TRX TRX Gold Corporation

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

__________________ _______

FORM 20-F

_________________________

q

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

x

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

For the fiscal year ended

August 31, 2016

q

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

For the transition period from

 to

q

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

Date of event requiring this shell company report

Commission File Number 001-32500

TANZANIAN ROYALTY EXPLORATION CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

ALBERTA, CANADA

(Jurisdiction of Incorporation or Organization)

Bay Adelaide Centre, East Tower

22 Adelaide Street West, Suite 3400

Toronto, Ontario

M5H 4E3

(Address of Principal Executive Offices)

James Sinclair

Chief Executive Officer

Tanzanian Royalty Exploration Corporation

Bay Adelaide Centre, East Tower

22 Adelaide Street West, Suite 3400

Toronto, Ontario

M5H 4E3

Telephone:  1.844.364.1830

Fax: 860.799.0350

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

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

Common Shares, without Par Value

NYSE MKT LLC

(Title of Class)

Name of Each Exchange on Which Registered

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

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

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Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:  107,853,554.

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

q  Yes

x  No

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

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

x   Yes

q   No

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

q   Yes

q   No

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

Large accelerated filer

q

Accelerated filer

q

Non-accelerated filer

x

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

U.S. GAAP   q

International Financial Reporting Standards as issued by the International Accounting Standards Board   x

Other   q

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

Item 17   q

Item 18   q

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

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TABLE OF CONTENTS

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

1

Currency

1

Foreign Private Issuer Filings

1

Glossary o f Technical Terms

2

PART I

Item 1.

Identity of Directors, Senior Management and Advisers

7

Item 2.

Offer Statistics and Expected Timetable

7

Item 3.

Key Information

7

A.

Selected Financial Data

7

B.

Capitalization and Indebtedness

8

C.

Reas ons for the Offer and Use of Proceeds

9

D.

Risk Factors

9

Item 4.

Information on the Company

17

A.

History and Devel opment of the Company

17

B.

Business O verview

18

Plan of Ope rations

18

Governmental Re gulations

36

C.

Organ izational Structure

37

D.

Prope rt y , Plant and Equipment

38

Buckreef Property

38

Kigosi Property

46

Lunguya Property

52

Itetemia Property

55

Luhala Property

59

Item 4.A.

Unresolved Staff Comments

62

Item 5.

Operati n g and Fina n cial R eview and Prospects

62

A.

Operati ng Re sults

64

B.

Liquidity and Ca pita l R esources

72

C.

Research and Devel opment, Patent s and License, etc.

75

D.

Trend Information

75

E.

Off Balance Sheet Arrangements

75

F.

Tabular Disclosu re of Contractual Obligations

75

Item 6.  

Directors, Senior Management and Employees

75

A.

Directors and Seni or Management

75

B.

Executiv e Compensat ion

80

C.

Boar d Practices

87

D.

Emp lo yees

92

E.

Share O wnership

92

Item 7.

Major Shareho lders and Rela ted Party Transactions

93

A.

Major Shareholders

93

B.

Related Party T ransactions

94

C.

Interes ts of E xperts and Counsel

95

Item 8.

Financial St atements

95

A.

Co nsolidated Stat ements and Other Financial Information

95

B.

Sign if icant Changes

96

Item 9.

The Offering and Listing

96

A.

Offering and Listing Details

96

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- ii -

B.

Plan of Distribution

97

C.

Ma rkets

97

D.

Selling Shareh olders

97

E.

Dilution

97

F.

Expens es of the Issue

97

Item 10.

Addition al Information

97

A.

Shar e Capital

97

B.

Articles o f Ass ociation and Bylaws

98

C.

Materia l Cont racts

102

D.

Exchange Con trols

103

E.

Tax a tion

105

F.

Dividends a nd Pa ying Agents

111

G.

Statement by Experts

112

H.

Documents on Display

112

I.

Subsidi ary I nformation

1126

Item 11.

Quantitative and Qualitative Disclosures About Market Risk

112

Item 12.

Description of Secu rities Oth e r than Equity Securities

113

PART II

Item 13.

Defaults, Divid end Arrears and Delinquencies

113

Item 14.

Material Modifications to the Rights of Security Holders and Use of Proceeds

113

Item 15.

Controls a nd Procedures

114

Item 16 A.

Audit Co m mittee Financial Expert

114

Item 16 B.

Code of Ethics

115

Item 16 C.

Principal Acco u ntant Fees and Services

115

Item 16 D.

Exemptions from the Listing Stand ards for Audit Committees

115

Item 16 E.

Purchase s of Equity Securities by the Is suer and Affiliated Pur chasers

115

Item 16 F.

Change in Registrant's Certifying Accountant

115

Item 16 G.

Cor po r a t e G overnance

116

Item 16 H

Mine Safety Disclosure

116

P ART III

Item 17.

Financial Statements

116

Item 18.

Financial Statements

116

Item 19.

Exhibits

117

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

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

The “Company” advises U.S. investors that while the terms “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources” are recognized and required by Canadian securities regulations, the SEC and its regulations do not recognize them.  U.S. investors are cautioned not to assume that any part or all of mineral resources in these categories will ever be converted into mineral reserves.  Further, these terms are not defined terms under SEC Industry Guide 7 and are not recognized in reports and registration statements filed with the SEC.  In addition, National Instrument 43-101, “Standards of Disclosure for Mineral Projects”, as adopted by the Canadian Securities Administrators (“NI 43-101”) permits disclosure of “contained ounces” of mineralization. In contrast, the SEC only permits issuers to report mineralization as in place tonnage and grade without reference to unit measures.

For clarification, the Company has no properties that contain “mineral reserves” as defined by either the SEC or Canadian securities regulations.

Currency

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

Foreign Private Issuer Filings

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

1

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Glossary of Technical Terms

2

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3

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4

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5

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6

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PART I

Item 1.

Identity of Directors, Senior Management and Advisers

A.

Directors and Senior Management :

Not applicable.

B.

Advisers

Not applicable.

Item 2.

Offer Statistics and Expected Timetable

Not applicable.

Item 3.

Key Information

A.

Selected Financial Data

The audited financial statements for the Company’s fiscal years ended August 31, 2016, 2015, 2014, 2013 and 2012 are prepared in accordance with International Financial Reporting Standards (“ IFRS ”) as issued by the International Accounting Standards Board.  The following selected financial data is based on financial statements prepared in accordance with IFRS and is presented for the five most recent financial years.  Unless stated otherwise, reference to dollar amounts shall mean Canadian dollars.

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

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

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

	2016($)	2015 ($)	2014 ($)	2013 ($)	2012 ($)
Operations:
Revenues	$              --	$              --	$              --	$              --	$               -
Net loss	(12,781,902)	(8,995,697)	(2,416,265)	(3,225,998)	(8,897,843)
Basic and diluted loss per share	(0.12)	(0.09)	(0.02)	(0.03)	(0.09)

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Exchange Rates

The following table sets forth information as to the period end, average, the high and the low exchange rate for Canadian Dollars (“ CDN ”) and U.S. Dollars for the periods indicated based on the noon buying rate in New York City for cable transfers in Canadian Dollars as certified for customs purposes by the Federal Reserve Bank of New York (Canadian dollar = US$1):

Year Ended: August 31	Average	Period End	High	Low
2016	1.3261	1.3122	1.4592	1.2544
2015	1.2109	1.3223	1.3301	1.0862
2014	1.0777	1.0858	1.1251	1.0237
2013	1.011	1.0554	1.0578	0.971
2012	1.008	0.9862	1.0605	0.9751

The following table sets forth the high and low exchange rate for the past six months.  As of August 31, 2016, the exchange rate was CDN $1.3122 for each US$1.00.

Month	High	Low
October 2016	1.3403	1.3105
September 2016	1.3247	1.2843
August 2016	1.3179	1.2777
July 2016	1.3224	1.2897
June 2016	1.3089	1.2694
May 2016	1.3155	1.2544

B.

Capitalization and Indebtedness

Not applicable.

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C.

Reasons for the Offer and Use of Proceeds

Not applicable.

D.

Risk Factors

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

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

Risks relating to the Company

Risks Relating to the Company

The Company has decided to begin production at the Buckreef Project without preparing a pre-feasibility study or bankable feasibility study which may subject it to more risks.

The Company has decided to begin production at the Buckreef Project without preparing a pre-feasibility study or bankable feasibility study, which is a more common practice within the mining industry, and therefore may subject it to more business risks.  The Company’s decision to begin production at the Buckreef Project was based on limited prior historical information, drilling programs, modeling, and positive metallurgical testing.  Therefore, its decision to begin production at the Buckreef Project was based on limited information which may or may not be representative of information regarding the mine had it otherwise prepared a more comprehensive study.  In addition, basing its decision to begin production on limited information may make the Company susceptible to risks, including:

·

certain difficulties in obtaining expected metallurgical recoveries when scaling up to production scale;

·

the preliminary nature of mine plans and processing concepts and applying them to full scale production;

·

determining operating/capital costs estimates and possible variance associated with constructing, commissioning and operating the Buckreef facilities based on limited information;

·

that metallurgical testing is in development and may not be representative of results of the Buckreef Project; and

9

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·

that the Company may underestimate capital and operating costs without a comprehensive bankable feasibility study.

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

The Company has not been profitable since its inception.  For the fiscal year ended August 31, 2016, the Company had a net loss of $12,781,902 and an accumulated deficit on August 31, 2016 of $90,600,819.  The Company has never generated revenues and does not expect to generate revenues from operations until one or more of its properties are placed in production.  There is a risk that none of the Company’s properties will be placed in production.

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

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

The Company has uninsurable risks.

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

The Company depends on key management personnel.

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

The Company will need additional capital.

As at August 31, 2016, the Company had cash and cash equivalents of $84,913 and working capital deficiency of $11,836,214.  However, the Company will continue to incur exploration costs to fund its plan of operations and may need to raise additional capital.  Ultimately, the Company’s ability to continue its exploration activities depends in part on the Company’s ability to commence operations and generate revenues or to obtain financing through joint ventures, debt financing, equity financing, production sharing agreements or some combination of these or other means.  Further the raising of additional capital by the Company may dilute existing shareholders.

Substantial doubt about the Company’s ability to continue as a going concern.

Based on the Company’s current funding sources and taking into account the working capital position and capital requirements at August 31, 2016, these factors indicate the existence of a material uncertainty that

10

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raises substantial doubt about the Company’s ability to continue as a going concern and is dependent on the Company raising additional debt or equity financing. The Company must obtain additional funding in 2017 in order to continue development and construction of the Buckreef Project. Furthermore, the Company is currently negotiating project financing terms with a number of lending institutions, which the Company believes will result in the Company obtaining the project financing required to fund the construction of the Buckreef Project. However there is no assurance that such additional funding and/or project financing will be obtained or obtained on commercially favourable terms.

The Company has no cash flow from operations and has historically depended on the proceeds from equity financings for its operations.

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

The Company’s former auditor communicated deficiencies to its Audit Committee regarding the 2015 impairment assessment and financial statement closing process.

In connection with the audit investigation of the Company’s 2015 financial statements, the Company’s former auditor identified to the Audit Committee significant deficiencies in the impairment assessment and financial statement closing process.  The Audit Committee considered the auditors’ position and concluded there was no deficiency in the impairment assessment and that the financial statement closing process for 2015 was consistent with prior year audits, and the audit opinion delivered by the auditor on the 2015 financial statements was not qualified.  

The Company may be characterized as a passive foreign investment company.

The Company may be characterized as a passive foreign investment company (“ PFIC ”). If it is determined to be a PFIC, its U.S. shareholders may suffer adverse tax consequences.  Under the PFIC rules, for any taxable year that the Company’s passive income or its assets that produce passive income exceed specified levels, it will be characterized as a PFIC for U.S. federal income tax purposes.  This characterization could result in adverse U.S. tax consequences for the U.S. shareholders, which may include having certain distributions on the Company’s common shares and gains realized on the sale of its common shares treated as ordinary income, rather than as capital gains income, and having potentially punitive interest charges apply to the proceeds of sales of the Company’s common shares and certain distributions.

Certain elections may be made to reduce or eliminate the adverse impact of the PFIC rules for holders of the Company’s common shares, but these elections may be detrimental to the shareholder under certain circumstances.  The PFIC rules are extremely complex and U.S. investors are urged to consult independent tax advisers regarding the potential consequences to them of our classification as a PFIC.  See “Taxation – Material United States Federal Income Tax Considerations”.

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Risks relating to the Mining Industry

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

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

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

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

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

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

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

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

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The Company may not have clear title to its properties.

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

Mining exploration, development and operating activities are inherently hazardous.

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

Development of the Company’s projects is based on estimates and the Company cannot guarantee that its projects, if any, will be placed into production.

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

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

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

The Company’s mineral interests in Tanzania are held under prospecting licenses granted pursuant to the Mining Act, 2010 (Tanzania) for a period of up to four years, and are renewable two times for a period of up to two years each.  There are initial preparation fees and annual rental fees for prospecting licenses based on the total area of the license. Renewals of prospecting licenses can take many months and possibly even

13

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years to process by the regulatory authority in Tanzania and there is no guarantee that they will be granted. With each renewal at least 50% of the licensed area, if greater than 20 square kilometres, must be relinquished and if the Company wishes to keep the relinquished one-half portion, it must file a new application for the relinquished portion.  There is no guarantee on the timing for processing the new application and whether it will be successful.

Risks relating to the Market

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

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

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

The economics of developing metal and mineral properties are affected by many factors beyond the Company’s control, including, without limitation, the cost of operations, variations in the grade ore or resource mined, and the price of such resources.  The market prices of the metals for which the Company is exploring are highly speculative and volatile.  Depending on the price of gold or other resources, the Company may determine that it is impractical to commence or continue commercial production.  Gold prices fluctuate widely and are affected by numerous factors beyond the Company’s control, including central bank purchases and sales, producer hedging and de-hedging activities, expectations of inflation, the relative exchange rate of the U.S. dollar with other major currencies, interest rates, global and regional demand, political and economic conditions, production costs in major gold-producing regions, speculative positions taken by investors or traders in gold and changes in supply, including worldwide production levels.  The price of gold and other metals and minerals may not remain stable, and such prices may not be at levels that will make it feasible to continue the Company’s exploration activities, or commence or continue commercial production. The aggregate effect of these factors is impossible to predict with accuracy.  

The Company’s business activities are conducted in Tanzania.

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

The Company may be affected in varying degrees by political stability and government regulations relating to the mining industry and foreign investment in Tanzania. The government of Tanzania may institute regulatory policies that adversely affect the exploration and development (if any) of the Company’s properties. Any changes in regulations or shifts in political conditions in this country are beyond the control

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

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

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

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

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

Risks relating to the Securities of the Company

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

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

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the corresponding Canadian insider reporting requirements are longer. In addition, as a foreign private issuer, the Company is exempt from the proxy rules under the Exchange Act.

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

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

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

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

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

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

The Company’s common shares must meet the requirements of the NYSE MKT.

The NYSE MKT rules provides that the NYSE MKT may, in its discretion, at any time, and without notice, suspend dealings in or remove any security from listing or unlisted trading privileges, if, among other things, where the financial condition and/or operating results of the issuer appear to be unsatisfactory or it appears that the extent of public distribution or the aggregate market value of the security has become so reduced as to make further dealings on the NYSE MKT inadvisable.  Although the Company has received no indication or notification that its common shares may be delisted, in light of the current per common

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share price, there is no assurance that the Company’s common shares will continue to be listed on the NYSE MKT.

Offers or availability for sale of a substantial number of common shares may cause the price of our common shares to decline.

Sales of a significant number of the Company’s common shares in the public market could harm the market price of its common shares and make it more difficult for the Company to raise funds through future offerings of common shares. The Company’s shareholders may sell substantial amounts of its common shares in the public market. The availability of these common shares for resale in the public market has the potential to cause the supply of its common shares to exceed investor demand, thereby decreasing the price of the common shares.

In addition, the fact that the Company’s shareholders can sell substantial amounts of its common shares in the public market, whether or not sales have occurred or are occurring, could make it more difficult for the Company to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that it deems reasonable or appropriate.

Item 4.

Information on the Company

A.

History and Development of the Company

The Company was originally incorporated under the name “ 424547 Alberta Ltd .” in the Province of Alberta on July 5, 1990, under the Business Corporations Act (Alberta).  The name was changed to “ Tan Range Exploration Corporation ” on August 13, 1991.  The name of the Company was again changed to “Tanzanian Royalty Exploration Corporation” on February 28, 2006.  The Company is also registered in the Province of British Columbia as an extra-provincial company under the Business Corporations Act (British Columbia) and in the Province of Ontario as an extra-provincial company under the Business Corporations Act (Ontario).

The principal executive office of the Company is located at 44th Floor, Scotia Plaza, 40 King Street West, Toronto, Ontario, M5H 3Y4, Canada, and its telephone number is (604) 696-4236.  

For the year ended August 31, 2016, the Company reported a net loss of $12,781,902.  Included in the net loss is $3,516,268 of mineral properties and deferred exploration expenses that was written off relating to abandoned mineral properties.  The Company incurred deferred exploration expenditures of $1,168,935 during the year ended August 31, 2016.

In connection with the Company’s disclosure of mineral resources and the cut-off grade associated with each mineral resource, it has made certain assupmtions for mineral pricing and cost associated with each cut-off grade to determine the reasonable prospects for economic extraction as discussed below.

Significant Acquisitions and Significant Dispositions

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

The Company awarded a contract to Venmyn Independent Projects (Pty) Limited, a subsidiary of Venmyn Rand (Pty) Limited, to undertake an update of the 21 August 2012 National Instrument 43-101 Independent Technical Report on the Buckreef Project in Tanzania.  The updated report is dated February 24, 2014 (the

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“ Updated Buckreef Technical Project ”) and it was filed on SEDAR on February 24, 2014.  See “ Mineral Properties ”.

The Company completed the pilot heap leach pad construction at its Buckreef redevelopment gold project, located in the Lake Victoria Goldfields of Tanzania for a total cost of $1,496,078.  Construction began in April 2014 and was completed as of September 2, 2014, and was overseen by civil contractor Yale-Constech Company Limited.  Four heap leach cells with dimensions of 100 metres by 30 metres each are complete. This will support the processing of stacked ore delivered from the Buckreef South Pit. The Company has also completed a significant portion of the Buckreef South Pit preparation, including grade control drilling, maps and roads.

B.

Business Overview

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

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

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

Plan of Operations

Exploration Activities

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

By way of general description of the Company’s operating activities, the Company’s business operations involve using known or published geological and geophysical data to locate mineral resource properties meriting further exploration or development.  Once identified, the Company must stake and apply for registration to title of the mineral properties, or negotiate the acquisition of such properties from any third party owners.  Upon registration or acquisition of title, the Company then designs a program of preliminary exploration which can involve grid mapping, geophysical and magnetic surveying, geochemical surveying,

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geological mapping and sampling, grab sampling, assaying and other forms of prospecting as circumstances may require.  Based on the preliminary results, mineral properties are ranked according to merit for further exploration work, which may involve further mapping, more detailed geophysical and geochemical surveying, and trenching to identify potential drill targets.  If mineralization is indicated which merits further investigation, drill targets are selected and a preliminary RC drilling program commences for underground sampling and assaying.  If the results are positive, then a diamond drilling program will commence mainly to check, verify and confirm the mineralization potential of the prospect.

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

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

Highlights for the year ended August 31, 2016

Financial:

·

On September 1, 2016, the Company closed the first tranche of a $5 Million private placement of securities with Crede CG III, Ltd.

In the initial round of financing, the Company privately placed 1,840,400 shares of its common stock and warrants for US$1.25 million. The common stock issued in the first tranche of the financing, which closed on September 1, 2016, was priced at US$0.6792 per share. The investor also received five-year warrants to purchase 1,840,400 shares of Common Stock with an exercise price of US$0.8291 per share. The common stock issued in the first tranche of the financing or issued upon exercise of the warrants issued in the first tranche of the financing will be restricted until a valid registration for such common stock becomes effective.

On September 26, 2016, the Company closed the second tranche of the $5 million private placement of securities with Crede CG III, Ltd.  

In the second round of the financing, the Company privately placed convertible notes and warrants for US$3.75 million. The convertible notes were issued in the principal amount of US$3.75 million, carried a coupon of 2.0% and matured on September 26, 2046. The Company immediately exercised its right to cause the conversion of the convertible notes, resulting in the cancellation of the notes and the issuance of 5,357,143 shares of common stock to the investor. The investor also received five-year warrants to purchase 4,017,857 shares of common stock at an exercise price of US$1.10 per share. The closing of the second tranche of the financing was conditioned upon a valid

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registration statement for the common stock issued or issuable to the investor upon exercise of warrants being declared effective by the U.S. Securities and Exchange Commission. The Commission declared the Company’s Form F-3 Registration Statement registering the stock effective on September 23, 2016.

·

During the year ended August 31, 2016, the Company closed US $1,000,000 in gold loans with the following terms:

·

Under the terms of the loan agreements, the gold loans are for a period of three years, are subject to renewal, and carry an 8% interest rate payable quarterly. The bullion loans may be repaid in cash or common shares of the Company or gold in specified form.  If the bullion loans are paid back by bullion, the valuation date for such bullion will the date of the loan agreements. The bullion loans may be converted into common shares of the Company at the sole discretion of the lenders at an exercise price of US$0.70 per share.  Interest is payable quarterly, either in cash or in shares at a price of US$0.308 per share. There is no prepayment penalty.

The Company also closed and additional US $104,540 in gold loans with the following terms:

·

Under the terms of the loan agreements, the gold loans are for a period of one year, are subject to renewal, and carry an 8% interest rate payable quarterly. The bullion loans may be repaid in cash or common shares of the Company or gold in specified form.  If the bullion loans are paid back by bullion, the valuation date for such bullion will the date of the loan agreements. The bullion loans may be converted into common shares of the Company at the sole discretion of the lenders at an exercise price of US$0.50 per share.  Interest is payable quarterly, either in cash or in shares at a price of US$0.375 per share. There is no prepayment penalty.

The Company also closed and additional US $200,000 in gold loans with the following terms:

·

Under the terms of the loan agreements, the gold loans are for a period of one year, are subject to renewal, and carry an 8% interest rate payable quarterly. The bullion loans may be repaid in cash or common shares of the Company or gold in specified form.  If the bullion loans are paid back by bullion, the valuation date for such bullion will the date of the loan agreements. The bullion loans may be converted into common shares of the Company at the sole discretion of the lenders at an exercise price of US$0.40 per share.  Interest is payable quarterly, either in cash or in shares at a price of US$0.39 per share. There is no prepayment penalty.

Buckreef Project: Mine Development and Operations

Q1_2016 (September 2015 – November 2015)

·

Limited mining activities covering both the southern half (flooded for the most part) and northern half (new pit extension) of the South pit conducted during the 12 months ending 31st August 2016.

·

By news release dated February 8, 2016, the Company announced that first gold had been poured from the pilot Carbon-in-Column plant at the Buckreef Gold mine.  The timing and amount of the pour of gold was not an initiative of management but was done in response to a request made by the Deputy Minister of Energy and Minerals of Tanzanian.  As a show of reasonable willingness to

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cooperate on this non-contract item, the Company did what it preferred not to do - pour prematurely to proper market price. The Company mined an additional total of 5,895t ore gold ore grading at 1.31g/t from the South pit pilot operations. Cumulative Total Ore stockpiled respectively on ROMPAD, Pads# 1, 2 & 3 as of 30th November, 2015 was 73,710.66t @ 1.39g/t Au (3,300.42Ozs); 20,931.75t @ 2.29g/t Au (1,541.77Ozs);  12,943.78t @ 2.78g/t Au (1,155.55Ozs) & 12,087.90t @ 3.64g/t Au (1,416.65Ozs) . Cumulative Total Ore mined from the South Pit (Rompad + Heap Leach Pads) as of 30th November, 2015 stood at 119,725.59t @ 1.86g/t Au (7,161.24Ozs) .

·

The Company processed an additional total of 618m ³ with an average grade of 0.50mg/L Au of pregnant leachate solution from the PLS pond through 3 carbon columns on the CIC process plant during the quarter. In-house electrowinning of the pregnant carbon chips was also conducted resulting in an estimated cumulative Au-in-wire-wool ready for smelting at ~8.563kg (275Ozs).

·

The Company conducted metallurgical test-work on a 3.9 tonne bulk sample (Buckreef South/Main oxide/transition ore-2t and Buckreef Main Pit sulphide ore-1.9t) with a reputable laboratory in South Africa. The results indicated a very promising 36-40% fine gold component that can be recovered (90%) by simple gravity recovery processing from all three types of ores tested. Overall leaching results returned recoveries in the low 90%. The detailed analytical findings in the report are being utilized to fine tune the final settings of the new Gravity-CIL process plant proposed for the commercial operation of the Buckreef Mine.

Q2_2016 (December 2015 – February 2016)

·

In Q2 2016 (Dec 2015 – Feb 2016), The Honourable Deputy Minister of Energy and Minerals paid a surprise visit to the Buckreef premises on the 4 ^th of January 2016 where he was received by JK Kahama, Pius Dominick and Tony Minde for a quick brief of the project. He however laid down some verbal requests pertaining to the need to set aside some areas with limited economic potential for us for small scale miners to be allocated. He also stressed the need for the mining operations to resume within 14 days of his despite being informed the workers were due back on site on the 6 ^th January as they had been on their annual Xmas break. A third request to smelt whatever gold in wire-wool we had was also stated as it was deemed the state was losing out on the royalty due from whatever we had in stock.

·

The Company subsequently conducted its first smelting and gold pour from the pilot heap leach operations at Buckreef Gold mine in February 2016 where it recovered 5,863.20grams (188.51Ozs) of gold dore with an averaged purity of 91.64%. The smelting was conducted in the presence of authorities from the TMAA, MEM and TRA (Customs & Revenue) and gold dore was successfully exported to the Company agent in Zurich for further processing after payment of royalties due to the government.

·

Force Majeure:

On February 5, 2016, the Company, through its subsidiary Tanzam 2000, provided notice of Force Majeure under its Buckreef Gold Mine Re-Development JV Agreement with Stamico, a parastatal wholly owned by the Tanzanian government. The notice of Force Majeure was based upon several factors with the main ones being:

i.

The Company was requested by the Deputy Minister of Energy and Minerals, in a televised meeting held at the Buckreef Mine site, to provide an area of access for artisanal miners

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with an unreasonable 14 days of notice period for compliance or else the Company would lose some of its licenses.

ii.

The recurrent and intermittent invasions and forced occupation by several hundred illegal miners of the Company’s properties including the South Pit, Eastern Porphyhry, Bingwa, Tembo and Mbagala prospects all within the active and enlarged Buckreef Special Mining License immediately after the 14-day deadline and also over a period of time since initial occupancy.

In order to show willingness to continue with the project,

a.

The Company did resume active mining on the South pit within 3 days (as workers had gone for their annual Christmas break in any case).

b.

The Company identified three potential areas with one to be designated for true artisanal mining, meaning without the use of mechanized mining equipment. Mining would not be allowed below the water table. The Company would also require artisanal miners to operate responsibly in accordance with Tanzanian mining and environmental law, and land and water requirements. These terms were presented to the Minister of Mines via postal letter as well as email but to date no response has been received.

Q3_2016 (March 2016 – May 2016)

·

In Q3 2016 (March – May 2016), no mining activities were conducted on the South pit as the force majeure was still in effect. Cumulative Total Ore stockpiled respectively on ROMPAD, Pads# 1, 2 & 3 as of 30th May, 2016 was 73,710.66t @ 1.39g/t Au (3,300.42Ozs); 20,931.75t @ 2.29g/t Au (1,541.77Ozs);  12,943.78t @ 2.78g/t Au (1,155.55Ozs) & 12,087.90t @ 3.64g/t Au (1,416.65Ozs) . Cumulative Total Ore mined from the South Pit (Rompad + Heap Leach Pads) as of 30th May, 2016 stood at 119,725.59t @ 1.86g/t Au (7,161.24Ozs) .

·

The Company however commenced phased construction of the gravity recovery component of the proposed new CIL process plant.  This comprised installation of the crusher circuit units, refurbishment and installation of the gravity recovery scrubber, nugget trap and diestar table.  Preliminary testing of the effectiveness and functionality of the circuit was tested using a temporary 1m long Diestar table recovered from the Kigosi camp. Purchase and installation of a 6m-long Diestar table to afford reasonable commercial production trials is underway.

Q4_2016 (June 2016 – August 2016)

In Q4 2016 (June – August 2016), On June 9 ^th , 2016, Force Majeure was lifted and no mining was conducted at South Pit.

·

As part of preparations for the gravity processing of mined ore, a total of 2,250t of HG ore was shifted from ROMPAD ( 1,395t ) and Pad#3 ( 15t ) to the crusher pad during the quarter.

·

The disposition of the Ore mined and stockpiled as of 31 ^st August 2016, was as follows: ROMPAD: 72,315.66 t @1.39g/t Au ( 3,237.96 Ozs); Pad#1: 20,931.75t @2.29g/t Au ( 1,541.77 Ozs); Pad#2: 12,943.78t @2.78g/t Au ( 1,155.55 Ozs); Pad#3: 11,232.90t @ 3.85g/t Au (1,389.27 Ozs) & Crusher Pad : 2,250t @ 3.88g/t Au (280.84 Ozs).

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·

Preliminary testing of the effectiveness and functionality of the gravity processing and recovery circuit using a temporary 1.5m-long Deistar shaking table also commenced during the last part of the quarter.

·

Technical Advisory Committee (TAC) for NEMC met both the Client and the Consultant at NEMC head office in in mid-August 2016 to review Buckreef project EMP upgrade report that had been submitted to the agency in January 2016 as part of the environmental certification process. NEMC eventually conducted the mandatory field check visit to verify the report by the consultant. A revised final report was subsequently re-filed with the NEMC Technical Advisory Committee at the end of the quarter.

·

The company also submitted all PL and SML renewal application documentation for the Buckreef Project licences during the quarter. With the exception of the SML, all other PLs were successfully renewed while extra data requests on the SML renewal application from the Mining Commissioner’s office were successfully attended to.

·

The Main 6m-long Diester shaking table which arrived at site in mid-July 2016 and now awaits installation and commissioning by the supplier.

·

The Teechnical staff at Buckreef mine commenced a detailed in-house review of all TRE projects in the country.   

Exploration

Progress

The Buckreef Project is located in the Geita District of the Geita Region south of Lake Victoria, some 110km southwest of the city of Mwanza (see Figure, overleaf).  The project area can be accessed by ferry across Smiths Sound, via tarred national road and thereafter via unpaved but well-maintained gravel roads. The Project comprises five prospects namely Buckreef, Bingwa, Tembo, Eastern Porphyry and Buziba. The Buckreef prospect encompasses three ore zones namely Buckreef South, Buckreef Main and Buckreef North.

The Project is fully-licensed for mining and extraction of gold. The oxide/transition ore component from the Buckreef Prospect is one among other gold prospects including Bingwa and Tembo in the pipe line to generate cash flow in the short term to fund the development, mining and extraction of the main sulphide ore component for the entire Buckreef Project.

No exploration activities were conducted on the Buckreef project for the year-end reporting period ending 31 ^st August 2016.

License Status

At the end of this reporting quarter Buckreef project area had 13 PLs and 1 SML covering a surface area of 95.40km2. The Buckreef Project license status and statutory liabilities are as shown in the table below:

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Exploration Projects

Brief descriptions of PL holdings for each respective project area are summarized below up to 31 ^st August 2016.

Itetemia Project

The Itetemia gold deposit includes the mineral resources of the Golden Horseshoe Reef (“ GHR ”), and is an advanced stage exploration project focusing on the development of the GHR. A total of 9,833m of diamond core drilling (51 holes) and 8,339m of RC drilling (138 holes) was completed on the project. Modeling and processing of assay results from both the core drilling and RC drilling so far completed over the GHR and surrounding areas culminated in the estimation of the following Mineral Resources by CSA Australia Pty (Ltd) (“ CSA ”).  The gold resource numbers for the GHR are as at 30th May 2016 using a cut-off grade of 1.0g/t:-

DOMAIN	CLASSIFICATION	VOLUME (m 3 )	TONNES (t)	GRADE (g/t)	OUNCES oz
Main Lode	Indicated	816,000	2,390,000	3.14	241,000
	Inferred	355,000	1,053,000	3.68	125,000
TOTAL MAIN LODE		1,171,000	3,443,000	3.31	366,000
Footwall Lode	Indicated	141,000	409,000	1.92	25,000
	Inferred	128,000	380,000	2.57	31,000
TOTAL FOOTWALL LODE		269,000	789,000	2.23	57,000
TOTAL INDICATED		957,000	2,799,000	2.96	266,000
TOTAL INFERRED		483,000	1,433,000	3.39	156,000
GRAND TOTAL		1,440,000	4,232,000	3.11	422,000

Rounding results in computational discrepancies.

The process to convert the PL covering the Horseshoe Gold Prospect at Itetemia into a Special Mining License (SML) was commenced during the reporting period. The Company submitted all documentation required for the conversion of the Itetemia PL into a Special Mining License to the relevant authorities in the Ministry of Mines.  A follow up on the Mining License renewal shows that the application is still under review.

As of the 31 ^st August 2016, Itetemia project area has 10 active PLs, 1 ML application and 1 PL renewal application all covering a surface area of 46.23km ² . The Itetemia Project license status and statutory liabilities are as shown in the table below:

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Kigosi Project

Kigosi Project area remains subject to a Game Reserve Declaration Order. Upon repeal or amendment of that order by the Tanzanian Government, the Kigosi Mining Company will be legally entitled to exercise its rights under the Mineral Rights and Mining Licence. The procedures for de-gazetting the Kigosi mining licence project area from a game reserve area to a mining area on the government gazette has not been completed by government of Tanzania.

There were no developments on the Kigosi mining area degazetting process during the reporting quarter to allow mine development on the idling Kigosi Mining Licence.  The gold resource numbers for the Kigosi Project are, as at 30 ^th May 2016 using a cut-off grade of 0.5g/t:-

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Table 1:Kigosi Project Resource (Measured and Indicated category)

Table 2: Kigosi Project Resource (Inferred category)

At the end of this reporting quarter Kigosi project area had 32 PLs and 1 ML covering a surface area of 510.85km ² . The Kigosi Project license status and statutory liabilities are as shown in the tables below:

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Table 1a: Kigosi Project Active PLs-Tancan Mining  

Table 1b: Kigosi Project Active PLs-Tanzam2000 Ltd.

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Table 1c: Kigosi Project Active PLs-JV partners

Luhala Project

The Luhala Project is an advanced stage exploration project focusing on the development of the Luhala gold deposit which consists of five anomalous hilltops. The mineralization is stratabound shear-zone hosted gold mineralization (stratigraphic and structural control) within a distinct unit of felsic rocks with associated ferruginized mafic and felsic rocks.

Drilling at the Luhala Project has been concentrated on the Luhala Hills (Luhala Hill, Kisunge Hill, Shilalo Hill South and Shilalo Hill West). A total of 3,279m of diamond core drilling (26 holes) and 8,665m of RC drilling (144 holes) was completed on the project. Modeling and processing of assay results from both the core drilling and RC drilling conducted over the various deposits at Luhala, has to-date resulted in the estimation, by CSA, of the following Mineral Resources for Luhala as at 8th March 2011 using a cut-off grade of 1.0g/t:

DOMAIN / ZONE	CLASSIFICATION	VOLUME (m 3 )	TONNES (t)	GRADE (g/t)	OUNCES oz
Kisunge Central	Inferred	410,000	870,000	1.76	48,900
Kisunge East		110,000	240,000	2.15	16,800
Kisunge South		60,000	120,000	1.68	6,300
Shilalo South		100,000	200,000	2.47	15,900
Shilalo West		200,000	430,000	1.73	23,900
TOTAL LUHALA PROJECT		880,000	1,860,000	1.87	112,000
TOTAL INFERRED		880,000	1,860,000	1.87	112,000
GRAND TOTAL		880,000	1,860,000	1.87	112,000

Rounding results in computational discrepancies.

The process of selecting a consultant to carry out feasibility study at the Luhala gold project has been completed and once funds are available the contract to engage the consultant to carry out the study will be signed to initiate the FS study works.

At the end of this reporting quarter Luhala project area had 4 PLs covering a surface area of 36.50km ² . The Luhala Project license status and statutory liabilities are as shown in the table below:

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Lunguya Project

As reported in Q3, historical JV agreements covering the bulk of the areas in which exploration work was conducted and resources defined lapsed hence the resources have been written off and still no further work is planned on this project.

As of 31 ^st August 2016, Lunguya project area had 8 PLs covering a surface area of 90.43km ² . The Lunguya Project license status and statutory liabilities are as shown in the table below:

Kanegele Project

There were no exploration activities on the Kanegele Project licences in fiscal 2016 due to the Company’s strategy to concentrate on projects with potential to generate near term cash flow, more specifically gold production startup.

The Company will continue to explore opportunities to maximise shareholder value by actively looking for potential JV agreements on these outlying projects with any interested third parties. As of 31 ^st August 2016, Kanegele project area had 12 active PLs and 1 PL renewal application all covering a surface area of 55.63km ² . The statutory liabilities are as shown in the table below:

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Biharamulo Project

There were no exploration activities on both the Biharamulo and the Kanegele Project licences in fiscal 2015 due to the Company’s strategy to concentrate on projects with potential to generate near term cash flow, more specifically gold production startup.

The Company will continue to explore opportunities to maximise shareholder value by actively looking for potential JV agreements on these outlying projects with any interested third parties. As of 31 ^st August 2016, Biharamulo project area had 12 active PLs and 1 PL renewal application all covering a surface area of 55.63km ² . The statutory liabilities are as shown in the table below:

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Kongwa Project

There were no exploration activities on the Kongwa Project license in fiscal 2016 due to the Company’s strategy to concentrate on projects with potential to generate near term cash flow, more specifically gold production startup.

The Company will continue to explore opportunities to maximise shareholder value by actively looking for potential JV agreements on these outlying projects with any interested third parties.

As of 31 ^st August 2016, Kongwa Gold project area had 1PL covering a surface area of 266.51km ² and pending surrender back to the Ministry of Energy & Minerals. The statutory liabilities are as shown in the table below:

Manonga Project

There were no exploration activities on the Manonga Project licenses in fiscal 2016 due to the Company’s strategy to concentrate on projects with potential to generate near term cash flow, more specifically gold production startup.

The Company will continue to explore opportunities to maximise shareholder value by actively looking for potential JV agreements on these outlying projects with any interested third parties.

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As of 31 ^st August 2016, Manonga Gold project area had 7 active PLs covering a surface area of 56.71km ² .   The statutory liabilities are as shown in the table below:

Nzega Project

There were no exploration activities on the Nzega Project licenses in fiscal 2016 due to the Company’s strategy to concentrate on projects with potential to generate near term cash flow, more specifically gold production startup.

The Company will continue to explore opportunities to maximise shareholder value by actively looking for potential JV agreements on these outlying projects with any interested third parties.

As of 31 ^st August 2016, Nzega Gold project area had 2 active PLs covering a surface area of 52.24km ² .  The statutory liabilities are as shown in the table below:

Ushirombo Project

There were no exploration activities on the Ushirombo Project license in fiscal 2016 due to the Company’s strategy to concentrate on projects with potential to generate near term cash flow, more specifically gold production startup.

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The Company will continue to explore opportunities to maximise shareholder value by actively looking for potential JV agreements on these outlying projects with any interested third parties.

As of 31 ^st August 2016, Ushirombo Gold project area had 1 active PL covering a surface area of 9.27km ² .  The statutory liabilities are as shown in the table below:

Nyanzaga Project

There were no exploration activities on the Nyanzaga Project licenses in fiscal 2016 due to the Company’s strategy to concentrate on projects with potential to generate near term cash flow, more specifically gold production startup.

The Company will continue to explore opportunities to maximise shareholder value by actively looking for potential JV agreements on these outlying projects with any interested third parties.

As of 31 ^st August 2016, Nyanzaga Gold project area had 2 active PLs covering a surface area of 18.09km ² .   The statutory liabilities are as shown in the table below:

Mwadui Project

There were no exploration activities on the Mwadui Project licenses in fiscal 2016 due to the Company’s strategy to concentrate on projects with potential to generate near term cash flow, more specifically gold production startup.

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The Company will continue to explore opportunities to maximise shareholder value by actively looking for potential JV agreements on these outlying projects with any interested third parties.

As of 31 ^st August 2016, Mwadui Diamond project area had 4 active PLs covering a surface area of 144.65km ² . The statutory liabilities are as shown in the table below:

Tulawaka Project

There were no exploration activities on the Tulawaka Project licenses in fiscal 2016 due to the Company’s strategy to concentrate on projects with potential to generate near term cash flow, more specifically gold production startup.

The Company will continue to explore opportunities to maximise shareholder value by actively looking for potential JV agreements on these outlying projects with any interested third parties.

As of 31 ^st August 2016, Tulawaka Gold project area had 6 active PLs covering a surface area of 54.56km ² . The statutory liabilities are as shown in the table below:

Kibara Project

There were no exploration activities on the Kibara Project licenses in fiscal 2016 due to the Company’s strategy to concentrate on projects with potential to generate near term cash flow, more specifically gold production startup.

The Company will continue to explore opportunities to maximise shareholder value by actively looking for potential JV agreements on these outlying projects with any interested third parties.

As of 31 ^st August 2016, Kibara Gold project area had 3 active PLs covering a surface area of 60.62km ² . The statutory liabilities are as shown in the table below:

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Kabanga Project

There were no exploration activities on the Kabanga Project licenses in fiscal 2016 due to the Company’s strategy to concentrate on projects with potential to generate near term cash flow, more specifically gold production startup.

The Company will continue to explore opportunities to maximise shareholder value by actively looking for potential JV agreements on these outlying projects with any interested third parties.

As of 31 ^st August 2016, Kabanga Gold project area had 3 PLs covering a surface area of 292.92km ² and all pending surrender to the Ministry of Energy and Minerals. The statutory liabilities are as shown in the table below:

License Relinquishment

Following the Company’s decision to include mine development to its strategy of generating maximum revenue from its extensive portfolio of properties and with the rising costs of maintaining prospecting and other licenses in Tanzania, management decided review, revamp and clean up the TRX PL portfolio with a view to discard certain licenses and/or alternatively farm them out in JV packages.

A detailed in-house geological reviews of each respective project area and its potential for discovery of gold mineralization have been submitted to a technical team that will review the merits and de-merits of each project in Tanzania.

This exercise was necessitated by the need to establish all outstanding, current and future financial liabilities and obligations arising from our total land-holdings.

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Exploration

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

Competition

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

Dependence on Customers and Suppliers

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

Governmental Regulations

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

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

All prospecting licenses in Tanzania also require the holder to expend funds which are set out in the Mining Act, 2010.  At each renewal, at least 50% of the Company’s licensed area must be relinquished on prospecting licences in excess of 20 square kilometres.  On relinquishing the ground, the area is automatically returned to the Mining Commissioner’s jurisdiction for a period of 4 months after which it will be declared vacant or otherwise by the Commissioner.  If the Company still has an interest in the relinquished one-half portion, it must then file a new application in competition with other interested companies for the relinquished portion 4 months after the relinquishment date.  If more than one application

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is lodged on the same day at the Mining Commissioner’s office, then the Commissioner may award the ground by tender.  There is no guarantee on the timing for processing the new application and whether it will be successful.

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

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

An environmental impact statement and an environmental management plan must accompany special mining license, mining license and gemstone mining license applications for mineral rights.  In addition to the establishment of environmental regulations, the Tanzanian Government has improved management procedures for effective monitoring and enforcement of these regulations by strengthening the institutional capacity, especially in the field offices.  The Government has provided rules for the creation of reclamation funds to reinstate land to alternative uses after mining and it has developed guidelines for mining in restricted areas, such as forest reserves, national parks, sources of water and other designated areas.  

C.

Organizational Structure

The Company has the following seven subsidiaries:

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(1)

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

(2)

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

(3)

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

(4)

The remaining interest is held 15% by State Mining Corporation and 10% by Songshan.

(5)

The remaining interest is held 60% by Allied Gold Corp. of United Arab Emirates.

(6)

Joint venture letter of intent signed and subject to final approval.

D.

Property, Plant and Equipment

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

Mineral Properties

Buckreef Project

History

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

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

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Buckreef Exploration History Synopsis

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The technical content of the following discussion regarding the Buckreef Project in Tanzania is summarized from the Buckreef Property technical report dated February 24, 2014 entitled Updated National Instrument 43-101 Independent Technical Report on the Buckreef Project in Tanzania for Tanzanian Royalty Exploration Corporation prepared by Venmyn Rand (Pty) Limited and compiled by Fiona Harper, D. Richards and Andrew Neil Clay (the “ Updated Buckreef Technical Report ”).  The Updated Buckreef Technical Report was filed on SEDAR on February 24, 2014.

Ownership

Prior Ownership

Originally, the Buckreef Project was an advanced exploration project held by Iamgold Tanzania (“ IAGT ”) prior to July 2009. The Agreement to Redevelop the Buckreef Gold Mine (“ ARBGM ”) between IAGT and

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the Ministry for Energy and Minerals included at that point, a single Mining Licence and 12 Prospecting Licences covering 98.19km ² .

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

Current Ownership, Property and Location

In December 2010, the Company signed a binding heads of agreement with Stamico for the Buckreef Project and on October 25, 2011 entered into a Definitive Joint Venture Agreement with Stamico for the development of the project.  Through its wholly-owned subsidiary, Tanzam, the Company will hold a 55% interest in the joint venture company, Buckreef Gold Company Limited, with Stamico holding the remaining 45%. The agreement provided for the formation and establishment of a joint venture company, Buckreef Gold Company Limited (“ BGC Ltd. ”). On 24 ^th of October 2011, BGC Ltd. was formed and incorporated under certificate of incorporation number 86681.

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

·

BRMA: includes the Buckreef Prospect, the Bingwa Prospect, Eastern Porphyry Prospect and the Tembo Prospect; and

·

BZMA: includes the Buziba Prospect

An extended mining right was granted to Tanzam (Special Mining Licence 04/1992) encompassing the Buckreef, Bingwa, Eastern Porphyry and Tembo Prospect areas.  The Buziba Prospect is held under a prospecting licence which is in the process of being converted into either a retention licence or a special mining. Within the BZMA small-scale miners operate under numerous primary mining licences adjacent to our main prospect.  

Geology and Mineralisation

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

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

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Regional Geological Setting

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

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

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

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

·

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

·

mineralisation within major ductile shear zones;

·

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

·

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

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

·

structural lineaments trending at 120º;

·

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

·

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

·

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

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Local Geological Setting

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

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

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

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

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

A non-penetrative deformation fabric is developed at Buziba, which dips steeply to the south, sub-parallel to the stratigraphy. Individual zones in which this fabric is well developed cannot be traced for distances of

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more than a few hundred metres on drill sections, but a number of such zones occur throughout the 200m of thickness of stratigraphy, which hosts the mineralisation.

Exploration Status

The Buckreef Gold Mine was an underground mine operated by the Tanzanian State during the late 1980s.  Apart from the state, several previous owners of the project undertook numerous exploration programmes including aeromagnetic, helicopter borne IP, ground magnetic and soil geochemistry surveys, as well as extensive RC, Air Circulation (“ AC ”) and diamond drilling programmes. Iamgold, the most recent historic owner of the project, verified the historic drilling data, undertook additional exploration and defined JORC compliant Mineral Resources in 2006. In total, the exploration programme included approximately 30,000 soil samples, 202,000m of RC drilling, 124,000m of AC drilling and 28,000m of diamond core drilling.

The Company acquired the rights to the Buckreef Project early in 2011 and results of the current metallurgical and geotechnical diamond drilling programs, as well as detailed RC and diamond mineral resource drilling programs, are incorporated in the Updated Buckreef Technical Report. To date, additional mineralisation has been intersected on Buckreef Prospect Main Zone in a wide zone between 150m and 250m vertical depth with assay results of 4.5g/t Au over 26m and 10.58g/t Au over 19m. Additional near surface mineralisation at less than 200m depth, from Buckreef North includes a mineralised zone 46m wide at 2.31g/t Au. Gold mineralisation has also been identified in the Eastern Porphyry deposit 800m east of Buckreef Main Zone, over 500m of strike length with near surface mineralisation ranging between 1.25g/tAu to 6.3g/tAu over widths of 2.25m to 10.5m.

Historic metallurgical testwork programs were undertaken on both the BRMA and BZMA mineralisation types. The testwork on BMRA material indicated that oxide and transitional material are amenable to treatment using typical carbon-in-leach (“ CIL ”) processing techniques and fresh material may benefit from flotation and a finer grind with recoveries anticipated to be in the low 90%s.  The testwork results for BZMA mineralisation indicated that it is amenable to treatment using gravity and CIL processing techniques.  Metallurgical recoveries for BZMA mineralisation were anticipated to be in the low to mid 90%s. Heap leaching testwork indicated that, at a 25mm to 50mm crushing size fraction in oxide mineralisation, a 75% recovery could be anticipated, whilst transitional and fresh mineralisation recoveries were lower, at 35% to 50%.  

Recent heap leach metallurgical testwork indicate positive results from column leach test for the oxide ore resources, at a 6mm crushing size fraction in oxide mineralization, up to 71% recovery was achieved on agglomerated ores during the testing. Testwork on the sulphide and transition resource indicate a recovery of 58% using a 12.5mm crush size and agglomeration using 4kg/t of lime and 3kg/t of cement.

Current (2016) metallurgical testwork indicate positive results from carbon-in-column leach test for all three (3) resources types, oxide; transition and sulphide resources. For the oxide and transition resources overall recovery achieved is in the low 90s while for sulphide resources, recoveries are in the upper 80s.

Previous Mineral Resource and Mineral Reserve Estimates

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

The Mineral Resource estimates were based partially on a historic dataset that has been verified and deemed

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

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

DEPOSIT	MEASURED			INDICATED			INFERRED			MEASURED & INDICATED
	Tonnes (Mt)	Au Grade (g/t)	Contained Au (Mcz)	Tonnes (Mt)	Au Grade (g/t)	Contained Au (Moz)	Tonnes (Mt)	Au Grade (g/t)	Contained Au (Moz)	Tonnes (Mt)	Au Grade (g/t)	Contained Au (Moz)
Buckreef	5.176	2.05	0.341	3.706	1.86	0.222	7.158	1.89	0.435	8.882	1.97	0.563
Buziba-Busolwa				35.270	1.04	1.179	14.350	0.90	0.415	35.27	1.04	1.179
Bingwa							1.120	2.4	0.086
Tembo							0.725	2.18	0.051
TOTAL	5.17	2.05	0.34	38.97	1.12	1.40	23.35	1.32	0.98	44.15	1.23	1.74

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

Mineral Resources inclusive of Mineral Reserves.

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

Estimates over variable widths of 3m to 40m

Bulk Density ranges from 2.0g/cm ³  to 2.8g/cm ³

Inconsistencies in totals are due to rounding down

55% attributable to the Company

Cut-off grade 0.5g/t Au

New Mineral Resource and Mineral Reserve Estimates

A Mineral Resource estimate was completed on the BRMA based on the geological models supplied by CAE Mining. The Mineral Resource estimate was informed by both the diamond drilling and reverse circulation drilling results and a Mineral Resource block model was confined by wireframed interpretations of the volumes of the individual prospects as developed by CAE Mining using Datamine™ Studio 3 (version 3.21.7164). Venmyn Deloitte carried out the grade estimation using Ordinary Kriging (OK), using Datamine™ Studio 3 (version 3.20.5321).

The Buckreef Project was modelled for gold grade only using the shell of the wireframe models as hard boundaries. Only data within the wireframes were used in the estimate. The variograms ranges were used to define the search ellipse and each domain was estimated separately. The definition of narrow mineralised stringers which frequently change strike direction posed a difficulty to the estimation process but this issue was solved by the use of local anisotropy Kriging (LAK) for the stringers implemented through Datamine™'s dynamic anisotropy functions. Specific Gravity values from all prospects and the three alteration zones namely; fresh, transitional and oxide are sufficient for the estimation purposes. Topographic surface models were provided by the Company.

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NI 43-101 Compliant Mineral Resource Estimate for BRMA as at 29 November 2013

Source:  Venmyn Deloitte 2013, CAE Mining 2013 and TRX 2013

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

Mineral Resources reported inclusive of Mineral Reserves (although no Mineral Reserves are reported)

Cut-off Grade 0.5 g/t Au

Estimates over variable widths to 1m to 40m

Specific Gravity ranges 2.0 to 2.8

Inconsistencies in totals are due to rounding

55% attributable to TRX

The Company has incurred total net costs (after recoveries, if any) of $881,357 on the Buckreef Project for the year ended August 31, 2016.

The cut-off grade calculations for the Buckreef Project were based on costs from the Buckreef Project PEA and at the June 2011 gold spot price of approximately USD1,500/oz and a three year trailing average of USD1,024/oz. The economic cut-off grade thus calculated ranges from 0.39g/t Au to 0.6g/t Au which shows that reasonable prospects for economic extraction are possible from grade of 0.39g/t and above. TRX made a strategic decision to publish the Mineral Resource estimate at an average of 0.5g/t Au cut-off as a reasonably conservative position.

The Exploration Target estimate column contained in the foregoing chart was prepared in accordance to the NI 43-101 guidelines of the Canadian securities administrators.  It should be noted that Exploration Targets are conceptual in nature and there has been insufficient exploration to define them as Mineral Resources, and, while reasonable potential may exist, it is uncertain whether further exploration will result in the determination of a Mineral Resource under NI 43-101.  The Exploration Target stated above is not being reported as part of any Mineral Resource or Mineral Reserve.

Kigosi Project

Property Description and Location

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

In December 2012, the Kigosi Access Agreement between the Company (through its subsidiary Tanzam)  and the Director of Wildlife, Wildlife Division, Ministry of Natural Resources and Tourism was signed, and in February 23, 2013, the Company (through Tanzam), was awarded the Environmental Impact Assessment Certificate for the Kigosi gold project.  Stamico has a 15% carried interest in the Kigosi Project.   

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On May 30, 2013 the Company announced it had been granted a Mineral Rights and Mining Licence through its wholly owned subsidiary, Tanzam.  The Mineral Rights and Mining Licence covers the entire area applied for of 9.91 square kilometres of the Kigosi Project.  The area remains subject to a Game Reserve Declaration Order.  Upon repeal or amendment of that order by the Tanzanian government, the Company will be legally entitled to exercise its rights under the Mineral Rights and Mining Licence.

Accessibility, Climate, Local Resources, Infrastructure and Physiography

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

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

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

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

Geology and Mineralization

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

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

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

The Company received an updated NI 43-101 technical report dated September 1, 2011 from Venmyn Rand (Pty) Limited of South Africa (the “ Kigosi Technical Report ”). A quartz rubble area of mineralization has been identified which is of particular interest due to its tabular extent and unconsolidated nature.  The 43-101 Technical Report has defined a surface area of 3.36km ² and an average thickness of 1.15m which contains an Indicated Mineral Resource of 3.89 million tons at an in-situ grade of 0.83g/t Au and an Inferred Mineral Resource of 6.30 million tons at a grade of 0.34g/t Au.

The Kigosi Mineral Resource estimate September 2009 includes Mineral Resources from several prospects each with primary mineralisation in shears and secondary mineralisation in alluvial gravels. No cut-off grade was applied to the shear hosted mineralisation and a cut-off of 0.1g/t Au was applied in the case of the gravels just as nominal indicator of the presence of mineralisation. The Kigosi prospect is an early exploration project and no specific costing exercises have been yet been conducted that could be used in an economic cut-off grade calculation. Nonetheless, the effect of introducing and changing cut-off grades was provided in the document as an indicative exercise. The parameters pertaining to prospects for economic extraction in the Victoria Goldfields are well known, and the grades and style of mineralisation reported for the Kigosi prospect were considered relative to this benchmark.

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

Luhwaika Quartz Rubble Deposit

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

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

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

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Bulk Sampling Program

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

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

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

Luhwaika Prospect

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

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

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

Igunda Prospect

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

Gold mineralization is structurally controlled and the Igunda Reefs are localized in two sub-vertical dipping

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northwest striking shear zones, dipping steeply (75º – 85º) to the northeast. Gold mineralization also occurs in the host wall rock up to over a meter and is not confined to the veins.

Msonga Prospect

Drilling

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

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

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

Kigosi Exploration History

The exploration history of the Kigosi Property from 2006 to 2016 is summarized as follows:

Kigosi Exploration History Synopsis

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The Company has incurred total net costs (after recoveries, if any) of $245,860 on the Kigosi Project for the year ended August 31, 2016.

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Lunguya Project Area

Property Description and Location

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

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

In late 2015, the Option and Royalty Agreement between Joseph Magunila and the company became null and void as the Company relinquished its interest in the Primary Mining Licenses.

Accessibility, Climate, Local Resources, Infrastructure and Physiography

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

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

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History

Lunguya Exploration History Synopsis

Geology

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

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

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

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

Mineralization

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

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

Exploration

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

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

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

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

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

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available online at www.sedar.com , filed on February 16, 2010 under the heading, “ Technical Report (NI 43-101) ”.

During the period ended August 31, 2016, no direct property work was conducted on the Lunguya property.  

The Company has incurred total net costs (after any recoveries and write offs) of $nil and written off $3,353,923 on the Lungua Property for the year ended August 31, 2016.  

The Lunguya Property is without known mineral reserves and any exploration program is an exploratory search for ore.

Itetemia Property

Property Description and Location

The Itetemia Property is located in the Mwanza Region of the Lake Victoria Greenstone Region, Tanzania, approximately 90 kilometres by air southwest of the city of Mwanza, situated on the south shore of Lake Victoria.  

Accessibility, Climate, Local Resources, Infrastructure and Physiography

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

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

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

Ownership

Prior Ownership

With respect to one Itetemia prospecting license, the interest of the Company was acquired from Stamico pursuant to a joint venture agreement dated July 12, 1994 (the “ Stamico Venture Agreement ”).  The

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Stamico Venture Agreement obligated the Company to make two initial payments of TSh$1,000,000 and US$7,200 to Stamico, both of which were satisfied.

The Company’s Interest

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

1.

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

2.

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

3.

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

4.

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

5.

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

6.

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

7.

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

8.

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

9.

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

10.

Tancan may assign its rights under the agreement, subject to the prior written consent of Stamico.

The Itetemia prospecting licences are adjacent to Barrick’s Bulyanhulu gold mine.  

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History

The exploration history of the Itetemia Property from 2006 to 2015 is summarized as follows:

Itetemia Exploration History Synopsis

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Geology

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

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

Mineralization

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

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

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

Exploration

The majority of the exploration work in 2007 consisted of RC and diamond drilling, along with limited ground geophysics.  Exploration crews were mobilized to the Itetemia Project in August 2007 and drilling commenced in mid-September.  The first phase drill program completed 10 RC holes aggregating 1,489m and eight diamond drill holes totaling 2,286.5m.  The drill program targeted the shallowest part of the previously established Golden Horseshoe Reef with a view to developing an open pit resource with a notional floor level of 200m below surface.  In support of preparation of a resource estimate, drill holes

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were sited to provide data at grid points at or below 50 x 50m spacing.  A number of deeper holes were also sited to test the extent of the mineralized body at depth and along strike.

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

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

The Itetemia Project concept study positively demonstrated that the chosen cut-off grade of 0.5g/t Au supports not just reasonable but actual, prospects for economic extraction. The original Mineral Resource estimate was published at 1.0g/t Au but this included areas of lower grade which had to be mined in order to access the entire orebody. By lowering the cut-off grade to 0.5g/t Au, it has become possible to incorporate this material into both the Indicated and Inferred categories, effectively making the orebody more continuous and practical to mine. Comparison with the previous Mineral Resource statement indicates a 5% increase in the total tonnage at a 4% reduction in mean grade, resulting in an overall 1% increase in the contained gold. The prospects for economic extraction at 1.0g/t Au and 0.5g/t Au were clearly demonstrated by the concept study.

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

During the period ended August 31, 2016, no direct property work was conducted on the Itetemia property.  

The Company has incurred total net costs (after any recoveries and write offs) of $35,865 and written off $153,588 of expenditure on the Itetemia Property for the year ended August 31, 2016.  

Luhala Property

Property Description and Location

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

The target on the Luhala property is gold stockwork mineralization associated with felsic rock units in dilatational structures.  

Accessibility, Climate, Local Resources, Infrastructure and Physiography

Access to the Luhala Property is via the main Mwanza – Shinyanga road, which is a single lane, good to excellent quality, asphalt highway.  To access the property, one drives approximately 45km to the south of Mwanza, where a dirt road from a junction at the settlement of Manawa, leads southwest to the town of Misasi.  The property has year round access, although seasonal winter rains, December to March, may

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result in flooding in low lying areas which are dominated by mbuga (black organic rich laustrine flood soils).  Most lowland areas are under active cultivation, corn, rice, beans and mixed crops, by subsistence farmers.  Low scrub and thorn bushes cover the small hills.  The area has been, for many years, deforested by local agricultural practices.

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

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

History

Luhala has had a significantly more protracted exploration history than Lunguya, beginning with the initial exploration by the then Tanganyikan Geological Survey in 1947.  The exploration history of Luhala since 2006 to 2015 is summarized as:

LUHALA EXPLORATION HISTORY SYNOPSIS

Year	Operator	Work Performed
2006	Tancan	Diamond drilling, RC drilling
2007	Sloane	Follow-up exploration planning
2008	Sloane	Data analysis
2009	Sloane	Data analysis
2010	Sloane	Data analysis
2011-2012	Company	NI 43-101 report prepared by Venmyn Rand (Pty) Ltd.
2013	Company	In-house evaluation
2014	Company	Continued in-house evaluation
2015	Company	Continued in-house evaluation/property maintenance
2016	Company	No fieldwork conducted. Property maintenance observed.

Geology

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

In the Luhala area, the predominant structural grain is dominated by an early deformational event which has deformed all supracrustal rocks into tight, south to southwest plunging, west overturned, synforms and

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antiforms.  The short limbs of these folds may have east-west strikes and modest, 40 degree south dips. The long limbs of these folds have north to northeast strikes and generally much steeper, 60 – 80 degree, and east dips.

At Luhala, three principal mineralized zones have been identified. These include Kisunge Hill, Shilalo South, and Shilalo West.  All of the three principal mineralized areas are linked by a common southwest plunging antiform, the limbs of which are separated by 500 to 800m and converge just south of Line 6200 E and 3800 N.  Mineralization to Kisunge Hill is associated with a chert – felsic volcanic contact.  As Shilalo South, structurally controlled gold mineralization closely tracks the position of a massive to locally well-bedded chert or cherty iron formation.  The results of diamond drilling in Shilalo West strongly outline the importance of the felsic volcanic - chert – structural sites and gold association.  For example, borehole LSD – 08A is collared in the hangingwall to the Shilalo West mineralized zone, traverses the host rhyolite-chert lithology, and terminates in the footwall.  This borehole intersected significant gold mineralization of 3.55 g/t Au over 5 m near the hangingwall contact of the felsic volcanic rocks, and is mineralized repeatedly at over one gram ranges throughout much of the felsic host interval, which in this borehole is over 35m thick.

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

Exploration

During the period ended August 31, 2016, no site-based exploration work was conducted on the Luhala Property.

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

Mineralization

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

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

Historical Drilling

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

For additional information regarding the Luhala Property see the Technical Report entitled “National Instrument 43-101F on the Itetemia and Luhala Gold Projects in the Lake Victoria Greenstone Belt,

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Tanzania” prepared for the Company by Venmyn Rand (Pty) Limited and compiled by A.N. Clay, N. McKenna, and R.M. Tayelor dated January 31, 2012 and filed on SEDAR February 1, 2012 (the “Itetemia and Luhala Technical Report”).

The Company has incurred total net costs of $5,853 and written off $8,757 of expenditures on the Luhala Property for the year ended August 31, 2016.

The Luhala Property is without known mineral reserves and any exploration program is an exploratory search for ore.  

Item 4A.

Unresolved Staff Comments

None

Item 5.

Operating and Financial Review and Prospects

This discussion and analysis of the operating results and the financial position of the Company for the years ended August 31, 2016 and 2015, and should be read in conjunction with the consolidated financial statements and the related notes attached hereto.

Critical Accounting Policies

Mineral Properties

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

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

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

The Company reviews the carrying value of a mineral exploration property when events or changes in circumstances indicate that the carrying value may not be recoverable. If the carrying value of the property exceeds its fair value, the property will be written down to fair value with the provision charged against operations in the year of impairment. An impairment is also recorded when management determines that it will discontinue exploration or development on a property or when exploration rights or permits expire.

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

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

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

Impairment of Long-lived Assets

At each date of the statement of financial position, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is an indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash ‐ generating unit to which the assets belong.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre ‐ tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or cash ‐ generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash ‐ generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in the statement of comprehensive loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash ‐ generating unit) in prior years.

The Company’s most critical accounting estimate relates to the impairment of mineral properties and deferred exploration costs.  During the year ended August 31, 2016, the Company wrote off $3,516,268 of costs related to its mineral properties (2015 – $2,233,843).  Management assesses impairment of its exploration prospects quarterly. If an impairment results, the capitalized costs associated with the related project or area of interest are charged to expense.  

Asset Retirement Obligations

The Company recognizes liabilities for statutory, contractual, constructive or legal obligations, including those associated with the reclamation of mineral properties and property, plant and equipment, when those

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obligations result from the acquisition, construction, development or normal operation of the assets. Initially, a liability for an asset retirement obligation is recognized at its fair value in the period in which it is incurred. Upon initial recognition of the liability, the corresponding asset retirement obligation is added to the carrying amount of the related asset and the cost is amortized as an expense over the economic life of the asset using either the unit ‐ of ‐ production method or the straight ‐ line method, as appropriate.  Following the initial recognition of the asset retirement obligation, the carrying amount of the liability is increased for the passage of time and adjusted for changes to the current market ‐ based discount rate, amount or timing of the underlying cash flows needed to settle the obligation.   

A.

Operating Results

The following discussion and analysis of the financial condition and operating results of the Company for the years ended August 31, 2016 and 2015 should be read in conjunction with the consolidated financial statements and related notes to the financial statements which have been prepared in accordance with IFRS.

Overall Performance

As at August 31, 2016, the Company had current assets of $1,032,319, compared to $1,552,416 on August 31, 2015.  The decrease is mainly due to cash outflows in regard toexpenditures on exploration of $688,296 (2015 - $2,529,248), net additions to property, plant and equipment of $88,339 (2015 - $665,099) primarily in connection with the construction of the processing plant, and cash used in operations of $1,914,495 (2015 - $901,062) offset by proceeds from the gold bullion loan financing of $1,729,000 (2015 - $1,852,036), proceeds from the sales-leasebacks of $nil (2015 - $496,559), net proceeds from the convertible senior note financing of $nil (2015 - $684,979) and net proceeds from loans from related parties and proceeds from convertible loans of $354,747 (2015 - $Nil).  Mineral properties and deferred exploration assets were $45,802,858 as at August 31, 2016, compared to $48,150,191 at August 31, 2015.

Net loss for the year ended August 31, 2015 was $12,781,902 compared to a net loss of $8,995,697 in the comparable year ended August 31, 2015.  The main difference in net loss between the two periods is due to the following fluctuations:

-

Lower share based payment expense in the form of a recovery of $38,996 during the year ended August 31, 2016, as compared to $506,747 expense during the year ended August 31, 2015 due to the number of RSU’s forfeited during the current period resulting in a recovery of expense (see note 6 of the audited consolidated financial statements for the years ended August 31, 2016 and 2015 for details of RSU’s issued),

-

A decrease in the salaries and benefits expense of $623,716 for the year ended August 31, 2016, compared to $1,053,384 for the year ended August 31, 2015.  Salaries and benefits decreased after the departure of several officers, directors and employees who left the Company during the year.

-

A decrease in the gain on the revaluation of derivative liability to a loss of $3,905,000 for the year ended August 31, 2016, compared to a gain of $150,000 for the year ended August 31, 2015.  See notes 19 and 22 of the audited consolidated financial statements for the years ended August 31, 2016 and 2015 for details on warrant liability.

-

A decrease in the loss on the amendment of the convertible senior note financing resulting from the amendment of the terms of the convertible senior notes financing on March 25, 2015, which resulted in a loss of $2,034,406 for the year ended August 31, 2015 as compared to $nil in 2016.

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-

A decrease in the gain on the revaluation of derivative liability to a loss of $964,600 for the year ended August 31, 2016, compared to a gain of $324,000 for the year ended August 31, 2015.  See note 6 of the audited consolidated financial statements for the years ended August 31, 2016 and 2015 for details on warrant liability.

-

An increase in write offs of mineral properties to $3,516,268 during the year ended August 31, 2016, compared to $2,233,843 during the year ended August 31, 2015, mainly due to the write down of the Lunguya project during the current period.

-

Interest accretion of $1,028,568, compared to $738,134 in the comparable period in 2015.  Interest accretion in the current period represent interest in connection with the gold loan bullion loans, which increased as compared to the year ended August 31, 2015.  Interest accretion in the comparative period mainly represent interest in connection with the convertible senior notes, which were fully converted during the year ended August 31, 2015.

The remainder of the expenses primarily decreased in comparison to the prior period as the Company looked to be more cost effective as it worked towards securing additional financing and moving its Buckreef project into production.  These variances are further discussed below.

During the year ended August 31, 2016, the Company issued 50,000 shares (2015 – 174,608 shares) pursuant to the RSU plan with a value of $120,500 (2015 - $729,778).  The Company also issued 536,137 (2015 – nil) shares with a value of $372,130 (2015 - $nil) in connection with interest payments related to the bullion loans outstanding.  The Company issued 75,000 (2015 – nil) shares with a value of $26,250 (2015 - $nil) for services during the period.  In the comparative period, the Company issued 400,000 shares with a value of $264,000 in connection with a finder’s fee related to the convertible senior note financing completed in December 2014, and 500,000 shares with a value of $250,000 in connection with the March 25, 2015 amendment to the terms of the convertible senior note financing that was originally completed in December 2014.  Similarly, during the current year, 320,543 shares with a value of $477,609 were issued as financing fees for the gold loans closed during the year.  The convertible senior notes were fully converted during the year ended August 31, 2015 through the issuance of 5,010,518 shares with a value of $1,958,397 through redemptions by the lender pursuant to the redemption option held by the lender in connection with the terms of the convertible senior note financing.  In the current period, capital was utilized for the Buckreef Gold Project development, property acquisition, exploration, capital equipment purchases and general operating expenses as tabulated below.  The remaining funds/cash liquid assets, when available, are invested in interest bearing investments, which are highly liquid.

	C$ (000)
Funds available August 31, 2015	768
Net proceeds (repayments) from sales-leasebacks	(76)
Equipment purchases	(88)
Mineral property expenditures including licences, environmental and exploration, net of recoveries	(688)
Proceeds from gold bullion loan	1,729
Other loans	355
General corporate expenses	(1,915)
Funds available August 31, 2016	$85

At August 31, 2016, the Company had a working capital deficiency of $11,836,214 (August 31, 2015 – $4,684,253 working capital deficiency), had not yet achieved profitable operations, has accumulated losses

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of $90,600,819 (August 31, 2015 – $77,970,955) and expects to incur further losses in the development of its business. The Company will require additional financing in order to conduct its planned work programs on mineral properties, meet its ongoing levels of corporate overhead and discharge its future liabilities as they come due.

Based on the Company’s current funding sources and taking into account the working capital position and capital requirements at August 31, 2016, these factors indicate the existence of a material uncertainty that raises substantial doubt about the Company’s ability to continue as a going concern and is dependent on the Company raising additional debt or equity financing. The Company must obtain additional funding in order to continue development and construction of the Buckreef Project. The Company presently does not have adequate resources to maintain its core activities for the next fiscal year or sufficient working capital to fund all of its planned activities.  The Company is continuing to pursue additional financing to fund the construction of the Buckreef Project and additional projects. However there is no assurance that such additional funding and/or project financing will be obtained or obtained on commercially favourable terms.  Force majeure which was in effect at the Company’s Buckreef Project in Tanzania as described in Note 4 of the audited consolidated financial statements for the years ended August 31, 2016 and 2015 was lifted on June 9, 2016.

Additional funding may be derived from revenues generated in the future from operation of its heap leach mine.  Management continues to explore alternative financing sources in the form of equity, debt or a combination thereof; however, the current economic uncertainty and financial market volatility make it difficult to predict success.  Risk factors potentially influencing the Company’s ability to raise equity or debt financing include:  the outcome of the feasibility study at the Buckreef Project, mineral prices, the risk of operating in a foreign country, including, without limitation, risks relating to permitting, and the buoyancy of the credit and equity markets.  

Due to the current low interest rate environment and lack of funds, interest income is not expected to be a significant source of income or cash flow.  Management intends to monitor spending and assess results on an ongoing basis and will make appropriate changes as required.

Trends

·

There are significant uncertainties regarding the prices of precious and base metals and other minerals and the availability of equity and debt financing for the purposes of mineral exploration and development.  The prices of precious and base metals have been subject to extreme volatility over recent periods, as such the Company remains cautious;

·

The Company’s future performance is largely tied to development of the Buckreef project and other main projects and outcome of future drilling results; and

·

Current financial markets are likely to be volatile in Canada for the remainder of the year, reflecting ongoing concerns about the stability of the global economy.  As well, concern about global growth may lead to future drops in the commodity markets.  Uncertainty in the credit markets has also led to increased difficulties in borrowing or raising funds.  Companies worldwide have been negatively affected by these trends.  As a result, the Company may have difficulties raising equity and debt financing for the purposes of base and precious metals exploration and development.

These trends may limit the Company’s ability to discover and develop an economically viable mineral deposit.

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Results of operations

Fiscal year ended August 31, 2016 compared to fiscal year ended August 31, 2015

Net additions to mineral properties and deferred exploration costs for the year ended August 31, 2016 were $1,168,935, net of recoveries from the sale of gold of $279,203, compared to $3,331,566 for the year ended August 31, 2015.  The amount has decreased as compared with the prior year as the Company has had to allocate limited resources on core and crucial activities at the Buckreef property and other properties to keep the properties in good standing due to the limited financial resources as a result of difficult market conditions.  During the comparable period, the Company was in the process of actively bringing the Buckreef into production and as such incurred higher additions as compared to the current period once the financial difficulties hit the Company beginning with the second quarter in 2015.  As the Company was under Force Majeure on its Buckreef Project for much of the year, only limited expenditures to keep the project ongoing were incurred.

The Company also incurred property, plant and equipment additions of $157,862 (2015 - $668,005).  The amount was higher during the comparative period as the Company continued to finalize construction of the heap leach pads and processing plant which began during the year ended August 31, 2014.  Exploration activities have reduced as the Company was under Force Majeure on its Buckreef project for much of the year, and is working to continue towards the commencement of production and continue exploration work on other projects in its portfolio and at the same time is conscious about conserving its cash in the current economic downturn.  

Net loss for the year ended August 31, 2016 was $12,781,902, compared to a net loss of $8,995,697 for the comparable year ended August 31, 2015.   For the three month period ended August 31, 2016 and 2015, there was a net loss of $5,509,566 compared to a net loss of $2,030,188, respectively.  The main difference in net loss between the comparable periods ended August 31, 2016 and 2015 is mainly due to the variances discussed above.  

Variances in the remaining expenditures is set out below:

For the year ended August 31, 2016, depreciation expense was $478,699, compared to $384,708 for the year ended August 31, 2015. The increase of $93,991 is due to additions to property, plant and equipment over last year resulting in higher amounts of depreciation on overall capital assets. The capital expenditure for the year ended August 31, 2016 was $157,862 as compared to $668,005 in the year ended August 31, 2015.  Capital expenditures were higher in the comparable period and commencing from the fourth quarter of fiscal 2014 due to construction of the heap leach pads and processing plant.  The processing plant is currently not yet being depreciated as it is currently still under testing and commissioning.

Consulting fees for the year ended August 31, 2016 were $432,316, compared to $246,147 in the comparable year ended August 31, 2015.  Consulting expenses increased during the current period as the Company hired consultants in an effort to advance its Buckreef project.  The consultants were hired to advise in regards to the status of the processing plant and any modifications and changes to the operational process.  Consulting fees for the three months ended August 31, 2016 were $204,446 compared to $98,337 in the comparable period ended August 31, 2015. The expense for the three month period increased due to the same reason as the increase for the year.  

Directors’ fees for the year ended August 31, 2016 were $285,188, compared to $367,524 in the comparable year ended August 31, 2015.  For the three month period ended August 31, 2016, director fees amounted to $54,890 (2015 - $129,702).  The amount decreased as compared to the same period in the prior

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year due to director resignations during the year as well as lower RSU expense in the current period, driven by lower stock prices for most of the year.

Office and general expenses for the year ended August 31, 2016 were $246,938, compared to $326,088 in the comparable year ended August 31, 2015.  Office and general costs decreased between the comparable periods due to cost reduction measures across all areas of the Company in light of the current economic conditions and resources available to the Company.  For the three month period ended August 31, 2016, office and general expenses were $87,752 compared to $128,983 in the comparable period ended August 31, 2015. The expense for the three month period increased due to the same reason as the increase for the year.  

Shareholder information costs for the year ended August 31, 2016 decreased to $249,645 from $361,265 for the comparable year ended August 31, 2015. The decrease is due to the additional reporting requirements in connection with the convertible senior note financing and operational updates during the comparable quarter.  For the three month period ended August 31, 2016, shareholder information costs were $99,299 compared to $17,167 for the three month period ended August 31, 2015.  The reason for the increase for the three month period is due to various filings and activity close to the end of the year as the Company lifted force majeure and worked towards the financings closed subsequent to year end.  

Professional fees decreased by $292,871 for the year ended August 31, 2016 to $387,177 from $680,048 for the year ended August 31, 2015.  Professional fees were higher during the comparable quarter as the Company dealt with tax litigation in Tanzania, increased accounting costs surrounding the convertible senior note financing transaction and various business consulting fees on strategy regarding financings.  For the three month period ended August 31, 2016 professional fees went from $244,297 for the three month period ended August 31, 2015 to $127,180.  The expense for the three month period decreased due to the same reason as the decrease for the year.  

Salaries and benefits expense decreased to $623,716 for the year ended August 31, 2016 from $1,053,364 for the year ended August 31, 2015.  Salaries and benefits decreased as the Company moved towards using consultants in the place of salaried employees which carries a lower cost than having salaried employees as well as the Company reducing its workforce wherever possible in an effort to minimize costs.  The expenses for the corresponding three month period ending August 31, 2016 and 2015 were $57,778 and $279,072 respectively.  

Share based payments for the year ended August 31, 2016 resulted in a recovery of $38,996, compared to an expense of $506,747 in the comparable year ended August 31, 2015.  Share based payments vary depending on the number of equity based compensation options issued and vesting.  See note 6 of the audited consolidated financial statements for the years ended August 31, 2016 and 2015 for details.  The decrease is mainly due to RSUs forfeited during the year.  Director fee RSU expense was $157,813 and $192,468 respectively for the years ended August 31, 2016 and 2015.  

For the year ended August 31, 2016, travel and accommodation expense increased by $3,174 from $58,507 in 2015 to $61,681.  For the three months ended August 31, 2016 and 2015, travel and accommodation expense increased by $664 from $22,562 in 2015 to $39,773. Travel and accommodation expense increased in the fourth quarter due to timing of travel during the year but remained consistent overall with the previous year.   

For the year ended August 31, 2016, the foreign exchange gain was $111,352 compared to an exchange gain of $390,459 for the same year ended August 31, 2015.  The Tanzanian Shilling exchange rate increased from 1,587 at August 31, 2015 to 1,635 at August 31, 2016.  The US Dollar exchange rate increased from 1.3157 at August 31, 2015 to 1.312 at August 31, 2016.

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The interest accretion expense for the year ended August 31, 2016 was $1,028,568, compared to $738,134 for the year ended August 31, 2015. Interest accretion in the current period represent interest in connection with the gold loan bullion loans, which increased as compared to the year ended August 31, 2015.  Interest accretion in the comparative period mainly represent interest in connection with the convertible senior notes, which were fully converted during the year ended August 31, 2015.

During the nine month period ended May 31, 2016, the Company agreed to abandon and wrote off $3,516,268 in expenses in various project areas (2015 – wrote off $2,233,843) (see note 4 of the audited consolidated financial statements for the three and years ended August 31, 2016 and 2015 for details). The Company is continuously evaluating its mineral properties Licenses and Carry Forward Balances and makes adjustments as deemed necessary to reflect current plans to explore and develop licenses into the future.

A loss of $946,600 (2015 – gain of $324,000) was recognized during the year ended August 31, 2016 in connection with the revaluation of the warrant liability.  Warrant liability is revalued at every reporting period using the Black-Scholes model.  See note 6 of the audited consolidated financial statements for the years ended August 31, 2016 and 2015 for details.

A loss of $3,905,000 (2015 – $150,000 gain) was recognized during the year ended August 31, 2016, in connection with the revaluation of the derivative liability.  The derivative liability is revalued at every reporting period using the Black-Scholes model.  See note 19 and 22 of the audited consolidated financial statements for the years ended August 31, 2016 and 2015 for details.

A loss on the amendment of the convertible senior note financing resulting from the amendment of the terms of the financing on March 25, 2015 as described earlier which resulted in a loss of $nil (2015 - $2,057,506) for the year ended August 31, 2016.

Fiscal year ended August 31, 2015 compared to fiscal year ended August 31, 2014

Net additions to mineral properties and deferred exploration costs for the year ended August 31, 2015 were $3,331,566, compared to $2,329,901 for the year ended August 31, 2014.  The amount has increased as compared with the prior year as the Company has allocated resources on mining of the Buckreef property, as well as a significant cost addition due to the recognition of the asset retirement obligation in the current year of $680,000 as at August 31, 2015 (August 31, 2014 - $Nil).  The Company also incurred property, plant and equipment additions of $665,099 (2014 - $2,412,541) on construction of the heap leach and processing plant.  Exploration activities have reduced as the Company advances its Buckreef project towards the commencement of production and continues exploration work on other projects in its portfolio and at the same time is conscious about conserving its cash in the current economic downturn.  

Net loss for the year ended August 31, 2015 was $8,995,697, compared to a net loss of $2,416,265 for the comparable year ended August 31, 2014.   For the three month period ended August 31, 2015 and 2014, there was a net loss of $2,030,188 compared to a loss of $1,649,399, respectively.  

The main difference in net loss between the comparable years for the year ended August 31, 2015 is mainly due to the variances discussed above.  For the three month period ended August 31, 2015 net loss remained consistent between the two years.

Variances in the remaining expenditures is set out below:

For the year ended August 31, 2015, depreciation expense was $384,708, compared to $258,068 for the

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year ended August 31, 2014. The increase of $126,640 is due to additions to property, plant and equipment over the last quarter of the prior fiscal year resulting in higher amounts of depreciation on overall capital assets. The capital expenditure for the year ended August 31, 2015 was $665,099 as compared to $2,412,541 in the year ended August 31, 2014.  The increase in capital expenditures over historical amounts commencing from the fourth quarter of fiscal 2014 is due to construction of the heap leach pads and processing plant.  The processing plant is currently not yet being depreciated as it is currently still under testing and commissioning.

Consulting fees for the year ended August 31, 2015 were $246,147, compared to $225,914 in the comparable year ended August 31, 2014.  Consulting expenses remained fairly consistent during the current period as the Company decreased its employee base and hired consultants in their place to be more cost efficient.  The increase in consulting fees is offset by a decrease in salaries and benefits as discussed below.  This increase was offset by a decrease in consulting fees as the Company looked to reduce costs wherever possible due to the current economic condition.  Consulting fees for the three months ended August 31, 2015 were $98,337 compared to $173,933 in the comparable period ended August 31, 2014. The decrease in the expense for the three month period is due to the same cost cutting measures as described above.

Directors’ fees for the year ended August 31, 2015 were $367,524, compared to $376,434 in the comparable year ended August 31, 2014.  For the three month period ended year ended August 31, 2014, director fees amounted to $129,702 (2014 - $89,445).  Director fees remained consistent between the two periods.  See note 8 of the audited consolidated financial statements for the years ended August 31, 2015 and 2014 for details on RSU’s granted.

Office and general expenses for the year ended August 31, 2015 were $326,088, compared to $380,631 in the comparable year ended August 31, 2014. Office and general costs decreased between the comparable periods due to cost reduction measures across all areas of the Company in light of the current economic conditions and resources available to the Company.  For the three month period ended August 31, 2015, office and general expenses were $128,983, compared to $107,655 in the comparable period ended August 31, 2014. Office and general expenses remained consistent between the two periods.  

Shareholder information costs for the year ended August 31, 2015 increased to $361,265 from $265,421 for the comparable year ended August 31, 2014. The increase is due to additional reporting requirements in connection with the various financings and operational updates in the current year.  For the three month period ended August 31, 2015, shareholder information costs were $17,167 compared to $18,202 for the three month period ended August 31, 2014. Shareholder information costs for the three month period were consistent with the prior year.

Professional fees increased by $156,689 for the year ended August 31, 2015 to $680,048 from $523,359 for the year ended August 31, 2014.  Professional fees were higher during the current quarter as the Company deals with tax litigation in Tanzania, increased accounting costs surrounding various financing transactions during the year and various business consulting fees on strategy regarding future financings, and other matters as it approaches initial production on its Buckreef project.  For the three month period ended August 31, 2015 professional fees went from $145,803 for the three month period ended August 31, 2014 to $244,297. The increase is due to the same reasons above.  

Salaries and benefits expense decreased to $1,053,364 for the year ended August 31, 2015 from $1,304,895 for the year ended August 31, 2014.  Salaries and benefits decreased as the former CFO left the Company and the new CFO came in at lower rates as well as the Company using consultants in the place of salaried employees which carries a lower cost than having salaried employees.  The expenses for the corresponding three month period ending August 31, 2015 and 2014 were $279,072 and $269,840 respectively. Salaries and benefits were consistent between the two periods.  

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Share based payments for the year ended August 31, 2015 were $506,747, compared to $1,106,517 in the comparable year ended August 31, 2014.  Share based payments vary depending on the number of equity based compensation options issued and vesting.  See note 8 of the audited consolidated financial statements for the years ended August 31, 2015 and 2014 for details.  Director fee RSU expense was $192,468 and $194,682, respectively.  

For the year ended August 31, 2015, travel and accommodation expense decreased by $165,379 from $223,886 in 2014 to $58,507.  For the three months ended August 31, 2015, travel and accommodation expense decreased by $26,056 from $48,618 in 2014 to $22,562. Travel and accommodation expense was particularly high in 2014 due to an increase in travel to Tanzania related to working towards the advancement of projects into future production.   

For the year ended August 31, 2015, the foreign exchange gain was $390,459 compared to an exchange loss of $18,957 for the same year ended August 31, 2014. The years’ Tanzanian Shilling exchange rate increased from 1,503 at August 31, 2014 to 1,587 at August 31, 2015.

Interest expense for the year ended August 31, 2015 was $12,128, compared to income of $65,362 for the year ended August 31, 2014.  Interest income decreased as the average cash balance in interest bearing accounts decreased during the current period.  The expense is a result of interest assessed on taxes due in Tanzania.

The interest accretion expense for the year ended August 31, 2015 was $738,134, compared to $4,779 for the year ended August 31, 2014. The interest relates to the issuance of convertible debt.  Interest accretion was higher as of August 31, 2015 as the Company raised funds through the convertible senior note financing closed in December 2014.  The Company also incurred finance costs of $196,525 (2014 - $Nil) in relation to interest payments on the convertible senior note financing as well as costs related to the gold bullion loans during the year ended August 31, 2015.

During the year ended August 31, 2015, the Company agreed to abandon and wrote off $2,233,843 in expenses in various project areas (2014 – wrote off $1,209,640) from abandoning various licenses; see note 4 of the audited consolidated financial statements for the year ended August 31, 2015 and 2014 for details. The Company is continuously evaluating its mineral properties Licenses and Carry Forward Balances and makes adjustments as deemed necessary to reflect current plans to explore and develop licenses into the future.

A gain of $324,000 (2014 – gain of $3,524,000) was recognized during the year ended August 31, 2015 in connection with the revaluation of the warrant liability.  Warrant liability is revalued at every reporting period using the Black-Scholes model.  See note 8 of the audited consolidated financial statements for the year ended August 31, 2015 and 2014 for details.

A gain of $150,000 (2014 – $Nil) was recognized during the year ended August 31, 2015, in connection with the revaluation of the derivative liability.  The derivative liability is revalued at every reporting period using the Black-Scholes model.  See note 21 of the audited consolidated financial statements for the three and year ended August 31, 2015 and 2014 for details.

A loss on the amendment of the convertible senior note financing resulting from the amendment of the terms of the financing on March 25, 2015 as described earlier which resulted in a loss of $2,034,406 (2014 - $Nil) for the year ended August 31, 2015.

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A loss on redemption of the convertible senior note financing resulting from the redemption option held by the lender in connection with the terms of the convertible senior note financing resulted in a loss of $174,041 (2014 - $Nil) for the year ended August 31, 2015.

A loss on sale of gold bullion resulting from the sale of the gold received in connection with the terms of the gold bullion loan resulted in a loss of $184,810 (2014 - $Nil) for the year ended August 31, 2015.

Inflation

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

Foreign Exchange

The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates.  The Company has offices in Canada, USA, and Tanzania, but holds cash mainly in Canadian and United States currencies.  A significant change in the currency exchange rates between the Canadian dollar relative to US dollar and Tanzanian shillings could have an effect on the Company’s results of operations, financial position, or cash flows.  At August 31, 2016, the Company had no hedging agreements in place with respect to foreign exchange rates.  As a majority of the funds of the Company are held in Canadian currencies, the foreign currency risk associated with US dollar and Tanzanian Shilling financial instruments is not considered significant at August 31, 2016.  

B.

Liquidity and Capital Resources

The Company manages liquidity risk by maintaining adequate cash balances in order to meet short term business requirements.  Because the Company does not currently derive any production revenue from operations, its ability to conduct exploration and development work on its properties is largely based upon its ability to raise capital by equity funding.  Previously, the Company obtained funding via private placements, public offering and various sources, including the Company’s President and CEO.

Based on the Company’s current funding sources and taking into account the working capital position and capital requirements at August 31, 2016, these factors indicate the existence of a material uncertainty that raises substantial doubt about the Company’s ability to continue as a going concern and is dependent on the Company raising additional debt or equity financing. The Company must obtain additional funding in order to continue development and construction of the Buckreef Project. The Company is continuing to pursue additional financing to fund the construction of the Buckreef Project and additional projects. However there is no assurance that such additional funding and/or project financing will be obtained or obtained on commercially favourable terms. These consolidated financial statements do not give effect to any adjustment which would be necessary should the Company be unable to continue as a going concern and, therefore, be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the consolidated financial statements.

As of August 31, 2016, the Company’s working capital position was a negative working capital of $11,836,214 (August 31, 2015 – $4,684,253 negative working capital).  As the Company’s mineral properties advance, additional equity and debt financing will be required to fund exploration and mining activities.  Additional funding may be derived from revenues generated in the future from anticipated completion and operation of its heap leach mine currently under development.  

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Some of the Company’s mineral properties are being acquired over time by way of option payments.  It is at the Company’s option as to whether to continue with the acquisition of the mineral properties and to incur these option payments.  

2014 Convertible Senior Note

Initial issuance:

On December 29, 2014, the Company closed out of escrow the issuance of US$10,000,000 in convertible senior notes to an institutional lender. The facility may be increased to US$15,000,000, subject to financial criteria.  

The notes were issued at an 8% discount, with an initial funding amount of US$9,200,000.  The notes are convertible at the option of the lender at a price of US$0.98.  The notes bear interest at 8% per annum, payable monthly.   The lender may opt to receive interest in common shares in lieu of cash at US$0.98 per share .  The notes mature in 24 months and are prepayable in full (if the prepayment amount is funded by new debt) or in part (if the prepayment amount is funded by equity) at the option of the Company after 6 months at a price equal to 107% of the principal being repaid . The lender may redeem 7.5% of principal monthly commencing in March, 2015 payable in cash or shares at the option of the Company (at a price based on 90% of the then-current volume weighted average trading price ) , subject to certain conditions, including that the volume-weighted average trading price (“VWAP”) of the common shares exceeds US$0.60 per share on the payment date and on each of the 20 trading days immediately preceding such date, and that an SEC registration statement is effective for resale of the common shares issuable under the notes .

The initial closing drawdown was US$1,766,588. Subsequent drawdowns may be made based on meeting certain financial conditions, including the Company achieving net free cash flow of at least US$1,050,000 over a quarterly period .  As at February 28, 2015, the Company had not achieved the financial conditions, as such, the cash held in escrow is restricted and unavailable to the Company for use.  As at February 28, 2015, the Company repaid USD$750,000.

On closing, 982,143 warrants were issued to the lender which are exercisable for 5 years at the conversion price of US$0.98.   Any warrants issued to the lender in the future will be exercisable at 115% of the 5-day VWAP of the common shares on the 5 trading days immediately preceding the date of issue.  

The Company incurred $435,174 in direct expenditures relating to securing this financing.  In addition, 400,000 shares and 400,000 warrants were issued as finders fees (Note 5).  The 400,000 warrants are exercisable for 2 years at the conversion price of US$0.98.These costs have been recorded as transaction costs against the convertible senior notes to be amortized over the life of the notes.

Amendment to initial issuance:

On March 25, 2015, the Company amended the terms of its convertible senior note financing, the first drawdown under which successfully closed on December 29, 2014.

The outstanding principal at the time of the amendment was US$9,250,000 representing the original USD$10,000,000 less the payment made as part of the lenders “mandatory redemption option”. The previously escrowed funds were returned to the lender.  Under the amended financing, there is no escrow of funds and the outstanding principal amount of the notes was reduced to US$1,450,000. Interest at 8% per annum is calculated on the reduced principal amount only, effective from March 1, 2015. A maximum of US$300,000 in cash will be repayable in April, 2015, pursuant once again to the lender’s "mandatory

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redemption option."

The reduced amount of outstanding notes remain convertible at the option of the lender at 115% of the 5-day volume-weighted average trading price on the NYSE MKT of the Company's common shares as at December 9, 2014 (being US0.98). The terms of the 982,143 share purchase warrants issued to the lender on closing are unchanged; they remain exercisable for 5 years at the conversion price, and the lender may also opt to receive interest in common shares in lieu of cash at that price. The notes mature in 24 months and are prepayable at the option of the Company 6 months after the original closing. The lender may resume mandatory redemptions of up to US$750,000 monthly commencing in May, 2015 payable in cash or, subject to registration and certain financial criteria, shares at the option of the Company (at a price based on 90% of the then-current volume weighted average trading price).

The lender will be entitled to advance up to an additional US$4,000,000 to the Company in exchange for 8% discount notes subject to the same maturity and repayment terms (and entitlement to share purchase warrants) as currently apply, with a conversion price of US$0.98, subject to downward adjustment to $0.50, from and after September 30, 2015, under certain market conditions. In consideration of the amendments agreed to, the lender will receive 500,000 common shares of the Company.

The loss on amendment is presented net of gains on the conversion option occurring up to the time of amendment.

The balance of the convertible senior note is as follows:

	August 31, 2015                            and 2016
Note issued at face value ($10,000,000 USD)	$       11,626,808
Discount on convertible note ($800,000 USD)	(930,145)
Conversion component of convertible note ($2,934,000 USD)	(3,359,000)
Transaction costs relating to convertible note – shares	(264,000)
Warrants issued to debenture holders	(444,000)
Transaction costs relating to convertible note – broker warrants	(71,000)
Transaction costs relating to convertible note – cash	(435,174)
Amortization of bond discount and transaction costs	540,980
Repayments – cash ($750,000 USD)	(933,825)
Reduction of conversion component on repayment	252,000
Foreign exchange	282,731
Balance, prior to amendment	$         6,265,375
Reduction in notes on amendment	(4,521,501)
Redemption of convertible notes	(1,784,356)
Foreign exchange	40,482
Balance, August 31, 2015 and August 31, 2016	$                        -

Derivative in convertible senior notes:

The conversion option is considered an embedded derivative as it is denominated in USD whereas the Company’s functional currency is the Canadian dollar. The feature is classified as a current liability on the statement of financial position and is carried at fair value as determined by the Black-Scholes option pricing model, with changes in fair value recorded as gains or losses in the statement of comprehensive loss.  

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The assumptions in valuing the embedded derivative on issuance at December 9, 2014 include an expected volatility of 74%, a risk free interest rate of 0.72% and an expected life of 2 years resulting in a fair value on issuance of $3,359,000.  As at August 31, 2015, the derivative in the convertible note was valued at $nil (August 31, 2014 - $nil), as the balance of the convertible notes was converted into shares.

Interest expense related to the Debentures amounted to $172,700 (2014 - $nil), as at August 31, 2015 and is recorded as finance charge in the statement of comprehensive loss. Accretion expense during the year ended August 31, 2015 totaled $540,980 (2014 - $nil).  All interest payments have been paid as of August 31, 2015.

During the year ended August 31, 2015, the lender redeemed $1,784,356 of convertible senior notes which were paid in shares, which resulted in the issuance of 5,010,518 common shares with a fair value of $1,958,397.  The resulting loss on redemption of convertible senior notes of $174,041 (2014 - $nil) is

reflected as a loss for the year ended August 31, 2015.  

Mineral Property Projects

As of August 31, 2016, amounts capitalized in respect of mineral properties were $45,802,858, being a decrease from August 31, 2015 when the balance was $48,150,191.

During the fiscal year ended August 31, 2016, the Company capitalized mineral property exploration costs of $1,168,935 on its mineral resource properties, compared to fiscal 2015 when the Company capitalized mineral property exploration costs of $3,331,566.  

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

C.

Research and Development, Patents and License, etc.

Not applicable.  

D.

Trend Information

No known trend.

E.

Off Balance Sheet Arrangements

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

F.

Tabular Disclosure of Contractual Obligations

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

Item 6.

Directors, Senior Management and Employees

A.

Directors and Senior Management

Directors and Senior Management

A.

Directors and Senior Management

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The following is a list of the Company’s current directors and officers.  The directors named below were elected or re-elected by the Company’s shareholders on March 16, 2016. There are no family relationships between the directors and officers.

Directors and Senior Management

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

Mr. Sinclair is the President and CEO of the Company.  Mr. Sinclair, age 74, devotes his full time to the business and affairs of the Company.

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

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

Dr. Norman Betts , Ph.D., Director

Dr. Betts is an associate professor, Faculty of Business Administration, University of New Brunswick (UNB) and a Chartered Accountant Fellow (FCA). Dr. Betts serves as a Chair of the board of directors of Starfield Resources Inc. and as a director and member of the audit committees of Tembec Inc., New Brunswick Power Corporation, Export Development Canada and Adex Mining Inc.  In June, Dr. Betts was appointed to the Board of Directors of the Bank of Canada.  He is also a co-chair of the board of trustees of the UNB Pension Plan for Academic Employees. He is a former Finance Minister and Minister of Business New Brunswick with the Province of New Brunswick. He was awarded a PhD in Management from the School of Business at Queen’s University in 1992.  Dr. Betts, age 61, devotes approximately 10% of his time to the business and affairs of the Company.

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

Dr. Harvey is a Clinical Psychologist, who for over thirty years has served as a consultant and technical expert on matters relating to substance abuse prevention and mental health promotion to a wide variety of private and governmental programs and agencies in the United States. These include the National Institute of Drug Abuse, the National Institute of Alcoholism and Alcohol Abuse, the Office of Juvenile Justice & Delinquency Prevention, and the National Mental Health Association. He was an Adjunct Professor in the Department of Sociology at Washington University, and a Senior Research Scientist at the Missouri Institute of Mental Health, University of Missouri. He continues to be involved in the formulation of new programs and policies aimed at the betterment of society.  Dr. Harvey will continue to expand the role which the Company has at the local level to ensure that stakeholder interests are addressed.  Dr. Harvey, age 82, devotes approximately 10% of his time to the business and affairs of the Company.

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

A graduate of Trinity College, Toronto, the Royal Conservatory of Music of Toronto and the University of Toronto Law School, Ms. Morrow specializes in corporate and securities law with a particular emphasis on financings, including government and structured finance, corporate governance and mergers and acquisitions.  She has advised Canadian and international corporations on a number of major projects in the financial, communications and resource sectors.  Ms. Morrow is a former member of the Securities Advisory Committee to the Ontario Securities Commission.  Since the inception of the program in 2001, Ms. Morrow has been lead external counsel to Canada Mortgage and Housing Corporation on over $250 billion in fully underwritten global bond issuances under its Canada Mortgage Bond Program, and since 2008 has represented the Canadian federal government on its $125 billion Insured Mortgage Purchase Program, the Canadian equivalent of the U.S. TARP Program.  A past president of the Women’s Law Association of Ontario and recipient of its President’s Award, Ms. Morrow currently serves on the Board of Governors of Trent University where she is a member of its Executive Committee and Chair of its Nominating and Governance Committee .  She is also Chair of The Living City Foundation, the charitable arm of the Toronto and Region Conservation Authority, one of the largest environmental organizations in North America, dedicated to the preservation of a green environment in the Toronto region. Ms. Morrow, age 61, devotes approximately 10% of her time to the business and affairs of the Company.

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Ulrich E. Rath , Director

Mr. Rath has a wide range of experience in the mining industry, and has specific experience in North America, South America including Argentina, Chile and Peru and in South Africa. Mr. Rath was the President and CEO and Director of Chariot Resources Ltd., a junior resource company focused on the exploration, acquisition and development of copper and precious metal mineral deposits in the Andes region of Latin America. In June 2010, Mr. Rath facilitated the sale of Chariot Resources following a global auction. The sale was approved by over 98% of the shareholders of Chariot Resources. As the former President, CEO and Director of Chimera Gold Corp. (previously known as EAGC Ventures), Ulrich Rath was responsible for facilitating the $US67 million acquisition of gold operations in the East Rand region of South Africa that now produce more than 200,000 ounces gold per annum. Subsequently, the Board of Chimera agreed to a 1:1 merger with Bema Gold Corp.  He was formerly CEO and director of Compania Minera Milpo, a medium sized Peruvian zinc mining company.   Mr. Rath was also formerly Vice-President, Corporate Development, for Rio Algom Ltd. from December 1992 to October 1998.  Rio Algom Ltd. was a U.S. reporting issuer, whose common shares were listed on the American Stock Exchange.  Mr. Rath, age 69, devotes approximately 10% of his time to the business and affairs of the Company.

Marco Guidi, B.Com (Hons), CPA, CA , Chief Financial Officer

Mr. Guidi is a Chartered Professional Accountant and holds an Honours Bachelor degree in Business Administration from Wilfrid Laurier University.  Mr. Guidi began his career with an accounting firm where he was as an audit supervisor specializing in serving the audit and tax needs of clients in a variety of industries. He has worked with publicly listed junior mining companies, technology companies, and privately-owned and entrepreneurial companies. In 2010, Mr. Guidi transitioned out of public accounting and is currently serving as Chief Financial Officer, Controller and Accountant for a number of junior mining companies. Mr. Guidi, age 31, devotes 30% of his time to the business and affairs of the Company.

Donna M. Moroney , Corporate Secretary :  

Ms. Moroney has over 30 years of experience in regulatory and corporate compliance in both Canada and the United States, and as a senior officer of various public companies.  As President and owner of Wiklow Corporate Services Inc. since 2008, she assists companies in the resource, financial and technology sectors in maintaining the securities and exchange demands on public companies, as well as keeping them up-to-date on relevant issues, policies and working practices.  Ms. Moroney also assists companies reporting in the U.S. in preparing registration statements, quarterly and annual financial filings and other various facets of meeting U.S. securities requirements.  She also leads workshops that provide a practical guide for public companies in meeting their securities regulatory compliance requirements.  She currently serves as a director or senior officer for seven public companies.  Ms. Moroney, age 55, devotes 30% of her time to the business and affairs of the Company.

Cease Trade Orders

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

(i)

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

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(ii)

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

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

(i)

a cease trade order;

(ii)

an order similar to a cease trade order; or

(iii)

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

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

Penalties or Sanctions

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

(a)

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

(b)

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

Personal Bankruptcies

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

(i)

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

(ii)

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

Conflicts of Interest

There is no existing material conflict of interest between the Company or its subsidiaries and a director or executive officer of the Company or its subsidiaries.  However, certain directors and officers of the Company are and may continue to be involved in the mining and mineral exploration industry through their

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direct and indirect participation in corporations, partnerships or joint ventures which are potential competitors.  Situations may arise in connection with potential acquisitions and investments where the other interests of these directors and officers may conflict with the interests of the Company.  As required by law, each of the directors of the Company is required to act honestly, in good faith and in the best interests of the Company.  Any conflicts which arise shall be disclosed by the directors and officers in accordance with the Business Corporations Act (Alberta) and they will govern themselves in respect thereof to the best of their ability in accordance with the obligations imposed on them by law.

B.

Executive Compensation

Compensation Discussion and Analysis

The adequacy and form of director and officer compensation is reviewed on an annual basis by the Audit and Compensation Committee of the Board of Directors (the “ Board ”) of the Company.  The Audit and Compensation Committee recommends to the Board any adjustments to the compensation payable to directors, officers, and senior staff.  The Audit and Compensation Committee is comprised of three directors: Norman Betts (Chair), William Harvey and Ulrich Rath, all of whom are independent for the purposes of National Instrument 58-101 – Corporate Governance .  

The Audit and Compensation Committee meet to discuss salary matters as required.  Its recommendations are reached primarily by comparison of the remuneration paid by the Company with publicly available information on remuneration paid by other reporting issuers that the Audit and Compensation Committee feels are similarly placed within the same stage of business development as the Company. No consultant or advisor has been retained by the Company to assist in determining compensation.

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

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

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

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

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

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

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

(a)

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

(b)

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

(c)

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

(d)

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

Based on the foregoing definition, the Company had six NEOs for the fiscal year ended August 31, 2016:  James E. Sinclair, President and CEO; Joseph Kahama, former Chairman and COO (Tanzania); Marco Guidi, CFO, Victoria Luis, Corporate Accountant, Peter Zizhou, General Manager and Donna M. Moroney, Corporate Secretary.

The following tables set forth particulars concerning the compensation of the named executive officers for the Company’s last three fiscal years ended August 31, 2016, 2015 and 2014:

Summary Compensation Table

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(1)

US$ exchange average for the year = $1.3269.

(2)

US$ exchange average for the year = $1.2092.

(3)

US$ exchange average for the year= $1.0908.

(4)

US$ exchange = 1.00.

(5)

Valued at $4.89 per RSU granted on April 11, 2012.

(6)

Mr. Kahama resigned as a director, Chairman and COO (Tanzania) on February 6, 2016.

(7)

Valued at $6.28 per RSU granted on May 6, 2011.

(8)

Valued at $2.72 per RSU granted on July 3, 2013.

(9)

Marco Guidi was appointed as CFO on December 31, 2014.

(10)

Valued at $2.41 per RSU granted on September 5, 2014.

(11)

Valued at $3.58 per RSU granted on April 10, 2013.

(12)

Peter Zizhou was appointed as General Manager on March 21, 2015.

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

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Incentive Plan Awards

Outstanding share-based awards and option-based awards