UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, DC 20549


_________________________





FORM 20-F


_________________________





o
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12 (g) OF THE SECURITIES EXCHANGE ACT OF 1934





x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended
August 31, 2012





o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from to




o
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Date of event requiring this shell company report




Commission File Number 001-32500





TANZANIAN ROYALTY EXPLORATION CORPORATION


(Exact Name of Registrant as Specified in Its Charter)





ALBERTA, CANADA


(Jurisdiction of Incorporation or Organization)





Suite 404 – 1688 152nd Street


South Surrey, BC


V4A 4N2


(Address of Principal Executive Offices)




James Sinclair


Chief Executive Officer


Tanzanian Royalty Exploration Corporation


Suite 404 – 1688 152nd Street


South Surrey, BC


V4A 4N2


Telephone:  604 536-7873


Fax: 604 536-2529


(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)





Securities registered or to be registered pursuant to Section 12(b) of the Act:





Common Shares, without Par Value


(Title of Class)











Securities registered or to be registered pursuant to Section 12(g) of the Act: NONE





Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:  NONE





Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:  100,459,937.





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.


o Yes                      x No





If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  o Yes     x No





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


x Yes  o No





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


o Yes  o No




Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):


Large accelerated filer  o                                                      Accelerated filer  x                                                      Non-accelerated filer  o





Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:





U.S. GAAP o


International Financial Reporting Standards as issued by the International Accounting Standards Board xOther o




If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the Company has elected to follow.


Item 17  o                                Item 18  o





If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  o Yesx No





TABLE OF CONTENTS




Cautionary Note to U.S. Investors Concerning Estimates of Mineral Resources
1Currency
1Foreign Private Issuer Filings
1Glossary of Technical Terms
2Part I
7Item 1.
Identity of Directors, Senior Management and Advisers
7Item 2.
Offer Statistics and Expected Timetable
7Item 3.
Key Information
7A.
Selected Financial Data
7B.
Capitalization and Indebtedness
9C.
Reasons for the Offer and Use of Proceeds
9D.
Risk Factors
9Item 4.
Information on the Company
19A.
History and Development of the Company
19B.
Business Overview
21Plan of Operations
21Governmental Regulations
23C.
Organizational Structure
24D.
Property, Plant and Equipment
24Buckreef Property
25Kigosi Property
41Lunguya Property
45Itetemia Property
48Luhala Property
52Item 4.A.

Unresolved Staff Comments
54Item 5.

Operating and Financial Review and Prospects
54A.
Operating Results
54B.
Liquidity and Capital Resources
58C.
Research and Development, Patents and License, etc.
60D.
Trend Information
60E.
Off Balance Sheet Arrangements
60F.
Tabular Disclosure of Contractual Obligations
60Item 6.

Directors, Senior Management and Employees
61A.
Directors and Senior Management
61B.
Executive Compensation
66C.
Board Practices
74D.
Employees
80E.
Share Ownership
80Item 7.

Major Shareholders and Related Party Transactions
81A.
Major Shareholders
81B.
Related Party Transactions
81C.
Interests of Experts and Counsel
82
  
  Item 8.
Financial Statements
82A.
Consolidated Statements and Other Financial Information
83B.
Significant Changes
83Item 9.
The Offering and Listing
83A.
Offering and Listing Details
83B.
Plan of Distribution
85C.
Markets
85D.
Selling Shareholders
85E.
Dilution
85F.
Expenses of the Issue
85Item 10.
Additional Information
85A.
Share Capital
85B.
Articles of Association and Bylaws
86C.
Material Contracts
88D.
Exchange Controls
89E.
Taxation
90F.
Dividends and Paying Agents
98G.
Statement by Experts
98H.
Documents on Display
98I.
Subsidiary Information
99Item 11.
Quantitative and Qualitative Disclosures About Market Risk
99Item 12.
Description of Securities Other than Equity Securities
99Part II

100Item 13.
Defaults, Dividend Arrears and Delinquencies
100Item 14.
Material Modifications to the Rights of Security Holders and Use of Proceeds
100Item 15.
Controls and Procedures
103Item 16 A.
Audit Committee Financial Expert
104Item 16 B.
Code of Ethics
104Item 16 C.
Principal Accountant Fees and Services
104Item 16 D.
Exemptions from the Listing Standards for Audit Committees
105Item 16 E.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
105Item 16 F.
Change in Registrant's Certifying AccountantItem 16 G.
Corporate Governance
105Item 16 F
Mine Safety Disclosure
105Part III

106Item 17.
Financial Statements
106Item 18.
Financial Statements
106Item 19.
Exhibits
106





Cautionary Note to U.S. Investors Concerning Estimates of Mineral Resources




The Company advises U.S. investors that while the terms “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources” (see “Glossary of Technical Terms – Canadian Terminology” herein) are recognized and required by Canadian securities regulations,  and the U.S. Securities and Exchange Commission (the “SEC”) and their regulations do not recognize them.  U.S. investors are cautioned not to assume that any part or all of mineral resources in these categories will ever be converted into mineral reserves.





As an Alberta corporation, the Company is subject to certain rules and regulations issued by Canadian Securities Administrators.  The Company files this Annual Report on Form 20-F as its Annual Information Form (“AIF”) with the British Columbia, Alberta and Ontario Securities Commissions via the System for Electronic Document Analysis and Retrieval (“SEDAR”).  Under the filing requirements for an AIF, the Company is required to provide detailed information regarding its properties including mineralization, drilling, sampling and analysis, security of samples, and mineral resource and mineral reserve estimates, if any.  Further, the Company may describe its properties utilizing terminology such as “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources” that are permitted by Canadian securities regulations, but are not recognized by the SEC.  For clarification, the Company has no properties that contain “mineral reserves” as defined by either the SEC or Canadian securities regulations.




Currency




All references to dollar amounts are expressed in the lawful currency of Canada, unless otherwise specifically stated.




Foreign Private Issuer Filings




As a foreign private issuer registered under section 12(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), the Company is subject to section 13 of the Exchange Act, and is required to file Annual Reports on Form 20-F and Reports of Foreign Private Issuer on Form 6-K with the SEC.  However, the Company is exempt from the proxy rules under section 14 of the Exchange Act, and the short-swing profit rules under section 16 of the Exchange Act.




1





Glossary of Technical Terms





Ag
The elemental symbol for silver.alteration
Mineralogical change at low pressures due to invading fluids or the influence of chemical reactions in a rock mass resulting from the passage of hydrothermal fluids.anomaly
Any concentration of metal noticeably above or below the average background concentration.assay
An analysis to determine the presence, absence or quantity of one or more components.Au
The elemental symbol for gold.background
Traces of elements found in sediments, soils, and plant material that are unrelated to any mineralization and which come from the weathering of the natural constituents of the rocks.Barrick
Barrick Gold Corp.BEAL
Barrick Exploration Africa Limited.BLEG
Acronym for “bulk leach extractable gold” sampling.Cu
The elemental symbol for copper.dyke
A tabular body of igneous rock that has been injected while molten into a fissure.exploration information
Means geological, geophysical, geochemical, sampling, drilling, trenching, analytical testing, assaying, mineralogical, metallurgical and other similar information concerning a particular property that is derived from activities undertaken to locate, investigate, define or delineate a mineral prospect or mineral deposit.fault
A planar fracture or discontinuity in a volume of rock, across which there has been significant displacement.Fe
The elemental symbol for iron.feasibility study
Is a comprehensive technical and economic study of the selected development option for a mineral project that includes appropriately detailed assessments of realistically assumed mining, processing, metallurgical, economic, marketing, legal, environmental, social and governmental considerations together with any other relevant operational factors and detailed financial analysis, that are necessary to demonstrate at the time of reporting that extraction is reasonably justified (economically mineable).  The results of the study may reasonably serve as the basis for a final decision by a proponent or financial institution to proceed with, or finance, the development of the project.  The confidence level of the study will be higher than that of a Pre-Feasibility Study.fracture
Any local separation or discontinuity plane in a geologic formation, such as a joint or a fault that are commonly caused by stress exceeding the rock strength.
  2
  grade
The concentration of each ore metal in a rock sample, usually given as weight percent.  Where extremely low concentrations are involved, the concentration may be given in grams per tonne (g/t or gpt) or ounces per ton (oz/t).  The grade of an ore deposit is calculated, often using sophisticated statistical procedures, as an average of the grades of a very large number of samples collected from throughout the deposit.hectare or ha
An area totalling 10,000 square metres.hydrothermal
Hot fluids, usually mainly water, in the earth's crust which may carry metals and other compounds in solution to the site of ore deposition or wall rock alteration.IP
Induced polarization survey, a form of geophysical survey used in the exploration for minerals.intrusive
A rock mass formed below earth's surface from magma which has intruded into a pre-existing rock mass.Jinchuan Mining
Jinchuan Mining, a Chinese metals company.JORC
The Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia.JV
A joint venture, which is a term for a contractual relationship between parties, usually for a single purpose, which is not a partnership.Kazakh
Kazakh Africa Mining Ltd.kilometres or km
Metric measurement of distance equal to 1,000 metres (or 0.6214 miles).mill
A facility for processing ore to concentrate and recover valuable minerals.mineral reserve
That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.mineralization
The hydrothermal deposition of economically important metals in the formation of ore bodies or "lodes”.net smelter or NSR royalty
Payment of a percentage of net mining profits based on returns from the smelter, after deducting applicable smeltering charges.Newmont
Newmont Overseas Exploration Corporation.NI 43-101
National Instrument 43-101, “Standards of Disclosure for Mineral Projects”, as adopted by the Canadian Securities Administrators, as the same may be amended or replaced from time to time, and shall include any successor regulation or legislation.ore
A mineral or an aggregate of minerals from which a valuable constituent, especially a metal, can be profitably mined or extracted.outcrop
An exposure of rock at the earth's surface.overburden
A general term for any material covering or obscuring rocks from view.Pb
The elemental symbol for lead.porphyry
A variety of igneous rock consisting of large-grained crystals, such as feldspar or quartz, dispersed in a fine-grained feldspathic matrix or groundmass.ppm or parts per million
A unit of measurement which is 1000 times larger than parts per billion (i.e. ppb); 1 ppm is equivalent to 1000 ppb, and is also equivalent to 1 gram/tonne.
  3
   prefeasibility study and preliminary feasibility study
Each mean a comprehensive study of a range of options for the technical and economic viability of a mineral project that has advanced to a stage where a preferred mining method, in the case of underground mining, or the pit configuration, in the case of open pit, is established and an effective method of mineral processing is determined. It includes a financial analysis based on reasonable assumptions on mining, processing, metallurgical, economic, marketing, legal, environmental, social and governmental considerations and the evaluation of any other relevant factors which are sufficient for a Qualified Person, acting reasonably, to determine if all or part of the Mineral Resource may be classified as a Mineral Reserve.Pyrrhotite
A bronze coloured mineral of metallic lustre that consists of ferrous sulphide and is attracted by a magnet.pyrite
Iron sulphide mineral.Qualified Person
An individual who is an engineer or geoscientist with at least five years of experience in mineral exploration, mine development or operation or mineral project assessment, or any combination of these; has experience relevant to the subject matter of the mineral project and the technical report; and is a member or licensee in good standing of a professional association.quartz
Silica or SiO2, a common constituent of veins, especially those containing gold and silver mineralization.RAB
Rotary air blast drilling.RC
Reverse circulation drilling.reef
A geological discontinuity which served as a trap or conduit for hydrothermal mineralizing fluids to form an ore deposit.Sb
The elemental symbol for antimony (stibnite).silicification
Replacement and or impregnation of the constituent of a rock by quartz rich hydrothermal fluids or (silica).Sloane
Sloane Developments Ltd., a corporation based in the United Kingdom.Songshan
Songshan Mining Co. Ltd., a corporation based in the People’s Republic of China.Stamico
State Mining Corporation of Tanzania.Tancan
Tancan Mining Company Limited, a wholly-owned Tanzanian subsidiary of the Company.Tanzam
Tanzania American International Development Corporation 2000 Limited, a wholly-owned Tanzanian subsidiary of the Company.test pits
Shallow holes dug at spots along the strike of any mineralization or, if it is disseminated, anywhere in the area where the shallow holes might reach mineralized bedrock.ton
Imperial measurement of weight equivalent to 2,000 pounds (sometimes called a “short ton”).tonne
Metric measurement of weight equivalent to 1,000 kilograms (or 2,204.6 pounds).tuff
A rock comprised of fine fragments and ash particles ejected from a volcanic vent.
  4
  veins
Distinct sheetlike body of crystallized mineral constituents carried by hydrothermal aqueous solutions that are deposited through precipitation within the host country rock. These bodies are often the source of mineralisation either in or proximal to the veins.Canadian Terminology

The following terms may be used in the Company’s technical reports to describe its mineral properties and have been used in this Annual Report (see “Cautionary Note to U.S. Investors Concerning Estimates of Measured and Indicated Mineral Resources”).  These definitions have been published by the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) as the CIM Standards on Mineral Resources and Reserves Definitions and Guidelines adopted by the CIM Council on November 27, 2010, and have been approved for use by Canadian reporting issuers by the Canadian Securities Administrators under NI 43-101, and as those definitions may be amended:Measured Mineral Resource
That part of a Mineral Resource for which quantity, grade or quality, densities, shape, and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit.  The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological grade and continuity.Indicated Mineral Resource
That part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics, can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit.  The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.Inferred Mineral Resource
That part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity.  The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.

Confidence in the estimate is insufficient to allow the meaningful application of technical and economic parameters or to enable an evaluation of economic viability worthy of public disclosure.
  5
  Mineral Reserve
A Mineral Reserve is the economically mineable part of a Measured or Indicated Mineral Resource demonstrated by at least a Preliminary Feasibility Study.  This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.  A Mineral Reserve includes diluting materials and allowances for losses that may occur when the material is mined.

Mineral resources are sub-divided in order of increasing confidence into Probable Mineral Reserves and Proven Mineral Reserves.  A Probable Mineral Reserve has a lower level of confidence than a Proven Mineral Reserve.  The term “mineral reserve” need not necessarily signify that extraction facilities are in place or operative or that all governmental approvals have been received.  It does signify that there are reasonable expectations of such approvals.Mineral Resource
A concentration or occurrence of diamonds, natural solid inorganic material, or natural solid fossilized organic material including base and precious metals, coal, and industrial minerals in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction.  The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge.

A Mineral Resource is an inventory of mineralization that under realistically assumed and justifiable technical and economic conditions might become economically extractable.Probable Mineral Reserve
Is the economically mineable part of an Indicated and, in some circumstances, a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study.  This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.Proven Mineral Reserve
Is the economically mineable part of a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study.  This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified.

The term should be restricted to that part of the deposit where production planning is taking plce and for which any variation in the estimate would not significantly affect potential economic viability.





6


Part I





Item 1.   Identity of Directors, Senior Management and Advisers





A.           Directors and Senior Management:





Not Applicable.





B.           Advisers





Not Applicable.





Item 2.  Offer Statistics and Expected Timetable





Not Applicable.





Item 3.   Key Information





A.           Selected Financial Data





In February 2008, the Canadian Accounting Standards Board confirmed that Canadian publicly accountable enterprises will be required to adopt International Financial Reporting Standards (“IFRS”) for financial periods beginning on and after January 1, 2011.  The Company has adopted IFRS with an adoption date of September 1, 2011 and a transition date of September 1, 2010.





The audited financial statements for the issuer’s financial year ended August 31, 2012 are prepared in accordance with IFRS.  The following selected financial data is based on financial statements prepared in accordance with IFRS and is presented for the two most recent financial years.  Prior to the two most recent financial years, the historical financial data presented in the following tables set forth and summarize selected consolidated financial data for the Company prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) and US GAAP.   Unless stated otherwise, reference to dollar amounts shall mean Canadian dollars.





For each of the years in the five year periods ended August 31, the information in the tables was extracted from the more detailed audited financial statements of the Company.





The selected financial data should be read in conjunction with Item 5, “Operating and Financial Review and Prospects” and in conjunction with the consolidated financial statements of the Company and the notes thereto contained elsewhere in this Annual Report.  The Company’s fiscal period ends on August 31 of each year.





The following is a summary of certain selected financial information for the Company’s five most recently completed fiscal years (in Canadian dollars, except number of shares):




7




IFRS 2012-2011


2012


2011Operations:Revenues

$
--


$
--Net loss


(8,897,843
)


(11,132,371
)Basic and diluted loss per share


(0.09
)


(0.12
)Balance sheet:Working Capital


18,165,431



30,451,179Total Assets


63,256,530



67,632,380Net Assets


50,750,851



56,491,892Share Capital


113,476,858



109,935,253Number of Shares


100,459,937



99,758,753Deficit


64,266,823



55,504,339





Canadian GAAP 2010 - 2008


2010


2009


2008Operations:Revenues

$
--


$
--


$
--Net loss


(3,427,655
)


(4,731,836
)


(3,698,045
)Basic and diluted

loss per share


(0.04
)


(0.05
)


(0.04
)Balance sheet:Working Capital


1,113,969



943,219



1,264,534Total Assets


32,783,560



29,285,205



26,956,294Net Assets


30,321,539



28,601.035



26,380,456Share Capital


72,855,310



68,111,716



61,705,400Number of Shares


91,415,459



89,782,544



88,114,352Deficit


43,884,125



40,456,470



35,724,634




8




U.S. GAAP 2010 – 2008




2010


2009


2008Operations:Revenues

$
--


$
--


$
--Net loss


(6,472,311
)


(7,720,030
)


(5,738,430
)Basic and diluted loss per share


(0.07
)


(0.09
)


(0.07
)Balance sheet:Working Capital


1,113,969



943,219



1,264,534Total Assets


8,879,270



8,289,169



9,044,354Net Assets


6,494,100



7,399,383



8,459,516Share Capital


76,484,387



71,339,854



64,460,328Number of Shares


91,415,459



89,782,544



88,114,352Deficit


(70,679,742
)


(64,207,431
)


(56,400,502
)




9


Exchange Rates





The Company’s accounts are maintained in Canadian dollars.  In this Annual Report, all dollar amounts are expressed in Canadian dollars, except where otherwise indicated.  The following table sets forth information as to the period end, average, the high and the low exchange rate for Canadian Dollars (“CDN”) and U.S. Dollars for the periods indicated based on the noon buying rate in New York City for cable transfers in Canadian Dollars as certified for customs purposes by the Federal Reserve Bank of New York (Canadian dollar = US$1):





Year Ended:

August 31
Average
Period End
High
Low2012
1.008
0.9862
1.0605
0.97512011
0.988
0.9783
1.052
0.94482010
1.044
1.064
1.106
0.9962009
1.177
1.0967
1.2995
1.03382008
1.006
1.0631
1.0677
0.9168





The following table sets forth the high and low exchange rate for the past six months.  As of August 31, 2012, the exchange rate was CDN $0.9862 for each US$1.00.





Month
High
LowOctober 2012
1.0003
0.9763September 2012
0.9901
0.971August 2012
1.0017
0.9862July 2012
1.0215
1.0014June 2012
1.0414
1.019May 2012
1.0349
0.9839





B.           Capitalization and Indebtedness





Not Applicable.





C.           Reasons for the Offer and Use of Proceeds





Not Applicable.





D.           Risk Factors





An investment in our Common Shares involves a high degree of risk and should be considered speculative. You should carefully consider the following risks set out below and other information before investing in our Common Shares.  If any event arising from these risks occurs, the Company’s business, prospects, financial condition, results of operations or cash flows could be adversely affected, the trading price of Common Shares could decline and all or part of any investment may be lost.




10





The operations of the Company are highly speculative due to the high-risk nature of its business, which include the acquisition, financing, exploration and development of mineral properties.  The risks and uncertainties set out below are not the only ones facing the Company.  Additional risks and uncertainties not currently known to the Company, or that the Company currently deems immaterial, may also impair the Company’s operations.  If any of the risks actually occur, the Company’s business, financial condition and operating results could be adversely affected.  As a result, the trading price of the Common Shares could decline and investors could lose part or all of their investment. The Company’s business is subject to significant risks and past performance is no guarantee of future performance.




Risks relating to the Company




The Company has incurred net losses since its inception and expects losses to continue.




The Company has not been profitable since its inception.  For the fiscal year ended August 31, 2012, the Company had a net loss of $8,897,843 and an accumulated deficit on August 31, 2012 of $64,266,823.  The Company has never generated revenues and does not expect to generate revenues from operations until one or more of its properties are placed in production.  There is a risk that none of the Company’s properties will be placed in production, and that the Company’s operations will not be profitable in the future.




The Company’s exploration activities are highly speculative and involve substantial risks.




The Company’s exploration activities are highly speculative and involve substantial risks.  All of the Company’s properties are in the exploration stage and no proven mineral reserves have been established. The Company’s exploration work may not result in the discovery of mineable deposits of ore in a commercially economical manner. There may be limited availability of water, which is essential to milling operations, and interruptions may be caused by adverse weather conditions. The Company’s operations are subject to a variety of existing laws and regulations relating to exploration and development, permitting procedures, safety precautions, property reclamation, employee health and safety, air quality standards, pollution and other environmental protection controls. The Company’s exploration activities are subject to substantial hazards, some of which are not insurable or may not be insured for economic reasons.




The Company has uninsurable risks.




The Company may be subject to unforeseen hazards such as unusual or unexpected formations and other conditions. The Company may become subject to liability for pollution, cave-ins or hazards against which it cannot insure or against which it may elect not to insure. The payment of such liabilities may have a material adverse effect on the Company’s financial position.




The Company depends on key management personnel.




The success of the operations and activities of the Company is dependent to a significant extent on the efforts and abilities of its management including James E. Sinclair, President and Chief Executive Officer, and Steve van Tongeren, Chief Financial Officer.  Investors must be willing to rely to a significant extent on their discretion and judgment. The Company does not have employment contracts with the President and Chief Executive Officer or the Chief Financial Officer. The Company maintains key-man life insurance on the President and Chief Executive Officer but not on the Chief Financial Officer of the Company.




11




Failure to maintain effective internal controls could have a material adverse effect on the Company’s operations.




The Company is required to document and test its internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of the United States, which requires annual management assessments of the effectiveness of the Company’s internal controls over financial reporting, and a report by the Company’s independent auditors addressing these assessments. During the course of the Company’s testing, the Company may identify material weaknesses which the Company may not be able to remediate for its annual compliance with the requirements of Section 404. If the Company fails to achieve and maintain the adequacy of its internal controls, as such standards are modified, supplemented or amended from time to time, the Company may not be able to ensure that the Company can conclude on an ongoing basis that the Company has effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover, effective internal controls are necessary for the Company to produce reliable financial reports and are important to help prevent financial fraud. If the Company cannot provide reliable financial reports or prevent fraud, the Company’s business and operating results could be harmed, investors could lose confidence in the Company’s reported financial information, and the trading price of the Company’s stock could drop significantly.




The Company may need additional capital.




As at August 31,2012, the Company had cash and marketable securities of $20,058,678 and working capital of $18,165,431.  However, the Company will continue to incur exploration costs to fund its plan of operations and may need to raise additional capital.  Ultimately, the Company’s ability to continue its exploration activities depends in part on the Company’s ability to commence operations and generate revenues or to obtain financing through joint ventures, debt financing, equity financing, production sharing agreements or some combination of these or other means.  Further the raising of additional capital by the Company may dilute existing shareholders.




The Company has no cash flow from operations and depends on equity financing for its operations.




The Company’s current operations do not generate any cash flow. Any work on the Company’s properties may require additional equity financing. If the Company seeks funding from existing or new joint venture partners, its project interests will be diluted. If the Company seeks additional equity financing, the issuance of additional shares will dilute the current interests of the Company’s current shareholders.  The Company may not be able to obtain additional funding to allow the Company to fulfill its obligations on existing exploration properties.  The Company’s failure to obtain such additional financing could result in delay or indefinite postponement of further exploration and the possible partial or total loss of the Company’s potential interest in certain properties or dilution of the Company’s interest in certain properties.




Conflicts of interest may arise among the Company’s board of directors.




Norman Betts a, director of the Company, is also a director, officer, or shareholder of other companies that are similarly engaged in the business of acquiring, developing, and exploiting natural resource properties.  Dr. Betts serves as Chair of the Board of Directors of Starfield Resources Inc. and as a director and member of the Audit Committee of Adex Mining Inc. Such associations may give rise to conflicts of interest from time to time if the Company were to enter into negotiations to acquire an interest in a mineral project in which their other companies hold an interest, or the Company were to enter into negotiations to sell or joint venture an interest in its mineral properties to any of these companies.  The directors of the Company are required to act honestly and in good faith with a view to the best interests of the Company and disclose any interest which they may have in any project or opportunity of the Company. If a conflict of interest arises at a meeting of the board of directors, any director in a conflict will disclose his interest and abstain from voting on such matter.




12




International Financial Reporting Standards (“IFRS”)




The Canadian Accounting Standards Board has announced that Canadian publicly accountable enterprises must adopt IFRS effective for fiscal years beginning on or after January 1, 2011.  The Company  adopted IFRS in the first quarter of its 2012 fiscal year with comparative figures.





Risks relating to the Mining Industry




The Company cannot accurately predict whether commercial quantities of ores will be established.




Whether an ore body will be commercially viable depends on a number of factors beyond the control of the Company, including the particular attributes of the deposit such as size, grade and proximity to infrastructure, as well as mineral prices and government regulations, including regulations relating to permitting, prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. The Company cannot accurately predict the exact effect of these factors, but the combination of these factors may result in a mineral deposit being unprofitable. The Company has no mineral producing properties at this time.  Although the mineralized material estimates included herein have been prepared by the Company, or, in some instances have been prepared, reviewed or verified by independent mining experts, these amounts are estimates only and there is a risk that a particular level of recovery of gold or other minerals from mineralized material will not in fact be realized or that an identified mineralized deposit, if any, will ever qualify as a commercially mineable or viable reserve.




The exploration for and development of mineral deposits involves significant risks.




Mineral resource exploration is a speculative business and involves a high degree of risk. The Company has recently completed a diamond drilling program on the Buckreef Project.  The Company is reviewing the results of the drilling program in the context of analyzing the economic significance of the deeper resources at the Buckreef Project using current gold prices.  However, the exploration for and development of mineral deposits involves significant risks, which even a combination of careful evaluation, experience and knowledge may not eliminate. Although the discovery of a resource may result in substantial rewards, few explored properties are ultimately developed into producing mines.  Significant expenditures may be required to locate and establish reserves, to develop metallurgical processes and to construct mining and processing facilities at a particular site.




The Company may not be able to establish the presence of minerals on a commercially viable basis.




The Company’s ability to generate revenues and profits is expected to occur through exploration of its existing properties as well as through acquisitions of interests in new properties. The Company will need to incur substantial expenditures in an attempt to establish the economic feasibility of mining operations by identifying mineral deposits and establishing ore reserves through drilling and other techniques, developing metallurgical processes to extract metals from ore, designing facilities and planning mining operations. The economic feasibility of a project depends on numerous factors beyond the Company’s control, including the cost of mining and production facilities required to extract the desired minerals, the total mineral deposits that can be mined using a given facility, the proximity of the mineral deposits to a user of the minerals, and the market price of the minerals at the time of sale. The Company’s existing or future exploration programmes or acquisitions may not result in the identification of deposits that can be mined profitably.




13




The Company depends on consultants and engineers for its exploration programmes.




The Company has relied on and may continue to rely upon consultants for exploration development, construction and operating expertise. Substantial expenditures are required to construct mines, to establish ore reserves through drilling, to carry out environmental and social impact assessments, to develop metallurgical processes to extract the metal from the ore and, in the case of new properties, to develop the exploration infrastructure at any suite chosen for exploration. The Company may not be able to discover minerals in sufficient quantities to justify commercial operation, and the Company may not be able to obtain funds required for exploration on a timely basis.




The Company may not have clear title to its properties.




Acquisition of title to mineral properties is a very detailed and time-consuming process, and the Company’s title to its properties may be affected by prior unregistered agreements or transfers, or undetected defects. Several of the Company’s prospecting licenses are currently subject to renewal by the Ministry of Energy and Minerals of Tanzania. There is a risk that the Company may not have clear title to all its mineral property interests, or they may be subject to challenge or impugned in the future.    See “Mineral Properties – Ownership”.




Mining exploration, development and operating activities are inherently hazardous.




If the Company experiences mining accidents or other adverse conditions, the Company’s mining operations could be materially adversely affected.  The Company’s exploration activities may be interrupted by any or all of the following mining accidents such as cave-ins, rock falls, rock bursts, pit wall failures, fires or flooding.  In addition, exploration activities may be reduced if unfavourable weather conditions, ground conditions or seismic activity are encountered, ore grades are lower than expected, the physical or metallurgical characteristics of the ore are less amenable than expected to mining or treatment, dilution increases or electrical power is interrupted.  Occurrences of this nature and other accidents, adverse conditions or operational problems in future years may result in the Company’s failure to achieve current or future exploration and production estimates.




The Company cannot guarantee when its projects will be placed into production.




The Company’s ability to place its projects into production will be dependent upon using the services of appropriately experienced personnel or contractors and purchasing additional equipment, or entering into agreements with other major resource companies that can provide such expertise or equipment. There can be no assurance that the Company will have available the necessary expertise or equipment when and if the Company places its mineral deposit properties into production. If the Company is unable to successfully retain such expertise and equipment, its development and growth could be significantly curtailed.




14




Upon commencing production, the Company may not achieve its production estimates.




Though the Company identified a potentially economic, sub-surface, gold-bearing quartz rubble bed, any potential production and revenues based on production from this area are estimates only. Estimates are based on, among other things, mining experience, resource estimates, assumptions regarding ground conditions and physical characteristics of ores (such as hardness and presence or absence of certain metallurgical characteristics) and estimated rates and costs of mining and processing. The Company’s actual production from the Buckreef Project, if it ever achieves production, may be lower than its production estimates.  Each of these factors also applies to future development properties not yet in production at the Company’s other projects.  In the case of mines the Company may develop in the future, it does not have the benefit of actual experience in its estimates, and there is a greater likelihood that the actual results will vary from the estimates. In addition, development and expansion projects are subject to unexpected construction and start-up problems and delays.




The Company’s exploration activities are subject to various federal, state and local laws and regulations.




Laws and regulation govern the development, mining, production, importing and exporting of minerals; taxes; labor standards; occupational health; waste disposal; protection of the environment; mine safety; toxic substances; and other matters. The Company requires licenses and permits to conduct exploration and mining operations. Amendments to current laws and regulations governing operations and activities of mining companies or more stringent implementation thereof could have a substantial adverse impact on the Company. Applicable laws and regulations will require the Company to make certain capital and operating expenditures to initiate new operations. Under certain circumstances, the Company may be required to close an operation once it is started until a particular problem is remedied or to undertake other remedial actions.




The Company’s mineral interests in Tanzania are held under prospecting licenses granted pursuant to the Mining Act, 2010 (Tanzania) for a period of up to four years, and are renewable two times for a period of up to two years each.  There are initial preparation fees and annual rental fees for prospecting licenses based on the total area of the license. Renewals of prospecting licenses can take many months and possibly even years to process by the regulatory authority in Tanzania and there is no guarantee that they will be granted. With each renewal at least 50% of the licensed area, if greater than 20 square kilometres, must be relinquished and if the Company wishes to keep the relinquished one-half portion, it must file a new application for the relinquished portion.  There is no guarantee on the timing for processing the new application and whether it will be successful.




Risks relating to the Market


The Company’s competition is intense in all phases of the Company’s business.




The Company competes with many companies possessing greater financial resources and technical facilities than itself for the acquisition of mineral interests, as well as for the recruitment and retention of qualified employees.




15




The Company is subject to the volatility of metal and mineral prices.




The economics of developing metal and mineral properties are affected by many factors beyond the Company’s control including, without limitation, the cost of operations, variations in the grade ore or resource mined, and the price of such resources. The market prices of the metals for which the Company are exploring are highly speculative and volatile. Depending on the price of gold or other resources, the Company may determine that it is impractical to commence or continue commercial production. The price of gold has fluctuated widely in recent years. The price of gold and other metals and minerals may not remain stable, and such prices may not be at levels that will make it feasible to continue the Company’s exploration activities, or commence or continue commercial production.




The Company’s business activities are conducted in Tanzania.




The Company’s principal exploration properties are currently located in the United Republic of Tanzania, Africa.  Although the Company believes that Tanzania government is a stable, multi-party democracy, there is no guarantee that this will continue.  Tanzania is surrounded by unstable countries enduring political and civil unrest, and in some cases, civil war.  There is no guarantee that the surrounding unrest will not affect the Tanzanian government and people, and therefore, the Company’s mineral exploration activities.  Any such effect is beyond the control of the Company and may materially adversely affect its business.




The Company may be affected in varying degrees by political stability and government regulations relating to the mining industry and foreign investment in Tanzania. The government of Tanzania may institute regulatory policies that adversely affect the exploration and development (if any) of the Company’s properties. Any changes in regulations or shifts in political conditions in this country are beyond the control of the Company and may materially adversely affect its business. Investors should assess the political and regulatory risks related to the Company’s foreign country investments.  The Company’s operations in Tanzania are also subject to various levels of economic, social and other risks and uncertainties that are different from those encountered in North America.  The Company’s operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, restrictions on foreign exchange and repatriation, income taxes, expropriation of property, environmental legislation and mine safety.  Other risks and uncertainties include extreme fluctuations in currency exchange rates, high rates of inflation, labour unrest, risks of war or civil unrest, government and civil unrest, regional expropriation and nationalization, renegotiation or nullification of existing concessions, licences, permits and contracts, illegal mining, corruption, hostage taking, civil war and changing political conditions and currency controls.  Infectious diseases (including malaria, HIV/AIDS and tuberculosis) are also major health care issues where the Company operates.




Mineral exploration in Tanzania is affected by local climatic and economic conditions.




The Company’s properties have year round access, although seasonal winter rains from December to March may result in flooding in low lying areas, which are dominated by mbuga, a black organic rich laustrine flood soils. Further, most lowland areas are under active cultivation for corn, rice, beans and mixed crops by subsistence farmers. As a result, the area has been deforested by local agricultural practices for many years. The seasonal rains and deforested areas can create a muddy bog in some areas, which can make access more difficult, and could impede or even prevent the transport of heavy equipment to the Company’s mineral properties at certain times of the year between December and March.




16




Commodity prices are subject to fluctuation.





The Company’s future earnings, if any, are directly related to commodity prices as revenues are derived from rental/option payments on its mineral properties and post-production royalties received on the sales of gold. Gold prices fluctuate widely and are affected by numerous factors beyond the Company’s control, including central bank purchases and sales, producer hedging and de-hedging activities, expectations of inflation, the relative exchange rate of the U.S. dollar with other major currencies, interest rates, global and regional demand, political and economic conditions, production costs in major gold-producing regions, speculative positions taken by investors or traders in gold and changes in supply, including worldwide production levels. The aggregate effect of these factors is impossible to predict with accuracy. In addition, the price of gold has on occasion been subject to very rapid short-term changes because of speculative activities. Fluctuations in gold prices may materially adversely affect the Company’s financial performance or results of operations.




The Company’s operations are subject to issues relating to security and human rights.




Civil disturbances and criminal activities such as trespass, illegal mining, theft and vandalism may cause disruptions at the Company’s operations in Tanzania which may result in the suspension of operations.  There is no guarantee that such incidents will not occur in the future.  Such incidents may halt or delay exploration, increase operating costs, result in harm to employees or trespassers, decrease operational efficiency, increase community tensions or result in criminal and/or civil liability for the Company or its employees and/or financial damages or penalties. The manner in which the Company’s personnel respond to civil disturbances and criminal activities can give rise to additional risks where those responses are not conducted in a manner that is consistent with international standards relating to the use of force and respect for human rights. The failure to conduct security operations in accordance with these standards can result in harm to employees or community members, increase community tensions, reputational harm to the Company and its partners or result in criminal and/or civil liability for the Company or its employees and/or financial damages or penalties. It is not possible to determine with certainty the future costs that the Company may incur in dealing with the issues described above at its operations.




Risks relating to the Securities of the Company


Current global financial conditions.




Following the onset of the credit crisis in 2008, global financial conditions were characterized by extreme volatility. While global financial conditions subsequently stabilized, there remains considerable risk in the system given the extraordinary measures adopted by government authorities to achieve that stability.  Global financial conditions could suddenly and rapidly destabilize in response to future economic shocks, as government authorities may have limited resources to respond to future crises. Future economic shocks may be precipitated by a number of causes, including a continued rise in the price of oil, geopolitical instability and natural disasters. Any sudden or rapid destabilization of global economic conditions could impact the Company’s ability to obtain equity or debt financing in the future on terms favorable to the Company. In such an event, the Company’s operations and financial condition could be adversely impacted.




17




As a foreign private issuer, the Company is subject to different U.S. securities laws and rules than a domestic U.S. issuer, which may limit the information publicly available to U.S. shareholders.




The Company is a foreign private issuer under applicable U.S. federal securities laws.  As a result, the Company does not file the same reports that a U.S. domestic issuer would file with the SEC, although the Company is required to file with or furnish to the SEC the continuous disclosure documents that the Company is required to file in Canada under Canadian securities laws. In addition, the Company’s officers, directors, and principal shareholders are exempt from the reporting and “short swing” profit rules of Section 16 of the Exchange Act. Therefore, shareholders may not know on as timely a basis when the Company’s officers, directors and principal shareholders purchase or sell Common Shares, as the reporting date under the corresponding Canadian insider reporting requirements are longer. In addition, as a foreign private issuer the Company is exempt from the proxy rules under the Exchange Act.




The Company may lose its foreign private issuer status in the future, which could result in significant additional costs and expenses.




In order to maintain the Company’s current status as a foreign private issuer, a majority of its Common Shares must be either directly or indirectly owned by non-residents of the United States, unless the Company also satisfies one of the additional requirements necessary to preserve this status.  The Company may in the future lose its foreign private issuer status if a majority of its Common Shares is held in the United States and it fails to meet the additional requirements necessary to avoid loss of foreign private issuer status.  The regulatory and compliance costs under U.S. federal securities laws as a U.S. domestic issuer may be significantly more than the costs incurred as a Canadian foreign private issuer eligible to use the MJDS. If the Company is not a foreign private issuer, it would not be eligible to use the MJDS or other foreign issuer forms and would be required to file periodic and current reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. In addition, the Company may lose the ability to rely upon exemptions from NASDAQ corporate governance requirements that are available to foreign private issuers.




United States investors may not be able to obtain enforcement of civil liabilities against the Company.




The enforcement by investors of civil liabilities under the United States federal or state securities laws may be affected adversely by the fact that the Company is governed by the Business Corporations Act (Alberta), that the some of the Company’s officers and directors are residents of Canada or otherwise reside outside the United States, and that all, or a substantial portion of their assets and a substantial portion of the Company’s assets, are located outside the United States. It may not be possible for investors to effect service of process within the United States on certain of the Company’s directors and officers or enforce judgments obtained in the United States courts against the Company, certain of its directors and officers based upon the civil liability provisions of United States federal securities laws or the securities laws of any state of the United States.




18




There is some doubt as to whether a judgment of a United States court based solely upon the civil liability




Provisions of United States federal or state securities laws may not be enforceable in Canada against the Company and its directors and officers . There is also doubt as to whether an original action could be brought in Canada against the Company or its directors and officers  to enforce liabilities based solely upon United States federal or state securities laws.




Common Share prices will likely be highly volatile, and investment could decline in value or the entire investment may be lost.




The market price of the Common Shares is likely to be highly volatile and may fluctuate significantly in response to various factors and events, many of which the Company cannot control. The stock market in general, and the market for mining company stocks in particular, has historically experienced significant price and volume fluctuations. Volatility in the market price for a particular issuer’s securities has often been unrelated or disproportionate to the operating performance of that issuer. Market and industry factors may depress the market price of the Company’s securities, regardless of operating performance. Volatility in the Company’s securities price also increases the risk of securities class action litigation.




Risk of dilution from further equity financings or exercise of Compensation Options and Warrants.




If the Company raises additional funding by issuing additional equity securities, such financing may substantially dilute the interests of the Company’s shareholders and reduce the value of their investment. Such additional financing may result in a substantial dilution to the Company’s shareholders and decrease the value of the Company’s securities.




Item 4.                      Information on the Company





A.           History and Development of the Company





The Company was originally incorporated under the corporate name “424547 Alberta Ltd.” in the Province of Alberta on July 5, 1990, under the Business Corporations Act (Alberta).  The name was changed to “Tan Range Exploration Corporation” on August 13, 1991.  The name of the Company was again changed to “Tanzanian Royalty Exploration Corporation”on February 28, 2006.  On March 7, 2008, the Company amended its Articles to increase the maximum number of directors from nine (9) to eleven (11).  The Company is also registered in the Province of British Columbia as an extra-provincial company under the Business Corporations Act (British Columbia).





The principal executive office of the Company is located at Suite 404 – 1688 152nd Street, South Surrey, BC V4A 4N2, Canada, and its telephone number is (604) 536-7873.  Mr. Sinclair, President and CEO is located at 93 Benton Hill Road, Sharon, Connecticut, 06069, U.S.A., telephone number (860) 364-1830.





On November 25, 2011 the Company announced that the board of directors had approved the adoption of a shareholder rights plan (the “Rights Plan”) designed toencourage the fair and equal treatment of shareholders in connection with any take-overbid for the outstanding common shares of the Company.  The Company’s board is not aware of any specific take-over bid for Tanzanian Royalty that has been made or is contemplated.  The Rights Plan was approved by the shareholders at the Annual General and Special Meeting held on March 1, 2012.  See Item 14 for a summary of the terms of the Rights Plan.




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For the year ended August 31, 2012 the Company reported a net loss of $8,897,843.  Included in the net loss  $1,293,969 of mineral properties and deferred exploration expenses was written off relating to abandoned mineral properties.    The Company incurred deferred exploration expenditures of $9,593,993 during the year ended August 31, 2012.





Significant Acquisitions and Significant Dispositions





The Company’s principal capital expenditures and divestitures (including interests in other companies and amounts invested) for the last three fiscal years are described as follows:





On December 21, 2010, the Company announced it was the successful bidder for the Buckreef Gold Mine Re-development Project in northern Tanzania (the “Buckreef Project”).  Pursuant to the terms of the heads of agreement dated December 16, 2010, the Company paid U.S. $3,000,000 to State Mining Corporation of Tanzania (“Stamico”) in consideration of the transaction.  On October 25, 2011 a Definitive Joint Venture Agreement was entered into with Stamico for the development of the Buckreef Project.  Through its wholly-owned subsidiary, Tanzania American International Development Corporation 2000 Limited (Tanzam), the Company  holds a 55% interest in the joint venture company, Buckreef Gold Company Limited, with Stamico holding the remaining 45%.




The Company awarded a contract to Venmyn Independent Projects (Pty) Limited, a subsidiary of Venmyn Rand (Pty) Limited, to undertake a Preliminary Economic Assessment  on the Buckreef Project.  The Company received the National Instrument 43-101 Preliminary Economic Assessment of the Buckreef Gold Mine Re-Development Project dated August 23, 2012 (the “Buckreef PEA”) and it was filed on SEDAR on August 24, 2012. The information generated by the Buckreef PEA will assist in the strategic planning of a Definitive Feasibility Study (“DFS”).  See “Mineral Properties”.





On August 12, 2011, the Company completed a U.S.$30 million bought deal financing (the “August Financing”) consisting of 5,263,158 units issued at a price of U.S.$5.70 per unit.   Each unit consisted of one Common Share of the Company and one Common Share purchase warrant exercisable at a price of U.S.$6.25 for a period of two years ending August 12, 2013.  In connection with the August Financing, the Company issued 368,421 compensation options, exercisable for a period of two years ending August 12, 2013 entitling the holder to purchase an aggregate of 368,421 Common Shares at a price of U.S.$5.91 per Common Share.





In January 2009, the Company signed an option and royalty agreement with Kazakh over the Company’s Mwadui Project area diamond licenses and applications, located in the Lake Victoria Greenstone Belt of Tanzania.  Kazakh has the option to acquire a 100% interest in the licenses by fulfilling various option payments over 72 months, whereby the Company will then receive a gross overriding royalty of 1.5% on all diamonds sold, and a net smelter returns royalty of up to 2% on any other minerals produced.  On August 7, 2011 the Company gave Kazakh notice of default for non-payment of overdue amounts under the option and royalty agreement.  On September 5, 2011 the option rights of Kazakh were terminated.





On February 25, 2009, the Company entered into an option and royalty agreement with Songshan granting Songshan an option to acquire the Company’s interest in its Kabanga nickel licenses and applications located in northwestern Tanzania, by completing certain exploration work over a period of three years, and then making a production decision, subject to a 3% net smelter royalty reserved in favor of the Company. In January 2010, Jinchuan Mining concluded an agreement with Songshan to participate in the exploration and development of the Kabanga nickel properties.  In 2012, the Company and Songshan commenced discussions regarding a possible new joint venture involving the Company, Songshan and a new third party as direct participants to explore and develop the Kabanga nickel properties.





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In January 2007, the Company concluded an option and royalty agreement with Sloane over a portion of the Company’s Itetemia Property and its entire Luhala gold project.  Under the agreement, the Company granted Sloane the right to earn a beneficial interest ranging from 90% to 100% in certain Itetemia and Luhala prospecting licenses in the Lake Victoria greenstone belt of Tanzania.  In December 2011, Sloane returned the Itetemia and Luhala gold prospects to the Company.





B.           Business Overview





The Company is a mineral resource company with exploration stage properties, which engages in the acquisition of interests in and the exploration of natural resource properties. The Company commits its own resources to the initial evaluation of mineral properties and in select situations, if and when warranted, the Company enters into joint venture agreements with other corporations to further the exploration of such properties, in exchange for annual rental/option payments and post-production royalty payments. At present, the Company’s natural resource activities do not generate any income from production.





The Company’s main area of interest has been in the exploration of gold properties, with a primary focus on exploring for gold properties in Tanzania.  Tanzania remains the focus of the Company’s exploration activities.





In the Company’s view, its use of a joint venture and royalty strategy in addition to direct exploration and development offers investors leverage to precious and base metal prices with lower risk and shareholder dilution. Future production royalties from any producing properties discovered by the Company’s joint venture partners would provide the Company with a direct interest in the mine’s cash flow, with exposure to any benefits from new discoveries and production growth, but without the capital obligations, and environmental and social liabilities, associated with direct ownership.





Plan of Operations





Exploration Activities





All of the properties in which the Company holds an interest are in the exploration stage and/or Preliminary Economic Assessment stages of mine development.  Mineral exploration and development involves a high degree of risk and few properties, which are explored, are ultimately developed into producing mines.  There is no assurance that the Company’s mineral exploration activities will result in any discoveries of commercial bodies of ore.  The long-term profitability of the Company’s operations will be in part directly related to the cost and success of its exploration programs, which may be affected by a number of factors beyond the control of the Company.





21


By way of general description of the Company’s operating activities, the Company’s business operations involve using known or published geological and geophysical data to locate mineral resource properties meriting further exploration or development.  Once identified, the Company must stake and apply for registration to title of the mineral properties, or negotiate the acquisition of such properties from any third party owners.  Upon registration or acquisition of title, the Company then designs a program of preliminary exploration which can involve grid mapping, geophysical and magnetic surveying, geochemical surveying, geological sampling, grab sampling, assaying and other forms of prospecting as circumstances may require.  Based on the preliminary results, mineral properties are ranked according to merit for further exploration work, which may involve further mapping, more detailed geophysical and geochemical surveying, and trenching to identify potential drill targets.  If mineralization is indicated which merits further investigation, drill targets are selected and a preliminary RC drilling program commences for underground sampling and assaying.  If the results are positive, then a diamond drilling program will commence mainly to check, verify and confirm the mineralization potential of the prospect.





Based on the drilling program results, the Company will develop models of the underlying geology and mineralized zones for more detailed testing.  After further drilling, some mineralized zones will then be modeled using relevant geological software and ultimately be classified as inferred or indicated mineral resources.  With sufficient infill drilling, these inferred or indicated mineral resources can be confirmed as a measured mineral resource, upon which a pre-feasibility study can be prepared by a qualified, independent mining engineer or geologist to determine whether mining activities are economic in the circumstances of the particular property.  A pre-feasibility study must be completed under the requirements of NI 43-101 in Canada in order for mineral reserves to be designated and to confirm the appropriate mining and mineral processing method based on the geological and metallurgical studies of the ore.  A final or bankable feasibility study must be completed for the designation of reserves under the SEC’s Industry Guide 7.  If the bankable feasibility study is favorable, the Company can then use the feasibility study to seek out the necessary financing from a merchant banker or other financial institution for mine construction and development.





During the 2012 fiscal year, the Company continued evaluation of all prospecting licenses in its portfolio with a view of offering some of them for royalty agreements to other mining companies.  The evaluation of their potential comprises geological mapping, soil sampling and geophysical surveys and RC drilling.





The Company continued its efforts for the “farming-out” of identified properties for royalty agreements with other mining companies, and continues to examine and review other exploration opportunities in Tanzania.





Exploration





The Company’s principal exploration properties are currently all located in the United Republic of Tanzania, Africa.  The government of Tanzania is a stable, multi-party democracy.  Mineral exploration in Tanzania is affected by local climatic, political, and economic conditions.  The Company’s properties have year round access, although seasonal summer rains from December to March may result in flooding in low lying areas, which are dominated by mbuga (black organic rich laustrine flood soils).  Further, most lowland areas are under active cultivation for corn, rice, beans and mixed crops by subsistence farmers.  As a result, the area has been deforested by local agricultural practices for many years.  The seasonal rains and deforested areas can create a muddy bog in some areas, which can make access more difficult, and could impede or even prevent the transport of heavy equipment to the Company’s mineral properties at certain times of the year between December to March.




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Competition





The mining industry in which the Company is engaged is in general, highly competitive.  Competitors include well-capitalized mining companies, independent mining companies and other companies having financial and other resources far greater than those of the Company.  The Company competes with other mining companies in connection with the acquisition of gold and other precious metal properties.  In general, properties with a higher grade of recoverable mineral and/or which are more readily mineable afford the owners a competitive advantage in that the cost of production of the final mineral product is lower.  Thus, a degree of competition exists between those engaged in the mining industries to acquire the most valuable properties.  As a result, the Company may eventually be unable to acquire attractive gold mining properties.





Dependence on Customers and Suppliers





The Company is not dependent upon a single or few customers or supplier for revenues or its operations.





Governmental Regulations





As of November 1, 2010 the Tanzania Mining Act, 2010 (“Mining Act, 2010”) came into effect.  The Tanzania Ministry of Energy and Minerals announced changes to fees effective July 27, 2012.  Changes include:





·
Prospecting Licence annual rental increases to US$100/sq.km for initial period, $150/sq.km. for first renewal and $200/sq.km. for second renewal.








The Company’s mineral interests in Tanzania are initially held under prospecting licenses granted pursuant to the Mining Act, 2010 for a period of up to four years, and are renewable two times for a period of up to two years each.  We must pay annual rental fees for our prospecting licenses based on the total area of the license measured in square kilometres, multiplied by  US$100/sq.km for initial period, $150/sq.km for the first renewal and $200/sq.km for the second renewal There is also an initial one-time “preparation fee” of US$500 per license.  Upon renewal, we pay a renewal fee of US$300 per license.  Renewals of our prospecting licenses can take many months and even years to process by the regulatory authority in Tanzania.





All prospecting licenses in Tanzania also require the holder to expend funds which are set out in the Mining Act, 2010.  At each renewal, at least 50% of our licensed area must be relinquished on prospecting licences in excess of 20 square kilometres.  On relinquishing the ground, the area is automatically returned to the Mining Commissoner’s jurisdiction for a period of 4 months after which it will be declared vacant or otherwise by the Commissioner.  If the Company still has an interest in the relinquished one-half portion, it must then file a new application in competition with other interested companies for the relinquished portion 4 months after the relinquishment date.  If more than one application is lodged on the same day at the Mining Commissioner’s office, then the Commissioner may award the ground by tender.  There is no guarantee on the timing for processing the new application and whether it will be successful.





We must hold a mining license or special mining licence to carry on mining activities.  Pursuant to the Mining Act, 2010 a mining license is granted for a maximum initial period of 10 years.  It is renewable 6 months prior to expiry for a period the applicant will state but not exceeding 10 years.  A special mining licence is granted for the estimated life of the ore body indicated in the feasibility study report, or such period as the applicant may request whichever period is shorter.  It is renewable not exceeding the estimated life of the remaining ore body.




23








Prospecting and special mining and mining license holders must submit regular reports in accordance with mining regulations.  Upon commercial production, the government of Tanzania imposes a royalty on the gross value of all production at the rate of 4% of all gold produced.  The applicable regulatory body in Tanzania is the Ministry of Energy and Minerals.





An environmental impact statement and an environmental management plan must accompany special mining license, mining license and gemstone mining license applications for mineral rights.  In addition to the establishment of environmental regulations, the Tanzanian Government has improved management procedures for effective monitoring and enforcement of these regulations by strengthening the institutional capacity, especially in the field offices.  The Government has provided rules for the creation of reclamation funds to reinstate land to alternative uses after mining and it has developed guidelines for mining in restricted areas, such as forest reserves, national parks, sources of water and other designated areas.  These regulations have not had any material adverse effect on the Company’s operations, which are exploration in nature at this time.





C.           Organizational Structure





The Company has the following five subsidiaries:





Name of Subsidiary
Jurisdiction of Incorporation
Percentage &Type of Securities Owned or Controlled by CompanyVoting Securities Held
Non-Voting SecuritiesItetemia Mining Company Limited(1)
Republic of Tanzania, Africa
90% (common)
n/aLunguya Mining Company Ltd.(2)
Republic of Tanzania, Africa
60% (common)
n/aTancan Mining Company Limited
Republic of Tanzania, Africa
100% (common)
n/aTanzania American International Development Corporation 2000 Limited
Republic of Tanzania, Africa
100% (common)
n/aBuckreef Gold Company Limited(3)
Republic of Tanzania, Africa
55% (common)
n/a


(1)       The remaining 10% interest is held by State Mining Corporation.


(2)       The remaining 40% interest is held by Northern Mining and Consultancy Company Ltd.


(3)       The remaining 45% interest is held by State Mining Corporation.





D.           Property, Plant and Equipment





The Company’s business is the acquisition and exploration of mineral properties, with a primary focus on exploring for gold properties in Tanzania.  The Company funds its activities by way of the sale and issuance of its securities.  The Company also obtains operating funds through sales of and options to sell its various mineral property interests to other parties, retaining a royalty interest.  The Company’s properties are without a known body of commercial ore, with no established mineral reserves, and the Company’s activities to date on such properties have been exploratory in nature.





24




Mineral Properties




Buckreef Project




History




The LVG was discovered in 1894 by German explorers and significant exploitation began in the 1930s at the Geita Gold Mine. Several small gold mines exploiting near surface reefs, operated throughout the RGB, particularly near the village of Rwamagaza. By 1940, Tanzania was producing 4.5tpa of gold (Au).




Gold bearing quartz veins were reported from the current Buckreef Mine area in 1945 and reports from the 1950s attest to ongoing production at a number of localities near Rwamagaza, including the Buckreef area. The extent of the small scale local and colonial mining activities is evident from the numerous pits and adits covering the entire Buckreef tenement, however no production figures are available.




An airborne geophysical survey was flown during 1959 over the RGB, in a joint effort between the United Nations and the Tanzanian Mineral Resources Division, with a ground magnetic survey follow-up between 1965 to 1968. The Buckreef quartz vein hosted deposit was rediscovered in 1965 and followed-up by drilling by the Tanzanian Mineral Resources Division.




The Buckreef Mine was an underground mine exploited in the name of the Buckreef Gold Mining Company approved by Stamico in 1982 and the exploration and mining activities during this period are summarised in the table below. The mining ceased in 1990 due to a number of operational reasons and the mine flooded. Approximately 100,000t of Run of Mine (RoM) ore was mined at a diluted grade of approximately 3g/t Au to 4g/t Au. In 1994, the Buckreef Redevelopment Agreement was signed between the State of Tanzania and East Africa Mines Limited (“EAM”) and additional surface and subsurface gold resources were identified.




Post 1990, a new phase of modern exploration focused on potential Archaean deposits in the Lake Victoria region and the LVG developed after significant gold discoveries.




EAM explored 40km of contiguous strike length of the RGB. During that time (2003) Spinifex Gold, the original parent company to East Africa Mines, merged with Gallery Gold Limited of Australia (“Gallery Gold”). Gallery Gold then became the parent company of East Africa Mines. Iamgold Corporation acquired Gallery Gold in March 2006 and held the Buckreef Project until July 2009.




Summary of Buckreef Exploration and Mining between 1960 and 2003


DATE

EXPLORATION UNDERTAKEN***1960

13 diamond drill holes by UNDP (12 in current database, UNBR01-12) identified a “possible one zone 107m long, 8m wide and extending to 122m depth1968

13 diamond drill holes by Tanzanian Mineral Resources Division (MRD01-13)1970s

Early 1970s Underground development on 30m and 61m levels by Williamson Diamonds Ltd. Indicated one reserve of 106,000t @ 8.7g/t Au between 23m and 76m levels using minimum mining width of 1.5m***1972

Tanzanian government approved investment decision and Buckreef Gold Mining Company (BGMC)1973-1979

Further underground development and 3 diamond drill holes (BGMDD01-03) by BGMC.1978-1981

Treatment plant and other facilities established with financial assistance from Swedish International Development Agency
  25
  DATE

EXPLORATION UNDERTAKEN***
 1982-1988

Gold production commenced but reached only 25-40% of forecast targets.

Production figure unavailable.1988

Review of operations by British Mining Consultants Ltd. who found Buckreef assay laboratory assays 65% higher than overseas check assays1990

Mining ceased and workings flooded. Total ore extracted estimated at approximately 100,000t @3-4g/t Au***1992

Aircore, RC and diamond drilling by East African Mining Corporation (now East Africa Gold Mines Ltd.)Source: Hellman and Schofield 2007.*** This historical estimate is derived from an unpublished report prepared by Hellman and Schofield (Pty.) Ltd. In 2007. This historical estimate presented above is relevant to the further exploration of the project, which the Company is undertaking. Further drilling would be required to upgrade or verify the historical resource estimate as current mineral resources or reserves. A qualified person, as such term is defined under NI 43-101, has not done sufficient work to classify the historical estimate as current mineral resource or mineral reserve estimate and the historical estimate should not be relied upon. Please refer to the Buckreef Technical Report.




The technical content of the following discussion regarding the Buckreef Project in Tanzania is summarized from the Buckreef Property technical report effective August 23, 2012 entitled “National Instrument 43-101 Preliminary Economic Assessment of Tanzanian Royalty Exploration Corporation’s Buckreef Gold Mine Re-Development Project in Tanzania” prepared by Venmyn Rand (Pty) Limited and compiled by Fiona Harper and Andrew Neil Clay (the “Buckreef PEA”).




Ownership




Prior Ownership




Originally, the Buckreef Project was an advanced exploration project held by Iamgold Tanzania (“IAGT”) prior to July 2009. The Agreement to Redevelop the Buckreef Gold Mine (“ARBGM”) between Iamgold and the Ministry for Energy and Minerals included at that point, a single Mining Licence and 12 Prospecting Licences covering 98.19km2.




In July 2009, IAGT applied to surrender all licenses relating to the ARBGM, effective October 25, 2009 and the Commissioner for Minerals withdraw all license applications relating to the ARBGM.




Current Ownership, Property  and Location




In December 2010 the Company signed a binding heads of agreement with Stamico for the Buckreef Project and on October 25, 2011 entered into a Definitive Joint Venture Agreement with Stamico for the development of the project.  Through its wholly-owned subsidiary, Tanzania American International Development Corporation 2000 Limited (Tanzam), the Company will hold a 55% interest in the joint venture company, Buckreef Gold Company Limited, with Stamico holding the remaining 45%.




The Buckreef Project is located in north central Tanzania immediately to the south of Lake Victoria, in the Mwanza Provincial District. The Buckreef Project is situated 110km southwest of Mwanza, in the Geita District and is accessed by ferry across Smiths Sound and then via unpaved roads and an airstrip. The Buckreef Project comprises five gold deposits located within two geographically separated areas approximately 25km apart, termed the Buckreef Mining Area (BRMA) and the Buziba Mining Area (BZMA) and the individual gold deposits within these mining areas have been termed Prospects, as summarized below:-




26




·
BRMA: includes the Buckreef Prospect, the Bingwa Prospect and the Tembo Prospect; and




·
BZMA: includes the Buziba Prospect and the Busolwa Prospect




An extended mining right was granted to Tanzam (Special Mining Licence 04/1992) encompassing the Buckreef, Bingwa and Tembo Prospect areas.  The Buziba and Busolwa Prospects are held under a prospecting licence and a retention licence, respectively, and within the BZMA small-scale miners operate under numerous primary mining licences (PMLs).  The results in the Buckreef PEA were reported on a 100% project basis and not a Company attributable basis as various Busolwa Prospect joint venture agreements are still to be finalized. There is no certainty that a definitive agreement relating to the Busolwa Prospect will be reached, nor as to the terms that may be agreed upon in respect of any such definitive agreement.




Geology and Mineralisation




The BRMA and BZMA gold deposits are classified as low to medium grade orogenic gold deposits hosted by mafic volcanic sequences of the eastwest trending Archaean Rwamagaza Greenstone Belt (RGB) within the Lake Victoria Goldfields of the Tanzanian Craton. The BRMA gold deposits are hosted by a major steeply dipping, northeast-southwest trending brittle-ductile shear zone and subsidiary shears, with an early phase of iron rich carbonate alteration, re-brecciation, felsite intrusion and a later phase of auriferous quartz veining.




The BZMA deposit is located 25km east of the Buckreef Prospect in the RGB.  The principal host lithologies include magnesium rich basalt, co-magmatic dolerite and a suite of quartz-albite felsic porphyries that have intruded the mafic sequence. Gold mineralisation is associated with quartz vein arrays that occur in altered shear zones in mafic lithologies and as extensive stock works in the felsic porphyries.




Regional Geological Setting




The Buckreef Project is situated within the LVG of northern Tanzania, which consists of a number of eastwest trending, linear, Archaean greenstone belts, which are separate granite-gneiss terrains within the Tanzanian Craton of east Africa. The LVG is the third largest gold producing region of Africa, surpassed only by the Witwatersrand Basin in South Africa and the Tarkwa region of Ghana.  Numerous gold occurrences have been identified in the LVG, and new discoveries continue to be made. Since 1998, when the first mine, Golden Pride was commissioned, four additional large scale mines namely, Geita, Bulyanhulu, North Mara, and Tuluwaka have come into production.




The greenstone belts comprise mafic volcanics, pyritic sediments, tuffs, iron formation, chert, and felsic volcanics, collectively known as the Nyanzian Group. The metamorphic grade of the Nyanzian Group is lower to middle greenschist facies, and two major deformational episodes have been identified. Amphibolite facies metamorphic rocks are exposed in the western portions of the belt near Tulawaka Mine, but in general higher grade metamorphic complexes are rare.




27




The greenstone belt sequences have geological and structural similarities to major gold districts in the Canadian Shield (Val d ́Or, Kirkland Lake) and the Yilgarn Craton in Western Australia (Kalgoorlie, Laverton, Leonora, Kambalda and Southern Cross).




Gold mineralisation within the LVG occurs in a number of styles including:-




·
quartz veins within minor brittle lineaments, most commonly worked on a small scale by artisanal workers, due to their limited extent and erratic gold distribution;




·
mineralisation within major ductile shear zones;




·
mineralisation associated with replacement of iron formation and ferruginous sediments; and




·
felsic (porphyry) hosted mineralisation, such as within the RGB.




Regardless of the geological environment, it is accepted that structural control on the emplacement of the mineralisation is critical. The following structural features have proven to be important foci of gold mineralisation:




·
structural lineaments trending at 120o;




·
flexures and splays to the 120o trend (such as at Golden Pride);




·
structural lineaments at 70o (such as at Golden Ridge); and




·
granite-greenstone contacts (such as at the Ushirombo and RGB).




Local Geological Setting




The Buckreef Project area covers the eastern portion of the eastwest trending RGB, which forms part of the Sukumaland Greenstone Belt. The Sukumaland Greenstone Belt is oval shaped and is defined by two intermittently exposed belts of meta-volcanic and meta-sedimentary rocks that surround a core of granitoids and gneisses. The inner belt comprises an older, Lower Nyanzian sequence characterised by basaltic and andesitic lavas and tuffs, whilst the outer, younger, Upper Nyanzian succession consists of iron formation and tuffs. The understanding of the geology in the region has been hampered by the lack of outcrop (less than 2%). Isotopic dating suggests that the sequences are approximately 2.6Ga in age and although no contact between the outer and inner belts is exposed, a general trend of younging outwards is considered valid.




Within the Sukumaland Greenstone Belt, the RGB consists of a sequence of eastwest trending, poorly outcropping basaltic flows and overall the RGB varies in width from 5km to 10km. The mafic sequences consist of komatiitic basalts to the south and tholeitic basalts in the north, separated by the Rwamagaza Shear Zone. The basalts display well preserved volcanic features such as varioles, pillows, and flow top breccias Aeromagnetic data and minor outcrop, indicate the presence of a number of elongate discontinuous, serpentinised, sheared ultramafic bodies which parallel the flow stratigraphy and which could represent either intrusive bodies or the cumulate portions of thick, magnesium rich basaltic lava flows.




28




Two main clusters of felsic intrusions occur throughout the region and comprise large batholithic granites and porphyry intrusions. The RBG could possibly form part of a much larger mafic belt that has been dissected by the intrusion of large batholithic granites. Aeromagnetic surveys over the Project area indicate the presence of granites at depth. The RBG mafic-ultramafic sequence is strained to varying degrees, with the highest strain occurring in the central area of the Buckreef Prospect tenements, where the belt is thinnest. In this area, the dominant rock type is mafic schist. Toward the thicker (less attenuated) eastern and western parts, the schists forms thinner more discrete zones of high strain separating areas of relatively unstrained ultramafic lithologies. The granitoids are generally unstrained and hence assumed to be post peak deformation. A large portion of the basalts to the southeast of Nyarugusu are hornfelsed, suggesting the presence of granite at shallow depths beneath them.




The tectonic evolution of the RGB is very poorly understood. Aeromagnetic data reveals several generations of crosscutting, late stage, brittle-ductile faults and shears, which offset flow stratigraphy and have locally been intruded by the felsic porphyries and by a late stage dolerite dykes. Early formed ductile structures are not easily defined in aeromagnetic data and there is evidence of shear zones that parallel the stratigraphy.  The Project host rocks comprise meta-basalt, which is generally un-deformed but metamorphosed to lower greenschist facies grades. At Buckreef Prospect interflow units of predominantly pelitic and cherty sediments occur, as well as a variety of porphyritic textured, dyke and vein like felsic intrusions along crosscutting structures or sub-parallel to flow stratigraphy.




The RGB has been subjected to a phase of laterite development, with formation of predominantly iron rich ferricrete caps, which were subsequently extensively eroded and only isolated remnants of laterite remain in situ. The high rainfall and sub-tropical climate has resulted in deep laterisation and although there is evidence of localised gold enrichment in the shallow oxidation profiles in both BRMA or BZMA areas, major zones of supergene gold enrichment are not developed in either area. The RGB in general is covered by a thin layer of elluvial regolith, which is amenable to standard soil sampling techniques.




A non-penetrative deformation fabric is developed at Buziba, which dips steeply to the south, sub-parallel to the stratigraphy. Individual zones in which this fabric is well developed cannot be traced for distances of more than a few hundred metres on drill sections but a number of such zones occur throughout the 200m of thickness of stratigraphy, which hosts the mineralisation.




Exploration History Prior to Buckreef PEA




The Buckreef Gold Mine was an underground mine operated by the Tanzanian State during the late 1980s.  Apart from the state, several previous owners of the project undertook numerous exploration programmes including aeromagnetic, helicopter borne Induced Polarisation (IP), ground magnetic and soil geochemistry surveys, as well as extensive Reverse Circulation (“RC”), Air Circulation (“AC”) and diamond drilling programmes.




Iamgold Corporation (“Iamgold”), the most recent historic owner of the project, verified the historic drilling data, undertook additional exploration and defined JORC compliant Mineral Resources in 2006. In total, the exploration programme included approximately 30,000 soil samples, 202,000m of RC drilling, 124,000m of AC drilling and 28,000m of diamond core drilling. An unconfirmed estimate for the historic exploration expenditure is U.S. $23 million (Iamgold 2009).




29




Historic metallurgical testwork programs were undertaken on both the BRMA and BZMA mineralisation types. The testwork on BMRA material indicated that oxide and transitional material is amenable to treatment using typical carbon-in-leach (“CIL”) processing techniques and fresh material may benefit from flotation and a finer grind with recoveries anticipated to be in the low 90%s.  The testwork results for BZMA mineralisation indicated that it is amenable to treatment using gravity and CIL processing techniques.  Metallurgical recoveries for BZMA mineralisation were anticipated to be in the low to mid 90%s. Heap leaching testwork indicated that, at a 25mm to 50mm crushing size fraction in oxide mineralisation, a 75% recovery could be anticipated, whilst transitional and fresh mineralisation recoveries were lower, at 35% to 50%.  Consequently, heap leaching was not considered in detail as part of the Buckreef PEA.




Mineral Resource and Mineral Reserve Estimates




Hellman & Schofield (Pty) Ltd (Hellman and Schofield) was retained by the Company to undertake the Mineral Resource estimation for the Buckreef Project reported in the technical report effective June 30, 2011 entitled “National Instrument 43-101 Technical Report on Tanzanian Royalty Exploration Corporation’s Buckreef Gold Project in Tanzania” prepared by Venmyn Rand (Pty) Limited and compiled by Fiona Harper, Andrew Neil Clay and Nicholas J. Johnson (the “Buckreef Technical Report”).  Those Mineral Resource estimates were independently interrogated and reviewed by Venmyn Projects, as part of the Buckreef PEA.




The Mineral Resource estimates were based partially on a historic dataset that has been verified and deemed suitable for Mineral Resource estimation (Hellman and Schofield 2007), as well as Iamgold exploration data, which is similarly of a standard compliant with National Instrument and JORC reporting requirements. The Mineral Resources were estimated using Multiple Indicator Kriging (MIK) techniques in GS3 software produced by Hellman and Schofield. The model estimates resources into panels, which approximate the drillhole sample spacing throughout the majority of the study area. The Mineral Resource estimates within each panel were classified according to the distribution of sampling in the kriging neighbourhood and took into account the uncertainty in the estimates related to the proximity and distribution of the informing composites.




The following December 2011 Summary of Mineral Resources of the Buckreef Project is included in the Buckreef PEA.




Summary of Mineral Resources of the Buckreef Project (Cut-Off 0.5g/t Au) - Dec 2011





DEPOSIT
MEASURED
INDICATED
INFERRED
MEASURED & INDICATEDTonnes (Mt)
Au Grade (g/t)
Contained Au (Mcz)
Tonnes (Mt)
Au Grade (g/t)
Contained Au (Moz)
Tonnes (Mt)
Au Grade (g/t)
Contained Au (Moz)
Tonnes (Mt)
Au Grade (g/t)
Contained Au (Moz)Buckreef
5.176
2.05
0.341
3.706
1.86
0.222
7.158
1.89
0.435
8.882
1.97
0.563Buziba-Busolwa



35.270
1.04
1.179
14.350
0.90
0.415
35.27
1.04
1.179Bingwa






1.120
2.4
0.086Tembo






0.725
2.18
0.051TOTAL
5.17
2.05
0.34
38.97
1.12
1.40
23.35
1.32
0.98
44.15
1.23
1.74




30




Source: Hellman and Schofield 2007, 2011; Venmyn 2011.


Mineral Resources inclusive of Mineral Reserves (no Mineral Reserves reported for the Buckreef PEA).


Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability


Estimates over variable widths of 3m to 40m


Bulk Density ranges from 2.0g/cm3 to 2.8g/cm3 Inconsistencies in totals are due to rounding down


55% attributable to the Company


Cut-off grade 0.5g/t Au





Development and Operations




The Buckreef Project is an advanced exploration project and apart from historic mining on the Buckreef Prospect, no mining operations or development has been undertaken by the Company. The Buckreef PEA mine design and costing assessment for the Buckreef Project was undertaken by Sound Mining Solutions (Pty) Limited (SMS).




The mining study was based on the geological and Mineral Resource block models for the BRMA and BZMA and for the purposes of the Buckreef PEA, Inferred, Indicated and Measured Mineral Resources were included in the assessment.  The Buckreef PEA mining study was intended to highlight the optimal mining sequence of the deposits and clarify the mine design. The current mine design approach is based on incomplete geotechnical information and the conceptual pit design for the Buckreef PEA cannot as yet be considered an optimised design, as there are several design criteria which will be improved once the recently gathered geotechnical data is available. For this reason, the pit designs are termed ‘concepts’ and it is possible that future studies will optimise this basic design, both in terms of layout and design criteria.




The mine design consists of a number of conventional open pit layouts with access to the mineralisation provided via a series of ramps into the pits. The pit optimisation results in segregation of the deposits into small, economic cone shaped pits rather than large single pits. This configuration is considered to be a function of grade, a reflection of ore to waste ratios and a possible effect of data paucity in areas discarded by the NPV SchedulerTM software.




The BRMA and BZMA orebodies consist of an upper, weathered, oxidised zone overlying a variable transition zone and lower, primary, fresh sulphide orebodies with depth. The weathered, oxidised, near surface material permits excavation by a combination of free digging, ripping, drill and blasting, whilst for the deeper fresh, competent material conventional pre-splitting, drill and blasting methods will be used to extract the ore.




Mining will consist of shovel loading of ore and waste, and Articulated Dump Truck (ADT) hauling via the planned access ramps. The pit dewatering requirements are expected to be approximately 1M litres per day (lpd). The possible underground extensions of the mine design have not been included in the Buckreef PEA mining study. The summary results of the Buckreef PEA pit concept designs are as follows:




Summary Results of the Pit Concept DesignPROSPECT

ORE TONNAGE (Mt)

WASTE TONNAGE (Mt)

TOTAL (Mt)Buckreef

8.67

40.82

49.49Bingwa

0.83

4.58

5.41Tembo

0.38

5.37

5.75Buziba / Busolwa

23.60

49.64

73.24TOTAL

33.48

100.41

133.89




31




The preliminary mining schedule for all cases was based on the requirement to produce 100,000oz Au per annum from 1.8Mtpa of plant feed from the BRMA area and 3.6Mtpa of plant feed from BZMA. The scheduling made no allowance for dilution or mining losses. The mining plan has scheduled 33.48M mined ore tonnes at stripping ratios varying from 5.45 for BRMA to 1.99 for BZMA over a Life of the Mine (LoM) of 12 years for a total of 1.35Moz Au recovered. The target plant feed requirement is achieved throughout the LoM for both the BRMA and the BZMA.




The total mining capital expenditure (capex) estimates range from USD125m to USD140m excluding allowances and contingencies and the total operating costs (opex) over the LoM range between USD751.4/oz Au to 1,051.4/oz Au.




Buckreef Project Process and Recovery


The BRMA and BZMA deposits consist of an upper, weathered, oxidised zone overlying a variable transition zone and a lower, primary, fresh sulphide zone with depth. The ores are free milling with direct leach recoveries in the lower 90% range and are amenable to gravity recovery.




The fresh sulphide mineralisation contains pyrite and arsenopyrite and some improvement in recovery could be obtained by floatation of the sulphides and subjecting them to fine grinding to liberate the gold. However, the incremental recovery would be unlikely to justify the added expense and complexity of the plant. The presence of arsenic has potential impact on the environmental management and the possibility of flotation and separate processing and disposal of the concentrated sulphide stream, could be considered. However, there is also arsenic in the oxide ore and therefore the separate flotation of the sulphides has not formed part of the Buckreef PEA.




The oxide zone of the deposits is clay rich saprolitic material, which potentially poses a significant problem in terms of material handling and secondary crushing. The oxide zone is more developed at BZMA and therefore the comminution circuits of the plants are designed to accommodate the higher quantities of clay rich, oxide zone run-of-mine (RoM) at BZMA. At BRMA, the 150,000tpm RoM is crushed, screened and ball milled, whilst the BZMA 300,000tpm RoM is crushed and SAG milled.




Beyond the comminution circuits, the downstream pre-leach, leaching and recovery circuits are identical for both the large conventional BRMA and BZMA plants.




The metallurgical testwork results indicate that there is a recovery advantage to utilising gravity concentration of free gold and has the advantage that some sulphide associated gold in the gravity concentrate can be subjected to a more intensive cyanidation. Furthermore, the metallurgical testwork indicates that there is limited “preg robbing” effect and hence CIL will be used in preference to Leach/carbon-in-pulp (CIP).




The capex for the large conventional process plant is USD134m for BRMA and USD110m for the BZMA plant, with a relocation cost of the BRMA plant to BZMA of USD66m. The small, 30,000tpm modular plants require a capex input of USD129m at BRMA and USD125m at BZMA. However, the capital savings of the small modular plants is off-set by higher power, labour, reagent and maintenance costs.




The SMS metallurgical consultants suggested that alternative process plant components could improve the Project economics and efficiencies. The alternatives include skid mounted comminution units or skid mounted Vertical Shaft Impactors or High Pressure Grinding Rolls, which would be less capital intensive and could open the possibility of coarse gangue rejection.




Heap leaching was rejected as a viable option given the clay rich oxide zone, low recoveries and the time required for gold recovery, which would negatively affect the Project economics.




32




Buckreef Project Infrastructure and Services





Preliminary water baseline studies have been completed by Africa Geo-Environmental Services (Pty) Limited (AGES) and indicate that surface water is scarce in the Project area but wetlands are developed in drainage channels. The Nyamazuvu River is a dammed, small stream to the west of the BRMA, which was used historically as a fresh water supply for the Buckreef process plant. Another important drainage channel is that of the Nyaruyeye River, which forms a confluence with the Nyikonga approximately 10km to the east of Buckreef mine.  No groundwater abstraction schemes exist in the Project area and surface water forms the sole source of water to the rural communities. The underlying geology contains deep structures in the BRMA, which extend to 400m depths and could contain groundwater.




The water anticipated to be generated from the pit dewatering programme is estimated to be approximately 1Ml per day and is sufficient to meet mining requirements. The net water surplus after mining requirements, is to be pumped to a surface return dam, located adjacent to the plant areas at both the BRMA and BZMA for integration into the total operational water requirements. Effluent treatment facilities and the supply and reticulation will ensure that any water discharge will meet with all prescribed environmental guidelines. A Storm Water Management plan will have to be completed for each of the Project sites during subsequent phases of the Project, to ensure that water resources are protected from pollution and that run-off is managed in accordance with the applicable environmental legal requirements.




The total power requirements for the Buckreef Project mining operations were estimated at 12MW for the BRMA and 24MW for the BZMA. Electricity supply for Cases 1, 2 and 3 is assumed to be from the Tanzanian national supply at a cost of 12c/KW and a capital cost of USD8m. If the project is to fully powered by diesel generators as in Case 4, then the diesel consumption is estimated at greater than 3 x 30,000l diesel tankers per day and the logistical supply of these quantities of diesel is critical to the project. The total capital cost estimate for the diesel powered power supply is USD16.25m and the diesel will contribute a significant 25% of the Project opex per processed tonne.




The geographically separated mining areas and the plant sites, will be linked by 50km of graded mining haul roads with four river crossings, which will be upgraded at a total estimated cost of USD7.64m.




The design and costings of the tailings disposal facilities (TDFs) for the Buckreef Project were undertaken by Epoch Resources (Pty) Limited and the main TDF design criteria and assumptions included:-




·
the potential to produce acid run-off and drainage,




·
the potential to leach heavy metals, especially arsenic, and




·
the suitability and provision of the construction material for the TDF walls.




Two potential TDF sites were identified for each of the mining areas and the preferred options are located beyond the existing Mining Right boundaries. Two design scenarios were investigated in the Buckreef PEA, one an unlined TDF where the tailings are not acid generating and the arsenic content or mobility is insufficient to require lining the TDF, and the second, a lined scenario where the tailings is acid generating and the arsenic is of sufficient concentration to warrant lining the TDF with a synthetic liner. The incorporation of a synthetic liner in the design has a significant impact on the capital cost with an unlined TDF capex of USD17.5m and a lined capex of USD96.2m.




33




The environmental specialists conducted some initial As leachate testing for the Buckreef PEA and found that the As in the leachate is below detection limits. Consequently, whilst the Buckreef PEA TSF designs included both lined and unlined options, the Buckreef PEA selected unlined but monitored options based on geochemistry results thus far.




Environmental Considerations


AGES conducted the Preliminary Environmental Assessment (PEnA) for the Buckreef Project specifically to inform the future PFS from an environmental management perspective. The historic owner of the Project, Iamgold, maintained high standards of environmental management and all surface damage was fully compensated in line with government requirements under the Lands Act of 1998. The PEnA highlighted the environmental policy and statutory requirements for the Project and summarised the anticipated authorisations and studies that will be required in future phases of the Project. An EIA will be required, as well as a Water Use Permit.




A series of preliminary specialist studies were conducted as part of the PEnA which resulted in essential project baseline descriptions in terms of ecology, bio-diversity, wetlands, surface and groundwater, cultural and heritage resources, human health risk, noise and air pollution, visual impacts, land use and capability and socio-economic environment.




The environmental risks have been initially assessed and identified as occurring in the following categories;-




·
ground water quality and associated impacts on human and ecological health;




·
ground water availability and the resultant impact on the livelihoods of local inhabitants and ecology;




·
ambient air quality pollution and residual ecological impacts and impacts on human health;




·
direct impacts on ecological features due to destruction of habitat, pollution and alteration of the natural ecological systems including wetlands and the Rwamagaza Forest Reserve;




·
social impacts, including alteration of the sense-of-place, loss of or damage to heritage resources especially at the Buziba Hill area; and




·
regulatory risks associated with obtaining environmental authorisations.




At this stage of the Project evaluation and based on the information available for the Buckreef PEA, no environmental risk has been identified that is highly likely to occur and that cannot be managed.




A strategic decision to not actively engage with stakeholders at the Buckreef PEA stage was taken, as the Project parameters will only be finalised in later study stages. A preliminary Stakeholder Engagement Plan has been developed and will be utilised in the PFS. The environmental programme has to date been supported by a robust community benefits programme which spent in excess of USD500,000 on community infrastructure, water projects, health and education projects.




The preliminary estimation for the rehabilitation and closure costs of the BRMA and BZMA was a high-level estimate of the closure provision based on standard South Africa rates, which will be refined according to the Tanzanian mining industry in the PFS. The sensitivity of the Project area in terms of biophysical, social and economic sensitivities was assessed and the overall rehabilitation and closure costs are estimated at USD20m including after care and maintenance, as well as contingencies.




34




Project Capex and Opex


The summary capex and opex for the Buckreef Project are presented in the tables below:-





Summary Capital Expenditure for the Buckreef Project CAPITAL EXPENDITURE

UNIT

CASE 1

CASE 2

CASE 3

CASE 4Mining Capital

(USDm)

(125.16)

(140.01)

(125.16)

(125.53)Process Plant Capital

(USDm)

(309.14)

(309.14)

(258.81)

(309.14)Closure Capital

(USDm)

(19.96)

(19.96)

(19.96)

(19.96)TDF Capital

(USDm)

(17.53)

(17.53)

(17.53)

(17.53)TOTAL CAPITAL EXPENDITURE

(USDm)

(471.79)

(486.65)

(421.46)

(472.16)




Economic Analysis


The Economic Analysis of the Buckreef Project was undertaken utilising the Discounted Cash Flow (DCF) methodology with base case economic inputs that are directly comparable with more than half of the Buckreef PEAs published in 2012. Venmyn conducted the Economic Analysis with a base case gold price of USD1,500/oz gold price and a 5% real discount rate.




Monte Carlo simulations compared the Net Present Value (NPV) outputs of the DCF model for numerous combinations of input parameter values on all of the Buckreef PEA Cases. The resultant NPVs and Internal Rate of Return (IRR) for the four Cases are positive in all cases and summarised in the table below.




The simulations showed that Case 1 is this most economically advantageous mining sequence and plant configuration.




Summary Economic Analysis for the Buckreef Project at USD1,500/0z and a 5% Discount RateOPTION
DISCOUNT RATE 5%Case 1: Large plant, moved to BZMA, grid powered
NPV (USD)
220.4mPretax NPV (USD)
296.5mPost tax IRR
36%Case 2:Central large plant, grid powered
NPV (USD)
140.3mPretax NPV (USD)
188mPost tax IRR
21%Case 3:Modular Plants, moved to BZMA, grid powered
NPV (USD)
162.3mPretax NPV (USD)
214.03Post tax IRR
29%Case 4;Case 1 diesel powered
NPV (USD)
10.77mPretax NPV (USD)
14.38mPost tax IRR
7%





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The results of the Economic Analysis as summarised in the table above include Inferred Mineral Resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorised as Mineral Reserves, and there is no certainty that the Buckreef PEA will be realised.




The NPVs of the DCF models are most sensitive to the gold price and the table below provides a summary of the effect of gold price changes on the intrinsic project value of Case 1:-




Gold Price Sensitivity MatrixECONOMIC ANALYSIS

GOLD PRICEUSD1,600/oz

USD1,500/oz

USD1,400/oz

USD1,300/ozPost TaxProject NPV (at 5% discount rate)

287.98

220.41

149.58

81.17Project NPV (at 10% discount rate)

196.25

143.44

87.88

33.69IRR

48%

36%

25%

16%Pre TaxProject NPV (at 5% discount rate)

391.97

296.49

201.00

105.52Project NPV (at 10% discount rate)

268.41

195.16

121.91

48.66IRR

54%

41%

29%

17%




The most sensitive cost parameter is the plant opex, which is most affected by the cost of power. The cost of diesel for Case 4 accounts for over 30% of the USD/processed tonne value. The overall total opex per ounce over the LoM is USD751/oz Au, which is in-line with AngloGold Ashanti’s reported total production costs of USD657/oz Au on the Geita mine in its quarterly report ending September 2011.




Conclusions of the Economic Analysis


Venmyn concluded that the Buckreef Project Economic Analysis, based on the 5% discount rate and gold price of USD1,500/oz, suggests that the Project will have positive NPVs for all cases and a post-tax value of USD220.4m, a pre-tax value of USD296.5m and an IRR of between 36% and 41%.




The results of the Project Economic Analysis as summarised above, include Inferred Mineral Resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorised as Mineral Reserves, and there is no certainty that the Buckreef PEA will be realised.




36




Venmyn Projects is of the opinion that this Buckreef PEA outcome can improve with optimisation of the open pit designs based on new Mineral Resource models and geotechnical data, refinement of the processing plant design and the increase in the Mineral Resource base expected from the current on-going drilling exploration programme.




Conclusions and Recommendations


The positive results of the Buckreef PEA of the Buckreef Project have confirmed that progression of the project to the pre-feasibility study (PFS) stage is warranted and in addition have highlighted the following factors, which have lead to definitive foci for the PFS. These foci are essentially Venmyn Projects recommendations for the future PFS, which can be categorised into trade-off studies that will clarify options going forward and optimisations that be undertaken:-




·
the Inferred Mineral Resources included in the Buckreef PEA are, if possible, to be upgraded to Indicated Mineral Resources in the PFS by means of current exploration drilling which has provided additional density data and defined extensions of the Buckreef Prospect mineralisation.  The PFS will be based on newly constructed Mineral Resources models for all five prospects, which include the newly identified medium to high grade mineralisation at Buckreef Main zone, Buckreef North and Buckreef Eastern Porphyry deposits. The newly identified mineralisation ranges in grade from 1.25g/t Au to 10.58g/t Au over widths ranging from 2.25m to 46m and much of the mineralisation occurs at depths accessible to open pit mining;




·
the economic analysis indicates that the mining sequence Case 1 is the most favourable. The options of mining BRMA and BZMA simultaneously, or BZMA first, are both unviable at current and forecast gold market conditions. The capital cost of the two plants early in the LoM is disadvantageous. The Case 5, whereby BZMA is mined first, is negatively affected by early high capital costs for the two plants, low grades from the BZMA orebody and insufficient revenue streams to cover opex costs;




·
Venmyn Projects considers the primary factors impacting the Project economics to be the combination of grade and stripping ratio. At BRMA, the stripping ratios average 5.45 and 2.3 at BZMA. The PFS, therefore, will aim to investigate ways of improving the stripping ratios by optimising the mine design;




·
the Buckreef PEA mine design can be viewed as a worst case scenario and the PFS pit design can be more aggressive as it will be based on improved geo-technical data which indicates design at 60o to 90o may be possible. The possibility of the pit design being to some extent a function of data paucity at Buckreef Prospect and BZMA will be investigated in the PFS. Improvement in the pit shell shape from smaller conical pits to larger, simple pits would be advantageous in decreasing the stripping ratios and therefore the PFS will investigate whether increased data density in the areas rejected by the pit optimiser, can improve the pit design in these areas;




·
a backfill mining methodology was not proposed for the Buckreef PEA and the PFS will undertake a trade-off study to investigate the effect of decreasing the mine design cut-off grade so that lower grade mineralisation, which for the Buckreef PEA is classed as uneconomic waste, could be stockpiled and processed later in the Project life to provide additional revenue;




·
the mine schedule will be refined and optimised in the PFS by applying a number of measures which will be investigated in the PFS;




·
the geographical characteristics of the Project is negatively impacting the Project economics. The requirement to improve 50km of roads and construct four river crossings, as well as dismantle and relocate infrastructure from BRMA is considerable but has proven less costly than the capex and opex of haulage of ore to a centrally located plant. The possibility of optimising the cost of buildings at BZMA by relocating BRMA buildings will be examined in the PFS;




37




·
the costs and logistics of the diesel supply for the power generation in Case 4 have a significant impact on the opex of the Project which is USD1,051/oz, as compared to Geita USD657/oz. The cost and availability of power from the national grid must be investigated in as a critical project component for the PFS;




·
the results of the environmental sensitivity reviews have proved favourable in that no unmanageable environmental risks have been identified. Initial indications are that no requirement for a lined TDF will necessary but this will be further investigated in the PFS, as the costs associated with lining are approximately USD96.0m, as opposed to USD17.5m for an unlined facility;




·
an environmental impact study (EIA) will have to be completed for the BZMA;




·
the proposed plant sites, TDF and waste disposal sites must be further investigated in the PFS and sterilised particularly in the BRMA, where potential for additional mineralised shears is high;




·
a trade-off study of the benefits of contractor mining as opposed to owner mining will be undertaken for the PFS;




·
trade-off studies of the effect of different processing plant options will be undertaken in the PFS. Different modular sized plants with alternative comminution sections could reduce capital and operational costs, especially the power consumption;




·
the possibility of improving the Project outcomes by negotiating a contribution by the Tanzanian government partner Stamico to the infrastructure upgrading costs, should be investigated by the Company;




·
Venmyn Project’s conclusion is that the results of the Buckreef PEA are favourable and in addition, a number of refinements, optimisations and alternatives are possible which collectively could improve the final Project outcome. In the PFS, options need to be investigated to reduce the opex cost per ounce through finding solutions to the high BRMA stripping ratio, targeting higher grade areas, finding a solution to the high electricity costs and optimising the production schedule;




·
the exploration potential of the RGB has not been fully realised and the Company is well positioned to benefit when the full extent of the prospectivity of the greenstone belt is determined. Furthermore, the Buckreef Project benefits particularly from being an open pittable gold deposit, which can be brought rapidly into production to benefit from the current favourable gold market conditions. The definite upside potential to define further Mineral Resources serves to provide focus for future exploration and expansion of the project; and




·
the drilling programmes currently being undertaken demonstrate a reasonable likelihood that the Mineral Resources are classified as Indicated Mineral Resources for PFS. The drilling will provide geotechnical data for a detailed TDF design, as well as plant sterilisation drilling. An environmental fatal flaw analysis will be undertaken and following the results of that study, numerous specialist consultant studies will be required. The PFS results will be independently reviewed and the project economic viability assessed.




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·
Venmyn Projects further concluded that the positive Buckreef PEA outcomes have provided a valuable basis for the development of a PFS on the Buckreef Project. A number of refinements, optimisations and alternatives have been identified, which collectively should improve the final Project outcome. The newly identified mineralisation will increase the Mineral Resource base of the Project and there is definite upside potential to define further Mineral Resources to provide a focus for future exploration and expansion of the Project. The Buckreef Project benefits particularly from being an open pittable gold deposit, which can be brought rapidly into production to benefit from the current favourable gold market conditions.




For more information regarding the Buckreef PEA, see “National Instrument 43-101 Preliminary Economic Assessment of Tanzania Royalty Exploration Corporation’s Buckreef Gold Mine Re-Development Project in Tanzania” by Venmyn Independent Project (Pty) Limited dated August 23, 2012 and filed on SEDAR on August 24, 2012 and with the SEC on September 10, 2012.




The following discussion summarizes the highlights of the Company’s current drilling program at the Buckreef Project:




Current Drilling Program




Since acquiring the Buckreef Project in December 2010, the Company has undertaken comprehensive reverse circulation and diamond drilling programs on the Buckreef Project.  Please note that at the time that the Buckreef PEA was done the Company did not have sufficient information to warrant inclusion of the Eastern Porphyry prospect in the BRMA.





The Company has completed an aggressive resource definition drilling program in five areas of the BRMA (Buckreef Main zone, Buckreef Footwall zone, Eastern Porphyry prospect, Bingwa prospect and Tembo prospect). A total of 165 holes for 32,569.28m were drilled during this period, which include 51 RC holes (3073m); 6 PQ Diamond holes (330.30m) for metallurgical test work for Bingwa and Tembo prospects;  and 108 NQ Diamond holes (29,165.98m).




Buckreef Footwall Zone


The Footwall zone is located 100m west in the footwall of the Buckreef Main zone of the historic Buckreef mine. A total of 30 Reverse Circulation holes for 1873m were completed to investigate the lateral and deep extension of the target.




The drilling returned interesting assay results which include 3m averaging 1.29g/t gold; 6m averaging 2.67g/t gold; 5m averaging 2.62g/t gold; 6m averaging 4.87g/t gold and 6m averaging 1.63g/t gold, including 2m at 3.75g/t gold.






Eastern Porphyry Prospect


The Eastern Porphyry prospect is located 800m east of the Main Zone on the strike extension of the ENE-WSW trending, 5-30m wide, brittle-ductile fault zone within relatively undeformed mafic volcanics immediately east of the main Buckreef Mine.  The area is dominated by sequences of mafic rocks which include basaltic rock units alternating with dolerite and a series of narrow felsic porphyry units with pronounced shearing and pyrite-quartz-carbonate alteration of the mafic packages at the contacts with the felsic porphyry units. Mineralisation is localized within the sheared, quartz-carbonate-pyrite altered zones in both mafic and felsic units.  Previous wide-spaced exploration drilling defined the presence of finely disseminated pyrite and quartz veining slivers of persistent but discontinuous sub parallel zones of quartz porphyry units hosted in the main fault zone.




39




At the Eastern Porphyry prospect, a total of 7 Diamond holes for 1,211.42m were completed to investigate and determine whether there is any potential to define the resource. The diamond core drilling program on the Eastern Porphyry prospect returned some  significant intercepts.  Among them are 4.8m averaging 4.63g/t gold (including 2m @ 10.93g/t gold) and 2m averaging 7.47g/t gold (including 1m @14.6g/t gold); 10.5m averaging 2.27g/t gold (including 1.1m @ 8.89g/t gold and 1.5m @ 5.32g/t gold).




Buckreef Main Zone


A total of 101 holes for 27,954.56m have been completed on the Buckreef Main zone and Buckreef Northeast extension. Drilling consists of: 3 diamond wedge holes (1,057.75m) and 98 Diamond holes (26,896.81m). Approximately half of this drilling has been carried out on the Buckreef Main zone and half of it on the Buckreef Northeast zone. This drilling was intended to explore the potential to define and upgrade the current inferred resource to the Indicated and Measured category at vertical depth of 150m and 200m, while testing the down dip continuity of the shear zone-hosted gold mineralisation associated with quartz-carbonate-pyrite veins emplaced in the mafic volcanic sequence below 300m.




Surveys of inclination and azimuth were completed at nominal 30m intervals for all DD. The survey tool was usually a single shot Reflex camera and was operated by the drill contractor as part of normal drilling.




For diamond drilling, core recovery is generally very good. All DD holes commenced with an HQ size to the base of sap rock, followed by NQ size diameter which in turn is reduced to NQ2 size when fresh rock is reached or difficulties are encountered.  TRE standard procedure is to mark a Top-of-Hole Reference (TOH) line which may be solid, dashed or dotted depending on the confidence attached to the core fitting.




The deeper drilling confirmed the down-dip continuity of the various near-surface mineralized zones, and some deeper holes seemed to indicate a thickening of mineralisation with depth and occasional very high grade intercepts. One diamond drill hole returned 16m grading 2.23 g/t gold including a high grade section of 2.0 metres averaging 7.03 g/t, with a second hole yielding 35.35m grading 2.75 g/t gold including 6.35m averaging 5.75 g/t and 4.7m at 4.33 g/t. Another diamond drill hole targeted the down dip potential in the Main zone, returning 30m grading 2.66 g/t gold including 2.0m @ 6.5g/t, along with 5.0m grading 4.06g/t. The deepest segment of this hole returned 2.0m @ 1.77g/t from 197m in sheared, altered dolerite intercalated with felsic porphyry and milky white late quartz veins; 7.0m grading 3.47g/t gold; 4.0m grading 3.2 g/t gold; 3.0m is averaging 4.06 g/t; 3.0m at 3.16g/t gold; 13m averaging 2.86g/t gold; and 3.3m at 2.53 g/t gold.




Tembo Prospect


The Tembo Prospect located in an adjacent but sub-parallel shear zone to the regional ENE-WSW trending Rwamagaza main shear zone is located approximately 3km south-west of the main Buckreef Mine.  Gold mineralisation at Tembo is hosted within grey quartz stringers, veinlets and boudins all tightly constrained by east-west shears hosted in weathered basaltic volcanic units.




A total of 23 holes for 1355.60m have been completed on the Tembo prospect. Drilling consists of 3 PQ Diamond holes (157.60m) and 20 RC holes (1198m). The PQ holes were intended for metallurgical testwork and the collected sample were analysed by MINTEK laboratory in South Africa.




Positive drill results were reported at Tembo including: 3.0m grading 14.75 g/t gold; 6.0m averaging 3.38 g/t gold; 3.0m averaging 2.62 g/t gold; and 2.0m at 1.92 g/t gold. Similar to Buckreef Main, Tembo mineralisation is structurally controlled and is hosted in a sub-vertical shear zone emplaced along a mafic basaltic sequence. The mineralisation is confined along an East-West trending shear structure and a newly discovered northeast trending splay.




40




Contribution of The Recent Drill Campaign At The Buckreef Project





According to the Buckreef PEA, prior to the recent drilling campaign the BRMA, excluding the Eastern Porphyry prospect, had a resource base made up of the following components: (a) the Buckreef prospect with 8.882 million tons of Measured and Indicated Mineral Resource at a grade of 1.97 g/t Au that contained approximately 563,000 ounces of gold and an Inferred Mineral Resource at 1.89 g/t Au that contained approximately 435,000 ounces of gold ; (b) the Tembo prospect with 0.725 million tons of Inferred Mineral Resource at a grade of 2.18 g/t Au that contained approximately 51,000 ounces of gold; and (c) the Bingwa prospect with 1.120 million tons of Inferred Mineral Resource at a grade of 2.4 g/t Au that contained approximately 86,000 ounces of gold. The Report did not contain any estimate of a potential resource for the Eastern Porphyry prospect; however, sufficient drilling has now been done to warrant including the Eastern Porphyry prospect into the Buckreef Project. The Company has initiated a comprehensive evaluation of the contribution of the recent drill campaign to the resource base of the BRMA.




In October 2012 the Company announced it had retained Venmyn Rand Limited to prepare NI 43-101 compliant Mineral Resource block models and updated mineral resource statements for the Buckreef Project.




The Company has incurred total net costs (after recoveries, if any) of $13,366,027 on the Buckreef Project to August 31, 2012.




THE BUCKREEF PROJECT IS WITHOUT KNOWN MINERAL RESERVES AND ANY EXPLORATION PROGRAM IS AN EXPLORATORY SEARCH FOR ORE.





Kigosi Project





Property Description and Location




The Kigosi Project area is principally located within the Kigosi Game Reserve controlled area.  Through prospecting and mining option agreements, the Company has options to acquire interests in several Kigosi prospecting licenses.  A comprehensive report summarizing exploration work done and results to date was submitted to the Director of Wildlife and Nature Conservation as part of the requisite and mandatory requirements for an application to renew the Kigosi game reserve access permit.  It is a statutory requirement to have a access permit to conduct any exploration activities in an area designated as a forest and/or game reserve. On May 31st, 2012 the Company was granted a two year permit from the Ministry of Wildlife and Nature Conservation to enter the Kigosi Game Reserve and continue with exploration activities.  The Company is currently evaluating various alternatives for advancing the Kigosi Project by focusing on an area of near surface mineralization.




The Kigosi Project is located in the Sukumaland Province in northwest Tanzania, some 100 km south of Lake Victoria within the Shinyanga Region (see property location map above).





Accessibility, Climate, Local Resources, Infrastructure and Physiography





The property is accessed via air from the city of Dar Es Salaam on the Indian Ocean coast to the city of Mwanza on the southern shoreline of Lake Victoria.  From Mwanza, a moderately maintained tar road accesses the town of Ushirombo, via the towns of Shinyanga and Kahama, around the southern part of the Lake, referred to as Smith Sound.  This trip is approximately 400 km and takes some 5 hours.  From the town of Ushirombo one keeps heading east along the main Burundi tar road for approximately 6 km, where a dirt track allows access into the Kigosi Game Reserve.




41




The southern bulk of the Kigosi Project area is wholly located within the northern sector of the Kigosi game reserve with a third of the licenses being located in the adjacent Nikonga-Ushirombo Forestry reserves further north.  As per legal and mandatory requirements, the Company acquired respective renewable permits from the Departments of Game Reserves and Forestry Reserves of the Ministry of Wildlife and Tourism to conduct exploration activities in both the game and forestry reservation areas throughout the year.  Access to the main Kigosi exploration camp via the dirt track has been substantially improved by the Company to allow access by four wheel drive vehicles during the rainy season.





The exploration camp at Kigosi is predominantly a tented facility with larger semi-permanent structures employed for offices and storage facilities. Recent construction included the installation of metal containers which will be utilized as living and office quarters. Communications at the camp are via satellite, internet and telephone.





The access track passes over the Shiperenge River, a tributary to the Nikonga River and both are perennial rivers, typically dry in the winter months and overflowing during the October-May rainy season.  Three (3) large ponds located on the Nikonga River were the only close source of water until recently when the company drilled a highly productive water borehole located some 5km northwest of the camp.  The river water is mainly used for the operations of our recently installed bulk sampling plant while drinking water for the camp is pumped via pipeline from the borehole to the camp.  The Nikonga and Shiperenge rivers have played a major part in structuring the physiographic landscape in the area.  These rivers drain southwards into the Moyowosi and Njingwe Swamps.  Small undulating granite hills form the topographic highs, and generally trend northwest.  These hills make up approximately 5% of the project area.  The climate is typical of an African tropical climate, being hot during the day and cooling down in the evenings.  Winters are very mild, but a blanket is needed in the early hours of the mornings.  Kigosi fall within a malaria area, and precautions are necessary. Tsetse flies are also present in some parts of the project area.  The region is heavily forested, but has only limited wildlife, chiefly small gazelle and baboons.





Geology and Mineralization





The Kigosi-Miyabi granite-greenstone belt and the Ushirombo greenstone belt, form part of two of the greenstone belts within the Nyanzian Archaean greenstone terrain in northwestern Tanzania.  These belts host small-scale artisanal workings at Luhwaika and Igunda within the core project area at Kigosi and further to the southeast. The Ushirombo Greenstone Belt has been extensively explored by geologists and small scale miners over the past decade. It consists predominantly of mafic volcanics with lesser meta-sedimentary rocks across an east-west trending belt some 50 kilometres in strike. Gold mineralization generally occurs in narrow quartz veins.  The Kigosi-Miyabi Greenstone Belt has been less explored, mainly because of the location within the Kigosi Game Reserve.





Several prominent regional scale NW trending structural lineaments, interpreted as regional shear zones, appear to be the major conduits and controls for the localization of gold mineralization in the Kigosi area.  There is also a prominent NNW trending set of regional scale lineaments that are believed to be deep seated sources of the gold bearing fluids.





The Company previously discovered three previously undocumented shear-zone hosted gold mineralized targets and it has also established the presence of a surface to sub-surface horizon of unconsolidated residual in-situ auriferous vein quartz rubble on the Kigosi Property, forming a part of the Company’s Lake Victoria Goldfield Properties held through its subsidiary, Tanzam.




The Company received an updated NI 43-101 technical report dated September 1, 2011 from Venmyn Rand (Pty) Limited of South Africa (the “Kigosi Technical Report”). A quartz rubble area of mineralization has been identified which is of particular interest due to its tabular extent and unconsolidated nature.  The 43-101 Technical Report has defined a surface area of 3.36km2 and an average thickness of 1.15m which contains an  Indicated Mineral Resource of 3.89 million tons at an in-situ grade of 0.83g/t Au and an Inferred Mineral Resource of 6.30 million tons at a grade of 0.34g/t Au.




42




For additional information regarding the Kigosi Property see the Technical Report entitled “National Instrument 43-101F Technical Report on the Kigosi Project in the Lake Victoria Greenstone Belt, Tanzania” prepared for Tanzanian Royalty Exploration Corporation by Venmyn Rand (Pty) Limited and compiled by C.A. Telfer, N. McKenna, J. Glanvill and R.M. Tayelor dated September 1, 2011 and filed on SEDAR December 13, 2011.





During fiscal 2012, the Company entered into an agreement with Stamico providing Stamico a 15% carried interest in the Kigosi Project.   Also during fiscal 2012, the Company awarded a contract for a Preliminary Economic Assessment of surface rubble deposit at Kigosi (“Kigosi PEA”).




Luhwaika Quartz Rubble Deposit





A brief summary of the work done on the Luhwaika Quartz Rubble Deposit and the Msonga Prospect during the year are briefly summarized. Historical summaries for Luhwaika and Igunda Prospects are also briefly described.





During a previous detailed vertical RC-drilling program on the Luhwaika Prospect, the company established the presence of a consistent and sizeable near-surface quartz-rubble bed with a potentially significant economic potential. The Luhwaika Prospect is host to a potentially economic quartz rubble deposit which is likely a direct result of surface collapse and erosion of the Luhwaika Main and West reefs. Artisanal mining activity has concentrated on this loose quartz rubble deposit which is easily accessible for mining. High grade quartz rubble have so far been identified in three areas: the Luhwaika West reef, the Luhwaika Main reef and the Luhwaika East area.





The company completed a detailed bulk sampling program on this potentially economic quartz rubble bed.





Bulk Sampling Program





The Company initiated a pit bulk sampling campaign between September 2010 and February 2011. The nature of this exploration was the collection of composite channel sampling from the pit side walls as a way of providing an indication of the in-situ grade. The bulk sample itself was fed through a mobile modular gravity separation plant located at the main camp. The extent of the exploration was on a small scale and included 43 excavated and channel sampled pit bulk samples. Only 18 of these pit bulk samples underwent the full excavation, channel sampling and pilot plant testing within the four month period. The objective of the pit bulk sampling campaign was to provide confidence in the gold grades for the already finalised resource model for the quartz rubble deposit and to ascertain the free gold recoverability using a rudimentary pilot plant as a low cost exercise.





The Company utilised an in-house geologist and field assistants to carry out the pit bulk sampling. Excavation was conducted with a small excavator and a single dump truck. Excavation was monitored by the geologist to ensure uniformity of the excavation and to stop the hole once the mottled zone has been reached. The mottled zone was also dug out as part of the bulk sample to a further depth of ~0.5m below the quartz rubble.




43




The location of the bulk sampling pits was defined by the then Senior VP, Mr. R. Van Der Westhuizen, based on the earlier RAB drilling and various other requirements. The pit co-ordinates were emailed to the field geologist who then located the pit using a hand-held GPS and staked the limits on an east-west orientation.  A 5.0m x 2.5m x 2.5m pit was measured out with tape and staked. The sizing of each pit was targeted to yield approximately 80t of bulk sample. No specific grid size or spacing was used for the pit location.





Luhwaika Prospect





Gold mineralization at the Luhwaika Prospect occurs in a series of sub-parallel and variably auriferous shear zones. The geological setting of the Luhwaika Gold Prospect shows many characteristics that are typical of classic mesothermal lode gold deposits.





At Luhwaika, two principal shear zones have been identified: the Luhwaika Main and Luhwaika West reefs. These reefs carry significant gold mineralization as evidenced by strike extensive small-scale mining and exploration shafts, and more recent drill results. The gold mineralization in the Luhwaika Main reef is structurally controlled, consisting mostly of lodes of laminated quartz veins impregnated in strongly sheared and altered quartz sericite schist with occasional massive tabular whitish-grey quartz vein blow-outs. These veins are shear hosted, with lesser extensional veins noted in outcrop in the granite host rock.





The Luhwaika West reef, located 100-200 metres in the hanging-wall and sub-parallel to the Luhwaika Main reef, consists mainly of shear-zone hosted tabular quartz veins that often contain irregular hematite filled fracture surfaces.





Igunda Prospect





The structural setting of the Igunda Gold Prospect is similar to that of the Luhwaika Prospect with the exception that the former is hosted in mafic greenstone rocks intruded by lenses of felsic granitoids including quartz-feldspar porphyry. At Igunda, two principal shear zones have been identified: the Igunda A and B reefs. Closely associated with the reefs are sub parallel quartz feldspar porphyry units.





Gold mineralization is structurally controlled and the Igunda Reefs are localized in two sub-vertical dipping northwest striking shear zones, dipping steeply (75o – 85o) to the northeast. Gold mineralization also occurs in the host wall rock up to over a meter and is not confined to the veins.





Msonga Prospect





Drilling





The Msonga Prospect is situated in the far northeast of the Kigosi license area.  The earlier geochemical and structural studies covering this area had identified the presence of a substantial (7 km long) Au-in-soil anomaly hosted in mafic greenstone rocks. Dominant regional structures in the area (Ushirombo greenstone belt) generally trend east-west and are associated with the development of swarms of auriferous quartz veins such as those being currently mined by small-scale miners in the Katente area at Ushirombo. The Msonga Prospect is located between 3-5km along strike from these artisanal workings, and as such it was considered conceivable that the Msonga Prospect represented a similar setting to the Igunda Prospect (i.e., a greenstone and shear zone hosted gold deposit).





During the period mid-2009 to early-2011, the Company conducted a single phase of widely spaced RAB drilling covering the 7km-long Au-in-soil anomaly outline. From early 2010 to June 2011, the Company conducted two phases of RC drilling. The first phase of RC drilling comprised short vertical RC drill-holes mainly investigating the area’s potential for gold mineralization in a distinctive auriferous surficial lateritic quartz rubble deposit. The second phase of RC drilling comprised inclined RC drill-holes to mainly investigate the east-west strike extension of the auriferous quartz veins associated with the nearby Katente Prospect. A total of 148 inclined RC holes were drilled on the Msonga Prospect.




44




Subsequent modelling and krigging was conducted on the deposit. However, no mineral resources could be declared for Msonga Prospect due to the very low average grade, the paucity of sampling and a lack of geological control for mineralisation. The current targets at Msonga prospect are therefore, classified as minor gold occurrences only.
  Kigosi Exploration History





From 1998 to 2007 the Company and AngloGold-Ashanti conducted regional and detailed exploration work on the Kigosi Project Area including airborne magnetics, soil sampling, mapping and trenching. The aeromagnetic survey flown in 1999 covered the entire Ushirombo greenstone belt and parts of the Miyabi-Kigosi greenstone belt. Limited field work was conducted by the Company during this initial period including a helicopter visit to the Luhwaika artisanal site which included grab sampling and mapping.





In June 2002 the Company sent a team to investigate the Luhwaika and Igunda showings at which time a more thorough grab sampling program was conducted. Positive results from this sampling led to further sampling and a small mapping program was initiated. A Landsat and radiometric investigation was also conducted on the Kigosi Project Area in 2003.





AngloGold-Ashanti conducted a detailed airborne survey in 2003 that covered the eastern Kigosi licenses. A soil sampling program was also conducted as part of initial follow-up work on prospective aeromagnetic anomalies which were later classified as the Msonga, Bungoni, Luhwaika and Igunda prospect areas. AngloGold-Ashanti conducted limited trenching at both Luhwaika and Igunda.





The Company has incurred total net costs (after recoveries, if any) of $13,960,725 on the Kigosi Project to August 31, 2012 of which $207,675 was incurred during the most recently completed fiscal year.





THE KIGOSI PROJECT IS WITHOUT KNOWN MINERAL RESERVES AND ANY EXPLORATION PROGRAM IS AN EXPLORATORY SEARCH FOR ORE.





Lunguya Project Area





Property Description and Location





The Lunguya Property is located in the Kahama District of Tanzania. The Lunguya Property is situated in the Lake Victoria Greenstone Belts, approximately 100 kms by air to the southwest of Mwanza and about 15 kms south of Bulyanhulu.With respect to Lunguya PL 1766/01 in January, 2003, a Shareholder’s Agreement was entered into wherein a new company, Lunguya Mining Company Limited (“LMC”), was created to form a joint venture between Northern Mining and Consultancy Company Limited (“NMCCL”), Tanzam and LMC.  Tanzam has a 60% shareholding and NMCCL has the remaining 40% shareholding in LMC.





In February 2010, the Company entered into an Option and Royalty Agreement with Joseph Magunila and Partners (“JMP”) over an area in the Kahama District of the Shinyanga Region in Tanzania 100% owned by JMP.  The agreement grants the Company an option to acquire up to 90% of JMP’s interest and/or, at the sole discretion of the Company, to enter into a mining and exploration services agreement.  The Company paid US$90,000 for this option.





45





Accessibility, Climate, Local Resources, Infrastructure and Physiography





The Lunguya Property can be reached by plane from Mwanza to an airstrip accommodating Bulyanhulu or by road via Geita up to the Bulyanhulu/Kahama road intersection. From Kahama, the property is located approximately 8 kms to the south, toward Lunguya village. Secondary roads and trails traverse the property. The Nyamakwenge Reef, located in the northeastern part of the property, can be accessed using a 12 kms dirt tract passing to the north of the property.  Climate and elevation are similar to the Luhala Property.





Very little outcrop (less than 1%) has been identified at Lunguya.  The entire property is flat and covered largely by granitic sands and grey orange laterities derived from granitic sources.  Like Luhala, Lunguya is actively cultivated, but also is being actively mined by a few score artisanal miners along the trend of the Nyamakwenge Reefs.  No significant infrastructure, power or water is available on site.  However, the entire infrastructure of the region including electricity, air transport, health clinics, schools, and improved road networks, have been greatly improved due to the proximity to Barrick’s Bulyanhulu mine, some 20 kms to the north.





History





The project was acquired by the Company in 2001 and a program of bulk leach extractable gold (BLEG) sampling, geological mapping, rock sampling, RC and diamond drilling was initiated.





Geology





The very limited outcrop exposures on the Lunguya concession necessitate development of a geological and interpretive environment largely based on geophysical interpretations.





Regionally, Lunguya is located near the eastern terminus of the inner volcanic arc, lower Nyanzian, of the Sukumaland Greenstone belt.  The succession is dominated by tholeiitic volcanic rocks containing lesser felsic tuffaceous rocks and argillaceous horizons cut by thin quartz porphyry dykes and sills.  The thick, banded iron formation and felsic flows characteristic of the outer arc Upper Nyanzian sequence are absent. Most of the map scale granite – greenstone contacts strike north-south.  No information is available with respect to the orientation of sub-surface contacts.





At Lunguya, all currently known, auriferous structural zones track at an oblique angle, the eastern granodiorite-mafic volcanic contact.  Auriferous veins strike at 020° to 030° with the dominant intrusive volcanic contact trending at approximately 360°.  On the property scale, two 330° trending fault  structures are interpreted to offset the Lunguya vein into two fault repeated vein segments, having strike lengths of  approximately 180 and 300 m.  A few score artisanal miners have exploited these veins to a depth not exceeding 30 vertical m’s subsurface. A second set of auriferous reefs, the Nyikoboko Reefs, are located 12 kilometres to the south. This area is associated with a smaller set of largely inactive artisanal dumps and workings.





Based on the aeromagnetic data a model has been proposed whereby a large NS trending shear zone is believed to exist below a thick black cotton soil (mbuga) cover. The thin veins associated with the Nyikoboko and Nyamakwengwe reefs probably represent secondary structures from the main shear. This idea has been tested using biogeochemistry.





Mineralization





Lunguya is a mineralized brittle ductile strain zone, developing internal to a major granite-greenstone contact. Gold is associated with one fault offset vein which is likely broken into two segments, the Western and Eastern reefs.  Lesser veins are also present.  Initial sampling of artisanal vein waste dumps indicated the presence of well mineralized dump samples.  The site contained greater than 200 of these small pits-shafts ranging from 1 to 20 metres deep.




46




Diamond drill and RC programs at Lunguya have demonstrated geological continuity of the Nyamakwenge West and East Reefs but weaker continuity of grade.  The difficulty in obtaining representative gold grades from small core samples of vein material containing coarse particulate gold is a well documented phenomenon. Widths in these boreholes are approximately true widths and the boreholes have been collared roughly perpendicular to the strike and dip of the mineralized structural zones.





Exploration





In November 2010, Tanzanian Royalty announced positive results from laboratory test work on surface quartz rubble collected from its Lunguya Primary Mining Licenses (PMLs) in northern Tanzania.  The laboratory test work was intended to establish the mineralogical (physical) characteristics of gold contained within an extensive auriferous (gold bearing) quartz rubble bed identified at Lunguya, along with suitable gravity-based recovery methods to extract gold from the quartz rubble which are essentially broken and fractured surface rock.





Chemical analysis of sample material returned values of 3.58g/t, 5.75g/t, 2.33g/t and 3.31g/t, giving an average "head grade" for gold of 3.74g/t. (The "head grade" refers to the average grade of the material submitted for processing and analysis).





Bulk samples were collected from random pits within the Lunguya PML in February 2010.  RC drilling began at Lunguya in June 2011. The program was intended to confirm evidence of reef mineralization identified during the 2002 RC and diamond drilling program in the area.  A total of 14 drill holes consisting of 1,247m were completed during the month. A number of narrow, parallel, moderate dipping shear structures hosted in granite were intersected.  The shears are possibly related to those hosting gold mineralization in the area.





The RC drilling program continued at Lunguya  in August 2011, demonstrating the continuity of Nyamakwenge reefs to the southwest of the prospect. Two sets of quartz vein in sheared granite were identified during the drilling program in 2002, with their thickness ranging from 1 – 8m thick. During 2011 RC program another two sets of quartz reefs were identified, with their thickness ranging from 2 to 20m. These two new sets of quartz reef have similar characteristics with the first sets of quartz veins identified.





A study was completed for the Lunguya project. For additional information regarding the Lunguya Property the reader is referred to the complete text of a technical report prepared in accordance with the requirements of NI 43-101 dated February 8, 2010, entitled, “Report on the Lunguya Mineral Exploration Property of Tanzanian Royalty Exploration Corporation in the Kahama District, Shinyanga Region of the United Republic of Tanzania, East Africa” by Martin J. Taylor, P.Geo.  The Preliminary Lunguya Report is available online at www.sedar.com, filed on February 16, 2010 under the heading, “Technical Report (NI 43-101)”.





During the period ended August 31, 2012, no direct property work was conducted on the Lunguya property.





The Company has deferred total net costs (after any recoveries and write offs) of $3,423,291 on the Lunguya Property to August 31, 2012.




47




THE LUNGUYA PROPERTY IS WITHOUT KNOWN MINERAL RESERVES AND ANY EXPLORATION PROGRAM IS AN EXPLORATORY SEARCH FOR ORE.





Itetemia Property





Property Description and Location





The Itetemia Property consists of prospecting licenses covering approximately 40 km2.  In January 2007, the Company concluded an option and royalty agreement with Sloane over a portion of the Company’s Itetemia project.  Under the option agreement, the Company granted Sloane the right to earn a beneficial interest ranging from 90% to 100% in  prospecting licenses comprising a portion of the Itetemia Project.   In December 2011, Sloane returned the Itetemia gold prospects to the Company (see “Item 4. Information on the Company - Significant Acquisitions and Significant Dispositions” above).  The Itetemia Property is located in the Mwanza Region of the Lake Victoria Greenstone Region, Tanzania, approximately 90 kilometres by air southwest of the city of Mwanza, situated on the south shore of Lake Victoria (see property location map above).





Accessibility, Climate, Local Resources, Infrastructure and Physiography





The property is accessed via local roads from Geita or by plane from Mwanza to an airstrip accommodating the neighbouring Bulyanhulu Mine, owned by Barrick.  The Barrick airstrip is 3.75 km west of the western boundary of the Itetemia prospecting license, and approximately 4 km northeast of the Nyamykonze village. Local resources are available at Mwanza, located on the southern shore of Lake Victoria.





The topography in the region and on the property consists of large flat-lying areas surrounded by numerous small hills. The hills have elevations of up to 100 m above local terrain.  The hills are thickly vegetated and access is only possible along cut lines.  Little outcrop exists on the property. The climate is similar to the rest of the region.  The rainy season starts in November and lasts to the middle of April, but precipitation is irregular from one season to another. The dry seasons are usually hot. Mwanza, located along the southern shore of Lake Victoria, can, and has, provided limited supplies for mining and exploration operations in the area.  Dwellers in the area of the Itetemia Project, such as the neighbouring Nyamykonze village, are traditionally subsistence farmers and ranchers, and have limited mining experience from the Bulyanhulu operation and numerous small scale activities.  Water for the purpose of mining and processing is not readily available in the region; however, a pipeline from Lake Victoria built by Barrick for its Bulyanhulu Mine, provides an adequate supply.





The large, relatively flat terrain surrounding the known gold mineralization may be suitable for potential tailings and waste rock storage and for heap leach pads and a potential processing plant. Electric power is available via the national grid within 5 km; due to the unreliability of such power, alternative forms of residual or back-up power would be necessary for mining or processing operations, such as diesel power generation used by Barrick at its Bulyanhulu mine.





Ownership





Prior Ownership





With respect to one Itetemia prospecting license, the interest of the Company was acquired from Stamico pursuant to a joint venture agreement dated July 12, 1994 (the “Stamico Venture Agreement”).  The Stamico Venture Agreement obligated the Company to make two initial payments of TSh$1,000,000 and US$7,200 to Stamico, both of which were satisfied.




48




The Company’s Interest





Through prospecting and mining option agreements, the Company has options to acquire interests in several Itetemia Property prospecting licenses.  The prospecting licenses comprising the Itetemia Property, are indirectly  held by the Company; through the Company’s subsidiaries, Tancan or Tanzam. In the case of one prospecting license, Tancan acquired its interest pursuant to the Stamico Venture Agreement, as amended June 18, 2001 and July 2005, which provides, among other things, that:





1.
Tancan had to pay Stamico, on execution of the Stamico Venture Agreement, the sum of US$7,200 (as an advance against the 2% gross revenue royalty) and TSh1,000,000.





2.
Tancan and Stamico were to form a joint venture company for the purpose of holding the prospecting license that shall be held 10% by Stamico (with no obligation to contribute) and 90% by Tancan, which was effected through the formation of Itetemia Mining Co.





3.
Stamico is entitled to acquire an additional 20% interest in the joint venture company by paying a sum equal to 20% of the cost of placing the property into commercial production based on the feasibility study submitted to the Government of Tanzania for such purpose.





4.
Tancan shall assist Stamico in raising the required capital to exercise the right referred to in (3) above.





5.
Tancan was to expend the sum of US$25,000 in the first year and US$50,000 annually thereafter in relation to the training of Tanzanian personnel.





6.
Upon commencement of commercial production, Stamico shall receive a 2% gross revenue royalty, which shall be increased to a 2.5% gross revenue royalty should a mine on the Itetemia prospecting license produce recoverable gold in excess of 12 grams per tonne.





7.
Tancan shall pay to Stamico, as an advance against the 2% gross revenue royalty, the sum of US$7,200 on or before every anniversary of the Stamico Venture Agreement up until the development phase, upon and after which the annual sum of US$10,000 shall be paid as an advance against such royalty.





8.
Tancan shall show preference to Stamico for the provision of local materials and services during the period of mining operations.





9.
As amended July 2005, Tancan had to pay to Stamico the sum of US$15,000 on or before July 12 of 2006 and 2007, and ending upon commercial production, provided that commercial production commences by December 31, 2007, failing which the aforementioned payment shall be revisited.  As expected, commercial production did not commence by December 31, 2007.  In 2008, the annual option fee was renegotiated to US$25,000 per annum until commercial production.





10.
Tancan may assign its rights under the agreement, subject to the prior written consent of Stamico.
The Itetemia prospecting licences  are adjacent to Barrick’s Bulyanhulu gold mine.




49




History





The exploration history of the Itetemia Property from 2006 to 2012 is summarized as follows:





Itetemia Exploration History Synopsis





Year

Operator

Work Performed2006

Tancan

In-house evaluation. 4-hole diamond drill program2007

Sloane Developments Ltd.

Planned 2000 m RC drill program and 3000 m infill diamond drilling program.2008

Sloane Developments Ltd.

First phase drill program consisted of 10 Reverse Circulation (RC) aggregating 1,489 metres.  Eight diamond drill holes were drilled totalling 2,286.5 metres.2009

Sloane Developments Ltd.

Data analysis2010

Sloane Developments Ltd.

Data analysis2011-2012

Tanzanian Royalty

NI 43-101 report prepared by Venmyn Rand (Pty) Ltd.





Geology





The Lake Victoria area contains 12 Archean Nyanzian greenstone belts which are surrounded by and have been interrupted by numerous granitic intrusions.  The Nyanzian belts comprise a volcano-sedimentary sequence composed of mafic to felsic volcanics (lavas and tuffs), BIF and shales. The greenstone belts have been grouped into locally distinct geographic regions.  One of these regions is the Southwest Mwanza Region which includes a large area south of town of Mwanza, located on the south shore of Lake Victoria.  There are five greenstone belts in the Southwest Mwanza Region, one of which is the Ushirombo belt. The Ushirombo belt is an east-west trending belt, the eastern end of which is located approximately 25 km west of the southern end of Smith Sound on Lake Victoria. The eastern end of the belt is arcuate in shape and trends northerly tangential to the northwestern flank of the Siga Hills.





The Itetemia Property is underlain by the northerly trending eastern portion of the Ushirombo Nyanzian greenstone belt.  Granite underlies the eastern and northern portions of the property.  The greenstone/granite contact trends northerly through the east-central portion of the Itetemia prospecting license and through the central portion of the Itetemia East prospecting license onto the Itetemia Village license; at which point, the contract tends westerly through the Mwingilo license cutting the northeast corner of the Ngula license. Sixty percent of the Itetemia, Itetemia North and Ngula licenses are underlain by the Nyanzian greenstone belt.  The remaining 40% is underlain by granite.  Granite variably underlies 90 to 100% of the Itetemia East, Itetemia Village and Mwingilo prospecting licenses. The mbuga soil covers 10 to 40% of the property.





Mineralization





The sulphide mineralization encountered on the Itetemia Property comprise massive to semi-massive, stringers, veins and veinlets, disseminated and nodular mineralization.  The types of mineralization are (i) sulphides associated with volcanism activity; (ii) remobilized sulphides associated with deformation (shear hosted); and (iii) sulphides associated with sedimentation.  The gold and metallic contents associated with this mineralization are variable and the relation between the grades and the mineralized type is not well known at this stage.





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The massive to semi-massive sulphide mineralization seems to be related to volcanism.  It occurs in two areas on the Property.  One area is located in the northern part of the licenses and has been intersected by the hole ITDD-06.  More than 30 m. of sulphides were intersected at the contact between a QFP and an argillite horizon separating two pillowed basalts.  The sulphide content ranges from 10 to 90% pyrrhotite, 2 to 5% pyrite, trace to 5% sphalerite, trace to 1% copper.





The Golden Horseshoe Reef mineralization occurs as massive sulphide veins locally ranging from 15-30 cm wide.  Sulphides dominantly appear in veins/veinlets less than 5 cm wide in felsic volcanic rocks.  Five to thirty percent pyrite-pyrrhotite is common over sections of 1 to 15 m along the holes.  They are sub-concordant and parallel to the schistosity.  The strong shearing at the Golden Horseshoe Reef probably represents a remobilization of the sulphides.





Exploration





Since entering into the option agreement with Sloane in 2007, Sloane has carried out the exploration work on the licenses comprising a portion of the Itetemia property under option to Sloane.





The majority of the exploration work in 2007 consisted of RC and diamond drilling, along with limited ground geophysics.  Exploration crews were mobilized to the Itetemia Project in August 2007 and drilling commenced in mid-September.  The first phase drill program completed 10 RC holes aggregating 1,489 metres and eight diamond drill holes totaling 2,286.5 metres.  The drill program targeted the shallowest part of the previously established Golden Horseshoe Reef with a view to developing an open pit resource with a notional floor level of 200 metres below surface.  In support of preparation of a resource estimate, drill holes were sited to provide data at grid points at or below 50 x 50 metres spacing.  A number of deeper holes were also sited to test the extent of the mineralized body at depth and along strike.





The Company is reviewing various alternatives for advancing its Itetemia project. Previous studies have indicated that the Golden Horseshoe Reef (GHR) represents a small, yet robust, medium-grade, near surface gold deposit that warrants further feasibility investigations. A Technical Report dated January 31, 2012 (the “Itetemia and Luhala Technical Report”) shows that preliminary economic studies indicate the potential feasibility of a small opencast operation, at the current high gold prices. At lower gold prices, studies show the possibility of toll treating the GHR material at the neighbouring Bulyanhulu Mine.





The Itetemia and Luhala Technical Report also includes a Resource Summary for the GHR. Based on a 1.0g/t Au cut-off grade, Itetemia has an Indicated Mineral Resource of 2.80  million tons  grading 2.96g/t Au containing 266,000 ounces of gold.





For additional information regarding the Itetemia Property see the Technical Report entitled “National Instrument 43-101F on the Itetemia and Luhala Gold Projects in the Lake Victoria Greenstone Belt, Tanzania” prepared for Tanzanian Royalty Exploration Corporation by Venmyn Rand (Pty) Limited and compiled by A.N. Clay, N. McKenna, and R.M. Tayelor dated January 31, 2012 and filed on SEDAR February 1, 2012 (the “Itetemia and Luhala Technical Report”).





During the period ended August 31, 2012, no direct property work was conducted on the Itetemia property.





The Company has incurred total net costs (after any recoveries and write offs) of $5,787,736 on the Itetemia Property to August 31, 2012.





THE ITETEMIA PROPERTY IS WITHOUT KNOWN MINERAL RESERVES AND ANY PROPOSED PROGRAM IS AN EXPLORATORY SEARCH FOR ORE.




51




Luhala Property





Property Description and Location





The Luhala property is located in Misungwi District of Mwanza Region of Tanzania.  It lies approximately 70 kilometres south of the city of Mwanza.  The Luhala prospecting licenses are in good standing with respect to required filings and payments with the Government of Tanzania.





In January 2007, the Company concluded an option royalty agreement with Sloane for its Luhala property.  Under the option agreement, the Company granted Sloane the right to earn a 100% beneficial interest in the Luhala Project.  In December 2011, Sloane returned the Luhala gold prospects to the Company (see “Item 4. Information on the Company - Significant Acquisitions and Significant Dispositions” above).





The Luhala property covers an area of approximately 60 square kilometres.  The target on the Luhala property is gold stockwork mineralization associated with felsic rock units in dilatational structures.





Accessibility, Climate, Local Resources, Infrastructure and Physiography





Access to the Luhala Property is via the main Mwanza – Shinyanga road, which is a single lane, good to excellent quality, asphalt highway.  Approximately 45 kms south of Mwanza, a dirt road from a junction at the settlement of Manawa, leads southwest to the town of Misasi.  The property has year round access, although seasonal winter rains, December to March, may result in flooding in low lying areas which are dominated by mbuga (black organic rich laustrine flood soils).  Most lowland areas are under active cultivation, corn, rice, beans and mixed crops, by subsistence farmers.  Low scrub and thorn bushes cover the small hills.  The area has been, for many years, deforested by local agricultural practices.





At Luhala, the mean elevation is approximately 1,200 m above sea level, with a series of small sub-rounded hills, rising up to one hundred metres above the surrounding plain.  These hills are typically formed by either resistive iron formations or felsic volcanic rocks.  Mafic volcanic rocks weather recessively and are typically only exposed in trenches through well formed laterite profiles.  Laterite development is extensive with brick-red laterites overlying weak mottled zones and saprolites at a depth of approximately 3-5 m’s.  Deep weathering penetrates 45 - 60 m’s vertically within the subsurface.





An enthusiastic and competent labor force is available through the surrounding villages, and local people have been routinely hired during the trenching, drilling and soil sampling programs conducted on this property.  However, no other significant infrastructure is available.





History





Luhala has had a significantly more protracted exploration history than Lunguya, beginning with the initial exploration by the then Tanganyikan Geological Survey in 1947.  The exploration history of Luhala since 2006 to 2012 may be summarized as:





LUHALA EXPLORATION HISTORY SYNOPSIS





Year

Operator

Work Performed2006

Tancan

Diamond drilling, RC drilling2007

Sloane Developments Ltd.

Follow-up exploration planning2008

Sloane Developments Ltd.

Data analysis2009

Sloane Developments Ltd.

Data analysis2010

Sloane Developments Ltd.

Data analysis2011-2012

Tanzanian Royalty

NI 43-101 report prepared by Venmyn Rand (Pty) Ltd.




52




Geology





Luhala is found within the eastern portion of the Buhungukira Belt, a local place name assigned to one to the eight greenstone belts in the Lake Victoria District.  These rocks are believed to be the eastern continuation of the Geita Greenstone Belt and consist of dominantly Upper Nyanzian rock sequences.





In the Luhala area, the predominant structural grain is dominated by an early deformational event which has deformed all supracrustal rocks into tight, south to southwest plunging, west overturned, synforms and antiforms.  The short limbs of these folds may have east-west strikes and modest, 40 degree south dips. The long limbs of these folds have north to northeast strikes and generally much steeper, 60 – 80 degree, and east dips.





At Luhala, three principal mineralized zones have been identified. These include Kisunge Hill, Shilalo South, and Shilalo West.  All of the three principal mineralized areas are linked by a common southwest plunging antiform, the limbs of which are separated by 500 to 800 m’s and converge just south of Line 6200 E and 3800 N.  Mineralization to Kisunge Hill is associated with a chert – felsic volcanic contact.  As Shilalo South, structurally controlled gold mineralization closely tracks the position of a massive to locally well-bedded chert or cherty iron formation.  The results of diamond drilling in Shilalo West strongly outline the importance of the felsic volcanic - chert – structural sites and gold association.  For example, borehole LSD – 08A is collared in the hangingwall to the Shilalo West mineralized zone, traverses the host rhyolite-chert lithology, and terminates in the footwall.  This borehole intersected significant gold mineralization of 3.55 g/t Au over 5 m near the hangingwall contact of the felsic volcanic rocks, and is mineralized repeatedly at over one gram ranges throughout much of the felsic host interval, which in this borehole is over 35 metres thick.





The felsic volcanic rock package at Shilalo West once again presents an excellent structural site for the development of dilatant sites and gold mineralization.  As of Shilalo South, a well defined planar, brittle-ductile structural zone was not identified at Shilalo West.  Gold distribution is likely related to the presence of extensional and shear extensional veinlets, which are developed within the felsic volcanic rocks at or near, the felsic volcanic “red tuff” contact.





Exploration





During the period ended August 31, 2012, no site-based exploration work was conducted on the Luhala Property.





At Luhala, three principal mineralized zones have been identified: Kisunge Hill, Shilalo South, and Shilalo West.  Gold mineralization is associated with zones of diffuse silicification, localized around small scale fractures within competent chert and felsic volcanic rock units.





Mineralization





At Luhala, gold mineralization is associated with zones of diffuse silicification, localized around small cm and mm scale fractures within competent chert and felsic volcanic rock units.  Major discordant vein structures are not identified and planar high strain zones are absent.




53




No specific gravity data have been calculated for any of the rocks cored in these intervals and without strong cross sectional control, no reliable resource estimates for any of the principal mineralized zones at Kisunge, Shilalo South and Shilalo West may be calculated.





Historical Drilling





The Phase 7 drill program at Luhala was completed in August 2006 and consisted of nine diamond drill holes aggregating 991 metres.  All the holes tested the eastern limb of the Kisunge Main Zone. Among the better intercepts reported from this program was 3.07 metres grading 6.87 g/t. Within this intercept was a 1.44 metres interval averaging 10.95 g/t. Invaluable structural information was obtained from the Phase 7 diamond drilling program which will be utilized in the planning process for follow-up exploration.





For additional information regarding the Luhala Property see the Technical Report entitled “National Instrument 43-101F on the Itetemia and Luhala Gold Projects in the Lake Victoria Greenstone Belt, Tanzania” prepared for Tanzanian Royalty Exploration Corporation by Venmyn Rand (Pty) Limited and compiled by A.N. Clay, N. McKenna, and R.M. Tayelor dated January 31, 2012 and filed on SEDAR February 1, 2012 (the “Itetemia and Luhala Technical Report”).





The Company has incurred total net costs (after any recoveries) of $3,759,347 on the Luhala Property to August 31, 2012.





THE LUHALA PROPERTY IS WITHOUT KNOWN MINERAL RESERVES AND ANY PROPOSED EXPLORATION PROGRAM IS AN EXPLORATORY SEARCH FOR ORE.




Item 4A. Unresolved Staff Comments





None





Item 5.                      Operating and Financial Review and Prospects





This discussion and analysis of the operating results and the financial position of the Company for the years ended August 31, 2012 and 2011, and should be read in conjunction with the consolidated financial statements and the related notes attached hereto.





Critical Accounting Policies





The Company is in the process of exploring its mineral properties and has not yet determined whether these properties contain mineral deposits that are economically recoverable.  The recoverability of the amounts shown for mineral properties and related deferred costs are dependent upon the existence of economically recoverable reserves, securing and maintaining title and beneficial interest in the properties, obtaining necessary financing to explore and develop the properties, and upon future profitable production or proceeds from disposition of the mineral properties.







All direct costs related to the acquisition and exploration and development of specific properties are capitalized as incurred.  If a property is brought into production, these costs will be amortized against the income generated from the property.  If a property is abandoned, sold or impaired, an appropriate charge will be made.  Discretionary option payments arising on the acquisition of mining properties are only recognized when paid.  Amounts received from other parties to earn an interest in the Company's mining properties are applied as a reduction of the mining property and deferred exploration and development costs, except for administrative reimbursements which are credited to operations.




54




Consequential revenue from the sale of metals, extracted during the Company's test mining activities, is recognized on the date the mineral concentrate level is agreed upon by the Company and customer, as this coincides with the transfer of title, the risk of ownership, the determination of the amount due under the terms of settlement contracts the Company has with its customer, and collection is reasonably assured.  Revenues from properties earned during the development stage (prior to commercial production) are deducted from capitalized costs.




The amounts shown for mining claims and related deferred costs represent costs incurred to date, less amounts expensed or written off, reimbursements and revenue, and do not necessarily reflect present or future values of the particular properties.  The recoverability of these costs is dependent upon discovery of economically recoverable reserves and future production or proceeds from the disposition thereof.




The Company reviews the carrying value of a mineral exploration property when events or changes in circumstances indicate that the carrying value may not be recoverable. If the carrying value of the property exceeds its fair value, the property will be written down to fair value with the provision charged against operations in the year. An impairment is also recorded when management determines that it will discontinue exploration or development on a property or when exploration rights or permits expire. The amount shown for deferred exploration expenses, represents costs incurred to date net of write-downs, if any, and is not intended to reflect present or future values.




Ownership in mineral properties involves certain risks due to the difficulties in determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyance history characteristic of many mineral interests.  The Company has investigated the ownership of its mineral properties and, to the best of its knowledge, ownership of its interests are in good standing.




Capitalized mineral property exploration costs are those directly attributable costs related to the search for, and evaluation of mineral resources that are incurred after the Company has obtained legal rights to explore a mineral property and before the technical feasibility and commercial viability of a mineral reserve are demonstrable.  Any cost incurred prior to obtaining the legal right to explore a mineral property are expensed as incurred.




Once an economically viable reserve has been determined for a property and a decision has been made to proceed with development has been approved, acquisition, exploration and development costs previously capitalized to the mineral property are first tested for impairment and then classified as property, plant and equipment under construction.





The Consolidated Financial Statements utilize estimates and assumptions principally regarding mineral properties, going concern, future income taxes, fair value of convertible debt and stock-based compensation, that reflect management’s expectations at the date of preparation.  Events or circumstances in the future, many of which are beyond the control of the Company, may impact these expectations and accordingly could lead to different assumptions and estimates from those utilized.  Factors that could impact the estimates and assumptions that were made at the date of preparation of the Consolidated Financial Statements have been previously discussed under the heading “Risk Factors”.




A.           Operating Results





The following discussion and analysis of the financial condition and operating results of the Company for the years ended August 31, 2012 and 2011 should be read in conjunction with the Consolidated Financial Statements and related notes to the financial statements which have been prepared in accordance with IFRS.





55




Overview





For the year ended August 31, 2012 the Company had current assets of $20,483,824 compared to $32,922,378 on August 31, 2011.  The decrease is mainly due to net expenditures on exploration of $9,593,993 (2011 - $7,640,353) and cash used in operations of $4,713,619 (2011 - $3,739,845).  Deferred exploration costs were $41,562,996 as compared to $33,262,972 at August 31, 2011.





Net loss for the year ended August 31, 2012 was $8,897,843 compared to a net loss of $11,132,371 in the comparable year ended August 31, 2011.  The decrease is primarily due to the decrease in the loss due to the write down in mineral properties and deferred exploration costs of $1,293,969 (2011 - $3,845,564) and a withholding tax recovery of $250,019 (2011 - $856,191 withholding tax expense).  Change in the valuation of the warrant liability of $2,321,921 (2011 - $315,159), partially offset the loss decrease.





Results of operations





Fiscal year ended August 31, 2012 compared to fiscal year ended August 31, 2011




Net expenditures on mineral properties and deferred exploration costs for the year ended August 31, 2012 were $9,593,993 compared to $7,640,353 for the year ended August 31, 2011.  The increase is a result of increases in Buckreef project expenditure, but partially offset by decreased exploration expenditures at the Kigosi project.  Recoveries received during the year ended August 31, 2012 and August 31, 2011 from various option agreements were $50,114 and $285,198, respectively.





Net loss for the year ended August 31, 2012 was $8,897,843 compared to $11,132,371 for the comparable year ended August 31, 2011.For the three month period ended August 31, 2012 and August 31, 2011, the Company had net loss of $3,576,139 and a net loss of $7,401,871, respectively.





Salaries and benefits expense has decreased to $1,596,951 for the year ended August 31, 2012 from $1,601,832 for the year ended August 31, 2011. The expenses for the corresponding three month period ending August 31, 2012 and 2011 were $502,877 and $469,031 respectively.  The decrease in salaries expense is a result of the Company closely managing payroll and hiring costs and outsourcing certain functions.





Professional fees increased by $236,760 for the year ended August 31, 2012 to $869,077 from $632,317 for the year ended August 31, 2011.  For the three month period ended August 31, 2012 professional fees were $464,054 and $217,400 respectively.  The increase in total year and final quarter is due to increased costs during 2012 surrounding legal, audit and tax advisor professional fees.





For year ended August 31, 2012, the foreign exchange income was $24,082 compared to an exchange loss of $518,794 for the same period ended August 31, 2011. This decreased loss of $542,876 was due to the years’ average Tanzanian Shilling exchange rate having increased from 1,622 at August 31, 2011 to 1,572 at August 31, 2012.





Share based payments for the year ended August 31, 2012 were $777,630 compared to $368,161 in the comparable period ended August 31, 2011.  Share based payments vary on the number of equity based compensation options issued and vesting.  See note 9 of the financial statements for details.  Director fee RSU expense was $289,448 and $441,000, respectively.





Shareholder information costs increased from $332,586 for the year ended August 31, 2011 to $581,526 for the year ended August 31, 2012. The increase of $248,940 was due to increased transfer agent and listing fees from the issue of shares for converted debt and exercise of warrants.  Corporate investor promotion activity completed during the year also increased as an investor public relations firm was hired during the period.  For the three month period ended August 31, 2012, shareholder information costs were $(21,143) compared to $99,019 for the three month period ended August 31, 2011.  The negative amount in fiscal 2012 was due to account reclassifications in the period.





56





For the year ended August 31, 2012, travel and accommodation expense decreased by $30,211 from $199,631 in 2011 to $169,420. For the three months ended August 31, 2012, travel and accommodation expense decreased by $26,429 from $61,778 in 2011 to $35,349. Travel and accommodation expense decreased due to timing and increased control of travel requirements.





The interest accretion expense for the year ended August 31, 2012 was $102,785, compared to $181,076 for the year ended August 31, 2011. The interest relates to the issuance of convertible debt.  Interest accretion is expected to decrease as debt is converted into shares.





For the year ended August 31, 2012, depreciation expense was $379,603 compared to $463,169 for the same period ended August 31, 2011. The decrease of $83,566 was due to the lower capital asset cost base as purchases in the period were minimal and depreciation lowered the capital asset balance. The capital expenditure for the year ended August 31, 2012 was $142,283 as compared to $817,429 in the year ended August 31, 2011.





During the year ended August 31, 2012, the Company abandoned and wrote-off expenses in various project areas in the amount of $1,293,969 (2011 - $3,845,564), as the Company evaluated its mineral properties and deemed certain properties to warrant no further exploration.





Consulting fees for the year ended August 31, 2012 were $266,011 compared to $287,885 in the comparable period ended August 31, 2011.  Consulting expenses remained consistent between the comparable periods.   Consulting fees for the three months ended August 31, 2012 were $87,943 compared to $76,925 in the comparable period ended August 31, 2011.  Consulting expenses remained consistent between the comparable periods.  The decrease in total consulting expense is a result of the Company closely managing consulting costs in the current uncertain economic environment.




Directors’ fees for the year ended August 31, 2012 were $365,049 compared to $461,484 in the comparable period ended August 31, 2011.  The decrease in director fees expense is a result of a decrease in number and valuation of RSU’s issued to board members.




Office and general expenses for the year ended August 31, 2012 were $437,380 compared to $443,774 in the comparable period ended August 31, 2011.  The decrease is mainly due to the company closely managing its office and general costs including closure of the Mwanza office and consolidation of offices at the Buckreef camp.  For the three month period ended August 31, 2012, office and general expenses were $151,581 compared to $120,004 in the comparable period ended August 31, 2011.  The increase for the quarter is due timing differences as total expenses are in line with prior period.





Inflation





Historically, inflation has not affected the Company’s business in the current locations where it is doing business and the Company does not expect it to affect the Company’s operations in the future.





57





Foreign Exchange





The Company’s financial assets and liabilities consist of cash and cash equivalents, accounts and other receivables, accounts payable and accrued liabilities, convertible debt and obligations under the capital lease, of which a portion are held in different currencies.  The Company does not engage in any hedging activities relating to these foreign denominated assets and liabilities.





B.           Liquidity and Capital Resources





The Company had $20,058,678 in cash and marketable securities at August 31, 2012 compared to $32,428,471 as of August 31, 2011.  The Company had working capital of $18,165,431 at August 31, 2012, compared to $30,451,179 at August 31, 2011.  Although the Company believes it has enough resources through working capital to finance operations for its 2013 fiscal year, ultimately the Company will need to obtain additional financing to sustain operations at the present rate of activity.  The current cash position is expected to sustain operations for its 2013 fiscal year. Historically, the Company has raised funds through equity financing, convertible promissory notes and entering into joint venture or royalty agreements with other mining companies.  The Company’s funding requirements by major expenditure category, listed in order of priority are:





(a)
as a result of the successful outcome of a preliminary economic assessment on the Buckreef Project, proceed to a definitive feasibility study;


(b)
exploration work,


(b)
new property investigations, and


(c)
general and administrative costs.





Exploration work and new property investigations can generally be deferred until adequate capital resources are available, and general and administrative costs can be reduced during periods when funding is not available.





At this time, the Company has no operating revenues, and does not anticipate any operating revenues unless the Company is able to find, acquire, place in production and operate a profitable mining property. Because the Company does not currently derive any production revenue from operations, its ability to conduct exploration and development work on its properties is largely based upon its ability to raise capital by equity funding.  The Company has financed its operations and investments through the issuance of common shares.  During 2012, the Company has received US$1,000,000 from the exercise of 250,000 compensation warrants.




On October 26, 2009, the Company completed a private placement with the Company’s President and CEO for 306,749 common shares at a price of $3.26 per share, resulting in net proceeds of $1,000,000 to the Company. With completion of this $1 million private placement, the $3 million private placement agreement dated February 1, 2009 between the Company and the President and CEO was complete.





On December 21, 2009 the Company completed private placements with arm’s length third parties for an aggregate 1,155,835 common shares at a price of $2.718 per share.




58





On May 28, 2010 the Company completed a private placement with an arm’s length third party consisting of a three-year convertible promissory note in the principal amount of $1,000,000 bearing interest at 3% and convertible into 222,173 common shares at the price of $4.501.  A bonus of 25,000 common shares will be payable if the note is converted into common shares by October 11, 2011.  On April 1, 2011, this Promissory Note was converted into 222,173 common shares at a price of $4.501 per share and the 25,000 bonus common shares were issued.





On August 17, 2010 the Company completed a private placement with an arm’s length third party consisting of a three-year convertible promissory note dated July 9, 2010 in the principal amount of $1,095,000 bearing interest at 3% and convertible into 255,484 common shares at the price of $4.286.  $95,000 of the outstanding principal was converted into 22,166 common shares, which shares will be refundable to the Company if the remaining principal is not fully converted into common shares by December 9, 2011.  On September 23, 2011, this Promissory Note was converted into 233,318 common shares at a price of $4.286 per share.





On September 7, 2010 the Company completed a $800,000 private placement pursuant to a subscription agreement dated August 24, 2010 with the President and CEO for 144,430 common shares at a price of $5.539 per share.





On September 23, 2010 the Company completed a private placement with an arm’s length third party consisting of a three-year convertible promissory note in the principal amount of $1,000,000 bearing interest at 3% and convertible into 221,337 common shares at the price of $4.518 per share.





On October 4, 2010 the Company completed a private placement with arm’s length third parties consisting of three-year convertible promissory notes in the aggregate principal amount of $1,060,000 bearing interest at 3% and convertible into 204,772 common shares at the price of $5.1765 per share.





On November 5, 2010 the Company completed a $4,841,600 private placement with arm’s length third parties for an aggregate 800,000 common shares at the price of $6.052/share and an aggregate 200,000 common share purchase warrants exercisable at the price of $7.309 per share and expiring on October 20, 2012.  In addition, the Company paid a finder’s fee payable in 64,000 common shares at the subscription price of $6.052/share.   Effective January 25, 2012 the exercise price of 125,000 common share purchase warrants was reduced from C$7.309 to US$4.00, and the term of the warrants was extended one year to expire October 20, 2013. In addition, if the weighted average trading price of the common shares increases to US$6.50 after April 12, 2012, the Company will be entitled to require that the holders exercise the warrants, failing which the warrants will terminate.





On November 23, 2010 the Company completed a private placement with an arm’s length third party and 851,209 common shares at the price of $5.874 per share were issued for proceeds of $5,000,000.  212,802 common share purchase warrants exercisable at the price of $7.05 per share and expiring on November 9, 2012 were issued and 68,097 common shares at the subscription price of $5.874 were issued to arm’s length third parties in respect of the finder’s fee.


On January 31, 2011 the Company completed a private placement with an arm’s length third party and 690,150 common shares at the price of $5.867 per share were issued for proceeds of $4,049,110.  172,528 common share purchase warrants exercisable at the price of $6.903 per share and expiring on December 22, 2012 were issued and 58,663 common shares at the subscription price of $5.867 was issued to an arm’s length third party in respect of the finder’s fee.




59




On August 12, 2011 the Company completed a US$30 million bought deal offering and 5,263,158 Units at a price of US$5.70 per Unit were issued.  Each Unit consists of one common share and one common share purchase warrant exercisable at a price of US$6.25 per warrant expiring on August 12, 2013.  The Undewriter received a cash commission of 7% of the gross proceeds and 368,421 compensation warrants exercisable at a price of US$5.91 per share expiring on August 12, 2013. Effective December 7, 2011 the exercise price of 5,263,158 common share purchase warrants was reduced from US$6.25 to US$4.00 and the term of the warrants was extended one year to expire August 12, 2014. In addition, if the weighted average trading price of the common shares increases to US$6.50 after March 11, 2012, the Company will be entitled to require that the holders exercise the warrants, failing which the warrants will terminate. 368,421 compensation warrants issued under the prospectus financing have been amended in the same manner and re-priced from US$5.91 to US$4.00.  On March 27, 2012, the Company received US$1,000,000 from the exercise of 250,000 compensation warrants.





Mineral Property Projects





As of August 31, 2012 amounts capitalized in respect of mineral properties were $41,562,472 an increase from August 31, 2011 when the balance was $33,262,972.





During the fiscal year ended August 31, 2012, the Company capitalized mineral property exploration costs of $9,593,993 (net of recoveries of $50,114) on its mineral resource properties.  The Company wrote off $1,293,969 in exploration expenditures on areas abandoned in the year ended August 31, 2012.





For information on the Company’s commitments for property and rental payments, refer to Item 4.





Events Subsequent To August 31, 2012





Pursuant to the private placement completed on September 23, 2010, the Company received notice from an arm’s length third party to convert its Promissory Note in the principal amount of $1,000,000 bearing interest at 3% and convertible into 221,337 common shares at a price of $4.518 per share, and 221,337 shares were issued on October 17, 2012.





C.           Research and Development, Patents and License, etc.





Not Applicable.





D.           Trend Information





No known trend.





E.           Off Balance Sheet Arrangements





The Company has no material off balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition.





F.           Tabular Disclosure of Contractual Obligations





The Company has no contractual obligations as of the latest fiscal year end.





Many of the Company’s mineral properties are being acquired over time by way of option payments.  It is at the Company’s option as to whether to continue with the acquisition of the mineral properties and to incur these option payments.  Current details of option payments required in the future if the Company elects to maintain its interest are as follows:




60





Option Payments Due by Period (US$)Total

Less than 1 year

2-3 years

4-5 years

More than

5 yearsOption Agreement Obligations

$19,000

$19,000

$Nil

$Nil

$Nil





Item 6.  Directors, Senior Management and Employees





A.           Directors and Senior Management




Directors and Senior Management




A.           Directors and Senior Management




The following is a list of the Company’s current directors and officers.  The directors named below were elected or re-elected by the Company’s shareholders on March 1, 2012. There are no family relationships between the directors and officers.




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Name, Municipality of Residence and Position With the Company

Principal occupation or employment and, if not a previously elected director, occupation during the past 5 years

Served as a Director Continuously SinceJames E. Sinclair

Sharon, Connecticut

President, Chief Executive Officer and Director

President and CEO of the Company

April 30, 2002Joseph Kahama

Dar es Salaam, Tanzania

Chairman and Chief Operating Officer (Tanzania) and Director

Chairman and COO (Tanzania) of the Company; President, Tanzania American International Development Corporation 2000 Limited

February 29, 2008Dr. Norman Betts

Fredericton,New Brunswick

Director

Associate Professor, Faculty of Business Administration, University of New Brunswick and a Chartered Accountant

January 4, 2005William Harvey

Sharon, Connecticut

Director

Psychologist

April 30, 2002Rosalind Morrow

Toronto, Ontario

Director

Lawyer; Partner, Borden Ladner Gervais LLP

October 20, 2003Abdulkarim Mruma

Dar es Salaam, Tanzania

Director

Professor of Geology, University of Dar es Salaam

February 22, 2011Ulrich E. Rath

Toronto, Ontario

Director

Formerly President and CEO and Director of Chariot Resources Ltd.

October 7, 2003Steven Van Tongeren

Yorktown Heights, New York

Chief Financial Officer

Chief Financial Officer of the Company

Not a Director

Officer





Directors and Senior Management





James E. Sinclair, President, Chief Executive Officer and Director





Mr. Sinclair is the President and CEO of the Company.  Mr. Sinclair, age 71, devotes his full time to the business and affairs of the Company.





Mr. Sinclair is a precious metals specialist, commodities and foreign currency trader, and a respected minerals industry executive. He founded the Sinclair Group of Companies in 1977 which offered full brokerage services in stocks, bonds, and other investment vehicles. The companies, which operated branches in New York, Kansas City, Toronto, Chicago, London and Geneva, were sold in 1983.  From 1981 to 1984, Mr. Sinclair served as a Precious Metals Advisor to Hunt Oil and the Hunt family for the liquidation of their silver position as a prerequisite for a $1 billion loan arranged by the Chairman of the Federal Reserve, Paul Volcker.  He was also a General Partner and Member of the Executive Committee of two New York Stock Exchange firms and President of Sinclair Global Clearing Corporation and Global Arbitrage, a derivative dealer in metals and currencies.





Mr. Sinclair has authored numerous magazine articles and three books dealing with a variety of investment subjects including precious metals, trading strategies and geopolitical events, and their relationship to world economics and the markets. He maintains a high public profile and his commentary on gold and other financial issues garners extensive media attention at home and abroad.





62




Joseph Kahama, Chairman and Chief Operating Officer (Tanzania) and Director





Joseph Kahama was appointed Chairman and Chief Operating Officer (Tanzania) of the Company in February 2011.  He became a director of Tanzanian Royalty Exploration Corporation in February 2008 and he formerly served as President and Senior Vice President of the Corporation. A native of Tanzania, Mr. Kahama has served as president and director of the Company's wholly-owned subsidiary, Tanzam, since 1997. In his capacity as president of Tanzam, Mr. Kahama has been responsible for corporate administration and also for maintaining good relations with government, vendors, and the Company's various business partners in Tanzania. In addition to being a  councilor at the Tanzania Chamber of Energy & Minerals (TCME) since 1999, where he represents the Company and its various Tanzanian subsidiaries, Mr. Kahama was elected as Chairman of the Tanzania Chamber of Energy & Minerals in 2011. In 2007, he was appointed to the Tanzania National Business Council (TNBC) and the Local Investors Roundtable (LIRT). In 2006, Mr. Kahama was appointed as a member and advisor to the China Africa Business Council (CABC) which is headquartered in Beijing, Peoples Republic of China.  In addition, Joseph Kahama is Chairman of The Kahama Foundation, a not-for-profit organization which enables, fosters and nurtures business entrepreneurship, modern management practices and ethical leadership in business and cooperatives.  Mr. Kahama is also a Trustee and Founding member of The Mawalla Chair for Legal and Business Studies, an academic endowment covering five universities in Tanzania.  Mr. Kahama is also author of a Book called "SIR GEORGE: A Thematic History of Tanzania Through His Fifty Years of Public Service", printed in 2010.Mr. Kahama, age 44, devotes his full time to the business and affairs of the Company.





Dr. Norman Betts, Ph.D., Director





Dr. Betts is an associate professor, Faculty of Business Administration, University of New Brunswick (UNB) and a Chartered Accountant Fellow (FCA). Dr. Betts serves as a Chair of the board of directors of Starfield Resources Inc. and as a director and member of the audit committees of Tembec Inc., New Brunswick Power Corporation, Export Development Canada and Adex Mining Inc.    He is also a co-chair of the board of trustees of the UNB Pension Plan for Academic Employees. He is a former Finance Minister and Minister of Business New Brunswick with the Province of New Brunswick. He was awarded a PhD in Management from the School of Business at Queen’s University in 1992.  Dr. Betts, age 58, devotes approximately 10% of his time to the business and affairs of the Company.





Dr. William Harvey, B.A., Ph.D., Director




Dr. Harvey is a Clinical Psychologist, who for over thirty years has served as a consultant and technical expert on matters relating to substance abuse prevention and mental health promotion to a wide variety of private and governmental programs and agencies in the United States. These include the National Institute of Drug Abuse, the National Institute of Alcoholism and Alcohol Abuse, the Office of Juvenile Justice & Delinquency Prevention, and the National Mental Health Association. He was an Adjunct Professor in the Department of Sociology at Washington University, and a Senior Research Scientist at the Missouri Institute of Mental Health, University of Missouri. He continues to be involved in the formulation of new programs and policies aimed at the betterment of society.  Dr. Harvey will continue to expand the role which the Company has at the local level to ensure that stakeholder interests are addressed.  Dr. Harvey, age 79, devotes approximately 10% of his time to the business and affairs of the Company.





63





Rosalind Morrow, B.A., B.Ed., A.R.C.T, LL.B., Director





A graduate of Trinity College, Toronto, the Royal Conservatory of Music of Toronto and the University of Toronto Law School, Ms. Morrow specializes in corporate and securities law with a particular emphasis on financings, including government and structured finance, corporate governance and mergers and acquisitions.  She has advised Canadian and international corporations on a number of major projects in the financial, communications and resource sectors.  Ms. Morrow is a former member of the Securities Advisory Committee to the Ontario Securities Commission.  Since the inception of the program in 2001, Ms. Morrow has been lead external counsel to Canada Mortgage and Housing Corporation on over $250 billion in fully underwritten global bond issuances under its Canada Mortgage Bond Program, and since 2008 has represented the Canadian federal government on its $125 billion Insured Mortgage Purchase Program, the Canadian equivalent of the U.S. TARP Program.  A past president of the Women’s Law Association of Ontario and recipient of its President’s Award, Ms. Morrow currently serves on the Board of Governors of Trent University.  She is also Vice Chair of The Living City, the foundation arm of the Toronto and Region Conservation Authority, one of the largest environmental organizations in North America, dedicated to the preservation of a green environment in the Toronto region. Ms. Morrow, age 58, devotes approximately 10% of her time to the business and affairs of the Company.





Abdulkarim Hamisi Mruma,PhD., M.Sc. (Geology), B.Sc. (Geology),Director




Dr. Mruma is a graduate of the University of Dar es Salaam where he currently serves as a Professor of Geology. His post graduate studies included research sabbaticals at universities and government institutions in Germany, Belgium, Zimbabwe and Finland. He has authored numerous technical reports on various geological topics and contributed to several technical and non-technical journals on a broad range of geology and industry-related subjects. The list of publications includes UNESCO Magazine, Journal of African Earth Sciences, and the Tanzanian Journal of Earth Sciences. In addition to his academic duties, Dr. Mruma is Chief Executive Officer of the Geological Survey of Tanzania, a position he has held since October 2004. He also serves as a Board member of both Williamson Diamonds Limited, National Development Corporation, College of Earth Sciences of the University of Dodoma,  and the State Mining Corporation (STAMICO) of Tanzania, the Company's joint venture partner for the Buckreef Gold Mine Re-development Project. Dr. Mruma is the Chairman of the Advisory Board of Mineral Resources Institute and he also acts as National Coordinator of International Geological Correlation Programs and International Year of Planet Earth Programs. He is also a member of the Research and Development Advisory Committee on Natural Resources - Tanzania Commission for Science and Technology (COSTECH). Dr. Mruma, age 57, devotes approximately 10% of his time to the business and affairs of the Company.




Ulrich E. Rath, Director




Mr. Rath has a wide range of experience in the mining industry, and has specific experience in North America, South America including Argentina, Chile and Peru and in South Africa. Mr. Rath was the President and CEO and Director of Chariot Resources Ltd., a junior resource company focused on the exploration, acquisition and development of copper and precious metal mineral deposits in the Andes region of Latin America. In June 2010 Mr. Rath facilitated the sale of Chariot Resources following a global auction. The sale was approved by over 98% of the shareholders of Chariot Resources. As the former President, CEO and Director of Chimera Gold Corp. (previously known as EAGC Ventures), Ulrich Rath was responsible for facilitating the $US67 million acquisition of gold operations in the East Rand region of South Africa that now produce more than 200,000 ounces gold per annum. Subsequently, the Board of Chimera agreed to a 1:1 merger with Bema Gold Corp.  He was formerly CEO and director of Compania Minera Milpo a medium sized Peruvian zinc mining company.   Mr. Rath was also formerly Vice-President, Corporate Development, for Rio Algom Ltd. from December 1992 to October 1998.  Rio Algom Ltd. was a U.S. reporting issuer, whose common shares were listed on the American Stock Exchange.  Mr. Rath, age 66, devotes approximately 10% of his time to the business and affairs of the Company.




64





Steven Van Tongeren,B.Sc, CPA, Chief Financial Officer





Mr. Van Tongeren holds a Bachelor of Science degree from the State University of New York and is a Certified Public Accountant. He completed Executive Finance Management Training at INSEAD France, one of the world's leading and graduate business schools. He has extensive international experience having lived and worked in various countries. Mr. Van Tongeren was Executive Director, Finance for a London Stock Exchange listed restaurant group operating throughout Europe. He successfully brought the privately held company to full public listing and went on to complete major fund raising for the company's rapid international expansion. He acted as Vice President, Finance and Administration, for PolyGram Video and later as Manager of World-Wide Consolidation and Reporting for Polygram International BV. In that capacity he was responsible for preparing all consolidated world-wide financial reporting for one of the world's major record and film entertainment companies with subsidiaries in 34 countries. He served as European and South African Financial Director for the Borden Food Inc. International packaging group with manufacturing and sales operations throughout Europe and South Africa. Mr. Van Tongeren has worked as Senior Operations Auditor for Gulf & Western Inc. where he was responsible for domestic and international company audits and special project due diligence. Mr. Van Tongeren, age 55, devotes his full time to the business and affairs of the Company.





Cease Trade Orders





No director or executive officer of the Company (or any personal holding corporation of such persons) is, or was within the ten (10) years prior to the date hereof, a director, chief executive officer or chief financial officer of any company, including the Company, that:




(i)
was subject to an order (as defined below) that was issued while the director or executive officer was acting in the capacity as director, chief executive officer, or chief financial officer; or




(ii)
was subject to an order (as defined below) that was issued after the director or executive officer ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer, or chief financial officer.




For the purposes of the above disclosure, “order” means:




(i)
a cease trade order;


(ii)
an order similar to a cease trade order; or


(iii)
an order that denied the relevant company access to any exemption under securities legislation;




that was in effect for a period of more than thirty (30) consecutive days.





Penalties or Sanctions





Within the past 10 years no directors or executive officers of the Company, or a shareholder holding a sufficient number of securities of the Company to affect materially the control of the Company (or any personal holding corporation of such persons), has been subject to:





(a)
any penalties or sanctions imposed by a court relating to Canadian securities legislation or by a Canadian securities regulatory authority or has entered into a settlement agreement with a Canadian securities regulatory authority; or





(b)
any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.




65




Personal Bankruptcies





No director or executive officer of the Company, or a shareholder holding a sufficient number of securities of the Company to materially affect control of the Company (or any personal holding corporation of such persons):




(i)
is at the date hereof, or has been within the last ten (10) years, a director or executive officer of any company that while the person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement, or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold its assets; or




(ii)
has, within the last ten (10) years, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement, or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director, executive officer or shareholder




Conflicts of Interest





There is no existing material conflict of interest between the Company or its subsidiaries and a director or executive officer of the Company or its subsidiaries.  However, certain directors and officers of the Company are and may continue to be involved in the mining and mineral exploration industry through their direct and indirect participation in corporations, partnerships or joint ventures which are potential competitors.  Situations may arise in connection with potential acquisitions and investments where the other interests of these directors and officers may conflict with the interests of the Company.  As required by law, each of the directors of the Company is required to act honestly, in good faith and in the best interests of the Company.  Any conflicts which arise shall be disclosed by the directors and officers in accordance with the Business Corporation Act (Alberta) and they will govern themselves in respect thereof to the best of their ability with the obligations imposed on them by law.





B.           Executive Compensation





Compensation Discussion and Analysis





The adequacy and form of director and officer compensation is reviewed on an annual basis by the Audit and Compensation Committee of the Board of Directors (the “Board”) of the Company.  The Audit and Compensation Committee recommends to the Board any adjustments to the compensation payable to directors, officers, and senior staff.  The Audit and Compensation Committee is comprised of three directors: Norman Betts (Chair), William Harvey and Ulrich Rath, all of whom are independent for the purposes of National Instrument 58-101 – Corporate Governance.  The Audit and Compensation Committee meet to discuss salary matters as required.  Its recommendations are reached primarily by comparison of the remuneration paid by the Company with publicly available information on remuneration paid by other reporting issuers that the Audit and Compensation Committee feels are similarly placed within the same stage of business development as the Company. No consultant or advisor has been retained by the Company to assist in determining compensation.




In assessing the compensation of its executive officers, the Company does not have in place any formal objectives, criteria or analysis; instead, it relies mainly on the recommendations of the Audit and Compensation Committee and Board discussion.  The Company’s executive compensation program has three principal components: base salary, incentive bonus plan, and equity compensation plans.




66




Base salaries for all employees of the Company are established for each position based on market information obtained through the recruitment process from recruitment consultants and candidates on an ad hoc basis. The Audit and Compensation Committee familiarizes itself with this market information, but does not employ a statistical or formal benchmarking approach in making its compensation recommendations. Individual qualifications and experience together with the Company’s pay scale and any market information obtained are considered in determining base compensation levels.




Equity compensation plans are designed to provide an incentive to the directors, officers, employees and consultants of the Company to achieve the longer-term objectives of the Company; to give suitable recognition to the ability and industry of such persons who contribute materially to the success of the Company; and to attract and retain persons of experience and ability, by providing them with the opportunity to acquire an increased proprietary interest in the Company.  The Company awards equity based compensation to its executive officers and employees, based upon the Board’s review of the recommendations of the Audit and Compensation Committee.  Previous awards of such equity compensation are taken into account when considering new grants.  The Company does not currently have an incentive stock option plan and none is contemplated.





Implementation of a new incentive equity based compensation plans and amendments to the existing plans are the responsibility of the Company’s Board.  The Company’s equity compensation plans are discussed in more detail below, under the sub-headings, “Restricted Stock Unit Plan” and “Employee Share Ownership Plan”.




The Company's Code of Ethics and Business Conduct prohibits Directors and NEOs from entering into transactions to hedge or offset a decrease or protect the value of equity securities of the Company granted as compensation or otherwise directly or indirectly held.





The Company has no other forms of compensation, although payments may be made from time to time to individuals or companies they control for the provision of consulting services.  Such consulting services are paid for by the Company at competitive industry rates for work of a similar nature by reputable arm’s length services providers.




We are required, under applicable securities legislation in Canada to disclose to our shareholders details of compensation paid to our named executive officers (a “named executive officer” or “NEO”).  A named executive officer of the Company as defined in Form 51-102F6 – Statement of Executive Compensation, prescribed by National Instrument 51-102 - Continuous Disclosure Obligations, means an individual who, at any time during the year, was:





(a)
the Company’s chief executive officer (“CEO”);




(b)
the Company’s chief financial officer (“CFO”);




(c)
each of the Company’s three most highly compensated executive officers, or the three most highly compensated individuals acting in a similar capacity, other than the CEO and CFO, at the end of the most recently completed financial year and whose total compensation will be, individually, more than $150,000 for that financial year; and




(d)
each individual who would be a NEO under paragraph (c) but for the fact that the individual was neither an executive officer of the Company, nor acting in a similar capacity, at the end of the most recently completed financial year.




Based on the foregoing definition, the Company has five (5) NEOs for the fiscal year ended August 31, 2012:  James E. Sinclair, President and CEO of the Company; Joseph Kahama, Chairman and COO (Tanzania) of the Company; Steven Van Tongeren, CFO of the Company, Victoria Luis, Corporate Accountant, and Helen Hansen, Corporate Secretary of the Company.





In this document, unless otherwise specified, $ refers to Canadian dollars.





The following tables set forth particulars concerning the compensation of the named executive officers for the Company’s last three fiscal years ended August 31, 2012:




67


Summary Compensation Table





Name and Principal Position
Year
Salary

($)
Share-based awards

($)
Option-based awards

($)
Non-equity incentive plan compen-

sation

($)
Pension Value

($)
All other compensation

($)
Total compensation

($)Annual incentive plans

(RSU)
Long term incen-

tive plans

(ESOP)James

Sinclair,

President and

CEO
2012

2011

2010
69,803(11)

22,459(8)

Nil
Nil

Nil

Nil
Nil

Nil

Nil
None

None

None
None

None

None
None

None

None
Nil

Nil

Nil
69,803

22,459

NilJoseph

Kahama,(7)

Chairman and

COO

(Tanzania)
2012

2011

2010
131,143(11)

108,327(1)(8)

75,240(2)
Nil

Nil

168,750(3) (5) (6)*
Nil

Nil

Nil
None

None

None
None

None

None
None

None

None
Nil

2,328

Nil
131,143

110,655

243,990Steven

Van Tongeren

Chief

Financial

Officer
2012

2011

2010
166,100(11)

75,665(8)

N/A
325,500(9)

Nil

N/A
14,004

8,612

Nil
None

None

None
None

None

None
None

None

None
10,200

Nil

N/A
515,804

84,277

N/AHelen Hansen

Corporate

Secretary
2012

2011

2010
85,800

78,600

72,000
103,000(10)

40,000(5)

25,000(3)
4,709

4,400

3,600
None

None

None
None

None

None
None

None

None
8,000

6,600

6,000
201,509

129,600

106,000Victoria Luis

Corporate

Accountant
2012

2011

2010
73,027(11)

12,926(11)

8,622(11)
158,750(12)

68,750(5)

62,500(3)
Nil

Nil

Nil
None

None

None
None

None

None
None

None

None
3,000

Nil

Nil
234,777

81,676

71,122


N/A = Not Applicable


(1)Includes taxes paid in Tanzania and statutory deductions.


(2)US$ exchange = 1.045


(3)Valued at $5.58 per RSU granted on April 26, 2007.


(5)Valued at $5.54 per RSU granted on May 20, 2008.


(6)Valued at $3.84 per RSU granted on May 27, 2009.


* Total is combination of 5600 RSUs at $5.58 per RSU, 12,410 RSUs at $5.54 per RSU and 17,903 RSUs at $3.84 per RSU.


(7)For information relating to compensation for serving as a member of the Board, please see the discussion under “Restricted Stock Unit Plan” and the narrative under “Director Compensation”.


(8) US$ exchange = 0.9893


(9) Total is a combination of 20,000 RSUs valued at $6.90 per RSU granted on February 24, 2011 and 29,857 RSUs valued at $6.28 per RSU granted on May 6, 2011.


(10) Total is a combination of 10,416 RSUs valued at $3.84 per RSU granted on May 27, 2009 and 10,032 RSUs  valued at $6.28 per RSU granted on May 6, 2011


(11) US$ exchange = 1.00


(12) Total is a combination of 17,903 RSUs valued at $3.84 per RSU granted on May 27, 2009 and 14,331 RSUs  valued at $6.28 per RSU granted on May 6, 2011




Compensation is determined by the Audit and Compensation Committee as set out under “Compensation Discussion and Analysis”.  Salary compensation is not tied to a named executive officer’s individual performance, however the grant of restricted share units (“RSUs”) may be.  The grant date fair value of RSUs is based on the closing price of the Company’s shares on the Toronto Stock Exchange (the “TSX”) on the date of grant.  All Employee Share Ownership Plan (“ESOP”) share purchases are at market prices at the time of each monthly purchase, through the facilities of the TSX using registered representatives.  See “Restricted Stock Unit Plan” and “Employee Share Ownership Plan” below for more information.




68





Prior to 2011, the Company’s President and CEO voluntarily chose to forego compensation for services rendered as President and CEO and a member of the Board, and elected not to participate in the Company’s share based award programs.


Incentive Plan Awards





Outstanding share-based awards and option-based awards





Option-based Awards
Share-based AwardsName
Number of securities underlying unexercised options

(#)
Option exercise price

($)
Option expiration date
Value of unexercised in-the-money RSUs

($)
Number of shares or units of shares that have not vested

(#)
Market or payout value of share-based awards that have not vested

($)James Sinclair, CEO
2012

2011

2010
None

None

None
None

None

None
Not

Applic-

able
206,125(1)

187,500(2)

Nil
42,152

29,857

Nil
206,125

187,500

NilJoseph Kahama, President
2012

2011

2010
None

None

None
None

None

None
Not

Applic-

able
206,125(1)

193,750(2)

89,515(3)
42,152

30,852

19,086
206,125

193,750

89,515Steven Van Tongeren,CFO
2012

2011

2010
None

None

None
None

None

None
Not

Applic-

able
311,125(4)

Nil

N/A
67,152

Nil

N/A
311,125

Nil

N/AHelen Hansen,

Corporate Secretary
2012

2011

2010
None

None

None
None

None

None
Not

Applic-

able
72,750(1)

Nil

47,500(3)
14,877

Nil

10,128
72,750

Nil

47,500Victoria Luis,

Corporate Accountant
2012

2011

2010
None

None

None
None

None

None
Not

Applic-

able
113,975(1)

Nil

68,750(3)
23,307

Nil

14,659
113,975

Nil

68,750


(1)Valued at $4.89 per RSU granted on April 11, 2012


(2)Valued at $6.28 per RSU granted on May 6, 2011


(3)Valued at $4.69 per RSU granted on June 2, 2010


(4)Total is a combination of 25,000 RSUs valued at $4.20 per RSU granted on February 24, 2012 and 42,152 RSUs  valued at $4.89 per RSU granted on April 11, 2012


Incentive plan awards – Value vested or earned during the year





Name
Option-based awards – Value vested during the year

($)
Share-based awards – Value vested during the year

($)
Non-equity incentive plan compensation – Value earned during the year

($)James Sinclair, CEO
None
Nil
NoneJoseph Kahama, President
None
Nil
NoneSteven Van Tongeren, CFO
None
325,500
NoneHelen Hansen, Corporate Secretary
None
103,000
NoneVictoria Luis, Corporate Acountant
None
158,750
None




69




Long Term Incentive Plan Awards to NEOs





The Company has made long-term incentive plan awards during the fiscal year ended August 31, 2012 to NEOs of the Company.  See “Restricted Stock Unit Plan” and “Employee Share Ownership Plan” below.





Restricted Stock Unit Plan





The Restricted Stock Unit Plan (“RSU Plan”) is intended to enhance the Company’s and its affiliates’ abilities to attract and retain highly qualified officers, directors, key employees and other persons, and to motivate such officers, directors, key employees and other persons to serve the Company and its affiliates and to expend maximum effort to improve the business results and earnings of the Company, by providing to such persons an opportunity to acquire or increase a direct proprietary interest in the operations and future success of the Company. To this end, the RSU Plan provides for the grant of RSUs.  Each RSU represents an entitlement to one common share of the Company, upon vesting.  As of November 24, 2010, the Board resolved to suspend 1,800,000 common shares of the 2,500,000 common shares previously authorized for issuance under the RSU Plan, such that a maximum of 700,000 shares shall be authorized for issuance under the RSU Plan, until such suspension may be lifted or further amended.  Any of these awards of RSUs may, but need not, be made as performance incentives to reward attainment of annual or long-term performance goals in accordance with the terms of the RSU Plan.  Any such performance goals are specified in the agreement between the Company and the recipient governing the award.  The Board implemented the RSU Plan under which employees and directors are compensated for their services to the Company.  See “Director Compensation.”





On April 26, 2011, the Company’s Restricted Stock Unit Plan was amended as the Plan expressly excluded the Chairman and Chief Executive Officer of the Company from participating in the Plan.  As the the joint office of Chairman and Chief Executive Officer of the Company no longer exists, and has been replaced by two new positions, being President and Chief Executive Officer and Chairman and Chief Operating Officer (Tanzania), the Board determined that it would be in keeping with the objects of the Plan and in the best interests of the Company that each of the offices of President and Chief Executive Officer and Chairman and Chief Operating Officer (Tanzania) be unambiguously included in the category of Service Providers eligible to receive awards of RSUs under the Plan, and that the wording of the Plan be amended as required to effect such result (as so amended, the “Amended RSU Plan”).  The Amended RSU Plan was presented to shareholders and approved at the Company’s Annual General and Special Meeting held on March 1, 2012.





RSUs Granted to Directors and Named Executive Officers During the Fiscal Year Ended August 31, 2012:





Name
Date of Grant
No. of RSUs(1)
Cash Compensation Election
Vesting Period(3)
Expiration DateNorman Betts
April 11, 2012
8,397
$38,000
3 years
April 11, 2015William Harvey
April 11, 2012
7,732
$37,812
1 year
April 11, 2013Joseph Kahama
April 11, 2012
42,152
N/A
3 years
April 11, 2015Rosalind Morrow
April 11, 2012
15,465
Nil
3 years
April 11, 2015Abdulkarim Mruma
April 11, 2012
8,103
$36,000
1 year
April 11, 2013Ulrich Rath
April 11, 2012
8,084
$39,531
1 year
April 11, 2013James Sinclair
April 11, 2012
42,152
N/A
3 years
April 11, 2015Steven Van Tongeren
February 24, 2012
25,000(2)
N/A
3 years
February 24, 2015Steven Van Tongeren
April 11, 2012
42,152
N/A
3 years
April 11, 2015Helen Hansen
April 11, 2012
14,877
N/A
3 years
April 11, 2015Victoria Luis
April 11, 2012
23,307
N/A
3 years
April 11, 2015RSUs granted to directors and executive

officers as a group:                                                       237,421


(1)
Valued at $4.89 per RSU


(2)
Valued at $4.20 per RSU


(3)
Subject to the conditions of the Amended RSU Plan with respect to earlier vesting.




70




The following RSUs granted to directors during the fiscal year ended August 31, 2011 vested during fiscal year ended August 31, 2012 and 4,783 shares were issued shares were issued on February 24, 2012 and 42,363 shares were issued on May 6, 2012:





Name
Date of Grant
No. of Shares(1)
Cash Compensation Election
Vesting Period
Expiration DateNorman Betts
May 6, 2011
13,429
Nil
1 year
May 6, 2012William Harvey
May 6, 2011
12,845
Nil
1 year
May 6, 2012Abdul Mruma
February 24, 2011
4,783(2)
Nil
1 year
February 24, 2012Abdul Mruma
May 6, 2011
8,061
$25,000
1 year
May 6, 2012Ulrich Rath
May 6, 2011
8,028
$25,208
1 year
May 6, 2012


(1)
Valued at $6.28 per RSU


(2)
Valued at $6.90 per RSU





The following RSUs granted to directors during the fiscal year ended August 31, 2009 vested during fiscal year ended August 31, 2012.  17,903 shares were issued on May 27, 2012:





Name
No. of Shares(1)
Date of Grant
Vesting Period
Expiration DateRosalind Morrow
17,903
May 27, 2009
Vested
May 27, 2012


(1)  Valued at $3.84 per RSU.





Outstanding RSUs





RSUs granted to directors and executive officers during fiscal year 2012 are outstanding as of August 31, 2012.





Employee Share Ownership Plan





By an agreement dated May 1, 2003, the Company appointed Olympia Trust Company of Calgary, Alberta, as trustee (the “Trustee”) to manage and administer an ESOP.  Under the ESOP, eligible employees, directors, and consultants can elect to contribute up to 30% of their salary or compensation on a monthly basis for investment by the Trustee in shares of the Company.  The Company will contribute funds equal to 100% of the employee’s contribution up to an amount equal to 5% or less of the employee’s salary.  The Company will contribute funds equal to 50% of the employee’s contribution for the next 6% to 30% inclusive of the employee’s salary.  All share purchases are at market prices at the time of purchase, through the facilities of the TSX using registered representatives.  As at August 31, 2012, thirteen participants, including participating directors, together with Company contributions, have purchased 42,081 common shares under the ESOP.  The average monthly participant contributions are $7,370 and the Company’s matching monthly contribution is $5,872 per month.  Included in the above contributions are the following director and NEO contributions:




71





Name
Director/Officer Contribution

($)
Company Contribution

($)
Number of Common Shares PurchasedRosalind Morrow
10,000
10,000
4,074Steven Van Tongeren
20,238
14,004
9,057Helen Hansen
5,160
4,709
2,587





Pension Plan Benefits





The Company has not set aside or accrued any funds for pension, retirement or similar benefits.





Equity Compensation Plan Information





The following table provides information regarding compensation plans under which securities of the Company are authorized for issuance in effect as of the end of the Company’s most recently completed financial year end:




Number of securities to be issued upon exercise of outstanding RSUs
Weighted average exercise price of outstanding RSUs
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))Plan Category
(a)
(b)
(c)Equity compensation plans approved by security holders (Restricted Stock Unit Plan)
446,247
$5.09
67,947Total
446,247
$5.09
67,947





Director Compensation




Director Compensation Table




The following table sets forth the value of all compensation provided to directors not including those directors who are also NEOs, for the Company’s most recently completed financial year:




Name
Fees Earned

($)
RSUs granted(1)

(#)
Cash Compensation Election

($)
All Other Compensation

(US$)
Total

($)Norman Betts
79,062
8,397
38,000
Nil
79,062Anton Esterhuizen(2)
Nil
Forfeited
Nil
50,400(3)
50,400William Harvey
75,625
7,732
37,812
Nil
75,625Rosalind Morrow
75,625
15,465
Nil
Nil
75,625Abdulkarim Mruma
75,625
8,103
36,000
Nil
75,625Ulrich Rath
79,062
8,084
39,531
60,656(3)
139,718


(1)Valued at $4.89 per RSU (the closing price of the Company’s shares on the date of grant of the RSUs).


(2) Anton Esterhuizen did not stand for re-election March 1, 2012.  Unvested RSUs were forfeited.


(3)Additional compensation to certain members of the Technical Committee for providing expert technical advice to the Company.




72





Directors who are also members of management do not receive any additional cash compensation for serving on the Board.  All directors are granted RSUs as compensation for serving on the Company’s Board.   Please see the table entitled “RSUs Granted to Directors and Named Executive Officers During the Fiscal Year Ended August 31, 2012” under “Restricted Stock Unit Plan” above.





Annual compensation for outside directors is $68,750 per year, plus $6,875 per year for serving on Committees, plus $3,437.50 per year for serving as Chair of a Committee.  On April 11, 2012 the board approved that at the election of each individual director, up to one half of the annual compensation may be received in cash, paid quarterly.  The remainder of the director’s annual compensation (at least one half, and up to 100%) will be awarded as RSUs in accordance with the terms of the RSU Plan and shall vest within a minimum of one (1) year and a maximum of three (3) years, at the election of the director, subject to the conditions of the Amended RSU Plan with respect to earlier vesting.   In 2012 outside directors had the option to elect to receive 100% of their compensation in RSUs.  If 100% compensation in RSUs is elected, the compensation on which the number of RSUs granted in excess of the required one half shall be increased by 20%.





Under the Amended RSU Plan, at the election of each outside director, outside directors were granted 47,781 RSUs during the fiscal year ended August 31, 2012.





At the election of each outside director, directors’ fees of $75,491 were paid to outside directors during the fiscal year ended August 31, 2012.





Pension Plan Benefits


The Company has not set aside or accrued any funds for pension, retirement or similar benefits.





Termination and Change of Control Benefits





There are currently no contracts for outside management services.  There are two (2) employment contracts with certain NEOs, including Mr. Kahama and Mr. Steven Van Tongeren, whereby they will be entitled to receive an amount by way of severance payment equal to one month's salary per full year of service in the event of termination without cause.  The employment contracts do not provide for change of control benefits.  If a termination without cause was to have occurred on August 31, 2012, the Company would have been required to pay a severance payment in the aggregate amount of $74,583 in the case of Mr. Kahama and Mr. Van Tongeren.





C.           Board Practices





The directors of the Company serve a one year term and are elected at the Annual General Meeting of shareholders.  At the last Annual General Meeting, held on March 1, 2012, the shareholders elected James Sinclair, Joseph Kahama,  William Harvey, Rosalind Morrow, Norman Betts, Ulrich Rath and Abdulkarim Mruma as directors.  The officers of the Company are elected by the Board serve at the pleasure of the Board.





The Company has an audit committee consisting of Ulrich Rath, William Harvey and Norman Betts.  The roles and responsibilities of the audit committee have been specifically defined as described below under Audit Committee Information, and include responsibilities for overseeing management reporting on internal control.  The audit committee has direct communication channels with the external auditors.




73





The Company also has a compensation committee. The audit committee and compensation committee is collectively referred to as the “Audit and Compensation Committee”.




The adequacy and form of director and officer compensation is reviewed on an annual basis by the Audit and Compensation Committee of the Board of Directors of  the Company.  The Audit and Compensation Committee recommends to the Board any adjustments to the compensation payable to directors, officers, and senior staff.  The Audit and Compensation Committee is comprised of three directors: Norman Betts (Chair), William Harvey and Ulrich Rath, all of whom are independent for the purposes of National Instrument 58-101 – Corporate Governance.  The Audit and Compensation Committee meet to discuss salary matters as required.  Its recommendations are reached primarily by comparison of the remuneration paid by the Company with publicly available information on remuneration paid by other reporting issuers that the Audit and Compensation Committee feels are similarly placed within the same stage of business development as the Company.




The Company also has a nominating committee (the “Nominating Committee”) comprised of Ulrich Rath, William Harvey and Norman Betts.  The Nominating Committee considers the size of the Board each year when it considers the number of directors to recommend to shareholders for election at the annual meeting of shareholders, taking into account the number required to carry out the Board’s duties effectively and to maintain a diversity of view and experience.  When a vacancy on the Board arises, the independent directors of the Nominating Committee will be encouraged to bring forward any potential nominees that have the necessary skills and knowledge to serve on the Company’s Board.





The Company has a Technical Committee currently comprised of Ulrich Rath (Chair), Abdulkarim Mruma, and Phillip Kaniki.  The Technical Committee reviews the definitive exploration policy for the Company and reports directly to the Board of Directors.





AUDIT COMMITTEE INFORMATION





Under National Instrument 52-110 – Audit Committees (“NI 52-110”) reporting issuers are required to provide disclosure with respect to its Audit Committee including the text of the Audit Committee’s Charter, composition of the Committee, and the fees paid to the external auditor.  Accordingly, the Company provides the following disclosure with respect to its Audit Committee:





1.  The Audit and Compensation Committee’s Charter





1.0        Purpose of the Committee





1.1
The purpose of the Audit and Compensation Committee is to assist the Board in its oversight of the integrity of the Company's financial statements and other relevant public disclosures, the Company's compliance with legal and regulatory requirements relating to financial reporting, the external auditors' qualifications and independence and the performance of the internal audit function and the external auditors.





2.0        Compensation





2.1
The adequacy and form of director and officer compensation is reviewed on an annual basis by the Board.  The Audit and Compensation Committee recommends to the Board any adjustments to the compensation payable to directors, officers, and senior staff.  The Audit and Compensation Committee meet to discuss salary and bonus incentive matters as required.




74




3.0        Members of the Audit and Compensation Committee





3.1
All of the members of the Audit and Compensation Committee must be "financially literate" as defined under NI 52-110, Audit Committees, having sufficient accounting or related financial management expertise to read and understand a set of financial statements, including the related notes, that present a breadth and level of complexity of the accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company's financial statements.





3.2
The Audit and Compensation Committee shall consist of no less than three Directors.





3.3
All of the members of the Audit and Compensation Committee shall be "independent" as defined under NI 52-110.





4.0        Relationship with External Auditors





4.1
The external auditors are the independent representatives of the shareholders, but the external auditors are also accountable to the Board of Directors and the Audit and Compensation Committee.





4.2
The external auditors must be able to complete their audit procedures and reviews with professional independence, free from any undue interference from the management or directors.





4.3
The Audit and Compensation Committee must direct and ensure that the management fully co-operates with the external auditors in the course of carrying out their professional duties.





4.4
The Audit and Compensation Committee will have direct communications access at all times with the external auditors.





4.5
The Audit and Compensation Committee will ensure the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law.





4.6
The Audit and Compensation Committee will recommend to the Board of Directors policies for the Company’s hiring of employees or former employees of the external auditors who participated in any capacity in the audit of the Company.





5.0        Non-Audit Services





5.1
The external auditors are prohibited from providing any non-audit services to the Company, without the express written consent of the Audit and Compensation Committee.  In determining whether the external auditors will be granted permission to provide non-audit services to the Company, the Audit and Compensation Committee must consider that the benefits to the Company from the provision of such services, outweighs the risk of any compromise to or loss of the independence of the external auditors in carrying out their auditing mandate.





5.2
Notwithstanding section 5.1, the external auditors are prohibited at all times from carrying out any of the following services, while they are appointed the external auditors of the Company:





(i)
acting as an agent of the Company for the sale of all or substantially all of the undertaking of the Company; and





(ii)
performing any non-audit consulting work for any director or senior officer of the Company in their personal capacity, but not as a director, officer or insider of any other entity not associated or related to the Company.




75




6.0        Appointment of Auditors





6.1
The external auditors will be appointed each year by the shareholders of the Company at the annual general meeting of the shareholders.





6.2
The Audit and Compensation Committee will nominate the external auditors for appointment, such nomination to be approved by the Board of Directors.





7.0        Evaluation of Auditors





7.1
The Audit and Compensation Committee will review the performance of the external auditors on at least an annual basis, and notify the Board and the external auditors in writing of any concerns in regards to the performance of the external auditors, or the accounting or auditing methods, procedures, standards, or principles applied by the external auditors, or any other accounting or auditing issues which come to the attention of the Audit and Compensation Committee.





8.0        Remuneration of the Auditors





8.1
The remuneration of the external auditors will be determined by the Board of Directors, upon the annual authorization of the shareholders at each general meeting of the shareholders.





8.2
The remuneration of the external auditors will be determined based on the time required to complete the audit and preparation of the audited financial statements, and the difficulty of the audit and performance of the standard auditing procedures under generally accepted auditing standards and generally accepted accounting principles of Canada.





9.0        Termination of the Auditors





9.1
The Audit and Compensation Committee has the power to terminate the services of the external auditors, with or without the approval of the Board of Directors, acting reasonably.





10.0        Funding of Auditing and Consulting Services





10.1
Auditing expenses will be funded by the Company.  The auditors must not perform any other consulting services for the Company, which could impair or interfere with their role as the independent auditors of the Company.





11.0        Role and Responsibilities of the Internal Auditor





11.1
At this time, due to the Company's size and limited financial resources, the Chief Financial Officer of the Company shall be responsible for implementing internal controls and performing the role as the internal auditor to ensure that such controls are adequate.




76




12.0        Oversight of Internal Controls





12.1
The Audit and Compensation Committee will have the oversight responsibility for ensuring that the internal controls are implemented and monitored, and that such internal controls are effective.





13.0        Continuous Disclosure Requirements





13.1
At this time, due to the Company's size and limited financial resources, the Chief Financial Officer of the Company is responsible for ensuring that the Company's continuous reporting requirements are met and in compliance with applicable regulatory requirements.





14.0        Other Auditing Matters





14.1
The Audit and Compensation Committee may meet with the Auditors independently of the management of the Company at any time, acting reasonably.





14.2
The Auditors are authorized and directed to respond to all enquiries from the Audit and Compensation Committee in a thorough and timely fashion, without reporting these enquiries or actions to the Board of Directors or the management of the Company.





15.0        Annual Review





15.1
The Audit and Compensation Committee Charter will be reviewed annually by the Board of Directors and the Audit and Compensation Committee to assess the adequacy of this Charter.





16.0        Independent Advisers





16.1
The Audit and Compensation Committee shall have the power to retain legal, accounting or other advisors to assist the Committee.





17.0
Reports of Fraud and Misconduct





17.1
The Audit and Compensation Committee will review, investigate and evaluate all reports of fraud and misconduct.  Refer to the Company’s Whistle Blower Policy and Procedures.





18.0
Changes in Accounting Policies





18.1
The Audit and Compensation Committee will review and maintain Accounting Policies including the selection, documentation and changes in Accounting Policies.





19.0        Nominating Committee





19.1
The Nominating Committee considers the size of the Board of Directors each year when it considers the number of directors to recommend to shareholders for election at the annual meeting of shareholders, taking into account the number required to carry out the Board’s duties effectively and to maintain a diversity of view and experience.   When a vacancy on the Board arises, the independent directors of the Nominating Committee will be encouraged to bring forward any potential nominees that have the necessary skills and knowledge to serve on the Company’s Board.




77




2.  Composition of the Audit and Compensation Committee





Following are the members of the Audit and Compensation Committee:





Norman Betts (Chair)
Independent(1)
Financial expert (3)Ulrich Rath
Independent(1)
Financially literate(2)William Harvey
Independent(1)
Financially literate(2)




(1)
A member of an audit committee is independent if the member has no direct or indirect material relationship with the Company, which could, in the view of the Board of Directors, reasonably interfere with the exercise of a member’s independent judgment.




(2)
An individual is financially literate if he has the ability to read and understand a set of financial statements that present a breadth of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company’s financial statements.




(3)
An Audit Committee Financial Expert must possess five attributes:  (i) an understanding of GAAP and financial statements; (ii) the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves; (iii) experience preparing auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant’s financial statements, or experience actively supervising one or more persons engaged in such activities; (iv) an understanding of internal controls and procedures for financial reporting; and  (v) an understanding of audit committee functions.




3.  Relevant Education and Experience





Dr. Betts is the Chair of the Committee.  He is the former Minister of Finance of New Brunswick and current Associate Professor of Business Administration, University of New Brunswick; Mr. Rath was  the President and CEO of a Canadian resource company; and Dr. William Harvey is a psychologist and businessman.





4.- 6.  Reliance on Certain Exemptions





At no time since the commencement of the Company’s most recently completed financial year has the Company relied on the exemption in Section 2.4 of NI 52-110 (De Minimis Non-audit Services), Section 3.3(2) (Controlled Companies), Section 3.6 (Temporary Exemption for Limited and Exceptional Circumstances), or an exemption from NI 52-110, in whole or in part, granted under Part 8 of National Instrument 52-110.  Nor has the Company relied on Section 3.8 (Acquisition of Financial Literacy) of NI 52-110.





7.  Audit and Compensation Committee Oversight





At no time since the commencement of the Company’s most recently completed financial year was a recommendation of the Audit and Compensation Committee to nominate or compensate an external auditor not adopted by the Board of Directors.





8.  Pre-Approval Policies and Procedures





The Audit and Compensation Committee is authorized by the Board of Directors to review the performance of the Company’s external auditors and approve in advance the provision of services other than auditing and to consider the independence of the external auditors, including a review of the range of services provided in the context of all consulting services bought by the Company. The Audit and Compensation Committee is authorized to approve in writing any non-audit services or additional work which the Chairman of the Audit and Compensation Committee deems is necessary, and the Chairman will notify the other members of the Audit and Compensation Committee of such non-audit or additional work and the reasons for such non-audit work for the Committee’s consideration, and if thought fit, approval in writing.




78





9.  External Auditor Service Fees





The fees billed by the Company’s external auditors in each of the last two fiscal years for audit and non-audit related services provided to the Company or its subsidiaries (if any) are as follows:





Financial Year Ending August 31
Audit Fees
Audit Related Fees
Tax Fees
Non-Audit Fees2012
Canada - $231,500

Tanzania - $52,760
Nil

Nil
Nil

Nil
Nil

Nil2011
Canada - $234,500

Tanzania - $8,000
Nil

Nil
Nil

Nil
Nil

Nil





D.           Employees





The Company has one (1) full time employee located in South Surrey, British Columbia, Canada,  one full time employee located in Sharon, Connecticut, USA,  thirty-two (32) full time employees located in Buckreef, Tanzania, and eight (8) full time employees located in Dar es Salaam, Tanzania.





The Company also hires employees on a part time or temporary basis as dictated by the exploration activities on its properties.  The full time and temporary employees and consultants of the Company can be grouped according to main category of activity and geographic location as follows:





Location

Category
Full Time Employees
Temporary Employees
Full Time Consultants
Part Time ConsultantsSouth Surrey, Canada

Administration
1
Nil
Nil
NilBuckreef , Tanzania

Administration
11
Nil
Nil
NilExploration
21

Nil
NilDar es Salaam,

Tanzania

Administration
6
Nil
Nil
NilExploration
2
Nil
Nil
NilConnecticut, USA

Administration
1
Nil
2
1Exploration
Nil
Nil
Nil
Nil





E.           Share Ownership





The following table sets forth the share ownership of our directors and named executive officers, held by such persons as of October 31, 2012.





Name of Owner
Number of Shares Owned
Percentage (1)Norman Betts
2,100
<0.01%Helen Hansen
1,372
<0.01%William Harvey
332,358
0.33%Joseph Kahama
5,000
<0.01%Victoria Luis
144,045
0.14%Rosalind Morrow
424,047
0.42%Abdulkarim Mruma
12,844
0.01%Ulrich E. Rath
61,705
0.06%James E. Sinclair
2,064,543
2.05%Steven Van Tongeren
64,617
0.06%All directors and named executive officers as a group
3,112,631
3.09%


(1)
calculation based on 100,681,274 shares of common stock outstanding as of October 31, 2012




79




The voting rights attached to the common shares owned by our officers and directors do not differ from those voting rights attached to shares owned by people who are not officers or directors of our Company.




Item 7.                      Major Shareholders and Related Party Transactions





A.           Major Shareholders





As far as it is known to the Company, it is not directly or indirectly owned or controlled by any other Company or by the Canadian Government, or any foreign government.  The Company has no knowledge of any arrangements which at a subsequent date would result in a change of control.  All of the Company’s issued common shares rank equally as to voting rights, dividends, and any distribution of assets on winding-up or liquidation.





As of October 31, 2012, the Company knows of one shareholder who beneficially own more than five (5%) of the outstanding shares of the Company’s voting securities as set forth in the following table:




Title of Class
Identity of Holder(2)
Amount Owned
Percent of Class(1)Common Shares
Van Eck Associates Corporation
12,977,367
12.92%


(1)
Based on the issued and outstanding shares of the Company of 100,459,937 shares as at September 30, 2012


(2)
As per information provided pursuant to sec. 2.2 of NI 62-103 an Alternative Monthly Report filed on SEDAR on October 5, 2012





The following table sets out the portion of common shares of the Company held by registered shareholders in Canada, the United States of America, and all other countries by total number of holders, total shareholdings, percentage of total issued shares, and percentage of total holders as of August 31, 2012:





Jurisdiction Shareholders of Record
Number of Shareholders
Number of Common Shares
Percentage of Total Issued Shares
Percentage of Total HoldersUnited States
1,288
40,284,898
40%
84%Canada
151
58,309,281
58%
10%Other Countries
90
1,865,758
2%
6%TOTAL
1,529
100,459,937
100%
100%





B.           Related Party Transactions





Financing Transactions





None




80




Other Related Party Transactions





The Company engages a legal firm for professional services in which one of the Company’s directors is a partner.  During the year ended August 31, 2012, the legal expense charged by the firm was $553,949 (2011 - $797,146), of which $140,245 remains payable at year end (2011 - $419,032).





During the year ended August 31, 2012, $365,049 (2011 - $461,484) was paid or payable by the Company to directors for serving on the Board and/or related Committees.





During the year ended August 31, 2012, US$8,800 (2011 - US$9,600) was paid to a company associated with the Company’s Chairman and COO for office rental.





The Company makes certain payments for administrative services including technical support and services for the Company’s President and CEO’s website.  These expenses are reimbursed to the Company.  As at August 31, 2012 the Company has a receivable of $22,977 from an organization associated with the Company’s President and CEO.  At August 31, 2011, the Company had a receivable of $7,214.





During the year ended August 31, 2012, $130,160 (2011 - $156,119) was paid or payable by the Company to directors as incremental fees for serving on the Company’s Technical Committee.





The above transactions were in the normal course of operations and were measured at the exchange amount which is the amount agreed to by the related parties.




C.           Interests of Experts and Counsel





Not Applicable.





Item 8.                      Financial Statements





A.           Consolidated Statements and Other Financial Information





This Annual Report contains the audited consolidated financial statements of the Company for the fiscal years ended August 31, 2012 and 2011 with the Report of Independent Registered Public Accounting Firm, comprised of:





(a)
Consolidated Balance Sheets as of August 31, 2012 and 2011;





(b)
Consolidated Statements of Comprehensive Loss for the years ended August 31, 2012 and 2011;





(c)
Consolidated Statements of Changes in Equity for the years ended August 31, 2012 and 2011;





(d)
Consolidated Statements of Cash Flows for the years ended August 31, 2012 and 2011; and





(e)      Notes to the consolidated financial statements.





Dividend Policy





The Company has never paid dividends and does not intend to in the near future.




81





Litigation





As of August 31, 2012 there were no legal or arbitration proceedings which may have or have had significant effects on the Company’s financial position.





B.           Significant Changes





None.





Item 9.                      The Offering and Listing





A.           Offering and Listing Details





The common share of the Company was listed on the Toronto Stock Exchange (TSX”) under the symbol “TNX” on October 29, 2001, and prior to that date the Company’s common share was listed on the Canadian Venture Exchange, now known as the TSX Venture Exchange.





The common share of the Company was listed on the American Stock Exchange (“AMEX”) (now NYSE MKT LLC (“NYSE MKT”)) under the symbol “TRE” on May 12, 2005.  On June 13, 2011 the NYSE MKT symbol changed to “TRX”.





As of August 31, 2012 there were 1,288 registered shareholders in the United States holding 40% of the Company’s outstanding common shares, representing approximately 84% of the total number of registered shareholders. The Company’s Common share is issued in registered form and the percentage of shares reported to be held by registered holders in the United States is taken from the records of the Computershare Trust Company of Canada in the City of Vancouver, the registrar and transfer agent for the common share.





The number of registered shareholders resident in the United States is attributed as to 0.2%  to directors and officers of the Company who are United States residents; a further 0.2% held by United States residents who are immediate family members of a director and officer of the Company; and the balance of 39.96% are United States residents who have purchased shares in the secondary market, through the facilities of the Toronto Stock Exchange or NYSE MKT.





The high and low market prices expressed in Canadian dollars on the Toronto Stock Exchange and the high and low expressed in US dollars on the NYSE MKT for the Company’s common share for the last five years, for the  last six months, and  each quarter for the last three fiscal years




82





Toronto Stock Exchange

(Canadian Dollars)Last Six Months
High
Low
VolumeOctober 2012
5.21
4.61
1,084,094September 2012
5.19
4.28
1,352,214August 2012
4.65
3.96
1,455,562July 2012
4.51
3.91
1,285,690June 2012
5.18
3.88
2.250,947May 2012
4.60
3.25
1,528,8232011-2012
High
Low
VolumeFourth Quarter ended August 31, 2012
5.18
3.88
4,992,199Third Quarter ended May 31, 2012
5.28
3.25
7,107,846Second Quarter ended February 28, 2012
4.50
2.21
4,369,050First Quarter ended November 30, 2011
5.87
1.59
8,577,3912010-2011
High
Low
VolumeFourth Quarter ended August 31, 2011
7.55
5.32
4,347,116Third Quarter ended May 31, 2011
7.40
5.88
4,305,338Second Quarter ended February 28, 2011
7.39
5.93
4,424,588First Quarter ended November 30, 2010
7.79
5.74
4,882,5852009-2010
High
Low
VolumeFourth Quarter ended August 31, 2010
5.98
4.51
2,819,382Third Quarter ended May 31, 2010
5.16
4.02
4,017,954Second Quarter ended February 28, 2010
5.15
3.20
6,038,868First Quarter ended November 30, 2009
4.20
2.91
13,235,199Last Five Fiscal Years
High
Low2012
5.87
1.592011
7.79
5.322010
5.98
2.912009
6.50
1.992008
6.52
3.79




83





NYSE MKT

(US Dollars)Last Six Months
High
Low
VolumeOctober 2012
5.30
4.70
4,825,761September 2012
5.34
4.32
10,531,233August 2012
4.69
3.93
7,791,914July 2012
4.45
3.83
4,974,265June 2012
4.82
3.74
13,082,204May 2012
4.68
3.20
12,331,0712012-2011
High
Low
VolumeFourth Quarter ended August 31, 2012
4.82
3.74
25,848,383Third Quarter ended May 31, 2012
5.32
3.20
51,388,433Second Quarter ended February 28, 2012
4.56
2.18
33,685,275First Quarter ended November 30, 2011
5.94
1.56
55,934,8862010-2011
High
Low
VolumeFourth Quarter ended August 31, 2011
7.82
5.38
25,477,782Third Quarter ended May 31, 2011
7.48
5.95
29,742,121Second Quarter ended February 28, 2011
7.40
5.95
30,188,047First Quarter ended November 30, 2010
7.57
5.46
33,640,8812009-2010
High
Low
VolumeFourth Quarter ended August 31, 2010
5.63
4.33
19,323,144Third Quarter ended May 31, 2010
5.07
3.92
19,352,772Second Quarter ended February 28, 2010
4.86
3.00
29,385,355First Quarter ended November 30, 2009
3.95
2.69
30,234,230Last Five Fiscal Years
High
Low2012
5.94
1.562011
7.82
5.382010
5.63
2.692009
5.29
1.582008
7.25
3.55





84





B.           Plan of Distribution





Not Applicable.





C.           Markets





The Company’s common share is listed on the Toronto Stock Exchange under the trading symbol “TNX” and on the NYSE MKT under the trading symbol “TRX”.





D.           Selling Shareholders





Not Applicable.





E.           Dilution





Not Applicable.





F.           Expenses of the Issue





Not Applicable.





Item 10.                      Additional Information





A.           Share Capital





The Company’s Restated Articles of Incorporation authorized the Company to issue an unlimited number of common shares.  On November 23, 2011 the Board resolved that the Company authorize for issuance up to a maximum of 115,000,000 common shares, subject to further resolutions of the Company’s board of directors, from time to time.  Of the 115,000,000 common shares authorized, without par value, 100,459,937 shares were issued and outstanding as of August 31, 2012.





Each of the common shares has equal dividend, liquidation and voting rights.  Voters of the common shares are entitled to one vote per share on all matters that may be brought before them.  Holders of the common shares are entitled to receive dividends when declared by the Board from funds legally available therefor.  The common shares are not redeemable, have no conversion rights and carry no pre-emptive or other rights to subscribe for additional shares.  The outstanding common shares are fully paid and non-assessable.




85




The following table reconciles the total number of shares outstanding for the last three fiscal years:





No. of Shares
AmountTotal Outstanding as of August 31, 2010
91,415,459
72,855,310Add:Issued for private placements, net
2,532,119
12,912,833Issued pursuant to share subscriptions agreement
144,430
800,000Issued pursaunt to Restricted Stock Unit Plan
136,408
681,339Issued on conversion of convertible debt agreement
247,173
971,107Issued for acquisition of property
20,006
97,035Issued for Prospectus
5,263,158
21,617,629Total Outstanding as of August 31, 2011
99,758,753
109,935,253Add:Issued on conversion of convertible debt
233,318
950,213Issued for services
35,000
115,834Exercise of compensation options
250,000
1,000,000Issued pursuant to Restricted Share Unit Plan
182,866
1,024,793Reserve transferred on exercise of compensation warrants

450,765Total Outstanding as of August 31, 2012
100,459,937
113,476,858





Shares are issued by the Company with the regulatory acceptance of the Toronto Stock Exchange and NYSE MKT, upon resolution of the Board of Directors of the Company.  As of August 31, 2012 there are a total of 100,459,937 common shares issued and a further 446,247 common shares reserved for issuance under outstanding RSUs, 426,109 common shares reserved for issuance under 3-year convertible promissory notes and 5,966,919 for issuance under outstanding warrants.





B.           Articles of Association and Bylaws





The Company was originally incorporated under the corporate name “424547 Alberta Ltd.” in the Province of Alberta on July 5, 1990, under the Business Corporations Act (Alberta).





The Articles of 424547 Alberta Ltd. were amended on August 13, 1991 as follows:





·
the name of the Company was changed to “Tan Range Exploration Corporation”;


·
the restriction on the transfer of shares was removed; and


·
a new paragraph regarding the appointment of additional directors was added as follows:




86




“(b)
The Directors, may, between annual general meetings, appoint one or more additional directors of the Company to serve until the next annual general meeting, but the number of additional Directors shall not at any time exceed one-third (1/3) of the number of Directors who held office at the expiration of the last annual meeting of the corporation.”





The Company was registered in the Province of British Columbia as an extra provincial company under the Company Act (British Columbia) on August 5, 1994.





The Articles of the Company were further amended on February 15, 1996 as follows:





·
the provisions of the Articles authorizing the issue of Class “B” Voting shares, Class “C”


Non-Voting shares and Class “D” Preferred shares were deleted;


·
Class “A” voting shares were redesignated as common shares; and


·
a provision was added to allow meetings of shareholders to be held outside Alberta in either of the cities of Vancouver, British Columbia or Toronto, Ontario.





The Articles of the Company were further amended on February 28, 2006 as follows:





·
the name of the Company was changed to its present name, “Tanzanian Royalty Exploration Corporation”.





The Articles of the Company were further amended on February 29, 2008 as follows:





·
Pursuant to Section 173(1)(l) of the Business Corporations Act (Alberta), Item 5 of the Articles of the Company was amended by changing the maximum number of directors from 9 to 11.





Common Shares





All issued and outstanding common shares are fully paid and non-assessable.  Each holder of record of common shares is entitled to one vote for each common share so held on all matters requiring a vote of shareholders, including the election of directors.  The holders of common shares will be entitled to dividends on a pro-rata basis, if and when as declared by the board of directors.  There are no preferences, conversion rights, preemptive rights, subscription rights, or restrictions or transfers attached to the common shares.  In the event of liquidation, dissolution, or winding up of the Company, the holders of common shares are entitled to participate in the assets of the Company available for distribution after satisfaction of the claims of creditors.





The rights of shareholders cannot be changed without a special resolution of at least 2/3 of the votes cast by the shareholders who voted in respect of the resolution, and separate classes of shareholders are entitled to separate class votes.  Any such alteration of shareholder’s rights would also require the regulatory acceptance of the Toronto Stock Exchange.  There are no provisions of the Company’s Articles or Bylaws that would have the effect of delaying, deferring, or preventing a change of control of the Company, and that would operate only with respect to a merger, acquisition, or corporate restructuring involving the Company (or any of its subsidiaries).





87




Powers and Duties of Directors





The directors shall manage or supervise the management of the affairs and business of the Company and shall have authority to exercise all such powers of the Company as are not, by the Business Corporations Act (Alberta) or by the Articles or Bylaws, required to be exercised by the Company in a general meeting.





Directors will serve as such until the next annual meeting.  In general, a director who is, in any way, directly or indirectly interested in an existing or proposed contract or transaction with the Company whereby a duty or interest might be created to conflict with his duty or interest director, shall declare the nature and extent of his interest in such contract or transaction or the conflict or potential conflict with his duty and interest as a director.  Such director shall not vote in respect of any such contract or transaction with the Company in which he is interested and if he shall do so, his vote shall not be counted, but he shall be counted in the quorum present at the meeting at which such vote is taken.  However, notwithstanding the foregoing, directors shall have the right to vote on determining the remuneration of the directors.





The directors may from time to time on behalf of the Company:  (a) borrow money in such manner and amount from such sources and upon such terms and conditions as they think fit; (b) issue bonds, debentures and other debt obligations; or (c) mortgage, charge or give other security on the whole or any part of the property and assets of the Company.





At least one-quarter of the directors of the Company should be persons ordinarily resident in Canada and all must be at least 18 years of age.  There is no minimum share ownership to be a Director.  No person shall be a Director of the Company who is not capable of managing their own affairs; is an undischarged bankrupt or who is a person who is not an individual.





Shareholders





An annual general meeting shall be held once in every calendar year at such time and place as may be determined by the directors.  A quorum at an annual general meeting and special meeting shall be two shareholders or one or more proxy holder representing two shareholders, or one shareholder and a proxy holder representing another shareholder.  There is no limitation imposed by the laws of Canada or by the charter or other constituent documents of the Company on the right of a non-resident to hold or vote the common shares, other than as provided in the Investment Canada Act, (the “Investment Act”) discussed below under “Item 10. Additional Information, D. Exchange Controls.”





In accordance with Alberta law, directors shall be elected by an “ordinary resolution” which means (a) a resolution passed by the shareholders of the Company in general meeting by a simple majority of the votes cast in person or by proxy, or (b) a resolution that has been signed by all shareholders entitled to vote on the resolution.





Under Alberta law certain items such as an amendment to the Company’s articles or entering into a merger, requires approval by a special resolution, which means (a) a resolution passed by a majority of not less than 2/3 of the votes cast by the shareholders of the Company who, being entitled to do so, vote in person or by proxy at a general meeting of the company (b) a resolution consented to in writing by every shareholder of the Company who would have been entitled to vote in person or by proxy at a general meeting of the Company, and a resolution so consented to is deemed to be a special resolution passed at a general meeting of the Company.




88


C.           Material Contracts





The following are the material contracts of the Company (other than contracts in the ordinary course of business) entered into within the last two years:





Date

Names of Parties

Description of General Nature of the Contract

Consideration Paid; Terms and ConditionsNovember 25, 2011

Computershare Trust Company of Canada as Rights Agent and the Company

Shareholder Rights Plan

N/AOctober 25, 2011

State Mining Corporation (Stamico) and the Company

Joint Venture Agreement for the development of the Buckreef Project

Through its wholly-owned subsidiary, Tanzania American International Development Corporation 2000 Limited (Tanzam), the Company will hold a 55% interest in the joint venture company, Buckreef Gold Company Limited, with Stamico holding the remaining 45%.December 16, 2010

State Mining Corporation and the Company

Heads of Agreement

$3,000,000 for 55% interest in the Buckreef ProjectAugust 24, 2010

James E. Sinclair and the Company

Subscription Agreement for purchase of  144,430 common shares

$5.539  per share for a total of $800,000





D.           Exchange Controls





Canada





There is no law, governmental decree or regulation in Canada that restricts the export or import of capital or affects the remittance of dividends, interest or other payments to a non-resident holder of common shares other than withholding tax requirements.  Any such remittances to United States residents are subject to withholding tax.  See “Taxation.”





There is no limitation imposed by the laws of Canada or by the charter or other constituent documents of the Company on the right of a non-resident to hold or vote the common shares, other than as provided in the Investment Act.  The following discussion summarizes the principal features of the Investment Act for a non-resident who proposes to acquire the common shares.





The Investment Canada Act generally prohibits implementation of a reviewable investment by an individual, government or agency thereof, corporation, partnership, trust or joint venture (each an “entity”) that is not a “Canadian” as defined in the Investment Canada Act (a “non-Canadian”), unless after review, the Director of Investments appointed by the minister responsible for the Investment Canada Act is satisfied that the investment is likely to be of net benefit to Canada.  An investment in the common shares by a non-Canadian other than a “WTO Investor” (as that term is defined by the Investment Canada Act, and which term includes entities which are nationals of or are controlled by nationals of member states of the World Trade Organization) when the Company was not controlled by a WTO Investor, would be reviewable under the Investment Canada Act if it was an investment to acquire control of the Company and the value of the assets of the Company, as determined in accordance with the regulations promulgated under the Investment Canada Act, was $5,000,000 or more, or if an order for review was made by the federal cabinet on the grounds that the investment related to Canada’s cultural heritage or national identity, regardless of the value of the assets of the Company.  An investment in the common shares by a WTO Investor, or by a non-Canadian when the Company was controlled by a WTO Investor, would be reviewable under the Investment Canada Act if it was an investment to acquire control of the Company and the value of the assets of the Company, as determined in accordance with the regulations promulgated under the Investment Canada Act was not less than a specified amount, which as specified in 2009 was any amount in excess of $312 million.  A non-Canadian would acquire control of the Company for the purposes of the Investment Canada Act if the non-Canadian acquired a majority of the common shares.  The acquisition of one third or more, but less than a majority of the common shares would be presumed to be an acquisition of control of the Company unless it could be established that, on the acquisition, the Company was not controlled in fact by the acquirer through the ownership of the common shares.




89





Certain transactions relating to the common shares would be exempt from the Investment Canada Act, including:  (a) an acquisition of the common shares by a person in the ordinary course of that person’s business as a trader or dealer in securities; (b) an acquisition of control of the Company in connection with the realization of security granted for a loan or other financial assistance and not for a purpose related to the provisions of the Investment Canada Act; and (c) an acquisition of control of the Company by reason of an amalgamation, merger, consolidation or corporate reorganization following which the ultimate direct or indirect control in fact of the Company, through the ownership of the common shares, remained unchanged.





Foreign Investments and Exchange in Tanzania





The Tanzania Investment Centre (TIC) issues certificates of Approval to Foreign and Local Companies wishing to invest in Tanzania. Possession of Certificate of Approval entitles the investor to the following Tax Incentives under the Income Tax Act.


(i)
maximum Corporate Tax Rate of 30% (Residents and Non Residents)


(ii)
Withholding Tax on Dividends = 10%


(iii)
Withholding Tax on Interest = 10%


(iv)
50% write – off of capital expenditure incurred during the year of expenditure of the project.


(v)
Carry forward of losses for unlimited period of time.





In 1992, the stringent foreign exchange legislation was repealed and the restriction on foreign commercial banks abolished. Any person whether resident or not may establish foreign currency accounts with any of the commercial banks and transfer foreign currency outside Tanzania without restriction.  The Bank of Tanzania regulates commercial banks and approves the establishment of offshore foreign currency accounts by residents.  There are no controls on foreign exchange rates or interest rate on loans and overdrafts.





E.           Taxation





Canadian Federal Income Tax Consequences





The following summarizes the principal Canadian federal income tax consequences applicable to the holding and disposition of common shares in the capital of the Company by a United States resident, a corporation or partnership created or organized in or under the laws of the United States or of any political subdivision thereof, an entity created or organized in or under the laws of the United States or of any political subdivision thereof, which has elected to be treated as a corporation for U.S. federal income tax purposes, an estate whose income is taxable in the U.S. irrespective of source, or a trust subject to primary supervision of a court within the U.S. and control of a U.S. fiduciary, and who holds common shares solely as capital property and who owns (directly and indirectly) no more than 5% of the value of the total outstanding stock of the Company (a “U.S. Holder”).  This summary is based on the current provisions of the Income Tax Act (Canada) (the “Tax Act”), the regulations thereunder, all amendments thereto publicly proposed by the government of Canada, the published administrative practices of Canada Revenue Agency, and on the current provisions of the Canada-United States Income Tax Convention, 1980, as amended (the “Treaty”).  Except as otherwise expressly provided, this summary does not take into account any provincial, territorial or foreign (including without limitation, any U.S.) tax law or treaty.  It has been assumed that all currently proposed amendments will be enacted substantially as proposed and that there is no other relevant change in any governing law or practice, although no assurance can be given in these respects.




90





Each U.S. Holder is advised to obtain tax and legal advice applicable to such U.S. Holder’s particular circumstances.





Every U.S. Holder is liable to pay a Canadian withholding tax on every dividend that is or is deemed to be paid or credited to the U.S. Holder on the U.S. Holder’s common shares.  The statutory rate of withholding tax is 25% of the gross amount of the dividend paid.  The Treaty reduces the statutory rate with respect to dividends paid to a U.S. Holder for the purposes of the Treaty.  Where applicable, the general rate of withholding tax under the Treaty is 15% of the gross amount of the dividend, but if the U.S. Holder is a corporation that owns at least 10% of the voting stock of the Company and beneficially owns the dividend, the rate of withholding tax is 5% for dividends paid or credited after 1996 to such corporate U.S. Holder.  The Company is required to withhold the applicable tax from the dividend payable to the U.S. Holder, and to remit the tax to the Receiver General of Canada for the account of the U. S. Holder.





Pursuant to the Tax Act, a U.S. Holder will not be subject to Canadian capital gains tax on any capital gain realized on an actual or deemed disposition of a common share, including a deemed disposition on death, provided that the U.S. Holder did not hold the common share as capital property used in carrying on a business in Canada, and that neither the U. S. Holder nor persons with whom the U.S. Holder did not deal a arms length (alone or together) owned or had the right or an option to acquire 25% or more of the issued shares of any class of the Company at any time in the five years immediately preceding the disposition.





United States Federal Income Tax Consequences





The following is a discussion of material United States federal income tax consequences, under current law, generally applicable  to a U.S. Holder (as defined above) of common shares of the Company. This discussion does not address all potentially relevant federal income tax matters and it does not address consequences peculiar to persons subject to special provisions of federal income tax law. In addition, this discussion does not cover any state, local or foreign tax consequences. (See “Taxation – Canadian Federal Income Tax Consequences” above). Accordingly, holders and prospective holders of common shares of the Company are urged to consult their own tax advisors about the specific federal, state, local, and foreign tax consequences to them of purchasing, owning and disposing of common shares of the Company, based upon their individual circumstances.





The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations, published Internal Revenue Service (“IRS”) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time and which are subject to differing interpretations. This discussion does not consider the potential effects, both adverse and beneficial, of any proposed legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time. There can be no assurance that future changes in applicable law or administrative and judicial interpretations thereof will not adversely affect the tax consequences discussed herein.




Since the United States federal income and withholding tax treatment may vary depending upon U.S. Holder’s particular situation, a U.S. Holder may be subject to special rules that may have been excluded in this discussion.  Special rules will apply, for example, if the U.S. Holder is




91




-
an insurance company;-
a tax-exempt organization;-
a financial institution;-
a person subject to the alternative minimum tax;-
a person who is a broker-dealer in securities;-
an S corporation;-
an expatriate subject to Section 877 of the Code;-
an owner of, directly, indirectly or by attribution, 10% or more of the outstanding common shares; or-
an owner holding common shares as part of a hedge, straddle, synthetic security or conversion transaction.




In addition, this summary is generally limited to persons holding common shares as "capital assets" within the meaning of Section 1221 of the Code, and whose functional currency is the U.S. dollar.  The discussion below also does not address the effect of any United States state or local tax law or foreign tax law.




Passive Foreign Investment Company.





The Company believes that it could be a passive foreign investment company (“PFIC”) for United States federal income tax purposes with respect to a U.S. Holder (as defined above).  The Company will be a PFIC with respect to a U.S. Holder if, for any taxable year in which such U.S. Holder held the Company’s shares, either (i) at least 75% of the gross income of the Company for the taxable year is passive income, or (ii) on average, at least 50% of the Company’s assets are attributable to assets that produce or are held for the production of passive income.  In each case, the Company must take into account a pro rata share of the income and the assets of any corporation in which the Company owns, directly or indirectly, 25% or more of the stock by value (the “look-through” rules).  Passive income generally includes dividends, interest, royalties, rents (other than rents and royalties derived from the active conduct of a trade or business and not derived from a related person), annuities, and gains from assets that produce passive income.  As a publicly traded corporation, the Company would apply the 50% asset test based on the value of the Company’s assets.





Because the Company may be a PFIC, unless a U.S. Holder who owns shares in the Company (i) elects (a section 1295 election) to have the Company treated as a “qualified electing fund” (a “QEF”) (described below), or (ii) marks the stock to market (described below), the following rules apply:





1.      Distributions made by the Company during a taxable year to a U.S. Holder who owns shares in the Company that are an “excess distribution” (defined generally as the excess of the amount received with respect to the shares in any taxable year over 125% of the average received in the shorter of either the three previous years or such U.S. Holder's holding period before the taxable year) must be allocated ratably to each day of such shareholder’s holding period.  The amount allocated to the current taxable year and to years when the Company was not a PFIC must be included as ordinary income in the shareholder’s gross income for the year of distribution.  The remainder is not included in gross income but the shareholder must pay a deferred tax on that portion.  The deferred tax amount, in general, is the amount of tax that would have been owed if the allocated amount had been included in income in the earlier year, plus interest.  The interest charge is at the rate applicable to deficiencies in income taxes.  For a U.S. Holder that is not a corporation, the interest charge is wholly non-deductible.





2.      The entire amount of any gain realized upon the sale or other disposition of the shares will be treated as an excess distribution made in the year of sale or other disposition and as a consequence will be treated as ordinary income and, to the extent allocated to years prior to the year of sale or disposition, will be subject to the interest charge described above.




92





A shareholder that makes a section 1295 election will be currently taxable on his or her pro rata share of the Company’s ordinary earnings and net capital gain (at ordinary income and long term capital gains rates, respectively) for each taxable year of the Company, regardless of whether or not distributions were received. The shareholder’s basis in his or her shares will be increased to reflect taxed but undistributed income.  Distributions of income that had previously been taxed will result in a corresponding reduction of basis in the shares and will not be taxed again as a distribution to the shareholder.





A shareholder may make a section 1295 election with respect to a PFIC for any taxable year of the shareholder (shareholder’s election year).  A section 1295 election is effective for the shareholder’s election year and all subsequent taxable years of the shareholder.  Procedures exist for both retroactive elections and filing of protective statements.  Once a section 1295 election is made it remains in effect, although not applicable, during those years that the Company is not a PFIC.  Therefore, if the Company re-qualifies as a PFIC, the section 1295 election previously made is still valid and the shareholder is required to satisfy the requirements of that election. Once a shareholder makes a section 1295 election, the shareholder may revoke the election only with the consent of the Commissioner.  Nevertheless, the Commissioner in his discretion may invalidate or terminate a section 1295 election applicable to a shareholder, if the shareholder and the Company fail the annual reporting requirements of the section 1295 election.





If a shareholder makes the section 1295 election for the first taxable year of the Company as a PFIC that is included in the shareholder’s holding period of the PFIC shares, the PFIC qualifies as a pedigreed QEF with respect to the shareholder.  If a QEF is an unpedigreed QEF with respect to the shareholder, the shareholder is subject to both the non-QEF and QEF regimes.  Under the proposed regulations, a  PFIC that qualifies as a pedigreed QEF with respect to the shareholder would be taxed currently on his or her share of the PFIC’s earnings and profits, whether distributed or not.  On the other hand, a PFIC that qualifies as an unpedigreed QEF with respect to the shareholder would be taxed currently on his or share of the PFIC’s earnings and profits, whether distributed or not, during the period the PFIC shares qualify as a QEF; and would be taxed under the “excess distribution” and “interest charge” rules during the period the PFIC shares do not qualify as a QEF. Certain elections are available which enable shareholders to convert an unpedigreed QEF into a pedigreed QEF thereby avoiding such dual application.





A shareholder making the section 1295 election must make the election on or before the due date, as extended, for filing the shareholder’s income tax return for the first taxable year to which the election will apply. A shareholder must make a section 1295 election by completing a Form 8621, Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund (the “Form”); attaching said Form to its federal income tax return; and reflecting in the Form the information provided in the PFIC Annual Information Statement or if the shareholder calculated the financial information, a statement to that effect.  The PFIC Annual Information Statement must include the shareholder’s pro rata shares of the ordinary earnings and net capital gain of the PFIC for the PFIC’s taxable year or information that will enable the shareholder to calculate its pro rata shares.  In addition, the PFIC Annual Information Statement must contain information about distributions to shareholders and a statement that the PFIC will permit the shareholder to inspect and copy its permanent books of account, records, and other documents of the PFIC necessary to determine that the ordinary earnings and net capital gain of the PFIC have been calculated according to federal income tax accounting principles.  A shareholder may also obtain the books, records and other documents of the foreign corporation necessary for the shareholder to determine the correct earnings and profits and net capital gain of the PFIC according to federal income tax principles and calculate the shareholder’s pro rata shares of the PFIC’s ordinary earnings and net capital gain.  In that case, the PFIC must include a statement in its PFIC Annual Information Statement that it has permitted the shareholder to examine the PFIC’s books of account, records, and other documents necessary for the shareholder to calculate the amounts of ordinary earnings and net capital gain.  A shareholder that makes a Section 1295 election with respect to a PFIC held directly or indirectly, for each taxable year to which the Section 1295 election applies, must comply with the foregoing submissions.




93





Because the Company’s stock is “marketable” under section 1296(e), a U.S. Holder may elect to mark the stock to market each year.  In general, a PFIC shareholder who elects under section 1296 to mark the marketable stock of a PFIC includes in ordinary income each year an amount equal to the excess, if any, of the fair market value of the PFIC stock as of the close of the taxable year over the shareholder’s adjusted basis in such stock.  A PFIC shareholder is also generally allowed an ordinary deduction for the excess, if any, of the adjusted basis of the PFIC stock over the fair market value as of the close of the taxable year.  Deductions under this rule, however, are allowable only to the extent of any net mark to market gains with respect to the stock included by the PFIC shareholder for prior taxable years.  While the interest charge regime under the PFIC rules generally does not apply to distributions from and dispositions of stock of a PFIC where the U.S. Holder has marked to market, coordination rules for limited application will apply in the case of a U.S. Holder that marks to market PFIC stock later than the beginning of the shareholder's holding period for the PFIC stock, unless the PFIC stock was a QEF with respect to the U.S. Holder.





Special rules apply with respect to the calculation of the amount of the foreign tax credit with respect to excess distributions by a PFIC or current income inclusions under a QEF.





Distribution on Common Shares of the Company





In general, U.S. Holders receiving dividend distributions (including constructive dividends) with respect to common shares of the Company are required to include in gross income for United States federal income tax purposes the gross amount of such distributions, equal to the U.S. dollar value of such distributions on the date of receipt (based on the exchange rate on such date), to the extent that the Company has current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions. Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holder’s federal income tax liability or, alternatively, may be deducted in computing the U.S. Holder’s federal taxable income. (See  more detailed discussion at “Foreign Tax Credit” below). To the extent that distributions exceed current or accumulated earnings and profits of the Company, they will be treated first as a tax-free return of capital up to the U.S. Holder’s adjusted basis in the common shares and thereafter as gain from the sale or exchange of property. Preferential tax rates for long-term capital gains are applicable to a U.S. Holder which is an individual, estate or trust. There are currently no preferential tax rates for long-term capital gains for a U.S. Holder which is a corporation.








In the case of foreign currency received as a dividend that is not converted by the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have a tax basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Generally any gain or loss recognized upon a subsequent sale or other disposition of the foreign currency, including the exchange for U.S. dollars, will be ordinary income or loss. However, an individual whose realized gain does not exceed $200 will not recognize that gain, provided that there are no expenses associated with the transaction that meet the requirements for deductibility as a trade or business expense (other than travel expenses in connection with a business trip) or as an expense for the production of income.





Dividends paid on the common shares of the Company generally will not be eligible for the dividends received deduction provided to corporations receiving dividends from certain United States corporations.  A U.S. Holder which is a corporation and which owns shares representing at least 10% of the voting power and value of the Company may, under certain circumstances, be entitled to a 70% (or 80% if the U.S. Holder owns shares representing at least 20% of the voting power and value of the Company) deduction equal to the United States source portion of dividends received from the Company (unless the Company qualifies as a “passive foreign investment company” (a PFIC) as defined above). The Company does not anticipate that it will earn any U.S. source income, however, and therefore does not anticipate that any U.S. Holder which is a corporation will be eligible for the dividends received deduction.




94





Foreign Tax Credit





A U.S. Holder who pays (or has withheld from distributions) Canadian income tax with respect to the ownership of common shares of the Company may be entitled, at the option of the U.S. Holder, to either receive a deduction or a tax credit for such foreign tax paid or withheld. Generally, it will be more advantageous to claim a credit because a credit reduces United States federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer’s income subject to tax. This election is made on a year-by-year basis and generally applies to all foreign taxes paid by (or withheld from) the U.S. Holder during that year. There are significant and complex limitations which apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder’s United States income tax liability that the U.S. Holder’s foreign source income bears to his or its worldwide taxable income. In the determination of the application of this limitation, the various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern this classification process. In addition, this limitation is calculated separately with respect to specific classes of income such as “passive income”, “high withholding tax interest,” “financial services income,” “shipping income,” and certain other classifications of income. Dividends distributed by the Company will generally constitute “passive income” or, in the case of certain U.S. Holders, “financial services income” for these purposes. The availability of the foreign tax credit and the application of  the limitations on the credit are fact specific, and U.S. Holders of common shares of the Company should consult their own tax advisors regarding their individual circumstances.  U.S. Holders should be aware that recently enacted legislation eliminates the “financial services income” category for taxable years beginning after December 31, 2006.  Under the recently enacted legislation, the foreign tax credit limitation categories are limited to “passive category income” and “general category income”.





Disposition of Common Shares of the Company





In general, U.S. Holders will recognize gain or loss upon the sale of common shares of the Company equal to the difference, if any, between (i) the amount of cash plus the fair market value of any property received, and (ii) the shareholder’s tax basis in the common shares of the Company. Preferential tax rates apply to long-term capital gains of U.S. Holders which are individuals, estates or trusts. In general, gain or loss on the sale of common shares of the Company will be long-term capital gain or loss if the common shares are a capital asset in the hands of the U.S. Holder and are held for more than one year. Deductions for net capital losses are subject to significant limitations. For a U.S. Holder that is an individual, estate, or trust, capital losses may be used to offset capital gains and up to US$3,000 of ordinary income and any unused portion of net capital loss may be carried over to be used in later taxable years until such net capital loss is thereby exhausted. For U.S. Holders that are corporations (other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years and carried forward five years from the loss year to be offset against capital gains until such net capital loss is thereby exhausted.





Controlled Foreign Corporations.





Sections 951 through 964 and Section 1248 of the Code relate to controlled foreign corporations (“CFCs”).  A foreign corporation that qualifies as a CFC will not be treated as a PFIC with respect to a shareholder during the portion of the shareholder’s holding period after December 31, 1997, during which the shareholder owns, directly or indirectly, 10% or more of the total voting power of the outstanding shares of the Company (a “10% Shareholder”) and the corporation is a CFC.  A CFC is a foreign corporation where more  than 50% of the corporation’s voting stock or value is owned by U.S. shareholders on any day during the foreign corporation’s taxable year. The PFIC provisions continue to apply in the case of PFIC that is also a CFC with respect to shareholders that are not 10% Shareholders.




95





The 10% Shareholders of a CFC are subject to current U.S. tax on their pro rata shares of certain income of the CFC and their pro rata shares of the CFC’s earnings invested in certain U.S. property.  The effect is that the CFC provisions may impute some portion of such a corporation’s undistributed income to certain shareholders on a current basis and convert into dividend income some portion of gains on dispositions of stock, which would otherwise qualify for capital gains treatment.





The Company does not believe that it will be a CFC.  It is possible that the Company could become a CFC in the future.  Even if the Company were classified as a CFC in a future year, however, the CFC rules referred to above would apply only with respect to 10% Shareholders.





U.S. Information Reporting and Backup Withholding.





Payments made within the United States, or by a U.S. payor or U.S. middleman, of dividends or proceeds arising from certain sales or other taxable dispositions of the common shares of the Company are generally subject to the information reporting requirements of the Code.  Dividends may be subject to backup withholding at the rate of 28% unless the holder provides a taxpayer identification number on a properly completed Form W-9 or otherwise establishes an exemption.  U.S. Holders that are corporations generally are excluded from these information reporting and backup withholding tax rules.





The amount of any backup withholding will not constitute additional tax and will be allowed as a credit against the U.S. Holder's federal income tax liability, provided the required information is furnished to the IRS.





Filing of Information Returns.





Under a number of circumstances, a U.S. Holder acquiring shares of the Company may be required to file an information return.  In particular, any U.S. Holder who becomes the owner, directly or indirectly, of 10% or more of the shares of the Company will be required to file such a return.  Other filing requirements may apply, and U.S. Holders should consult their own tax advisors concerning these requirements.





Tanzania





Taxation


Tax in Tanzania is levied based on residence and source. Resident persons are taxed on worldwide income whilst non residents are only taxed on income sourced in Tanzania. An individual is considered to be Tanzanian resident, if he has a permanent home in Tanzania and is present during any part of the year, he was resident in Tanzania during the year of income for periods amounting in aggregate to 183 days or more; or if he was in the United Republic in that year of income and each of the two preceding years of income for periods averaging more than 122 days in each such year of income.





The minimum annual income tax threshold is TShs. 2,040,000  or TShs. 170,000 per month.  Income Tax Rates vary from NIL up to 30%.  Prevailing corporate income tax rate is 30%.





96





Value Added Tax (“VAT”)





Taxable Supplies
RateSupply of goods and services in Mainland Tanzania
18%Import of goods and services in Mainland Tanzania
18%Export of goods and services from Mainland Tanzania*
18%Special relief to some entities/items **
10%


Note:


* In certain cases the rate could be 0%.


** This was proposed in the Finance Bill 2012 which has not yet been passed therefore could be subject to further amendments. Before this proposal the relief was provided in full i.e. the VAT rate was 0%.





VAT registrable threshold is TShs. 40 Million (or about US$25,000 at prevailing exchange rates).




Withholding Tax





Withholding tax is charged at the rates specified below:


Resident
Non-ResidentDividend
10%
10%Dividend from  listed on the Dar es Salaam Stock Exchange
5%
5%Interest
10%
10%Royalties
0%
15%Management Fees
0%
15%Professional Fees
0%
15%Rent, Premium for Use of Property
10%
15%Pension/Retirement Annuity
10%
15%Service fee
0
15%Insurance premium
0
5%




Special Rates for Persons Engaged in “Mining Operations” Rates




Resident
Non-ResidentTechnical Services to Mining Operations
5%
15%Management Fee
0%
15%Interest on Loans
10%
10%.





Capital Gains Taxation




0% applies to capital gains on the sale of shares listed at the DSM Stock Exchange.  Normal pay as you earn rates with a marginal rate of 30% applies to capital gains by resident individuals, 30% applies to capital gains by corporations.




Thin capitalisation





For exempt controlled entities, the interest expense that is allowable for tax purposes is restricted to debt and equity ratio of 7 to 3. Debts and equity are defined terms in the legislation. Any interest expense relating to debts exceeding this ratio is permanently disallowed.




97





Stamp duty




Stamp duty is chargeable on various legal documents and agreements (e.g. transfer of shares, issue of shares, etc.) generally at ad valorem rates of up to 1%.




Customs Duty




There are three import duty rates: 0% for capital goods and raw materials, 10% for semi – finished goods and 25% for finished final consumer goods.





Mining Sector




The Tax Incentives and Investment allowances are designed to encourage industrial growth and attract foreign investments. They are granted for capital expenditure on hotels and manufacturing and mining operations. The allowance is a deduction in computing taxable income.




For Companies investing in the Mining Industries (Mineral mining Rights Holders) specific tax incentives are applicable to their investments. These are:-




(i)       100% write off of capital expenditure in the year of Income of expenditure.


(ii)      Indefinite carry forward of losses.


(iii) 15% additional Capital Expenditure on unredeemed qualifying Capital Expenditure for Mining Operators who had entered into Agreement with the Government before 1st July 2001, under the Mining Acts.


(iv)     Withholding tax on dividends and branch profits at 10%


(v)      Withholding tax on interest at 10%


(vi)      Corporate tax rate maximum at 30%




The government of Tanzania also imposes a royalty on the gross value of all production equal to 5% for diamonds and 4% for metallic minerals (incl. Copper, silver, gold and platinum group minerals).




Double Taxation Agreement




Tanzania has  tax treaties to prevent double taxation with Canada, Denmark, Finland, India, Italy, , Norway, South Africa, Sweden and Zambia. Tanzania is also in the process of negotiating treaties with several countries including Belgium, Burundi, Iran, Lebanon, Malaysia, Mauritius, Pakistan, and Rwanda.




F.           Dividends and Paying Agents




Not Applicable.





G.           Statement by Experts





Not Applicable.





H.           Documents on Display





The Company files annual reports and other information with the SEC.  You may read and copy any document that we file at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549.  Please call the SEC at 1-800-SEC-0330 for more information about the Public Reference Rooms.  The SEC also maintains a website, www.sec.gov, where you may obtain our reports.  We also file certain reports with the Canadian Securities Administrators that you may obtain through access of the SEDAR website, www.sedar.com.




98





Copies of the Company’s material contracts are kept in the Company’s principal executive office.





I.           Subsidiary Information





Not Applicable.





Item 11.                      Quantitative and Qualitative Disclosures About Market Risk





The Company is exposed to market risk, primarily related to foreign exchange and metals prices (gold in particular).  The Company uses the Canadian dollar as its reporting currency, but the Company converts Canadian dollars to U.S. dollars, and then U.S. dollars to Tanzanian schillings.  The Company is therefore exposed to foreign exchange movements in Tanzania where the Company is incurring costs in conducting exploration activities.  Most of the Company’s exploration work is conducted in U.S. dollars; however, some general and administrative expenses are paid in Tanzanian schillings.





The following table sets forth the percentage of the Company's administrative expense by currency for the year ended August 31, 2012.





By Currency





2012Canadian Dollar
25%U.S. Dollar
50%Tanzanian Schilling
25%Total:
100%





Such administrative expense by currency may change from time to time, but it has been roughly the same year to year.  Further, the Company incurred net exploration costs of $9,593,993 and $7,640,353 for the years ended August 31, 2012 and 2011, respectively, which are primarily paid in U.S. dollars.





The Company has not entered into any material foreign exchange contracts to minimize or mitigate the effects of foreign exchange fluctuations on the Company's operations.  Based on prior years, the Company does not believe that it is subject to material foreign exchange fluctuations.  However, no assurance can be given that this will continue to be true in the future.





The market prices of most precious metals, including gold, have generally increased over the past three years, but are subject to market fluctuations based primarily on supply and demand.





The following table sets out the cumulative average prices of gold for the past five years, based on the London Metals Market afternoon price fix in U.S. dollars:





2008
2009
2010
2011
2012

(Average to August 31)$871.96
$972.35
$1,224.53
$1,581.52
$1,640.59





Item 12.                      Description of Securities Other than Equity Securities





Not Applicable.




99





Part II





Item 13.                      Defaults, Dividend Arrears and Delinquencies





None.





Item 14.                      Material Modifications to the Rights of Security Holders and Use of Proceeds





At the Annual General and Special Meeting held on March 1, 2012 the shareholders approved the Shareholder Rights Plan (the “Rights Plan”).  The following is a summary of the Tanzanian Royalty Exploration Corporation Rights Plan.  The full text of the Rights Plan is incorporated herein by reference.  A complete copy of the Rights Plan can be obtained either by accessing it on SEDAR (www.sedar.com) or upon written request from the Company, free of charge.





Summary of the Rights Plan




This summary is qualified in its entirety by reference to the full text of the Rights Plan, including the definitions therein.




Objectives




The primary objective of the Rights Plan is to provide the Board with sufficient time to explore and develop alternatives for maximizing shareholder value if a take-over bid is made for the Company and to provide every shareholder with an equal opportunity to participate in such a bid.  The Rights Plan encourages a potential acquiror to proceed either by way of a Permitted Bid (as defined in the rights agreement), which requires the take-over bid to satisfy certain minimum standards designed to promote fairness, or with the concurrence of the Board.




Effective Date





The Rights Plan became effective as of November 25, 2011, subject to approval of the Shareholder Rights Plan Resolution which was obtained on March 1, 2012.





Term





Unless renewed with the concurrence of the shareholders of the Company, the Rights Plan will terminate on the close of business on the date of the 2015 annual meeting of shareholders of the Company.





Issue of Rights





Effective at the close of business on December 12, 2011, one right (a “TNX Right”) has been issued and attached to each Common Share issued and outstanding at the close of business on December 12, 2011 (the “Record Time”) and one TNX Right shall be issued in respect of each Common Share issued after the Record Time and prior to the earlier of the Expiration Time (as defined in the Rights Plan) and date of termination of the Rights Plan.




100




TNX Rights Exercise Privilege





The TNX Rights will separate from the Common Shares and will be exercisable ten trading days (the “Separation Time”) after a person has acquired, or commences a take-over bid to acquire, 20% or more of the shares, other than by an acquisition pursuant to a take-over bid permitted by the Rights Plan (a “Permitted Bid”).  Prior to a flip-in event (as described below), each TNX Right entitles the registered holder thereof to purchase from the Company one Common Share at the exercise price equal to five times the market price of a Common Share, subject to adjustments and anti-dilution provisions.  The beneficial acquisition by any person (an “Acquiring Person”) of 20% or more of the Common Shares, other than by way of a Permitted Bid, is referred to as a “Flip-in Event”.  Any TNX Rights held by an Acquiring Person will become void upon the occurrence of a Flip-in Event.  Ten trading days after the occurrence of the Flip-in Event, each TNX Right (other than those held by the Acquiring Person), will permit registered holders to purchase, upon payment of the Exercise Price, a number of Common Shares having an aggregate market value equal to twice the Exercise Price.





The issue of the TNX Rights is not initially dilutive.  Upon a Flip-in Event occurring and the TNX Rights separating from the Common Shares, holders of TNX Rights not exercising their TNX Rights upon the occurrence of a Flip-in Event may suffer substantial dilution.





Lock-up Agreement





A bidder may enter into Permitted Lock-up Agreements with the Company’s shareholders (“Locked-up Persons”) whereby such shareholders agree to tender their Common Shares to the take-over bid (the “Subject Bid”) without a Flip-in Event (as referred to above) occurring.  Any such agreement must include a provision that permits the Locked-up Person to withdraw the Common Shares to tender to another take-over bid or to support another transaction that will provide greater consideration to the shareholder than the Subject Bid.  The Permitted Lock-up Agreement may require that the consideration under the other transaction exceed the consideration under the Subject Bid by a specified amount.  The specified amount may not be greater than 4%.  For greater certainty, a Permitted Lock-up Agreement may contain a right of first refusal or require a period of delay to give a bidder an opportunity to match a higher price in another transaction as long as the shareholder can accept another bid or tender to another transaction.





The Rights Plan requires that any Permitted Lock-up Agreement be made available to the Company and the public.  Under a Permitted Lock-up Agreement, no “break up” fees, “top up” fees, penalties, expense reimbursements or other amounts that exceed in aggregate the greater of (i) 2 1⁄2% of the value payable under the Subject Bid, and (ii) 25% of the amount by which the value received by a Locked-up Person under another take-over bid or transaction exceeds what such Locked-up Person would have received under the Subject Bid, may be payable by such Locked-up Person if the Locked-up Person fails to deposit or tender Common Shares to the Subject Bid or withdraws Common Shares previously tendered thereto in order to deposit such Common Shares to another take-over bid or support another transaction.





Certificates and Transferability





Prior to the Separation Time, the TNX Rights are evidenced by a legend imprinted on certificates for the Common Shares issued from and after the Effective Date and are not to be transferable separately from the Common Shares.  From and after the Separation Time, the TNX Rights will be evidenced by TNX Rights certificates which will be transferable and traded separately from the Common Shares.





Permitted Bid Requirements





The requirements for a Permitted Bid include the following:





w the take-over bid must be made by way of a take-over bid circular;





w the take-over bid must be made to all shareholders;




101





w the take-over bid must be outstanding for a minimum period of 60 days, and Common Shares tendered pursuant to the take-over bid may not be taken up prior to the expiry of the 60 day period, and only if at such time more than 50% of the Common Shares held by shareholders, other than the bidder, its affiliates and persons acting jointly or in concert and certain other persons (collectively, the “Independent Shareholders”), have been tendered to the take-over bid and not withdrawn; and





w if more than 50% of the Common Shares held by Independent Shareholders are tendered to the take-over bid within the 60 day period, the bidder must make a public announcement of that fact and the take-over bid must remain open for deposits of Common Shares for an additional 10 business days from the date of such public announcement.





w the Rights Plan allows for a competing Permitted Bid (a “Competing Permitted Bid”) to be made while a Permitted Bid is in existence.  A Competing Permitted Bid must satisfy all the requirements of a Permitted Bid except that it may expire on the same date as the Permitted Bid, subject to the requirement that it be outstanding for a minimum period of 35 days.





Waiver





The Board of Directors, acting in good faith, may, prior to the occurrence of a Flip-in Event, waive the application of the Rights Plan to a particular Flip-in Event (an “Exempt Acquisition”) where the take-over bid is made by a take-over bid circular to all holders of Common Shares.  Where the Board exercises the waiver power for one take-over bid, the waiver will also apply to any other take-over bid for the Company made by a take-over bid circular to all holders of Common Shares prior to the expiry of any other bid for which the Rights Plan has been waived.





The Board of Directors may also waive the application of the Rights Plan if the Acquiring Person reduces its Beneficial Ownership to less than 20% of all outstanding Common Shares.





Redemption





The Board of Directors, with the approval of a majority of the votes of the holders of Common Shares (or the holders of TNX Rights if the Separation Time has occurred) recorded (including any votes cast by proxy) at a meeting duly called for that purpose, may redeem the TNX Rights at $0.0001 per TNX Right. TNX Rights shall also be redeemed by the Board without such approval following completion of a Permitted Bid, Competing Permitted Bid or Exempt Acquisition.





Amendment





The Board of Directors may amend the Rights Plan with the approval of a majority vote of the votes cast by shareholders (or the holders of TNX Rights if the Separation Time has occurred) voting in person or by proxy at a meeting duly called for that purpose. The directors without such approval may correct clerical or typographical errors and, subject to approval as noted above at the next meeting of the shareholders (or holders of TNX Rights, as the case may be), may make amendments to the Rights Plan to maintain its validity due to changes in applicable legislation.





Exemptions for Institutional Investors





Generally, investment managers (for client accounts), trust companies (acting in their capacities as trustees and administrators), statutory bodies whose business includes the management of funds and administrators or trustees of registered pension plans or funds (as well as the pension plans or funds) acquiring greater than 20% of the Common Shares are exempted from triggering a Flip-in Event, provided that they are not making, or are not part of a group making, a take-over bid. The Rights Plan also includes in this exemption the managers or trustees of certain mutual funds as well as the mutual fund itself.




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Item 15.                      Controls and Procedures





Disclosure Controls and Procedures





The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, as of the end of the period covered in this report, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) and concluded that they are appropriately designed and operating effectively to ensure that information required to be disclosed by the Company  in reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.





Management’s Annual Report on Internal Control Over Financial Reporting





Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934.  Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.  The Company’s management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of August 31, 2012.  In making this assessment, the Company’s management used the criteria established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).  The Company’s management has completed their review and testing of the Company’s internal control over financial reporting and concluded that they are appropriately designed and operating effectively as of August 31, 2012.





The Public Company Accounting Oversight Board’s Auditing Standard No. 5 defines a material weakness as a control deficiency, or a combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the Company’s annual financial statements will not be prevented or detected.





Attestation Report of the Registered Public Accounting Firm





Our independent auditor, KPMG LLP, the independent registered public accounting firm that audited the financial statements included in this Annual Report on Form 20-F, has issued an attestation report on the Company's internal control over financial reporting.  Their attestation report appears with the Financial Statements.





Changes in Internal Controls over Financial Reporting





During the year ended August 31, 2012, the Company continued to strengthen internal controls and implement additional segregation of duties on both administrative and operational sides of the business. New procedures and controls are documented and implemented in conjunction with the continued growth of the Company. The Chief Executive Officer and the Chief Financial Officer, together with other members of management, have designed the Company’s disclosure controls and procedures in order to provide reasonable assurance that material information relating to the Company and its consolidated subsidiaries would have been known to them, and by others, within those entities. Management have also designed internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of  financial statements in accordance with IFRS.




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Item 16 A.                   Audit Committee Financial Expert





The Company’s Board has determined that Dr. Norman Betts qualified as an Audit Committee financial expert.  Dr. Betts is an “independent director”, as defined under NI 52-110 and as defined pursuant to National Association of Securities Dealers (NASD) Rule 4200(a)(15) (as such definition may be modified or supplemented).  The SEC has indicated that the designation of an audit committee financial expert does not make that person an “expert” for any purpose, impose any duties, obligations, or liability on that person that are greater than those imposed on members of the audit committee and board of directors who do not carry this designation, or affect the duties, obligations, or liabilities of any other member of the audit committee.





Item 16 B.                   Code of Ethics





The Company has a Code of Ethics and Business Conduct that applies to the Company’s directors, officers, employees and consultants.  In addition, the Company has a Code of Ethical Conduct for Financial Managers that applies to our principal executive officer, principal financial officer, principal accounting officer, controller and other persons performing similar functions.  A copy of our Code of Ethics and Business Conduct and Code of Ethical Conduct for Financial Managers can be found on our website at www.TanzanianRoyalty.com.  The Company will report any amendment or waiver to the Code of Ethics on our website within five (5) business days.





The Company undertakes to provide any person without charge a copy of our code of ethics.  Persons requesting a copy should address their request to Corporate Secretary, Tanzanian Royalty Exploration Corporation, Suite 404 – 1688 152nd Street, South Surrey, British Columbia, Canada, V4A 4N2.





Item 16 C.                   Principal Accountant Fees and Services





The Company’s independent auditor for the fiscal years ended August 31, 2012 and 2011 was KPMG LLP, Chartered Accountants.





Our Audit and Compensation Committee pre-approves all services provided by our independent auditors.  All of the services and fees described below were reviewed and pre-approved by our audit committee.




The following summarizes the significant professional services rendered by KPMG LLP to the Company for the years ended August 31, 2012 and 2011:





Fiscal Year Ending August 31
Audit Fees
Audit Related Fees
Tax Fees
All Other Fees2012
Canada – $231,500

Tanzania - $52,760
Nil

Nil
Nil

Nil
Nil

Nil2011
Canada – $234,500

Tanzania – $8,000
Nil

Nil
Nil

Nil
Nil

Nil




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Item 16 D.                   Exemptions from the Listing Standards for Audit Committees





Not Applicable.





Item 16 E.                   Purchases of Equity Securities by the Issuer and Affiliated Purchasers





Not Applicable.





ITEM 16 F.                      Change in Registrant’s Certifying Accountant





Not Applicable.





Item 16 G.                   Corporate Governance





The Company’s common shares are listed on the NYSE MKT.   Section 110 of the NYSE MKT Company Guide permits NYSE MKT to consider the laws, customs and practices of foreign issuers in relaxing certain NYSE MKT listing criteria, and to grant exemptions from NYSE MKT listing criteria based on these considerations. A company seeking relief under these provisions is required to provide written certification from independent local counsel that the non-complying practice is not prohibited by home country law. A description of the significant ways in which the Company’s governance practices differ from those followed by domestic companies pursuant to NYSE MKT standards





Shareholder Meeting Quorum Requirement. The NYSE MKT minimum quorum requirement for shareholder meeting is 33 1/3% of the outstanding shares of common stock.  In addition, a company listed on NYSE MKT is required to state its quorum requirement in its bylaws.  The Company’s quorum requirement is set forth in its bylaws.  The Company’s bylaws provide that a quorum at any meeting of shareholders shall be persons present not being less than two in number  and who hold or represent not less than 20 percent of the total number of the issued shares of the Company for the time being enjoy voting rights at the meeting.





Proxy Delivery Requirement. NYSE MKT requires the solicitation of proxies and delivery of proxy statements for all shareholder meetings, and requires that these proxies be solicited pursuant to a proxy statement that conforms to the proxy rules of the SEC.,  The Company is a foreign private issuer as defined in Rule 3b-4 under the Securities Exchange Act of 1934, as amended, and the equity securities of the Company are accordingly exempt from the proxy rules set forth in Sections 14(a), 14(b), 14(c) and 14(f) of such Act.  The Company solicits proxies in accordance with applicable rules and regulations in Canada.





Shareholder Approval Requirements.  NYSE MKT requires a listed company to obtain the approval of its shareholders for certain types of securities issuances, including private placements that may result in the issuance of common shares (or securities convertible into common shares) equal to 20% or more of presently outstanding shares for less than the greater of book or market value of the shares.  In general, there is no such requirement under the rules of the Toronto Stock Exchange unless the transaction results in a change of control.  The Company will seek a waiver from NYSE MKT’s shareholder approval requirements in circumstances where the securities issuance does not trigger such a requirement under the rules of the Toronto Stock Exchange.




The foregoing is consistent with the laws, customs and practices in Canada.




Item 16 H.                      Mine Safety Disclosure





The Company does not operate a mine.




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Part III





Item 17.                      Financial Statements





Not Applicable.





Item 18.                      Financial Statements





The consolidated financial statements are prepared in accordance with International Financial Reporting Standards and are expressed in Canadian dollars.





Item 19.                      Exhibits




Exhibit No.
Name1.1
Articles and Bylaws of Tan Range Exploration Corporation, as amended.(1)1.2
Certificate of Amendment for Change of Name dated February 28, 2006(6)1.3
Certificate of Amendment and Registration of Restated Articles dated March 7, 2008 for increase in the maximum number of directors to eleven (6)2.1
Employee Share Ownership Plan (2003) (1)2.2
2001 Stock Option Plan (1)2.3
Shareholder Rights Plan(2)2.4
2011 Shareholder Rights Plan*2.5
Restricted Stock Unit Incentive Plan(4)2.6
Amended Restricted Stock Unit Incentive Plan(8)4.1
Subscription and Property Option Agreement dated May 31, 1999 between the Company and Barrick Gold Corporation(2)4.2
Option Agreement dated December 14, 2001 between Tanzam 2000 Limited and Barrick Exploration Africa Limited(2)4.3
Letter of Intent dated January 20, 2003 between the Company and Northern Mining Explorations Ltd., as amended by Letter Agreement dated March 18, 2003(2)4.4
Letter of Intent dated July 21, 2003 between the Company and Ashanti Goldfields (Cayman) Limited (2)4.8
Option Agreement dated September 7, 2004 between the Company and Northern Mining Explorations Ltd.(3)4.9
Purchase and Sale Agreement dated September 26, 2006 between the Company and Ashanti Goldfields (Cayman) Limited (4)4.10
Option and Royalty Agreement dated January 25, 2007 between the Company and Sloane Developments Ltd.(5)4.12
March 27, 2009 Subscription Agreement for purchase of 248,139 common shares with James E. Sinclair(6)4.13
February 23, 2009 Subscription Agreement for purchase of 189,036 common shares with James E. Sinclair(6)4.14
February 1, 2009 Subscription Agreement for purchase of $3,000,000 of common shares with James E. Sinclair(6)4.15
August 24, 2010 Subscription Agreement for purchase of 144,430 common shares with James E. Sinclair(7)4.16
Heads of Agreement dated December 16, 2010 between the Company and State Mining Corporation(8)4.17
Joint Venture Agreement dated October 25, 2011 between the Company and State Mining Corporation(8)8.1
List of Subsidiaries*12.1
Certification of the Principal Executive Officer under the Sarbanes-Oxley Act*12.2
Certification of the Principal Financial Officer under the Sarbanes-Oxley Act*13.1
Certification under Section 1350*15.1
Consolidated Financial Statements for the years ended August 31, 2012 and 2011*15.2
Management’s Discussion and Analysis for the years ended August 31, 2012 and 2011*  * Filed herewith


(1)
Previously filed on Form 20-F filed with the SEC on March 15, 2004


(2)
Previously filed on Amendment No. 1 to Form 20 with the SEC on June 28, 2004


(3)
Previously filed on Form 20-F with the SEC on February 10, 2005


(4)
Previously filed on Form 20-F with the SEC on November 30, 2006


(5)
Previously filed on Form 20-F with the SEC on November 30, 2007


(6)
Previously filed on Form 20-F with the SEC on November 25, 2009


(7)
Previously filed on Form 20-F with the SEC on November 30, 2010


(8)
Previously filed on Form 20-F with the SEC on December 12, 2011




106




SIGNATURE





The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.




Date           November 23, 2012




TANZANIAN ROYALTY EXPLORATION CORPORATIONBy:
“James E. Sinclair”James E. Sinclair,President and Chief Executive Officer(Principal Executive Officer)




107




Exhibit 12.1


CERTIFICATIONS





I, James E. Sinclair, certify that:





1.           I have reviewed this annual report on Form 20-F of Tanzanian Royalty Exploration Corporation (the “Company”);





2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;





3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;





4.           The Company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:





(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;





(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;





(c)
Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and





(d)
Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; and





5.           The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions):





(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and





(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting.





Date:           November 23, 2012“James E. Sinclair”James E. Sinclair,President and Chief Executive Officer(Principal Executive Officer)





108


Exhibit 12.2


CERTIFICATION




I, Steven Van Tongeren, certify that:





1.           I have reviewed this annual report on Form 20-F of Tanzanian Royalty Exploration Corporation (the “Company”);





2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;





3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;





4.           The Company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:





(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;





(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;





(c)
Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and





(d)
Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; and





5.           The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions):





(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and





(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting.




Date:           November 23, 2012“Steven Van Tongeren”Steven Van Tongeren,Chief Financial Officer(Principal Financial Officer)




109




Exhibit 13.1




CERTIFICATION




PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002




(SUBSECTIONS (a) AND (b) OF SECTION 1350, CHAPTER 63 OF




TITLE 18, UNITED STATES CODE)




Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of Title 18, United States Code), each of the undersigned officers of Tanzanian Royalty Exploration Corporation (the “Company”), does hereby certify with respect to the Annual Report of the Company on Form 20-F for the year ended August 31, 2012 as filed with the Securities and Exchange Commission (the “Form 20-F”) that, to the best of their knowledge:





(1)
the Form 20-F fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and





(2)
the information contained in the Form 20-F fairly presents, in all material respects, the financial condition and results of operations of the Company.




Dated:           November 23, 2012“James E. Sinclair”James E. Sinclair,President and Chief Executive Officer(Principal Executive Officer)“Steven Van Tongeren”Steven Van TongerenChief Financial Officer(Principal Financial Officer)
  110