**Twin
Mining Corporation**
 
 Supplemental
Information
 December
31, 2004, 2003 and 2002
 (expressed
in Canadian dollars)
 
   
   
 March
18, 2005
 
 
 
 
 
 **Auditors’
Report**
 
 **To
the Directors of**
 **Twin
Mining Corporation**
 
 
 We
have audited the consolidated balance sheets of **Twin
Mining Corporation** as at December 31, 2004, 2003 and 2002 and the consolidated statements of loss,
accumulated deficit and cash flows for the years then ended, included in Item
19(a) of the Form 20-F. In addition, we have audited information under the
caption “Supplemental Information” in Item 17 of this Form 20-F. These
consolidated financial statements and the information described above are the
responsibility of the company’s management. Our responsibility is to express an
opinion on these financial statements and the information based on our
audits.
 
 We
conducted our audits, referred to in the above paragraph, in accordance with
both Canadian generally accepted auditing standards and the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform an audit to obtain reasonable assurance whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
 
 In
our opinion, the information presented under the caption “Supplemental
Information” in Item 17 of Form 20-F is presented fairly, in all material
respects, when read in conjunction with the related consolidated financial
statements.
 
 
 **(Signed)
“PricewaterhouseCoopers LLP”**
 
 
 **Chartered
Accountants**
 
 Toronto,
Canada
 
   
   **Differences
between Canadian and United States generally accepted accounting
principles**
  **Years
ended December 31, 2004, 2003 and 2002**
  Twin
Mining Corporation has prepared its consolidated financial statements in
accordance with Canadian generally accepted accounting principles (GAAP). In
preparing the Form 20-F, the company is also required to provide additional
information relating to measurement differences between Canadian and United
States (U.S.) GAAP as it applies to the company’s consolidated financial
statements.
  Canadian
GAAP varies in certain significant respects from the accounting principles and
practices generally accepted in the U.S. The nature and effect of these
principal measurement differences on the company’s consolidated financial
statements are presented below:
  **Consolidated
statements of loss**
  **Years
      ended December 31,****2004**
      **$**
    
    **2003**
      **$**
    
    **2002**
      **$**Loss
      in accordance with Canadian GAAP
    
    
    7,144,087
    
    
    104,656
    
    
    855,658Exploration
      costs expensed for the year (a)
    
    
    4,875,104
    
    
    4,499,338
    
    
    2,593,328Reversal
      of mineral property costs written off
    
    
    (1,450,626
    )
    
    (31,219
    )
    
    -Future
      income taxes (b)
    
    
    (6,427,491
    )
    
    922,135
    
    
    -Loss
      in accordance with U.S. GAAP
    
    
    4,141,074
    
    
    5,494,910
    
    
    3,448,986Loss
      per share under Canadian GAAP
    
    
    0.071
    
    
    0.001
    
    
    0.010Loss
      per share under U.S. GAAP
    
    
    0.040
    
    
    0.070
    
    
    0.040
  
  **Consolidated
balance sheets**
  The
incorporation of the differences in accounting principles into the consolidated
balance sheets as at December 31, 2004 and 2003 results in the following
consolidated balance sheets presented under U.S. GAAP:
  **As
      at December 31,****2004**
      **$**
    
    **2003**
      **$**Current
      assets
    
    
    2,491,107
    
    
    1,256,481Mineral
      properties
    
    
    5,096,275
    
    
    4,395,214Capital
      assets
    
    
    51,496
    
    
    59,7737,638,878
    
    
    5,711,468Current
      liabilities
    
    
    2,462,766
    
    
    3,117,993Shareholders’
      equity
    
    
    5,176,112
    
    
    2,593,4757,638,878
    
    
    5,711,468
 **Consolidated
statements of cash flows**
  **Years
      ended December 31,****2004**
      **$**
    
    **2003**
      **$**
    
    **2002**
      **$**Cash
      flows provided by (used in)Operating
      activities
    
    
    (6,668,335
    )
    
    (3,446,320
    )
    
    (3,494,496
    )Financing
      activities
    
    
    8,531,172
    
    
    2,809,462
    
    
    2,939,192Investing
      activities
    
    
    (685,987
    )
    
    (294,325
    )
    
    (340,498
    )Increase
      (decrease) in cash and cash equivalents
    
    
    1,176,850
    
    
    (931,183
    )
    
    (895,802
    )Cash
      and cash equivalents - Beginning of year
    
    
    719,606
    
    
    1,650,789
    
    
    2,546,591Cash
      and cash equivalents - End of year
    
    
    1,896,456
    
    
    719,606
    
    
    1,650,789
 a)
    Exploration
      costs  U.S.
GAAP requires that exploration and development costs related to mineral
properties where mineralization has not been classified as proven and probable
reserves under SEC rules be charged to expense as incurred. As such, some of the
costs accounted for as mineral properties under Canadian GAAP are charged to the
consolidated statements of loss under U.S. GAAP. Property acquisition costs are
capitalized under both U.S. and Canadian GAAP.
  
 b)
    Income
      taxes  As
a result of the difference in capitalization policies with respect to
exploration expenditures, the carrying value of mineral properties is different
under U.S. GAAP than under Canadian GAAP. An adjustment is required to remove
the $6,427,491 future income tax liability recorded under Canadian GAAP to $nil.
This adjustment arises because the U.S. GAAP carrying value of mineral
properties is less than the tax basis of the properties and the company does not
meet the FAS 109 criteria for recognizing a future income tax
asset.
  Under
U.S. GAAP, the sale of flow-through shares results in a deferred credit being
recognized for the excess of the purchase price paid by investors over the fair
value of the common shares without the flow-through feature. The fair value of
the shares is recorded as equity. When the tax deductibility of the qualifying
expenditure is renounced, a temporary difference arises with the mining property
interests. A future income tax liability is established in the amount of the
benefit foregone and an income tax expense is recorded for the difference
between the future income tax liability and the premium received upon issuance
of the flow-through shares. This future income tax liability reverses as the
interests are depleted or written off. There is no future income tax liability
resultant from this due to the large deficit of carrying value to tax basis of
mineral properties under U.S. GAAP.
  **New
accounting pronouncements**
  **Emerging
Issues Task Force (EITF), Issue No. 04-2, “Whether Mineral Rights are Tangible
or Intangible Assets” (EITF 04-2)**
  EITF
04-2 was issued in 2004 and concludes that mineral rights, which are defined as
the legal right to explore, extract and retain at least a portion of the
benefits from mineral deposits, are tangible assets. EITF 04-2 was effective in
third quarter 2004, and had no impact on the classification of such assets in
the financial statements.
  **EITF
Issue No. 04-3, Mining Assets, “Impairment and Business Combinations” (EITF
04-3)**
  EITF
04-3 was issued in 2004 and establishes guidance for the inclusion of the
expected value of mineralization not considered proven and probable reserves
when allocating the purchase price in a business combination and also when
testing a mining asset for impairment. The principles of EITF 04-3 are required
to be adopted prospectively and had no impact on the financial statements as at
December 31, 2004.
  **FAS
123R, “Accounting for Stock-Based Compensation” (FAS 123R)**
  In
December 2004, the FASB issued FAS 123R. FAS 123R is applicable to transactions
in which an entity exchanges its equity instruments for goods and services. It
focuses primarily on transactions in which an entity obtains employee services
in share-based payment transactions. FAS 123R requires that the fair value of
such equity instruments be recorded as an expense as services are performed.
Prior to FAS 123R, only certain pro forma disclosures of accounting for these
transactions at fair value were required. FAS 123R will be effective for the
2005 financial statements and may require recognition of expense for equity
instruments issued since 1995 to give effect to the fair value based method of
accounting for awards granted in those prior periods.
   
  **FAS
151, “Inventory Costs” (FAS 151)**
  FAS
151 was issued in November 2004 as an amendment to APB No. 43. FAS 151 specifies
the general principles applicable to the pricing and allocation of certain costs
to inventory. Under FAS 151, abnormal amounts of idle facility expense, freight,
handling costs and wasted materials are recognized as current period charges
rather than capitalized to inventory. FAS 151 also requires that the allocation
of fixed production overhead to the cost of inventory be based on the normal
capacity of production facilities. FAS 151 will be effective for inventory costs
incurred beginning in the 2006 fiscal year. There is no impact on the December
31, 2004 financial statements.
  **FAS
153, “Exchanges of Non-Monetary Assets” (FAS 153)**
  FAS
153 was issued in December 2004 as an amendment to APB No. 29. FAS 153 provides
guidance on the measurement of exchanges of non-monetary assets, with exceptions
for exchanges that do not have a commercial substance. Under FAS 153, a
non-monetary exchange has commercial substance if, as a result of the exchange,
the future cash flows of an entity are expected to change
significantly.
  Under
FAS 153, a non-monetary exchange is measured based on the fair values of the
assets exchanged. If fair value is not determinable, the exchange lacks
commercial substance or the exchange is to facilitate sales to customers, a
non-monetary exchange is measured based on the recorded amount of the
non-monetary asset relinquished. FAS 153 will be effective for non-monetary
exchanges that occur in fiscal periods beginning after June 15,
2005.
  **FIN
46R, “Variable Interest Entities” (VIEs)**
  A
VIE is defined as an entity that either lacks enough equity investment at risk
to permit the entity to finance its activities without additional subordinated
financial support from other parties; has equity owners who are unable to make
decisions about the entity; or has equity owners that do not have the obligation
to absorb the entity’s expected losses or the right to receive the entity’s
expected residual returns. VIEs can arise from a variety of entities or legal
structures.
  FIN
46R requires a variable interest holder to consolidate the VIE if that party
will absorb a majority of the expected losses of the VIE, receive a majority of
the residual returns of the VIE, or both. As at December 31, 2004, the company
does not hold interests in other entities that identify it as a primary
beneficiary of a VIE.