[GRAPHIC OMITTED] BANRO CORPORATION
ANNUAL INFORMATION FORM
For the financial year ended December 31, 2005
Dated March 30, 2006
TABLE OF CONTENTS
Page
PRELIMINARY INFORMATION......................................................1
Date of Information.....................................................1
Incorporation by Reference of Technical Reports.........................1
Forward-Looking Statements..............................................1
Cautionary Note to U.S. Investors.......................................2
Currency................................................................2
ITEM 1: CORPORATE STRUCTURE.................................................2
1.1 Name and Incorporation.............................................2
1.2 Intercorporate Relationships.......................................3
ITEM 2: GENERAL DEVELOPMENT OF THE BUSINESS.................................3
2.1 Background.........................................................3
2.2 More Recent Events.................................................4
ITEM 3: DESCRIPTION OF THE BUSINESS.........................................5
3.1 General............................................................5
3.2 Risk Factors.......................................................5
3.3 Banro's Gold Properties............................................10
3.3.1 Twangiza....................................................10
3.3.2 Lugushwa....................................................13
3.3.3 Namoya......................................................13
3.3.4 Kamituga....................................................16
ITEM 4: DIVIDENDS...........................................................17
ITEM 5: DESCRIPTION OF CAPITAL STRUCTURE....................................17
5.1 Authorized Share Capital...........................................17
5.2 Shareholder Rights Plan............................................18
ITEM 6: MARKET FOR SECURITIES...............................................19
ITEM 7: ESCROWED SECURITIES.................................................19
ITEM 8: DIRECTORS AND OFFICERS .............................................20
8.1 Name, Occupation and Security Holding .............................20
8.2 Corporate Cease Trade Orders or Bankruptcies.......................21
8.3 Personal Bankruptcies..............................................22
8.4 Penalties or Sanctions.............................................22
8.5 Conflicts of Interest..............................................22
ITEM 9: AUDIT COMMITTEE INFORMATION.........................................22
ITEM 10: PROMOTERS...........................................................24
ITEM 11: LEGAL PROCEEDINGS...................................................25
ITEM 12: INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS..........25
ITEM 13: TRANSFER AGENT AND REGISTRAR ......................................25
ITEM 14: MATERIAL CONTRACTS.................................................25
ITEM 15: INTERESTS OF EXPERTS...............................................25
15.1 Names of Experts..................................................25
15.2 Interests of Experts..............................................26
ITEM 16: ADDITIONAL INFORMATION.............................................26
PRELIMINARY INFORMATION
Date of Information
All information in this annual information form ("AIF") is as at December 31,
2005, unless otherwise indicated.
Incorporation by Reference of Technical Reports
The following technical reports are incorporated by reference into, and form
part of, this AIF. These documents have been filed on, and may be accessed
using, the System for Electronic Document Analysis and Retrieval ("SEDAR") on
the internet at www.sedar.com.
1. The technical report dated March 30, 2006 and entitled "NI 43-101
Technical Report, Twangiza Project, South Kivu Province, Democratic
Republic of the Congo" (the "2006 Twangiza Technical Report"). The
2006 Twangiza Technical Report was prepared under the supervision of
Michael B. Skead ("Skead"), who is Vice President, Exploration of
Banro Corporation ("Banro" or the "Company") and a "qualified person"
as such term is defined in National Instrument 43-101 - Standards of
Disclosure for Mineral Projects ("NI 43-101") of the Canadian
Securities Administrators;
2. The technical report of CME Consulting Ltd. dated April 30, 2003 and
entitled "Review and Mineral Resource Update of the Twangiza Property,
Kivu Province, Democratic Republic of the Congo" (the "CME Technical
Report"). The CME Technical Report was prepared under the supervision
of Christopher O. Naas, who is a "qualified person" as such term is
defined in NI 43-101;
3. The technical report dated March 30, 2006 and entitled "NI 43-101
Technical Report, Lugushwa Project, South Kivu Province, Democratic
Republic of the Congo" (the "2006 Lugushwa Technical Report"). The
2006 Lugushwa Technical Report was prepared under the supervision of
Skead;
4. The technical report dated March 30, 2006 and entitled "NI 43-101
Technical Report, Namoya Project, Maniema Province, Democratic
Republic of the Congo" (the "2006 Namoya Technical Report"). The 2006
Namoya Technical Report was prepared under the supervision of Skead;
and
5. The technical report of Steffen, Robertson and Kirsten (UK) Ltd.
("SRK") dated February 2005 and entitled "NI 43-101 Technical Report
Resource Estimation and Exploration Potential at the Kamituga,
Lugushwa and Namoya Concessions, Democratic Republic of Congo" (the
"SRK Technical Report"). The "qualified persons" (as such term is
defined in NI 43-101) for the purposes of the SRK Technical Report
were Martin F. Pittuck and A. Gareth O'Donovan.
Forward-Looking Statements
Certain statements contained in this AIF and the documents incorporated by
reference herein that are not historical facts constitute "forward-looking
statements", including but not limited to those statements with respect to the
estimation of mineral resources and the Company's plans and objectives. Often,
but not always, forward-looking statements can be identified by the use of words
such as "plans", "expects", "is expected", "budget", "scheduled", "estimates",
"forecasts", "intends", "anticipates", or "believes", or variations (including
negative variations) of such words and phrases, or state that certain actions,
events or results "may", "could", "would", "might", or "will" be taken, occur or
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be achieved. Forward-looking statements involve known or unknown risks,
uncertainties and other factors, which may cause the actual results, performance
or achievements of the Company to be materially different from those projected
by such forward-looking statements. Such factors include, among others, the
actual results of current exploration activities, access to capital and future
prices of gold and those factors discussed in item 3.2 ("Risk Factors") of this
AIF.
Although Banro has attempted to identify important factors that could cause
actual actions, events or results to differ materially from those described in
forward-looking statements, there may be other factors that cause actions,
events or results to differ from those anticipated, estimated or intended.
Forward-looking statements contained herein are made as of the date of this AIF
based on the opinions and estimates of management, and, except as may be
required by applicable securities laws, Banro disclaims any obligation to update
any forward-looking statements, whether as a result of new information,
estimates or opinions, future events or results or otherwise. There can be no
assurance that the forward-looking statements contained in this AIF and the
documents incorporated by reference herein 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 statements.
Cautionary Note to U.S. Investors
The United States Securities and Exchange Commission (the "SEC") permits U.S.
mining companies, in their filings with the SEC, to disclose only those mineral
deposits that a company can economically and legally extract or produce. Certain
terms are used in this AIF, such as "measured", "indicated", and "inferred"
"resources", that the SEC guidelines strictly prohibit U.S. registered companies
from including in their filings with the SEC. U.S. Investors are urged to
consider closely the disclosure in the Company's Form 40-F Registration
Statement, File No. 001-32399, which may be secured from the Company, or from
the SEC's website at http://www.sec.gov/edgar.shtml.
Currency
All dollar amounts in this AIF are expressed in United States dollars, except as
otherwise indicated. References to "$" or "US$" are to United States dollars and
references to "Cdn$" are to Canadian dollars. For United States dollars to
Canadian dollars, based on the Bank of Canada noon rate, the average exchange
rate for 2005 and the exchange rate at December 30, 2005 (December 31, 2005 was
a Saturday) were one United States dollar per $1.2116 and $1.1659 Canadian
dollars, respectively. For reporting purposes, the Company prepares its
financial statements in United States dollars and in conformity with accounting
principles generally accepted in Canada.
ITEM 1: CORPORATE STRUCTURE
1.1 Name and Incorporation
The head office and registered office of Banro is located at 1 First Canadian
Place, Suite 7070, 100 King Street West, Toronto, Ontario, M5X 1E3.
The Company was incorporated under the Canada Business Corporations Act (the
"CBCA") on May 3, 1994 by articles of incorporation. Pursuant to articles of
amendment effective May 7, 1996, the name of the Company was changed from Banro
International Capital Inc. to Banro Resource Corporation and the authorized
share capital of the Company was increased by creating an unlimited number of a
new class of shares designated as preference shares, issuable in series. The
Company was continued under the Ontario Business Corporations Act by articles of
continuance effective on October 24, 1996. By articles of amendment effective on
January 16, 2001, the name of the Company was changed to Banro Corporation and
2
the Company's outstanding common shares were consolidated on a three old for one
new basis. The Company was continued under the CBCA by articles of continuance
dated April 2, 2004. By articles of amendment dated December 17, 2004, the
Company's outstanding common shares were subdivided by changing each one of such
shares into two common shares.
1.2 Intercorporate Relationships
The following chart illustrates the relationship between Banro and its material
subsidiaries, together with the jurisdiction of incorporation of each such
subsidiary and the percentage of voting securities beneficially owned or over
which control or direction is exercised by Banro.
Banro Corporation
(CBCA)
|
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| | | | |
100% 100% 100% 100% 100%
| | | | |
Banro Congo Kamituga Lugushwa Namoya Twangiza
Mining SARL Mining SARL Mining SARL Mining SARL Mining SARL
(DRC) (DRC) (DRC) (DRC) (DRC)
ITEM 2: GENERAL DEVELOPMENT OF THE BUSINESS
The Company is a Canadian-based gold exploration company focused on the
exploration and development of four major, 100% owned gold properties (the
"Properties") located along the 210 kilometre-long Twangiza-Namoya gold belt in
the South Kivu and Maniema Provinces of the eastern region of the Democratic
Republic of the Congo (the "DRC"). These Properties are known as Twangiza,
Lugushwa, Namoya and Kamituga.
2.1 Background
In 1996, the Company acquired, by way of several transactions, 72% of the
outstanding shares of the DRC company, Societe Zairoise Miniere et Industrielle
du Kivu S.A.R.L. ("SOMINKI"). The DRC government held the remaining 28% of
SOMINKI's shares as a participating interest. SOMINKI, which held 100% of the
Properties, was an operating, very well-established mining company in the DRC
with a long production history. With the acquisition of control of SOMINKI, the
Company also acquired SOMINKI's significant library of geological and
exploration data that had accumulated since the early 1920s.
In early 1997, the DRC government ratified a new 30 year mining convention (the
"Mining Convention") among itself, SOMINKI and the Company. The Mining
Convention provided for the transfer of all of the mineral assets and real
property of SOMINKI to a newly created DRC company, Societe Aurifere du Kivu et
du Maniema S.A.R.L. ("SAKIMA"), and that 93% of SAKIMA's shares were to be held
by the Company, with the remaining 7% to be owned by the DRC government as a
non-dilutive interest. The Mining Convention also provided for, among other
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things, confirmation of title in respect of all of the Properties for a 30 year
period.
Commencing in August 1997 and ending in April 1998, the Company carried out a
phase I exploration program on the Twangiza property which consisted of
geological mapping, surveying, data verification, airborne geophysical
surveying, diamond drilling and resource modeling.
In July 1998, the DRC government, without prior warning or consultation, issued
Presidential decrees which effectively resulted in the expropriation of the
Company's Properties.
In April 2002, the DRC government formally signed a settlement agreement (the
"Settlement Agreement") with the Company. The agreement called for, among other
things, the Company to hold a 100% interest in the Twangiza, Kamituga, Lugushwa
and Namoya gold projects under a revived Mining Convention. In accordance with
the Settlement Agreement, the Company reorganized its Properties by transferring
the four projects (ie. Twangiza, Kamituga, Lugushwa and Namoya) from SAKIMA to
four newly-created, wholly-owned DRC subsidiaries of the Company (which are
named Twangiza Mining SARL, Kamituga Mining SARL, Lugushwa Mining SARL and
Namoya Mining SARL), each of which owns 100% of its respective project (see
item 1.2 of this AIF).
In late 2003, the Company re-opened its exploration office in the town of Bukavu
in eastern DRC.
2.2 More Recent Events
2004 and 2005 Financings - In March 2004, the Company completed a Cdn$16,000,000
private placement financing. Kingsdale Capital Markets Inc. and Kingsdale
Capital Partners Inc. acted as the Company's agents in connection with the
financing. In July 2005, the Company completed an Cdn$18,375,000 private
placement financing. RBC Capital Markets acted as the Company's agent in
connection with this financing. This placement was made to an investment fund
managed by Capital Research and Management Company and to institutional accounts
managed by affiliates of Capital Group International, Inc. In October 2005, the
Company completed a non-brokered Cdn$13,000,000 private placement financing. The
subscribers in respect of this most recent financing were an investment fund
managed by Actis Capital LLP and an investment fund co-managed by Actis Capital
LLP and Cordiant Capital Inc.
Recruitment of Management - During 2004, the Company recruited a management team
with extensive African and gold industry experience. Included in the people who
joined the Company during 2004 were Peter N. Cowley as Chief Executive Officer,
President and a director, Simon F.W. Village as Chairman of the Board and a
director, Michael B. Skead as Exploration Manager (later promoted to Vice
President, Exploration) and John A. Clarke as a director. See item 8 ("Directors
and Officers") of this AIF.
Resumption of Exploration - In November 2004, the Company commenced exploration
activities at the Namoya property and in January 2005 the Company commenced
exploration activities at the Lugushwa property. The Company commenced the
second phase of exploration at the Twangiza property in October 2005. See items
3.3.1, 3.3.2 and 3.3.3 of this AIF for a summary of the Company's exploration
activities during 2005.
Stock Exchange Listings - On March 28, 2005, the Company's common shares began
trading on the American Stock Exchange. On November 10, 2005, the Company's
common shares began trading on the Toronto Stock Exchange (the "TSX") and ceased
trading on the TSX Venture Exchange concurrent with the TSX listing. RBC Capital
Markets acted as sponsor to Banro in its application for listing on the TSX.
4
ITEM 3: DESCRIPTION OF THE BUSINESS
3.1 General
The Company is a Canadian-based gold exploration company focused on the
exploration and development of four major, 100% owned gold properties (the
"Properties") located along the 210 kilometre-long Twangiza-Namoya gold belt in
the South Kivu and Maniema Provinces of the eastern region of the Democratic
Republic of the Congo (the "DRC"). These Properties are known as Twangiza,
Lugushwa, Namoya and Kamituga and consist of a total of 13 exploitation permits
held by four wholly-owned DRC subsidiaries of the Company. The Company has also
applied for exploration permits relating to property in between the Company's
four project areas.
Employees
- ---------
The Company and its subsidiaries have a total of 120 full-time employees (as at
December 31, 2005).
3.2 Risk Factors
The exploration and development of gold properties are speculative activities
that involve a high degree of financial risk. The risk factors which should be
taken into account in assessing the Company's activities and an investment in
its securities include, but are not necessarily limited to, those set out below.
Any one or more of these risks could have a material adverse effect on the value
of any investment in the Company and the business, financial position or
operating results of the Company and should be taken into account in assessing
the Company's activities.
The following summary, which is not exhaustive, represents some of the major
risk factors that affect Banro.
Risks of Operating in the DRC
Banro's Properties are located in the east of the DRC. The assets and operations
of the Company are therefore subject to various political, economic and other
uncertainties, including, among other things, the risks of war and civil unrest,
expropriation, nationalization, renegotiation or nullification of existing
licenses, permits, approvals and contracts, taxation policies, foreign exchange
and repatriation restrictions, changing political conditions, international
monetary fluctuations, currency controls and foreign governmental regulations
that favour or require the awarding of contracts to local contractors or require
foreign contractors to employ citizens of, or purchase supplies from, a
particular jurisdiction. Changes, if any, in mining or investment policies or
shifts in political attitude in the DRC may adversely affect Banro's operations
or profitability. Operations may be affected in varying degrees by government
regulations with respect to, but not limited to, restrictions on production,
price controls, export controls, currency remittance, income taxes, foreign
investment, maintenance of claims, environmental legislation, land use, land
claims of local people, water use and mine safety. Failure to comply strictly
with applicable laws, regulations and local practices relating to mineral
rights, could result in loss, reduction or expropriation of entitlements. In
addition, in the event of a dispute arising from operations in the DRC, the
Company may be subject to the exclusive jurisdiction of foreign courts or may
not be successful in subjecting foreign persons to the jurisdiction of courts in
Canada. The Company also may be hindered or prevented from enforcing its rights
with respect to a governmental instrumentality because of the doctrine of
sovereign immunity. It is not possible for the Company to accurately predict
such developments or changes in laws or policy or to what extent any such
developments or changes may have a material adverse effect on the Company's
operations.
5
The DRC is a developing nation emerging from a period of civil war and conflict.
Physical and institutional infrastructure throughout the DRC is in a debilitated
condition. The DRC is in transition from a largely state controlled economy to
one based on free market principles, and from a non-democratic political system
with a centralized ethnic power base, to one based on more democratic principles
(presidential and parliamentary elections are scheduled to be held by the end of
June 2006). There can be no assurance that these changes will be effected or
that the achievement of these objectives will not have material adverse
consequences for Banro and its operations. The east of the DRC continues to
experience instability in parts of the region due to certain militia and
criminal elements. While the government and United Nations forces are working to
support the extension of central government authority throughout the region,
there can be no assurance that such efforts will be successful.
HIV/AIDS, malaria and other diseases represent a serious threat to maintaining a
skilled workforce in the mining industry in the DRC. HIV/AIDS is a major
healthcare challenge faced by the Company's operations in the country. There can
be no assurance that the Company will not lose members of its workforce or
workforce manhours or incur increased medical costs, which may have a material
adverse effect on the Company's operations.
The DRC has historically experienced relatively high rates of inflation.
Exploration and Mining Risks
All of the Company's Properties are in the exploration stage only and none of
the Properties contain a known body of commercial ore. The exploration for and
development of mineral deposits involves significant risks that even a
combination of careful evaluation, experience and knowledge may not eliminate.
While the discovery of an ore body may result in substantial rewards, few
properties that are explored are ultimately developed into producing mines.
Major expenditures may be required to locate and establish mineral reserves, to
develop metallurgical processes and to construct mining and processing
facilities at a particular site. Whether a mineral deposit, once discovered,
will be commercially viable depends on a number of factors, some of which are:
the particular attributes of the deposit, such as size, grade and proximity to
infrastructure; metal prices which are highly cyclical; and government
regulations, including regulations relating to prices, taxes, royalties, land
tenure, land use, importing and exporting of minerals and environmental
protection. The exact effect of these factors cannot be accurately predicted,
but the combination of these factors may result in Banro not receiving an
adequate return on invested capital.
There is no certainty that the expenditures made by Banro towards the search for
and evaluation of mineral deposits will result in discoveries that are
commercially viable. In addition, assuming discovery of a commercial ore-body,
depending on the type of mining operation involved, several years can elapse
from the initial phase of drilling until commercial operations are commenced.
Mining operations generally involve a high degree of risk. Such operations are
subject to all the hazards and risks normally encountered in the exploration
for, and development and production of gold and other precious or base metals,
including unusual and unexpected geologic formations, seismic activity, rock
bursts, cave-ins, flooding and other conditions involved in the drilling and
removal of material, any of which could result in damage to, or destruction of,
mines and other producing facilities, damage to life or property, environmental
damage and possible legal liability. Milling operations are subject to hazards
6
such as equipment failure or failure of retaining dams around tailings disposal
areas, which may result in environmental pollution and consequent liability.
Uncertainty in the Estimation of Mineral Resources
There is a degree of uncertainty to the calculation of mineral resources. Until
mineral resources are actually mined and processed, the quantity and grade of
mineral resources must be considered as estimates only. In addition, the
quantity and grade of mineral resources may vary depending on, among other
things, metal prices. Any material change in quantity or grade of mineral
resources may affect the economic viability of the deposit. In addition, there
can be no assurance that gold recoveries or other metal recoveries in small
scale laboratory tests will be duplicated in larger scale tests under on-site
conditions or during production.
Uncertainty Relating to Inferred Mineral Resources
There is a risk that the inferred mineral resources cannot be converted into
mineral reserves as the ability to assess geological continuity is not
sufficient to demonstrate economic viability. Due to the uncertainty that may
attach to inferred mineral resources, there is no assurance that inferred
mineral resources will be upgraded to resources with sufficient geological
continuity to constitute proven and probable mineral reserves as a result of
continued exploration.
Gold Prices
The future price of gold will significantly affect the development of Banro's
Properties. Gold prices are subject to significant fluctuation and are affected
by a number of factors which are beyond Banro's control. Such factors include,
but are not limited to, interest rates, exchange rates, inflation or deflation,
fluctuation in the value of the United States dollar and foreign currencies,
global and regional supply and demand, and the political and economic conditions
of major gold-producing countries throughout the world. The price of gold has
fluctuated widely in recent years, and future serious price declines could cause
continued development of and commercial production from Banro's mineral
interests to be impracticable. Depending on the price of gold, projected cash
flow from planned mining operations may not be sufficient and Banro could be
forced to discontinue development and may be forced to sell its Properties.
Future production from Banro's Properties is dependent on gold prices that are
adequate to make these Properties economic.
No History of Mining Operations or Profitability
Banro does not have a history of mining operations, and there is no assurance
that it will produce revenue, operate profitably or provide a return on
investment in the future. Banro has only incurred operating losses, and the
development of its Properties is at an early stage. It is therefore not possible
to evaluate future prospects based on past performance. There can be no
certainty that Banro will achieve or sustain profitability or achieve or sustain
positive cash flow from its operating activities.
Dependence on Limited Properties
The Twangiza, Lugushwa, Namoya and Kamituga projects account for all of the
Company's mineral resources. Any adverse development affecting the progress of
any of these Properties may have a material adverse effect on the Company's
financial performance and results of operations.
7
Finance Requirements
The Company will require significant financing in order to carry out plans to
develop its Properties. The Company has no revenues and is wholly reliant upon
external financing to fund such plans. There can be no assurance that such
financing will be available to the Company or, if it is, that it will be offered
on acceptable terms. If additional financing is raised through the issuance of
equity or convertible debt securities of the Company, the interests of the
Company's shareholders in the net assets of the Company may be diluted. Any
failure of the Company to obtain required financing on acceptable terms could
have a material adverse effect on the Company's financial condition, results of
operations and liquidity and require the Company to cancel or postpone planned
capital investments.
Market Perception
Market perception of junior gold exploration companies such as the Company may
shift such that these companies are viewed less favourably. This factor could
impact the value of investors' holdings and the ability of the Company to raise
further funds, which could have a material adverse effect on the Company's
business, financial condition and prospects.
Uninsured Risks
Banro may become subject to liability for accidents, pollution and other hazards
against which it may elect not to insure because of premium costs or for other
reasons, or in amounts which exceed policy limits. Losses from these events may
cause Banro to incur significant costs that could have a material adverse effect
upon its financial performance and results of operations.
Environmental Risks and Hazards
All phases of Banro's operations are subject to environmental regulation. These
regulations mandate, among other things, the maintenance of air and water
quality standards and land reclamation. They also set forth limitations on the
generation, transportation, storage and disposal of solid and hazardous waste.
Environmental legislation is evolving in a manner which will require stricter
standards and enforcement, increased fines and penalties for non-compliance,
more stringent environmental assessments of proposed projects and a heightened
degree of responsibility for companies and their officers, directors and
employees. There is no assurance that future changes in environmental
regulation, if any, will not adversely affect Banro's operations. Environmental
hazards may exist on the properties on which Banro holds interests which are
unknown to Banro at present and which have been caused by previous owners or
operators of the properties. Reclamation costs are uncertain and planned
expenditures may differ from the actual expenditures required.
Government Regulation
Banro's mineral exploration and planned development activities are subject to
various laws governing prospecting, mining, development, production, taxes,
labour standards and occupational health, mine safety, toxic substances, land
use, water use, land claims of local people and other matters. Although Banro's
exploration and development activities are currently carried out in accordance
with all applicable rules and regulations, no assurance can be given that new
rules and regulations will not be enacted or that existing rules and regulations
will not be applied in a manner which could limit or curtail development.
8
Many of Banro's mineral rights and interests are subject to government
approvals, licenses and permits. Such approvals, licenses and permits are, as a
practical matter, subject to the discretion of the applicable governments or
governmental officials. No assurance can be given that Banro will be successful
in maintaining any or all of the various approvals, licenses and permits in full
force and effect without modification or revocation. To the extent such
approvals are required and not obtained, Banro may be curtailed or prohibited
from continuing or proceeding with planned exploration or development of mineral
properties.
Failure to comply with applicable laws, regulations and permitting requirements
may result in enforcement actions thereunder, including orders issued by
regulatory or judicial authorities causing operations to cease or be curtailed,
and may include corrective measures requiring capital expenditures, installation
of additional equipment, or remedial actions. Parties engaged in the exploration
or development of mineral properties may be required to compensate those
suffering loss or damage by reason of the activities and may have civil or
criminal fines or penalties imposed for violations of applicable laws or
regulations.
Amendments to current laws and regulations governing operations or more
stringent implementation thereof could have a substantial adverse impact on
Banro and cause increases in exploration expenses, capital expenditures or
require abandonment or delays in development of mineral interests.
Infrastructure for the Projects
The Company's Properties are located in remote areas of the DRC, which lack
basic infrastructure, including sources of power, water, housing, food and
transport. In order to develop any of its Properties Banro will need to
establish the facilities and material necessary to support operations in the
remote locations in which they are situated. The remoteness of each Property
will affect the potential viability of mining operations, as Banro will also
need to establish substantially greater sources of power, water, physical plant
and transport infrastructure than are currently present in the area. The lack of
availability of such sources may adversely affect mining feasibility and will,
in any event, require Banro to arrange significant financing, locate adequate
supplies and obtain necessary approvals from national, provincial and regional
governments, none of which can be assured.
Share Price Risk
The market price of a publicly traded stock, particularly a junior resource
issuer like the Company, is affected by many variables not directly related to
the success of the company, including the market for all junior resource sector
shares, the breadth of the public market for the stock, and the attractiveness
of alternative investments. The affect of these and other factors on the market
price of common shares on the exchanges on which the Company trades suggests
that the Company's shares will be volatile.
Future Sales of Common Shares by Existing Shareholders
Sales of a large number of the Company's common shares in the public markets, or
the potential for such sales, could decrease the trading price of such shares
and could impair Banro's ability to raise capital through future sales of common
shares. Banro has previously completed private placements at prices per share
which are lower than the current market price of its common shares. Accordingly,
a significant number of the Company's shareholders have an investment profit in
the common shares that they may seek to liquidate.
9
Currency Risk
The Company uses the United States dollar as its functional currency.
Fluctuations in the value of the United States dollar relative to the Canadian
dollar could have a material impact on the Company's consolidated financial
statements by creating gains or losses. No currency hedge policies are in place
or are presently contemplated.
Dependence on Management and Key Personnel
The success of the Company depends on the good faith, experience and judgment of
the Company's management and advisors in supervising and providing for the
effective management of the business and the operations of the Company. The
Company is dependent on a relatively small number of key personnel, the loss of
any one of whom could have an adverse effect on the Company. The Company
currently does not have key person insurance on these individuals. The Company
may need to recruit additional qualified personnel to supplement existing
management and there is no assurance that the Company will be able to attract
such personnel.
Competition
The natural resource industry is intensely competitive in all of its phases, and
the Company competes with many companies possessing greater financial resources
and technical facilities than itself.
Conflict of Interest
A number of directors of the Company also serve as directors and/or officers of
other companies involved in the exploration and development of natural resource
properties. As a result, conflicts may arise between the obligations of these
individuals to the Company and to such other companies.
3.3 Banro's Gold Properties
The Company holds, though four wholly-owned DRC subsidiaries, a 100% interest in
four gold properties, which are known as Twangiza, Lugushwa, Namoya and
Kamituga. These properties are comprised of a total of 13 exploitation permits
and are found along the 210 kilometre-long Twangiza-Namoya gold belt in the
South Kivu and Maniema Provinces of eastern DRC. These properties, totalling
2,600 square kilometres, cover all the major, historical producing areas of the
gold belt, where approximately 2.4 million ounces of gold were reportedly
produced in the past from alluvial and hard rock sources.
The "qualified person" (as such term is defined in NI 43-101) who oversees the
Company's exploration programs is Michael B. Skead. Mr. Skead is Vice President,
Exploration of Banro.
3.3.1 Twangiza
--------
The following summary regarding the Twangiza property is derived from the 2006
Twangiza Technical Report, a copy of which can be obtained from SEDAR. The
detailed disclosure in the 2006 Twangiza Technical Report is incorporated into
this AIF by reference. The CME Technical Report on the Twangiza property (a copy
of which can be obtained from SEDAR) is also incorporated into this AIF by
reference.
The 1,164 square kilometre Twangiza property is located in the South Kivu
Province of the DRC, 35 kilometres west of the Burundi border and 45 kilometres
to the south southeast of the town of Bukavu. The Twangiza property consists of
six exploitation permits. Banro's wholly-owned DRC subsidiary, Twangiza Mining
SARL, has a 100% in the said permits.
10
The Twangiza property is located in the northern half of the Great Lakes
sub-province of High Africa, one of the world's principal Precambrian
orogenic-metallogenic provinces. Miniere des Grande Lacs ("MGL") began
exploration for in-situ resources in 1957. Work followed the occurrence of
alluvial gold deposits upstream from the Mwana River to the present day Twangiza
deposit. MGL tested the Twangiza deposit through 8,200 metres of trenching and
12,100 metres of adits on seven levels, collecting a total of 17,400 samples. In
1996, Banro acquired control of the Twangiza property and, in the following
year, undertook an exploration program of geological mapping, surveying, data
verification, airborne geophysical surveying, diamond drilling and resource
modeling that was completed in 1998. Work included 10,490 line kilometres of
airborne geophysics, 2,161 surface samples, 1,613 adit samples from 16 adits,
8,577 drill core samples from 9,122 metres of diamond drilling and 162 density
tests.
Shortly after the completion of the 1997-1998 exploration program, President
Laurent D. Kabila issued presidential decrees which, among other things,
effectively resulted in the expropriation of the Twangiza property from Banro
(as well as the Lugushwa, Namoya and Kamituga properties). Banro initiated
arbitration proceedings against the DRC government seeking compensation. In
April 2002, the DRC government signed a settlement agreement with Banro which
called for, among other things, Banro to hold a 100% interest in the Twangiza
property (as well as the Lugushwa, Namoya and Kamituga properties) under a
revived Mining Convention that expires in March 2027 (subject to extension under
the new Mining Code).
The Twangiza deposit is 800 metres long and is located at the hinge of the
Twangiza Anticline. It is underlain by mudstone, siltstones and greywackes which
have been intruded along bedding planes by mafic and feldspar porphyry sills.
Auriferous sulphides (pyrite and arsenopyrite) occur as dissemination and vein
gangue in both the sediments and the feldspar porphyry sills. Sulphide content
is greatest at the axial plane of the fold as brittle deformation is greatest
due to extension forces from the folding.
All fieldwork undertaken during Banro's 1997-1998 exploration program has been
determined to be compliant with NI 43-101. The mineral resource study completed
in 1998 was updated in April 2003 in the CME Technical Report to conform to the
reporting standards of NI 43-101 and to incorporate the removal of the oxide
horizon, which had occurred during the intervening period between 1998 and April
2003. The mineral resource estimates for the Twangiza property are listed in the
table below utilizing a 1.0 g/t cut-off grade and cover both oxide and non-oxide
material. No change has been made to the resource estimates as a result of the
exploration program carried out by the Company between October and December
2005.
Measured Mineral Resource Indicated Mineral Resource Inferred Mineral Resource
- ------------------------------------------------------------------------------------------------------------------
Tonnes Au g/t Oz gold Tonnes Au g/t Oz gold Tonnes Au g/t Oz gold
- ------------------------------------------------------------------------------------------------------------------
2,601,000 3.20 268,000 27,785,000 1.95 1,742,000 19,241,000 1.90 1,175,000
At a 0.5 g/t Au cut-off, an estimated 1,348,000 tonnes of the oxide resource
(measured plus indicated) was determined to have been removed between 1998 and
2003.
Banro re-commenced exploration at Twangiza in mid-October 2005. The objectives
of the current exploration program are to (a) convert the remaining inferred
mineral resource as outlined in the 1997-1998 drill program into the measured
and indicated mineral resource categories, and (b) define further inferred and
indicated mineral resources through a program of soil geochemistry, trenching,
geological mapping and drilling.
11
By the end of 2005, a total of 84.92 line kilometres of gridding had been
completed at Twangiza, and 1,976 soil geochemical, 482 trench, and 153
chip/channel samples had been collected. The soil geochemical program has
defined a robust gold-in-soil anomaly to the immediate north of the known
Twangiza deposit that is some 880 metres long and 450 metres wide. Geological
mapping of trenches and artisanal workings indicate that the geological setting
and controls of mineralization are the same as those of the known Twangiza
deposit. In the table below, the following mineralization was intersected in the
trenching program in 2005.
Significant Trench Intersections on the Twangiza Property (2005 Program)
- ------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROSPECT TRENCH No. FROM TO LENGTH GRADE
- --------------------------------------------------------------------------------
(metres) (metres) (metres) (g/t)
- --------------------------------------------------------------------------------
Twangiza TWT-1 15.5 22.5 7.00 1.16
- --------------------------------------------------------------------------------
37.3 71.0 33.70 5.15
- --------------------------------------------------------------------------------
82.0 93.0 11.00 5.97
- --------------------------------------------------------------------------------
109.0 125.0 16.00 1.60
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Twangiza TWT-2 52.0 62.0 10.00 2.51
- --------------------------------------------------------------------------------
69.6 73.0 3.40 2.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Twangiza TWT-5 0.0 4.0 4.00 3.52
- --------------------------------------------------------------------------------
10.0 26.0 16.00 3.14
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Lukungurhi TWT-3 11.0 17.0 6.00 1.53
- --------------------------------------------------------------------------------
140.0 141.8 1.80 2.47
- --------------------------------------------------------------------------------
146.0 154.0 8.00 1.50
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Lukungurhi TWT-4 19.5 29.5 10.00 16.06
- --------------------------------------------------------------------------------
The field exploration work undertaken at Twangiza by the Company during 2005 to
date is compliant with NI 43-101.
The historical data for the Twangiza property indicates good potential for
adding significant resources to the already defined multi-million ounce gold
resource, associated with the Proterozoic sediments of the Kibaran Metallogenic
Province ("KMP"). The gold mineralization is interpreted to be related to the
same suite of intrusions responsible for the widespread Sn and W mineralization
in the KMP. This class of gold deposit has been recognised in many parts of the
world, and is known to have the potential for hosting world-class resources.
The sediments and the intrusive feldspar porphyry sills at the Twangiza deposit
have been folded into a tight upright fold. The feldspar porphyry intrusives
appear to have undergone brittle deformation prior to the mineralizing
hydrothermal event, most likely when the sediments were folded. Structures and
mineralized hydrothermal fluids are believed to have exploited the contact
between the feldspar porphyry intrusives and sediments. The upright tightly
folded anticlines have been affected by a cross-folding resulting in a dome and
basin fold pattern. The Twangiza deposit is believed to represent a domal
feature as mineralization appears to plunge both to the north and south.
12
The mineralization controls at Twangiza are interpreted to be:
o Lithological, with the brittle and more chemically reactive feldspar
porphyry intrusives hosting the majority of the mineralization.
Mineralization is hosted in the sediments but to a lesser extent.
o Folding in that the intrusives appear to have been emplaced prior to
the folding event as they are folded themselves. The folding has
resulted in brittle deformation of the intrusives which has resulted
in a favourable plumbing system.
o Shearing, with the contact between the sediments and intrusives being
sheared resulting in favourable fluid path.
Skead recommends in the 2006 Twangiza Technical Report that the exploration
program at Twangiza for 2006 should focus on the following:
o Continuation of the soil sampling program to define extension of known
mineralization as well as areas of new mineralization.
o Diamond drilling to test soil geochemical anomalies in order to
generate additional inferred mineral resources.
o Diamond drilling to upgrade inferred mineral resources to the
indicated mineral resource category.
o Completion of a scoping study to provide preliminary indications of
the economic viability of the indicated mineral resource.
o Commencement of regional exploration elsewhere in the Twangiza project
area, through the use of remote sensing, stream sediment sampling and
soil geochemistry.
The budget for the Twangiza project for 2006 is approximately $4.6 million. The
actual expenditures incurred at Twangiza during 2006 will be dependent on the
exploration results achieved during 2006.
3.3.2 Lugushwa
--------
The following summary regarding the Lugushwa property is derived from the 2006
Lugushwa Technical Report, a copy of which can be obtained from SEDAR. The
detailed disclosure in the 2006 Lugushwa Technical Report is incorporated into
this AIF by reference.
The Lugushwa property consists of three exploitation permits covering an area of
641 square kilometres and is located approximately 150 kilometres southwest of
the town of Bukavu in the South Kivu Province in the east of the DRC. Banro's
wholly-owned DRC subsidiary, Lugushwa Mining SARL, has a 100% interest in the
said permits.
The Lugushwa area was explored and exploited for alluvial gold between 1957 and
1963. However, from 1963 to the outbreak of political unrest in 1996/7, primary
gold mineralization was the main exploration and mining target. Production
records are incomplete, but at least 457,000 ounces of alluvial gold were
produced, with a further 10,000 ounces from primary sources.
In 1996, Banro acquired control of the Lugushwa property together with a large
library of historical data relating to the property. Consolidation,
computerisation and interpretation of this data were carried out for Banro by
CME & Company during 1997 and 1998. SRK completed a detailed geological review
in 1999, and carried out a follow-up visit in 2004, on the basis of which the
following inferred mineral resource (using a 1.0 g/t Au cut-off grade) was
outlined in four historical deposits:
13
Inferred Mineral Resource
-------------------------
Tonnes Au g/t Oz gold
----------------------------------------------
37,000,000 2.3 2,735,000
Banro commenced an exploration program at Lugushwa in January 2005, comprising
geological mapping, soil geochemistry, trenching, adit mapping, and surveying.
This work has provided a clearer understanding of the mineralization style and
controls and has supported the historical data. In addition, significant
extensions to the known deposits have been identified by soil geochemistry and
tested by trenching. This work was concentrated in the vicinity of the known
deposits, within an area representing less than 3% of the total property area.
Historical data and current artisanal mining activity elsewhere in the property
indicate excellent potential for locating additional mineralization through the
continuation of systematic exploration.
The field exploration work undertaken at Lugushwa by the Company from January
2005 to date is compliant with NI 43-101. The mineral resource estimate conforms
to the reporting standards of NI 43-101.
In January 2006, Banro commenced a diamond drilling program with the objectives
of (a) elevating inferred mineral resources in the known deposits to indicated
mineral resource status, and (b) outlining the new mineralized zones for the
calculation of additional inferred mineral resources.
The mineralization at Lugushwa is interpreted to be associated with the Sn-W
bearing granites that have intruded the metasediments of the Proterozoic Kibara
belt. This class of intrusion-related gold deposits has been identified in
several parts of the world, and individual deposits have the potential for
hosting large, multi-million ounce resources. At Lugushwa the mineralization
takes the form of (a) cross-cutting auriferous quartz vein sets in several
orientations, with disseminated, sulphide-associated-mineralization in the
surrounding rock, and (b) discrete, locally high grade quartz veins.
The mineralization controls are interpreted to be:
o Lithological, with less competent and more chemically reactive
metapelite units interbedded with quartzites and siltstones;
o Folding, which has probably caused bedding plane slip and
bedding-parallel dilation, particularly in the axial zones of the
folds; and
o Shearing, with at least two important shear directions recognised
(NNE-SSW and E-W).
Mineralization appears to be most intense where shears intersect, due to a
higher density of host structures for quartz vein emplacement, and more intense
fluid-wall rock interaction (and disseminated style mineralization). This
setting is more conducive for the formation of bulk-mineable deposits. Outside
these "intersection zones" the mineralizing fluids will tend to form more
isolated and discrete veins, with less opportunity for wall-rock interaction and
disseminated mineralization.
Skead recommends in the 2006 Lugushwa Technical Report that the exploration
program at Lugushwa during 2006 should focus on the following:
o Diamond drilling to upgrade inferred mineral resources to the
indicated mineral resource category.
o Completion of a scoping study to provide preliminary indications of
the economic viability of the indicated mineral resources.
14
o Completion of sufficient drilling to enable the estimation of inferred
mineral resources in the new zones of mineralization, recently
identified through soil geochemistry and trenching.
o Commencement of regional exploration elsewhere in the Lugushwa
property, through the use of remote sensing, stream sediment sampling
and soil geochemistry.
The budget for the Lugushwa project for 2006 is approximately $5.05 million. The
actual expenditures incurred at Lugushwa during 2006 will be dependent on the
exploration results achieved during 2006.
3.3.3 Namoya
------
The following summary regarding the Namoya property is derived from the 2006
Namoya Technical Report, a copy of which can be obtained from SEDAR. The
detailed disclosure in the 2006 Namoya Technical Report is incorporated into
this AIF by reference.
The Namoya property consists of one exploitation permit covering an area of 174
square kilometres and is located approximately 225 kilometres southwest of the
town of Bukavu in Maniema Province in the east of the DRC. Namoya Mining SARL,
which is wholly-owned by Banro, has a 100% interest in the said permit. The
Namoya property comprises five separate ore bodies: Mwendamboko and Muviringu to
the northwest, Kakula in the center and Namoya Summit and Filon B to the
southeast.
Alluvial deposits of gold were first discovered at Namoya in 1930 and mined
between 1931 and 1947. Primary gold was also discovered during this period and
underground mining commenced on the Filon B deposit in 1947. Further discoveries
of primary gold mineralization were made at Mwendamboko, Kakula, Namoya Summit
and Muviringu where selective mining was carried out. The majority of this
mining was based on small scale underground development along specific
mineralized quartz veins or "stockwork" zones. During the 1950s a small open pit
was established on the summit of Mwendamboko. Mining ceased in 1961, although
there remained substantial un-mined resources in the various deposits plus
several other untested mineralized targets. Limited regional and strike
exploration appears to have been conducted since 1961.
The main host rock unit of the mineralized zone at Namoya is a fine to very
fine-grained chlorite schist with associated albite, quartz, sericite and
calcite. Quartz veins and quartz "stockworks" cross-cut the majority of the host
sediments. The quartz systems host the primary gold mineralization. The
distribution of the quartz vein system is controlled by a northwest-southeast
oriented shear zone which controls the distribution of the various deposits
along this corridor.
The Company's exploration program at Namoya commenced in November 2004 and
included gridding, soil sampling, adit and trench sampling, detailed and
regional scale mapping and drilling. A detailed adit sampling and mapping
programme was initiated in early 2005 in order to (a) covert a significant
portion of the resource from the inferred to the indicated mineral resource
category, (b) gain an understanding on the controls and distribution of gold
minerlization, and (3) confirm the historical assay data. Over 40% of the
historical adits and trenches were re-sampled and mapped. Comparison between
historical and modern analytical results has shown that there is little
variability and no evidence of bias between the two data sets. Diamond drilling
has also confirmed the width and tenor of mineralization intersected in both
trenches and adits. Detailed mapping has greatly improved the understanding on
the controls of mineralization.
The adit sampling program was successful in upgrading 436,000 ounces of gold
(4,560,400 tonnes grading 2.97 g/t Au) from the inferred mineral resource
category to the indicated mineral resource category. The current mineral
resource estimates for Namoya, using a 1.0 g/t cut-off grade, is summarised in
the table below. These estimates are conservative due to the methodology
employed in estimating the volume and grade of the depleted Mwendamboko
15
high-grade material. The indicated mineral resource estimate compares well with
the previous inferred mineral resource estimates undertaken by independent
geological consultants, SRK (as set out in the SRK Technical Report), and gives
a clear scope and direction to the project.
Indicated Mineral Resource Inferred Mineral Resource
-------------------------------------------------------------------------------------------------------
Tonnes Au g/t Oz gold Tonnes Au g/t Oz gold
-------------------------------------------------------------------------------------------------------
4,560,400 2.97 436,000 7,818,700 2.61 657,000
The field exploration work undertaken at Namoya by the Company from November
2004 to date is compliant with NI 43-101. The mineral resource estimates conform
to the reporting standards of NI 43-101.
Much of the work carried out by Banro and proposed to be carried out by Banro at
Namoya is based on historical data that has been verified by recent re-sampling
and mapping activities. Data quality and data reliability issues have been
studied, with no evidence of bias between the historical data and the modern
sampling and laboratory methods. In particular, the accuracy and precision of
the assay data has been studied in detail and independent check analysis have
been undertaken. Sampling procedure and laboratory results have been checked. In
principle, the adit re-sampling program has provided assay results that are more
reliable and has therefore provided increased confidence and solid back-up to
the thicknesses and grades of intersections used for the current mineral
resource estimates. In addition, independent geological consultants, SRK, who
undertook the previous resource determinations for Namoya, has reviewed the
re-sampling and quality control procedures and concurs with Banro's findings.
A phase II exploration program of detailed and regional geological mapping, rock
sampling, soil and topographic surveys, as well as diamond drilling, is
currently underway at Namoya. The current drill program objective at Namoya is
to complete resource drilling on the most advanced prospects of Mwendamboko,
Kakula and Namoya Summit. On completion of the first phase of resource drilling,
exploration drilling is planned to commence in the second quarter of 2006 on
those targets generated from the on-going regional exploration program.
The budget for the Namoya project for 2006 is approximately $5.54 million. The
actual expenditures incurred at Namoya during 2006 will be dependent on the
exploration results achieved during 2006.
3.3.4 Kamituga
--------
The following provides a summary regarding the Kamituga property. Additional
information relating to the Kamituga property is contained in the SRK Technical
Report, which is incorporated into this AIF by reference. A copy of the SRK
Technical Report can be obtained from SEDAR.
The Kamituga property consists of three exploitation permits covering an area of
649 square kilometres and is located approximately 100 kilometres southwest of
the town of Bukavu in the South Kivu Province in the east of the DRC. Banro's
wholly-owned DRC subsidiary, Kamituga Mining SARL, has a 100% interest in the
said permits. Kamituga is the most mature of the Company's four properties,
having previously been the site of major alluvial and underground mining
operations.
16
Gold was first reported in the Kamituga region during the early 1920s with the
discovery of alluvial gold in the Luliaba, Mobale, Kahushimira, Kamakundu and
Idoka rivers. Commercial alluvial mining commenced in 1924. Exploration during
the 1930s also led to the discovery of numerous high grade quartz veins with
hard rock mining commencing in 1937 at the Mobale underground operation. At the
closure of the Kamituga operations in 1996, approximately 1.5 million ounces of
gold had been produced from alluvial and hard rock mining.
SRK noted in the SRK Technical Report: "...there is much evidence to support the
wide scale occurrence of gold mineralization. Most of the work to date has been
confined to the area surrounding the Mobale Mine and very little appears to have
been conducted throughout the remaining area of the concession."
In the SRK Technical Report, SRK outlined the following mineral resource
estimate for Kamituga, using a 1.0 g/t cut-off grade and based on polygonal
methods using historical assay results from underground and surface channel
sampling:
Inferred Mineral Resource
-------------------------
Tonnes Au g/t Oz gold
--------------------------------------------
7,260,000 3.9 915,000
Mineralisation at Kamituga is hosted within quartz veins containing gold either
present as free native gold or associated with sulphides, particularly
arsenopyrite. Veins are present in zones along slippage planes parallel to the
schistosity or at fold axes resulting from dextral movement of blocks along
east-west fault planes due to the intrusion of a deep seated granitoid body.
Late stage brittle shear has caused local offset of the vein system up to
several tens of metres.
No exploration was conducted at Kamituga during 2005. Banro is proposing to
commence exploration activities at Kamituga during the second quarter of 2006,
such activities to consist of reviewing and assessing the historical data,
gridding, geological mapping, soil, trench and adit sampling. Exploration will
focus on the disseminated, wall rock mineralization that may have been neglected
in the past by previous mining activities when the focus was on high grade,
quartz veins and stockworks. No drilling has been budgeted during 2006 although
this may change depending on results.
The budget for the Kamituga project for 2006 is approximately $1.45 million. The
actual expenditures incurred at Kamituga during 2006 will be dependent on the
exploration results achieved during 2006.
ITEM 4: DIVIDENDS
Subject to the requirements of the CBCA, there are no restrictions in the
Company's articles or by-law that would restrict or prevent the Company from
paying dividends. However, the Company has not paid any dividend or made any
other distribution in respect of its outstanding shares and management does not
anticipate that the Company will pay dividends or make any other distribution in
respect on its shares in the foreseeable future. The Company's board of
directors, from time to time, and on the basis of any earnings and the Company's
financial requirements or any other relevant factor, will determine the future
dividend policy of the Company with respect to its shares.
17
ITEM 5: DESCRIPTION OF CAPITAL STRUCTURE
5.1 Authorized Share Capital
The Company's authorized share capital consists of an unlimited number of common
shares and an unlimited number of preference shares, issuable in series, of
which 33,931,188 common shares and no preference shares were issued and
outstanding as of the date of this AIF. The following is a summary of the
material provisions attaching to the common shares and preference shares.
Common Shares
The holders of the common shares are entitled to receive notice of and to attend
all meetings of the shareholders of the Company and shall have one vote for each
common share held at all meetings of the shareholders of the Company, except for
meetings at which only holders of another specified class or series of shares
are entitled to vote separately as a class or series. Subject to the prior
rights of the holders of the preference shares or any other shares ranking
senior to the common shares, the holders of the common shares are entitled to
(a) receive any dividends as and when declared by the board of directors, out of
the assets of the Company properly applicable to the payment of dividends, in
such amount and in such form as the board of directors may from time to time
determine, and (b) receive the remaining property of the Company in the event of
any liquidation, dissolution or winding-up of the Company.
Preference Shares
The board of directors of the Company may issue the preferences shares at any
time and from time to time in one or more series, each series of which shall
have the designations, rights, privileges, restrictions and conditions fixed by
the directors. The preference shares of each series shall rank on a parity with
the preference shares of every other series, and shall be entitled to priority
over the common shares and any other shares of the Company ranking junior to the
preference shares, with respect to priority in the payment of dividends and the
return of capital and the distribution of assets of the Company in the event of
the liquidation, dissolution or winding-up of the Company.
5.2 Shareholder Rights Plan
Effective April 29, 2005, the board of directors of the Company (the "Board")
adopted a Shareholder Rights Plan (the "Rights Plan"). The Rights Plan was
implemented by way of a shareholder rights plan agreement (the "Rights Plan
Agreement") dated as of April 29, 2005 between the Company and Equity Transfer
Services Inc., as rights agent. The Rights Plan Agreement was approved by
shareholders of the Company at the annual and special meeting of shareholders
held on June 29, 2005.
The objectives of the Rights Plan are to ensure, to the extent possible, that
all shareholders of the Company are treated equally and fairly in connection
with any take-over bid for the Company. The Rights Plan discourages
discriminatory, coercive or unfair take-overs of the Company and gives the
Company's Board time if, in the circumstances, the Board determines it is
appropriate to take such time, to pursue alternatives to maximize shareholder
value in the event an unsolicited take-over bid is made for all or a portion of
the outstanding common shares of the Company (the "Common Shares").
The Rights Plan discourages coercive hostile take-over bids by creating the
potential that any Common Shares which may be acquired or held by such a bidder
will be significantly diluted. The potential for significant dilution to the
holdings of such a bidder can occur as the Rights Plan provides that all holders
of Common Shares who are not related to the bidder will be entitled to exercise
rights ("Rights") issued to them under the Rights Plan and to acquire Common
Shares at a substantial discount to prevailing market prices. The bidder or the
18
persons related to the bidder will not be entitled to exercise any Rights under
the Rights Plan. Accordingly, the Rights Plan will encourage potential bidders
to make take-over bids by means of a "Permitted Bid" (as such term is defined in
the Rights Plan Agreement) or to approach the Board to negotiate a mutually
acceptable transaction. The Permitted Bid provisions of the Rights Plan are
designed to ensure that in any take-over bid for outstanding Common Shares all
shareholders are treated equally and are given adequate time to properly assess
such take-over bid on a fully-informed basis.
The Board authorized the issuance of one Right in respect of each Common Share
outstanding at the close of business on April 29, 2005 (the "Record Time"). In
addition, the Board authorized the issuance of one Right in respect of each
additional Common Share issued after the Record Time. The Rights trade with and
are represented by the Company's Common Share certificates, including
certificates issued prior to the Record Time. Until such time as the Rights
separate from the Common Shares and become exercisable, Rights certificates will
not be distributed to shareholders. At any time prior to the Rights becoming
exercisable, the Board may waive the operation of the Rights Plan with respect
to certain events before they occur. The issuance of the Rights is not dilutive
until the Rights separate from the underlying Common Shares and become
exercisable or until the exercise of the Rights.
A copy of the Rights Plan Agreement can be obtained from SEDAR at www.sedar.com.
Reference is made to the Rights Plan Agreement for additional information with
respect to the Rights Plan.
ITEM 6: MARKET FOR SECURITIES
The Company's common shares are listed for trading on the Toronto Stock Exchange
(the "TSX") and on the American Stock Exchange, in each case under the symbol
"BAA". The Company's common shares commenced trading on the American Stock
Exchange on March 28, 2005 and commenced trading on the TSX on November 10,
2005. Prior to November 10, 2005, such shares traded on the TSX Venture
Exchange.
The following table sets forth the high, low and closing sale prices and volume
of trading of the Company's common shares for the months indicated, as reported
by the TSX Venture Exchange (until November 9, 2005) and by the TSX (after
November 9, 2005).
Month High Low Close Volume
----- ---- --- ----- ------
(Cdn$) (Cdn$) (Cdn$) (#)
2006
March (to March 24) 12.99 12.00 12.56 644,448
February 13.00 10.25 12.50 2,731,932
January 11.25 9.65 10.81 791,381
2005
December 10.00 9.35 9.85 897,689
November 9.62 8.06 9.40 1,195,016
October 9.00 8.05 8.50 341,536
September 9.00 6.45 8.70 828,049
August 7.05 6.50 6.50 769,046
July 6.75 3.80 6.75 3,180,255
June 4.00 3.50 4.00 56,804
19
Month High Low Close Volume
----- ---- --- ----- ------
(Cdn$) (Cdn$) (Cdn$) (#)
May 5.00 3.80 3.93 349,344
April 5.22 4.85 5.00 658,701
March 5.05 4.40 4.90 950,971
February 4.70 4.40 4.65 156,664
January 5.00 4.45 4.65 237,225
The closing price of the common shares of the Company on March 29, 2006 was
Cdn$12.89 per share, as reported by the TSX.
ITEM 7: ESCROWED SECURITIES
To the knowledge of the Company, no securities of the Company are held in
escrow.
ITEM 8: DIRECTORS AND OFFICERS
8.1 Name, Occupation and Security Holding
The following table sets forth, as of the date hereof, the name and municipality
of residence of each director and officer of the Company, as well as such
individual's current position(s) with the Company, principal occupation(s)
during the past five years and period of service as a director (if applicable).
Each director will hold office until the close of the next annual meeting of
shareholders of the Company unless his office is earlier vacated in accordance
with the by-law of the Company.
Name, Municipality of
Residence and Current
Position(s) with Banro Principal Occupation(s) During the Past Five Years Director Since
---------------------- -------------------------------------------------- --------------
John A. Clarke(1) (2) President of Nevsun Resources Ltd. (a mineral exploration February 3, 2004
West Vancouver, British and development company).
Columbia, Canada
Director
Peter N. Cowley President of the Company since June 2004; Managing Director January 13, 2004
Surrey, United Kingdom (Ashanti Exploration) of Ashanti Goldfields Company Limited
Chief Executive Officer, (a gold mining company) until May 2004.
President and a director
Arnold T. Kondrat Executive Vice President of the Company, Executive Vice May 3, 1994
Toronto, Ontario, Canada President of BRC Diamond Corporation (a diamond exploration
Executive Vice President and company) and Chairman of the Board of Nevada Bob's
a director International Inc. (an international franchisor).
20
Name, Municipality of
Residence and Current
Position(s) with Banro Principal Occupation(s) During the Past Five Years Director Since
---------------------- -------------------------------------------------- --------------
Richard J. Lachcik(1) Partner of Macleod Dixon LLP (a law firm). August 23, 1996
Oakville, Ontario, Canada
Director
Bernard R. van Rooyen(1)(2) Deputy Chairman of Mvelaphanda Resources Limited (a company June 16, 1997
Johannesburg, South Africa which holds major interests in public gold, platinum and
Director diamond mining companies ) from March 2004 to present;
President of the Company from November 1996 to January 2001;
director of various private and public companies engaged in
mining.
Simon F.W. Village Chairman of the Board of the Company since November 2004; March 8, 2004
Kent, United Kingdom Managing Director, Gold Investment Services, of the World
Chairman of the Board of Gold Council (an international marketing organization for
Directors and a director the gold industry formed and funded by the world's leading
gold mining companies) from September 2002 to October 2004;
Managing Director in charge of the South African securities
business of HSBC (James Capel) (an investment dealer) from
September 2000 to September 2002.
Geoffrey G. Farr Partner of Macleod Dixon LLP (a law firm). Not applicable
Toronto, Ontario, Canada
Secretary
Martin D. Jones Vice President, Corporate Development of the Company since Not applicable
Toronto, Ontario, Canada October 2004; prior thereto, Vice President with Advance
Vice President, Corporate Planning/MS&L (a public relations firm).
Development
Donat K. Madilo Treasurer of the Company, Treasurer of BRC Diamond Not applicable
Mississauga, Ontario, Canada Corporation (a diamond exploration company) and Treasurer of
Treasurer Nevada Bob's International Inc. (an international
franchisor).
J. Gregory Short Self-employed Chartered Accountant. Not applicable
Aurora, Ontario, Canada
Chief Financial Officer
Michael B. Skead Vice President, Exploration of the Company since August Not applicable
Rondebosch, South Africa 2005; exploration manager for the Company from May 2004 to
Vice President, Exploration August 2005; prior to May 2004, self-employed geological
consultant.
- -----------------
(1) Member of the audit committee of the board of directors of the Company (the
"Audit Committee").
(2) Member of the compensation committee of the board of directors of the
Company.
(3) Macleod Dixon LLP acts as counsel to the Company.
21
As of the date hereof, the directors and officers of the Company as a group
beneficially own, directly or indirectly, or exercise control or direction over,
2,820,862 common shares of the Company, representing 8.31% of the issued and
outstanding common shares of the Company as of the date hereof.
8.2 Corporate Cease Trade Orders or Bankruptcies
No director or officer of Banro, or a shareholder holding a sufficient number of
securities of Banro to affect materially the control of Banro, is, or within the
10 years before the date of this AIF has been, a director or officer of any
company that, while that person was acting in that capacity,
(a) was the subject of a cease trade or similar order, or an order that
denied the relevant company access to any exemption under securities
legislation, for a period of more than 30 consecutive days;
(b) was subject to an event that resulted, after the director or officer
ceased to be a director or officer, in the company being the subject
of a cease trade or similar order or an order that denied the relevant
company access to any exemption under securities legislation, for a
period of more than 30 consecutive days; or
(c) 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,
save as described below.
As a result of not filing its audited financial statements for the year ended
December 31, 2004 by the filing deadline, Mediterranean Resources Ltd. (which
was then named Mediterranean Minerals Corp.) ("Mediterranean") was made subject
to an issuer cease trade order issued by the British Columbia, Alberta and
Ontario Securities Commissions which was revoked on August 17, 2005 (following
the filing of the required records). Mr. John A. Clarke, a director of the
Company, is a director of Mediterranean and was a director of Mediterranean
during the time the said cease trade order was in effect.
8.3 Personal Bankruptcies
No director or officer of the Company, or a shareholder holding a sufficient
number of securities of the Company to affect materially the control of the
Company, or a personal holding company of any such persons has, within the 10
years before the date of this AIF, 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, officer, shareholder or personal holding company.
8.4 Penalties or Sanctions
No director or officer of the Company, or a shareholder holding a sufficient
number of securities of the Company to affect materially the control of the
Company, has
(a) been subject to any penalties or sanctions imposed by a court relating
to Canadian securities legislation or by a securities regulatory
authority or has entered into a settlement agreement with a securities
regulatory authority; or
22
(b) been subject to 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.
8.5 Conflicts of Interest
To the best of the Company's knowledge, there are no existing or potential
material conflicts of interest between the Company or a subsidiary of the
Company and a director or officer of the Company or a subsidiary of the Company.
ITEM 9: AUDIT COMMITTEE INFORMATION
The Audit Committee's Charter
The text of the Audit Committee's charter is attached to this AIF as Schedule
"A".
Composition of the Audit Committee
The members of the Audit Committee are as follows: John A. Clarke, Richard J.
Lachcik and Bernard R. van Rooyen. Each such member is "financially literate"
within the meaning of Multilateral Instrument 52-110 - Audit Committees ("MI
52-110"). Each of Mr. Clarke and Mr. van Rooyen is "independent" within the
meaning of MI 52-110 and Mr. Lachcik is not "independent" within the meaning of
MI 52-110.
Relevant Education and Experience of Audit Committee Members
The following is a description of the education and experience of each Audit
Committee member that is relevant to the performance of his responsibilities as
an Audit Committee member:
John A. Clarke
- --------------
From 1997 to present, Mr. Clarke has been President and Chief Executive Officer
of Nevsun Resources Ltd., a mineral exploration and development company which is
listed on the Toronto Stock Exchange and the American Stock Exchange.
From 1988 to 1993, Mr. Clarke was with Ashanti Goldfields Company Limited
("Ashanti") engaged as a General Manager in a range of roles, including
strategic planning, mine production and the technical/administrative support of
mining operations. From 1993 to 1997, Mr. Clarke was an Executive Director of
Ashanti and was in charge of business development, including company strategic
planning, Africa-wide exploration programs, and the acquisition of listed
companies. His roles with Ashanti required experience and understanding of all
of the issues required in assessing/analyzing and preparing technical and
financial plans and statements for mining and exploration operations.
Mr. Clarke holds a Masters of Business Administration from Middlesex Polytechnic
(now Middlesex University). This degree included in-depth courses in accounting
principles, standards and practices.
Richard J. Lachcik
- ------------------
Mr. Lachcik has been practising corporate and securities law in Toronto for over
22 years, and has extensive experience in representing public companies. Mr.
Lachcik has been a member of the board of directors of many junior mineral
exploration companies such as Banro, and been a member of the audit committee of
several of these companies.
23
Bernard R. van Rooyen
- ---------------------
From 1980 to 1990, Mr. van Rooyen was Executive Director, Corporate Finance and
Non-Technical Services to Gold Fields of South Africa Limited, an international
mining company listed in Johannesburg, New York, London and various European
Exchanges. He was responsible for, among other things, the entire financial
system from financial accounts through management accounts, cost control and
management information to the treasury.
From 1998 to 2005, Mr. van Rooyen served as a non-executive director on the
audit committee of Gold Fields Limited, an international gold producer with a
market capitalization of approximately US$10 billion and the successor to Gold
Fields of South Africa Limited. Gold Fields Limited is listed in Johannesburg,
New York, London and Frankfurt.
Mr. van Rooyen is currently a non-executive member of the audit committees of
Trans Hex Group, a producer and marketer of diamonds listed on the JSE
Securities Exchange.
Mr. van Rooyen was President of the Company from November 1996 to January 2001.
Reliance on Certain Exemptions
At no time since the commencement of the year ended December 31, 2005 has the
Company relied on an exemption in section 2.4 of MI 52-110 (De Minimis Non-audit
Services), section 3.2 of MI 52-110 (Initial Public Offerings), section 3.3(2)
of MI 52-110 (Controlled Companies), section 3.4 of MI 52-110 (Events Outside
Control of Member), section 3.5 of MI 52-110 (Death, Disability or Resignation
of Audit Committee Member) or section 3.6 of MI 52-110 (Temporary Exemption for
Limited and Exceptional Circumstances), on an exemption from MI 52-110, in whole
or in part, granted under Part 8 of MI 52-110 (Exemptions) or on section 3.8 of
MI 52-110 (Acquisition of Financial Literacy).
Audit Committee Oversight
At no time since the commencement of the Company's financial year ended December
31, 2005 was a recommendation of the Audit Committee to nominate or compensate
an external auditor not adopted by the board of directors of the Company.
Pre-Approval Policies and Procedures
The Audit Committee has not adopted specific policies or procedures for the
engagement of non-audit services.
External Auditors Service Fees
The following summarizes the total fees billed by BDO Dunwoody LLP, the external
auditors of the Corporation, for the financial years of the Company ended
December 31, 2005 and December 30, 2004:
2005 2004
---- ----
Audit Fees $58,850 $50,290
Audit-Related Fees Nil $3,210(1)
Tax Fees Nil Nil
All Other Fees $10,079(2) $5,136(3)
24
- --------------------
(1) The services comprising these fees related to a reconciliation of
differences between Canadian and United States generally accepted
accounting principles.
(2) The services comprising these fees related to services carried out in
connection with the Company's applications to list its common shares on the
American Stock Exchange and on the Toronto Stock Exchange.
(3) The services comprising these fees related to services carried out in
connection with the Company's application to list its common shares on the
American Stock Exchange.
ITEM 10: PROMOTERS
No person or company has been, within the three most recently completed
financial years or during the current financial year, a "promoter" (as such term
is defined under applicable Canadian securities laws) of the Company.
ITEM 11: LEGAL PROCEEDINGS
There are currently no legal proceedings involving the Company or its
properties, and the Company knows of no such proceedings currently contemplated.
ITEM 12: INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
No director or officer of the Company or person or company beneficially owning,
directly or indirectly, or exercising control or direction over, more than 10%
of the outstanding common shares of the Company, or any of their respective
associates or affiliates, had or has any material interest, directly or
indirectly, in any transaction within the three most recently completed
financial years or during the current financial year that has materially
affected or would materially affect the Company.
ITEM 13: TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's common shares is Equity
Transfer Services Inc. at its office in Toronto, Ontario.
ITEM 14: MATERIAL CONTRACTS
The following are the only material contracts, other than contracts entered into
in the ordinary course of business, which have been entered into by Banro within
the most recently completed fiscal year or before the most recently completed
fiscal year but are still in effect:
1. the Mining Convention (as amended in connection with the Settlement
Agreement) dated February 13, 1997 among the DRC government, SOMINKI
and the Company (see item 2.1 of this AIF);
2. the Settlement Agreement dated April 18, 2002 between the DRC
government and the Company (see item 2.1 of this AIF); and
3. the Rights Plan Agreement dated as of April 29, 2005 between the
Company and Equity Transfer Services Inc., as rights agent (see item
5.2 of this AIF).
25
ITEM 15: INTERESTS OF EXPERTS
15.1 Names of Experts
The following have prepared or certified a statement, report or valuation
described or included in a filing, or referred to in a filing, made by the
Company under National Instrument 51-102 during, or relating, to the financial
year of the Company ended December 31, 2005:
(a) BDO Dunwoody LLP, Chartered Accountants, who provide the auditors'
report accompanying the Company's annual consolidated financial
statements (BDO Dunwoody LLP has confirmed to the Company its
independence);
(b) Michael B. Skead, who is Vice President, Exploration of the Company
and the "qualified person" (as such term is defined in NI 43-101) for
the purpose of each of the 2006 Twangiza Technical Report, the 2006
Lugushwa Technical Report and the 2006 Namoya Technical Report;
(c) Martin F. Pittuck and A. Gareth O'Donovan, who are the "qualified
persons" (as such term is defined in NI 43-101) for the purpose of the
SRK Technical Report; and
(d) Christopher O. Naas, who is the "qualified person" (as such term is
defined in NI 43-101) for the purpose of the CME Technical Report.
15.2 Interests of Experts
To the knowledge of the Company, none of the above-mentioned individuals
beneficially owns, directly or indirectly, or exercises control or direction
over, 1% or more of the outstanding common shares of the Company. Mr. Skead
currently holds 150,000 stock options of the Company granted pursuant to the
Company's stock option plan.
ITEM 16: ADDITIONAL INFORMATION
Additional information concerning the Company may be found on SEDAR at
www.sedar.com. Additional information, including directors' and officers'
remuneration and indebtedness, principal holders of the Company's securities and
securities authorized for issuance under equity compensation plans, is contained
in the Company's information circular for its most recent annual meeting of
shareholders that involved the election of directors. Additional financial
information is contained in the Company's audited consolidated financial
statements and management's discussion and analysis for the year ended December
31, 2005.
26
Schedule "A"
Banro Corporation
Terms of Reference
Audit Committee of the Board of Directors
Banro Corporation
November 23, 2004
- --------------------------------------------------------------------------------
Mandate
- -------
A. Role and Objectives
-------------------
The Audit Committee (the "Committee") is a committee of the Board of
Directors (the "Board") of Banro Corporation ("Banro") established for the
purpose of overseeing the accounting and financial reporting process of
Banro and external audits of the consolidated financial statements of
Banro. In connection therewith, the Committee assists the Board in
fulfilling its oversight responsibilities in relation to Banro's internal
accounting standards and practices, financial information, accounting
systems and procedures, financial reporting and statements and the nature
and scope of the annual external audit. The Committee also recommends for
Board approval Banro's audited annual consolidated financial statements and
other mandatory financial disclosure.
Banro's external auditor is accountable to the Board and the Committee as
representatives of shareholders of Banro. The Committee shall be directly
responsible for overseeing the relationship of the external auditor. The
Committee shall have such access to the external auditor as it considers
necessary or desirable in order to perform its duties and responsibilities.
The external auditor shall report directly to the Committee.
The objectives of the Committee are as follows:
1. to be satisfied with the credibility and integrity of financial
reports;
2. to support the Board in meeting its oversight responsibilities in
respect of the preparation and disclosure of financial reporting,
including the consolidated financial statements of Banro;
3. to facilitate communication between the Board and the external auditor
and to receive all reports of the external auditor directly from the
external auditor;
4. to be satisfied with the external auditor's independence and
objectivity; and
5. to strengthen the role of independent directors by facilitating
in-depth discussions between members of the Committee, management and
Banro's external auditor.
B. Composition
-----------
1. The Committee shall comprise at least 3 directors, none of whom shall
be an officer or employee of Banro or any of its subsidiaries or any
affiliate thereof. Each Committee member shall satisfy the
independence, financial literacy and experience requirements of
applicable securities laws, rules or guidelines, any applicable stock
exchange requirements or guidelines and any other applicable
regulatory rules. In particular, each member of the Committee shall
have no direct or indirect material relationship with Banro or any
affiliate thereof which could reasonably interfere with the exercise
of the member's independent judgment. Determinations as to whether a
particular director satisfies the requirements for membership on the
Committee shall be made by the full Board.
2. Members of the Committee shall be appointed by the Board. Each member
shall serve until his successor is appointed, unless he shall resign
or be removed by the Board or he shall otherwise cease to be a
director of Banro.
3. The Chair of the Committee may be designated by the Board or, if it
does not do so, the members of the Committee may elect a Chair by vote
of a majority of the full Committee membership. The Committee Chair
shall satisfy the independence, financial literacy and experience
requirements (as described above).
4. The Committee shall have access to such officers and employees of
Banro and to such information respecting Banro as it considers to be
necessary or advisable in order to perform its duties and
responsibilities.
C. Meetings
--------
1. At all meetings of the Committee, every question shall be decided by a
majority of the votes cast. In case of an equality of votes, the
matter will be referred to the Board for decision.
2. A quorum for meetings of the Committee shall be a majority of its
members.
3. Meetings of the Committee shall be scheduled at least quarterly and at
such other times during each year as it deems appropriate. Minutes of
all meetings of the Committee shall be taken. The Chief Financial
Officer shall attend meetings of the Committee, unless otherwise
excused from all or part of any such meeting by the Committee Chair.
The Chair of the Committee shall hold in camera sessions of the
Committee, without management present, at every meeting.
4. The Committee shall report the results of meetings and reviews
undertaken and any associated recommendations to the Board.
5. The Committee shall meet periodically with Banro's external auditor
(in connection with the preparation of the annual consolidated
financial statements and otherwise as the Committee may determine),
part or all of each such meeting to be in the absence of management.
A-2
Responsibilities
- ----------------
As discussed above, the Committee is established to assist the Board in
fulfilling its oversight responsibilities with respect to the accounting
and financial reporting processes of Banro and external audits of Banro's
consolidated financial statements. In that regard, the Committee shall:
1. satisfy itself on behalf of the Board with respect to Banro's internal
control systems including identifying, monitoring and mitigating
business risks as well as compliance with legal, ethical and
regulatory requirements. The Committee shall also review with
management, the external auditor and, if necessary, legal counsel, any
litigation, claim or other contingency (including tax assessments)
that could have a material effect on the financial position or
operating results of Banro (on a consolidated basis), and the manner
in which these matters may be, or have been, disclosed in the
financial statements;
2. review with management and the external auditor the annual
consolidated financial statements of Banro, the reports of the
external auditor thereon and related financial reporting, including
Management's Discussion and Analysis and any earnings press releases,
(collectively, "Annual Financial Disclosure") prior to their
submission to the Board for approval. This process should include, but
not be limited to:
(a) reviewing changes in accounting principles, or in their
application, which may have a material impact on the current or
future year's financial statements;
(b) reviewing significant accruals, reserves or other estimates;
(c) reviewing accounting treatment of unusual or non-recurring
transactions;
(d) reviewing adequacy of reclamation fund;
(e) reviewing disclosure requirements for commitments and
contingencies;
(f) reviewing financial statements and all items raised by the
external auditor, whether or not included in the financial
statements; and
(g) reviewing unresolved differences between Banro and the external
auditor.
Following such review, the Committee shall recommend to the Board for
approval all Annual Financial Disclosure;
3. review with management all interim consolidated financial statements
of Banro and related financial reporting, including Management's
Discussion and Analysis and any earnings press releases, (collectively
"Quarterly Financial Disclosure") and, if thought fit, approve all
Quarterly Financial Disclosure;
4. be satisfied that adequate procedures are in place for the review of
Banro's public disclosure of financial information extracted or
derived from Banro's financial statements, other than Annual Financial
Disclosure or Quarterly Financial Disclosure, and shall periodically
assess the adequacy of those procedures;
A-3
5. review with management and recommend to the Board for approval, any
financial statements of Banro which have not previously been approved
by the Board and which are to be included in a prospectus of Banro;
6. review with management and recommend to the Board for approval,
Banro's Annual Information Form;
7. with respect to the external auditor:
(a) receive all reports of the external auditor directly from the
external auditor;
(b) discuss with the external auditor:
(i) critical accounting policies;
(ii) alternative treatments of financial information within GAAP
discussed with management (including the ramifications
thereof and the treatment preferred by the external
auditor); and
(iii) other material, written communication between management
and the external auditor;
(c) consider and make a recommendation to the Board as to the
appointment or re-appointment of the external auditor, being
satisfied that such auditor is a participant in good standing
pursuant to applicable securities laws;
(d) review the terms of engagement of the external auditor, including
the appropriateness and reasonableness of the auditor's fees and
make a recommendation to the Board as to the compensation of the
external auditor;
(e) when there is to be a replacement of the external auditor, review
with management the reasons for such replacement and the
information to be included in any required notice to securities
regulators and recommend to the Board for approval the
replacement of the external auditor along with the content of any
such notice;
(f) oversee the work of the external auditor in performing its audit
or review services and oversee the resolution of any
disagreements between management and the external auditor;
(g) review and discuss with the external auditor all significant
relationships that the external auditor and its affiliates have
with Banro and its affiliates in order to determine the external
auditor's independence, including, without limitation:
(i) requesting, receiving and reviewing, on a periodic basis,
written or oral information from the external auditor
delineating all relationships that may reasonably be thought
A-4
to bear on the independence of the external auditor with
respect to Banro;
(ii) discussing with the external auditor any disclosed
relationships or services that the external auditor believes
may affect the objectivity and independence of the external
auditor; and
(iii) recommending that the Board take appropriate action in
response to the external auditor's information to satisfy
itself of the external auditor's independence;
(h) as may be required by applicable securities laws, rules and
guidelines, either:
(i) pre-approve all non-audit services to be provided by the
external auditor to Banro (and its subsidiaries, if any),
or, in the case of de minimus non-audit services, approve
such non-audit services prior to the completion of the
audit; or
(ii) adopt specific policies and procedures for the engagement of
the external auditor for the purposes of the provision of
non-audit services;
(i) review and approve the hiring policies of Banro regarding
partners, employees and former partners and employees of the
present and former external auditor of Banro;
8. (a) establish procedures for:
(i) the receipt, retention and treatment of complaints received
by Banro regarding accounting, internal accounting controls
or auditing matters; and
(ii) the confidential, anonymous submission by employees of Banro
of concerns regarding questionable accounting or auditing
matters; and
(b) review with the external auditor its assessment of the internal
controls of Banro, its written reports containing recommendations
for improvement, and Banro's response and follow-up to any
identified weaknesses;
9. with respect to risk management, be satisfied that Banro has
implemented appropriate systems of internal control over financial
reporting (and review senior management's assessment thereof) to
ensure compliance with any applicable legal and regulatory
requirements;
10. review annually with management and the external auditor and report to
the Board on insurable risks and insurance coverage; and
11. engage independent counsel and other advisors as it determines
necessary to carry out its duties and set and pay the compensation for
any such advisors.
A-5