Exhibit 15.1







MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE YEAR ENDED DECEMBER 31, 2011



The following management’s
discussion and analysis (“MD&A”), which is dated as of March  30, 2012, 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, 2011 (“fiscal 2011”) in comparison with those
as at and for the financial year of the Company ended December 31, 2010 (“fiscal 2010”), 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 2011 and fiscal 2010 (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 30, 2012, 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 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, 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 69 exploration permits, directly through a wholly-owned DRC subsidiary, Loncor
Resources Congo SPRL, or under option agreements with the holders of the permits.



During  fiscal 2011 and up to the date
of this MD&A, the Company carried out exploration activities at its Ngayu and North Kivu projects in the DRC. Exploration
consisted of gridding, mapping, soil, stream (including Bulk Leach Extractable Gold (“BLEG”) surveys) and rock
geochemical sampling as well as core drilling within the Ngayu exploration permit areas.



On April 27, 2011, the Company’s
common shares commenced trading on the NYSE Amex LLC under the trading symbol "LON". The Company has retained its primary
listing on the TSX Venture Exchange under the trading symbol "LN".



In February 2011, the Company completed
concurrent brokered and non-brokered private placement equity financings. Pursuant to a “bought deal” private placement
financing conducted by GMP Securities L.P. as lead underwriter, together with Cormark Securities Inc. and Raymond James Ltd.,
the Company issued 8,500,000 common shares of the Company at a price of Cdn$2.35 per share, resulting in aggregate gross proceeds
of Cdn$19,975,000. The Company also issued, by way of non-brokered private placement, to Newmont Mining Corporation of Canada
Limited (“Newmont”), 1,700,000 common shares of the Company at a price of Cdn$2.35 per share for aggregate
proceeds of Cdn$3,995,000.



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 originally covered an area of 4,550 square kilometers but was recently reduced by 50% to 2,087 square kilometers in February
2012, in conformity with the DRC 2003 mining code. The Ngayu project 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 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 11 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 Yindi, Makapela, Itali and Anguluku.



2







Yindi prospect



During
2011 at Yindi the Company recommenced the exploration program and a total of 1,545 metres (7 core holes) had been drilled during
the first quarter of 2011 giving a total of 18 core holes (2,574 metres) being drilled on the prospect to date. Although a number
of significant gold intersections were made, including 21.30 metres grading 3.31 g/t Au, 22.27 metres grading 2.26 g/t Au and 24.04
metres grading 1.45 g/t Au, it was considered that Makapela had a higher potential to delineate a significant mineral resource
and, as a result, the core rigs were relocated to Makapela.



Makapela prospect



The Makapela prospect is situated in the
north of the Ngayu project area and covers a number of significant artisanal sites over a strike length of 2.2 kilometres.



Up to the end of 2011, a total of 54 drill
holes (13,737 metres) had been completed at the Makapela prospect with the objective of determining the mineral resource potential
of the mineralized quartz veins (i.e. Reefs 1 and 2 plus Sele Sele) in the vicinity of the Main, North and Sele Sele pits, and
testing down-dip continuity to a vertical depth of up to 450 metres. Several significant high grade intersections have been made
at Makapela including 7.19 metres grading 64.0 g/t Au, 4.08 metres grading 15.2 g/t Au, 4.35 metres grading 17.5 g/t Au, 3.47 metres
grading 24.9 g/t Au, 5.63 metres grading 13.8 g/t Au, and 20.32 metres grading 8.67 g/t Au.



During
the first half of 2012, the core drilling program with four rigs is planned to focus on outlining an initial inferred mineral resource
at Makapela. The current program entails drilling Reef 1, Reef 2 and the Sele Sele Reef on an 80 by 80 metre spacing down to a
vertical depth of 240 metres, and on a 160 by 80 metre spacing from 240 to 450 metres vertical depth. Further drilling to elevate
all or part of any inferred resource to indicated status will be considered depending on results and availability of additional
funding. Drilling will also continue on new reefs and reef extensions defined by soil, auger and rock chip anomalies, including
the results from the initial five “exploration holes” drilled in late 2011 in new target areas at Makapela.



It is
planned that approximately 60% of the 22,000 metres of diamond drilling budgeted by the Company for 2012 will be at Makapela.
Other work at Makapela will comprise additional auger drilling of soil anomalies on the original grid, and on anomalies that may
be defined on the eastern and western line extensions completed in late 2011.



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. Mapping and channel sampling were conducted at the Itali prospect during the third quarter of
2010. Two channel sample profiles and one old trench were also sampled.



3







In late 2011, one core drill hole was completed
at Itali, with the objective of testing a trench intersection of 42.50 metres grading 2.11 g/t Au. The drill hole was 161.85 metres
in length and inclined at -50 degrees to the south, and was drilled parallel to and immediately below the trench. Core results
included an intersection of 38.82 metres (true thickness of 37.97 metres) grading 2.66 g/t Au. This initial drill hole also illustrated
oxidation extending to at least 100 metres below the surface, increasing the potential for significant amounts of gold oxide material
to be outlined. Based on soil geochemistry and artisanal mining activity, there is potential for one kilometer of mineralized
strike at the Itali prospect. Further drilling will be undertaken at Itali during Q2 2012 as a rig becomes available from Makapela.
Approximately 3,000 metres of drilling is planned for Itali in 2012



Regional Assessment of the Ngayu Project



In 2011, regional exploration consisting
of a number of regional BLEG stream sediment surveys as well as a regional geophysical interpretation of the entire Ngayu project
area was completed which resulted in a number of priority targets for more detailed ground follow up being delineated. This work
was carried out in conjunction with Newmont, with whom Loncor has a technical services agreement. Following successful orientation
surveys in the Yindi and Makapela areas in 2010, in which 32 samples were collected, three phases of BLEG sampling were carried
out:



| | · | Phase 1, carried out in March 2011, in
which 418 samples were taken over the whole concession area, at an average sampling density of one sample per 10 km2.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Phase 2, completed in September 2011,
with the objective of more closely defining the anomalies outlined in Phase 1. A total of 192 samples were collected representing
an average sampling density of one sample per 4 km2.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Phase 3 was implemented in November 2011
in order to further delineate the sources of gold anomalism in selected target areas. A total of 129 samples were collected, but
results are still awaited.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Results from the BLEG surveys plus the
regional geophysical airborne magnetic and radiometric surveys were used to define and prioritize target areas for follow up.
Priority targets included the Imva Fold, Anguluku and the Adumbi trend extension. In early 2012, follow up field work at the first-priority
Matete target within the Imva Fold area was initiated andincluded soil sampling on 320 metre-spaced lines over an initial
area of 2 x 4 kilometers and pitting to determine regolith types and their distribution as well as geological mapping, rock chip
and channel sampling. Results from this target area are awaited. Further infill geochemical soil surveys will also be undertaken
on other priority targets within the Imva fold area during the first half of 2012.



The Angukulu prospect is an area mined
by the Belgians in the late 1940’s and early 1950’s, located approximately 10 kilometres NW of Yindi. Gold was exploited
from alluvial and eluvial workings, and hardrock quartz veins. During reconnaissance mapping in 2011, a total of 47 rock chip
samples were collected. Three regional 2 kilometre-long soil traverses were sampled, in order to assist with the positioning of
a systematic soil sampling grid. Preliminary results indicate the presence of an anomalous area (>100ppb) with more than 1.2
kilometres strike length and width of 120 metres. The regional BLEG survey and airborne interpretations also outlined this target
as a priority area for follow up. More detailed infill soil sampling and mapping will be undertaken during 2012.



4







North Kivu Project



The North Kivu project is situated in the
North Kivu Province in eastern DRC to the northwest of Lake Edward and consists of 56 exploration permits totaling 17,760 square
kilometers. 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
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 recommenced at North Kivu in
June 2011 after geologists from the North Kivu gold project were relocated to Ngayu at the beginning of 2011, in order to maximise
progress on this project. Work during the remainder of 2011 focused on the following prospects in the Manguredjipa area:



| | a) | Muhanga. Located in the northeastern part of the Durba grid, gold mineralization occurs within
steeply-dipping, massive quartzite, in the form of sheeted quartz veins and irregular stockworks as well as disseminations within
the host rock. Rock chip sampling on the quartzite ridge outlined an area of approximately 330 x 90 metres with anomalous gold
values: of 199 samples taken, 37% returned grades >0.5 g/t Au, the average of all samples being 4.41 g/t Au. In order to better
assess the continuity of the mineralization, a channel sampling program was completed in November 2011. A total of 189 metres were
sampled by means of a rock cutter, and results are expected during the first quarter of 2012.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | Manguredjipa West. This prospect is located immediately to the west of the Durba grid. The area
was selected for follow-up on the basis of (a) the presence of fold closures within the quartzite-schist sequence i.e. favourable
structural sites for gold mineralization in the Kibaran, (b) historical maps showing anomalous Au values from streams draining
the area, and (c) correlation of the main quartzite unit with the Muhanga ridge. Work in 2011 entailed stream sediment sampling,
mapping, rock chip sampling, and soil sampling on three regional traverses. Low order soil anomalies and the presence of colluvial
and alluvial workings, indicate the presence of gold mineralization, and this will be tested by in-fill soil sampling in 2012.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The main operational objective of the 2012 exploration program is to justify a core drilling program at
Muhanga which will be divided into two phases. Assuming positive results are received from the channel sampling, Phase 1 will comprise
three 250 metre drill holes spaced along strike at 100 metre intervals, to intersect the mineralized zone at an average vertical
depth of 80 metres. Depending on Phase 1 results, Phase 2 would comprise (a) two additional 250 metre holes 100 metres further
along strike, and (b) two down-dip holes to test the mineralized zone to 160 metres depth. In Manguredjipa West, soil sampling
will be carried out with trenching and/or auger drilling employed to test soil anomalies.



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 2011, limited exploration was conducted
on these non-gold targets but included the assessment and analysis of historical data and some reconnaissance fieldwork including
a radiometric survey at the Bingo carbonatite complex. For 2012, exploration will focus on the Etaetu wolframite (tungsten) and
the Bingo pyrochlore (niobium, rare earths) prospects.



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
February 29, 2012 and entitled "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 atwww.sedar.comand EDGAR atwww.sec.gov.



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 2011 and 2010 have been prepared in accordance with International Financial Reporting Standards (“IFRS”)
as issued by the International Accounting Standards Board (“IASB”). 2009 information has not been restated
to conform to IFRS and is presented in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”).



|                            |  | 2011 |            |  | 2010 |   |            | 2009 | 
|--------------------------- |  | ---- | ---------- |  | ---- | - | ---------- | ---- | 
|                            |  |      |            |  |      |   |            |      | 
|Total revenue               |  | $    | -          |  |      | $ | -          |      | 
|Net income (loss)           |  | $    | 533,160    |  |      | $ | (5,990,028 | )    | 
|Net income (loss) per share |  | $    | 0.01       |  |      | $ | (0.14      | )    | 
|Total assets                |  | $    | 45,800,011 |  |      | $ | 23,841,498 |      | 
|Total liabilities           |  | $    | 2,464,464  |  |      | $ | 7,382,741  |      | 



6







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 (refer to page 7 for details) in fiscal
2011 compared to a loss on derivative financial instruments of $2,405,857 that was recorded in 2010. There were no impairment losses
recorded in fiscal 2011. The Company’s net loss for fiscal 2010 increased to $5,990,028 from a net loss of $1,010,891 recorded
during fiscal 2009 mainly due to a loss of $2,405,857 on derivative financial instruments. The net loss during fiscal 2010 was
also significantly impacted by increased travel, consulting fees, salaries and stock based compensation expenses.



Results of Operations



For fiscal 2011, the Company reported
a net  income of $533,160 compared to a net loss of $5,990,028 reported for fiscal 2010. Expenses capitalized to mineral
properties are discussed under the “Exploration and Evaluation Expenditures” section below. Significant changes
in expenses occurred during fiscal 2011 in the expense categories described below as compared to fiscal 2010:



Consulting, management and professional
fees

Consulting, management and professional
fees increased to $1,191,315 for fiscal 2011 from $817,576 for fiscal 2010. The increase 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, increased by approximately
20% to $286,478 during fiscal 2011 from $238,356 during fiscal 2010, mainly related to higher accounting-related fees with respect
to the Company’s transition to IFRS effective January 1, 2011. 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 $328,439 for fiscal 2011 which significantly increased from $154,519 incurred fiscal 2010, due to increased visits
to the Company's projects in the DRC, as well as corporate travel costs in relation to the Company’s shareholder relations
and business promotion activities, particularly during the first quarter of 2011.



Employee benefits

The Company employee benefits expense increased
to $1,015,040 during fiscal 2011 compared to $585,543 recorded during fiscal 2010 due to the hiring of additional personnel.



Office and sundry

Office and sundry expenses increased to
$375,835 for fiscal 2011 compared to $78,023 for fiscal 2010, mainly due to increased rent and other office expenses as a result
of additional office space leased during fiscal 2011.



7







Gain on derivative financial instruments

A fair value adjustment gain of $5,215,060
was recorded for fiscal 2011, compared to a loss on derivative financial instruments of $2,405,857 recorded during fiscal 2010,
representing 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.



Foreign exchange loss (gain)

The Company recorded a foreign exchange
loss of $1,896 during fiscal 2011, compared to a foreign exchange gain of $307,662 recorded during fiscal 2010, 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 2011 increased to $1,671,475 from $1,211,529 recorded during the corresponding period in 2010.
This increase 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 2011 and fiscal 2010. 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.



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



|                              |  | 2010        |             |   | 2010        |   |           | 2010        |  |   | 2010        | 
|----------------------------- |  | ----------- | ----------- | - | ----------- | - | --------- | ----------- |  | - | ----------- | 
|                              |  | 4th Quarter |             |   | 3rd Quarter |   |           | 2nd Quarter |  |   | 1st Quarter | 
|                              |  |             |             |   |             |   |           |             |  |   |             | 
|Net income (loss)             |  | $           | (11,356,526 | ) |             | $ | 4,919,728 |             |  | $ | 1,312,170   | 
|Net earnings (loss) per share |  | $           | (0.26       | ) |             | $ | 0.11      |             |  | $ | 0.03        | 





8







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 is 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
2011 compared to $716,162 recorded during the first quarter of 2011. The Company’s net loss for the first quarter of 2011
decreased to $2,138,846 from $11,356,526 incurred during the fourth quarter of 2010 mainly due to the recording of the loss on
derivative financial instruments during the fourth quarter of 2010. The Company’s net loss during the fourth quarter of 2010
of $11,356,526 was $16,276,254 lower than the net income of $4,919,728 recorded in the third quarter of 2010. This was mainly due
to the loss on derivative financial instruments of $6,194,504 as opposed to a gain on derivative financial instruments of $5,290,413
in the third quarter of 2010. An impairment of $957,318 related to the Bas Congo project, an increase in salary expenses of $169,158
recorded in the fourth quarter with respect to year-end bonuses paid to employees, an increase in professional fees of $84,290
and a decrease in foreign exchange gain of $53,375 increased the loss in the fourth quarter. The Company’s net income of
$4,919,728 recorded in the third quarter of 2010 was significantly higher than the net income of $1,312,170 incurred in the second
quarter of 2010. This increase was due in part to a gain on derivative financial instruments of $5,290,413 in the third quarter
compared to a gain of only $2,222,850 in the second quarter of 2010. The Company’s net income in the second quarter of 2010
was $1,312,170 compared to a net loss in the first quarter of 2010 of $865,400. This was due to a gain on derivative instruments
of $2,222,850 in the second quarter compared to a loss on derivative financial instruments of $261,565 that was recorded in the
first quarter of 2010.



Liquidity and Capital Resources



The Company relies primarily on equity
financings to fund its activities. 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, 2011, the Company had
cash and cash equivalents of $14,667,658 and working capital of $14,050,905 compared to cash and cash equivalents of $10,449,774
and working capital of $9,823,378 as at December 31, 2010. The Company’s liquidity position was significantly improved during
the first quarter of 2011 as the Company completed financings involving the issuance of an aggregate of 10,200,000 common shares
of the Company at a price of Cdn$2.35 per share for gross proceeds of Cdn$23,970,000.



During the first quarter of 2012, the Company
received an additional $1,694,596 from the exercise of 1,075,000 common share purchase warrants, 48,999 agent warrants and 47,998
compensation options.



During fiscal 2011, the Company incurred
cash exploration expenditures of $16,482,374 (2010 - $7,818,987). A breakdown of all exploration expenditures by project for fiscal
2011 and fiscal 2010 is presented below under “Exploration and Evaluation Expenditures”.



The Company has a proposed operating budget for 2012 of approximately
$21,646,293 in the aggregate, allocated as follows:



9







|Ngayu project                     |  | $ | 14,000,369 | 
|--------------------------------- |  | - | ---------- | 
|North Kivu project                |  |   | 2,155,287  | 
|North Kivu Non-Gold project       |  |   | 384,190    | 
|Administration and office support |  |   | 5,106,447  | 
|                                  |  |   |            | 
|Total                             |  | $ | 21,646,293 | 



The Company’s current cash position
is expected to be sufficient to fund the Company’s proposed 2012 exploration program and corporate overhead until the second
or third quarter of 2012. The Company will need to raise additional funds to meet its financial obligations and to continue its
exploration programs in 2012 and beyond. There is no assurance that such financing will be available on acceptable terms, if at
all.



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, 2011 are as follows:



| | 2012 |  |  | $ | 154,817 | 
| | ---- |  |  | - | ------- | 
| |      |  |  | $ | 154,817 | 



Included in the Company’s minimum operating lease commitments
is an amount of $130,400 which relates to a minimum purchase obligation of helicopter services in the DRC.



Exploration and Evaluation Expenditures



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



10







|                            |  | Bas Congo |   |  | North Kivu |   |           |               |  |   |            | 
|--------------------------- |  | --------- | - |  | ---------- | - | --------- | ------------- |  | - | ---------- | 
|                            |  | Project   |   |  | Project    |   |           | Ngayu Project |  |   | Total      | 
|                            |  |           |   |  |            |   |           |               |  |   |            | 
|Balance 12/31/2010          |  | $         | - |  |            | $ | 5,529,725 |               |  | $ | 6,872,603  | 
|                            |  |           |   |  |            |   |           |               |  |   |            | 
|Opening adjustments:        |  |           |   |  |            |   |           |               |  |   |            | 
|IFRS adjustment January 1   |  |           | - |  |            |   | -         |               |  |   | 39,443     | 
|IFRS adjustment December 31 |  |           | - |  |            |   | -         |               |  |   | 216,021    | 
|                            |  |           | - |  |            |   | -         |               |  |   | 255,464    | 
|                            |  |           |   |  |            |   |           |               |  |   |            | 
|Field camps                 |  |           | - |  |            |   | 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          |  |           | - |  |            |   | 65,807    |               |  |   | 318,206    | 
|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    | 
|Subtotal                    |  |           | - |  |            |   | 2,066,983 |               |  |   | 15,365,588 | 
|Balance 12/31/2011          |  |           | - |  |            | $ | 7,596,708 |               |  | $ | 22,493,655 | 



The following table provides a breakdown
of the Company's exploration and evaluation expenditures incurred during fiscal 2010:



|                            |  | Bas Congo |          |   | North Kivu |   |           |               |  |   |           | 
|--------------------------- |  | --------- | -------- | - | ---------- | - | --------- | ------------- |  | - | --------- | 
|                            |  | Project   |          |   | Project    |   |           | Ngayu Project |  |   | Total     | 
|                            |  |           |          |   |            |   |           |               |  |   |           | 
|Balance 12/31/2009          |  | $         | 865,971  |   |            | $ | 4,021,074 |               |  | $ | 67,357    | 
|IFRS adjustment             |  |           |          |   |            | $ | -         |               |  | $ | 39,443    | 
|Adjusted balance 12/31/2009 |  | $         | 865,971  |   |            | $ | 4,021,074 |               |  | $ | 106,800   | 
|Field camps                 |  |           | 805      |   |            |   | 146,300   |               |  |   | 696,556   | 
|Geochemistry                |  |           | 188      |   |            |   | 111,569   |               |  |   | 265,616   | 
|Geology                     |  |           | 833      |   |            |   | 13,948    |               |  |   | 74,224    | 
|Drilling                    |  |           | -        |   |            |   | 1,879     |               |  |   | 839,182   | 
|Helicopter                  |  |           | -        |   |            |   | 150,635   |               |  |   | 1,031,369 | 
|Professional fees           |  |           | 8,527    |   |            |   | 9,627     |               |  |   | 11,226    | 
|Business promotion          |  |           | 10,200   |   |            |   | 73,791    |               |  |   | 223,522   | 
|Travel                      |  |           | -        |   |            |   | 129,370   |               |  |   | 401,362   | 
|Office and sundry           |  |           | -        |   |            |   | 157,245   |               |  |   | 429,581   | 
|Interest and bank charges   |  |           | 4,962    |   |            |   | 28,829    |               |  |   | 43,765    | 
|Consulting fees             |  |           | 46,547   |   |            |   | 113,187   |               |  |   | 54,189    | 
|Salaries                    |  |           | 10,742   |   |            |   | 461,448   |               |  |   | 1,890,479 | 
|Stock based compensation    |  |           | -        |   |            |   | -         |               |  |   | 460,604   | 
|Amortization                |  |           | -        |   |            |   | 22,794    |               |  |   | 102,859   | 
|Other                       |  |           | 8,543    |   |            |   | 88,029    |               |  |   | 280,712   | 
|Subtotal                    |  |           | 91,347   |   |            |   | 1,508,651 |               |  |   | 6,805,246 | 
|Impairment loss             |  |           | (957,318 | ) |            |   | -         |               |  |   | -         | 
|IFRS adjustment             |  |           | -        |   |            |   | -         |               |  |   | 216,021   | 
|                            |  |           |          |   |            |   |           |               |  |   |           | 
|Balance 12/31/2010          |  | $         | -        |   |            | $ | 5,529,725 |               |  | $ | 7,128,067 | 



11







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
30, 2012, the Company had outstanding 59,344,732 common shares, 1,000,000 common share purchase warrants (exercisable at a price
of Cdn$2.30 per share until December 2012), 5,055,000 stock options to purchase common shares and 510,000 broker warrants (which
were granted to the underwriters as part of the consideration for their services under the 2011 brokered private placement financing
and are exercisable at a price of Cdn$2.35 per share until February 2013).



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 year, ended December 31, 2011 and 2010 was as follows:



|                                          |  | Year ended   |           |  | Year ended   |  
|----------------------------------------- |  | ------------ | --------- |  | ------------ | -
|                                          |  | December 31, |           |  | December 31, |  
|                                          |  | 2011         |           |  | 2010         |  
|Salaries                                  |  | $            | 859,237   |  |              | $
|Employee retention allowance              |  | $            | 62,166    |  |              | $
|Compensation expense-share-based payments |  | $            | 1,348,721 |  |              | $
|                                          |  | $            | 2,270,124 |  |              | $



12







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



As at December 31, 2011, an
amount of $152,833 was due to related companies with common directors related to common expenses in the DRC (December 31, 2010
- $118,765). In addition, as at December 31, 2011, an amount of $nil was due from a company with common directors (December 31,
2010 - $2,346).



|                         |  | December 31, |         |  | December 31, |  |         | January 1, | 
|------------------------ |  | ------------ | ------- |  | ------------ |  | ------- | ---------- | 
|                         |  | 2011         |         |  | 2010         |  |         | 2010       | 
|                         |  | $            |         |  | $            |  |         | $          | 
|Due from related parties |  |              | -       |  |              |  | 2,346   |            | 
|Due to related party     |  |              | 152,833 |  |              |  | 118,765 |            | 



New Pronouncements Adopted



December 31, 2011 is the Company’s
fourth reporting period under IFRS. Accounting standards effective for periods beginning on January 1, 2011 have been adopted as
part of the transition to IFRS.



Transition to IFRS



IFRS 1, First Time Adoption of IFRS, requires
that comparative financial information be provided. As a result, the first date at which the Company has applied IFRS was January
1, 2010. IFRS 1 requires first-time adopters to retrospectively apply all effective IFRS standards as of the reporting date, which
for the Company will be December 31, 2011. However, it also provides for certain optional exemptions and certain mandatory exceptions
for first-time IFRS adoption. Prior to transition to IFRS, the Company prepared its financial statements in accordance with Canadian
GAAP.



In preparing the Company’s opening
IFRS consolidated statements of financial position, the Company has adjusted amounts reported previously in the financial statements
prepared in accordance with previous Canadian GAAP. The IFRS 1 applicable exemptions and exceptions applied in the conversion from
Canadian GAAP to IFRS are as follows:



| | i) | Business Combinations
| | -- | ---------------------



The Company has elected not
to retrospectively or prospectively apply IFRS 3  to the business combination that occurred prior to the transition
date and therefore, has not restated any of these transactions.



| | ii) | Share-based payment transactions
| | --- | --------------------------------



The Company has elected not to
retrospectively apply IFRS 2 to equity instruments that were granted and that vest before the transition date and therefore,
has not restated any of these transaction.



13







| | iii) | Estimates
| | ---- | ---------



The estimates previously made by the Company
under Canadian GAAP were not revised for the application of IFRS except where necessary to reflect any difference in accounting
policy or where there was objective evidence that those estimates were in error. As a result, the Company has not used hindsight
to create or revise estimates.



IFRS employs a conceptual framework that
is similar to Canadian GAAP. However significant differences exist in certain matters of recognition, measurement and disclosure.
While the adoption has not changed the Company’s actual cash flows, it has resulted in changes to the Company’s consolidated
statements of financial position and statements of operations and comprehensive income (loss). The statement of comprehensive income
(loss) has been changed to comply with IAS 1 Presentation of Financial Statements. The Canadian GAAP consolidated balance sheets
as at January 1, 2010 and December 31, 2010, the consolidated statements of operations and comprehensive income (loss) for the
year ended December 31, 2010 as well as the consolidated statement of cash flows for the year ended December 31, 2010 have been
reconciled to IFRS, with a summary of the most significant changes in policy as follows:



| | a) | Share-Based Payments
| | -- | --------------------



Under IFRS 2 Share-Based Payments, each
tranche of an award with different graded vesting are accounted for as separate awards and the resulting fair value is amortized
over the vesting period of the respective tranches. Under Canadian GAAP, the Company was accounting for these as a single award.
In addition, under IFRS 2, 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. Under Canadian GAAP, forfeitures
were recognized as they occurred.



The impact of adjustments related to share-based
payments on the Company’s consolidated statements of financial position is as follows:



|                                       |  | December 31, 2010 |          |   | January 1, 2010 | 
|-------------------------------------- |  | ----------------- | -------- | - | --------------- | 
|                                       |  | $                 |          |   | $               | 
|Exploration and evaluation assets      |  |                   | 216,021  |   |                 | 
|Impact on total assets                 |  |                   | 216,021  |   |                 | 
|                                       |  |                   |          |   |                 | 
|Deferred taxes                         |  |                   | 227,045  |   |                 | 
|Contributed surplus                    |  |                   | 417,770  |   |                 | 
|Deficit                                |  |                   | (428,794 | ) |                 | 
|Impact on total liabilities and equity |  |                   | 216,021  |   |                 | 



| | b) | Common Share Purchase Warrants
| | -- | ------------------------------



Under Canadian GAAP, the Company accounted
for its Cdn$ denominated common share purchase warrants as equity instruments measured at their historical cost. Under IFRS, warrants
issued with exercise prices denominated in currencies other than the Company’s functional currency are considered derivative
instruments and have been reclassified as liabilities measured at fair value. On initial recognition and at each subsequent reporting
date the derivatives are adjusted to fair value and changes in fair value are recognized in the consolidated statement of comprehensive
income (loss).



14







The impact of adjustments related to the
common share purchase warrants on the Company’s consolidated statements of financial position is as follows:



|                                       |  | December 31, 2010 |            |   | January 1, 2010 | 
|-------------------------------------- |  | ----------------- | ---------- | - | --------------- | 
|                                       |  | $                 |            |   | $               | 
|Common share purchase warrants         |  |                   | 6,006,322  |   |                 | 
|Impact on total liabilities            |  |                   | 6,006,322  |   |                 | 
|                                       |  |                   |            |   |                 | 
|Share capital                          |  |                   | (3,600,465 | ) |                 | 
|Deficit                                |  |                   | (2,405,857 | ) |                 | 
|Impact on total liabilities and equity |  |                   | (6,006,322 | ) |                 | 



| | c) | Mineral Properties
| | -- | ------------------



Mineral properties as reported under Canadian GAAP have been
classified into exploration and evaluation assets under IFRS. There was no impact on the statement of comprehensive income (loss).



A revised version of IAS 24 Related party
disclosures (“IAS 24”) was issued by the IASB on November 4, 2009. IAS 24 requires entities to disclose in their
consolidated financial statements information about transactions with related parties. Generally, two parties are related to each
other if one party controls, or significantly influences, the other party. IAS 24 has simplified the definition of a related party
and removed certain of the disclosures required by the predecessor standard. The revised standard is effective for annual periods
beginning on or after January 1, 2011. The adoption of this issuance did not have a significant impact on the Company’s consolidated
financial statements.



IFRS 7 Financial instruments: disclosures
(“IFRS 7”) The Accounting Standards Board ("AcSB") approved the incorporation of the IASB's
amendments to IFRS 7 Financial Instruments: Disclosures and the related amendment to IFRS 1 First-time Adoption of International
Financial Reporting Standards into Part I of the Canadian Institute of Chartered Accountants Handbook. These amendments were made
to Part I in January 2011 and are effective for annual periods beginning on or after July 1, 2011. Earlier application is permitted.
The amendments relate to required disclosures for transfers of financial assets to help users of the financial statements evaluate
the risk exposures relating to such transfers and the effect of those risks on an entity's financial position. The Company’s
adoption of IFRS 7 had no significant impact on its consolidated financial statements.



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:



15







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 is currently evaluating the impact of this standard 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 is currently evaluating the impact of this standard 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 is currently evaluating the impact of this standard 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 is currently evaluating the impact of this standard on its consolidated financial statements.



An amendment to IAS 1, Presentation of
financial statements (“IAS 1”) was issued by the IASB in June 2011. The amendment requires separate presentation
for items of other comprehensive income that would be reclassified to profit or loss in the future, such as foreign currency differences
on disposal of a foreign operation, if certain conditions are met from those that would never be reclassified to profit or loss.
The effective date is July 1, 2012 and earlier adoption is permitted. The Company is currently evaluating the impact of this amendment
on its consolidated financial statements.



An amendment to IAS 12, Income Taxes (“IAS
12”) was issued by the IASB in June 2011. The amendment requires that deferred tax on non-depreciable assets measured
should always be measured on a sale basis. The amendments to IAS 12 are effective for annual periods beginning on or after January
1, 2012. The Company is currently evaluating the impact of the amendments on its consolidated financial statements.



16







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 is currently evaluating
the impact of the amendments on its consolidated financial statements.



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 is currently evaluating the impact of the amendments 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 is currently
evaluating the impact of the amendments on its consolidated financial statements.



In October 2011, IFRIC published IFRIC
Interpretation 20, Stripping Costs in the Production Phase of a Surface Mine (“IFRIC 20”). The Interpretation
requires stripping activity costs, which provide improved access to ore, to be recognized as a non-current 'stripping activity
asset' when certain criteria are met. The stripping activity asset is depreciated or amortised on a systematic basis, over the
expected useful life of the identified component of the ore body that becomes more accessible as a result of the stripping activity,
using the units of production method unless another method is more appropriate. The requirements of IFRIC 20 are effective for
annual periods beginning on or after January 1, 2013. The Company is currently evaluating the impact of the amendments 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:



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.



17







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.



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.



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.



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.



18







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, 2011 and 2010 included:



|Years ended                  |  | December 31, 2011 |                   |  | December 31, 2010 | 
|---------------------------- |  | ----------------- | ----------------- |  | ----------------- | 
|Risk Free Interest Rate      |  |                   | 1.83% - 2.18%     |  |                   | 
|Expected life                |  |                   | 3 years           |  |                   | 
|Annualized volatility        |  |                   | 101.78% - 115.19% |  |                   | 
|Dividend yield               |  |                   | 0%                |  |                   | 
|Forfeiture rate              |  |                   | 2%                |  |                   | 
|Grant date fair value (Cdn$) |  |                   | $1.69 - $2.06     |  |                   | 



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. 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.



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



|Year ended              |  | December 31, 2011 |                    |  | December 31, 2010 | 
|----------------------- |  | ----------------- | ------------------ |  | ----------------- | 
|Risk free interest rate |  |                   | 0.97% - 1.77%      |  |                   | 
|Expected life           |  |                   | 0.13 to 0.96 years |  |                   | 
|Annualized volatility   |  |                   | 69.44% - 76.58%    |  |                   | 
|Dividend yield          |  |                   | 0%                 |  |                   | 
|Fair value (Cdn$)       |  |                   | $0.61 - $1.04      |  |                   | 



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.



19









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 is ranked Level 1 as the market value is readily observable.
The carrying value of cash 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 15a 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.



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.



20







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.



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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 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 2011 and 2010,
the Company recorded a foreign exchange loss of $1,896 and a foreign exchange gain of $307,662, 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.



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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 29, 2012 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, 2011, 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, 2011, 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.



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, 2011, 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, 2011, 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, 2011, that management believes have materially affected, or are reasonably likely
to materially affect, the Company’s internal control over financial reporting.



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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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