MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2004

Management’s discussion and analysis of the consolidated operating resullts and financial condition of Guinor Gold Corporation (“Guinor”) for the fiscal years ended December 31, 2004 and 2003 should be read in conjunction with the consolidated financial statements and accompanying notes which have been prepared in accordance with Canadian GAAP.This Management’s discussion and analysis has been prepared as of March 23, 2005.

Capitalized terms used and not defined below have the meanings given to them in the consolidated financial statements and the accompanying notes. References below to “$” or “US dollars” refer to United States dollars. The Company uses the US dollar as its reporting currency. Certain financial information relating to Guinor set out below originated in Canadian dollars (C$), Norwegian kroner (“NOK”) or Guinea Franc (“GNF”) and has been translated into US dollars based on prevailing exchange rates and in accordance with note 2 to the consolidated financial statements.

Guinor was incorporated on February 12 2004. As a result of a corporate reorganization, Guinor became owner of 100% of the shares of Kenor ASA. Guinor’s financial statements have been prepared on a “continuity of interests” basis, with all activities included as if Guinor had been the parent company for all periods presented. Guinor’s shares are traded on the Toronto and Oslo stock exchanges.

Guinor is engaged in gold exploration, development and production and its only operating asset is the 85% interest in the Lero mine based in the Republic of Guinea.

The Lero mine produced 77,245 ounces in 2004 and sold 74,291 ounces. Feasibility drilling for its proposed expansion was completed during the year, resulting in the declaration of reserves of 2.3 million ounces as at March 2005. The expansion includes the construction of a carbon-in-leach treatment plant to replace the current heap leach operations and is expected to increase production to over 300,000 ounces per annum from 2007.

Selected annual production and financial information:

Earnings

Guinor’s net loss for the twelve months ended December 31, 2004 was US$21.2 million (2003: US$14.2 million). The US$7.0 million increase in losses was due primarily to increased exploration spending of US$6.3 million in 2004 compared to 2003 and a reduction of 18,442 ounces of gold sold in 2004, partially offset by lower corporate administration costs (US$4.4 million in 2004 compared to US$5.7 million in 2003).

Loss per share for the year was US$0.13 (2003: US$0.12). Weighted average number of shares increased from 116.5 million in 2003 to 159.2 million in 2004 following the issue of 33 million shares in 2004.

Revenue

Revenue for the year was US$30.4 million, compared to US$33.7 million in 2003, a reduction of US$3.3 million or 10%. The lower revenue in 2004 was due to a reduction in gold sold by 18,442 oz (20%) from 92,733 to 74,291, partially offset by a US$45/oz (12%) increase in the average realized gold price to US$409/oz.

Cash operating costs

Cash operating costs were US$29.9 million in the year, compared to US$32.0 million in 2003, a decrease of US$2.1 million or 7%. This was due mainly to a reduction in gold production. Cash operating costs in 2003 were also higher due to an additional US$1.8 million included in costs that related to a change in estimate of the inventory of gold in circuit, in dumps and heaps as a result of applying lower densities and grade.

Cash operating costs comprised the following (US$ million):

Total cash operating cost per ounce increased by US$56/oz or16% to US$402/oz in 2004. The increase in unit costs resulted from the reduction in gold sold by 20% to 74,291 ounces in 2004 and higher mining costs arising principally from increased fuel prices.

Basic mining data:

Total ore mined in 2004 was 1.3 million tons at a grade of 2.0 g/t compared to 1.1 million tons mined in 2003 at a grade of 3.2 g/t. Ore mined in 2004 contained 80,581 oz against 111,895 oz in 2003 due to the significant drop in grades. Grade mined in the year fell due to the decision to mine and process lower grades in order to preserve the majority of the ore body for the proposed expansion and carbon-in-leach process.

Mining cost was US$140/oz for the year, up US$32/oz from last year. The increase of US$32/oz was due to lower gold produced, increased costs from an increase in ore tons mined in 2004 compared to 2003, increased fuel prices and longer haul distances.

Stacking data for heaps and dumps:

During the year, 1,038,789 dry tons of ore were placed on heaps for irrigation, an increase of 128,568 tons or 14% on 2003. Ore placed on the dumps was 233,165 tons, up 224,247 tons on 2003.

Treatment costs were US$11.6 million in 2004, compared to US$14.7 million in 2003, a decrease of US$3.1 million, or 21% due mainly to lower production. Unit treatment costs were US$156/oz for 2004, in line with that achieved in 2003 of US$158/oz.

Mine related sales, general and administrative expenses:

Sales, general and administrative expenses at the mine site were US$7.9 million (US$106/oz) for 2004, up US$0.5 million (US$26/oz) on the previous year. The increase in cost was due to an increase in salaries and security costs.

Amortization

Guinor’s total amortization costs increased from US$1.7 million in 2003 to US$3.0 million in 2004. The increase of US$1.3 million was due to an acceleration in the amortization of heap leach related assets as the mine plans to move to a carbon-in-leach plant from 2006.

Exploration Expenditures

Exploration costs increased by US$6.3 million from US$8.8 million in 2003 to US$15.1 million in 2004. The increase in exploration costs in 2004 reflects infill drilling during the year for the reserve calculation, continued local and regional exploration to continue the growth of resources and more use of expensive diamond core drilling.

Corporate Administration Expenses

Corporate administration expenses were US$4.4 million and US$5.7 million in 2004 and 2003 respectively, a reduction of US$1.3 million or 23%. Costs in 2003 were higher due to the conversion of the Kenor ASA financial statements to IFRS, and preparations for the listing of the Company’s shares on the Toronto Stock Exchange.

Finance Costs

Net finance income was US$0.8 million in the year, compared to US$0.4 million in 2003. The increase in finance income was due mainly to gains in the retranslation of the Norwegian kroner based accounts, partly offset by net losses arising from the retranslation of Guinea Franc balances following its devaluation during the year.

Taxes

Guinor recorded no tax expenses or tax recovery, and paid no income taxes in either 2004 or 2003. This was due to losses made in both years and the non-recognition of any future tax assets or liabilities.

Financial Position, Liquidity and Capital Resources

At December 31, 2004, Guinor had net working capital of US$16.5 million compared to US$16.7 million in 2003. Cash and cash equivalents totalled US$13.2 million in 2004 against US$3.3 million in 2003. At December 31, 2003 the company held US$15.6 million in short term investments which were realized during 2004. Cash and short term investments includes US$0.6 million (2003:US$0.6 million) in restricted bank deposits for employee salaries and related statutory payments in Norway.

Included in total assets for the year is a Value Added Tax (VAT) recoverable of US$2.2m (2003:US$2.5) due from the Government of Guinea. During the year, an agreement was reached with the Government on a payment schedule for the refunding of outstanding VAT. Payments are due to be made quarterly commencing in March 2005 for two years.

Net cash used in operating activities increased by US$11.6 million to US$20.6 million in 2004. The increase resulted mainly from higher exploration costs (US$15.1 million in 2004 compared to US$8.8 million in 2003) and the reduction in creditors built up at the end of 2003.

Net cash from investing activities in 2004 amounted to US$15.2 million, compared to a net outflow of US$10.8 million in 2003. The inflows in 2004 were mainly proceeds from the disposal of short term investments purchased and held in 2003. For the twelve months to December 31, 2004 the company used US$0.9 million to invest in property, plant and equipment, compared to US$1.9 million in 2003. The reduction in capital expenditure was due to the plans to switch operations from current heap leach operations to a carbon-in-leach facility with the proposed mine expansion project.

Financing activities generated US$15.3 million in 2004 (2003: US$19.0 million). During the year, Guinor raised net proceeds of US$21.6 million through the issuance of 33 million shares through the exercise of Special Warrants issued in March 2004.

A further 150,000 shares were issued as a result of the exercise of employee options. Total net proceeds from the share issues was US$21.7 million. US$2.0 million was used in 2004 to acquire Kenor ASA shares not tendered in the exchange offer (described under ‘reorganization’ below).

On June 7, 2004, Guinor repaid a US$4.4 million bond loan. As at December 31, 2004 Guinor has no outstanding debt or contracted obligations.

Shareholders’ equity decreased by US$1.2 million in the twelve months to December 31, 2004. The decrease was due to the share issues described above, offset by a loss of US$21.2 million for the period and the payment of US$2.0 million to acquire Kenor ASA shares.

The exchange rates of the Guinea Franc (GNF) and the Norwegian kroner (NOK) to the US$ used in the preparation of the financial statements are as follows:

At December 31, 2004, Guinor had net monetary assets denominated in GNF and NOK of GNF2.4 billion and NOK2.3 million respectively, that translated into US$0.9 million and US$0.4 million respectively in the consolidated balance sheet. A future change in the exchange rate by 20% from the rates at December 31, 2004 would change the US$ amount in the consolidated balance sheet of Guinor by US$0.2 million for GNF balances and US$0.1 million for NOK balances. The effect of such changes would be reported as part of finance income/costs, net.

Quarterly Information

The following table provides selected consolidated financial information for each of the last eight quarters:

Revenue in the fourth quarter of 2004 was lower than the preceding quarters due to a significant drop in gold sold to 15,273 ounces (compared to an average of 21,600 ounces for the preceding seven quarters). The fall in gold sold was partly offset by the higher average gold price realized in the quarter of US$438/oz.

Loss from operations increased in the quarter due to the fall in production and an adjustment to amortization in the quarter to accelerate the write-off of the mine’s heap leach related assets.

Outlook

The Lero mine is expected to produce approximately 50,000 ounces of gold in 2005 at a cash cost of approximately US$400/oz. The reduced production level is aimed at the preservation of ore for the proposed expansion and switch to a carbon-in-leach treatment plant from the end of 2006.

On March 14, 2005 Guinor announced the completion of a bankable feasibility study (BFS). The BFS is based on a new 2.3 million ounce reserve and estimates average annualised gold production of around 320,000 ounces per annum over 7 years, with plant commissioning by the end of 2006 at an average life of mine cash cost of US$231 per ounce before royalties.

The BFS incorporates the Kelian CIL plant in Indonesia and based on a gold price of US$400/oz, the expansion project is expected to generate net cash inflows of US$112 million after allowing for the estimated project capital cost of US$144 million. The IRR for the project is estimated at 22.3%.

The contract to purchase the Kelian CIL plant has been recently signed, and delivery of the plant is conditional upon receipt and satisfaction of a number of customary approvals and conditions, including the Indonesian Government not exercising its rights to purchase the plant. Based on precedents management does not expect this right to be exercised.

On March 16, 2005, Guinor entered into an agreement with BMO Nesbitt Burns Inc., on behalf of a syndicate of Underwriters, under which the Underwriters have agreed to buy 70 million Special Warrants from Guinor and sell to the public at a price of C$1.05 per Special Warrant, representing an aggregate amount of C$73.5 million (approx. US$60 million). The Underwriters have been granted an option to purchase up to an additional 17.5 million Special Warrants at any time up to 48 hours prior to closing. Closing is expected on or about April 5, 2005, and is subject to approval by the TSX.

Critical Accounting Policies and Significant Estimates

The preparation of financial statements in conformity with Canadian GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Guinor’s estimates and assumptions used in the valuation of work in progress inventories include estimates of gold contained in the ore stacked on leach pads, estimates of the amount of gold stacked that is expected to be recovered, and estimates of the gold price expected to be realized when the gold is recovered. If the estimates prove to be inaccurate, Guinor could be required to write down the recorded value of its work in progress inventory. Further, inaccuracy in the estimates can result in operating costs being reported in other periods than the gold is actually sold, giving fluctuations in cost per ounce, not directly attributable to the mining or processing of the ore.

Net realizable value of inventories is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses. The current gold price is normally used as the estimate for the future gold price in these calculations.

When assessing the physical inventory in the part of the production cycle where the mineral content cannot be measured when in progress (i.e. ore under irrigation), the inventory is based on estimates using original recoverable mineral content in the ore, and the estimated leaching time. The estimated recoverability and leaching time is based on column testing of the ore. Estimates of original mineral content of the ore is based on laboratory testing of the mineral content of the ore and testing of the density of the ore.

As discussed under “Cash operating cost” above, changes in the estimates used have historically been made as result of changes in the estimates of density, grade and leaching, affecting the operating costs in the financial statements.

Non-GAAP Financial Measures

The terms ‘’cash cost’’ are used on a per ounce of gold basis. Cash cost per ounce is equivalent to mining operations, transport and smelting expenses for the period divided by the number of ounces of gold sold during the period. Cash operating costs information is included to provide information about the cost structure of mining operations. The mine operating costs exclude exploration expense, foreign exchange gains and losses, amortization and interest and financing fees. This information differs from measures of performance determined in accordance with GAAP in Canada and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. These measures are not necessarily indicative of operating profit or cash flow from operations as determined under GAAP and may not be comparable to similarly titled measures of other companies.

Corporate Reorganization

Guinor Gold Corporation, previously a wholly-owned subsidiary of Kenor ASA, incorporated under the laws of Yukon Territory, Canada, has become owner of 100% of the Kenor ASA shares upon the successful completion of an exchange offer (and subsequent compulsory acquisition of all non-tendered Kenor shares). During April 2004, Guinor Gold Corporation obtained a listing for its common shares on both the Toronto Stock Exchange and the Oslo Stock Exchange (Oslo Børs).

Risks and Uncertainties

Guinor Gold Corporation is subject to risks and uncertainties emanating from the nature of its business and environment in which it operates. These include, but are not limited, to the following factors:

Capital Requirements

Guinor requires and must obtain substantial capital resources to enable it to continue with plans to expand its present mining and processing operations. Historically, the Company has financed these expenditures primarily with bank borrowings and offering its equity shares. Given the nature of the capital market, there can be no assurances that Guinor will obtain necessary financing in a timely manner on acceptable terms, if at all.

Failure to raise the needed capital for the expansion will adversely affect Guinor’s future viability as current operations are expected to cease in less than two years.

Gold Price Volatility

The Company derives all its revenues from the production and sale of gold. The profitability of Guinor’s operations are related to the market price of gold. Gold prices have fluctuated widely in the past and are affected by factors beyond the company’s control.

There are numerous factors that may affect the price of gold including industrial and retail demand, central bank lending, sales and purchases of gold, forward sales of gold by producers and speculators, levels of gold production, short-term changes in supply and demand because of speculative hedging activities, confidence in the global monetary system, expectations of the future rate of inflation, the strength of the U.S. dollar (the currency in which the price of gold is generally quoted), interest rates, terrorism and war, and other global or regional political or economic events.

Guinor currently does not hedge its future production and therefore a decline in gold prices for a substantial period would materially and adversely affect its production, profitability and financial position.

Country Risk

Guinor conducts mining, development or exploration activities in Guinea, Ghana and Norway. Guinor’s foreign mining investments are subject to the risks normally associated with the conduct of business in foreign countries. The occurrence of one or more of these risks could have a material and adverse effect on Guinor’s profitability or the viability of its affected foreign operations, which could have a material and adverse effect on Guinor’s future cash flows, earnings, results of operations and financial condition.

Risks may include, among others, labour disputes, invalidation of government orders and permits, war (including in neighbouring states), civil disturbances and activities of governments that could restrict the movement of resources and personnel and affect legal rights over properties.

Guinor’s only mining property is in the Republic of Guinea which is currently experiencing some political tensions and disturbances. Recent civil wars in neighbouring countries of Sierra Leone and Liberia may also have had an adverse effect on the Guinean economy. The company’s activities in Guinea are governed by the Convention de Base signed with the Government and Guinor maintains good relations with the Government and the local community in Guinea.

Mining Risk

Guinor’s operations are subject to operational risks and hazards inherent in the mining industry, including but not limited to, variations in grade, deposit size, density and other geological problems, hydrological conditions, metallurgical and other processing problems, mechanical equipment performance problems, the unavailability of materials and equipment including fuel, labour force disruptions, unanticipated transportation costs, unanticipated regulatory changes, unanticipated or significant changes in the costs of supplies including, but not limited to, petroleum, and adverse weather conditions. Should any of these risks and hazards affect any of Guinor’s mining operations or its exploration activities, it may cause the cost of production to increase to a point where it would no longer be economic to produce gold, which may require the write-down of the carrying values of one or more mines or a property which is material to Guinor. This would have a material and adverse effect on the financial condition, results of operation, and cash flows of the Company.

Guinor’s mineral reserves and resource estimates are only estimates and may not reflect the actual deposits or the economic viability of gold extraction. The estimating of mineral reserves and resources is a subjective process and the accuracy of mineral reserve and resource estimates is a function of the quantity and quality of available data, the accuracy of statistical computations, and the assumptions used and judgments made in interpreting engineering and geological information. There is significant uncertainty in any mineral reserve or resource estimate, and the actual deposits encountered and the economic
viability of mining reserve or resource estimate and the actual deposits encountered and the economic viability of mining a deposit may differ materially from Guinor’s estimates. A reduction in estimated reserves could require material write-downs in investment in the affected mining property and increased amortization, reclamation and closure charges.

Exploration for gold is highly speculative in nature. Guinor’s exploration activities involve many risks and 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. Guinor cannot give any assurances that its future exploration efforts will result in the discovery of a mineral reserve or resource, or that its current and future exploration programs will result in the expansion or replacement of current production with new proven and probable mineral reserves. Guinor cannot give any assurance that its exploration programs will be able to extend the life of its existing properties or result in the discovery of new producing mines or suitable ore bodies.

Mining projects are associated with a number of risks that could materially affect outcomes. Projected capital expenditures and completion schedules from feasibility studies are based on assumptions including exchange rates and shipping times. Actual capital expenditures may differ from those projected and projects could face significant bottlenecks in the construction and start up phases that could result in production delays and affect project returns.

Exchange Risk

Currency fluctuations may affect the costs that Guinor incurs at its operations. All revenue is earned in US dollars, but a portion of Guinor’s operating expenses are incurred in non-US dollar currencies. Fluctuations in the value of the non-US dollar currencies in those countries where Guinor has mining and exploration operations against the US dollar could materially affect, favourably or unfavourably, the company’s profitability, results of operations and financial condition.

Credit Risk

Guinor has two significant concentrations of credit risk, being VAT recoverable from the Government of Guinea and trade receivables from gold sold to its customer.

The Company currently has an agreement with the Guinean Government which provides a schedule for the refund of the outstanding VAT over a two year period.

Guinor’s gold sales are to one customer, from which 95 per cent of estimated sales value is payable on the day after delivery. Gold is however a commodity traded on the global markets and the Company would be able to find alternative buyers for its gold output should that need arise.

Related Party Transactions

During the year ended December 31, 2004, Guinor paid US$463,000 (2003: US$482,000) to Stikeman Elliott LLP, a partner of which is also a director of Guinor. These payments were for services rendered in connection with a prospectus, share issues and the redomiciling and listing of the Company on the Toronto Stock Exchange.

Outstanding Share Data

As at March 23, 2005 the following items were issued and outstanding:

• 173,092,089 common shares.
• 7,410,000 common share purchase options, 6,060,000 options are at an average option price of NOK4.34 and 1,350,000 at an option price of C$1.07. All the options expire in 2005.
• 1,980,000 warrants expiring in 2007 are exercisable into one common share of Guinor at C$1.04 per share.

Additional Information

Additional Information relating to Guinor, including Guinor’s most recent annual information form is available on SEDAR at www.sedar.com.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains certain forward-looking statements. Forward-looking statements, include, but are not limited to those with respect to the price of gold, the estimation of mineral reserves and resources, the realization of mineral reserves estimates, the timing and amount of estimated future success of exploration activities, Guinor’s hedging practices, currency fluctuations, requirements for additional capital, government regulation of mining operations, environmental risk, title disputes or claims limitations on insurance coverage and the timing and possible outcome of pending litigation. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects’, “does not expect”, “is expected”, “budget”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate” or “believes”, or “equivalents or variation, including negative variation, of such words and phases, or state that certain actions, events or results, “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the company to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements. Such risks and uncertainties include, among others, the actual results of current exploration activities, conclusions of economic evaluations, changes in project parameters as plans continue to be refined, possible variations in grade and ore densities or recovery rates, failure of plant, equipment or processes to operate as anticipated, accidents, labour disputes and other risks of the mining industry, delays in obtaining government approvals or financing or in completion of development or construction activities. Although Guinor has attempted to identify important factors that could cause actual actions, events or cause actions events or results not to be anticipated, estimated or intended, there can be no assurance that forward-looking statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. The Company expressly disclaims any obligation to update or revise any such forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events. Accordingly, readers should not place undue reliance on forward-looking statements.