Document:

CC Filed by Filing Services Canada Inc. 403-717-3898

TANZANIAN ROYALTY EXPLORATION CORPORATION 

RESTRICTED STOCK UNIT INCENTIVE PLAN 

Tanzanian Royalty Exploration Corporation, a corporation incorporated under the laws of the Province of Alberta (the “Corporation”), sets forth herein the terms of its Restricted Stock Unit Incentive Plan (the “Plan”), as follows: 

1.

PURPOSE 

The Plan is intended to enhance the Corporation’s and its Affiliates’ (as defined herein) ability 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 Corporation and its Affiliates and to expend maximum effort to improve the business results and earnings of the Corporation, by providing to such persons an opportunity to acquire or increase a direct proprietary interest in the operations and future success of the Corporation. To this end, the Plan provides for the grant of restricted stock units. Any of these awards of restricted stock units may, but need not, be made as performance incentives to reward attainment of annual or long-term performance goals in accordance with the terms hereof (as such performance goals are specified in the Award Agreement). 

2.

DEFINITIONS 

For purposes of interpreting the Plan and related documents (including Award Agreements), the following definitions shall apply: 

1)

“Affiliate” means, with respect to the Corporation, any person or company if it is a Subsidiary entity of the other or if both are Subsidiary entities of the same person or company within the meaning of OSC Rule 61-501- Insider Bids, Issuer Bids, Going Private Transactions and Related Party Transactions. 

2)

“Award” means a grant of Restricted Stock Units under the Plan. 

3)

“Award Agreement” means the written agreement between the Corporation and a Grantee that evidences and sets out the terms and conditions of an Award. 

4)

“Board” means the Board of Directors of the Corporation. 

5)

“Cause” means, as determined by the Board and unless otherwise provided in an applicable agreement with the Corporation or an Affiliate, (i) gross negligence or willful misconduct in connection with the performance of duties; (ii) conviction of a criminal offense; or (iii) material breach of any term of any employment, consulting or other services, confidentiality, intellectual property or non-competition agreements, if any, between the Service Provider and the Corporation or an Affiliate. 

6)

“Change of Control” means (i) a takeover bid for a sufficient number of Shares such that if such number of Shares are tendered into the bid and the bid closes, the bidder and all parties acting jointly or in concert with the bidder (the “bid group”) would have direction or control over more than 50% of the outstanding common shares of the Corporation, excluding the shares subject to the Plan, unless parties exercising control or 

direction over a blocking number of common shares of the Corporation have provided by the date (the “blocking date”) which is five business days before the initial expiry date of the bid, their written undertaking to all Grantees under the Plan not to tender into the bid, in the aggregate, at least a blocking number of Shares; “blocking number” means that number of common shares of the Corporation which, if withheld from being tendered into the bid and assuming no increase in the number of outstanding common shares of the Corporation, would result in the bidder not acquiring direction or control over more than 50% of the outstanding common shares of the Corporation immediately following closing of the bid; (ii) a merger, consolidation, combination, reorganization or other transaction pursuant to which a party, or parties acting jointly and in concert, would acquire direction or control over more than 50% of the outstanding common shares of the Corporation or more than 50% of the votes attaching to all of the voting securities of any successor entity resulting from such transaction; (iii) a sale of all or substantially all of the assets of the Corporation determined on either a consolidated or a non-consolidated basis; or (iv) the election or appointment to the Board of a number of persons who represent a majority of the Board and who were not proposed or approved by a majority of the Board as previously constituted.

The effective date of a Change of Control is (a) for the purposes of (i), the date immediately following the blocking date; (b) for the purposes of (ii) and (iii), the date of the latest of shareholder, other stakeholder, Court or other required approval of the transaction; and for the purposes of (iv), the date of the shareholder resolution or other corporate action approving the election or appointment.

7)

“Committee” means the Audit and Compensation committee of the Board, and designated from time to time by resolution of, the Board, which shall be constituted as provided in Section 3.2. 

8)

“Corporation” means Tanzanian Royalty Exploration Corporation. 

9)

“Effective Date” means January 24, 2006, the date the Plan is approved by the Board.  

10)

“Fair Market Value” means the value of a Share, determined as follows:  if on the Grant Date or other determination date the Shares are listed on an established national or regional stock exchange, is admitted to quotation on the Toronto Stock Exchange (the “TSX”) or is publicly traded on an established securities market, the Fair Market Value of the Corporation’s Shares shall be the closing price of the Shares on such exchange or in such market (if there is more than one such exchange or market the Board shall determine the appropriate exchange or market) on the Grant Date or such other determination date (or if there is no such reported closing price, the Fair Market Value shall be the mean between the highest bid and lowest asked prices or between the high and low sale prices on such trading day) or, if no sale of Shares is reported for such trading day, on the next preceding day on which any sale shall have been reported. If the Shares are not listed on such an exchange, quoted on such system or traded on such a market, Fair Market Value shall be the value of a Share as determined by the Board in good faith. 

11)

“Grant Date” means, as determined by the Board, the latest to occur of (i) the date as of which the Board approves an Award, (ii) the date on which the recipient of an 

Award first becomes eligible to receive an Award under Section 6 hereof, or (iii) such other date as may be specified by the Board. 

12)

“Grantee” means a person who receives or holds an Award under the Plan. 

13)

“Outside Director” means a member of the Board who is not an officer or employee of the Corporation. 

14)

“Plan” means this Tanzanian Royalty Exploration Corporation Restricted Stock Unit Incentive Plan. 

15)

“Restricted Stock Unit” or “RSU” means a bookkeeping entry representing the right to receive one Share, subject to the restrictions and vesting provisions provided herein, and awarded to a Grantee pursuant to Section 8 hereof.

16)

“Securities Act” means the Securities Act (Ontario), as now in effect or as hereafter amended.

17)

“Service” means service of a Service Provider to the Corporation or an Affiliate. Unless otherwise stated in the applicable Award Agreement, a Grantee’s change in position or duties shall not result in interrupted or terminated Service, so long as such Grantee continues to be a Service Provider to the Corporation or an Affiliate.  Subject to the preceding sentence, whether a termination of Service shall have occurred for purposes of the Plan shall be determined by the Board, which determination shall be final, binding and conclusive. 

18)

“Service Provider” means an employee, officer, director or Outside Director of the Corporation or an Affiliate other than the Chairman & Chief Executive Officer of the Corporation.

19)

“Share(s)” means the issued and outstanding common shares of the Corporation. 

20)

“Subsidiary” means any “subsidiary entity” of the Corporation within the meaning of OSC Rule 61-501 – Insider Bids, Issuer Bids, Going Private Transactions and Related Party Transactions. 

3.

ADMINISTRATION OF THE PLAN 

3.1

Board. 

The Board shall have such powers and authorities related to the administration of the Plan as are consistent with the Corporation’s articles of incorporation and by-laws and applicable law. The Board shall have full power and authority to take all actions and to make all determinations required or provided for under the Plan, any Award or any Award Agreement, and shall have full power and authority to take all such other actions and make all such other determinations not inconsistent with the specific terms and provisions of the Plan that the Board deems to be necessary or appropriate to the administration of the Plan, any Award or any Award Agreement. All such actions and determinations shall be by the affirmative vote of a majority of the members of the Board present at a meeting or by unanimous consent of the Board executed in writing in accordance with the Corporation’s articles of incorporation and by-laws and 

applicable law.  The interpretation and construction by the Board of any provision of the Plan, any Award or any Award Agreement shall be final, binding and conclusive. 

3.2

Committee. 

The Board from time to time may delegate to the Committee such powers and authorities related to the administration and implementation of the Plan, as set forth in Section 3.1 above and other applicable provisions, as the Board shall determine, other than the Board’s power and authority grant awards or to issue Shares to Grantees upon the vesting of an Award, consistent with the articles of incorporation and by-laws of the Corporation and applicable law. 

(i)

Except as provided in Subsection (ii) and except as the Board may otherwise determine, the Committee, if any, appointed by the Board to administer the Plan shall consist of two or more Outside Directors of the Corporation who meet such requirements as may be established from time to time by the securities regulatory authorities for such incentive plans and who comply with the independence requirements of the Toronto Stock Exchange. 

(ii)

The Board may also appoint one or more separate committees of the Board, each composed of one or more directors of the Corporation who need not be Outside Directors, who may administer the Plan and may determine all terms of such Awards. 

Notwithstanding the foregoing, the Board may not delegate its authority to grant Awards or to issue Shares to Grantees upon the vesting of an Award. 

In the  event that the Plan, any Award or any Award Agreement entered into hereunder provides for any action to be taken by or determination to be made by the Board, such action may be taken or such determination may be made by the Committee if the power and authority to do so has been delegated to the Committee by the Board as provided for in this Section . Unless otherwise expressly determined by the Board, any such action or determination by the Committee shall be final, binding and conclusive. To the extent permitted by law, the Committee may delegate its authority under the Plan to a member of the Board. 

3.3

Terms of Awards. 

Subject to the other terms and conditions of the Plan, the Board shall have full and final authority to: 

(i)

designate Grantees; 

(ii)

determine the number of Shares to be subject to an Award; 

(iii)

establish the terms and conditions of each Award (including, but not limited to, the nature and duration of any restriction or condition (or provision for lapse thereof) relating to the vesting or forfeiture of an Award and any other  terms or conditions); 

(iv)

prescribe the form of each Award Agreement evidencing an Award; 

(v)

establish performance criteria; and

(vi)

amend, modify, or supplement the terms of any outstanding Award.  Such authority specifically includes the authority, in order to effectuate the purposes of the Plan but without amending the Plan, to modify Awards to eligible individuals who are foreign nationals or are individuals who are employed outside Canada to recognize differences in local law, tax policy, or custom.  

As a condition to any subsequent Award, the Board shall have the right, at its discretion, to require Grantees to return to the Corporation Awards previously made under the Plan.  Subject to the terms and conditions of the Plan, any such new Award shall be upon such terms and conditions as are specified by the Board at the time the new Award is made. The Board shall have the right, in its discretion, to make Awards in substitution or exchange for any other award under another plan of the Corporation, any Affiliate, or any business entity to be acquired by the Corporation or an Affiliate. The Corporation may retain the right in an Award Agreement to cause a forfeiture of the gain realized by a Grantee on account of actions taken by the Grantee in violation or breach of or in conflict with any employment agreement, non-competition agreement, any agreement prohibiting solicitation of employees or clients of the Corporation or any Affiliate thereof or any confidentiality obligation with respect to the Corporation or any Affiliate thereof or otherwise in competition with the Corporation or any Affiliate thereof, to the extent specified in such Award Agreement applicable to the Grantee. Furthermore, the Corporation may, within 30 days, annul an Award if the Grantee is an employee of the Corporation or an Affiliate thereof and is terminated for Cause. The grant of any Award shall be contingent upon the Grantee executing the appropriate Award Agreement. 

3.4

No Liability. 

No member of the Board or of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Award or Award Agreement. 

3.5

Book Entry. 

Notwithstanding any other provision of this Plan to the contrary, the Corporation may elect to satisfy any requirement under this Plan for the delivery of share certificates through the use of book-entry. 

4.

SHARES SUBJECT TO THE PLAN 

Shares issued or to be issued under the Plan shall be authorized but unissued shares.  Subject to adjustment as provided in Section 11 hereof, the number of Shares available for issuance under the Plan shall be the sum of two million, five hundred thousand (2,500,000).  If any Shares covered by an Award are forfeited, or if an Award terminates without delivery of any Shares subject thereto, then the number of Shares counted against the aggregate number of Shares available under the Plan with respect to such Award shall, to the extent of any such forfeiture or termination, again be available for making Awards under the Plan. The Board shall have the right to substitute or assume Awards in connection with mergers, reorganizations, separations, or other transactions.  The number of Shares reserved pursuant to this Section 4 may be increased by the corresponding number of Awards assumed and, in the case of a substitution, by the net increase in the number of Shares subject to Awards before and after the substitution. 

Notwithstanding the foregoing, the number of securities issuable to insiders of the Corporation under all security-based compensation arrangements, including the Plan, at any time, cannot exceed 10% of the issued and outstanding Shares and the number of securities issued to insiders of the Corporation pursuant to such arrangements, within any one-year period, cannot exceed 10% of the issued and outstanding Shares. 

5.

EFFECTIVE DATE, DURATION AND AMENDMENTS 

5.1

Effective Date. 

The Plan shall be effective as of the Effective Date, subject to approval of the Plan by the Corporation’s shareholders within one year of the Effective Date. Upon approval of the Plan by the shareholders of the Corporation as set forth above, all Awards made under the Plan on or after the Effective Date shall be fully effective as if the shareholders of the Corporation had approved the Plan on the Effective Date. If the shareholders fail to approve the Plan within one year after the Effective Date, any Awards made hereunder shall be null and void and of no effect. 

5.2

Term. 

The Plan shall terminate automatically ten (10) years after its adoption by the Board and may be terminated on any earlier date or extended as provided in Section 5.3. 

5.3

Amendment and Termination of the Plan. 

The Board may, at any time and from time to time, amend, suspend, extend or terminate the Plan as to any Shares as to which Awards have not been made. An amendment shall be contingent on approval of the Corporation’s shareholders to the extent stated by the Board, required by applicable law or required by applicable stock exchange listing requirements.  However, amendments of a housekeeping nature, changes to vesting provisions, changes to the term of the Plan or Awards made hereunder or changes to performance criteria will not require shareholder approval. 

6.

AWARD ELIGIBILITY AND LIMITATIONS 

6.1

Service Providers and Other Persons. 

Subject to this Section 6, Awards may be made under the Plan to: (i) any Service Provider, as the Board shall determine and designate from time to time, (ii) any other individual whose participation in the Plan is determined to be in the best interests of the Corporation by the Board.  Notwithstanding the foregoing, no Award may be granted under this Plan to the Chairman & Chief Executive Officer of the Corporation. 

6.2

Successive Awards. 

An eligible person may receive more than one Award, subject to such restrictions as are provided herein. 

6.3

Stand-Alone, Additional, Tandem, and Substitute Awards. 

Awards granted under the Plan may, in the discretion of the Board, be granted either alone or in addition to, in tandem with, or in substitution or exchange for, any other Award or any award granted under another plan of the Corporation, any Affiliate, or any business entity to be acquired by the Corporation or an Affiliate, or any other right of a Grantee to receive payment from the Corporation or any Affiliate. Such additional, tandem, and substitute or exchange Awards may be granted at any time. If an Award is granted in substitution or exchange for another Award, the Board shall require the surrender of such other Award in consideration for the grant of the new Award.

7.

AWARD AGREEMENT 

Each Award granted pursuant to the Plan shall be evidenced by an Award Agreement, in such form or forms as the Board shall from time to time determine. Award Agreements granted from time to time or at the same time need not contain similar provisions but shall be consistent with the terms of the Plan.  

8.

TERMS AND CONDITIONS OF RESTRICTED STOCK UNITS 

8.1

Grant of Restricted Stock Units.  

Awards shall be in the form of Restricted Stock Units. Subject to the restrictions and vesting provisions provided in Section 8.2, each RSU shall entitle the Grantee to receive one Share.

8.2

Restrictions and Vesting. 

At the time a grant of Restricted Stock Units is made, the Board may, in its sole discretion, establish a period of time (a “Vesting period”) applicable to such Restricted Stock Units.  Each Award of Restricted Stock Units may be subject to a different Vesting period. The Board may, in its sole discretion, at the time a grant of Restricted Stock Units is made, prescribe restrictions in addition to or other than the expiration of the Vesting period, including the satisfaction of corporate or individual performance objectives, which may be applicable to all or any portion of the Restricted Stock Units in accordance with Section 9.1 Notwithstanding the foregoing and except in the case of accelerated vesting for Grantees whose age plus years of Service total at least sixty-five (65), (i) Restricted Stock Units that vest solely by the passage of time shall not vest in full in less than three (3) years from the Grant Date; (ii) Restricted Stock Units for which vesting may be accelerated by achieving performance targets shall not vest in full in less than one (1) year from the Grant Date; and (iii) Restricted Stock Units granted to Outside Directors vest, (a) at the election of an Outside Director at the time the Award is granted, within a minimum of one (1) year to a maximum of three (3) years following the Grant Date, as such Outside Director may elect, and (b) if no election is made, (a) upon the earlier of a Change of Control in accordance with Section 11.2 or his or her ceasing to hold the office of Outside Director of the Board. 

Restricted Stock Units may not be sold, transferred, assigned, pledged or otherwise encumbered or disposed of (other than to the Grantee’s beneficiary or estate, as the case may be, upon the death of the Grantee) during the Vesting period. 

8.3

Restricted Stock Unit Accounts. 

An account will be maintained by the Secretary of the Corporation or his or her designate in the name and for the benefit of the Grantee, in which will be recorded the number of RSUs granted to the Grantee, the Grant Date and expiry date of the RSUs.

8.4

Rights of Holders of Restricted Stock Units. 

8.4.1

Voting and Dividend Rights. 

Grantees of Restricted Stock Units shall have no rights as shareholders of the Corporation. The Board may provide in an Award Agreement evidencing a grant of Restricted Stock Units that the Grantee shall be entitled to receive, upon the Corporation’s payment of a cash dividend on its outstanding Shares, a cash payment for each Restricted Stock Unit granted equal to the per-share dividend paid on the outstanding Shares.  Such Award Agreement may also provide that such cash payment will be deemed reinvested in additional Restricted Stock Units at a price per unit equal to the Fair Market Value of the Shares on the date that such dividend is paid. 

8.4.2

Creditor’s Rights. 

A Grantee shall have no rights other than those of a general creditor of the Corporation.  Restricted Stock Units represent an unfunded and unsecured obligation of the Corporation, subject to the terms and conditions of the applicable Award Agreement. 

8.5

Termination of Service. 

Unless the Board otherwise provides in an Award Agreement or in writing after the Award Agreement is issued, upon the termination of a Grantee’s Service, any Restricted Stock Units granted to a Grantee that have not vested and will not vest within 30 days from the date of termination, or with respect to which all applicable restrictions and conditions have not lapsed, shall immediately be deemed forfeited. Upon forfeiture of Restricted Stock Units, the Grantee shall have no further rights with respect to such Award, including but not limited to any right to receive dividends with respect to the Restricted Stock Units. 

8.6

Delivery of Shares. 

Upon the expiration or termination of the Vesting period and the satisfaction of any other restrictions prescribed by the Board, the Restricted Stock Units shall vest and shall be settled in Shares issued by the Corporation from treasury and, unless otherwise provided in the Award Agreement, a share certificate for that number of Shares equal to the number of vested RSUs shall be delivered, free of all such restrictions, to the Grantee or the Grantee’s beneficiary or estate, as the case may be. 

Settlement of RSUs shall be in Shares issued by the Corporation from treasury. The Committee shall specify the circumstances in which Awards shall be made or forfeited in the event of termination of Service by the Grantee prior to vesting.

9.

TERMS AND CONDITIONS OF AWARDS 

9.1

Performance Conditions. 

The granting and vesting of RSUs may be subject to such performance conditions as may be specified by the Board in the Award Agreement. The Board may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions, and may exercise its discretion to reduce the amounts payable under any Award subject to performance conditions. 

9.1.1

Performance Goals Generally. 

The performance goals for Awards shall consist of one or more business criteria and a targeted level or levels of performance with respect to each of such criteria, as specified by the Committee consistent with this Section 9.1. Performance goals shall be objective and shall otherwise meet the requirements that the level or levels of performance targeted by the Committee result in the achievement of performance goals being “substantially uncertain.” The Committee may determine that Awards shall vest upon achievement of any one performance goal or that two or more of the performance goals must be achieved as a condition to the vesting of an Award. Performance goals may differ for Awards granted to any one Grantee or to different Grantees. 

9.1.2

Business Criteria. 

The Board, in its sole discretion, may establish business criteria for the purpose of establishing performance goals in accordance with Section 9.1, including but not limited to, one or more of the following business criteria for the Corporation, on a consolidated basis, and/or specified Subsidiaries or business units of the Corporation (except with respect to the total shareholder return and earnings per share criteria): (1) total shareholder return; (2) such total shareholder return as compared to total return (on a comparable basis) of a publicly available index such as, but not limited to, the S&P/TSX Composite Index; (3) past service to the Corporation; (4) net income; (5) pre-tax earnings; (6) earnings before interest expense, taxes, depreciation and amortization; (7) pre-tax operating earnings after interest expense and before bonuses, service fees, and extraordinary or special items; (8) operating margin; (9) earnings per share; (10) return on equity; (11) return on capital; (12) return on investment; (13) operating earnings; (14) working capital; (15) ratio of debt to shareholders’ equity; (16) revenue and (17) free cash flow and free cash flow per share; (18) bank feasibility studies; and (19) acquisitions of material royalty rights through acquisitions, dispositions, restructurings or other comparable transactions of one or more properties.  Business criteria may be measured on an absolute basis or on a relative basis (i.e., performance relative to peer companies) and on a GAAP or non-GAAP basis.

9.1.3

Timing For Establishing Performance Goals. 

Performance goals shall be established not later than 90 days after the beginning of any performance period applicable to such Awards, or at such other date as may be determined by the Board. 

9.1.4

Settlement of Restricted Stock Units.

9.2

Written Determinations. 

All determinations by the Committee as to the establishment of performance goals, the amount of any Award and as to the achievement of performance goals relating to Awards, and the amount of any final Awards, shall be made in writing. 

10.

REQUIREMENTS OF LAW 

10.1

General. 

The Plan shall comply with the provisions of any applicable law or regulation of any governmental authority, including without limitation any federal, state or provincial securities laws or regulations and the requirements of any stock exchange having jurisdiction. The failure to comply with such laws or regulations, including without limitation The Securities Act, may result in a termination of the Plan and/or the forfeiture of previously granted RSUs.

11.

EFFECT OF CHANGES IN CAPITALIZATION 

11.1

Changes in Shares. 

If the number of outstanding Shares is increased or decreased or the Shares are changed into or exchanged for a different number or kind of shares or other securities of the Corporation on account of any recapitalization, reclassification, stock split, reverse split, combination of shares, exchange of shares, stock dividend or other distribution payable in capital stock, or other increase or decrease in such shares effected without receipt of consideration by the Corporation occurring after the Effective Date, the number and kinds of shares for which Awards may be made under the Plan shall be adjusted proportionately and accordingly by the Corporation. In addition, the number and kind of shares for which Awards are outstanding shall be adjusted proportionately and accordingly so that the proportionate interest of the Grantee immediately following such event shall, to the extent practicable, be the same as immediately before such event.  The conversion of any convertible securities of the Corporation shall not be treated as an increase in shares effected without receipt of consideration. Notwithstanding the foregoing, in the event of any distribution to the Corporation’s shareholders of securities of any other entity or other assets (including an extraordinary cash dividend but excluding a non-extraordinary dividend payable in cash or in shares of the Corporation) without receipt of consideration by the Corporation, the Corporation may, in such manner as the Corporation deems appropriate, adjust the number and kind of shares subject to outstanding Awards. 

11.2

Change of Control. 

Subject to the exceptions set forth in the last sentence of this Section 11.2 and the last sentence of Section 11.4, upon the occurrence of a Change of Control, all outstanding Restricted Stock Units shall be deemed to have vested, and all restrictions and conditions applicable to such Restricted Stock Units shall be deemed to have lapsed and the Shares subject to such Restricted Stock Units shall be issued and delivered, immediately prior to the occurrence of such Change of Control.

11.3

Adjustments. 

Adjustments under Section 11.1 relating to Shares or securities of the Corporation shall be made by the Board, whose determination in that respect shall be final, binding and conclusive.  No fractional shares or other securities shall be issued pursuant to any such adjustment, and any fractions resulting from any such adjustment shall be eliminated in each case by rounding downward to the nearest whole Share. The Board may provide in the Award Agreement at the time of grant, or any time thereafter with the consent of the Grantee, for different provisions to apply to an Award in place of those described in Sections 11.1 and 11.3. 

11.4

No Limitations on Corporation. 

The making of Awards pursuant to the Plan shall not affect or limit in any way the right or power of the Corporation to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure or to merge, consolidate, dissolve, or liquidate, or to sell or transfer all or any part of its business or assets. 

12.

GENERAL PROVISIONS 

12.1

Disclaimer of Rights. 

No provision in the Plan or in any Award or Award Agreement shall be construed to confer upon any individual the right to remain in the employ or service of the Corporation or any Affiliate, or to interfere in any way with any contractual or other right or authority of the Corporation either to increase or decrease the compensation or other payments to any individual at any time, or to terminate any employment or other relationship between any individual and the Corporation. In addition, notwithstanding anything contained in the Plan to the contrary, unless otherwise stated in the applicable Award Agreement, no Award granted under the Plan shall be affected by any change of duties or position of the Grantee, so long as such Grantee continues to be a director, officer, consultant or employee of the Corporation or an Affiliate. The obligation of the Corporation to issue Shares or pay any benefits pursuant to this Plan shall be interpreted as a contractual obligation only in respect of those amounts described herein, in the manner and under the conditions prescribed herein. The Plan shall in no way be interpreted to require the Corporation to transfer any amounts to a third party trustee or otherwise hold any amounts in trust or escrow for payment to any Grantee or beneficiary under the terms of the Plan. 

12.2

Nonexclusivity of the Plan. 

Neither the adoption of the Plan nor the submission of the Plan to the shareholders of the Corporation for approval shall be construed as creating any limitations upon the right and authority of the Board to adopt such other incentive compensation arrangements (which arrangements may be applicable either generally to a class or classes of individuals or specifically to a particular individual or particular individuals) as the Board in its discretion determines desirable. 

12.3

Withholding Taxes. 

The Corporation or an Affiliate, as the case may be, shall have the right to deduct from payments of any kind otherwise due to a Grantee any federal, provincial, state, or local taxes of any kind required by law to be withheld with respect to the vesting of an Award or upon 

the issuance of any Shares upon the vesting of an Award. At the time of such vesting, lapse, or exercise, the Grantee shall pay to the Corporation or the Affiliate, as the case may be, any amount that the Corporation or the Affiliate may reasonably determine to be necessary to satisfy such withholding obligation.

12.4

Captions. 

The use of captions in this Plan or any Award Agreement is for the convenience of reference only and shall not affect the meaning of any provision of the Plan or such Award Agreement. 

12.5

Other Provisions. 

Each Award granted under the Plan may contain such other terms and conditions not inconsistent with the Plan as may be determined by the Board, in its sole discretion. 

12.6

Number and Gender. 

With respect to words used in this Plan, the singular form shall include the plural form, the masculine gender shall include the feminine gender, etc., as the context requires. 

12.7

Severability. 

If any provision of the Plan or any Award Agreement shall be determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction. 

12.8

Governing Law. 

The validity and construction of this Plan and the instruments evidencing the Award hereunder shall be governed by the laws of the province of Ontario, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Plan and the instruments evidencing the Awards granted hereunder to the substantive laws of any other jurisdiction.CC Filed by Filing Services Canada Inc. 403-717-3898

PURCHASE AND SALE AGREEMENT

THIS AGREEMENT made as of the 26th day of September, 2006.

B E T W E E N:

ASHANTI GOLDFIELDS (CAYMAN) LIMITED, a corporation existing under the laws of Cayman Islands;

(hereinafter referred to as “Ashanti”)

OF THE FIRST PART

- and –

TANZANIAN ROYALTY EXPLORATION CORPORATION a corporation existing under the laws of Alberta, Canada;

(hereinafter referred to as “Tanzanian”)

OF THE SECOND PART

WHEREAS pursuant to an option agreement between Ashanti and Tan Range Exploration Corporation (which subsequently changed its name to Tanzanian Royalty Exploration Corporation), Tanzanian American International Development Corporation 2000 Limited and Tancan Mining Company Limited (such latter three companies, collectively, the “Tanzanian Group”) dated the 21st day of July, 2003 (the “Kigosi Option Agreement”) attached as Appendix “A”, the Tanzanian Group granted certain option rights to Ashanti in specified licenses and underlying agreements relating to various properties in Tanzania, all as more particularly described in Appendix “B”;

AND WHEREAS pursuant to the Kigosi Option Agreement, certain benefits agreements were entered into between Ashanti and various parties, all as more particularly described in Appendix “C” (such agreements collectively, the “Benefits Agreements”);

AND WHEREAS pursuant to an agreement made effective March 8, 2006 by way of exchange of correspondence (such agreement, the “First Letter Agreement”, a copy of which is attached as Appendix “D1”) between Ashanti and Tanzanian, Ashanti agreed to sell and Tanzanian agreed to purchase all of Ashanti’s right, title and interest in, to and under the Kigosi Option Agreement, the Benefits Agreement, the Kigosi Property and the Kigosi Assets; 

- 2 –

AND WHEREAS pursuant to an agreement made effective July 12, 2006 by way of exchange of correspondence (such agreement, the “Second Letter Agreement”, a copy of which is attached as Appendix “D2”) between Ashanti and Tanzanian, Ashanti agreed to sell and Tanzanian agreed to purchase all of Ashanti’s right, title and interest in, to and under the Dongo Property and the Dongo Assets;

NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the premises and the mutual covenants and agreements herein contained, the parties hereto agree as follows, namely:

Article 1 - Interpretation

In this Agreement, unless the context otherwise requires, words and phrases not otherwise defined herein shall have the meaning ascribed thereto in the Kigosi Option Agreement or in the recitals hereto, as the case may be, and the following terms and expressions shall have the following meanings:

1.1

“Acquisition” means the transaction contemplated herein;

1.2

“Affiliate” means, with respect to a party, an entity that controls, is controlled by, or is under common control with such party;

1.3

“AMEX” means the American Stock Exchange;

1.4

“Assets” means all tangible assets of Ashanti or any Affiliate thereof used on site in connection with the Kigosi Option Rights, the Kigosi Property, the Dongo Rights and/or the Dongo Property, including tent buildings and other equipment, together with all studies, analyses, technical reports and data of any kind in whatsoever form whether hard copy, electronic of otherwise, relating to the Kigosi Rights, the Kigosi Property, the Dongo Rights and/or the Dongo Property, all as more particularly described in Appendix “E”;

1.5

“Business Day” means a day upon which both the AMEX and the TSX are open for trading;

- 3 –

1.6

“Closing” and “Closing Time” have the respective meanings ascribed thereto in Section 4.1 hereof;

1.7

“Common Shares” means such number of the common shares of Tanzanian to be issued to Ashanti on Closing and released to Ashanti on and after Closing in accordance with Section 2.2;

1.8

“control” means, with respect to any party or entity, the effective direct or indirect right to elect or determine a majority of the directors or other most senior level of management of such party or entity, and any form of the verb “to control” when used herein shall have a corresponding meaning;

1.9

“Dongo Property” means the licenses owned [or leased] by Ashanti or any Affiliate of Ashanti, as described in Appendix “G” hereto;

1.10

“Dongo Rights” means all of the right, title, and interests of Ashanti and any party claiming through Ashanti in and to the Dongo Property;

1.11

“effective date” means September 26 , 2006;

1.12

“Kigosi Rights” means all of the right, title, and interests of Ashanti and any party claiming through Ashanti under and pursuant to the Kigosi Option Agreement and the Benefits Agreements and in and to the Kigosi Property;

1.13

“Kigosi Property” means the licenses owned by any member of the Tanzanian Group or other Affiliate of Tanzanian, as described in Appendix “B” hereto;

1.14

“Ministerial Consent” means the consent of the Ministry of Energy and Minerals of the Government of Tanzania required to be obtained as a pre-condition to the transfer of ownership of the Dongo Property from Ashanti to Tanzanian.

- 4 –

1.15

“Purchased Assets” means the Kigosi Rights, the Dongo Rights and the Assets together with all liabilities and obligations related or appurtenant thereto pursuant to the Kigosi Option Agreement, the Benefits Agreements, the Dongo Property or otherwise;

1.16

“Purchase Price” means US$900 000;

1.16

“signature date” means the date on which the last party to the Agreement signs the Agreement;

1.17

“Stock Exchange Approvals” means the approval of each of the TSX and the AMEX to the issuance of Common Shares to Ashanti or any Affiliate thereof pursuant to this Agreement, which approval may be conditional upon the compliance by Tanzanian subsequent to Closing with the normal course requirements of the TSX and the AMEX;

1.18

“TSX” means the Toronto Stock Exchange.

1.19

“Warranty” means the warranties set out in Article 3 and Warranty shall mean any of them.

Article 2 - Purchase and Sale

2.1

Subject to and on the terms and conditions hereof, Ashanti hereby sells, transfers and assigns to Tanzanian, and Tanzanian hereby accepts such sale, transfer and assignment from Ashanti, the Purchased Assets in consideration of the payment by Tanzanian to Ashanti of the purchase price of US$900,000.00.

2.2

The purchase price of US$900,000.00 shall be satisfied by the creation and issue at Closing to the order of Ashanti of 180,058 Common Shares, being that number of Common Shares that is equal to the quotient obtained when US$900,000 is divided by the five-day weighted average trading price of the Common Shares on the AMEX over the five trading days immediately preceding the effective date, each such Common Share to be issued at a cash equivalent consideration of US$4.9984 in accordance with such weighted average trading price.  A share certificate representing 160,052 Common Shares, being eight-ninths (8/9ths) of the Common Shares being issued in payment of the purchase price, rounded up to the nearest share, shall be delivered to the order of Ashanti at Closing, and a share certificate representing 20,006 

- 5 –

Common Shares, being one-ninth (1/9th) of such Common Shares, rounded down to the nearest share, shall be delivered to the order of Ashanti no later than five (5) Business Days following the receipt by Tanzanian of written confirmation of the obtaining of Ministerial Consent, by way of written consent or letter from the Honourable Ibrahim Msabaha, Minister of Energy and Minerals, or another duly authorized representative of the Ministry of Energy and Minerals.  

2.3

Tanzanian agrees, both before and after Closing, to use its best efforts to obtain expeditiously and in accordance with applicable law the Ministerial Consent, and Ashanti agrees, both before and after Closing, to use its best efforts to provide such cooperation and assistance to Tanzanian, including any required disclosure and/or documentation, as may be necessary or appropriate in order to assist Tanzanian to so obtain such Ministerial Consent.  The parties acknowledge and agree that such Ministerial Consent is a condition precedent to the acquisition by Tanzanian of the Dongo Property and the issuance to Ashanti of the 20,006 Common Shares which are the portion of the Purchase Price attributable to such acquisition.

2.4

(i)

Tanzanian shall be liable for and shall pay all applicable transfer taxes, provincial sales taxes, goods and services taxes and all other like taxes, duties or charges properly payable upon and in connection with the sale, assignment and transfer of the Purchased Assets from Ashanti to Tanzanian hereunder (excluding any income tax liability of Ashanti arising therefrom).  Ashanti shall do all such things as are reasonably requested to enable Tanzanian to comply with such obligations in an efficient and timely manner.

(ii)

The parties agree that the purchase price shall not be  subject to any adjustments as at the date of Closing, notwithstanding that any license and other third party fees and like charges with respect to the Purchased Assets may be outstanding and due from Ashanti

Article 3 - Representations and Warranties

3.1

(a)

Ashanti hereby represents and warrants to Tanzanian as at the date hereof and the Closing Time as follows, and acknowledges that Tanzanian is relying upon the following representations and warranties in connection with the Acquisition:

(i)

Ashanti has the corporate power and capacity to enter into and to perform its obligations under this Agreement, the execution, delivery and 

- 6 –

performance of this Agreement has been duly authorized by all necessary corporate action on the part of Ashanti, and this Agreement has been duly executed and delivered by Ashanti as a valid and binding obligation of Ashanti enforceable in accordance with its terms;

(ii)

neither the execution and delivery of this Agreement nor the performance of its terms results in a breach of or creates a state of facts which after notice or lapse or time or both will result in a breach of or conflict with any of the terms, conditions or provisions of any agreement or other instrument to which Ashanti is a party or by which it is bound;

(iii)

Ashanti has not sold, assigned or otherwise transferred any of its rights, entitlements and/or interests owned or held under or pursuant to any one or more of the Option Agreement, the Benefits Agreement, the Kigosi Property or the Dongo Property;

(iv)

no person, firm, corporation or other entity has any agreement or option or any right or privilege (whether pre-emptive or contractual) capable of becoming an agreement or option or right or privilege to purchase all or any part of the Purchased Assets from Ashanti;

(v)

with respect to the Dongo Property:

(i)

Ashanti or, or together with, one or more of its Affiliates has a good and marketable title to and is the beneficial owner of an undivided one hundred percent (100%) interest in and to the Dongo Property;

(ii)

the obligations of the licensee under the license agreements constituting the Dongo Property have been fully complied with, and the Dongo Property is in good standing under the local, provincial/state and federal laws of Tanzania;

- 7 –

(iii)

the Dongo Property is free and clear of all liens, charges and encumbrances and is not subject to any right, claim or interest of any other person other than the local, provincial/state and/or federal government of Tanzania under any primary mining license;

(iv)

it has complied, and all work has been conducted in a manner in material compliance, with all local, provincial/state and federal laws in effect in Tanzania, and the Dongo Property has been duly and properly granted, issued and recorded in accordance with such laws, and that Tanzanian may enter in, under or upon the Dongo Property as primary mining licensee without making any payment to, and without accounting to or obtaining the permission of, any other person except pursuant to the license agreements constituting the Dongo Property in the ordinary course; and

(v)

there is no adverse claim or challenge against or to Ashanti’s ownership of or title to the Dongo Property, or any portion thereof, nor is there any basis therefor, and there are no outstanding agreements or options to acquire or purchase the Dongo Property or any portion thereof or interest therein and no person has any royalty or interest whatsoever in production or profits from the Dongo Property or any portion thereof;

(vi)

other than Ministerial Consent, no third party authorizations, consents, approvals, waivers or exemptions are required to be obtained by Ashanti in connection with the Acquisition;

(vii)

the Purchased Assets are owned by Ashanti free and clear of all claims, liens, encumbrances or other rights of third parties and all rentals applicable to the leased Assets have been paid to date and all license fees and other amounts payable to any level of government with respect to the Kigosi Property, the Dongo Property or any of the Purchased Assets have been paid in full;

- 8 –

(viii)

Appendix “H” fairly and accurately summarizes the Expenditures incurred to date by or on behalf of Ashanti in connection with the exploration and/or development of the Kigosi Property pursuant to the Option Agreement; and 

(ix)

all work on or with respect to the Kigosi Property conducted by Ashanti or its Affiliates or agents has been conducted in a manner in material compliance with all applicable federal, provincial/state and local laws, rules, orders and regulations.

(b)

Tanzanian acknowledges that the amount of US$75,000 due from Ashanti to Tanzanian under the Option Agreement has not been paid by Ashanti, and agrees that effective upon Closing, Ashanti shall be discharged from its obligation to make such payment.

3.2

Tanzanian represents and warrants to Ashanti as at the date hereof and the Closing Time as follows, and acknowledges that Ashanti is relying upon the following representations and warranties in connection with the Acquisition:

(i)

Tanzanian has the corporate power and capacity to enter into and to perform its obligations under this Agreement, the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of Tanzanian, and this Agreement has been duly executed and delivered by Tanzanian as a valid and binding obligation of Tanzanian enforceable in accordance with its terms;

(ii)

neither the execution and delivery of this Agreement nor the performance of its terms results in a breach of or creates a state of facts which after notice or lapse of time or both will result in a breach of or conflict with any of the terms, conditions or provisions any agreement or other instrument to which Tanzanian is a party or by which Tanzanian is bound;

- 9 –

(iii)

no authorizations, consents, approvals, waivers, exemptions or filings are required to be obtained or made by Tanzanian in connection with the Acquisition except the Stock Exchange Approvals;

(iv)

Tanzanian is a reporting issuer in the Canadian provinces of British Columbia, Alberta, and Ontario and reports as a foreign private issuer with the Securities and Exchange Commission (US), and to is (a) not in default of its obligations under the securities laws of any of the aforesaid jurisdictions and (b) in material compliance with the rules and policies of the AMEX and the TSX;

(v)

Tanzanian has been duly incorporated and is a valid and subsisting corporation under the laws of the Province of Alberta, Canada and is duly qualified to hold prospecting licenses, leases and other mining property and to carry on operations in Tanzania;

(vi)

the authorized capital of Tanzanian consists of 91,000,000 common shares without par value of which 86,241,075 common shares are validly issued and outstanding as at the date of execution of this Agreement;

(vii)

the common shares of Tanzanian are listed and posted for trading on the AMEX and the TSX;

(viii)

the issue and sale of the Common Shares by Tanzanian does not and will not conflict with, and does not and will not result in a breach of, any of the terms of Tanzanian’s incorporating documents or any agreements or instruments to which Tanzanian is a party; 

(ix)

Section 2.13 of Rule 45-106 made under the Securities Act (Ontario) provides for an exemption from the requirement to file a prospectus in connection with the sale of securities as consideration for the acquisition of mining properties or any interest therein, and the sale and delivery of the Common Shares to Ashanti are conditional upon such sale and delivery being exempt as at the date thereof from the requirement to file a prospectus pursuant to such Rule or other applicable statutory provision or regulation or pursuant to such 

- 10 –

exemption orders, consents or approvals as may be required to permit such sale without the requirement of filing a prospectus;

(x)

upon consummation of the Acquisition contemplated hereby Ashanti will have acquired from Tanzanian validly issued, fully paid and non-assessable Common Shares of Tanzanian, free and clear of all covenants, conditions, restrictions, voting trust arrangements, liens, charges, encumbrances, options and adverse claims or rights whatsoever on the part of Tanzanian (other than pursuant to this Agreement, as contemplated hereby, or pursuant to applicable securities and other laws);

(xi)

as at the date hereof, Tanzanian has made application for the requisite conditional listing approval of the TSX with respect to the proposed issuance to Ashanti of the Common Shares.  Subject to compliance with the terms of the Stock Exchange Approvals, as and when obtained: at the Closing Time, the Common Shares shall be conditionally listed and posted for trading through the facilities of the TSX and the AMEX and shall not, as at such time, be subject to any restrictions on trading through the facilities of the TSX or the AMEX other than as contemplated hereby, by the applicable rules, policies and by-laws of the TSX and the AMEX generally in effect, or by applicable securities and other laws.  The parties acknowledge that pursuant to applicable Canadian securities regulation the Common Shares shall be subject to a four-month hold period following issuance and shall not be freely tradable during such period for the purposes of such regulation except pursuant to a prospectus for which a valid receipt has been obtained from the Canadian provincial and/or territorial securities regulatory authorit(ies) having jurisdiction or pursuant to a valid exemption from such prospectus requirements; and

(xii)

the Common Shares to be issued to Ashanti shall rank pari passu/ equally in all respects to all other ordinary shares constituting Tanzanian’s capital.

3.3

All representations and warranties contained in Sections 3.1 and 3.2 shall survive Closing for a period of two years.

 

- 11 –

Article 4 - Closing

4.1

The closing (the “Closing”) of the Acquisition shall take place on September 30, 2006 or the date that is three Business Days following the date upon which the Stock Exchange Approvals have been obtained, whichever is later, at 10:00 a.m., or at such other time as the parties may agree upon (the “Closing Time”) at the offices of Borden Ladner Gervais LLP in Toronto, Canada.

4.2

At Closing, Tanzanian shall deliver to Ashanti:

(i)

an executed copy of this Agreement;

(ii)

a share certificate representing eight-ninths of the Common Shares in accordance with Section 2.2;

(iii)

a legal opinion of counsel to Tanzanian in respect of the Acquisition in form acceptable to in-house counsel to Ashanti, acting reasonably; and

(iv)

evidence of the receipt of the Stock Exchange Approvals.

4.3

At Closing, Ashanti shall deliver to Tanzanian:

(i)

an executed copy of this Agreement;

(ii)

if not previously delivered, all technical and laboratory reports, analyses, and other documentation representing Purchased Assets, whether in paper, digital or other form, together with documentation as shall effectively deliver title and possession to Tanzanian of all samples, whether in the laboratory, on site or in transit;

(iii)

transfers and assignments duly executed by Ashanti in registrable form, including registrable transfers, assignments, discharges or surrenders of interest under the Benefits Agreements, and of all of Ashanti’s right, title and interest to the Kigosi Property and the Dongo Property, and registrable bills of sale or comparable documentation with respect to all tangible Purchased Assets 

 

- 12 –

not physically delivered to Tanzanian prior to Closing, and without limiting the generality of the foregoing, in connection therewith, Ashanti covenants and agrees, on or before the date of Closing, to deliver to Tanzanian such recordable transfer or transfers, or such other instruments as may be required, of an undivided one hundred percent (100%) interest in and to the Dongo Property, which, together with the required evidence of Ministerial Consent, shall entitle Tanzanian to record such transfer documents in the appropriate office in Tanzania; and

(iv)

a legal opinion of in-house counsel to Ashanti in respect of the Acquisition in form acceptable to counsel to Tanzanian, acting reasonably.

4.4

Each of Tanzanian and Ashanti agrees to deliver or cause to be delivered to the other at the Closing Time or, where appropriate, subsequent thereto all necessary agreements of transfers, assignments and other documents necessary and reasonably required to effectively consummate the Acquisition all as contemplated in this Agreement and such other documents and instruments as the parties hereto and/or their counsel may reasonably request, including such certificates, instruments and other evidence establishing the due consummation of the Acquisition, the truth and accuracy of the representations and warranties of the parties made herein and other relevant matters.

Article 5 - General

5.1

All costs and expenses incurred in connection with this Agreement and the Acquisition shall be paid by the party incurring such costs.

5.2

The parties hereto agree that all announcements respecting the Acquisition shall require the prior approval of both parties, such approval not to be unreasonably withheld or delayed, and the parties acknowledge that each has statutory and regulatory disclosure responsibilities that must be complied with on a timely basis.

5.3

This Agreement constitutes the entire agreement between the parties with respect to the Acquisition and replaces for all purposes the First Letter Agreement and the Second Letter Agreement.  

 

- 13 –

5.4

This Agreement shall be governed by and construed in accordance with the laws of Ontario and the applicable federal laws of Canada.

5.5

No party shall have any claim or right of action arising from any undertaking representation or warranty not included in this document.

5.6

No failure by a party to enforce any provision of this Agreement shall constitute a waiver of such provision or affect in any way a party’s right to require performance of any such provision at any time in the future, nor shall the waiver of any subsequent breach nullify the effectiveness of the provision itself.

5.7

No agreement to vary, add to or cancel this Agreement shall be of any force or effect unless reduced to writing and signed by or on behalf of both parties to this Agreement.

5.8

No party may cede any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the other party, which consent shall not unreasonably be withheld.

5.9

Each party warrants that it is acting as a principal and not as an agent for an undisclosed principal.

5.10

The parties undertake at all times to do all such things, perform all such actions and take all such steps and to procure the doing of all such steps as may be open to them and necessary for or incidental to the fulfillment of the conditions precedent and the putting into effect or maintenance of the terms, conditions and/or import of this Agreement.

5.11

Cancellation of previous agreements between the parties.

The parties agree that effective upon Closing, the Royalty Agreement is and is deemed to be cancelled ab initio, the Option Agreement is terminated and that there are no outstanding obligations or amounts owing by either party to the other under either of the aforesaid agreements.  Tanzanian Royalty agrees to perform any and all ongoing obligations of AngloGold Ashanti under the Benefits Agreements.

 

- 14 –

Article 6 - Confidentiality

6.1

For the purpose of this clause the party disclosing the Confidential Information shall be referred to as “the disclosing party” and the party receiving the information shall be referred to as the “receiving party”.

6.2

“Confidential Information” shall for the purpose of this Agreement mean all information relating solely to the disclosing party provided by the disclosing party in connection with this Agreement, or relating to the parties’ negotiations in connection with this Agreement.  For greater certainty, any and all information provided by the disclosing party relating to either or both of the Kigosi Property or the Dongo Property that may be disclosed by the receiving party in connection with the exploration, development, management, ownership and/or operation of either or both of such properties shall not constitute Confidential Information for the purpose of this Agreement.

6.3

The parties agree that they will not during the course of their association with one another or thereafter disclose the Confidential Information to any third party for any reason or purpose whatsoever without the prior written consent of the disclosing party save in accordance with the provisions of this Agreement.

6.4

Notwithstanding anything to the contrary contained in this Agreement, the parties agree that the Confidential Information may be disclosed by the receiving party to its professional advisors, agents, and consultants provided that the receiving party takes whatever steps are reasonable and appropriate to ensure that such professional advisors, agents and consultants agree to abide by the terms of this clause to prevent the unauthorized disclosure of the Confidential Information to third parties.

6.5

The obligations of the parties pursuant to this clause shall not apply to information:

(i)

which is already known to the receiving party prior to the disclosure thereof by the disclosing party and in respect of which the receiving party has a free right of disposal at the date of receipt, or

(ii)

which is already public knowledge at the date of receipt by the receiving party, or

 

- 15 –

(iii)

which becomes public knowledge thereafter otherwise than through default on the part of the receiving party, its professional advisors, agents and consultants, or

(iv)

which the receiving party obtained from any third party with good legal title thereto and free right of disposal thereof, or

(v)

is required by the provisions of any law or statute or regulations, or during any court proceedings or by the rules or regulations of any recognized Stock Exchange where the party required to make the disclosure has taken all reasonable steps to oppose or prevent the disclosure of, and to limit, as far as is reasonably possible, the extent of such disclosure and has consulted with the other Party prior to making such disclosure.

6.6

News Release.   If either Tanzanian or Ashanti proposes to issue a news release in connection with this Agreement or the Acquisition, such party shall first provide to the other party a written draft of the proposed text of such release, and the parties shall use their best efforts to cooperate diligently and promptly in order to agree upon the final wording of such release without delay.  The aforesaid agreement of each party is subject to the disclosure obligations of such party under applicable securities law or other law or regulation, including the requirements of any stock exchange.

IN WITNESS WHEREOF the parties have executed this Agreement as of the date first above written. 

ASHANTI GOLDFTELDS (CAYMAN)

LIMITED

By: 

Authorized signature

c/s

 

 TANZANIAN ROYALTY

 

c/s

 

- 16 –

- 17 –

APPENDIX “A”

OPTION AGREEMENT

ggg

                       CORPORATE OFFICE:

       Suite 1730

                       355 Burrard Street

       Vancouver, B.C., Canada

       V6C 2G8

       Phone:(604) 669-5598

       Fax:    (604) 669-8915

       www.tanrange.com 

     

      EXPLORATION OFFICE:

      P.O. Box 10953

      Mwanza, Tanzania

      Phone : 255-28-250-2343

      Fax:      255-28-250-2305

July 21 , 2003

Ashanti Goldfields(Cayman) Limited

Ugland House,

PO Box 309 Georgetown,

Cayman Islands

Attn: 

Mr. Peter Cowley

Dear Sirs:

RE: 

Those agreements copied in Schedule “A’ attached hereto (“Underlying Agreements”) concerning those mineral properties located in Tanzania and more particularly described in Schedule “A” attached hereto (collectively the "Licenses") 

Further to our discussions, we confirm that Tan Range Exploration Corporation, Tanzanian American International Development Corporation 2000 Limited and Tancan Mining Company Limited (collectively, “Tan Range”) are prepared to grant you an option to acquire an interest in the Licenses, through the assumption of all rights and obligations under the Underlying Agreements, pursuant to the following terms and conditions of this letter agreement and in consideration of the premises and the mutual promises, covenants and agreements herein contained and the sum of $2 now paid by each party to the other (the receipt and sufficiency of which is hereby acknowledged): 

·

INTERPRETATION

·

Capitalized words and phrases shall have the meanings given thereto in Schedule “B” hereto.

·

REPRESENTATIONS AND WARRANTIES

·

Each party represents and warrants to the other that: 

(a)

it is a body corporate duly incorporated, organized and validly subsisting under the laws of its incorporating jurisdiction and it has full power and authority to carry on its business and to enter into this Agreement and any agreement or instrument referred to or contemplated by this Agreement; 

 

- 18 –

(b)

neither the execution and delivery of this Agreement, nor any of the agreements or transactions referred to herein or contemplated hereby, will conflict with, result in the breach of or accelerate the performance required by any agreement to which it is a party; and

(c)

the execution and delivery of this Agreement and the agreements and transactions contemplated hereby will not violate or result in the breach of the laws of any jurisdiction applicable or pertaining thereto or of its constating documents. 

·

Tan Range represents and warrants to the Optionee that:

(d)

the Property is properly and accurately described in Schedule “A” attached hereto;

(e)

Tan Range has the right to obtain or has been vested with:

(i)

an undivided 51% beneficial right, title and interest in and to License PL 2040/02 pursuant and subject to that Underlying Agreement with Tese Mining Co. Ltd. and F-B Minerals Company Limited, dated in the year 1998;

(ii)

an undivided 65% beneficial right, title and interest in and to License PL 1775/01 pursuant and subject to that Underlying Agreement with Bazo Enterprises & General Supplies, dated January 22, 1999;

(iii)

an undivided 65% beneficial right, title and interest in and to License PL 1796/01 pursuant and subject to that Underlying Agreement with Afrigold Limited, dated January 22, 1999;

(iv)

an undivided 65% beneficial right, title and interest in and to License PL 1400/99 pursuant and subject to that Underlying Agreement with Martedo Investment Limited, dated July 5, 1999;

(v)

an undivided 65% beneficial right, title and interest in and to License PL 1854/01 pursuant and subject to that Underlying Agreement with Abby’s Mining Co. Limited, dated in the month of March, 1999;

(vi)

an undivided 70% beneficial right, title and interest in and to License PL 1762/01 pursuant and subject to that Underlying Agreement with Charles S. Shumbi, dated June 29, 1999;

(vii)

an undivided 65% beneficial right, title and interest in and to License PL 1853/01 pursuant and subject to that Underlying Agreement with Sigo Gems Limited, dated June 27, 1999; and

(viii)

an undivided 90% beneficial right, title and interest in and to License PL 2019/02 pursuant to that Underlying Agreement with Mega Deposits Explorers, dated in the month of September, 2002;

(f)

Tan Range holds and owns a 100% beneficial and registered right, title and interest in and to License PL 1251/99;

 

- 19 –

(g)

other than Tan Range and the parties to the Underlying Agreements, no person has any proprietary or possessory right to the Property and no person is entitled to any royalty or other payment in the nature of rent or royalty on any Mineral Products; 

(h)

all taxes and other applicable payments, and all other acts, have been made and taken to maintain the Property in good standing, including those set forth in section 33 of The Mining Act, 1998 (Tanzania); 

(i)

to the best of its information, conditions on and relating to the Property are in compliance with all applicable laws, regulations and orders relating to environmental matters;

(j)

to the best of its information, there are no outstanding or threatened actions, investigations, suits or claims that would affect its right, title or interest in or to the Property; and

(k)

to the best of its information, the Property is free and clear of all recorded and unrecorded liens, charges and encumbrances.

·

The representations and warranties hereinbefore set out are conditions on which the parties have relied in entering into this Agreement and will survive for a period of one year after the Effective Date and each party will indemnify and save the other parties harmless from all loss, damage, costs, actions and suits arising out of or in connection with any breach of any representation or warranty made by it and contained in this Agreement. 

·

FIRST OPTION

·

Tan Range hereby gives and grants to the Optionee the sole and exclusive option (“Option”) to acquire a 100% right, title and interest in and to its right, title and interest in and to the Property, save and except for the Royalty. In order to exercise the Option, the Optionee shall:

(l)

make cash payments to Tan Range, or its nominee, as follows:

(i)

US$75,000 on or before the 30th day
 subsequent to the Effective Date;

(ii)

US$50,000 on or before that date which is 6
 months subsequent to the Effective Date;

(iii)

US$75,000 on or before that date which is 12 months subsequent to the Effective Date; 

(iv)

US$75,000 on or before that date which is 18  months subsequent to the Effective Date; 

(v)

US$75,000, plus US$25,000 for each  License held in excess of three, on or before that date which is 24 months subsequent to the Effective Date; 

(vi)

US$80,000, plus X, on or before that date which is 30 months  subsequent to the Effective Date; 

 

- 20 –

(vii)

US$100,000, plus X, on or before that date which is 36 months subsequent to the Effective Date; 

(viii)

US$120,000, plus X, on or before that date which is 42 months subsequent to the Effective Date; 

(ix)

US$140,000, plus X, on or before that date which is 48  months subsequent to the Effective Date; 

(x)

US$160,000, plus X, on or before that date which is 54 months subsequent to  the Effective Date; 

(xi)

US$180,000, plus X, on or before that date which is 60 months
 subsequent to the Effective Date;  

where X equals the number resulting when US$25,000 is multiplied by Y, where Y equals the positive number obtained, if any, when 2 is subtracted from the number of Licenses forming part of the Property as of the date of such payment, provided, however, that a cash payment may be delayed by the Optionee if Tan Range has not obtained the required Wildlife and Forestry permits for the Optionee to undertake prospecting and exploration works for the 6 month period following the date corresponding to such payment (in which event, such payment shall be made upon receipt or renewal of such permit or permits).

(m)

incur Expenditures aggregating US$800,000 on or before the second anniversary of the Effective Date, as follows: 

(i)

US$300,000 on or before the first anniversary of the Effective Date; and

(ii)

US$800,000 (in the aggregate) on or before the second anniversary of the Effective Date; 

(n)

complete the following Diamond Drilling Metres on or before the fifth anniversary of the Effective Date:

(i)

6,000 Diamond Drilling Metres on or before the third anniversary of the Effective Date;

(ii)

8,000 Diamond Drilling Metres (in the aggregate) on or before the fourth anniversary of the Effective Date; and

(iii)

10,000 Diamond Drilling Metres (in the aggregate) on or before the fifth anniversary of the Effective Date; and

(o)

complete a Bankable Feasibility Report, and make a positive production decision, on or before the fifth anniversary of the Effective Date;

provided, however, that the performance by the Optionee of Expenditure, Diamond Drilling Metre and Bankable Feasibility Report obligations within the periods set out in Sections 3.1(b), 3.1(c) and 3.1(d) shall be dependent upon Tan Range obtaining the required Wildlife and Forestry permits for the Optionee to undertake prospecting, exploration and development activities. Should Tan Range fail to secure such permits such that the Optionee is hindered in its prospecting, 

 

- 21 –

exploration or development activities hereunder, then such failure shall constitute an Event of Force Majeure for purposes of Section 8.8.

Should the Optionee complete a Bankable Feasibility Report and make a positive production decision prior to the fifth anniversary of the Effective Date, then the provisions of Sections 3.1(a), (b) and (c) shall cease to have further effect. 

·

EXPENDITURES

·

If the Optionee has not incurred the requisite Expenditures in Section 3.1(b) to maintain the Option in good standing during any period, then the Optionee may pay to Tan Range, within 10 days following the expiry of such period, the amount of the deficiency and such amount shall thereupon be deemed to have been Expenditures incurred by the Optionee during such period. Tan Range understands and agrees that the amounts to be spent within the periods referred to in Section 3.1(b) are cumulative amounts and that, accordingly, Expenditures incurred in a particular period in excess of the amount of Expenditures required to be incurred to maintain the Option in good standing during such period shall be carried over and included in the aggregate amount of Expenditures for the next subsequent period or periods, as the case may be.

·

Within 60 days following each anniversary of the Effective Date, the Optionee shall deliver to Tan Range a statement showing in reasonable detail the Expenditures incurred by the Optionee during the annual period just expired (ending the last anniversary of the Effective Date) and the aggregate Expenditures incurred to the end of such period and Tan Range shall have 45 days from the time of receipt of such statement to question the accuracy thereof in writing, failing which such statement shall be deemed to be correct and unimpeachable thereafter. If a statement delivered pursuant to this Section 4.2 is questioned by Tan Range: 

(p)

Tan Range shall have 60 days from the time of delivery of the statement to have the statement audited by a firm of international repute; and

(q)

the audited results shall be final and determinative of the amount of Expenditures incurred for the audited period; 

 

provided that if such audit discloses a
 deficiency in the amount of Expenditures required to be incurred to maintain its option in good standing, then the Optionee may pay to Tan Range the amount of such deficiency within 30 days following receipt of notice of such audited results, whereupon such amount shall be deemed to have been Expenditures incurred during the audited period. The costs of the audit shall be borne by the Optionee if
 the statement shows a deficiency of greater than 5%; otherwise the costs shall be borne by Tan Range.

·

MINING ACTIVITIES

·

Should the Optionee exercise the Option, then Tan Range shall be entitled to the Royalty on the terms and condition of the Royalty Agreement attached as Schedule “C,” to which they agree to be bound. The Royalty shall be in addition to all other compensation provided hereunder.

·

The Optionee shall have the absolute discretion as to the manner in which Commercial Production shall be achieved, provided, however, that if the Mine is producing at a rate of less than 50,000 Gold Ounces on or before the eighth anniversary of the Effective Date, then the Optionee shall pay to Tan Range a sum equal to US$X, where X equals the result when the Gold Ounces are deducted from 50,000 and then multiplied by US$25.

·

 The Optionee shall use its best endeavours to keep the Property free and clear of all third party miners.

 

- 22 –

·

OPERATIONS AND TERMINATION

·

During the Option Period, the following shall apply, subject to the laws of Tanzania and the terms and conditions of the Licenses:

(r)

The Optionee, along with its employees, agents and independent contractors, shall have the sole and exclusive right and option to:

(i)

enter upon the Property and have exclusive and quiet possession thereof;

(ii)

do such prospecting, exploration, development or other mining work thereon and thereunder as the Optionee in its sole discretion may consider advisable; and

(iii)

bring and erect upon the Property such facilities as the Optionee may consider advisable.

(s)

The Optionee shall:

(i)

conduct all work on or with respect to the Property in material compliance with all applicable federal, provincial and local laws, rules, orders and regulations, and indemnify and save Tan Range, as well as its directors, officers, employees and agents, harmless from any and all claims, suits or actions made or brought against them as a result of work done by the Optionee on or with respect to the Property;

(i)

provide Tan Range with a status report on a quarterly basis in respect of field operations, which report shall include all analyses, assay results and other factual information acquired or learned during such month;

(ii)

provide Tan Range with a technical report on a yearly basis within 60 days of each anniversary of the Effective Date, which report shall interpret all analyses, results and factual information acquired or learned during the annual period just expired (as of the last anniversary of the Effective Date);

(iii)

arrange for insurance in keeping with industry standards and, upon request, provide evidence of such insurance to Tan Range; 

(iv)

provide Tan Range with draft copies of all pre-feasibility, feasibility and other studies or reports prepared by or for the benefit of the Optionee; and

(v)

make available to Tan Range such information as may be necessary, from time to time, to enable Tan Range to meet with investors or potential investors to describe operations on the Property and all results therefrom.

(t)

Tan Range and its respective authorized agents:

(i)

may enter upon the Property to inspect the Property and activities conducted by the Optionee thereon, provided reasonable notice is first 

 

- 23 –

given to the Optionee, the Optionee is then active on the Property and such inspections occur during normal business hours;

(ii)

shall keep the Property in good standing by the doing of all work and the filing of all necessary reports and by the doing of all other acts and things and making all other payments which may be necessary in that regard (including the timely renewal or reapplication for all Licenses and other forms of mineral properties embraced by the Property as and when required), provided all necessary cooperation and assistance in doing so is provided by Ashanti and, where applicable, the License holder and all reasonable expenses borne by Tan Range in doing so are reimbursed by Ashanti promptly upon notice with reasonable evidence thereof;

(iii)

shall make available to the Optionee and its representatives all records and files in the possession of either of them relating to the Property, and permit the Optionee and its representatives at its own expense to take abstracts therefrom and make copies thereof; and

(iv)

shall promptly provide the Optionee with any and all notices and correspondence from government agencies in respect of the Property; and

(u)

Tan Range and the Optionee each shall use its best efforts to keep the Property free and clear of all liens, charges and encumbrances.

·

If any party (a “Defaulting Party”) is in default of any requirement herein set forth, including those set forth in Section 3.1, the party affected by such default shall give written notice to the Defaulting Party specifying the default and the Defaulting Party shall not lose any rights under this Agreement should it cure the default within 30 days after the receipt of such notice of default by the appropriate performance.  If the Defaulting Party fails within such period to cure any such default, then:

(a)

Prior to the exercise of the Option where such Defaulting Party is the Optionee, the Option shall terminate; and

(b)

In all other circumstances, the affected party shall be entitled to seek any remedy it may have on account of such default, including a claim for damages or injunctive relief. 

Notwithstanding the foregoing, the Optionee may terminate the Option at any time by giving 30 days advance notice in writing to Tan Range Subject to Clause 6.1.

·

In the event of the termination of the Option, the Optionee shall:

(c)

leave the Property in good standing for a minimum of three (3) months under all applicable legislation, free and clear of all liens, charges and encumbrances arising from this Agreement or its operations hereunder and in a safe and orderly condition;

(d)

deliver to Tan Range a comprehensive, interpretative report on all work carried out by the Optionee in a form in keeping with industry standards.

(e)

remove from the Property within three (3) months of the effective date of termination all facilities erected, installed or brought upon the Property by or at 

 

- 24 –

the instance of the Optionee, unless the consent of Tan Range is obtained to the contrary.

·

TRANSFERS AND ASSIGNMENTS 

·

No party (“Sellor”) shall sell, transfer, assign or otherwise dispose of (“Sell” or “Sale”) all or any portion of its right, title and interest in and to the Property or its rights and obligations under this Agreement (“Interest”), except:

(f)

Pursuant to an agreement in which the consideration is expressed in lawful money of Canada or the United States of America;

(g)

As a single transaction not directly or indirectly part of some other sale or purchase or agreement of any nature whatsoever; and,

(h)

Otherwise in accordance with this Section 7.

If the Sellor receives a bona fide offer from a third party to Sell all or any portion of its Interest (“Offered Interest”) and intends to accept such offer (the “Offer”), the Sellor, prior to accepting the Offer, shall give notice in writing to the other party (the “Potential Preemptor”) of the Offer together with a copy of the Offer, which shall be in written form (the “Notice’). A Notice shall be deemed to constitute an offer (“1st Offer”) by the Sellor to the Potential Preemptor to Sell the Offered Interest on the terms and conditions set out in the Notice and shall be open for acceptance by the Potential Preemptor for a period of 60 days from the date of its receipt by the Potential Preemptor. Such Notice shall clearly identify the person or person making the Offer and include such information as is known by the Sellor about such person or persons. If the Potential Preemptor gives notice to the Sellor electing to accept the 1st Offer within the 60 day period, such acceptance shall constitute a binding agreement of purchase and sale between the Sellor and the Potential Preemptor in respect of the Offered Interest on the terms and conditions set out in the Notice. If the Potential Preemptor does not accept the 1st Offer within the 60 day period, the Sellor may complete a sale and purchase of the Offered Interest to the person or persons making the Offer on the terms and conditions set out in the Notice and such sale and purchase shall be completed within 100 days of the expiration of the right of the Potential Preemptor to accept the 1st Offer provided for in this Section 7.1, failing which the Sellor must again comply with the provisions of this Section 7.1 in respect to a sale and purchase of the Offered Interest. Nothing in this Section 7 shall prevent a party from soliciting offers from third parties to purchase its Interest, provided, however, that no party shall make offers to third parties to Sell its Interest if the effect of such an offer would avoid the application of the provisions of this Section 7.1.

·

The Sellor may Sell all or any portion of its Interest to an Affiliate of the Sellor. For purposes of clarity, such sale, transfer, assignment or disposal is not subject to Section 7.1, provided, however, that if control over such Affiliate is immediately transferred to a third party or if such transaction is merely an attempt at avoiding the provisions of Section 7.1, then the provisions of Section 7.1 shall be deemed to apply to such transaction and such transaction shall have no effect, unless the Potential Preemptor subsequently declines to exercise its right to acquire the Offered Interest pursuant to Section 7.1.

·

Should the Sellor Sell only a portion of its Interest to a third party (“New Party”), the Sellor and the New Party shall be deemed to be one continuing party for purposes of this Agreement and the Sellor shall be deemed to be such continuing party and shall act as an agent for the New Party hereunder.

·

This Agreement shall be binding upon and enure to the benefit of the parties’ successors and permitted assignees, provided, however, that any assignment by the Sellor of all or any portion of its rights or obligations hereunder shall include a provision whereby the New Party agrees to abide by the terms of this Agreement, including the provision of this Section 7, and assume all of 

 

- 25 –

the liabilities and obligations of the Sellor under this Agreement, whether accruing before or becoming due after such assignment. The Sellor and New Party shall execute such agreements or documents as may be reasonably required in this regard by the other party to this Agreement. No assignment shall serve to release or discharge the Sellor from any of the said liabilities or obligations, unless all of the rights and obligations of the Sellor have been assigned to the New Party and the other party has released the Sellor.

·

Subsequent to the exercise of the Option, Section 7.1 shall no longer have effect.

·

Notwithstanding the foregoing part of this Section 7 and in addition to the other obligations imposed upon the Optionee pursuant to this Section 7, the Optionee shall not Sell all or any portion of its Interest to a New Party, unless the New Party passes the Financial Test. The “Financial Test” shall be passed by the New Party where its:

(i)

assets net of liabilities are in excess of C$25,000,000; and

(j)

gross revenues are in excess of C$25,000,000;

and the New Party is not then contemplating bankruptcy, liquidation, dividends in-kind or any other transaction or event that would substantially affect its ability to assume the obligations hereunder. 

·

For purposes of this Article 7, Tan Range Exploration Corporation, Tanzanian American International Development Corporation 2000 Limited and Tancan Mining Company Limited shall be treated as one party and Tan Range Exploration Corporation shall act as agent for the others.

·

It is understood and agreed that the transfer of control over the Optionee to a party that is not a shareholder of the Optionee at present (or does not have a sufficient shareholding to control the Optionee at present) will not constitute a Sale for purposes of this Article 7.

·

GENERAL

·

Upon the exercise of the Option, Tan Range shall execute such documents as may be reasonably necessary to transfer the Property into the name of the Optionee, subject to the Underlying Agreements. Prior to the exercise of the Option, the Optionee and Tan Range shall take all such actions as may be necessary to notify applicable governmental agencies of this Agreement, and register the agreement with all applicable registries, and all costs in respect thereof shall be borne by the Optionee and constitute Expenditures.

·

The Optionee shall have the right at any time to remove from this Agreement any portion of the Property by delivering a notice to Tan Range, which notice shall list the license or other mineral property that the Optionee wishes to remove (“Infertile Property”). Infertile Property shall be in good standing for at least three months beyond the date of such notice and free and clear of all liens, charges and encumbrances arising from the operations of the Optionee

·

No party shall disclose Confidential Information to a third party, unless the disclosure is believed to be required by law or a regulatory authority having jurisdiction or the disclosure is consented to by the other party (“Non-Disclosing Party”); consent of the Non-Disclosing Party shall not be unreasonably withheld or delayed. Where disclosure is believed to be required by law or a regulatory authority having jurisdiction, a copy of the information to be disclosed shall be provided to the Non-Disclosing Party in advance of its disclosure. Notwithstanding the foregoing:

(k)

either party may disclose Confidential Information to a bank or other financial institution for purposes of arranging financing or securing credit and to a third party that has 

 

- 26 –

evidenced a bona fide interest in acquiring all or a portion of such party’s right, title or interest in or to the Property, provided such third party agrees in writing to keep such information confidential for a period of time of not less than two years; and

(l)

it is understood and agreed that a party shall not be liable to the other party for the fraudulent or negligent disclosure of information by any of its employees, agents or contractors, provided that such party has taken reasonable steps to ensure the preservation of the confidential nature of such information.

·

The parties hereto agree that they and each of them shall execute all documents and do all acts and things within their respective powers to carry out and implement the provisions and intent of this Agreement.

·

Any notice, direction or other communication required, permitted or otherwise given hereunder (“Communication”) shall be in writing and shall be delivered or mailed as follows:

(m)

if to Tan Range:

Tan Range Exploration Corporation

Suite 1730 – 355 Burrard Street

Vancouver, B.C., V6C 2G8

Attention :

Marek Kreczmer, President

Telecopier:

604-669-8915

(n)

if to the Optionee:

Ashanti Goldfields Company Limited

Gold House

Patrice Lumumba Road

PO Box 2665

Accra

Ghana

Attention: Peter Cowley, Managing Director 

Telecopier:  +233-21-778-739 or 773-521

A Communication shall, if delivered, be deemed to have been given and received on the day it was delivered and, if mailed, be deemed to have been given and received on the fourth business day following the day of mailing, except in the event of a disruption of postal services in which event such notice shall be deemed to be received only when actually received. Any party may at any time give notice to the other parties of a change of address of the party giving such notice and, from and after the giving of such notice, the address or addresses therein specified (not to exceed two) shall be deemed to be the address of such party for the purpose of giving notice hereunder.

·

In this Agreement, headings have been inserted for ease of reference and may not accurately describe the provisions that follow them.  Consequently, headings shall not be used for purposes of interpreting this Agreement.

·

All references to monies hereunder are to funds of the United States of America.  All payments to be made to any party hereunder shall be mailed or delivered to such party at its address for notice purposes or to the account of such party at such bank or banks in Canada as such party may designate from time to time by notice. All payments to be made to Tan Range shall be made to Tan Range Exploration Corporation or its nominee.

 

- 27 –

·

Notwithstanding anything herein contained to the contrary, if either party is prevented from or delayed in performing any obligation under this Agreement by any cause, whether foreseeable or unforeseeable, beyond its reasonable control including without limiting the generality of the foregoing, acts of war or conditions arising out of or attributable to war, whether declared or undeclared, riot, civil strife, insurrection or rebellion, fire, explosion, earthquake, storm, flood or other adverse weather condition (an “Event of Force Majeure”), then the time for the observance of the condition or performance of the obligation in question shall be extended for a period equivalent to the period the Event of Force Majeure persists or remains in effect. A party claiming an Event of Force Majeure shall promptly notify the other party to that effect and shall take and continue to take all reasonable steps to remove or remedy the cause of the prevention or delay insofar as it is reasonably able to do so and as soon as possible.

·

This Agreement provides for an option only and nothing herein contained shall be construed as obligating the Optionee to do any acts or make any payment hereunder and any act or acts or payment or payments as shall be done or made hereunder shall not be construed as obligating the Optionee to do any further act or make any further payment.

·

No waiver of any breach of this Agreement shall be binding, unless evidenced in writing executed by the party against whom waiver is claimed.  Any waiver shall extend only to the particular breach so waived and shall not limit any rights with respect to any future breach. Time is of the essence of this Agreement.

·

This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof.  It supersedes and revokes all previous writings and all proposals, negotiations, representations, agreements, commitments and communications between the parties.  An amendment or variation of this Agreement shall only be binding upon a party if evidenced in writing and executed by that party.

·

ARBITRATION

·

Any dispute or conflict between the parties concerning this Agreement, including an question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the rules of the London Court of International Arbitration, which rules are deemed to be incorporated herein by reference. The number of arbitrators shall be one, the place of hearing shall be London, England and the language used in the proceedings shall be English.

·

Resorting to arbitration shall not prevent the parties from directly petitioning a Court having jurisdiction for injunctive relief or special recourses.

·

The arbitrator shall have the power to make determinations with respect to the costs, expenses and fees which it may incur.  The parties waive their right to contest any decision of the arbitration tribunal in this regard and agree to pay any amounts so determined upon demand.

·

Unless the arbitration award provides otherwise, the arbitration costs shall be shared equally by the parties. 

·

The terms and provisions of this Agreement shall be interpreted in accordance with the laws of England 

 

- 28 –

·

CONDITION PRECEDENT

·

Subject to Section 10.2, this Agreement shall be conditional upon and effective as of the date upon which all of the third parties to the Underlying Agreements execute the Ashanti Benefits Agreement in form and substance to that set forth in Schedule “D” hereto. 

·

Should Tan Range obtain some, but not all, of the requisite signatures contemplated in Section 10.1, then the parties hereto agree to negotiate in good faith for the purpose of modifying the terms hereof with a view to retaining the essence of the agreement contemplated between the parties.

If the foregoing terms and conditions, and the attached schedules which form a part of this Letter of Intent, accurately set out our mutual understandings, please indicate your acceptance by signing this letter where indicated below and returning to us the enclosed copy duly signed on or before 4:30 p.m. on  June 30 2003.

Yours very truly,

Tan Range Exploration Corporation

Per:

Signed by Marek Kreczmer

                                                                                                                    

Further agreed to by:

Tanzanian American International Development Corporation 2000 Limited

Per:

Signed by Joseph Kahama

                                                                                                                    

And

Tancan Mining Company Limited 

Per:

Signed by Marek Kreczmer

                                                                                                                    

Terms and conditions approved as of the date first above written.

Ashanti Goldfields (Cayman) Limited

Per:

Signed by Trevor S. Schultz

                                                                                                                    

 

- 29 –

SCHEDULE “A”

LICENSES AND UNDERLYING AGREEMENTS

						
	Book No.

	Current PL No.

	Previous PL No.

	License Owner

	Area

(km2)

	Interest earned at Vesting

	15

	2040/02

	936/98

	Tese Mining Co. Ltd.

	83.99

	51% Tanzam

	16

	1775/01

	947/98

	Bazo Enterprises & General Supplies

	39.77

	65% Tanzam

	17

	1796/01

	1223/99

	Afrigold Limited

	84.00

	65% Tanzam

	18

	 
	1400/99

	Martedo Investments Limited

	34.28

	65% Tanzam

	19

	 
	1251/99

	Tanzam 2000

	147.00

	100% Tanzam

	20

	1854/01

	1180/98

	Abby's Mining Co. Ltd.

	154.30

	65% Tanzam

	24

	1762/01

	1192/98

	Charles S. Shumbi

	34.57

	70% Tanzam

	45

	1853/01

	66/92

	Sigo Gems Limited

	22.00

	65% Tanzam

	125

	2019/02

	 
	Mega Deposit Explorers

	495.10

	90% Tancan

 

- 30 –

SCHEDULE “B”

DEFINED TERMS

“Affiliate” means, in respect of a party hereto, a corporation with which that party is affiliated within the meaning of section 1 of the Securities Act (Ontario).

“Agreement” means the letter agreement to which this Schedule is attached, including all written amendments and modifications hereof, and all schedules hereto.

“Bankable Feasibility Report” means a technical report to be prepared by the Optionee or a contractor or contractors employed by the Optionee for purposes of assessing the viability of establishing a Mine on the Property, which report shall be based upon the exploration and development work performed prior to the date of such report and which shall consider, in good faith, the following elements: 

(o)

the results of such exploration and development work, including analyses of a proposal for mining Mineral Products; proposed mining, milling and production rates; a proposal for placement of facilities; a proposal for waste treatment and handling; the estimated recoverable reserves of Mineral Products, and the estimated mineral composition and content thereof; a general conceptual analysis of the permitting and environmental liability implications of the proposal; appropriate metallurgical tests to project the efficiency of proposed extraction, recovery and, if applicable, processing techniques; and such other analyses as deemed appropriate by the Optionee; and

(p)

general estimates of capital costs for the development and start-up of a Mine and, if proposed, of a mill and other processing and ancillary facilities, which cost estimates shall include: 

(i)

reasonable estimates of all material expenditures required to purchase, construct and install all material, machinery, equipment and facilities and infrastructure (including contingencies) required to bring a Mine into Commercial Production; 

(ii)

reasonable estimates of material expenditures required to perform all other related work required to commence Commercial Production of Mineral Products (including reasonable estimates of working capital requirements, if any);

(iii)

reasonable estimates of all other material direct and indirect expenditures and general and administrative expenses that may be required for an evaluation of the proposed production levels; 

which capital cost estimates shall include a timing schedule showing the estimated time when all such material costs will likely be incurred; 

(iv)

a general estimate of the annual expenditures required for the first year of operations after completion of the capital program described above, and for subsequent years of operations, including estimates of annual production, administrative, operating and maintenance expenditures, taxes (other than income taxes), working capital funding requirements, royalties (if any), material equipment leasing or material supply contract 

 

- 31 –

expenditures, expansion or modification of capital requirements, work commitments, and all other anticipated material costs of operations, which estimate shall also include a general estimate of the number of employees required to conduct operations; 

(v)

a review of the nature, extent and rated capacity of the mining equipment and a proposed production schedule; 

(vi)

a development plan showing the proposed development of all ore bodies, with associated process facilities, waste disposal facilities, infrastructures and services and the timing thereof; and

(vii)

such other information as the Optionee deems appropriate.

(q)

“Commercial Production” shall be deemed to have commenced the first day following any period of 40 consecutive days during which ore has been processed in 30 of those 40 days at a rate of production equal to 66% of the initial design-rated capacity or, if no milling facilities are located on the Property, the first day following any period of 40 consecutive days during which ore has been produced from the Property on a reasonably regular basis for the purpose of earning profit.

(r)

“Confidential Information” means all information and data prepared by, provided to or acquired by a party, which is marked « Confidential » or is stated to be confidential or is by its nature intended to be confidential relating to the Property, and all analyses, compilations, data, studies, documents or other information derived therefrom, other than information or data which a party is able to establish: (i) was readily available to the public at the time such information was made available to that party; (ii) became readily available to the public after the time such information was made available to that party other than as a result of disclosure by a party in contravention of this Agreement; or (iii) became available to a party on a non-confidential basis from a third party provided such third party was not bound by confidentiality obligations relating thereto. 

(s)

“Construction” means every kind of work carried out in accordance with a Bankable Feasibility Report to prepare the Property for production.

(t)

“Diamond Drilling Metres” means metres of diamond drilling, provided, however, that where drilling has been completed using techniques other than diamond drilling then the aggregate Expenditures incurred in respect of such drilling shall be divided by the then per metre cost of diamond drilling in such region to arrive at the number of Diamond Drilling Metres thereby completed.

(u)

“Effective Date” means the date upon which the Agreement shall be effective pursuant to Article 10 thereof.

(v)

“Expenditures” shall include all expenditures and costs made or incurred by the Optionee or its Affiliates or assigns relating directly or indirectly to the Property, including the Overhead Fee, but excluding expenditures and costs relating to head office management, regional offices not solely dedicated to the Property, technology and facilities held by the Optionee for general application in respect of its projects, professional services (including legal, accounting and tax advisors) and other matters normally considered to be covered by an overhead 

 

- 32 –

fee, provided, however, that where Expenditures are charged by an Affiliate of the Optionee for services rendered such Expenditures shall not exceed the fair market value of the services rendered. 

(w)

(x)

“Option” has the meaning given thereto in Section 3.1.

(y)

“Option Period” means the period of time prior to the exercise of the Option.

(z)

“Optionee” means Ashanti Goldfields (Cayman) Limited.

(aa)

“Mine” means the workings established and assets acquired, including development headings, plant and concentrator installations, infrastructure, housing, airport and other facilities, in order to bring the Property into Commercial Production.

(bb)

“Mineral Products” means any and all ores, concentrates, dore and other products derived from the Property, directly or indirectly, whose value is principally dependent upon precious or base minerals, including gold, silver, platinum, palladium, nickel, copper and zinc, or diamonds.

(cc)

“Overhead Fee” means 10% of all Expenditures (other than the Overhead Fee) during the period prior to the completion of a Bankable Feasibility Report and 3% of all Expenditures (other than the Overhead Fee) thereafter.

(dd)

“Property” means the Licenses, along with all substitute and successor properties.

(ee)

“Royalty” has the meaning given thereto in Schedule “C” attached to the Agreement.

 

- 33 –

SCHEDULE “C”

ROYALTY AGREEMENT

THIS AGREEMENT, DATED JULY 21, 2003, 

BETWEEN:

TAN RANGE EXPLORATION CORPORATION

- and -

ASHANTI GOLDFIELDS (CAYMAN) LIMITED

WITNESSETH THAT:

AND WHEREAS [Tan Range] and Ashanti Goldfields (Cayman) Limited agreed to enter into this Agreement (the “Royalty Agreement”) upon the exercise of an option granted to the latter by [Tan Range];

NOW, THEREFORE, the parties do hereby agree, in consideration for the sum of $2 (the receipt and sufficiency of which is hereby acknowledged), as follows:

1.

Grant of Royalty:

Ashanti Goldfields (Cayman) Limited (referred to as the “Payor,” collectively with its successors or assignees) hereby agrees to grant, transfer and convey to Tan Range (referred to as the “Payee,” collectively with its successors or assignees) a royalty (the “Royalty”) in respect of all Mineral Products that may be produced from the [property description] (“Property”). It is the parties’ intention that the Royalty be construed as an interest in land.

2.

Definitions: 

The Royalty shall be calculated on a quarterly basis. The following words shall have the following meanings:

(i)

“Commercial Production” shall be deemed to have commenced the first day following any period of 40 consecutive days during which ore has been processed in 30 of those 40 days at a rate of production equal to 66% of the initial design-rated capacity or, if no milling facilities are located on the Property, the first day following any period of 40 consecutive days during which ore has been produced from the Property on a reasonably regular basis for the purpose of earning profit;

(ii)

“Fair market value” shall be determined by using, for gold, the quarterly average price of gold which shall be calculated by dividing the sum of all London Bullion Market Association P.M. Gold Fix prices reported for the month in question by the number of days for which such prices were quoted and, for silver, the monthly average price of silver, which shall be calculated by dividing the sum of all New York Commodity Exchange (“COMEX”) prices reported for silver quoted by and at the closing of COMEX for the month in question by a number of days for which such prices were quoted, less, in each case, an amount reasonably equivalent to the deductions permitted by section 

 

- 34 –

2(vii);  fair market value for all other Mineral Products shall be determined by reference to the monthly average price of such commodity as quoted on the London Metal Exchange or, should such exchange not provide a quotation for the relevant mineral product, a similarly transparent commodity market, less, in either case, an amount reasonably equivalent to the deductions permitted by section 2(vii);

(iii)

“Gross Revenue” shall mean the aggregate of the following amounts received in each monthly period from Sales:

(A)

all revenue received by the Payor in such period from Sales; and

(B)

any proceeds of insurance received in such period due to losses or damages in respect to Mineral Products;

provided, that no such revenues or proceeds arising from activities prior to the commencement of Commercial Production shall give rise to Gross Revenue;

(iv)

“Maintenance Shutdowns” shall mean any period of time during which production of Mineral Products has ceased from the Property due to maintenance, capital equipment alterations or other similar reasons, other than those periods of time exceeding 20 consecutive days of shutdown time;

(v)

“Mineral Products” shall mean any and all ores, concentrates, dore and other products derived from the Property, directly or indirectly, whose value is principally dependent upon precious or base minerals, including gold, silver, platinum, palladium, nickel, copper and zinc, or diamonds;

(vi)

“Net Smelter Returns” shall mean Gross Revenue less all Permissible Deductions in respect of Mineral Products derived from the Property;

(vii)

“Permissible Deductions” shall mean the aggregate of the following charges (to the extent not previously deducted or accrued in computing Gross Revenue) that are paid in each monthly period:

(A)

sales charges levied by any arms length sales agent in respect to the Sale of Mineral Products;

(B)

transportation costs incurred in respect to the transportation of Mineral Products from the Property to the place of beneficiation, processing or treatment including shipping, freight, handling and forwarding expenses;

(C)

all costs, expenses and charges of any nature whatsoever which are either paid or incurred by the Payor in connection with the refinement or beneficiation of Mineral Products after leaving the Property, including all weighing, sampling, assaying and representation costs, metal losses, any umpire charges and any penalties charged by the processor, refinery or smelter; 

(D)

all insurance costs in respect of Mineral Products; and

(E)

all government mineral royalties prescribed by law;

but,

(F)

excluding, for purposes of clarity, any milling costs and royalties or other payments payable to third parties;

 

- 35 –

provided that where a cost or expense otherwise constituting a Permissible Deduction is incurred by the Payor in a transaction with a party with whom it is not dealing at arm’s length (as that term is defined in the Income Tax Act (Canada)), such costs or expenses may be deducted, but only as to the lesser of the actual cost incurred by the Payor or the fair market value thereof considering the time of such transaction and under all the cir­cumstances thereof;

(viii)

“Property” shall include all forms of mineral title into which the Property may be converted by process of law or otherwise, including mining agreements and leases;

(ix)

“Royalty” shall mean the following percentage of Net Smelter Returns depending upon the applicable Gold Price:

Gold Price

Percentage of Net Smelter Returns Payable as Royalty

Below $250.0

0.5%

$250 - $269.9

0.7%

$270 - $289.9

0.8%

$290 - $309.9

0.9%

$310 - $329.9

1.0%

$330 - $339.9

1.1%

      

$340 - $349.9

1.2%

   

$350 - $359.9

1.3%

$360 - $369.9

1.4%

$370-  $379.9

1.5%

above $380.0

2.0%   and

(x)

“Sales” shall mean sales of Mineral Products, provided, however, that where Mineral Products have been produced from the Property and not sold within a period of 90 days then such Mineral Products will be deemed to have been sold and the Fair Market Value thereof shall be used for determining the Net Smelter Returns therefrom.

3.

Payment Timing. 

The Royalty shall be calculated and paid within 30 days after the end of each quarter. Settlement sheets, if any, and a statement setting forth calculations in sufficient detail to show how the payment was derived (the “Statement”) shall be submitted with the payment. In the event that final amounts required for the calculation of the Royalty are not available within the time period referred to in this section 3, then provisional amounts shall be established, the Royalty shall be paid on the basis of such provisional amounts and positive or negative adjustments shall be made to the payment within the following 30 days, as necessary. All Royalty payments shall be considered final and in full satisfaction of all obligations of the Payor with respect thereto, unless the Payee delivers to the Payor a written notice (the “Objection Notice”) describing and setting forth a specific objection to the calculation thereof within 360 days after receipt by the Payee of the Statement or revised Statement, as the case may be.  If the Payee objects to a particular Statement as herein provided, the Payee shall, for a period of 90 days after the Payor’s receipt of such Objection Notice, have the right, upon reasonable notice and at a reasonable time, to have the Payor’s accounts and records relating to the calculation of the Royalty in question audited by the auditors of the Payee.  If such audit determines that there has been a deficiency or an excess in the payment made to the Payee, such deficiency or excess will be resolved by adjusting the next quarterly Royalty payment(s) due hereunder.  The Payee shall pay all the costs and expenses of such audit unless a deficiency of 5% or more of the amount due is determined to exist; otherwise the Payor shall pay such costs. All books and records used and kept by the Payor to calculate the Royalty due hereunder shall be kept in accordance with industry standard accepted accounting principles.  Failure on the part of the Payee to make claim against the Payor for adjustment in such 360 day period by delivery of an 

 

- 36 –

Objection Notice shall conclusively establish the correctness and sufficiency of the Statement and Royalty payment for such month. 

4.

Right to Take in Kind:

The Payee may give notice to the Payor at any time indicating its desire to receive the Royalty in the form of one of the Mineral Products produced from the Property, provided:

(i)

the Payor does not have to comply with this provision for a period of 12 months;

(ii)

the Payor may stockpile Royalty taken in kind on the Property and, upon such stockpiling, title and risk shall transfer to the Payee; and

(iii)

the Payee shall bear all costs of insurance, storage, transportation, treatment and any other costs incurred subsequent to it taking title thereto.

5.

Registration Against Title: 

The Payor shall register the Royalty against title to the Property and the Payee shall execute any necessary documentation to this effect. The Payor shall ensure that notice of the Royalty is maintained against title to the Property at all times. Should the Payor fail to comply with the terms of this section 5, the Payee may register notice of the Royalty on title and all costs associated therewith, including costs in respect of legal counsel, shall be borne by the Payor.

6.

Reversionary Interest Upon Default: 

Should the Payor fail to pay the Royalty in accordance with this Royalty Agreement (“Default”), then the Payee may give notice to the Payor (“Default Notice”). Within 10 days of its receipt of a Default Notice, the Payor may deny the Default and refer the matter to its auditors for review or, alternatively, acknowledge the Default. Should the Payor refer a Default to its auditors, it shall provide them with all material information necessary to determine whether or not a Default has occurred. The auditors shall report on any Default within a period of 90 days. Should:

(i)

the Payor acknowledge a Default (or fail to respond to a Default Notice within the requisite 10 day period), but fail to correct the Default within a period of 30 days following a Default Notice;

(ii)

the auditors report that a Default has occurred, but the Payor fail to correct the Default within a period of 30 days following such report; or

(iii)

the auditors fail to report within a period of 90 days after being referred a Default and the Payor fail, within a further 30 days, to commence proceedings before a court for relief from such failure;

then the Payee may give notice (“Vesting Notice”) to the Payor that it wishes to have the Property transferred to it. In addition, the Payee shall have the right to give a Vesting Notice at any time after the thirtieth anniversary (30th) of this Royalty Agreement. Upon receipt of a Vesting Notice, the Payor and the Payee shall execute documentation granting, transferring and conveying all of the Payor’s right, title and interest in and to the Property to the Payee. The Payor hereby appoints the Payee its attorney, and grant the Payee all necessary powers of attorney, to effect such grant, transfer and conveyance on its behalf.  The Payee may forfeit and abandon its reversionary rights and interest upon notice to the Payor at any time.

7.

Failure to Produce:

Should the Payor commence Commercial Production, but then cease to produce Mineral Products from the Property for a cumulative period of time equal to 60 months, whether or not consecutive, but excluding Maintenance Shutdowns:

(i)

the Payor shall forfeit the Property to the Payee (at the Payee’s election); and

 

- 37 –

(ii)

the provisions of section 6 hereof shall apply mutatis mutandis with respect to such forfeiture.

8.

Hedging and Related Trading:

All profits and losses resulting from the Payor engaging in any commodity futures trading, option trading, metals trading, gold loans or any combination thereof, and any other hedging transactions with respect to Mineral Products (collectively, “Hedging Transactions”) are specifically excluded from calculations of the Royalty pursuant to this Royalty Agreement, it being understood by the parties that both the Payor and Payee may engage in speculative hedging trading activities for their own account.  All Hedging Transactions by the Payor and all profits or losses associated therewith, if any, shall be solely for the Payor’s account, irrespective of whether or not Mineral Products are delivered in fulfilment of such obligations.  When necessary to give effect to the provisions of this section 8, Gross Revenue from Mineral Products subject to Hedging Transactions by the Payor shall be determined by reference to the Fair Market Value of such Mineral Products.

9.

Commingling:

No commingling of the Mineral Products may occur with products produced from other properties without the consent of the Payee.

10.

Transfers of Property:

The Payor shall not grant, transfer or convey the whole or any portion of its right, title and interest in and to the Property (“Interest”) to a third party (“New Party”), unless the New Party enters into an agreement with the Payee and Payor agreeing to assume, jointly and severally with the Payor, the obligations of the Payor hereunder. Where the Payor is transferring all of its Interest to a New Party, the Payor may request that the Payee release the Payor from its obligations hereunder, which request may be unreasonably refused unless the New Party passes the Financial Test. The “Financial Test” shall be passed by the New Party where its:

(i)

assets net of liabilities are in excess of C$25,000,000; and

(ii)

gross revenues are in excess of C$25,000,000;

and the New Party is not then contemplating bankruptcy, liquidation, dividends in-kind or any other transaction or event that would substantially affect its ability to assume the obligations hereunder. In no event shall the Payor be granted a royalty or other interest in the nature of rent or royalty from the Property upon a grant, transfer or conveyance to a New Party. For purposes of clarity, neither party owes the other a right of first refusal or any other pre-emptive right and, subject to the terms of this Royalty Agreement, each is free to grant, transfer or convey all or any portion of its Interest, or its rights under this Royalty Agreement, to a third party. 

11.

Abandonment:

The Payor shall be obligated to maintain the Property in good standing. Should the Payor wish to abandon the Property or any portion thereof (the “Infertile Property”) it shall give notice to the Payee (“Notice of Infertility”) at least three (3) months prior to the date upon which the Infertile Property would cease to be in good standing. Upon receipt of a Notice of Infertility, the Payee may give notice to the Payor (“Notice of Transfer”) electing to have transferred to the Payee the Infertile Property that the Payor no longer wishes to retain. The Payee shall be responsible for all such transfer costs. Should the Payee fail to give a Notice of Transfer to the Payor within 30 days of its receipt of a Notice of Infertility or fail to pay for all transfer costs when required, then the Payor may abandon the Infertile Property without any liability whatsoever to the Payee. In the event that the Payor abandons Infertile Property and either the Payor or any of its affiliates subsequently acquires an interest, direct or indirect, in the Infertile Property, then the Payor shall be liable to the Payee hereunder as if the Infertile Property continued to form part of the Property hereunder.

12.

Notices:

    All notices, statements, reporting documents and other communications required, permitted or otherwise given hereunder (“Notices”) shall be deemed to have been 

 

- 38 –

properly given if delivered by registered mail, postage prepaid, to each of the parties at the following addresses:

Tan Range:

Suite 1730 – 355 Burrard Street

Vancouver, B.C., V6C 2G8

Attention :

Marek Kreczmer, President

Telecopier:

604-669-8915

Ashanti Goldfields Company Limited:

Gold House

Patrice Lumumba Road

PO Box 2665

Accra

Ghana

Attention: 

Peter Cowley, Managing Director 

Telecopier:  

233-21-778-739 or 773-521

or such other address or addresses (not to exceed two) as a party may in writing designate. Every Notice so given shall be deemed to be received on the fourth day of business following the date of mailing or the first day of business following the date of a facsimile transmission, provided that (i) in the event of an interruption of postal service at any time prior to the deemed receipt of any Notice sent by mail such Notice shall be deemed to be received on the fourth business day following the resumption of normal postal service, unless earlier delivered or actually received, and (ii) any Notice sent by facsimile transmission shall be followed within one day by a Notice sent by mail.

13.

Interpretation:

This Royalty Agreement shall be governed and interpreted in accordance with the laws of England and, subject to section 14, the parties hereby  submit to the jurisdiction of English Courts. In this Royalty Agreement, headings have been inserted for ease of reference and may not accurately describe the provisions that follow them.  Consequently, headings shall not be used for purposes of interpreting this Royalty Agreement. This Royalty Agreement constitutes the whole of this agreement concerning the payment of royalty to the Payee and replaces any prior agreements between the parties with respect thereto. There are no warranties, representations or other agreements between the parties in connection with Royalty, except as specifically set forth herein. In this Royalty Agreement, the singular encompasses the plural and vice versa, and the masculine encompasses the feminine and vice versa. 

14.

Arbitration:

The parties hereto shall endeavour to resolve any dispute or interpretative issue arising in relation to this Royalty Agreement amicably and without recourse to the courts. Subject to section 3 and failing such resolution, any dispute concerning this Royalty Agreement, including the failure to pay Royalty or the computation of Royalty, shall be determined by an independent technical arbitrator to be chosen by the President of the Institute of Materials, Minerals and Mining (IMMM) of the United Kingdom or his or her nominee. Such arbitrator shall be a person:

(i)

experienced in conducting arbitration proceedings; and

(ii)

familiar with mining concepts and processes.

The arbitrator shall be appointed within a period of 60 days of either party giving notice to the President of the IMMM, which notice shall be copied to the other party; failing which, either party may apply for the appointment of same. The arbitrator shall forthwith establish procedural rules to govern the conduct of the arbitration taking into account the significance of the issues in dispute and the intention of the parties in entering into this Royalty Agreement that arbitration be concluded as quickly as possible. In all cases, the arbitrator shall seek to resolve disputes within a period of 45 days.

 

- 39 –

15.

Diamonds:

For the purpose of this Royalty Agreement, “2% Gross Overriding Royalty” shall mean:

(i)

2% (two percent) of the gross sales revenue (i.e. gross proceeds) derived from the sale of diamonds produced or originating from the Property after sorting, cleaning and polishing; or,

(ii)

2% (two percent) of the diamonds produced from the Property after sorting, cleaning and polishing, which in kind delivery shall be representative of the sizes and colours of all diamonds produced during the relevant time period, which shall be confirmed by an independent party mutually agreed upon by the parties;

but not both.  The Payee shall be entitled to elect on or before November 30 of each applicable calendar year after the commencement of Commercial Production whether or not to receive payment of the 2% Gross Overriding Royalty pursuant to Section 15(i) or (ii); failing any such election, payment shall be made pursuant to Section 15(i).The provisions of Sections 3, 5, 6, 7, 8 and 9 of this Royalty Agreement shall apply mutatis mutandis with respect to the 2% Gross Overriding Royalty.

SIGNED, SEALED AND DELIVERED THIS 21ST DAY OF JULY, 2003.

Tan Range Exploration Corporation

Per:  

  c/s

Per:  

  c/s

Ashanti Goldfields(Cayman) Limited

Per:  

  c/s

Per:  

  c/s

 

- 40 –

SCHEDULE “D”

ASHANTI BENEFITS AGREEMENT

Whereas Tanzanian American International Development Corporation 2000 Limited (“Tanzam”) entered into an agreement (“1999 Agreement”) with [OWNER] on [DATE] for the purpose of advancing exploration, and potentially development and production, activities on [PL NO.] (“Property”);

And Whereas Tanzam undertook in the 1999 Agreement to seek potential joint venture associations that might accelerate such activities and has now advanced the Property to the point that Ashanti Goldfields (Cayman) Limited (“Ashanti”) is prepared to assist in such activities;

Now therefore the parties do hereby agree as follows:

1.

Tanzam and [Owner] agree to permit Ashanti to:

(a)

access, explore, develop and produce minerals from the Property, as determined by Ashanti in its sole discretion; and

(b)

obtain a 100% right, title and interest in and to the Property;

subject only to such terms and conditions as may be agreed upon by Ashanti and Tanzam.

2.

Tanzam shall remain responsible for maintaining the Property in good standing and preparing all reports required under the Mining Act, 1998, [as well as all annual payments required to be made to the [Owner] in the 1999 Agreement]. [Language required in Sigo agreement.]

3.

Should Tanzam become entitled to any royalty payments in respect of the Property, then Tanzam hereby agrees to share such payments with [Owner], as follows:

(a)

[65%] as to Tanzam; and

(b)

[35%] as to [Owner].

Tanzam shall have a 60 day right of first refusal in the event of any intended sale of such royalty interest by [Owner].

4.

The parties agree that the Property shall be governed by the terms of this Agreement without regard to any prior agreements so long as Ashanti (or any successor or assignee thereof) has any rights to or interest in the Property.

5.

Tanzanian law shall be applied and Tanzanian courts shall have jurisdiction with respect to this Ashanti Benefits Agreement.

DATED THIS ____________ DAY OF ___________________, 2003

Ashanti Goldfields (Cayman) Limited

[Owner]

__________________________________

__________________________________

per:_______________________________

 

- 41 –

Tanzanian American International Development Corporation 2000 Limited

__________________________________

per:_______________________________

 

 

- 42 –

APPENDIX “B”

KIGOSI AND DINGO PROPERTY

LICENSES AND UNDERLYING AGREEMENTS

						
	Book No.

	Current PL No.

	Previous PL No.

	License Owner

	Area

(km2)

	Interest to be earned at Vesting

	15

	2040/02

	936/98

	Tese Mining Co. Ltd.

	83.99

	51% Tanzam

	16

	1775/01

	947/98

	Bazo Enterprises & General Supplies

	39.77

	65% Tanzam

	17

	1796/01

	1223/99

	Afrigold Limited

	84.00

	65% Tanzam

	18

	 
	1400/99

	Martedo Investments Limited

	34.28

	65% Tanzam

	19

	 
	1251/99

	Tanzam 2000

	147.00

	100% Tanzam

	20

	1854/01

	1180/98

	Abby's Mining Co. Ltd.

	154.30

	65% Tanzam

	24

	1762/01

	1192/98

	Charles S. Shumbi

	34.57

	70% Tanzam

	45

	1853/01

	66/92

	Sigo Gems Limited

	22.00

	65% Tanzam

	125

	2019/02

	 
	Mega Deposit Explorers

	495.10

	90% Tancan

						
	ASHANTI EXPLORATION TANZANIA LIMITED-TAN RANGE JOINT VENTURE

	LICENCES

	Licence No

	Corner

	Latitude (deg min  sec)

	Longitude (deg min  sec)

	UTM_E

	UTM_N

	2449/2004

	A

	03 30 00

	31 30 00

	        333,375 

	    9,613,042 

	 
	B

	03 30 00

	31 35 00

	        342,634 

	    9,613,057 

	 
	C

	03 32 00

	31 35 00

	        342,639 

	    9,609,372 

	 
	D

	03 32 00

	31 30 00

	        333,381 

	    9,609,357 

	 
	 
	 
	 
	 
	 

	2191/2003

	A

	03 32 00

	31 30 00

	        333,381 

	    9,609,357 

	 
	B

	03 32 00 

	31 35 00

	        342,639 

	    9,609,372 

	 
	C

	03 30 00

	31 35 00

	        342,634 

	    9,613,057 

	 
	D

	03 30 00

	31 37 00

	        346,337 

	    9,613,062 

	 
	E

	03 33 00

	31 37 00

	        346,345 

	    9,607,535 

	 
	F

	03 33 00

	31 38 00

	        348,197 

	    9,607,537 

	 
	G

	03 37 00

	31 38 00

	        348,208 

	    9,600,167 

	 
	H

	03 37 00

	31 30 00

	        333,396 

	    9,600,144 

 

- 43 –

						
	 
	 
	 
	 
	 
	 

	2040/2002

	A

	 03 26 30 

	31 30 00

	        333,365 

	    9,619,492 

	 
	B

	03 26 30

	31 37 00

	        346,328 

	    9,619,511 

	 
	C

	03 30 00

	31 37 00

	        346,337 

	    9,613,062 

	 
	D

	03 30 00

	31 30 00

	        333,375 

	    9,613,042 

	 
	 
	 
	 
	 
	 

	1854/2001

	A

	03 33 50

	31 41 08

	        354,001 

	    9,606,010 

	 
	B

	03 33 50

	31 46 32

	        363,999 

	    9,606,024 

	 
	C

	03 37 30

	31 46 32

	        364,008 

	    9,599,268 

	 
	D

	03 37 30

	31 41 08

	        354,010 

	    9,599,254 

	 
	 
	 
	 
	 
	 

	1775/2001

	A

	03 24 00

	31 35 00

	        342,617 

	    9,624,113 

	 
	B

	03 24 00

	31 37 00

	        346,321 

	    9,624,118 

	 
	C

	03 26 30

	31 37 00

	        346,328 

	    9,619,511 

	 
	D

	03 26 30

	31 34 27

	        341,605 

	    9,619,505 

	 
	E

	03 25 00

	31 34 27

	        341,601 

	    9,622,268 

	 
	F

	03 25 00

	31 35 00

	        342,620 

	    9,622,270 

	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 

	1796/2001

	A

	03 24 00

	31 37 00

	        346,321 

	    9,624,118 

	 
	B

	03 24 00

	31 39 30

	        350,951 

	    9,624,125 

	 
	C

	03 27 00

	31 39 30

	        350,959 

	    9,618,597 

	 
	D

	03 27 00

	31 40 00

	        351,884 

	    9,618,598 

	 
	E

	03 28 36

	31 40 00

	        351,889 

	    9,615,650 

	 
	F

	03 28 36

	31 37 00

	        346,333 

	    9,615,642 

	 
	 
	 
	 
	 
	 

	1853/2001

	A

	03 24 00

	31 42 15

	        356,043 

	    9,624,131 

	 
	B

	03 24 00

	31 45 00

	        361,136 

	    9,624,138 

	 
	C

	03 25 00

	31 45 00

	        361,139 

	    9,621,989 

	 
	D

	03 25 00

	31 42 15

	        356,046 

	    9,621,982 

	 
	 
	 
	 
	 
	 

	1762/2001

	A

	03 25 10.0

	31 42 15

	        356,046 

	    9,621,982 

	 
	B

	03 25 10.0

	31 45 00

	        361,139 

	    9,621,989 

	 
	C

	03 27 00.0

	31 45 00

	        361,143 

	    9,618,611 

	 
	D

	03 27 00.0

	31 42 15

	        356,051 

	    9,618,604 

	 
	 
	 
	 
	 
	 

	3507/2005

	A

	03 37 30

	31 38 00

	        348,209 

	    9,599,246 

	 
	B

	03 37 30

	31 45 00

	        361,169 

	    9,599,264 

	 
	C

	03 45 00

	31 45 00

	        361,189 

	    9,585,446 

	 
	D

	03 45 00

	31 38 00

	        348,231 

	    9,585,426 

	 
	 
	 
	 
	 
	 

	3181/2005

	A

	03 24 00

	31 39 30

	        350,951 

	    9,624,125 

 

- 44 –

						
	 
	B

	03 24 00

	31 42 15

	        356,043 

	    9,624,131 

	 
	C

	03 25 10

	31 42 15

	        356,046 

	    9,621,982 

	 
	D

	03 25 10

	31 39 30

	        350,954 

	    9,621,975 

	 
	 
	 
	 
	 
	 

	2927/2004

	A

	03 25 00

	31 32 00

	        337,064 

	    9,622,262 

	 
	B

	03 25 00

	31 34 27

	        341,601 

	    9,622,268 

	 
	C

	03 26 30

	31 34 27

	        341,605 

	    9,619,505 

	 
	D

	03 26 30

	31 30 00

	        333,365 

	    9,619,492 

	 
	E

	03 25 27

	31 30 00

	        333,362 

	    9,621,427 

	 
	F

	03 25 27

	31 32 00

	        337,065 

	    9,621,432 

	 
	 
	 
	 
	 
	 

	3178/2005

	A

	03 32 30

	31 38 00

	        348,196 

	    9,608,459 

	 
	B

	03 32 30

	31 47 00

	        364,860 

	    9,608,482 

	 
	C

	03 37 30

	31 47 00

	        364,872 

	    9,599,269 

	 
	D

	03 37 30

	31 46 32

	        364,008 

	    9,599,268 

	 
	E

	03 33 50

	31 46 32

	        363,999 

	    9,606,024 

	 
	F

	03 33 50 

	31 41 08

	        354,001 

	    9,606,010 

	 
	G

	03 37 30

	31 41 08

	        354,010 

	    9,599,254 

	 
	H

	03 37 30

	31 38 00

	        348,209 

	    9,599,246 

	 
	 
	 
	 
	 
	 

	2925/2004

	A

	03 28 36

	31 37 00

	346333

	9615642

	 
	B

	03 28 36

	31 40 00

	351889

	9615650

	 
	C

	03 32 30

	31 40 00

	351899

	9608464

	 
	D

	03 32 30

	31 38 00

	348196

	9608459

	 
	E

	03 33 00

	31 38 00

	348197

	9607537

	 
	F

	03 33 00

	31 37 00

	346345

	9607535

	 
	 
	 
	 
	 
	 

	3070/2005

	A

	03 42 00

	31 33 00

	        338,965 

	    9,590,939 

	 
	B

	03 42 00

	31 38 00

	        348,222 

	    9,590,954 

	 
	C

	03 45 00

	31 38 00

	        348,231 

	    9,585,426 

	 
	D

	03 45 00

	32 00 00

	        388,954 

	    9,585,481 

	 
	E

	03 47 51

	32 00 00

	        388,960 

	    9,580,230 

	 
	F

	03 47 51

	31 33 00

	        338,983 

	    9,580,160 

	 
	 
	 
	 
	 
	 

	2833/2004

	A

	03 25 10

	31 39 30

	        350,954 

	    9,621,975 

	 
	B

	03 25 10

	31 45 00

	        356,046 

	    9,621,982 

	 
	C

	03 27 00

	31 45 00

	        356,051 

	    9,618,604 

	 
	D

	03 27 00

	31 39 30

	        350,959 

	    9,618,597 

 

- 45 –

APPENDIX “C”

BENEFITS AGREEMENTS

					
	

Parties

	

Effective Date of Agreement

	Copy Delivered to Tanzanian and Ashanti for Confirmation

	Ashanti Goldfields (Cayman) Limited

	Sigo Gems Limited

	Tanzanian American International Development Corporation 2000 Limited

	July 31, 2003

	[Yes]

	Ashanti Goldfields (Cayman) Limited

	Tese Mining Company Limited

and

F-B Minerals Company Limited

	Tanzanian American International Development Corporation 2000 Limited

	July 31, 2003

	Y/N

	Ashanti Goldfields (Cayman) Limited

	Martedo Investments Limited

	Tanzanian American International Development Corporation 2000 Limited

	Aug. 1, 2003

	Y/N

	Ashanti Goldfields (Cayman) Limited

	Afrigold Limited

	Tanzanian American International Development Corporation 2000 Limited

	Aug. 1, 2003

	Y/N

	Ashanti Goldfields (Cayman) Limited

	Mega Deposits Explorers (T) Limited

	Tancan Mining Company Limited

	Aug. 2, 2003

	Y/N

	Ashanti Goldfields (Cayman) Limited

	Ms. Charles S. Shumbi

	 
	Aug. 2, 2003

	Y/N

	Ashanti Goldfields (Cayman) Limited

	Abbys Mining Co. Limited

	Tanzanian American International Development Corporation 2000 Limited

	Aug. 2, 2003

	Y/N

	Ashanti Goldfields (Cayman) Limited

	Bazo Enterprises and General Supplies

	Tanzanian American International Development Corporation 2000 Limited

	Aug. 4, 2003

	Y/N

 

- 46 –

APPENDIX “D1”

FIRST LETTER AGREEMENT

 

- 47 –

- 48 –

APPENDIX “D2”

SECOND LETTER AGREEMENT

 

- 49 –

- 50 –

APPENDIX “E”

KIGOSI AND DONGO ASSETS

					
	ITEM

	QUANTITY

	 
	ITEM

	QUANTITY

	WATER TANK 

	 
	 
	r) Buckets

	4 pcs

	a) sim tank 1000 lit

	1

	 
	s) Stove

	1 pc

	b) sim tank 500 lit

	1

	 
	t) Lantern

	1 pc

	c) steel tank 2000 lit

	1

	 
	u) Folks

	15

	TENT

	 
	 
	v)Kettle

	2

	a) Big size 5*5

	3 pcs (new)

	 
	MESS

	 

	b) Small size 2.5*2.5

	2 pcs (new)

	 
	a) plastic chair

	17 pcs

	c) Medium size 3m*3m 

	1pc  (new)

	 
	b) Dinning table

	2 pcs

	d) Medium size 3m*3m

	1pc  (old)

	 
	c) Water filter

	1 pc

	e) Top canvas

	5 pcs

	 
	d) TV set

	1 set

	OFFICE.

	 
	 
	e) Satellite Dish (DSTV)

	1pc

	 a) Table 

	2pcs

	 
	f) Voltage regulator

	1 pc

	b) Table (metalux)

	1pc

	 
	g) Deep freezer

	1 pc

	c) shelf 

	1 pc

	 
	h) Medicine shelf

	1 pc

	d) Sample book

	24 pcs

	 
	i) Fire extinguisher

	1 pc

	e) Sample bags (plastic)

	1100pcs

	 
	j) Gas cylinder

	2 pcs

	f ) Sample bags (cotton) 

	577pcs

	 
	 COMMUNICATION

	 

	g) Boots

	12 pairs

	 
	a) Motorola hand set

	2 pcs

	KITCHEN

	 
	 
	b) Barret 530 VHF

	1 set

	a) Gas cooker 4 plate

	1 pc

	 
	c) Solar panel

	1 set

	b) Gas cooker (small )

	1 pc

	 
	d) Solar battery 12 vlt

	1 pc

	c) Plate

	34 pcs

	 
	e) Power supply

	1 pc

	d ) Bowl ( plastic) 

	3 pcs

	 
	f) Repeater GR 500 Motorola

	1 pc

	e) Tea cup

	23 pcs

	 
	STORE

	 

	f) Thermos

	2 pcs

	 
	a) Helmet

	15 pcs

	g) Table knives

	19 pcs

	 
	b) pick

	18 pcs

	h) Table spoons

	21 pcs

	 
	c) Shovel

	19 pcs

	i) Washing basin 

	2 pcs

	 
	d) Slasher 

	7 pcs

	j) Glass

	7 pcs

	 
	e) Ranging pole

	6 pcs

	k) Pots

	9 pcs

	 
	f) Hose pipe ( for water pump)

	2 pcs 

	l) Hot pots

	2 pcs

	 
	g) Blankets

	6 pcs

	m) Bowl ( steel)

	13 pcs

	 
	h)Pillow

	8 pcs

	n) Field chair

	2 pcs

	 
	i) Pillow case

	8pcs

	o) Food container

	10 pcs

	 
	j) Mattress ( tan foam)

	3 (new)

	p) kitchen knife

	1 pc

	 
	k) Mattress ( banko)

	19 pcs

	q)Pot cover 

	7 pcs

	 
	l)Generator

	1 set

	 
	 
	 
	m) Empty drum

	3 pcs

	 
	 
	 
	n) Plastic containers 60 lit

	3

	 
	 
	 
	o) plastic containers 20 lit

	6

LIST OF GEOLOGICAL DATABASE

1. GEOPHYSICAL DATA

 

- 51 –

- UTS XCALIBUR AIRBORNE SURVEY DATA

2. GEOCHEMICAL DATA

- SAMPLING DATA

- KIGOSI NORTH ALL ASSAYS

- KIGOSI NORTH ALL ASSAYS_LAB FILES

3. GEOLOGY SHAPEFILES

4. LICENCE DATA (SEE ATTACHED FILE ASH-TAN LICENCES_ POSITION.XLS)

5. MAPS

- BLOCK 1 INTERPRETATIVE GEOLOGY

- BLOCK 1 REGOLITH

- BLOCK 2 GEOLOGY

- BLOCK 2 REGOLITH

- BLOCK 1&2 GEOLOGY

- BLOCK I & 2 SAMPLING

- KIGOSI NORTH LOCATION 

- KIGOSI NORTH MAPPED GEOLOGY

- LUWAHIKA GEOLOGY

- IGUNDA GEOLOGY

- PLANNED RC HOLES

- HIGH RESOLUTION AIRBORNE MAGNETIC SURVEY

 

- 52 –

APPENDIX “F”

DETAILS OF EXPENDITURES ON KIGOSI PROPERTY

					
	 
	 
	 
	 

	 
	 
	 
	 

	KIGOSI EXPENDITURES 2004-2005

	 
	 
	 
	 

	ITEM 

	2004

	2005

	TOTAL 

	SALARIES

	                    80,928 

	                           82,343 

	 

	RECRUITMENT & TRAINING

	                         159 

	                                  -   

	 

	TRAVEL & SUBSISTENCE

	                    12,044 

	                             7,740 

	 

	OFFICE AND GUEST HOUSE 

	                    16,116 

	                             8,411 

	 

	VEHICLES

	                    48,502 

	                           12,638 

	 

	COMMUNICATION (HF-VHF RADIO)

	                    31,422 

	                             7,528 

	 

	FIELD CAMP SUPPLIES

	                      9,573 

	                           12,297 

	 

	COMPUTERS & OFFICE EQUIPMENT

	                      4,862 

	                             1,054 

	 

	GEOPHYSICS (AIRBORNE SURVEY)

	                    96,495 

	                                  -   

	 

	ASSAYING AND CONSUMABLES

	                    15,142 

	                           77,122 

	 

	DGPS SURVEY GRIDS AND SAMPLE LOCATION

	                      1,261 

	                                  -   

	 

	GEOLOGICAL SUPPLIES AND EQUIPMENT

	                         439 

	                             4,024 

	 

	OPTION FEES & CHARGES

	                    78,922 

	                           54,735 

	 

	LICENSE RENEWALS

	                           -   

	                           36,415 

	 

	LONG-TERM ACCESS (WILDLIFE PERMIT)

	                           -   

	                          105,000 

	 

	FINANCE CHARGES

	                             4 

	                                965 

	 

	TOTAL

	                   395,870 

	                          410,271 

	             806,141 

	 
	 
	 
	 

 

- 53 –

APPENDIX “G”

DONGO PROPERTY LICENCES

					
	Licence No

	Corner

	Latitude (deg min  sec)

	Longitude (deg min  sec)

	Area (km2) 

	3438/2005

	A

	05 48 10

	36 40 30

	 

	 
	B

	05 48 10

	36 47 45

	 

	 
	C

	05 55 00

	36 47 45 

	 

	 
	D

	05 55 00

	36 47 00

	 

	 
	E

	06 00 00 

	36 47 00 

	 

	 
	F 

	06 00 00 

	36 40 30

	 

	 
	 
	 
	TOTAL 

	280.30

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00114-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00114-of-00352.parquet"}]]