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

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

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

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

Currency

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

Foreign Private Issuer Filings

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

Glossary of Technical Terms

PART I

Item 1.

Identity of Directors, Senior Management and Advisers

A.

Directors and Senior Management:

Not applicable.

B.

Advisers

Not applicable.

Item 2.

Offer Statistics and Expected Timetable

Not applicable.

Item 3.

Key Information

A.

Selected Financial Data

The audited financial statements for the Company’s fiscal years ended August 31, 2016, 2015, 2014, 2013 2012 and 20112012 are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.  The following selected financial data is based on financial statements prepared in accordance with IFRS and is presented for the threefive most recent financial years.  Unless stated otherwise, reference to dollar amounts shall mean Canadian dollars.

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

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

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

Exchange Rates

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

The following table sets forth the high and low exchange rate for the past six months.  As of August 31, 2015,2016, the exchange rate was CDN $1.0858$1.3122 for each US$1.00.

B.

Capitalization and Indebtedness

Not applicable.

C.

Reasons for the Offer and Use of Proceeds

Not applicable.

D.

Risk Factors

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

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

Risks relating to the Company

Risks Relating to the Company

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

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

·

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

·

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

·

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

·

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

·

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

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

The Company has not been profitable since its inception.  For the fiscal year ended August 31, 2015,2016, the Company had a net loss of $8,995,697$12,781,902 and an accumulated deficit on August 31, 20152016 of $77,970,955.$90,600,819.  The Company has never generated revenues and does not expect to generate revenues from operations until one or more of its properties are placed in production.  There is a risk that none of the Company’s properties will be placed in production.

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

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

The Company has uninsurable risks.

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

The Company depends on key management personnel.

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

The Company will need additional capital.

As at August 31, 2015,2016, the Company had cash and cash equivalents of $1,552,416$84,913 and working capital deficiency of $4,684,253.$11,836,214.  However, the Company will continue to incur exploration costs to fund its plan of operations and may need to raise additional capital.  Ultimately, the Company’s ability to continue its exploration activities depends in part on the Company’s ability to commence operations and generate revenues or to obtain financing through joint ventures, debt financing, equity financing, production sharing agreements or some combination of these or other means.  Further the raising of additional capital by the Company may dilute existing shareholders.

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

Based on the Company’s current funding sources and taking into account the working capital position and capital requirements at August 31, 2015,2016, these factors indicate the existence of a material uncertainty that

raises substantial doubt about the Company’s ability to continue as a going concern and is dependent on the Company raising additional debt or equity financing. The Company must obtain additional funding in 2016

2017 in order to continue development and construction of the Buckreef Project. Furthermore, the Company is currently negotiating project financing terms with a number of lending institutions, which the Company believes will result in the Company obtaining the project financing required to fund the construction of the Buckreef Project. However there is no assurance that such additional funding and/or project financing will be obtained or obtained on commercially favourable terms.

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

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

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

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

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

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

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

Risks relating to the Mining Industry

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

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

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

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

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

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

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

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

The Company may not have clear title to its properties.

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

Mining exploration, development and operating activities are inherently hazardous.

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

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

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

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

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

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

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

Risks relating to the Market

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

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

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

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

The Company’s business activities are conducted in Tanzania.

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

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

of the Company and may materially adversely affect its business. Investors should assess the political and regulatory risks related to the Company’s foreign country investments.  The Company’s operations in Tanzania are also subject to various levels of economic, social and other risks and uncertainties that are different from those encountered in North America.  The Company’s operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export

controls, restrictions on foreign exchange and repatriation, income taxes, expropriation of property, environmental legislation and mine safety.  Other risks and uncertainties include extreme fluctuations in currency exchange rates, high rates of inflation, labour unrest, risks of war or civil unrest, government and civil unrest, regional expropriation and nationalization, renegotiation or nullification of existing concessions, licences, permits and contracts, illegal mining, corruption, hostage taking, civil war and changing political conditions and currency controls.  Infectious diseases (including Ebola virus, malaria, HIV/AIDS and tuberculosis) are also major health care issues where the Company operates.

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

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

The Company is subject to risks related to global financial conditions.

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

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

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

Risks relating to the Securities of the Company

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

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

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

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

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

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

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

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

The market price of the common shares is likely to be highly volatile and may fluctuate significantly in response to various factors and events, many of which the Company cannot control. The stock market in general, and the market for mining company stocks in particular, has historically experienced significant price and volume fluctuations. Volatility in the market price for a particular issuer’s securities has often

been unrelated or disproportionate to the operating performance of that issuer. Market and industry factors may depress the market price of the Company’s securities, regardless of operating performance. Volatility in the Company’s securities price also increases the risk of securities class action litigation.

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

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

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

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

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

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

Item 4.

Information on the Company

A.

History and Development of the Company

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

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

For the year ended August 31, 2015,2016, the Company reported a net loss of $8,995,697.$12,781,902.  Included in the net loss is $2,223,843$3,516,268 of mineral properties and deferred exploration expenses that was written off relating to abandoned mineral properties.  The Company incurred deferred exploration expenditures of $3,331,566$1,168,935 during the year ended August 31, 2015.2016.

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

Significant Acquisitions and Significant Dispositions

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

The Company awarded a contract to Venmyn Independent Projects (Pty) Limited, a subsidiary of Venmyn Rand (Pty) Limited, to undertake an update of the21 August 2012National Instrument 43-101 Independent Technical Report on the Buckreef Project in Tanzania.  The updatedreport is dated February 24, 2014 (the

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

The Company completed the pilot heap leach pad construction at its Buckreef redevelopment gold project, located in the Lake Victoria Goldfields of Tanzania for a total cost of $1,682,355.$1,496,078.  Construction began in April 2014 and was completed as of September 2, 2014, and was overseen by civil contractor Yale-Constech Company Limited.  Four heap leach cells with dimensions of 100 metres by 30 metres each are complete. This will support the processing of stacked ore delivered from the Buckreef South Pit. The Company has also completed a significant portion of the Buckreef South Pit preparation, including grade control drilling, maps and roads.

B.

Business Overview

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

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

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

Plan of Operations

Exploration Activities

All of the properties in which the Company holds an interest are in the exploration, preliminary economic assessment or extraction (pre-production) stages of mining.  Mineral exploration and extraction involves a high degree of risk and few properties, which are explored, are ultimately developed into producing mines.  

There is no assurance that the Company’s mineral exploration activities will result in any discoveries of commercial bodies of ore.  The long-term profitability of the Company’s operations will be in part directly related to the cost and success of its exploration programs, which may be affected by a number of factors beyond the control of the Company.

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

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

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

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

Highlights for the year ended August 31, 20152016

Financial:

·

On July 8, 2015,September 1, 2016, the Company announced that it successfully secured unrestricted $1.53closed the first tranche of a $5 Million private placement of securities with Crede CG III, Ltd.

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

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

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

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

·

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

·

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

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

·

Under the terms of the loan agreements, the gold loans are for a period of one year, are subject to renewal, and carry an 8% interest rate payable quarterly. The bullion loans may be repaid in cash or common shares of the Company or gold in specified form at the lenders discretion.form.  If the bullion loans are paid back by bullion, the valuation date for such bullion will be the date of the loan agreements. The bullion loans may be converted into common shares of the Company at the sole discretion of the lenders at an exercise price of US$0.276580.50 per share.  Interest is payable quarterly, either in cash or in shares at a price of US$0.276580.375 per share. There is no prepayment penalty.

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

·

Under the terms of the loan agreements, the gold loans are for a period of one year, are subject to renewal, and carry an 8% finder’s feeinterest rate payable quarterly. The bullion loans may be repaid in cash or common shares of $122,400 wasthe Company or gold in specified form.  If the bullion loans are paid back by bullion, the issuancevaluation date for such bullion will the date of 442,548the loan agreements. The bullion loans may be converted into common shares of the Company at the sole discretion of the lenders at an exercise price of US$0.40 per share.  Interest is payable quarterly, either in cash or in shares at a deemedprice of US$0.39 per share. There is no prepayment penalty.

Buckreef Project:Mine Development and Operations

Q1_2016 (September 2015 – November 2015)

·

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

·

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

pricecooperate on this non-contract item, the Company did what it preferred not to do - pour prematurely to proper market price.The Company mined an additional total of US$0.27658 per share.5,895t ore gold ore grading at 1.31g/t from the South pit pilot operations. Cumulative Total Ore stockpiled respectively on ROMPAD, Pads# 1, 2 & 3 as of 30th November, 2015 was73,710.66t @ 1.39g/t Au (3,300.42Ozs); 20,931.75t @ 2.29g/t Au (1,541.77Ozs);  12,943.78t @ 2.78g/t Au (1,155.55Ozs) & 12,087.90t @ 3.64g/t Au (1,416.65Ozs). Cumulative Total Ore mined from the South Pit (Rompad + Heap Leach Pads) as of 30th November, 2015 stood at119,725.59t @ 1.86g/t Au (7,161.24Ozs).

·

AsThe Company processed an additional total of June 16, 2015,618m³ with an average grade of 0.50mg/L Au of pregnant leachate solution from the lender redeemedPLS pond through 3 carbon columns on the remaining outstanding balanceCIC process plant during the quarter. In-house electrowinning of US$632,217 of convertible senior notes payable (pursuant to the convertible senior note financing discussed below) into shares, which resultedpregnant carbon chips was also conducted resulting in the issuance of 2,011,383 common shares with a fair value of US$721,462 reducing the balance of convertible senior notes to $Nil.an estimated cumulative Au-in-wire-wool ready for smelting at ~8.563kg (275Ozs).

·

On March 25, 2015,The Company conducted metallurgical test-work on a 3.9 tonne bulk sample (Buckreef South/Main oxide/transition ore-2t and Buckreef Main Pit sulphide ore-1.9t) with a reputable laboratory in South Africa. The results indicated a very promising 36-40% fine gold component that can be recovered (90%) by simple gravity recovery processing from all three types of ores tested. Overall leaching results returned recoveries in the Company amendedlow 90%. The detailed analytical findings in the termsreport are being utilized to fine tune the final settings of its convertible senior note financing, the first drawdown from escrow under which successfully closed on December 29, 2014.new Gravity-CIL process plant proposed for the commercial operation of the Buckreef Mine.

Under the original financing terms, notes in the principal amount of US$10,000,000 were issued at an 8% discount, yielding an initial funding amount of US$9,200,000. The initial (closing) drawdown from escrow was US$1,766,558, and the balance of the funded amount (less expenses of issue) was placed in escrow to be available for future drawdowns, subject to the Company meeting certain financial ratios. The notes were to bear interest at 8% per annum, payable monthly.

The outstanding principal at the time of the amendment was US$9,250,000 representing the original USD$10,000,000 less the payment made as part of the lenders “mandatory redemption option”. The previously escrowed funds were returned to the lender -- under the amended financing, there is no escrow of funds -- and the outstanding principal amount of the notes was reduced to US$1,450,000. Interest at 8% per annum has thereafter been calculated on the reduced principal amount only, effective from March 1, 2015. A maximum of US$300,000 in cash was repayable in AprilQ2_2016 (December 2015 pursuant once again to the lender’s "mandatory redemption option."

The reduced amount of outstanding notes remained convertible at the option of the lender at 115% of the 5-day volume-weighted average trading price on the NYSE MKT of the Company's common shares as at December 9, 2014 (being US$0.98). The terms of the 982,143 share purchase warrants issued to the lender on closing are unchanged; they remain exercisable for 5 years at the conversion price, and the lender may also opt to receive interest in common shares in lieu of cash at that price. The maturity of the notes remained 24 months prepayable at the option of the Company 6 months after the original closing. The lender was entitled to resume mandatory redemptions of up to US$750,000 monthly commencing in May 2015 payable in cash or, subject to registration and certain financial criteria, shares at the option of the Company (at a price based on 90% of the then-current volume weighted average trading price).  As noted, the lender opted to redeem the entire outstanding principal in shares and the loan is now fully repaid.

The lender will be entitled to advance up to an additional US$4,000,000 to the Company in exchange for 8% discount notes subject to the same maturity and repayment terms (and entitlement to share purchase warrants) as currently apply, with a conversion price of US$0.98, subject to downward adjustment to US$0.50, from and after September 30, 2015, under certain market conditions. In consideration of the amendments agreed to, the lender received 500,000 common shares of the Company.– February 2016)

·

On December 29, 2014,In Q2 2016 (Dec 2015 – Feb 2016), The Honourable Deputy Minister of Energy and Minerals paid a surprise visit to the Buckreef premises on the 4^th of January 2016 where he was received by JK Kahama, Pius Dominick and Tony Minde for a quick brief of the project. He however laid down some verbal requests pertaining to the need to set aside some areas with limited economic potential for us for small scale miners to be allocated. He also stressed the need for the mining operations to resume within 14 days of his despite being informed the workers were due back on site on the 6^th January as they had been on their annual Xmas break. A third request to smelt whatever gold in wire-wool we had was also stated as it was deemed the state was losing out on the royalty due from whatever we had in stock.

·

The Company subsequently conducted its first smelting and gold pour from the pilot heap leach operations at Buckreef Gold mine in February 2016 where it recovered 5,863.20grams (188.51Ozs) of gold dore with an averaged purity of 91.64%. The smelting was conducted in the presence of authorities from the TMAA, MEM and TRA (Customs & Revenue) and gold dore was successfully exported to the Company closedagent in Zurich for further processing after payment of royalties due to the issuance of US$10,000,000 in convertible senior notes and up to 3,642,857 common share purchase warrants to an institutional lender. The facility was increasable to US$15,000,000, subject to financial criteria.  Forefront Capital acted as Placement Agent.government.

The notes were issuable at an 8% discount, with an initial funding amount of US$9,200,000. The initial closing drawdown was US$1,766,588. Subsequent drawdowns were based on meeting certain financial conditions, including·

Force Majeure:

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

i.

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

US$1,050,000with an unreasonable 14 days of notice period for compliance or else the Company would lose some of its licenses.

ii.

The recurrent and intermittent invasions and forced occupation by several hundred illegal miners of the Company’s properties including the South Pit, Eastern Porphyhry, Bingwa, Tembo and Mbagala prospects all within the active and enlarged Buckreef Special Mining License immediately after the 14-day deadline and also over a quarterly period. The notes bear interest at 8% per annum, payable monthly.

The notes were convertible at the optionperiod of the lender at a price of US$0.98. The 982,143warrants issued to the lender on closing are exercisable for 5 years at the conversion price of US$0.98, and any warrants issued to the lender in future will be exercisable at 115% of the 5-day volume-weighted average trading price (“ VWAP ”) of the common shares on the 5 trading days immediately preceding the date of issue.  The lender may also opt to receive interest in common shares in lieu of cash at US $0.98 per share.The notes mature in 24 months and are prepayable in full (if the prepayment amount is funded by new debt) or in part (if the prepayment amount is funded by equity) at the option of the Company after 6 months at a price equal to 107% of the principal being repaid .. The lender had the right to redeem 7.5% of principal monthly commencing in March, 2015 payable in cash or shares at the option of the Company (at a price based on 90% of the then-current volume weighted average trading price) , subject to certain conditions, including that the VWAP of the common shares exceeds US$0.60 per share on the payment date and on each of the 20 trading days immediately preceding such date, and that an SEC registration statement is effective for resale of the common shares issuable under the notes ..time since initial occupancy.

In order to show willingness to continue with the project,

a.

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

b.

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

Operational:Q3_2016 (March 2016 – May 2016)

·

Pilot pre-production open-cutIn Q3 2016 (March – May 2016), no mining at Buckreefactivities were conducted on the South Pit (host to 207,000 tonnespit as the force majeure was still in effect. Cumulative Total Ore stockpiled respectively on ROMPAD, Pads# 1, 2 & 3 as of oxide ore with an average gold grade of 1.54g/t) commenced in late October 2014 up to 31^st August 2015 as per plan. Up to 31^st August 2015, a total of 113,831 tonnes with an average gold grade30th May, 2016 was73,710.66t @ 1.89 g/1.39g/t Au for 6,913 ounces of gold were extracted(3,300.42Ozs); 20,931.75t @ 2.29g/t Au (1,541.77Ozs);  12,943.78t @ 2.78g/t Au (1,155.55Ozs) & 12,087.90t @ 3.64g/t Au (1,416.65Ozs). Cumulative Total Ore mined from the South pit. The mined ore was stockpiled piled onto the ROMPADPit (Rompad + Heap Leach Pads) as follows; 36,362 tonnes @4.03 g/of 30th May, 2016 stood at119,725.59t @ 1.86g/t classified as High Grade ore (HG), 3,083 tonnes @2.00g/t classified as Medium Grade ore (MG) and 72,385 tonnes @0.75g/t classified as Low Grade ore (LG)Au (7,161.24Ozs).

·

ConstructionThe Company however commenced phased construction of the four Heap Leach pads and solution ponds was commenced and completed during the reporting period. Installation of protective Geo-textile and HDPE membrane liners on the walls and floorsgravity recovery component of the padsproposed new CIL process plant.  This comprised installation of the crusher circuit units, refurbishment and installation of the solution pondsgravity recovery scrubber, nugget trap and diestar table.  Preliminary testing of the effectiveness and functionality of the circuit was also completed essentially astested using a mandatory environmental safe-guard. The HDPE material is impervious to solutions and liquids hence protect the surroundings from any poisonous chemical leakagestemporary 1m long Diestar table recovered from the ponds or the pads into the sub-surface strata.  Kigosi camp. Purchase and installation of a 6m-long Diestar table to afford reasonable commercial production trials is underway.

Q4_2016 (June 2016 – August 2016)

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

·

Truck-stackingAs part of dry oxide/transitionpreparations for the gravity processing of mined ore, materiala total of2,250t of HG ore was shifted from ROMPAD (1,395t) and Pad#3 (15t) to the ROMPAD onto Heap Leach Pads #1, #2 and # 3 was successfully completed in staggered stagescrusher pad during the period January 2015-May 2015. Asquarter.

·

The disposition of the Ore mined and stockpiled as of 31^st August 2015, Pad#1 holds 20,932 tonnes with an average gold grade2016, was as follows:ROMPAD:72,315.66t @1.39g/t Au (3,237.96 Ozs);Pad#1:20,931.75t @2.29g/t while Pad#2 holds 12,944 tonnes with an average gold grade of 2.78g/t. Pad#3 holds 12,088 tonnes of ore with an average gold grade of 3.64g/t.   

·

During the year, the Company successfully started pilot irrigation of ore on Pads #1, #2 and #3 out of the four leach pads, marking the launch of the pilot gold heap leach processing operation at Buckreef Gold Project.

·

Concurrently with the pilot mining operations, the Company also contracted DMO Technologies Pvt Ltd to design, fabricate and install a Carbon-in-Column ore processing plant at the Buckreef Mine site. Designing and fabrication was done at their base in Kwekwe, Zimbabwe after which the various completed sections of the plant were transported by road to site. By 31^st August 2015, 85% of the CIC plant was functional with the major outstanding issues being the carbon regeneration circuit, the acid wash circuit and the smelter unit.Au (1,541.77 Ozs);Pad#2:12,943.78t @2.78g/t Au(1,155.55 Ozs);Pad#3:11,232.90t @ 3.85g/t Au (1,389.27 Ozs) &Crusher Pad: 2,250t @ 3.88g/t Au (280.84 Ozs).

·

DMO completed installation of about 85% of all the CIC plant parts, the temporary boiler and the extensionPreliminary testing of the gold room platform. DMO technicians have since left site after partial commissioningeffectiveness and functionality of the completed partsgravity processing and recovery circuit using a temporary 1.5m-long Deistar shaking table also commenced during the last part of the plant. Construction of the gold room, laboratory and cyanide storage building, including erection of the wall, deck, painting and installation of strong gold room doors and windows were also completed.quarter.

·

WaterTechnical Advisory Committee (TAC) for NEMC met both the CIC Process Plant was sourced fromClient and the Consultant at NEMC head office in in mid-August 2016 to review Buckreef fresh water dam by constructing a 4 inch pipeline from the damproject EMP upgrade report that had been submitted to the Plant and an alternative sourceagency in January 2016 as part of water supplythe environmental certification process. NEMC eventually conducted the mandatory field check visit to verify the Plantreport by the consultant. A revised final report was pumped fromsubsequently re-filed with the old Buckreef mine shaft using a 3 inch supply line laid fromNEMC Technical Advisory Committee at the shaft toend of the CIC Plant using a submersible pump from Buckreef store.quarter.

·

DMO,The company also submitted all PL and SML renewal application documentation for the contractor alsoBuckreef Project licences during the quarter. With the exception of the SML, all other PLs were successfully installed and commissioned a temporary gold elution boiler-cum-electrowinning unit with a capacity 250kg dry carbon or 450kg wet (Au-loaded) carbon.renewed while extra data requests on the SML renewal application from the Mining Commissioner’s office were successfully attended to.

·

In JuneThe Main 6m-long Diester shaking table which arrived at site in mid-July 2016 and July 2015,now awaits installation and commissioning by the Company successfully conducted gold electrowinning (stripping gold from pregnant carbon onto steel wire-wool) in readiness for the final smelting process to produce gold dore. As of 31^st August 2015, the Company had 7.014kg (226 ounces) of gold in steel wire-wool ready for the first smeltsupplier.

·

The Teechnical staff at Buckreef Gold Project.

Buckreef Project

Duringmine commenced a detailed in-house review of all TRE projects in the 2015 fiscal year, the Company’s main activities focused on the Buckreef Project.country.   

Mine Development and OperationsExploration

Progress

The project successfully completed a critical year withBuckreef Project is located in the completionGeita District of the constructionGeita Region south of four heap leach pads each with dimensionsLake Victoria, some 110km southwest of 100mthe city of Mwanza (see Figure, overleaf).  The project area can be accessed by 30m, as scheduled.ferry across Smiths Sound, via tarred national road and thereafter via unpaved but well-maintained gravel roads. The Company also commenced pilotProject comprises five prospects namely Buckreef, Bingwa, Tembo, Eastern Porphyry and Buziba. The Buckreef prospect encompasses three ore zones namely Buckreef South, Buckreef Main and Buckreef North.

The Project is fully-licensed for mining and extraction of oxide and gold. The oxide/transition ore component from the Buckreef South Pit. In addition,Prospect is one among other gold prospects including Bingwa and Tembo in the Company also commenced cyanide leachingpipe line to generate cash flow in the short term to fund the development, mining and extraction of the oxide ores that were successfully truck-stacked onto 3 ofmain sulphide ore component for the 4 heap leach pads.  Last but not least, the Company also bought and installed a pilot Carbon-in-Column gold recovery process plant and this plant was successfully used to commence the final process in recovering gold from the ore into a cyanide solution and finally gold in wire-wool that’s now ready for a first commercial smelt.entire Buckreef Project.

ThroughoutNo exploration activities were conducted on the year, significant improvements were made toBuckreef project for the surrounding infrastructure, especially demolishment of the old Buckreef processing plant, and up@ of approximately 30 kilometres of Buckreef - Katoro road, the main access road to the mine site.year-end reporting period ending 31^st August 2016.

The Company applied for and was granted a Water Use Permit from Lake Tanganyika Basin Water Board (as per WRMA No. 11, 2009 Water Act). The Company also successfully applied for and was granted an Environmental and Social Impact Assessment certification by the Occupational Safety and Health Agency (OSHA) of Tanzania as a pre-requisite for any new and operating mining project.License Status

In order to powerAt the mining, crushingend of this reporting quarter Buckreef project area had 13 PLs and gold process plant operations above,1 SML covering a surface area of 95.40km2. The Buckreef Project license status and statutory liabilities are as shown in the Company contracted the Tanzanian Electricity Supply Company (Tanesco) to install a 33Kv overhead power line connection to the Buckreef camp 100kVA, 33/0.4/0.23kV sub-station.  The construction of the 500m overhead power line from the nearby Tanesco main line was contracted to Agape Enterprises Ltd electric contractors. The activities completed by the contractor included bush clearing of the 500m route way from the Tanesco line to Buckreef substation, erection of 7 wooden electric poles on the line, and the installation of the conductor wire string and a power drop down transformer.table below:

As part of security reinforcement, the Company also constructed and reinforced a diamond mesh fence around the Buckreef camp to enclose all houses at the camp including the main office, power substation, heap leach pads, ROMPAD and CIC process plant. The work involved construction and erection of concrete fence poles. Razor wire was then installed atop the entire fence length as a further deterrent.

The Company also commenced to review and revise the planned open pit mining designs and schedules as follows; commence pilot mining on the oxide and transition ores at Buckreef South pit, then move onto the Bingwa oxide/transition ore component then onto the Tembo prospect oxide/transition ores and finally onto the Buckreef Main Prospect oxide/transition ore component. However, the planned schedule would also depend on how soon the villagers within the extended mining license will be compensated and cleared off to facilitate mining. Alternative would be to concentrate on mining within the bounds of the pre-existing old Special Mining License where villagers have already been vacated and once we complete the South pit, we will then go directly to the Buckreef Main pit. However, this will also entail relocating the bulk of the camp facilities and residential houses some 500m away as per legal requirements for a buffer blast zone around any open pit mine.Exploration Projects

A MemorandumBrief descriptions of Agreement of Sale was made and entered into by DMO Technological Services Ltd. of Zimbabwe and Buckreef Gold CompanyPL holdings for the purchase of a carbon in column (“CIC”) plant for the proposed 1000 tpd heap leach operations at Buckreef. The CIC heap leach process plant fabrication which includes carbon adsorption unit, carbon elution unit, electrowinning unit, smelter, carbon regeneration unit, acid wash tank, calcine oven and gold room units were partially completed and/or fabricated during the year. As of 31^st August 2015, 85% of the CIC plant components had been fabricated and installed. However, the consignments for Elution boiler, Carbon Regeneration Kiln, Acid wash holding tank, calcine oven and smelting furnace that were scheduled for delivery on 12 December, 2014 and on 15th February, 2015 have still not yet been dispatched by the supplier, DMO Technological Services of Zimbabwe.

Grade Control drilling program was completed at the South Pit where a total of 6,727m were drilled from 282 holes using a 5m x 10m x 24m grid to define & confirm Buckreef south ore zone as defined from the Buckreef block model. The drilling confirmed two distinct mineralized zones termed as Buckreef South Zone One and Zone Two with an average grade of 3.16g/t Au and 5.31g/t Au respectively over average mineralized intersection widths of 7.65m and 10.5m respectively.

Significant intercepts reported include:

Buckreef South Zone One

• Drill-hole BMGC00120 returned 5m @4.77g/t Au (19 - 24m).

• Drill-hole BMGC00134 returned 7m @1.68g/t Au (12 - 19m).

• Drill-hole BMGC00162 returned 4m @ 4.43g/t Au (18 - 22m).

• Drill-hole BMGC00163 returned 8m @ 3.40g/t Au (9 - 17m).

• Drill-hole BMGC00164 returned 4m @ 2.75g/t Au (4 - 8m).

• Drill-hole BMGC00176 returned 4m @ 6.12g/t Au (20 - 24m).

• Drill-hole BMGC00177 returned 8m @ 7.27g/t Au (13- 21m).

• Drill-hole BMGC00178 returned 8m @ 7.18g/t Au (5- 13m).

Buckreef South Zone Two

• Drill-holeBMGC00128 returned 4m @ 3.76g/t Au (11 – 15m).

• Drill-holeBMGC00129 returned 5m @ 9.68g/t Au (10 – 15m).

• Drill-holeBMGC00130 returned 4m @ 3.07g/t Au (2 – 6m).

• Drill-holeBMGC00156 returned 16m @ 4.10g/t Au (0 – 6m).

• Drill-holeBMGC00157 returned 6m @ 3.01g/t Au (4 – 8m).

• Drill-holeBMGC00172 returned 12m @ 8.25g/t Au (12 – 24m).

• Drill-holeBMGC00175 returned 17m @ 12.93g/t Au (5 – 22m).

The Environmental Impact Assessment Certificate for the Buckreef Gold Project was issued on May 14, 2014 by the Minister of state, Vice-President’s Office – Environment.  The Environmental certificate (Registration No. EC/EIS/1264) will remain in force during the whole lifecycle of the Buckreef Gold Project.  The Company has since contracted the relevant authorities to commence the process for generating and getting certified an Environmental Management Plan (EMP) for the Buckreef Project.

Buckreef enlarged Mining Licence (SML04/92) land valuation work was completed and the valuation and resettlement report was approved by the Chief Government Valuer for compensation.  Management is currently reviewing the valuation to determine what, if any, resettlement will be required for mining the various deposits. It is however mandatory to evacuate all households within any approved and current mining license by law prior to commencing actual mining activities. Payments and evacuation will be done as the need arises.

Pilot pre-production open-cut mine development targeted oxide & transition ore on the Buckreef South Prospect.  The initial pit design covers a deposit strike length of 300m with a proved reserve of 206,551 tonnes grading @ 1.54g/t with 10,225ozs total contained Au.  Actual mining commenced in late October 2014 andeach respective project area are summarized below up to 31^st August 2015, a total of 113,831 tonnes with an average gold grade @ 1.89 g/t Au for 6,913 ounces of gold were extracted from the South pit. The mined ore was stockpiled piled onto the ROMPAD as follows; 36,362 tonnes @4.03 g/t classified as High Grade ore (HG), 3,083 tonnes @2.00g/t classified as Medium Grade ore (MG) and 72,385 tonnes @0.75g/t classified as Low Grade ore (LG).2016.

As preliminary stage of gold recovery, the Company commenced cyanide heap leaching of the oxide ores stacked on 3 of 4 active heap leach pads at Buckreef gold mine. The total ore stockpile at Pad #1 as of 31^st August 2015, is 20,932 tonnes with an average gold grade @2.29g/t while Pad#2 holds 12,944 tonnes with an average gold grade of 2.78g/t. Pad#3 holds 12,088 tonnes of ore with an average gold grade of 3.64g/t.   

Despite the inhibited percolation and permeability experienced due to the high (20-30%) clay content in the saprolitic oxide/transition ore stacked on the heap leach pads, the Company managed to generate, collect, store and process the gold rich (pregnant) solution using a simple Carbon-in-Column process plant. As of 31^st August 2015, Company successfully electrowinned (stripping gold from pregnant carbon onto steel wire-wool), 7.014kg (226 ounces) of gold that is now ready for the first smelt at Buckreef Gold Project.

The BZMA Project entered a development pipeline after BGCL, a project subsidiary of the Company, (55% by Tanzanian Royalty and 45% by Stamico, signed a letter of intent in February 2014 with ARL Gold Tanzania Limited, a subsidiary of Allied Gold Company of United Arab Emirates, to conclude a Definitive Joint Venture Agreement for the standalone mine development of the Buziba resource.

As of 31^st August 2015, Buckreef and Buziba project area had 13 active PLs and 1 Special Mining License covering a surface area of 95.38km².

Itetemia Project

The Itetemia gold deposit essentially comprisesincludes the Mineral Resourcesmineral resources of the Golden Horseshoe Reef (“GHR”), and is an advanced pre-productionstage exploration project focusing on the development of the GHRGHR. A total of 9,833m of diamond core drilling (51 holes) and the Company believes thatthe Golden Horseshoe Reef (GHR) at Itetemia represents a modest, yet robust, medium-grade, near surface gold deposit that warrants further feasibility investigations.

The main activity8,339m of RC drilling (138 holes) was completed for the Itetemia project were the studies (final metallurgical testwork, process engineering designs, etc.) undertaken by MaSS Resources company as a pre-requisite for environmental compliance certification.

The Environmental & Social Impact Assessment (“ESIA”) study was done by Efficient Consultants. The Environmental Impact Assessment Certificate on the Itetemia Gold Project was issued on May 28, 2015 byproject. Modeling and processing of assay results from both the Minister of state, Vice-President’s Office – Environment.  The Environmental certificate (Registration No. EC/EIS/1811) will remain in force during the whole lifecycle of the Itetemia Gold Project.

Significant ofcore drilling and sampling historicallyRC drilling so far completed over the GHR and surrounding areas has culminated in the estimation of the following Mineral Resources by CSA Australia Pty (Ltd) (“CSA”).  The gold resource numbers for the GHR are as at 8th March 201130th May 2016 using a cut-off grade of 1.0g/t:-

Rounding results in computational discrepancies.

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

As of the 31^st August 2015,2016, Itetemia project area had 12has 10 active PLs, 1 ML application and 1 PL renewal application all covering a surface area of 55.47km46.23km². The Itetemia Project license status and statutory liabilities are as shown in the table below:

Kigosi Project

There were no exploration activities on the Kigosi Project licences in fiscal year 2015 due to the Company’s strategy to concentrate on projects with immediate potential to generate near term cash flow, more specifically gold production start up. Kigosi Project area remains subject to a Game Reserve Declaration Order.UponOrder. Upon repeal or amendment of that order by the Tanzanian Government, the Kigosi Mining Company will be legally entitled to exercise its rights under the Mineral Rights and Mining Licence. The procedures for degazzettingde-gazetting the Kigosi mining licence project area from a game reserve area to a forestry reservemining area haveon the government gazette has not yet been completed by the parliament and government of Tanzania.

There were no developments on the Kigosi mining area degazetting process during the thirdreporting quarter to allow mine development on the idling Kigosi Mining Licence.  The gold resource numbers for the Kigosi Project are, as at 130^stth September 2009May 2016 using a cut-off grade of 0.5g/t:-

Tables

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

TablesTable 2: Kigosi Project Resource (Inferred category)

AsAt the end of 31^st August 2015,this reporting quarter Kigosi project area had 27 active32 PLs and 1 Special Mining License allML covering a surface area of 448.7km510.85km². The Kigosi Project license status and statutory liabilities are as shown in the tables below:

Table 1a: Kigosi Project Active PLs-Tancan Mining

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

Table 1c: Kigosi Project Active PLs-JV partners

Luhala Project

There were no exploration activities on the Luhala Project licences in fiscal year 2015 due to the Company’s strategy to concentrate on projects with immediate potential to generate near term cash flow, more specifically gold production start up.

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

Historical exploration drillingDrilling at the Luhala Project has been concentrated on the Luhala Hills (Luhala Hill, Kisunge Hill, Shilalo Hill South and Shilalo Hill West). A total of 3,279m of diamond core drilling (26

holes) and 8,665m of RC drilling (144 holes) was completed on the project. Modeling and processing of assay results from both the core drilling and RC drilling conducted over the various deposits at Luhala, has to-date resulted in the estimation, by CSA, of the following Mineral Resources for Luhala as at 8th March 2011 using a cut-off grade of 1.0g/t:

Rounding results in computational discrepancies.

The Company is currently seeking bidsprocess of selecting a consultant to preparecarry out feasibility study at the Luhala gold project has been completed and once funds are available the contract to engage the consultant to carry out the study required in connection with an application for a mining licence forwill be signed to initiate the Luhala Project. AsFS study works.

At the end of 31^st August 2015,this reporting quarter Luhala project area had 4 active PLs covering a surface area of 27.21km36.50km². The Luhala Project license status and statutory liabilities are as shown in the table below:

Lunguya Project

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

As of 31^st August 2016, Lunguya project area had 8 PLs covering a surface area of 90.43km². The Lunguya Project license status and statutory liabilities are as shown in the table below:

Kanegele Project

There were no exploration activities on the LunguyaKanegele Project licences in fiscal year 20152016 due to the Company’s strategy to concentrate on projects with immediate potential to generate near term cash flow, more specifically gold production start up.startup.

The Lunguya goldCompany will continue to explore opportunities to maximise shareholder value by actively looking for potential JV agreements on these outlying projects with any interested third parties. As of 31^st August 2016, Kanegele project is situated onarea had 12 active PLs and 1 PL renewal application all covering a major NW-SE regional shear zone which extend north into Barrick’s Bulyanhulu gold mine (>10M oz).  Gold mineralization has been identified in a seriessurface area of planar, brittle-ductile strain zones which form gold mineralized fault-fill shear hosted veins. The Lunguya concession area overlies the contacts between sequences of lower Nyanzian mafic volcanic rocks which are cut by well foliated syn-orogenic granites. Shear zones hosting the auriferous quartz veins range in widths from less than 1.0 to greater than 8.0 m.

Veins identified at Lunguya (Nyamakwenge & Nyikoboko Reefs) strike 030° to 040° and dip modestly northwest (25° - 45°)55.63km². The reefs commonly have well developed chlorite-sericite alteration mineralogy along their footwall, and sometimes, hangingwall contacts. Gold is presentstatutory liabilities are as coarse, visibly identifiable, grains commonly associated with hematitic fractures. Highest gold grades are frequently noted forming towards the footwall contact of the Nyamakwenge Reefs with the enclosing granodiorites.

A reconnaissance exploration drilling program comprising 81RC drill-holes totalling 1,504m probing both a residual gravel deposit and the Nyamakwenge reef system was successfully completed. A follow-up 19-hole 1,331m diamond drilling program confirmed that the Nyamakwenge and Nyikoboko reefs comprise single persistent veins, with respective strike lengths of approximately 475m and 110m. Excellent structural continuity of the veins has been demonstrated but continuity of gold grades is the subject of future exploration programs.

Gold grades within the Nyamakwenge reef range from less than 1.0 g/t to > 40 g/t over variable widths (< 0.3-2.75 m) while gold grades within the Nyikoboko reef range from < 0.2 g/t Au to 7.06 g/t Au over narrow, 0.3 m widths, and the chlorite-sericite envelope notedshown in the hanging-wall and footwall to the main veins are absent. Gold in these shear zones thus associated with narrow shear-foliated quartz veins intable below:

sheared contacts between basalts and granites. Potential for the discovery of an economic resource from Lunguya can be inferred from active small scale mining activities which are contiguous with Lunguya.  

Based on the exploration work so far completed at Lunguya, no definitive 43-101 compliant mineral resource statement has been complied. As of 31^st August 2015, Lunguya project area had 6 active PLs covering a surface area of 90.23km².

Exploration Projects

Biharamulo/Kanegele ProjectsBiharamulo Project

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

The Company will continue to explore opportunities to maximise shareholder value by actively looking for potential JV agreements on these outlying projects with any interested third parties. As of 31^st August 2015,2016, Biharamulo project area had 12 active PLs and 1 PL renewal application all covering a surface area of 55.63km². The statutory liabilities are as shown in the table below:

Kongwa Project

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

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

As of 31^st August 2016, Kongwa Gold project area had 1PL covering a surface area of 266.51km²and pending surrender back to the Ministry of Energy & Minerals. The statutory liabilities are as shown in the table below:

Manonga Project

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

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

As of 31^st August 2016, Manonga Gold project area had 7 active PLs covering a surface area of 56.71km².   The statutory liabilities are as shown in the table below:

Nzega Project

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

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

As of 31^st August 2016, Nzega Gold project area had 2 active PLs covering a surface area of 52.24km².  The statutory liabilities are as shown in the table below:

Ushirombo Project

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

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

As of 31^st August 2016, Ushirombo Gold project area had 1 active PL covering a surface area of 9.27km².  The statutory liabilities are as shown in the table below:

Nyanzaga Project

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

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

As of 31^st August 2016, Nyanzaga Gold project area had 2 active PLs covering a surface area of 18.09km².  The statutory liabilities are as shown in the table below:

Mwadui Project

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

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

As of 31^st August 2016, Mwadui Diamond project area had 4 active PLs covering a surface area of 93.50km144.65km² while Kanegele. The statutory liabilities are as shown in the table below:

Tulawaka Project

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

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

As of 31^st August 2016, Tulawaka Gold project area had 86 active PLs covering a surface area of 55.63km54.56km². The statutory liabilities are as shown in the table below:

Kibara Project

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

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

As of 31^st August 2016, Kibara Gold project area had 3 active PLs covering a surface area of 60.62km². The statutory liabilities are as shown in the table below:

Kabanga Project

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

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

As of 31^st August 2016, Kabanga Gold project area had 3 PLs covering a surface area of 292.92km² and all pending surrender to the Ministry of Energy and Minerals. The statutory liabilities are as shown in the table below:

License Relinquishment

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

A detailed in-house geological reviews of each respective project area and its potential for discovery of gold mineralization have been submitted to a technical team was formed tothat will review the prospectivitymerits and de-merits of the entire licence portfolioeach project in Tanzania and propose to management licences to be dropped. Thirty-nine (39) licences were proposed to be droppedTanzania.

This exercise was necessitated by the technical teamneed to establish all outstanding, current and the licences were approved for relinquishment by the Company’s Technical Committee.future financial liabilities and obligations arising from our total land-holdings.

Exploration

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

Competition

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

most valuable properties.  As a result, the Company may eventually be unable to acquire attractive gold mining properties.

Dependence on Customers and Suppliers

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

Governmental Regulations

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

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

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

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

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

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

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

C.

Organizational Structure

The Company has the following seven subsidiaries:

(1)

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

(2)

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

(3)

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

(4)

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

(5)

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

(6)

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

D.

Property, Plant and Equipment

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

Mineral Properties

Buckreef Project

History

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

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

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

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

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

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

Summary of Buckreef Exploration and Mining between 1960 and 2003

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

Ownership

Prior Ownership

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

the Ministry for Energy and Minerals included at that point, a single Mining Licence and 12 Prospecting Licences covering 98.19km².

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

Current Ownership, Property and Location

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

The Buckreef Project is located in north central Tanzania immediately to the south of Lake Victoria, in the Mwanza Provincial District. The Buckreef Project is situated 110km southwest of Mwanza, in the Geita District and is accessed by ferry across Smiths Sound and then via unpaved roads and an airstrip. The

Buckreef Project comprises five gold deposits located within two geographically separated areas approximately 25km apart, termed the Buckreef Mining Area (“BRMA”) and the Buziba-Busolwa Mining Area (“BZMA”) and the individual gold deposits within these mining areas have been termed Prospects, as summarized below:-

·

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

·

BZMA: includes the Buziba Prospect

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

Geology and Mineralisation

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

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

Regional Geological Setting

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

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

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

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

·

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

·

mineralisation within major ductile shear zones;

·

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

·

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

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

·

structural lineaments trending at 120º;

·

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

·

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

·

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

Local Geological Setting

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

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

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

peak deformation. A large portion of the basalts to the southeast of Nyarugusu are hornfelsed, suggesting the presence of granite at shallow depths beneath them.

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

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

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

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

Exploration Status

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

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

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

mineralisation, a 75% recovery could be anticipated, whilst transitional and fresh mineralisation recoveries were lower, at 35% to 50%.  

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

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

Previous Mineral Resource and Mineral Reserve Estimates

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

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

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

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

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

Mineral Resources inclusive of Mineral Reserves.

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

Estimates over variable widths of 3m to 40m

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

Inconsistencies in totals are due to rounding down

55% attributable to the Company

Cut-off grade 0.5g/t Au

New Mineral Resource and Mineral Reserve Estimates

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

Datamine™ Studio 3 (version 3.20.5321).

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

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

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

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

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

Cut-off Grade 0.5 g/t Au

Estimates over variable widths to 1m to 40m

Specific Gravity ranges 2.0 to 2.8

Inconsistencies in totals are due to rounding

55% attributable to TRX

The Company has incurred total net costs (after recoveries, if any) of $2,985,705$881,357 on the Buckreef Project for the year ended August 31, 2015.2016.

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

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

Kigosi Project

Property Description and Location

The Kigosi Project area is principally located within the Kigosi Game Reserve controlled area.  Through prospecting and mining option agreements, the Company has options to acquire interests in several Kigosi prospecting licenses.  A comprehensive report summarizing exploration work done and results to date was submitted to the Director of Wildlife and Nature Conservation as part of the requisite and mandatory requirements for an application to renew the Kigosi game reserve access permit.  It is a statutory

requirement to have an access permit to conduct any exploration activities in an area designated as a forest and/or game reserve.  On May 31^st, 2012, the Company was granted a two year permit from the Ministry of Wildlife and Nature Conservation to enter the Kigosi Game Reserve and continue with exploration activities.  The Company is evaluating various alternatives for advancing the Kigosi Project by focusing on an area of near surface mineralization.  

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

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

Accessibility, Climate, Local Resources, Infrastructure and Physiography

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

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

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

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

Geology and Mineralization

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

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

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

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

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

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

Luhwaika Quartz Rubble Deposit

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

During a previous detailed vertical RC-drilling program on the Luhwaika Prospect, the company established the presence of a consistent and sizeable near-surface quartz-rubble bed with a potentially

significant economic potential. The Luhwaika Prospect is host to a potentially economic quartz rubble deposit which is likely a direct result of surface collapse and erosion of the Luhwaika Main and West reefs. Artisanal mining activity has concentrated on this loose quartz rubble deposit which is easily accessible for mining. High grade quartz rubble has so far been identified in three areas: the Luhwaika West reef, the Luhwaika Main reef and the Luhwaika East area.

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

Bulk Sampling Program

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

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

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

Luhwaika Prospect

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

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

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

Igunda Prospect

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

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

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

Msonga Prospect

Drilling

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

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

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

Kigosi Exploration History

From 1998 to 2007, the Company and AngloGold-Ashanti conducted regional and detailedThe exploration work onhistory of the Kigosi Project Area including airborne magnetics, soil sampling, mapping and trenching. The aeromagnetic survey flown in 1999 covered the entire Ushirombo greenstone belt and parts of the Miyabi-Kigosi greenstone belt. Limited field work was conducted by the Company during this initial period including a helicopter visitProperty from 2006 to the Luhwaika artisanal site which included grab sampling and mapping.2016 is summarized as follows:

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

AngloGold-Ashanti conducted a detailed airborne survey in 2003 that covered the eastern Kigosi licenses.

A soil sampling program was also conducted as part of initial follow-up work on prospective aeromagnetic anomalies which were later classified as the Msonga, Bungoni, Luhwaika and Igunda prospect areas. AngloGold-Ashanti conducted limited trenching at both Luhwaika and Igunda.

The Company has incurred total net costs (after recoveries, if any) of $261,867$245,860 on the Kigosi Project for the year ended August 31, 2015.2016.

Lunguya Project Area

Property Description and Location

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

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

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

Accessibility, Climate, Local Resources, Infrastructure and Physiography

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

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

History

The project was acquired by the Company in 2001 and a program of BLEG sampling, geological mapping, rock sampling, RC and diamond drilling was initiated.Lunguya Exploration History Synopsis

Geology

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

Regionally, Lunguya is located near the eastern terminus of the inner volcanic arc, lower Nyanzian, of the Sukumaland Greenstone belt.  The succession is dominated by tholeiitic volcanic rocks containing lesser

felsic tuffaceous rocks and argillaceous horizons cut by thin quartz porphyry dykes and sills.  The thick, banded iron formation and felsic flows characteristic of the outer arc Upper Nyanzian sequence are absent. Most of the map scale granite – greenstone contacts strike north-south.  No information is available with respect to the orientation of sub-surface contacts.

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

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

Mineralization

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

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

Exploration

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

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

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

mineralization in the area.

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

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

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

During the period ended August 31, 2015,2016, no direct property work was conducted on the Lunguya property.  

The Company has deferredincurred total net costs (after any recoveries and write offs) of $11,353$nil and written off $3,353,923 on the Lungua Property for the year ended August 31, 2015.2016.  

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

Itetemia Property

Property Description and Location

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

Accessibility, Climate, Local Resources, Infrastructure and Physiography

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

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

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

Ownership

Prior Ownership

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

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

The Company’s Interest

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

1.

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

2.

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

3.

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

4.

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

5.

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

6.

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

7.

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

8.

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

9.

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

10.

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

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

History

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

Itetemia Exploration History Synopsis

Geology

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

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

Mineralization

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

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

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

Exploration

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

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

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

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

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

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

During the period ended August 31, 2015,2016, no direct property work was conducted on the Itetemia property.  

The Company has incurred total net costs (after any recoveries and write offs) of $65,817$35,865 and written off $153,588 of expenditure on the Itetemia Property for the year ended August 31, 2015.2016.  

Luhala Property

Property Description and Location

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

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

Accessibility, Climate, Local Resources, Infrastructure and Physiography

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

result in flooding in low lying areas which are dominated by mbuga (black organic rich laustrine flood

soils).  Most lowland areas are under active cultivation, corn, rice, beans and mixed crops, by subsistence farmers.  Low scrub and thorn bushes cover the small hills.  The area has been, for many years, deforested by local agricultural practices.

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

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

History

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

LUHALA EXPLORATION HISTORY SYNOPSIS

Geology

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

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

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

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

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

Exploration

During the period ended August 31, 2015,2016, no site-based exploration work was conducted on the Luhala Property.

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

Mineralization

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

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

Historical Drilling

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

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

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

The Company has incurred total net costs of $6,824$5,853 and written off $47,152$8,757 of expenditures on the Luhala Property for the year ended August 31, 2015.2016.

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

Item 4A.

Unresolved Staff Comments

None

Item 5.

Operating and Financial Review and Prospects

This discussion and analysis of the operating results and the financial position of the Company for the years ended August 31, 20152016 and 2014,2015, and should be read in conjunction with the consolidated financial statements and the related notes attached hereto.

Critical Accounting Policies

Mineral Properties

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

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

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

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

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

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

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

Impairment of Long-lived Assets

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

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

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

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

The Company’s most critical accounting estimate relates to the impairment of mineral properties and deferred exploration costs.  During the year ended August 31, 2015,2016, the Company wrote off $2,233,843$3,516,268 of costs related to its mineral properties (2014(2015 – $1,209,640)$2,233,843).  Management assesses impairment of its exploration prospects quarterly. If an impairment results, the capitalized costs associated with the related project or area of interest are charged to expense.  

Asset Retirement Obligations

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

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

the underlying cash flows needed to settle the obligation.   

A.

Operating Results

The following discussion and analysis of the financial condition and operating results of the Company for the years ended August 31, 20152016 and 20142015 should be read in conjunction with the consolidated financial statements and related notes to the financial statements which have been prepared in accordance with IFRS.

Overall Performance

As at August 31, 2015,2016, the Company had current assets of $1,552,416$1,032,319, compared to $2,614,572$1,552,416 on August 31, 2014.2015.  The decrease is mainly due to net expenditurescash outflows in regard toexpenditures on exploration of $3,331,566 (2014$688,296 (2015 - $2,329,901)$2,529,248), net additions to property, plant and equipment of $668,005 (2014$88,339 (2015 - $2,412,541)$665,099) primarily in connection with the construction of the processing plant, and cash used in operations of $901,062 (2014$1,914,495 (2015 - $3,485,590)$901,062) offset by proceeds from the gold bullion loan financing of $1,729,000 (2015 - $1,852,036), proceeds from the sales-leasebacks of $496,559 (2014$nil (2015 - $Nil) and the$496,559), net proceeds from the convertible senior note financing of $684,979 (2014$nil (2015 - $Nil)$684,979) and gold bullion loan financingnet proceeds from loans from related parties and proceeds from convertible loans of $1,852,036 (2014$354,747 (2015 - $Nil).  Mineral properties and deferred exploration assets were $48,150,191$45,802,858 as compared to $47,052,468 at August 31, 2014.2016, compared to $48,150,191 at August 31, 2015.

Net loss for the year ended August 31, 2015 was $8,995,697$12,781,902 compared to a net loss of $2,416,265$8,995,697 in the comparable year ended August 31, 2014.2015.  The main difference in net loss between the two periods is due to the following fluctuations:

·-

Lower share based payment expense in the form of a recovery of $38,996 during the year ended August 31, 2016, as compared to $506,747 expense during the year ended August 31, 2015 as compared to $1,106,517 during the year ended August 31, 2014 due to the number of RSU’s issued andforfeited during the lower Company share price, seecurrent period resulting in a recovery of expense (see note 86 of the audited consolidated financial statements for the years ended August 31, 20152016 and 20142015 for details of RSU’s issued,issued),

·

-

A lower gain fromdecrease in the revaluationsalaries and benefits expense of warrant liability during$623,716 for the year ended August 31, 2015 of $324,000,2016, compared to a gain$1,053,384 for the year ended August 31, 2015.  Salaries and benefits decreased after the departure of $3,524,000several officers, directors and employees who left the Company during the year.

-

A decrease in 2014,

·

Athe gain on the revaluation of derivative liability to a loss of $150,000 compared to $Nil in 2014.  

·

An increase in write offs of mineral properties of $2,233,843 during$3,905,000 for the year ended August 31, 20152016, compared to $1,209,640 in 2014

·

Interest accretiona gain of $738,134 in connection with$150,000 for the convertible senior note financing that was closed in December 2014 as well as the gold bullion loans financings closed in June 2015, which were not present in the comparable year ended August 31, 2014.

·

Finance costs2015.  See notes 19 and 22 of $196,525 compared to $Nil in the comparable period, which represents interest in connection withaudited consolidated financial statements for the convertible senior note financing that closed in December 2014 as well as interest on the gold loan bullion  loans, which were not present in the comparable yearyears ended August 31, 2014.2016 and 2015 for details on warrant liability.

·

-

A decrease in the loss on the amendment of the convertible senior note financing resulting from the amendment of the terms of the convertible senior notes financing on March 25, 2015, as described above, which resulted in a loss of $2,034,406 (2014 for the year ended August 31, 2015 as compared to $nil in 2016.

- $Nil)

A decrease in the gain on the revaluation of derivative liability to a loss of $964,600 for the year ended August 31, 2016, compared to a gain of $324,000 for the year ended August 31, 2015.

·

A loss on redemption  See note 6 of the convertible senior note financing resulting fromaudited consolidated financial statements for the redemption option held byyears ended August 31, 2016 and 2015 for details on warrant liability.

-

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

-

Interest accretion of $1,028,568, compared to $738,134 in the comparable period in 2015.  Interest accretion in the current period represent interest in connection with the terms ofgold loan bullion loans, which increased as compared to the year ended August 31, 2015.  Interest accretion in the comparative period mainly represent interest in connection with the convertible senior note financing,notes, which resulted in a loss of $174,041 (2014 - $Nil) forwere fully converted during the year ended August 31, 2015.

·

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

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

During the year ended August 31, 2015,2016, the Company issued 174,60850,000 shares (2014(2015 – 320,893174,608 shares) pursuant to the RSU plan with a value of $729,778 (2014$120,500 (2015 - $1,354,238)$729,778).  The Company also issued 400,000 (2014536,137 (2015 – Nil)nil) shares with a value of $264,000 (2014$372,130 (2015 - $Nil)$nil) in connection with interest payments related to the bullion loans outstanding.  The Company issued 75,000 (2015 – nil) shares with a value of $26,250 (2015 - $nil) for services during the period.  In the comparative period, the Company issued 400,000 shares with a value of $264,000 in connection with a finder’s fee related to the convertible senior note financing completed in December 2014.  The Company issued2014, and 500,000 (2014 – Nil) shares with a value of $250,000 (2014 - $Nil) in connection with the March 25, 2015 amendment to the terms of the convertible senior note financing that was originally completed in December 2014.  Similarly, during the current year, 320,543 shares with a value of $477,609 were issued as financing fees for the gold loans closed during the year.  The Company also issuedconvertible senior notes were fully converted during the year ended August 31, 2015 through the issuance of 5,010,518 (2014 – Nil) shares with a value of $1,958,397 (2014 - $Nil) in connection  withthrough redemptions by the lender pursuant to the redemption option held by the lender in connection with the terms of the convertible senior note financing.  In the current year,period, capital was utilized for the Buckreef Gold Project development, property acquisition, exploration, capital equipment purchases and general operating expenses as tabulated below.  The remaining funds/cash liquid assets, when available, are invested in interest bearing investments, which are highly liquid.