20-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

_________________________

FORM 20‑F

_________________________

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

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

For the fiscal year ended August 31, 2013

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

For the transition period from to

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

Date of event requiring this shell company report

Commission File Number 001-32500

TANZANIAN ROYALTY EXPLORATION CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

ALBERTA, CANADA

(Jurisdiction of Incorporation or Organization)

Suite 404 – 1688 152nd Street

South Surrey, BC

V4A 4N2

(Address of Principal Executive Offices)

James Sinclair

Chief Executive Officer

Tanzanian Royalty Exploration Corporation

Suite 404 – 1688 152nd Street

South Surrey, BC

V4A 4N2

Telephone: 604 536-7873

Fax: 604 536-2529

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

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

Common Shares, without Par Value NYSE MKT LLC

(Title of Class) Name of Each Exchange on Which Registered

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

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

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 100,922,582 ..

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

[ ] Yes [ X ] No

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

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

[X ]Yes [ ]No

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

[ ]Yes [ ]No

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

Large accelerated filer [ ] Accelerated filer [ X ] Non-accelerated filer [ ]

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

U.S. GAAP [ ]

International Financial Reporting Standards as issued by the International Accounting Standards Board [ X ] Other [ ]

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

Item 17 [ ] Item 18 [ ]

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

TABLE OF CONTENTS
Cautionary Note to U.S. Investors Concerning Estimates of Mineral Resources			1
Currency			1
Foreign Private Issuer Filings			1
Glossary of Technical Terms			2
Part I			7
Item 1.	Identity of Directors, Senior Management and Advisers		7
Item 2.	Offer Statistics and Expected Timetable		7
Item 3.	Key Information		7
	A.	Selected Financial Data	7
	B.	Capitalization and Indebtedness	9
	C.	Reasons for the Offer and Use of Proceeds	9
	D.	Risk Factors	9
Item 4.	Information on the Company		16
	A.	History and Development of the Company	16
	B.	Business Overview	18
		Plan of Operations	18
		Governmental Regulations	20
	C.	Organizational Structure	21
	D.	Property, Plant and Equipment	21
		Buckreef Property	21
		Kigosi Property	39
		Lunguya Property	43
		Itetemia Property…	46
		Luhala Property	50
		KabangaProperty	52
Item 4.A. Unresolved Staff Comments			54
Item 5.	Operating and Financial Review and Prospects		54
	A.	Operating Results	56
	B.	Liquidity and Capital Resources	60
	C.	Research and Development, Patents and License, etc	62
	D.	Trend Information	62
	E.	Off Balance Sheet Arrangements	62
	F.	Tabular Disclosure of Contractual Obligations	62
Item 6.	Directors, Senior Management and Employees		62
	A.	Directors and Senior Management	62
	B.	Executive Compensation	67
	C.	Board Practices	75
	D.	Employees	81
	E.	Share Ownership	81
Item 7.	Major Shareholders and Related Party Transactions		82
	A.	Major Shareholders	82
	B.	Related Party Transactions	83

- ii -
		C.	Interests of Experts and Counsel	83
	Item 8.	Financial Statements		83
		A.	Consolidated Statements and Other Financial Information	83
		B.	Significant Changes	84
	Item 9.	The Offering and Listing		84
		A.	Offering and Listing Details	84
		B.	Plan of Distribution	86
		C.	Markets	86
		D.	Selling Shareholders	86
		E.	Dilution	86
		F.	Expenses of the Issue	86
	Item 10.	Additional Information		87
		A.	Share Capital	87
		B.	Articles of Association and Bylaws	88
		C.	Material Contracts	90
		D.	Exchange Controls	90
		E.	Taxation	91
		F.	Dividends and Paying Agents	99
		G.	Statement by Experts	99
		H.	Documents on Display	99
		I.	Subsidiary Information	100
	Item 11.	Quantitative and Qualitative Disclosures About Market Risk		100
	Item 12.	Description of Securities Other than Equity Securities		100
Part II				101
	Item 13.	Defaults, Dividend Arrears and Delinquencies		101
	Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds		101
	Item 15.	Controls and Procedures		101
	Item 16 A. Audit Committee Financial Expert			102
	Item 16 B. Code of Ethics			102
	Item 16 C. Principal Accountant Fees and Services			102
	Item 16 D. Exemptions from the Listing Standards for Audit Committees			103
	Item 16 E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers			103
	Item 16 F. Change in Registrant's Certifying Accountant                                                                                                                                                                                                                                                                                                                                                                                        105
	Item 16 G. Corporate Governance			105
	Item 16 F Mine Safety Disclosure			105
Part III				104
	Item 17.	Financial Statements		104
	Item 18.	Financial Statements		105
	Item 19.	Exhibits		105

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

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

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

Currency

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

Foreign Private Issuer Filings

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

1

Glossary of Technical Terms

ABG	ABG Exploration Limited (formerly Barrick Exploration Africa Limited (BEAL).
Ag	The elemental symbol for silver.
alteration	Mineralogical change at low pressures due to invading fluids or the influence of chemical reactions in a rock mass resulting from the passage of hydrothermal fluids.
anomaly	Any concentration of metal noticeably above or below the average background concentration.
assay	An analysis to determine the presence, absence or quantity of one or more components.
Au	The elemental symbol for gold.
background	Traces of elements found in sediments, soils, and plant material that are unrelated to any mineralization and which come from the weathering of the natural constituents of the rocks.
Barrick	Barrick Gold Corp.
BEAL	Barrick Exploration Africa Limited (now ABG Exploration Limited).
BLEG	Acronym for “bulk leach extractable gold” sampling.
Cu	The elemental symbol for copper.
dyke	A tabular body of igneous rock that has been injected while molten into a fissure.
exploration information	Means geological, geophysical, geochemical, sampling, drilling, trenching, analytical testing, assaying, mineralogical, metallurgical and other similar information concerning a particular property that is derived from activities undertaken to locate, investigate, define or delineate a mineral prospect or mineral deposit.
fault	A planar fracture or discontinuity in a volume of rock, across which there has been significant displacement.
Fe	The elemental symbol for iron.
feasibility study	Is a comprehensive technical and economic study of the selected development option for a mineral project that includes appropriately detailed assessments of realistically assumed mining, processing, metallurgical, economic, marketing, legal, environmental, social and governmental considerations together with any other relevant operational factors and detailed financial analysis, that are necessary to demonstrate at the time of reporting that extraction is reasonably justified (economically mineable). The results of the study may reasonably serve as the basis for a final decision by a proponent or financial institution to proceed with, or finance, the development of the project. The confidence level of the study will be higher than that of a Pre-Feasibility Study.
fracture	Any local separation or discontinuity plane in a geologic formation, such as a joint or a fault that are commonly caused by stress exceeding the rock strength.

2

grade	The concentration of each ore metal in a rock sample, usually given as weight percent. Where extremely low concentrations are involved, the concentration may be given in grams per tonne (g/t or gpt) or ounces per ton (oz/t). The grade of an ore deposit is calculated, often using sophisticated statistical procedures, as an average of the grades of a very large number of samples collected from throughout the deposit.
hectare or ha	An area totalling 10,000 square metres.
hydrothermal	Hot fluids, usually mainly water, in the earth's crust which may carry metals and other compounds in solution to the site of ore deposition or wall rock alteration.
IP	Induced polarization survey, a form of geophysical survey used in the exploration for minerals.
intrusive	A rock mass formed below earth's surface from magma which has intruded into a pre-existing rock mass.
Jinchuan Mining	Jinchuan Mining, a Chinese metals company.
JORC	The Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia.
JV	A joint venture, which is a term for a contractual relationship between parties, usually for a single purpose, which is not a partnership.
Kazakh	Kazakh Africa Mining Ltd.
kilometres or km	Metric measurement of distance equal to 1,000 metres (or 0.6214 miles).
MDN	MDN Inc.
mill	A facility for processing ore to concentrate and recover valuable minerals.
mineral reserve	That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.
mineralization	The hydrothermal deposition of economically important metals in the formation of ore bodies or "lodes”.
net smelter or NSR royalty	Payment of a percentage of net mining profits based on returns from the smelter, after deducting applicable smeltering charges.
NI 43-101	National Instrument 43-101, “Standards of Disclosure for Mineral Projects”, as adopted by the Canadian Securities Administrators, as the same may be amended or replaced from time to time, and shall include any successor regulation or legislation.
NWBM	Northwestern Base Metals Company Limited
ore	A mineral or an aggregate of minerals from which a valuable constituent, especially a metal, can be profitably mined or extracted.
outcrop	An exposure of rock at the earth's surface.
overburden	A general term for any material covering or obscuring rocks from view.
Pb	The elemental symbol for lead.
porphyry	A variety of igneous rock consisting of large-grained crystals, such as feldspar or quartz, dispersed in a fine-grained feldspathic matrix or groundmass.

3

ppm or parts per million	A unit of measurement which is 1000 times larger than parts per billion (i.e. ppb); 1 ppm is equivalent to 1000 ppb, and is also equivalent to 1 gram/tonne.
prefeasibility study and preliminary feasibility study	Each mean a comprehensive study of a range of options for the technical and economic viability of a mineral project that has advanced to a stage where a preferred mining method, in the case of underground mining, or the pit configuration, in the case of open pit, is established and an effective method of mineral processing is determined. It includes a financial analysis based on reasonable assumptions on mining, processing, metallurgical, economic, marketing, legal, environmental, social and governmental considerations and the evaluation of any other relevant factors which are sufficient for a Qualified Person, acting reasonably, to determine if all or part of the Mineral Resource may be classified as a Mineral Reserve.
Pyrrhotite	A bronze coloured mineral of metallic lustre that consists of ferrous sulphide and is attracted by a magnet.
pyrite	Iron sulphide mineral.
Qualified Person	An individual who is an engineer or geoscientist with at least five years of experience in mineral exploration, mine development or operation or mineral project assessment, or any combination of these; has experience relevant to the subject matter of the mineral project and the technical report; and is a member or licensee in good standing of a professional association.
quartz	Silica or SiO2, a common constituent of veins, especially those containing gold and silver mineralization.
RAB	Rotary air blast drilling.
RC	Reverse circulation drilling.
reef	A geological discontinuity which served as a trap or conduit for hydrothermal mineralizing fluids to form an ore deposit.
Sb	The elemental symbol for antimony (stibnite).
silicification	Replacement and or impregnation of the constituent of a rock by quartz rich hydrothermal fluids or (silica).
Sloane	Sloane Developments Ltd., a corporation based in the United Kingdom.
Songshan	Songshan Mining Company.
Stamico	State Mining Corporation of Tanzania.
Tancan	Tancan Mining Company Limited, a wholly-owned Tanzanian subsidiary of the Company.
Tanzam	Tanzania American International Development Corporation 2000 Limited, a wholly-owned Tanzanian subsidiary of the Company.
test pits	Shallow holes dug at spots along the strike of any mineralization or, if it is disseminated, anywhere in the area where the shallow holes might reach mineralized bedrock.
ton	Imperial measurement of weight equivalent to 2,000 pounds (sometimes called a “short ton”).
tonne	Metric measurement of weight equivalent to 1,000 kilograms (or 2,204.6 pounds).

4

tuff	A rock comprised of fine fragments and ash particles ejected from a volcanic vent.
veins	Distinct sheetlike body of crystallized mineral constituents carried by hydrothermal aqueous solutions that are deposited through precipitation within the host country rock. These bodies are often the source of mineralisation either in or proximal to the veins.
Canadian Terminology The following terms may be used in the Company’s technical reports to describe its mineral properties and have been used in this Annual Report (see “Cautionary Note to U.S. Investors Concerning Estimates of Measured and Indicated Mineral Resources”). These definitions have been published by the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) as the CIM Standards on Mineral Resources and Reserves Definitions and Guidelines adopted by the CIM Council on November 27, 2010, and have been approved for use by Canadian reporting issuers by the Canadian Securities Administrators under NI 43-101, and as those definitions may be amended:
Measured Mineral Resource	That part of a Mineral Resource for which quantity, grade or quality, densities, shape, and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological grade and continuity.
Indicated Mineral Resource	That part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics, can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.
Inferred Mineral Resource	That part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. Confidence in the estimate is insufficient to allow the meaningful application of technical and economic parameters or to enable an evaluation of economic viability worthy of public disclosure.

5

Mineral Reserve	A Mineral Reserve is the economically mineable part of a Measured or Indicated Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A Mineral Reserve includes diluting materials and allowances for losses that may occur when the material is mined. Mineral resources are sub-divided in order of increasing confidence into Probable Mineral Reserves and Proven Mineral Reserves. A Probable Mineral Reserve has a lower level of confidence than a Proven Mineral Reserve. The term “mineral reserve” need not necessarily signify that extraction facilities are in place or operative or that all governmental approvals have been received. It does signify that there are reasonable expectations of such approvals.
Mineral Resource	A concentration or occurrence of diamonds, natural solid inorganic material, or natural solid fossilized organic material including base and precious metals, coal, and industrial minerals in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge. A Mineral Resource is an inventory of mineralization that under realistically assumed and justifiable technical and economic conditions might become economically extractable.
Probable Mineral Reserve	Is the economically mineable part of an Indicated and, in some circumstances, a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.
Proven Mineral Reserve	Is the economically mineable part of a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified. The term should be restricted to that part of the deposit where production planning is taking plce and for which any variation in the estimate would not significantly affect potential economic viability.

6

Part I

Item 1. Identity of Directors, Senior Management and Advisers

A. Directors and Senior Management:

Not Applicable.

B. Advisers

Not Applicable.

Item 2. Offer Statistics and Expected Timetable

Not Applicable.

Item 3. Key Information

A. Selected Financial Data

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

The audited financial statements for the issuer’s fiscal years ended August 31, 2013, 2012 and 2011 are prepared in accordance with IFRS. The following selected financial data is based on financial statements prepared in accordance with IFRS and is presented for the three most recent financial years. Unless stated otherwise, reference to dollar amounts shall mean Canadian dollars.

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

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

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

IFRS 2013-2011

	2013	2012	2011
Operations:
Revenues	$ --	$ --	$ --
Net loss	(3,225,998)	(8,897,843)	(11,132,371)
Basic and diluted loss per share	(0.03)	(0.09)	(0.12)

7

Balance sheet:
Working Capital	5,416,104	18,165,431	30,451,179
Total Assets	58,193,340	65,711,075	67,632,380
Net Assets	52,319,699	53,205,396	56,491,892
Share Capital	115,614,202	113,476,858	109,935,253
Number of Shares	100,922,582	100,459,937	99,758,753
Deficit	67,117,263	64,098,273	55,504,339

Exchange Rates

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

Year Ended: August 31	Average	Period End	High	Low
2013	1.01	1.0554	1.0578	0.9839
2012	1.008	0.9862	1.0605	0.9751
2011	0.988	0.9783	1.052	0.9448
2010	1.044	1.064	1.106	0.996
2009	1.177	1.0967	1.2995	1.0338

The following table sets forth the high and low exchange rate for the past six months. As of August 31, 2013, the exchange rate was CDN $1.0554 for each US$1.00.

Month	High	Low
October 2013	1.0454	1.0282
September 2013	1.0532	1.0237
August 2013	1.0554	1.0297
July 2013	1.0578	1.0259
June 2013	1.0533	1.017
May 2013	1.0371	1.0023

8

B. Capitalization and Indebtedness

Not Applicable.

C. Reasons for the Offer and Use of Proceeds

Not Applicable.

D. Risk Factors

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

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

Risks relating to the Company

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

The Company has not been profitable since its inception. For the fiscal year ended August 31, 2013, the Company had a net loss of $3,225,998 and an accumulated deficit on August 31, 2013 of $67,117,263. The Company has never generated revenues and does not expect to generate revenues from operations until one or more of its properties are placed in production. There is a risk that none of the Company’s properties will be placed in production, and that the Company’s operations will not be profitable in the future.

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

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

The Company has uninsurable risks.

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

9

The Company depends on key management personnel.

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

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

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

The Company may need additional capital.

As at August 31, 2013, the Company had cash and cash equivalents of $10,679,516 and working capital of $5,416,104. However, the Company will continue to incur exploration costs to fund its plan of operations and may need to raise additional capital. Ultimately, the Company’s ability to continue its exploration activities depends in part on the Company’s ability to commence operations and generate revenues or to obtain financing through joint ventures, debt financing, equity financing, production sharing agreements or some combination of these or other means. Further the raising of additional capital by the Company may dilute existing shareholders.

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

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

10

Risks relating to the Mining Industry

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

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

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

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

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

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

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

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

11

The Company may not have clear title to its properties.

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

Mining exploration, development and operating activities are inherently hazardous.

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

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

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

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

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

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

12

Risks relating to the Market

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

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

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

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

The Company’s business activities are conducted in Tanzania.

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

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

13

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

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

Commodity prices are subject to fluctuation.

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

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

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

Risks relating to the Securities of the Company

Current global financial conditions.

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

14

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

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

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

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

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

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

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

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

15

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

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

Risk of dilution from further equity financings

If the Company raises additional capital by issuing equity securities, such financing may substantially dilute the interests of the Company’s shareholders and reduce the value of their investment.

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. 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.

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

For the year ended August 31, 2013 the Company reported a net loss of $3,225,998. Included in the net loss $2,194,907 of mineral properties and deferred exploration expenses was written off relating to abandoned mineral properties. The Company incurred deferred exploration expenditures of $4,109,573 during the year ended August 31, 2013.

Significant Acquisitions and Significant Dispositions

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

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

16

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

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

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

On February 25, 2009, the Company entered into an option and royalty agreement with Songshan granting Songshan an option to acquire the Company’s interest in its Kabanga nickel licenses and applications located in northwestern Tanzania, by completing certain exploration work over a period of three years, and then making a production decision, subject to a 3% net smelter royalty reserved in favor of the Company. In January 2010, Jinchuan Mining (“Jinchuan”) concluded an agreement with Songshan to participate in the exploration and development of the nickel properties. In 2012, the Company and Songshan commenced discussions regarding a possible new joint venture involving the Company, Songshan and a new third party as direct participants to explore and develop the Kabanga nickel properties. As a result of those discussions the February 25, 2009 agreement between the Company and Songshan was terminated and on November 28, 2012 the Company announced the formation of a new company, Northwestern Basemetals Company Limited (“NWBM”) to explore the Kabanga nickel, cobalt and platinum group metals belt. NWBM will be owned 75% by the Company, 15% by Stamico, and 10% by Songshan Mining Co. (“Songhsan”). Jinchuan will not participate

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

17

On January 20, 2003, as amended on March 18, 2003 and January 9, 2007, the Company entered into an agreement (the “MDN Agreement”) with MDN Inc. (“MDN”) granting MDN the exclusive option to acquire the total rights, titles, and interests in certain prospecting licenses located at Biharamulo and Tulawaka. In January 2013 MDN advised the Company that they were unable to fulfill the terms of the MDN Agreement and the MDN Agreement was terminated. The Company does not currently intend to pursue further exploration activities in Biharamulo and is reviewing its future exploration plan in Tulawaka.

The Company had an Option Agreement (the “BEAL Option Agreement”) with Barrick Exploration Africa Limited (“BEAL”) (now ABG Exploration Limited (“ABG”). BEAL had the option to acquire the total rights, titles, and interests of the Company in certain prospecting licenses in various properties In prior years, the Company received from BEAL notices of relinquishment for all rights, titles and interests in prospecting licenses included in the BEAL Option Agreement, and on April 18, 2013, ABG advised that they were returning the last remaining prospecting licence optioned under the BEAL Option Agreement.

B. Business Overview

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

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

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

Plan of Operations

Exploration Activities

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

18

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

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

During the 2013 fiscal year, the Company continued evaluation of prospecting licenses in its portfolio with a view of offering some of them for royalty agreements to other mining companies. The evaluation of their potential comprises geological mapping, soil sampling and geophysical surveys and RC drilling.

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

Exploration

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

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.

19

Dependence on Customers and Suppliers

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

Governmental Regulations

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

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

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

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

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

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

20

C. Organizational Structure

The Company has the following six subsidiaries:

Name of Subsidiary	Jurisdiction of Incorporation	Percentage &Type of Securities Owned or Controlled by Company
		Voting Securities Held	Non-Voting Securities
Itetemia Mining Company Limited(1)	Republic of Tanzania, Africa	90% (common)	n/a
Lunguya Mining Company Ltd. (2)	Republic of Tanzania, Africa	60% (common)	n/a
Tancan Mining Company Limited	Republic of Tanzania, Africa	100% (common)	n/a
Tanzania American International Development Corporation 2000 Limited	Republic of Tanzania, Africa	100% (common)	n/a
Buckreef Gold Company Limited(3)	Republic of Tanzania, Africa	55% (common)	n/a
Northwest Basemetals Company Limited(4)	Republic of Tanzania, Africa	75% (common)	n/a

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

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

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

⁽⁴⁾ The remaining interest is held 15% by State Mining Corporation and 10% by Songshan Mining Co.

D. Property, Plant and Equipment

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

Mineral Properties

Buckreef Project

History

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

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

21

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

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

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

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

Summary of Buckreef Exploration and Mining between 1960 and 2003

DATE	EXPLORATION UNDERTAKEN***
1960	13 diamond drill holes by UNDP (12 in current database, UNBR01-12) identified a “possible ore zone 107m long, 8m wide and extending to 122m depth
1968	13 diamond drill holes by Tanzanian Mineral Resources Division (MRD01-13)
1970s	Early 1970s Underground development on 30m and 61m levels by Williamson Diamonds Ltd. Indicated ore reserve of 106,000t @ 8.7g/t Au between 23m and 76m levels using minimum mining width of 1.5m***
1972	Tanzanian government approved investment decision and Buckreef Gold Mining Company (BGMC)
1973-1979	Further underground development and 3 diamond drill holes (BGMDD01-03) by BGMC.
1978-1981	Treatment plant and other facilities established with financial assistance from Swedish International Development Agency
1982-1988	Gold production commenced but reached only 25-40% of forecast targets. Production figure unavailable.
1988	Review of operations by British Mining Consultants Ltd. who found Buckreef assay laboratory assays 65% higher than overseas check assays
1990	Mining ceased and workings flooded. Total ore extracted estimated at approximately 100,000t @3-4g/t Au***
1992	Aircore, RC and diamond drilling by East African Mining Corporation (now East Africa Gold Mines Ltd.)
Source: Hellman and Schofield 2007.
*** This historical estimate is derived from an unpublished report prepared by Hellman and Schofield (Pty.) Ltd. In 2007. This historical estimate presented above is relevant to the further exploration of the project, which the Company is undertaking. Further drilling would be required to upgrade or verify the historical resource estimate as current mineral resources or reserves. A qualified person, as such term is defined under NI 43-101, has not done sufficient work to classify the historical estimate as current mineral resource or mineral reserve estimate and the historical estimate should not be relied upon. Please refer to the Buckreef Technical Report.

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

22

Ownership

Prior Ownership

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

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

Current Ownership, Property and Location

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

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

• BRMA: includes the Buckreef Prospect, the Bingwa Prospect and the Tembo Prospect; and
• BZMA: includes the Buziba Prospect and the Busolwa Prospect

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

Geology and Mineralisation

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

23

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

Regional Geological Setting

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

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

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

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

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

• mineralisation within major ductile shear zones;
• mineralisation associated with replacement of iron formation and ferruginous sediments; and
• felsic (porphyry) hosted mineralisation, such as within the RGB.

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

• structural lineaments trending at 120º;
• flexures and splays to the 120º trend (such as at Golden Pride);
• structural lineaments at 70º (such as at Golden Ridge); and
• granite-greenstone contacts (such as at the Ushirombo and RGB).

Local Geological Setting

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

24

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

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

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

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

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

25

Exploration History Prior to Buckreef PEA

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

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

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

Previous Mineral Resource and Mineral Reserve Estimates

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

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

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

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

DEPOSIT                        MEASURED             INDICATED INFERRED MEASURED & INDICATED

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

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

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

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

Estimates over variable widths of 3m to 40m

Bulk Density ranges from 2.0g/cm³ to 2.8g/cm³

Inconsistencies in totals are due to rounding down

55% attributable to the Company

Cut-off grade 0.5g/t Au

26

Development and Operations

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

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

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

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

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

27

Summary Results of the Pit Concept Design PROSPECT	ORE TONNAGE (Mt)	WASTE TONNAGE (Mt)	TOTAL (Mt)
Buckreef	8.67	40.82	49.49
Bingwa	0.83	4.58	5.41
Tembo	0.38	5.37	5.75
Buziba / Busolwa	23.60	49.64	73.24
TOTAL	33.48	100.41	133.89

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

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

Buckreef Project Process and Recovery

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

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

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

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

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

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

28

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

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

Buckreef Project Infrastructure and Services

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

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

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

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

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

• the potential to produce acid run-off and drainage,
• the potential to leach heavy metals, especially arsenic, and
• the suitability and provision of the construction material for the TDF walls.

29

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

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

Environmental Considerations

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

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

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

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

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

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

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

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

· regulatory risks associated with obtaining environmental authorisations.

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

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

30

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

Project Capex and Opex

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

Summary Capital Expenditure for the Buckreef Project CAPITAL EXPENDITURE	UNIT	CASE 1	CASE 2	CASE 3	CASE 4
Mining Capital	(USDm)	(125.16)	(140.01)	(125.16)	(125.53)
Process Plant Capital	(USDm)	(309.14)	(309.14)	(258.81)	(309.14)
Closure Capital	(USDm)	(19.96)	(19.96)	(19.96)	(19.96)
TDF Capital	(USDm)	(17.53)	(17.53)	(17.53)	(17.53)
TOTAL CAPITAL EXPENDITURE	(USDm)	(471.79)	(486.65)	(421.46)	(472.16)

Economic Analysis

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

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

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

Summary Economic Analysis for the Buckreef Project at USD1,500/0z and a 5% Discount Rate OPTION		DISCOUNT RATE 5%
Case 1: Large plant, moved to BZMA, grid powered	NPV (USD)		220.4m
Pretax NPV (USD)		296.5m
Post tax IRR		36%
Case 2: Central large plant, grid powered	NPV (USD)		140.3m

31

Pretax NPV (USD)		188m
Post tax IRR		21%
Case 3: Modular Plants, moved to BZMA, grid powered	NPV (USD)		162.3m
Pretax NPV (USD)		214.03
Post tax IRR		29%
Case 4; Case 1 diesel powered	NPV (USD)		10.77m
Pretax NPV (USD)		14.38m
Post tax IRR		7%

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

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

Gold Price Sensitivity Matrix ECONOMIC ANALYSIS					GOLD PRICE
		USD1,600/oz		USD1,500/oz	USD1,400/oz	USD1,300/oz
Post Tax
Project NPV (at 5% discount rate)	287.98		220.41		149.58	81.17
Project NPV (at 10% discount rate)	196.25		143.44		87.88	33.69
IRR	48%		36%		25%	16%
Pre Tax
Project NPV (at 5% discount rate)	391.97		296.49		201.00	105.52
Project NPV (at 10% discount rate)	268.41		195.16		121.91	48.66
IRR	54%		41%		29%	17%

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

32

Conclusions of the Economic Analysis

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

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

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

Conclusions and Recommendations

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

• the Inferred Mineral Resources included in the Buckreef PEA are, if possible, to be upgraded to Indicated Mineral Resources in the PFS by means of current exploration drilling which has provided additional density data and defined extensions of the Buckreef Prospect mineralisation. The PFS will be based on newly constructed Mineral Resources models for all five prospects, which include the newly identified medium to high grade mineralisation at Buckreef Main zone, Buckreef North and Buckreef Eastern Porphyry deposits. The newly identified mineralisation ranges in grade from 1.25g/t Au to 10.58g/t Au over widths ranging from 2.25m to 46m and much of the mineralisation occurs at depths accessible to open pit mining;
• the economic analysis indicates that the mining sequence Case 1 is the most favourable. The options of mining BRMA and BZMA simultaneously, or BZMA first, are both unviable at current and forecast gold market conditions. The capital cost of the two plants early in the LoM is disadvantageous. The Case 5, whereby BZMA is mined first, is negatively affected by early high capital costs for the two plants, low grades from the BZMA orebody and insufficient revenue streams to cover opex costs;
• Venmyn Projects considers the primary factors impacting the Project economics to be the combination of grade and stripping ratio. At BRMA, the stripping ratios average 5.45 and 2.3 at BZMA. The PFS, therefore, will aim to investigate ways of improving the stripping ratios by optimising the mine design;
• the Buckreef PEA mine design can be viewed as a worst case scenario and the PFS pit design can be more aggressive as it will be based on improved geo-technical data which indicates design at 60º to 90º may be possible. The possibility of the pit design being to some extent a function of data paucity at Buckreef Prospect and BZMA will be investigated in the PFS. Improvement in the pit shell shape from smaller conical pits to larger, simple pits would be advantageous in decreasing the stripping ratios and therefore the PFS will investigate whether increased data density in the areas rejected by the pit optimiser, can improve the pit design in these areas;

33

• a backfill mining methodology was not proposed for the Buckreef PEA and the PFS will undertake a trade-off study to investigate the effect of decreasing the mine design cut-off grade so that lower grade mineralisation, which for the Buckreef PEA is classed as uneconomic waste, could be stockpiled and processed later in the Project life to provide additional revenue;
• the mine schedule will be refined and optimised in the PFS by applying a number of measures which will be investigated in the PFS;
• the geographical characteristics of the Project is negatively impacting the Project economics. The requirement to improve 50km of roads and construct four river crossings, as well as dismantle and relocate infrastructure from BRMA is considerable but has proven less costly than the capex and opex of haulage of ore to a centrally located plant. The possibility of optimising the cost of buildings at BZMA by relocating BRMA buildings will be examined in the PFS;
• the costs and logistics of the diesel supply for the power generation in Case 4 have a significant impact on the opex of the Project which is USD1,051/oz, as compared to Geita USD657/oz. The cost and availability of power from the national grid must be investigated in as a critical project component for the PFS;
• the results of the environmental sensitivity reviews have proved favourable in that no unmanageable environmental risks have been identified. Initial indications are that no requirement for a lined TDF will necessary but this will be further investigated in the PFS, as the costs associated with lining are approximately USD96.0m, as opposed to USD17.5m for an unlined facility;
• an environmental impact study (EIA) will have to be completed for the BZMA;
• the proposed plant sites, TDF and waste disposal sites must be further investigated in the PFS and sterilised particularly in the BRMA, where potential for additional mineralised shears is high;
• a trade-off study of the benefits of contractor mining as opposed to owner mining will be undertaken for the PFS;
• trade-off studies of the effect of different processing plant options will be undertaken in the PFS. Different modular sized plants with alternative comminution sections could reduce capital and operational costs, especially the power consumption;
• the possibility of improving the Project outcomes by negotiating a contribution by the Tanzanian government partner Stamico to the infrastructure upgrading costs, should be investigated by the Company;

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

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

34

• the drilling programmes currently being undertaken demonstrate a reasonable likelihood that the Mineral Resources are classified as Indicated Mineral Resources for PFS. The drilling will provide geotechnical data for a detailed TDF design, as well as plant sterilisation drilling. An environmental fatal flaw analysis will be undertaken and following the results of that study, numerous specialist consultant studies will be required. The PFS results will be independently reviewed and the project economic viability assessed.
• Venmyn Projects further concluded that the positive Buckreef PEA outcomes have provided a valuable basis for the development of a PFS on the Buckreef Project. A number of refinements, optimisations and alternatives have been identified, which collectively should improve the final Project outcome. The newly identified mineralisation will increase the Mineral Resource base of the Project and there is definite upside potential to define further Mineral Resources to provide a focus for future exploration and expansion of the Project. The Buckreef Project benefits particularly from being an open pittable gold deposit, which can be brought rapidly into production to benefit from the current favourable gold market conditions.

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

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

Drilling Program

Since acquiring the Buckreef Project in December 2010, the Company has undertaken comprehensive reverse circulation and diamond drilling programs on the Buckreef Project. A total of 189 holes for 37,853.19 were drilled since acquiring the project, this drilling include 64 RC holes (4,472); 9 PQ Diamond holes (539.10m), and 116 NQ Diamond holes (32742.09m). Please note that at the time that the Buckreef PEA was done the Company did not have sufficient information to warrant inclusion of the Eastern Porphyry prospect in the BRMA.

The Company has completed an aggressive resource definition drilling program in four areas of the BRMA (Buckreef Main zone, Buckreef North, Eastern Porphyry prospect and Bingwa prospect). A total of 31 holes for 5,538.75m were drilled during this period, which include 13 RC holes (1386m); 3 PQ Diamond holes (208.80m) for Heap Leach metallurgical test work for Bingwa prospect; and 15 NQ Diamond holes (3,943.95m).

The best intercept includes 12.22m @ 6.20g/t Au, including 2m @ 31.75g/t Au; 3m @ 6.20g/t Au, including 2m @ 9.67g/t Au and 11m @ 9.82g/t Au, including 3m @ 28.53g/t Au.

Eastern Porphyry Prospect

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

35

At the Eastern Porphyry prospect, a total of 12 Diamond holes for 3,032.70m and 13 Reverse Circulation hole for 1386m were completed to investigate and determine whether there is any potential to define the resource. The diamond core drilling program on the Eastern Porphyry prospect returned some significant intercepts. Among them are 11m averaging 9.82g/t gold (including 3m @ 28.53g/t gold) and 12.22m averaging 6.20g/t gold (including 2m @31.75g/t gold); and 9m @ 3.07g/t gold (including 4m @ 6.25g/t gold) from Diamond drilling and 7m averaging 2.81g/t gold (including 3m @ 4.59g/t gold), 6m averaging 2.0g/t gold (including 2m @ 4.89g/t gold), 2m grading at 2.8g/t gold (including 1m @ 5.1g/t gold) from Reverse Circulation drilling.

Buckreef Main Zone

A total of 3 holes for 911.25m have been completed on the Buckreef Main zone and Buckreef Northeast extension. This drilling was intended to explore the potential to define and upgrade the current inferred resource to the Indicated and Measured category at vertical depth of 150m and 200m, while testing the down dip continuity of the shear zone-hosted gold mineralisation associated with quartz-carbonate-pyrite veins emplaced in the mafic volcanic sequence below 300m.

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

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

The deeper drilling confirmed the down-dip continuity of the various near-surface mineralized zones, and some deeper holes seemed to indicate a thickening of mineralisation with depth and occasional very high grade intercepts. One diamond drill hole returned 10m grading 1.89 g/t gold including a high grade section of 2.0 metres averaging 3.9 g/t, with a second hole yielding 1.0m grading 11.60 g/t gold. Another diamond drill hole targeted the down dip potential in the Main zone, returning 2m grading 12.14 g/t gold including 1.5m @ 15.59g/t.

Bingwa Prospect

The Tembo Prospect located in an adjacent but sub-parallel shear zone to the regional ENE-WSW trending Rwamagaza main shear zone is located approximately 4km north-east of the main Buckreef Mine. Gold mineralisation at Bingwa mineralized structure is an IP chargeable/resistive structure on the contact of granite to the north and highly sheared mafic rock units to the south, emplaced where a major NW-SE regional structure crosscuts a major NE-SW structure. Mineralization on the structure is in the shattered quartz vein system on the structure and within the highly sheared, quartz-sericite-carbonate-pyrite altered mafic volcanic unit, with quartz veins registering the highest gold grades in the area.

A total of 3 holes of 3 PQ Diamond holes (208.80m) were completed during the reporting period. The PQ holes were intended for Heap Leach metallurgical testwork on coarse fraction size materials ranging from 50mm down to 3mm using column leach cyanide spray technique and the collected sample were analysed by SGS laboratory in South Africa.

36

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

Contribution of the Recent Drill Campaign at the Buckreef Project

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

            The 2013 geological models include the exploration data obtained post the 2006-2007 Hellman and Schofield modelling exercise, which results in extensions to the Buckreef Prospect deposit and the new definition of the Eastern Porphyry deposit. The diamond drillhole and reverse circulation drillhole data was presented as fixed format .dat (text) files with the breakdown as follows: At the Buckreef prospect, a total of 684 Diamond holes for 97,287.37m were used to estimate the Mineral Resource, Tembo Prospect only 74 holes for 5,713.00m were used, Bingwa Prospect, a total of 136 holes for 12,537.23m were used for Mineral Resource Estimate and at Eastern Porphyry, a total of 80 holes for 10,814.52 used for the mineral estimate.

Resource Developments

§ Company management awarded an independent mineral consultant group a contract to undertake the Buckreef Mineral Resource estimate and to produce a NI 43-101 compliant technical report.

§ Site visit completed by independent consultants, to examine styles of mineralization, verify data and gather Information for compilation into NI 43-101 report and completion of resource modeling wireframes.

Geological interpretation and data validation

All the geological information including geological interpretation on the Buckreef Project required for the compilation into NI43-101 technical report was provided to independent consultants and database collected from the Company is being reviewed and validated.

Resource Modeling Progress

Database reconstructed for modelling using consistent codes have been completed, collar elevations fixed to fit surveyed topography at Buckreef, wireframes have been modeled for all zones, and rules have been applied so that the wireframes have been constructed in a consistent manner and honor the data.

Resource Wireframing Progress

Tembo prospect has been modeled using single zone with 0.1g/t gold grade shell, Eastern Porphyry prospect modeled into geological domains by three porphyry units enclosed within mafic unit either side, Bingwa deposit modeled in five discrete zones with 0.18g/t gold grade shells and Buckreef main mineralized wireframe constructed using 0.15g/t gold grade shells and oxide, transition and topographic surfaces were modeled using gridding algorithm.

37

Mineral Resource Estimation

Buckreef Project Mineral Resource Upgrade by independent consultants for the Buckreef, Tembo, Bingwa and Eastern Porphyry prospects progressed well during the period. 

Project Development

Management of the Company is considering whether to adopt a coarse fraction column Heap Leach (HL) process option on the Buckreef mining plan as a suitable option compared to the conventional CIL process. The HL process bears the lowest processing costs and has reasonable gold recoveries.

Metallurgical testwork to date has focused on suitability for conventional CIL processing of the ore material. However a Phase 2 metallurgical testwork report identified relatively good results for coarse ore leaching. Recoveries of between 52% and 81% for Buckreef ore were achieved. This was considered by the consultants to be a reasonable recovery for Heap Leach, and it was suggested that further investigations into the viability of this process be carried out.

Heap Leach Sampling and testwork

A total of 592.5kg sample material representing Oxide ore (261kg), transition ore (149.5kg) and sulphide ore (182kg) were collected from drill holes BGDD015, BGDD016 and BGDD017. The samples were packed at site and submitted to an independent metallurgical laboratory in South Africa for required testing.

Scope of work and testwork required

Two scenarios were established to carry out the testwork as per the total mass required to complete the scope of work.

· Scenario 1

Ø Head assay 0.5kg

Ø Simulated heap leach on 4 crushed size 20kg

Ø Screening and Grading analysis 1kg

Ø Agglomeration and Percolating rate 90kg

Ø Heap height versus Percolation 15kg

Ø Column Heap Leach Trial (4m column) 300kg

Ø Total weight required 425.5kg per each ore materials

· Scenario 2

Ø Head assay 0.5kg

Ø Simulated heap leach on 4 crushed size 20kg

38

Ø Screening and Grading analysis 1kg

Ø Agglomeration and Percolating rate 60kg

Ø Heap height versus Percolation 15kg

Ø Column Heap Leach Trial (4m column) 100kg

Ø Total weight required 196.5kg per each ore materials

Scenario 2 was recommended as the total weight for all ore material submitted is 592.5kg and the required weight for that scenario to complete the testwork is 196.5kg * 3 = 589.5kg.

The Company has incurred total net costs (after recoveries, if any) of $18,417,087 on the Buckreef Project to August 31, 2013.

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

Kigosi Project

Property Description and Location

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

In December 2012 the Kigosi Access Agreement between the Company (through its subsidiary Tanzania American International Development Corporation 2000 Limited (“Tanzam”)) and the Director of Wildlife, Wildlife Division, Ministry of Natural Resources and Tourism was signed, and in February 23, 2013, the Company (through Tanzam), was awarded the Environmental Impact Assessment Certificate for the Kigosi gold project. Stamico has a 15% carried interest in the Kigosi Project.

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

Accessibility, Climate, Local Resources, Infrastructure and Physiography

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

39

.

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

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

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

Geology and Mineralization

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

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

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

40

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

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

During fiscal 2012, the Company entered into an agreement with Stamico providing Stamico a 15% carried interest in the Kigosi Project.

Luhwaika Quartz Rubble Deposit

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

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

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

Bulk Sampling Program

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

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

41

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

Luhwaika Prospect

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

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

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

Igunda Prospect

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

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

Msonga Prospect

Drilling

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

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

42

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

Kigosi Exploration History

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

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

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

The Company has incurred total net costs (after recoveries, if any) of $13,789,630 on the Kigosi Project to August 31, 2013.

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

Lunguya Project Area

Property Description and Location

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

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

43

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 Gold Corp’s. (“Barrick”) 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.

44

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

Exploration

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

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

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

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

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

            During the period ended August 31, 2013, no direct property work was conducted on the Lunguya property.

The Company has deferred total net costs (after any recoveries and write offs) of $3,380,457 on the Lunguya Property to August 31, 2013.

45

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

Itetemia Property

Property Description and Location

The Itetemia Property is located in the Mwanza Region of the Lake Victoria Greenstone Region, Tanzania, approximately 90 kilometres by air southwest of the city of Mwanza, situated on the south shore of Lake Victoria (see property location map above).

Accessibility, Climate, Local Resources, Infrastructure and Physiography

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

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

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

Ownership

Prior Ownership

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

46

The Company’s Interest

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

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

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

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

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

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

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

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

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

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

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

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

47

History

The exploration history of the Itetemia Property from 2006 to 2013 is summarized as follows:

Itetemia Exploration History Synopsis

Year	Operator	Work Performed
2006	Tancan	In-house evaluation. 4-hole diamond drill program
2007	Sloane Developments Ltd.	Planned 2000 m RC drill program and 3000 m infill diamond drilling program.
2008	Sloane Developments Ltd.	First phase drill program consisted of 10 Reverse Circulation (RC) aggregating 1,489 metres. Eight diamond drill holes were drilled totalling 2,286.5 metres.
2009	Sloane Developments Ltd.	Data analysis
2010	Sloane Developments Ltd.	Data analysis
2011-2012	Tanzanian Royalty	NI 43-101 report prepared by Venmyn Rand (Pty) Ltd.
2013	Tanzanian Royalty	In-house evaluation

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.

48

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

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

Exploration

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

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

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

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

            During the period ended August 31, 2013, no direct property work was conducted on the Itetemia property.

The Company has incurred total net costs (after any recoveries and write offs) of $5,945,053 on the Itetemia Property to August 31, 2013.

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

49

Luhala Property

Property Description and Location

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

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

Accessibility, Climate, Local Resources, Infrastructure and Physiography

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

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

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

History

Luhala has had a significantly more protracted exploration history than Lunguya, beginning with the initial exploration by the then Tanganyikan Geological Survey in 1947. The exploration history of Luhala since 2006 to 2013 may be summarized as:

LUHALA EXPLORATION HISTORY SYNOPSIS

Year	Operator	Work Performed
2006	Tancan	Diamond drilling, RC drilling
2007	Sloane Developments Ltd.	Follow-up exploration planning
2008	Sloane Developments Ltd.	Data analysis
2009	Sloane Developments Ltd.	Data analysis
2010	Sloane Developments Ltd.	Data analysis
2011-2012	Tanzanian Royalty	NI 43-101 report prepared by Venmyn Rand (Pty) Ltd.
2013	Tanzanian Royalty	In-house evaluation

50

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, 2013, no site-based exploration work was conducted on the Luhala Property.

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

Mineralization

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

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

51

Historical Drilling

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

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

           The Company has incurred total net costs of $3,762,533 on the Luhala Property to August 31, 2013.

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

Kabanga Project

Property Description and Location

            The Kabanga project is located in north western Tanzania, south of Lake Victoria and near the Burundi and Rwanda borders within the Mesoproterozoic Karagwe-Ankolean sequence within the Kibaran Fold Belt of NW Tanzania and is owned 75% Northwestern Basemetals Company Limited, 15% by Stamico and 10% by Songshan Mining.

            Northwestern Basemetals Company Limited, a subsidiary company of Tanzanian Royalty Exploration Corporation is engaged in the exploration and development of the Kagera Nickel project, adjacent to the Barrick/Xstrata Kabanga Nickel Project within the Kabanga-Musongati mafic-ultramafic belt, which contains Ni sulphide ores at Kabanga deposit and reef-type PGE concentrations at Musongati. The project portfolio consists of 32 granted prospective licenses (PLs) totalling 2350.45 square kilometres in area. In addition, the Company holds 18 applications for PLs covering 1563.14 square kilometres.

History

            From1992 to 1993 BHP Billiton conducted regional and detailed exploration work on the Kabanga Project Area including airborne magnetics; soil sampling, mapping and stream sediment sampling which covered a broad north-northeast trending strip of ground some 220km long and up to 60km wide.

            From 1993 to 1997 BHP Billiton conducted a follow-up with considerable exploration on targeted aeromagnetic anomalies.

52

In 2000, an interpretation of the regional aeromagnetic survey of the greater Kabanga Ni belt was carried out as part of the TRE regional exploration programme.

In 2004, with a Nickel price rise forecast, Tan Range Exploration Corporation Ltd applied for open ground on the stratigraphy that favours these magnetic anomalies

Geology

                Weakly metamorphosed sedimentary formations of the mid-Proterozoic Karagwe – Ankolean Supergroup underlie this region in extreme northwestern Tanzania, and forms part of the northerly trending Kibaran Orogenic Belt. This orogenic belt extends from Zambia in the south, through the DRC, Burundi, Rwanda and NW Tanzania, into Uganda in the north. To the east this belt is in structural contact with the late-Proterozoic Bukoban Supergroup, a sequence of younger, essentially unmetamorphosed sediments.

            The thick (+10 km) sedimentary sequence of the Karagwe – Ankolean Supergroup consists of massive to well-bedded sandstones and interbedded laminated shales and siltstones, now metamorphosed to quartzites, phyllites and mica schists. The K-A strata are moderately folded and can be mapped out for many kilometres, and are divided into Upper, Middle and Lower Divisions, each with characteristic “marker” units referred to as the q1, q2 and q3 quartzites. Later quartz reefs (veins) of metamorphic segregation origin are common.

            The belt is characterised by early intrusions of mafic sill-like bodies at ~1400 Ma that are the host rocks to the nickel mineralisation, and are interbedded within the folded meta-sediments. These mafic-ultramafic intrusions form the complex Kabanga – Musongati – Kapalagulu igneous belt, reflected in the Kagera region as an elongate zone of airborne magnetic anomalies. Extensive bodies (sheets) of gabbroic magma were intruded later, towards the end of the main period of folding. A-type granitoids were intruded at a ~1250 Ma and post-orogenic Sn granites around 1000 Ma, which have developed contact aureoles.

There is a range of much younger deposits including old land-surface terrace deposits, laterite, mbuga, alluvium and seasonal swamp. In the northeast a considerable area is blanketed by recent surface deposits; similar deposits overlie low ground along the Lake Ihema shoreline in the west.

Exploration

                6,791 of biogeochemistry (BGC) samples were collected on PL4572/07 and 4571/07. A total of 4490 samples were sent to BGC Preparation Laboratory at Buckreef exploration camp for preparation by drying at 70 degree celcius for 12 hours, sieving and grinding. 3476 samples were shipped at 100g of the pulps to ACME Analytical Laboratory in Vancouver, Canada for Mult Element analysis using Coupled Plasma Mass Spectrometry (ICP – MS) to detect a53 elements suite within the collected tissue samples after proper laboratory preparation by controlled ashing and then placing the sample material on an aqua regia digestion.

                The Buhamila area was initially targeted because of both its relative proximity to the Company’s Exploration camp at Buckreef in the Geita Destrict, making it an ideal test case for long range intermediate duration prospecting surveys. Furthermore, the Company conducted an aeromagnetic survey of the entire Kabanga corridor in northwestern Tanzania in the 1990s, and such data would act as a validation check on some of our large-scale findings due to the ferromagnetic characteristics of Ni and Co. Lastly, because of the nearly complete lack of other (non-Ni) geochemical exploration data for the region, our rapid mineral exploration capabilities inherent in BGC surveys (Woolman, Yi 2013) would provide excellent exploratory value on a cost-per-observation metric relative to other large-scale prospecting methods.

53

Mineralization

            In summary the Kabanga nickel deposit is hosted within sill-like ultramafic to mafic intrusions and pipe-like bodies and breccias that form part of the complex Kabanga – Musongati – Kapalagulu igneous belt. Various reports indicate that individual igneous bodies are up to 1 km thick and 4 km long, and formed from several distinct primary magmas pulses (picritic to basaltic in composition) into sulphide-bearing phyllitic sediments. In the Kabanga area the intrusions contain abundant sulphides which form massive layers and lenses in places. Local remobilisation of sulphides occurred late during the Kibaran Orogeny and formed rich sulphide-hornfels breccias. In part these intrusions are considered to be “chonolithic” – pipe-like mafic/ultramafic intrusions that were emplaced by early structural controls, and which may host significant ore. The concept of an early structural control at the Kabanga Ni and other deposits deserves to be investigated further.

            The main Kabanga mineralisation is located between the Upper Division and Middle Divisions and is associated with a marked aeromagnetic low more than 1000 m long and over 300 m wide, and is coincident with a strong Ni geochemical anomaly. This anomaly lies at the southern end of a 200 km-long, north-trending zone of aeromagnetic anomalies – interpreted as the “prime” zone of exploration interest – and provides a focus for on-going Ni exploration. The Upper, Middle and Lower Divisions of the Supergroup are reported to have definitive aeromagnetic signatures which makes regional stratigraphic correlation relatively easy.

The Company has incurred total net costs of $637,447 on the Kabanga Property to August 31, 2013.

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

Item 4A. Unresolved Staff Comments

None

Item 5. Operating and Financial Review and Prospects

This discussion and analysis of the operating results and the financial position of the Company for the years ended August 31, 2013 and 2012, 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.

54

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

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

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

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

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

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

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

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

55

A. Operating Results

The following discussion and analysis of the financial condition and operating results of the Company for the years ended August 31, 2013 and 2012 should be read in conjunction with the Consolidated Financial Statements and related notes to the financial statements which have been prepared in accordance with IFRS.

Overview

As at August 31, 2013 the Company had current assets of $11,289,745 compared to $20,483,824 on August 31, 2012. The decrease is mainly due to net expenditures on exploration of $4,109,573 (2012 - $9,593,993) and cash used in operations of $4,137,953 (2012 - $4,713,619). Mineral properties and deferred exploration costs were $45,932,207 as compared to $44,017,541 at August 31, 2012.

Net loss for the year ended August 31, 2013 was $3,225,998 compared to a net loss of $8,897,843 in the comparable year ended August 31, 2012. The decrease in net loss is primarily due to a gain of $4,590,000 from the revaluation of warrant liability during the year ended August 31, 2013 compared to a loss of $2,321,921 on the same revaluation of the warrant liability in 2012 offset by an increase in the loss due to share based payments of $1,053,509 for the year ended August 31, 2013 (2012 - $777,640) and write down in mineral properties and deferred exploration costs of $2,194,907 (2012 - $1,293,969).

Results of operations

Fiscal year ended August 31, 2013 compared to fiscal year ended August 31, 2012

Net additions to mineral properties and deferred exploration costs for the year ended August 31, 2013 were $4,109,573 compared to $9,593,993 for the year ended August 31, 2012. The amount has decreased as compared with prior year as the Company advances its exploration of the Buckreef project and other projects in its portfolio and at the same time is conscious about conserving its cash in the current economic downturn. Recoveries received during the year ended August 31, 2013 and 2012 from various option agreements and other miscellaneous sources were $41,786 and $50,114, respectively.

Net loss for the year ended August 31, 2013 was $3,225,998 compared to a loss of $8,897,843 for the comparable year ended August 31, 2012. For the three month period ended August 31, 2013 and 2012, the net loss was $2,754,677 and $3,576,139, respectively. The main reason for the decrease in net loss for the year ended August 31, 2013 is the gain on revaluation of warrant liability of $4,590,000 (2012 – loss of $2,321,921) offset by a write down in mineral properties and deferred exploration costs of $2,194,907 (2012 - $1,293,969). For the three month period ended August 31, 2013, net loss also decreased mainly due to the revaluation of warrant liability resulting in a loss of $747,000 (2012 – loss of $1,927,000) offset by a write down in mineral properties and deferred exploration costs of $695,094 (2012 - $((66,601)).

For the year ended August 31, 2013, depreciation expense was $288,519 compared to $379,603 for the year ended August 31, 2012. The decrease of $91,084 was due to the lower capital asset cost base as purchases in the period were minimal and depreciation lowered the capital asset balance. The capital expenditure for the year ended August 31, 2013 was $50,197 as compared to $142,283 in the year ended August 31, 2012.

56

Consulting fees for the year ended August 31, 2013 were $317,257 compared to $266,011 in the comparable year ended August 31, 2012. Consulting expenses increased due to independent work on resource upgrade and other general consulting. Consulting fees for the three months ended August 31, 2013 were $136,807 compared to $87,943 in the comparable three month period ended August 31, 2012. The increase for the three month period is due to the same reason as above.

Directors’ fees for the year ended August 31, 2013 were $375,342 compared to $365,049 in the comparable year ended August 31, 2012. Director fees remained consistent between the two periods as the number and valuation of RSU’s issued to board members remained comparable.

Office and general expenses for the year ended August 31, 2013 were $388,675 compared to $437,380 in the comparable year ended August 31, 2012. The decrease is mainly due to the company closely managing its office and general costs including closure of the Mwanza office and consolidation of offices at the Buckreef camp, as well as reduced freight expenses. For the three month period ended August 31, 2013, office and general expenses were $124,742 compared to $151,581 in the comparable three month period ended August 31, 2012. The decrease for the three month period is due to the same reason as above.

Shareholder information costs decreased from $581,526 for the year ended August 31, 2012 to $343,291 for the year ended August 31, 2013. The decrease of $238,235 was due to decreased activity during the year ended August 31, 2013 in comparison to 2012 due to transfer agent and listing fees from the issue of shares for converted debt and corporate investor promotion activity completed during the prior year ended 2012. For the three month period ended August 31, 2013, shareholder information costs were $70,711 compared to $(21,143) for the three month period ended August 31, 2012. The negative amount in fiscal 2012 was due to account reclassifications in the period.

Professional fees decreased by $136,749 for the year ended August 31, 2013 to $732,328 from $869,077 for the year ended August 31, 2012. Professional fees decreased between the comparable periods as the Company incurred one time costs during fiscal 2012 related to the transition to IFRS and various legal work related to its Buckreef property. For the three month period ended August 31, 2013 professional fees went from $464,054 for the three month period ended August 31, 2012 to $318,594 for the three month period ended August 31, 2013. The decrease in the current three month period is due to the same reason as above.

Salaries and benefits expense has decreased to $1,388,160 for the year ended August 31, 2013 from $1,596,951 for the year ended August 31, 2012. The decrease is due to a reduced workforce on staff in Tanzania during the current year and termination payments in the prior year. The expenses for the corresponding three month period ending August 31, 2013 and 2012 were $261,860 and $502,877 respectively. The decrease in the current three month period is due to the same reason as above.

Share based payments for the year ended August 31, 2013 were $1,053,509 compared to $777,630 in the comparable year ended August 31, 2012. Share based payments vary depending on the number of equity based compensation options issued and vesting. See note 8 of the financial statements for details. Director fee RSU expense was $208,572 and $289,448, respectively.

For the year ended August 31, 2013, travel and accommodation expense decreased by $43,058 from $169,420 in 2012 to $126,362. For the three months ended August 31, 2013, travel and accommodation expense increased by $3,107 from $35,349 in 2012 to $38,456. Travel and accommodation expense decreased due to timing and increased control of travel requirements, while remaining consistent in the last quarter of 2013.

For the year ended August 31, 2013, the foreign exchange loss was $5,215 compared to an exchange gain of $24,082 for the same year ended August 31, 2012. This increased loss of $29,297 was due to the years’ average Tanzanian Shilling exchange rate having increased from 1,572 at August 31, 2012 to 1,524 at August 31, 2013.

57

The interest accretion expense for the year ended August 31, 2013 was $55,549, compared to $102,785 for the year ended August 31, 2012. The interest relates to the issuance of convertible debt. Interest accretion is expected to decrease as debt is converted into shares or repaid. Interest income for the year ended August 31, 2013 was $133,116, compared to $274,913 for the year ended August 31, 2012. Interest income has decreased as the average cash balance in interest bearing accounts decreased during the current year.

During the year ended August 31, 2013, the Company agreed to abandon and wrote off $2,194,907 in expenses in various project areas (2012 – wrote off $1,293,969) from abandoning various licenses, see note 4 of the financial statements, as the Company evaluated its mineral properties and has no current plans to explore, but may in the future.

A gain of $4,590,000 (2012 – loss of $2,321,921) was recognized during the year ended August 31, 2013 in connection with the revaluation of the warrant liability.

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

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

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

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

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

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

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

58

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

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

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

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

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

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

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

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

Inflation

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

59

Foreign Exchange

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

B. Liquidity and Capital Resources

The Company had $10,679,516 in cash and marketable securities at August 31, 2013 compared to $20,058,678 as of August 31, 2012. The Company had working capital of $5,416,104 at August 31, 2013, compared to $18,165,431 at August 31, 2012. Although the Company believes it has enough resources through working capital to finance operations for its 2014 fiscal year, ultimately the Company will need to obtain additional financing to sustain operations at the present rate of activity. The current cash position is expected to sustain operations for its 2014 fiscal year. Historically, the Company has raised funds through equity financing, convertible promissory notes and entering into joint venture or royalty agreements with other mining companies. The Company’s funding requirements by major expenditure category, listed in order of priority are:

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

(b) exploration work,

(b) new property investigations, and

(c) general and administrative costs.

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

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

On August 17, 2010 the Company completed a private placement with an arm’s length third party consisting of a three-year convertible promissory note dated July 9, 2010 in the principal amount of $1,095,000 bearing interest at 3% and convertible into 255,484 common shares at the price of $4.286. $95,000 of the outstanding principal was converted into 22,166 common shares. On September 23, 2011, this Promissory Note was converted into 233,318 common shares at a price of $4.286 per share.

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

On September 23, 2010 the Company completed a private placement with an arm’s length third party consisting of a three-year convertible promissory note in the principal amount of $1,000,000 bearing interest at 3% and convertible into 221,337 common shares at the price of $4.518 per share. On October 17, 2012 this Promissory Note was converted into 221,337 common shares at a price of $4.518 per share.

60

On October 4, 2010 the Company completed a private placement with arm’s length third parties consisting of three-year convertible promissory notes in the aggregate principal amount of $1,060,000 bearing interest at 3% and convertible into 204,772 common shares at the price of $5.1765 per share On September 14, 2013 the promissory notes matured and the Holders elected repayment of the promissory notes in cash.  Accordingly $1,060,000 plus interest in the amount of $30,000 was paid on September 16, 2013.

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

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

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

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

Mineral Property Projects

As of August 31, 2013 amounts capitalized in respect of mineral properties were $45,932,207 an increase from August 31, 2012 when the balance was $44,017,541.

During the fiscal year ended August 31, 2013, the Company capitalized mineral property exploration costs of $4,109,573 (net of recoveries of $41,786) on its mineral resource properties. The Company wrote off $2,194,907 in exploration expenditures on areas abandoned in the year ended August 31, 2013.

61

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

Events Subsequent To August 31, 2013

On October 4, 2010 the Company completed a private placement with arm’s length third parties consisting of three-year convertible promissory notes in the aggregate amount of $1,060,000 bearing interest at 3% per annum and convertible into 204,772 common shares, if the Holders elected to convert.  On September 14, 2013 the promissory notes matured and the Holders elected repayment of the promissory notes in cash.  Accordingly $1,060,000 plus interest in the amount of $30,000 was paid on September 16, 2013.

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

Not Applicable.

D. Trend Information

No known trend.

E. Off Balance Sheet Arrangements

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

F. Tabular Disclosure of Contractual Obligations

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

Item 6. Directors, Senior Management and Employees

A. Directors and Senior Management

Directors and Senior Management

A. Directors and Senior Management

The following is a list of the Company’s current directors and officers. The directors named below were elected or re-elected by the Company’s shareholders on February 28, 2013. There are no family relationships between the directors and officers.

62

Name, Municipality of Residence and Position With the Company	Principal occupation or employment and, if not a previously elected director, occupation during the past 5 years	Served as a Director Continuously Since
James E. Sinclair Sharon, Connecticut President, Chief Executive Officer and Director	President and CEO of the Company	April 30, 2002
Joseph Kahama Dar es Salaam, Tanzania Chairman and Chief Operating Officer (Tanzania) and Director	Chairman and COO (Tanzania) of the Company; President, Tanzania American International Development Corporation 2000 Limited	February 29, 2008
Dr. Norman Betts Fredericton, New Brunswick Director	Associate Professor, Faculty of Business Administration, University of New Brunswick and a Chartered Accountant	January 4, 2005
William Harvey Sharon, Connecticut Director	Psychologist	April 30, 2002
Rosalind Morrow Toronto, Ontario Director	Lawyer; Partner, Borden Ladner Gervais LLP	October 20, 2003
Abdulkarim Mruma Dar es Salaam, Tanzania Director	Professor of Geology, University of Dar es Salaam	February 22, 2011
Ulrich E. Rath Toronto, Ontario Director	Formerly President and CEO and Director of Chariot Resources Ltd.	October 7, 2003
Steven Van Tongeren Yorktown Heights, New York Chief Financial Officer	Chief Financial Officer of the Company	Not a Director Officer

Directors and Senior Management

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

Mr. Sinclair is the President and CEO of the Company. Mr. Sinclair, age 72, devotes his full time to the business and affairs of the Company.

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

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

63

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

Joseph Kahama was appointed Chairman and Chief Operating Officer (Tanzania) of the Company in February 2011. He became a director of Tanzanian Royalty Exploration Corporation in February 2008 and he formerly served as President and Senior Vice President of the Corporation. A native of Tanzania, Mr. Kahama has served as president and director of the Company's wholly-owned subsidiary, Tanzam, since 1997. In his capacity as president of Tanzam, Mr. Kahama has been responsible for corporate administration and also for maintaining good relations with government, vendors, and the Company's various business partners in Tanzania. In addition to being a councilor at the Tanzania Chamber of Energy & Minerals (TCME) since 1999, where he represents the Company and its various Tanzanian subsidiaries, Mr. Kahama was elected as Chairman of the Tanzania Chamber of Energy & Minerals in 2011. In 2007, he was appointed to the Tanzania National Business Council (TNBC) and the Local Investors Roundtable (LIRT). In 2006, Mr. Kahama was appointed as a member and advisor to the China Africa Business Council (CABC) which is headquartered in Beijing, Peoples Republic of China. In addition, Joseph Kahama is Chairman of The Kahama Foundation, a not-for-profit organization which enables, fosters and nurtures business entrepreneurship, modern management practices and ethical leadership in business and cooperatives. Mr. Kahama is also a Trustee and Founding member of The Mawalla Chair for Legal and Business Studies, an academic endowment covering five universities in Tanzania. Mr. Kahama is also author of a Book called "SIR GEORGE: A Thematic History of Tanzania Through His Fifty Years of Public Service", printed in 2010.  Mr. Kahama, age 45, devotes his full time to the business and affairs of the Company.

Dr. Norman Betts, Ph.D., Director

Dr. Betts is an associate professor, Faculty of Business Administration, University of New Brunswick (UNB) and a Chartered Accountant Fellow (FCA). Dr. Betts serves as a Chair of the board of directors of Starfield Resources Inc. and as a director and member of the audit committees of Tembec Inc., New Brunswick Power Corporation, Export Development Canada and Adex Mining Inc. He is also a co-chair of the board of trustees of the UNB Pension Plan for Academic Employees. He is a former Finance Minister and Minister of Business New Brunswick with the Province of New Brunswick. He was awarded a PhD in Management from the School of Business at Queen’s University in 1992. Dr. Betts, age 59, devotes approximately 10% of his time to the business and affairs of the Company.

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

Dr. Harvey is a Clinical Psychologist, who for over thirty years has served as a consultant and technical expert on matters relating to substance abuse prevention and mental health promotion to a wide variety of private and governmental programs and agencies in the United States. These include the National Institute of Drug Abuse, the National Institute of Alcoholism and Alcohol Abuse, the Office of Juvenile Justice & Delinquency Prevention, and the National Mental Health Association. He was an Adjunct Professor in the Department of Sociology at Washington University, and a Senior Research Scientist at the Missouri Institute of Mental Health, University of Missouri. He continues to be involved in the formulation of new programs and policies aimed at the betterment of society.  Dr. Harvey will continue to expand the role which the Company has at the local level to ensure that stakeholder interests are addressed.  Dr. Harvey, age 80, devotes approximately 10% of his time to the business and affairs of the Company.

64

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

A graduate of Trinity College, Toronto, the Royal Conservatory of Music of Toronto and the University of Toronto Law School, Ms. Morrow specializes in corporate and securities law with a particular emphasis on financings, including government and structured finance, corporate governance and mergers and acquisitions. She has advised Canadian and international corporations on a number of major projects in the financial, communications and resource sectors. Ms. Morrow is a former member of the Securities Advisory Committee to the Ontario Securities Commission. Since the inception of the program in 2001, Ms. Morrow has been lead external counsel to Canada Mortgage and Housing Corporation on over $250 billion in fully underwritten global bond issuances under its Canada Mortgage Bond Program, and since 2008 has represented the Canadian federal government on its $125 billion Insured Mortgage Purchase Program, the Canadian equivalent of the U.S. TARP Program. A past president of the Women’s Law Association of Ontario and recipient of its President’s Award, Ms. Morrow currently serves on the Board of Governors of Trent University. She is also Vice Chair of The Living City, the foundation arm of the Toronto and Region Conservation Authority, one of the largest environmental organizations in North America, dedicated to the preservation of a green environment in the Toronto region. Ms. Morrow, age 59, devotes approximately 10% of her time to the business and affairs of the Company.

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

Dr. Mruma is a graduate of the University of Dar es Salaam where he currently serves as a Professor of Geology. His post graduate studies included research sabbaticals at universities and government institutions in Germany, Belgium, Zimbabwe and Finland. He has authored numerous technical reports on various geological topics and contributed to several technical and non-technical journals on a broad range of geology and industry-related subjects. The list of publications includes UNESCO Magazine, Journal of African Earth Sciences, and the Tanzanian Journal of Earth Sciences. In addition to his academic duties, Dr. Mruma is Chief Executive Officer of the Geological Survey of Tanzania, a position he has held since October 2004. He also serves as a Board member of both Williamson Diamonds Limited, National Development Corporation, College of Earth Sciences of the University of Dodoma,  and the State Mining Corporation (STAMICO) of Tanzania, the Company's joint venture partner for the Buckreef Gold Mine Re-development Project. Dr. Mruma is the Chairman of the Advisory Board of Mineral Resources Institute and he also acts as National Coordinator of International Geological Correlation Programs and International Year of Planet Earth Programs. He is also a member of the Research and Development Advisory Committee on Natural Resources - Tanzania Commission for Science and Technology (COSTECH). Dr. Mruma, age 58, devotes approximately 10% of his time to the business and affairs of the Company.

Ulrich E. Rath, Director

Mr. Rath has a wide range of experience in the mining industry, and has specific experience in North America, South America including Argentina, Chile and Peru and in South Africa. Mr. Rath was the President and CEO and Director of Chariot Resources Ltd., a junior resource company focused on the exploration, acquisition and development of copper and precious metal mineral deposits in the Andes region of Latin America. In June 2010 Mr. Rath facilitated the sale of Chariot Resources following a global auction. The sale was approved by over 98% of the shareholders of Chariot Resources. As the former President, CEO and Director of Chimera Gold Corp. (previously known as EAGC Ventures), Ulrich Rath was responsible for facilitating the $US67 million acquisition of gold operations in the East Rand region of South Africa that now produce more than 200,000 ounces gold per annum. Subsequently, the Board of Chimera agreed to a 1:1 merger with Bema Gold Corp.  He was formerly CEO and director of Compania Minera Milpo a medium sized Peruvian zinc mining company.   Mr. Rath was also formerly Vice-President, Corporate Development, for Rio Algom Ltd. from December 1992 to October 1998.  Rio Algom Ltd. was a U.S. reporting issuer, whose common shares were listed on the American Stock Exchange.  Mr. Rath, age 67, devotes approximately 10% of his time to the business and affairs of the Company.

65

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

Mr. Van Tongeren holds a Bachelor of Science degree from the State University of New York and is a Certified Public Accountant. He completed Executive Finance Management Training at INSEAD France, one of the world's leading and graduate business schools. He has extensive international experience having lived and worked in various countries. Mr. Van Tongeren was Executive Director, Finance for a London Stock Exchange listed restaurant group operating throughout Europe. He successfully brought the privately held company to full public listing and went on to complete major fund raising for the company's rapid international expansion. He acted as Vice President, Finance and Administration, for PolyGram Video and later as Manager of World-Wide Consolidation and Reporting for Polygram International BV. In that capacity he was responsible for preparing all consolidated world-wide financial reporting for one of the world's major record and film entertainment companies with subsidiaries in 34 countries. He served as European and South African Financial Director for the Borden Food Inc. International packaging group with manufacturing and sales operations throughout Europe and South Africa. Mr. Van Tongeren has worked as Senior Operations Auditor for Gulf & Western Inc. where he was responsible for domestic and international company audits and special project due diligence. Mr. Van Tongeren, age 56, devotes his full time to the business and affairs of the Company.

Cease Trade Orders

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

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

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

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

(i) a cease trade order;

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

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

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

Penalties or Sanctions

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

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

66

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

Personal Bankruptcies

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

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

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

Conflicts of Interest

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

B. Executive Compensation

Compensation Discussion and Analysis

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

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

67

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

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

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

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

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

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

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

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

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

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

68

Based on the foregoing definition, the Company has six (6) NEOs for the fiscal year ended August 31, 2013: James E. Sinclair, President and CEO; Joseph Kahama, Chairman and COO (Tanzania); Steven Van Tongeren, CFO, Victoria Luis, Corporate Accountant, Phillip Kaniki, General Manager and Helen Hansen, Corporate Secretary.

The following tables set forth particulars concerning the compensation of the named executive officers for the Company’s last three fiscal years ended August 31, 2013:

69

Summary Compensation Table

Name and Principal Position	Year	Salary ($)	Share-based awards ($)		Option-based awards ($)	Non-equity incentive plan compen- sation ($)	Pension Value ($)	All other compensation ($)	Total compensation ($)
			Annual incentive plans (RSU)	Long term incen- tive plans (ESOP)
James Sinclair, President and CEO	2013 2012 2011	87,512(11) 69,803(11) 22,459(8)	Nil Nil Nil	Nil Nil Nil	None None None	None None None	None None None	10,348 Nil Nil	97,860 69,803 22,459
Joseph Kahama, Chairman and COO (Tanzania)	2013 2012 2011	113,064(1)(11) 131,143(1)(11) 108,327(1)(8)	89,515(13) Nil Nil	Nil Nil Nil	None None None	None None None	None None None	149,700(18) Nil 2,328	352,279 131,143 110,655
Steven Van Tongeren Chief Financial Officer	2013 2012 2011	173,885(11) 166,100(11) 75,665(8)	311,125(16) 325,500(9) Nil	9,328 14,004 8,612	None None None	None None None	None None None	28,375 10,200 Nil	522,713 515,804 84,277
Helen Hansen Corporate Secretary	2013 2012 2011	87,120 85,800 78,600	120,250(14) 103,000(10) 40,000(5)	4,758 4,709 4,400	None None None	None None None	None None None	12,260 8,000 6,600	224,388 201,509 129,600
Victoria Luis Corporate Accountant	2013 2012 2011	113,665(11) 73,027(11) 12,926(11)	182,725(15) 158,750(12) 68,750(5)	Nil Nil Nil	None None None	None None None	None None None	14,395 3,000 Nil	310,785 234,777 81,676
Phillip Kaniki General Manager	2013 2012 2011	92,500(11) N/A N/A	41,225(17) N/A N/A	8,948 N/A N/A	None None None	None None None	None None None	8,500 N/A N/A	151,173 N/A N/A

N/A = Not Applicable

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

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

⁽⁸⁾ US$ exchange = 0.9893

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

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

⁽¹¹⁾ US$ exchange = 1.00

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

⁽¹³⁾ Valued at $4.69 per RSU granted on June 2, 2010..

⁽¹⁴⁾ Total is a combination of 10,128 RSUs valued at $4.69 per RSU granted on June 2, 2010 and 14,877 RSUs valued at $4.89 per RSU granted on April 11, 2012

⁽¹⁵⁾ Total is a combination of 14,659 RSUs valued at $4.69 per RSU granted on June 2, 2010, 23,307 RSUs valued at $4.89 per RSU granted on April 11, 1012,

⁽¹⁶⁾ Total is a combination of 25,000 RSUs valued at $4.20 per RSU granted on February 24, 2012 and 42,152 RSUs valued at $4.89 per RSU granted on April 11, 2012

⁽¹⁷⁾ Valued at $4.89 per RSU granted on April 11, 2012

⁽¹⁸⁾ Total is a combination of $74,700 cash and 27,574 RSUs valued at $2.72 per RSU granted on July 3, 2013.

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

70

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

Incentive Plan Awards

Outstanding share-based awards and option-based awards

Option-based Awards					Share-based Awards
Name		Number of securities underlying unexercised options (#)	Option exercise price ($)	Option expiration date	Value of unexercised in-the-money RSUs ($)	Number of shares or units of shares that have not vested (#)	Market or payout value of share-based awards that have not vested ($)
James Sinclair, CEO	2013 2012 2011	N/A N/A N/A N/A	N/A N/A N/A	Not Applic- able	206,125(3) 206,125(1) 187,500(2)	57,577 42,152 29,857	206,125 206,125 187,500
Joseph Kahama, President	2013 2012 2011	N/A N/A N/A	N/A N/A N/A	Not Applic- able	281,125(4) 206,125(1) 193,750(2)	85,151 42,152 30,852	281,125 206,125 193,750
Steven Van Tongeren, CFO	2013 2012 2011	N/A N/A N/A	N/A N /A N/A	Not Applic- able	313,525(3) 311,125(5) Nil	87,577 67,152 Nil	313,525 311,125 Nil
Helen Hansen, Corporate Secretary	2013 2012 2011	NA N/A N/A	N/A N/A N/A	Not Applic- able	72,750(3) 72,250(1) Nil	20,321 14,877 Nil	72,750 72,250 Nil
Victoria Luis, Corporate Accountant	2013 2012 2011	N/A N/A N/A	N/A N/A N/A	Not Applic- able	113,975(3) 113,975(1) Nil	31,837 23,307 Nil	113,975 113,975 Nil
Phillip Kaniki, General Manager	2013 2012	N/A	N/A	Not Applicable	41,225(3) 41,225(1)	11,515 8,430	41,225 41,225

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

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

⁽³⁾ Valued at $3.58 per RSU granted on April 10, 2013

⁽⁴⁾ Total is a combination of 57,577 RSUs valued at $3.58 per RSU granted on April 10, 2013 and 27,574 RSUs valued at $2.72 per RSU granted on July 3, 2013

⁽⁵⁾ Total is a combination of 25,000 RSUs valued at $4.20 per RSU granted on February 24, 2012 and 42,152 RSUs valued at $4.89 per RSU granted on April 1, 2012.

71

Incentive plan awards – Value vested or earned during the year

Name	Option-based awards – Value vested during the year ($)	Share-based awards – Value vested during the year ($)	Non-equity incentive plan compensation – Value earned during the year ($)
James Sinclair, CEO	None	Nil	None
Joseph Kahama, President	None	$89,515	None
Steven Van Tongeren, CFO	None	$311,125	None
Helen Hansen, Corporate Secretary	None	$120,250	None
Victoria Luis, Corporate Acountant	None	$182,725	None
Phillip Kaniki, General Manager	None	$41,225	None

Long Term Incentive Plan Awards to NEOs

The Company has made long-term incentive plan awards during the fiscal year ended August 31, 2013 to NEOs of the Company. See “Restricted Stock Unit Plan” and “Employee Share Ownership Plan” below.

Restricted Stock Unit Plan

The Restricted Stock Unit Plan (“RSU Plan”) is intended to enhance the Company’s and its affiliates’ abilities to attract and retain highly qualified officers, directors, key employees and other persons, and to motivate such officers, directors, key employees and other persons to serve the Company and its affiliates and to expend maximum effort to improve the business results and earnings of the Company, by providing to such persons an opportunity to acquire or increase a direct proprietary interest in the operations and future success of the Company. To this end, the RSU Plan provides for the grant of RSUs. Each RSU represents an entitlement to one common share of the Company, upon vesting. As of November 9, 2012, the Board resolved to suspend 1,500,000 common shares of the 2,500,000 common shares previously authorized for issuance under the RSU Plan, such that a maximum of 1,000,000 shares shall be authorized for issuance under the RSU Plan, until such suspension may be lifted or further amended. Any of these awards of RSUs may, but need not, be made as performance incentives to reward attainment of annual or long-term performance goals in accordance with the terms of the RSU Plan. Any such performance goals are specified in the agreement between the Company and the recipient governing the award. The Board implemented the RSU Plan under which employees and directors are compensated for their services to the Company. See “Director Compensation.”

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

72

RSUs Granted to Directors and Named Executive Officers During the Fiscal Year Ended August 31, 2013:

Name	Date of Grant	No. of RSUs(1)	Cash Compensation Election	Vesting Period(3)	Expiration Date
Norman Betts	April 10, 2013	11,470	$38,000	3 years	April 10, 2016
William Harvey	April 10, 2013	10,562	$37,812	1 year	April 10, 2014
Joseph Kahama	April 10, 2013	57,577	N/A	3 years	April 10, 2016
Joseph Kahama	July 3, 2013	27,574(2)	N/A	1 year	July 3, 2014
Rosalind Morrow	April 10, 2013	9,602	$34,375	3 years	April 10, 2016
Abdulkarim Mruma	April 10, 2013	11,068	$39,625	1 year	April 10, 2014
Ulrich Rath	April 10, 2013	11,042	$39,531	1 year	April 10, 2014
James Sinclair	April 10, 2013	57,577	N/A	3 years	April 10, 2016
Steven Van Tongeren	April 10, 2013	87,577	N/A	3 years	April 10, 2016
Helen Hansen	April 10, 2013	20,321	N/A	3 years	April 10, 2016
Victoria Luis	April 10, 2013	31,837	N/A	3 years	April 10, 2016
Phillip Kaniki	April 10, 2013	11,515	N/A	3 years	April 10, 2016
RSUs granted to directors and executive officers as a group: 347,722

⁽¹⁾ Valued at $3.58 per RSU

⁽²⁾ Valued at $2.72 per RSU

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

The following RSUs granted to directors during the fiscal year ended August 31, 2012 vested during fiscal year ended August 31, 2013 and 23,919 shares were issued on April 11, 2013:

Name	Date of Grant	No. of Shares(1)	Cash Compensation Election	Vesting Period	Expiration Date
William Harvey	April 11,2012	7,732	$37,812	1 year	April 11, 2013
Abdul Mruma	April 11, 2012	8,103	$39,625	1 year	April 11, 2013
Ulrich Rath	April 11, 2012	8,084	$39,531	1 year	April 11, 2013

⁽¹⁾ Valued at $4.89 per RSU

The following RSUs granted to directors during the fiscal year ended August 31, 2010 vested during fiscal year ended August 31, 2013. 15,636 shares were issued on June 3, 2013:

Name	Date of Grant	No. of Shares(1)	Vesting Period	Expiration Date
Rosalind Morrow	June 2, 2010	15,636	3 years	June 3, 2013

⁽¹⁾ Valued at $4.69 per RSU.

Outstanding RSUs

RSUs granted to directors and executive officers during fiscal year 2013 are outstanding as of August 31, 2013.

Employee Share Ownership Plan

By an agreement dated May 1, 2003, the Company appointed Olympia Trust Company of Calgary, Alberta, as trustee (the “Trustee”) to manage and administer an ESOP. Under the ESOP, eligible employees, directors, and consultants can elect to contribute up to 30% of their salary or compensation on a monthly basis for investment by the Trustee in shares of the Company. The Company will contribute funds equal to 100% of the employee’s contribution up to an amount equal to 5% or less of the employee’s salary. The Company will contribute funds equal to 50% of the employee’s contribution for the next 6% to 30% inclusive of the employee’s salary. All share purchases are at market prices at the time of purchase, through the facilities of the TSX using registered representatives. As at August 31, 2013, fifteen participants, including participating directors, together with Company contributions, have purchased 37,301 common shares under the ESOP. The average monthly participant contributions are $5,895 and the Company’s matching monthly contribution is $4,900 per month. Included in the above contributions are the following director and NEO contributions:

73

Name	Director/Officer/NEO Contribution ($)	Company Contribution ($)	Number of Common Shares Purchased
Rosalind Morrow	10,000	10,000	5,382
Steven Van Tongeren	9,762	9,328	5,220
Helen Hansen	5,161	4,758	2,755
Phillip Kaniki	13,423	8,948	6,598

Pension Plan Benefits

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

Equity Compensation Plan Information

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

	Number of securities to be issued upon exercise of outstanding RSUs	Weighted average exercise price of outstanding RSUs	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Plan Category	(a)	(b)	(c)
Equity compensation plans approved by security holders (Restricted Stock Unit Plan)	621,578	$4.164	126,639
Total	621,578	$4.164	126,639

Director Compensation

Director Compensation Table

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

Name	Fees Earned ($)	RSUs granted(1) (#)	Cash Compensation Election ($)	All Other Compensation (US$)	Total ($)
Norman Betts	79,062	11,470	38,000	Nil	79,062
William Harvey	75,625	10,562	37,812	Nil	75,625
Rosalind Morrow	68,750	9,602	34,375	Nil	68,750
Abdulkarim Mruma	75,625	11,068	36,000	Nil	75,625
Ulrich Rath	79,062	11,042	39,531	55,709(2)	134,771

⁽¹⁾ Valued at $3.58 per RSU (the closing price of the Company’s shares on April 10, 2013, the date of grant of the RSUs).

⁽²⁾ Additional compensation to certain members of the Technical Committee for providing expert technical advice to the Company.

74

Directors who are also members of management do not receive any additional cash compensation for serving on the Board. All directors are granted RSUs as compensation for serving on the Company’s Board. Please see the table entitled “RSUs Granted to Directors and Named Executive Officers During the Fiscal Year Ended August 31, 2013” under “Restricted Stock Unit Plan” above.

Annual compensation for outside directors is $68,750 per year, plus $6,875 per year for serving on Committees, plus $3,437.50 per year for serving as Chair of a Committee. On April 11, 2012 the board approved that at the election of each individual director, up to one half of the annual compensation may be received in cash, paid quarterly. The remainder of the director’s annual compensation (at least one half, and up to 100%) will be awarded as RSUs in accordance with the terms of the RSU Plan and shall vest within a minimum of one (1) year and a maximum of three (3) years, at the election of the director, subject to the conditions of the Amended RSU Plan with respect to earlier vesting. In 2013 outside directors had the option to elect to receive 100% of their compensation in RSUs. If 100% compensation in RSUs is elected, the compensation on which the number of RSUs granted in excess of the required one half shall be increased by 20%.

Under the Amended RSU Plan, at the election of each outside director, outside directors were granted 53,744 RSUs during the fiscal year ended August 31, 2013.

At the election of each outside director, directors’ fees of $160,852 were paid to outside directors during the fiscal year ended August 31, 2013.

Termination and Change of Control Benefits

There are currently no contracts for outside management services. There are two (2) employment contracts with certain NEOs, including Mr. Kahama and Mr. Steven Van Tongeren, whereby they will be entitled to receive an amount by way of severance payment equal to one month's salary per full year of service in the event of termination without cause. The employment contracts do not provide for change of control benefits. If a termination without cause was to have occurred on August 31, 2013, the Company would have been required to pay a severance payment in the aggregate amount of $132,500 in the case of Mr. Kahama and Mr. Van Tongeren.

C. Board Practices

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

75

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

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

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

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

The Company has a Technical Committee currently comprised of Joseph Kahama, Chair, Abdulkarim Mruma, Phillip Kaniki and Joas Kabete. The Technical Committee has approved a Technical Committee Manual defining Composition and Terms of Reference. Among other things, the Technical Committee reviews with management any exploration, geological, mining, metallurgical and other technical issues and reviews technical and financial issues associated with new and existing projects that require Board approval with respect to their technical and financial impact on the Company. The Technical Committee reports directly to the Board of Directors.

AUDIT COMMITTEE INFORMATION

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

1. The Audit and Compensation Committee’s Charter

1.0 Purpose of the Committee

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

76

2.0 Compensation

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

3.0 Members of the Audit and Compensation Committee

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

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

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

4.0 Relationship with External Auditors

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

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

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

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

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

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

5.0 Non-Audit Services

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

77

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

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

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

6.0 Appointment of Auditors

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

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

7.0 Evaluation of Auditors

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

8.0 Remuneration of the Auditors

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

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

9.0 Termination of the Auditors

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

10.0 Funding of Auditing and Consulting Services

78

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

11.0 Role and Responsibilities of the Internal Auditor

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

12.0 Oversight of Internal Controls

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

13.0 Continuous Disclosure Requirements

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

14.0 Other Auditing Matters

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

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

15.0 Annual Review

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

16.0 Independent Advisers

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

17.0 Reports of Fraud and Misconduct

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

18.0 Changes in Accounting Policies

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

79

19.0 Nominating Committee

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

2. Composition of the Audit and Compensation Committee

Following are the members of the Audit and Compensation Committee:

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

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

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

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

3. Relevant Education and Experience

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

4.- 6. Reliance on Certain Exemptions

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

7. Audit and Compensation Committee Oversight

At no time since the commencement of the Company’s most recently completed financial year was a recommendation of the Audit and Compensation Committee to nominate or compensate an external

80

auditor not adopted by the Board of Directors.

8. Pre-Approval Policies and Procedures

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

9. External Auditor Service Fees

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

Financial Year Ending August 31	Audit Fees	Audit Related Fees	Tax Fees	Non-Audit Fees
2013	Canada – $135,000 Tanzania - $35,000	Nil Nil	Nil Nil	Nil Nil
2012	Canada - $231,500 Tanzania - $52,760	Nil Nil	Nil Nil	Nil Nil

D. Employees

The Company has one (1) full time employee located in South Surrey, British Columbia, Canada, one full time employee located in Sharon, Connecticut, USA, thirty-three (33) full time employees located in Buckreef, Tanzania, and seven (7) full time employees located in Dar es Salaam, Tanzania.

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

Location	Category	Full Time Employees	Temporary Employees	Full Time Consultants	Part Time Consultants
South Surrey, Canada	Administration	1	Nil	Nil	Nil
Buckreef , Tanzania	Administration	13	Nil	Nil	Nil
	Exploration	19	Nil	Nil	Nil
Dar es Salaam, Tanzania	Administration	7	Nil	Nil	Nil
	Exploration	1	Nil	Nil	Nil
Connecticut, USA	Administration	1	Nil	2	Nil

E. Share Ownership

The following table sets forth the share ownership of our directors and named executive officers, held by such persons as of August 31, 2013.

81

Name of Owner	Number of Shares Owned	Percentage (1)
Norman Betts	2,100	<0.01%
Helen Hansen	2,501	<0.01%
William Harvey	340,090	0.33%
Joseph Kahama	15,800	<0.01%
Victoria Luis	144,011	0.14%
Rosalind Morrow	445,065	0.44%
Abdulkarim Mruma	20,947	0.02%
Ulrich E. Rath	69,789	0.07%
James E. Sinclair	1,885,543	1.87%
Steven Van Tongeren	116,161	0.11%
All directors and named executive officers as a group	3,042,007	3.01%

⁽¹⁾ calculation based on 100,922,582 shares of common stock outstanding as of August 31, 2013

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

Item 7. Major Shareholders and Related Party Transactions

A. Major Shareholders

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

As of August 31, 2013, the Company knows of one shareholder who beneficially own more than five (5%) of the outstanding shares of the Company’s voting securities as set forth in the following table:

Title of Class	Identity of Holder(2)	Amount Owned	Percent of Class(1)
Common Shares	Van Eck Associates Corporation	8,408,462	8.33%

⁽¹⁾ Based on the issued and outstanding shares of the Company of 100,922,582 shares as at September 30, 2013

⁽²⁾ As per information provided pursuant to sec. 2.2 of NI 62-103 an Alternative Monthly Report filed on SEDAR on October 4, 2013

The following table sets out the portion of common shares of the Company held by registered shareholders in Canada, the United States of America, and all other countries by total number of holders, total shareholdings, percentage of total issued shares, and percentage of total holders as of August 31, 2013:

Jurisdiction Shareholders of Record	Number of Shareholders	Number of Common Shares	Percentage of Total Issued Shares	Percentage of Total Holders
United States	1,486	40,158,652	40%	83%
Canada	206	58,705,294	58%	11%
Other Countries	99	2,058,636	2%	6%
TOTAL	1,791	100,922,582	100%	100%

82

B. Related Party Transactions

Financing Transactions

None

Other Related Party Transactions

The Company engages a legal firm for professional services in which one of the Company’s directors is a partner. During the year ended August 31, 2013, the legal expense charged by the firm was $269,880 (2012 - $553,949), of which $13,143 remains payable at August 31, 2013 (2012 - $140,245).

During the year ended August 31, 2013, $375,342 (2012 - $365,049) was paid or payable by the Company to directors for serving on the Board and/or related Committees.

During the year ended August 31, 2013, $21,364 (2012 - $8,886) was paid to a company associated with the Company’s Chairman and COO and his spouse for office rental.

During the year ended August 31, 2013, $55,709 (2012 - $130,160) was paid or payable by the Company to directors as incremental fees for serving on the Company’s Technical Committee.

During the year ended August 31, 2013, $23,750 (2012 - $nil) was paid to a company associated with the Company’s CFO for office rental.

At August 31, 2013, the Company has a receivable of $nil (2012 - $22,977) from an organization associated with the Company’s President and CEO.

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

C. Interests of Experts and Counsel

Not Applicable.

Item 8. Financial Statements

A. Consolidated Statements and Other Financial Information

This Annual Report contains the audited consolidated financial statements of the Company for the fiscal years ended August 31, 2013 and 2012 with the Report of Independent Registered Public Accounting Firm, comprised of:

(a) Consolidated Balance Sheets as of August 31, 2013 and 2012;

(b) Consolidated Statements of Comprehensive Loss for the years ended August 31, 2013 and 2012;

(c) Consolidated Statements of Changes in Equity for the years ended August 31, 2013 and 2012;

83

(d) Consolidated Statements of Cash Flows for the years ended August 31, 2013 and 2012; and

(e) Notes to the consolidated financial statements.

Dividend Policy

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

Litigation

The Company in the ordinary course of business has been notified of a claim for additional compensation by a contractor and believes that the ultimate outcome of this action will not have a material adverse effect on its operation results, liquidity or financial position. 

B. Significant Changes

None.

Item 9. The Offering and Listing

A. Offering and Listing Details

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

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

As of August 31, 2013 there were 1,486 registered shareholders in the United States holding 40% of the Company’s outstanding common shares, representing approximately 83% of the total number of registered shareholders. The Company’s Common share is issued in registered form and the percentage of shares reported to be held by registered holders in the United States is taken from the records of the Computershare Trust Company of Canada in the City of Vancouver, the registrar and transfer agent for the common share.

The number of registered shareholders resident in the United States is attributed as to 0.15% to directors and officers of the Company who are United States residents; a further 0.2% held by United States residents who are immediate family members of a director and officer of the Company; and the balance of 39.65% are United States residents who have purchased shares in the secondary market, through the facilities of the Toronto Stock Exchange or NYSE MKT.

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

84

	Toronto Stock Exchange (Canadian Dollars)
Last Six Months	High	Low	Volume
October 2013	2.67	2.13	1,555,714
September 2013	4.14	2.61	4,101,108
August 2013	4.40	2.96	2,176,942
July 2013	3.79	2.54	1,284,084
June 2013	3.61	2.20	1,402,331
May 2013	3.49	2.38	1,529,084
2012-2013	High	Low	Volume
Fourth Quarter ended August 31, 2013	4.40	2.20	4,863,35,7
Third Quarter ended May 31, 2013	4.32	2.38	4,699,925
Second Quarter ended February 28, 2013	4.78	3.02	3,153,469
First Quarter ended November 30, 2012	5.21	4.28	3,575,412
2011-2012	High	Low	Volume
Fourth Quarter ended August 31, 2012	5.18	3.88	4,992,199
Third Quarter ended May 31, 2012	5.28	3.25	7,107,846
Second Quarter ended February 28, 2012	4.50	2.21	4,369,050
First Quarter ended November 30, 2011	5.87	1.59	8,577,391
2010-2011	High	Low	Volume
Fourth Quarter ended August 31, 2011	7.55	5.32	4,347,116
Third Quarter ended May 31, 2011	7.40	5.88	4,305,338
Second Quarter ended February 28, 2011	7.39	5.93	4,424,588
First Quarter ended November 30, 2010	7.79	5.74	4,882,585
Last Five Fiscal Years	High	Low
2013	5.21	2.20
2012	5.87	1.59
2011	7.79	5.32
2010	5.98	2.91
2009	6.50	1.99

	NYSE MKT (US Dollars)
Last Six Months	High	Low	Volume
October 2013	2.64	2.05	10,355,573
September 20132	4.06	2.53	23,601,462
August 2013	4.15	2.80	12,592,574
July 2013	3.70	2.39	7,873,621
June 2013	3.49	2.14	9,997,166
May 2013	3.38	2.35	8,048,873

85

2012-2011	High	Low	Volume
Fourth Quarter ended August 31, 2013	4.15	2.14	30,,463,361
Third Quarter ended May 31, 2013	4.20	2.35	30,245,852
Second Quarter ended February 28, 2013	4.79	3.03	25,583,328
First Quarter ended November 30, 2012	5.34	4.32	20,539,806
2012-2011	High	Low	Volume
Fourth Quarter ended August 31, 2012	4.82	3.74	25,848,383
Third Quarter ended May 31, 2012	5.32	3.20	51,388,433
Second Quarter ended February 28, 2012	4.56	2.18	33,685,275
First Quarter ended November 30, 2011	5.94	1.56	55,934,886
2010-2011	High	Low	Volume
Fourth Quarter ended August 31, 2011	7.82	5.38	25,477,782
Third Quarter ended May 31, 2011	7.48	5.95	29,742,121
Second Quarter ended February 28, 2011	7.40	5.95	30,188,047
First Quarter ended November 30, 2010	7.57	5.46	33,640,881
Last Five Fiscal Years	High	Low
2013	5.34	2.14
2012	5.94	1.56
2011	7.82	5.38
2010	5.63	2.69
2009	5.29	1.58

B. Plan of Distribution

Not Applicable.

C. Markets

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

D. Selling Shareholders

Not Applicable.

E. Dilution

Not Applicable.

F. Expenses of the Issue

Not Applicable.

86

Item 10. Additional Information

A. Share Capital

          The Company’s Restated Articles of Incorporation authorized the Company to issue an unlimited number of common shares. On November 23, 2011 the Board resolved that the Company authorize for issuance up to a maximum of 115,000,000 common shares, subject to further resolutions of the Company’s board of directors, from time to time. Of the 115,000,000 common shares authorized, without par value, 100,922,582 shares were issued and outstanding as of August 31, 2013.

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

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

	No. of Shares	Amount
Total Outstanding as of August 31, 2011	99,758,753	109,935,253
Add: Issued on conversion of convertible debt	233,318	950,213
Issued for services	35,000	115,834
Exercise of compensation options	250,000	1,000,000
Issued pursuant to Restricted Share Unit Plan	182,866	1,024,793
Reserve transferred on exercise of compensation warrants		450,765
Total Outstanding as of August 31, 2012	100,459,937	113,476,858
Add: Issued on conversion of convertible debt	221,337	986,334
Issued pursuant to Restricted Share Unit Plan	241,308	1,151,010
Total Outstanding as of August 31, 2013	100,922,582	115,614,202

Shares are issued by the Company with the regulatory acceptance of the Toronto Stock Exchange and NYSE MKT, upon resolution of the Board of Directors of the Company. As of August 31, 2013 there are a total of 100,922,582 common shares issued and a further 621,578 common shares reserved for issuance under outstanding RSUs, 204,772 common shares reserved for issuance under 3-year convertible promissory notes and 5,506,579 for issuance under outstanding warrants. 204,772 shares reserved for issuance under 3-year convertible promissory notes matured on September 14, 2013. The Holders elected repayment of the promissory notes in cash and accordingly, $1,060,000 plus interest in the amount of $30,000 was paid on September 16, 2013.

87

B. Articles of Association and Bylaws

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Common Shares

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

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

88

Powers and Duties of Directors

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

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

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

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

Shareholders

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

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

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

89

.

C. Material Contracts

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

Date	Names of Parties	Description of General Nature of the Contract	Consideration Paid; Terms and Conditions
December 10, 2012	Director of Wildlife, Wildlife Division, Ministry of Natural Resources and Tourism and the Company	Kigosi Access Agreement	N/A
November 25, 2011	Computershare Trust Company of Canada as Rights Agent and the Company	Shareholder Rights Plan	N/A
October 25, 2011	State Mining Corporation (Stamico) and the Company	Joint Venture Agreement for the development of the Buckreef Project	Through its wholly-owned subsidiary, Tanzania American International Development Corporation 2000 Limited (Tanzam), the Company will hold a 55% interest in the joint venture company, Buckreef Gold Company Limited, with Stamico holding the remaining 45%.

D. Exchange Controls

Canada

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

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

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

90

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

Foreign Investments and Exchange in Tanzania

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

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

(ii) Withholding Tax on Dividends = 10%

(iii) Withholding Tax on Interest = 10%

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

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

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

E. Taxation

Canadian Federal Income Tax Consequences

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

91

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

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

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

United States Federal Income Tax Consequences

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

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

92

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

- an insurance company;

- a tax-exempt organization;

- a financial institution;

- a person subject to the alternative minimum tax;

- a person who is a broker-dealer in securities;

- an S corporation;

- an expatriate subject to Section 877 of the Code;

- an owner of, directly, indirectly or by attribution, 10% or more of the outstanding common shares; or

- an owner holding common shares as part of a hedge, straddle, synthetic security or conversion transaction.

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

Passive Foreign Investment Company.

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

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

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

93

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

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

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

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

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

94

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

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

Distribution on Common Shares of the Company

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

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

95

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

Foreign Tax Credit

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

Disposition of Common Shares of the Company

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

96

Controlled Foreign Corporations.

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

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

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

U.S. Information Reporting and Backup Withholding.

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

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

Filing of Information Returns.

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

Tanzania

Taxation

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

97

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

Value Added Tax (“VAT”)

Taxable Supplies	Rate
Supply of goods and services in Mainland Tanzania	18%
Import of goods and services in Mainland Tanzania	18%
Export of goods and services from Mainland Tanzania*	0%
Special relief to some entities/items **	10%

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

Withholding Tax

Withholding tax is charged at the rates specified below:

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

Special Rates for Persons Engaged in “Mining Operations” Rates

	Resident	Non-Resident
Technical Services to Mining Operations	5%	15%
Management Fee	0%	15%

Capital Gains Taxation

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

Thin capitalisation

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

Stamp duty

98

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

Customs Duty

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

Mining Sector

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

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

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

(ii) Indefinite carry forward of losses.

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

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

Double Taxation Agreement

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

F. Dividends and Paying Agents

Not Applicable.

G. Statement by Experts

Not Applicable.

H. Documents on Display

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

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

99

I. Subsidiary Information

Not Applicable.

Item 11. Quantitative and Qualitative Disclosures About Market Risk

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

The following table sets forth the percentage of the Company's administrative expense by currency for the year ended August 31, 2013.

By Currency

	2013
Canadian Dollar	25%
U.S. Dollar	50%
Tanzanian Shilling	25%
Total:	100%

           Such administrative expense by currency may change from time to time, but it has been roughly the same year to year. Further, the Company incurred net exploration costs of $4,109,573 and $9,593,993for the years ended August 31, 2013 and 2012 respectively, which are primarily paid in U.S. dollars.

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

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

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

2009	2010	2011	2012	2013 (Average to August 31)
$972.35	$1,224.53	$1,571.52	$1,668.98	$1,470.77

Item 12. Description of Securities Other than Equity Securities

Not Applicable.

100

Part II

Item 13. Defaults, Dividend Arrears and Delinquencies

None.

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

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

Item 15. Controls and Procedures

Disclosure Controls and Procedures

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

Management’s Annual Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934. Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.  The Company’s management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of August 31, 2013.  In making this assessment, the Company’s management used the criteria established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).  The Company’s management has completed their review and testing of the Company’s internal control over financial reporting and concluded that they are appropriately designed and operating effectively as of August 31, 2013.

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

Attestation Report of the Registered Public Accounting Firm

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

101

Changes in Internal Controls over Financial Reporting

During the year ended August 31, 2013, the Company continued to strengthen internal controls and implement additional segregation of duties on both administrative and operational sides of the business. New procedures and controls are documented and implemented in conjunction with the continued growth of the Company. The Chief Executive Officer and the Chief Financial Officer, together with other members of management, have designed the Company’s disclosure controls and procedures in order to provide reasonable assurance that material information relating to the Company and its consolidated subsidiaries would have been known to them, and by others, within those entities. Management have also designed internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of  financial statements in accordance with IFRS.

Item 16 A. Audit Committee Financial Expert

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

Item 16 B. Code of Ethics

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

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

Item 16 C. Principal Accountant Fees and Services

The Company’s independent auditor for the fiscal years ended August 31, 2013 and 2012 was Ernst & Young LLP, Chartered Accountants (2013) and KPMG LLP, Chartered Accountants (2012).

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

The following summarizes the significant professional services rendered by Ernst & Young LLP for the year ended August 31, 2013 and KPMG LLP for the year ended August 31, 2012:

102

Fiscal Year Ending August 31	Audit Fees	Audit Related Fees	Tax Fees	All Other Fees
2013	Canada – $135,000 Tanzania - $35,000	Nil Nil	Nil Nil	Nil Nil
2012	Canada – $231,500 Tanzania - $52,760	Nil Nil	Nil Nil	Nil Nil

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

Not Applicable.

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

Not Applicable.

ITEM 16 F. Change in Registrant’s Certifying Accountant

On December 20, 2012, the Company decided not to reappoint KPMG LLP (“KPMG”) as our independent accountant effective as of the expiry of KPMG’s current appointment at the close of the annual shareholder’s meeting held on February 28, 2013.

KPMG’s report on our consolidated statements of financial position as of August 31, 2012, August 31, 2011 and September 1, 2010, and the related consolidated statements of comprehensive loss, changes in equity and cash flows for the years ended August 31, 2012 and August 31, 2011 did not contain an adverse opinion, and was not modified as to uncertainty, audit scope or accounting principles.

The decision to change our independent accountant was made and approved by our Audit Committee on December 20, 2012, which is comprised of independent directors who serve on the Company’s Board of Directors.

During the fiscal years ended August 31, 2012 and 2011 and the subsequent interim period through to February 28, 2013, there have been no disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement, if not resolved to the satisfaction of KPMG, would have caused it to make reference to the subject matter of the disagreements in connection with its report.

A letter from KPMG addressed to the SEC is attached in Exhibit 4.19 to this Form 20-F.

On December 20, 2012, we engaged Ernst & Young LLP (“E&Y”) to serve as our independent registered public accounting firm effective March 1, 2013, for our fiscal year ended August 31, 2013.  During our most recent fiscal years ended August 31, 2012 and 2011, and through the subsequent interim periods ended November 30, 2012 and February 28, 2013, we did not consult with E&Y regarding (i) the application of accounting principles to a specific transaction, either completed or contemplated, or the type of audit opinion that might be rendered on our financial statements, and no written report or oral advice was provided to us that was an important factor to be considered by us in reaching a decision as to an accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement of the type described in paragraph (a)(1)(iv) or any reportable event as described in paragraph (a)(1)(v) of Item 16F of Form 20-F.

We have requested E&Y to review the disclosure required by this Item 16F(a) and provided E&Y the opportunity to furnish us a letter addressed to the SEC containing any new information, clarification of our views, or the respects in which E&Y does not agree with our statements made in response to this Item 16F(a).  E&Y has provided us no letter.

103

Item 16 G. Corporate Governance

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

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

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

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

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

Item 16 H. Mine Safety Disclosure

The Company is in the exploration stage and its mining properties are located outside the United States.

Part III

Item 17. Financial Statements

Not Applicable.

104

Item 18. Financial Statements

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

Item 19. Exhibits

Exhibit No. Name

1.1	Articles and Bylaws of Tan Range Exploration Corporation, as amended.(1)
1.2	Certificate of Amendment for Change of Name dated February 28, 2006 (6)
1.3	Certificate of Amendment and Registration of Restated Articles dated March 7, 2008 for increase in the maximum number of directors to eleven (6)
2.1	Employee Share Ownership Plan (2003) (1)
2.2	2001 Stock Option Plan (1)
2.3	Shareholder Rights Plan(2)
2.4	2011 Shareholder Rights Plan(9)
2.5	Restricted Stock Unit Incentive Plan(4)
2.6	Amended Restricted Stock Unit Incentive Plan(8)
4.1	Subscription and Property Option Agreement dated May 31, 1999 between the Company and Barrick Gold Corporation (2)
4.2	Option Agreement dated December 14, 2001 between Tanzam 2000 Limited and Barrick Exploration Africa Limited(2)
4.3	Letter of Intent dated January 20, 2003 between the Company and Northern Mining Explorations Ltd., as amended by Letter Agreement dated March 18, 2003(2)
4.4	Letter of Intent dated July 21, 2003 between the Company and Ashanti Goldfields (Cayman) Limited (2)
4.8 4.9	Option Agreement dated September 7, 2004 between the Company and Northern Mining Explorations Ltd. (3) Purchase and Sale Agreement dated September 26, 2006 between the Company and Ashanti Goldfields (Cayman) Limited (4)
4.10	Option and Royalty Agreement dated January 25, 2007 between the Company and Sloane Developments Ltd.(5)
4.12	March 27, 2009 Subscription Agreement for purchase of 248,139 common shares with James E. Sinclair(6)
4.13	February 23, 2009 Subscription Agreement for purchase of 189,036 common shares with James E. Sinclair(6)
4.14	February 1, 2009 Subscription Agreement for purchase of $3,000,000 of common shares with James E. Sinclair(6)
4.15	August 24, 2010 Subscription Agreement for purchase of 144,430 common shares with James E. Sinclair(7)
4.16	Heads of Agreement dated December 16, 2010 between the Company and State Mining Corporation(8)
4.17	Joint Venture Agreement dated October 25, 2011 between the Company and State Mining Corporation(8)
4.18	Kigosi Access Agreement dated December 10, 2012 between the Company and The Director of Wildlife, Wildlife Division, Ministry of Natural Resources and Tourism*

105

4.19	Letter from KPMG*
8.1	List of Subsidiaries*
12.1	Certification of the Principal Executive Officer under the Sarbanes-Oxley Act*
12.2	Certification of the Principal Financial Officer under the Sarbanes-Oxley Act*
13.1	Certification under Section 1350*
15.1	Consolidated Financial Statements for the years ended August 31, 2013 and 2012 *
15.2	Management’s Discussion and Analysis for the years ended August 31, 2013 and 2012*

* Filed herewith

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

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

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

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

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

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

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

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

(9) Previously filed on Form 20-F with the SEC on November 27, 2012

106

SIGNATURE

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

Date November 12, 2013

TANZANIAN ROYALTY EXPLORATION CORPORATION

By: “James E. Sinclair”

James E. Sinclair,

President and Chief Executive Officer

(Principal Executive Officer)

107

EX-12.1

Exhibit 12.1

CERTIFICATIONS

I, James E. Sinclair, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: November 12, 2013

“James E. Sinclair”

James E. Sinclair,

President and Chief Executive Officer

(Principal Executive Officer)

EX-13.1

Exhibit 13.1

CERTIFICATION

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

(SUBSECTIONS (a) AND (b) OF SECTION 1350, CHAPTER 63 OF

TITLE 18, UNITED STATES CODE)

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of Title 18, United States Code), each of the undersigned officers of Tanzanian Royalty Exploration Corporation (the “Company”), does hereby certify with respect to the Annual Report of the Company on Form 20-F for the year ended August 31, 2013 as filed with the Securities and Exchange Commission (the “Form 20-F”) that, to the best of their knowledge:

(1) the Form 20-F fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Form 20-F fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 12, 2013

“James E. Sinclair”

James E. Sinclair,

President and Chief Executive Officer

(Principal Executive Officer)

“Steven Van Tongeren”

Steven Van Tongeren

Chief Financial Officer

(Principal Financial Officer)

EX-12.2

Exhibit 12.2

CERTIFICATION

I, Steven Van Tongeren, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: November 12, 2013

“Steven Van Tongeren”

Steven Van Tongeren,

Chief Financial Officer

(Principal Financial Officer)

EX-4.18

EX-4.19

EX-8.1

Exhibit 8.1

LIST OF SUBSIDIARIES

Name of Subsidiary	Jurisdiction of Incorporation	Percentage &Type of Securities Owned or Controlled by Company
		Voting Securities Held	Non-Voting Securities
Itetemia Mining Company Limited(1)	Republic of Tanzania, Africa	90% (common)	n/a
Lunguya Mining Company Ltd. (2)	Republic of Tanzania, Africa	60% (common)	n/a
Tancan Mining Company Limited	Republic of Tanzania, Africa	100% (common)	n/a
Tanzania American International Development Corporation 2000 Limited	Republic of Tanzania, Africa	100% (common)	n/a
Buckreef Gold Company Limited(3)	Republic of Tanzania, Africa	55% (common)	n/a
Northwest Base Metals Company Limited(4)	Republic of Tanzania, Africa	75% (common)	n/a

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

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

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

⁽⁴⁾ The remaining interest is held 15% by State Mining Corporation and 10% by Beijing Songshanheli Mining Investment Co.

EX-15.1

Tanzanian Royalty Exploration Corporation

Consolidated Financial Statements

For the years ended
August 31, 2013 and 2012

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING

The accompanying consolidated financial statements of Tanzanian Royalty Exploration Corporation were prepared by management in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board. Management acknowledges responsibility for the preparation and presentation of the consolidated financial statements, including responsibility for significant accounting judgments and estimates and the choice of accounting principles and methods that are appropriate to the Company’s circumstances. The significant accounting policies of the Company are summarized in Note 3 to the consolidated financial statements.

Management has established processes, which are in place to provide them with sufficient knowledge to support management representations that they have exercised reasonable diligence that (i) the consolidated financial statements do not contain any untrue statement of material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the date of and for the year presented by the consolidated financial statements and (ii) the consolidated financial statements fairly present in all material respects the financial condition and results of operations of the Company, as of the date of and for the year presented by the consolidated financial statements.

The Board of Directors is responsible for ensuring that management fulfills its financial reporting responsibilities and for reviewing and approving the consolidated financial statements together with other financial information. An Audit Committee assists the Board of Directors in fulfilling this responsibility. The Audit Committee meets with management to review the internal controls over the financial reporting process. The Audit Committee meets with management as well as with the independent auditors to review the consolidated financial statements and the auditors' report. The Audit Committee also reviews the Annual Report to ensure that the financial information reported therein is consistent with the information presented in the consolidated financial statements. The Audit Committee reports its findings to the Board of Directors for its consideration in approving the consolidated financial statements together with other financial information of the Company for issuance to the shareholders.

Management recognizes its responsibility for conducting the Company’s affairs in compliance with established financial standards, and applicable laws and regulations, and for maintaining proper standards of conduct for its activities.

“James E. Sinclair”	“Steven Van Tongeren”
James E. Sinclair	Steven Van Tongeren
Chief Executive Officer	Chief Financial Officer

INDEPENDENT AUDITORS’ REPORT

OF REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of
Tanzanian Royalty Exploration Corporation

We have audited the accompanying consolidated financial statements of Tanzanian Royalty Exploration Corporation, which comprise the consolidated statement of financial position as at August 31, 2013, and the consolidated statements of comprehensive loss, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the consolidated financial statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

- 2 -

We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Tanzanian Royalty Exploration Corporation as at August 31, 2013, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Other matter

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Tanzanian Royalty Exploration Corporation’s internal control over financial reporting as of August 31, 2013, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 8, 2013 expressed an unqualified opinion on Tanzanian Royalty Exploration Corporation’s internal control over financial reporting.

  

Vancouver, Canada,
November 8, 2013.	Chartered Accountants

KPMG LLP	Telephone	(604)	691-3000
Chartered Accountants	Fax	(604)	691-3031
PO Box 10426 777 Dunsmuir Street	Internet		www.kpmg.ca
Vancouver BC V7Y 1K3
Canada

INDEPENDENT AUDITORS’ REPORT OF REGISTERED PUBLIC

ACCOUNTING FIRM

To the Shareholders and Directors of Tanzanian Royalty Exploration Corporation

We have audited the accompanying consolidated financial statements of Tanzanian Royalty Exploration Corporation, which comprise the consolidated statement of financial position as at August 31, 2012, the consolidated statements of comprehensive loss, changes in equity and cash flow for the year ended August 31, 2012, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity.
KPMG Canada provides services to KPMG LLP.

Tanzanian Royalty Exploration Corporation
Page 2

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Tanzanian Royalty Exploration Corporation as at August 31, 2012, and its consolidated financial performance and its consolidated cash flows for the year ended August 31, 2012, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

/s/ KPMG LLP

Chartered Accountants

November 16, 2012
Vancouver, Canada

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934. Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. The Company’s management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of August 31, 2013. In making this assessment, the Company’s management used the criteria established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The Company’s management has completed their review and testing of the Company’s internal control over financial reporting and concluded that they are appropriately designed and operating effectively as of August 31, 2013.

7

INDEPENDENT AUDITORS’ REPORT

OF REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Tanzanian Royalty Exploration Corporation

We have audited Tanzanian Royalty Exploration Corporation’s internal control over financial reporting as of August 31, 2013, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria).

Tanzanian Royalty Exploration Corporation’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying “Management’s Report on Internal Control Over Financial Reporting”. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Tanzanian Royalty Exploration Corporation maintained, in all material respects, effective internal control over financial reporting as of August 31, 2013, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of financial position of Tanzanian Royalty Exploration Corporation as at August 31, 2013 and the related consolidated statements of comprehensive loss, changes in equity, and cash flow for the year then ended and our report dated November 8, 2013 expressed an unqualified opinion thereon.

Vancouver, Canada,
November 8, 2013.	Chartered Accountants

- 2 -

Tanzanian Royalty Exploration Corporation
Consolidated Statements of Financial Position
(Expressed in Canadian Dollars)
		August 31,			August 31,
As at		2013			2012
Assets
Current Assets
Cash and cash equivalents (Note 18)	$	10,679,516		$	20,058,678
Other financial assets (Note 7)		5,250			17,850
Other receivables (Note 15)		512,369			71,225
Inventory (Note 17)		11,849			248,395
Prepaid expenses (Note 14)		80,761			87,676
		11,289,745			20,483,824
Property, plant and equipment (Note 5)		971,388			1,209,710
Mineral properties and deferred exploration (Note 4)		45,932,207			44,017,541
	$	58,193,340		$	65,711,075
Liabilities
Current Liabilities
Trade, other payables and accrued liabilities (Note 16)	$	1,264,420		$	2,318,393
Convertible debt (Note 6)		1,085,221			-
Warrant liability (Note 8)		3,524,000			-
		5,873,641			2,318,393
Convertible debt (Note 6)		-			2,073,286
Warrant liability (Note 8)		-			8,114,000
		5,873,641			12,505,679
Shareholders’ equity
Share capital (Note 8)		115,614,202			113,476,858
Share based payment reserve (Note 10)		873,736			670,779
Warrants reserve (Note 9)		870,037			870,037
Accumulated deficit		(67,117,263	)		(64,098,273	)
Equity attributable to owners of the Company		50,240,712			50,919,401
Non-controlling interests (Note 4(j), 4(k))		2,078,987			2,285,995
Total shareholders’ equity		52,319,699			53,205,396
	$	58,193,340		$	65,711,075

Nature of operations (Note 1)

Segmented information (Note 19)

Commitments (Notes 4 and 20)

Subsequent event (Note 23)

The accompanying notes are an integral part of these consolidated financial statements

10

Tanzanian Royalty Exploration Corporation
Consolidated Statements of Comprehensive Loss
(Expressed in Canadian Dollars)
Year ended August 31,			2013			2012
Administrative expenses
Depreciation		$	288,519		$	379,603
Consulting			317,257			266,011
Directors’ fees (Note 11)			375,342			365,049
Office and general			388,675			437,380
Shareholder information			343,291			581,526
Professional fees			732,328			869,077
Salaries and benefits			1,388,160			1,596,951
Share based payments (Note 8)			1,053,509			777,630
Travel and accommodation			126,362			169,420
			(5,013,443	)		(5,442,647	)
Other income (expenses)
Foreign exchange			(5,215	)		24,082
Interest, net			133,116			274,913
Interest accretion			(55,549	)		(102,785	)
Loss on other financial assets (Note 7)			(12,600	)		(18,017	)
Exploration costs			(497,263	)		(84,518	)
Change in value of warrant liability (Note 8)			4,590,000			(2,321,921	)
Write-off of mineral properties and deferred exploration costs (Note 4)			(2,194,907	)		(1,293,969	)
Write-off of inventory			(246,548	)		-
Modification of warrants (Note 8)			-			(183,000	)
Withholding tax recoveries (costs)			76,411			250,019
Net loss and comprehensive loss	$		(3,225,998	)	$	(8,897,843	)
Loss and comprehensive loss for the year attributable to:
Owners of the Company			(3,018,990	)		(8,729,293	)
Non-controlling interests			(207,008	)		(168,550	)
	$		(3,225,998	)	$	(8,897,843	)
Loss per share – basic and diluted		$	(0.03	)	$	(0.09	)
Weighted average # of shares outstanding – basic and diluted		100,735,972				100,151,347

The accompanying notes are an integral part of these consolidated financial statements

11

	Tanzanian Royalty Exploration Corporation
	Consolidated Statements of Changes in Equity
			(Expressed in Canadian Dollars)
	Share Capital				Reserves
	Number of Shares		Amount		Share based payments		Warrants		Accumulated deficit		Owner's equity	Non controlling interests			Total equity
Balance at September 1, 2011	99,758,753	$	109,935,253	$	706,988	$	1,353,990	$	(55,504,339)	$	56,491,892	$	2,454,545	$	58,946,437
Issued on conversion of convertible debt agreement	233,318		950,213		(30,638)		-		-		919,575		-		919,575
Shares issued for services	35,000		115,834		-		-		-		115,834		-		115,834
Issued pursuant to Restricted Share Unit ("RSU") Plan	182,866		1,024,793		(1,024,793)		-		-		-		-		-
RSU shares forfeited			-		(264,528)		-		-		(264,528)		-		(264,528)
Reserve transferred on exercise of compensation warrants			450,765		-		(450,765)		-		-		-		-
Transfer of warrants to warrant liability			-		-		(216,188)		135,359		(80,829)		-		(80,829)
Compensation warrants exercised	250,000		1,000,000		-		-		-		1,000,000		-		1,000,000
Modification of warrants			-		-		183,000		-		183,000		-		183,000
Share based compensation			-		1,283,750		-		-		1,283,750		-		1,283,750
Total comprehensive loss for the year			-		-		-		(8,729,293)		(8,729,293)		(168,550)		(8,897,843)
Balance at August 31, 2012	100,459,937	$	113,476,858	$	670,779	$	870,037	$	(64,098,273)	$	50,919,401	$	2,285,995	$	53,205,396
Issued on conversion of convertible debt agreement	221,337		986,334		-		-		-		986,334		-		986,334
Issued pursuant to Restricted Share Unit ("RSU") Plan	241,308		1,151,010		(1,151,010)		-		-		-		-		-
Share based payments			-		1,353,967		-		-		1,353,967		-		1,353,967
Total comprehensive loss for the year			-		-		-		(3,018,990)		(3,018,990)		(207,008)		(3,225,998)
Balance at August 31, 2013	100,922,582	$	115,614,202	$	873,736	$	870,037	$	(67,117,263)	$	50,240,712	$	2,078,987	$	52,319,699

The accompanying notes are an integral part of these consolidated financial statements

12

Tanzanian Royalty Exploration Corporation
Consolidated Statements of Cash Flow
(Expressed in Canadian Dollars)
Year ended August 31,		2013			2012
Operations
Net loss	$	(3,225,998	)	$	(8,897,843	)
Adjustments to reconcile net loss to cash flow from
operating activities:
Depreciation		288,519			379,603
Change in value of warrant liability		(4,590,000	)		2,321,921
Modification of warrants		-			183,000
Shares issued for services		-			50,359
Share based payments		1,053,509			777,630
Loss on other financial assets		12,600			11,550
Cash interest paid		(74,486	)		(67,964	)
Cash interest received		124,432			259,116
Interest, net		-			(274,913	)
Interest accretion		55,549			102,785
Non cash directors’ fees		208,572			289,448
Write-off of mineral properties		2,194,907			1,293,969
Write-off of inventory		246,548			-
Net change in non-cash operating working capital items:
Other receivables		(441,144	)		85,909
Inventory		(10,002	)		(24,877	)
Prepaid expenses		6,915			(3,821	)
Trade, other payables and accrued liabilities		12,126			(1,199,491	)
Cash used in operations		(4,137,953	)		(4,713,619	)
Investing
Mineral properties and exploration expenditures		(5,232,798	)		(8,564,005	)
Option payments received and recoveries		41,786			50,114
Equipment and leasehold improvements, net		(50,197	)		(142,283	)
Cash used in investing activities		(5,241,209	)		(8,656,174	)
Financing
Share capital issued – net of issue costs		-			1,000,000
Cash provided from financing activities		-			1,000,000
Net decrease in cash and cash equivalents		(9,379,162	)		(12,369,793	)
Cash and cash equivalents, beginning of year		20,058,678			32,428,471
Cash and cash equivalents, end of year	$	10,679,516		$	20,058,678

The accompanying notes are an integral part of these consolidated financial statements

13

Tanzanian Royalty Exploration Corporation

Consolidated Statements of Cash Flow

(Expressed in Canadian Dollars)

Supplementary information:		2013		2012
Non-cash transactions:
Share based payments capitalized to mineral properties	$	91,886	$	17,138
Shares issued on conversion of convertible debt		986,334		950,213
Shares issued pursuant to RSU plan		1,151,010		1,024,793
Shares issued for services		-		115,834

The accompanying notes are an integral part of these consolidated financial statements

14

     Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

1. Nature of Operations

The Company is in the process of exploring and evaluating its mineral properties. The business of exploring and mining for minerals involves a high degree of risk. The underlying value of the mineral properties is dependent upon the existence and economic recovery of mineral reserves, the ability to raise long-term financing to complete the development of the properties, government policies and regulations, and upon future profitable production or, alternatively, upon the Company’s ability to dispose of its interest on an advantageous basis; all of which are uncertain.

The amounts shown as mineral properties and deferred expenditures represent costs incurred to date, less amounts amortized and/or written off, and do not necessarily represent present or future values. The underlying value of the mineral properties is entirely dependent on the existence of economically recoverable reserves, securing and maintaining title and beneficial interest, the ability of the Company to obtain the necessary financing to complete development, and future profitable production.

At August 31, 2013 the Company had working capital of $5,416,104 (August 31, 2012 – $18,165,431), including warrant liability or a working capital of $8,940,104 (August 31, 2012 – $18,165,431) excluding warrant liability, had not yet achieved profitable operations, has accumulated losses of $67,117,263 (August 31, 2012 – $64,098,273) and expects to incur further losses in the development of its business. In the long term, the Company will require additional financing in order to conduct its planned work programs on mineral properties, meet its ongoing levels of corporate overhead and discharge its future liabilities as they come due.

2. Basis of Preparation

2.1 Statement of compliance

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” (“TREC” or the “Company”) on February 28, 2006. The address of the Company’s registered office is 400 3rd Avenue SW, Suite 3700, Calgary, Alberta T2P 4H2 Canada. The Company’s principal business activity is in the exploration and development of mineral property interests. The Company’s mineral properties are located in United Republic of Tanzania. The consolidated financial statements of the Company as at and for the years ended August 31, 2013 and 2012 comprise of the Company and its subsidiaries (together referred to as the “Company” or “Group”).

The Company’s consolidated financial statements, including comparatives, have been prepared in accordance with and using accounting policies in full compliance with the International Financial Reporting Standards (“IFRS”) and International Accounting Standards (“IAS”) issued by the International Accounting Standards Board (“IASB”) and Interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”), effective for the Company’s reporting for the year ended August 31, 2013.

These consolidated financial statements were approved and authorized by the Board of Directors of the Company on November 8, 2013.

2.2 Basis of presentation

The consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair value, as explained in the accounting policies set out in note 3.

15

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

2.      Basis of Preparation (continued)

Adoption of new and revised standards and interpretations

The IASB issued a number of new and revised International Accounting Standards, International Financial Reporting Standards, amendments and related interpretations which are effective for the Company’s financial year beginning on or after September 1, 2012. For the purpose of preparing and presenting the Financial Information for the relevant periods, the Company has consistently adopted all new standards for the relevant reporting periods.

At the date of authorization of these financial statements, the IASB and IFRIC has issued the following new and revised Standards and Interpretations which are not yet effective for the relevant reporting periods.

IFRS 7 ‘Financial Instruments, Disclosures’ - effective for annual periods beginning on or after January 1, 2013, IFRS 7 has been amended to provide more extensive quantitative disclosures for financial instruments that are offset in the statement of financial position or that are subject to enforceable master netting similar arrangements.

IFRS 9 ‘Financial Instruments: Classification and Measurement’ – effective for annual periods beginning on or after January 1, 2015, with early adoption permitted, introduces new requirements for the classification and measurement of financial instruments.

IFRS 10 ‘Consolidated Financial Statements’ – effective for annual periods beginning on or after January 1, 2013, with early adoption permitted, establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities.

IFRS 11 ‘Joint Arrangements’ - effective for annual periods beginning on or after January 1, 2013, with early adoption permitted, provides for a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than its legal form.

IFRS 12 ‘Disclosure of Interests in Other Entities’ - effective for annual periods beginning on or after January 1, 2013, with early adoption permitted, requires the disclosure of information that enables users of financial statements to evaluate the nature of, and risks associated with its interests in other entities and the effects of those interests on its financial position, financial performance and cash flows.

IFRS 13 ‘Fair Value Measurement’ - effective for annual periods beginning on or after January 1, 2013, with early adoption permitted, provides the guidance on the measurement of fair value and related disclosures through a fair value hierarchy.

IAS 27 ‘Separate Financial Statements’ - effective for annual periods beginning on or after January 1, 2013, as a result of the issue of the new consolidation suite of standards, IAS 27 Separate Financial Statements has been reissued, as the consolidation guidance will now be included in IFRS

10. IAS 27 will now only prescribe the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statements.

IAS 28 ‘Investments in Associates and Joint Ventures’ - effective for annual periods beginning on or after January 1, 2013, as a consequence of the issue of IFRS 10, IFRS 11 and IFRS 12, IAS 28 has been amended and will provide the accounting guidance for investments in associates and to set out requirements for the application of the equity method when accounting for investments in and joint ventures. The amended IAS 28 will be applied by all entities that are investors joint control of, or significant influence over, an investee.

16

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

2.      Basis of Preparation (continued)

IAS 32 ‘Financial instruments, Presentation’ - In December 2011, effective for annual periods beginning on or after January 1, 2013, IAS 32 was amended to clarify the requirements for offsetting financial assets and liabilities. The amendments clarify that the right of offset must be available on the current date and cannot be contingent on a future date.

2.3 Adoption of new and revised standards and interpretations (continued)

Management anticipates that where required, the above standards will be adopted at the applicable effective dates in the Company's financial statements, and is in the process of considering the impact of adoption of these standards.

3.    Summary of Significant Accounting Policies
3.1	Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its wholly controlled subsidiaries: Tanzania American International Development Corporation 2000 Limited ("Tanzam"), Tancan Mining Co. Limited ("Tancan"), Buckreef Gold Company Ltd. ("Buckreef"), and Northwestern Base Metals Company Limited ("NWBM"). Control is achieved when the Company has power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Subsidiaries are consolidated from the date of acquisition, being the date on which the Company obtains control, and continued to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

The consolidated financial statements of the Company set out the assets, liabilities, expenses, and cash flows of the Corporation and its subsidiaries, namely:

		Ownership interest as at August 31,
	Country of
	incorporation	2013		2012
Tanzam	Tanzania	100	%	100	%
Tancan	Tanzania	100	%	100	%
Buckreef	Tanzania	55	%	55	%
NWBM	Tanzania	75	%	0	%

All intra-company transactions, balances, income and expenses are eliminated in full on consolidation.

Noncontrolling interests in the net assets of consolidated subsidiaries are identified separately from the Company’s equity therein. Total comprehensive income within a subsidiary is attributed to the non-controlling interest even if it results in a negative balance.

17

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

3. Summary of Significant Accounting Policies (continued) 3.2 Mineral properties

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

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

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

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

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

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

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

18

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

3. Summary of Significant Accounting Policies (continued)

3.3 Property, plant and equipment

Property, plant and equipment (“PPE”) are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of PPE consists of the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for its intended use and an initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

Depreciation is provided at rates calculated to write off the cost of PPE, less their estimated residual value, using the declining balance method over the following expected useful lives:

Assets	Rate
Machinery and equipment	20% to 30	%
Automotive	30	%
Computer equipment	30	%
Drilling equipment and automotive equipment	6.67	%
Leasehold improvements	20	%

An item of PPE is derecognized upon disposal, when held for sale or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal of the asset, determined as the difference between the net disposal proceeds and the carrying amount of the asset, is recognized in the consolidated statement of comprehensive loss.

The Company conducts an annual assessment of the residual balances, useful lives and depreciation methods being used for PPE and any changes arising from the assessment are applied by the Company prospectively.

Where an item of plant and equipment comprises major components with different useful lives, the components are accounted for as separate items of plant and equipment. Expenditures incurred to replace a component of an item of property, plant and equipment that is accounted for separately, including major inspection and overhaul expenditures are capitalized.

3.4 Decommissioning, restoration and similar liabilities ("Asset retirement obligation" or "ARO")

The Company recognizes liabilities for statutory, contractual, constructive or legal obligations, including those associated with the reclamation of mineral properties and PPE, when those obligations result from the acquisition, construction, development or normal operation of the Company's assets. Initially, a liability for an asset retirement obligation is recognized at its fair value in the period in which it is incurred. Upon initial recognition of the liability, the corresponding asset retirement obligation is added to the carrying amount of the related asset and the cost is amortized as an expense over the economic life of the asset using the declining balance method. Following the initial recognition of the asset retirement obligation, the carrying amount of the liability is increased for the passage of time and adjusted for changes to the current marketbased discount rate, and adjusted for changes to the amount or timing of the underlying cash flows needed to settle the obligation. As of August 31, 2013, and 2012 no liability for asset retirement obligations exists.

3.5 Share based payments

Share based payment transactions

Employees (including directors and senior executives) of the Company receive a portion of their remuneration in the form of share based payment transactions, whereby employees render services as consideration for equity instruments ("equitysettled transactions").

In situations where equity instruments are issued and some or all of the goods or services received by the entity as consideration cannot be specifically identified, they are measured at fair value of the sharebased payment.

19

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

3. Summary of Significant Accounting Policies (continued)

3.5 Share based payments (continued)

Equity settled transactions

The costs of equitysettled transactions with employees are measured by reference to the fair value at the date on which they are granted.

The costs of equitysettled transactions are recognized, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award ("the vesting date"). The cumulative expense is recognized for equitysettled transactions at each reporting date until the vesting date reflects the Company's best estimate of the number of equity instruments that will ultimately vest. The profit or loss charge or credit for a period represents the movement in cumulative expense recognized as at the beginning and end of that period and the corresponding amount is represented in share based payment reserve.

No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied provided that all other performance and/or service conditions are satisfied.

Where the terms of an equitysettled award are modified, the minimum expense recognized is the expense as if the terms had not been modified. An additional expense is recognized for any modification which increases the total fair value of the sharebased payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification.

The effect of outstanding options is considered in the computation of earnings per share, if dilutive.

3.6 Taxation

Income tax expense represents the sum of tax currently payable and deferred tax.

Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the date of the statement of financial position.

Deferred income tax

Deferred income tax is provided using the liability method on temporary differences at the date of the statement of financial position between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognized for all taxable temporary differences, except:

• where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

20

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

3. Summary of Significant Accounting Policies (continued)

3.6 Taxation (continued)

Deferred income tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilized except:

• where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred income tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

The carrying amount of deferred income tax assets is reviewed at each date of the statement of financial position and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each date of the statement of financial position and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the date of the statement of financial position.

Deferred income tax relating to items recognized directly in equity is recognized in equity and not in the statement of comprehensive loss.

Deferred income tax assets and deferred income tax liabilities are offset if, and only if, a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend to either settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

Sales tax

Expenses and assets are recognized net of the amount of sales tax, except:

• When the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item, as applicable

• When receivables and payables are stated with the amount of sales tax included

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

21

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

3. Summary of Significant Accounting Policies (continued)

3.7 Loss per share

The basic loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. The diluted loss per share reflects the potential dilution of common share equivalents, such as outstanding restricted stock units and share purchase warrants, in the weighted average number of common shares outstanding during the year, if dilutive.

3.8 Financial assets

All financial assets are initially recorded at fair value and designated upon inception into one of the following four categories: heldtomaturity, availableforsale, loansand-receivables or at fair value through profit or loss ("FVTPL"). The Company initially recognizes loans and receivables on the date they are originated. All other financial assets are recognized on the trade date at which the Company becomes party to the contractual provisions of the instruments.

Subsequent to initial recognition, financial assets classified as FVTPL are measured at fair value with unrealized gains and losses recognized through earnings. The Company's other financial assets are classified as FVTPL.

Financial assets classified as loansandreceivables and heldtomaturity are measured at amortized cost. The Company's cash and cash equivalents and trade and other receivables are classified as loansand-receivables.

Subsequent to initial recognition, financial assets classified as availableforsale are measured at fair value with unrealized gains and losses recognized in other comprehensive income (loss) except for losses in value that are considered other than temporary. During the periods presented, the Company has not classified any financial assets as availableforsale.

Transactions costs associated with FVTPL financial assets are expensed as incurred, while transaction costs associated with all other financial assets are included in the initial carrying amount of the asset.

The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the rights and rewards of ownership of the financial asset are transferred.

3.9 Financial liabilities

All financial liabilities are initially recorded at fair value and designated upon inception as FVTPL or otherfinancialliabilities on the trade date at which the Company becomes party to the contractual provisions of the instrument.

Financial liabilities classified as otherfinancialliabilities are initially recognized at fair value less directly attributable transaction costs. After initial recognition, otherfinancial-liabilities are subsequently measured at amortized cost using the effective interest method. The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. The Company's trade and other payables and convertible debt are classified as otherfinancialliabilities.

Financial liabilities classified as FVTPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as FVTPL. Derivatives, including separated embedded derivatives are also classified as FVTPL unless they are designated as effective hedging instruments. Fair value changes on financial liabilities classified as FVTPL are recognized through the statement of comprehensive loss. At August 31, 2013 and 2012 the Company's warrant liability has been classified as FVTPL.

22

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

3. Summary of Significant Accounting Policies (continued)

3.9 Financial liabilities (continued)

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, as they expire.

3.10 Impairment of financial assets

The Company assesses at each date of the statement of financial position whether a financial asset is impaired.

Assets carried at amortized cost

If there is objective evidence that an impairment loss on assets carried at amortized cost has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate. The carrying amount of the asset is then reduced by the amount of the impairment. The amount of the loss is recognized in profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed to the extent that the carrying value of the asset does not exceed what the amortized cost would have been had the impairment not been recognized. Any subsequent reversal of an impairment loss is recognized in profit or loss.

In relation to trade receivables, a provision for impairment is made and an impairment loss is recognized in profit and loss when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor) that the Company will not be able to collect all of the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through use of an allowance account. Impaired debts are written off against the allowance account when they are assessed as uncollectible.

Available-for-sale

If an availableforsale asset is impaired, an amount comprising the difference between its cost and its current fair value, less any impairment loss previously recognized in profit or loss, is transferred from equity to profit or loss. Reversals in respect of equity instruments classified as availableforsale are not recognized in profit or loss.

3.11 Impairment of non-financial assets

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

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

If the recoverable amount of an asset (or cashgenerating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cashgenerating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in the statement of comprehensive loss, unless the relevant asset is carried at a re-valued amount, in which case the impairment loss is treated as a revaluation decrease.

23

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

3. Summary of Significant Accounting Policies (continued)

3.11 Impairment of non-financial assets (continued)

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

3.12 Cash and cash equivalents

Cash and cash equivalents in the statement of financial position comprise cash at banks and on hand, and short term deposits with an original maturity of three months or less, which are readily convertible into a known amount of cash.

3.13 Related party transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. Related party transactions that are in the normal course of business and have commercial substance are measured at the exchange amount, being the amount agreed by the parties to the transaction.

3.14 Foreign currency transactions

Functional and presentation currency

Items included in the financial statements of each of the Company's entities are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The functional currency of the Company and each of its subsidiaries is the Canadian Dollar ("CDN"). The consolidated financial statements are presented in Canadian Dollars which is the Company's presentation currency.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of comprehensive loss.

3.15 Significant accounting judgments and estimates

The preparation of these consolidated financial statements requires management to make judgements and estimates and form assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its judgements and estimates in relation to assets, liabilities, revenue and expenses. Management uses historical experience and various other factors it believes to be reasonable under the given circumstances as the basis for its judgements and estimates. Actual outcomes may differ from these estimates under different assumptions and conditions. The most significant estimates relate to the appropriate depreciation rate for property, plant and equipment, the valuation of warrant liability, the recoverability of accounts receivable, the valuation of deferred income tax amounts, impairment testing of mineral properties and deferred exploration and property, plant and equipment and the calculation of sharebased payments. The most significant judgements relate to the recognition of deferred tax assets and liabilities and asset retirement obligations, the determination of the economic viability of a project or mineral property and the determination of functional currencies.

24

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

3. Summary of Significant Accounting Policies (continued)

3.16 Inventory

Inventory consists of supplies for the Company's drilling rig to be consumed during the course of exploration development and operations. Cost represents the delivered price of the item.

4. Mineral Properties

The Company explores or acquires gold or other precious metal concessions through its own efforts or through the efforts of its subsidiaries. All of the Company's concessions are located in Tanzania.

The Company's mineral interests in Tanzania are initially held under prospecting licenses granted pursuant to the Mining Act, 2010 (Tanzania) for a period of up to four years, and are renewable two times for a period of up to two years each. Annual rental fees for prospecting licenses are based on the total area of the license measured in square kilometres, multiplied by USD$100/sq.km for the initial period, USD$150/sq.km for the first renewal and USD$200/sq.km for the second renewal. With each renewal at least 50% of the licensed area, if greater than 20 square kilometres, must be relinquished and if the Company wishes to keep the relinquished one-half portion, it must file a new application for the relinquished portion. There is also an initial one-time "preparation fee" of USD$500 per license. Upon renewal, there is a renewal fee of USD$300 per license.

Certain of the Company's prospecting licenses are currently being renewed.

The Company assessed the carrying value of mineral properties and deferred exploration costs as at August 31, 2013 and recorded a write-down of $2,194,907 during the year ended August 31, 2013 (2012 - $1,293,969).

25

					Tanzanian Royalty Exploration Corporation
					Notes to the Consolidated Financial Statements
					For the Years Ended August 31, 2013 and 2012
4. Mineral Properties (continued)
The continuity of expenditures on mineral properties is as follows:
		Itetemia			Luhala			Kigosi			Lunguya			Kanagele				Tulawaka Ushirombo Mbogwe Biharamulu														Buckreef			Kabanga			Other
		(a)			(b)			(c)			(d)				(e)				(f)				(g)			(h)			(i)			(j)			(l)			(k)			Total
Balance, September 1, 2011	$	5,823,059		$	3,727,626		$	13,753,050		$	3,184,675		$	1,124,487			$	636,175			$		264,355		$	82,039		$	124,329		$	6,875,788		$	-		$	121,934		$	35,717,517
Exploration expenditures:
Camp, field supplies and travel		14,565			-			116,566			34,976				-				-				-			-			-			424,035			-			-			590,142
License fees and exploration and field overhead		1,420			1,340			47,581			71,737				2,755				3,573				6,285			12,463			7,211			1,124,484			-			88,114			1,366,963
Geological consulting and field wages		-			-			-			-				-				-				-			-			-			664,513			-			-			664,513
Geophysical and geochemical		-			30,381			-			90,050				-				-				-			-			-			569,283			-			-			689,714
Property acquisition costs		37,070			-			3,892			13,326				17,693				17,092				-			-			-			108,804			-			13,070			210,947
Trenching and drilling		-			-			39,636			28,527				-				-				-			-			-			6,053,665			-			-			6,121,828
Recoveries		(41,834	)		-			-			-				-				-				-			(176	)		(2,250	)		-			-			(5,854	)		(50,114	)
		11,221			31,721			207,675			238,616				20,448				20,665				6,285			12,287			4,961			8,944,784			-			95,330			9,593,993
		5,834,280			3,759,347			13,960,725			3,423,291			1,144,935					656,840				270,640			94,326			129,290			15,820,572			-			217,264			45,311,510
Write-offs		(46,544	)		-			-			-				(297,588	)		(331,402		)			(266,379	)		(13,019	)	(129,290		)		-			-			(209,747	)		(1,293,969	)
Balance, August 31, 2012	$	5,787,736		$	3,759,347		$	13,960,725		$	3,423,291			$	847,347		$	325,438			$		4,261		$	81,307		$	-		$	15,820,572		$	-		$	7,517		$	44,017,541
Exploration expenditures:
Camp, field supplies and travel		20,408			-			11,288			(227	)			-				-				-			-			-			231,466			-			-			262,935
License fees and exploration and field overhead		65,755			10,169			337,710			71,638				33,675				80,250				34,270			3,546			18,022			1,254,651			655,051			20,717			2,585,454
Geological consulting and field wages		74,750			-			-			-				-				-				-			-			-			418,315			-			-			493,065
Geophysical and geochemical		-			-			(6,431	)		(10,596	)			-				-				-			-			-			122,443			-			-			105,416
Property acquisition costs		37,054			-			(10,092	)		-				11,705				-				-			-			-			(29,849	)		129,825			-			138,643
Trenching and drilling		-			-			(33,630	)		(13	)			-				-				-			-			-			599,489			-			-			565,846
Recoveries		(40,650	)		-			-			-				-				-				-			-			(1,116	)		-			-			(20	)		(41,786	)
		157,317			10,169			298,845			60,802				45,380				80,250				34,270			3,546			16,906			2,596,515			784,876			20,697			4,109,573
Write-offs		-			(6,983	)		(469,940	)		(103,636	)			(892,727	)		(405,688		)			(38,531	)		(84,853	)		(16,906	)		-			(147,429	)		(28,214	)		(2,194,907	)
Balance, August 31, 2013	$	5,945,053		$	3,762,533		$	13,789,630		$	3,380,457			$	-			$	-			$	-		$	-		$	-		$	18,417,087		$	637,447		$	-		$	45,932,207

26

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

4.	Mineral Properties (continued)
(a)	Itetemia Project:

Through prospecting and mining option agreements, the Company has options to acquire interests in several ltetemia property prospecting licenses. The prospecting licenses comprising the Itetemia property are held by the Company; through the Company's subsidiaries, Tancan or Tanzam. In the case of one prospecting license, Tancan acquired its interest pursuant to the State Mining Corporation ("Stamico") Venture Agreement dated July 12, 1994, as amended June 18, 2001, July 2005, and October 13, 2008.

Stamico retains a 2% royalty interest as well as a right to earn back an additional 20% interest in the prospecting license by meeting 20% of the costs required to place the property into production. The Company retains the right to purchase one-half of Stamico's 2% royalty interest in exchange for USD$1,000,000.

The Company is required to pay Stamico an annual option fee of USD$25,000 per annum until commercial production.

As at August 31, 2013, there are no licenses subject to an Option Agreement with Barrick Exploration Africa Ltd. (BEAL) (note 4(m)).

During the year ended August 31, 2013, the Company did not abandon any licenses in the area and no write off was taken in this area (year ended August 31, 2012 - $46,544) related to deferred exploration costs associated with licenses the Company does not intend to renew.

(b) Luhala Project:

During the year ended August 31, 2013, the Company agreed to abandon 5 licenses in the area and a write-off of $6,983 was taken in this area (year ended August 31, 2012 - $nil).

(c) Kigosi:

The Kigosi Project is principally located within the Kigosi Game Reserve controlled area. Through prospecting and mining option agreements, the Company has options to acquire interests in several Kigosi prospecting licenses. The Company has an agreement with Stamico providing Stamico a 15% carried interest in the Kigosi Project.

The Kigosi Mining Licence application with an area of 9.91 sq km was officially lodged with the Ministry of Energy and Minerals (MEM) on 4^th March 2013 after some amendments as required by the Ministry. The Kigosi Mining License application was given a number and sent to the Minister for signature. The application covers parts of two licences and the licences will cease after the grant of the Mining Licence. Company management, together with Ministry officials will be attending the Kigosi Mining Licence signing ceremony where the Kigosi Project will be officially handed over to the Company. Subsequent to the period end the official signing ceremony took place and the Kigosi Mining Licence has been signed by the respective Ministries.

During the year ended August 31, 2013, the Company abandoned 10 licenses not considered core to the main targeted mining area therefore a write off $469,940 was taken for these licenses related to the property (year ended August 31, 2012 - $nil).

(d) Lunguya:

During the year ended August 31, 2013, the Company abandoned 8 licenses not considered core properties in the area and a write-off of $103,636 was taken in this area (year ended August 31, 2012 -$nil).

27

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

4.	Mineral Properties (continued)
(e) Kanagele:

During the year ended August 31, 2013, the Company agreed to abandon 5 licenses in the area and a write-off of $892,727 was taken for this property (year ended August 31, 2012 - $297,588), as the Company is focusing its exploration efforts on other projects at this time, however, the Company may consider future exploration development on the license.

(f) Tulawaka:

The Company owns or has options to acquire interests ranging from 65% to 90% in the licenses through prospecting and option agreements. Three licenses in the Tulawaka area were subject to an option agreement with MDN Inc. (MDN) (note 4(n)).

During the year ended August 31, 2013, the Company agreed to abandon 5 licenses in the area and a write-off of $405,688 was taken for this property (year ended August 31, 2012 - $331,402), as the Company is focusing its exploration efforts on other projects at this time, however, the Company may consider future exploration development on the license.

(g) Ushirombo:

During the year ended August 31, 2013, the Company agreed to abandon 4 licenses in the area and a write-off of $38,531 was taken for this property (year ended August 31, 2012 - $266,379), as the Company is focusing its exploration efforts on other projects at this time, however, the Company may consider future exploration development on the license.

(h) Mbogwe:

During the year ended August 31, 2013, the Company did not abandon any licenses in the area and a write-off of $84,853 was taken for this property (year ended August 31, 2012 - $13,019), as the Company is focusing its exploration efforts on other projects at this time, however, the Company may consider future exploration development on the license.

(i) Biharamulo:

Five Biharamulo licenses were subject to the option agreement with MDN (note 4(n)).

During the year ended August 31, 2013, the Company agreed to abandon 4 licenses in the area and a write-off of $16,906 was taken for this property (year ended August 31, 2012 - $129,290), The Company is focusing its exploration efforts on other projects at this time, however, the Company may consider future exploration development on the license.

28

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

4.	Mineral Properties (continued)
(j)	Buckreef Gold Project:

On December 21, 2010, the Company announced it was the successful bidder for the Buckreef Gold Mine Re-development Project in northern Tanzania (the Buckreef Project). Pursuant to the terms of the heads of agreement dated December 16, 2010, the Company paid USD $3,000,000 to Stamico in consideration of the transaction. On October 25, 2011, a Definitive Joint Venture Agreement was entered into with Stamico for the development of the Buckreef Gold Project. Through its wholly-owned subsidiary, Tanzania American International Development Corporation 2000 Limited (Tanzam), the Company holds a 55% interest in the joint venture company, Buckreef Gold Company Limited, with Stamico holding the remaining 45%. The comparative statement of financial position has been adjusted to reflect an immaterial adjustment relating to recording NCI in respect of Stamico's 45% interest.

The Company has 100% control over all aspects of the joint venture company. In accordance with the joint venture agreement, the Company has to arrange financing, incur expenditure, make all decisions and operate the mine in the future. The Company's obligations and commitments include completing a preliminary economic assessment, feasibility study and mine development. Stamico's involvement is to contribute the licences and rights to the property and received a 45% interest in Buckreef Gold Company Limited.

The joint venture agreement contains an obligation clause regarding the commissioning date for the plant. If the property has not been brought into production by May 31, 2014, the Company shall be entitled to extend the date for one additional year:

i)	for the extension year, on payment to Stamico of US$500,000;
ii)	for the second extension year, on payment to Stamico of US$625,000; and
iii)	for each subsequent extension year, on payment to Stamico of US$750,000.

The Company has recognized a non-controlling interest (NCI) in respect of Stamico's 45% interest on the Consolidated Financial Statements based on the initial payment by the Company to Stamico and will be adjusted based on annual exploration and related expenditures. Stamico has a free carried interest and does not contribute to exploration expenses.

There is supervisory board made up of 4 directors of Tanzam and 3 of Stamico who will be updated with periodic reports and review major decisions. Amounts paid to Stamico and subsequent expenditure on the property were capitalized under Mineral Properties and reported under Buckreef Gold Company Limited.

(k) Kabanga:

The Kabanga Project is located in northwestern Tanzania, south of Lake Victoria and near the Burundi border within the Mesoproterozoic Karagwe-Ankolean sequence within the Kibaran Fold Belt of NW Tanzania.

The Company is engaged in the exploration and development of the Kagera Nickel project, adjacent to the Barrick/Xstrata Kabanga Nickel Project within the Kabanga-Musongati mafic-ultramafic belt, which contains Ni sulphide ores at Kabanga deposit and reef-type PGE concentrations at Musongati.

During the year ended August 31, 2013, the company abandoned 6 licenses not considered core and a write off of $147,429 was taken (year ended August 31, 2012 $nil).

Northwestern Basemetals Company Limited, a new company 75% owned by the Company, 15% owned by Stamico and 10% owned by Songshan Mining Company was formed to explore the Kabanga nickel, cobalt and platinum group metals belt in Tanzania. Stamico has a carried interest on the Company and Songshan has a carried interest.

29

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

4. Mineral Properties (continued) (l) Other properties:

The Company has options to acquire interests in their other properties. To maintain these options and licenses, the Company made the following payment:

	USD$
2013	19,000

During the year ended August 31, 2013, the Company did not abandon any licenses in the area but recorded a write-off of $28,214 (year ended August 31, 2012 - $209,747) of costs related to the abandoned area located within the other properties category.

(m) Option Agreement with BEAL (now ABG Exploration Limited ("ABG"):

BEAL had the option to acquire the total rights, titles, and interests of the Company in prospecting licenses in various properties, herein called the BEAL project. In exchange for this option, BEAL paid USD$100 to the Company. To maintain and exercise the option, BEAL was required to incur USD$250,000 in exploration and development costs on the BEAL project within a year of closing the agreement (completed), and thereafter, BEAL must expend USD$50,000 each year for each retained prospecting license. In addition, BEAL must make USD$40,000 annual payments to the Company for each retained prospecting licenses in December 2006 and subsequent years.

In prior years, the Company received from BEAL notices of relinquishment for all rights, titles and interests in prospecting licenses included in the Option Agreement, and on April 18, 2013, ABG advised that they were returning the last remaining prospecting licence optioned under the BEAL Option Agreement.

(n) Option Agreement with MDN:

On January 20, 2003, as amended on March 18, 2003 and January 9, 2007, the Company entered into an agreement with MDN granting MDN the exclusive option to acquire the total rights, titles, and interests of the Company in certain prospecting licenses. The prospecting licenses under option to MDN are located at Biharamulo and Tulawaka.

In January 2013 MDN advised the Company that they were unable to fulfill the terms of the option agreement between the Company and MDN and the option agreement has been terminated. The Company is focusing its exploration efforts on other projects at this time, however, the Company may consider future exploration development on these licenses.

30

					Tanzanian Royalty Exploration Corporation
				Notes to the Consolidated Financial Statements
					For the Years Ended August 31, 2013 and 2012
5	.	Property, plant and equipment
				Drilling			Computer			Machinery and				Leasehold
				equipment		Automotive	Equipment			equipment				improvements			Total
		Cost
		As at September 1, 2011		464,487		302,640		157,892			1,507,349			4,469			2,436,837
		Additions		-		-		12,372			40,582			89,329			142,283
		Disposals		-		-		(78,619	)		(20,778	)		(4,469	)		(103,866	)
		As at August 31, 2012	$	464,487	$	302,640	$	91,645		$	1,527,153		$	89,329		$	2,475,254
		Additions		-		-		26,122			13,076			10,999			50,197
		As at August 31, 2013	$	464,487	$	302,640	$	117,767		$	1,540,229		$	100,328		$	2,525,451
		Accumulated depreciation
		As at September 1, 2011		217,630		124,895		106,345			536,468			4,469			989,807
		Depreciation expense		14,509		49,606		22,645			274,977			17,866			379,603
		Removed on disposal of asset		-		-		(78,619	)		(20,778	)		(4,469	)		(103,866	)
		As at August 31, 2012	$	232,139	$	174,501	$	50,371		$	790,667		$	17,866		$	1,265,544
		Depreciation expense		15,490		35,160		22,695			199,415			15,759			288,519
		As at August 31, 2013	$	247,629	$	209,661	$	73,066		$	990,082		$	33,625		$	1,554,063
		Net book value
		As at September 1, 2011	$	246,857	$	177,745	$	51,547		$	970,881		$	-		$	1,447,030
		As at August 31, 2012	$	232,348	$	128,139	$	41,274		$	736,486		$	71,463		$	1,209,710
		As at August 31, 2013	$	216,858	$	92,979	$	44,701		$	550,147		$	66,703		$	971,388

31

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

6.	Convertible Debt
(i)	August 31, 2013:

			August			September			October			Total
			2010			2010			2010
	Gross proceeds at inception	$	1,000,000		$	1,000,000		$	1,060,000		$	3,060,000
	Fair value of liability portion		965,375			965,375			1,023,297			2,954,047
	Fair value of equity portion		34,625			34,625			36,703			105,953
	Liability portion of convertible debt:
	Initial fair value of debt component	$	965,375		$	965,375		$	1,023,297		$	2,954,047
	Issuance costs		(111,160	)		(3,359	)		(22,383	)		(136,902	)
	Accretion expense		101,523			87,606			147,937			337,066
	Interest paid		(36,164	)		(63,288	)		(63,630	)		(163,082	)
	Conversion into common shares		(919,574	)		(986,334	)		-			(1,905,908	)
	Closing balance of liability portion (current)	$	-		$	-		$	1,085,221		$	1,085,221
	Equity portion of convertible debt:
	Opening balance	$	-		$	-		$	-		$	-
	Initial fair value of equity component		34,625			34,625			36,703			105,953
	Issuance costs		(3,987	)		(120	)		(804	)		(4,911	)
	Conversion into common shares		(30,638	)		(34,505	)		-			(65,143	)
	Closing balance of equity portion	$	-		$	-		$	35,899		$	35,899
(ii)	August 31, 2012:
			August			September			October			Total
			2010			2010			2010
	Gross proceeds at inception	$	1,000,000		$	1,000,000		$	1,060,000		$	3,060,000
	Fair value of liability portion		965,375			965,375			1,023,297			2,954,047
	Fair value of equity portion		34,625			34,625			36,703			105,953
	Liability portion of convertible debt:
	Initial fair value of debt component	$	965,375		$	965,375		$	1,023,297		$	2,954,047
	Issuance costs		(111,160	)		(3,359	)		(22,383	)		(136,902	)
	Accretion expense		101,523			82,065			90,091			273,679
	Interest paid		(36,164	)		(30,000	)		(31,800	)		(97,964	)
	Conversion into common shares		(919,574	)		-			-			(919,574	)
	Closing balance of liability portion	$	-		$	1,014,081		$	1,059,205		$	2,073,286
	Equity portion of convertible debt:
	Opening balance	$	-		$	-		$	-		$	-
	Initial fair value of equity component		34,625			34,625			36,703			105,953
	Issuance costs		(3,987	)		(120	)		(804	)		(4,911	)
	Conversion into common shares		(30,638	)		-			-			(30,638	)
	Closing balance of equity portion	$	-		$	34,505		$	35,899		$	70,404

32

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

6. Convertible Debt (continued)

On August 17, 2010, the Company issued a three-year convertible promissory note to an arm's length third party, in the principal amount of $1,000,000 bearing interest at 3% and convertible into 255,484 common shares at a price of $4.286 per share. The agreement charged finance and commitment fees of $95,000 which was paid by issuing 22,166 common shares. In September 2011, the loan was converted into 233,318 shares (see note 8).

On September 23, 2010 the Company completed a private placement with an arm's length third party consisting of a three-year convertible promissory note in the principal amount of $1,000,000 bearing interest at 3% and convertible into 221,337 common shares at the price of $4.518 per share. The Company received notice to convert the Promissory Note in the principal amount of $1,000,000 and 221,337 shares were issued on October 17, 2012 (see note 8).

On October 4, 2010 the Company completed a private placement with arm's length third parties consisting of three-year convertible promissory notes in the aggregate principal amount of $1,060,000 bearing interest at 3% and convertible into 204,772 common shares at the price of $5.1765 per share. Subsequent to year end, the notes were repaid (see note 23).

Each of the convertible debentures includes a conversion feature. The Company determined a fair value of the financial liability by obtaining independent bank rates of 4.25% for the August, September and October 2010 debt, assuming a three-year expected life and assigned the residual value of all debts to the equity conversion feature in the amount of $105,953. Total transaction costs for all debt agreements were $141,813 of which $4,911 was allocated to the equity component, which aggregated to $35,899 at August 31, 2013 (August 31, 2012 - $70,404) and is included in share based payment reserve in shareholders' equity.

7. Other financial assets

Other financial assets are comprised of shares of publicly traded companies. As at August 31, 2013, these investments have been measured at their fair value of $5,250 (August 31, 2012 - $17,850). The impact to the consolidated financial statements of this revaluation to market value for the year ended August 31, 2013 resulted in a $12,600 loss (2012 - $11,550 loss) as market values of these securities decreased (2012 - decreased) in the year.

33

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

8. Capital Stock

Share Capital

The Company's Restated Articles of Incorporation authorize the Company to issue an unlimited number of common shares. On November 23, 2011, the Board resolved that the Company authorize for issuance up to a maximum of 115,000,000 common shares, subject to further resolutions of the Company's board of directors.

	Number		Amount ($)
Balance on September 1, 2011	99,758,753		109,935,253
Issued on conversion of convertible debt	233,318		950,213
Issued for services	35,000		115,834
Issued pursuant to Restricted Share Unit Plan	182,866		1,024,793
Compensation warrants exercised	250,000		1,000,000
Reserve transferred on exercise of compensation warrants	-		450,765
Balance at August 31, 2012	100,459,937	$	113,476,858
Issued on conversion of convertible debt	221,337		986,334
Issued pursuant to Restricted Share Unit Plan	241,308		1,151,010
Balance at August 31, 2013	100,922,582	$	115,614,202

Activity during the year ended August 31, 2012:

On September 23, 2011, pursuant to the private placement completed on August 17, 2010, the Company received notice from an arm's length third party to convert its Promissory Note in the principal amount of $1,000,000 bearing interest at 3% and convertible into 233,318 common shares at a price of $4.286 per share, and 233,318 shares were issued on September 23, 2011.

On January 25, 2012 the Company issued 25,000 common shares common shares at a price of $2.619 per share respectively to an arm's length third party in satisfaction of finder's services provided to the Company in connection with a previous transaction. On April 23, 2012 the Company issued 10,000 common shares at a price of $5.036 to an arm's length third party for investor relations services.

Activity during the year ended August 31, 2013:

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

34

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

8. Capital Stock (continued)

Warrant issuances:

There were no warrant issuances during the year ended August 31, 2013 or the year ended August 31, 2012.

Warrants outstanding:

At August 31, 2013, the following warrants and compensation options were outstanding:

	Number of
	Warrants		Exercise price	Expiry date
Private placement
November 5, 2010	125,000	*	USD$4.00	October 20, 2013**
Equity financing
August 12, 2011	5,263,158	*	USD$4.00	August 12, 2014
Equity financing
compensation options
August 12, 2011	118,421		USD$4.00	August 12, 2014
Balance,
August 31, 2013	5,506,579		-	-

* warrants classified under Warrant Liability ** expired unexercised subsequent to year end

Effective December 7, 2011 the exercise price of 5,263,158 common share purchase warrants was

reduced from USD$6.25 to USD$4.00 and the term of the warrants was extended one year to expire August 12, 2014. In addition, if the weighted average trading price of the common shares increases to USD$6.50 after March 11, 2012, the Company will be entitled to require that the holders exercise the warrants, failing which the warrants will terminate. 368,421 compensation warrants issued under the prospectus financing have been amended in the same manner and re-priced from USD$5.91 to USD$4.00. The 5,263,158 warrants are accounted for and included in the calculation of the warrant liability. The compensation warrants continue to be classified as an equity instrument under warrants reserve and the increase in value of $183,000 from the modification of the warrants was recorded in the statement of loss and comprehensive loss for the year ended August 31, 2012.

35

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

8. Capital Stock (continued)

Warrant liability:

Foreign currency denominated warrants (not including compensation warrants), are considered a derivative as they are not indexed solely to the entity's own stock. The Company's functional currency is the Canadian dollar as such the warrants whose exercise price is denominated in US dollars have been recorded under liabilities and carried at fair value as determined by the Black-Scholes option pricing model, with changes in fair values recorded as gains or losses in the statements of comprehensive loss.

The table below shows the activity for warrant liability for the year ended August 31, 2013 and the year ended August 31, 2012:

Year ended		August 31, 2013		August	31, 2012
Balance at beginning of year	$	8,114,000		$	5,711,250
(Decrease) Increase in value of warrant liability		(4,590,000	)		2,321,921
Transfer of warrants on re-pricing to USD (i)		-			80,829
Balance at end of year	$	3,524,000		$	8,114,000
Current portion of warrant liability	$	3,524,000		$	-
Long term portion of warrant liability	$	-		$	8,114,000

During the year ended August 31, 2013, the value of the warrants decreased to $3,524,000 from the balance at August 31, 2012 of $8,114,000, as a result of changes in fair value of warrants during the year. The assumptions in valuing the warrants at August 31, 2013 included an expected volatility of 64-83% (August 31, 2012 - 58%-71%), a US risk free interest rate of 0.03% to 0.13% (August 31, 2012 - 1.16%) and an expected life ranging from 2 to 12 months (August 31, 2012 - one to two years). The decrease in value of $4,590,000 (2012 - $2,321,921 increase) has been recorded as a gain (2012 - loss) in the statement of comprehensive loss.

(i)      Effective January 25, 2012 the exercise price of 125,000 common share purchase warrants was reduced from CDN $7.309 to USD$4.00, and the term of the warrants was extended one year to expire October 20, 2013. In addition, if the weighted average trading price of the common shares increases to USD$6.50 after April 12, 2012, the Company will be entitled to require that the holders exercise the warrants, failing which the warrants will terminate. The warrants are held by an arm's length investor. The result of the modification resulted in the new foreign currency denominated warrants being considered a derivative as they are not indexed solely to the entity's own stock. The warrants were transferred from reserve for warrants to liabilities and were accounted for and included in the calculation of the warrant liability and consequently reclassified $80,829 from warrants reserve to warrant liability.

36

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

8. Capital Stock (continued)

Compensation options:

Employee stock ownership plan:

On May 1, 2003, the Company established a non-leveraged employee stock ownership plan (ESOP) for all eligible employees, consultants, and directors. The Company matches 100 percent of participants' contributions up to 5 percent of the participants' salaries and 50 percent of participants' contributions between 6 percent and 30 percent of the participants' salaries. All contributions vest immediately. ESOP compensation expense for the year ended August 31, 2013 was $58,864 (2012 - $70,859) and is included in salaries and benefits expense.

Restricted share units:

The Restricted Stock Unit Plan (RSU Plan) is intended to enhance the Company's and its affiliates' abilities to attract and retain highly qualified officers, directors, key employees and other persons, and to motivate such officers, directors, key employees and other persons to serve the Company and its affiliates and to expend maximum effort to improve the business results and earnings of the Company, by providing to such persons an opportunity to acquire or increase a direct proprietary interest in the operations and future success of the Company. To this end, the RSU Plan provides for the grant of restricted stock units (RSUs). Each RSU represents an entitlement to one common share of the Company, upon vesting. As of November 9, 2012 the Board resolved to suspend 1,500,000 of the 2,500,000 common shares previously authorized for issuance under the RSU Plan, such that a maximum of 1,000,000 shares shall be authorized for issuance under the RSU Plan, until such suspension may be lifted or further amended. RSU awards may, but need not, be subject to performance incentives to reward attainment of annual or long-term performance goals in accordance with the terms of the RSU Plan. Any such performance goals are specified in the award agreement.

The Board of Directors implemented the RSU Plan under which officers, directors, employees and others are compensated for their services to the Company. Annual compensation for outside directors is $68,750 per year, plus $6,875 per year for serving on Committees, plus $3,437 per year for serving as Chair of a Committee. On April 11, 2012 the board approved that at the election of each individual director, up to one half of the annual compensation may be received in cash, paid quarterly. The remainder of the director's annual compensation (at least one half, and up to 100%) will be awarded as RSUs in accordance with the terms of the RSU Plan and shall vest within a minimum of one (1) year and a maximum of three (3) years, at the election of the director, subject to the conditions of the RSU Plan with respect to earlier vesting. In 2012 outside directors had the option to elect to receive 100% of their compensation in RSUs. If 100% compensation in RSUs is elected, the compensation on which the number of RSUs granted in excess of the required one half shall be increased by 20%.

The Company uses the fair value method to recognize the obligation and compensation expense associated with the RSU's. The fair value of RSU's issued is determined on the grant date based on the market price of the common shares on the grant date multiplied by the number of RSUs granted. The fair value is expensed over the vesting term. Upon redemption of the RSU the carrying amount is recorded as an increase in common share capital and a reduction in the share based payment reserve.

The Company has a RSU Plan which allows the Company to issue RSU's which are redeemable for the issue of common shares at prevailing market prices on the date of the RSU grant. The aggregate number of RSU's outstanding is limited to a maximum of ten percent of the outstanding common shares. The Company has granted RSU's to officers and key employees.

Of the 1,000,000 shares authorized for issuance under the Plan, 873,361 shares have been issued as at August 31, 2013.

37

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

8. Capital Stock (continued)

Total share-based compensation expense related to the issue of RSUs was $1,353,967 for the year ended August 31, 2013 (2012 - $1,283,750).

The following table summarizes changes in the number of RSU's outstanding:
						Weighted average
						fair value at issue
		Number of RSU's				date
		Balance, September 1, 2011	440,932		$ 5.55
		Granted	296,926		$ 4.83
		Redeemed for common shares	(182,866	)	$ 5.60
		Forfeited - unvested	(108,745	)	$ 5.39
		Balance, August 31, 2012	446,247		$ 5.09
		Granted	416,639		$ 3.52
		Redeemed for common shares	(241,308	)	$ 4.77
		Balance, August 31, 2013	621,578		$ 4.16
9	.	Reserve for warrants
						August 31,			August 31,
		Year ended				2013			2012
		Balance at beginning of year	$			870,037		$	1,353,990
		Transfer of warrants to warrant liability				-			(216,188	)
		Modification of warrants				-			183,000
		Transfer on exercise of compensation warrants				-			(450,765	)
		Balance at end of year	$			870,037		$	870,037
10	.	Reserve for share based payments
						August 31,			August 31,
		Year ended				2013			2012
		Balance at beginning of year	$			670,779		$	706,988
		Shares issued pursuant to RSU plan				(1,151,010	)		(1,024,793	)
		Issued on conversion of convertible debt				-			(30,638	)
		RSU shares forfeited				-			(264,528	)
		Share based compensation				1,353,967			1,283,750
		Balance at end of year	$			873,736		$	670,779

38

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

11. Related party transactions and key management compensation

Related parties include the Board of Directors and officers, close family members and enterprises that are controlled by these individuals as well as certain consultants performing similar functions.

Related party transactions conducted in the normal course of operations are measured at the exchange value (the amount established and agreed to by the related parties).

(a) Tanzanian Royalty Exploration Corporation entered into the following transactions with related parties:

Year ended August 31,	Notes		2013		2012
Legal services	(i)	$	269,880	$ 553,949
Director compensation	(ii)	$	375,342	$ 365,049
Rent	(iii)	$	21,364	$ 8,886
Technical Committee	(iv)	$	55,709	$ 130,160
Rent	(v)	$	23,750		$nil

(i) The Company engages a legal firm for professional services in which one of the Company's directors is a partner. During the year ended August 31, 2013, the legal expense charged by the firm was $269,880

(2012 - $553,949), of which $13,143 remains payable at August 31, 2013 (2012 - $140,245).

(ii) During the year ended August 31, 2013, $375,342 (2012 - $365,049) was paid or payable by the Company to directors for serving on the Board and/or related Committees.

(iii) During the year ended August 31, 2013, $21,364 (2012 - $8,886) was paid to a company associated with the Company's Chairman and COO and his spouse for office rental.

(iv) During the year ended August 31, 2013, $55,709 (2012 - $130,160) was paid or payable by the Company to directors as incremental fees for serving on the Company's Technical Committee.

(v) During the year ended August 31, 2013, $23,750 (2012 - $nil) was paid to a company associated with the Company's CFO for office rental.

At August 31, 2013, the Company has a receivable of $nil (2012 - $22,977) from an organization associated with the Company's President and CEO.

(b) Remuneration of Directors and key management personnel (being the Company's Chief Executive Officer, Chief Financial Officer and Chief Operating Officer), other than consulting fees, of the Company was as follows:

Year ended August 31,				2013				2012
		Salaries		Share		Salaries		Share
		and		based		and		based payments
		benefits (1)		payments (2), (3)		benefits (1)		(2),	(3)
Management	$	508,217	$	654,412	$	377,230	$	617,449
Directors		166,770		208,572		75,601		289,448
Total	$	674,987	$	862,984	$	452,831	$	906,897

⁽¹⁾ Salaries and benefits include director fees. The board of directors do not have employment or service contracts with the Company. Directors are entitled to director fees and RSU's for their services and officers are entitled to cash remuneration and RSU's for their services.

⁽²⁾ Compensation shares may carry restrictive legends.

⁽³⁾ All RSU share based compensation is based on the accounting expense recorded in the year.

39

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

12. Management of Capital

The Company's objective when managing capital is to obtain adequate levels of funding to support its exploration activities, to obtain corporate and administrative functions necessary to support organizational functioning and obtain sufficient funding to further the identification and development of precious metals deposits.

The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support the acquisition, exploration and development of mineral properties. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company's management to sustain future development of the business. The Company defines capital to include its shareholders' equity. In order to carry out the planned exploration and pay for administrative costs, the Company will spend its existing working capital and raise additional amounts as needed. The Company will continue to assess new properties and seek to acquire an interest in additional properties if it feels there is sufficient geologic or economic potential and if it has adequate financial resources to do so. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There were no changes in the Company's approach to capital management during the year ended August 31, 2013. The Company is not subject to externally imposed capital requirements.

The Company considers its capital to be shareholders' equity, which is comprised of share capital, reserves, and deficit, which as at August 31, 2013 totaled $50,240,712 (August 31, 2012 - $50,919,401).

The Company raises capital, as necessary, to meet its needs and take advantage of perceived opportunities and, therefore, does not have a numeric target for its capital structure. Funds are primarily secured through equity capital raised by way of private placements. There can be no assurance that the Company will be able to continue raising equity capital in this manner.

Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.

The Company invests all capital that is surplus to its immediate operational needs in short term, liquid and highly rated financial instruments, such as cash, and short term guarantee deposits, all held with major Canadian financial institutions and Canadian treasury deposits.

13. Financial Instruments

Fair Value of Financial Instruments

The Company designated its other financial assets and warrant liability as FVTPL, which are measured at fair value. Fair value of other financial assets is determined based on quoted market prices and is categorized as Level 1 measurement. Fair value of warrant liability is categorized as Level 3 measurement as it is calculated based on unobservable market inputs. Trade and other receivables and cash and cash equivalents are classified as loans and receivables, which are measured at amortized cost. Trade and other payables and convertible debt are classified as other financial liabilities, which are measured at amortized cost. Fair value of trade and other payables and convertible debt are determined from transaction values that are not based on observable market data.

The carrying value of the Company's cash and cash equivalents, trade and other receivables, trade and other payables approximate their fair value due to the relatively short term nature of these instruments.

The Company's convertible debt fair value is based on market interest rate. As at August 31, 2013, and August 31, 2012 the fair value of the convertible debt agreements did not differ materially from their carrying value, due to the short time to maturity.

40

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

13. Financial Instruments (continued)

Fair value estimates are made at a specific point in time, based on relevant market information and information about financial instruments. These estimates are subject to and involve uncertainties and matters of significant judgment, therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

A summary of the Company's risk exposures as they relate to financial instruments are reflected below:

Credit Risk

Credit risk is the risk of an unexpected loss if a third party to a financial instrument fails to meet its contractual obligations. The Company is subject to credit risk on the cash balances at the bank, its short-term bank investments and accounts and other receivables and the carrying value of those accounts represent the Company's maximum exposure to credit risk. The Company's cash and cash equivalents and short-term bank investments are with Schedule 1 banks or equivalents. The accounts and other receivables consist of GST/HST and VAT receivable from the various government agencies and amounts due from related parties. The Company has not recorded an impairment or allowance for credit risk as at August 31, 2013, or August 31, 2012.

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rate. The Company's bank accounts earn interest income at variable rates. The Company's future interest income is exposed to changes in short-term rates. As at August 31, 2013, a 1% increase/decrease in interest rates would decrease/increase net loss for the year by approximately $107,000 (2012 - $200,000).

Liquidity Risk

The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at August 31, 2013, the Company had current assets of $11,289,745 (August 31, 2012 - $20,483,824) and current liabilities of $5,873,641 (August 31, 2012 - $2,318,393), including warrant liability or $2,349,641 (August 31, 2012 - $2,318,393) excluding warrant liability. All of the Company's trade payables and receivables have contractual maturities of less than 90 days and are subject to normal trade terms. Current working capital of the Company is $5,416,104 (August 31, 2012 - $18,165,431) including warrant liability or a working capital of $8,940,104 (August 31, 2012 - $18,165,431) excluding warrant liability.

Foreign Currency Risk

The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates. The Company has offices in Canada, USA, and Tanzania, but holds cash mainly in Canadian and United States currencies. A significant change in the currency exchange rates between the Canadian dollar relative to US dollar and Tanzanian shillings could have an effect on the Company's results of operations, financial position, or cash flows. At August 31, 2013, the Company had no hedging agreements in place with respect to foreign exchange rates. As a majority of the funds of the Company are held in Canadian currencies, the foreign currency risk associated with US dollar and Tanzanian Shilling financial instruments is not considered significant at August 31, 2013.

41

Tanzanian Royalty Exploration Corporation
Notes to the Consolidated Financial Statements
For the Years Ended August 31, 2013 and 2012
14. Prepaid expenses
		August 31, 2013		August 31, 2012
Insurance	$	47,159	$	41,525
Listing fees		30,411		23,806
Other		3,191		22,345
Total prepaid expenses	$	80,761	$	87,676
15. Other receivables

The Company's other receivables arise from two main sources: receivables due from related parties and harmonized services tax ("HST") and value added tax ("VAT") receivable from government taxation authorities. These are broken down as follows:

		August 31, 2013		August 31, 2012
Receivable from related parties	$	811	$	23,315
HST and VAT Receivable		510,062		38,824
Other		1,496		9,086
Total Trade and Other Receivables	$	512,369	$	71,225
Below is an aged analysis of the Company's other receivables:
		August 31, 2013		August 31, 2012
Less than 1 month	$	499,537	$	4,034
1 to 3 months		12,832		64,016
Over 3 months		-		3,175
Total Other Receivables	$	512,369	$	71,225

At August 31, 2013, the Company anticipates full recovery of these amounts and therefore no impairment has been recorded against these receivables. The credit risk on the receivables has been further discussed in Note 13.

The Company holds no collateral for any receivable amounts outstanding as at August 31, 2013.

42

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

16. Trade, other payables and accrued liabilities

Trade and other payables of the Company are principally comprised of amounts outstanding for trade purchases relating to exploration activities and payroll liabilities. The usual credit period taken for trade purchases is between 30 to 90 days.

The following is an aged analysis of the trade, other payables and accrued liabilities:
	August 31, 2013			August 31, 2012
Less than 1 month	$	1,186,377	$	921,893
1 to 3 months		51,315		1,378,486
Over 3 months		26,728		18,014
Total Trade, Other Payables and Accrued Liabilities	$	1,264,420	$	2,318,393

17. Inventory

Inventory consists of supplies for the Company's drilling rig and fuel to be consumed during the course of exploration development and operations. Cost represents the delivered price of the item. The following is a breakdown of items in inventory:

		August 31, 2013		August 31, 2012
Replacement parts for drill	$	-	$	186,296
Other		11,849		62,099
Total Inventory	$	11,849	$	248,395
18. Cash and cash equivalents

As at August 31, 2013, cash and cash equivalents total $10,679,516 (August 31, 2012 - $20,058,678), consisting of cash on deposit with banks in general minimum interest bearing accounts totalling $329,659 (August 31, 2012 - $2,027,295), and Government investment certificates and treasury bills consisting of interest-generating money-market accounts of $10,349,857 (August 31, 2012 - $18,031,383). The interest-generating government investment certificate is cashable at any time and the Company expects to convert this into cash on an as needed basis.

19. Segmented information

Operating Segments

At August 31, 2013 the Company's operations comprise a single reporting operating segment engaged in mineral exploration in Tanzania. The Company's corporate division only earns interest revenue that is considered incidental to the activities of the Company and therefore does not meet the definition of an operating segment as defined in IFRS 8 'Operating Segments'. As the operations comprise a single reporting segment, amounts disclosed in the consolidated financial statements also represent operating segment amounts.

An operating segment is defined as a component of the Company:

• that engages in business activities from which it may earn revenues and incur expenses;
• whose operating results are reviewed regularly by the entity's chief operating decision maker; and
• for which discrete financial information is available.

43

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

19. Segmented information, (continued)

Geographic Segments

The Company is in the business of mineral exploration and production in the country of Tanzania.

Information concerning TREC's geographic locations is as follows:

		Year ended			Year ended
		August 31,			August 31,
		2013			2012
Consolidated net income (loss)
Canada	$	1,223,920		$	(6,088,262	)
Tanzania		(4,449,918	)		(2,809,581	)
	$	(3,225,998	)	$	(8,897,843	)
		As at			As at
		August 31,			August 31,
		2013			2012
Identifiable assets
Canada	$	10,748,028		$	20,137,766
Tanzania		47,445,312			45,573,309
	$	58,193,340		$	65,711,075
Non-current assets
Canada	$	21,486		$	14,470
Tanzania		46,882,109			45,212,781
	$	46,903,595		$	45,227,251

20. Commitments

In addition to the property payments committed to by the Company to maintain options in certain prospecting and mining option agreements (note 4), the Company is committed to rental payments of approximately $13,266 for premises in 2014.

44

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

21. Taxes

The Company's provision for income taxes differs from the amount computed by applying the combined federal and provincial income tax rates to income (loss) before income taxes as a result of the following:

		2013			2012
Combined basic Canadian federal and
provincial statutory income tax rates
including surtaxes		26.0	%		25.8	%
Statutory income tax rates applied to
accounting income	$	(837,000	)	$	(2,292,000	)
Increase (decrease) in provision for income
taxes:
Foreign tax rates different from statutory rate		(259,000	)		(120,000	)
Permanent differences and other items		487,000			645,000
Benefit of tax losses not recognized		609,000			1,767,000
Provision for income taxes	$	-		$	-

The enacted tax rates in Canada of 26.0% (25.8% - 2012) and Tanzania of 30% (30% - 2012) where the company operates are applied in the tax provision calculation. The combined Canadian federal and provincial statutory rate has increased from the prior period due to a scheduled enacted rate increase.

The following table reflects the Company's deferred income tax assets (liabilities):

The tax effects of significant temporary differences which would comprise deferred income tax assets and liabilities at August 31, 2013 and 2012 are as follows:

		Mineral			Debt issuance			Total
Deferred Income Tax Liabilities		properties			cost
At August 31, 2012	$	(10,348,000	)	$	(18,000	)	$	(10,366,000	)
Charged to the consolidated statement of
comprehensive loss		(369,000	)		(8,000	)		(377,000	)
At August 31, 2013	$	(10,717,000	)	$	(26,000	)	$	(10,743,000	)
		Mineral			Debt issuance			Total
Deferred Income Tax Assets		properties			cost
At August 31, 2012	$	10,348,000		$	18,000		$	10,366,000
Charged to the consolidated statement of
comprehensive loss		369,000			8,000			377,000
At August 31, 2013	$	10,717,000		$	26,000		$	10,743,000
Net deferred tax assets (liabilities)	$	-		$	-		$	-

45

Tanzanian Royalty Exploration Corporation

Notes to the Consolidated Financial Statements

For the Years Ended August 31, 2013 and 2012

21. Taxes (continued)

The following temporary differences have not been recognized in the Company's consolidated financial statements:

		August 31, 2013		August 31, 2012
Non capital losses	$	30,136,000	$	27,076,000
Property, plant and equipment		184,000		271,000
Capital losses		127,000		127,000
	$	30,447,000	$	27,474,000

At August 31, 2013, the Company has Tanzanian non-capital losses of $13,743,000 (2012 - $12,965,000), that have not been recognized and may be carried forward and applied against Tanzania taxable income of future years. The non-capital loss may be carried forward without limitation.

At August 31, 2013, the Company has non-capital losses of $16,393,000 (2012 - $14,111,000), that have not been recognized and may be carried forward and applied against Canadian taxable income of future years. The non-capital losses have expiry dates as follows:

2014	$	914,000
2015		997,000
2026		1,711,000
2027		1,388,000
2028		1,333,000
2029		1,587,000
2030		1,427,000
2031		2,378,000
2032		2,496,000
2033		2,162,000
	$	16,393,000

At August 31, 2013, $nil (2012 - $nil) was recognized as a deferred tax liability for taxes that would be payable as the Company's subsidiaries have a deficit.

22. Comparative figures

Certain comparative figures have been reclassified to conform to the current year's presentation.

23. Subsequent event

On October 4, 2010 the Company completed a private placement with arm's length third parties consisting of three-year convertible promissory notes in the aggregate amount of $1,060,000 bearing interest at 3% per annum and convertible into 204,772 common shares, if the Holders elected to convert. On September 14, 2013 the promissory notes matured and the Holders elected repayment of the promissory notes in cash. Accordingly $1,060,000 plus interest in the amount of $30,000 was paid on September 16, 2013.

46

EX-15.2

Management Discussion and Analysis

August 31, 2013

The following Management’s Discussion and Analysis (“MD&A”) of the financial condition and results of operations for Tanzanian Royalty Exploration Corporation (the “Company”) should be read in conjunction with the audited consolidated financial statements for the years ended August 31, 2013 and 2012. The MD&A was prepared as of November 12, 2013. All amounts are in Canadian dollars, unless otherwise specified.

Highlights – for the year ended August 31, 2013

· The Company’s Kigosi Project has been granted a Mineral Rights and Mining Licence, through its wholly owned subsidiary, Tanzania American International Development Corporation 2000 Limited (“Tanzam”). The Mineral Rights and Mining Licence covers the entire area applied for, 9.91 square kilometres of the Kigosi Project. The grant of a Mining Licence allows for eventual production at Kigosi.

· Potential Tungsten occurrences in northwest Tanzania from licences held by Northwestern Base Metals Company Limited, a subsidiary of the Company.

· The Company reintroduced the Biogeochemical (BGC) program for macro targeting of mineral resources. The BGC objective for the company’s prospecting licenses in the Karagwe-Akolean belt is to conduct an efficient and rapid exploration survey targeting Nickel, Cobalt and the Platinum Group Metals (PGM).

· Buckreef Gold Project deep diamond drill program was completed during the year. Assay results from the deep diamond drill program confirmed continuity of wide, higher grade gold mineralization.

· The Company signed Kigosi Access Agreement in December 2012 and in February 2013 the Company was awarded an Environmental Impact Assessment (EIA) Certificate for Kigosi.

· Assay results from Eastern Porphyry prospect at the Buckreef Gold Project continues to increase confidence in the additional potential the prospect might possess

· The Company is preparing mineral resource block models and upgraded mineral resource statements for the Company’s Buckreef Project as a result of the successful completion of the Company’s expanded drilling program

· In November 2012 the Company announced the formation of Northwestern Basemetals Company Limited, a new company 75% owned by Tanzanian Royalty, 15% by State Mining Corporation (“Stamico”) and 10% by Songshan Mining Company, to explore the Kabanga nickel, cobalt and platinum group metals belt in Tanzania

1

 

Management Discussion and Analysis

August 31, 2013

Overall Performance

As at August 31, 2013 the Company had current assets of $11,289,745 compared to $20,483,824 on August 31, 2012. The decrease is mainly due to net expenditures on exploration of $4,109,573 (2012 - $9,593,993) and cash used in operations of $4,137,953 (2012 - $4,713,619). Mineral properties and deferred exploration costs were $45,932,207 as compared to $44,017,541 at August 31, 2012.

Net loss for the year ended August 31, 2013 was $3,225,998 compared to a net loss of $8,897,843 in the comparable year ended August 31, 2012. The decrease in net loss is primarily due to a gain of $4,590,000 from the revaluation of warrant liability during the year ended August 31, 2013 compared to a loss of $2,321,921 on the same revaluation of the warrant liability in 2012 offset by an increase in the loss due to share based payments of $1,053,509 for the year ended August 31, 2013 (2012 - $777,640) and write down in mineral properties and deferred exploration costs of $2,194,907 (2012 - $1,293,969).

The Company issued common shares during the year ended August 31, 2013 with a value of $986,334 on conversion of 221,337 shares under the convertible debt agreement (compared to a value of $950,213 on conversion of 233,318 shares under the convertible debt agreement during the year ended August 31, 2012). The Company also issued 241,308 shares (2012 – 182,866 shares) pursuant to the RSU plan with a value of $1,151,010 (2012 - $1,024,793). During the comparative year ended August 31, 2012, 250,000 warrants were exercised for proceeds of $1,000,000 and 35,000 shares valued at $115,834 were issued for services. No warrants were exercised in the current year ended August 31, 2013. In the current year, capital is being utilized for the Buckreef Gold Project development, property acquisition, exploration, capital equipment purchases and general operating expenses as tabulated below. The remaining funds/cash liquid assets are invested in interest bearing investments, which are highly liquid.

	C$ (000)
Funds available August 31, 2012	20,059
Equipment purchases	(50)
Mineral property expenditures including licences, environmental and exploration, net of recoveries	(5,191)
General corporate expenses	(4,138)
Funds available August 31, 2013	$10,680

Management of the Company believes that the current level of funds is sufficient to achieve its business objectives and milestones over the next 12 months. Management continues to explore alternative financing sources in the form of equity, debt or a combination thereof; however the current economic uncertainty and financial market volatility make it difficult to predict success. Risk factors potentially influencing the Company’s ability to raise equity or debt financing include: the outcome of the feasibility study at the Buckreef Project, mineral prices, the risk of operating in a foreign country, including, without limitation, risks relating to permitting, and the buoyancy of the credit and equity markets. For a more detailed list of risk factors, refer to the Company’s Annual Information Form for the year ended August 31, 2013, which is filed on SEDAR.

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

2

 

Management Discussion and Analysis

August 31, 2013

TRENDS

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

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

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

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

Selected Financial Information

	As at and for the year ended August 31, 2013	As at and for the year ended August 31, 2012	As at and for the year ended August 31, 2011
Total Revenues	$0	$0	$0
Net (loss) for the period	$(3,225,998)	($8,897,843)	($11,132,371)
Basic and diluted (loss) per share	$(0.03)	($0.09)	($0.12)
Total assets	$58,193,340	$65,711,075	$67,632,380
Total long term financial liabilities	$0	$10,187,286	$8,669,289
Cash dividends declared per share	$0	$0	$0

Results of Operations

Net additions to mineral properties and deferred exploration costs for the year ended August 31, 2013 were $4,109,573 compared to $9,593,993 for the year ended August 31, 2012. The amount has decreased as compared with prior year as the Company advances its exploration of the Buckreef project and other projects in its portfolio and at the same time is conscious about conserving its cash in the current economic downturn. Recoveries received during the year ended August 31, 2013 and 2012 from various option agreements and other miscellaneous sources were $41,786 and $50,114, respectively.

Net loss for the year ended August 31, 2013 was $3,225,998 compared to a loss of $8,897,843 for the comparable year ended August 31, 2012. For the three month period ended August 31, 2013 and 2012, the net loss was $2,754,677 and $3,576,139, respectively. The main reason for the decrease in net loss for the year ended August 31, 2013 is the gain on revaluation of warrant liability of $4,590,000 (2012 – loss of $2,321,921) offset by a write down in mineral properties and deferred exploration costs of $2,194,907 (2012 - $1,293,969). For the three month period ended August 31, 2013, net loss also decreased mainly due to the revaluation of warrant liability resulting in a loss of $747,000 (2012 – loss of $1,927,000) offset by a write down in mineral properties and deferred exploration costs of $695,094 (2012 - $((66,601)).

3

 

Management Discussion and Analysis

August 31, 2013

For the year ended August 31, 2013, depreciation expense was $288,519 compared to $379,603 for the year ended August 31, 2012. The decrease of $91,084 was due to the lower capital asset cost base as purchases in the period were minimal and depreciation lowered the capital asset balance. The capital expenditure for the year ended August 31, 2013 was $50,197 as compared to $142,283 in the year ended August 31, 2012.

Consulting fees for the year ended August 31, 2013 were $317,257 compared to $266,011 in the comparable year ended August 31, 2012. Consulting expenses increased due to independent work on resource upgrade and other general consulting. Consulting fees for the three months ended August 31, 2013 were $136,807 compared to $87,943 in the comparable three month period ended August 31, 2012. The increase for the three month period is due to the same reason as above.

Directors’ fees for the year ended August 31, 2013 were $375,342 compared to $365,049 in the comparable year ended August 31, 2012. Director fees remained consistent between the two periods as the number and valuation of RSU’s issued to board members remained comparable.

Office and general expenses for the year ended August 31, 2013 were $388,675 compared to $437,380 in the comparable year ended August 31, 2012. The decrease is mainly due to the company closely managing its office and general costs including closure of the Mwanza office and consolidation of offices at the Buckreef camp, as well as reduced freight expenses. For the three month period ended August 31, 2013, office and general expenses were $124,742 compared to $151,581 in the comparable three month period ended August 31, 2012. The decrease for the three month period is due to the same reason as above.

Shareholder information costs decreased from $581,526 for the year ended August 31, 2012 to $343,291 for the year ended August 31, 2013. The decrease of $238,235 was due to decreased activity during the year ended August 31, 2013 in comparison to 2012 due to transfer agent and listing fees from the issue of shares for converted debt and corporate investor promotion activity completed during the prior year ended 2012. For the three month period ended August 31, 2013, shareholder information costs were $70,711 compared to $(21,143) for the three month period ended August 31, 2012. The negative amount in fiscal 2012 was due to account reclassifications in the period.

Professional fees decreased by $136,749 for the year ended August 31, 2013 to $732,328 from $869,077 for the year ended August 31, 2012. Professional fees decreased between the comparable periods as the Company incurred one time costs during fiscal 2012 related to the transition to IFRS and various legal work related to its Buckreef property. For the three month period ended August 31, 2013 professional fees went from $464,054 for the three month period ended August 31, 2012 to $318,594 for the three month period ended August 31, 2013. The decrease in the current three month period is due to the same reason as above.

Salaries and benefits expense has decreased to $1,388,160 for the year ended August 31, 2013 from $1,596,951 for the year ended August 31, 2012. The decrease is due to a reduced workforce on staff in Tanzania during the current year and termination payments in the prior year. The expenses for the corresponding three month period ending August 31, 2013 and 2012 were $261,860 and $502,877 respectively. The decrease in the current three month period is due to the same reason as above.

4

 

Management Discussion and Analysis

August 31, 2013

Share based payments for the year ended August 31, 2013 were $1,053,509 compared to $777,630 in the comparable year ended August 31, 2012. Share based payments vary depending on the number of equity based compensation options issued and vesting. See note 8 of the financial statements for details. Director fee RSU expense was $208,572 and $289,448, respectively.

For the year ended August 31, 2013, travel and accommodation expense decreased by $43,058 from $169,420 in 2012 to $126,362. For the three months ended August 31, 2013, travel and accommodation expense increased by $3,107 from $35,349 in 2012 to $38,456. Travel and accommodation expense decreased due to timing and increased control of travel requirements, while remaining consistent in the last quarter of 2013.

For the year ended August 31, 2013, the foreign exchange loss was $5,215 compared to an exchange gain of $24,082 for the same year ended August 31, 2012. This increased loss of $29,297 was due to the years’ average Tanzanian Shilling exchange rate having increased from 1,572 at August 31, 2012 to 1,524 at August 31, 2013.

The interest accretion expense for the year ended August 31, 2013 was $55,549, compared to $102,785 for the year ended August 31, 2012. The interest relates to the issuance of convertible debt. Interest accretion is expected to decrease as debt is converted into shares or repaid. Interest income for the year ended August 31, 2013 was $133,116, compared to $274,913 for the year ended August 31, 2012. Interest income has decreased as the average cash balance in interest bearing accounts decreased during the current year.

During the year ended August 31, 2013, the Company agreed to abandon and wrote off $2,194,907 in expenses in various project areas (2012 – wrote off $1,293,969) from abandoning various licenses, see note 4 of the financial statements, as the Company evaluated its mineral properties and has no current plans to explore, but may in the future.

A gain of $4,590,000 (2012 – loss of $2,321,921) was recognized during the year ended August 31, 2013 in connection with the revaluation of the warrant liability.

Summary of Quarterly Results (unaudited)

(Expressed in thousands of dollars, except per share amounts)

	2013 Q4	2013 Q3	2013 Q2	2013 Q1	2012 Q4	2012 Q3	2012 Q2	2012 Q1
Total revenues	$0	$0	$0	$0	$0	$0	$0	$0
Net Income (Loss)	$(2,755)	$(1,497)	$2,632	$(1,606)	$(3,576)	$385	$(8,516)	$2,809
Basic and diluted income (loss) per share	$(0.03)	$(0.01)	$0.03	($0.02)	($0.04)	$0.00	($0.09)	$0.03

5

 

Management Discussion and Analysis

August 31, 2013

Liquidity and Capital Resources

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

As of August 31, 2013, the Company’s working capital position was $5,416,104 (August 31, 2012 – $18,165,431), including warrant liability or a working capital of $8,940,104 (August 31, 2012 – $18,165,431) excluding warrant liability. As the Company’s mineral properties advance, additional equity and debt financing will be required to fund exploration and mining activities.

The Company has prepared a cash flow forecast for fiscal 2014 and believes that it has sufficient funds to continue operations for at least the next twelve months.

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

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

Convertible Debt

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

On October 4, 2010 the Company completed a private placement with arm’s length third parties consisting of three-year convertible promissory notes in the aggregate principal amount of $1,060,000 bearing interest at 3% and convertible into 204,772 common shares at the price of $5.1765 per share. On September 14, 2013 the promissory notes matured and the Holders elected repayment of the promissory notes in cash.  Accordingly $1,060,000 plus interest in the amount of $30,000 was paid on September 16, 2013.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Transactions with Related Parties

Related parties include the Board of Directors and officers, close family members and enterprises that are controlled by these individuals as well as certain consultants performing similar functions.

6

 

Management Discussion and Analysis

August 31, 2013

Related party transactions conducted in the normal course of operations are measured at the exchange value (the amount established and agreed to by the related parties).

(a) Tanzanian Royalty Exploration Corporation entered into the following transactions with related parties:

Year ended August 31,	Notes	2013	2012
Legal services	(i)	$269,880	$553,949
Director compensation	(ii)	$375,342	$365,049
Rent	(iii)	$21,364	$8,886
Technical Committee	(iv)	$55,709	$130,160
Rent	(v)	$23,750	$nil

(i) The Company engages a legal firm for professional services in which one of the Company’s directors is a partner. During the year ended August 31, 2013, the legal expense charged by the firm was $269,880 (2012 - $553,949), of which $13,143 remains payable at August 31, 2013 (2012 - $140,245).

(ii) During the year ended August 31, 2013, $375,342 (2012 - $365,049) was paid or payable by the Company to directors for serving on the Board and/or related Committees.

(iii) During the year ended August 31, 2013, $21,364 (2012 - $8,886) was paid to a company associated with the Company’s Chairman and COO and his spouse for office rental.

(iv) During the year ended August 31, 2013, $55,709 (2012 - $130,160) was paid or payable by the Company to directors as incremental fees for serving on the Company’s Technical Committee.

(v) During the year ended August 31, 2013, $23,750 (2012 - $nil) was paid to a company associated with the Company’s CFO for office rental.

At August 31, 2013, the Company has a receivable of $nil (2012 - $22,977) from an organization associated with the Company’s President and CEO.

7

 

Management Discussion and Analysis

August 31, 2013

(b) Remuneration of Directors and key management personnel (being the Company’s Chief Executive Officer, Chief Financial Officer and Chief Operating Officer), other than consulting fees, of the Company was as follows:

Year ended August 31,	2013		2012
	Salaries and benefits (1)	Share based payments (2), (3)	Salaries and benefits (1)	Share based payments (2), (3)
Management	$ 508,217	$ 654,412	$ 377,230	$ 617,449
Directors	166,770	208,572	75,601	289,448
Total	$ 674,987	$ 862,984	$ 452,831	$ 906,897

(1) Salaries and benefits include director fees. The board of directors do not have employment or service contracts with the Company. Directors are entitled to director fees and RSU’s for their services and officers are entitled to cash remuneration and RSU’s for their services.

    (2) Compensation shares may carry restrictive legends.

    (3) All RSU share based compensation is based on the accounting expense recorded in the year.

Restricted Stock Unit Plan

The Restricted Stock Unit Plan (“RSU Plan”) is intended to enhance the Company’s and its affiliates’ abilities to attract and retain highly qualified officers, directors, key employees and other persons, and to motivate such officers, directors, key employees and other persons to serve the Company and its affiliates and to expend maximum effort to improve the business results and earnings of the Company, by providing to such persons an opportunity to acquire or increase a direct proprietary interest in the operations and future success of the Company. To this end, the RSU Plan provides for the grant of restricted stock units (“RSUs”). Each RSU represents an entitlement to one common share of the Company, upon vesting. As of November 9, 2012 the Board resolved to suspend 1,500,000 of the 2,500,000 common shares previously authorized for issuance under the RSU Plan, such that a maximum of 1,000,000 shares shall be authorized for issuance under the RSU Plan, until such suspension may be lifted or further amended. Any of these awards of RSUs may, but need not, be made as performance incentives to reward attainment of annual or long-term performance goals in accordance with the terms of the RSU Plan. Any such performance goals are specified in the Award Agreement.

Of the 1,000,000 shares authorized for issuance under the Plan, 873,361 shares have been issued as at August 31, 2013.

Critical Accounting Estimates

Assessment of Recoverability of Mineral Property Costs

The deferred cost of mineral properties and their related development costs are deferred until the properties are placed into production, sold or abandoned. These costs will be amortized over the estimated useful life of the properties following the commencement of production. Cost includes both the cash consideration as well as the fair market value of any securities issued on the acquisition of mineral properties. Properties acquired under option agreements or joint ventures, whereby payments are made at the sole discretion of the Company, are recorded in the accounts at such time as the payments are made. The proceeds from property options granted reduce the cost of the related property and any excess over cost is applied to income The Company’s recorded value of its exploration properties is based on historical costs that expect to be recovered in the future. The Company’s recoverability evaluation is based on market conditions for minerals, underlying mineral resources associated with the properties and future costs that may be required for ultimate realization through mining operations or by sale.

8

 

Management Discussion and Analysis

August 31, 2013

Assessment of Recoverability of Deferred Income Tax Assets

TREC follows the balance sheet method of accounting for income taxes. Under this method, deferred tax liabilities and assets are recognized for the estimated tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax liabilities and assets are measured using substantively enacted tax rates. The effect on the deferred tax liabilities and assets of a change in tax rates is recognized in the period that the change occurs. Deferred income tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that is probable that taxable profit will be available against which the deductible temporary difference and the carry forward of unused credits and unused tax losses can be utilized. In preparing the consolidated financial statements, the Company is required to estimate its income tax obligations. This process involves estimating the actual tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. The Company assesses, based on all available evidence, the likelihood that the deferred income tax assets will be recovered from future taxable income and, to the extent that recovery cannot be considered probable, the deferred tax asset is not recognized.

Estimate of Share Based Payments and Warrant Liability and Associated Assumptions

The Company recorded share based payments based on an estimate of the fair value on the grant date of share based payments issued and reviews its foreign currency denominated warrants each period based on their fair value. The accounting required for the warrant liability requires estimates of interest rate, life of the warrant, stock price volatility and the application of the Black-Scholes option pricing model. See note 8 of the August 31, 2013, audited consolidated financial statements for a full disclosure.

9

Management Discussion and Analysis

August 31, 2013

Critical accounting policies

Mineral Properties

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

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

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

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

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

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

10

 

Management Discussion and Analysis

August 31, 2013

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

Impairment of Long-lived Assets

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

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

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

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

The Company’s most critical accounting estimate relates to the impairment of mineral properties and deferred exploration costs. During the year ended August 31, 2013 the Company wrote off $2,194,907 of costs on abandoned mineral properties (2012 – $1,293,969). Management assesses impairment of its exploration prospects quarterly. If an impairment results, the capitalized costs associated with the related project or area of interest are charged to expense.

Asset Retirement Obligations

The Company recognizes liabilities for statutory, contractual, constructive or legal obligations, including those associated with the reclamation of mineral properties and PPE, when those obligations result from the acquisition, construction, development or normal operation of the assets. Initially, a liability for an asset retirement obligation is recognized at its fair value in the period in which it is incurred. Upon initial recognition of the liability, the corresponding asset retirement obligation is added to the carrying amount of the related asset and the cost is amortized as an expense over the economic life of the asset using either the unit‐of‐production method or the straight‐line method, as appropriate. Following the initial recognition of the asset retirement obligation, the carrying amount of the liability is increased for the passage of time and adjusted for changes to the current market‐based discount rate, amount or timing of the underlying cash flows needed to settle the obligation. As of August 31, 2013 no liability for restoration exists.

11

 

Management Discussion and Analysis

August 31, 2013

Financial Instruments

Fair Value of Financial Instruments

The Company designed its other financial assets and warrant liability as FVTPL, which are measured at fair value. Fair value of other financial assets is determined based on quoted market prices and is categorized as Level 1 measurement. The warrant liability is recorded at fair value based on observable market inputs. Other receivables and cash and cash equivalents are classified as loans and receivables, which are measured at amortized cost. Trade and other payables and convertible debt are classified as other financial liabilities, which are measured at amortized cost. Fair value of Trade and other payables and convertible debt are determined from transaction values that are not based on observable market data.

The carrying value of the Company’s cash and cash equivalents, trade and other receivables, trade and other payables approximate their fair value due to the relatively short term nature of these instruments.

The Company’s convertible debt fair value is based on market interest rate. As at August 31, 2013 the fair value of the convertible debt agreements did not differ materially from their carrying value.

Fair value estimates are made at a specific point in time, based on relevant market information and information about financial instruments. These estimates are subject to and involve uncertainties and matters of significant judgment, therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

A summary of the Company's risk exposures as they relate to financial instruments are reflected below:

Credit Risk

Credit risk is the risk of an unexpected loss if a third party to a financial instrument fails to meet its contractual obligations. The Company is subject to credit risk on the cash balances at the bank, its short-term bank investments and accounts and other receivables. The Company’s cash and cash equivalents and short-term bank investments are with Schedule 1 banks or equivalents. The accounts and other receivables consist of GST/HST receivable from the Canada Revenue Agency, Tanzanian Revenue Agency and amounts due from related parties.

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rate. The Company’s bank accounts earn interest income at variable rates. The Company’s future interest income is exposed to changes in short-term rates. As at August 31, 2013, a 1% increase/decrease in interest rates would decrease/increase net loss for the year by approximately $107,000 (2012 - $200,000).

12

 

Management Discussion and Analysis

August 31, 2013

Liquidity Risk

The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at August 31, 2013, the Company had current assets of $11,289,745 (August 31, 2012 - $20,483,824) and current liabilities of $5,873,641 (August 31, 2012 - $2,318,393), including warrant liability or $2,349,641 (August 31, 2012 – $2,318,393) excluding warrant liability. All of the Company’s trade payables and receivables have contractual maturities of less than 90 days and are subject to normal trade terms. Current working capital of the Company is $5,416,104 (August 31, 2012 - $18,165,431) including warrant liability or a working capital of $8,940,104 (August 31, 2012 – $18,165,431) excluding warrant liability.

Foreign Currency Risk

The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates. The Company has offices in Canada, USA, and Tanzania, but holds cash mainly in Canadian and United States currencies. A significant change in the currency exchange rates between the Canadian dollar relative to US dollar and Tanzanian shillings could have an effect on the Company’s results of operations, financial position, or cash flows. At August 31, 2013, the Company had no hedging agreements in place with respect to foreign exchange rates. As a majority of the funds of the Company are held in Canadian currencies, the foreign currency risk associated with US dollar and Tanzanian Shilling financial instruments is not considered significant at August 31, 2013.

Disclosure of Outstanding Share Data

As at the date of this MD&A, there were 100,922,582 common shares outstanding. There were RSUs and warrants outstanding to purchase an aggregate 6,003,157 common shares.

Subsequent Event

On October 4, 2010 the Company completed a private placement with arm’s length third parties consisting of three-year convertible promissory notes in the aggregate amount of $1,060,000 bearing interest at 3% per annum and convertible into 204,772 common shares, if the Holders elected to convert.  On September 14, 2013 the promissory notes matured and the Holders elected repayment of the promissory notes in cash.  Accordingly $1,060,000 plus interest in the amount of $30,000 was paid on September 16, 2013.

Litigation

The Company in the ordinary course of business has been notified of a claim for additional compensation by a contractor and believes that the ultimate outcome of this action will not have a material adverse effect on its operation results, liquidity or financial position. 

13

 

Management Discussion and Analysis

August 31, 2013

Outlook

The Company’s Board of Directors has confirmed the strategic objective of the Corporation is to explore and evaluate its various mineral properties and develop the Buckreef Gold Mine Re-development Project and the Kigosi project in northern Tanzania. In addition, management is of the opinion that the Golden Horseshoe Reef (GHR) at Itetemia represents a modest, yet robust, medium-grade, near surface gold deposit that warrants further feasibility investigations. Management of the Company has developed a conceptual production plan. This plan is based on advancing Buckreef (including Bingwa and Tembo), Itetemia and Kigosi projects through various stages of development to production. The Company seeks out and explores gold, nickel and other mineral deposits with the intention of developing certain ones for our own account and partnering with an exploration corporation to generate royalty interest in a deposit that results in production.

Exploration Summary

Buckreef Project

A total of 3 PQ size holes were completed at Bingwa prospect for 209m to enable the collection of at least 400kg samples of Oxide ore material, Transition ore material and sulphide ore material for column Heap Leach amenability testwork on the coarse size ore fraction.

Resource Developments

§ Company management awarded an independent mineral consultant group a contract to undertake the Buckreef Mineral Resource estimate and to produce a NI 43-101 compliant technical report.

§ Site visit completed by independent consultants, to examine styles of mineralization, verify data and gather Information for compilation into NI 43-101 report report and completion of resource modeling wireframes.

Geological interpretation and data validation

All the geological information including geological interpretation on the Buckreef Project required for the compilation into NI43-101 technical report was provided to independent consultants and database collected from the Company is being reviewed and validated.

Resource Modeling Progress

Database reconstructed for modelling using consistent codes have been completed, collar elevations fixed to fit surveyed topography at Buckreef, wireframes have been modeled for all zones, and rules have been applied so that the wireframes have been constructed in a consistent manner and honor the data.

14

Management Discussion and Analysis

August 31, 2013

Resource Wireframing Progress

Tembo prospect has been modeled using single zone with 0.1g/t gold grade shell, Eastern Porphyry prospect modeled into geological domains by three porphyry units enclosed within mafic unit either side, Bingwa deposit modeled in five discrete zones with 0.18g/t gold grade shells and Buckreef main mineralized wireframe constructed using 0.15g/t gold grade shells and oxide, transition and topographic surfaces were modeled using gridding algorithm.

Mineral Resource Estimation

Buckreef Project Mineral Resource Upgrade by independent consultants for the Buckreef, Tembo, Bingwa and Eastern Porphyry prospects progressed well during the period. 

Project Development

Management of the Company is considering whether to adopt a coarse fraction column Heap Leach (HL) process option on the Buckreef mining plan as a suitable option compared to the conventional CIL process. The HL process bears the lowest processing costs and has reasonable gold recoveries.

Metallurgical testwork to date has focused on suitability for conventional CIL processing of the ore material. However a Phase 2 metallurgical testwork report identified relatively good results for coarse ore leaching. Recoveries of between 52% and 81% for Buckreef ore were achieved. This was considered by the consultants to be a reasonable recovery for Heap Leach, and it was suggested that further investigations into the viability of this process be carried out.

Heap Leach Sampling and testwork

A total of 592.5kg sample material representing Oxide ore (261kg), transition ore (149.5kg) and sulphide ore (182kg) were collected from drill holes BGDD015, BGDD016 and BGDD017. The samples were packed at site and submitted to an independent metallurgical laboratory in South Africa for required testing.

Scope of work and testwork required

Two scenarios were established to carry out the testwork as per the total mass required to complete the scope of work.

· Scenario 1

Ø Head assay 0.5kg

Ø Simulated heap leach on 4 crushed size 20kg

Ø Screening and Grading analysis 1kg

15

 

Management Discussion and Analysis

August 31, 2013

Ø Agglomeration and Percolating rate 90kg

Ø Heap height versus Percolation 15kg

Ø Column Heap Leach Trial (4m column) 300kg

Ø Total weight required 425.5kg per each ore materials

· Scenario 2

Ø Head assay 0.5kg

Ø Simulated heap leach on 4 crushed size 20kg

Ø Screening and Grading analysis 1kg

Ø Agglomeration and Percolating rate 60kg

Ø Heap height versus Percolation 15kg

Ø Column Heap Leach Trial (4m column) 100kg

Ø Total weight required 196.5kg per each ore materials

Scenario 2 was recommended as the total weight for all ore material submitted is 592.5kg and the required weight for that scenario to complete the testwork is 196.5kg * 3 = 589.5kg.

Karagwe BGC Survey

During the report period, Kabanga nickel biogeochemical (BGC) field sampling activities continued with a total of 4,208 samples BGC samples and 365 soil samples collected on two prospecting licences.

The fourth quarter period also saw the progress of BGC sample preparation laboratory at the Buckreef camp. A total of 1578 samples were prepared by drying at 70 degrees celsius for 12 hours, sieved and ground ready for dispatch to the laboratory. 893 samples were packed, inspected by officials from the Ministry of Energy & Minerals (MEM) and Tanzania Revenue Authority (TRA) before an export permit was issued. The 893 samples were then shipped to Acme Analytical Laboratories (“Acme”) in Vancouver, Canada for analysis for multi-element analysis using Coupled Plasma Mass Spectrometry (ICP-MS) to detect 53 elements suite within the collected tissue samples after proper laboratory preparation by controlled ashing and then placing the sample material on an aqua regia digestion.

During the reporting period, a total of 893 analytical results were received from Acme in the case of BGC samples that led to a thorough analysis of the BGC data for that property.

Itetemia

16

 

Management Discussion and Analysis

August 31, 2013

A mining technical review on the Itetemia prospect has demonstrated that the Itetemia open pit project is technically feasible and justifies further economic studies.

Kigosi

The Kigosi Mining Licence application with an area of 9.91 sq km was officially lodged with the Ministry of Energy and Minerals (MEM) on 4^th March 2013 after some amendments as required by the Ministry.

The Kigosi Mining License application was given a number and sent to the Minister for signature. The application covers parts of two licences and the licences will cease after the grant of the Mining Licence. Company management, together with Ministry officials will be attending the Kigosi Mining Licence signing ceremony where the Kigosi Project will be officially handled over to the Company. Subsequent to the period end the official signing ceremony took place and the Kigosi Mining Licence has been signed by the respective Ministries.

Risk Factors

The Company is subject to a number of extraneous risk factors over which it has no control. These factors are common to most exploration companies and include, among others: project ownership and exploration risk, depressed equity markets and related financing risk, commodity price risk, fluctuating exchange rates, environmental risk, insurance risk, sovereign risk. For further details on the risk factors affecting the Company, please see the Company’s Annual Information Form filed on SEDAR.

Disclosure Controls and Procedures (“DC&P”)

Requirements of NI 52-109 include conducting an evaluation of the effectiveness of DC&P. Management conducted an assessment of the effectiveness of the DC&P in place as of August 31, 2013 and concluded that such procedures are adequate and effective to ensure accurate and complete disclosures in filings. Any system control over disclosure procedures, particularly for junior exploration companies, no matter how well designed and implemented, has inherent limitations and may not prevent or detect all inaccuracies. These limitations include limited personnel available for such work, geographical logistics and human error among others. The Board of Directors assess the integrity of the public financial disclosures through the oversight of the Audit Committee.

Internal Control Over Financial Reporting (“ICFR”)

Requirements of NI 52-109 include conducting an evaluation of the effectiveness of ICFR. Management conducted an assessment of the effectiveness of the ICFR in place as of August 31, 2013 and concluded that such procedures are adequate and effective to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of financial statements in compliance with International Financial Reporting Standards. Any system of internal control over financial reporting, no matter how well designed and implemented, has inherent limitations and may not prevent or detect all misstatements. The Board of Directors assess the integrity of the public financial disclosure through the oversight of the Audit Committee.

17

 

Management Discussion and Analysis

August 31, 2013

Additional Information

Tanzanian Royalty Exploration Corporation is a Canadian public company listed on the TSX Exchange trading under the symbol “TNX” and also listed on the NYSE Amex Equities Exchange trading under the symbol “TRX”. Additional information about the company and its business activities is available on SEDAR at www.sedar.com and the Company’s website at www.tanzanianroyalty.com .

Approval

The Board of Directors of Tanzanian Royalty Exploration Corporation has approved the disclosure contained in the annual MD&A. A copy of this annual MD&A will be provided to anyone who requests it. It is also available on the SEDAR website at www.sedar.com

Cautionary Note Regarding Forward-Looking Statements

Except for statements of historical fact relating to the Company, certain information contained in this MD&A constitutes “forward-looking information” under Canadian securities legislation. Forward-looking information includes, but is not limited to, statements with respect to the potential of the Company’s properties; the future prices of base and precious metals; success of exploration activities, cost and timing of future exploration and development; the estimation of mineral reserves and mineral resources; conclusions of economic evaluations; requirements for additional capital; and other statements relating to the financial and business prospects of the Company. Generally, forward-looking information can be identified by the use of forward-looking terminology such as “plans”, “expects”, or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or “variations of such words and phrases or statements that certain actions, events or results “may” , “could”, “would”, “might” or “will be taken”, “occur” or “be achieved”. Forward-looking information is based on the reasonable assumptions, estimates, analysis and opinions of management made in light of its experience and its perception of trends, current conditions and expected developments at Buckreef or other mining or exploration projects, as well as other factors that management believes to be relevant and reasonable in the circumstances at the date that such statements are made, and is inherently subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information, including but not limited to risks related to: unexpected events and delays during permitting; the possibility that future exploration results will not be consistent with the Company’s expectations; timing and availability of external financing on acceptable terms in light of the current decline in global liquidity and credit availability; uncertainty of inferred mineral resources; future prices of base and precious metals; currency exchange rates; government regulation of mining operations; failure of equipment or processes to operate as anticipated; risks inherent in base and precious metal exploration and development including environmental hazards, industrial accidents, unusual or unexpected geological formations; and uncertain political and economic environments. Although management of the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.