In 2004, most precious and base metals continued to rise in price, a trend established during the last three years. Led by strong demand from China, which recently surpassed the United States as the largest consumer of industrial commodities, several metals are at multi-year highs. Among the strongest metals has been molybdenum oxide (MoO₃), which has surged in value ten-fold, rising from US$3 per pound in 2002 to over US$30 in January 2005. Although molybdenum prices are expected to retreat, many experts believe moly will still trade significantly higher than historical price levels given its usage in steel manufacture, the building blocks of China’s modernization boom.

Another metal that has increased in value tremendously in the last three years, also as a result of surging demand and declining reserves, is uranium. In 2004, uranium oxide (U₃O₈) reached US$20 per pound representing a twenty-year high. Given that uranium supplies are forecast to fall well below future needs, prices are expected to continue to rise for several years. As Pathfinder is conducting exploration for uranium and molybdenum, as well as gold and copper, which also have appreciated significantly during the same period, the Company provides shareholders exposure to among the fundamentally strongest commodities in the world.

During 2004, the Company's primary exploration focus was on the Zulema property, a copper-gold prospect located in northern Chile. In total, ten holes were drilled at Zulema encountering long intersections of low-grade sulphide copper and gold mineralization in several holes. As the results were unfortunately not of sufficient grade, the option on the property was terminated.

In September, Pathfinder obtained an option to acquire a 100% interest in the Dude property located on Texada Island, British Columbia, just 95 kilometres north of Vancouver. The property has potential to host a large porphyry-style copper-molybdenum deposit with gold credits. In addition to excellent year-round accessibility, Dude has a large defined drill target as a result of previous work conducted by Falconbridge Ltd. in 1969-1970. Falconbridge's exploration program included grid soil sampling, geophysical surveys and approximately 490 metres of drilling in six short holes. Most of the drill holes encountered mineralization to support the property’s porphyry model; it is clear that further drilling is warranted to properly evaluate Dude’s potential in light of today's economics.

In January 2005, when British Columbia's new online staking program came into effect, the Company acquired 1,828 hectares contiguous to its original 372 hectare Dude claim block. The new ground, which increased the property's size by six-fold, was staked to cover the entire intrusive rock suite which hosts copper and molybdenum mineralization within the Company's initial holdings. No apparent work has been undertaken in the new area; however, given the geological similarities to known mineralization, the potential for discovery of other copper-molybdenum-gold bearing zones is considered to be excellent.

The Company plans to conduct geological and geophysical surveys over the new ground to define additional targets for the 2005 drill program at Dude. In addition to its close proximity to Vancouver and year-round access, Texada Island has the added benefit of a long mining history dating back to the late 1800's when the Island's first iron mine opened in 1886. In the early 1900's, mining of copper-gold skarn deposits occurred, followed by the mining of magnetite ore from 1952 - 1977. Today, Texada has three major limestone mining and processing operations. Since the settlement of this mineral-rich island, mining has been a mainstay of the local economy and culture.

In early 2005, Pathfinder joined a three-company syndicate formed to explore for uranium in Central America. In addition to a high-value commodity, driving this endeavor is extensive data obtained covering exploration work conducted by the United Nations and subsequently a foreign government. A land package has been applied for based on this valuable information. The syndicate provides cost-effective participation in relatively unexplored territory and makes our group an early player in what we hope will become another significant region for uranium deposits.

Pathfinder's management team and directors has excellent experience in exploring for uranium - and importantly - participating in world-class uranium discoveries. The rich Cigar Lake and Dawn Lake uranium deposits in Canada's Athabasca Basin of northern Saskatchewan, as well as the giant Jabiluka uranium deposit in Australia, are three projects we have been intimately involved with. In 2005 we plan to leverage our uranium exploration expertise by pursuing additional uranium projects, domestically and internationally.

On behalf of the Board of Directors, I would like to thank shareholders for their continued support. I am confident 2005 will be a very rewarding year.

Yours truly,

President

February 21, 2005