SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934
For the day of:January 14, 2013
Commission File Number 001-32500
TANZANIAN ROYALTY EXPLORATION CORPORATION
(Registrant's name)
404-1688 152nd Street
South Surrey, BC V4A 4N2
Canada
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-FPForm 40-F ___
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):__
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):__
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ___NoP
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):
Attached hereto asExhibit 1 and incorporated by reference herein is the Registrant's First Quarter Financial Statements, Management Discussion and Analysis and CEO and CFO Certifications, for the period ended November 30, 2012.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Tanzanian Royalty Exploration Corp. (Registrant) | |||
Date: January 14, 2013 | By: | “Steven Van Tongeren” | |
Steven Van Tongeren | |||
Chief Financial Officer | |||
![](https://capedge.com/proxy/6-K/0001137171-13-000008/img001.jpg)
Tanzanian Royalty Exploration Corporation Unaudited Interim Condensed Consolidated Statements of Financial Position (Expressed in Canadian Dollars) |
As at | November 30, 2012 | August 31, 2012 | ||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents (Note 17) | $ | 16,437,407 | $ | 20,058,678 | ||||
Other financial assets (Note 6) | 12,600 | 17,850 | ||||||
Other receivables (Note 14) | 47,232 | 71,225 | ||||||
Inventory (Note 16) | 248,385 | 248,395 | ||||||
Prepaid expenses (Note 13) | 41,075 | 87,676 | ||||||
16,786,699 | 20,483,824 | |||||||
Property, plant and equipment (Note 4) | 1,155,660 | 1,209,710 | ||||||
Mineral properties and deferred exploration (Note 3) | 43,303,700 | 41,562,996 | ||||||
$ | 61,246,059 | $ | 63,256,530 | |||||
Liabilities | ||||||||
Current Liabilities | ||||||||
Trade, other payables and accrued liabilities (Note 15) | $ | 1,195,510 | $ | 2,318,393 | ||||
Convertible debt (Note 5) | 1,047,801 | - | ||||||
2,243,311 | 2,318,393 | |||||||
Convertible debt (Note 5) | - | 2,073,286 | ||||||
Warrant liability (Note 7) | 8,663,000 | 8,114,000 | ||||||
10,906,311 | 12,505,679 | |||||||
Shareholders' equity | ||||||||
Share capital (Note 7) | 114,463,192 | 113,476,858 | ||||||
Share based payment reserve (Note 9) | 878,962 | 670,779 | ||||||
Warrants reserve (Note 8) | 870,037 | 870,037 | ||||||
Accumulated deficit | (65,872,443 | ) | (64,266,823 | ) | ||||
Total shareholders' equity | 50,339,748 | 50,750,851 | ||||||
$ | 61,246,059 | $ | 63,256,530 |
Tanzanian Royalty Exploration Corporation Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss (Expressed in Canadian Dollars) |
Three month periods ended November 30, | 2012 | 2011 | ||||||
Administrative expenses | ||||||||
Depreciation | $ | 70,146 | $ | 108,447 | ||||
Consulting | 51,592 | 64,219 | ||||||
Directors' fees | 88,955 | 131,354 | ||||||
Office and general | 91,437 | 119,925 | ||||||
Shareholder information | 69,323 | 170,443 | ||||||
Professional fees | 133,679 | 229,843 | ||||||
Salaries and benefits | 332,600 | 389,214 | ||||||
Share based payments (Note 7) | 151,369 | 30,649 | ||||||
Travel and accommodation | 33,397 | 67,568 | ||||||
(1,022,498 | ) | (1,311,662 | ) | |||||
Other income (expenses) | ||||||||
Foreign exchange | (14,973 | ) | 29,342 | |||||
Interest, net | 36,969 | 25,040 | ||||||
Interest accretion | (25,937 | ) | (31,509 | ) | ||||
Loss on other financial assets (Note 6) | (5,250 | ) | (3,150 | ) | ||||
Change in value of warrant liability (Note 7) | (549,000 | ) | 5,540,577 | |||||
Property investigation costs | (23,084 | ) | (81,786 | ) | ||||
Write-off of mineral properties and deferred exploration costs (Note 3) | - | (1,226,455 | ) | |||||
Withholding tax recoveries (costs) | (1,847 | ) | (131,360 | ) | ||||
Net (loss) income and comprehensive (loss) income | $ | (1,605,620 | ) | $ | 2,809,037 | |||
(Loss) Income per share - basic | $ | (0.02 | ) | $ | 0.03 | |||
- diluted | $ | (0.02 | ) | $ | 0.03 | |||
Weighted average # of shares outstanding | ||||||||
- basic | 100,569,389 | 99,932,445 | ||||||
- diluted | 100,569,389 | 107,002,208 |
Share Capital | Reserves | |||||||||||||||||||||||
Number of Shares | Amount | Share based | Warrants | Accumulated deficit | Total | |||||||||||||||||||
Balance at September 1, 2011 | 99,758,753 | $ | 109,935,253 | $ | 706,988 | $ | 1,353,990 | $ | (55,504,339 | ) | $ | 56,491,892 | ||||||||||||
Issued on conversion of convertible debt agreement | 233,318 | 950,213 | (30,638 | ) | - | - | 919,575 | |||||||||||||||||
RSU shares forfeited | - | (10,889 | ) | - | - | (10,889 | ) | |||||||||||||||||
Share based compensation | - | - | 171,096 | - | - | 171,096 | ||||||||||||||||||
Total comprehensive income for the period | - | - | - | 2,809,037 | 2,809,037 | |||||||||||||||||||
Balance at November 30, 2011 | 99,992,071 | $ | 110,885,466 | $ | 836,557 | $ | 1,353,990 | $ | (52,695,302 | ) | $ | 60,380,711 | ||||||||||||
Shares issued for services | 35,000 | 115,834 | - | - | - | 115,834 | ||||||||||||||||||
Issued pursuant to Restricted Share Unit ("RSU") Plan | 182,866 | 1,024,793.00 | (1,024,793 | ) | - | - | - | |||||||||||||||||
RSU shares forfeited | - | (253,639 | ) | - | - | (253,639 | ) | |||||||||||||||||
Transfer of warrants to warrant liability | - | - | (216,188 | ) | 135,359 | (80,829 | ) | |||||||||||||||||
Compensation warrants exercised | 250,000 | 1,000,000 | - | - | - | 1,000,000 | ||||||||||||||||||
Reserve transferred on exercise of compensation warrants | 450,765 | - | (450,765 | ) | - | - | ||||||||||||||||||
Modification of warrants | - | - | 183,000 | - | 183,000 | |||||||||||||||||||
Share based compensation | - | 1,112,654 | - | - | 1,112,654 | |||||||||||||||||||
Total comprehensive loss for the period | - | - | - | (11,706,880 | ) | (11,706,880 | ) | |||||||||||||||||
Balance at August 31, 2012 | 100,459,937 | $ | 113,476,858 | $ | 670,779 | $ | 870,037 | $ | (64,266,823 | ) | $ | 50,750,851 | ||||||||||||
Issued on conversion of convertible debt agreement | 221,337 | 986,334 | - | - | - | 986,334 | ||||||||||||||||||
Share based payments | - | 208,183 | - | - | 208,183 | |||||||||||||||||||
Total comprehensive loss for the period | - | - | - | (1,605,620 | ) | (1,605,620 | ) | |||||||||||||||||
Balance at November 30, 2012 | 100,681,274 | $ | 114,463,192 | $ | 878,962 | $ | 870,037 | $ | (65,872,443 | ) | $ | 50,339,748 |
Tanzanian Royalty Exploration Corporation Unaudited Interim Condensed Consolidated Statements of Cash Flow (Expressed in Canadian Dollars) |
Three month periods ended November 30, | 2012 | 2011 | ||||||
Operations | ||||||||
Net loss | $ | (1,605,620 | ) | $ | 2,809,037 | |||
Adjustments to reconcile net loss to cash flow from operating activities: | ||||||||
Depreciation | 70,146 | 108,447 | ||||||
Change in value of warrant liability | 549,000 | (5,540,577 | ) | |||||
Share based payments | 157,137 | 30,649 | ||||||
Loss on other financial assets | 5,250 | 3,150 | ||||||
Cash interest paid | (73,331 | ) | (67,964 | ) | ||||
Cash interest received | 30,739 | 25,040 | ||||||
Interest accretion | 25,937 | 31,509 | ||||||
Non cash directors' fees | 51,046 | 118,802 | ||||||
Write-off of mineral properties | - | 1,226,455 | ||||||
Net change in non-cash operating working capital items: | ||||||||
Trade and other receivables | 23,993 | - | ||||||
Inventory | 10 | (38,449 | ) | |||||
Prepaid expenses | 46,601 | (28,029 | ) | |||||
Trade, other payables and accrued liabilities | (140,436 | ) | (742,140 | ) | ||||
Cash used in operations | (859,528 | ) | (2,064,070 | ) | ||||
Investing | ||||||||
Mineral properties and exploration expenditures | (2,746,754 | ) | (1,263,546 | ) | ||||
Option payments received and recoveries | 1,107 | - | ||||||
Equipment and leasehold improvements, net | (16,096 | ) | (135,500 | ) | ||||
Cash used in investing activities | (2,761,743 | ) | (1,399,046 | ) | ||||
Net decrease in cash and cash equivalents | (3,621,271 | ) | (3,463,116 | ) | ||||
Cash and cash equivalents, beginning of period | 20,058,678 | 32,428,471 | ||||||
Cash and cash equivalents, end of period | $ | 16,437,407 | $ | 28,965,355 |
Supplementary information: | ||||||||
Non-cash transactions: | ||||||||
Share based payments capitalized to mineral properties | 5,768 | 37,632 | ||||||
Shares issued on conversion of convertible debt | 986,334 | 950,213 |
1. | Nature of Operations |
2. | Basis of Preparation |
2. | Basis of Preparation (continued) |
· | 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 1 'Presentation of Financial Statements' - the IASB amended IAS 1 with a new requirement for entities to group items presented in other comprehensive income on the basis of whether they are potentially reclassifiable to profit or loss. |
· | IAS 19 'Employee Benefits' - effective for annual periods beginning on or after January 1, 2013, a number of amendments have been made to IAS 19, which included eliminating the use of the "corridor" approach in accounting for defined benefit plans and requiring defined benefit plan remeasurements to be presented in OCI. The standard also includes amendments related to termination benefits as well as enhanced disclosures. |
· | 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 11and IFRS 12, IAS 28 has been amended and will provide the accounting guidance for investments in associates and to set out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. The amended IAS 28 will be applied by all entities that are investors with joint control of, or significant influence over, an investee. |
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. |
3. | Mineral Properties |
3. | Mineral Properties (continued) |
Itetemia (a) | Luhala (b) | Kigosi (c) | Lungaya (d) | Kanagele (e) | Tulawaka (f) | Ushirombo (g) | Mbogwe (h) | Biharamulu (i) | Buckreef (j) | Kabanga (k) | Other(l) | 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 | $ | 4,421,243 | $ | - | $ | 121,934 | $ | 33,262,972 | |||||||||||||
Exploration expenditures: | |||||||||||||||||||||||||||||||||||||||
Camp, field supplies and travel | 14,565 | - | 116,566 | 34,976 | - | - | - | - | - | 424,035 | - | - | 590,142 | ||||||||||||||||||||||||||
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 | 13,366,027 | - | 217,264 | 42,856,965 | |||||||||||||||||||||||||||
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 | $ | - | $ | 13,366,027 | $ | - | $ | 7,517 | $ | 41,562,996 | |||||||||||||
Exploration expenditures: | |||||||||||||||||||||||||||||||||||||||
Camp, field supplies and travel | 3,514 | - | 10,713 | - | - | - | - | - | - | 80,159 | - | - | 94,386 | ||||||||||||||||||||||||||
Exploration and field overhead | 4,784 | 1,174 | 19,148 | 15,557 | 4,952 | 64,071 | - | 6,957 | - | 187,702 | 261,944 | 3,364 | 569,653 | ||||||||||||||||||||||||||
Geological consulting and field wages | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||
Geophysical and geochemical | - | - | - | - | - | - | - | - | - | 98,413 | - | - | 98,413 | ||||||||||||||||||||||||||
Property acquisition costs | - | - | - | - | 11,604 | - | - | - | - | (21,348 | ) | - | - | (9,744 | ) | ||||||||||||||||||||||||
Trenching and drilling | - | - | - | - | - | - | - | - | - | 987,996 | - | - | 987,996 | ||||||||||||||||||||||||||
Recoveries | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||
8,298 | 1,174 | 29,861 | 15,557 | 16,556 | 64,071 | - | 6,957 | - | 1,332,922 | 261,944 | 3,364 | 1,740,704 | |||||||||||||||||||||||||||
Balance, November 30, 2012 | $ | 5,796,034 | $ | 3,760,521 | $ | 13,990,586 | $ | 3,438,848 | $ | 863,903 | $ | 389,509 | $ | 4,261 | $ | 88,264 | $ | - | $ | 14,698,949 | $ | 261,944 | $ | 10,881 | $ | 43,303,700 |
3. | Mineral Properties (continued) |
3. | Mineral Properties (continued) |
3. | Mineral Properties (continued) |
USD$ | ||
2013 | 19,000 | |
4. | Property, plant and equipment |
Drilling equipment | Automotive | Computer Equipment | Machinery and equipment | Leasehold 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 | - | - | 16,096 | - | - | 16,096 | ||||||||||||||||||
As at November 30, 2012 | $ | 464,487 | $ | 302,640 | $ | 107,741 | $ | 1,527,153 | $ | 89,329 | $ | 2,491,350 |
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 | 22,646 | 274,977 | 17,866 | 379,604 | ||||||||||||||||||
Removed on disposal of asset | - | - | (78,620 | ) | (20,778 | ) | (4,469 | ) | (103,867 | ) | ||||||||||||||
As at August 31, 2012 | $ | 232,139 | $ | 174,501 | $ | 50,371 | $ | 790,667 | $ | 17,866 | $ | 1,265,544 | ||||||||||||
Depreciation expense | 3,872 | 8,790 | 4,222 | 49,689 | 3,573 | 70,146 | ||||||||||||||||||
As at November 30, 2012 | $ | 236,011 | $ | 183,291 | $ | 54,593 | $ | 840,356 | $ | 21,439 | $ | 1,335,690 | ||||||||||||
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 November 30, 2012 | $ | 228,476 | $ | 119,349 | $ | 53,148 | $ | 686,797 | $ | 67,890 | $ | 1,155,660 |
5. | Convertible Debt |
(i) | November 30, 2012: |
August 2010 | September 2010 | October 2010 | Total | |||||||||||||
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 | 110,517 | 299,616 | ||||||||||||
Interest paid | (36,164 | ) | (63,288 | ) | (63,630 | ) | (163,052 | ) | ||||||||
Conversion into common shares | (919,574 | ) | (986,334 | ) | - | (1,905,908 | ) | |||||||||
Closing balance of liability portion | $ | - | $ | - | $ | 1,047,801 | $ | 1,047,801 | ||||||||
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 2010 | September 2010 | October 2010 | Total | |||||||||||||
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 |
5. | Convertible Debt (continued) |
6. | Other financial assets |
7. | Capital Stock |
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 | ||||||
Balance at November 30, 2012 | 100,681,274 | $ | 114,463,192 |
7. | Capital Stock (continued) |
Number of Warrants | Exercise price | Expiry date | |||||||||
Private placement November 5, 2010 | 125,000 | * | USD$4.00 | October 20, 2013 | |||||||
Private placement January 31, 2011 | 172,538 | $ | 6.903 | December 22, 2012 | |||||||
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, November 30, 2012 | 5,679,117 | - | - |
7. | Capital Stock (continued) |
Period/year ended | November 30, 2012 | August 31, 2012 | ||||||
Balance at beginning of period/year | $ | 8,114,000 | $ | 5,711,250 | ||||
Increase in value of warrant liability | 549,000 | 2,321,921 | ||||||
Transfer of warrants on re-pricing to USD (i) | - | 80,829 | ||||||
Balance at end of period/year | $ | 8,663,000 | $ | 8,114,000 |
(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. |
7. | Capital Stock (continued) |
7. | Capital Stock (continued) |
Number of RSU's | Weighted average fair value at issue 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 and November 30, 2012 | 446,247 | $ | 5.09 |
8. | Reserve for warrants |
Period/year ended | November 30, 2012 | August 31, 2012 | ||||||
Balance at beginning of period/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 period/year | $ | 870,037 | $ | 870,037 |
9. | Reserve for share based payments |
Period/year ended | November 30, 2012 | August 31, 2012 | ||||||
Balance at beginning of period/year | $ | 670,779 | $ | 706,988 | ||||
Shares issued pursuant to RSU plan | - | (1,024,793 | ) | |||||
Issued on conversion of convertible debt | - | (30,638 | ) | |||||
RSU shares forfeited | - | (264,528 | ) | |||||
Share based compensation | 208,183 | 1,283,750 | ||||||
Balance at end of period/year | $ | 878,962 | $ | 670,779 |
10. | Related party transactions and key management compensation |
Three month periods ended November 30, | Notes | 2012 | 2011 | |||||||
Legal services | (i) | $ | 112,284 | $ | 456,591 | |||||
Director compensation | (ii) | $ | 88,956 | $ | 35,169 | |||||
Chairman and COO | (iii) | USD$ 21,332 | USD$ 2,400 | |||||||
Technical Committee | (iv) | $ | 35,169 | $ | 46,000 |
10. | Related party transactions and key management compensation, (continued) |
Three month period ended November 30, | 2012 | 2011 | ||||||||||||||
Salaries and benefits (1) | Share based payments (3) | �� | Salaries and benefits (1) | Share based payments (3) | ||||||||||||
Management | $ | 91,554 | $ | 99,239 | $ | 76,220 | $ | 66,173 | ||||||||
Directors | 37,909 | 51,047 | 12,562 | 118,802 | ||||||||||||
Total | $ | 129,463 | $ | 150,286 | $ | 88,782 | $ | 184,975 |
11. | Management of Capital |
12. | Financial Instruments |
12. | Financial Instruments (continued) |
13. | Prepaid expenses |
November 30, 2012 | August 31, 2012 | |||||||
Insurance | $ | 22,680 | $ | 41,525 | ||||
Listing fees | 5,951 | 23,806 | ||||||
Other | 12,444 | 22,345 | ||||||
Total prepaid expenses | $ | 41,075 | $ | 87,676 |
14. | Other receivables |
November 30, 2012 | August 31, 2012 | |||||||
Receivable from related parties | $ | 18,071 | $ | 23,315 | ||||
HST and VAT Receivable | 24,609 | 38,824 | ||||||
Other | 4,552 | 9,086 | ||||||
Total Trade and Other Receivables | $ | 47,232 | $ | 71,225 |
November 30, 2012 | August 31, 2012 | |||||||
Less than 1 month | $ | 4,150 | $ | 4,034 | ||||
1 to 3 months | 32,140 | 64,016 | ||||||
Over 3 months | 10,942 | 3,175 | ||||||
Total Trade and Other Receivables | $ | 47,232 | $ | 71,225 |
15. | Trade, other payables and accrued liabilities |
November 30, 2012 | August 31, 2012 | |||||||
Less than 1 month | $ | 50,842 | $ | 921,893 | ||||
1 to 3 months | 1,063,167 | 1,378,486 | ||||||
Over 3 months | 81,501 | 18,014 | ||||||
Total Trade, Other Payables and Accrued Liabilities | $ | 1,195,510 | $ | 2,318,393 |
16. | Inventory |
November 30, 2012 | August 31, 2012 | |||||||
Replacement parts for drill | $ | 186,289 | $ | 186,296 | ||||
Other | 62,096 | 62,099 | ||||||
Total Inventory | $ | 248,385 | $ | 248,395 |
17. | Cash and cash equivalents |
18. | Segmented information |
18. | Segmented information, (continued) |
November 30, 2012 | August 31, 2012 | |||||||
Consolidated net loss | ||||||||
Canada | $ | (729,918 | ) | $ | (6,088,262 | ) | ||
Tanzania | (875,702 | ) | (2,809,581 | ) | ||||
$ | (1,605,620 | ) | $ | (8,897,843 | ) | |||
Identifiable assets | ||||||||
Canada | $ | 16,487,473 | $ | 20,137,766 | ||||
Tanzania | 44,758,586 | 43,118,764 | ||||||
$ | 61,246,059 | $ | 63,256,530 |
19. | Commitments |
Management Discussion and Analysis
November 30, 2012
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 unaudited interim condensed consolidated financial statements for the three month period ended November 30, 2012 and the audited consolidated financial statements for the years ended August 31, 2012 and 2011. The MD&A was prepared as of January 14, 2013. All amounts are in Canadian dollars, unless otherwise specified.
Highlights – for the three months ended November 30, 2012
· | Assay results from Eastern Porphyry prospect at the Buckreef Gold Project continues to increase confidence in the additional potential the prospect might possess |
· | Assay results from the Company’s ongoing deep diamond drill program at the Buckreef Gold Project confirm continuity of wide, higher-grade gold mineralization |
· | In October 2012 the Company retained Venmyn Rand Limited to prepare mineral resource block models and updated mineral resource statements for the Company’s Buckreef Project |
· | 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 Beijing Songshanheli Mining Investment Co., to explore the Kabanga nickel, cobalt and platinum group metals belt in Tanzania |
Overall Performance
For the three month period ended November 30, 2012 the Company had current assets of $16,786,699 compared to $20,483,824 on August 31, 2012. The decrease is mainly due to net expenditures on exploration of $2,746,754 (2011 - $1,263,546) and cash used in operations of $859,528 (2011 - $2,064,070). Mineral properties and deferred exploration costs were $43,303,700 as compared to $41,562,996 at August 31, 2012.
Net loss for the three month period ended November 30, 2012 was $1,605,620 compared to a net income of $2,809,037 in the comparable three month period ended November 30, 2011. The decrease is primarily due to a gain of $5,540,577 from the revaluation of warrant liability during the three month period ended November 30, 2011 compared to a loss of $549,000 on the same revaluation of the warrant liability in 2012 offset by a decrease in the loss due to the write down in mineral properties and deferred exploration costs to $nil for the three month period ended November 30, 2012 (2011 - $1,226,455).
The Company issued common shares during the three month period ended November 30, 2012 with a value of $986,334 on conversion of 221,337 shares under the convertible debt agreement (compared to a value of $950,213
on conversion of 233,318 shares under the convertible debt agreement during the three month period ended November 30, 2011). In the current quarter, capital is being utilized for the Buckreef Gold Project development, property acquisition, exploration, capital equipment purchases and general operating expenses as previously disclosed and as tabulated below. The remaining capital is invested in interest bearing investments, which are readily available.
1 |
Management Discussion and Analysis
November 30, 2012
C$ (000) | ||||
Funds available August 31, 2012 | 20,059 | |||
Equipment purchases | (16 | ) | ||
Mineral property expenditures including licences, environmental and exploration, net of recoveries | (2,746 | ) | ||
General corporate expenses | (860 | ) | ||
Funds available November 30, 2012 | $ | 16,437 |
Management of the Company believes that the current level of funds is expected to be 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, 2012, 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.
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. Although the prices of precious and base metals have risen substantially over the past several months, 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.
2 |
Management Discussion and Analysis
November 30, 2012
Selected Financial Information
As at and for the three month period ended November 30, 2012 | 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 | $ | (1,605,620 | ) | $ | (8,897,843 | ) | $ | (11,132,371 | ) | |||
Basic loss per share | $ | (0.02 | ) | $ | (0.09 | ) | $ | (0.12 | ) | |||
Total assets | $ | 61,246,059 | $ | 63,256,530 | $ | 67,632,380 | ||||||
Total long term financial liabilities | $ | 9,710,801 | $ | 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 three month period ended November 30, 2012 were $1,740,704 compared to $1,263,546 for the three month period ended November 30, 2011. The amount remains consistent with prior year as the Company continues with its exploration of the Buckreef project.Recoveries received during the three month period endedNovember30, 2012 and 2011 from various option agreements and other miscellaneous sources were $1,107 and $nil, respectively.
Net loss for the three month period endedNovember30, 2012 was $1,605,620 compared to income of $2,809,037 for the comparable three month period endedNovember30, 2011.
Salaries and benefits expense has decreased to $332,600 for the three month period endedNovember30, 2012 from $389,214 for the three month period endedNovember30, 2011.Salaries and benefits have remained consistent between the two periods and the minor decrease is due to better cost controls by the Company.
Professional fees decreased by $96,164 for the three month period endedNovember30, 2012 to $133,679 from $229,843 for the three month period endedNovember30, 2011. The decrease in the current quarter is due to increased costs during the comparative 2011 quarter surrounding legal, audit and tax advisor professional fees which were not incurred during the current quarter.
For the three month period endedNovember30, 2012, the foreign exchange expense was $14,973 compared to an exchange income of $29,342 for the same period endedNovember30, 2011. This decreased loss of $14,973 was due to the years’ average Tanzanian Shilling exchange rate having increased from 1,572 atAugust31, 2012 to 1,586 atNovember30, 2012.
Share based payments for thethree month period endedNovember30, 2012were $151,369 compared to $30,649 in the comparable periodendedNovember30, 2011. Share based payments vary on the number of equity based compensation options issued and vesting. See note 7 of the financial statements for details.Director fee RSU expense was $51,046 and $118,802, respectively.
3 |
Management Discussion and Analysis
November 30, 2012
Shareholder information costs decreased from $170,443 for the three month period endedNovember30, 2011 to $69,323 for the three month period endedNovember30, 2012. The decrease of $101,120 wasdue to increased activity during 2011 due to transfer agent and listing fees from the issue of shares for converted debt and corporate investor promotion activity completed during 2011 as an investor public relations firm was hired during the period.
For the three month period endedNovember30, 2012, travel and accommodation expense decreased by $34,171 from $67,568 in 2011 to $33,397. Travel and accommodation expense decreased due to timing and increased control of travel requirements.
The interest accretion expense for the three month period endedNovember30, 2012 was $25,937, compared to $31,509 for the three month period endedNovember30, 2011. The interest relates to the issuance of convertible debt.Interest accretion is expected to decrease as debt is converted into shares.
For the three month period endedNovember30, 2012, depreciation expense was $70,146 compared to $108,447 for the same three month period endedNovember30, 2011. The decrease of $38,301 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 three month period endedNovember30, 2012 was $16,096 as compared to $135,500 in the three month period endedNovember30, 2011.
During thethree month period endedNovember30, 2012, the Company did not abandon or write-off expenses in various project areas (2011 – wrote off $1,226,455 from abandoning various licenses, see note 3 of the financial statements, as the Company evaluated its mineral properties and deemed certain properties to warrant no further exploration).
Consulting fees for thethree month period endedNovember30, 2012were $51,592 compared to $64,219 in the comparablethree month period endedNovember30, 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 thethree month period endedNovember30, 2012were $88,955 compared to $131,354 in the comparablethree month period endedNovember30, 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 thethree month period endedNovember30, 2012were $91,437 compared to $119,925 in the comparablethree month period endedNovember30, 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.
4 |
Management Discussion and Analysis
November 30, 2012
Summary of Quarterly Results (unaudited)
(Expressed in thousands of dollars, except per share amounts)
2013 Q1 | 2012 Q4 | 2012 Q3 | 2012 Q2 | 2012 Q1 | 2011 Q4 | 2011 Q3 | 2011 Q2 | |||||||||||||||||||||||||
Total revenues | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||
Net Income (Loss) | $ | (1,606 | ) | $ | (3,576 | ) | $ | 385 | $ | (8,516 | ) | $ | 2,809 | ($ | 7,402 | ) | ($ | 1,493 | ) | ($ | 1,081 | ) | ||||||||||
Basic and diluted income (loss) per share | ($ | 0.02 | ) | ($ | 0.04 | ) | $ | 0.00 | ($ | 0.09 | ) | $ | 0.03 | ($ | 0.07 | ) | ($ | 0.02 | ) | ($ | 0.01 | ) |
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 November 30, 2012, the Company’s working capital position was $14,543,388, as compared to $18,165,431 as of August 31, 2012. As the Company’s mineral properties advance, additional equity and debt financing will be required to fund exploration and mining activities.
The Company has prepared a cash flow forecast for fiscal 2013 and believes that it has sufficient funds to continue operations for at least the next twelve months.
Some of the Company’s mineral properties are being acquired over time by way of option payments. It is at the Company’s option as to whether to continue with the acquisition of the mineral properties and to incur these option payments. Current details of option payments required in the future if the Company is to maintain its interests are as follows:
Option Payments due by Period (US$) | |||||
Total | Less than 1 year |
2 - 3 years |
4 - 5 years |
Over 5 years | |
Option agreement obligations | 19,000 | 19,000 | nil | nil | nil |
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.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
5 |
Management Discussion and Analysis
November 30, 2012
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.
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:
Three month periods ended November 30, | Notes | 2012 | 2011 |
Legal services | (i) | $112,284 | $456,591 |
Director compensation | (ii) | $88,956 | $35,169 |
Chairman and COO | (iii) | USD$ 21,332 | USD$ 2,400 |
Technical Committee | (iv) | $35,169 | $46,000 |
(i) The Company engages a legal firm for professional services in which one of the Company’s directors is a partner. During the three month period ended November 30, 2012, the legal expense charged by the firm was $112,284 (2011 - $456,591), of which $82,781 remains payable at November 30, 2012 (August 31, 2012 - $140,245).
(ii) During the three month period ended November 30, 2012, $88,956 (2011 - $35,169) was paid or payable by the Company to directors for serving on the Board and/or related Committees.
(iii) During the three month period ended November 30, 2012, USD$21,332 (2011 - USD$2,400) was paid to a company associated with the Company’s Chairman and COO and his spouse for office rental.
(iv) During the three month period ended November 30, 2012, $35,169 (2011 - $46,000) was paid or payable by the Company to directors as incremental fees for serving on the Company’s Technical Committee.
6 |
Management Discussion and Analysis
November 30, 2012
(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:
Three month period ended November 30, | 2012 | 2011 | ||
Salaries and benefits (1) | Share based payments (3) | Salaries and benefits (1) | Share based payments (3) | |
Management | $ 91,554 | $ 99,239 | $ 76,220 | $ 66,173 |
Directors | 37,909 | 51,047 | 12,562 | 118,802 |
Total | $ 129,463 | $ 150,286 | $ 88,782 | $ 184,975 |
(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 prohibiting selling within certain time frames up to a year.
(3)All RSU share based compensation is based on the accounting expense recorded in the period.
At November 30, 2012, the Company has a receivable of $17,596 (August 31, 2012 - $22,977) from an organization associated with the Company’s President and CEO.
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, 632,053 shares have been issued as of November 30, 2012.
7 |
Management Discussion and Analysis
November 30, 2012
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 berecovered in the future. The Company’s recoverability evaluation is based on market conditions forminerals, underlying mineral resources associated with the properties and future costs that may be required for ultimate realization through mining operations or by sale.
Assessment of Recoverability of Deferred Income Tax Assets
TREC follows the liability 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 taxobligations. This process involves estimating the actual tax exposure together with assessing temporarydifferences resulting from differing treatment of items for tax and accounting purposes. The Companyassesses, 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 dateof 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 pricevolatility and the application of the Black-Scholes option pricing model. See note 7 of the November 30,2012, unaudited interim condensed consolidated financial statements for a full disclosure.
8 |
Management Discussion and Analysis
November 30, 2012
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. Discretionary option payments arising on the acquisition of mining properties are only recognized when paid. Amounts received from other parties to earn an interest in the Company's mining properties are applied as a reduction of the mining property and deferred exploration and development costs, except for administrative reimbursements which are credited to operations.
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 conveyancing 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.
9 |
Management Discussion and Analysis
November 30, 2012
Impairment of Long-lived Assets
At each date of the statement of financial position, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is an indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash‐generating unit to which the assets belong.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre‐tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
If the recoverable amount of an asset (or cash‐generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash‐generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in the statement of comprehensive loss, unless the relevant asset is carried at a re-valued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash‐generating unit) in prior years.
The Company’s most critical accounting estimate relates to the impairment of mineral properties and deferred exploration costs. During the three month period endedNovember30, 2012 the Company wrote off $nil of costs on abandoned mineral properties (2011 – $1,226,455). 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 ofNovember30, 2012 no liability for restoration exists.
10 |
Management Discussion and Analysis
November 30, 2012
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. 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 atNovember30, 2012 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 Custom 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 November 30, 2012, a 1% increase/decrease in interest rates would decrease/increase net loss for the period by approximately $164,000 (2011 - $290,000).
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Management Discussion and Analysis
November 30, 2012
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 November 30, 2012, the Company had current assets of $16,786,699 (August 31, 2012 - $20,483,824) and current liabilities of $1,195,510 (August 31, 2012 - $2,318,393). 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 $14,543,388 (August 31, 2012 - $18,165,431).
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 November 30, 2012, 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 November 30, 2012.
Disclosure of Outstanding Share Data
As at the date of this MD&A, there were 100,681,274 common shares outstanding. There were RSUs, convertible debt and warrants outstanding to purchase an aggregate 6,157,980 common shares.
Subsequent Event
There are no subsequent events to report.
Litigation
There are no legal proceedings which may have or have had a significant effect on the Company’s financial position or profitability.
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. 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.
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Management Discussion and Analysis
November 30, 2012
Exploration Summary
Buckreef Project
· | BMDD202 with 12.22m at 6.20g/t gold from 99.78m, including 2m @ 31.75g/t gold; 6m at 1.46g/t gold from 103m; 3m at 6.74g/t gold from 165m, including 2m @ 9.67g/t gold and 11m at 9.82g/t gold from 186m, including 3m @ 28.53g/t gold. |
· | BMDD203 which intersected 1m at 1.34g/t Au from 192m, and a second zone of 1m at 1.57g/t Au from 284m. |
· | BMDD205 returned intervals of 1 metres grading 1.31g/t Au from 97m, 1m grading 3.02 g/t Au from 119m, 2m grading 1.43 g/t Au from 123m and 1m 1.17 g/t Au from 192m. |
· | BMDD206 returned intervals of 1m grading 2.25g/t Au from 70m, 1m grading 1.95 g/t Au from 87m and 1m grading 3.28 g/t Au from 93m. |
· | BMDD207 returned intervals of 2.95 metre grading 1.06g/t Au from 14m, 1m grading 4.41 g/t Au from 22m, 1m grading 1.19 g/t Au from 34m, 1m grading 2.37 g/t Au from 48m, 1m grading 4.31 g/t Au from 58m, 1m grading 3.17 g/t Au from 65m, 1m grading 3.33 g/t Au from 109m, 4m grading 1.61 g/t Au from 132m, 1m grading 1.5 g/t Au from 183m, 1m grading 1.18 g/t Au from 195m and 1m grading 17.8 g/t Au from 216m. |
· | BMDD208 returned intervals of 2.83 metres grading 0.58g/t Au from 23m, 1m grading 0.91 g/t Au from 83m and 4m grading 0.62 g/t Au from 86m. |
· | BMDD209 returned intervals of 2.68 metres grading 0.53g/t Au from 164m, 0.9m grading 1.41 g/t Au from 211m, 1m grading 2.23 g/t Au from 218m, 0.88m grading 3.29 g/t Au from 223m, 2m grading 2.73 g/t Au from 264m, 2m grading 1.08 g/t Au from 289m, 3m grading 0.78 g/t Au from 293m and 1.5m grading 3.55 g/t Au from 304m. |
· | BMDD210 returned intervals of 3 metres grading 0.62g/t Au from 95m, 2.75m grading 0.83g/t Au from 136.25m, 1m grading 11.60g/t Au from 140m, 2m grading 1.75g/t Au from 143m, 1m grading 2.11g/t Au from 166m, 10m grading 1.89g/t Au from 181m, including 2m grading 3.9g/t gold from 184m; 2m @ 1.75g/t gold from 258m. |
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Management Discussion and Analysis
November 30, 2012
· | BMDD211 returned intervals of 1 metres grading 1.76g/t Au from 89m, 0.75m grading 14.4g/t Au from 97m, 2m grading 12.14g/t Au from 233m including 1.5m grading 15.59 g/t Au from 233m, 1m grading 1.15g/t Au from 264m, 1m grading 1.84g/t Au from 267m, 3.7m grading 1.05g/t Au from 275m, 1m @ 1.85g/t gold from 280m. |
The Eastern Porphyry prospect is located 800m in the footwall of the Main Zone of the historic Buckreef mine which operated briefly as an underground gold producer. Down-the–hole lithological sequences include a series of mafic 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. Mineralization is localized within the sheared, quartz-carbonate-pyrite altered zones.
The Company has retained Venmyn Rand Limited to prepare mineral resource block models and updated mineral resource statements for the Buckreef Project. Venmyn recommended that new DatamineTM block models be constructed for the Buckreef Project to eliminate any incompatibility with mine design scheduling programs going forward into the Preliminary Feasibility Study and ultimately the Definitive Feasibility Study. In addition, new exploration data from the recently completed mineral resource drilling program will be incorporated into a new and updated Mineral Resource estimate for the project.
Kigosi Project
An Agreement for Access and Mineral Operations at the Kigosi Project has been signed by the Company and the Tanzanian Ministry of Natural Resources and Tourism. On behalf of the Kigosi Project, the Company has lodged applications for a Certificate of Environmental Compliance after having undertaken a full Environmental and Social Impact Assessment Study which was undertaken by the Environmental Association of Tanzania and approved by the National Environment Management Council.
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.
In November 2012 the Company announced the formation of Northwestern Basemetals Company Limited, a new company to explore the Kabanga nickel, cobalt and platinum group metals belt in Tanzania. The new company owned 75% by the Company, 15% by the State Mining Corporation of Tanzania (Stamico), and 10% by Beijing Songshanheli Mining Investment Co., a Beijing mining company.During the first quarter of 2013, the Company completed a review of the historical work carried out on the project area. In assessing the historical work, the project has been grouped into seven geographic blocks. The geological nature of potential nickel (Ni) deposits in the Kagera region makes the seven blocks well suited to conventional geochemical and geophysical exploration techniques. The availability of an extensive and high quality database of regional aeromagnetic and geochemical data from past exploration as well as geological mapping, augmented in places by results of ground follow-up.
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Management Discussion and Analysis
November 30, 2012
- Kahinga North Block
The main attraction of this area is the potentially prospective stratigraphy, two aeromagnetic anomalies and relative proximity to the Barrick/Xstrata Kabanga Ni deposit.
- Ngara-Ngoma Block
This represents a large group of PLs, good stratigraphic location make this block conceptually very prospective, direct to the south of this block an extensive exploration work have been carried out by BHP.
- Burigi Block
Drilling at Burigi established the presence of significant Ni mineralization associated with an aeromagnetic (low) anomaly. This area is potential for further conceptual mineralization needs to be investigated.
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 November 30, 2012 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.
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Management Discussion and Analysis
November 30, 2012
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 November 30, 2012 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.
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.
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Exhibit 1
This is an unofficial consolidation of Form 52-109F2Certification of Interim Filings Full Certificate reflecting amendments made effective January 1, 2011 in connection with Canada’s changeover to IFRS. The amendments apply for financial periods relating to financial years beginningon or after January 1, 2011. This document is for reference purposes only and is not an official statement of the law. |
Form 52-109F2
Certification of Interim Filings
Full Certificate
I, James E. Sinclair, President and CEO of Tanzanian Royalty Exploration Corporation, certify the following:
1. | Review:I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Tanzanian Royalty Exploration Corporation (the “issuer”) for the interim period ended November 30, 2012. |
2. | No misrepresentations:Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a 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 was made, with respect to the period covered by the interim filings. |
3. | Fair presentation:Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings. |
4. | Responsibility:The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer. |
5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings |
(a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
(i) | material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
(ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
(b) | designed ICFR, or caused it 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 the issuer’s GAAP. |
5.1Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
5.2 | ICFR – material weakness relating to design:The issuer has disclosed in its interim MD&A for each material weakness relating to design existing at the end of the interim period |
(a) | a description of the material weakness; |
(b) | the impact of the material weakness on the issuer’s financial reporting and its ICFR; and |
(c) | the issuer’s current plans, if any, or any actions already undertaken, for remediating the material weakness. |
5.3 | Limitation on scope of design: N/A |
6. | Reporting changes in ICFR:The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on September 1, 2012 and ended on November 30, 2012that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
January 14, 2013
“James E. Sinclair”
James E. Sinclair
President and Chief Executive Officer
This is an unofficial consolidation of Form 52-109F2Certification of Interim Filings Full Certificate reflecting amendments made effective January 1, 2011 in connection with Canada’s changeover to IFRS. The amendments apply for financial periods relating to financial years beginningon or after January 1, 2011. This document is for reference purposes only and is not an official statement of the law. |
Form 52-109F2
Certification of Interim Filings
Full Certificate
I, Steven Van Tongeren, Chief Financial Officer of Tanzanian Royalty Exploration Corporation, certify the following:
1. | Review:I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Tanzanian Royalty Exploration Corporation (the “issuer”) for the interim period ended November 30, 2012. |
2. | No misrepresentations:Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a 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 was made, with respect to the period covered by the interim filings. |
6. | Fair presentation:Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings. |
7. | Responsibility:The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer. |
8. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings |
(a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
(i) | material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
(ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
(b) | designed ICFR, or caused it 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 the issuer’s GAAP. |
5.1Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
5.2 | ICFR – material weakness relating to design:The issuer has disclosed in its interim MD&A for each material weakness relating to design existing at the end of the interim period |
(a) | a description of the material weakness; |
(b) | the impact of the material weakness on the issuer’s financial reporting and its ICFR; and |
(c) | the issuer’s current plans, if any, or any actions already undertaken, for remediating the material weakness. |
5.3 | Limitation on scope of design: N/A |
6. | Reporting changes in ICFR:The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on September 1, 2012 and ended on November 30, 2012that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
January 14, 2013
“Steven Van Tongeren”
Steven Van Tongeren
Chief Financial Officer