**UNITED
STATES**
 **SECURITIES
AND EXCHANGE COMMISSION**
 **Washington,
D.C. 20549**
 
 **FORM
20-F**
 (Mark
One)
  o
    Registration
      statement pursuant to section 12(b) or 12(g) of the Securities Exchange
      Act of 1934
 or
  x
    Annual
      report pursuant to section 13 or 15(d) of the Securities Exchange Act of
      1934
  For
the fiscal year ended **December
31, 2004**
 or
  o
    Transition
      report pursuant to section 13 or 15(d) of the Securities Exchange Act of
      1934
 For
      the transition period from________________ to
      __________________
  Commission
file number 0-17791
 Twin
Mining Corporation
 (Exact
name of registrant as specified in its charter)
 
 Incorporated
in the Province of British Columbia on March 6, 1985
 and
continued into the Province of Ontario effective March 15, 2000
 (Jurisdiction
of incorporation or organization)
 
 Suite
1250, 155 University Avenue, Toronto, Ontario, Canada M5H 3B7
 (Address
of principal executive offices)
 
 Securities
registered or to be registered pursuant to Section 12(b) of the
Act:
 Title
      of each
    
    Name
      of each exchangeClass
    
    on
      which registered
 
 Securities
registered or to be registered pursuant to Section 12(g) of the
Act:
  common
shares without par value
 (Title
of Class)
  Securities
for which there is a reporting obligation pursuant to Section 15(d) of the
Act:
  
 (Title
of Class)
  Indicate
the number of outstanding shares of each of the issuer's classes of capital or
common stock as of the close of the period covered by the annual report. As
of **December
31, 2004** :
132,363,542 common shares
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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
  Indicate
by check mark which financial statement item the Corporation has elected to
follow.
  Item
17 x Item
18
 
 
    In
the Annual Report furnished in this Form 20-F, unless otherwise specified, all
monetary amounts are expressed in Canadian dollars. The noon rate of exchange
reported by the Bank of Canada for the conversion of United States dollars into
Canadian dollars on March 4, 2005 was **U.S.$1.00
= Cdn$1.2037** .
A table disclosing the high, low, year-end, and average exchange rates for the
previous five fiscal years is located in **ITEM
3 - Selected Financial Data** .
  **THIS
REPORT CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 21E OF
THE UNITED STATES SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND IS SUBJECT TO
THE SAFE HARBOR CREATED BY THAT SECTION. FORWARD LOOKING STATEMENTS CONTAINED IN
THIS REPORT INCLUDE, WITHOUT LIMITATION, STATEMENTS IN THIS REPORT RELATING TO
EXPLORATION AND DEVELOPMENT ACTIVITIES PROPOSED TO BE UNDERTAKEN BY THE
CORPORATION AND EXPECTED RESULTS THEREFROM AS SET OUT BELOW UNDER ITEM 3 "KEY
INFORMATION - SELECTED FINANCIAL DATA" AND CERTAIN EXPECTATIONS OF MANAGEMENT OF
THE CORPORATION AS SET OUT BELOW UNDER ITEM 5 "OPERATING AND FINANCIAL REVIEW
AND PROSPECTS". FACTORS THAT COULD CAUSE RESULTS TO DIFFER MATERIALLY FROM THOSE
PROJECTED IN THE SUCH FORWARD LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION,
THOSE FACTORS, INCLUDING RISK FACTORS, SET FORTH BELOW UNDER ITEM 3 "KEY
INFORMATION - RISK FACTORS" AND ITEM 5 "OPERATING AND FINANCIAL REVIEW AND
PROSPECTS".**
  **Part
I**
  **ITEM
      1.**
    **IDENTITY
      OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISERS**
  Not
applicable.
  **ITEM
      2.**
    **OFFER
      STATISTICS AND EXPECTED TIMETABLE**
  Not
applicable.
  **ITEM
      3.**
    **KEY
      INFORMATION**
  **Selected
Financial Data**
  Set
forth in the tables **** below
are selected financial data with respect to the Corporation's financial
condition and results of operations for the five most recent financial years
ending on December 31. In Table 1, the selected financial data were prepared in
accordance with accounting principles generally accepted (“GAAP”) in Canada,
which, for the purposes of these data, conform in all material respects to
accounting principles generally accepted in the United States, and are qualified
by reference to the U.S. GAAP Reconciliation information, indexed herein as **ITEM
19(a)** (the
Corporation has responded to **ITEM
8** in
lieu of responding to this item) and by reference to "Management's Discussion
and Analysis” in the annual report furnished pursuant to **ITEM
17** hereof (and **ITEM
19 (b)** ).
In Table 2, the selected financial data were prepared in accordance to U.S.
GAAP. The Corporation is in the exploration stage and has not commenced
commercial operations, consequently the data disclosed herein may not be
indicative of future financial position or results of operations.
  2.
 Table
      1 – Prepared in accordance with Canadian GAAP(Canadian
      Dollars, In Thousands, except per share data)FINANCIAL
      POSITION AS ATDecember
      31
    
    2004
    
    2003
    
    2002
    
    2001
    
    2000$
    
    $
    
    $
    
    $
    
    $Cash
    
    
    1,896
    
    
    720
    
    
    1,651
    
    
    2,547
    
    
    7,047Other
      current assets
    
    
    595
    
    
    536
    
    
    227
    
    
    272
    
    
    209Fixed
      assets
    
    
    51
    
    
    60
    
    
    43
    
    
    42
    
    
    57Mineral
      properties
    
    
    34,592
    
    
    30,466
    
    
    25,688
    
    
    22,748
    
    
    19,053Total
      assets
    
    
    37,134
    
    
    31,782
    
    
    27,609
    
    
    25,609
    
    
    26,366Current
      liabilities
    
    
    2,463
    
    
    3,118
    
    
    769
    
    
    880
    
    
    419Future income
      taxes
    
    
    6,427
    
    
    2,117
    
    
    -
    
    
    -
    
    
    -Share
      capital
    
    
    57,230
    
    
    47,743
    
    
    47,931
    
    
    44,965
    
    
    44,078Deficit
    
    
    (28,986
    )
    
    (21,196
    )
    
    (21,091
    )
    
    (20,236
    )
    
    (18,131
    )37,134
    
    
    31,782
    
    
    27,609
    
    
    25,609
    
    
    26,366STATEMENT OF
      LOSS FOR THE YEARS ENDED DECEMBER 31Interest
      income
    
    
    (2
    )
    
    (23
    )
    
    (24
    )
    
    (211
    )
    
    (281
    )General
      and administrative expenses
    
    
    1,200
    
    
    1,037
    
    
    882
    
    
    936
    
    
    808(Gain)/loss
      from foreign exchange
    
    
    (79
    )
    
    (18
    )
    
    (2
    )
    
    4
    
    
    1Future
      income tax (recovery)
    
    
    4,574
    
    
    (922
    )
    
    -
    
    
    -
    
    
    -Mineral
      property costs written off
    
    
    1,451
    
    
    31
    
    
    -
    
    
    1,376
    
    
    2,413Loss,
      per Canadian GAAP
    
    
    7,144
    
    
    105
    
    
    856
    
    
    2,105
    
    
    2,941Loss
      per share, per Canadian GAAP
    
    
    0
    
    
    0
    
    
    0
    
    
    0
    
    
    0Number
      of common shares issued and subscribed, in Thousands132,364
    
    
    89,921
    
    
    80,079
    
    
    73,404
    
    
    *
      70,434
 *
- includes 6,160,328 special warrants issued on December 31, 1999, and converted
into common shares in 2000 (see Exhibit **2.17** included with the 1999 Form 20-F).
 Table
      2 – Prepared in accordance with U.S. GAAP(Canadian
      Dollars, In Thousands, except per share data)FINANCIAL
      POSITION AS ATDecember
      31
    
    2004
    
    2003
    
    2002
    
    2001
    
    2000$
    
    $
    
    $
    
    $
    
    $Cash
    
    
    1,896
    
    
    720
    
    
    1,651
    
    
    2,547
    
    
    7,047Other
      current assets
    
    
    596
    
    
    536
    
    
    227
    
    
    272
    
    
    209Fixed
      assets
    
    
    51
    
    
    60
    
    
    42
    
    
    42
    
    
    57Mineral
      properties
    
    
    5,096
    
    
    4,395
    
    
    4,086
    
    
    3,739
    
    
    3,782Total
      assets
    
    
    7,639
    
    
    5,711
    
    
    6,006
    
    
    6,600
    
    
    11,095Current
      liabilities
    
    
    2,463
    
    
    3,118
    
    
    769
    
    
    880
    
    
    419Shareholders’
      equity
    
    
    5,176
    
    
    2,593
    
    
    5,237
    
    
    5,720
    
    
    10,6767,639
    
    
    5,711
    
    
    6,006
    
    
    6,600
    
    
    11,095STATEMENT OF
      LOSS FOR THE YEARS ENDED DECEMBER 31Loss,
      per Canadian. GAAP
    
    
    7,144
    
    
    105
    
    
    856
    
    
    2,105
    
    
    2,941Development
      and exploration costs
    
    
    4,875
    
    
    4,499
    
    
    2,593
    
    
    4,790
    
    
    3,278Reversal
      of mineral property costs written off
    
    
    (1,451
    )
    
    (31
    )
    
    -
    
    
    (1,052
    )
    
    (707
    )Income
      tax (provision) recovery
    
    
    (6,427
    )
    
    922
    
    
    -
    
    
    -
    
    
    (456
    )Loss,
      per U.S. GAAP
    
    
    4,141
    
    
    5,495
    
    
    3,449
    
    
    5,843
    
    
    5,056Loss
      per share, per U.S. GAAP
    
    $
    0.040
    
    $
    0.070
    
    $
    0.040
    
    $
    0.080
    
    $
    0.072
  3.
  The
following table discloses certain high, low and average exchange rates for
converting Canadian dollars into US dollars for the five years ended December 31
and six most recent months in the last financial year:
  Period
    End
      ofPeriod
    Average
    High
    LowYear
      ended December 31, 2000
    0.666
    0.673
    0.691
    0.639Year
      ended December 31, 2001
    0.628
    0.640
    0.691
    0.623Year
      ended December 31, 2002
      Year
      ended December 31, 2003
      Month
      ended July 31, 2004
      Month
      ended August 31, 2004
      Month
      ended September 30, 2004
      Month
      ended October 31, 2004
      Month
      ended November 30, 2004
      Year
      ended December 31, 2004
    0.639
      0.756
      0.752
      0.761
      0.791
      0.821
      0.841
      0.828
    0.640
      0.759
      0.757
      0.764
      0.777
      0.806
      0.839
      0.769
    0.659
      0.771
      0.764
      0.771
      0.791
      0.825
      0.849
      0.849
    0.620
      0.639
      0.752
      0.761
      0.770
      0.798
      0.828
      0.744
 
  **Risk
Factors**
  *Nature
of Mineral Exploration and Mining*
  At
the present time, the Corporation does not hold any interest in a mining
property in production. The Corporation's viability and potential success lie in
its ability to develop, exploit and generate revenue out of mineral deposits.
The exploration and development of mineral deposits involve significant
financial risks over a significant period of time, which, even a combination of
careful evaluation, experience and knowledge may not eliminate. While discovery
of a mine may result in substantial rewards, few properties which are explored
are ultimately developed into producing mines. Major expenses may be required to
establish reserves by drilling and to construct mining and processing facilities
at a site. It’s impossible to ensure that the current or proposed exploration
programs on exploration properties in which the Corporation has an interest will
result in a profitable commercial mining operation.
  The
operations of the Corporation are subject to all of the hazards and risks
normally incident to exploration and development of mineral properties, any of
which could result in damage to life or property, environmental damage and
possible legal liability for any or all damage. The activities of the
Corporation may be subject to prolonged disruptions due to weather conditions
depending on the location of operations in which the Corporation has interests.
Hazards, such as unusual or unexpected formation, rock bursts, pressures,
cave-ins, flooding or other conditions may be encountered in the drilling and
removal of material. While the Corporation may obtain insurance against certain
risks in such amounts as it considers adequate, the nature of these risks are
such that liabilities could exceed policy limits or could be excluded from
coverage. There are also risks against which the Corporation cannot insure or
against which it may elect not to insure. The potential costs which could be
associated with any liabilities not covered by insurance or in excess of
insurance coverage or compliance with applicable laws and regulations may cause
substantial delays and require significant capital outlays, adversely affecting
the future earnings and competitive position of the Corporation and,
potentially, its financial position.
  Whether
a mineral deposit will be commercially viable depends on a number of factors,
some of which are the particular attributes of the deposit, such as its size and
grade, proximity to infrastructure, financing costs and governmental
regulations, including regulations relating to prices, taxes, royalties,
infrastructure, land use, importing and exporting and environmental protection.
The effect of these factors cannot be accurately predicted, but the combination
of these factors may result in the Corporation not receiving an adequate return
on invested capital.
  *Fluctuating
Prices*
  Factors
beyond the control of the Corporation may affect the marketability of any
diamonds, gold or any other minerals discovered. Resource prices have fluctuated
widely and are affected by numerous factors beyond the Corporation's control.
The effect of these factors cannot accurately be predicted. The following table
sets forth in U.S. dollars the high, average and low sales price of gold for the
last five years:
  4.
 Year
    High
    Low
    Average
    Close2000
    313
    264
    279
    2752001
    293
    256
    271
    2772002
    349
    278
    310
    3472003
    416
    320
    363
    4162004
    454
    375
    418
    437
 Source: www.kitco.com  *(Historical
London Fix)*
  *Permits
and Licenses*
  The
operations of the Corporation require licenses and permits from various
governmental authorities. The Corporation believes that it presently holds all
necessary licenses and permits required to carry on with activities which it is
currently conducting under applicable laws and regulations and the Corporation
believes it is presently complying in all material respects with the terms of
such licenses and permits. However, such licenses and permits are subject to
change in regulations and in various operating circumstances. There can be no
assurance that the Corporation will be able to obtain all necessary licenses and
permits required to carry out exploration, development and mining operations at
its projects.
  *Competition*
  The
mineral exploration and mining business is competitive in all of its phases. The
Corporation competes with numerous other companies and individuals, including
competitors with greater financial, technical and other resources than the
Corporation, in the search for and the acquisition of attractive mineral
properties. The ability of the Corporation to acquire properties in the future
will depend not only on its ability to develop its present properties, but also
on its ability to select and acquire suitable properties or prospects for
mineral exploration. There is no assurance that the Corporation will continue to
be able to compete successfully with its competitors in acquiring such
properties or prospects.
  *Financing
Risks*
  The
Corporation has limited financial resources and there is no assurance that
additional funding will be available to it for further exploration and
development of its projects or to fulfill its obligations under applicable
agreements. Although the Corporation has been successful in the past in
obtaining financing through the sale of equity securities, there can be no
assurance that the Corporation will be able to obtain adequate financing in the
future or that the terms of such financing will be favourable. Failure to obtain
such additional financing could result in delay or indefinite postponement of
further exploration and development of the property interests of the Corporation
with the possible dilution or loss of such interests.
  *No
Assurance of Titles*
  The
acquisition of title to mineral projects is a very detailed and time-consuming
process. Although the Corporation has taken precautions to ensure that legal
title to its property interests is properly recorded in the name of the
Corporation, there can be no assurance that such title will ultimately be
secured. The interests of the Corporation in its properties in Indonesia are
held under applications for contracts of work, which have yet to receive final
approval from the Government of Indonesia, and therefore may not be approved at
all or, if approved, may not cover all of the area applied for. Furthermore,
there is no assurance that the interests of the Corporation in any of its
properties may not be challenged or impugned.
  5.
 *Environmental
Regulations*
  The
operations of the Corporation are subject to environmental regulations
promulgated by government agencies from time to time. Environmental legislation
provides for restrictions and prohibitions on spills, releases or emissions of
various substances produced in association with certain mining industry
operations, such as seepage from tailings disposal areas, which would result in
environmental pollution. A breach of such legislation may result in the
imposition of fines and penalties. In addition, certain types of operations
require the submission and approval of environmental impact assessments.
Environmental legislation is evolving in a manner which means stricter
standards, and enforcement, fines and penalties for non-compliance are more
stringent. Environmental assessments of proposed projects carry a heightened
degree of responsibility for companies and their directors, officers and
employees. The cost of compliance with changes in governmental regulations has a
potential to reduce the profitability of operations.
  *Currency
Fluctuation*
  The
Corporation's currency fluctuation exposure is primarily to the US dollar as the
Atlanta Gold Property is in the United States of America and all material
commitments on the Atlanta Gold Property are in Canadian or US dollars. Such
fluctuations may materially affect the Corporation's financial position and
results of the Corporation.
  *Conflicts
of Interest*
  The
directors and officers of the Corporation may serve as directors or officers of
other public resource companies or have significant shareholdings in other
public resource companies. Situations may arise in connection with potential
acquisitions and investments where the other interests of these directors and
officers may conflict with the interests of the Corporation. In the event that
such a conflict of interest arises at a meeting of the directors of the
Corporation, a director is required under the *Business
Corporations Act* (Ontario) to disclose the conflict of interest and to abstain from voting on the
matter.
  From
time to time several companies may participate in the acquisition, exploration
and development of natural resource properties thereby allowing for their
participation in larger programs, permitting involvement in a greater number of
programs and reducing financial exposure in respect of any one program. It may
also occur that a particular company will assign all or a portion of its
interest in a particular program to another of these companies due to the
financial position of the company making the assignment. In determining whether
or not the Corporation will participate in a particular program and the interest
therein to be acquired by it, the directors will primarily consider the degree
of risk to which the Corporation may be exposed and its financial position at
that time.
  *Estimates
of Reserves, Mineral Deposits and Production Costs*
  Although
the reserve and mineral deposit figures included or incorporated by reference
herein have been carefully prepared by the Corporation, or, in some instances
have been prepared, reviewed or verified by independent mining experts, these
amounts are estimates only and no assurance can be given that any particular
level of recovery of gold or other mineral from reserves will in fact be
realized or that an identified mineral deposit will ever qualify as a
commercially mineable (or viable) ore body which can be economically exploited.
Estimates of reserves, mineral deposits and production costs can also be
affected by such factors as environmental permitting regulations and
requirements, weather, environmental factors, unforeseen technical difficulties,
unusual or unexpected geological formations and work interruptions. In addition,
the grade of ore ultimately mined may differ from that indicated by drilling
results. Short term factors relating to reserves, such as the need for orderly
development of ore bodies or the processing of new or different grades, may also
have an adverse effect on mining operations and on the results of operations.
Material changes in reserves, grades, stripping ratios or recovery rates may
affect the economic viability of projects. Reserves are reported as general
indicators of mine life. Reserves should not be interpreted as assurances of
mine life or of the profitability of current or future operations. There is a
degree of uncertainty attributable to the calculation of reserves and
corresponding grades being mined or dedicated to future production. Until ore is
actually mined and processed, reserves and grades must be considered as
estimates only. In addition, the quantity of reserves may vary depending on
mineral prices. Any material change in reserves, or grades or stripping ratios
will affect the economic viability of the projects. In addition, there can be no
assurance that gold recoveries or other mineral recoveries in pilot plant tests
will be duplicated during production.
  6.
 *U.S.
Mining Law*
  Proposed
legislation has been introduced in the United States Congress which would
supplant or radically alter the provisions of the Mining Law of 1872 which
currently applies to unpatented mining claims held in the United States of
America. The Atlanta Gold Property includes unpatented mining claims. If
enacted, such legislation could substantially increase the cost of holding
unpatented mining claims and could materially impair the ability to develop
mineral resources on unpatented mining claims. Under the proposed legislation,
the ability of companies to obtain a patent on unpatented mining claims would be
nullified or substantially impaired. Moreover, such proposed legislation
contains provisions for the payment of royalties to the federal government in
respect of production from unpatented mining claims, which could materially and
adversely affect the potential for development of such claims and the economics
of operating existing mines on federal unpatented mining claims. In addition,
the proposed legislation may prohibit mineral exploration or development, even
on existing unpatented mining claims, unless and until a federal agency finds
that mining is a suitable use of the land in question, a review process which
could take years.
  *Incorporation*
  The
Corporation exists under the laws of the Province of Ontario, Canada and all of
the Corporation's directors and officers are residents of Canada. Consequently,
it may be difficult for United States investors to effect service of process
within the United States upon the Corporation or upon the directors or officers
who are not residents of the United States, or to realize in the United States
upon judgments of United States courts predicated upon civil liabilities under
the United States securities laws. A judgment of a U.S. court predicated solely
upon such civil liabilities may be enforceable in Canada by a Canadian court if
the U.S. court in which the judgment was obtained had jurisdiction, as
determined by the Canadian court, in the matter. There is substantial doubt
whether an original action could be brought successfully in Canada against any
of such persons or the Corporation predicated solely upon such civil
liabilities.
  **ITEM
      4.**
    **INFORMATION
      ON THE COMPANY**
  **History
and development of the Company**
  Twin
Mining Corporation (the "Corporation") was incorporated under the laws of the
Province of British Columbia under the name Atlanta Gold Corporation by
memorandum of incorporation dated March 6, 1985. On April 3, 1997,
Atlanta Gold Corporation acquired Voisey Bay Resources Inc. pursuant to an
amalgamation by way of an arrangement effected under the *Companies
Act* (British Columbia) and changed the name of Atlanta Gold Corporation to Twin Gold
Corporation. On March 15, 2000, the Corporation was continued under the *Business
Corporations Act* (Ontario) and the name of the Corporation was changed from Twin Gold Corporation
to Twin Mining Corporation. The registered and executive office of the
Corporation is located at Suite 1250, 155 University Avenue, Toronto, Ontario
M5H 3B7. The Corporation has a field office located at Suite B, 1509 Tyrell
Lane, Boise, Idaho, 83706 and a registered head office for the territory of
Nunavut, Canada, located at the P.O. Box 1779, Building 1088C, Iqaluit, Nunavut,
X0A 0H0.
  The
Corporation has two subsidiaries, Atlanta Gold Corporation of America, Inc.
("Atlanta U.S.") (a Nevada company) and Voisey Bay Resources Inc. ("Voisey Bay")
(a British Columbia company), both of which are wholly-owned.
  In
March 2005, the Corporation transferred the Layuh gold property from Twin Gold
Layuh Mining Corporation to the Corporation and wound down two companies, Twin
Gold Cayman Corporation and Twin Gold Layuh Mining (Resources) Corporation
("Twin Gold Layuh") (each of which is a Cayman Islands company).
  7.
 The
Corporation is engaged in the exploration and development of mineral resource
properties. The Corporation has various interests in five mineral resource
properties: 100% interest in the Torngat diamond property (the "Torngat
Property") located in the Province of Québec, consisting of three mining
exploration permits; 100% interest in the Jackson Inlet diamond property
(“Jackson Inlet”) consisting of 532 mineral claims located on the Brodeur
Peninsula of Baffin Island; 100% interest in the Atlanta gold property
("Atlanta") located in the State of Idaho, consisting of 35 patented and 113
unpatented mining claims; and the Abitibi Gold Property (“Abitibi”) located in
eastern Québec, consisting of an 80% interest in 62 mining claims and 100%
interest in an additional 50 mining claims ; and an 85% interest in the Layuh
gold property, an 86,880-hectares property, located in Kalimantan,
Indonesia.
  In
addition to the interests currently held by the Corporation in mineral resource
properties, management of the Corporation reviews opportunities to acquire
interests in further mineral resource properties as such opportunities become
available to the Corporation.
  **Properties**
  **Torngat
Property, Québec**
  The
Corporation continues to hold three contiguous mining exploration permits
covering a total of 327 square kilometres first issued by the Quebec Ministry of
Natural Resources in 1999. The permits are valid for up to five years and may be
renewed for one additional five-year period. Annual expenditures are required to
maintain the permits. The Corporation’s efforts to date on the property have
been directed towards a series of five (5) diamondiferous kimberlite dyke
systems that strike over a combined length of 37 km.
  Location
and Access
  The
Torngat Property is located in northeast Québec on the eastern shore of Ungava
Bay. The nearest habitation is the town of Kangiqsualujjuaq (formerly George
River) about 90 kilometres south-southwest of the Torngat Property and the town
of Kuujjuaq (formerly Fort Chimo) about 250 kilometres southwest of the Torngat
Property. Montréal is approximately 1,500 kilometres south-southwest of the
Torngat Property. Access to the Torngat Property is by boat, fixed-wing aircraft
or helicopter from Kuujjuaq or Kangiqsualujjuaq, both of which have scheduled
air service.
  The
central part of the Torngat Property is a plateau about 400 metres above sea
level and is part of a larger geographical entity, the George Plateau. The
plateau is broken by steep-sided gorges and fjords. The largest fjord is
Alluviaq Fjord that bisects the property and trends in a southeast-northwest
direction. The first of the dikes discovered on the Torngat Property is exposed
in the steep-sided walls on the northern side of Alluviaq Fjord.
  The
Torngat Property is above the tree line. The climate is arctic with an average
annual temperature between -7.5° Celsius and -5° Celsius (18.5° Fahrenheit and
23° Fahrenheit). The property area receives about 400 millimetres to 500
millimetres of precipitation annually, with about 45 per cent of the
total falling as snow. There are normally about 20 to 40 frost free days
annually.
  Regional
and Property Geology
  The
Torngat Property lies within the Torngat Orogen. The crust in the Orogen is
thickened because Rae Province rocks were thrust below the Nain Province more
than a billion years ago.
  The
Torngat Property covers three different tectonic regimes. To the southwest are
quartzo-felspathic gneisses of the Rae Province. Locally, there are infolds of
Aphebian age shallow water sedimentary rocks of the Lake Harbour Group, which
are progressively deformed to the northeast by the Abloviak Shear Zone. The
predominant rock type on the Torngat Property is the Tasiuyak Gneiss, a
northwest trending belt of garnet-quartz-plagioclase gneisses which extend
southwards into Labrador. The gneisses are considered to be altered sedimentary
rocks. The northeastern part of the Torngat Property is underlain by granulitic
gneiss of the Burwell Terrane.
  8.
 The
rocks of the Torngat Orogen strike northwest-southeast within the Torngat
Property. Cross-cutting the gneisses, there are a number of kimberlite dikes.
The first dikes discovered are located on the northern shore of Alluviaq Fjord.
These dikes strike northeast and dip subvertically. They are exposed on the
steep side of the fjord, typically in crevices where the kimberlite has been
eroded preferentially and the debris from weathering flushed from the crevice by
water flowing over the fjord wall.
  Three
dikes in this area have been sampled by the Corporation numbered, from east to
west, Torngat 1 to 3. The dikes are approximately 2.5 metres, 1 metre and 0.6
metres in thickness, respectively. Torngat 1, the largest dike, has been traced
through discontinuous exposure about 1.5 kilometres across the plateau to an
unnamed lake. A number of other dikes have been identified by the Corporation
and three narrow dikes have been observed so far at sea level on the south side
of Alluviaq Fjord. The Corporation completed a lineament study of the property
using air photographs. This study demonstrated that there are a number of linear
features striking northeast across the property on the northern side of Alluviaq
Fjord. South of the fjord, the trend of the linear feature swings to
north-south. Near the Baufremont River, in an area called Torngat South, other
kimberlite dikes have been identified and one has been sampled. One sample is
from float overlying a dike estimated to be about 3 metres wide. Based on
outcrop patterns, other parallel dikes are recognized in this area. The
individual dikes are dark green and generally coarse-grained. Torngat1 has a
thin selvage of fine-grained kimberlite on both sides, which is typically about
10 to 15 centimetres thick. Contacts between the coarse-grained and fine-grained
kimberlite and between the kimberlite and the enclosing rocks are sharp. The
dikes outcrop recessively, and the fine-grained kimberlite is more resistant to
weathering than the coarse-grained kimberlite. Torngat 1 appears to bifurcate in
the fjord cliff face, so that a horse of wall rock is surrounded by
kimberlite.
  Mineralogically,
the dikes are made up of olivine, which is frequently serpentinized, and
phlogopite, contained in a matrix of fine-grained phlogopite, olivine, spinel
(titanium-magnesium chromites, magnesium-aluminum chromites and
titanium-magnesium magnetites), perovskite and carbonate. Previous geochemical
work completed by staff and students of the University of Québec in Montreal
showed that the rocks contain very low silica and are ultra potassic, and that
titania is high and alumina is low. Based on these results, and the mineralogy,
these rocks are classified as Type 1 kimberlites.
  Mini-bulk
sample analysis - Summer/Fall 2002
  In
2002 samples from two anomalously diamondiferous dyke segments were processed.
In January 2003, fifteen samples, ranging in weight from 24 kg to 100 kg were
analyzed for diamonds by caustic fusion (100-micron cut-off size), selection and
description was completed by SGS Lakefield Research Limited (“Lakefield”) and
reviewed by AMEC E & C Services Limited (“AMEC”).
  Analytical
results of the 900-meter and 400-meter segment, respectively, are tabulated
below.
 ****
 9.
 **Dyke
Segment Diamond Summary- According to square mesh sieve analysis provided by
Lakefield**
 Sampled
      segment
    900m
      dyke segment(578.52kg)
    400m
      dyke segment(432kg)Sieve
      size(mm square mesh)
    Number
      of diamonds
    Weight
      of diamonds (carats)
    Number
      of diamonds
    Weight
      of diamonds (carats)0.85
      to 1.18
    3
    0.042511
    3
    0.034710.600
      to 0.850
    10
    0.046633
    12
    0.050980.425
      to 0.600
    27
    0.038755
    14
    0.019630.300
      to 0.425
    38
    0.020585
    19
    0.0109650.212
      to 0.300
    69
    0.01526
    38
    0.007840.150
      to 0.212
    99
    0.007448
    50
    0.003230.100
      to 0.150
    103
    0.002725
    61
    0.001585Total
    349
    0.173917
    197
    0.12894
 **Samples
listed in this table make up the 900 meter TORNGAT North dyke
segment**
  Sample
      No.
    Sample
      Weight (Kg)
    Diamonds
      recovered
    Total
      Diamond Weight In Sample (Carats)GL10
    101.80
    99
    0.026835887573
    24.00
    32
    0.006175DB09
    100.00
    60
    0.017590GL09
    72.52
    47
    0.030285887574
    24.00
    14
    0.002190DB03
    100.00
    43
    0.015010GL08
    81.25
    20
    0.032385887575
    24.00
    2
    0.000060DU
      character
    50.95
    32
    0.043387TOTAL
    578.52
    349
    0.173917
 *1.
13 diamonds measure greater than 0.5 mm in three dimensions and*
 *2.
41 diamonds measure greater than 0.5 mm in two dimensions.*
 
  **Samples
listed in this table make up the 400 meter TORNGAT North dyke
segment**
  Sample
      No.
    Sample
      Weight (Kg)
    Diamonds
      recovered
    Total
      diamond weight in sample (Carats)DB04
    100.00
    36
    0.021595DB01
    100.00
    63
    0.029975887587
    24.00
    15
    0.021265DB06
    100.00
    53
    0.011465GL07
    84.00
    29
    0.042070887588
    24.00
    1
    0.002570TOTAL
    432.00
    197
    0.128940
 *12
diamonds measure greater than 0.5 mm in three dimensions and*
 *28
diamonds measure greater than 0.5 mm in two dimensions*
 
 10.
 Largest
diamonds discovered to date from the 900 meter and 400 meter dyke sections are
2.90 x 2.50 x 1.80mm (0.065 ct) and 1.85 x 1.25 x 1.07mm (0.0142 ct),
respectively. The diamonds are very white, mostly transparent and of high
preservation, as previously described by Lakefield.
  These
results and work to date on the project relate to exposed dyke intervals that
strike roughly at right angles to stratigraphy. Cross faults, that are believed
to occupy overburden covered valley floors, also intersect dykes at rights
angles and potential exists for dyke width enhancement where dykes and cross
structures exist. Additional surveying and ultimately diamond drilling would be
required to evaluate overburden covered sections of dyke material.
  The
Corporation believes that further work should focus primarily on identifying the
geometry of the TORNGAT dyke at depth and along strike. Since the topography is
primarily controlled by geology, the deeper valleys could be underlain by shear
zones or faults where the dykes could have formed blows. These areas cannot be
sampled on surface and further work would involve geophysical surveying followed
up by drilling to evaluate those anomalies thought to be representative of dyke
material.
  Since
2003, the Corporation has elected to focus its primary attention on its Atlanta
and Jackson Inlet properties and as a result, no significant expenditures have
been made on TORNGAT since that time. Management continues to pursue various
alternatives, including the participation of joint venture partners so as to
further advance this project.
  Sufficient
work has been completed to secure the mining rights: 1) on the first permit
staked, totaling 50 square kilometers, until July 2009; 2) on the second permit
totaling 101 square kilometers, until August 2006; and 3) on the third permit,
totaling 176 square kilometers, until September 2005.
  **Jackson
Inlet, Baffin Island**
  Pursuant
to agreements dated April 27, 2000 and November 7, 2000 (the “Agreement”), the
Corporation acquired a 100% interest in three mineral claims from Helix
Resources Inc. (“Helix”) covering a total of 7,128.5 acres (28.85 square
kilometres). One of the claims, covering 2,480 acres (10.03 square kilometres),
was allowed to lapse because of apparent low potential. These mineral claims
were acquired by the Corporation by paying $50,000 and issuing 30,000 common
shares. To maintain the Agreement in good standing, Helix was paid $100,000 and
issued 45,000 common shares of the Corporation in 2001. In 2002, the Corporation
paid $150,000 and issued another 75,000 common shares of the Corporation to
Helix. In 2003, the Corporation issued 105,000 additional common shares and paid
$200,000 in January 2004 to Helix. In 2004, the Corporation issued 120,000
common shares and paid $250,000. The Corporation is required to complete a
pre-feasibility study by December 31, 2005, which shall be a broad-based study
to evaluate whether a deposit on a northern block of 13 claims on Jackson Inlet,
covering 23,811 acres, may be mined at a profit, and to make one further payment
of $100,000 to Helix by December 31, 2006. In addition, a payment of $500,000 is
due upon receipt of all development permits and a payment of $1,000,000 plus
500,000 common shares is due upon production of 500,000 carats. Subsequently,
Helix is to receive a 5% net profits interest and a 1% gross royalty after
crediting all previous payments. In May 2000, the Corporation staked 16
additional claims covering 106 square kilometres (26,290 acres) over nearby
potential kimberlite target areas chosen in consultation with Helix. In 2001,
the Corporation staked 61 mineral claims covering 529.77 sq. km (130,908.35
acres). In 2002, the Corporation staked another 32 mineral claims covering
334.43 sq. km (82,640 acres) and in 2003, the Corporation staked 426 additional
mineral claims in the region covering 4,118 sq. km (1,017,593 acres). Five of
the claims staked in prior years were allowed to lapse. Since the end of the
2003, the Corporation has owned a 100% interest in 532 mineral claims totaling
5,075 sq. km (1,254,029 acres) within the region.
  Location
and Access
  The
Jackson Inlet cluster of kimberlite pipes is located 12 kilometres east of
Tidewater on the Brodeur Peninsula, on the west coast of Baffin Island. It is
centered 3.3 kilometres south of Jackson River at 73°14' 48" latitude north and
88°16' 12" longitude west. Approximately 100 kilometres to the east is the
community of Arctic Bay (Ikpiarjuk), which is linked by a 21 kilometre
all-weather highway to the more easterly Nanisivik zinc mine and
townsite.
  11.
 Arctic
Bay and Nanisivik have First Air Boeing 727 jet service twice weekly. Marine
shipping companies make the first scheduled delivery in mid-July and the last in
mid-September. Navigable waters of Admiralty Inlet, Lancaster Sound and Prince
Regent Inlet bound the Brodeur Peninsula.
  Geology
  Flat-lying
ordovician and silurian carbonates are exposed along the steep coastline of the
Brodeur Peninsula and in the deeply incised river gorges. From the air, evidence
of the Jackson Inlet cluster of kimberlite pipes is manifested as three dark
brown circular patches along a northeast-southwest axis and surrounded by a 500
metres by 600 metres halo of tan colouration. Within the halo are patches of
darker tan colour.
  The
unweathered kimberlite, sampled from three pipes, has a dark brownish green,
fine-grained ground mass which comprises 20% to 30% of the rock. The remaining
70% to 80% is primarily light green olivine of random dimensions up to 2
centimetres. Fragments of limestone, shale and gneiss are also present. Although
hand specimens are only slightly magnetic, many contain 5% to 10% very magnetic
fragments. These fragments resemble a siliceous iron-manganese shale or iron
formation and are prominent in the weathered material in permafrost and "soil"
above the pipes.
  Thin
sections of various kimberlite samples were examined by microscope at Lakefield.
The mineral assemblage consists of abundant olivine macrocrysts as well as
scarce phlogopite and garnet macrocrysts set in a fine grained serpentine
matrix. The presence of pyroclastic texture suggests crater facies material and
a relatively shallow level of erosion.
  2002
Core Drilling Program
  During
2002, the Corporation pursued a multi-phase exploration program on Jackson
Inlet. The two main objectives for the 2002 exploration season were the
evaluation of known potential kimberlite targets by drill testing.
  Work
started with Phase-1 comprising ground magnetometer surveys, soil sampling,
gravity and core drilling on known pipes and previously identified airborne
magnetometer anomalies. Soil samples and drill core samples were processed by
Lakefield in 2003.
  The
indicator mineral distribution from 489 soil samples collected in 2002 together
with recovery of the micro-diamond from till immediately above bedrock in drill
hole JI-CG2-02 led to a change in the 2003 exploration program objectives
discussed in the prior year’s annual report. Instead of drilling to establish
geometry of the Freightrain pipe and the drill testing of other targets, it was
decided that giving immediate attention to the overall upside potential of the
project would enable the Corporation to acquire the most favorable land position
on the Brodeur Peninsula.
  Reinterpretation
of government air-borne magnetic data in light of the distribution of known
kimberlites and indicator minerals made possible the selection of priority areas
for claim staking. Two high sensitivity ground magnetic surveys were carried out
by JVX Ltd. to further clarify structural control of kimberlite emplacement and
to clearly define drill targets not readily apparent from low resolution and
suspect data obtained by 2002 ground magnetic surveys. The soil sampling area
was considerably enlarged from the initially contemplated survey of selected
claims and target areas. Soil sampling was supplemented by collection of stream
sediments at an approximate density of one sample per 42 sq. km in order to
cover as much of the newly staked claims as possible on a reconnaissance
basis.
  Results
of 2002 and Exploration reported in 2003
  Analytical
testing was finalized in 2003 on bedrock and overburden recovered from ten holes
(1,173m) drilled (NQ core, 47-mm diameter) **** at
four targets during the July-September period of 2002. The Cargo2 and ANO 10
magnetic anomalies detected by the 2001 Fugro-SIAL helicopter-borne survey were
each tested by three holes and another hole tested ANO 9.
  12.
 The
three holes at ANO 10 and one at the nearby ANO 9 (2.5 km) did not encounter
kimberlite nor explain both airborne and ground magnetic anomalies. Drilling at
Cargo2 recovered a micro-diamond from till immediately above bedrock in drill
hole JI-CG2-02.
  The
objective of two of the three holes drilled at Cargo1 pipe (JI-CG1-03 & -04)
was to obtain representative samples from the fine grained ashy core facies and
the coarse rim facies.
  Laboratory
investigations of the third hole (JI-CG1-05) revealed low magnetic
susceptibility of the core which explains the weak magnetic anomalies over this
and a number of other suspected kimberlites. The two other holes intersected as
much as 200 meters apart and the dimensions of the pipe could be much larger
than what the magnetic contours indicate.
  **Summary
of Caustic Fusion Processing Results,Cargo 1 kimberlite drill holes JI-CGI-03,
-04 and -05**
  Hole
      
      No.
    Weight
      
      (kg)
    Diamonds
      Recovered by Sieve Class (square mesh opening in millimeters)+1.7
      mm
    1.18
      mm
    0.85
      mm
    0.600
      mm
    0.425
      mm
    0.300
      mm
    0.212
      mm
    0.150
      mm
    0.100
      mm
    Total03
    284
    0
    0
    0
    0
    1
    2
    7
    12
    20
    4204
    647
    1
    1
    0
    2
    5
    17
    24
    53
    86
    18905
    87
    0
    0
    0
    0
    0
    0
    0
    5
    5
    10Total
    1018
    1
    1
    0
    2
    6
    19
    31
    70
    111
    241
 *The
diamonds are mostly white and transparent. Largest stones (JI-CG1-04): 2.34 x
2.25 x 1.65mm - 0.0869 carat; 2.14 x 1.68 x 1.14mm - 0.0269
carats*
  Results
were also received in 2003 from processing and indicator mineral grain selection
by Lakefield on 489 soil samples which had been collected in 2002. The 2002
regional till sampling program covered the main claim block at that time. The
sampling involved collection of approximately 25 kg of till at 400-metre
intervals on lines two kilometers apart in the Freightrain-Cargo1 pipe and
Cargo2 areas and four kilometers apart elsewhere. Pyrope and eclogitic garnet,
Mg-ilmenite and spinel were found in anomalous concentrations in a number of
clusters, most notably at Cargo2 and immediately surrounding the Freightrain and
Cargo1 pipes.
  2003
Claim-Staking Programs
  Encouraged
by the results from the indicated mineral surveys, the Corporation undertook two
claim-staking campaigns during the year with the strategic objective ultimately
being to discover a number of diamondiferous pipes within truck haulage distance
from a central plant. The first program added 1,145 sq. km following receipt of
indicator mineral counts from the 2002 till sampling program and evidence of
diamonds at Cargo2.
  Following
the discovery of the 1.7km kimberlite fragment trail and detailed ground
magnetic survey confirmation of previously inferred geological controls of
kimberlite emplacement, the Corporation staked a further contiguous 2,283 sq. km
to the east and south. After allowing for the expiry of 5 claims where results
did not warrant further exploration, the net 100%-owned land position at the end
of 2003 was 5,075 sq. km (1,254,029 acres).
  2003
Exploration Program and Results
  During
the 2003 field season a further 426 samples were collected to define airborne
survey targets in a large portion of the newly staked claims and for purposes of
determining whether discrete and separate drill targets were present in the
immediate vicinity of Freightrain and Cargo1 pipes. Based on the recovery of
kimberlite indicator mineral grains from the 355 soil and 71 stream sediment
samples, twelve (12) new kimberlite indicator mineral clusters were discovered.
Of the 426 samples collected, 110 contained kimberlite indicator
minerals.
  13.
 Seven
of the twelve (12) clusters are located in the eastern half of the new Jackson
Inlet claim block from 72 degrees 15' to 73 degrees 15' latitude. Several of the
seven clusters correlate well with airborne magnetic anomalies and intersecting
structures, which enhances the probability of their relationship to kimberlite
targets. Five clusters are within 3 to 6 km of the Freightrain and Cargo1 pipes.
The high numbers of kimberlite indicator minerals from the five areas provide
strong evidence of kimberlite bodies under shallow overburden cover. These new
indicator mineral clusters are in addition to the previously reported finds of
the diamondiferous kimberlite fragment corridor between Freightrain and Cargo1
pipes and the eight potential kimberlite targets at Cargo2. 2003 key results are
summarized below:
 Heavy
    **Indicator
      Mineral Recovery -20+60 Mesh**MineralsNon-mag
      &
    Pyrope
    Eclogitic
    Chrome
    Lo
      Chrome
    
    PicroPara-mag
    Garnet
    Garnet
    Diopside
    Pyroxene
    Omphacite
    Ilmenite
    Chromite
    Olivine
    Total(grams)
    (number of
      grains)5
      samples*within 1
      km
    14.38
    2019
    465
    66
    96
    15
    25
    1208
    46508
    50402of
      Freightrain16 samples
      innext 1.0-2.5
      km
    42.24
    28
    7
    5
    5
    1
    10
    17
    580
    653from
      Freightrain405 samples
      in3,470
      km2 other
    1230.32
    59
    26
    7
    70
    3
    28
    63
    1032
    1288surveyed
      areaTotal
    1286.94
    2106
    498
    78
    171
    19
    63
    1288
    48120
    52343
 *(*)
High indicator mineral counts are due to 2 of 5 samples taken closer to
outcropping Freightrain kimberlite.*
  In
2003, most soil and stream sediment samples were collected at approximately 500
m intervals along 4 km spaced north-south lines. The stream sediment samples
collected were spaced at 5 to 8 km apart. The samples cover 3,490 sq. km of the
5,075 sq. km Jackson Inlet property. Soil samples were collected from frost
boils which are ubiquitous on the sparsely vegetated Brodeur Peninsula. The
samples represent glacial till which the boiling action has brought from
considerable depth. This has been evidenced by a coincidence of indicator
minerals with known kimberlite on occasion beneath many meters of
overburden.
  A
heavy mineral concentrate was produced by Lakefield followed by diamond
indicator mineral picking by HDM Laboratories Inc. (“HDM”). HDM is located in
Loveland, CO, U.S.A., and has specialized in kimberlite indicator mineral
recovery and evaluation for more than 10 years.
  In
July 2003, the Corporation’s field personnel made a significant discovery of
kimberlite fragments by careful classic prospecting along a NE-SW corridor that
connects Freightrain with Cargo1 pipes. The fragments, which are interpreted to
originate from kimberlite bodies beneath and brought to surface by frost boil
action, are distributed across up to 50 meters width within this corridor. They
were surveyed and sampled over a distance of 1.7 km; 1 km SW from Cargo1 pipe
towards Freightrain and 0.7 km to the NE beyond Cargo1 pipe. They show no
evidence of transport.
  Three
kimberlite fragment samples totaling 50.5 kg collected from separate portions
along the 1.7 km were analyzed by Lakefield. Diamond indicator minerals were
extracted from two of the three samples and one was analyzed for diamond content
only. Thirteen micro diamonds were extracted from the three samples.
  Regarding
diamond indicator minerals, the Lakefield report states that "highly depleted
sub-calcic Cr-pyrope garnet (G10) and rare high-pressure eclogitic garnet, which
are associated with diamonds and occur as inclusions in diamonds, are present,
as is mantle ilmenite. Mantle ilmenite compositions indicate that diamond will
be highly preserved, if present."
  14.
 "Pressures
and temperatures calculated using single clinopyroxene geothermometry for
clinopyroxene grains that are interpreted to have equilibrated with garnet in
garnet lherzolite, indicate that all of these clinopyroxenes and host
kimberlites erupted from within the diamond stability field. Calculated
pressures and temperatures form a linear array coincident with a relatively cool
35 to 40 mW/m(2) conductive geotherm similar to that of geothermal arrays for
kimberlites from the Slave province in Canada."
  High
sensitivity ground magnetic (gradiometer) surveys were performed by JVX Ltd.
(“JVX”) in July and August 2003 over a 2 km by 3 km area encompassing
Fugro-SIAL’s Cargo2 aeromagnetic anomaly as well as over a 2 km by 6 km corridor
encompassing Freightrain and Cargo1 pipes (Gap Grid). Objectives of the latter
survey were to identify new or satellite pipes and to determine whether the
kimberlite fragment trail reflects bodies that are as magnetic as the initially
discovered portion of Cargo1 pipe or whether the source is probably more like
the weakly magnetic northeast portion of the pipe probed by drill hole
JI-CG1-05.
  At
Cargo2, the objectives were to define the anomalies, which were not established
by the 2002 survey, and to develop drill targets for 2004. These objectives were
exceeded in that the small area (6 sq. km) yielded 8 anomalies, about which the
JVX report concluded that “ if
kimberlite is recognized at Anomaly A-I this entire trend becomes
prospective. ”
The JVX report describes A-I, that is Cargo2, from which the grid takes its
name, as “a moderate anomaly with an amplitude of about 23 nano taslas (nT)
spread over a roughly circular area about 300m across.” They describe Anomaly
A-IV as “probably the most intriguing anomaly on the grid. The intensity of this
anomaly is comparable to Cargo2 but it appears to be the strongest of a series
of 5 magnetic highs that trend NW-SE.”
  Within
the Gap Grid, the JVX survey clearly defined 5 lobes or components of the
Freightrain kimberlite the two most prominent of which are: 1) approximately 22
nT and “roughly 125 by 100 m, flanked on the North, West, and East by magnetic
lows”, and 2) approximately 20 nT that is “roughly 100 by 150 m with secondary
lobes to the northeast”.
  JVX
recommends prospecting about
0.75 km northeast of the Freightrain anomaly in the vicinity of Anomaly 2, a new
anomaly of which the “ source
probably extends to depth as there is no accompanying magnetic
low”.
  The
JVX report describes Cargo1 pipe as “a strong (approximately 15 nT), roughly
circular magnetic high. It is about 160 m across and it is truncated on the
northeast side by a magnetic depression”. The kimberlite bodies discovered over
1.7 km on the Freightrain - Cargo1 pipes corridor are visible on surface as a
diamondiferous kimberlite fragment corridor. Due to their low magnetic
susceptibility their magnetic footprint is very faint.
  2004
Exploration Program and Results
  The
Corporation advanced Jackson Inlet after entering into two agreements during the
year. Pursuant to a letter agreement entered into in April 2004 with Kennecott
Canada Exploration Inc. (“Kennecott”) in connection with 270,644 acres of the
north claim block (the “Jackson East & West”) of Jackson Inlet, Kennecott
incurred expenditures in excess of $615,000 in completing a 15,700-line
kilometre MIDAS II TM aeromagnetic survey over 200,000 acres of Jackson East & West using 50-metre
spacing for one block of claims (“Block 1”) and 75-metre spacing for a second
block of claims (“Block 2”). The final results of the survey, which were
received during the first quarter of 2005, revealed as many as 78 new potential
kimberlite drill targets. The agreement with Kennecott was terminated in July
2004 as a result of discussions of the Corporation’s obligations towards a third
party having an interest in Jackson Inlet not producing the necessary results
within the anticipated time frame. The Corporation remains committed to honoring
the third party agreement and to continue advanced exploration at Jackson Inlet.
  In
August 2004, the Corporation entered into an agreement with Stornoway Diamond
Corporation (“Stornoway”) in respect of the south claim block running along the
Vista River (“Vista”) covering over 980,000 acres of Jackson Inlet. Under the
terms of this agreement, Stornoway has the option to earn a 51% interest in
these claims by, among other things, incurring a minimum of $3 million in
exploration expenditures on Vista over a three-year period. Prior to Stornoway
having to elect to take up the option and commence expenditures, the Corporation
is required to complete a minimum $900,000 exploration program mutually
acceptable to both parties and to deliver to Stornoway a report thereon. The
Corporation completed a 1,200-sample soil/till sampling program in the third
quarter of 2004. The samples were processed for kimberlite indicator minerals at
Vancouver Indicator Processors Inc. in Burnaby, B.C., Canada. Heavy mineral
concentrates at this lab was sent to HDM Laboratories Inc, in Denver, and KIM
Dynamics, in Vancouver, B.C., Canada, for sorting, selecting and counting
kimberlite indicator indicator minerals. Results from the counting, expected to
be completed within the second quarter of 2005, will be used to complete the
exploration program.
  15.
 In
July 2004, the Corporation discovered kimberlite fragments on frost boil
surfaces at the A-2 magnetic anomaly, located 450 meters northeast of the
Freightrain diamondiferous kimberlite. The A-2 anomaly was detected during a
ground magnetometer survey carried out in 2003 by JVX.
  A
sample of frost boil till of approximately 25 kg from this site contained 83
pyropes, 2 clinopyroxene and 5 chromite grains as determined by a SGS Lakefield
microscopic examination.
  On
the basis of proven existence of kimberlites, extensive soil sampling on a 2 km
by 0.5 km grid and promising chemistry of indicator mineral anomalies, the
Jackson Inlet East claim block (Block 1) and West claim block (Block 2) were
chosen for a high resolution aeromagnetic survey. A flight line spacing of 50 m
in Block 1 and 75 m in Block 2 was chosen, that is, sufficiently close to spot
drill holes without the need to conduct follow-up ground magnetic
surveys.
  Fugro
Airborne Surveys carried out the 8,955.2 line kilometer airborne geophysical
program during July 2004 utilizing a helicopter mounted multi-sensor MIDAS IITM
horizontal gradiometer over both blocks.
  Due
to the thick flat lying platform sediments over the Archean basement, craton
background variations of the magnetic field are mainly due to large-scale
deep-seated features. This setting improves the likelihood of identifying
smaller, and possibly lower amplitude, anomalies. Magnetic surveys on
surrounding properties have shown that the known kimberlites in the area display
a monopolar magnetic high signature. Individual anomalies recognized in
processed airborne data consist of discrete magnetic features representing
either ‘highs’ or ‘lows’ relative to background data. Typically, these features
are less than one kilometer in diameter.
  Careful
inspection of the data resulted in the selection of 54 anomalies on the Jackson
Inlet East claims (Block 1), 20 on the Jackson Inlet West claims (Block 2) and 4
on the Vista project claims just outside of the Block 1 boundary. The magnetic
gradient data assisted in prioritization of subtle anomalies.
  On
the Jackson Inlet West block, one anomaly is expressed on 4 profiles of the
flight lines spaced at 75 m. Two anomalies are expressed on 3 lines, five on 2
lines and 12 on 1 line. The strongest anomalies are 9, 6, 5 and 4 nT .
  On
Jackson Inlet East and in the case of the four anomalies just outside its
boundary (located on the Vista Claim Blocks) one anomaly is expressed on 5
flight lines spaced at 50 m, one on 4 lines, ten on 3 lines, eighteen on 2 lines
and twenty eight on 1 line. The strongest anomalies are adjacent 12.5 nT and 11
nT peaks with dimensions of 200 m by 100 m and 250 m by 90 m, respectively.
These and at least 5 other prominent anomalies comprise a cluster of 1.2 km
radius centered 7.5 km east of Cargo2. The 12.5 and 11 nT anomalies display
approximately twice the magnetic intensity of Cargo2. Fourteen of the 24 soil
samples within a 2.5 km radius yielded peridotitic and eclogitic garnets, mantle
ilmenites and/or chromites.
  Of
the 45 East claim block survey anomalies of at least 2 nT, three are in the
10-12-5 nT range, ten are in the 5-9- nT range and 32 are in the 2-4 nT range.
These anomalies lie along two broad bands trending northeast-southwest as do the
corridors of anomalies on the West claim block. In the case of both blocks,
there is a strong coincidence of kimberlite indicator mineral anomalies with
these corridors of magnetic anomalies as well as with many individual magnetic
anomalies.
  16.
 The
MIDAS IITM survey detected JVX’s magnetic anomaly A-VII (2003 exploration) and
the previously identified Cargo2 (JVX’s A-1) which is strongly inferred to
reflect a diamondiferous kimberlite because of the presence of indicator
minerals as well as a diamond recovered in 2002 during core drilling in deep
overburden.
  The
980,000 acre Vista project has been confirmed by indicator mineral analyses to
have diamond potential and is at the airborne survey stage with the exception of
the earlier mentioned MIDAS IITM survey executed on the Jackson Inlet East block
that revealed just outside its boundary four anomalies located on
Vista.
  During
the 2004 field season, a total of 1,200 soil samples were collected by the
Corporation’s field personnel, most at 500 m intervals along north-south lines
spaced 2 km apart. Areas covered included the previously untested northeast
portion of the Vista project, the anomalous blocks identified by the 2003 stream
sediment sampling and several magnetic anomalies selected by a study of the
Geological Survey of Canada regional aeromagnetic data.
  2005
Exploration Program
  By
mid-March 2005, indicator mineral selection had been completed on 784 of the
1,200 soil samples. Although no microprobe analyses had been done, the selected
indicator minerals when plotted on the map suggest at least 15 possible new
anomalies. Based on results of these new anomalies, the Corporation is planning
a carry out an airborne geophysical program on Vista in the second quarter of
2005.
  **Atlanta
Gold Property, Idaho**
  The
Corporation, through its wholly owned subsidiary Atlanta U.S., owns and leases a
total of 33 patented lode claims, 3 patented mill site claims and 113 unpatented
contiguous mining claims known as Atlanta Gold covering 1,891 acres near the
town of Atlanta in Elmore County, Idaho, approximately 60 miles east-northeast
of Boise, Idaho. Of the mining claims comprising Atlanta, three of the patented
claims and 70 of the unpatented claims are beneficially owned by Atlanta U.S.
and 32 of the patented claims and 43 of the unpatented claims are leased by
Atlanta U.S. with terms extending to various dates up to 2015. Since the
acquisition by Atlanta U.S. of an interest in Atlanta in 1985, the Corporation
has endeavoured to establish and expand estimated proven and probable reserves
at Atlanta and to evaluate the feasibility of constructing and operating a mine
at Atlanta.
  On
July 22, 1997, Atlanta U.S. and Canadian American Mining Company, LLC (“CAMC”)
(formerly Quest International Resources Corporation) (“Quest”), entered into a
joint venture agreement (the “Quest Agreement”) whereby Atlanta U.S. was
appointed the operator of, and held an 80 per cent interest in Atlanta, with
Quest holding the remaining 20% participating interest. On December 17, 1997,
Quest advised Atlanta U.S. that it had elected under the Agreement not to
participate in its contractual share of further property costs incurred after
1997. On December 13, 2002, CAMC agreed to transfer its 20 per cent
participating interest in the joint venture to Atlanta U.S. CAMC retains the 2%
net smelter return royalty on Atlanta, as per the Quest Agreement.
  On
February 2, 1999, Atlanta U.S. signed a Lease/Option to Purchase Agreement (“the
Monarch Agreement”) with Monarch Greenback, LLC (“Monarch”) relating to
Monarch’s surface and mineral rights to Atlanta. During the term of the ten-year
lease, Atlanta U.S. has the option to purchase such surface and mineral rights
for US$2 million. If this option is exercised, the existing minimum annual
rental payments on such surface and mineral rights will be terminated and
replaced by a net smelter return royalty of 0.5% of gold sales if the average
realized gold price is US$365 per ounce or less, provided that the cumulative
minimum annual rental payments made by Atlanta U.S. pursuant to the Monarch
Agreement are credited against the obligation of Atlanta U.S. to make net
smelter return royalty payments to Monarch. For each US$1 increase in the
average realized gold price over US$365 per ounce, the net smelter return
royalty will be increased by 0.01% to a maximum rate of 3.5%. In 1999, the terms
of the minimum annual rental payments payable to Monarch were amended. US$25,000
owing in 1999, was paid in January 2000 and the US$75,000 unpaid balance was
added to the option price. In 2001, the Monarch Agreement was further amended
such that, commencing in 2001, Atlanta U.S. will pay Monarch US$50,000 per year
in minimum annual rental payments until 2008. The cumulative balance owing to
2008 of US$800,000 will be added to the option price. By then, the option price
to purchase such surface and mineral rights will be US$2,875,000.
  17.
 A
net smelter return royalty is payable on production from Atlanta, subject to
annual payments to the lessors as set forth below. These payments are required
to keep the agreements in good standing. The advance royalty payments will be
terminated if the option to purchase is exercised. During the year, the
Corporation paid US$17,500 (2003 and 2002 - US$17,500) in advance royalty
payments to the lessors.
  The
following table sets forth the existing minimum annual lease payments required
to be made by Atlanta U.S. under the amended leases entered into by Atlanta U.S.
in respect of Atlanta:
  Year
      ending
      December 31
    Minimum
      annual
      Rental
      payments
    Advance
      Royalty PaymentUS$
    US$2005
    50,000
    17,5002006
    50,000
    159,5002007
      to 2008
    50,000
    20,0002009
      to 2011
    -
    20,0002012
      to 2015
    -
    10,000
 
  In
1997, a prefeasibility study completed on behalf of Quest identified a total
resource for Atlanta estimated to be 1,083,000 ounces of gold at 0.02 ounces per
ton cutoff and 3,217,000 ounces of silver. The scoping studies conducted on
behalf of Atlanta U.S. in 1998 and January 1999 confirmed the estimated gold and
silver resources for Atlanta identified in the 1997 prefeasibility study and
recommended that Atlanta U.S. proceed with a feasibility study for
Atlanta.
  Atlanta
was reactivated once it became evident that the price of gold had risen above
U.S.$300 on a sustained basis. Following the project outline in the 1998 scoping
study, a conventional open-pit cyanide heap leach operation is planned. Behre
Dolbear & Company (USA) Inc. (“Behre Dolbear”) was retained to complete a
feasibility study.
  Montgomery
Watson Harza, an environmental consulting firm experienced in mine permitting,
was retained in May 2002 to conduct a review of the existing environmental
baseline data and recommend a program to update our information for a new
Environmental Impact Statement (EIS). A Draft Environmental Impact Statement
(DEIS) had been prepared for Atlanta by the United States Department of
Agriculture (“USDA”) Forest Service, Boise, National Forest in l989. A great
advantage for Atlanta is the extensive amount of baseline data, which currently
exists on the project and can be used to update the existing DEIS. This should
help to reduce the lengthy permitting process significantly.
  To
confirm extensive previous in-house and third party test work (more than 50
column leach tests) and simulate conventional heap leach conditions, a
metallurgical column testing program is planned using fresh mineralization
representative of the Monarch and the Idaho deposits.
  The
metallurgical drilling program was designed by Atlanta U.S. staff and reviewed
by Behre Dolbear and Company of Denver, Colorado (“Behre Dolbear”). Drilling
commenced on October 23, 2002. A total of 1,284 meters (4,211 feet) was drilled
on 13 core holes using HQ size core (63.5mm / 2.5 inch diameter). Nine holes
were drilled into the Monarch ore body and four holes were drilled into the
Idaho ore body. One of the four holes was a geotechnical hole, which was drilled
into the south wall of the Idaho ore body.
  18.
 Split
core samples were collected in 3-meter increments and were assayed for gold
using a 500-gram cyanide bottle roll test as a first step in determining gold
recovery characteristics.
  
  **Monarch
Deposit**
 hole
      #
    dip
    Mineralized
      Interval
    Core
      length
    Assayoz/ton
    g/tonneD02-14W05
    50°
    147’-177’
    30’
    0.103
    3.52227’-267’
    40’
    0.061
    2.09D02-10W06
    54°
    30’-148’
    118’
    0.061
    2.09D02-8W07
    60°
    142’-322’
    180’
    0.076
    2.61or
      142’-362’
    220’
    0.066
    2.25D02-6W08
    56°
    90’-158’
    68’
    0.054
    1.86181’-301'
    120’
    0.059
    2.02or
      181’-341’
    160’
    0.05
    1.7D02-5W09
    65°
    55’-360’
    305’
    0.065
    2.23**incl.
      265’-360’**
    **95’**
    **0.12**
    **4.1**D02-1W10
    68°
    95’-185’
    90
    0.029
    0.99285’-409.5’
    124.5’
    0.039
    1.33425’-465’
    40’
    0.149
    5.08D02-1E11
    64°
    196’-282’
    86’
    0.231
    7.91**incl.
      246’-282’**
    **36’**
    **0.481**
    **16.5****incl.
      256’-266’**
    **10’**
    **1.03**
    **35.3**D02-3W12
    54°
    10’-70’
    60’
    0.168
    5.76D02-3E13
    56°
    100’-290’
    190’
    0.058
    1.97
 **Idaho
Deposit**
  hole
      #
    Dip
    Mineralized
      Interval
    Core
      length
    Assayoz/ton
    g/tonneD02-36W01
    60°
    0’-280’
    280’
    0.046
    1.56D02-34W03
    57°
    10’-310’
    300’
    0.046
    1.56D02-31W04
    60°
    10’-305’
    295’
    0.039
    1.32
 
  **Environmental/Geotechnical
Hole For Wall Rock Sample**
  hole
      #
    Dip
    Mineralized
      Interval
    Core
      length
    assayoz/ton
    g/tonneD02-34W02*
    58°
    20’-150’
    130’
    0.014
    0.46
 
  All
of the holes were drilled as angle holes ranging from -45 to -60 degrees which
cut across the width of the shear zone (which is 18 to 55 meters wide) to obtain
representative samples of gold mineralization. Mineralized drill core was sawed
lengthwise with one half of the core saved for metallurgical testing, one
quarter for assaying, and one quarter was saved for reference.
  Atlanta
ores have undergone extensive metallurgical testing over the years, including
over 50 column leach tests. However, most of these tests were done in-house,
used primarily coarse crush sizes (38.1 to 50.8 mm, 1 1⁄2 to 2 inches) and were
leached for relatively short periods of time (approx. 60 days). A close
examination of the historic metallurgical data and a limited amount of column
test data from l998 indicated that finer crushing and a longer leach time would
significantly improve the gold recovery over what was achieved in previous work,
especially for the moderate and low recovery ores.
  19.
 In
parallel with the metallurgical testing program and commencement of preparation
of the feasibility study, preparation of an Environmental Impact Statement (EIS)
was commenced in compliance with the United States National Environmental Policy
Act (NEPA). Much of the baseline environmental data needed for an EIS and in
fact, had previously prepared a draft EIS in l989.
  Several
other key components of the process were also commenced: the preparation of a
Memorandum of Understanding (“MOU”) between the U.S. Forest Service and Atlanta
U.S., an updated Plan of Operations, and a new Reclamation Plan. The MOU serves
to outline each party’s responsibilities and sets out the procedures and
timetable for the EIS process. The Plan of Operations is a preliminary
description of the mining operation that is proposed by Atlanta U.S. and is used
as the basis for public scoping and the development of the data required for the
EIS. Based on the Plan of Operations, a Reclamation Plan is prepared to outline
the proposed methods and timing to reclaim the mining and processing areas after
the project has ceased production.
  Atlanta
U.S. has maintained close ties with both state and federal regulatory
authorities during the past several years and has been proactive in soliciting
support. Meetings have been held with the Idaho Governor’s office, Idaho
Department of Lands, the U.S. Senators from Idaho, and the Environmental
Protection Agency. The Corporation believes that a partnership approach to the
permitting process, where everyone participates, will allow it to proceed
quickly and efficiently to final approval of the EIS.
  Plan
of Operations - 2003
  In
April 2003, a proposed Plan of Operations was submitted to the USDA Forest
Service (“USFS”), Idaho City Ranger District, which outlined the mining plan for
Atlanta. As the lead Federal agency for the environmental permitting process,
the USFS issued a Notice of Intent on July 10, 2003 requiring the preparation of
an Environmental Impact Statement (EIS) for the project. A Memorandum of
Understanding (MOU) outlining the procedures and responsibilities of the USFS
and Atlanta Gold for the preparation of the EIS was executed on July 10, 2003.
On February 1, 2005, Atlanta Gold issued the final Plan of Operation to the USFS
and the USFS has given approval to proceed with the next phase of the EIS,
namely the permitting process. The EIS is expected to be completed by the end of
2005. Mine construction is expected to commence in the second quarter of 2006
and gold is expected to be poured before the end of 2006.
  *The
EIS Process*
  In
October 2003, Tetra Tech Maxim Technologies (“Maxim”) was chosen as the
third-party environmental contractor to prepare the EIS. Maxim has extensive
experience in the preparation of mine related environmental studies and recently
completed the EIS for the Astaris Dry Valley Mine (Phosphate) located in
southeast Idaho. At the same time, Atlanta U.S. appointed Patrick J. Maley as
Environmental Manager for the project as the Corporation’s representative in
this process of preparing the EIS. Mr. Maley is highly qualified, having held
similar positions with companies like Battle Mountain, Sante Fe Pacific Gold
Corporation and ASARCO.
  Environmental
data collection began in mid-October 2003 with field crews active on the mine
site working through the fall and winter. Surface water, ground water, cultural
resources, soils, fisheries, wildlife, and air quality, are all being studied to
evaluate the potential impacts of the project. New information is being
collected to up-date and supplement the extensive, existing baseline data that
is available from a Draft EIS that was prepared in the late l980s on the
project.
  Once
the Final EIS has been completed, a Record of Decision (ROD) is issued by the
USFS, which is the final step in the federal permitting process. State and local
permits are being developed in parallel with the EIS process. Completion of the
permitting process is anticipated to occur by the end of 2005.
  20.
 Atlanta
U.S. believes that the EIS and permitting process is a partnership between the
company, the federal, state and local agencies, and the public. Effective
participation in the process is encouraged and critical to our success.
  Completion
of the Feasibility Study - 2004
  In
the fourth quarter of 2004, Behre Dolbear delivered a positive full Feasibility
Study on Atlanta. This study concludes that, at prevailing (+ US$425 per ounce)
or lower gold prices, an economically mineable gold deposit has been identified
and confirmed at Atlanta. At a gold price of US$375, Atlanta has an Internal
Rate of Return (“IRR”) of 24.62 percent and a Net Present Value (“NPV”) of $15.9
million at a discount rate of 10 percent. Life-of Mine capital expenditures
total US$37.977 million.
  The
operation, which is anticipated to have a life of six or more years will employ
conventional open pit mining of two orebodies, the Monarch and Idaho, followed
by three-stage crushing, heap leaching and processing through an
adsorption-desorption-refining (“ADR”) carbon plant.
  Total
cash cost per equivalent ounce of gold is US$187.90 per ounce (see Table 1) and
the total production cost, including depreciation, depletion and the mine fleet
leasing cost is US$288.00 per ounce.
  
  Table
      1        **Cost
      per Equivalent Ounce of Gold ($)****Item**
    **Base
      Case**Mining*
    75.80*Processing
    78.90G
      & A
    28.90**Sub
      Total**
    **183.60**By-Product
      Credits, less refining & transport*
    (9.40)**Cash
      Operating Costs**
    **174.20**Royalties
    9.50Production
      Taxes, Water Rights Payments
    4.20**Total
      Cash Costs**
    **187.90**Mine
      Fleet Leasing Cost
    27.80Depreciation
    36.80Depletion
      Amortization
    19.70Other
      Investment
    15.80**Total
      Production Costs**
    **288.00**
 
  *
In this table the cost of the leased mining equipment has been removed from the
mining operating cost and inserted as a separate line item.
  Key
financial results for the Base Case based on gold and silver prices of US$375
and US$6.00 per ounce respectively (see Table 2) reflect a commercially
attractive and financially robust project.
  21.
 
  Table
      2**Key
      Financial Results****Item**
    **Base
      Case @ US$375/oz**Recoverable
      Ounces of Gold
    525,229Internal
      Rate of Return (%)
    24.62Net
      Income after Taxes ($millions)
    18.6Net
      Present Value @ 0% Discount Rate ($millions)
    36.2Net
      Present Value @ 10% Discount Rate ($millions)
    15.9Net
      Present Value @ 15% Discount Rate ($millions)
    9.2Net
      Present Value @ 20% Discount Rate ($millions)
    3.9Payback
      Period (Years)
    2.6
 
  Key
production statistics for the operations, as set forth in the Feasibility Study,
include 525,000 ounces of gold and 1,084,000 ounces of silver (see Table
3).
  
  Table
      3**Key
      Production Statistics****Item**
    **Quantity**Life-of-Mine
      (years)
    5.5Total
      Gold Sold (ounces)
    525,229Total
      Silver Sold (ounces)
    1,083,839Average
      Annual Gold Sold (ounces)
    95,900Average
      Annual Gold Sold - 1stthree years (ounces)
    106,000Total
      Tons of Ore Processed (k tons)
    13,669Average
      Annual Ore Tonnage Processed (k tons)
    2,485Total
      Tons of Waste moved (k tons)
    46,287Life-of-Mine
      Stripping Ratio
    3.39
      to 1
 
  *Mineable
Reserves*
  Behre
Dolbear used the recoverable gold resource model to develop diluted open pit
mineable reserves, which are the basis of the Feasibility Study (see Table 4 and
5).
  22.
 
  Table
      4**Parameters
      used for pit optimization**Item
    ParameterGold
      Price ($/troy ounce)
    350.00Silver
      Price ($/troy ounce)
    6.00Refining
      & Transportation ($/tray ounce)
    3.00Royalty
      (NSR)
    2.5%Mining
      (ore & waste $/ton)
    1.00Feeding
      Crusher with Loader ($/ton)
    0.15Crushing
      ($/ton)
    0.92Stacking
      ($/ton)
    0.15Heap
      Leach Processing
    1.66General
      & Administrative ($/ton)
    1.12Interramp
      Pit Slope (degrees)
    50Gold
      Recovery
    Variable*Silver
      Recovery
    45%Allowance
      for property, sales and use taxes $ per ounce
    3.75*
      Gold recoveries are input into each block of the model, and range from a
      low of 44% for the refractory sulfide material to a high of 80% for the
      clean oxide material. The overall average is approximately
      64%.
 
  The
mineable proven and probable reserves for Atlanta are calculated at a gold price
of US$350 per ounce and a silver price of US$6.00 per ounce. The mineable
reserves total 13.669 million tons of ore grading 0.0601 ounces of gold per ton,
which, with a weighted recovery of 64.0 percent, yields 525,000 ounces of
recoverable (salable) gold.
  
  Table
      5**Proven
      and Probable Reserves - Atlanta Project**Ore
      body
    K
      tons
    Diluted
      Au grade oz/t
    Ag
      grade
      
      oz/t
    Recoverable
      Au grade
      
      oz/t
    Equiv.
      Rec.
      
      Au
      grade
      
      oz/t**Monarch
      Pit**Proven
    7,023
    0.0732
    0.2306
    0.0463
    0.0481Probable
    977
    0.0664
    0.2062
    0.0421
    0.0437
  23.
 **Total**
    8,000
    0.0724
    0.2276
    0.0458
    0.0475**Idaho
      Pit**Proven
    5,002
    0.0421
    0.0766
    0.0280
    0.0286Probable
    667
    0.0467
    0.0654
    0.0279
    0.0284**Total**
    5,669
    0.0426
    0.0753
    0.0280
    0.0286**Total
      Atlanta**Proven
    12,025
    0.0603
    0.1665
    0.0387
    0.0400Probable
    1,644
    0.0584
    0.1491
    0.0363
    0.0375**Total**
    **13,669**
    **0.0601**
    **0.1644**
    **0.0384**
    **0.0397**
 
  *Possible
Future Additions to the Ore Reserves*
  The
Feasibility Study advises that there are significant possible additions to the
mineral reserves/resources, which are likely to extend the mine
life:
  ·
    Outside
      the boundaries of the Monarch and Idaho pits, the orebody is incompletely
      drilled, particularly below both the Monarch and Idaho pit bottoms and in
      the area between the two pits. Additional ore may be found in these
      areas;
 ·
    There
      are two higher-grade partially drilled inferred resources within one mile
      or less of the Monarch Pit. These are the Tahoma Zone and the East
      Extension Zone, which together contain nearly 200,000 in-place ounces, but
      require confirmatory drilling;
 ·
    There
      is a partially drilled, inferred underground resource containing some
      240,000 ounces, which by itself has upside potential from additional
      drilling.
 
  Behre
Dolbear believes that the ultimate mineable ore reserves could grow to 1.5
million ounces contained or approximately 1.0 million ounces of recoverable
gold.
  *Mining*
  The
reserves are contained in two open pits, the Monarch and Idaho. The Monarch,
larger and higher grade but with a higher stripping ratio, will be mined first,
and some of the waste from the Idaho pit will be backfilled into the mined out
Monarch pit (Table 6).
  Atlanta
will do its own mining with a fleet of reconditioned, conventional,
Caterpillar-manufactured mining equipment. The equipment will be leased from and
maintained by an independent contractor who has provided firm bids for equipment
lease rates as well as for maintenance of the fleet. Ore will be hauled to a
stockpile ahead of the primary crusher for eight months of the year (May through
December); waste will be mined all year. The crusher will be fed by a front-end
loader.
  The
major items of mining equipment are rotary blast hole drills, drilling 6-7/8
inch diameter holes into 25-foot high benches, 14 cubic yard front end loaders
and 100-ton haulage trucks. Life-of-mine unit mining costs, reflecting the short
hauls and the high annual volumes of waste, are approximately $0.90 per ton for
both ore and waste, including the contractor’s leasing and maintenance
charges.
  24.
 
  Table
      6**Life-of
      Mine Schedule****Item**
    **2005****Nov-Dec**
    **2006**
    **2007**
    **2008**
    **2009**
    **2010**
    **2011**
    **Totals**Tons
      of Waste Mined (k tons)
    1,972
    12,135
    12,116
    10,439
    7,742
    2,153
    --
    46,287Tons
      of Ore Mined (k tons)
    672
    2,596
    2,464
    2,464
    2,464
    2,464
    545
    13,669Stripping
      Ratio
    2.93
    4.67
    4.92
    4.24
    3.03
    0.72
    --Recovered
      Gold
      
      Grade
      (opt)
    0.0467
    0.0496
    0.0386
    0.0483
    0.0281
    0.0257
    0.0340
    0.0384Recovered
      Gold
      
      Placed
      on Heaps (ozs)
    31,382
    128,632
    95,110
    119,011
    69,238
    63,325
    18,530
    525,229Gold
      Sold (ozs)
    6,280
    102,420
    116,280
    111,700
    84,100
    65,100
    39,349
    525,229True
      Silver
      
      Grade
      Mined (ozs)
    0.2738
    0.2663
    0.2241
    0.1500
    0.0979
    0.0736
    0.1080
    0.167Silver
      Recovery (5)
    50
    50
    50
    50
    50
    50
    50Recovered
      Silver Placed on Heaps (ozs)
    91,997
    345,656
    276,091
    184,800
    120,613
    90,675
    31,050
    1,140,883Recovered
      Silver Placed on Heaps (ozs)
    91,997
    345,656
    276,091
    184,800
    120,613
    90,675
    31,050
    1,140,883Silver
      Sold (ozs)
    17,480
    342,000
    271,700
    185,250
    123,500
    95,950
    47,959
    1,083,839
 
  *Processing*
  The
Atlanta ore will be crushed through a three-stage crushing circuit and
agglomerated with cement and cyanide solution in an agglomeration drum prior to
placement on the leach pads. The crushed ore will be crushed to a nominal 80
percent passing 3/8-inch size. The cement is added for agglomerate stability as
well as pH control. The agglomerated ore will be placed on the heap leach pads
with a conveyor system to maintain good permeability. The initial production
will be placed on the Ridge heap leach pad, which will enable gold production to
commence at an earlier date while the larger Valley heap leach pad is under
construction. Leaching operations will continue year around although mining,
crushing, and ore emplacement on the pad will be conducted for eight months of
the most seasonably amenable portion of the year (May through December). The
extra leach time allowed by this placement and leaching schedule will give an
increased extraction of gold and silver from the slower leaching components of
the ore.
  25.
 The
initial 2.2 million tons of ore will be placed on the Ridge Pad (Starter Pad)
and the remainder of the ore will be placed on the Valley Pad. There are two
additional advantages of this sequencing of leach pads beyond the initial
advantage of earlier gold production. Detoxification and reclamation of the
Ridge Pad can commence during the operation of the Valley Pad, shortening the
overall time requirement for this obligation of the project. Secondly, the
volume placement in the Valley Pad is reduced compared to the use of this pad as
the sole leach pad, which allows some additional capacity should additional
reserves be proven or some cost reductions should the full potential volume of
this pad not be needed.
  The
pregnant solutions from the heap leach pads will be processed through a carbon
adsorption plant to remove the gold and silver, with the barren solution
recycled to the heap after adjusting cyanide strength and pH. Provisions have
been made in the pregnant and barren pond content to the carbon adsorption
plant. The carbon plant will operate year around in conjunction with the
leaching operations.
  *ADR
plant general arrangement*
  Daily,
a portion of the carbon will be removed from the adsorption circuit and the gold
and silver will be stripped from the carbon. The stripped carbon will be acid
washed to remove any scale and adsorbed base metals prior to returning to the
adsorption circuit. Periodically, the stripped carbon will be regenerated to
restore its adsorption capacity prior to returning to the adsorption
circuit.
  The
gold and silver recovered in a concentrated cyanide solution from the stripped
carbon will be recovered in electrolytic cells. The cathodic sludge from the
cells will be smelted to produce a gold and silver doré for shipment to a
refiner.
  *Heap
Leach Facility*
  The
site is located in steep topography and thus to achieve the goal of early
production, Atlanta plans on processing the 13.7 million ton reserve on two heap
leach pads. Crushing and placement of ore on the smaller Ridge Pad is scheduled
to start in late 2005 or early 2006 contingent on operating permits issued by
the US Forest Service in a timely fashion. The larger Valley Pad with a capacity
of 11.5 million tons is expected to be ready for loading and leaching in
September 2006. In general, construction is season and weather dependent. It
takes approximately one month after stacking has commenced to produce the first
gold bar.
  *Land
Status*
  The
entire claim block is irregular in plan but lies within Sections 2, 3, 4, 10,
11, 12, 13, 14 and 15 of Township 5 North, Range 11 East, Boise Meridian, Elmore
County, Idaho. Patented claim blocks owned mostly by the Monarch Greenback LLC
and leased to Atlanta, straddle the approximately 12,000 feet of strike length
of the Atlanta Main Zone. It is mainly within those claim blocks that the
Monarch and Idaho Pit zones lie.
  Approximately
115 acres of patented and unpatented claims within the perimeter of the claim
block and remote from the main mineralized Atlanta zone are held by others. All
facilities have, however, been located on mineral claims owned or leased by the
Corporation.
  The
Corporation’s holdings comprise patented, unpatented, lode, and millsite claims,
which are either leased or owned by the Corporation. The total area of the
property is 1,891 acres, consisting of 152 contiguous and, in some cases,
overlapping claims (Table 7).
  26.
  Table
      7**Claims
      Held****Number
      of Claims**
    **Classification**
    **Total
      Area (acres)**33
    Patented
      claims with surface rights
    3553
    Patented
      millsites
    14115
    Unpatented
      lode claims
    1,5171
    Unpatented
      millsite
    5
 
  *Water
Supply*
  The
Corporation has a 10-year lease for an existing, decreed water right on the
Middle Fork of the Boise River from Greene Tree Incorporated for a monthly
rental of US$287.50. The water right consists of 0.92 cfs (412 gpm) and is a
seasonal, irrigation water right that must have the use and point of diversion
changed through the Idaho Department of Water Resources prior to its use for
mining purposes. Additional water can be acquired through lease or purchase of
existing water rights, or from an annual lease of stored water from the Water
District #63 rental pool. Rental pool water is priced at US$6.50 per acre-foot
for in-basin use.
  *Capital
Costs*
  Behre
Dolbear, Lyntek, and Knight Piesold, under the overall direction of Behre
Dolbear, have determined that the project capital costs will total
US$37.977million, allowing for three months, or US$6 million, of working capital
to be on hand at start-up (see Table 8).
  Table
      8**Total
      Project Capital and Working Capital****Item**
    **(US$000’s)**Pre-Production
      Capital
    **28,562**Continuing
      and Sustaining Capital
    9,415**Total
      Project Capital**
    **37,977**Working
      Capital
    6,000**Pre-Production
      Cash Requirements**
    **34,562**
 
  *Operating
Costs*
  Average
operating costs for the life of the mine total US$6.92 per ton of ore, based on
the stripping ratio of 3.39 to 1. Actual yearly costs are lower in the first
three years because higher tonnages of ore and higher volumes of waste are being
handled (Table 9).
  27.
  Table
      9**Operating
      Costs (per ton)****Item**
    **US$
      per Ton**Mining
      Ore and Waste* (Avg.-Life-of-Mine)
    0.68*Feeding
      Crusher with Front End Loader*
    0.15*Crushing
      Ore
    0.92Stacking
      Ore
    0.15Heap
      Leach Processing
    1.66General
      and Administrative (Avg.)
    1.05Total
      Cost per Ton of Ore at stripping ratio of 3.39/1
    6.92
 *Does
not include mine fleet leasing costs
  *Sensitivities*
  Behre
Dolbear ran several sensitivities on the Base Case (US$375 per ounce gold price)
to determine the effects on the key financial statistics of the following (see
Table 10):
  a)
Gold prices of $325, $350, $375, $400, $425 (considered to be the current price),
$450, and $500 per ounce were run. A silver price of $6.00 per ounce was
used in all cases, except for the current price case* (see table), where $7.25
per ounce was used.
  b)
±10 percent change in operating cost
  c)
±10 percent change in capital cost
  d)
± 5 percent change in gold recovery
  Table
      10**Sensitivities**%
      Change over base or actual gold price per ounce
    IRR
      
      %
    NPV
      @
      
      5
      %
      
      ($Millions)
    Net
      Income after tax
      
      ($Millions)
    Net
      free
      
      Cash
      flow after tax
      
      ($Millions)
    Payback
      
      (years)Gold
      price per oz
    $375
    24.62
    24.6
    18.6
    36.2
    2.6Gold
      price per oz
    $325
    12.07
    9.1
    8.5
    18.3
    3.9Gold
      price per oz
    $350
    18.53
    17.2
    13.3
    27.5
    2.9Gold
      price per oz
    $400
    30.32
    31.7
    24.1
    44.4
    2.3Gold
      price per oz
    $450
    41.61
    45.3
    35.4
    60.4
    2.0Gold
      price per oz
    $500
    53.05
    58.6
    47.0
    75.9
    1.9Current metal prices*
    Gold =
    $425
  28.
 Silver
      =$7.25
    36.73
    39.3
    30.3
    53.3
    2.1Operating
      costs
    ±10
    19.23
    18.2
    13.4
    28.8
    2.8Operating
      costs
    -10
    29.78
    30.7
    24.3
    43.2
    2.3Capital
      costs
    ±10
    20.72
    21.6
    17.1
    33.4
    2.8Capital
      costs
    -10
    29.24
    27.6
    20.2
    39.0
    2.3Gold
      recovery
    ±5
    29.03
    30.1
    22.8
    42.6
    2.3Gold
      recovery
    -5
    20.02
    19.0
    14.6
    29.6
    2.8
 
  Environmental
Impact Statement
  Atlanta
was permitted in 1989 on a milling scenario. Presently, an Environmental Impact
Statement ("EIS") is being prepared for the US Forest Service by Tetra Tech,
Inc. on a heap leach scenario.
  The
Corporation has finalized the memo of understanding (MOU), the notice of intent
(NOI), and the plan of operations (POO). Further, the Corporation has conducted
the required initial agency meetings and prepared and discussed the EIS project
scoping, the EIS proposed action, and the EIS alternatives.
  To
help ensure the EIS process is completed and Atlanta is built in an efficient,
timely and cost effective manner, Bruce Thorndycraft was hired as the General
Manager of Atlanta in November 2004. He’s assisted by Pat Maley, Environmental
Manager since September 2003.
  **Abitibi
Gold Property, Eastern** **Québec**
  In
view of the positive market developments for gold, the Corporation **** decided
early in 2003 to build on its Atlanta Gold base and to expand its gold sector
and develop a project pipeline. Considering the lead times from exploration to
production, the Corporation decided, for its next gold project, to acquire
strategically located gold properties in historically productive gold districts
in North America.
  Location
and Access
  After
examining data on numerous individual opportunities, it became apparent that
history has demonstrated the Abitibi volcanic belt to be characterized by one of
the highest probabilities for discovering new or adding to known gold resources.
The Province of Québec is also the top ranked North American jurisdiction for
mining investment according to the Fraser Institute, both with respect to policy
and mineral potential.
  The
Abitibi gold belt is the source of approximately 5,000 (150 million ounces) of
the 8,000 tonnes of gold which have been extracted from the Superior Province of
the Canadian Shield. Québec’s portion of the belt continues to yield many new
discoveries and annual production exceeds one million ounces, of which a large
portion is from the Doyon-Bousquet-LaRonde Mining Camp.
  Breakwater
Option Granted in 2003
  In
late August 2003, Breakwater Resources Ltd. (“Breakwater”) granted the
Corporation an option to purchase up to an 80% interest in the 6 properties
along Quebec’s Cadillac-Malartic portion of the Abitibi gold belt. Under terms
of the option agreement, the Corporation was required to spend $150,000 before
September 2004 and make a payment of $25,000 on that date to renew the option.
Aggregate expenditures of $3.5 million and payments totaling $125,000 will be
required to maintain the option through September 2008 and to earn an initial
60% interest. The Corporation can then purchase a further 10% interest for
$100,000 and following completion of a feasibility study, the Corporation can
purchase an additional 10% interest by paying $500,000. There is a provision to
buy Breakwater out of the project for $1,500,000 if it decides not to
participate in the development of the properties.
  29.
 Following
a comprehensive review of Breakwater’s information on the optioned properties,
an exploration program was established to focus on the Normar, Malartic “H”,
Malartic “H” Annex and the Mouskor claim portion of the optioned property,
totaling 4,500 acres. Certain other claims optioned from Breakwater on the
Joannes North and Joannes West portions of the property covering 2,540 acres,
were returned to Breakwater during 2004. In addition to the 62 claims optioned
from Breakwater, the Corporation also holds an additional 50 claims, for total
holdings of 112 claims covering 26.1 square kilometers (6,450 acres). The
Corporation anticipates resuming exploration activities with partners on Abitibi
in the second half of 2005.
  Regional
Geology
  Normar
was selected as having a high potential for discovery of a gold resource because
it straddles the prolific Cadillac Break which most recently has yielded Agnico
Eagle’s impressive Lapa gold deposit about 20 km to the east. Past drilling had
confirmed the existence of the Decoeur and Paquin gold deposits for which
Breakwater reports cited a combined “drill-indicated mineral inventory” of
60,000 tonnes at 6.6 g of gold per tonne. This grade is better than the 5.3 g
Au/t reserve grade at Cambior’s Doyon mine some 8 km to the
northeast.
  The
Malartic “H” property is situated on the northern limb of the Malartic Syncline
which hosts within 2.5 km of the property boundary the Black Cliff, Marban,
Malartic Hygrade, Norlartic and Camflo gold mines. Production from these mines
has exceeded 2 million ounces. Up to six gold-bearing zones are associated with
the Norbenite/Norlartic shear where it crosses the south portion of the Malartic
“H” claims. The shear zone continues on to the south where it has yielded
significant gold production. Portions of the Malartic “H” zones, from one of the
deeper holes reported in Breakwater files, assayed 5.33 g Au/t over 1.05 m, 5.54
g Au/t over 1.76 m, 7.93 g Au/t over 2.25 m, 42.7 g Au/t over 0.9 m and 3.86 g
Au/t over 2.89 m.
  On
the Malartic “H” Annex claims gold has been known to be associated with pyrite
where a prominent shear zone cuts basaltic volcanics (“Discovery Zone”). Over 2
million ounces of gold have been produced from the Siscoe and Sullivan mines,
which are located on the same shear zone. This is the only property for which
Breakwater files revealed that additional geophysical coverage might result in
definition of new drill targets. Thus, it was decided to conduct induced
polarization and magnetometer surveys to focus drilling on unexplored parts of
the shear zone with the highest gold potential. Grab samples from a trench on
the “Discovery Zone” were reported in Breakwater files to have returned gold
values of more than 1,800 g Au/tonne. A drill hole (M-3, 1936) under this
mineralization encountered sections which assayed 94 g Au/t over 0.35 m, 31 g
Au/t over 0.34 m and 21 g Au/t over 0.65 m.
  The
Mouskor property is considered to be located on the same favorable horizon,
which to the east contains the Doyon, Bousquet #1, Bousquet #2 and Dumagami
Mines. More than 5 million ounces of gold already have been produced from the
Doyon and Bousquet #1 mines.
  Exploration
Program and Results - 2003
  With
the high prospectivity of the area, the Corporation set its objectives to make a
significant gold discovery. Forage Benoit/Benoit Diamond Drilling Limited
commenced drilling in September 2003. Six (6) drill rigs (BQ, 36.5 mm core
diameter) were deployed on the four properties. 61 holes were drilled totaling
over 22,000 meters.
  On
the Mouskor property, 10 holes, totaling 2,191 meters were drilled; on the
Malartic "H" and Malartic “H” Annex properties, 20 holes, totaling 9,392 meters
were drilled. The described gold zones were tested at depth, as were several
geophysical targets. Overall continuity was confirmed while grade and thickness
did not change.
  30.
 On
the Normar Property, 31 holes, totaling 11,008 meters, were drilled resulting in
two gold discoveries. Although thickness did not change previously interpreted
mineralization continuity at Decoeur and Paquin was consistent with previous
results. To complement the investigation of the known gold occurrences, profiles
were drilled across other areas of favorable geology on the property. One gold
discovery was made with three "profile" holes. Two were drilled into a package
of intrusive highly altered tonalite intersected gold values which showed a more
than eightfold increase in the lower 40 meters from hole # TMN-03-07 to hole #
TMN-03-08 approximately 130 meters vertically below. The third hole, TMN-03-31,
collared 400 meters to the west, encountered 148.7 meters of tonalite and
produced a 1.5 m intersection of 5.67 g/t Au (3.82 g/t Au pulp check assay). The
discovery zone has an indicated width of approximately 100 meters, a strike
length of more than 500 meters and an apparent steep northerly dip. A review of
the geological and assay results by Roscoe Postle Associates Inc. (“RPA”)
concluded that this newly discovered mineralized area has potential for an
economic concentration of gold.
  Another
"profile" hole to the north of the Paquin East zone, TMN03-19, returned an uncut
assay of 44.7 g/t Au from a 0.6 m interval within a 12.5 m intersection
containing numerous blue to smokey quartz injection veinlets and veins,
sericitic alteration and silicification, arsenopyrite (locally > 5 %),
pyrrhotite and pyrite. Most sulphides are fine grained and mainly in altered
dark siltstone at the margin of the quartz veins. This intersection is more
sulphide-rich and stratigraphically separated by at least 150 m from Paquin
East.
  Exploration
Program Review - 2004 and 2005
  A
thorough review was performed of the large amount of data obtained from the
major drilling program in the last four months of 2003. As a result of the
review, the Corporation is focusing future exploration on the Normar property
while Mouskor, Malartic “H” and Malartic “H” Annex are planned to be explored
with joint venture partners.
  Benefits
from the work of others during the Corporation’s 2004 review were derived from a
new gold discovery on the nearby Noranda property about one kilometer NW of the
Mouskor boundary. This discovery is along strike with the favorable trend on
which the Mouskor and Doyon mines are located and which passes through the
Mouskor claims. This area will be monitored closely during 2005.
  A
ten-hole exploration program on Normar has been recommended. The Corporation
expects that the first 5 holes tested in the Tonalite Zone should determine
whether there is enough evidence of increasing gold grades with depth to proceed
to complete the ten-hole program. The second priority is to investigate the deep
high grade zone intersected by drill hole TMN-03-19. The approximate budget for
the recommended work is $450,000.
  **Indonesian
Propert** **y**
  In
1997, the Corporation, and its wholly-owned subsidiary, Twin Gold Layuh Mining
Corporation (“Twin Gold Layuh”) entered into agreements (collectively the "Layuh
Agreements") with two wholly-owned subsidiaries of PT Harita Jayaraya ("PT
Harita"), an Indonesian company, to form a joint venture between Twin Gold Layuh
and such subsidiaries to explore for gold and related minerals and, if
successful, to mine in an area covering 86,880 hectares (the "Layuh Property")
in the Layuh area of South Kalimantan, Indonesia. The joint venture will be
formed provided that an application is granted for a Seventh Generation Draft
C.O.W. (“Contract of Work”).
  The
Corporation’s Layuh property has been on care and maintenance, awaiting a
recently-elected federal government administration to provide political and
economic stability since 1999. **** In
June 2004, the Corporation submitted a request to extend the Approval in
Principle for a Seventh Generation Contract of Work (C.O.W.), first granted in
1998, for another twelve months. By the end of the year, the Corporation
wrote-off Twin Gold Layuh’s carrying value of $1,450,626 because it decided to
focus its time and effort on Atlanta, Jackson Inlet and Abitibi. However, it
will continue pursuing third party participants, including one that’s presently
conducting due diligence on Layuh.
  31.
 **Method
of Operation**
  The
Corporation has been an exploration stage mineral resource company since
inception and has undertaken gold exploration and mine development activities
since 1994. Between July 1999 and December 2001, the Corporation focused on
diamond exploration in Canada. In 2002, the Corporation reactivated development
activities on Atlanta and continued to direct its efforts towards diamond
exploration on Jackson Inlet. In 2004, a positive feasibility study on Atlanta
was completed and the Corporation has commenced discussions in respect of
financing the mine at Atlanta. Concurrently with this, the EIS and permitting
process at Atlanta is progressing. At Jackson Inlet, the Corporation plans in
2005 to conduct an 11,000 line-kilometers airborne survey on the Vista portion
of the property.
  On
February 9, 2005, the Corporation submitted a Supplement to the Plan of
Operation to the U.S. Department of Agriculture - Forest Service (“USFS”), the
lead agency in the permitting process, and on March 2, 2005, the USFS accepted
the Supplement as adequate to proceed with the NEPA analysis through the
completion of an Environmental Impact Statement (“EIS”). The EIS is expected to
be completed by the end of 2005. Mine construction is expected to commence in
the second quarter of 2006 and gold is expected to be poured before the end of
2006.
  During
the past three years, all financings undertaken by the Corporation have been by
way of private equity offerings. In 2002, the Corporation completed two private
offerings. The first offering was completed in December 2002 for gross proceeds
of $3,255,000 by the issuance of 6,510,000 flow through common shares of the
Corporation and warrants to purchase another 3,255,000 common shares of the
Corporation at $1.00 per share. In the second offering, members of management of
the Corporation paid $45,000 to subscribe for a total of 90,000 flow through
common shares of the Corporation. Net proceeds from these private offerings
totaled $2,939,192, net of share issue costs of $360,808, including $226,100
paid as agency fees to the agent of the first offering. The agent was also
granted purchase warrants to acquire 586,000 common shares of the Corporation at
$0.50 per share. All warrants expire within two years from date of grant. In
2003, four private offerings were completed for total proceeds of $2,938,063 by
issuing 5,357,143 flow through shares, 4,379,167 common shares, and 2,116,667
common share purchase warrants, with each warrant exercisable at $0.50 per
warrant. Total share issue costs for the 2003 offerings was only $128,601
because the 2003 offerings were non-brokered efforts initiated by the
Corporation’s management. In fiscal 2004, the Corporation raised aggregate gross
proceeds of $9,261,275 by means of equity financings. The financings consisted
of the private placement of units, with each unit consisting of one common share
and one common share purchase warrant, with each warrant being exercisable for
two years with exercise prices ranging from $0.24 to $0.50 per share. Pursuant
to these financings, the Corporation issued warrants in payment of commissions
and advisory fees, consisting of 1,642,500 warrants exercisable at $0.205 per
share and 1,589,136 warrants exercisable at $0.23 per share. The Corporation has
also agreed to pay early in 2005 fees totaling $248,456. Of the aggregate amount
raised, $4,896,100 was raised during the fourth quarter of 2004.
  Pursuant
to the various financings, three directors of the Corporation subscribed for, in
aggregate, 4,934,221 units for aggregate proceeds to the Corporation of
$1,250,075. The warrants included in the units subscribed for by the directors
are exercisable at prices ranging from $0.24 to $0.50 per share.
  In
the first quarter of 2005, the Corporation raised additional gross proceeds of
$70,000 by issuing 318,181 units (with each unit being similar in nature as the
units issued in the last financing of fiscal 2004). The Corporation continues to
actively pursue various financing alternatives so that it will have sufficient
funds to adequately finance the planned expenditures on Atlanta and on the Vista
portion of Jackson Inlet described above, as well as for general working capital
purposes for the first half of 2005. The Corporation is currently in discussions
to secure project financing for Atlanta. A delay in arranging project financing
on terms satisfactory to the Corporation could result in construction at Atlanta
and ultimately production from Atlanta, being delayed.
  32.
 **Segmented
Information**
  Information
regarding geographical segments in which the Corporation has operated is
disclosed in note 8 to the annual consolidated financial statements in the 2004
annual report of the Corporation, which consolidated financial statements and
notes thereto are incorporated herein by reference.
  **Mining
Agreements**
  Certain
of the interests of the Corporation in the mineral properties of the Corporation
are held through various agreements which are described in note 4 to the
consolidated financial statements of the Corporation as set out in the 2004
annual report of the Corporation, which consolidated financial statements and
notes thereto are incorporated herein by reference.
  **ITEM
      5.**
    **OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS**
  Disclosure
regarding management's discussion and analysis of financial condition and
results of operations is set out in the 2004 annual report of the Corporation,
which disclosure is incorporated herein by reference.
  **Off-Balance
Sheet Arrangements**
  The
Corporation does not have any off-balance sheet arrangements.
  **Tabular
Disclosure of Contractual Obligations**
  During
the fourth quarter of 2004, the Corporation renewed its office and equipment
leases resulting in operating lease commitments for these leases totaling
$357,500 until January 2010 as follows:
  Year
    Payments
      due2005
    $50,3002006
    $73,7502007
    $73,7502008
    $75,7602009
    $77,700
 
  The
Corporation has made commitments in respect of its mineral properties that are
required to keep the various properties in good standing as follows:
  Year
    Jackson
      Inlet
    TORNGAT
    Abitibi
    Atlanta
      - $US2005
    -
    34,335
    25,000
    67,5002006
    100,000
    34,335
    25,000
    209,5002007
    -
    34,335
    25,000
    70,0002008
    -
    34,335
    25,000
    70,0002009
    -
    34,335
    -
    20,000
  33.
 2010
      - 2011
    -
    -
    -
    20,0002012
      - 2015
    -
    -
    -
    10,000
 
  The
Corporation has also made expenditure commitments of $3,500,000 necessary for it
to earn a 60% interest on Abitibi as follows:
  On
      or before
    Exploration
      expenditures incurred $2004
    150,0002005
    350,0002006
    600,0002007
    1,000,0002008
    1,400,000
 
  To
date, the Corporation has incurred $1,690,891 in expenditures at Abitibi in
respect of the Abitibi property. Expenditures exceeding minimum annual
requirements incurred may be carried forward to following years and credited
against future expenditure minimums. The Corporation can acquire an additional
10% interest by making a $100,000 cash payment to Breakwater. Within six months
after the preparation of an independent positive feasibility study, the
Corporation may acquire a further 10% interest in the property by making a
$500,000 cash payment to Breakwater. Upon formation of a joint venture,
expenditures will be shared between the Corporation and Breakwater in accordance
with their respective ownership interest. If Breakwater’s interest in the joint
venture is reduced to, or below, a 10% interest, then Breakwater’s interest in
the joint venture will be deemed to be converted to a 1.5% net smelter return
(NSR) royalty. The Corporation may purchase the 1.5% NSR royalty at any time for
a cash payment of $1,500,000 to Breakwater.
  The
Corporation files assessment reports in respect of its Canadian mineral
properties (i.e. Jackson Inlet, Torngat, and Abitibi) that are required to keep
the properties in good standing and to maintain the Corporation’s rights in such
properties. The Corporation may decide to allow certain non-productive claims or
permits to lapse, and lose some or all of its interest in such properties.
Currently, the Corporation has incurred sufficient exploration expenditures,
paid for all relevant filing fees and has filed all relevant assessment reports
to keep all of its Canadian mineral claims and permits in good standing until
May 1, 2005.
  **ITEM
      6.**
    **DIRECTORS,
      SENIOR MANAGEMENT AND EMPLOYEES**
  **Directors
and officers of the Corporation**
 Name and
      Position
    
    Term of
      OfficeHermann
      Derbuch, P.Eng.Chairman,
      President & Chief Executive Officer
    
    Since
      December 3, 1996Alfred
      Powis, O.C. *Director
    
    Since
      March 8, 1999
 
 34.
 Robert
      Pendreigh *Director
    
    Since
      May 1, 1999James K.
      Gray, O.C. *Director
    
    Since
      March 15, 2000W. Warren
      HolmesDirector
    
    Since
      January 13, 2005Cedric E.
      Ritchie, O.C. *Director
    
    Since
      July 15, 2003Domenico
      Bertucci, CAChief
      Financial Officer
    
    Since
      February 18, 2000F. Paul
      Collins,Secretary
    
    Since
      March 15, 2001
 *
Members of the Audit Committee of the Board of Directors of the
Corporation during 2004. Mr. Holmes replaced Mr. Powis an the Audit Committee on March 17,
2005.
  Hermann
Derbuch, the Chairman, Chief Executive Officer and President of the Corporation,
has over 25 years of international mining, exploration and investment
experience. In addition to his past roles as President and Chief Executive
Officer of Minorca Resources Inc. and President and Chief Operating Officer of
Eden Roc Mineral Corp., Mr. Derbuch is a past Director of Mining with
Noranda Minerals Inc. Mr. Derbuch has a masters degree in mining
engineering and is a Professional Engineer in the Province of
Ontario.
  James
K. Gray, O.C., a director of the Corporation, has been engaged in the oil
and natural gas exploration business in Western Canada for the past 45 years. In
1973, Mr. Gray co-founded Canadian Hunter Exploration Ltd. He’s the former
Chairman of Canadian Hunter Exploration Ltd., one of the larger natural gas
producers in Canada. Mr. Gray is also a director of Canadian National
Railways, EdperBrascan Corporation and Nova Scotia Power. Mr. Gray was
awarded an Honourary Doctor of Laws degree in 1991 by the University of Calgary,
a Citation for Citizenship by the Government of Canada in 1992, the Fellowship
of Honour by YMCA, Canada and was appointed as an Officer of the Order of Canada
in 1995.
  W.
William Holmes, a director of the Corporation, has 40 years of mining industry
experience including with Noranda Inc. (1964 - 1986) where he became Vice
President and General Manager of Pamour Porcupine Mines Limited and Falconbridge
Limited (1986 - 2002) where he became Senior Vice-President - Canadian Mining
Operations. Mr. Holmes is presently CEO of Nuinsco Resources Limited and is
President of the Canadian Institute of Mining, Metallurgy & Petroleum (CIM).
Mr. Holmes is also a director of several companies and research organizations.
Mr. Holmes holds an engineering degree from Queens University and an MBA from
the University of Western Ontario.
  Robert
Pendreigh, a director of the Corporation, has a degree in metallurgical
engineering from the University of Glasgow and has worked as a consulting
engineer at gold, uranium, diamond and base metal deposits in South Africa,
Australia and North America. Prior to becoming a director of the Corporation's
predecessor, Atlanta Gold Corporation, in 1988, Mr. Pendreigh was a
consulting metallurgist for Anglo-American Corporation. Mr. Pendreigh is a
fellow of the Canadian Institute of Mining and Metallurgy.
  Alfred
Powis, a director of the Corporation, is a current director of Inmet Mining
Corporation and Denison Mines Limited, a former director of Sears Canada Inc.
and Sun Life Assurance Company of Canada, a retired director of Canadian
Imperial Bank of Commerce, a retired member of the president's advisory council
of Ford Motor Company of Canada Limited and the board of trustees of Princess
Margaret Hospital and the former chairman of the board of trustees of The
Toronto Hospital. Mr. Powis was appointed as an Officer of the Order of
Canada in 1984. In addition, Mr. Powis has received an award from the
Mineral Economics and Management Society for outstanding contribution to mineral
economics, and was made and honourary associate of The Conference Board of
Canada in 1997.
  35.
 Cedric
Ritchie, a director of the Corporation, brings extensive national and
international experience in the finance business to the Corporation. He is the
former chairman of Scotia Bank and present chairman of the Business Development
Bank of Canada.
  Domenico
Bertucci, the Chief Financial Officer of the Corporation, formerly worked as an
independent financial consultant and, prior thereto, was the Controller and
Secretary Treasurer of Oxbridge Securities Inc. and articled with Laventhol
& Horwath, Chartered Accountants. Mr. Bertucci received his chartered
accountant designation in 1991 and joined the Corporation in July 1997 as
accounting manager.
  F.
Paul Collins, the Secretary of the Corporation, has been a partner with the law
firm of Lang Michener LLP since 1991, practicing in the areas of corporate
finance, mergers and acquisitions and securities law.
  Directors
of the Corporation are elected at each annual meeting of shareholders of the
Corporation and hold office until the close of the first annual meeting of
shareholders of the Corporation, occurring following their election unless their
office is earlier vacated in accordance with the by-laws of the Corporation.
Officers of the Corporation are appointed by the directors of the Corporation
and serve as officers at the pleasure of the directors of the
Corporation.
  **Family
relationships among directors and executive officers**
  There
are no family relationships between any director or executive officer of the
Corporation and any other director or executive officer of the
Corporation.
  **Employees**
  As
of December 31, 2004, the Corporation had five employees. Four employees reside
in Canada and one employee resides in the United States. In 2005, a second
employee was added at the Corporation’s Boise, Idaho office.
  **Compensation**
  Disclosure
regarding the compensation paid by the Corporation and its subsidiaries to the
directors and officers of the Corporation is set out in the management
information circular dated January 31, 2005 of the Corporation, which disclosure
is incorporated herein by reference. In 2004, the aggregate compensation paid by
the Corporation and its subsidiaries to the directors and officers of the
Corporation as a group for services in all capacities was US$179,066 (2003 -
US$262,400).
  **Options
and Warrants**
  Certain
of the directors and officers and employees who are not directors or officers of
the Corporation have been granted options to purchase common shares of the
Corporation at various prices under the share option plan of the Corporation. As
at March 28, 2005, the following options were outstanding under the share option
plan of the Corporation:
 Held
      by
    
    Number
      of Options
    
    Exercise
      Price
    
    Expiration
      DateDirectors and
      Officers
    
    
    1,000,000
    
    $
    0.43
    
    
    December 22,
      2005400,000
    
    $
    0.52
    
    
    June 1,
      2006450,000
    
    $
    0.60
    
    
    January 21,
      2007250,000
    
    $
    0.63
    
    
    February 12,
      2007200,000
    
    $
    0.51
    
    
    May 17,
      200750,000
    
    $
    0.40
    
    
    February 5,
      2008200,000
    
    $
    0.35
    
    
    August 19,
      2008100,000
    
    $
    0.39
    
    
    November 13,
      2008250,000
    
    $
    0.28
    
    
    November 24,
      2009450,000
    
    $
    0.22
    
    
    February
      11, 2010
  36.
 3,350,000Employees
      & others who are not directors or officers
    
    
    300,000
    
    $
    0.52
    
    
    June 1,
      2006150,000
    
    $
    0.60
    
    
    January 21,
      2007100,000
    
    $
    0.45
    
    
    January 17,
      200850,000
    
    $
    0.40
    
    
    January 29,
      2008100,000
    
    $
    0.35
    
    
    August 21,
      2008200,000
    
    $
    0.39
    
    
    November 13,
      2008400,000
    
    $
    0.29
    
    
    November 24,
      2009250,000
    
    $
    0.22
    
    
    February 11,
      20101,550,000Total
      options outstanding
    
    
    4,900,000
 ****
 **Share
Ownership of Directors and Officers**
  As
of March 28,2005, to the knowledge of the Corporation, the total amount of any
class of the Corporation's voting securities owned by the officers and directors
of the Corporation as a group is as follows:
  Title
      of Class
    Identity
      of Person or Group
    Amount
      Owned
    Percent
      of ClassCommon
      shares
    Officers
      and directors
    20,432,013
      (1)
    14.40%
 (1)
Includes 8,284,221 common shares which the officers and directors as a group
have the right to acquire beneficial ownership pursuant to the exercise of stock
options and common share purchase warrants.
  The
following table discloses on an individual basis the number of shares owned and
options granted to directors and senior management of the
Corporation.
  Name
    Number
      of shares owned
    Options
      granted
    Exercise
      price
    Expiry
      datesHermann
      Derbuch
    951,268
    1,850,000
    $0.22
      to $0.63
    22-Dec-04
      to 11-Feb-10James
      K. Gray
    5,803,270
    250,000(2)
    $0.52
      to $0.60
    01-Jun-06
      to 17-May-07W.
      Warren Holmes
    100,000
    150,000
    $0.285
    24-Nov-09Robert
      Pendreigh
    210,000
    250,000
    $0.22
      to $0.52
    01-Jun-06
      to 11-Feb-10Alfred
      Powis
    1,455,754
    250,000(3)
    $0.22
      to $0.52
    01-Jun-06
      to 11-Feb-10Cedric
      E. Ritchie
    3,391,500
    150,000(4)
    $0.35
    19-Aug-08Domenico
      Bertucci
    236,000
    450,000
    $0.285
      to $0.60
    01-Jun-06
      to 24-Nov-09F.
      Paul Collins
    -
    -
    -
    -
 (2)
Excludes warrants held by James K. Gray to purchase, in aggregate, 3,338,864
common shares. Of these warrants, 952,500 are exercisable at $0.50 per share
until February 26,2006; 1,250,000 are exercisable at $0.24 per share until
August 27,2006; and 1,136,364 are exercisable at $0.24 per share until December
23, 2006.
 (3)
Excludes warrants held by Mr. Powis to purchase 142,857 common shares
exercisable at $0.35 per share until July 5, 2005 and at $0.45 per share until
July 5, 2006.
 (4)
Excludes warrants held by Mr. Ritchie to purchase, in aggregate, 1,452,500
common shares. Of these warrants, 952,500 are exercisable at $0.50 per share
until February 26, 2006; 500,000 are exercisable at $0.24 per share until August
27, 2006.
  37.
 To
the knowledge of the Corporation, there are no arrangements, the operation of
which may at a subsequent date result in a change in control of the
Corporation.
  **ITEM
      7.**
    **MAJOR
      SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS**
  To
the knowledge of the Corporation, the Corporation is not directly or indirectly
owned or controlled by a corporation or foreign government and no person is the
owner of more than five per cent of any class of voting securities of the
Corporation, except RAB Special Situations LP, which owns 7,000,000 common
shares (5.3%) and warrants to acquire an additional 7,000,000 common
shares.
  Robert
Pendreigh, a director of the Corporation entered into a consulting agreement
with the Corporation to provide technical engineering expertise in respect of
the Atlanta gold project. Total amount invoiced to the Corporation in the first
two months of 2005 was $29,218. Disclosure regarding the interest of management
in certain transactions is set out in the management information circular dated
January 31, 2005 of the Corporation, which disclosure is incorporated herein by
reference.
  **ITEM
      8.**
    **FINANCIAL
      INFORMATION (also see ITEMS 3 and
19(a))**
  **Legal
Proceedings**
  On
August 30, 1999, the Corporation and Atlanta U.S. were made third party
defendants in an action commenced in the United States District Court for the
District of Idaho by Monarch Greenback, LLC against, among others, Doe Run
Resources Corporation ("Doe Run"). The third party complaint was commenced by
Doe Run against, among others, the Corporation and Atlanta U.S. and involves
claims for environmental cleanup cost recovery and contribution arising out of a
failure in May 1997 of a tailings impoundment on a property known as the Butler
Ranch near Atlanta, Idaho, which property is adjacent to the Atlanta Gold
Property. The Corporation disputes the claims made in the third party complaints
and has instructed legal counsel to move for summary judgment dismissing all
claims against the Corporation and Atlanta U.S. In 2002, the Corporation
obtained an order from the U.S. District Judge in Boise, Idaho, summarily
dismissing the claims against the Corporation and Atlanta Gold. Doe Run has
appealed that order to the United States Court of Appeals for the Ninth Circuit.
The Appeal has not yet been heard.
  **ITEM
      9.**
    **THE
      OFFER AND LISTING**
  The
table below summarizes the high and low trading prices of the common shares of
the Corporation on the Toronto Stock Exchange for (a) each of the previous five
financial years; (b) each of the eight quarterly periods within the past two
financial years of the Corporation; and (c) each of the most recent five
months:
 Period
    
    (In Canadian
      Dollars)High
    
    LowFinancial
      year ended December 31, 2000
    
    $
    1.20
    
    $
    0.37Financial
      year ended December 31, 2001
    
    $
    0.66
    
    $
    0.30Financial
      year ended December 31, 2002
    
    $
    0.82
    
    $
    0.30Quarter
      ended March 31, 2003
    
    $
    0.36
    
    $
    0.27Quarter
      ended June 30, 2003
    
    $
    0.33
    
    $
    0.22Quarter
      ended September 30, 2003
    
    $
    0.47
    
    $
    0.27Quarter
      ended December 31, 2003
    
    $
    0.49
    
    $
    0.33Quarter
      ended March 31, 2004
    
    $
    0.395
    
    $
    0.30Quarter
      ended June 30, 2004
    
    $
    0.375
    
    $
    0.25Quarter
      ended September 30, 2004
    
    $
    0.28
    
    $
    0.15Month
      ended October 31, 2004
    
    $
    0.22
    
    $
    0.165Month
      ended November 30, 2004
    
    $
    0.325
    
    $
    0.16Month
      ended December 31, 2004
    
    $
    0.275
    
    $
    0.20Month
      ended January 31, 2005
    
    $
    0.215
    
    $
    0.19Month
      ended February 28, 2005
    
    $
    0.20
    
    $
    0.155
  38.
 As
at January 31, 2005 there were 16,410,424 **** common
shares (12.4% of the outstanding common shares) of the Corporation held of
record by 147 persons residing in the United States.
  There
is no United States market in which any securities of the Corporation are
traded. The common shares of the Corporation are traded on the Toronto Stock
Exchange under the trading symbol "TWG" and on the Berlin/Frankfurt Over-the-
Counter Exchange under the symbol "#878 341, EDV Kürzel ATG".
  **ITEM
      10.**
    **ADDITIONAL
      INFORMATION**
  **A.**
    **Share
      Capital (See Consolidated Statement of Shareholders’ Equity in ITEM 19(a))**
  **B.**
    **Articles
      of Continuance and By-laws**
  The
Corporation was incorporated under the laws of the Province of British Columbia
on March 6, 1995 as Atlanta Gold Corporation. On April 3, 1997, Atlanta Gold
Corporation acquired Voisey Bay Resources Inc. pursuant to an amalgamation by
way of an arrangement and changed its name to Twin Gold Corporation. By
Certificate and Articles of Continuance dated March 15, 2000, the Corporation
was continued under the laws of the Province of Ontario as Twin Mining
Corporation. The Corporation’s Articles of Continuance do not contain any
limitations on the objects or purposes of the Corporation.
  *Matters
in Which a Director or Officer is Interested*
  The
Corporation’s by-laws and the *Business
Corporations Act* (Ontario) (the “Act”) provide that each director or officer of the Corporation
who is a party to or who is a director or officer of or who otherwise has a
material interest in any entity which is a party to, any existing or proposed
material contract or transaction with the Corporation, must disclose in writing
or request to have entered in the minutes of a directors’ meeting, the nature
and extent of such interest. The declaration of interest must be made at the
meeting of the Corporation’s Board of Directors at which the question of
entering into the proposed contract or transaction is first taken into
consideration, or if the interested director did not then have an interest in
the contract or transaction, at the first meeting of the Board of Directors
occurring after the director acquired an interest. An officer who is not a
director must declare his or her interest forthwith after the officer becomes
aware that the contract or transaction is to be considered or has been
considered by the Board of Directors. The Corporation’s by-laws provide that a
director interested in a contract or transaction shall not vote on any motion to
approve any such contract or transaction, except as otherwise permitted by the
Act. The Act permits a director to vote on resolutions in respect of
arrangements by way of security for money lent to or obligations undertaken for
the benefit of the Corporation, in respect of matters relating primarily to his
or her remuneration as a director, officer, employee or agent of the Corporation
and in respect of matters relating to indemnity and insurance.
  *Borrowing
Powers*
  Pursuant
to the Corporation’s by-laws, the Board of Directors may from time to time,
without the authorization of the shareholders of the Corporation:
  (i)
    borrow
      money upon the credit of the Corporation;
  (ii)
    issue,
      reissue, sell or pledge debt obligations of the Corporation;
  (iii)
    subject
      to the Act, give a guarantee on behalf of the Corporation to secure
      performance of an obligation of any person;
and
  (iv)
    mortgage,
      hypothecate, pledge or otherwise create a security interest in all or any
      present or future property of the Corporation to secure an obligation of
      the Corporation.
  The
Board of Directors may by resolution delegate any or all of the above-noted
powers to a director, a committee of directors or to an officer of the
Corporation.
  39.
 *Directors’
Retirement and Share Ownership*
  The
Corporation’s articles and by-laws do not require directors to retire at a fixed
age and do not require a director to hold qualifying shares of the Corporation.
Unless otherwise stated, the term of office for each director expires at the
close of the next annual meeting of shareholders following such director’s
election or when such director’s successor is elected unless prior to such
annual meeting, such director retires or is removed from office or otherwise
ceases to be qualified to be a director, in each case in accordance with the
Act.
  *Rights
and Preferences of Shares*
  The
authorized share capital of the Corporation consists of an unlimited number of
common shares, an unlimited number of first preference shares (“First Preference
Shares”) issuable in series and an unlimited number of second preference shares
(“Second Preference Shares”) issuable in series. As of February 28, 2005, the
Corporation had 132,363,542 common shares, no First Preference Shares and no
Second Preference Shares issued and outstanding. Each common share of the
Corporation entitles the holder to one vote at all meetings of shareholders of
the Corporation, other than meetings at which only holders of another class or
series of shares are entitled to vote. Subject to the prior rights and
privileges attaching to the First Preference Shares and the Second Preference
Shares and the shares of any other class ranking senior to the common shares,
holders of common shares are entitled to receive dividends in such amounts as
and when declared by the Board of Directors. In the event of the liquidation,
dissolution or winding-up of the Corporation or other distribution of the
property and assets of the Corporation for the purpose of winding-up the affairs
of the Corporation and subject to the prior rights of holders of First
Preference Shares, Second Preference Shares and shares of any class ranking
senior to the common shares, holders of common shares are entitled to receive
the remaining property and assets of the Corporation.
  The
First Preference Shares and the Second Preference Shares are each issuable in
one or more series. The Board of Directors is entitled to fix the number of
shares in, and determine the designation, rights, privileges, restrictions and
conditions attaching to the First Preference Shares and the Second Preference
Shares of each series, including voting and dividend rights. With regard to
payment of dividends and the distribution of property and assets in the event of
the liquidation, dissolution or winding-up of the Corporation, the First
Preference Shares rank in priority to the Second Preference Shares and the First
Preference Shares and Second Preference Shares rank in priority to the common
shares and any other shares of the Corporation ranking junior to the First
Preference Shares or Second Preference Shares. The First Preference Shares and
Second Preference Shares of each series may also be given such other preferences
over any other shares ranking junior to them as may be determined. Each series
of First Preference Shares will rank on a parity with every other series of
First Preference Shares and each series of Second Preference Shares will rank on
a parity with every other series of Second Preference Shares, in each case with
respect to payment of dividends and priority in the return of capital in the
event of the liquidation, dissolution or winding-up of the Corporation.
  The
First Preference Shares and Second Preference Shares are non-voting, except as
otherwise required by the Act and except as may be designated by the Board of
Directors with respect to any series of such shares.
  *Amendment
of Share Capital*
  Pursuant
to the Act, the creation of a new class of shares, the addition, change or
removal of any rights, privileges or restrictions in respect of all or any of
the Corporation’s shares and the change of the Corporation’s shares into a
different number of shares, among other things, require the approval of a
majority of not less than two-thirds of the votes cast by shareholders who vote
in respect of the matter, and in certain circumstances, with each class or
series of shares entitled to vote separately. The Board of Directors is
authorized (without shareholder approval) to designate one or more series of
First Preference Shares and Second Preference Shares and to fix the rights,
privileges, conditions and restrictions attaching to each such
series.
  40.
 *Shareholders’
Meetings*
  The
Act requires that an annual meeting of the Corporation’s shareholders be held
not later than 15 months after the preceding annual meeting, at a time and place
determined by the Board of Directors of the Corporation. The Board of Directors
may at any time call a special meeting of the shareholders. At least 21 days’
notice and not more than 50 days’ notice of every shareholders meeting,
specifying the time, place and purpose for holding such meeting and, when
special business is to be considered, specifying the nature of the special
business to be transacted, must be given to the Corporation’s shareholders
entitled to vote at the meeting, to each director and to the auditor of the
Corporation. Those persons entitled to notice of the shareholders’ meeting,
those entitled to vote at the meeting and such other persons as may be required
by the Act, are entitled to be present at the meeting. Any other person may be
admitted to the shareholders’ meeting only on the invitation of the chairman of
the meeting or with the consent of the meeting.
  *Shareholder
Ownership Disclosure*
  The
Corporation’s articles and by-laws do not contain a provision governing the
ownership threshold at which a shareholder’s ownership must be disclosed. Under
the securities laws of the Province of Ontario, a person or company who acquires
beneficial ownership of, or the power to exercise control or direction over, 10%
or more of the outstanding common shares of the Corporation, is required to
forthwith issue and file a news release and within 2 business days after such
acquisition, file a report, in each case containing prescribed information.
Thereafter, such person or company must issue a further news release and file a
further report for each additional 2% increase in its shareholdings.
  ***Investment
Canada Act***
  Except
as provided in the *Investment
Canada Act* (the "Investment Act"), there are no limitations under the laws of Canada, the
Province of Ontario or in the articles or bylaws of the Corporation, on the
right of non- Canadians to hold or vote the Corporation's common
shares.
  The
Investment Act generally prohibits implementation of a reviewable investment by
an individual, government (or agency thereof), corporation, partnership, trust
or joint venture that is not a "Canadian" as defined in the Investment Act (a
"non-Canadian"), unless after review the minister responsible for the Investment
Act is satisfied that the investment is likely to be of net benefit to Canada.
An investment in the Corporation's common shares by a non-Canadian (other than a
"WTO Investor" or a “NAFTA Investor” as defined in the Investment Act) would be
reviewable under the Investment Act if it was an investment to acquire control
of the Corporation and the value of the assets of the Corporation was $5 million
or more. A non-Canadian (other than a WTO Investor or NAFTA Investor) would be
deemed to acquire control of the Corporation for the purposes of the Investment
Act if he acquired a majority of the common shares outstanding (or less than a
majority but controlled the Corporation in fact through the ownership of
one-third or more of the common shares outstanding) unless it could be
established that, on the acquisition, the Corporation was not controlled in fact
by the acquisition through the ownership of such shares. Certain transactions in
relation to the Corporation's common shares would be exempt from review under
the Investment Act, including, among others, the following:
  (a) acquisition
of shares by a person in the ordinary course of that person's business as a
trader or dealer in securities;
  (b) acquisition
of control of the Corporation in connection with the realization of security
granted for a loan or other financial assistance and not for any purpose related
to the provision of the Investment Act; and
  (c) acquisition
of control of the Corporation by reason of any amalgamation, merger,
consolidation or corporate reorganization following which the ultimate direct or
indirect control of the Corporation, through the ownership of voting interests,
remains unchanged.
  The
Investment Act provides for special review thresholds for WTO Investors and
NAFTA Investors, who are essentially a natural or permanent resident of a World
Trade Organization (“WTO”) or North American Free Trade Agreement (“NAFTA”)
member, or an entity controlled by such persons. The United States is a member
of the WTO and NAFTA. Under the Investment Act, as amended, an investment in the
Corporation's common shares by a WTO Investor or a NAFTA Investor would be
reviewable only if it was an investment to acquire control of the Corporation
and the value of the assets of the Corporation was equal to or greater than a
specified amount (the "Review Threshold"), which increases in stages. The Review
Threshold is currently $250 million , and is adjusted annually (calculated as
prescribed in the Investment Act).
  41.
 The
provisions of the Investment Act may have an anti-takeover effect as they may
operate to prevent non-Canadian persons from directly or indirectly acquiring
control of the Corporation.
  ***Shareholders
Rights Plan***
  In
November 2000, the Board of Directors of the Corporation adopted a Shareholder
Rights Plan (the “Plan”), the terms of which are set forth in the Shareholder
Rights Plan Agreement dated as of November 17, 2000 between the Corporation and
Equity Transfer Services Inc. As amended by agreement dated January 26, 2001,
the Plan was ratified by shareholders at a meeting held on March 15, 2001 and
the Plan will be in effect until the 2011 annual meeting.
  Under
the Plan, a right to purchase one of the Corporation’s common shares (a “Right”)
was issued for each outstanding common share as of November 17, 2000. In
addition, a Right will be issued for each share issued subsequent to November
17, 2000 and prior to the separation date of the Rights. The rights are
initially not separate from the Corporation’s common shares nor are they
represented by separate certificates. However, upon a person acquiring ownership
of 20% or more of the Corporation’s common shares (other than by means of
complying with the Plan’s Permitted Bid provisions or with approval of the Board
of Directors of the Corporation), a holder of a Right (other than the acquiror
of 20% or more of the Corporation’s common shares) becomes entitled to exercise
the Right and to purchase the number of common shares as determined under the
Plan at a 50% discount to the then prevailing market price per
share.
  Under
the Plan, a Permitted Bid is, among other things, a bid made to all shareholders
for all common shares that is open for at least 60 days and which must be
accepted by holders of at least 50% of the Corporation’s outstanding common
shares, excluding shares held by the offeror and certain related parties. If at
the end of 60 days, at least 50% of the outstanding shares, other than those
owned by the offeror and certain related parties, have been tendered, the
offeror may take up and pay for the shares, but must extend the bid for a
further 10 days to allow other shareholders to tender. The Rights may, in
certain circumstances, be redeemed by the Corporation at a price of $0.00001 per
Right.
  **C.**
    **Material
      Contracts**
  On
July 22, 1997, the Corporation and Canadian American Mining Company, LLC
(“CAMC”) (formerly Quest International Resources Corporation) (“Quest”), entered
into a joint venture agreement (the “Quest Agreement”) whereby the Corporation
was initially appointed as the operator of Atlanta with an 80% interest, with
Quest holding the remaining 20% participating interest. Quest subsequently
advised the Corporation that it had elected under the Quest Agreement not to
participate in its contractual share of further property costs incurred after
1997. In December 2002, CAMC transferred its 20% participating interest in the
joint venture to the Corporation. CAMC retains the 2% Net Smelter Return royalty
on Atlanta, as per the Quest Agreement.
  In
August 2003, the Corporation signed a letter agreement with Breakwater Resources
Ltd. (“Breakwater”), whereby Breakwater granted the Company the exclusive right
and option to earn up to a 100% interest in six gold properties, totaling 91
mining claims and covering 28.49 sq. km, located along a 65km stretch of the
Abitibi gold belt in eastern Québec. The Corporation can earn a 60% interest by
paying Breakwater $125,000 in rental and option payments (“Payments”) and by
incurring $3,500,000 in expenditures as follows:
 On
      or before
    Payments
    Expenditures
      to be incurred**Signing**
    **Nil**
    **Nil**
   42.
 01-Sep-04
    
    $
    25,000
    
    $
    150,00001-Sep-05
    
    $
    25,000
    
    $
    350,00001-Sep-06
    
    $
    25,000
    
    $
    600,00001-Sep-07
    
    $
    25,000
    
    $
    1,000,000**01-Sep-08**
    
    **$**
    **25,000**
    
    **$**
    **1,400,000**
 Expenditures
exceeding minimum annual requirements incurred may be carried forward to
following years and credited against future expenditure minimums. The
Corporation can acquire an additional 10% interest by making a $100,000 cash
payment to Breakwater. Within six months after the preparation of an independent
positive feasibility study, the Corporation may acquire a further 10% interest
in the property by making a $500,000 cash payment to Breakwater. Upon formation
of a joint venture, expenditures will be shared between the Corporation and
Breakwater in accordance with their respective ownership interest. If
Breakwater’s interest in the joint venture is reduced to, or below, a 10%
interest, then Breakwater’s interest in the joint venture will be deemed to be
converted to a 1.5% net smelter return (NSR) royalty. The Corporation may
purchase the 1.5% NSR royalty at any time for a cash payment of $1,500,000 to
Breakwater.
  After
incurring expenditures of $1,620,000 in 2003, the Corporation incurred $76,000
in 2004, and paid $25,000 in December 2004. After twenty-nine claims were
returned to Breakwater, the Corporation has incurred sufficient exploration
expenditures, paid all relevant filing fees and has filed all relevant
assessment reports with the Quebec Ministry of Natural Resources (“QMNR”) to
maintain all of its remaining Abitibi mineral claims in good standing until
September 1, 2007.
  **D.**
    **Exchange
      Controls**
  There
are currently **** no
restrictions on the export or import of capital out of or into Canada, nor are
there foreign exchange controls or other laws, decrees or regulations of Canada
or the Province of Ontario restricting remittance of dividends or other payments
to non-resident holders of the Corporation's common shares, other than any
applicable withholding taxes. However, no assurance can be given that
legislation enacted in the future will not have an adverse impact on
non-Canadian shareholders.
  **E.**
    **Taxation**
  The
following paragraphs set forth certain United States and Canadian income tax
considerations in connection with the ownership of common shares of the
Corporation. These tax considerations are stated in general terms. There may be
relevant state, provincial or local income tax considerations which are not
discussed.
  **Certain
United States Federal Income Tax Consequences**
  The
following is a general discussion of certain possible United States Federal
income tax consequences, under current law, generally applicable **** to
a U.S. Holder (as defined below) of common shares of the Corporation. This
discussion does not address all potentially relevant Federal income tax matters
and it does not address consequences peculiar to persons subject to special
provisions of Federal income tax law, such as those described below as excluded
from the definition of a U.S. Holder. In addition, this discussion does not
cover any state, provincial, local or foreign tax consequences. (See certain
Canadian tax consequences below under the heading "Certain Canadian Federal
Income Tax Consequences"). The following discussion is based upon the sections
of the Internal Revenues Code of 1986, as amended (the "Code"), Treasury
Regulations, published Internal Revenue Service (the "IRS") rulings, published
administrative positions of the IRS and court decisions that are currently
applicable, any or all of which could be materially and adversely changed,
possibly on a retroactive basis, at any time. In addition, this discussion does
not consider the potential effects, both adverse and beneficial, of recently
proposed legislation which, if enacted, could be applied, possibly on a
retroactive basis, at any time. The following discussion is for general
information only and it is not intended to be, nor should it be construed to be,
legal or tax advice to any holder or prospective holder of common shares of the
Corporation, and no opinion or representation with respect to the United States
Federal income tax consequences to any such holder or prospective holder is
made. Accordingly, holders and prospective holders of common shares should
consult their own tax advisors about the Federal **,** state,
provincial, local, and foreign tax consequences of purchasing, owning and
disposing of common shares.
  43.
 *U.S.
Holders*
  As
used herein, a "U.S. Holder" includes a holder of common shares who is a citizen
or resident of the United States, a corporation created or organized in or under
the laws of the United States or of any political subdivision thereof and any
other person or entity whose ownership of common shares is effectively connected
with the conduct of a trade or business in the United States. A U.S. Holder does
not include persons subject to special provisions of Federal income tax law,
such as tax-exempt organizations, qualified retirement plans, financial
institutions, insurance companies, real estate investment trusts, regulated
investment companies, broker-dealers, partnerships, estates, trusts, nonresident
alien individuals or foreign corporations whose ownership of common shares is
not effectively connected with the conduct of a trade or business in the United
States and shareholders who are not residents or citizens of the United States
who acquired their stock through the exercise of employee stock options or
otherwise as compensation.
  *Distributions
on Common Shares*
  U.S.
Holders receiving dividend distributions (including constructive dividends) with
respect to common shares are required to include in gross income for United
States Federal income tax purposes the gross amount of such distributions in the
year received to the extent that the Corporation has current or accumulated
earnings and profits, without reduction for any Canadian income tax withheld
from such distributions. Such Canadian tax withheld may be credited, subject to
certain limitations, against the U.S. Holder's Federal income tax liability, or
alternatively, may be deducted in computing the U.S. Holder's United States
Federal taxable income by corporations or individuals who itemize deductions.
(See more detailed discussion in "Foreign Tax Credit" below). To the extent that
distributions exceed current or accumulated earnings and profits of the
Corporation, they will be treated first as a return of capital up to the U.S.
Holder's adjusted basis in the common shares and thereafter as gain from the
sale or exchange of the common shares. Dividend income will be taxed at marginal
tax rates applicable to ordinary income while net long term capital gains of a
shareholder other than a corporation are subject to a maximum tax rate of 15%.
Corporate United States shareholders are taxed on the net capital gains at the
regular tax rates. Gain from the sale or exchange of the common shares will be
capital gain if the Common shares are held as a capital asset, and will be long
term capital gain if the common shares with respect to which the gain is
realized have been held for more than twelve months.
  Dividends
paid on the common shares will not generally be eligible for the dividends
received deduction provided to corporations receiving dividends from certain
United States corporations. A U.S. Holder which is a corporation may, under
certain circumstances, be entitled to a 70% deduction of the United States
source portion of dividends received from the Corporation (unless the
Corporation is a "foreign personal holding company" or a "passive foreign
investment company", as defined below) if such U.S. Holder owns shares
representing at least 10% of the voting power and value of the Corporation and
such U.S. Holder has held the shares of the Corporation for at least 46 days.
The availability of this deduction is subject to several complex limitations
which are beyond the scope of this discussion.
  *Foreign
Tax Credit*
  A
U.S. Holder who pays (or has withheld from distributions) Canadian income tax
with respect to dividends paid with respect to common shares may be entitled, at
the option of the U.S. Holder, to either a deduction or a tax credit for such
foreign tax paid or withheld. Generally, it will be more advantageous to claim a
credit because a credit reduces United States Federal income taxes on a
dollar-for-dollar basis, while a deduction merely reduces the taxpayer's income
subject to tax. The foreign tax credit is elective, and if the U.S. Holder
elects to take the credit, no deduction for foreign taxes paid is available.
Generally, the U.S. Holder accounts for the foreign tax credit in a manner
consistent with the U.S. Holder’s method of accounting. However, the U.S. Holder
may be able to claim a foreign tax credit in the year that the foreign taxes
accrue even if the U.S. Holder uses the cash method of accounting. This election
is made on a year-by-year basis and applies to all foreign taxes paid by (or
withheld from) the U.S. Holder during that year. There are significant and
complex limitations which apply to the credit, among which is the general
limitation that the credit cannot exceed the proportionate share of the U.S.
Holder's United States income tax liability that the U.S. Holder's foreign
source income bears to his or its worldwide taxable income. In the determination
of the application of this limitation, the various items of income and deduction
must be classified into foreign and domestic sources. Complex rules govern this
classification process. There are further limitations on the foreign tax credit
for certain types of income such as "passive income," "high withholding tax
interest," "financial services income," "shipping income," and certain other
classifications of income. The availability of the foreign tax credit and the
application on the limitations on the credit are fact specific and holders and
prospective holders of common shares should consult their own tax advisors
regarding their individual circumstances.
  44.
 *Other
Considerations*
  In
the following circumstances, the above sections of this discussion may not
describe the United States Federal income tax consequences resulting from the
holding and disposition of common shares of the Corporation:
  *i)
Foreign Personal Holding Corporation*
  If
at any time during a taxable year more than 50% of the total combined voting
power or the total value of the Corporation's outstanding shares is owned,
actually or constructively, by five or fewer individuals who are citizens or
residents of the United States and 60% or more of the Corporation's gross income
for such year was derived from certain passive sources (e.g. possibly dividends
received from its non Canadian subsidiaries), the Corporation would be treated
as a "foreign personal holding company". In that event, U.S. Holders that hold
common shares would be required to include in gross income for such year their
allowable portions of such passive income to the extent the Corporation does not
actually distribute such income. A person acquiring stock of a Foreign Personal
Holding Corporation from a decedent will not be entitled to a step-up in the
basis of the Foreign Personal Holding Corporation at the decedent's death
  *ii)
Foreign Investment Corporation*
  If
50% or more of the combined voting power or total value of the Corporation's
outstanding shares are held, actually or constructively, by citizens or
residents of the United States, United States domestic partnerships or
corporations, or estates or trusts other than foreign estates or trusts (as
defined by Code Section 7701 (a)(31)), and the Corporation is found to be
engaged primarily in the business of investing, reinvesting or trading in
securities, commodities or any interest therein, **** it
is possible that the Corporation may be treated as a "foreign investment
company" as defined in Section 1246 of the Code, causing all or part of any gain
realized by a U.S. Holder selling or exchanging common shares to be treated as
ordinary income rather than capital gains. A U.S. Shareholder acquiring stock of
a Foreign Investment Corporation from a decedent may not be entitled to a
step-up in the basis of the Foreign Investment Corporation at the decedent's
death.
  *iii)
Passive Foreign Investment Corporation*
  Under
the Code, certain tax consequences may result from classification of a
corporation as a passive foreign investment company (a "PFIC"). A corporation
not formed in the United States is a PFIC if 75% or more of its gross income for
the taxable **** year
is from passive sources such as interest, dividends and certain rents and
royalties or if the average percentage of assets by value (in the case of a
publicly-traded corporation) held by such corporation during the taxable year
which produce passive income is at least 50%. Where the Corporation is both a
controlled foreign corporation and a PFIC, the PFIC rules will not apply.
Furthermore, a PFIC will not include any Foreign Investment Corporation which
has made an election to distribute its income currently under Code section 1247.
Classification of the Corporation as a PFIC may affect shareholders who are
United States citizens, resident aliens or United States corporations, estates
or trusts other than foreign estates or trusts (a "U.S. shareholder"). A U.S.
shareholder who holds stock indirectly (i.e., is a partner in a partnership or a
beneficiary in an estate or trust) is also subject to these rules. The
Corporation believes that there is a significant possibility that it would be
deemed to fit within the PFIC definition.
  45.
 U.S.
shareholders of a company that is a PFIC who held stock after December 31, 1986
are subject to certain adverse tax consequences. For example, a gain recognized
on disposition of PFIC stock or on receipt of an excess distribution from a PFIC
is considered earned pro rata over the U.S. shareholder's holding period and is
treated as ordinary income and is generally taxed at the highest marginal rates
in effect during that period (an excess distribution is the amount of any
distribution received by the U.S. shareholder during the taxable year over 125%
of the average amount received in respect of the PFIC stock by the U.S.
shareholder during the three preceding taxable years, subject to certain
adjustments). U.S. shareholders must also pay an interest charge based on the
value of tax deferral when the U.S. shareholder disposes of its stock or
receives an excess distribution. Additionally, a U.S. shareholder who uses PFIC
stock as security for a loan is treated as having disposed of the stock. A
transfer of the PFIC stock where there is not full recognition of gain, will be
treated as a taxable disposition in some circumstances, and a U.S. shareholder
acquiring PFIC stock from a decedent who was a U.S. shareholder during his or
her holding period of the PFIC stock, will not be entitled to a step-up in the
basis of the PFIC stock at death.
  *Shareholder
Election and Corporation Record-keeping Requirements*
  Adverse
tax consequences, other than the loss of the step-up in basis at death, and the
deemed disposition where PFIC stock is used as security of a loan, can be
avoided, if (i) the U.S. shareholder has elected to treat the PFIC as a
qualified electing fund (a "QEF'") with respect to that U.S. shareholder
effective for each of the PFIC's taxable years beginning on or after January 1,
1987, which include any portion of the U.S. shareholder's holding period, and
(ii) the Corporation complies with reporting requirements to be prescribed by
the Secretary of the Treasury.
  THE
QEF ELECTION FOR A TAXABLE YEAR MUST BE FILED BY THE DUE DATE (PLUS EXTENSION)
FOR FILING THE U.S. SHAREHOLDER'S INCOME TAX RETURN FOR THAT YEAR. A U.S.
shareholder makes a QEF election by filing a Form 8621 with his or her tax
return. Once the election is made with respect to the Corporation, it cannot be
revoked without permission from the Secretary of the Treasury.
  When
a PFIC becomes a QEF with respect to a U.S. shareholder and an election by the
U.S. shareholder to treat the PFIC as a QEF has not been in effect for each of
the PFIC's taxable years beginning on or after January 1, 1987, which include
any portion of the U.S. shareholder's holding period, the U.S. shareholder may
elect to recognize gain as if it had sold the QEF stock on the first day of the
taxable year in which the QEF election is made, if (i) the U.S. shareholder
holds stock in the PFIC **** on
that day, and (ii) the U.S. shareholder can establish the fair market value of
the PFIC stock on that day **.** The
U.S. shareholder will treat that deemed sale transaction as a disposition of
PFIC stock and will thereafter be subject to the rules described below
applicable to U.S. shareholders of a QEF.
  The
Corporation intends to comply with the reporting requirements that are
prescribed in Treasury regulations. In particular, the Corporation will maintain
information so that the ordinary earnings and net capital gain of the
Corporation may be determined. If, after review of the requirements, the
Corporation decides not to comply with the PFIC record-keeping requirements, the
Corporation will so notify its shareholders.
  *Qualified
Electing Funds*
  In
general, U.S. shareholders of a QEF are taxable currently on their pro rata
share of the QEF's ordinary income and net capital gain, unless they elect to
defer payments of tax on amounts included in income for which no distribution
has been received (subject to an interest charge). Because the Corporation
technically fits within the PFIC definition, **** each
U.S. shareholder of the Corporation should consult its tax advisor to determine
whether it wishes to make the QEF election and with respect to how the PFIC
rules affect its tax situation generally.
  46.
 *Controlled
Foreign Corporation*
  If
more than 50% of the voting power of all classes of stock or the total value of
the stock of the Corporation is owned, directly or indirectly, by citizens or
residents of the United States, United States domestic partnerships and
corporations or estates or trusts other than foreign estates or trusts, each of
whom own 10% or more of the total combined voting power of all classes of stock
of the Corporation ("United States shareholders"), the Corporation could be
treated as a "controlled foreign corporation" under Subpart F of the Code. This
classification would effect many complex results including the required
inclusion by such United States shareholders in income of their pro rata shares
of "Subpart F income" (as specially defined by the Code) of the Corporation. In
addition, under Section 1248 of the Code, a gain from the sale or exchange of
stock by a holder of common shares who is or was a United States shareholder at
any time during the five year period ending with the sale or exchange is treated
as ordinary dividend income to the extent of earnings and profits of the
Corporation attributable to the stock sold or exchanged. Because of the
complexity of Subpart F a more detailed review of these rules is outside of the
scope of this discussion.
  THE
FOREGOING SUMMARY IS A GENERAL DISCUSSION OF THE UNITED STATES FEDERAL INCOME
TAX CONSIDERATIONS GENERALLY APPLICABLE TO U.S. HOLDERS OF COMMON SHARES UNDER
CURRENT LAW. IT DOES NOT DISCUSS ALL OF THE TAX CONSEQUENCES THAT MAY BE
RELEVANT TO PARTICULAR HOLDERS IN LIGHT OF THEIR CIRCUMSTANCES OR TO HOLDERS
SUBJECT TO SPECIAL RULES, SUCH AS TAX-EXEMPT ORGANIZATIONS, QUALIFIED RETIREMENT
PLANS, FINANCIAL INSTITUTIONS, INSURANCE COMPANIES, REAL ESTATE INVESTMENT
TRUSTS, REGULATED INVESTMENT COMPANIES, BROKER-DEALERS, NONRESIDENT ALIEN
INDIVIDUALS OR FOREIGN CORPORATIONS WHOSE OWNERSHIP OF COMMON SHARES IS NOT
EFFECTIVELY CONNECTED WITH THE CONDUCT OF A TRADE OR BUSINESS IN THE UNITED
STATES, SHAREHOLDERS WHO ACQUIRED THEIR STOCK THROUGH THE EXERCISE OF EMPLOYEE
STOCK OPTIONS OR OTHERWISE AS COMPENSATION, AND ANY OTHER NON-U.S. HOLDERS. IN
ADDITION, U.S. HOLDERS MAY BE SUBJECT TO STATE, LOCAL OR FOREIGN TAX
CONSEQUENCES. THIS DISCUSSION IS NOT INTENDED TO BE, NOR SHOULD IT BE CONSTRUED
TO BE, LEGAL OR TAX ADVICE TO ANY HOLDER OF COMMON SHARES OF THE REGISTRANT AND
NO OPINION OR REPRESENTATION WITH RESPECT TO THE UNITED STATES FEDERAL INCOME
TAX CONSEQUENCES TO ANY SUCH HOLDER OR PROSPECTIVE HOLDER IS MADE. HOLDERS AND
PROSPECTIVE HOLDERS SHOULD THEREFORE CONSULT THEIR OWN TAX ADVISORS WITH RESPECT
TO THEIR PARTICULAR CIRCUMSTANCES.
  **Certain
Canadian Federal Income Tax Considerations**
  The
following summary of certain Canadian federal income tax considerations is
generally applicable to a holder (a "Holder") of common shares who for the
purposes of the *Income
Tax Act* (Canada)
(the "Act") is not a resident of Canada, holds the common shares as capital
property, deals **** at
arm's length and is not affiliated with the Corporation, does not use or hold
the common shares in carrying on a business in Canada and is not a non-resident
insurer for the purposes of the Act.
  *Dividends*
  A
Holder will be subject to Canadian withholding tax ("Part XIII Tax") equal to
25%, or such lower rate as may be available under an applicable tax treaty, of
the gross amount of any dividend paid or deemed to be paid on his common shares.
Under the Canada-U.S. Income Tax Convention (1980) (the "Treaty") the rate of
Part XIII Tax applicable to a dividend on common shares paid to a Holder who is
a resident of the United States is, if the Holder is a company that beneficially
owns at least 10% of the voting stock of the Corporation, 5% and, in any other
case, 15% of the gross amount of the dividend. The Corporation will be required
to withhold the applicable amount of Part XIII Tax from each dividend so paid
and remit the withheld amount to the Canada Revenue Agency.
  47.
 **Disposition
of Common Shares**
  A
Holder who disposes of a common share, including by deemed disposition on death,
will not be subject to tax under the Act on any capital gain thereby realized
unless the common share constituted "taxable Canadian property" at the time of
disposition as defined in the Act. Generally, a common share of a corporation
listed on a prescribed stock exchange (the Toronto Stock Exchange is a
prescribed stock exchange) will not constitute taxable Canadian property of a
Holder unless, at any time within the 60 months preceding the disposition,
the Holder or persons with whom the Holder did not deal at arm's length or the
Holder together with such persons owned or had an interest in or an option to
acquire 25% or more of the shares of any class of the capital stock of the
Corporation.
  A
Holder who is a resident of the United States and realizes a capital gain on
disposition of a common share that is taxable Canadian property will
nevertheless, by virtue of the Treaty, generally be exempt from Canadian tax
thereon unless (a) more than 50% of the value of the common share is derived
from, or from an interest in, Canadian real property, including Canadian mineral
resource properties, or (b) the Holder (i) was a resident of Canada at any time
within the ten years immediately preceding the disposition and was a resident of
Canada for a total of 120 months during the 20 consecutive years preceding the
disposition, and (ii) owned the common share when he ceased to be resident in
Canada.
  A
Holder who is subject to Canadian tax in respect of a capital gain realized on
disposition of a common share must include one-half of the capital gain realized
(“taxable capital gain”) in computing his taxable income earned in Canada. The
Holder may, subject to the detailed rules in the Act, deduct one-half of any
capital loss arising on disposition of taxable Canadian property from taxable
capital gains realized in the year of disposition upon the disposition of other
taxable Canadian property and, to the extent not so deductible, from such
taxable capital gains of any of the three preceding years or any subsequent
year.
  **F.**
    **Dividends**
  Not
applicable.
  **G.**
    **Documents
      on Display**
  All
material contracts listed herein may be inspected between the hours of 9:00 a.m.
and 5:00 p.m. at the head office of the Corporation located at 1250 - 155
University Avenue, Toronto, Ontario, L4W 3T6. The Financial Statements of the
Corporation are also available on the SEDAR website at www.sedar.com .
  **ITEM
      11.**
    **QUALITATIVE
      AND QUANTITATIVE DISCLOSURES ABOUT MARKET
RISK**
  See
“Risk Factors” section of Item **3.
KEY INFORMATION**
  **ITEM
      12.**
    **DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY
SECURITIES**
  Not
applicable.
  **Part
II**
  **ITEM
      13.**
    **DEFAULTS,
      DIVIDEND ARREARAGES AND
DELINQUENCIES**
  None.
  **ITEM
      14.**
    **MATERIAL
      MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
      PROCEEDS**
  See
Item **10.
B.**  Articles
of Continuance and By-laws
  48.
 **ITEM
      15.**
    **CONTROLS
      AND PROCEDURES**
  The
directors of the Corporation are elected annually and hold office until the next
annual meeting of the shareholders of the Corporation or until their successors
in office are duly elected or appointed. The Corporation does not have an
executive committee. All directors are elected for a one-year term. All officers
serve at the pleasure of the Board.
  The
Corporation's Board of Directors has only one committee, the Audit Committee,
which during 2004 was composed entirely of independent directors, being Cedric
Ritchie, Robert Pendreigh, Alfred Powis and James Gray. On March 17, 2005, Mr.
Holmes replaced Mr. Powis on the Audit Committee. The Audit Committee has the
responsibility of reviewing with the Corporation's external auditor all
financial statements to be submitted to an annual meeting of the shareholders of
the Corporation, prior to their consideration by the Board of Directors. The
members of the Audit Committee do not receive any separate remuneration for
acting as members of the committee. (Please see “Statement of Corporate
Governance Practices” in the Management Information Circular dated January 31,
2005 indexed herein as **ITEM
19(b)** ).
  As
of the end of the period covered by this report, the Corporation’s management
(with the participation of its Chief Executive Officer and Chief Financial
Officer) conducted an evaluation pursuant to Rule 13a-15 promulgated under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), of the
effectiveness of the design and operation of the Corporation’s disclosure
controls and procedures. Based on this evaluation, the Corporation’s Chief
Executive Officer and Chief Financial Officer concluded that as of the end of
the period covered by this report such disclosure controls and procedures were
effective to provide reasonable assurance that information required to be
disclosed by the Corporation in reports it files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the Securities and Exchange Commission.
During the period covered by this report, there were no changes in the internal
controls of the Corporation.
  **ITEM
16.**
  **A.**
    **AUDIT
      COMMITTEE**
  During
2003, the Corporation adopted a formal charter for its Audit Committee, the text
of which is set forth below. One of the Committee’s role is to recommend to the
board of directors the choice of auditor to be nominated for appointment by the
Corporation’s shareholders. The Committee has the authority to approve all audit
engagement terms and fees. The Committee must pre-approve all non-audit and
assurance services to be provided by the auditor. The auditor is required to
report directly to the Audit Committee. On December 14, 2004, there was a
meeting of the Audit Committee with the auditors present to discuss and,
ultimately, approve the audit plan for the 2004 fiscal year-end.
  *Audit
Committee Financial Expert*
  In
2004, the Board of Directors, after having reviewed the composition of its Audit
Committee, has determined that Alfred Powis and Cedric E. Ritchie qualify as the
committee’s financial expert in accordance with the audit committee financial
expert requirements pursuant to the rules of the Securities Exchange Act of
1934, as amended (the “ *Securities
Act* ”),
as set by the Securities and Exchange Commission (“SEC”).
  *Composition
of the Audit Committee and Relevant Education and Experience*
  During
2004, the Audit Committee consisted of Messrs. Gray, Powis, Pendreigh and
Ritchie. In 2005, Mr. Holmes replaced Mr. Powis on the Audit Committee. All four
members appointed to the 2005 Audit Committee are independent (pursuant to Rule
10A-3 of the “ *Securities
Act* ”),
and financially literate as evidenced by their background as follows:
  James
K. Gray, O.C., a member of the Audit Committee, has over 45 years of
experience in the oil and gas industry, including being a co-founder and former
Chairman of Canadian Hunter Exploration Ltd., one of the larger natural gas
producers in Canada. Mr. Gray is also a director of Canadian National
Railways, EdperBrascan Corporation and Nova Scotia Power.
  49.
 W.
William Holmes, a member of the Audit Committee, has 40 years of mining industry
experience including with Noranda Inc. (1964 - 1986) where he became Vice
President and General Manager of Pamour Porcupine Mines Limited and Falconbridge
Limited (1986 - 2002) where he became Senior Vice-President - Canadian Mining
Operations. Mr. Holmes is presently CEO of Nuinsco Resources Limited and Co.,
President of the Canadian Institute of Mining, Metallurgy & Petroleum (CIM).
He is a Professional Engineer, and earned an MBA with Honours from the Ivey
School of Business.
  Robert
Pendreigh, a member of the Audit Committee, has a degree in metallurgical
engineering from the University of Glasgow and has worked as a consulting
engineer at gold, uranium, diamond and base metal deposits in South Africa,
Australia and North America. Prior to becoming a director of the Corporation's
predecessor, Atlanta Gold Corporation, in 1988, Mr. Pendreigh was a
consulting metallurgist for Anglo-American Corporation. From 1998 through 2002,
Mr. Pendreigh has been a senior executive of international engineering and
construction firms.
  Cedric
Ritchie, O.C., a member of the Audit Committee, brings extensive national and
international experience in the finance business to the Corporation. He is the
former chairman of Scotia Bank and present chairman of the Business Development
Bank of Canada.
  *Charter
of the Audit Committee of the Board of Directors*
  **Purpose**
  The
Audit Committee (the “Committee”) is appointed by the Board of Directors (the
“Board”) for the purpose of assisting the Board in fulfilling its oversight
responsibilities and, to this end, will assist the Board with its review
of:
  ·
    the
      integrity, adequacy and timeliness of the Corporation’s auditing,
      accounting, and financial reporting
processes;
  ·
    the
      financial statements and related reports provided by the Corporation to
      its shareholders, securities regulators, other government or regulatory
      bodies, or the public; and
  ·
    the
      Corporation’s system of internal controls regarding finance, accounting,
      legal compliance and ethics, that Management and the Board have
      established from time to time.
  The
Committee will encourage continuous improvement of, and foster adherence to, the
Corporation’s policies, procedures, and practices at all levels. The Committee
shall also perform any other activities consistent with this Charter, the
Corporation’s by-laws and applicable laws as the Committee or the Board deems
necessary or appropriate.
  **Composition**
  The
Committee will consist of not less than three directors as appointed annually by
the Board, each of whom shall be independent and free from any relationship
that, in the opinion of the Board, would interfere with the exercise of his or
her independent judgment as a member of the Committee. In evaluating a member’s
independence, applicable laws and regulations shall be followed. The Chair of
the Committee shall be appointed by the full Board.
  All
members of the Committee will be financially literate. Financial literacy is the
ability to read and understand basic financial statements. At least one member
of the Committee will have accounting or related financial management expertise,
that is, the ability to analyze and interpret a full set of financial
statements, including the notes thereto, in accordance with generally accepted
accounting principles (“GAAP”), applicable laws and regulations. This member
must have past employment experience in finance or accounting, professional
certification in accounting, or any other comparable experience or background
that results in the individual’s financial sophistication, including being or
having been a chief executive officer, chief financial officer, or other senior
officer with financial oversight responsibilities.
  50.
 Each
Committee member serves until the earlier of the date on which he or she is
replaced by the Board, resigns from the Committee, or resigns from the
Board.
  **Responsibilities**
  The
Committee’s role is one of oversight. Management is responsible for preparing
the Corporation’s financial statements and other financial information and for
the fair presentation of the information set forth in the financial statements
in accordance with GAAP. Management is also responsible for establishing
internal controls and procedures and for maintaining the appropriate accounting
and financial reporting principles and policies designed to assure compliance
with accounting standards and all applicable laws and regulations. The external
auditor is responsible for auditing the Corporation’s financial statements and
for providing its opinion, based on its audit conducted in accordance with
generally accepted auditing standards, that the financial statements present
fairly, in all material respects, the financial position, results of operations
and cash flows of the Corporation in accordance with GAAP. In carrying out its
oversight responsibilities, the Committee is not providing any expert or special
assurance as to the Corporation’s financial statements or any professional
certification as to the external auditor’s work.
  The
Committee will be responsible for:
  1.
    Recommending
      to the Board and shareholders the external auditor to be selected. The
      Committee has the authority, pursuant to the authority granted by the
      Corporation’s shareholders, to approve all audit engagement terms and
      fees. The Committee shall pre-approve non-audit and assurance services to
      be provided to the Corporation by the auditor, but the Chairman of the
      Committee may be delegated the responsibility to approve these services
      where the fee is not significant. The external auditor shall report
      directly to the Committee, as the auditor is accountable to the Committee
      and the Board as representatives of the Corporation’s shareholders.
  2.
    Reviewing
      and assessing the adequacy of this Charter and recommend any proposed
      changes to the Board for approval on an ongoing
basis.
  3.
    Reviewing
      the appointments of the Corporation’s Chief Financial Officer and any
      other key financial executives involved in the financial reporting
      process.
  4.
    Reviewing
      with Management and the auditor the adequacy and effectiveness of the
      Company’s accounting and financial controls and the adequacy and
      timeliness of its financial reporting
processes.
  5.
    Reviewing
      with Management and the auditor the annual audited financial statements
      and unaudited quarterly financial statements and related documents, prior
      to filing or distribution, including matters required to be reviewed under
      applicable legal or regulatory requirements.
  6.
    Reviewing
      with Management, where appropriate and prior to release, any news releases
      that contain significant financial information that has not previously
      been released to the public.
  7.
    Reviewing
      the Corporation’s financial reporting and accounting standards and
      principles and significant changes in such standards or principles or in
      their application, including key accounting decisions affecting the
      financial statements, alternatives thereto and the rationale for decisions
      made.
  8.
    Reviewing
      the quality and appropriateness, not just the acceptability, of the
      accounting policies and the clarity of financial information and
      disclosure practices adopted by the Corporation, including consideration
      of the auditor’s judgments about the quality and appropriateness of the
      Company’s accounting policies. This review shall include discussions with
      the auditor without the presence of management.
  51.
 9.
    Reviewing
      with Management and the auditor, the annual audit plan and results of, and
      any problems or difficulties encountered during, any external audits and
      Management’s responses thereto.
  10.
    Monitoring
      the independence of the auditor by reviewing all relationships between the
      auditor and the Company and all non-audit and assurance work performed for
      the Corporation by the auditor on at least an annual basis.
  **Meetings**
  The
Committee will meet not less than four times per year or more frequently if
circumstances dictate. The Committee Chair shall prepare and/or approve an
agenda in advance of each meeting. A quorum shall consist of a majority of the
members of the Committee. The Committee will keep minutes or other records of
its meetings and activities.
  The
Corporation’s external auditor shall attend each of the Committee’s meetings
held to consider the audited annual financial statements of the Corporation. The
Corporation’s external auditor shall also be asked to attend each of the
Committee’s meetings held to consider the unaudited quarterly financial
statements of the Corporation and the auditor will be asked to provide its
comments thereon. The Committee may invite such other persons to its meetings as
it deems appropriate **.** The
external auditor is accountable to the Committee and to the Board as
representatives of the shareholders and shall report directly to the Committee,
which is expected to maintain free and open communication with the external
auditor and the Corporation’s Management. The Committee should meet privately in
executive session at least annually with each of Management and the external
auditor, and as a committee to discuss any matters that the Committee or each of
these groups believe should be discussed. The Committee Chair shall report on
Audit Committee activities to the full Board at each Board meeting. Employees
may submit anonymous complaints or concerns respecting accounting or audit
matters to any member of the Committee.
  **Education**
  The
Corporation is responsible for providing the Committee with educational
resources related to accounting principles and procedures, current accounting
topics pertinent to the Corporation, and other material as requested by the
Committee. Committee members are encouraged to enhance their familiarity with
finance and accounting by participating, at the Corporation’s expense, in
seminars, conferences, roundtables, and other educational programs conducted by
the Corporation or outside organizations. The Corporation will assist the
Committee in maintaining appropriate financial literacy.
  **Authority**
  The
Committee has the authority to conduct any investigation appropriate to
fulfilling its responsibilities, and therefore has direct access to the external
auditor, as well as Corporation personnel. The Committee has the ability to
retain, at the Corporation’s expense, independent legal, accounting, or other
advisors it deems necessary to carry out its duties.
  **B.**
    **CODE
      OF ETHICS**
  In
2003, the Corporation adopted a Code of Conduct, including an Insider Trading
Policy, applicable to all directors, officers, senior management and employees
of the Corporation. The text of the Code of Conduct is available on our website, *www.twinmining.com* ** and
a copy of the Code of Conduct is indexed as Exhibit 5.2.
  52.
 This
code promotes:
  ·
    compliance
      with applicable laws and regulations;
  ·
    the
      prevention of conflicts of interests;
  ·
    the
      fact that proper attention be given to people and the
      environment;
  ·
    the
      protection of the group’s assets;
  ·
    fairness
      in financial reporting; and
  ·
    internal
      controls.
  **C.**
    **PRINCIPAL
      ACCOUNTANT FEES AND SERVICES**
  *Pre-approved
policies and procedures*
  The
charter of the Board and its committees provides that the scope of audit
services are to be pre-approved for each year. Any amendment to the list of
audit services or any fees in excess of those that have been pre-approved (other
than by reason of exchange rate variations) shall be pre-approved by the Audit
Committee and the Board.
  Auditors
shall confirm every year to the Audit Committee that the services pre-approved
are in compliance with applicable rules and regulations relating to auditor’s
independence.
  The
Corporation’s external auditors, PricewaterhouseCoopers LLP, billed the
Corporation CD$35,000 for professional services rendered in connection with the
2004 financial year-end audit, an additional CD$2,000 for professional services
rendered in connection with the 2004 interim financial reporting and CD$27,500
in connection with the 2003 financial year-end audit. There were no other fees
incurred by PricewaterhouseCoopers LLP during this period.
  **D.**
    **EXEMPTIONS
      FROM THE LISTING STANDARDS FOR AUDIT
COMMITTEES**
  Not
applicable
  **E.**
    **PURCHASES
      OF EQUITY SECURITIES BY THE ISSUER AND
  AFFILIATED**
  Neither
the Corporation nor any “affiliated purchaser”, as defined in Rule 10b-18 (a)
under *the
Act* ,
made any purchase of the equity securities of the Corporation during the period
covered by this report.
   **Part
III**
  **ITEM
      17.**
    **FINANCIAL
      STATEMENTS**
  Indexed
herein at **ITEM
19.**
  **ITEM
      18.**
    **FINANCIAL
      STATEMENTS**
  The
Corporation has responded to item 17 in lieu of responding to this
Item.
  53.
 **ITEM
      19.**
    **FINANCIAL
      STATEMENTS AND EXHIBITS**
  **a)**
    **Index
      to Financial Statements**The Management Discussion and Analysis of the Corporation
      is included in the 2004 Annual Report of the Corporation incorporated
      herein by reference.Management's report on the consolidated financial
      statements.Independent auditors’ report to the
      shareholders.Consolidated balance sheets as at December 31, 2004 and
      December 31, 2003.Consolidated statements of loss for the years ended
      December 31, 2004, December 31, 2003 and December 31,
      2002.Consolidated statements of cash flow for the years ended
      December 31, 2004, December 31, 2003 and December 31,
      2002.Consolidated statements of mineral properties for the
      years ended December 31, 2004, December 31, 2003 and December 31,
      2002.Consolidated statement of shareholders' equity for the
      years ended December 31, 2004, December 31, 2003 and December 31,
      2002.Notes to the consolidated financial
      statements.U.S.
      GAAP reconciliation Schedule appended to notes and auditors’
      report**b)**
    **Index
      to Exhibits******
      **Documents****Incorporated**
      **by
      Reference****15(b).1**
    **The
      2004 Annual Report of the Corporation.**Item
      4, Segmented Information, Note. 8 to the consolidated financial statements
      of the 2004 Annual Report of the CorporationItem
      5, Management's Discussion and Analysis of Financial Condition and Results
      of Operations, included in the 2004 Annual Report of the
      CorporationItem
      19(a), Index to Financial Statements, included in the 2004 Annual Report
      of the Corporation**15(b).2**
    **Management information circular dated January 31, 2005
      of the Corporation**Item
      6, Directors, Senior Management and Employees, "Executive Compensation" is
      set in the management information circular.Item
      7, Related Party Transactions, "Interest of Management and Others in
      Material Transactions" set out in the management information
      circular.
 
 54.
 **Exhibit**
      **Number**
    **Description**
    **#
      of Pages**
 
 **1.1***
    Articles
      of continuance effective March 15, 2000 effecting the continuance of the
      Corporation under the*Business
      Corporations Act*(Ontario), the change of name of the Corporation from Twin Gold
      Corporation to Twin Mining Corporation and the alteration of the share
      capital of the Corporation.**4.1
      #**
    Agreement
      to abandon the 20% Participating Interest by Canadian American Mining
      Company, LLC (“CAMC”) (formerly Quest USA Resources Inc. (“Quest”)) under
      Venture Agreement dated July 22, 1997 between Quest and Atlanta
      U.S.**4.2
      ##**
    Option
      to acquire a 60% Participating Interest on 6 non-contiguous claim blocks
      totaling ninety one claims or 2,849 hectares from Breakwater Resources
      Ltd. (“Breakwater”) under an Option to Purchase Agreement dated August 13,
      2003 between Breakwater and the Corporation.**4.3**
    Proposed Letter Agreement with Stornoway Diamond Property
      in respect of entering into a formal Option and Joint Venture Agreement,
      dated July 28, 2004
    14
      pages**5.2
      ##**
    Charter
      of the Audit Committee of the Board of Directors of the Corporation and
      Code of Conduct, including Insider Trading Policy, adopted by the
      Corporation by way of written consent by the Board of Directors of
      Resolutions dated on December 8, 2003.**12.1**
    Chief Executive Officer certification pursuant to Rule
      13(a)-14 of the Securities Exchange Act of 1934.
    1
      page**12.2**
    Chief Financial Officer certification pursuant to Rule
      13(a)-14 of the Securities Exchange Act of 1934.
    1
      page**13**
    Certification pursuant to 18 U.S.C Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
    1
      page
 
 
 *
    Previously
      filed with 1999 Report on FORM 20-F.
 #
    Previously
      filed with 2002 Report on FORM 20-F.
 ##
    Previously
      filed with 2003 Report on FORM 20-F.
  **SIGNATURE**
  The
registrant hereby certifies that it meets all of the requirements for filing on
Form 20-F and has duly caused and authorized the undersigned to sign this annual
report on its behalf.
  **TWIN
MINING CORPORATION**
  
 
 DATE: March
31, 2005       /s/
Hermann Derbuch  _____
  HERMANN DERBUCH
 CHAIRMAN, PRESIDENT &
 CHIEF EXECUTIVE OFFICER
  55.