MANAGEMENT’S DISCUSSION AND
ANALYSIS

FOR THE YEAR ENDED DECEMBER 31, 2012



The following management’s discussion
and analysis (“MD&A”), which is dated as of March 28, 2013, provides a review of the activities, results
of operations and financial condition of Loncor Resources Inc. (the “Company”) as at and for the financial
year of the Company ended December 31, 2012 (“fiscal 2012”) in comparison with those as at and for the financial
year of the Company ended December 31, 2011 (“fiscal 2011”), as well as future prospects of the Company. This
MD&A should be read in conjunction with the audited consolidated financial statements of the Company for fiscal 2012 and fiscal
2011 (the “Annual Financial Statements”). As the Company’s financial statements are prepared in United
States dollars, all dollar amounts in this MD&A are expressed in United States dollars unless otherwise specified. Additional
information relating to the Company, including the Company’s annual report on Form 20-F dated March 28, 2013, is available
on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.



Forward-Looking Statements



The following MD&A contains forward-looking
statements. All statements, other than statements of historical fact, that address activities, events or developments that the
Company believes, expects or anticipates will or may occur in the future (including, without limitation, statements regarding
mineral resource estimates, exploration results, potential mineral resources, potential mineralization and future plans and objectives
of the Company are forward-looking statements. These forward-looking statements reflect the current expectations or beliefs of
the Company based on information currently available to the Company. Forward-looking statements are subject to a number of risks
and uncertainties that may cause the actual results of the Company to differ materially from those discussed in the forward-looking
statements, and even if such actual results are realized or substantially realized, there can be no assurance that they will have
the expected consequences to, or effects on the Company. Factors that could cause actual results or events to differ materially
from current expectations include, among other things, risks related to the exploration stage of the Company's mineral properties,
uncertainties relating to the availability and costs of financing needed in the future, the possibility that future exploration
results will not be consistent with the Company’s expectations, changes in equity markets, changes in commodity prices,
failure to establish estimated mineral resources  (the Company’s mineral resource figures are estimates and no assurances
can be given that the indicated levels of gold will be produced), fluctuations in currency exchange rates, inflation, political
developments in the Democratic Republic of the Congo (the “DRC”), changes to regulations affecting the Company's
activities, delays in obtaining or failure to obtain required project approvals, the uncertainties involved in interpreting geological
data and the other risks involved in the mineral exploration business. Any forward-looking statement speaks only as of the date
on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation
to update any forward-looking statement, whether as a result of new information, future events or results or otherwise. Although
the Company believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements
are not guarantees of future performance and accordingly undue reliance should not be put on such statements due to the inherent
uncertainty therein.



1







General



The Company is engaged in mineral exploration
with a primary focus on gold. The Company’s main areas of exploration are in the Orientale and North Kivu provinces of the
DRC where the Company holds or controls rights under 66 exploration permits (16,431 square kilometres), directly through a wholly-owned
DRC subsidiary, Loncor Resources Congo SPRL, or under option agreements with the holders of the permits.



During fiscal 2012 and up to the date
of this MD&A, the Company continued to carry out exploration activities at its Ngayu and North Kivu projects in the DRC with
the main focus being Ngayu. Exploration consisted of gridding, mapping and soil, stream (including Bulk Leach Extractable Gold
(“BLEG”) surveys) and rock geochemical sampling as well as core drilling within the Ngayu exploration permit
areas during 2012.



In a press release dated May 29, 2012,
the Company announced its maiden mineral resource estimate at the Company’s Makapela prospect at Ngayu of 4.10 million tonnes
grading 7.59 g/t Au (using a 2.75 g/t Au cut-off) for an inferred mineral resource of 1.0 million ounces. A total of 58 core holes
totalling 15,523 metres were used to estimate this mineral resource at Makapela.



In October 2012, the Company closed the
issuance and sale of 9,245,000 common shares of the Company
(the "Common Shares") at a price of Cdn$1.05 per Common Share for aggregate gross proceeds of Cdn$9,707,250 (the
"Offering"). The Offering was conducted by a syndicate of investment dealers (the "Underwriters").
The 9,245,000 Common Shares issued under the Offering include 645,000 Common Shares issued and sold pursuant to the full exercise
of the over-allotment option by the Underwriters. The Offering was made by way of a short form prospectus dated October 1, 2012
filed with securities regulatory authorities in all of the provinces of Canada (other than Québec). The Common Shares were
also offered on a private placement basis in certain jurisdictions outside of Canada. Newmont Mining Corporation ("Newmont")
also completed, through an affiliate of Newmont, a non-brokered private placement of 4,850,000 common shares of the Company at
the Offering price for aggregate gross proceeds of Cdn$5,092,500, concurrent with the Offering. Pursuant to the two financings,
the Company raised total gross proceeds of Cdn$14,799,750.



2







Mineral Properties in the Democratic
Republic of the Congo



The
Company’s exploration activities in the DRC are currently focused on the following projects:



Ngayu Project



The
Ngayu project covers an area of 2,087 square kilometers and is found within the Orientale Province in the northeast of the DRC,
approximately 270 kilometers northeast of Kisangani. The Ngayu project is situated within the Ngayu Archaean greenstone belt which
is one of a number of greenstone belts in the north-east Congo Archaean craton that includes the Kilo and Moto (which hosts the
Kibali mine development) greenstone belts. These Archaean greenstone belts are the northwestern extensions of the Lake Victoria
greenstone belt terrain that hosts a number of world class gold deposits including Geita and Bulyanhulu.



The
Company has an option agreement with Rio Tinto Exploration RDC Orientale SPRL on the gold rights at Ngayu. Under the option agreement,
the Company has a maximum period of 10 years (until February 2022) to make a discovery and complete feasibility studies and to
convert the exploration permits into exploitation permits.



The
Ngayu project includes a number of exploration prospects already identified such as Makapela, Yindi, Itali, Mondarabe, Nagasa,
Matete and Anguluku.



Makapela prospect



Exploration at Makapela is focusing on
a quartz vein system within a sequence of basalts, thin units of banded iron formation, and dolerite sills. The veins outcrop
in three large artisanal pits (Main, North and Sele Sele) which are each between 170 metres and 290 metres in length, located
along a strike of 2.2 kilometres.



In January 2012, the Company completed
initial bottle roll metallurgical testwork at the Makapela prospect. Bottle roll is a preliminary metallurgical test to determine
how much and how easily gold may be liberated from an ore using cyanide.



Drilling continued during the first half
of 2012, with a total of 11,685 metres completed in 31 drill holes, bringing the total for the prospect to 25,573 metres in 84
drill holes. In May 2012, the Company announced a maiden inferred mineral resource of 1.0 million ounces (4.10 million tonnes
grading 7.59 g/t Au) at a 2.75 g/t Au cut-off, based on the results of 58 core holes totalling 15,523 metres.



A preliminary economic assessment (“PEA”)
is currently underway, with the objective of determining whether the Makapela prospect has the potential to be mined as an economic
open pit/underground operation. A number of composite, representative bulk samples have been submitted for metallurgical testwork.
A mining study will also form part of the PEA and is being undertaken by SRK Consulting. The processing plant and infrastructure
and financial sections of the PEA are being undertaken by SENET. It is estimated that the Makapela PEA will be completed in May
2013.



3







Itali prospect



The Itali prospect is located in the Matete
area, about 40 kilometres to the north-west of Yindi and 10 kilometres south of Makapela. This prospect is situated on the southern
limb of the west-south-west trending fold in the Imva-Babeyru area, defined by magnetic highs interpreted to be caused by banded
ironstone formation (“BIF”) units. Mineralization was first intersected by trench and core holes, which returned
42.50 metres grading 2.11 g/t Au and 38.82 metres grading 2.66 g/t Au respectively. Artisanal workings and soil sampling results
indicate that there is potential for the mineralized zone to extend over a strike of approximately 1 kilometre.



Drilling recommenced in April 2012, and
four additional holes have been completed on three sections over a strike of 480 metres. The objective of the core drilling program
was to drill the mineralized zone on lines 160 metres apart, at vertical depths of 80 metres and 160 metres. In a press release
dated October 25, 2012, the Company announced the assay results of the four additional holes and included 14.7 metres grading
1.7 g/t Au and 3.9 metres grading 19.5 g/t Au. A significant feature of the Itali prospect is the deep level of oxidation. Ground
geophysics and further drilling will be considered to determine the strike potential, and to identify the higher-grade parts of
the mineralized package.



Mondarabe



Soil sampling and rock chip sampling at
Mondarabe have to date defined two anomalous areas,

one the north of the grid in the vicinity
of the Mondarabe artisanal workings, where +100 ppb values (maximum of 2350 ppb) occur over a strike of 960 metres and one in
the southern part of the grid, on a hill associated with folded BIF. A total of seven diamond drill holes (1,44 metres) were completed
during the fourth quarter 2012 and results are awaited.



Nagasa



The Nagasa prospect is located on the
southern limb of the Imva Fold, and is underlain by schists containing several BIF horizons which strike east-west and dip steeply
to the north. Strike-parallel faults, probably thrusts, are interpreted from the aeromagnetic data. A prominent BLEG anomaly is
found at Nagasa.



The area is characterized by a relatively
complex regolith cover, comprising a colluvial layer up to 3 metres thick containing abundant quartz clasts, overlain by a fine
grained silty clay layer, interpreted to be palaeo-alluvium. The matrix of the colluvium is auriferous and is extensively pitted
by artisanal miners, soil anomalies occurring where the colluvial material has been brought to surface. A +100 ppb soil anomaly
with a strike of 3.5 kilometres is present in the eastern half of the grid, with values of up to 4,070 ppb Au. A second soil anomaly
with a strike of about 1 kilometre occurs in the west.



Due to the overburden (regolith) covering
much of Nagasa, it was decided to discontinue drilling until a geophysical Induced Polarization (“IP”) ground
survey had been completed with the objective of detecting mineralized units below the regolith cover. It is estimated that drilling
will commence at Nagasa in May 2013.



Matete



Soil sampling was initially focused in
the western part of the Matete BLEG target. Anomalies were located in the vicinity of the Masasi and Dieu Donne artisanal workings,
in an area underlain by an intrusive varying in composition from quartz diorite to granite. Northeast-trending shear zones within
the intrusive locally contain auriferous quartz veins, although the results of channel sampling in workings and trenches indicate
that the mineralized zones are narrow (<5 metres) and lack continuity. The main soil anomaly at Masasi occurs in colluvium
and palaeo-alluvial material, initially considered to be locally derived. However, it is possible that this transported material
is instead derived from the BIF-hosted terrain to the south, and augering was undertaken in this area, in an attempt to sample
below the transported overburden.



4







The Matete grid was extended to cover
the eastern part of the target in September 2012. This area (known as Visa) includes abundant alluvial gold workings, and was
locally worked by the Belgians in shallow open pits which appear to have exploited colluvium and palaeo-alluvium. A soil anomaly
is present on elevated ground in the southeast of the grid, interpreted from the magnetics to be underlain by folded BIF. These
BIF units, and an associated strike-parallel fault, can be traced southwestwards to the Nagasa prospect, through an area where
rock chip samples have returned values of up to 11 g/t Au. Infill soil sampling and detailed mapping is in progress. As at Nagasa,
geophysical IP ground surveys will be undertaken during the first half of 2013 to outline potential blind, mineralized units below
cover.



Anguluku



Anguluku is located 10 kilometres to the
northwest of Yindi, in an area where BIF units appear to have been thickened by folding and possible thrusting. The prospect is
characterized by the presence of a strong BLEG anomaly and very high historical stream sediment values. Anomalous soil values
are present in the vicinity of an east-west trending zone of artisanal workings in the north of the prospect. However, it is apparent
that much of the grid is covered by colluvium and palaeo-alluvium, which has probably suppressed the soil geochemical response
from this and potentially other zones. Auger drilling is in progress to sample the saprolite underlying the transported overburden.
As at Nagasa and Matete, IP geophysical surveys will also be undertaken during 2013 to outline potential blind, mineralized units
below the transported overburden.



The Anguluku program for 2013 will entail
interpretation of magnetic and radiometric data, continuation of augering, geophysical IP surveys to generate and prioritise drill
targets



North Kivu Project



The North Kivu project, which is currently
under force majeure, is situated in the North Kivu Province in eastern DRC to the northwest of Lake Edward and consists of 53
exploration permits totaling 14,344 square kilometers. All but four of these exploration permits are currently under force majeure.
Historical data has been compiled from the colonial period of alluvial gold mining and exploration which has outlined ten gold
prospects for follow-up, the most prospective being the Manguredjipa prospect where 300,000 ounces of alluvial gold was reportedly
mined during the colonial period up to 1960. Other gold prospects warranting follow up include Lutunguru, Lubero, Makwasu, Lutela,
Bilolo, Manzia, Mohanga and Ludjulu.



In addition to gold, there are a number
of alluvial platinum occurrences in the project area including the type locality for the platinum selenide mineral luberaoite
near Lubero. To date no primary source has been found for alluvial platinum occurrences.



Exploration continued in the Manguredjipa
area until early June 2012, when activities were suspended to conserve funds for the priority Ngayu project. Field work focused
mainly on the Muhanga prospect in the Manguredjipa area, and regional field work. The Muhanga field work consisted of the completion
of a channel sampling program commenced in late 2011 where a total of 780 metres were sample by means of a mechanical rock cutter.
Stream sediment sampling was also carried out in the areas of the PRs due for relinquishment in 2012.



5







North Kivu Non-Gold Project



Although the Company’s priority
is the prospecting for gold and platinum, the North Kivu project area also contains a number of other minerals including niobium,
rare earths, tungsten, tantalum, copper, iron and diamond occurrences.



During 2012, limited exploration was conducted
on these non-gold targets but included the assessment and analysis of historical data and some reconnaissance fieldwork including
a trenching program at the Etaetu wolframite (tungsten) prospect and a regional stream sampling program. Results to date from
the Etaetu tungsten project suggest only narrow zones of wolframite mineralization.



Qualified Person



Peter N. Cowley, F.I.M.M.M, the Company’s
President and Chief Executive Officer and a "qualified person" as such term is defined in National Instrument 43-101,
has reviewed and approved the technical information in this MD&A.



Technical Reports



Additional information with respect to
the Company’s Ngayu project is contained in the technical report of Venmyn Rand (Pty) Ltd dated May 29, 2012 and entitled
"Updated National Instrument 43-101 Independent Technical Report on the Ngayu Gold Project, Orientale Province, Democratic
Republic of the Congo". Additional information with respect to the Company’s North Kivu project is contained in the
technical report of Venmyn Rand (Pty) Ltd dated February 29, 2012 and entitled "National Instrument 43-101 Independent Technical
Report on the Manguredjipa Gold Project, North Kivu Province, Democratic Republic of the Congo". A copy of each of the said
reports can be obtained from SEDAR at www.sedar.com and EDGAR
at www.sec.gov.



Cautionary Note to U.S. Investors



The
United States Securities and Exchange Commission (the "SEC") permits U.S. mining companies, in their filings
with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. Certain
terms are used by the Company, such as "inferred mineral resource", that the SEC guidelines strictly prohibit U.S. registered
companies from including in their filings with the SEC. U.S. Investors are urged to consider closely the disclosure in the Company's
Form 40-F Registration Statement, File No. 001-35124, which may be secured from the Company, or from the SEC's website athttp://www.sec.gov/edgar.shtml.



Selected Annual Information



The following financial data is derived
from the Company’s consolidated financial statements for each of the three most recently completed financial years. Fiscal
years 2012, 2011 and 2010 have been prepared in accordance with International Financial Reporting Standards (“IFRS”)
as issued by the International Accounting Standards Board (“IASB”).



6







|                            |  | 2012 |            |   | 2011 |   |            | 2010 | 
|--------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- | 
|                            |  |      |            |   |      |   |            |      | 
|Net (loss) income           |  | $    | (2,081,823 | ) |      | $ | 533,160    |      | 
|Net (loss) income per share |  | $    | (0.03      | ) |      | $ | 0.01       |      | 
|Total assets                |  | $    | 60,274,235 |   |      | $ | 45,800,011 |      | 
|Total liabilities           |  | $    | 2,488,103  |   |      | $ | 2,464,464  |      | 



For fiscal 2012, the Company had net loss
of $2,081,823 which was primarily due to a decreased gain on derivative financial instruments in fiscal 2012 of $768,264 compared
to a gain on derivative financial instruments of $5,215,060 that was recorded in 2011. For fiscal 2011, the Company had net income
of $533,160 which was primarily due to a $5,215,060 gain on derivative financial instruments in fiscal 2011 compared to a loss
on derivative financial instruments of $2,405,857 that was recorded in 2010.



Results of Operations



For fiscal 2012, the Company reported
a net loss of $2,081,823 compared to a net gain of $533,160 reported for fiscal 2011. Expenses capitalized to mineral properties
are discussed under the “Exploration and Evaluation Expenditures” section below. Significant changes in expenses occurred
during fiscal 2012 in the expense categories described below as compared to fiscal 2011:



Consulting, management
and professional fees

Consulting, management and professional
fees decreased to $673,277 for fiscal 2012 from $1,191,315 for fiscal 2011. The decrease in this category was mainly due to an
amount of $771,413 incurred with respect to consulting fees during 2011 in connection with the Company’s investor relations
and other corporate advice. This amount included $567,699 representing the fair value of stock options granted to consultants
under the Company’s Stock Option Plan. Professional fees, which were mainly legal, audit and accounting fees, decreased
by approximately 28% to $205,948 during fiscal 2012 from $286,478 during fiscal 2011, mainly related to higher accounting-related
fees with respect to the Company’s transition to IFRS effective January 1, 2012. Legal expenses were incurred in relation
to the Company’s financing and general corporate activities, including compliance with securities regulatory requirements.



Travel and promotion

The Company incurred travel
and promotion expenses of $226,310 for fiscal 2012 which significantly decreased from $328,439 incurred fiscal 2011, due to decreased
visits to the Company's projects in the DRC, as well as decreased corporate travel costs in relation to the Company’s shareholder
relations and business promotion activities.



7







Employee benefits

The Company employee benefits
expense decreased to $993,835 during fiscal 2012 compared to $1,015,040 recorded during fiscal 2011 due to decreases in foreign
exchange rates and minimal changes in remuneration.



Office and sundry

Office and sundry expenses decreased
to $281,997 for fiscal 2012 compared to $375,835 for fiscal 2011. Additional costs were incurred in 2011 that related to fees
for listing on the NYSE MKT.



Gain on derivative
financial instruments

A fair value adjustment gain
of $768,264 was recorded for fiscal 2012, compared to a gain on derivative financial instruments of $5,215,060 recorded during
fiscal 2011. The significant decrease is due to the change in the fair market value of the Company’s outstanding Canadian
dollar denominated common share purchase warrants classified as derivative instruments in the consolidated statements of financial
position and also the number of outstanding common share purchase warrants as they expired throughout the year.



Foreign exchange
loss

The Company recorded a foreign
exchange loss of $185,099 during fiscal 2012, compared to a foreign exchange loss of $1,896 recorded during fiscal 2011, due to
fluctuations in the value of the United States dollar relative to the Canadian dollar.



Compensation expense-share-based
payment

The fair value of employee share-based
payment expenses recorded during 2012 decreased to $484,897 from $1,671,475 recorded during the corresponding period in 2011.
This decrease is related to share-based compensation issued to employees, directors and officers of the Company.



Summary of Quarterly Results



The following table sets out certain unaudited
consolidated financial information of the Company for each of the quarters of fiscal 2012 and fiscal 2011. This financial information
has been prepared using accounting policies consistent with International Accounting Standards (“IAS”) 34 Interim
Financial Reporting issued by the IASB. The Company’s presentation and functional currency is the United States dollar.



|                   |  | 2012       |          |   | 2012       |   |          | 2012       |  |   | 2012       |  
|------------------ |  | ---------- | -------- | - | ---------- | - | -------- | ---------- |  | - | ---------- | -
|                   |  | 4thQuarter |          |   | 3rdQuarter |   |          | 2ndQuarter |  |   | 1stQuarter |  
|                   |  |            |          |   |            |   |          |            |  |   |            |  
|Net loss           |  | $          | (861,755 | ) |            | $ | (500,373 | )          |  | $ | (706,353   | )
|Net loss per share |  | $          | (0.01    | ) |            | $ | (0.01    | )          |  | $ | (0.01      | )



|                              |  | 2011        |         |  | 2011       |   |           | 2011       |  |   | 2011       |  
|----------------------------- |  | ----------- | ------- |  | ---------- | - | --------- | ---------- |  | - | ---------- | -
|                              |  | 4th Quarter |         |  | 3rdQuarter |   |           | 2ndQuarter |  |   | 1stQuarter |  
|                              |  |             |         |  |            |   |           |            |  |   |            |  
|Net income (loss)             |  | $           | 779,386 |  |            | $ | 2,383,203 |            |  | $ | (490,583   | )
|Net earnings (loss) per share |  | $           | 0.01    |  |            | $ | 0.04      |            |  | $ | (0.01      | )



8







The Company’s net loss for the fourth
quarter of 2012 increased to $861,755 from a net loss of $500,373 recorded in the third quarter of 2012. This net loss was most
significantly impacted by a $241,416 foreign exchange loss during the fourth quarter of 2012 compared to a $104,038 foreign exchange
gain during the third quarter of 2012. The Company’s net loss for the third quarter of 2012 decreased to $500,373 from a
net loss of $706,353 recorded in the second quarter of 2012. This net loss was most significantly impacted by a $104,038 foreign
exchange gain during the third quarter of 2012 compared to a $165,968 foreign exchange loss during the second quarter of 2012,
as well as the decrease in the gain on derivative financial instruments of $9,813 in the third quarter of 2012 compared to $150,585
in the second quarter of 2012. A decrease in the stock based compensation expense from $73,972 in the third quarter of 2012 compared
to $149,132 in the second quarter of 2012 also contributed in the decrease of the net loss during the third quarter of 2012. The
Company’s net loss for the second quarter of 2012 increased to $706,353 from $13,342 in the first quarter of 2012. This
was most significantly impacted by a $165,968 foreign exchange loss during the second quarter of 2012 compared to a $118,247 foreign
exchange gain during the first quarter of 2012 and a decrease in the gain on derivative financial instruments from $150,585 in
the second quarter of 2012 compared to $607,866 in the first quarter of 2012.The Company’s net loss for the first quarter
of 2012 was $13,342 compared to a gain of $779,386 incurred during the fourth quarter of 2011, which was most significantly impacted
by a gain on derivative financial instruments during the first quarter of 2012 of $607,866. The Company incurred net income of
$779,386 during the fourth quarter of 2011 which was $1,603,817 lower than the net income reported in the third quarter of 2011.
This was primarily due to a lower gain on derivative financial instruments in the fourth quarter of 2011 resulting from a decrease
in the fair market value of Canadian denominated warrants, as a result of a decrease in the Company’s share price. The Company
reported net income of $2,383,203 during the third quarter of 2011 compared to a loss of $490,583 in the second quarter of 2011.
This difference was mainly due to the recognition of a gain on derivative financial instruments. The Company’s net loss
for the second quarter of 2011 decreased to $490,583 from $2,138,846 incurred during the first quarter of 2011 mainly due to the
recording of a $455,565 gain on derivative financial instruments compared to a fair value adjustment loss of $753,362 recorded
during the first quarter of 2011. In addition, the second quarter 2011 net loss was significantly impacted by decreased consulting,
management and professional fees of $174,414 incurred during the second quarter of 2011 compared to $716,162 recorded during the
first quarter of 2011.



Liquidity and Capital Resources



The Company historically relies primarily
on equity financings to fund its activities. On October 9, 2012, the Company closed the issuance and sale, by way of short form
prospectus, of a total of 9,245,000 common shares at a price of Cdn$1.05 per share, resulting in gross proceeds of Cdn$9,707,250.
Also on October 9, 2012, the Company closed a non-brokered private placement involving the issuance and sale of a total of 4,850,000
common shares at a price of Cdn$1.05 per share, resulting in gross proceeds of Cdn$5,092,500. Although the Company has been successful
in completing equity financings in the past, there is no assurance that the Company will secure the necessary financings in the
future.



As at December 31, 2012, the Company had
cash and cash equivalents of $10,741,699 and working capital of $9,594,825 compared to cash and cash equivalents of $14,667,658
and working capital of $14,050,905 as at December 31, 2011. The Company’s liquidity position was improved during the fourth
quarter of 2012 as the Company completed the financings described above.



9







During fiscal 2012, the Company incurred
cash exploration expenditures of $16,963,931 (2011 - $16,482,374). A breakdown of all exploration expenditures by project for
fiscal 2012 and fiscal 2011 is presented below under “Exploration and Evaluation Expenditures”.



The Company’s current cash position
is expected to be sufficient to fund the Company’s proposed exploration program. As is typical for an exploration company,
the Company will need to raise additional funds to continue its exploration program beyond this year. The Company expects to raise
such additional funds through offerings of its shares. However, if the Company raises additional funds by issuing additional
shares, the ownership percentages of existing shareholders will be reduced and the securities that the Company may issue in the
future may have rights, preferences or privileges senior to those of the current holders of the Company’s common shares.
Such securities may also be issued at a discount to the market price of the Company’s common shares, resulting in possible
further dilution to the book value per share of common shares. If the Company is unable to raise sufficient funds through
equity offerings, it may need to sell an interest in its properties. There can be no assurance the Company would be successful
in selling any such interest.



Contractual Obligations



The Company has entered into leases for
buildings with renewal terms whereby the lease agreements can be extended based on market prices at the time of renewal. There
are no restrictions placed upon the lessee by entering into these leases.



The Company's future minimum operating
lease commitments as at December 31, 2012 are as follows:





|Contractual |  |       |         |  |          |  |         | Two to three |  |  | Four to five |  |  |                  |  
|----------- |  | ----- | ------- |  | -------- |  | ------- | ------------ |  |  | ------------ |  |  | ---------------- | -
|Obligations |  | Total |         |  | One year |  |         | years        |  |  | years        |  |  | After five years |  
|            |  |       |         |  |          |  |         |              |  |  |              |  |  |                  |  
|Operating   |  |       |         |  |          |  |         |              |  |  |              |  |  |                  |  
|Lease       |  |       |         |  |          |  |         |              |  |  |              |  |  |                  |  
|Obligations |  |       | 201,628 |  |          |  | 75,611  |              |  |  | 126,018      |  |  |                  | -
|Purchase    |  |       |         |  |          |  |         |              |  |  |              |  |  |                  |  
|Obligations |  |       | 136,800 |  |          |  | 136,800 |              |  |  | -            |  |  |                  | -
|Total       |  |       | 338,428 |  |          |  | 212,411 |              |  |  | 126,018      |  |  |                  | -



Included in the Company’s minimum operating lease commitments
is an amount of $136,800 which relates to a minimum purchase obligation of helicopter services in the DRC.



10







Exploration and Evaluation Expenditures



The following table provides a breakdown
of the Company's exploration and evaluation expenditures incurred during fiscal 2012:



|                           |  | North Kivu Project |           |  | Ngayu Project |   |            | Total | 
|-------------------------- |  | ------------------ | --------- |  | ------------- | - | ---------- | ----- | 
|Balance 12/31/2011         |  | $                  | 7,596,710 |  |               | $ | 22,493,653 |       | 
|                           |  |                    |           |  |               |   |            |       | 
|Mineral rights             |  |                    | -         |  |               |   | -          |       | 
|Field camps expenses       |  |                    | 215,284   |  |               |   | 2,069,623  |       | 
|Geophysics                 |  |                    | -         |  |               |   | 135,846    |       | 
|Geochemistry               |  |                    | 54,734    |  |               |   | 612,745    |       | 
|Geology                    |  |                    | 15,946    |  |               |   | 156,678    |       | 
|Drilling                   |  |                    | -         |  |               |   | 3,827,695  |       | 
|Remote and sensing         |  |                    | -         |  |               |   | -          |       | 
|Feasibility studies        |  |                    | -         |  |               |   | 77,263     |       | 
|Helicopter                 |  |                    | 6,832     |  |               |   | 2,438,707  |       | 
|Professional fees          |  |                    | 72,807    |  |               |   | 85,063     |       | 
|Business promotion         |  |                    | 27,279    |  |               |   | 283,378    |       | 
|Travel                     |  |                    | 172,850   |  |               |   | 698,960    |       | 
|Office and sundry          |  |                    | 475,218   |  |               |   | 523,299    |       | 
|Interest and bank charges  |  |                    | 34,846    |  |               |   | 71,730     |       | 
|Consulting fees            |  |                    | 134,071   |  |               |   | 53,418     |       | 
|Salaries                   |  |                    | 373,346   |  |               |   | 3,888,274  |       | 
|Stock based compensation   |  |                    | -         |  |               |   | 184,084    |       | 
|Amortization               |  |                    | 51,468    |  |               |   | 247,736    |       | 
|Loss on disposal of assets |  |                    | 2,803     |  |               |   | 24,532     |       | 
|Other                      |  |                    | 166,628   |  |               |   | 981,695    |       | 
|Expenditures for the year  |  |                    | 1,804,112 |  |               |   | 16,360,726 |       | 
|Balance 12/31/2012         |  | $                  | 9,400,822 |  |               | $ | 38,854,379 |       | 



11







The following table provides a breakdown of the Company's exploration
and evaluation expenditures incurred during fiscal 2011:



|                               |  | North Kivu Project |           |  | Ngayu Project |   |            | Total | 
|------------------------------ |  | ------------------ | --------- |  | ------------- | - | ---------- | ----- | 
|Balance 12/31/2010             |  | $                  | 5,529,725 |  |               | $ | 6,872,603  |       | 
|                               |  |                    |           |  |               |   |            |       | 
|Opening Balance Adjustment     |  |                    |           |  |               |   |            |       | 
|IFRS adjustment - Jan 1, 2010  |  |                    | -         |  |               |   | 39,443     |       | 
|IFRS adjustment - Dec 31, 2010 |  |                    | -         |  |               |   | 216,021    |       | 
|                               |  |                    |           |  |               |   |            |       | 
|                               |  |                    | -         |  |               |   | 255,464    |       | 
|                               |  |                    |           |  |               |   |            |       | 
|Mineral rights                 |  |                    | -         |  |               |   | -          |       | 
|Field camps expenses           |  |                    | 182,850   |  |               |   | 1,617,210  |       | 
|Geochemistry                   |  |                    | 25,826    |  |               |   | 214,991    |       | 
|Geology                        |  |                    | 29,417    |  |               |   | 74,243     |       | 
|Drilling                       |  |                    | 3,518     |  |               |   | 3,500,579  |       | 
|Remote and sensing             |  |                    | -         |  |               |   | 45,138     |       | 
|Helicopter                     |  |                    | 64,790    |  |               |   | 3,721,602  |       | 
|Professional fees              |  |                    | 18,545    |  |               |   | 943        |       | 
|Business promotion             |  |                    | 65,809    |  |               |   | 318,204    |       | 
|Travel                         |  |                    | 216,116   |  |               |   | 620,714    |       | 
|Office and sundry              |  |                    | 335,217   |  |               |   | 737,155    |       | 
|Interest and bank charges      |  |                    | 41,351    |  |               |   | 71,445     |       | 
|Consulting fees                |  |                    | 154,724   |  |               |   | 54,875     |       | 
|Salaries                       |  |                    | 673,614   |  |               |   | 2,783,579  |       | 
|Stock based compensation       |  |                    | -         |  |               |   | 643,410    |       | 
|Amortization                   |  |                    | 41,658    |  |               |   | 213,441    |       | 
|Other                          |  |                    | 213,550   |  |               |   | 748,057    |       | 
|Expenditures for the year      |  |                    | 2,066,985 |  |               |   | 15,365,586 |       | 
|Balance 12/31/2011             |  | $                  | 7,596,710 |  |               | $ | 22,493,653 |       | 



Outstanding Share Data



The authorized share capital of the Company
consists of an unlimited number of common shares and an unlimited number of preference shares, issuable in series. As at March
28, 2013, the Company had outstanding 73,439,732 common shares, 6,465,000 stock options to purchase common shares and 554,700
broker warrants (which were granted to the Underwriters as part of their consideration for their services under the 2012 Offering
and are exercisable at a price of Cdn$1.05 per share until October 2013).



12







Related Party Transactions



| | a) | Key Management Personnel
| | -- | ------------------------



The Company’s related
parties include key management. Key management includes directors (executive and non-executive), the Chief Executive Officer (“CEO”),
the Chief Financial Officer, and the senior executives reporting directly to the CEO. The remuneration of the key management of
the Company as defined above, during the years ended December 31, 2012, 2011 and 2010 was as follows:





|                                          |  | Year ended   |           |  | Year ended   |   |           | Year ended   | 
|----------------------------------------- |  | ------------ | --------- |  | ------------ | - | --------- | ------------ | 
|                                          |  | December 31, |           |  | December 31, |   |           | December 31, | 
|                                          |  | 2012         |           |  | 2011         |   |           | 2010         | 
|Salaries                                  |  | $            | 946,379   |  |              | $ | 859,237   |              | 
|Employee retention allowance              |  | $            | 59,014    |  |              | $ | 62,166    |              | 
|Compensation expense-share-based payments |  | $            | 317,407   |  |              | $ | 1,348,721 |              | 
|                                          |  | $            | 1,322,800 |  |              | $ | 2,270,124 |              | 







| | b) | Other Related Parties
| | -- | ---------------------



As at December 31, 2012, an
amount of $nil was due to related companies with common directors related to common expenses in the DRC (December 31, 2011 - $152,833).
In addition, as at December 31, 2012, an amount of $17,760 was due from a company with common directors (December 31, 2011 - $nil).





|                         |  | December 31, |        |  | December 31, | 
|------------------------ |  | ------------ | ------ |  | ------------ | 
|                         |  | 2012         |        |  | 2011         | 
|                         |  | $            |        |  | $            | 
|Due from related parties |  |              | 17,760 |  |              | 
|Due to related party     |  |              | -      |  |              | 







Accounting Standards Issued But Not
Yet Effective



The Company has reviewed new and revised
accounting pronouncements that have been issued but are not yet effective and determined that the following may have an impact
on the Company:



IFRS 7 Financial Instruments: disclosures
(“IFRS 7”) require disclosure of information about the significance of financial instruments to an entity,
and the nature and extent of risks arising from those financial instruments, both in qualitative and quantitative terms. An amendment
to IFRS 7 was issued in December 2011 which requires an entity to disclose rights of offset and related arrangements for financial
instruments under an enforceable master netting agreement or similar arrangement. IFRS 7 is effective for annual periods beginning
on or after January 1, 2013. The Company does not expect the standard to have a material impact on its consolidated financial
statements.



13







IFRS 9 Financial instruments (“IFRS
9”) was issued by the IASB on November 12, 2009 and will replace IAS 39 Financial Instruments: Recognition and Measurement
(“IAS 39”). IFRS 9 replaces the multiple rules in IAS 39 with a single approach to determine whether a financial
asset is measured at amortized cost or fair value and a new mixed measurement model for debt instruments having only two categories:
amortized cost and fair value. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context
of its business model and the contractual cash flow characteristics of the financial assets. The new standard also requires a
single impairment method to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods
beginning on or after January 1, 2015. The Company is currently evaluating the impact of IFRS 9 on its consolidated financial
statements.



IFRS 10 Consolidated Financial Statements
(“IFRS 10”) establishes principles for the presentation and preparation of consolidated financial statements
when an entity controls one or more other entities. IFRS 10 supersedes IAS 27 “Consolidated and Separate Financial Statements”
and SIC-12 “Consolidated – Special Purpose Entities” and is effective for annual periods beginning on or after
January 1, 2013. Earlier application is permitted. The Company does not expect the standard to have a material impact on its consolidated
financial statements.



IFRS 11 Joint Arrangements (“IFRS
11”) establishes principles for financial reporting by parties to a joint arrangement. IFRS 11 supersedes the current
IAS 31 “Interests in Joint Ventures” and SIC-13 “Jointly Controlled Entities – Non-Monetary Contributions
by Venturers” and is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted.
The Company does not expect the standard to have a material impact on its consolidated financial statements.



IFRS 12 Disclosure of Interests in Other
Entities (“IFRS 12”) applies to entities that have an interest in a subsidiary, a joint arrangement, an associate
or an unconsolidated structured entity. IFRS 12 is effective for annual periods beginning on or after January 1, 2013. Earlier
application is permitted. The Company does not expect the standard to have a material impact on its consolidated financial statements.



IFRS 13 Fair Value Measurements (“IFRS
13”) defines fair value, sets out in a single IFRS framework for measuring fair value and requires disclosures about
fair value measurements. IFRS 13 applies to IFRSs that require or permit fair value measurements or disclosures about fair value
measurements (and measurements, such as fair value less costs to sell, based on fair value or disclosures about those measurements),
except in specified circumstances. IFRS 13 is to be applied for annual periods beginning on or after January 1, 2013. Earlier
application is permitted. The Company does not expect the standard to have a material impact on its consolidated financial statements.



An amendment to IAS 19, Employee Benefits
(“IAS 19”) was issued by the IASB in June 2011. The amendment requires recognition of changes in the defined
benefit obligations and in fair value of plan assets when they occur, hence accelerating the recognition of past service costs.
The amendment also modifies accounting for termination benefits, including distinguishing benefits provided in exchange for service
and benefits provided in exchange for the termination of employment and affect the recognition and measurement of termination
benefits. The amendments to IAS 19 are effective for annual periods beginning on or after January 1, 2013. The Company does not
expect the standard to have a material impact its consolidated financial statements.



14







IAS 27, Separate financial statements
(“IAS 27”) was re-issued by the IASB in May 2011 to only prescribe the accounting and disclosure requirements
for investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statements. The consolidation
guidance will now be included in IFRS 10. The amendments to IAS 27 are effective for annual periods beginning on or after January
1, 2013. The Company does not expect the standard to have a material impact on its consolidated financial statements.



IAS 28, Investments in associates and
joint ventures (“IAS 28”) was re-issued by the IASB in May 2011. IAS 28 continues to prescribe the accounting
for investments in associates, but is now the only source of guidance describing the application of the equity method. The amended
IAS 28 will be applied by all entities that have an ownership interest with joint control of, or significant influence over, an
investee. The amendments to IAS 28 are effective for annual periods beginning on or after January 1, 2013. The Company does not
expect the standard to have a material impact on its consolidated financial statements.



An amendment to IAS 32, Financial Instruments:
presentation (“IAS 32”) was issued by the IASB in December 2011. The amendment clarifies the meaning of ‘currently
has a legally enforceable right to set-off’. The amendments to IAS 32 are effective for annual periods beginning on or after
January 1, 2014. The Company does not expect the standard to have a material impact its consolidated financial statements.



In October 2011, IFRIC published IFRIC
Interpretation 20, Stripping Costs in the Production Phase of a Surface Mine (“IFRIC 20”), effective for annual
periods beginning on or after January 1, 2013. The interpretation clarifies the requirements for accounting for the costs of stripping
activity in the production phase when two benefits accrue: (i) usable ore that can be used to produce inventory; and (ii) improved
access to further quantities of material that will be mined in future periods. The Company does not expect the standard to have
a material impact on its consolidated financial statements.



Critical Accounting Estimates



The preparation of the Company’s
consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that
affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Information about critical
judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements
included the following:



Estimates:



Impairment



Assets, including property, plant and
equipment and exploration and evaluation assets, are reviewed for impairment whenever events or changes in circumstances indicate
that their carrying amounts exceed their recoverable amounts. The assessment of the fair value often requires estimates and assumptions
such as discount rates, exchange rates, commodity prices, rehabilitation and restoration costs, future capital requirements and
future operating performance. Changes in such estimates could impact recoverable values of these assets. Estimates are reviewed
regularly by management.



15







Share-based payment transactions



The Company measures the cost of equity-settled
transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating
fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent
on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation
model including the expected life of the stock option, volatility and dividend yield and making assumptions about them. Under
IFRS, the Company is required to estimate the number of forfeitures likely to occur on grant date and reflect this in the share-based
payment expense revising for actual experiences in subsequent periods.



The fair value at grant date is determined
using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution,
the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk
free interest rate for the term of the option. Under IFRS, the Company is required to estimate the number of forfeitures likely
to occur on grant date and reflect this in the share-based payment expense revising for actual experiences in subsequent periods.



The model inputs for options granted during
the years ended December 31, 2012, 2011 and 2010 included:



|Years ended                  |  | December 31, 2012 |  | December 31, 2011 |  | December 31, 2010 | 
|---------------------------- |  | ----------------- |  | ----------------- |  | ----------------- | 
|Risk free interest rate      |  | 1.00% - 1.16%     |  | 1.83% - 2.18%     |  | 1.65% - 1.90%     | 
|Expected life                |  | 3 years           |  | 3 years           |  | 2 - 3 years       | 
|Annualized volatility        |  | 68.02% - 104.54%  |  | 101.78% - 115.19% |  | 156.38% - 157.32% | 
|Dividend yield               |  | 0%                |  | 0%                |  | 0%                | 
|Forfeiture rate              |  | 2%                |  | 2%                |  | 1%                | 
|Grant date fair value (Cdn$) |  | $0.32 - $1.14     |  | $1.69 - $2.06     |  | $0.91 - $1.01     | 



Common share purchase warrants



The Company measures the cost of common
share purchase warrants by reference to the fair value of the liability at the date at which they are granted and subsequent reporting
date. Estimating fair value for common share purchase warrants requires determining the most appropriate valuation model, which
is dependent on the terms and conditions of the grant and subsequent reporting date. This estimate also requires determining the
most appropriate inputs to the valuation model including the expected life of the warrant, volatility and dividend yield and making
assumptions about them. As  at December 31, 2012, all common share purchase warrants have expired.



The value of the warrants was calculated
using the Black-Scholes model and the assumptions at   grant date were as follows:



16







|Year ended              |  | December 31, 2012 |  | December 31, 2011 | 
|----------------------- |  | ----------------- |  | ----------------- | 
|Risk free interest rate |  | 1.03%             |  | 1.44% - 1.77%     | 
|Expected life           |  | 0.07 years        |  | 0.73 - 0.84 years | 
|Annualized volatility   |  | 136.34%           |  | 93.67% - 96.68%   | 
|Dividend yield          |  | 0%                |  | 0%                | 
|Fair value (Cdn$)       |  | $0.24             |  | $1.51 - $1.93     | 



Judgments:



Provisions and contingencies



The amount recognized as provision, including
legal, contractual and other exposures or obligations, is the best estimate of the consideration required to settle the related
liability, including any related interest charges, taking into account the risks and uncertainties surrounding the obligation.
In addition, contingencies will only be resolved when one or more future events occur or fail to occur. Therefore, assessment
of contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events. The Company
assesses its liabilities and contingencies based upon the best information available, relevant tax laws and other appropriate
requirements.



Exploration and evaluation expenditure



The application of the Company’s
accounting policy for exploration and evaluation expenditure requires judgment in determining whether it is likely that future
economic benefits will flow to the Company, which may be based on assumptions about future events or circumstances. Estimates
and assumptions made may change if new information becomes available. If, after expenditure is capitalized, information becomes
available suggesting that the recovery of expenditure is unlikely, the amount capitalized is written off in the statement of comprehensive
income (loss) during the period the new information becomes available.



Income taxes



The Company is subject to income taxes
in various jurisdictions and subject to various rates and rules of taxation. Significant judgment is required in determining the
provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for
which the ultimate tax determination is uncertain. The Company recognizes liabilities for anticipated tax audit issues based on
the Company’s current understanding of the tax law. Where the final tax outcome of these matters is different from the amounts
that were initially recorded, such differences will impact the current and deferred tax provisions in the period in which such
determination is made.



In addition, the Company has recognized
deferred tax assets relating to tax losses carried forward to the extent there is sufficient taxable income relating to the same
taxation authority and the same subsidiary against which the unused tax losses can be utilized. However, future realization of
the tax losses also depends on the ability of the entity to satisfy certain tests at the time the losses are recouped, including
current and future economic conditions, production rates and production costs.



17







Financial Risk Management



Fair Value of Financial Assets and Liabilities



The
consolidated statements of financial position carrying amounts for cash and cash equivalents, advances receivable, balances due
from/to related parties, accounts payable, accrued liabilities and the employee retention allowance approximate fair value due
to their short-term nature. Due to the use of subjective judgments and uncertainties in the determination of fair values these
values should not be interpreted as being realizable in an immediate settlement of the financial instruments. The Company determines
the fair value of the embedded derivative related to its Canadian dollar denominated common share purchase warrants based on an
estimate using the Black-Scholes model as the valuation technique.



Fair value hierarchy



The following table provides
an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1
to 3 based on the degree to which the fair value is observable:



| | · | Level
                                                                                                             1 fair value measurements
                                                                                                             are those derived
                                                                                                             from quoted prices
                                                                                                             (unadjusted) in active
                                                                                                             markets for identical
                                                                                                             assets or liabilities;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Level
                                                                                                             2 fair value measurements
                                                                                                             are those derived
                                                                                                             from inputs other
                                                                                                             than quoted prices
                                                                                                             included within Level
                                                                                                             1 that are observable
                                                                                                             for the asset or
                                                                                                             liability, either
                                                                                                             directly (i.e. as
                                                                                                             prices) or indirectly
                                                                                                             (i.e. derived from
                                                                                                             prices);
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Level
                                                                                                             3 fair value measurements
                                                                                                             are those derived
                                                                                                             from valuation techniques
                                                                                                             that include inputs
                                                                                                             for the asset or
                                                                                                             liability that are
                                                                                                             not based on observable
                                                                                                             market data (unobservable
                                                                                                             inputs).
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



There
were no transfers between Level 1, 2 and 3 during the reporting period. The fair values of financial assets and liabilities
carried at amortized cost are approximated by their carrying values. Cash and cash equivalents are ranked Level 1 as the
market value is readily observable. The carrying value of cash and cash equivalents approximates fair value, as maturities
are less than six months. Warrants are ranked within Level 3 which uses a combination of observable and unobservable inputs
in calculating fair value. See Note 15(a) in the Annual Financial Statements for additional details.



Foreign Currency Risk



Foreign
exchange risk is the risk that a variation in exchange rates between the United States dollar and Canadian dollar or other foreign
currencies will affect the Company’s operations and financial results. A portion of the Company’s transactions is
denominated in Canadian dollars. Significant foreign exchange gains or losses are reflected as a separate component of the consolidated
statement of comprehensive income (loss). The Company does not use derivatives instruments to reduce its exposure to foreign currency
risk. See Note 15(c) of the Annual Financial Statements for additional details.



18







Credit Risk



Financial
instruments which are potentially subject to credit risk for the Company consist primarily of cash and cash equivalents. Cash
and cash equivalents are maintained with several financial institutions of reputable credit and may be redeemed upon demand. It
is therefore the Company’s opinion that such credit risk is subject to normal industry risks and is considered minimal.
See Note 15(d) of the Annual Financial Statements for additional details.



Liquidity Risk



Liquidity risk is the risk that the Company
will not be able to meet its financial obligations as they become due. The Company attempts to ensure that there is sufficient
cash to meet its liabilities when they are due and manages this risk by regularly evaluating its liquid financial resources to
fund current and long-term obligations and to meet its capital commitments in a cost-effective manner. If future cash flows are
fairly uncertain, the liquidity risk increases. The Company’s liquidity requirements are met through a variety of sources,
including cash, and equity capital markets.



Mineral Property Risk



The Company’s operations in the
DRC are exposed to various levels of political risk and uncertainties, including political and economic instability, government
regulations relating to exploration and mining, military repression and civil disorder, all or any of which may have a material
adverse impact on the Company’s activities or may result in impairment or loss of part or all of the Company's assets.



Market Risk



Market risk is the potential for financial
loss from adverse changes in underlying market factors, including foreign-exchange rates, commodity prices and stock based compensation
costs.



Risks and Uncertainties



The Company is subject to a number of
risks and uncertainties that could significantly impact its operations and future prospects. The following discussion pertains
to certain principal risks and uncertainties but is not, by its nature, all inclusive.



All of the Company's projects are located
in the DRC. The assets and operations of the Company are therefore subject to various political, economic and other uncertainties,
including, among other things, the risks of war and civil unrest, hostage taking, military repression, labor unrest, illegal mining,
expropriation, nationalization, renegotiation or nullification of existing licenses, permits, approvals and contracts, taxation
policies, foreign exchange and repatriation restrictions, changing political conditions, international monetary fluctuations,
currency controls and foreign governmental regulations that favor or require the awarding of contracts to local contractors or
require foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. Changes, if any, in mining
or investment policies or shifts in political attitude in the DRC may adversely affect the Company's operations. Operations may
be affected in varying degrees by government regulations with respect to, but not limited to, restrictions on production, price
controls, export controls, currency remittance, income taxes, foreign investment, maintenance of claims, environmental legislation,
land use, land claims of local people, water use and mine safety. Failure to comply strictly with applicable laws, regulations
and local practices relating to mineral rights could result in loss, reduction or expropriation of entitlements. In addition,
in the event of a dispute arising from operations in the DRC, the Company may be subject to the exclusive jurisdiction of foreign
courts or may not be successful in subjecting foreign persons to the jurisdiction of courts in Canada. The Company also may be
hindered or prevented from enforcing its rights with respect to a governmental instrumentality because of the doctrine of sovereign
immunity. It is not possible for the Company to accurately predict such developments or changes in laws or policy or to what extent
any such developments or changes may have a material adverse effect on the Company's operations.



19







The DRC is a developing nation emerging
from a period of civil war and conflict. Physical and institutional infrastructure throughout the DRC is in a debilitated condition.
The DRC is in transition from a largely state controlled economy to one based on free market principles, and from a non-democratic
political system with a centralized ethnic power base, to one based on more democratic principles. There can be no assurance that
these changes will be effected or that the achievement of these objectives will not have material adverse consequences for the
Company and its operations. The DRC continues to experience instability in parts of the country due to certain militia and criminal
elements. While the government and United Nations forces are working to support the extension of central government authority
throughout the country, there can be no assurance that such efforts will be successful.



The only sources of future funds for further
exploration programs which are presently available to the Company are the sale of equity capital, or the offering by the Company
of an interest in its properties to be earned by another party carrying out further exploration. There is no assurance that such
sources of financing will be available on acceptable terms, if at all. In the event that commercial quantities of minerals are
found on the Company's properties, the Company does not have the financial resources at this time to bring a mine into production.



All of the Company's properties are in
the exploration stage only and none of the properties contain a known body of commercial ore. The Company currently operates at
a loss and does not generate any revenue from its mineral properties. 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. Few properties which are explored are ultimately developed into producing mines. Major expenditures
may be required to establish reserves by drilling and to construct mining and processing facilities at a site. It is impossible
to ensure that the Company's exploration programs will result in a profitable commercial mining operation.



The Company's mineral resources are estimates
and no assurances can be given that the indicated levels of gold will be produced. Such estimates are expressions of judgment
based on knowledge, mining experience, analysis of drilling results and industry practices. Valid estimates made at a given time
may significantly change when new information becomes available. While the Company believes that its resource estimates are well
established, by their nature resource estimates are imprecise and depend, to a certain extent, upon statistical inferences, which
may ultimately prove unreliable. If such estimates are inaccurate or are reduced in the future, this could have a material adverse
impact on the Company. In addition, there can be no assurance that gold recoveries or other metal recoveries in small-scale laboratory
tests will be duplicated in larger scale tests under on-site conditions or during production.



20







The Company's exploration and, if such
exploration is successful, development of its properties is subject to all of the hazards and risks normally incident to mineral
exploration and development, any of which could result in damage to life or property, environmental damage and possible legal
liability for any or all damage.



The price of gold has fluctuated widely.
The future direction of the price of gold will depend on numerous factors beyond the Company's control including international,
economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates, global or regional consumption
patterns, speculative activities and increased production due to new extraction developments and improved extraction and production
methods. The effect of these factors on the price of gold, and therefore on the economic viability of the Company's properties,
cannot accurately be predicted. As the Company is only at the exploration stage, it is not yet possible for the Company to adopt
specific strategies for controlling the impact of fluctuations in the price of gold.



The Company uses the United States dollar
as its functional currency. Fluctuations in the value of the United States dollar relative to the Canadian dollar could have a
material impact on the Company’s consolidated financial statements by creating gains or losses. During fiscal 2012 and 2011,
the Company recorded a foreign exchange loss of $185,099 and $1,896, respectively, due to the variation in the value of the United
States dollar relative to the Canadian dollar. No currency hedge policies are in place or are presently contemplated.



The natural resource industry is intensely
competitive in all of its phases, and the Company competes with many companies possessing greater financial resources and technical
facilities than itself.



Reference is made to the Company's annual
report on Form 20-F dated March 28, 2013 for additional risk factor disclosure (a copy of such document can be obtained from SEDAR
at www.sedar.com and EDGAR at www.sec.gov).



Disclosure Controls and Procedures



Management is responsible for establishing
and maintaining adequate internal controls over disclosure controls and procedures, as defined in National Instrument 52-109 Certification
of Disclosure in Issuers’ Annual and Interim Filingsof the Canadian Securities Administrators and Rules 13a-15(e) and
Rule 15d-15(e) under the United States Exchange Act of 1934, as amended. Disclosure controls and procedures are designed to provide
reasonable assurance that all relevant information is gathered and reported to senior management, including the Company’s
Chief Executive Officer and Chief Financial Officer, on a timely basis so that appropriate decisions can be made regarding public
disclosure. As at December 31, 2012, management of the Company, with the participation of the Chief Executive Officer and the
Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as required by
Canadian securities laws. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded
that, as of December 31, 2012, the disclosure controls and procedures were adequately designed and effective in ensuring that
information required to be disclosed by the Company it files or submits under Canadian securities laws is recorded, processed,
summarized and reported within the time periods specified by those laws and that material information is accumulated and communicated
to management of the Company, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosure.



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Internal Control Over Financial Reporting



Internal controls have been designed to
provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of financial
statements for external purposes in accordance with IFRS. As at December 31, 2012, the Company’s Chief Executive Officer
and Chief Financial Officer evaluated or caused to be evaluated under their supervision the effectiveness of the Company’s
internal control over financial reporting. In making this assessment, management used the criteria set forth by the Committee
of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework. Based on that evaluation,
the Chief Executive Officer and the Chief Financial Officer have concluded that, as of December 31, 2012, the Company’s
internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of the Company’s
financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.



The Company is required under Canadian
securities laws to disclose herein any change in the Company’s internal control over financial reporting that occurred during
the Company’s most recent interim period that has materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting. There were no changes in the Company’s internal control over
financial reporting during the year ended December 31, 2012, that management believes have materially affected, or are reasonably
likely to materially affect, the Company’s internal control over financial reporting.



It should be noted that a control system,
including the Company’s disclosure controls and procedures system and internal control over financial reporting system,
no matter how well conceived can provide only reasonable, but not absolute, assurance that the objective of the control system
will be met and it should not be expected that the Company’s disclosure controls and procedures system and internal control
over financial reporting will prevent or detect all reporting deficiencies whether caused by either error or fraud.





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