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 following tables set forth and summarize selected consolidated financial data for the Company prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP"). For each of the last five fiscal years, the tables also summarize certain corresponding information prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP").  Canadian GAAP, as applied to the Company, materially differs from U.S. GAAP, as set forth in Note 13 to the consolidated financial statements of the Company.  Unless stated otherwise, reference to dollar amounts shall mean Canadian dollars.

For each of the years in the five year period ended August 31, 2009, 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):

Exchange Rates

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

The following table sets forth the high and low exchange rate for the past six months.  As of August 31, 2009, the exchange rate was CDN $1.0967 for each US$1.00.

B.

Capitalization and Indebtedness

Not Applicable.

C.

Reasons for the Offer and Use of Proceeds

Not Applicable.

D.

Risk Factors

In addition to other information presented in this Annual Report, the following should be considered carefully in evaluating the Company and its business.  This Annual Report contains forward-looking statements that involve risk and uncertainties.  The Company's actual results may differ materially from the results discussed in the forward-looking statements.  Factors that might cause such a difference include, but are not limited to, those discussed below and elsewhere in this Annual Report.  The management of the Company has identified the following risk factors, listed in the view of management in order from most significant to least significant:

We have incurred net losses since our inception and expect losses to continue.  We have not been profitable since our inception.  For the fiscal year ended August 31, 2009, we had a net loss of $4,731,836 and an accumulated deficit on August 31, 2009 of $40,456,470.  The Company has never generated revenues and does not expect to generate revenues from operations until one or more of its properties are placed in production. There is a risk that none of the Company's properties will be placed in production, and that the Company's operations will not be profitable in the future.

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

We 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 prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection.  We 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.  The Company has not defined or delineated any proven or probable reserves or resources on any of its properties.  Although the mineralized material estimates included herein have been carefully 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.

We may not be able to establish the presence of minerals on a commercially viable basis.  Our ability to generate revenues and profits is expected to occur through exploration of our existing properties as well as through acquisitions of interests in new properties.  We 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 our 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.  Our existing or future exploration programs or acquisitions may not result in the identification of deposits that can be mined profitably.

Our competition is intense in all phases of our business.  The Company competes with many companies possessing greater financial resources and technical facilities than itself for the acquisition of mineral interests, as well as for the recruitment and retention of qualified employees.

Our 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.  We require 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.

We have uninsurable risks.  We 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.

We depend 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, Chairman and Chief Executive Officer, and Regina Kuo-Lee, Chief Financial Officer.  Investors must be willing to rely to a significant extent on their discretion and judgment.  We do not have employment contracts with the Chairman and Chief Executive Officer or the Chief Financial Officer.  We maintain key-man life insurance on the Chairman and Chief Executive Officer but not on the Chief Financial Officer or President of the Company.

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

We are subject to the volatility of metal and mineral prices.  The economics of developing metal and mineral properties are affected by many factors beyond our 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 we are exploring are highly speculative and volatile.  Depending on the price of gold or other resources, the Company may determine that it is impractical to commence or continue commercial production.  The price of gold has fluctuated widely in recent years.  The price of gold and other metals and minerals may not remain stable, and such prices may not be at levels that will make it feasible to continue the Company's exploration activities, or commence or continue commercial production.

Our business activities are conducted in Tanzania.  Our mineral exploration activities in Tanzania may be affected in varying degrees by political stability and government regulations relating to the mining industry and foreign investment in that country.  The government of Tanzania may institute regulatory policies that adversely affect the exploration and development (if any) of the Company's properties.  Any changes in regulations or shifts in political conditions in this country are beyond the control of the Company and may adversely affect its business.  Investors should assess the political and regulatory risks related to the Company's foreign country investments.  Our operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, foreign exchange controls, income taxes, expropriation of property, environmental legislation and mine safety.

We may not have clear title to our 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.  In result, there is a risk that we may not have clear title to all our mineral property interests, or they may be subject to challenge or impugned in the future.

We have requirements for and there is an uncertainty of access to additional capital.  At August 31, 2009, the Company had cash of $1,165,746 and working capital of $943,219.   The Company will continue to incur exploration costs to fund its plan of operations and intends to fund its plan of operations from working capital and equity subscriptions from the Company's Chairman and C.E.O.  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.

We have no cash flow from operations and depend on equity financing for our 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.  We may not be able to obtain additional funding to allow the Company to fulfill its obligations on existing exploration properties.  Our failure to obtain such additional financing could result in delay or indefinite postponement of further exploration and the possible partial or total loss of the Company's potential interest in certain properties or dilution of the Company's interest in certain properties.

Conflicts of interest may arise among our board of directors.  Marek J. Kreczmer, Ulrich E. Rath,   Anton Esterhuizen and Norman Betts, directors of the Company, are also directors, officers, or shareholders of other companies that are similarly engaged in the business of acquiring, developing, and exploiting natural resource properties.  Mr. Kreczmer is CEO, Chairman and a director of Hana Mining Ltd., a Canadian company exploring for minerals in Botswana. Mr. Ulrich Rath is a director of Starfield Resources Inc., and 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.  Mr. Esterhuizen is the Managing Director of Pangea Exploration (Pty.) Ltd., a South African company exploring for minerals in Africa and South America.  He is also a Director of NWT Uranium Corp.   Dr. Betts serves as Chair of the Board of Directors of Starfield Resources Inc. and as a director and member of the Audit Committee of Adex Mining Inc. Such associations may give rise to conflicts of interest from time to time if the Company were to enter into negotiations to acquire an interest in a mineral project in which their other companies hold an interest, or the Company were to enter into negotiations to sell or joint venture an interest in its mineral properties to any of these companies.  The directors of the Company are required to act honestly and in good faith with a view to the best interests of the Company and disclose any interest which they may have in any project or opportunity of the Company.  If a conflict of interest arises at a meeting of the board of directors, any director in a conflict will disclose his interest and abstain from voting on such matter.

Penny stock rules may make it more difficult to trade the Company's common shares.   The SEC has adopted regulations which generally define a "penny stock" to be any equity security that has a market price, as defined, less than US$5.00 per share or an exercise price of less than US$5.00 per share, subject to certain exceptions.  Our securities may be covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors such as, institutions with assets in excess of US$5,000,000 or an individual with net worth in excess of US$1,000,000 or annual income exceeding US$200,000 or US$300,000 jointly with his or her spouse. For transactions covered by this rule, the broker-dealers must make a special suitability determination for the purchase and receive the purchaser's written agreement of the transaction prior to the sale.  Consequently, the rule may affect the ability of broker-dealers to sell our securities and also affect the ability of our investors to sell their shares in the secondary market.

Failure to Maintain Effective Internal Controls Could Have a Material Adverse Effect on Our Operations.   We are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments of the effectiveness of our internal controls over financial reporting, and a report by our independent auditors addressing these assessments. During the course of our testing we may identify material weaknesses which we may not be able to remediate for our annual compliance with the requirements of Section 404.  If we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover, effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our stock could drop significantly.

Item 4.

Information on the Company

A.

History and Development of the Company

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

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

The Company is a mineral resource company with exploration stage properties, which means that the Company is engaged in the search for mineral deposits and that the properties are not in development or production.

In January 2009, the Company signed an option and royalty agreement with Kazakh over the Company's twenty-one (21) Mwadui Project area diamond prospecting licenses and applications located in the Lake Victoria Greenstone Belt of Tanzania.  Kazakh has the option to acquire a 100% interest in the licenses by fulfilling various option payments over a 72 month period, whereby the Company will then receive a gross overriding royalty of 1.5% on all diamonds sold, and a net smelter returns royalty of up to 2% on any other minerals produced.

On February 25, 2009, the Company entered into an option and royalty option agreement with Songshan, granting Songshan an option to acquire a 100% interest in the Company's 26 Kabanga nickel licenses and applications located in northwestern Tanzania, by completing certain exploration work over a period of three years, and then making a production decision, subject to a 3% net smelter royalty reserved in favor of the Company.  

In January 2007, the Company concluded an option and royalty agreement with Sloane over a portion of the Company's Itetemia Property and its entire Luhala gold project.  Under the option agreement, the Company granted Sloane the right to earn a beneficial interest ranging from 90% to 100% in currently thirteen (13) prospecting licenses in the Lake Victoria greenstone belt of Tanzania.  Eight (8) of these licenses comprise the Company's Luhala Project (all for a 100% interest), while the remaining five (5) licenses constitute a portion of the Itetemia Project (all for a 90% interest), which is adjacent to Barrick's Bulyanhulu gold mine.

The Itetemia Property, also located in Tanzania, consists of a total of nine (9) contiguous prospecting licenses.  One prospecting license is subject to a 3% net smelter royalty.  The Company has a 90% interest in one of these other prospecting licenses, which is subject to a 2% royalty interest.  The other seven (7) prospecting licenses are owned by the Company.  Under an option agreement dated December 14, 2001 with BEAL, BEAL currently has two (2) prospecting licenses located in the Itetemia Project area, under option with the Company.

In 2003, the Company signed a royalty and option agreement covering prospecting licenses in the Lake Victoria goldfields area of Tanzania with MDN.  There are currently six (6) prospecting licensees subject to this agreement.  Under the agreement, MDN holds the right to earn 100% of the Company's underlying interest in the licenses for an up-front cash payment, plus option payments and property expenditures for each retained licence over the five year life of the agreement, which have been completed.  MDN must also complete a feasibility study and make a production decision by December 31, 2009, and achieve production within 18 months or be subject to cash penalties in lieu of royalty payments.  By agreement between the parties dated January 9, 2007, in consideration for extending the production decision date from December 31, 2008 to December 31, 2009, MDN issued 125,000 common shares of MDN to the Company.  On November 11, 2009 the Company was advised by MDN that a feasibility study and production decision would not be made by December 31, 2009.  In consideration for a second extension of the feasibility study and production decision date to December 31, 2010, MDN has agreed to issue to the Company 125,000 common shares of MDN.   The Company retains the right to escalating net smelter royalties on commercial production that are tied to the price of gold and range from 0.5% below US$250 per ounce to a maximum of 2% at US$380 per ounce.  

The Company currently has royalty agreements with five (5) industry partners covering 68 prospecting licences and applications; 2 of these licenses are under agreement with BEAL; 6 licenses are under agreement with MDN; 13 licenses are under agreement with Sloane; another 21 licenses and applications are under agreement with Kazakh, and the remaining 26 licenses and applications are under agreement with Songshan.

At the present time, the Company's land position totals 136 prospecting licenses (not including pending applications or renewals) in the Lake Victoria Greenstone Belt and Kabanga/Kagera Nickel Belt regions of Tanzania, covering an area of approximately 7,100 square kilometers.    

Exploration activities continued during 2009 on the Company's properties located throughout the Lake Victoria Greenstone Belt.  Drilling with the Company's RC/RAB drill was conducted primarily on the Kigosi property.  There were no significant property acquisitions during the period; other significant property acquisitions and dispositions are discussed below.  

For the year ended August 31, 2009 the Company reported a net loss of $4,731,836.  A total of $1,207,409 of mineral properties and deferred exploration expenses was written off relating to abandoned mineral properties.  The Company's total capital lease obligation as of August 31, 2009 is $39,693.  The Company incurred net deferred exploration expenditures of $3,797,496 during the year ended August 31, 2009.

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:

In January 2009, the Company signed an option and royalty agreement with Kazakh over the Company's 21 Mwadui Project area diamond licenses and applications, located in the Lake Victoria Greenstone Belt of Tanzania.  Kazakh has the option to acquire a 100% interest in the licenses by fulfilling various option payments over 72 months, whereby the Company will then receive a gross overriding royalty of 1.5% on all diamonds sold, and a net smelter returns royalty of up to 2% on any other minerals produced.

On February 25, 2009, the Company entered into an option and royalty agreement with Songshan granting Songshan an option to acquire the Company's interest in its 26 Kabanga nickel licenses and applications located in northwestern Tanzania, by completing certain exploration work over a period of three years, and then making a production decision, subject to a 3% net smelter royalty reserved in favor of the Company.  

The Company entered into a Purchase and Sale Agreement (the "Agreement") with Ashanti dated September 26, 2006 for the repurchase of the Company's rights to the Kigosi property, including all related camp and equipment, along with the purchase of a non-associated property, the Dongo, from Ashanti in a transaction valued at US$900,000. The price of the acquisition will be satisfied by the Company's issuance to Ashanti of a total of 180,058 common shares of the Company, in two tranches and subject to certain conditions consisting of: (i) the issuance and allotment of 160,052 common shares to be issued in consideration of the transfer to the Company of the Kigosi Rights, as defined in the Agreement; and (ii) subject to receipt of ministerial consent from the Tanzanian government to the transfer from Ashanti to the Company of the Dongo Rights, as defined in the Agreement, the issuance and allotment to Ashanti of 20,006 common shares of the Company.  As of August 31, 2009, the issuance of 20,006 common shares of the Company to Ashanti remains outstanding.

In January 2007, the Company concluded an option and royalty agreement with Sloane, a UK-based company, for a portion of its Itetemia Property and its entire Luhala gold project.  Under the option agreement, the Company granted Sloane the right to earn a beneficial interest ranging from 90% to 100% currently in thirteen (13) prospecting licenses in the Lake Victoria greenstone belt of Tanzania.  Eight (8) of these licenses comprise the Luhala Project (all for a 100% interest), while the remaining five (5) licenses constitute the Itetemia Project (all for a 90% interest), which is adjacent to Barrick's Bulyanhulu gold mine.  The earn-in portion of the agreement includes prescribed annual cash payments, firm exploration expenditures and a minimum amount of diamond drilling metreage over the life of the agreement. In addition, the Company will receive a sliding scale net smelter royalty for any mineral discovery that achieves commercial production.  The exploration component of the option agreement called for a work commitment of US$1 million within a two-year period of which US$400,000 was to be incurred in the first year and the remaining amount in the second.  The Company is waiting for confirmation from Sloan that these expenditures have been completed.  Further provisions in the agreement call for the completion of a bankable feasibility study and the announcement of a production decision before the fifth anniversary of the agreement and the achievement of commercial production before the seventh anniversary.

B.

Business Overview

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

The Company's general area of interest has been in the exploration of gold properties, with a primary focus on exploring for gold properties in Tanzania.  Tanzania remains the prime focus of the Company's exploration activities.  Other corporations, including Sloane, Kazakh, Songshan Barrick, Ashanti, MDN, and Newmont, have all funded some of the exploration work on the Company's properties in this area since 1999 under option arrangements, with the exception of properties explored by the Company's subsidiary, Tanzam, which was privately funded, and exploration conducted by the Company.  The Company currently has royalty agreements with five industry partners covering 68 prospecting licences and applications; 2 of these prospecting licences are under agreement with BEAL; 6 prospecting licenses with MDN; 13 licenses with Sloane; 21 licenses and applications with Kazakh, and 26 licenses and applications with Songshan.

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

Plan of Operations

Exploration Activities

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

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

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 may 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.  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. A further mine feasibility study would be prepared to confirm the appropriate mining method based on the metallurgical studies of the ore, and to develop a mining plan.

At any point along this plan of operation, the Company may seek to interest larger mining companies in its mineral properties, which show potential for further development.  It is highly unlikely that the Company would pursue any particular property through to mineral production by itself.  By exploring and developing properties to a point where major mining companies are interested, the Company will leave the risk of mine development and operations to those companies, while retaining a carried interest or royalty from any future production.

During 2009 fiscal year, the Company continued evaluation of all prospecting licenses in its portfolio with a view of offering some of them for royalty agreements to other mining companies.  The evaluation of their potential comprises geological mapping, soil sampling and geophysical interpretations.  

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

Exploration

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

Competition

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

Dependence on Customers and Suppliers

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

Governmental Regulations

The Company's mineral interests in Tanzania are initially held under prospecting licenses granted pursuant to the Mining Act, 1998 (Tanzania) for a period of up to three years, and are renewable two times for a period of up to two years each.  We must pay annual rental fees for our prospecting licenses based on the total area of the license measured in square kilometres, multiplied by US$20.00 per sq. km.  There is also an initial one-time "preparation fee" of US$200.00 per license.  Upon renewal, we pay a renewal fee of US$200.00 per license.  Renewals of our prospecting licenses can take many months and even years to process by the regulatory authority in Tanzania.

All prospecting licenses in Tanzania also require the holder to expend funds in the employment and training of Tanzanian personnel, which expenditures typically amount to US$5,000 per year, and in exploration expenditures, which are set out in the Mining Act, 1998 (Tanzania).  At each renewal, at least 50% of our licensed area must be relinquished.  If the Company wishes to keep the relinquished one-half portion, it must file a new application for the relinquished portion.

We must hold a mining license to carry on mining activities, and a mining license will only be granted to the holder of a prospecting license over the area.  A mining license is granted for a period of 25 years or the life of the mine.  It is renewable for a period not exceeding 15 years.  We do not hold any mining licenses, only prospecting licenses.  Prospecting 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 3% of all gold produced.  The applicable regulatory body in Tanzania is the Ministry of Energy and Minerals.

In July 1999, environmental management and protection regulations under the Mining Act, 1998 (Tanzania) came into force.  An environmental impact statement and an environmental management plan must accompany special mining license, mining license and gemstone mining license applications for mineral rights.  In addition to the establishment of environmental regulations, the Tanzanian Government has improved management procedures for effective monitoring and enforcement of these regulations by strengthening the institutional capacity, especially in the field offices.  The Government has provided rules for the creation of reclamation funds to reinstate land to alternative uses after mining and it has developed guidelines for mining in restricted areas, such as forest reserves, national parks, sources of water and other designated areas.  These regulations have not had any material adverse effect on the Company's operations, which are exploration in nature at this time.

C.

Organizational Structure

The Company has the following four subsidiaries:

⁽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.

D.

Property, Plant and Equipment

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

1

Kigosi Project

Property Description and Location

The Kigosi Project area encompasses approximately 815 square kilometres and currently consists of thirty one- (31) prospecting licenses and applications, principally located within the Kigosi Game Reserve controlled area.  Through prospecting and mining option agreements, the Company has options to acquire interests in 26 licenses.  To maintain the options, the Company is required to make certain expenditures and fund all exploration costs of the properties.  

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

Accessibility, Climate, Local Resources, Infrastructure and Physiography

The property is accessed via air from the city of Dar Es Salaam on the Indian Ocean coast to the city of Mwanza on the southern shoreline of Lake Victoria.  From Mwanza, a moderately maintained tar road accesses the town of Ushirombo, via the towns of Shinyanga and Kahama, around the southern part of the Lake, referred to as Smith Sound.  This trip is approximately 400 km and takes some 5 hours.  From the town of Ushirombo one keeps heading east along the main Burundi tar road for approximately 6 km, where a dirt track allows access into the Kigosi Game Reserve.  The Kigosi Project is almost wholly located within this game reserve.  The Company acquired a permit from the Ministry of Wildlife and Tourism to continue exploration activities in the game reserve throughout the year.  Access to the exploration camp is via this dirt track that has been substantially upgraded by the Company to allow access by four wheel drive vehicles during the rainy season.  The track passes over the Shiperenge River, a tributary to the Nikonga River.

The exploration camp was originally erected by Anglogold Ashanti, near the Game Warden's camp in the vicinity of the Luhwaika gold workings, some 25 km south of the main Burundi road.  The camp is a tented camp with larger permanent structures used for offices and storage facilities that have been upgraded over time by Tancan.  Communications at the camp are via satellite internet and telephone, and a VHF radio system, linked to the Company's Mwanza field office.

The main river in the area is the Nikonga River and its associated tributaries.  This river is a perennial river, which is dry in the winter months and flows during the rainy season that occurs between the months of October and May.  The river is the only close source of water.  It has three large ponds within 5 km from the camp, which the camp utilizes throughout the year.  Drinking water is available at Ushirombo, and is also collected from roof structures at the camp when it rains.  The Nikonga and Kigosi rivers have played a major part in structuring the physiographic landscape in the area.  These rivers drain southwards into the Moyowosi and Njingwe Swamps.  Small undulating granite hills form the topographic highs, and generally trend northwest.  These hills make up approximately 5% of the project area.  The climate is typical of an African tropical climate, being hot during the day and cooling down in the evenings.  Winters are very mild, but a blanket is needed in the early hours of the mornings.  Kigosi fall within a malaria area, and precautions are necessary. Tsetse flies are also present in some parts of the project area.  The region is heavily forested, but has only limited wildlife, chiefly small gazelle and baboons.

Geology and Mineralization

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

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

The Company previously discovered three new gold occurrences on the Kigosi Property, forming a part of the Company's Lake Victoria Goldfield Properties held through its subsidiary, Tanzam.   In April 2009, J.G. Deane, Pr.Sci.Nat and P. Zizhou, Pr.Sci.Nat., completed a NI 43-101 compliant technical report on the Kigosi Project entitled, "Report on 2001 - 2008 Exploration Programs Kigosi Project Area, Ushirombo District, Shinyanga Region, in the United Republic of Tanzania, East Africa" (the "Preliminary Kigosi Report").  The following discussions concerning the Luwaika, Gravel Deposit, and Igunda gold prospects, are excerpted from that report:

Luhwaika Prospect

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

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

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

Gravel Deposit

The Luhwaika Prospect is host to a potential gravel 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 deposit which is easily accessible for mining. The Company is currently conducting more detailed work to determine how much gold occurs in the quartz, and how much free (alluvial) gold is in the system. High grade gravels have so far been identified in three areas: the Luhwaika West reef, the Luhwaika Main reef and the Luhwaika East area.

Igunda Prospect

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

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

Exploration History

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

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

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

With the return of the Kigosi Project Area to the Company, field operations commenced in September 2007. Exploration work including bio-geochem, geophysics and RC drilling were centered on known workings such as the Igunda and Luhwaika Prospects. In addition, prospective gold-in-soil anomalies identified from the initial regional soil surveys of AngloGold-Ashanti were followed up.

Over the past eight years, the Company has conducted extensive exploration over its Kigosi Project Area, focusing mainly on the known Luhwaika artisanal workings that currently remain the main exploration target.

Drilling

Drilling at Kigosi has been under way almost continuously during the past year, with the year-end rainy season being the notable exception. The drilling to date has focused on the Luhwaika and Igunda gold occurrences which occur within the Kigosi Lineament, an airborne magnetic feature that is known to extend for at least 35 kilometres.  In total, some 517 RC holes and 13 diamond drill holes have been drilled at Luhwaika over a strike extent of 3.6 kilometres, covering the Luhwaika Main and West reefs, the Luhwaika East area, and the German workings. Results to date indicate that there are four main targets that warrant a possible resource classification: Igunda reefs, the Luhwaika Main reef, Luhwaika West reef and sub-surface gold bearing gravel deposits that form the surface expression of the collapsed reefs.

The Kigosi property hosts numerous artisanal mining sites that are frequently used for drill-targeting purposes. Among the more interesting geological features on the Kigosi property is the presence of surface gravels that frequently host significant gold values. The current drill program is designed in part to gauge the extent of these surface gravels after which in-house studies will determine the viability of recovering gold from the gravels with a portable recovery plant.

For additional information regarding the Kigosi Property the reader is referred to the complete text of the Preliminary Kigosi Report, which is available online at www.sedar.com , filed on May 6, 2009 under the heading, "Technical Report (NI 43-101)".

The Company has incurred total net costs (after any recoveries) of $9,271,507 on the Kigosi Project to August 31, 2009, of which $3,240,141 was incurred during the most recently completed fiscal year.  

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

Itetemia Property

Property Description and Location

The Itetemia Property currently consists of nine (9) contiguous prospecting licenses and/or new and renewal applications, covering approximately 48 km ² .  Two of these prospecting licenses were optioned from third parties (see the discussion under the sub-heading, "Ownership" below).  In January 2007, the Company concluded an option and royalty agreement with Sloane over a portion of the Company's Itetemia project.  Under the option agreement, the Company granted Sloane the right to earn a beneficial interest ranging from 90% to 100% in the five (5) prospecting licenses comprising a portion of the Itetemia Project (see "Item 4. Information on the Company - Significant Acquisitions and Significant Dispositions" above).  The Itetemia Property is located in the Mwanza Region of the Lake Victoria Greenstone Region, Tanzania, approximately 90 kilometres by air southwest of the city of Mwanza, situated on the south shore of Lake Victoria (see property location map above).  

Accessibility, Climate, Local Resources, Infrastructure and Physiography

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

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

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

Ownership

Prior Ownership

Only two of the prospecting licenses comprising the Itetemia Property, namely, Itetemia and Itetemia North, were previously held by third parties.  With respect to the Itetemia prospecting license, the interest of the Company was acquired from Stamico pursuant to a joint venture agreement dated July 12, 1994 (the "Stamico Venture Agreement").  The Stamico Venture Agreement obligated the Company to make two initial payments of TSh$1,000,000 and US$7,200 to Stamico, both of which were satisfied. With respect to the Itetemia North prospecting license, the interest of the Company was acquired from RSR (Tanzania) Limited by agreement dated April 20, 1995 (the "RSR Royalty Agreement"). The RSR Royalty Agreement obligated the Company to pay a sum of US$35,000, which payment was made.

The Company's Interest

Prior to the Barrick Venture Agreement (defined below), four of the prospecting licenses comprising the Itetemia Property, namely, Itetemia Village, Mwingilo, Ngula and Itetemia East, were indirectly 100% held by the Company; in the case of the Itetemia North prospecting license, the Company held an indirect 100% interest therein, through the Company's subsidiary, Tancan, subject only to the 2% NSR Royalty payable pursuant to the RSR Royalty Agreement. In the case of the Itetemia 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 TSh$1,000,000.

2.

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

3.

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

4.

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

5.

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

6.

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

7.

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

8.

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

9.

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

10.

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

By an option and joint venture agreement dated May 31, 1999 as amended April 24, 2001 between the Company and Barrick (the "Barrick Venture Agreement"), Barrick agreed to provide funding to the Company totalling US$4,000,000.  On November 23, 2004 Barrick advised that they would return the Itetemia Prospecting Licences to the Company (with the exception of PL 2374/03, which is held under an agreement with BEAL with one other prospecting license).

In January 2007, the Company concluded an option and royalty agreement with Sloane over the Company's Itetemia and Luhala gold projects.  Under the option agreement, the Company granted Sloane the right to earn a beneficial interest ranging from 90% to 100% currently in thirteen (13) prospecting licenses in the Lake Victoria greenstone belt of Tanzania.  Eight (8) of these licenses comprise the Company's Luhala Project (all for a 100% interest), while the remaining five (5) licenses constitute a portion of the Itetemia Project (all for a 90% interest), which is adjacent to Barrick's Bulyanhulu gold mine.

History

The exploration history of the Itetemia Property from 2005 to 2009 is summarized as follows:

Geology

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

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

Mineralization

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

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

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

Exploration

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

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

During the period ended August 31, 2009, no direct property work was conducted on the Itetemia property by Sloane.  However, data analysis from past programs on Itetemia continued , as Sloane pursued financing options and a listing on a major stock exchange.

The Company has incurred total net costs (after any recoveries and write offs) of $6,109,586 on the Itetemia Property to August 31, 2009.  

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

Luhala Property

Property Description and Location

The Luhala property is located in Misungwi District of Mwanza Region of Tanzania (see property location map above) .  It lies approximately 70 kilometres south of the city of Mwanza.  The Luhala property consists of eight (8) prospecting licenses and/or new and renewal applications. These prospecting licenses are in good standing with respect to required filings and payments with the Government of Tanzania.  

The Company has a 100% interest in the Luhala prospecting license, and has earned the right to acquire a 100% interest in the Ngobo and Sima prospecting licenses by making a series of payments to the property holder, Widescope Promotion Ltd. ("Widescope"), totaling US$120,000 over six years for the Ngobo license and US$84,000 over six years for the Sima license, which payments have now been completed.  Widescope retains a 2% net smelter returns royalty on both the Ngobo and Sima licenses, which the Company may buy back, in each case, one-half (i.e. 1%) for US$1,000,000. For the Shilalo license, the Company has earned the right to acquire a 100% interest by having made a series of payments to the property owner totaling US$16,000.  The Shilalo property owner retains a 2% net smelter return royalty, of which the Company may buy back one-half (i.e.1%) for US$250,000.  

In January 2007, the Company concluded an option royalty agreement with Sloane for its Luhala property.  Under the option agreement, the Company granted Sloane the right to earn a 100% beneficial interest in the Luhala Project.

The Luhala property covers an area of approximately 47 square kilometres.  The target on the Luhala property is gold stockwork mineralization associated with felsic rock units in dilatational structures.  

Accessibility, Climate, Local Resources, Infrastructure and Physiography

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

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

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

History

Luhala has had a significantly more protracted exploration history than Lunguya, beginning with the initial exploration by the then Tanganyikan Geological Survey in 1947.  The exploration history of Luhala since 2005 to 2009 may be summarized as:

Geology

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

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

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

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

Exploration

During the period ended August 31, 2009, no site-based exploration work was conducted by Sloane on the Luhala Property. The Company expects to see a resumption of exploration when conditions improve in capital markets, and Sloane is able to proceed with its financing plans.

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.  There has been no exploration field work carried out by the Company on the Luhala Property during the fiscal year ended August 31, 2009.  

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

For additional information regarding both the Luhala and Lunguya Properties (see below) please refer to a technical report prepared in accordance with the requirements of NI 43-101 dated February 28, 2003, revised June 2007, entitled, "Report on the 2002 Exploration of the Luhala Concessions and the Lunguya Concessions, Lake Victoria Goldfields District, North-Central Tanzania" by Dr. Jim L. Oliver, Ph.D., P. Geo. (the "Revised Luhala and Lunguya 2002 Report").  The reader is referred to the complete text of the Revised Luhala and Lunguya 2002 Report, which is available at www.sedar.com , filed on August 13, 2007 under the heading, "Other".

The Company has incurred total net costs (after any recoveries) of $3,923,736 on the Luhala Property to August 31, 2009.

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

Lunguya Project Area

Property Description and Location

The Lunguya Property is located in the Kahama District of Tanzania, and the Company's interest therein is held indirectly through Tanzam.  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.  The Lunguya Property currently consists of ten (10) prospecting licenses covering an area of approximately 220 square kilometres.    

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.

Through prospecting and mining option agreements, the Company has options to acquire interests in the ten prospecting licenses.  To maintain the options, the Company is required to make certain expenditures and fund all exploration costs of the properties.  

Accessibility, Climate, Local Resources, Infrastructure and Physiography

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

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

History

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

Geology

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

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

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

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

Mineralization

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

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.  Significant assays obtained during the 2002 diamond drill program at Lunguya are summarized in Table 2 of the Revised Luhala and Lunguya 2002 Report.  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.

Drilling

Two programs of drilling where initiated on the Lunguya property during 2002. This included a seven hole RC program totaling 535 metres completed in late August 2002.  A follow-up diamond drill program consisting of 1175 metres, in 18 boreholes was completed in November and December of 2002.

Core recovery measurements where made on site by a geotechnician of the Company.  RC boreholes (LGRC 01 - 07) utilized the same grid system as the diamond drill program.  The location of all drill collars were marked with concrete monuments.  Drilling was concentrated on the Lunguya Reefs (11 boreholes) with three boreholes completed on the Nyikoboko Reefs.  A series of geological cross-sections and plans (Figures 10 to Figure 18 in the Revised Luhala and Lunguya 2002 Report), summarize the results of these programs.  Both RC and diamond drill data are combined on these sections.  Drill collar locations for 12 diamond holes and 7 RC holes on the Nyamakwenge Reefs are shown on Figure 9 of the Revised Luhala and Lunguya 2002 Report.  Drill logs for diamond drill holes are compiled on Appendix III and for RC holes in Appendix IV of the Revised Luhala and Lunguya 2002 Report.  Assay results for diamond drill holes are compiled in Appendix V and RC assay data in Appendix VI of the Revised Luhala and Lunguya 2002 Report.

Exploration

Limited exploration activities were carried out on the Lunguya property during fiscal 2009.  A NI 43-101 compliant study is currently being prepared for the Lunguya project, and this report will used to guide future exploration work on the property.

The Company has deferred total net costs (after any recoveries and write offs) of $2,821,694 on the Lunguya Property to August 31, 2009.  

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

Biharamulo/Tulawaka Project Area

Property Description and Location

The Biharamulo/Tulawaka Project Areas are located in the Biharamulo District of Kagera Region of Tanzania and is approximately 160 kilometres west-southwest of Mwanza.  The Biharamulo/Tulawaka Project consists of sixteen (16) prospecting licenses.   These prospecting licenses are in good standing with respect to required filings and payments with the Government of Tanzania.  Six of the Biharamulo/Tulawaka prospecting licenses are under option to MDN.  The Biharamulo/Tulawaka Project covers an area of approximately 280 square kilometres.  The properties lay on an east-west magnetic trend, between the Kakindu gold discovery (Ashanti) and the Tuluwaka gold discovery (Pangea).    

Geology and Mineralization

The Tulawaka Project Area is located in the western sector of the Rwamagaza Greenstone Belt.  One prospecting license is underlain predominantly by granite and the remainder have mixed assemblages of both granite and greenstone.  The Rwamagaza Greenstone Belt is located in the Lake Victoria Gold Belt.  The southern part of the Gold Belt (the Sukumaland greenstones) consists of two concentric belts, separated by granite.  The inner belt, the Rwamagaza belt, comprises mainly mafic volcanics of the lower Nyanzian System.  The principal ore deposit in the region is the Tulawaka deposit (±1 mil ounces of gold) owned by BEAL.

The Rwamagaza Greenstone Belt is an east-west trending belt.  The dip of the greenstones is generally sub-vertical.  This belt is renowned for its artisanal laterite workings with Matabi (±200,000 ounces of gold), being the largest.  Regionally, and crosscutting the belt in the Tulawaka area, is a set of parallel regional shear structures, referred to as the Muhama Dislocation.  This dislocation can be traced from Golden Pride Mine in the Nzega Belt, through the Miyabi region and through Tulawaka.  These structures are spatially related to a host of gold occurrences, including Golden Pride, Chocolate Reef, Miyabi, Nyakafuru and Tuluwaka.  These structures crosscut the Rwamagaza Belt in the vicinity of Tulawaka.  The loci for gold mineralization are typically at the intersection of parallel second order structures, and structures with a different orientation (often north-south).

Exploration

Some notable exploration successes were reported by MDN which has a number of licenses under option from the Company in the Tulawaka area of Tanzania.  In September and October of 2006, MDN tested several gold targets on its 102.9 km² Nyantimba licenses 15 kilometres north of the Tulawaka gold mine.  A total of 53 RC holes were drilled as a follow-up to the previous year's rotary air blast (RAB) program which produced a significant discovery of mineralization in the Viyonza zone.  Assay results from the 2,689 metres of drilling included 2.0 metres grading 35.95 g/t, 3.0 metres averaging 17.15 g/t and 2.0 metres of 13.18 g/t.

A second discovery of mineralization was made by MDN on ground optioned from the Company in the Mnezeki area 20 kilometres east of the Tulawaka Gold Mine. This discovery returned one of the highest grade gold intercepts reported from the region in recent years: 30.08 g/t gold over 6.0 metres.  Further assay results were reported by MDN from the Mnezeki area in August 2007 including 8.0 metres averaging 2.41 g/t.  A total of 1,736 metres of RC drilling and 1,252 metres of RAB drilling have been completed on the Mnezeki Project.  Follow-up work failed to find extensions to previously defined mineralization.

A soil geochemical program conducted by MDN on the Viyonza Project in 2007 significantly increased the size of the area previously targeted for exploration. The 102.9 km² Viyonza Project is located approximately 15 km north of the Tulawaka Gold Mine in Tanzania and is the subject of an option agreement with the Company.  Additional soil sampling is planned on the Viyonza Project to evaluate several favorable areas at the contact between the granodiorite and the volcanic rocks.  Follow-up work is planned by MDN on the Isozibi occurrence, which is located about 17 kilometres northwest of the Tulawaka Gold Mine process plant.

The Company has deferred total net costs (after any recoveries and write offs) of $711,872 on the Biharamulo/Tulawaka Properties to August 31, 2009.  

THE BIHARAMULO/TULAWAKA PROPERTIES ARE WITHOUT KNOWN MINERAL RESERVES AND ANY EXPLORATION PROGRAM IS AN EXPLORATORY SEARCH FOR ORE.

Ushirombo Project Area

Property Description, Location, Access, and Infrastructure

The Ushirombo Project consists of seven (7) prospecting licenses and three (3) pending applications, and encompasses an area of approximately 235.45 square kilometres within one of the principal Archaean greenstone belts of Tanzania, the Ushirombo Greenstone Belt, in the southwestern part of the Lake Victoria goldfields.  The property is located about 30 kms southeast of the Tulawaka gold mine, held 70% by Pangea Minerals Ltd., a subsidiary of Barrick, and 30% by MDN.   The project area is easily accessed by road, the tarred highway from Mwanza to Burundi via Shinyanga and Kahama, through the southwest of the property.  The large village of Ushirombo lies on the highway within one of the project's licenses.  This serves as the headquarters for the Bukombe District with the offices of the District Commissioner and the District Courthouse.

Geology and Mineralization

The Ushirombo property occurs in the same structural setting as the Tulawaka Gold Mine which is located 30 kilometres to the northwest. Ushirombo and Tulawaka share many similar geological characteristics including quartz rubble zones that frequently carry significant gold values. Recent work, including exploration drilling, has shown that some of the greenstone belts are more extensive than previously realized including those on the Company's holdings.

Exploration

In January 2009, the Company prepared a new geological interpretation of the Ushirombo property, integrating airborne magnetic/radiometric data, mapping data and rotary drilling (RAB) results. The Company subsequently identified the "Ushirombo Gold Corridor" (UGC), a 12 kilometre long by six kilometre wide northwest-trending zone, as a prime target area. The UGC contains the areas of historic and current artisanal gold mining and is traversed by the principal regional structures that appear to be associated with the gold mineralization.

In the coming months, the Company will focus on confirming significant drill intersections completed in earlier programs, ascertaining the existence at depth of gold-in-quartz mineralization sampled on surface, and extending the gold mineralization in the principal artisanal workings.

For additional information regarding the Ushirombo Property the reader is referred to the complete text of a technical report prepared in accordance with the requirements of NI 43-101 dated August 31, 2009, entitled, "Report on the Ushirombo Mineral Exploration Property of Tanzanian Royalty Exploration Corporation in the Bukombe District, Shinyanga Region of the United Republic of Tanzania, East Africa" by Martin J. Taylor, P.Geo.  The Preliminary Ushirombo Report is available online at www.sedar.com , filed on September 23, 2009 under the heading, "Technical Report (NI 43-101)".

The Company has deferred total net costs of $76,516 on the Ushirombo Property to August 31, 2009.

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

Kibara Project Area

  Property Description, Location, Access, and Infrastructure

The Kibara Project consists of six (6) prospecting licenses and five (5) application areas covering a contiguous area of approximately 376 square kilometres on the eastern shore of Lake Victoria in northern Tanzania.  The area typically has two rainy seasons, the "small rains" from mid-November through December and the "big rains" from mid-March into May, though significant rain often falls in January and February.  The months of June through October are usually dry, with occasional thunderstorms.  Access along the dirt tracks within the PLs may be impaired directly after heavy rainfall, though exploration activities should not be seriously affected during a normal rainy season unless access is required across areas of mbuga soils.  

The property is centred approximately 50 kilometres west of the district headquarters in Bunda.  Principal access is north to Bunda from Mwanza on the paved highway that continues to Nairobi and Kenya.  From Bunda a graded gravel road extends west to Nansio on Ukerewe Island in Lake Victoria, passing through the southern edge of the Kibara property.  The large village of Kibara is located on the Bunda-Nansio road just south of the centre of the property.  Small villages, hamlets and farms are scattered throughout the property.  Fishing on Lake Victoria is the principal activity of the communities are the lake shore.

Geology and Mineralization

The regional geological mapping published by Barth in 1990 shows the western half of the property to be largely underlain by volcanic rocks and the eastern half underlain by granites.  In February 2009 the Company prepared a new geological interpretation map from the geochemical, regolith, outcrop and satellite image data.  Unfortunately, the area falls outside the coverage of the government airborne magnetic survey.  This mapping confirmed the dominantly granitic eastern half of the area with a raft of mafic volcanic and a western half dominated by various greenstone lithologies and minor intrusives.

Exploration

The Company commenced exploration on the Kibara project in August 2002 with mini-BLEG sampling.  This was followed by rock and termite mount sampling to validate BLEG anomalies and then by trenching, biogeochemical (BGC) sampling and gradient IP surveys.  None of the geochemical or other targets have yet been testing with any form of drilling.  

The next phases of work at the Kibara Project could focus on initial RAB and/or RC drilling on the principal targets at Nyakona Hill and other artisanal workings with the object to confirm the existence at depth of gold/copper-in-quartz mineralization sampled in the trenches at Nyakona Hill and to extend the gold mineralization in the artisanal workings.  

For additional information regarding the Kibara Property the reader is referred to the complete text of a technical report prepared in accordance with the requirements of NI 43-101 dated October 31, 2009, entitled, "Report on the Kibara Mineral Exploration Property of Tanzanian Royalty Exploration Corporation in the Bunda District, Mara Region of the United Republic of Tanzania, East Africa" by Martin J. Taylor, P.Geo.  The Preliminary Kibara Report is available online at www.sedar.com , filed on November 16, 2009 under the heading, "Technical Report (NI 43-101)".

The Company has deferred total net costs of $80,746 on the Kibara Property to August 31, 2009.

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

Kabanga/Kagera Nickel Property

Property Description and Location

The Kabanga/Kagera Nickel Property consists of 25 prospecting licenses.  The prospecting licenses acquired by the Company cover an area of approximately 3,888 square kilometres within the Kagera Fold Belt of northwestern Tanzania.  Management recognized that base metal prices - especially nickel - were destined to move substantially higher, based on demand from China, which has been industrializing at a pace that is arguably without historical precedent.  With this positive demand outlook as an economic driver, the Company applied for open ground within the Kabanga Nickel Belt that was considered to be favorable for hosting magnetic anomalies or differences in the earth's magnetic field. These magnetic anomalies are often associated with economic mineral deposits, one of which has been discovered in the belt to date.  On February 25, 2009, the Company entered into an option and royalty agreement with Songshan, granting Songshan an option to acquire the Company's interest in its Kabanga nickel licenses located in northwestern Tanzania, subject to a 3% net smelter royalty reserved in favor of the Company.  

Geology and Mineralization

The Kabanga Nickel Belt hosts the Kabanga nickel deposit (Barrick Gold/Xstrata plc), which is presently in the feasibility stage and was discovered by the United Nations Development Program (UNDP) during the 1970s.  The actual discovery was made following a comprehensive geochemical and geophysical program that identified a chain of coincident airborne magnetic and geochemical anomalies within a 20-30 kilometres wide northeasterly trending belt that extends for over 200 kilometres.

Exploration

One of the prospecting licenses is located within a zone of two parallel magnetic highs that extends down to the Kabanga Nickel deposit, while another license hosts a 50 kilometres long magnetic anomaly whose geophysical signature is of similar intensity to the Kabanga nickel deposit.  Moderate nickel-in-soil anomalies are evident on some of the licenses as well.  

The Company has deferred total net costs of $51,756 on all of the Kabanga Nickel properties to August 31, 2009.  Any future exploration work will be at the cost of Songshan.

THE KABANGA/KAGERA NICKEL PROPERTY IS WITHOUT KNOWN MINERAL RESERVES AND ANY EXPLORATION PROGRAM IS AN EXPLORATORY SEARCH FOR ORE.

Biogeochemistry

The Company's expertise in biogeochemistry (BGC) remained an integral component in its first pass evaluation of favorable geological environments in the Lake Victoria Greenstone belt.  A key component in the Company's optimization of its exploration process is the deployment of BGC techniques in its field programs.  One of the major problems confronting mineral explorers in the Lake Victoria Greenstone Belt - and for that matter in most other greenstone belts in the world - is the presence of deep overburden, which frequently masks the existence of favorable host rocks for gold, diamonds and other mineral commodities.  

Biogeochemical protocols have been developed relating to the selection and analysis of sample materials and specially-trained crews have been put into the field to gather samples for analysis. In addition, a biogeochemistry laboratory has been established in Mwanza for the preparation of sample materials which are then sent to independent laboratories.  

Item 4A. Unresolved Staff Comments

Not Applicable

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, 2009, 2008, and 2007, and should be read in conjunction with the consolidated financial statements and the related notes attached hereto.

Critical Accounting Policies

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

In accordance with Canadian generally accepted accounting principles, acquisition costs and exploration and development costs relating to mineral properties are deferred until the properties are brought into production, at which time they are amortized on a unit-of-production basis, or until the properties are abandoned or sold or management determines that the mineral property is not economically viable, at which time the deferred costs are written off.  Option payments on mineral properties are exercisable at the discretion of the Company and, accordingly, are only recognized as paid.

Amounts recovered from third parties to earn an interest in the Company's mineral properties are applied as a reduction of the deferred exploration costs.  The amounts shown as deferred expenditures and property acquisition costs represent net costs to date, less amounts amortized and/or written off, and do not necessarily represent present or future values.

Overhead costs directly related to exploration are allocated to the mineral properties explored during the year and are deferred and amortized using the same method applied to property-specific exploration costs.  All other overhead and administration costs are expensed in the year they are incurred.

For the purposes of United States generally accepted accounting principles ("US GAAP"), the Company expenses all exploration expenditures made prior to commercially mineable deposits being identified.  Property acquisition costs are capitalized as incurred and are subject to impairment analysis on occurrence of a triggering event.   See Note 13 of the Consolidated Financial Statements of the Company.

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

A.

Operating Results

The following discussion and analysis of the financial condition and operating results of the Company for the years ended August 31, 2009, 2008 and 2007 should be read in conjunction with the Consolidated Financial Statements and related notes to the financial statements which have been prepared in accordance with Canadian GAAP.  The discussion and analysis set forth below covers the results measured under Canadian GAAP.  Material differences between the application of Canadian GAAP and U.S. GAAP to the Company's audited financial statements exist as described in Note 13 to the Consolidated Financial Statements.

Overview

As of August 31, 2009, the Company had current assets of $1,627,000 as compared to $1,811,000 on August 31, 2008.  The decrease of $184,000 in current assets is mainly attributed to decreases in drill inventory.  Mineral properties and deferred exploration costs amounted to $26,950,000 as of August 31, 2009, an increase  of $2,590,000 as compared to $24,360,000 at August 31, 2008. The current year's net expenditures on mineral property exploration is $3,798,000 (2008 - $2,573,000) and the Company recovered $416,000 of exploration costs from its option partners in 2009 (2008 - $390,000). The Company has also recorded a write-down in 2009 of $1,207,000 (2008 - $672,000) on mineral properties abandoned.

Results of operations

Fiscal year ended August 31, 2009 compared to fiscal year ended August 31, 2008

The loss before income tax in 2009 was $4,732,000 a $1,034,000 increase from last year's loss before income taxes of $3,698,000. The increase in loss before income taxes in 2009 was due mainly to an increase of write off of mineral properties and deferred exploration costs of $535,000 and an increase in salaries and benefits of $372,000.

During the year, the Company did not enter into any Service Agreements therefore no consulting income was earned (2008 - $88,000).  The foreign exchange loss has decreased by $63,000 from $74,000 for the year ended August 31, 2008 to $11,000 for the year ended August 31, 2009 due to the strength of the Canadian dollar throughout the year.  As there was a decrease in cash and cash equivalents throughout the year less interest income was earned, resulting in a net interest charge of $15,000 in 2009 compared to net interest income of $15,000 in 2008, which is a decrease of $30,000.  During 2009, three   members of the Company's Technical Committee received a monthly retainer.  This increased the consulting and management fee to $277,000 from $230,000 in 2008.

Property investigation costs were $23,000 for the year ended August 31, 2009 as compared to $83,000 for 2008.  The decrease of $60,000 was a result of the Company concentrating on operations in areas where the Company has determined that it will continue exploration.  Transfer agent and listing fees increased from $203,000 in 2008 to $228,000 in 2009 due to an increase in the number of private placements during 2009.  Professional Fees have increased by $87,000 from $395,000 in 2008 to $481,000 in 2009 due to additional legal expense from contract negotiations.

Salaries and benefit expense increased by $371,000 in 2009 to $1,374,000 from $1,003,000 in 2008.  The increase was to the full year effect of Tanzania having imposed minimum taxes in January 2008 and an accrual for severance pay of $132,000.  The effect had only a partial affect on salaries in 2008.  Travel and accommodation expenses were $88,000 for the year as compared to $47,000 in 2008.  The increase of $41,000 was due costs associated with trade shows and contract negotiations in China.

In 2009, stock based compensation decreased by $57,000, due to previously granted Restricted Stock Units having been forfeited.  The expenses incurred in previous years have been reversed in current year expenditure.

For the years ended August 31, 2009 and 2008, the Company did not record any income tax expense or recovery.  

Fiscal year ended August 31, 2008 compared to fiscal year ended August 31, 2007

The loss before income tax in 2008 was $3,698,000 a $223,000 decrease from last year's loss before income taxes of $3,921,000. The decreased in loss before income taxes in 2008 was due to decreases of write off of mineral properties and deferred exploration costs of $593,000, offset by an increase in salaries and benefit expense of $381,000. The increase in salaries and benefit is due to the government of Tanzania implementing a minimum wage program in January 2008.

During the year, the Company earned $88,000 (2007 - Nil) of Consulting income from a service agreement entered into with Sloane Developments Ltd.  The Foreign exchange loss has decreased by $51,800 from $125,000 for the year ended August 31, 2007 to $74,000 for the year ended August 31, 2008 due to the strength of the Canadian dollar in 2008. There was no gain on sale of investment as the Company did not receive any option payments in shares.   Net interest earned decreased in 2008 by $5,000 as there was a decrease in cash and cash equivalent throughout the year.  During 2008, the Company has hired the Scowcroft Group to assist in identifying and negotiating partnership arrangements with qualified third parties.  This increased the consulting and management fee to $230,000.  Press release expense decreased by $38,000 to $17,000 due to a change in news wire distribution agency.

Property investigation costs was $83,000 for the year ended August 31, 2008.  The increase of $52,000 resulted from operations in areas where the Company has determined that it will not continue exploration.  Promotion and shareholder relations expense has decrease by $33,000 due to discontinuation of advertising in mining journals.  Transfer agent and listing fees increased from $129,000 in 2007 to $203,000 in 2008 due to four private placements during 2008.  In 2008, the directors' fee increased by $58,000 and stock based compensation decreased by $29,000 die to an increase in new RSWUs and directors' fees.

For the years ended August 31, 2008 and 2007, the Company did not record any income tax expense or recovery.  

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

B.

Liquidity and Capital Resources

The Company had $1,166,000 in cash at August 31, 2009, compared to $1,195,000 as of August 31, 2008.  The Company had working capital of $943,000 at August 31, 2009, compared to $1,265,000 at August 31, 2008.  Although the Company believes it has enough resources through working capital and share subscription agreements to finance operations for its 2010 fiscal year, ultimately the Company will need to obtain additional financing to sustain operations at the present rate of activity.  The cash position at August 31, 2009 is expected to sustain operations for its 2010 fiscal year.   Historically, the Company has raised funds through equity financing, entering into joint venture or royalty agreements with other mining companies.  The Company's funding requirements by major expenditure category, listed in order of priority are:

(a)

exploration work,

(b)

new property investigations, and

(c)

general and administrative costs.

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

At this time, the Company has no operating revenues, and does not anticipate any operating revenues unless the Company is able to find, acquire, place in production and operate a profitable mining property. Because the Company does not currently derive any production revenue from operations, its ability to conduct exploration and development work on its properties is largely based upon its ability to raise capital by equity funding.  The Company has financed its operations and investments through the issuance of common shares.  During 2009, the Company raised $5,990,000 (2008 - $4,880,000) through the issuance of share capital and share subscriptions.  As described in further detail below, throughout the year, the Company issued 906,209 shares in private placements with Mr. Sinclair, Chairman and CEO of the Company in consideration for cash received of $4,250,000   In addition, the Company has received $1,740,000 for share subscriptions for which 692,401 common shares were issued.

On August 8, 2006 the Company entered into private placement subscription agreement with James E. Sinclair, Chairman and C.E.O. for the purchase of an aggregate of $3,000,000 worth of common shares of the Company in eight separate quarterly tranches of $375,000 each.  The initial quarterly period commenced February 1, 2007.  As of August 31, 2009 all of the eight quarterly tranches have been subscribed for.  

(a)

May 28, 2007 - 66,254 common shares at a price at a price of $5.66 per share;

(b)

August 14, 2007 - 63,345 common shares at a price of $5.267 per share;

(c)

November 13, 2007 - 63,993 common shares at a price of$5.86 per share;

(d)

February 19, 2008 - 61,871 common shares at a price of $6.061 per share;

(e)

May 14, 2008 - 72,268 common shares at a price of $5.189 per share;

(f)

August 14, 2008 - 73,242 common shares at a price of $5.12 per share;

(g)

January 13, 2009 - 69,832 common shares at a price of $5.37 per share;

(h)

February 20, 2009 - 71,977 common shares at a price of $5.21 per share.

On February 13, 2007, the Company completed the eighth (8) tranche of an eight (8) tranche private placement pursuant to a Subscription Agreement dated January 13, 2005 made between the Company and James E. Sinclair, for the purchase of 976,353 common shares for $3,000,000.

On October 26, 2007 the Company completed a $2 million private placement pursuant to a subscription agreement dated October 11, 2007 with James E. Sinclair, for the purchase of 347,222 common shares at a price of $5.76 per share.

On February 19, 2008 the Company completed a $1,000,000 private placement pursuant to a subscription agreement dated February 4, 2008 with James E. Sinclair, for the purchase of 167,196 common shares at a price of $5.981 per share.

On May 14, 2008 the Company completed a $1,725,000 private placement pursuant to a subscription agreement dated May 1, 2008 with James E. Sinclair, for the purchase of 332,434 common shares at a price of $5.189 per share.

On August 7, 2008 the Company completed a $1,000,000 private placement pursuant to a subscription agreement dated July 15, 2008 with James E. Sinclair, for the for the purchase of 184,843 common shares at a price of $5.41 per share.

On October 10, 2008 the Company completed a $1,000,000 private placement pursuant to a subscription agreement dated October 1, 2008 with James E. Sinclair, for 327,225 common shares at a price of $3.056 per share.

On December 9, 2008 the Company completed a $740,000 private placement pursuant to a subscription agreement dated October 29, 2008 with Van Tongeren Management LLC for 352,381 common shares at a price of $2.10 per share.  

On February 1, 2009, James E. Sinclair, confirmed his intention to continue his regular investments in the Company by entering into a new Private Placement Subscription Agreement with the Company under which he agreed to subscribe for common shares of the Company for an aggregate amount of $3,000,000.

On March 4, 2009 the Company completed a $1,000,000 private placement pursuant to a subscription agreement dated February 23, 2009 with James E. Sinclair for 189,036 common shares at a price of $5.29 per share.

On April 14, 2009 the Company completed a $1,500,000 private placement pursuant to a subscription agreement dated March 27, 2009 with James E. Sinclair for 248,139 common shares at a price of $6.045 per share for total proceeds of $1,500,000.

On May 28, 2009 the Company completed a $1,000,000 private placement pursuant to a subscription agreement dated May 6, 2009 with Van Tongeren Management LLC for 340,020 common shares at a price of $2.941 per share.  

Mineral Property Projects

As of August 31, 2009 amounts capitalized in respect of mineral properties were $26,950,000 an increase from August 31, 2008 when the balance was $24,360,343, and an increase from August 31, 2007 when the balance was $22,459,627.

During the fiscal year ended August 31, 2009, the Company capitalized mineral property exploration costs of $3,797,000 (net of option payments received of $416,000) on its mineral resource properties.  The Company wrote off $1,207,000 in exploration expenditures on areas abandoned in the year ended August 31, 2009.

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

Events Subsequent To August 31, 2009

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

On November 11, 2009 the Company was advised by MDN Inc. ("MDN") that a feasibility study and production decision would not be made by December 31, 2009.  In consideration for a second extension of the feasibility study and production decision date to December 31, 2010, MDN has agreed to issue to the Company 125,000 common shares of MDN.

The Company entered into private placement subscription agreements dated November 6, 2009 with arm's length third parties for an aggregate 1,155,835 common shares at a price of $2.718 per share.  The proposed private placements are subject to regulatory approval.

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 following table sets out the Company's known contractual obligations as of the latest fiscal year end:

⁽¹⁾

Includes finance charges

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