UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB


(MARK ONE)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the quarterly period ended: SEPTEMBER 30, 2004

[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ____________ to ____________


                         Commission File Number: 0-50894

                            WESTERN GOLDFIELDS, INC.
        (Exact name of small business issuer as specified in its charter)


                 IDAHO                               38-3661016
    (State or other jurisdiction of      (IRS Employer Identification No.)
     incorporation or organization)

                           961 MATLEY LANE, SUITE 120
                               RENO, NEVADA  89502
                    (Address of principal executive offices)
                                 (775) 337-9433
                           (Issuer's telephone number)


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X]  No [ ]

The number of shares of common stock outstanding as of: November 10, 2004 was
38,712,309.

Transitional Small Business Disclosure Format (Check one): Yes  [ ] No  [X]





                            WESTERN GOLDFIELDS, INC.
                                   FORM 10-QSB
                                      INDEX


                                                                        
PART I.  FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . .   1

Item 1.  Financial Information. . . . . . . . . . . . . . . . . . . . . .   1
    Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . .   1
    Consolidated Statements of Operations and Comprehensive Income (Loss)   2
    Consolidated Statement of Stockholders' Equity. . . . . . . . . . . .   3
    Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . .   4
    Notes to Consolidated Financial Statements. . . . . . . . . . . . . .   5
Item 2.  Plan of Operations . . . . . . . . . . . . . . . . . . . . . . .  22
Item 3.  Controls and Procedures. . . . . . . . . . . . . . . . . . . . .  28

PART II.  OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . .  29

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds. . .  29
Item 6.  Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30






                         PART I - FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

                                       WESTERN GOLDFIELDS, INC.
                                  (FORMERLY BISMARCK MINING COMPANY)
                                     CONSOLIDATED BALANCE SHEETS

                                                                       September 30,    December 31,
                                                                           2004             2003
                                                                        (Unaudited)
                                                                      ---------------  --------------
                                                                                 
ASSETS
  CURRENT ASSETS
    Cash                                                              $    1,397,334   $     373,500
    Restricted cash held by investment company                                     -       3,897,229
    Accounts receivable                                                      597,485          17,050
    Loan receivable, net of allowance of $10,000                                   -          40,000
    Inventories                                                            2,121,334       2,221,627
    Prepaid expenses                                                         257,068         534,440
    Deposits                                                                   4,050         585,000
                                                                      ---------------  --------------
      TOTAL CURRENT ASSETS                                                 4,377,271       7,668,846

  Mineral Properties                                                               -               -

  Property, plant, and equipment, net of
    accumulated depreciation                                               6,058,680       6,150,509
  Construction in progress                                                   443,850          13,303
  Investments - remediation and reclamation                                6,089,254       5,998,994
  Investments - other                                                         25,200          98,510
  Long-term deposits                                                         307,279         300,000
  Long-term prepaid expenses                                               1,350,765       1,482,921
  Deferred loan fees and expenses, net of amortization                       325,030         829,041
                                                                      ---------------  --------------

TOTAL ASSETS                                                          $   18,977,329   $  22,542,124
                                                                      ===============  ==============

LIABILITIES & STOCKHOLDERS' EQUITY
  CURRENT LIABILITIES
    Accounts payable                                                  $      585,975   $     677,585
    Accrued expenses                                                         783,323         257,699
    Accrued expenses - related party                                               -          22,500
    Accrued interest                                                          45,312          65,920
    Loan payable, current portion                                          3,000,000       3,000,000
                                                                      ---------------  --------------
      TOTAL CURRENT LIABILITIES                                            4,414,610       4,023,704
                                                                      ---------------  --------------

  LONG-TERM LIABILITIES
    Loan payable, net of current portion                                     750,000       3,000,000
    Reclamation and remediation liabilities                                5,998,994       5,998,994
                                                                      ---------------  --------------
      TOTAL LONG-TERM  LIABILITIES                                         6,748,994       8,998,994
                                                                      ---------------  --------------

  PROVISION FOR FORWARD SALES DERIVATIVE MARKED -
    TO-MARKET                                                                506,197         855,788
                                                                      ---------------  --------------

  COMMITMENTS AND CONTINGENCIES                                                    -               -
                                                                      ---------------  --------------

  STOCKHOLDERS' EQUITY
    Preferred stock, $0.01 par value, 25,000,000 shares authorized;
      no shares issued and outstanding                                             -               -
    Common stock, $0.01 par value, 100,000,000 shares authorized;
      38,704,475 and 38,149,078  shares issued
      and outstanding, respectively                                          387,045         381,491
    Additional paid-in capital                                             9,882,962      10,057,384
    Stock options and warrants                                             4,557,815       3,601,478
    Accumulated deficit                                                   (7,009,297)     (4,584,552)
    Accumulated other comprehensive income (loss)                           (510,997)       (792,163)
                                                                      ---------------  --------------
      TOTAL STOCKHOLDERS' EQUITY                                           7,307,528       8,663,638
                                                                      ---------------  --------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $   18,977,329   $  22,542,124
                                                                      ===============  ==============
<FN>
              The accompanying notes are an integral part of these financial statements



                                        1



                                                     WESTERN GOLDFIELDS, INC.
                                                (FORMERLY BISMARCK MINING COMPANY)
                               CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

                                                        Three Months Ended September 30,        Nine Months Ended September 30,
                                                     --------------------------------------  -------------------------------------
                                                           2004                2003                 2004               2003
                                                        (Unaudited)         (Unaudited)          (Unaudited)        (Unaudited)
                                                     -----------------  -------------------  ------------------  -----------------
                                                                                                     
REVENUES
  Gross revenue                                      $      2,766,463   $                -   $       8,109,877   $              -
  Royalties                                                  (251,181)                   -            (837,616)                 -
                                                     -----------------  -------------------  ------------------  -----------------
    Net revenue                                             2,515,282                    -           7,272,261                  -
                                                     -----------------  -------------------  ------------------  -----------------

COST OF GOODS SOLD
  Mine operating costs                                      1,727,253                    -           5,402,999                  -
  Mine site administration                                          -                    -           1,455,396                  -
  Selling, transportation, and refining                        11,646                    -              76,987                  -
  Depreciation, depletion & amortization                      554,070                    -           1,042,449                  -
  Inventory adjustment                                        302,106                    -            (354,457)                 -
                                                     -----------------  -------------------  ------------------  -----------------
    Total cost of goods sold                                2,595,075                    -           7,623,374                  -
                                                     -----------------  -------------------  ------------------  -----------------

GROSS PROFIT (LOSS)                                           (79,793)                   -            (351,113)                 -
                                                     -----------------  -------------------  ------------------  -----------------

EXPENSES
  General and administrative                                        -              332,228           1,712,443            578,002
  Exploration - other                                               -               25,668             230,011             54,415
                                                     -----------------  -------------------  ------------------  -----------------
    Total expenses                                                  -              357,896           1,942,454            632,417
                                                     -----------------  -------------------  ------------------  -----------------

OPERATING LOSS                                                (79,793)            (357,896)         (2,293,567)          (632,417)
                                                     -----------------  -------------------  ------------------  -----------------

OTHER INCOME (EXPENSE)
  Interest income                                              33,223                  401             112,120                401
  Interest expense                                            (72,991)                   -            (259,696)                 -
  Gain on sale of assets                                            -                    -              27,132              6,177
  Loss on sale of investments                                       -                    -             (10,734)                 -
                                                     -----------------  -------------------  ------------------  -----------------
    Total other income (expense)                              (39,768)                 401            (131,178)             6,578
                                                     -----------------  -------------------  ------------------  -----------------

LOSS BEFORE INCOME TAXES                                     (119,561)            (357,495)         (2,424,745)          (625,839)

INCOME TAXES                                                        -                    -                   -                  -
                                                     -----------------  -------------------  ------------------  -----------------

NET LOSS                                                     (119,561)            (357,495)         (2,424,745)          (625,839)
                                                     -----------------  -------------------  ------------------  -----------------

OTHER COMPREHENSIVE INCOME (LOSS)
  Change in market value of securities                        (17,800)             259,200             (68,425)           258,415
  Change in provision for forward sales derivative           (262,217)                   -             349,591                  -
                                                     -----------------  -------------------  ------------------  -----------------

    Total other comprehensive income (loss)                  (280,017)             259,200             281,166            258,415
                                                     -----------------  -------------------  ------------------  -----------------

NET COMPREHENSIVE LOSS                               $       (399,578)  $          (98,295)  $      (2,143,579)  $       (367,424)
                                                     =================  ===================  ==================  =================


BASIC AND DILUTED NET LOSS PER SHARE                 $              -   $            (0.04)  $           (0.06)  $          (0.07)
                                                     =================  ===================  ==================  =================

WEIGHTED AVERAGE NUMBER OF
  COMMON SHARES OUTSTANDING                                38,277,699            9,413,630          38,236,003          9,213,454
                                                     =================  ===================  ==================  =================
<FN>
                              The accompanying notes are an integral part of these financial statements



                                        2



                                             WESTERN GOLDFIELDS, INC.
                                        (FORMERLY BISMARCK MINING COMPANY)
                                  CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                                                                  Common Stock
                                                             ----------------------   Additional    Stock Options
                                                               Number                  Paid-in           and
                                                              of Shares    Amount      Capital        Warrants
                                                             -----------  ---------  ------------  ---------------
                                                                                       
Balance, January 1, 2002                                      3,333,333   $ 33,333   $   534,324   $            -

Common stock issued for:
  property at $0.45 per share                                   250,000      2,500       110,000                -
  payables at $0.37 per share                                    16,667        167        18,351                -

Common stock and warrants issued for
  cash at $0.30 per share                                     1,771,669     17,717       460,633           53,150

Adjustment and correction to outstanding shares                   8,607         86           (86)               -

Acquisition of Calumet Mining Company                         3,500,000     35,000        13,743                -

Net loss for the year ended December 31, 2002                         -          -             -                -

Other comprehensive income                                            -          -             -                -
                                                             -----------  ---------  ------------  ---------------

Balance, December 31, 2002                                    8,880,276     88,803     1,136,965           53,150

Common stock and warrants issued for
  services at $0.30 per share                                   209,166      2,092        52,000           11,687

Common stock and options issued for
  services at $0.30 per share                                    83,334        833        20,717            4,656

Common stock issued for services at $0.30 per share               9,834         98         2,852                -

Common stock issued for services at $0.80 per share              12,000        120         7,800                -

Stock options issued for services                                     -          -             -            1,500

Common stock issued for exercise of  warrants at $0.45
  per share, net of commission expense of $14,850               350,000      3,500       149,920          (10,500)

Common stock issued for services at $0.66 per share              30,000        300        19,500                -

Stock options issued for directors fees and other services            -          -             -           55,000

Common stock and warrants issued for purchase of
  the Mesquite Mine                                           3,454,468     34,545     1,755,346        1,344,485

Common stock and warrants issued in private placement
  less commissions and  expenses of $1,187,835               25,125,000    251,250     6,912,234        1,985,500

Warrants issued for debt financing agreement                          -          -             -          156,000

Miscellaneous adjustments of stock                               (5,000)       (50)           50                -

Net loss for the year ended December 31, 2003                         -          -             -                -

Other comprehensive (loss)                                            -          -             -                -

                                                             -----------  ---------  ------------  ---------------
Balance, December 31, 2003                                   38,149,078    381,491    10,057,384        3,601,478

Options issued for directors' services                                -          -             -          377,967

Options issued for officers' services                                 -          -             -          492,624

Warrants issued for services by related party                         -          -             -           22,500

Options issued for services by employees                              -          -             -           52,366

Options issued for services by consultants                            -          -             -           10,880

Common stock issued for services at $0.80 per share             109,000      1,090        86,110                -

Return of capital and adjustment in shares from prior
  private placement                                             446,398      4,464      (260,533)

Miscellaneous adjustments of stock                                   (1)         -             1                -

Net loss for the nine months ended September 30, 2004
  (unaudited)                                                         -          -             -                -

Other comprehensive income                                            -          -             -                -

                                                             -----------  ---------  ------------  ---------------
Balance, September 30, 2004 (unaudited)                      38,704,475   $387,045   $ 9,882,962   $    4,557,815
                                                             ===========  =========  ============  ===============


                                                                                  Other
                                                               Accumulated    Comprehensive
                                                                 Deficit      Income (Loss)      Total
                                                             ---------------  --------------  ------------
                                                                                     
Balance, January 1, 2002                                     $     (468,805)  $     (96,474)  $     2,378

Common stock issued for:
  property at $0.45 per share                                             -               -       112,500
  payables at $0.37 per share                                             -               -        18,518

Common stock and warrants issued for
  cash at $0.30 per share                                                 -               -       531,500

Adjustment and correction to outstanding shares                           -               -             -

Acquisition of Calumet Mining Company                                     -               -        48,743

Net loss for the year ended December 31, 2002                      (370,051)              -      (370,051)

Other comprehensive income                                                -         275,474       275,474
                                                             ---------------  --------------  ------------

Balance, December 31, 2002                                         (838,856)        179,000       619,062

Common stock and warrants issued for
  services at $0.30 per share                                             -               -        65,779

Common stock and options issued for
  services at $0.30 per share                                             -               -        26,206

Common stock issued for services at $0.30 per share                       -               -         2,950

Common stock issued for services at $0.80 per share                       -               -         7,920

Stock options issued for services                                         -               -         1,500

Common stock issued for exercise of  warrants at $0.45
  per share, net of commission expense of $14,850                         -               -       142,920

Common stock issued for services at $0.66 per share                       -               -        19,800

Stock options issued for directors fees and other services                -               -        55,000

Common stock and warrants issued for purchase of
  the Mesquite Mine                                                       -               -     3,134,376

Common stock and warrants issued in private placement
  less commissions and  expenses of $1,187,835                            -               -     9,148,984

Warrants issued for debt financing agreement                              -               -       156,000

Miscellaneous adjustments of stock                                        -               -             -

Net loss for the year ended December 31, 2003                    (3,745,696)              -    (3,745,696)

Other comprehensive (loss)                                                -        (971,163)     (971,163)

                                                             ---------------  --------------  ------------
Balance, December 31, 2003                                       (4,584,552)       (792,163)    8,663,638

Options issued for directors' services                                    -               -       377,967

Options issued for officers' services                                     -               -       492,624

Warrants issued for services by related party                             -               -        22,500

Options issued for services by employees                                  -               -        52,366

Options issued for services by consultants                                -               -        10,880

Common stock issued for services at $0.80 per share                       -               -        87,200

Return of capital and adjustment in shares from prior
  private placement                                                                              (256,069)

Miscellaneous adjustments of stock                                        -               -             1

Net loss for the nine months ended September 30, 2004
  (unaudited)                                                    (2,424,745)              -    (2,424,745)

Other comprehensive income                                                -         281,166       281,166

                                                             ---------------  --------------  ------------
Balance, September 30, 2004 (unaudited)                      $   (7,009,297)  $    (510,997)  $ 7,307,528
                                                             ===============  ==============  ============
<FN>
                The accompanying notes are an integral part of these financial statements



                                        3



                                         WESTERN GOLDFIELDS, INC.
                                    (FORMERLY BISMARCK MINING COMPANY)
                                   CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                        Nine Months Ended September 30,
                                                                     -------------------------------------
                                                                           2004               2003
                                                                        (Unaudited)        (Unaudited)
                                                                     ----------------  -------------------
                                                                                 
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                           $    (2,424,745)  $         (625,839)
  Adjustments to reconcile net loss to net cash provided (used)
  by operating activities:
    Depreciation and depletion                                               515,844                    -
    Amortization of loan fees                                                526,605                    -
    (Gain) on sale of assets and investments                                 (29,854)              (6,177)
    Interest accrued on investments - reclamation and remediation            (90,260)                   -
    Common stock, options and warrants issued for services                   963,537              278,140
    Exploration fees funded by stock                                          80,000                    -
    Common stock adjustment                                                        1                    -
    Changes in assets and liabilities:
    Decrease (increase) in:
      Restricted cash                                                      3,897,229                    -
      Accounts receivable                                                   (580,435)                   -
      Inventories                                                           (264,041)                   -
      Prepaid expenses                                                       409,528                    -
      Deposits                                                               580,950                    -
      Long Term Deposits                                                      (7,279)                   -
      Accrued interest receivable                                                  -                 (400)
      Allowance for bad debt                                                       -                  400
    Increase (decrease) in:
      Accounts payable                                                      (347,679)              62,772
      Accrued expenses                                                       525,624                8,000
      Accrued expensed - related party                                       (22,500)                   -
      Accrued interest expense                                               (20,608)                   -
                                                                     ----------------  -------------------
Net cash provided (used) by operating activities                           3,711,917             (283,104)
                                                                     ----------------  -------------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of property & equipment, including Construction
    in Progress                                                             (854,562)                   -
  Principal payments received on loan receivable                              40,000                    -
  Purchase of investments                                                          -              (29,972)
  Proceeds from sale of investments                                            7,606               39,025
  Bond refund                                                                      -                5,000
  Purchase of asset                                                          (15,764)                   -
  Proceeds from sale of assets                                               407,231                    -
                                                                     ----------------  -------------------
Net cash provided (used) by investing activities                            (415,489)              14,053
                                                                     ----------------  -------------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Loan proceeds                                                                    -               15,115
  Deferred debt offering costs                                               (22,594)                   -
  Principal payments on loan payable                                      (2,250,000)             (25,115)
  Common stock issued for cash                                                     -              135,900
                                                                     ----------------  -------------------
Net cash provided (used) by financing activities                          (2,272,594)             125,900
                                                                     ----------------  -------------------

Change in cash                                                             1,023,834             (143,151)

Cash, beginning of period                                                    373,500              209,101
                                                                     ----------------  -------------------

Cash, end of period                                                  $     1,397,334   $           65,950
                                                                     ================  ===================

SUPPLEMENTAL CASH FLOW DISCLOSURES:
  Cash paid for interest                                             $       280,303   $                -
                                                                     ================  ===================
  Cash paid for income taxes                                         $             -   $                -
                                                                     ================  ===================

NON-CASH FINANCING AND
INVESTING ACTIVITIES:
    Stock and warrants issued for services                           $         7,200   $           90,700
    Stock options issued for services                                $       956,337   $          187,440
    Stock options issued for deposit for acquisition                 $             -   $          167,789
    Exploration fees paid by issuance of common stock                $        80,000   $                -
    Stock issued for 2% penalty                                      $         4,464   $                -
    Accounts payable increased for 2% penalty on stock               $       256,069   $                -
    Interest reinvested, investments - reclamation and remediation   $        90,260   $                -
<FN>
    The accompanying notes are an integral part of these financial statements



                                        4

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Western  Goldfields,  Inc.  (hereinafter  "the  Company")  and  its wholly owned
subsidiaries  are  engaged in the exploration for, development of and extraction
of  precious  metals  principally in the states of California, Nevada and Idaho.
The  Company's  two  wholly  owned  subsidiaries  are Calumet Mining Company and
Western  Mesquite  Mines,  Inc.

Calumet  Mining  was  acquired  in August 2002 and was a dormant mining company.
(See  Note  12.)  Western  Mesquite  Mines  was  incorporated  in  2003  for the
acquisition  of  the Mesquite Mine in California from Newmont Mining Corporation
in  November  2003.  (See  Note  12.)

The Company was in the exploration stage through most of the year ended December
31, 2003 and all of the year ended December 31, 2002.    With the acquisition of
the  Mesquite  Mine,  the  Company  exited  the  exploration stage and became an
operating  mining company.  The Company's first sale of gold from its production
occurred  in  mid-January  2004.  For  the  year  ended  December  31, 2002, the
Company's  auditors  expressed  a  going  concern qualification in the Company's
audited  financial  statements.

In  November  and  December  2003,  the  Company obtained significant additional
capital  through  a private placement of its stock.  Management plans to use the
majority of the proceeds from the financing for operations of the Mesquite Mine,
as  well  as  exploration  and  development  on  the  Mesquite  Mine  and  other
properties.

The  Company  was  originally  formed on January 15, 1924, under the laws of the
State of Idaho, and in August 2002 changed its name from Bismarck Mining Company
to  Western  Goldfields,  Inc.

The  Company's  year-end  for  reporting  purposes  is  December  31.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This  summary  of  significant  accounting  policies  is  presented to assist in
understanding  the financial statements.  The financial statements and notes are
representations  of  the  Company's  management,  which is responsible for their
integrity  and  objectivity.  These  accounting  policies  conform to accounting
principles  generally  accepted  in  the  United States of America and have been
consistently  applied  in  the  preparation  of  the  financial  statements.

INTERIM FINANCIAL STATEMENTS
- ----------------------------

The  interim  financial  statements  for the periods September 30, 2004 and 2003
included  herein  have  not  been  audited, at the request of the Company.  They
reflect  all  adjustments, which are, in the opinion of management, necessary to
present  fairly  the results of operations for the period.  All such adjustments
are  normal  recurring  adjustments.  The  results of operations for the periods
presented  are  not necessarily indicative of the results to be expected for the
full  fiscal  year.

ACCOUNTING METHOD
- -----------------

The  Company  uses the accrual basis of accounting in accordance with accounting
principles  generally  accepted  in the United States of America.  The Company's
convention  for  closing  its  books is to cut-off all financial and operational
measurements at midnight on the Saturday closest to the actual end of each month
during  the  year  and  at  midnight  on  the  31st  of  December  each  year.

PRINCIPLES  OF  CONSOLIDATION
- -----------------------------

The  consolidated  financial  statements include the accounts of the Company and
its  wholly  owned subsidiaries, after elimination of the inter-company accounts
and  transactions.  Wholly  owned subsidiaries of the Company are listed in Note
14.


                                        5

REVENUE  RECOGNITION
- --------------------

Revenue  is  recognized when metal is delivered and title passes.  The effect of
forward  sales  contracts  are  reflected  in  revenue  at  the date the related
precious metals are delivered or the contracts expire.  Third party smelting and
refining  costs  are recorded as a reduction of revenue.  By-product credits are
off-set  against  operating  expenses  as  generated.

ACCOUNTS  RECEIVABLE
- --------------------

The  Company  records  its  accounts  receivable  at  cost less an allowance for
doubtful  accounts.  On  a  periodic  basis,  the Company evaluates its accounts
receivable  and  establishes  an  allowance  for  doubtful  accounts, based on a
history of past write-offs and collections and current credit conditions.

The Company's trade receivables are related to precious metals delivered against
a  forward  sales  contract  or  a  spot  sale contract whose settlement has not
occurred.  Settlement  usually  occurs  in between two and fifteen business days
and  is  made  through  international  metals  refiners  and  brokers.

USE OF ESTIMATES
- ----------------

The  preparation  of  consolidated  financial  statements  in  conformity  with
accounting  principles  generally  accepted  in  the  United  States  of America
requires  management  to make 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.  Significant areas requiring
the use of management estimates relate to the determination of mineral reserves,
reclamation  and  environmental  obligations, impairment of assets, useful lives
for  depreciation,  depletion  and amortization, measurement of metal-in-process
and  finished  goods  inventories, values of options and warrants, and valuation
allowances  for  future  tax  assets.  Actual  results  could  differ from those
estimates.

EXPLORATION  COSTS
- ------------------

In accordance with accounting principles generally accepted in the United States
of America, the Company expenses exploration costs as incurred.

EXPLORATION STAGE ACTIVITIES
- ----------------------------

The Company is primarily engaged in the acquisition, exploration and development
of  mining  properties.  On November 7, 2003, concurrent with the acquisition of
the  Mesquite  Mine,  the  Company  started  production of metals while studying
enhancements  to  the  processing of the heaps and the potential commencement of
future  mining  operations.

CASH  AND  CASH  EQUIVALENTS
- ----------------------------

The  Company considers all highly liquid investments with original maturities of
three  months  or  less  to  be  cash  equivalents.

RESTRICTED CASH
- ---------------

As of December 31, 2003, the Company had cash proceeds from common stock sold as
part of a private placement in November and December 2003 held by the investment
firm representing the Company.  Most of the proceeds from these stock sales were
released  in January and February 2004 with the remainder released in June 2004.

DERIVATIVE  INSTRUMENTS
- -----------------------

The  Financial  Accounting  Standards  Board  issued  Statement  of  Financial
Accounting  Standards  ("SFAS")  No. 133, "Accounting for Derivative Instruments
and  Hedging Activities," as amended by SFAS No. 137, "Accounting for Derivative
Instruments  and Hedging Activities - Deferral of the Effective Date of FASB No.
133,"  SFAS  No.  138,


                                        6

"Accounting  for Certain Derivative Instruments and Certain Hedging Activities,"
and  SFAS  No.  149,  "Amendment  of Statement 133 on Derivative Instruments and
Hedging  Activities,"  which  is  effective for the Company as of June 30, 2003.
These  standards  establish  accounting  and  reporting standards for derivative
instruments,  including  certain  derivative  instruments  embedded  in  other
contracts,  and  for  hedging activities.  They require that an entity recognize
all derivatives as either assets or liabilities in the balance sheet and measure
those  instruments  at  fair  value.

A  derivative  may  be  specifically  designated  as  a  hedge of financial risk
exposures of anticipated transactions if, both at the inception of the hedge and
throughout  the  hedge  period,  the  changes  in  fair  value  of  the contract
substantially  offset  the  effect of commodity price changes on the anticipated
transactions  and  if  it  is  probable  that  the transactions will occur.  The
Company  regularly  monitors its commodity exposures and ensures that contracted
amounts  do  not  exceed  the  amounts  of  underlying  exposures.

Realized  prices  under  the  Company's forward sales contract are recognized in
gold  sales  and by-product credits as the designated production is delivered to
meet  commitments.  The  Company  values gold for all cash flow hedging purposes
based  upon  the  London Afternoon Gold Fix for each valuation date, modified by
the  gold  forward  rate  expected  by  the  Company  subject  to  the Company's
discounted  financing  costs.  Management maintains estimates for each quarterly
expected  forward  sales  value to approximate the future value of forward sales
contracts  for  the  determination  of  provisions  for  gains  or  losses  on
derivatives.

The  income  effect  of the change in derivative values will be accounted for in
other  comprehensive  income based upon the Company's quarterly valuation of the
associated financial gain or loss. Any changes arising from the determination of
the  derivative's  effectiveness  is  accounted  for  as  a  charge  to  current
operations.

In the event of early settlement or redesignation of hedging transactions, gains
or  losses are deferred and brought into income at the delivery dates originally
designated.  Where the anticipated transactions are no longer expected to occur,
with  the  effect  that  the  risk  hedged no longer exists, unrealized gains or
losses  are  recognized  as  income  at  the  time such a determination is made.

Cash  flows arising in respect of these contracts are recognized under cash flow
from  operating  activities.

COMPREHENSIVE  INCOME  (LOSS)
- -----------------------------

Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards  ("SFAS")  No. 130, "Reporting Comprehensive Income", which was issued
in  June  1997.  SFAS No. 130 establishes rules for the reporting and displaying
of  comprehensive  income and its components, but had no effect on the Company's
net  loss.  SFAS  No.  130 requires unrealized gains and losses on the Company's
available-for-sale  securities, which prior to adoption were reported separately
in  stockholders'  equity,  to  be  included  in  comprehensive  income.

COMPENSATED  ABSENCES
- ---------------------

Employees  of  the  Company are entitled to paid vacation depending on length of
service.  As  of December 31, 2003, the Company had no liability and had not yet
hired  employees.  As  of September 30, 2004, a liability of $32,607 for accrued
vacation  has  been  recorded  for  all  locations.

RECENT ACCOUNTING PRONOUNCEMENTS
- --------------------------------

In  May  2003,  the  Financial  Accounting  Standards  Board issued Statement of
Financial  Accounting  Standards  No.  150,  "Accounting  for  Certain Financial
Instruments  with  Characteristics  of Both Liabilities and Equity" (hereinafter
"SFAS  No.  150").  SFAS  No.  150  establishes  standards  for  classifying and
measuring certain financial instruments with characteristics of both liabilities
and  equity  and requires that those instruments be classified as liabilities in
statements  of  financial  position.  Previously, many of those instruments were
classified  as  equity.  SFAS  No.  150  is  effective for financial instruments
entered  into  or  modified after May 31, 2003 and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. The Company
has  determined  that  this  statement  has no effect on the Company's financial
statements.


                                        7

In  December  2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 148, "Accounting for Stock-Based Compensation
- -  Transition and Disclosure" (hereinafter "SFAS No. 148").  SFAS No. 148 amends
SFAS  No. 123, "Accounting for Stock-Based Compensation," to provide alternative
methods  of  transition for a voluntary change to the fair value based method of
accounting  for  stock-based  employee compensation.  In addition, the statement
amends  the  disclosure  requirements  of  SFAS  No.  123  to  require prominent
disclosure  in  both annual and interim financial statements about the method of
accounting  for  stock-based  employee compensation and the effect of the method
used  on  reported  results.  The  provisions of the statement are effective for
financial  statements  for  fiscal  years  ending  after December 15, 2002.  The
Company currently reports stock issued to employees under the rules of SFAS 123.
Accordingly there is no change in disclosure requirements due to SFAS 148.

In  June  2002,  the  Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards  No. 146, "Accounting for Costs Associated with
Exit  or  Disposal  Activities"  (hereinafter  "SFAS  No.  146").  SFAS  No. 146
addresses  significant  issues  regarding  the  recognition,  measurement,  and
reporting  of  costs  associated  with  exit  and disposal activities, including
restructuring  activities.  SFAS  No.  146 also addresses recognition of certain
costs  related  to  terminating a contract that is not a capital lease, costs to
consolidate  facilities or relocate employees, and termination benefits provided
to  employees  that  are  involuntarily terminated under the terms of a one-time
benefit  arrangement that is not an ongoing benefit arrangement or an individual
deferred-compensation  contract.  SFAS  No.  146  was issued in June 2002 and is
effective for activities after December 31, 2002.  The Company has established a
remediation  and reclamation liability to cover costs related to the exit and/or
disposal  of  its  mining  property.

In  April  2002,  the  Financial  Accounting Standards Board issued Statement of
Financial Accounting Standards No. 145, "Rescission of FASB Statements No. 4, 44
and  64,  Amendment  of  FASB  Statement  No.  13,  and  Technical  Corrections"
(hereinafter  "SFAS  No. 145"), which updates, clarifies and simplifies existing
accounting pronouncements.  FASB No. 4, which required all gains and losses from
the  extinguishment  of debt to be aggregated and, if material, classified as an
extraordinary  item, net of related tax effect was rescinded.  As a result, FASB
No.  64, which amended FASB No. 4, was rescinded, as it was no longer necessary.
FASB  No.  44, "Accounting for Intangible Assets of Motor Carriers", established
the  accounting  requirements for the effects of transition to the provisions of
the  Motor  Carrier  Act of 1980.  Since the transition has been completed, FASB
No. 44 is no longer necessary and has been rescinded.  SFAS No. 145 amended FASB
No.  13  to  eliminate  an  inconsistency  between  the  required accounting for
sale-leaseback  transactions  and  the  required  accounting  for  certain lease
modifications  that  have  economic  effects  that are similar to sale-leaseback
transactions.  The  Company  adopted  SFAS No. 145 which did not have a material
effect  on  the  financial  statements  of  the Company at September 30, 2004 or
December  31,  2003.

CONCENTRATION  OF  CREDIT  RISK
- -------------------------------

The Company maintains its cash in several commercial accounts at major financial
institutions  which  includes  funds  included  in  cash  and  deposit accounts.
Although  the  financial  institutions  are considered creditworthy and have not
experienced any losses on their deposits, at September 30, 2004 and December 31,
2003,  respectively,  the  Company's  cash  balance  exceeded  Federal  Deposit
Insurance  Corporation  (FDIC)  limits  by  $1,197,334  and  $176,270.

The  Company  processes  and  sells  its  metal  through an international metals
company.  The  Company  reviews  the  credit worthiness of its metals outlets at
least  annually  and  as of September 30, 2004 was not aware of any factor which
would impact its sales of metal and ultimate collection of receivables from such
sales.

PROVISION FOR TAXES
- -------------------

Income taxes are provided based upon the liability method of accounting pursuant
to  Statement  of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."  Under  this approach, deferred income taxes are recorded to reflect the
tax  consequences in future years of differences between the tax basis of assets
and  liabilities  and  their  financial  reporting  amounts at each year-end.  A
valuation  allowance  is recorded against deferred tax assets if management does
not  believe  the Company has met the "more likely than not" standard imposed by
SFAS  No.  109  to  allow  recognition  of  such  an  asset.


                                        8

At September 30, 2004, the Company had net deferred tax assets (calculated at an
expected  rate  of 39% for 2004 and part of 2003, and 34% for all prior periods)
of  approximately  $1,255,000  principally  arising  from  net  operating  loss
carryforwards  for  income  tax purposes.  The net deferred taxes are calculated
based  upon  both  federal  and  state expected tax rates.  As management of the
Company  cannot  determine that it is more likely than not that the Company will
realize  the  benefit of the net deferred tax asset, a valuation allowance equal
to  the  net  deferred  tax  asset  has been recorded at September 30, 2004, and
December  31,  2003.  The  significant  components  of the deferred tax asset at
September  30,  2004,  and  December  31,  2003,  were  as  follows:



                                              SEPTEMBER 30,    DECEMBER 31,
                                                  2004             2003
                                             ---------------  --------------
                                                        
     Net operating loss carryforward         $   3,370 ,000   $   1,570,000
                                             ===============  ==============

     Deferred tax asset                      $    1,255,000   $     555,000
     Deferred tax asset valuation allowance      (1,255,000)       (555,000)
                                             ---------------  --------------
         Net tax assets                      $            -   $           -
                                             ===============  ==============


At  September  30,  2004,  the  Company  has net operating loss carryforwards of
approximately  $3,370,000,  which  expire  in  the years 2019 through 2024.  The
Company  recognized  approximately $935,000 and $180,000 of losses from issuance
of restricted common stock and stock options for services during the nine months
ended  September  30,  2004  and  fiscal  year 2003, respectively, which are not
deductible  for  tax  purposes  and are not included in the above calculation of
deferred  tax  assets.  Also,  the  Company  has  recognized costs for financial
statement  purposes  of approximately $2,700,000 for mineral property and ore on
leach  pad  that are not deductible for tax purposes in 2003.  The allocation of
the costs to the leach pads did result in additional tax deduction for depletion
from  recoveries of gold estimated to be $310,000 as of September 30, 2004.  The
change in the allowance account from December 31, 2003 to September 30, 2004 was
$700,000  and  from  December  31,  2002 to December 31, 2003 was $300,000.  The
Company  has  also  issued  substantial  amounts of new common stock in 2002 and
2003,  which  may  have resulted in control changes.  A control change may limit
the  availability  of the net operating losses from periods prior to the control
change.  The  Company also has available limited net operating losses from prior
acquisitions,  which  may  be  available  for  tax  purposes.

INVESTMENT  IN  SECURITIES
- --------------------------

Pursuant  to  Statement  of Financial Accounting Standards ("SFAS") No. 115, the
Company's  investments  in  securities  is classified as either trading, held to
maturity,  or  available-for-sale.  During  the  nine months ended September 30,
2004 and the year ended December 31, 2003 the Company did not own any securities
classified  as  either  trading  or held to maturity.  However, at September 30,
2004  and  December  31,  2003  the  Company  did  own  securities classified as
available-for-sale.

Securities  available-for-sale  consists  of  debt  and  equity  securities  not
classified  as  trading  securities  or  as  securities  to be held to maturity.
Unrealized  holding  gains  and  losses,  net  of  tax,  on  securities
available-for-sale are reported as a net amount in a separate component of other
comprehensive  income.

Gains  and  losses  on  the sale of securities available-for-sale are determined
using  the  specific  identification  method  and  are  included  in  earnings.

PROPERTY,  PLANT  AND  EQUIPMENT
- --------------------------------

Property,  plant and equipment are stated at cost.  Depreciation of property and
equipment is calculated using the straight-line method over the estimated useful
lives of the assets, which range from three to ten years, or units-of-production
method over the estimated useful life of the property. (See Note 5.)


                                        9

MINERAL  PROPERTIES
- -------------------

Mineral  properties  are  stated  at  cost.  Depletion  of mineral properties is
calculated  using  the units-of-production method over the estimated recoverable
ounces  of  gold  on  the  property.  (See  Note  3.)

BASIC AND DILUTED NET LOSS PER SHARE
- ------------------------------------

Net loss per share was computed by dividing the net loss by the weighted average
number  of shares outstanding during the period.  The weighted average number of
shares  was  calculated by taking the number of shares outstanding and weighting
them  by  the  amount of time that they were outstanding.  Basic and diluted net
loss  per  share was the same, as the common stock equivalents outstanding would
be  considered  anti-dilutive.  As  of September 30, 2004 and December, 31, 2003
respectively,  the  Company  had  outstanding  options for 4,668,334 and 358,334
shares and outstanding warrants for 24,787,515 and 24,637,515 shares.

FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS
- ---------------------------------------

The  Company's  financial  instruments  as defined by SFAS No. 107, "Disclosures
about  Fair  Value  of  Financial  Instruments,"  include cash, restricted cash,
accounts  and loans receivable, prepaids, accounts payable, accrued expenses and
short-term  borrowings.  All  instruments are accounted for on a historical cost
basis,  which,  due  to  the  short  maturity  of  these  financial instruments,
approximates fair value at September 30, 2004 and December 31, 2003.

ACCOUNTING  FOR STOCK OPTIONS AND WARRANTS GRANTED TO EMPLOYEES AND NONEMPLOYEES
- --------------------------------------------------------------------------------

Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (hereinafter "SFAS No. 123"), defines a fair value-based method of
accounting  for  stock  options  and  other equity instruments.  The Company has
adopted  this  method,  which measures compensation costs based on the estimated
fair  value  of  the  award  and  recognizes  that cost over the service period.

METAL  ON  LEACH  PAD  AND  IN  METAL-IN-PROCESS  INVENTORY
- -----------------------------------------------------------

The  Company  took  over the Mesquite Mine on November 7, 2003 with an estimated
50,800  ounces  of  recoverable  gold  contained  in mineralized ores previously
placed  on impermeable, lined pads.  During the periods ended September 30, 2004
and  December  31,  2003  the  Company produced 20,690 and 5,367 ounces of gold,
respectively, from the pads into metal-in-process inventory, leaving on the pads
an estimated 24,743 ounces of gold as of September 30, 2004 and 45,433 ounces of
gold  as  of  December  31, 2003.  The Company carries no value in its financial
statements  for metal on the leach pads as the initial value assigned to mineral
properties for metal on the leach pads, in accordance with SEC Industry Guide 7,
has  been  included  in  exploration  expense.

In  the  nine  month  period ended September 30, 2004, the Company had its first
sales of gold from metal-in-process inventory generating sales of 20,687 ounces.
There  were  no  sales  prior  to January 1, 2004.  Prior to November, 2003, the
Company  had  no  production  activities.

The  determination  of both the ultimate recovery percentage and the quantity of
metal  expected  over  time  requires the use of estimates, which are subject to
revision since they are based upon metallurgical test work.  The Company expects
to  continue  to  process  and recover metal from the leach pads until no longer
considered  economically  feasible.

INVENTORIES:
- ------------

     i)   Bullion  (metal refined to industry purity standards) inventory, which
          includes  metal  held  on  our  behalf  by  third parties is valued at
          market.
     ii)  Metal-in-process  inventory,  which is metal in solution or in various
          parts  of  the  processing  circuit, is valued at the lower of average
          production  cost  or  net  realizable  value. Production costs include
          processing  and  administrative costs, which are charged to operations
          and  included  in  cost  of  sales  on  the  basis  of  ounces of gold
          recovered.  Based upon actual gold recoveries and operating plans, the
          Company  continuously


                                       10

          evaluates  and refines estimates used in determining the costs charged
          to  operations  and  the  carrying  value of costs associated with the
          metals  in  circuit.
     iii) Materials  and  supplies  inventory  is stated at the lower of average
          cost  or  net  realizable  value.

DEPOSITS
- --------

Under  the  terms of its power purchase agreement with the local power provider,
which is a quasi-public agency, the Company is required to collateralize certain
portions  of  the  Company's  obligations.  The Company has collateralized these
obligations by assigning a $300,000 certificate of deposit for a period of three
years.  The  ultimate  timing  for  the release of the collateralized amounts is
dependent  on the credit worthiness of the Company and/or the timing and closure
of  the Mesquite mine.  Collateral could also be released to the extent that the
Company  is  able  to secure alternative financial assurance satisfactory to the
respective  agency.  The  Company's  management  expects that the aforementioned
collateral  will  remain in place beyond a twelve-month period and has therefore
classified  these  deposits  as  long-term.

The Company had also advanced working capital, in the amount of $585,000, to its
management contractor to cover anticipated operating costs at the Mesquite Mine.
In  May  2004,  this  deposit  was  offset  against  the final invoices from the
contractor  upon  the  termination  of  its  contract.

RECLAMATION  AND  REMEDIATION  COSTS
- ------------------------------------

Estimated  future  costs  are  based  principally  on  legal  and  regulatory
requirements.  Such  costs  related to active mines are accrued and charged over
the  expected operating lives of the mines using the units-of-production method.
Future  remediation  costs  for inactive mines are accrued based on management's
best estimate at the end of each period of the undiscounted costs expected to be
incurred  at  the  site.  Such cost estimates include, where applicable, ongoing
care and maintenance and monitoring costs. Changes in estimates are reflected in
earnings  in  the  period  an  estimate  is  revised.

RECLASSIFICATIONS
- -----------------

Certain  reclassifications  of  prior year balances have been made to conform to
current  year  presentation.

NOTE 3 - MINERAL PROPERTIES

The  Company  controls  the  following  mineral  properties:

CALIFORNIA  PROPERTIES

MESQUITE  MINE
- --------------

In  July 2003, the Company issued 111,859 shares of common stock as a deposit on
the  purchase of the Mesquite Mine, in Imperial County, California.  In November
2003,  the  Company  completed  this purchase and issued an additional 2,217,609
shares  of  common  stock and 2,494,810 warrants with an exercise price of $1.00
per  share.   As  of  December  2003,  the  Company  remained obligated to issue
additional shares and warrants under the purchase agreement.  The Company issued
1,125,000 shares of common stock in January 2004, and 5,596,370 warrants for the
purchase  of one share of common stock each, with an exercise price of $1.00 per
share,  in  March  2004,  in  final  settlement  of  its  obligations under this
agreement  (See  Note  12).


                                       11



                                                                      VALUE PER
                                                             AMOUNT     SHARE       VALUE
                                                           ---------  ----------  ----------
                                                                         
Reclamation Obligation Assumed                                     -           -  $5,998,994

Western Goldfields Common Stock                            3,454,468  $     0.52   1,789,891
Warrants - Western Goldfields stock, exercisable at $1.00
per share of common 450 days from issuance and for 5
years thereafter                                           2,494,810        0.18     449,066
Warrants - Western Goldfields stock, exercisable at $1.00
per share of common 815 days from issuance and for 5
years thereafter                                           5,596,370        0.16     895,419
                                                                                  ----------
    Total Consideration                                                            9,133,370
                                                                                  ==========

Allocation to Fixed Assets:
Property, plant and equipment, including buildings                                $6,471,000
Mineral properties                                                                 2,662,370
                                                                                  ----------
                                                                                  $9,133,370
                                                                                  ==========


The  fair  market  value  of  the  acquired  property,  plant  and equipment was
determined  by  review  by  the  mine operations contractor. (See Note 15.)  The
remaining  value  was  allocated to mineral properties, and expensed in December
2003  as  a  part  of  a  $2,791,603  in  exploration  expenses.

GOLD  POINT  MINE
- -----------------

In  September  2002, the Company acquired the Gold Point Mine mining claims from
Western  Continental,  Inc.  in  exchange for 250,000 shares of our common stock
valued at $112,500, assumption of liabilities of $5,000, mining claims valued at
$15,000,  141,875  shares  of Grand Central Silver Mines valued at approximately
$28,375 and $2,500 cash.  Western Continental, Inc. was controlled by William L.
Campbell,  its  President,  who  prior  to  August  24, 2002, also served as the
Company's  President.

CALIFORNIA  PROPERTIES  -  OTHER
- --------------------------------

In  January  2003, the Company reached an agreement on the Cahuilla Gold Project
near  Indio, California.  This agreement with the Torres Martinez Tribe, and two
extensions  signed  in  July  2004  and  October 2004, gives the Company through
January  2005  the exclusive negotiation rights and access to geologic sites for
their  evaluation  in  advance  of  entering  into  a  formal exploration/mining
agreement  to nearly two square miles of property.  In January 2004, the Company
increased  its  land  position  at  Cahuilla  by  acquiring  100%  of  La Cuesta
International,  Inc.'s interests in two separate mining leases that collectively
cover approximately 70 acres adjacent to the Torres Martinez Tribal lands.

NEVADA  AND  IDAHO  PROPERTIES

At  December  31,  2002,  Calumet Mining Company, the Company's subsidiary, held
several  mining  claims  throughout  Nevada  and  Idaho.  They  consist  of four
unpatented  mining claims in Sunnyslope, Nevada, two unpatented mining claims in
Koegel Hills, Nevada, two unpatented mining claims in Corral Canyon, Nevada, six
unpatented  mining  claims in Buckskin North (lease lapsed in 2003), Nevada, two
unpatented mining claims in Golden Lyon (lease lapsed in 2003), Nevada, nineteen
unpatented  lode  mining  claims  in  Shoshone  County,  Idaho, in addition to a
10-year  lease  for 635 acres in Shoshone County, Idaho and five unpatented lode
mining  claims  in  the  Pyramid  Mine  near  Fallon,  Nevada.  Due to a lack of
evidence  establishing  proven  and  probable reserves, the acquisition costs of
these  mines  were  included in Calumet Mining Company's net loss for the period
ended  August  25,  2002  as  an  exploration  expense.  (See  Note  14.)

In April 2004, the Company entered a non-binding letter of intent with Coolcharm
Ltd.  with  respect  to  a  joint  venture  for  the  Lincoln Hill Mine, whereby
Coolcharm will invest in exploration and development of the property.


                                       12

Under  the  agreement Coolcharm could invest up to $4,000,000 in exploration and
development  expenses and earn up to 60% interest in the property.  In September
2004,  Coolcharm paid a portion of its initial obligation and a joint venture is
in  the  process  of  being  formed.

Also  in April 2004 the Company entered a non-binding letter of intent to form a
joint  venture with 321 Gold for an exploration and development agreement on the
Sunny  Slope  Mine  property.  Under this agreement, 321 Gold would expend up to
$1,000,000 on the exploration and development of the property in anticipation of
earning  up  to  a  70%  interest  in  the  property.

The  Company  has  staked additional claims during 2003 at the Sunny Slope Mine,
increasing  the  unpatented  mining  claims  to  240  acres.

The  Company  has  staked additional claims during 2003 at the Kibby Flats Mine,
increasing  the  unpatented  mining  claims  to  320  acres.

The  Company  has  staked  additional  claims during 2003 at the Gold Star Mine,
increasing  the  unpatented  mining  claims  to  260  acres.

The  Company  has staked additional claims during 2003 at the Koegel Hills Mine,
increasing  the  unpatented  mining  claims  to  1,480  acres.

The Lincoln Hill Mine was leased in December 2002 from an officer of the Company
and  his partner.  This claim represents unpatented claims covering 700 acres in
the  Rochester  Mining  District  near  Lovelock,  Nevada.

In  January  2004,  the Company entered discussions regarding the acquisition of
Nevada  Colca Gold, a private corporation with mineral property interests in the
western  United  States  and  Mexico.


NOTE 4 -INVENTORIES
Inventories consist of the following:



                                 SEPTEMBER 30,   DECEMBER 31,
                                      2004           2003
                                 --------------  -------------
                                           
     Bullion                     $            -  $     364,334
     Metal-in-process                 1,989,423      1,634,966
     Supplies                           131,911        222,327
                                 --------------  -------------
     Inventories                 $    2,121,334  $   2,221,627
                                 ==============  =============


Inventories include $364,334 in bullion at December 31, 2003 which, along with
$15,765 acquired in the first quarter of 2004, was all related to the original
purchase transaction with Newmont Mining Corporation for the Mesquite Mine.
This purchased inventory was disposed of in the first quarter for the total
amount of $407,231, which resulted in a gain of $27,132.  These 1,003 gold
ounces of bullion were not produced in the normal course of business and were
not included in cost of sales.

Metal-in-process inventory contained approximately 5,303 and 5,367 ounces of
gold as of September 30, 2004, and December 31, 2003, respectively.  This did
not include the 1,003 ounces of gold in bullion inventory at December 31, 2003.


                                       13



                                     SEPTEMBER 30,   DECEMBER 31,
                                          2004           2003
                                     --------------  -------------
                                               
     Beginning Metal-in Process
     Inventory                       $    1,634,966  $           -

     Operating Costs for the Period       6,935,382      1,197,025
     Depreciation, Depletion &
     Amortization for the Period          1,042,449        437,941
     Less Cost of Metal Sales             7,623,374              -
                                     --------------  -------------
     Inventories                     $    1,989,423  $   1,634,966
                                     ==============  =============


NOTE  5  -  PROPERTY  AND  EQUIPMENT

The  following is a summary of property, equipment, and accumulated depreciation
at  September  30,  2004:



                                     SEPTEMBER 30,,    DECEMBER 31,
                                          2004             2003
                                    ----------------  --------------
                                                
     Buildings                      $     3,550,000   $   3,550,000
     Equipment                            3,405,391       2,981,376
                                    ----------------  --------------
                                          6,955,391       6,531,376
     Less accumulated depreciation         (896,711)       (380,867)
                                    ----------------  --------------
     Net Property and Equipment     $     6,058,680   $   6,150,509
                                    ================  ==============


Depreciation  expense  for the nine months ended September 30, 2004 and the year
ended  December  31, 2003 was $515,844 and $380,867, respectively.  There was no
depreciation  expense  taken for the year ended December 31, 2002 as the Company
had  no  depreciable  property.  The  Company  evaluates  the  recoverability of
property  and  equipment when events and circumstances indicate that such assets
might  be  impaired.  The Company determines impairment by comparing the present
value  of  future  cash flows estimated to be generated by these assets to their
respective  carrying amounts.  Maintenance and repairs are expensed as incurred.
Replacements  and betterments are capitalized.  The cost and related reserves of
assets  sold or retired are removed from the accounts, and any resulting gain or
loss  is  reflected  in  results  of  operations.

In addition, the Company had construction in progress of $443,850 and $13,303 at
September 30, 2004, and December 31, 2003, respectively.  No construction took
place in 2002.


NOTE 6 - RECLAMATION AND REMEDIATION INVESTMENTS AND BONDS

The  Company  paid  $7,388,910  for  a  reclamation  cost  policy  with American
International  Specialty  Loans  Insurance  Company  in  conjunction  with  the
acquisition  of  the Mesquite Mine.  The policy covers liability for reclamation
up  to  $14,000,000  and  establishes  a  reimbursement  account with an initial
balance of $5,998,994 and prepays the excess coverage with an additional premium
of  $1,389,916,  which  is  to  be  amortized  over  an  eleven-year  period.

The  reimbursement  account  has  a  balance  of $6,089,254 and $5,998,994 as of
September  30,  2004 and December 31, 2003, respectively.  Management's estimate
of  all  reclamation  obligations  arising from the mine purchase and subsequent
operations  are  exceeded  by  the  account  balance.


                                       14



The following bonds are covered by this insurance arrangement:

             INCEPTION   CONTRACT
BOND NUMBER    DATE       AMOUNT                 OBLIGEE(S)
- ---------------------------------------------------------------------------
                           
ESD 7315360  11/7/2003  $1,179,465  Imperial County, CA
                                    California Department of Conservation
                                    U.S. Bureau of Land Management
- ---------------------------------------------------------------------------
ESD 7315361  11/7/2003  $1,190,614  Imperial County, CA
                                    California Department of Conservation
                                    U.S. Bureau of Land Management
- ---------------------------------------------------------------------------
ESD 7315362  11/7/2003  $   61,783  Imperial County, CA
                                    California Department of Conservation
                                    U.S. Bureau of Land Management
- ---------------------------------------------------------------------------
ESD 7315363  11/7/2003  $  550,000  California Water Quality Control Board
- ---------------------------------------------------------------------------
ESD 7315358  11/7/2003  $3,984,199  U.S. Bureau of Land Management
- ---------------------------------------------------------------------------
ESD 7315359  11/7/2003  $   50,000  CA State Lands Commission
- ---------------------------------------------------------------------------


NOTE 7 - INVESTMENTS



The Company's investments are summarized as follows:

Fair value of common stock holdings:     SEPTEMBER 30,   DECEMBER 31,
                                              2004           2003
- ---------------------------------------  --------------  -------------
                                                   
    Cadence Resources Corporation        $       25,200  $      98,510
    Lucky Joe Mining Company                          -              -
    Trend Mining Company                              -              -
                                         --------------  -------------
Total fair value                                 25,200         98,510
Cost                                             30,000         34,885
                                         --------------  -------------
Gross unrealized holding gains/(losses)  $        4,800  $      63,625
                                         ==============  =============


In  October  2003, the Company sold all its interest in 250,000 common shares of
Trend Mining Company for $220,147, recognizing a loss on disposition of $29,853.
As  a  part  of  this  sale,  two former officers/directors purchased a total of
200,589  shares  for  $17,050 under similar terms to the other purchasers in the
transaction.

The  Company  classifies  its  investments  as  available-for-sale  securities.
Cadence Resources Corporation is a related party since one of Cadence's officers
is a director of the Company.   Prior to March 1, 2004, Lucky Joe Mining Company
and  Trend  Mining  Company were related parties in that each company had one or
more  officers  and  directors  in  common  with  the  Company.


NOTE  8  -  LOANS  RECEIVABLE

In  October  2003, the Company loaned $40,000 to Trend Mining Company.  The loan
is  uncollateralized,  non-interest  bearing  and  due  on demand.  The loan was
repaid  in  June  2004.

In  January  2003,  the  Company  paid  expenses  on behalf of Cadence Resources
Corporation  in the amount of $15,115.  In June 2003, these non-interest bearing
cash  advances  were  repaid  in  full.

In  September  2000, Calumet Mining Company loaned Elite Logistics $36,000 at 8%
per  annum,  uncollateralized, payable upon demand.  In February 2001, principal
and  accrued  interest was partially repaid in the form of securities, leaving a
balance of $10,000.  An allowance for bad debt has been established for the full
amount  of  the  loan  including  accrued  interest.


                                       15

NOTE  9  -  LONG-TERM  PREPAID  EXPENSES

The Company has entered into insurance contracts to insure the environmental and
pollution  risk  up  to $14 million at its Mesquite Mine project.  Additionally,
the policy covers reclamation risk, above the amount covered by the investment -
remediation  and  reclamation  account,  up  to  $14 million associated with the
Mesquite Mine project.  The policies cover risk for up to 11 years.  Their costs
are being amortized against earnings monthly and are summarized below.



                                       SEPTEMBER 30,    DECEMBER 31,
                                           2004             2003
                                      ---------------  --------------
                                                 
     Original Policy Premiums         $    1,642,621   $   1,661,159
     Amortization                           (140,207)        (25,169)
                                      ---------------  --------------
     Unamortized Premium Cost              1,502,414       1,635,990
     Current Portion                        (151,649)       (153,069)
                                      ---------------  --------------
     Long-Term Prepaid Expenses       $    1,350,765   $   1,482,921
                                      ===============  ==============


NOTE  10  -  LOAN  PAYABLE

As  part  of  the  acquisition  of the Mesquite Mine, the Company entered into a
credit  facility  agreement  on  November  5,  2003  with  R.M.B. International,
(Dublin)  Limited,  a  Republic  of  Ireland  corporation.  This two-year credit
facility  agreement resulted in the Company receiving $6,000,000 for a mortgage,
security,  assignment, and financing agreement.  Substantially all of the assets
acquired  in the Mesquite Mine are pledged and mortgaged under these agreements,
as  well  as  most of the Company's other property.  Interest is accrued on this
credit  facility  at  LIBOR  plus 6% per annum, on a monthly basis.  In January,
April,  and  July  2004,  the Company made the first three quarterly payments of
$750,000  plus interest.  The Company is obligated to pay an additional $750,000
of loan principal in 2004 and the balance of $3,000,000 in 2005.

As  part  of  the  credit  facility  agreement,  the Company entered into a gold
hedging program under which it sold forward 26,399 ounces of gold at $382.95 per
ounce,  or  approximately  50%  of  expected  production of gold from the heaps.
These  ounces  are scheduled to be delivered on January 30, 2004 and every three
months  thereafter until October 31, 2005.  On each of the settlement dates, the
Company  settles  in  cash  for  the  difference between the sales price and the
hedged  price  times  the  number  of scheduled ounces to be sold for that three
month  period.  Unlike a conventional hedge, the Company was not required to put
up collateral, and the Company is not subject to any margin requirements.  Since
the  Company  sold  gold  for  more  than  the hedged price in the periods ended
January  30,  April  30,  and  July  30,  2004, it made payments under the hedge
totaling  $120,165  and  reduced revenue by corresponding amounts.  Further, the
Company  expected the payments due under the hedge, net of the sales revenues in
excess of the forward price, covering the periods ended after September 30, 2004
to  be  nominal.

The  Company  has  a  long-term  strategy  of  selling  its  gold  production at
prevailing  market  prices.  Under  its  risk  management  policy,  the  Company
periodically  reviews its exposure under this hedge and adjusts its risk profile
accordingly.  Furthermore,  to manage a portion of its revenue risk and in order
to  provide  additional  comfort  to  the  lender  under the credit facility the
Company  entered  into this forward sale.  The forward sale was entered into for
the  amount  of  gold  projected  at the time entered into to be needed to cover
approximately  80%  of  the company's operating costs at Mesquite.   The Company
has concluded that this program is effective for its purpose and does not expect
that  it  will  be  ineffective  during  the  hedge  period.

In  addition  to the pledge, credit facility, and facility agreements associated
with the loan, the Company also entered into a deposit account control agreement
wherein  the Company agreed to maintain two bank accounts with an approved bank.
These  accounts  control  the funds advanced for the project and the proceeds of
gold and other metal sales.  Funds from these accounts can be released only with
the  consent  of  the  lender  and  the  approved  bank.


                                       16

The  Company's  summary  information  for  the  valuation  of derivatives, which
includes  management's  estimate  of the Company's discounted financing rate and
the  gold  forward  rate,  as  of September 30, 2004 and December 31, 2003 is as
follows:



     --------------------------------------------------------------------------------
                                                        SEPTEMBER 30,   DECEMBER 31,
                                                            2004            2003
     --------------------------------------------------------------------------------
                                                                  
     London Afternoon Gold Fix                         $       415.65   $      417.25

     --------------------------------------------------------------------------------
     Undelivered ounces of gold sold forward                   15,918          26,399
     --------------------------------------------------------------------------------
     Loss (Gain) recognized as other                   $     (349,591)  $     855,788
     comprehensive Income
     --------------------------------------------------------------------------------
     Value of provision for forward sales derivative-  $      506,197   $     855,788
     Marked-to-market
     --------------------------------------------------------------------------------


In  September  2002, Dotson Exploration Company, a related party, loaned $10,000
to  the  Company.  The  debt was uncollaterized, non-interest bearing and due on
demand.  In  June  2003,  the  loan  was  repaid  in  full.


NOTE  11  -  PREFERRED  STOCK

The Company has 25,000,000 shares, $0.01 par value per share, of preferred stock
authorized.  No  shares  are  issued  or  outstanding.


NOTE 12 - COMMON STOCK

As  discussed in Note 3, the Company issued 3,454,468 shares of common stock for
the  purchase  of  the  Mesquite  Mine  during  the period between July 2003 and
January  2004.   The  initial  deposit  for this transaction was the issuance in
July  2003  of  111,859  shares  of  common  stock.

During  the  first  quarter of 2004, the Company issued 100,000 shares of common
stock  to  satisfy  its  obligations  under two property acquisition agreements.

In  November  and  December  2003,  as  part of a private placement raising $9.1
million  after  expenses,  the Company issued 12,500,000 investments units.  The
investment units consisted of one share of common stock, one warrant to purchase
another  share  of  common  stock at $1.00 per share, and an additional share of
common stock held in escrow.   The escrowed shares were to be distributed if the
Company  had not completed a listing on the Toronto Stock Exchange by the end of
February  2004.  In  an attempt to satisfy this requirement, the Company entered
into  a  letter  of  intent  with  Tandem Resources, Ltd. for a potential merger
transaction  which  would  have accomplished this listing.  In February of 2004,
this  letter  of  intent  was  terminated  by the Company due to complex tax and
regulatory  issues.  The  escrow  agent  released  the  escrowed  shares  to the
original  purchasers  in  March  2004.

In  the fourth quarter of 2003, the Company issued 30,000 shares of common stock
at  $0.66  per  share  for  a  total  value  of  $19,800  for services rendered.

In  the  third quarter of 2003, certain shareholders exercised warrants at $0.45
per  share  for  350,000  shares  of  common  stock.

In  June  2003, the Company entered into a consulting agreement, with an outside
consulting  company  controlled by a director, but prior to his appointment as a
director,  whereby the Company issued common stock and 50,000 options to for the
purchase  of  common stock (with an exercise price of $1.70 per share) valued at
$31,470.  (See  Notes  13 and 15.)  At December 31, 2003, 12,000 shares had been
issued and an additional 9,000 shares accrued under the agreement.  The value of
the  9,000  shares  was accrued in accounts payable at December 31, 2003 and the
shares  were issued in March of 2004.  In November 2003, and in conjunction with
the  private  placement  referred  to  above,


                                       17

the  Company issued an additional 125,000 shares of common stock valued at $0.80
per share and 200,000 options to this consultant with an exercise price of $1.00
per  share  of  common  stock.  (See  Note  13.)
In  January  2003,  the Company issued 209,166 units for services rendered. Each
unit  consists  of  one  share of common stock and a warrant exercisable for the
purchase  of  one share of common stock.  The warrants have an exercise price of
$0.45  per share, are fully vested and can be exercised for up to two years from
the  date of issuance.  The common stock in this transaction was valued at $0.27
per  share,  and  the  warrants  at  $0.03  per  warrant.

Also  in  January  2003,  the  Company  issued  83,334 option units for services
rendered.  Each  unit  consists  of  one  share  of  common  stock and an option
exercisable  for the purchase of one share of common stock.  The options have an
exercise  price of $0.45 per share, are fully vested and can be exercised for up
to  two  years  from the date of issuance.  The common stock in this transaction
was  valued  at  $0.27  per  share,  and  the  options  at  $0.03  per  option.

In  January  2003,  the Company cancelled 5,000 shares of common stock valued at
par  as  part  of  a  shareholder transaction.  Also in 2003, the Company issued
9,834  shares  of  common  stock  for  services  rendered  of  $2,950.

In  December  2002,  the Company issued 1,771,669 units for $531,500 cash.  Each
unit  consists  of  one  share of common stock and a warrant exercisable for the
purchase  of  one share of common stock.  The warrants have an exercise price of
$0.45  per share, are fully vested and can be exercised for up to two years from
the  date they were issued.   The common stock in this transaction was valued at
$0.27  per  share,  and  the  warrants  at  $0.03  per  warrant.

In  April  2002,  the  Company  issued  16,667  shares  to  a  related party for
outstanding  payables  attributable to accounting, stock transfer and consulting
services rendered of $18,518.  On August 24, 2002, the Company completed a 1 for
3  reverse  split.  Prior issuances presented in these financial statements have
been  adjusted  to  reflect the split.  On August 25, 2002, the Company acquired
all  of  the  outstanding shares of Calumet Mining Company on a 1 for 2 basis by
issuing 3,500,000 shares (See Note 14).  Also in August 2002, the Company issued
250,000  shares  of  the  Company's  common stock plus other consideration for a
mineral  property  known  as  the  Gold  Point Mine.  The Company's common stock
issued  as  part  of  this  transaction  was  valued  at  $112,500.

The Company made other cumulative stock corrections during 2002 in the amount of
8,607  shares.


NOTE  13  -  STOCK  OPTIONS  AND  WARRANTS

The  Company  estimates  the  fair  value  of  options  and  warrants  using the
Black-Scholes  Option  Price  Calculation.  The  Company  used  the  following
assumptions in estimating fair value: the risk-free interest rate of 3.5% to 5%,
volatility  ranging  from  30%  to 60%, and the expected life of the options and
warrants  from  two  to  ten  years.  The Company also assumed that no dividends
would  be  paid  on  common  stock.  Some  warrants  may  be exercised under the
cash-less  method  requiring  a  corresponding reduction in the amount of common
stock  issued  in  relationship  to  its cash value at the time the warrants are
exercised.

In  the third quarter of 2004, the Company granted 1,985,000 options exercisable
for  the  purchase of one share of common stock each with an exercise price when
vested between $.65 and $.80.  These options generally vest over periods from 36
to  120  months.

In  the  second quarter of 2004, the Company granted 250,000 options exercisable
for  the  purchase of one share of common stock each with an exercise price when
vested  at  market  value, or at between $0.50 and $2.00 per share if specified.
These  options  generally  vest  over  periods  of  up  to  60  months.

In  the first quarter of 2004, the Company granted 2,075,000 options exercisable
for  the  purchase of one share of common stock each with an exercise price when
vested  at  market  value, or at between $0.50 and $2.00 per share if specified.
These  options  generally  vest  over  periods  of  up  to  60  months.

In  December  2003,  the  Company issued 13,750,000 warrants exercisable for the
purchase  of  one share of common stock each with an exercise price of $1.00 per
share.


                                       18

As  part  of  the  purchase  of  the  Mesquite  Mine in 2003, the Company issued
8,091,180  warrants  for  the purchase of one share of common stock each with an
exercise  price  of  $1.00  per  share.  (See  Note  3.)

In  June  2003,  the  Company issued 50,000 options to purchase common stock for
consulting  services  rendered.  In  November  2003,  the  Company  issued  an
additional 200,000 options to purchase common stock to the same consultant. (See
Note  12.)

In  September  2003, the Company issued 200,000 options to a director and 75,000
to  another  director for services rendered.  The options have an exercise price
of  $0.50  per  share,  and are exercisable for three years.  These options were
valued  at  $55,000.

In  September  2003,  the  Company  issued  75,000  options  to a consultant for
services rendered.    The options have an exercise price of $1.50 per share, and
are exercisable for three years. These options were valued at $10,500.

In  January  2003,  the  Company  issued 209,166 warrants and 83,334 options for
services  rendered.  (See  Note  12.)

No options were issued prior to January 1, 2003.

In  December  2002,  the  Company issued 1,771,669 warrants as part of a sale of
securities.  (See  Note  12.)



The following is a summary of stock options:

                                                   WEIGHTED AVERAGE   WEIGHTED AVERAGE
                                         SHARES     EXERCISE PRICE       FAIR VALUE
                                        ---------  -----------------  -----------------
                                                             
January 1, 2003                                 -  $               -
Granted                                   358,334               0.49
Exercised                                       -                  -
                                        ---------  -----------------
Outstanding and exercisable at
December 31, 2003                         358,334  $            0.49
                                        =========  =================

Weighted average fair value of options
granted during the year ended December
31, 2003                                                              $            0.17
                                                                      =================

Balance January 1, 2004                   358,334  $            0.49
Granted                                 4,310,000               0.83
Exercised                                       -                  -
                                        ---------  -----------------
Outstanding at September 30, 2004       4,668,334  $            0.80
                                        =========  =================
Exercisable at September 30, 2004       2,678,334  $            0.78
                                        =========  =================

Weighted average fair value of options
granted during the nine months ended
September 30, 2004                                                    $            0.30
                                                                      =================


The  above  stock  options  have  been  issued under an equity compensation plan
approved  by  the  directors  but  not  by  the  shareholders.


NOTE  14  -  SUBSIDIARIES

CALUMET  MINING  COMPANY
- ------------------------

On  August  25,  2002,  the  Company  acquired  all of the outstanding shares of
Calumet  Mining  Company.  (See  Note  12.)  This  was  considered  a  merger of
commonly  controlled  entities  because  Calumet  was  controlled  and  owned in


                                       19

part  by  one  of  the  Company's  directors.  The acquisition was accounted for
through  the  purchase method of accounting at the book value of the net assets.
Calumet  was mainly a dormant mining company with no significant transactions in
2002,  other than the information reflected in Note 3 and the acquisition of the
Gold  Point  Mine.  The  net  assets  acquired  were  as  follows:



                                                     
               Cash                                     $ 1,453
               Investments                               31,000
               Bond - State of Idaho                      5,000
               Note receivable                           10,000
               Accrued interest receivable                1,133
               Other assets                                 157
               Liabilities                                    -
                                                        -------
                   Total Net Assets Acquired            $48,743
                                                        =======


WESTERN  MESQUITE  MINES,  INC.
- -------------------------------

In  November  2003,  the  Company  created  a  wholly  owned subsidiary, Western
Mesquite  Mines,  Inc. ("WMMI"), which entered into a $6 million credit facility
agreement  with  two companies.  Coincident with the establishment of the credit
facility,  the  Company  contributed  to  WMMI  the  assets at the Mesquite Mine
referred  to  in  Note  3.
The  Company  guaranteed  the obligations of WMMI under the agreement and issued
warrants  to  purchase  780,000  shares  of  common  stock  to the lenders.  The
warrants  are  exercisable  for three years from the date of the agreement for a
purchase  price  of  $1.00  per  share.


NOTE  15  -  RELATED  PARTY  TRANSACTIONS

A  director  of  the  Company,  appointed on January 23, 2004, has and has had a
separate  consulting  relationship  with  the  Company,  through  a  company  he
controls,  whereby  his company is compensated for its consulting service at the
rate  of  $4,000  per month plus expenses.  All invoices are paid monthly and no
amounts  are  recorded  as  payable to him or his company at September 30, 2004.

In April 2002, payables of approximately $22,500 were settled by the issuance of
16,667  shares  of the Company and cash of $4,000.  The amounts were for general
and  administrative  expenses  and  were  advanced  to the Company by its former
president.

Prior  to  January  1,  2004, officers of the Company were compensated for their
services  as  independent  consultants  on a monthly basis.  As of September 30,
2004  and December 31, 2003, nothing and $33,228, respectively, were accrued for
these  services.

In  order  to complete the transition of operations, when the Company closed the
acquisition,  the Company retained the services of Harrison Western Construction
Corporation  to  manage  the  Mesquite Mine for an initial period of six months.
Under  the  contract,  Harrison  Western  Construction  Corporation  charged  a
management  fee  of  costs  plus  10%.  Prior  to July 8, 2004, the President of
Harrison  Western  Construction  Corporation was also a director of the Company.

Additionally,  two  shareholders,  and former officers, of the Company purchased
the remaining outstanding shares of Trend Mining Company that Western Goldfields
has  been  recognizing as an available-for-sale security.  At September 30, 2004
and  December  31,  2003,  these  persons  owe  the  Company $11,575 and $17,050
respectively  for  the purchase which is reflected in accounts receivable in the
financial  statements.

Other related party transactions are discussed in Notes 4, 7, 8, 10, 12, 14, and
16.


                                       20

NOTE 16 - COMMITMENTS AND CONTINGENCIES

MINING INDUSTRY
- ---------------

The Company is engaged in the exploration and development of mineral properties.
At  present,  the  Company  is  in  the process of preparing, but does not have,
feasibility  studies  establishing  proven  and  probable  reserves.

Although  the  minerals  exploration  and  mining  industries  are  inherently
speculative  and  subject  to  complex environmental regulations, the Company is
unaware of any pending litigation or of any specific past or prospective matters
which  could  impair  the  value  of  its  mining  claims.

CONSULTING AGREEMENTS
- ---------------------

During  the  period  August  1,  2002  through December, 31, 2003, the Company's
President  was  granted  compensation  between  $6,000  and  $10,000  per month,
Secretary/Treasurer  at  $3,000 per month and Vice-President at $2,000 per month
in  accordance  with consulting service contracts.  Amounts owed at December 31,
2003  and  2002 under these agreements are reflected in the accompanying balance
sheets  under  accrued  expenses.

MINE  OPERATING  AGREEMENT
- --------------------------

In  September 2003, a Company subsidiary entered into an agreement with Harrison
Western  Construction  Corporation  for the operation of the Mesquite Gold Mine.
The agreement, which became effective with the acquisition of the Mesquite Mine,
has  six-month  terms that are automatically renewed unless terminated by one of
the parties. The contract was completed and terminated on May 8, 2004.

LEASE  AGREEMENT
- ----------------

On April 1, 2004, the Company leased office space in Reno, Nevada to provide for
corporate  offices.  This  lease  is  for a term of two years, requiring monthly
minimum  lease  payments  of  $4,613.  The  lease  is renewable for two one-year
renewal  periods  at  a  5%  increase  in  base  rent  to $4,844 per month.  The
Company's  commitment  as  of  September  30, 2004 is $13,839 for the last three
months  of  2004,  $55,356  for  2005  and  $13,839 for three months of 2006. In
addition  to  the  minimum lease payments, the Company will pay 14% of the taxes
and  property  maintenance  expenses.  The  Company  paid  one month's rent as a
deposit  of  $4,444.

CONTRACT  WITH  THE  COUNTY  SANITATION  DISTRICT  OF  LOS  ANGELES
- -------------------------------------------------------------------

During  its  ownership  of  the Mesquite Mine, Hanson Natural Resources, a prior
operator  of  the  mine,  entered  into  an agreement with the County Sanitation
District  of  Los  Angeles  County  which then developed and permitted a plan to
create  a  100  year  landfill  at  the  Mesquite  Mine that, when completed, is
expected to be the largest residential waste disposal in the United States.

Waste  is  expected  to be dumped on lined pads on the pediment commencing in an
area  to  the  southwest of the Mesquite pits, ultimately including the southern
sections  of  the  leach pads.  The waste dumps can utilize much of the material
mined  at  Mesquite as liner and seal.  Each cell of the landfill is expected to
be  sealed  as  it  is  completed.

Under  the  agreement with the County Sanitation District of Los Angeles County,
the  Company  has  the right to explore, mine, extract, process, market and sell
ore,  and  otherwise  conduct  mining and processing activities, anywhere on the
property  for  an  initial  period  through 2024 with automatic extensions until
2078.  Much  of  the  infrastructure at the property is likely to be retained by
the  landfill  after  mining  operations  are  completed and the Company has met
certain  reclamation  standards.  Landfill  operations are not expected to begin
until  2008.

REGISTRATION  RIGHTS  AGREEMENT
- -------------------------------

During the period from November 2003 through January 2004 in connection with its
private  placement,  the  Company agreed to register under the Securities Act of
1933,  as  amended,  the shares of common stock issued in the private placement,
issued  upon exercise of the warrants issued in the private placement and shares
of  any  resulting


                                       21

entity  in  a merger transaction.  In addition, the Company agreed under certain
circumstances,  upon  the request of the holders, to include those shares of its
common  stock  in  a  securities registration that the Company undertakes on its
behalf  or on behalf of others by June 30, 2004.  In the agreements, the Company
agreed  to pay certain amounts to the holders based on 2% of the average closing
sale price of its common stock for each 30 days following June 30, 2004 in which
the  registration  statement  is  not  effective.  The  Securities  and Exchange
Commission  declared  the  Company's  SB-2  registration  statement effective on
August  12,  2004.  The  Company offered to satisfy the payment of these amounts
with  shares  of its common stock.  As of September 30, 2004, the Company issued
446,398  shares and recorded accounts payable for $256,069 to satisfy the agreed
upon  settlement  amount  of  $479,267.


                                       22

ITEM 2.   PLAN OF OPERATION

OVERVIEW

     We are an independent precious metals production and exploration company
focused on the western United States.

     In November 2003, we obtained a $6 million credit facility in connection
with our acquisition of the Mesquite Mine.  In addition, in November - December
2003, we conducted a private placement of 12,500,000 units consisting of two
shares of our common stock and warrants to purchase an additional share of our
common stock which resulted in aggregate net proceeds to us of approximately
$9.1 million.  The warrants are exercisable for a period of two years from the
date of issuance for a purchase price of $1.00 per share, subject to
anti-dilution adjustments.

     In early 2003 we began exploring the possibility of acquiring the Mesquite
Mine from Newmont Mining Corporation and a subsidiary of Newmont Mining
Corporation.  In July 2003, we issued 111,859 shares of our common stock to
Newmont Mining Corporation for an exclusive option to purchase the Mesquite
Mine.  In November 2003, we completed the purchase of the Mesquite Mine from
Newmont Mining Corporation for:

     -    assumption of reclamation responsibility and provision of
          approximately $7.8 million in reclamation bonds to various
          governmental authorities; which have since been reduced to $7.0
          million;
     -    additional shares of our common stock and warrants to purchase our
          common stock. As a result of the transaction, Newmont Mining
          Corporation owns 3,454,468 shares of our common stock and warrants to
          purchase an additional 8,091,180 shares of our common stock;
     -    a perpetual net smelter return royalty ranging from 0.5% to 2.0% on
          any newly mined ore; and
     -    a net operating cash flow royalty equal to 50% of the proceeds
          received, minus certain operating costs, capital expenses and other
          allowances and adjustments, from the sale of ore or products derived
          from ore that was placed on the heap leach pads as of the acquisition
          date.

The purchase included all infrastructures and permits necessary to operate the
mine.

     Poured gold production (poured gold into dore bars) from the Mesquite Mine
has averaged approximately 2,200 ounces per month for the nine months of 2004.
Poured gold averaged approximately 2,100 ounces per month in the first quarter,
approximately 2,000 ounces per month in the second quarter, and approximately
2,500 ounces per month in the third quarter from material that previous owners
had placed on the heap leach pads.  Mine management is more closely managing its
production schedules to match gold production and sales to its forward sales
commitments, starting in the third quarter.  During the period from November 7,
2003 to September 30, 2004, the poured production was approximately 22,575
ounces of gold, of which 1,888 ounces were held as inventory of metal at the
outside refiner waiting to be sold under our forward sales contract.

     During the first nine months of 2004, we sold approximately 20,687 ounces
of gold which either had been processed by Newmont Mining Corporation under the
terms of the carbon processing agreement with Newmont Mining Corporation or had
been processed at our own gold refining circuit.  The Mesquite operations
produced 19,982 ounces of gold in dore during the first nine months of 2004,
began the year with 2,593 ounces in inventory and ended the period ended
September 30, 2004 with 1,888 ounces in inventory.  We completed reconstruction
of the gold refining circuit in April 2004 and terminated the carbon processing
agreement.  Between April 1, 2004 and September 30, 2004, we have poured 13,624
ounces of gold.

     We have negotiated a bonding plan through American Home Assurance Company
for the operation and liability of the Mesquite Mine whereby the insurance
company offers a series of environmental insurance programs designed to cap
sponsor, vendor and partner liability for reclamation and closure costs,
including cost overruns as a result of unexpected contamination, increased costs
and legislative changes.  The insurance company charged us an initial premium
based on their estimate of the net present value of the completion of the
reclamation, plus an annual fee.  In exchange, the insurance company insures the
reclamation and closure process and provides the surety bond.  We will make
claims against the insurance policy and funds will be released to pay for the
reclamation and closure


                                       23

expenditures as they are incurred.  Any revenue from the sale of material is to
the account of the project sponsor and any profits from cost savings in the
actual program versus the bonded amount are released to the sponsors when the
project bonding is released.

     There are two phases of the Mesquite Mine project.  The continuing
operations comprise leaching of minerals inventoried on the pads prior to
September 2001.  We intend to implement a program that will seek to increase
recovery from the pads.  We estimate that in 2004 we will invest approximately
$1.1 million for facilities enhancements and infrastructure improvements for the
continuing operations, of which approximately $803,477 has been spent through
September 2004.

     In the second phase at the Mesquite Mine, we also intend to undertake
development of the existing heap leach pads and exploration of the other areas
of the Mesquite Mine in 2004.  There can be no assurance that we will find any
minerals or reserves on our properties.  We must conduct exploration to
determine what amount of minerals, if any, exist on our properties and if any
minerals which are found can be economically extracted and profitably processed.

     We are evaluating the expansion of the Big Chief pit to the north where we
have identified a potential mineralized zone of 19.7 million tons grading 0.022
ounces per ton within which our internal scoping study has identified a mineable
area that we believe may contain 5.2 million tons grading 0.032 ounce of gold
per ton, using a cutoff of 0.012 ounces of gold per ton.  In addition to Big
Chief North, we intend to complete a thorough review of all the permitted
expansion areas that in total cover approximately 2,700,000 feet of drilling in
more than 6,200 exploration holes and also cover 650,000 blast holes.  In
addition, work is in process on a third-party review of the potential to
increase production from 154 million tons of ore stacked on the leach pads at
the Mesquite Mine by prior owners.

     The Company is also engaged in the acquisition of advanced level precious
metal properties throughout the western United States, primarily Nevada.  We
believe that this area may have some of the most important geological terrain
conducive to hosting world-class economic gold deposits.  The Company's goal is
to obtain precious metal projects that are favorable for project development and
mine production in a cost effective, efficient manner.

     We intend to contact other companies to explore joint venture possibilities
with respect to our properties.  We intend to attempt to define mineralized
material on the properties that could be developed into minable reserves and to
bring reserves to production.  We intend to identify and engage joint venture
candidates with funds available to support the cost of defining and developing
the properties to production.  Currently, we have entered into nonbinding
letters of intent for joint venture arrangements with respect to the Lincoln
Hill Mine and the Sunny Slope Mine.  However, we have not identified or
contacted any other joint venture candidates.  We cannot assure you that we will
be able to enter into a joint venture arrangement for the exploration or
development of our properties, including the Lincoln Hill Mine and the Sunny
Slope Mine, on terms that are favorable to us, if at all.

     The Company is preparing an application to have its shares listed on the
Toronto Stock Exchange.  The Company anticipates listing on the Toronto Stock
Exchange in early 2005, subject to obtaining all required regulatory and stock
exchange approvals.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2003

     During the three months ended September 30, 2004, we had net revenues of
$2,515,282 from the sale of 7,008 ounces of gold produced from the Mesquite
Mine.  During the three month period ended September 30, 2003, the Company had
not conducted any mining operations and had not generated any revenues.

     Mine operating costs were $1,727,253 in the three months ended September
30, 2004 compared with $0 for the three months ended September 30, 2003.  Mine
site administration was $505,494 in the three months ended September 30, 2004
compared with $0 in the three months ended September 30, 2003.  Depreciation,
depletion and amortization were $554,070 in the third quarter of 2004 compared
with $0 in the third quarter of 2003.  After adjusting for a decrease in
inventories of $302,106 in the third quarter of 2004 compared with $0 in the
third quarter


                                       24

of 2003, total cost of goods sold was $3,100,569 in the three months ended
September 30, 2004 compared with $0 in the three months ended September 30,
2003.  We reported a gross loss of $585,287 for the three months ended September
30, 2004 compared with $0 in the three months ended September 30, 2003.  These
changes reflect the acquisition of our Mesquite Mine in November 2003.

     We incurred exploration expenses of $40,447 during the three months ended
September 30, 2004 compared with $25,668 in the three months ended September 30,
2003.  This increase reflects the costs of projects to expand the Mesquite
operations and preliminary exploration activity relating to several properties
we reviewed for possible acquisition.  General and administrative expenses
increased to $625,437 during the third quarter of 2004, compared with $332,228
in the third quarter of 2003, reflecting additional corporate costs associated
with the acquisition of the Mesquite Mine in November 2003 and costs relating to
financing transactions.  We reported an operating loss of $1,251,171 during the
three months ended September 30, 2004 compared with an operating loss of
$357,896 in the three months ended September 30, 2003.

     Other expense totaled $39,768 during the three months ended September 30,
2004 compared with other income of $401 in the three months ended September,
2003.  We reported a net loss of $1,290,939 for the three month period ended
September 30, 2004 compared with a net loss of $357,495 for the three month
period ended September 30, 2003.


NINE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 2003

     During the nine months ended September 30, 2004, we earned our first
revenues from operations since we emerged from dormancy in April 1999.  We had
net revenues of $7,272,261 during the nine months ended September 30, 2004 from
the sale of 20,687 ounces of gold produced from the Mesquite Mine.

     Mine operating costs were $5,402,999 in the nine months ended September 30,
2004 compared with $0 for the nine months ended September 30, 2003.  Mine site
administration was $1,455,396 in the nine months ended September 30, 2004
compared with $0 in the nine months ended September 30, 2003.  Selling,
transportation and refining was $76,987 and depreciation, depletion and
amortization was $1,042,449 in the first nine months of 2004 compared with $0
and $0 respectively in the first nine months of 2003.  After adjusting for an
increase in inventories of $354,457 in the first nine months of 2004 compared
with $0 in the nine months of 2003, total cost of goods sold was $7,623,374 in
the nine months ended September 30, 2004 compared with $0 in the nine months
ended September 30, 2003.  We reported a gross loss of $351,113 for the nine
months ended September 30, 2004 compared with $0 in the nine months ended
September 30, 2003.  These changes reflect the acquisition of our Mesquite Mine
in November 2003.

     We incurred exploration expenses of $230,011 during the nine months ended
September 30, 2004 compared with $54,415 in the nine months ended September 30,
2003.  This increase reflects the costs of projects to expand the Mesquite
operations and preliminary exploration activity relating to several properties
we reviewed for possible acquisition.  General and administrative expenses for
the nine months ended September 30, 2004 were $1,712,443, compared with $578,002
for the nine months ended September 30 2003, reflecting additional corporate
costs associated with the acquisition of the Mesquite Mine in November 2003 as
well as expenses incurred relating to financing transactions.  We reported an
operating loss of $2,293,567 for the nine months ended September 30, 2004
compared with an operating loss of $632,417 for the nine months ended September
30, 2003.

     Other expense totaled $131,178 for the nine months ended September 30, 2004
compared with other income of $6,578 for the nine months end September 30, 2003.
We reported a net loss of $2,424,745 for the nine month period ended September
30, 2004 compared with a net loss of $625,839 for the nine month period ended
September 30, 2003.

     Cash received from operating activities increased to $3,711,917 during the
nine month period ended September 30, 2004 compared with a cash outflow of
$283,104 during the nine month period ended September 30, 2003.  This change was
largely due to operations at the Mesquite Mine and the release of $3,897,229 in
restricted cash relating to proceeds of our November-December 2003 private
placement and by an increase in inventories of $264,041 during the period.


                                       25

     During the nine months ended September 30, 2004, we used $854,562 to
purchase plant and equipment primarily related to the gold recovery circuit, a
new computerized accounting system and project expansion studies at the Mesquite
Mine and office equipment and furniture at the corporate office, compared with
$0 in the nine months ended September 30, 2003.  We also made the first three
scheduled repayments totaling $2,250,000 under the terms of our credit facility.

     For the next four to five quarters, we expect to spend between
approximately $500,000 and $750,000 per month to operate the heap leach pad
operation, a total of approximately $200,000 for the investigation and initial
enhancement of heap leach pad processes and approximately $500,000 to complete a
feasibility study regarding the expansion of mining operations at the Mesquite
Mine.

LIQUIDITY AND CAPITAL RESOURCES; RECENT DEVELOPMENTS

     As of September 30, 2004 there is limited historical financial information
upon which to base an evaluation on the company's performance.  We began our
operation of the Mesquite Mine in November 2003.  As a result, our operating
profile and the reasons for fluctuation in the expense amounts between the
periods prior to and following November 2003 changed significantly.  Prior to
November 2003, we primarily concentrated our business on the acquisition of
properties and raising funds to advance our business.  After our acquisition of
the Mesquite Mine, we intend to dedicate the majority of our expenditures to
retrieve gold from heap leach pads or from new mining and processing at the
Mesquite Mine.

     The expansion of operations at the Mesquite Mine and plans for further
growth of the Company depend on our ability to obtain additional capital through
the issuance of additional debt or equity and through the generation of revenue.
Operating cash flows commenced in the first quarter of 2004, and therefore, we
have no historical comparative performance data.

     As of September 30, 2004, the cash balance was $1,397,334.  As of September
30, 2004, we had an accumulated deficit of $7,009,297 and generated net revenues
of $7,272,261 during the nine months ended September 30, 2004 compared to an
accumulated deficit of approximately $1,464,695 with no revenues at September
30, 2003.  Total current liabilities as of September 30, 2004 were $4,414,610 as
compared to $121,772 at September 30, 2003.

     In November 2003, Western Mesquite Mines, Inc., our wholly-owned
subsidiary, entered into a $6 million credit facility agreement with RMB
International (Dublin) Limited and RMB Resources Limited.  We guaranteed the
obligations of Western Mesquite Mines, Inc. under the facility agreement and
issued warrants to purchase 780,000 shares of our common stock to RMB Resources
Limited.  The warrants are exercisable for a period of three years from the date
of the facility agreement for a purchase price of $1.00 per share, subject to
adjustments.

     Western Mesquite Mines, Inc. commenced making principal and interest
payments under this loan in January 2004.  Western Mesquite Mines, Inc. made its
first three principal payments under the facility agreement of $750,000 at the
end of January, April, and July 2004.  Borrowings under the facility agreement
bear interest at a base interest rate of LIBOR plus 6 percent.  The facility
agreement also provides for contingent additional interest if cash flows from
the gold production from the materials currently located on the heap facilities
in the project areas described in the facility agreement exceed certain defined
levels.  No additional interest has been paid under this facility to date.

     Western Mesquite Mines, Inc. may prepay all or part of the outstanding
principal on any quarterly date after January 2004 and before the final
repayment date in an amount of not less than $200,000.  If Western Mesquite
Mines, Inc. does not make a quarterly payment, it must pay an additional amount
of not less than $750,000 on the next quarterly payment date as a reduction in
principal.  It is an event of default under the facility agreement if Western
Mesquite Mines, Inc. fails to pay an amount of not less than $750,000 on two
consecutive quarterly payment dates.  In addition, Western Mesquite Mines, Inc.
must pay 50% of its excess cash flow for each quarter as a prepayment of
principal.

     Our credit facility also restricts us from making expenditures that have
not been approved by the credit facility agent.  Under the facility agreement,
we have agreed with the credit facility agent on a corporate budget as


                                       26

well as a detailed operating budget for the Mesquite Mine.  We provide the
credit facility agent with monthly reports that reconcile the actual results
with that budget.  If we wish to make material expenditures not agreed to in the
budget, we have to seek the credit facility agent's prior approval.  In
particular, the facility agreement provides that we may not dispose of, or
create any encumbrance over, any assets other than in the normal course of
business, or incur indebtedness in excess of $250,000.

     In January 2004, we closed a private placement we conducted in November -
December 2003 of 12,500,000 units at a price of $0.80 per unit.  Units consisted
of one share of our common stock, a warrant to purchase one share of our common
stock exercisable for two years at an exercise price of $1.00 per share and the
right to receive one share of our common stock issued in escrow under certain
circumstances.  Each purchaser of a unit in the private placement was entitled
to receive the additional escrow share per unit purchased if we did not close a
transaction with another company before February 28, 2004 which resulted in the
listing of the resulting company's securities on the Toronto Stock Exchange.  We
entered into a letter of intent with Tandem Resources, Ltd. for a potential
merger transaction to satisfy this condition of the private placement, but we
terminated the letter of intent in February 2004 due to potential tax and
regulatory issues associated with the transaction.  The escrow agent released
the escrowed shares to the purchasers in March 2004.

     We also agreed to register under the Securities Act of 1933, as amended,
the shares of common stock issued in the private placement, issued upon exercise
of the warrants issued in the private placement and shares of any resulting
entity in a merger transaction.  In addition, we agreed under certain
circumstances, upon the request of the holders, to include those shares of our
common stock in a securities registration that we undertake on our behalf or on
behalf of others by June 30, 2004.  In the agreements, we agreed to pay certain
amounts to the holders based on 2% of the average closing sale price of our
common stock for each 30 days following June 30, 2004 in which the registration
statement is not effective. The Securities and Exchange Commission declared our
SB-2 registration statement effective on August 12, 2004, and these amounts
totaled $479,267.  We have offered to satisfy the payment of these amounts with
shares of our common stock and have issued 446,398 shares of our common stock to
these holders to satisfy $223,299 of this obligation.

     Except for the Mesquite Mine, none of our properties has commenced
commercial production, and we have no history of earnings or cash flow from our
operations.  While we may attempt to generate additional working capital through
the operation, development, sale or possible joint venture development of our
properties, there is no assurance that any such activity will generate funds
that will be available for operations.

     Our operations of the Mesquite Mine began in November 2003.  We accumulated
metal-in-procress inventory during 2003 and produced 2,593 ounces of poured gold
during operations in December 2003, produced an additional 19,982 ounces and
sold 20,687 ounces during the first three quarters of 2004, and kept in
inventory 1,888 ounces at an outside refiner for deliveries of gold under our
forward sales contract at the end of October 2004.  Production has not been at
the levels expected, from the releaching of the materials previously placed on
the pads, in all of 2004.  We have implemented programs at the mine to reduce
and control monthly expenditures with the objective of reducing the operating
cash cost.

     We had no sales in 2003 as metal was being built up in circuits at the
Mesquite Mine and at the processing facility.  Sales of metal will be recorded
at both the spot price and under the forward sales agreement in 2004, with the
related costs charged from inventory to cost of goods sold.

     As part of our credit facility agreement, we entered into a cash flow
hedging program under which we sold forward through RMB International (Dublin)
Limited 26,399 ounces of gold at $382.95 per ounce, or approximately 50% of
expected production of gold from the heaps.  These ounces were scheduled for
delivery beginning January 30, 2004 and every three months thereafter until
October 30, 2005 as follows: 2,380, 4,368, 3,733, 3,324, 3,577, 3,523, 2,897 and
2,597 ounces.  On each of the settlement dates, we settle in cash for the
difference between the sales price and the hedged price times the number of
scheduled ounces to be sold for that three month period.  Unlike a conventional
hedge, we were not required to put up collateral, and we are not subject to any
margin requirements.  Since we sold gold for more than the hedged price in the
periods ended January 31, April 30, and July 31, 2004, we made a payment under
the hedge of $64,379 as of January 31, 2004; $24,242 as of April 30, 2004; and
$31,544 as of July 31, 2004; and reduced revenue accordingly.  As of September
30, 2004, we have paid


                                       27

approximately $120,165 to RMB International (Dublin) Limited under this
agreement and have 15,918 ounces of gold outstanding subject to this hedge
facility.

     We have a long-term strategy of selling our gold production at prevailing
market prices.  Under our risk management policy, we periodically review our
exposure under this hedge and adjust our risk profile accordingly.  Furthermore,
to manage a portion of our revenue risk and provide additional comfort to the
lender under our facility agreement, we entered into this forward sale.  We
believe this program to be effective for its purpose and do not expect that it
will be ineffective during the hedge period.

     Our calculation of the derivative effects of the forward sales contract as
of September 30, 2004 and December 31, 2003 is as follows:



                                                                SEPTEMBER 30, 2004     DECEMBER 31, 2003
                                                                                
Afternoon Fix on the London Metal Exchange                    $              415.65   $           417.25
Undelivered ounces of gold sold forward                                      15,918               26,399
(Gain) Loss recognized as other comprehensive income                      ($349,591)  $          855,788
Value of provision for forward sales derivative - marked-to-  $             506,197   $          855,788
market


     We are currently spending approximately $75,000 per month for our ongoing
corporate functions.  In addition, we plan to spend between $300,000 and
$500,000 over the next 12 months to advance our current portfolio of properties
or to acquire and advance other strategically important projects.  We have not
budgeted specific amounts for exploration or development for any of our
properties.

     As of September 30, 2004, we believe that we have sufficient working
capital to make the royalty payments required on our properties, to conduct
preliminary exploration programs and to satisfy our cash requirements for the
next twelve months.  Our credit facility restricts us from making expenditures
that have not been approved by the credit facility agent.  We may need to obtain
additional funds, either through equity offerings or debt, to fund our general
and administrative expenses, make the advance royalty payments required on our
properties and conduct exploration programs on our properties.  Failure to
obtain such additional financing will result in the loss by us of our interests
in our mineral properties.  We have no agreements or understandings with any
person for additional financing.

OFF-BALANCE SHEET ARRANGEMENTS

     We do not have any off-balance sheet arrangements.

FORWARD LOOKING STATEMENTS

     This report contains several "forward-looking statements."  Forward-looking
statements are those that use words such as "believe," "expect," "anticipate,"
"intend," "plan," "may," "will," "likely," "should," "estimate," "continue,"
"future" or other comparable expressions.  These words indicate future events
and trends.  Forward-looking statements are our current views with respect to
future events and financial performance.  These forward-looking statements are
subject to many assumptions, risks and uncertainties, many of which are beyond
our control, that could cause actual results to differ significantly from
historical results or from those we anticipated.  The most significant risks are
detailed from time to time in our filings and reports with the Securities and
Exchange Commission.


ITEM 3.   CONTROLS AND PROCEDURES

     Our  management,  with the participation of our Principal Executive Officer
and  Principal  Accounting  Officer,  has  evaluated  the  effectiveness  of our
disclosure  controls  and procedures (as such term is defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) as
of  the end of the period covered by this report.  Based on such evaluation, our
Principal  Executive  Officer  and  Principal  Accounting


                                       28

Officer  have  concluded  that,  as  of  the  end of such period, our disclosure
controls  and procedures are effective in recording, processing, summarizing and
reporting,  on  a  timely  basis,  information  required  to be disclosed by the
Company  in  the  reports  that  it  files  or  submits  under the Exchange Act.

     There have not been any changes in our internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the fiscal quarter to which this report relates that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.


                                       29

                           PART II - OTHER INFORMATION

ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM 5.   OTHER INFORMATION

     We entered into a letter agreement on October 18, 2004 with the Torres
Martinez Desert Cahuilla Indian Tribe to extend the term of our Statement of
Intent and Confidentiality Agreement through January 2005.

     During the quarter ended September 30, 2004, we issued options to purchase
shares of our common stock in connection with ongoing services provided by the
officers and directors of the Company as follows:



                      Number of  Exercise   Vesting
Officer/Director       Options     Price      Date     Value
- --------------------  ---------  ---------  --------  --------
                                          
Thomas K. Mancuso       100,000  $    0.75  9/1/2004  $ 33,000
Thomas K. Mancuso        75,000  $    0.75  3/1/2005    24,750
Thomas K. Mancuso        75,000  $    0.75  9/1/2005    24,750
Thomas E. Callicrate    100,000  $    0.75  9/1/2004    33,000
Thomas E. Callicrate     75,000  $    0.75  3/1/2005    24,750
Thomas E. Callicrate     75,000  $    0.75  9/1/2005    24,750
Mark C. Shonnard        100,000  $    0.75  9/1/2004    33,000
Mark C. Shonnard         50,000  $    0.75  3/1/2005    16,500
Mark C. Shonnard         50,000  $    0.75  9/1/2005    16,500
Lawrence J. O'Connor    100,000  $    0.75  9/1/2004    33,000
Lawrence J. O'Connor     50,000  $    0.75  3/1/2005    16,500
Lawrence J. O'Connor     50,000  $    0.75  9/1/2005    16,500
James Mancuso           100,000  $    0.75  9/1/2004    33,000
James Mancuso            50,000  $    0.75  3/1/2005    16,500
James Mancuso            50,000  $    0.75  9/1/2005    16,500
Douglas J. Newby        100,000  $    0.75  9/1/2004    33,000
Douglas J. Newby         50,000  $    0.75  3/1/2005    16,500
Douglas J. Newby         50,000  $    0.75  9/1/2005    16,500
Gerald B. Ruth          100,000  $    0.75  9/1/2004    33,000
Gerald B. Ruth           50,000  $    0.75  3/1/2005    16,500
Gerald B. Ruth           50,000  $    0.75  9/1/2005    16,500
                      ---------                       --------

Total                 1,500,000                       $495,000
                      =========                       ========


     The options issued to the officers and directors are exercisable for
ten-year periods from their respective vesting dates.


                                       30

     During the quarter ended September 30, 2004, we issued options to purchase
shares of our common stock to employees and consultants providing ongoing
services as follows:



            Number of     Exercise      Vesting
             Options        Price        Date        Value
            ---------     ---------     -------     -------
                                        
               35,000     $    0.80      7/2004     $ 7,000
               30,000     $    0.80      7/2004       6,000
               10,000     $    0.80      7/2004       2,000
                5,000     $    0.80      9/2004       1,000
               70,000     $    0.80     10/2004      14,000
               70,000     $    0.80     11/2004      14,000
               15,000     $    0.80      1/2005       3,000
               75,000     $    0.80      4/2005      15,000
               75,000     $    0.80      5/2005      15,000
               40,000     $    0.65      7/2004       6,800
               60,000     $    0.65      1/2005      10,200
            ---------                               -------
     Total    485,000                               $94,000
            =========                               =======


     The options issued to the employees and consultants of the company are
exercisable for three-year periods from their respective vesting dates.

ITEM 6.     EXHIBITS



Number             Description
- ------             -----------
     
  10.1  Letter Agreement, dated October 18, 2004, from Western Goldfields, Inc. and accepted and agreed to
        by the Torres Martinez Desert Cahuilla Indian Tribe

  31.1  Certification of Principal Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of
        2002

  31.2  Certification of Principal Accounting Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of
        2002.

  32.1  Certification of Principal Executive Officer of Periodic Report Pursuant to Section 906 of Sarbanes-
        Oxley Act of 2002

  32.2  Certification of Principal Accounting Officer of Periodic Report Pursuant to Section 906 of Sarbanes-
        Oxley Act of 2002



                                       31

                                   SIGNATURES


     In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                        WESTERN GOLDFIELDS, INC.


Date:  November 15, 2004                /s/ Thomas K. Mancuso
                                        ----------------------------------------
                                        Thomas K. Mancuso
                                        President
                                        Principal Executive Officer


Date:  November 15, 2004                /s/ Mark C. Shonnard
                                        ----------------------------------------
                                        Mark C. Shonnard
                                        Treasurer and Secretary
                                        Principal Accounting Officer





                                                EXHIBIT INDEX

Number                          Description
- ------                          -----------
     
  10.1  Letter Agreement, dated October 18, 2004, from Western Goldfields, Inc. and accepted and agreed to
        by the Torres Martinez Desert Cahuilla Indian Tribe

  31.1  Certification of Principal Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of
        2002

  31.2  Certification of Principal Accounting Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of
        2002.

  32.1  Certification of Principal Executive Officer of Periodic Report Pursuant to Section 906 of Sarbanes-
        Oxley Act of 2002

  32.2  Certification of Principal Accounting Officer of Periodic Report Pursuant to Section 906 of Sarbanes-
        Oxley Act of 2002