”.

Following is a discussion of the Company’s operations during 2004:

San Martin Mine, Honduras

San Martin Mine made a smooth transition from the Rosa pit into the Palo Alto pit this year producing 102,152 ounces of gold. Capital expenditures of $3.5 million were related primarily to leach pad construction and development in the Palo Alto pit. Mining in 2005 will be almost entirely from the Palo Alto pit. San Martin is budgeted to produce approximately 85,000 ounces of gold in 2005. Proven and probable reserves stood at 507,200 contained ounces of gold at the end of 2004.

Marigold Mine, Nevada (66.7% Glamis-owned)

The Company is the operator at the Marigold Mine, a partnership operation with Barrick Gold Corporation. Marigold had a solid year of production, adding 94,209 ounces of gold to the Company’s account. In early February 2004, Marigold received a positive Record of Decision (“ROD”) on its Supplemental Environmental Impact Statement from the Bureau of Land Management (“BLM”). This will allow full development of the Millennium expansion project. Construction of the new Cell 12 leach pad and processing facilities was well underway at year-end, with the first ore being placed under leach on the pad in mid-October. Construction is planned to continue through the first half of 2005. The mine ran behind expected production for the year as late commissioning of the new haul-truck fleet and delayed construction on the Cell 12 leach pad resulted in the expected increase in production being delayed until late in the fourth quarter. Marigold continues to add to reserves with year-end 2004 reserves of 1.49 million contained ounces of gold (Company’s share) compared to 1.47 million ounces at the

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glamis gold ltd. 2004       management’s discussion and analysis

end of 2003. The Company expects that the purchase, in 2004, of four 320-ton trucks and construction of the new leach pad and processing facilities will increase production to approximately 135,000 ounces of gold for the Company’s account in 2005.

El Sauzal Project, Chihuahua, Mexico

The most significant event for the Company in 2004 was the completion of the El Sauzal Mine and its first gold production. The Company acquired the El Sauzal Project through the acquisition of Francisco Gold Corp. (“Francisco”) in July 2002. A feasibility study on the project was completed prior to closing of the Francisco acquisition and based on that study, and subsequent work performed by the Company, development of the mine commenced. During 2003, all major permits were received and construction proceeded. In October 2004, the mill began grinding ore and gold was produced in November 2004. El Sauzal produced 25,053 ounces of gold during 2004 at a total cash cost per ounce of $151 and is expected to produce approximately 170,000 ounces of gold during 2005. Gold reserves at El Sauzal were in excess of 1.9 million contained ounces at the end of 2004.

Rand Mine, California

The Rand Mine continued in reclamation. Rand continues to process gold from the leach pad, producing 13,019 ounces of gold at a total cash cost per ounce of $250 during 2004, its last year of production. During its 18 year life, the mine produced in excess of 968,000 ounces of gold for the Company. Reclamation is expected to be substantially completed in 2005.

PROJECTS

Marlin Project, Guatemala

The Marlin Project was also acquired as part of the Francisco acquisition. At the end of 2002, the project had been expanded from a mineral resource of 1.4 million gold-equivalent ounces to over 4 million gold-equivalent ounces. Additional drilling in 2003 established a reserve of 2.2 million gold ounces along with 33.6 million ounces of silver. At December 31, 2004, reserves stood at 2.3 million contained ounces of gold and 36.3 million ounces of silver. Late in the first quarter of 2003, a positive feasibility study was completed and presented to the Board of Directors at the first quarter meeting. The Board approved development of the project and in November 2003, formal approval of the construction budget was given. In late 2003, the Marlin Project obtained its environmental license and exploitation permit. Capital expenditures in Guatemala during 2004 were $83.2 million covering extensive development of the project site, underground decline and tailings impoundment, purchase of open pit and underground equipment and the ball mills, as well as capitalized interest and financing costs related to the International Finance Corporation loan. Approximately $63.0 million in capital expenditures are planned over the next year, with an anticipated start-up late in 2005.

Cerro San Pedro Project, San Luis Potosi, Mexico

As noted in the overview, in 2003, the Company agreed to sell its 50% interest in the Cerro San Pedro Project to Metallica for proceeds of $13.0 million plus additional payments of $5.0 million based on the mine being put into commercial production, and a net smelter return royalty of up to 2%, depending on the price of gold. On March 24, 2004, the Company sold the royalty to Metallica for $2.25 million and received the $5.0 million contingent payments due.

Cerro Blanco Project, Guatemala

In 2004, $1.7 million was spent exploring this project. Exploration included the drilling of 47 holes for a total of 6,840 meters. This drilling focused on extending the existing mineralization to the north and determining the orientation of the quartz veins. The results of this work included extending the high grade gold mineralization limit further north than originally estimated.

The Company plans to move the project into feasibility in 2005. Baseline environmental studies and permitting activities are in progress. Exploration drilling is planned to continue following the high grade gold mineralization trend and in-fill drilling is planned on the northern end of the deposit. A production style decline is also planned for a total of 1,500 meters. This decline will help in verifying the vein geometry in the existing geologic model and testing vein grade continuity. A total of $4.2 million has been budgeted for the 2005 work.

Imperial Project, California

In 2002, the Company recommenced the permitting process for the Imperial Project. Concurrently, the BLM completed a validity examination of the unpatented mining claims comprising the project and concluded that the mining claims are valid. However, during 2003, legislative and administrative actions were taken by the State of California to require that any new open pit metallic mines be completely back-filled at the completion of mining. The Company believes that these actions were taken directly to attempt to delay or stop the Company’s Imperial Project, as a requirement to back-fill renders the project uneconomic. Consequently, the Company has filed a Notice of Arbitration against the United States pursuant to the North American Free Trade Agreement. The notice alleges that the Company’s property rights in the Imperial Project in California have been unlawfully taken by various actions of the United States and the State of California, for which it is entitled to compensation. The Company is seeking recovery of the value of the Imperial Project, pre- and post-award interest and various costs incurred by the Company. A three-person arbitration panel has been selected, and the panel has recently issued a scheduling order which contemplates the claim being heard in July 2006. The Company cannot predict how long it may take to complete this legal process or whether it will be successful in its action.

RECLAMATION ACTIVITIES

The Company’s reclamation and closure activities were centered on the Dee and Rand Mines. The Company spent $2.8 million on reclamation activities in 2004, primarily at the Rand and Dee mine sites with some minor amounts at the Daisy and Marigold sites. The Company spent $3.3 million during 2003 and $2.5 million during 2002 on reclamation. The Company plans to spend approximately $0.9 million in 2005 on site closure and reclamation, primarily at the Rand Mine, with final expenditures at Dee.

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glamis gold ltd. 2004       management’s discussion and analysis

REVENUES

Revenues from gold sales increased to $94.7 million for the year ended December 31, 2004 from $84.0 million for the year ended December 31, 2003 and $80.8 million for the year ended December 31, 2002. The increase in revenues is the result of a significantly stronger realized gold price. The Company sold 227,700 ounces of gold during 2004 compared to 228,219 ounces sold in 2003, and 257,759 ounces sold in 2002. The Company realized an average price of $416 per ounce of gold sold in 2004 compared to $368 per ounce of gold sold in 2003 and $313 per ounce of gold sold in 2002.

COST OF PRODUCTION

The Company’s total cash cost of production includes mining, processing, direct mine overhead costs and royalties, but excludes selling, general and administrative costs at the corporate level. Total production costs include depreciation and depletion and amortization of site closure and reclamation accruals but exclude future income tax effects. There is a difference between cost of sales and cost of production relating to the difference in the cost of the ounces sold out of inventory during the year. In the Company’s case however, there is no significant difference in the total cash cost per ounce of production and the total cash cost per ounce sold. The number of gold ounces produced in 2004 was 234,433 compared to the number of ounces of gold actually sold of 227,700.

Cash costs of production should not be considered as an alternative to operating profit or net profit attributable to shareholders, or as an alternative to other Canadian or U.S. generally accepted accounting principle measures and may not be comparable to other similarly titled measures of other companies. However, the Company believes that cash costs of production per ounce of gold, by mine, is a useful indicator to investors and management of a mine’s performance as it provides: (i) a measure of the mine’s cash margin per ounce, by comparison of the cash operating costs per ounce by mine to the price of gold; (ii) the trend in costs as the mine matures; and (iii) an internal benchmark of performance to allow for comparison against other mines.

The Company’s cost of sales for the year ended December 31, 2004 was $43.9 million compared to the $41.6 million for the year ended December 31, 2003 and $41.1 million for the year ended December 31, 2002. Although there was a decrease of 519 ounces of gold sold in 2004, cost of sales increased as a result of increased total cash costs of production. Total cash cost per ounce of gold produced increased to an average of $192 per ounce from $184 per ounce in 2003 and $160 per ounce in 2002. Increased fuel costs and decreased production were the most significant factors in the increase in cash costs per ounce between 2003 and 2004. Decreased production was the most significant factor in the per-ounce increase between 2002 and 2003.

In 2004, the total cost of production per ounce rose to $276 from $261 per ounce in 2003. The average total cost of production per ounce of gold was $233 per ounce in 2002. Depreciation and depletion charges totaled $20.8 million during 2004 compared to $17.7 million during 2003 and $18.8 million during 2002. Changes in the depreciation and depletion expense are attributable to changes in the reserve base as well as production levels, as many charges are made on a “unit-of-production” basis. The increased depreciation and depletion charges in 2004 result from the significant capital investments the Company has made, which also result in an increase in these charges on a per ounce basis. A change in accounting for asset retirement obligations is reflected in the restated 2003 and 2002 amounts, as shown. The decline in overall depreciation and depletion charges between 2002 and 2003 was due to reduced production and sales.

The table below reconciles total cash costs per ounce of production and total costs per ounce of production based on the Gold Institute Production Cost Standard to cost of sales per the financial statements:

OTHER INCOME AND EXPENSES

Exploration expenditures in 2004 increased to $10.8 million, of which $6.7 million was capitalized: $4.5 million at the Marlin Project and $2.2 million at the Marigold Mine. Expensed exploration was $1.9 million in Guatemala, primarily at the Cerro Blanco Project, $1.4 million in Nevada at the Marigold and Dee properties, and $0.8 million in Mexico. The Company expended $9.3 million on exploration during 2003 of which $5.6 million was expensed and $3.7 million capital-

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glamis gold ltd. 2004       management’s discussion and analysis

ized to the related mineral property. The most significant expenditures were at the Marlin Project ($5.6 million), and at the Marigold Mine ($2.5 million). During 2002, $3.2 million was spent on exploration in addition to $2.9 million expended on the Marlin Project that was accounted for as part of the Francisco acquisition.

General and administrative expenses increased to $7.2 million in 2004 from $5.9 million in 2003 and $4.6 million in 2002. In 2004, the Company incurred increased expenses related to support for the new development projects, increased insurance costs and business development expenses.

The Company had no write-downs or recoveries associated with properties during 2004, 2003 or 2002.

Interest and other income recognized by the Company increased to $8.7 million during 2004 compared to $4.4 million in 2003 and $2.3 million in 2002. The Company received $7.25 million relating to the sale of the Cerro San Pedro property and $0.7 million on the sale of its interest in the Metates property in 2004. Interest income was $0.9 million, other miscellaneous income was $0.4 million, and foreign exchange losses were $0.5 million. Significant items in 2003 included the gain recognized on the sale of the Company’s investment in the Cerro San Pedro Project ($1.5 million) and interest received on a tax refund relating to previous years ($1.0 million). Interest income from the Company’s investments increased from 2002 to $1.8 million as invested cash balances averaged over $125 million during 2003. Foreign exchange losses were $0.4 million and other miscellaneous income from sales of assets totaled $0.5 million. In 2002, interest income was $0.9 million, foreign exchange gains were $0.8 million and other income was $0.6 million.

In 2004, current tax expense was $3.9 million relating to cash taxes payable at San Martin and in Mexico. There were no significant cash taxes paid in 2003 and 2002. Future income tax expense of $1.9 million during 2004 related primarily to earnings at the El Sauzal Mine and the San Martin Mine, offset by revaluations of total future income tax in Mexico (a reduction of expense) and an increase in the valuation allowance in the United States (an increase in expense). For 2002 and 2003, the future income tax expense was due primarily to tax-effecting the earnings from the San Martin Mine, resulting in future income tax expense of $1.8 million in 2003 and $0.8 million in 2002. In 2003, the valuation allowance related to U.S. tax losses was reduced, resulting in a recovery of $3.0 million; the $3.0 million valuation allowance was re-established in 2004, as noted above.

LIQUIDITY AND CAPITAL RESOURCES

Working Capital and Cash Flow

The Company’s working capital position tightened to $27.4 million at December 31, 2004, as the Company focused on construction at both the El Sauzal and Marlin Projects. The large balances of $145.4 million at December 31, 2003 and $169.1 million at December 31, 2002 were due primarily to the common share offering in November 2002, which netted the Company $110.6 million in cash.

Cash flow from operations (before changes in non-cash working capital and reclamation expenditures) was $37.4 million in 2004 compared to $33.9 million in 2003 and $33.8 million in 2002. The 2004 cash flow continues to reflect increases in revenues due to the higher realized gold price offset by slightly reduced ounces sold and increased costs per ounce compared to 2003. The 2003 cash flows reflect higher gold prices, offset by reduced ounces sold and increased costs compared to 2002. Net cash provided by operating activities, which includes the non-cash working capital changes and cash expenditures on the reclamation properties, increased to $45.9 million in 2004 compared to $27.0 million in 2003, reflecting increased accounts payable at December 31, 2004. The net cash flow from operating activities was $28.3 million in 2002.

The long-term portion of the reserve for site reclamation and closure was $7.6 million at December 31, 2004 compared to $5.7 million at the end of 2003 and $6.7 million at December 31, 2002. The liability for future income tax was $86.0 at December 31, 2004 compared to $82.9 million at December 31, 2003 and $70.4 million as at December 31, 2002. These balances include approximately $60.0 million recorded in connection with the purchase price of Francisco in 2002 and $10.0 million related to the tax effect of the shares issued to former shareholders of Montana Gold Corp. in 2003 (also see “Share Capital Transactions”). The balance in future income tax liabilities consists primarily of amounts recorded in connection with the purchase of the San Martin property as well as the result of tax-effecting the earnings from San Martin and El Sauzal.

Capital Resources

Long-term liabilities were $123.6 million at December 31, 2004 compared to $88.6 million at December 31, 2003. The amounts include the reserve for site closure and reclamation and future income taxes, as well as long-term debt. The largest increase in long-term liabilities came from the long-term debt financing the Company received from International Finance Corp. On June 30, 2004, the Company signed a loan agreement with International Finance Corporation, a division of the World Bank. The facility provides for up to $45.0 million in funding for development of the Company’s Marlin Project in Guatemala. The facility is available for drawdown until December 31, 2005, with any funds drawn repayable over three years at a six-month LIBOR plus 2.625%-based interest rate. The facility is secured by a pledge of the Company’s shares in the related Guatemalan subsidiaries. As at December 31, 2004, there was $30.0 million outstanding under the facility. In February 2005, the Company drew the remaining available balance of $15.0 million. The interest rate was 4.775% as of December 31, 2004; interest is payable semi-annually. Repayments are scheduled to begin in January 2007 and will be made semi-annually through July 2009. For the year ended December 31, 2004 $1.2 million of interest and financing costs were capitalized to the Marlin Project.

On March 4, 2005, the Company finalized a 3-year $50.0 million revolving credit facility with the Bank of Nova Scotia. The facility is available for borrowing and repayment at any time during the 3-year period ending March 4, 2008 at a LIBOR-based interest rate. The facility is secured by a pledge of the Company’s shares in certain U.S. and Mexican mining subsidiaries. As of March 11, 2005, no amounts were outstanding under this facility.

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gold glamis ltd. 2004       management’s discussion and analysis

Share Capital Transactions

During 2003, the Company paid $1.6 million to Chesapeake Gold Corp. and issued 2.2 million common shares of the Company valued at $20.7 million to former shareholders of Montana Gold Corp. upon filing of the technical report with the Toronto Stock Exchange establishing the reserves at the Marlin Project, pursuant to the terms of the 2002 Plan of Arrangement with Francisco.

In 2002, the Company sold 13.9 million common shares in a public offering resulting in gross proceeds to the Company of Cdn$175.7 million (US$111.7 million). Transaction costs associated with the offering were $1.1 million.

On July 16, 2002, the Company completed the acquisition by way of a plan of arrangement of Francisco. Francisco’s principal assets were the El Sauzal Project and the Marlin Project. The Company issued 25.8 million common shares valued at $124.5 million to the shareholders of Francisco under the terms of the plan of arrangement.

At an extraordinary shareholders meeting on February 9, 2005, the Company’s shareholders removed the restriction on the number of common shares the Company is authorized to issue by majority vote of all shareholders present.

In the course of its business, the Company may issue debt or equity securities to meet the growth plans of the Company if it determines that additional funding could be obtained under favorable financial terms. No assurance can be given that additional funding will be available or, if available, will be on terms acceptable to the Company.

No dividends are planned to be declared or paid in 2005 as the Company’s cash is being used for the development activities at Marlin and Marigold. No dividends were paid or declared in 2004, 2003 or 2002.

Capital Expenditures

The Company spent a record $191.4 million during 2004 as the El Sauzal Mine was completed and the Marlin Project significantly advanced. The Company’s capital expenditures were $77.8 million during 2003 as construction at the El Sauzal Project and the Marlin Project began and expansion at the Marigold Mine continued. Capital expenditures were $32.5 million during 2002 due primarily to expansion at Marigold and the Francisco acquisition.

Major capital expenditures during the fiscal year 2004 were as follows:

Included in the above were $2.3 million and $4.4 million of exploration expenditures that were capitalized relating to expanded reserves at Marigold and Marlin, respectively.

Capital expenditures and funds for exploration in 2005 are estimated to total approximately $103.6 million. The primary capital expenditures are expected to be for plant, equipment and development of the El Sauzal Project ($7.9 million), equipment purchases and development at the Marlin Project ($63.0 million), equipment purchases and development for the Marigold Mine expansion ($19.3 million), and leach pad expansion and development at the San Martin Mine ($2.8 million). Exploration is planned primarily at the Marlin Project and Marigold, with additional work in Guatemala and Mexico. Exploration at Cerro Blanco is budgeted at $4.2 million.

The Company believes that its estimated cash flows from operations and current cash reserves along with the $50.0 million revolving credit facility negotiated in early 2005 will be sufficient to fund its anticipated 2005 expenditures.

HEDGING

At December 31, 2004, December 31, 2003 and at December 31, 2002, the Company had no ounces hedged.

CONTRACTUAL OBLIGATIONS AND CONTINGENCIES

In the course of its normal business, the Company incurs various contractual obligations and contingent liabilities. These contractual obligations and contingencies as at December 31, 2004 are shown in the table below:

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glamis gold ltd. 2004       management’s discussion and analysis

DISCLOSURE OF OUTSTANDING SHARE DATA

The Company had 200,000,000 shares of common stock authorized as of December 31, 2004. At an extraordinary shareholders’ meeting on February 9, 2005, the restriction on the number of shares authorized was removed allowing the Company to issue an unlimited number of common shares. The Company had 130,863,953 common shares outstanding at December 31, 2004 and 130,950,953 common shares outstanding as of March 11, 2005. The number of common shares outstanding on March 11, 2005 includes 57,000 common shares issued as restricted stock, one third of which has vested and the balance of which will vest over the next two years. The Company also had outstanding 3,381,000 stock options as of December 31, 2004 and 3,724,000 stock options as of March 11, 2005, each of which is exercisable into one common share.

ENVIRONMENTAL, REGULATORY AND OTHER RISK FACTORS

Reclamation and Environmental

The Company generally is required to mitigate long-term environmental impacts by stabilizing, contouring, reshaping and re-vegetating various portions of a site once mining and processing are completed. Reclamation efforts are conducted in accordance with detailed plans that have been reviewed and approved by the appropriate regulatory agencies. Whenever feasible, reclamation is conducted concurrently with mining operations.

Though the Company believes that its mining operations are in material compliance with all present health, safety and environmental rules and regulations, there is always some uncertainty associated with such due to the complexity and application of such rules and regulations. The Company does not anticipate that the cost of compliance with existing environmental laws and regulations will have a material impact on its earnings in the foreseeable future. However, possible future health, safety and environmental legislation, regulations and actions could cause additional expense, capital expenditures, restrictions and delays in the activities of the Company, the extent of which cannot be predicted.

A portion of the $8.0 million of the Company’s expenditures in 2004 on leach pads at San Martin and Marigold, the filter system at El Sauzal, and the tailings impoundment at the Marlin Project are related to complying with environmental standards. The Company estimates that it will spend approximately $15.8 million in this area during the year ending December 31, 2005 including leach pad construction at San Martin ($2.2 million) and Marigold (Company’s share $1.5 million), work on the tailings impoundment at Marlin ($5.8 million) and upgrades to the process plant and filter plant at El Sauzal ($6.3 million), part of which can be considered to be related to compliance.

At the corporate level, an Environmental Policy is in place to assure measurable standards for internal environmental audits for review by the Environment Committee of the Board of Directors. The Committee has been active and is satisfied the Company is complying with regulatory parameters.

As of December 31, 2004, the Company had in place $10.7 million of certificates of deposit ($9.5 million at December 31, 2003) and $2.1 million in reclamation bonds ($3.8 million at December 31, 2003) posted as security for future reclamation costs.

Regulatory and Other Risk Factors

The Company conducts mining, development and exploration activities in countries other than Canada and the United States. The Company’s foreign mining investments are subject to the risks normally associated with the conduct of business in foreign countries, which include, among others, invalidation of governmental orders or permits, corruption, uncertain political and economic environments, terrorist actions, arbitrary changes in laws or policies, the opposition of mining from environmental or other non-governmental organizations and limitations on foreign ownership or the export of gold. These risks may limit or disrupt the Company’s projects, restrict the movement of funds or result in the deprivation of contractual rights or the taking of property by nationalization or expropriation without fair compensation, any or all of which could have a material and adverse effect on the Company’s profitability or the viability of its foreign operations.

Additionally, legislation has been introduced in prior sessions of the U.S. Congress to make significant revisions to the U.S. General Mining Law of 1872 that would affect the Company’s unpatented mining claims on federal lands, including a royalty on gold production. It cannot be predicted whether any of these proposals will become law. Any levy of the type proposed would only apply to unpatented federal lands and accordingly could adversely affect the profitability of portions of the gold production from the Marigold mine, and all production from the Imperial Project if it were to be developed.

The Company’s mineral development and mining activities and profitability are subject to significant risks due to numerous factors outside of its control including, but not limited to, the price of gold, changes in the regulatory environment, various foreign exchange fluctuations and risks inherent in mining. Refer to the Company’s Annual Information Form for additional discussions of risk factors.

Because the Company has no production hedged, any sustained change in the price of gold over or under current levels will appreciably affect the Company’s general liquidity position and could substantially increase or decrease revenues, earnings and cash flow.

Acquisition of title to mineral properties in all jurisdictions where the Company operates is a very detailed and time-consuming process. Certain of the Company’s properties have not been surveyed and therefore, in accordance with the laws of the jurisdiction in which the properties are located, their existence and area could be in doubt. Although the Company has investigated title to all of its mineral properties, the Company cannot give any assurance that title to such properties will not be challenged or impugned. In addition, portions of the Company’s mineral reserves lie within unpatented mining claims in the United States. There is a risk that any of the Company’s unpatented mining claims could be determined to be invalid, in which case the Company could lose the right to any mineral reserves contained within those mining claims.

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glamis gold ltd. 2004       management’s discussion and analysis

The Company prepares estimates of future gold production for its various operations. The Company’s production estimates are dependent on, among other things, the accuracy of mineral reserve estimates, the accuracy of assumptions regarding ore grades and recovery rates, assumptions pertaining to ground conditions and physical characteristics of ores, such as hardness and the presence or absence of particular metallurgical characteristics and the accuracy of estimated rates and costs of mining and processing. The failure of the Company to achieve its production estimates could have a material and adverse effect on any or all of the Company’s future cash flows, profitability, results of operations and financial condition.

The Company’s published figures for both mineral reserves and mineral resources are only estimates. The estimating of mineral reserves and mineral resources is a subjective process which depends in part on the quality of available data and the assumptions used and judgments made in interpreting such data. There is significant uncertainty in any reserve or resource estimate such that the actual deposits encountered and the economic viability of mining the deposits may differ materially from the Company’s estimates.

Gold exploration is highly speculative in nature. Success in exploration is dependent upon a number of factors including, but not limited to, quality of management, quality and availability of geological expertise and availability of exploration capital. Due to these and other factors, no assurance can be given that the Company’s exploration programs will result in the discovery of new mineral reserves or resources.

The Company also invests cash balances in short-term investments that are subject to interest rate fluctuations. Because these investments are in highly liquid, short-term instruments, the Company believes that any impact of an interest rate change would not be material. The Company’s long-term debt is based on a market rate, reset semi-annually. Changes in the “LIBOR” rates will directly affect the Company’s interest expense.

CRITICAL ACCOUNTING POLICIES

The preparation of its consolidated financial statements requires the Company to use estimates and assumptions that affect the reported amounts of assets and liabilities as well as revenues and expenses. The Company’s accounting policies are described in note 2 of the notes to its consolidated financial statements. The Company’s accounting policies relating to work-in-progress inventory valuation, depreciation and depletion of mineral property, plant and equipment and site reclamation and closure accruals are critical accounting policies that are subject to estimates and assumptions regarding reserves, recoveries, future gold prices and future mining activities. All estimates used are subject to periodic review and are adjusted as appropriate. Life-of-mine plans are prepared each year, so all estimates relating to mining activities, reserves, recoveries and gold prices are re-assessed annually, or more frequently as determined by management. Because of the ongoing review process, the Company has been able to update its estimates on a timely basis as developments affecting the underlying assumptions have necessitated such modifications.

The Company records the cost of mining ore stacked on its leach pads and at the El Sauzal mill as work-in-progress inventory, and values work-in-progress inventory at the lower of cost or estimated net realizable value. These costs are charged to earnings and included in cost of sales on the basis of ounces of gold recovered. The assumptions used in the valuation of work-in-progress inventories include estimates of gold contained in the ore stacked on leach pads, assumptions of the amount of gold stacked that is expected to be recovered from the leach pads, the amount of gold in the El Sauzal mill circuit and an assumption of the gold price expected to be realized when the gold is recovered. If these estimates or assumptions prove to be inaccurate, the Company could be required to write-down the recorded value of its work-in-progress inventories, which would reduce the Company’s earnings and working capital.

The Company records mineral property acquisition costs and mine development costs at cost. In accordance with Canadian generally accepted accounting principles, the Company capitalizes pre-production expenditures net of revenues received, until the commencement of commercial production. A significant portion of the Company’s mineral property, plant and equipment is depreciated and amortized on a unit-of-production basis. Under the unit-of-production method, the calculation of depreciation, depletion and amortization of mineral property, plant and equipment is based on the amount of reserves expected to be recovered from each location. If these estimates of reserves prove to be inaccurate, or if the Company revises its mining plan for a location, due to reductions in the price of gold or otherwise, to reduce the amount of reserves expected to be recovered, the Company could be required to write-down the recorded value of its mineral property, plant and equipment, or to increase the amount of future depreciation, depletion and amortization expense, both of which would reduce the Company’s earnings and net assets.

In addition, generally accepted accounting principles require the Company to consider at the end of each accounting period whether or not there has been an impairment of the capitalized mineral property, plant and equipment. For producing properties, this assessment is based on expected future cash flows to be generated from the location. For non-producing properties, this assessment is based on whether factors that may indicate the need for a write-down are present. If the Company determines there has been an impairment because its prior estimates of future cash flows have proven to be inaccurate, due to reductions in the price of gold, increases in the costs of production, reductions in the amount of reserves expected to be recovered or otherwise, or because the Company has determined that the deferred costs of non-producing properties may not be recovered based on current economics or permitting considerations, the Company would be required to write-down the recorded value of its mineral property, plant and equipment, which would reduce the Company’s earnings and net assets.

The Company has an obligation to reclaim its properties after the minerals have been mined from the site, and has estimated the costs necessary to comply with existing reclamation standards. Effective January 1, 2004, the Company retroactively

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glamis gold ltd. 2004 management’s discussion and analysis

adopted the Canadian Institute of Chartered Accountants Handbook Section 3110, “Asset Retirement Obligations” (“HB 3110”). HB 3110 requires that the fair value of a liability for an asset retirement obligation, such as site closure and reclamation costs, be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The Company is required to record the estimated present value of future cash flows associated with site closure and reclamation as a liability when the liability is incurred and increase the carrying value of the related assets for that amount. Subsequently, these asset retirement costs will be amortized to expense over the life of the related assets using the unit-of-production method. At the end of each period, the liability is increased to reflect the passage of time (accretion expense) and changes in the estimated future cash flows underlying any initial fair value measurements (additional asset retirement costs). Prior years’ financial statements have been restated to apply the provisions of the new accounting policy for site closure and reclamation costs. If these estimates of costs or of recoverable mineral resources prove to be inaccurate, the Company could be required to write down the recorded value of its mineral property or increase the amount of future depreciation and accretion expense, or both, all which would reduce the Company’s earnings and net assets.

CONTROLS AND PROCEDURES

The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures, as required by Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon the results of that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by the Company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

The Company’s disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by the Company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, believes that its disclosure controls and procedures are effective to provide such reasonable assurance.

The Company’s management, including the Chief Executive Officer and Chief Financial Officer, believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the control. The design of any systems of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected.

There has been no change in the Company’s internal control over financial reporting during the Company’s year ended December 31, 2004 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Forward-Looking Statements

Safe Harbor Statement under the United States Private Securities Litigation Reform Act of 1995: Except for the statements of historical fact contained herein, the information presented constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, “believes”, or variation of such words and phrases that refer to certain actions, events or results to be taken, occur or achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the actual results of exploration activities, actual results of reclamation activities, the estimation or realization of mineral reserves and resources, the timing and amount of estimated future production, costs of production, capital expenditures, costs and timing of the development of new deposits, requirements for additional capital, future prices of gold, possible variations in ore grade or recovery rates, failure of plant, equipment or processes to operate as anticipated, accidents, labor disputes and other risks of the mining industry, delays in obtaining governmental approvals, permits or financing or in the completion of development or construction activities, the Company’s hedging practices, currency fluctuations, title disputes or claims limitations on insurance coverage and the timing and possible outcome of pending litigation, as well as those factors discussed under Item 5 in the section entitled “Risk Factors” in the Company’s Annual Information Form. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

29

gold glamis ltd. 2004       statements financial consolidated

Management’s Responsibility

The accompanying consolidated financial statements and all of the data included in this annual report have been prepared by and are the responsibility of management of the Company. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Canada and reflect management’s best estimates and judgements based on currently available information. The Company has developed and maintains systems of internal accounting controls in order to assure, on a reasonable and cost-effective basis, the reliability of its financial information, and that assets are safeguarded from loss.

The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal control. The Board exercises its responsibilities through the Audit Committee of the Board which meets with the external auditors to satisfy itself that management’s responsibilities are properly discharged and to review the financial statements before they are presented to the Board of Directors for approval.

The consolidated financial statements have been audited by KPMG LLP Chartered Accountants. Their report outlines the scope of their examination and opinion on the consolidated financial statements.

C. Kevin McArthur		Cheryl S. Maher
President and		Vice President Finance and
Chief Executive Officer		Chief Financial Officer
February 10, 2005		February 10, 2005

Auditors’ Report to the Shareholders

We have audited the consolidated balance sheets of Glamis Gold Ltd. as at December 31, 2004 and 2003 and the consolidated statements of operations, deficit and cash flows for each of the years in the three-year period ended December 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2004 and 2003 and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2004 in accordance with Canadian generally accepted accounting principles.

Chartered Accountants

Vancouver, Canada
February 4, 2005, except for note 17
which is as of February 10, 2005

30

glamis gold ltd. 2004       consolidated financial statements

Consolidated Balance Sheets

(Expressed in millions of United States dollars)
December 31, 2004 and 2003

Commitments and contingencies (notes 5, 6, 7 and 15)
Subsequent event (note 17)

See accompanying notes to consolidated financial statements.

Approved on behalf of the Board:

Director		Director

31

glamis gold ltd. 2004       consolidated financial statements

Consolidated Statements of Operations

(Expressed in millions of United States dollars, except per share amounts)
Years ended December 31, 2004, 2003 and 2002

See accompanying notes to consolidated financial statements

Consolidated Statements of Deficit

(Expressed in millions of United States dollars)
Years ended December 31, 2004, 2003 and 2002

See accompanying notes to consolidated financial statements

32

glamis gold ltd. 2004       consolidated financial statements

Consolidated Statements of Cash Flows

(Expressed in millions of United States dollars)
Years ended December 31, 2004, 2003 and 2002

Non-cash financing and investing activities (notes 3 and 12)

See accompanying notes to consolidated financial statements.

33

glamis gold ltd. 2004       notes to consolidated financial statements

Notes to Consolidated Financial Statements

(Tables expressed in millions of United States dollars, except per share amounts)
Years ended December 31, 2004, 2003 and 2002

34

glamis gold ltd. 2004       notes to consolidated financial statements

Notes to Consolidated Financial Statements

35

glamis gold ltd. 2004       notes to consolidated financial statements

Notes to Consolidated Financial Statements

36

glamis gold ltd. 2004       notes to consolidated financial statements

Notes to Consolidated Financial Statements

On July 16, 2002, the Company completed the acquisition, by way of a plan of arrangement, of Francisco Gold Corp. (“Francisco”), a Canadian public company. Francisco’s principal assets were the El Sauzal gold project in Chihuahua, Mexico and the Marlin gold project in San Marcos, Guatemala.

Under the plan of arrangement, each issued Francisco share was exchanged for 1.55 common shares of the Company and one share in Chesapeake Gold Corp. (“Chesapeake”), a new exploration company formed by Francisco. In addition, prior to completion of the closing of the transaction, Francisco transferred to Chesapeake cash of CDN$1.50 per share for each issued share of Francisco (CDN$25.0 million), certain early stage Nicaraguan exploration assets and a 2% net smelter return royalty on Francisco’s Guatemalan projects outside the Marlin project area. The Company retained a right to acquire a 5% stake in Chesapeake (based on its initial capitalization) through a three year share purchase warrant.

The Company issued 25.8 million common shares to the shareholders of Francisco under the terms of the plan of arrangement and issued 1,674,000 stock options to directors, officers and employees of Francisco exercisable at prices between CDN$3.07 and CDN$4.04 per share in exchange for their existing Francisco stock options. The Company has accounted for this acquisition using the purchase method, as follows:

During the year ended December 31, 2003, the Company paid a further $1.6 million and issued a further 2.2 million common shares of the Company, at a price of CDN$13.50 per share, to the former owners of the Marlin project, pursuant to the plan of arrangement with Francisco. The $22.3 million additional consideration for the acquisition of Francisco was allocated as follows:

37

glamis gold ltd. 2004       notes to consolidated financial statements

Notes to Consolidated Financial Statements

At December 31, 2004 and 2003, all of the Company’s producing properties are held 100%, except for the Marigold Mine, which is 66-2/3% owned. The Company’s producing properties are subject to royalties pursuant to the terms of the underlying acquisition, option or lease agreements, which range up to 7% of net smelter returns and provide for minimum payments which vary with the price of gold aggregating approximately $1.0 million per year.

38

glamis gold ltd. 2004       notes to consolidated financial statements

Notes to Consolidated Financial Statements