REPORT on the LUNGUYA MINERAL EXPLORATION PROPERTY. of TANZANIAN ROYALTY EXPLORATION CORPORATION. in the KAHAMA DISTRICT, SHINYANGA REGION

Transcription

1 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 Toronto, Canada February 8, Martin J. Taylor P. Geo.

2 TABLE of CONTENTS Page 1.0 SUMMARY INTRODUCTION and TERMS OF REFERENCE PROPERTY DESCRIPTION and LOCATION United Republic of Tanzania Description of Lunguya Properties ACCESSIBILITY, CLIMATE, INFRASTRUCTURE, LOCAL RESOURCES, and PHYSIOGRAPHY Introduction Lunguya Project HISTORY and WORK BY OTHER PARTIES Exploration by Barrick Exploration Africa Ltd GEOLOGICAL SETTING Introduction to the Geology of Tanzania Archaean Greenstone Belts of the Lake Victoria Goldfields Geology of the Lunguya Project DEPOSIT TYPES Introduction Golden Pride Mine Bulyanhulu Mine Tulawaka Mine Nyakafura Deposit MINERALIZATION EXPLORATION by Tanzanian Royalty Summary of Biogeochemical (BGC) Sampling Kimberlite Exploration Gold Exploration SAMPLING METHOD and APPROACH BEAL Soils Tanzanian Royalty Soils Tanzanian Royalty Heavy Mineral Sampling BEAL RAB Drilling Tanzanian Royalty RC Drilling 114 i

3 10.6 Tanzanian Royalty Diamond Drilling Database SAMPLE PREPARATION, ANALYSES and SECURITY BEAL Soils Tanzanian Royalty Soils BEAL RAB Drilling BEAL RC Drilling Tanzanian Royalty RC Drilling Tanzanian Royalty Diamond Drilling DATA VERIFICATION Soils BEAL RAB and RC Drilling Biogeochemical Tanzanian Royalty RC Drilling Tanzanian Royalty Diamond Drilling INTERPRETATION and CONCLUSIONS RECOMMENDATIONS REFERENCES CERTIFICATE 131 Figures Page Figure 3.1 Administrative Regions of Tanzania 6 Figure 3.2 Lunguya Project Licences and Applications 9 Figure 3.3 Outline of PL 2059/2002, HQ-P17760, PL 4074/ HQ-P Figure 3.4 Outline of PL 2193/2003, HQ-P PL 4273/ Figure 3.5 Outline of PL 2472/2004, HQ-P PL 5289/ Figure 3.6 Outline of PL 3273/2005, HQ-P PL 5123/ Figure 3.7 Outline of PL 4594/ HQ-P Figure 3.8 Outline of PL 5127/ PL 5277/ Figure 4.1 Licence and Application outlines on 1:50,000 topography 23 Figure 5.1 PL 2455/2004 RTP-1VD Magnetic Image 25 Figure 5.2 PL 2455/2004 Gravity Image 26 Figure 5.3 Geology and 2002 Soil Results PL 2455/ Figure 5.4 Interpreted Geology and drilling Geochemistry 29 Figure 5.5 CBI Au over Cu colour grid 30 Figure 5.6 CBI Au over AS colour grid 31 Figure 5.7 BEAL RAB Drilling Fence 1 part 6 32 Figure 5.8 BEAL RAB Drilling Fence 1 part 7 33 Figure 5.9 BEAL RAB Drilling Fence 2 part 9 34 ii

4 Figure 5.10 BEAL RAB Drilling Fence 3 part 1 35 Figure 5.11 BEAL RAB Drilling Fence 3 part 5 36 Figure 5.12 BEAL RAB Drilling Fence 3 part 8 37 Figure 6.1 General Geology of Tanzania 40 Figure 6.2 Stratigraphic Column for Tanzania 41 Figure 6.3 Greenstone Belts of the Lake Victoria Goldfields 45 Figure 6.4 Mabale, Kahama and East Ushirombo Greenstone Belts 46 Figure 6.5 Regional Geology of the Lunguya Project 49 Figure 6.6 Geology of the Lunguya Project Area 50 Figure 6.7 Regional Compilation, Central Lunguya 51 Figure 9.1 Lunguya Project Airborne Magnetics RTP 62 Figure 9.2 Lunguya North shadow image of RTP Magnetics 63 Figure 9.3 Lunguya BGC species distribution 65 Figure 9.4 Lunguya BGC Au contours 66 Figure 9.5 Lunguya BGC trends over mbuga 67 Figure 9.6 Lunguya BGC trends over geology 68 Figure 9.7 Lunguya BGC trends over total count radiometrics 69 Figure 9.8 Magnetics and RC hole on LG36DIA02 70 Figure 9.9 Magnetics and RC holes on LG30DIA06 71 Figure 9.10 Magnetics and RC holes on LG30DIA02 72 Figure 9.11 Magnetics and RC holes on LG21DIA01 73 Figure 9.12 Magnetics and RC holes on LG28DIA06 74 Figure 9.13 BGC Au Shilela North PL 2059/ Figure 9.14 IP Chargeability PL 4074/ Figure 9.15 IP Chargeability + Au PL 2059/ Figure 9.16 BGC Au PL 4074/ Figure 9.17 IP Chargeability PL 2472/ Figure 9.18 Location of DDH Nyikoboko PL 2472/ Figure 9.19 Cross-section SHDD-01, Nyikoboko 84 Figure 9.20 Cross-section SHDD-02, Nyikoboko 85 Figure 9.21 Cross-section SHDD-03, Nyikoboko 86 Figure 9.22 BGC Au Lunguya west PL 2193/ Figure 9.23 IP Chargeability PL 2193/ Figure 9.24 IP Gradient Interpretation PL 2193/ Figure 9.25 July 2008 Soil Au HQ-P Figure 9.26 BGC Au Lunguya PL 1766/ Figure 9.27 IP Chargeability Nyamakwenge HQ-P Figure 9.28 DDH + RC Drilling Plan Nyamakwenge 99 Figure 9.29 Section LGDD LGRC Figure 9.30 Section LGDD Figure 9.31 Section LGRC-01, Figure 9.32 Section LGDD , LGRC Figure 9.33 Section LGDD , LGRC Figure 9.34 BGC Au Lunguya East 107 Figure 9.35 IP Chargeability PL 3273/ Figure 9.36 IP Chargeability Lunguya East 109 Figure 9.37 IP Resistivity and possible shear zone 109 Figure 9.38 IP Chargeability over soil anomaly PL 5277/ Figure 9.39 IP Chargeability North Soil Anomaly PL 5277/ Figure 12.1 QC Graph BGC Field Duplicates PL 2059/ iii

5 Figure 12.2 QC Graph BGC Field Duplicates PL 2193/ Figure 12.3 QC Graph BGC Field Duplicates PL 2472/ Figure 12.4 QC Graph BGC Field Duplicates PL 3273/ Figure 12.5 QC Graph BGC Field Duplicates PL 4594/ Figure 12.6 BGC Au Lunguya 95% vs. Fine regrinds 122 Figure 12.7 MLJ Au Lunguya 95% vs. Fine regrinds 123 Figure 12.8 NTG Au Lunguya 95% vs. Fine regrinds 123 Tables Page Table 1.1 Budget Summary for Proposed Exploration, Lunguya Project 3 Table 3.1 Coordinates of Lunguya Project Licences 11 Table 3.2 Status of Lunguya Project Licences 13 Table 3.3 Ownership of Lunguya Project Licences 13 Table 5.1 Summary of BEAL Exploration PL 2455/ Table 5.2 Significant Gold Assays BEAL RAB Drilling 28 Table 5.3 Summary of Statistics CBI Geochemistry 30 Table 5.4 BEAL Exploration Expenditures 39 Table 9.1 Summary of Tanzanian Royalty Expenditures 61 Table 9.2 Significant Gold Assays Nyikoboko Grab Samples 80 Table 9.3 Significant DDH Gold Assays Nyikoboko 83 Table 9.4 Grab Results PL 2193/ Table 9.5 Significant RC Results Nyamakwenge HQ-P Table 9.6 Significant DDH Results Nyamakwenge HQ-P Table 12.1 Summary of Lunguya Project BGC Samples and QC 118 Table 12.2 BGC Au Analysis Statistics for Coarse Original and Fine Regrind 121 Table 14.1 Budget Summary for Proposed Exploration, Lunguya Project 128 Plates Page Plate 9.1 Nyamakwenge artisanal workings 94 iv

6 1.0 SUMMARY Martin Taylor, P. Geo., was retained by Tanzanian Royalty Exploration Corporation ( Tanzanian Royalty ) in September 2009 to prepare a technical report to the standards of NI on their Lunguya mineral property in the United Republic of Tanzania. The author is familiar with gold exploration in Tanzania, having spent 8 years working there in that regard in , and visited the Lunguya property on several occasions in Tanzanian Royalty is a publicly-traded financial gold company whose business strategy is to acquire royalty interests in gold production from its core assets in the Lake Victoria Goldfields of Tanzania. As of December 31, 2008, the company had 88,793,958 common shares issued and outstanding. Tanzanian Royalty s head office is in South Surrey, British Columbia, Canada and it trades on the TSX Exchange under the symbol TNX and on the AMEX as TRE. The company operates in Tanzania through two wholly-owned, Tanzanian-registered companies, TANCAN Mining Company Ltd. and Tanzam 2000 Ltd. The Lunguya Project is at an early exploration stage and, as of October 31, 2009, consisted of 11 granted Prospecting Licences plus 6 approved applications covering a total area of approximately km². The property is located in the Lake Victoria Goldfields area within one of the principal Archaean greenstone belts of Tanzania and lies km south of Barrick Gold Corp s. Bulyanhulu Mine. The Lunguya Project includes northwest-trending magnetic lineaments and shear sets that are parallel to those hosting Bulyanhulu. Areas of current or historic artisanal workings contain surface quartz rubble zones, exploited by the artisanal miners. The Lunguya Project straddles the contact between Lower Nyanzian mafic volcanics to the east and granitic intrusives to the west. Its location south of the Bulyanhulu Mine (the largest underground gold mine in Tanzania) in the same greenstone belt makes the project area an attractive target. Several zones of auriferous quartz veins have been explored within the granites adjacent to the greenstone contact. The veins at Nyamakwenge Reefs are known over a strike of at least 450 m and have been tested by an initial diamond-drilling program. The results demonstrated good continuity of the vein but an apparently erratic distribution of gold with grades from 0.01 g/t to over 40 g/t Au over narrow widths. The smaller Nyikoboko Reefs, 12 km to the south, are in a similar regional environment with grades up to 7 g/t Au. The Archaean Tanzanian Craton and its surrounding Proterozoic mobile belts underlie much of the Central Plateau of Tanzania. Continentally-derived sediments of Mesoproterozoic and younger age cover part of the craton, especially in the east. Tertiary volcanics of mafic to intermediate composition, including carbonatites, occur primarily in the Kilimanjaro and Eastern Rift areas of the north of the country. The producing gold mines and other deposits of the Lake Victoria Goldfields are hosted within a series of Archaean greenstone belts, similar in age, lithologies and mineralization to the Abitibi Belt of northern Ontario and Quebec. These easttrending linear greenstone belts are separated by granite-gneiss terranes. Tanzania is the 4 th largest gold producer in Africa, after South Africa, Ghana and Mali. This has been achieved with the opening of five open-pit mines (Golden Pride, Geita, North Mara, Tulawaka and Buzwagi) and one major underground mine (Bulyanhulu) in recent years. 1

7 Previous work on the northern-most licences (now PLs 5127/2008 and 5277/2008) at Lunguya in by Barrick Exploration Africa Ltd. (BEAL) included exploration expenditures of US$281,431 and option payments to Tanzanian Royalty of US$100,000. This work included: airborne magnetic, EM and gravity surveys; geological mapping (1:20,000); geochemical soil (2,520 samples), soil ph and rock chip sampling; CBI (cover-bedrock interface) (748 m in 71 holes) and RAB drilling (13,774 m in 260 holes). The results of the RAB drilling in the east of the property returned significant results from several holes including; 1.71g/t Au, 2.23 g/t Au, 3.15 g/t Au, 1.72 g/t Au and 1.89 g/t Au. CBI drilling over much of the property outlined a northwest-trending gold anomaly (up to 128 ppb Au). BEAL concluded that the quartz veins were narrow and discontinuous, with limited potential to host a multi-million ounce gold deposit. As a result, they returned the property to Tanzam In 2000 a regional airborne magnetic and radiometric survey was flown on north-south flight lines 250 m apart by Geodass of South Africa on behalf of Tan Range (now Tanzanian Royalty). While appropriate for much of the regional structure and stratigraphy this orientation may have missed features on the generally north-south granite/greenstone contact and significant 020º structures parallel to Nyamakwenge. Subsequently Tanzanian Royalty carried out diamond exploration based on airborne magnetic anomalies but with no kimberlites being detected. The principal focus by Tanzanian Royalty, however, was on gold exploration which comprised: conventional soil and auger sampling; biogeochemical (BGC) sampling; geological mapping and rock sampling; ground magnetic and IP surveys; and RAB, RC and limited diamond drilling. Total exploration expenditures in by Tanzanian Royalty were C$1,109,039 with a further C$1,945,732 spent on property acquisitions. The current and recent artisanal gold workings exploit narrow quartz veins in the granites in close proximity to the greenstone contact. The soil geochemistry alone didn t recognize the gold mineralization at Nyamakwenge or Shilela, possibly because of transport of the lateritic soils. Nyikoboko outcrops in lateritic colluvium and had a stronger soil response at 20 ppb Au. At all three sites the artisanal workings focussed exploration. The presence of transported overburden and mbuga clays require careful interpretation of the geochemistry in this environment, as subtle anomalies may indicate the presence of bedrock mineralization. The Nyamakwenge and Nyikoboko quartz veins appear to be small shear zones in the granites with limited potential for economic mineralization. However, their proximity to a regional granite/greenstone contact km from a major gold mine (Bulyanhulu) suggests that they may be indicators of more extensive gold mineralization in the vicinity. The entire contact zone within the Lunguya property remains the prime area of potential for significant gold mineralization. The 2008 follow-up soil sampling by Tanzanian Royalty on HQ-P18934 detected gold anomalies over interpreted greenstone to the south of Nyamakwenge. Other than the Nyamakwenge area and the northwest corner of PL 2059/2002, the BGC gold results were inconclusive in the contact zone. The conventional soil sampling at 400 m x 200 m to the south of the PL 2059/2002 BGC anomaly suggests a northwest trend overlying granite bedrock. Initial preparation of soil samples was done by Tanzanian Royalty at their own facility in Mwanza. All other preparation and analysis was carried out at internationally-recognized 2

8 laboratories with ISO certification. The quality-control programs implemented by Tanzanian Royalty conform to industry standards and show that the sampling procedures and analyses received were acceptable. The author is of the opinion that the programs were carried out in a professional manner, to industry-standard procedures. Subject to confirmation by Tanzanian Royalty s geophysicist, a detailed ground magnetic orientation study should be carried out on east-west lines over the Nyamakwenge area. If this test is successful in detecting the contact and 020º structures, the entire contact zone across the property should be surveyed with ground total field and gradient magnetics. Given the general lack of outcrop and largely inconclusive soil or BGC geochemical results, an orientation MMI (Mobile Metal Ion) soil survey should be carried out on at least two of the east-west magnetic survey lines, preferably in the dry season. If this MMI orientation provides a clearer picture of the gold anomalies, the entire contact zone should be surveyed on the same lines as the ground magnetics. Samples should be collected at 25 m intervals with every second sample (i.e. at 50 m intervals) initially submitted for analysis, for gold and selected elements. The results of the ground magnetics and MMI should then be integrated with the previous geochemical, geophysical and drilling data. If this compilation shows clear drilling targets, these should be tested with lines of heel-to-toe RC drilling. If the initial RC program provides suitable confirmation of mineralization and significant intersections, the next phase should consist of additional RC drilling to expand the mineralization along strike and to depth. There should also be a review of the quartz rubble areas in the vicinity of the artisanal mining, especially Nyamakwenge, to determine if there is a viable target remaining for a potential resource. Table Budget Summary for Proposed Exploration, Lunguya Project Phase Magnetics MMI Soils Drilling (m) Cost Assays Support Total (US$) Ia 4,000 3,000 6,000 10,000 23,000 Ib 25,000 40, ,000 20, ,000 Sub-Total 29,000 43, ,000 30, ,000 II RC 5, ,000 45,000 80, ,000 Total 29,000 43, , , , ,000 The RC drilling program recommended for Phase II is contingent on suitable results being obtained from the magnetic and MMI soil surveys in Phase I. In the author s opinion, the character of the Lunguya Property and its current stage of exploration are of sufficient merit to justify the nature and scale of the programs outlined above. The budgets are considered appropriate by the author. 3

9 2.0 INTRODUCTION and TERMS of REFERENCE Martin Taylor, P. Geo., was retained by Tanzanian Royalty Exploration Corporation ( Tanzanian Royalty ) in June 2009 to prepare a technical report to the standards of National Instrument on the Lunguya mineral property in the United Republic of Tanzania (Tanzania) in which Tanzanian Royalty holds interests of 50-80%. Mr. Taylor visited the property in 2003, 2005 and on several occasions in The author is aware that Tanzanian Royalty may use this report in support of future fundraising efforts, or as required for other purposes by the TSX Exchange and the relevant provincial Securities Commissions. In writing this report the author relied on corporate and extensive property data provided by Tanzanian Royalty, his observations in the field, his knowledge of Tanzania and its geology obtained from his many visits, and public information from his own files and websites of other companies operating in Tanzania. Government of Tanzania reports and maps, and other relevant reports, papers and data in the public domain were also examined. All available data on Tanzanian Royalty s Lunguya property was reviewed in Toronto, including reports on recent exploration programs. Copies were examined in Toronto of the original licence documents for each of the Prospecting Licences, including those for renewals of existing licences and the new applications for areas relinquished. All of the licence documents issued by the Minerals Development Division of Tanzania and examined by the author appear to be in order. Although the author is familiar with both the procedure of acquiring Prospecting Licences in Tanzania and the nature of the relevant documents pertaining to them, as a Professional Geoscientist he is not qualified to give a formal legal opinion on the validity of the licence or agreement documents and takes no responsibility for any errors or omissions within said documents that might affect Tanzanian Royalty s title or interest in the properties. Recommendations for a phased exploration program together with budgets were prepared by Mr. Taylor, the latter in consultation with the management of Tanzanian Royalty. These programs reflect the minimum work considered appropriate to advance or evaluate the properties rather than what is merely required to maintain the properties in good standing. 4

10 3.0 PROPERTY DESCRIPTION AND LOCATION The Lunguya mineral property in which Tanzanian Royalty holds interests of 50-80% and described in this report is located within the United Republic of Tanzania, in East Africa. The following section (3.1) provides background information on Tanzania. 3.1 The United Republic of Tanzania Tanzania covers a total area of 945,087 sq. km between longitudes 29 E - 41 E and latitudes 1 S - 12 S. It is bounded on the north by Kenya and Uganda, on the east by the Indian Ocean, on the south by Mozambique, Malawi and Zambia, and on the west by The Democratic Republic of Congo, Burundi, and Rwanda (Figure 1). Three of Africa's largest lakes, Victoria in the north, Tanganyika in the west, and Nyasa in the south, lie within Tanzania. Mount Kilimanjaro (5,895m) in northern Tanzania is the highest point on the African continent. The original hunter-gatherers in Tanzania were absorbed by successive pastoralist migrants from the north and west, especially in the 15 th and 16 th centuries. Coastal Tanzania included important trading posts as early as 400 BC, and permanent settlements were established in the early centuries AD by Phoenician and later Arab and Persian traders. Intermixing of these traders with the indigenous Bantu speakers giving rise to the development of the Swahili language. Islam was introduced from Arabia and was dominant by the 11 th century. Portuguese explorers reached the Tanzanian coast by the beginning of the 16 th century, and controlled trade from 1525 until the early 1700s when local control was re-established. Omani Arab influence was growing, however, and soon came to dominate all trade, including that of slaves. European explorers began to penetrate the interior in the mid-19 th century, culminating with a British Protectorate being established over Zanzibar, and most of what is now mainland Tanzania being administered as German East Africa. After WWI the mainland was administered by Britain under a League of Nations mandate and renamed Tanganyika. The country achieved independence on December 9, 1961, and became a republic one year later. Zanzibar achieved independence in December 1963 and the two countries merged on April 26, 1964 to form the United Republic of Tanganyika (renamed the United Republic of Tanzania in October 1965). Julius Nyerere became prime minister of Tanganyika on Independence in 1961 and president in 1962 with the adoption of a republican constitution. In 1977 a new party (CCM) was formed by merging the dominant parties of the mainland and Zanzibar, ruling a one-party state until 1995 when opposition parties were legalized. Jakaya Kikwete of the CCM won the 2005 election and continues as President in Tanzania is divided into 27 administrative regions, each headed by a Regional Commissioner and subdivided into districts administered by a District Commissioner. Twenty-one of the regions cover the mainland, comprising a total of 86 districts. Tanzania s population is estimated at about 35 million, 95% of Bantu origin. The largest tribal group, the Sukuma, comprises about 13% of the population with the balance made up of about 120 smaller tribal groups. 5

11 Figure 3.1. Administrative Regions of Tanzania 6

12 The main urban centres are Dar es Salaam, the largest city and port on the Indian Ocean, commercial capital and seat of government with a population of about 3 million; Dodoma, the appointed capital, where some government offices are located; Mwanza, a major city and the principal port on the south shore of Lake Victoria; Tanga, an industrial centre and the second seaport; Mbeya in the southwest and Arusha in the north. Roughly one third of Tanzanians are Moslem, another third Christian with most of the remainder following traditional beliefs. Swahili and English are the official languages, the former being the most important universal language amongst Tanzania s ethnic groups, and Arabic is widely spoken in Zanzibar. Tanzania s legal system is based on English common law. The currency is the Tanzanian shilling, Tshs 1,330=US$1.00 in May Since the liberalization of the financial sector in the 1990s, many private foreign and local banks now operate in the country, as well as numerous Bureaux de Change. Tanzania is one of the least urbanised countries in sub-saharan Africa, agriculture providing some 60% of GDP in 2007 and employing about 80% of the workforce. Major commercial crops include coffee, tea, cotton, cashews, sisal and cloves. Tourism plays an important role, especially in the game parks in the north of the country. Industry accounts for 17% of GDP and is mainly limited to processing agricultural products and light consumer goods. Mining is becoming increasingly important to the Tanzanian economy, especially with the opening of the major Geita (Anglogold/Ashanti), Bulyanhulu (Barrick) gold mines in 2000 and 2001, plus North Mara (Barrick) and Buzwagi (Barrick) in 2005 and Gold sales comprised about 86% of the total mineral exports of about US$886.5 million in 2007, with the balance coming mainly from diamonds and other precious stones. The Mineral Resources Department (MRD) is an integral part of the Ministry of Energy and Minerals and consists of the Mines and Minerals Development Divisions. The MRD is based in Dar es Salaam, with zonal offices in Mwanza, Arusha, Shinyanga, Mpanda, Morogoro, Mbeya, Mtwara and Singida. The Mines Division is responsible for health and safety standards in mines, enforcement of environmental regulations and standards, production statistics and services to mineral producers, particularly to small scale miners. The Minerals Development Division issues mineral licences, maintains the mineral rights registry and the mineral occurrence database and archive, and is responsible for mineral sector promotion and review of minerals policy. The Tanzania Geological Survey is an executive agency within the Ministry of Energy and Minerals, and consists of the Regional and Engineering Geology, Economic Geology and Geophysics, and Laboratory Services and Research Directorates. The Survey s headquarters are in Dodoma and it is responsible for: undertaking reconnaissance mineral exploration and basic regional geological mapping of the country; preparation and publication of geological maps, reports and drawings; analysis of rocks, soils, water and minerals, and provision of mineral processing services; maintenance of mineral resources databases; and investigating and assessing earthquakes, volcanic activity, landslides etc. The Government of Tanzania has recognised the importance of the mineral sector in the future development of the country. The revision of the Mining Act in 1998 and the Mining Regulations in 1999 were directed at attracting private sector investment in the exploration, mining 7

13 development, mineral beneficiation and marketing of Tanzania s mineral resources. Details of the Mining Act and Mining Regulations are included in Appendix I. The government is also focussing on regulation and improvement of the artisanal mining sector, ensuring that revenue from mining supports sustainable economic and social development, and minimizing the potential adverse social and environmental impacts of mining development through the use of best practices and community participation. Title to minerals in the ground is vested in the United Republic of Tanzania, and no prospecting or mining operations can be carried out without the appropriate mineral rights licence granted by the government. Of the various levels of licensing available to local companies working in mineral exploration (which may be wholly-owned by a foreign company such as Tanzanian Royalty), almost all companies work under a Prospecting Licence in the exploration stage and a Mining Licence in the exploitation stage. A Prospecting Licence grants exclusive exploration rights over an area not exceeding 200 km² for a period of three years, after which the licence may be renewed for two 2-year periods with a 50% reduction in area for each extension. Required work expenditures and land fees per sq. km increase with each renewal. Annual work expenditures are US$300/km² for the initial 3-year period, increasing to US$1,000/km² and US$3,000/km² for each successive 2-year period. Annual land rents are US$20/km² for the initial 3-year period, increasing to US$30/km² and US$50/km² for each successive 2-year period. A Mining Licence can be granted for a period not exceeding 10 years, renewable for a period of up to 10 years, on presentation of a suitable feasibility study, environmental impact study and employment plan. The mining taxation, fiscal and legal frameworks were designed to attract investors to the mining industry through a stable and internationally competitive regime. In the Investment Act of 1997 Tanzania recognises the investor's need to recover exploration and development costs, to achieve a rate of return commensurate with risk, to repatriate dividends and to meet financial obligations with creditors and suppliers. The 1998 Mining Act and Regulations are also designed to deter hoarding of data on new discoveries and speculative freezing of exploration lands. The State does not participate directly in exploration or mining operations. Royalties payable to the government are 3% of net-back value for minerals, and 5% of net-back value for diamonds. 3.2 Description of Lunguya Project The Lunguya Project originally comprised six Prospecting Licences, PLs 454/96, 639/97, 1307/99, 1308/99, 1320/99 and 1887/2002. In 1999 TANCAN Mining Company Ltd. (a Tanzanian subsidiary of Tan Range, which is now Tanzanian Royalty) signed option agreements with the licence holders whereby TANCAN could acquire 50-70% interests in the properties by making cash payments and exploration expenditures. All required payments and expenditures have been made and Tanzanian Royalty, through its wholly-owned Tanzanian subsidiaries TANCAN and Tanzam 2000, now owns 50-70% of the properties. Renewals and divisions of the original licences have resulted in the project consisting, as of October 31, 2009, of 11 Prospecting Licences and 6 application areas covering an area of approximately km². 8

14 Figure 3.2. Lunguya Project Licences and Applications 9

15 Two small Primary Mining Licences (PMLs) exist within what is now application area HQ- P These are held by Joseph M. Magunila and total about 1.8 km² and cover part of the Nyamakwenge Reefs. A third PML is reported by Tanzanian Royalty to exist in the east of PL 2193/2003. Discussions are under way to obtain working agreements with the owners of the PMLs. In December 2001 TANCAN Mining (a subsidiary of Tanzanian Royalty) entered into an option agreement with Barrick Exploration Africa Ltd (BEAL) that included what was then PL 1308/99 (subsequently PL 2455/2004 and currently PLs 5127/2008 and 5277/2008). BEAL returned the licence to TANCAN Mining in November All of the 17 sectors of the Lunguya Project have valid Prospecting Licences granted or, as in the case of the application areas, the acquisition of a new Prospecting Licence is in progress. Due to a serious administrative backlog in the Minerals Development Division, applications accepted as far back as November 2007 have still not had their licences granted, nor have the letters of offer (the last step before the actual licence grant) been received. Copies of the original documents for the eleven granted Prospecting Licences were verified by the author in November 2009, as were those for the six pending applications accepted by the Ministry with the exception of HQ- P These documents show accepted payment of annual land rents for the PLs and application fees plus the dated stamp of acceptance by the Ministry for the application areas. None of the exploration licences on the Lunguya Project have been legally surveyed. This is not a requirement of the 1998 Mining Act where Prospecting Licences are issued with a list of the latitude and longitude coordinates of the corners. Licence holders are, however, required to mark each corner with a post and a short ditch pointing to the next post. This will be attended to, using GPS control, as part of future exploration programs. As far as is known, none of the Prospecting Licences in the Lunguya property are subject to any environmental liabilities. Prospecting Licences, under the 1998 Mining Act, are issued for an initial period of 3 years, renewable for two 2-year periods with a reduction in area of 50% in each case. Annual land rental fees are charged per square kilometre of the licence and minimum exploration expenditures are calculated on the same basis. Both land fees and exploration expenditures increase per sq. km with each renewal of a licence. The turn-around time for renewals and applications at the Ministry of Energy and Minerals is currently between 6 and 24 months. For both processes a Letter of Offer is first received from the Ministry. This letter, or notice of grant, notifies the applicant that the renewal or licence will be granted providing the applicant confirms acceptance of the description of the property; gives notice within 28 days of willingness to accept the proposed licence; and pays the required preparation fee. Once the licence fee has been paid the applicant is effectively guaranteed that the renewal or licence will be granted. Typically at least more three months will lapse before the actual grant of the renewal or new licence. In the case of renewal of an existing licence the applicant may commence work on the ground once the Letter of Offer has been received. For new licence applications, however, exploration can only commence once the new licence has actually been granted. 10

16 Table 3.1. Coordinates of Lunguya Project Licences PL Area km² Region District Map Corner UTM E UTM N Latitude Longitude 2059/ Shinyanga Kahama QDS A º S 32º E 46/4 B º S 32º E C º S 32º E D º S 32º E 2193/ Shinyanga Kahama QDS A º S 32º E 46/4 B º S 32º E C º S 32º E D º S 32º E 2472/ Shinyanga Kahama QDS A º S 32º E 46/4 B º S 32º E C º S 32º E D º S 32º E 3273/ Shinyanga Kahama QDS A º S 32º E 47/3 B º S 32º E C º S 32º E D º S 32º E E º S 32º E F º S 32º E 4074/ Shinyanga Kahama QDS A º S 32º E 46/4 B º S 32º E C º S 32º E D º S 32º E 4273/ Shinyanga Kahama QDS A º S 32º E 46/4 B º S 32º E C º S 32º E D º S 32º E 4594/ Shinyanga Kahama QDS A º S 32º E 46/4 B º S 32º E C º S 32º E D º S 32º E 5123/ Shinyanga Kahama QDS A º S 32º E 47/3 B º S 32º E C º S 32º E D º S 32º E 5127/ Shinyanga Kahama QDS A º S 32º E 46/4 B º S 32º E C º S 32º E D º S 32º E 5277/ Shinyanga Kahama QDS A º S 32º E 46/4 B º S 32º E C º S 32º E 11

17 D º S 32º E E º S 32º E F º S 32º E 5289/ Shinyanga Kahama QDS A º S 32º E 46/4 B º S 32º E C º S 32º E D º S 32º E HQ-P Shinyanga Kahama QDS A º S 32º E 46/4 B º S 32º E C º S 32º E D º S 32º E HQ-P Shinyanga Kahama QDS A º S 32º E 46/4 B º S 32º E C º S 32º E D º S 32º E HQ-P Shinyanga Kahama QDS A º S 32º E 47/3 B º S 32º E C º S 32º E D º S 32º E E º S 32º E F º S 32º E HQ-P Shinyanga Kahama QDS A º S 32º E 46/4 B º S 32º E C º S 32º E D º S 32º E HQ-P Shinyanga Kahama QDS A º S 32º E 46/4 B º S 32º E C º S 32º E D º S 32º E HQ-P Shinyanga Kahama QDS A º S 32º E 46/4 B º S 32º E C º S 32º E D º S 32º E Total

18 Table 3.2. Status of Lunguya Project Licences PL or Application Name of Date Current Previous Holder Applied Grant Ren 1 Ren 2 Expiry 2059/ /99 Zahabu Investment (T) Ltd / /97 Tanzam / /99 Fenites Ltd / /2002 Tanzam / /99 Tanzam / /2003 TANCAN Mining / /2001 Lunguya Mining Co. Ltd / /2002 Tanzam / /2004 JSN Ltd / /2004 TANCAN Mining / /2004 Tanzam HQ-P /2002 Tanzam HQ-P /2003 TANCAN Mining HQ-P /2005 TANCAN Mining HQ-P /2001 Tanzam HQ-P /2004 Tanzam HQ-P /2006 TANCAN Mining Table 3.3. Ownership of Lunguya Project Licences PL or Application Licence in the Name of % held by Date of JV Current Previous Tanz.Royalty Agreement Area km² 2059/ /99 Zahabu Investment (T) Ltd HQ-P /2002 Tanzam / /97 Tanzam HQ-P /2003 TANCAN Mining / /2003 TANCAN Mining / /99 Fenites Ltd HQ-P /2004 Tanzam / /2004 Tanzam / /2002 Tanzam HQ-P /2005 TANCAN Mining / /99 Tanzam HQ-P /2006 TANCAN Mining / /2001 Lunguya Mining Co. Ltd HQ-P /2001 Tanzam / /2002 Tanzam / /2004 JSN Ltd / /2004 TANCAN Mining Total

19 3.2.1 PL 2059/2002, HQ-P17760 PL 2059/2002, Shilela North, originally covered an area of approximately km² about 10 km southeast of Lunguya village in Kahama District. PL 2059/2002 was issued to Zahabu Investments Ltd. on November 19, 2002 and had been previously issued to Zahabu in 1999 as PL 1320/99. The licence was reduced to km² on first renewal in November 2005 and to 8.53 km² on second renewal in November The licence is due to expire in November 2009 and will be reapplied for by Tanzanian Royalty. The relinquished area on second renewal of 8.56 km² was reapplied for by Tanzam 2000 as HQ-P The licence for this application area has yet to be granted. Tanzam 2000 entered a joint venture with Zahabu Investments Ltd. on June 25, 1999 on the previous PL 1320/99 that remains in force on the current licence and its splits. Under the terms of the agreement, Tanzam 2000 has earned a 70% interest in the property PL4074/2006, HQ-P20718 PL 4074/2006 was granted to Tanzam 2000 on August 29, 2006, over the area of km² relinquished from PL 2059/2002 on first renewal. The licence is located about 7 km southeast of Lunguya village in Kahama district. On first renewal of PL 4074/2006 in August 2009, the area was reduced to 8.57 km² and the relinquished area of 8.57 km² was reapplied for by TANCAN Mining as HQ-P The application has been accepted by the Ministry but issuance of the letter of offer and the licence grant remain pending. Tanzam 2000 entered a joint venture with Zahabu Investments Ltd. on June 25, 1999 on the previous PL 1320/99 that remains in force on the current licence and its splits. Under the terms of the agreement, Tanzam 2000 has earned a 70% interest in the property. Figure 3.3. Outline of PL 2059/2002, 4074/2006, HQ-P17760 and HQ-P

20 3.2.3 PL 2193/2003, HQ-P17986, PL 4273/2007 PL 2193/2003, Lunguya West, originally covered an area of approximately km² southwest of Lunguya village in Kahama District. PL 2193/2003 was issued to Tanzam 2000 on March 28, 2003 and had been previously issued to Abby s Mining Company Ltd. in 1997 as PL 639/97. The licence was reduced to km² on first renewal in March 2006, with the relinquished area of km² reapplied for by TANCAN Mining and granted as PL 4273/2007 on April 7, The licence was further reduced to km² on second renewal in April 2008, with the relinquished area reapplied for as HQ- P The licence for this application area has yet to be granted. Tanzam 2000 entered into a joint venture with Abby s Mining Company Limited on January 22, 1999 on the previous PL 639/97 that remains in force on the current licence and its splits. Under the terms of the agreement, Tanzam 2000 has earned a 65% interest in the property. Figure 3.4. Outline of PL 2193/2003, PL 4273/2007 and HQ-P PL 2472/2004, HQ-P20036, PL 5289/2008 PL 2472/2004, Shilela, originally covered an area of approximately km² southeast of Shilela village in Kahama District. PL 2472/2004 was issued to Fenites Limited on March 11, 2004 and had been previously issued to Fenites in 1992 as PL 33/92 and in 1999 as PL 1307/99. The licence was reduced to km² on first renewal in March 2007, with the relinquished area of km² reapplied for by Tanzam 2000 and granted as PL 5289/2008 on August 28, The licence was further reduced to km² on second renewal in March 2009, with the relinquished area reapplied for by Tanzam 2000 as HQ-P The licence for this application area has yet to be granted. Tanzam 2000 entered into a joint venture with Fenites on June 25, 1999, that remains in force on PL 2472/2004 and its splits. Under the terms of the agreement Tanzam 2000 has earned a 70% interest in the property. 15

21 Figure 3.5. Outline of PL 2472/2004, PL 5289/2008 and HQ-P PL 3273/2005, HQ-P18233, PL 5123/2008 PL 3273/2005, Lunguya East, originally covered an area of approximately km², about 18 km east of Lunguya village in Kahama District. The licence was issued to Tanzam 2000 on April 30, 2005 and comprised the east half of the previous licence, PL 1887/2002, issued to Madaba Minerals Ltd. The licence was reduced to km² on first renewal in April 2008, with the relinquished area of km² reapplied for by TANCAN Mining as HQ-P The licence for this application area has yet to be granted. The west half of PL 1887/2002, covering km², was granted to Tanzam 2000 as PL 5123/2008 on July 21, Tanzam 2000 entered into a joint venture with Madaba Minerals Ltd. on August 13, 1999 on the precursor licence (PL 33/92) to PL 1887/2002 that remains in force on the current licences and splits. Under the terms of the agreement, Tanzam 2000 has earned a 70% interest in the property. 16

22 Figure 3.6. Outline of PL 3273/2005, HQ-P18233, PL 5123/ HQ-P18934, PL 4594/2007 PL 4594/2007, Lunguya, covers an area of approximately km² about 8 km east of Lunguya village in Kahama District. PL 4594/2007 was issued to Lunguya Mining Company Limited on August 7, The licence comprises the southeast quadrant of the previous licences, PL 454/96 and then PL 1766/2001 which were issued to Northern Mining and Consultancy Ltd. On first renewal of PL 1766/2001 in 2004, the western half was relinquished. On second renewal of PL 1766/2001 in 2006, the relinquished half was reapplied for and granted as PL 4594/2007. On expiry of PL 1766/2001 in 2008, the km² remnant was applied for by Tanzam 2000 as HQ-P The licence for this application area has yet to be granted. Tanzam 2000 entered into a joint venture with Northern Mining on March 31, 1999 on the previous PL 454/96 that remains in force on the current licence and application. Under the terms of the agreement, Tanzam 2000 has earned an 80% interest in the property. 17

23 Figure 3.7. Outline of PL 4594/2007 and HQ-P PL 5127/2008, PL 5277/2008 PL 5127/2008 (Ilogi West) and PL 5277/2008 (Ilogi East) cover and km² respectively, centred about 5 km north of Lunguya village in Kahama District. PL 5127/2008 was issued to JSN Limited on July 21, 2008 and PL 5277/2008 was issued to TANCAN Mining on July 25, The two licences previously comprised the western and eastern halves of PL 1308/99 and its successor PL 2455/2004, both of which were issued to Tanzam Tanzam 2000 entered into a joint venture with Barrick Exploration Africa Ltd. (BEAL) on December 14, 2001 and the property was returned by BEAL on November 6, The property is currently subject to a joint venture between Tanzam 2000 and JSN Ltd., with Tanzam 2000 holding a 70% interest in the property. 18

24 Figure 3.8. Outline of PL 5127/2008 and PL 5277/

25 4.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY 4.1 Introduction Most of mainland Tanzania consists of a central plateau from 900-1,800 metres above sea level (averaging about 1,200 m), rising gently from a fertile coastal belt that is about km wide. The western arm of the Great Rift Valley runs down the west side of the plateau and contains Lakes Tanganyika and Nyasa, while the eastern arm cuts through the central part of the plateau. The Lake Victoria basin lies in the northwest of the country between the arms of the rift valley. The principal mountain ranges are the Eastern Arc, in the northeast of the country, the Southern Highlands in the southwest, and the volcanic mountains in the north (Mt. Kilimanjaro, 5,896m, Mt. Meru, 4,566 m, and the Crater Highlands including Ngorongoro and Oldoinyo Lengai). The interior plateau is covered by dry thorn scrub, savannah grasslands and a variety of deciduous woodlands and forests. About 30% of the country, mainly in the south and west, is covered by miombo woodland. The largest river is the Rufiji, draining from the Southern Highlands to the Indian Ocean and including much of southern Tanzania in its catchment. The Zanzibar archipelago, including the principal coral island of Unguja (1,650 sq. km) lies about 40 km from the mainland. Pemba, about 984 sq. km, lies 50 km east of the mainland and 50 km northeast of Unguja. Tanzania s climate varies markedly with its topography. There are four main climatic zones: the hot, humid coastal plain with average temperatures of 27-29ºC and maximums of 29-34ºC; the hot, semi-arid central plateau where maximum daytime temperatures average 20-27ºC from June through August and 29-32ºC from December to March; the high-moist lake regions; and the temperate highland areas. Throughout the country there are two rainy seasons, the long rains from mid-march through May, and the short rains which fall primarily in November and December. Much of central Tanzania is semi-arid with less than 500 mm of rain per year, though the western part of the plateau is generally moister. In the Lake Victoria basin, especially west of the lake, annual rainfall usually exceeds 800 mm. The mountains in the northeast and southwest may receive over 2,000 mm annually, while rainfall on the coast ranges between 1,000 and 1,900 mm. Tanzania has an extensive network of over 88,000 km of classified roads, most of which are unpaved away from the main routes from Dar es Salaam to Arusha, Tanga, Mbeya and Dodoma. A paved road that has particular importance for access to the area southwest of Lake Victoria runs south from Mwanza through Shinyanga and Kahama and west to the Burundi border. The Government is working to upgrade and maintain roads, especially to improve access for major agricultural, tourism and mining areas. Tanzania Railways Corporation (TRC) runs passenger and cargo services on a m gauge line from Dar es Salaam to Mwanza on Lake Victoria, Kigoma on Lake Tanganyika, and from Tanga to Moshi and Arusha. The Tanzania-Zambia Railway Authority (TAZARA) operates a standard gauge line between Dar es Salaam and Kapiri Mposhi in Zambia via Mbeya. 20

26 Tanzania has three major ports on the Indian Ocean, Dar es Salaam, Tanga and Mtwara. An alternative route for large freight shipments to the Lake Victoria area is through the port of Mombasa in Kenya and then along good roads to Mwanza. The principal ports on Lake Victoria are Mwanza and Bukoba, while Kigoma handles most of the trade on Lake Tanganyika. Major airports at Dar es Salaam (DIA), Kilimanjaro (KIA), and Zanzibar (ZIA) are served by many international airlines. Domestic scheduled and charter flights connect the major centres, especially Mwanza which can handle jet aircraft, and utilize over 50 local airports and airstrips. Domestic and international telephone and facsimile services are provided by the Tanzania Telecommunications Company Limited (TTCL). The system is fair, operating below capacity and being modernized for better service. Five private companies provide good cellular service in the main population centres and along major roads, with adequate reception over much of the area around Lake Victoria. Internet cafés are now available in the cities and most towns. 4.2 Lunguya Project The Lunguya Project consists of eleven Prospecting Licences and six application areas covering a contiguous area of km² within western Tanzania. The area typically has two rainy seasons, the small rains from mid-november through December and the big rains from mid- March into May, though significant rain often falls in January and February. The months of June through October are usually dry, with occasional thunderstorms. Annual rainfall averages mm. Access along the dirt tracks to and within the PLs is frequently impaired directly after heavy rainfall, though exploration activities should not be seriously affected during a normal rainy season unless access is required onto or across areas of mbuga soils. The property is approximately 100 km southwest of Mwanza on Lake Victoria and 50 km northnorthwest of Kahama. Principal access is from the main tarred road from Mwanza to Burundi via Shinyanga and Kahama and thence via the graded gravel road that runs north through the property and on to the Bulyanhulu Mine and Geita. Various dirt tracks provide access across the property. The large villages of Lunguya and Shilela are located on the Bulyanhulu road immediately north and south of PL 2193/2003. The town of Kahama serves as the headquarters for the Kahama District with the offices of the District Commissioner and the District Courthouse. The project area is mostly gently rolling hills, with the intervening low-lying areas covered with mbuga soils. These hills reach a height of 1275 m asl within PL 2193/2003 in the west centre of the property. Scattered farms and a few small hamlets occur across the gentler slopes and the low-lying areas. Within the project area there is no major infrastructure but the proximity of the Bulyanhulu Mine (20 km north of Lunguya village) has greatly improved the road networks, health clinics, schools, electricity and air transport in the area PL 2059/2002, HQ-P17760 The Shilela North property is centred about 10 km southeast of Lunguya village in Kahama District and 7 km east of the Bulyanhulu - Kahama road. The area is flat, with a 21

27 northeast-draining mbuga making up 46% of the surface area. Access to the licence and application area is good, with numerous tracks transecting the area, though it can be a problem for heavy trucks in the rainy seasons PL4074/2006, HQ-P20718 PL 4074/2006, the western part of the original Shilela North property, is centred about 7 km southeast of Lunguya village, with the western boundary only a few hundred metres east of the Bulyanhulu-Kahama road. The area is essentially flat with a large northeastdraining mbuga cutting across the area PL 2193/2003, HQ-P17986, PL 4273/2007 The Lunguya West property lies southwest of Lunguya village, with the Bulyanhulu- Kahama road cutting across the eastern edge. The area is undulating with several minor drainages and mbuga areas trending southeast across the property. The highest point is about 1275 m asl in the north of PL 2193/2003 and the low about 1205 m in the southwest corner of PL 4273/ PL 2472/2004, HQ-P20036, PL 5289/2008 The Shilela property forms the southern part of the overall Lunguya project and lies immediately southeast of the village of Shilela on the Bulyanhulu-Kahama road. The area is flat and is drained to the east by a large mbuga making up 32% of the surface area. Access to the licence is good with numerous tracks transecting the entire area, though access for heavy trucks can be difficult in the rainy seasons PL 3273/2005, HQ-P18233, PL 5123/2008 The Lunguya East property comprises the eastern part of the Lunguya Project, in QDS sheet 47/3 Bukwimba. The property is centred about 18 km due east of Lunguya village and 10 km south of Bukwimba, with the principal access from the Bukwimba-Kahama dirt road which passes across the eastern edge of the property. The property is essentially flat with a few low rolling hills. The available copy of QDS sheet 47/3 is poor quality and it is difficult to determine the topography and drainage HQ-P18934, PL 4594/2007 The Lunguya property, comprising the remnants of PL 1766/2001, is centred 9 km east of Lunguya village and about 16 km south of the Bulyanhulu Mine. The area is flat and drained to the northeast by two shallow, mbuga-filled valleys. Elevations range from 1190 m asl to 1222 m asl in the southern part of HQ-P

28 4.2.7 PL 5127/2008, PL 5277/2008 PL 5127/2008 (Ilogi West) and PL 5277/2008 (Ilogi East) are transected by the Bulyanhulu-Kahama road about 5 km north of Lunguya village. The licences straddle the valley of the Kabhanda River which flows to the east and eventually drains into Lake Victoria. Much of PL 5127/2008 is low rolling hills up to 1330 m asl, while PL 5277/2008 to the east is mostly flat and covered by mbuga with a low of 1190 m asl. The two principal settlements in PL 5277/2008 are the small villages of Ilogi and Buyange on the Bulyanhulu-Kahama road. Figure 4.1. Licence and Application outlines on 1:50,000 topography 23

29 5.0 HISTORY and WORK BY OTHER PARTIES In 1978 the central and west parts of the Lunguya Project area were mapped by the Geological survey of Tanzania. The map of QDS 46 (Bukoli) was prepared by Nanyaro et al (1978). In Geosurvey International GmbH carried out country-wide airborne geophysics. In 1989 the Government of Tanzania and the BGR of Germany mapped the geology of the Lake Victoria Goldfields, the map and accompanying report being edited by Barth (1990). Reunion Diamonds explored the area for kimberlites in There are three areas of recent artisanal gold mining on the Lunguya Project area. Nyamakwenge is in the north of HQ-P18934 and is currently active on a small scale. Nyikoboko lies in the north of PL 2472/2004 and Shilela lies in the southeast of PL 2193/2003. Goldbearing quartz veins have been worked in shallow pits at each site. 5.1 Exploration by Barrick Exploration Africa Limited. On December 14, 2001, Barrick Exploration Africa Limited (BEAL) entered into an option agreement with Tanzam 2000 for the exploration of the then PL 1308/99, later PL 2455/2004 and currently PLs 5127/2008 and 5277/2008. After spending US$ 381, on exploration, BEAL returned the property to Tanzam 2000 on November 6, The property was selected by BEAL because of its proximity to the Bulyanhulu gold mine and the presence of northwest-trending structures sub-parallel to those hosting Bulyanhulu. Exploration work completed on the property by BEAL included: airborne magnetic, EM and gravity surveys; geological mapping (1:20,000); geochemical soil, soil ph and rock chip sampling; CBI (cover-bedrock interface) and RAB drilling. Initial RAB drilling in the east of the property returned significant results from several holes including; 1.71g/t Au, 2.23 g/t Au, 3.15 g/t Au, 1.72 g/t Au and 1.89 g/t Au. CBI drilling over much of the property outlined a northwest-trending gold anomaly (up to 128 ppb Au). A final phase of RAB drilling in 2005 tested the CBI anomaly and previous RAB intersections. Four holes out of fifty-three drilled returned anomalous results including: 0.91g/t Au (BBSRAB0807), 0.67g/t Au (BBSRAB0777), 0.79g/t Au (BBSRAB0786) and 0.61g/t Au (BBSRAB0797). All other holes returned values below 100 ppb Au. Table 5.1: Summary of BEAL Exploration Activities on PL 2455/2004. Soil Rock CBI Drilling RAB Drilling Auger Soils Samples Samples m/holes/samples m / holes/samples , /71/160 13,774/260/6,360 The descriptions below of the work carried out by BEAL are edited extensively by the author from a comprehensive report provided to Tanzanian Royalty by BEAL (November, 2006). The initial ground exploration work by BEAL was carried out in three phases. Phase I consisted of systematic soil sampling at 800 m x 200 m spacing, followed by infill sampling at 400 m x 24

30 100 m together with grab sampling from the limited outcrops. Soil anomalies of ppb Au were detected in the eastern part of the licence with a discrete maximum of 137 ppb Au. Rock chip results were generally low, with one sample returning 1.81 g/t Au. In Phase II BEAL used hand augers to sample at 500 m x 50 m over a small portion of the eastern part of the licence, followed by infill at 100 m x 50 m over anomalous zones. Pits were dug to examine the regolith profile. In Phase III RAB drilling was carried out to test the strongest gold-in-soil anomalies outlined by Phases I and II. Subsequently cover-bedrock interface drilling (CBI) was carried out at 800 m x 200 m spacing. The arsenic and copper plots highlighted the Kalole North target that was the focus of a second RAB drilling program in BEAL concluded that the quartz veins sampled in artisanal pits and intersected in RAB drilling were narrow and discontinuous. Despite the grades of up to 40.3 g/t Au in grab samples BEAL considered there was a lack of continuity that limited the potential to host a significant gold deposit. As a result, they returned the property to Tanzam Airborne Surveys The airborne magnetic data acquired by BEAL shows the north-south contact in the eastern end of the licence between the granites that underlie most of the property and the greenstones to the east. A northwest-trending, Bulyanhulu-parallel, structure is clearly evident in the greenstones and appears to be associated with the known gold mineralization. Other northwest to west-northwest structures appear in the granites in the centre and west of the property. Figure 5.1. PL 2455/2004 RTP 1VD Magnetic Image Similar north-south and northwest-trending features are evident on the gravity data. 25

31 5.1.2 Soil Sampling Figure 5.2. PL 2455/2004 Gravity Image In Phase I systematic soil sampling was carried out at 800 m x 200 m spacing, followed by infill sampling at 400 m x 100 m together with grab sampling from the limited outcrops. A total of 783 soil samples were collected at 50 cm depths from 187 line km. Soil anomalies of ppb Au were detected in the eastern part of the licence with a discrete maximum of 137 ppb Au. Duplicate samples were collected from the end of each sample line and standards and blanks were inserted alternately at every 20 th sample. All samples collected were shipped to Humac Laboratories in Mwanza for preparation and analysis. During the soil sampling 21 rock chip samples were collected from the scattered outcrops across the property. The rock chip results were generally low, with one sample returning 1.81 g/t Au. In Phase II BEAL used hand augers to sample at 500 m x 50 m over a small portion of the eastern part of the licence, followed by infill at 100 m x 50 m over anomalous zones. 1,737 samples were collected over an area of about km². The sample depth varied from 0.10 m to 4.00 m with the sample taken at the top of ferricrete. Standards and blanks were inserted every 20th sample and duplicate samples were collected after every 40 samples. No mbuga sample was collected. All soil samples were sent to Humac Laboratories in Mwanza for gold analysis. 26

32 . Figure 5.3. Geology and 2002 soil gold results 27

33 The most significant gold-in-soil anomaly, Kalole Main, occurs in the extreme eastern part of the property, 4 km in length along an almost north-south trend. The highest value of 840 ppb Au was obtained in the central part of the anomaly. The second strong soil anomaly, Kalole North, was outlined northwest of Kalole Main and is approximately 1.5 km long on a northwest trend. Interestingly the regolith mapping in this area indicated Kalole North is underlain by granite. The highest gold result from this anomaly was 1,311 ppb Au. Beal attempted to validate this anomaly by pitting, but were prevented by a shallow water table. As in Phase I rock grab samples were collected but only one of the six returned a significant gold value (4.44 g/t Au from a smoky grey quartz vein with iron oxide pseudomorphs after sulphides and traces of pyrite along fractures) RAB Drilling Five RAB fences with 207 holes totalling 11,895 m of drilling were completed at Kalole Main in All holes were drilled at -50º on an azimuth of 257º. A total of 6,354 samples were sent for analysis, primarily 3 m composites sent to Humac with 1 m followup samples sent ALS Chemex. Subsequent drilling in 2005 comprising 1,879 m in 53 holes along three fences focussed on the Kalole North target, with the holes drilled at -50º on an azimuth of 222º. A total of 582 samples were sent for analysis at SGS in Mwanza. All holes were drilled in a heel-to-toe pattern with additional overlap where significant mineralization was inferred from the visual examination of the drill chips. Table 5.2. Significant Results from BEAL RAB Drilling Hole Target From To Length (m) Assay g/t Au BBSRAB0044 Kalole Main BBSRAB0045 Kalole Main BBSRAB0121 Kalole Main BBSRAB0122 Kalole Main BBSRAB0174 Kalole Main BBSRAB0225 Kalole Main BBSRAB0226 Kalole Main BBSRAB0249 Kalole Main BBSRAB0249 Kalole Main BBSRAB0281 Kalole Main BBSRAB0283 Kalole Main BBSRAB0284 Kalole Main BBSRAB0376 Kalole Main BBSRAB0777 Kalole North BBSRAB0786 Kalole North BBSRAB0797 Kalole North BBSRAB0807 Kalole North

34 Figure 5.4. Interpreted Geology and Drilling Geochemistry Cover-Bedrock Interface (CBI) Drilling CBI drilling was carried out in 2004 at 800 m x 200 m spacing over mbuga-covered areas that had not been sampled in the earlier 50 cm or auger soil sampling. 748 m were drilled in 71 vertical holes, with 160 samples sent to ALS-Chemex for gold + multi-element ICP analysis. Two single-point anomalies of 124 and 128 ppb Au were detected, with three other weaker anomalous values of 28, 31 and 31 ppb Au. The ICP data showed a metal association of Au-Ag-As-Cu-Mo±Bi. The arsenic and copper plots outlined the Kalole North target. 29

35 Figure 5.5. CBI Au over Cu colour grid, with significant rock and RAB Drill Results. Table 5.3 Summary of Statistics, CBI Geochemistry Factor Au ppb Mean 4.84 Standard Deviation M M M Maximum Value 128 Hicut 100 >M+3 2 >M+2 4 n

36 Figure 5.6 CBI Au over As colour grid, with significant Rock and RAB Drill Results. 31

37 Figure 5.7 BEAL RAB drilling Fence 1 part 6 32

38 Figure 5.8 BEAL RAB Drilling Fence 1 part 7 33

39 Figure 5.9 BEAL RAB Drilling Fence 2 part 9 34

40 Figure 5.10 BEAL RAB Drilling Fence 3 part 1 35

41 Figure 5.11 BEAL RAB Drilling Fence 3 part 5 36

42 Figure 5.12 BEAL RAB Drilling Fence 3 part 8 37

43 5.1.5 Geological Mapping BEAL carried out geological mapping at a scale of 1:20,000 that was incorporated with interpretation of the airborne magnetic and gravity data and the results of auger soils and RAB drilling to complete a map of the project area. PL 2455/2004 is predominantly (more than 90%) underlain by granites, with the eastern edge underlain by Archaean greenstones of the West Kahama Belt. These Lower Nyanzian System rocks have been intruded by quartz-feldspar porphyries and mafic intrusives. Minor black argillite and quartz veining at or near the contacts between mafic flows may bear some similarity to Reef 2 at Bulyanhulu. The property geology is shown on Figures 5.3 and 5.4. The granites are essentially post-tectonic, unfoliated G5 intrusions, with minor sheared older granite (G3?) outcrops observed by BEAL along the Kabhanda River that runs east through the property. The G5 granites are pink, medium to coarse-grained, locally porphyritic and magnetic. The Lower Nyanzian mafic volcanics are fine-grained, massive to weakly-foliated basalts with fine disseminated pyrite mineralization. Black argillite interflow sediments hosting smoky quartz veinlets were intersected in two RAB fences. A sheared unit of fine-to medium-grained felsic tuffs, trending northwest, occurs within the basalts. It is intruded by tongues of mafic dykes hosting white to grey brecciated quartz veins. The mafic dykes are dark grey, medium-to coarse-grained and probably dolerites. Other white to grey quartz veins, trending east-west and up to 30 cm thick, were observed by BEAL in artisanal mining pits. Structural interpretation of the airborne magnetic data revealed the presence of northwest and minor east or north-trending lineaments. Moderate shear zones containing quartz veins/veinlets were locally intersected in three RAB fences and in small outcrops in the Kabhanda River valley. The airborne gravity survey data suggests granitoids occur under the surficial cover in the western two-thirds of PL2455/2004. Kaolinite is the most common alteration mineral in granite and quartz-feldspar porphyry throughout the area while hematite, limonite, chlorite, carbonates and sericite were observed by BEAL in basalts and mafic intrusives. Gold mineralization on the property is essentially associated with quartz veins in sheared basalt and at or near the contact between basalt and mafic intrusive rocks. The sulphide mineralization is predominantly pyrite with minor chalcopyrite, finely disseminated and as fracture filling. 38

44 Table 5.4. BEAL Exploration Expenditures (US Dollars) Category Cost (US$) Salaries, Wages and Taxes 56, Travel, Accommodation and Meals 24, Airborne Geophysics 6, Assays 48, RAB Drilling 98, Supplies 8, Geology 2, Vehicles, Fuel, Repairs 16, Property Options 100, Permits, taxes, property costs 15, Communications, Insurance 2, Total 381,

45 6.0 GEOLOGICAL SETTING 6.1 Introduction to the Geology of Tanzania The Archaean Tanzanian Craton and its surrounding Proterozoic mobile belts underlie much of the Central Plateau of Tanzania. The craton is bounded to the east by the polymetamorphic Mozambique Belt, to the southwest by the Ubendian Belt and to the northwest by the Karagwe- Ankolean System. Continentally-derived sediments of Mesoproterozoic and younger age cover part of the craton, especially in the east. Tertiary mafic to intermediate volcanics including carbonatites occur mainly in the Kilimanjaro and Eastern Rift areas of the north of the country. Figure 6.1. General Geology of Tanzania (after Hester, 1998) 40

46 Figure 6.2. Stratigraphic Column for Tanzania (after Hester, 1998). 41

47 Tanzania is now the third-largest gold producer in Africa, after South Africa and Ghana. This has been achieved with the opening of three major open-pit mines (Golden Pride, Geita and North Mara) and one major underground mine (Bulyanhulu) in recent years. These mines are all within the Nyanzian greenstone belts in the Lake Victoria Goldfields. Diamonds are produced from kimberlites within the Archaean craton, principally from the Williamson Mine at Mwadui. Other gemstones, especially tanzanite (a blue zoisite), are produced from gneisses of the Usagaran mobile belt. A major undeveloped resource is the nickel sulphide deposit at Kabanga, where close to 1 million tonnes of contained nickel has been outlined. The general geology of Tanzania is shown in Figure 6.1, and the stratigraphic table in Figure Archaean Historically interpreted as the oldest rocks of the craton are highly metamorphosed and migmatized sediments and minor igneous rocks of the Dodoman System, forming a band across the central part of the craton. These rocks are predominantly gneissic sediments, granites, schists and migmatites, with minor quartzites and amphibolites occurring in the southern part. Single zircon age dates developed by Borg and Krogh (1999), however, suggest the Dodoman sequence to be emplaced or reworked coevally. The main part of the Archaean craton comprises migmatites, biotite gneisses, gneissic granites and local massifs of biotite granites, and includes the Nyanzian greenstone belts to the south and east of Lake Victoria. These greenstone belts host the major gold deposits in Tanzania and are the principal focus of current exploration. The greenstones of the Nyanzian System can be divided into a Lower Series of dominantly mafic volcanics and associated sediments that include banded iron-formation, cherts, shale and conglomerate, and an Upper Series characterized by felsic volcanics, cherts and banded iron-formation. The Lower Nyanzian forms the inner belts of the Sukumaland Greenstone Belt south of Lake Victoria (and hosts the Lunguya property) while the Upper Nyanzian forms the outer belts. The greenstones are generally metamorphosed to lower to middle greenschist facies, locally to almandine amphibolite facies. They are commonly folded about steeply dipping axial planes, generally striking east-west. The Nyanzian is unconformably overlain (locally) by conglomerates, arkoses and quartzites of the Kavirondian System. These rocks appear to have been derived, at least in part, from the Nyanzian and contain clasts of all Nyanzian lithologies, some apparently deformed. A major period of granitoid emplacement followed the Kavirondian, and was followed in turn by major tectonic deformation. Syntectonic granitoids have been dated at Ma while some unfoliated granitoids may be post-tectonic. Many hypabyssal intrusives cut these Archaean sequences, including feldspar-porphyries and lamprophyres. Abundant younger dykes are related to Mesozoic and Tertiary tectonic events. The ages of the granite-gneiss terranes surrounding the greenstones are confusing, with the structural relationships not clearly understood. Some granites are discordant and intrusive, others display 42

48 conformable contacts with the greenstones, though most are of indeterminate affinity. Both Proterozoic and Archaean ages have been obtained from the granite-gneiss terranes and it is locally difficult to distinguish the two components Proterozoic The NW-trending Paleoproterozoic Ubendian ductile shear belt occurs on the southwest side of the Archaean craton and consists of a variety of medium to high-grade metamorphic rocks, much of which are reworked Archaean. Gneisses and schists predominate with minor amphibolites and marbles, and late granitoids along the craton/belt boundaries. The metamorphic grade is mostly almandine-amphibolite, locally up to granulite, the latter dated to Ga and likely related to the Usagaran orogeny. The Usagaran tectonic domain, which forms part of the Mozambique Belt on the eastern side of the craton, is of similar age to the Ubendian. It consists mainly of biotite-gneisses of pelitic origin and lesser granulites and quartzites. The structural trends are dominantly southwest, but the Neoproterozoic-Palaeozoic Pan-African deformation and granulite facies metamorphism has obliterated most of the signature of the older structures and metamorphism. The Usagaran granulites host a variety of gemstone deposits, including the unique tanzanite, a blue zoisite. The Mesoproterozoic Karagwe-Ankolean System forms part of the Kibaran Belt which extends from Uganda to Zambia, west of Lake Victoria, including the northwestern edge of Tanzania. The Karagwe-Ankolean is clearly younger than the Ubendian and Usagaran and is made up of phyllites, quartzites and sericitic schists derived from shallow-water sediments. The Tanzanian part of the belt includes both the Western Internal and the Eastern External Domains, their border zone marked by major mafic and granitic intrusives of Ma and post-orogenic tin-bearing granites ~1000 Ma. The Kabanga nickel deposit, on the border with Burundi, is hosted by the feeders to a major gabbroic sill. Neoproterozoic to early Palaeozoic? sedimentary and volcanic rocks of the Bukoban System occur in western Tanzania between the Kibaran Belt and the Archaean craton. The Bukoban includes sandstone, chert, plateau-type basalts, dolomitic limestones and red beds, weakly deformed and unmetamorphosed. These continental clastic sediments were deposited on a peneplain of the Archaean craton and older Proterozoic belts. Abundant mafic dykes cut the sequence, predominantly trending north-northeast and appear to have been essentially contemporaneous with sedimentation. Most of the Bukoban rocks have subsequently been removed by erosion, but the major outlier in western Tanzania includes one formation, the Bukoba Sandstone, which forms part of the Eastern External Domain of the Kibaran orogenic zone and may be of Mesoproterozoic rather than Neoproterozoic age. A significant outlier of Bukoban sediments occurs south of the Musoma-Mara greenstone belt. 43

49 6.1.3 Palaeozoic - Mesozoic Continental sediments of the Karoo System, named after the type locality in South Africa, reach their northern limit in Tanzania. The Karoo sediments were deposited from Late Carboniferous to Jurassic times during a long period of erosion of the Archaean highlands, punctuated by episodes of glaciation, volcanism and marine incursions. The Karoo rocks are predominantly coarse sandstones, shales and siltstones with coal, unconformably overlying the Precambrian basement in eastern and southeastern Tanzania. North of Dar es Salaam these rocks pass into marine sediments of similar age. Sediments of Upper Mesozoic age only occur in the coastal basins that were formed during the breakup of Gondwana in the Mesozoic. These sediments include limestone, sandstone, shale, marl and local evaporites. The major rifting commencing at this time was accompanied by the intrusion of alkalic rocks (carbonatites, kimberlites, alkali syenites) within the Archaean craton and into the Karoo Tertiary The break-up of the eastern part of the African Plate that commenced in the Upper Mesozoic accelerated considerably in the late Tertiary. The East African Rift system consists of a series of en echelon grabens, often with associated volcanism. In Tanzania the rifting is primarily along the Western Rift occupied by lakes Nyasa and Tanganyika and the Eastern (or Gregory) Rift passing through lakes Natron and Manyara in the north to Lake Nyasa. Subsidiary rifts occur around Lake Rukwa, Lake Eyasi, in the Selous Basin and elsewhere. The Lake Victoria basin is generally interpreted as being formed by gentle down-warping between the Western and Eastern Rifts. The rifts have preserved the Karoo rocks and are locally sites for Tertiary sedimentation. The coastal basins contain thick Miocene and younger marine sediments. The volcanism associated with the rifting is mostly intermediate to mafic alkalic, with carbonatite lavas continuing to the present day on Oldoinyo Lengai. Intrusion of kimberlites continued into the early Tertiary, with some diamondiferous kimberlites being less than 50 Ma old. Much of the Archaean craton and surrounding rocks was subject to extensive lateritic weathering in the Tertiary. The resulting ferricretes and saprolites, and their subsequent weathering products, are an important focus of mineral exploration efforts in Tanzania given the general paucity of outcrop. Thin lacustrine sediments of proto-lake Victoria locally overlie the Nyanzian and granitoid rocks in the Lake Victoria Basin, between about 1,170 m asl and the current lake level of 1,135 m. 44

50 6.2 Archaean Greenstone Belts of the Lake Victoria Goldfields The Lake Victoria Goldfields consists of a number of distinct east-trending linear greenstone belts separated by granite-gneiss terranes, together with several inliers or roof pendants of the greenstone lithologies within the granite-gneiss. Recent work, including exploration drilling, has shown that some of the greenstones are more extensive than was previously realised. The greenstone belts have undergone a varied nomenclature during the history of geological mapping in the country. The nomenclature used in this report is based on that in Hester, B.W., 1998 (ed.), Tanzania - Opportunities for Mineral Resource Development. The outline of the principal greenstone belts in the Lake Victoria Goldfields area of Tanzania is shown in Figure 6.3. Figure 6.3. Greenstone Belts of Lake Victoria Goldfields (after Hester, 1998) Mabale, Kahama and Ushirombo Belts The Kahama Greenstone Belt (Figure 6.4) can be separated into East Kahama and West Kahama, the former being the extension of the Geita and Mabale Greenstone Belts (sometimes referred to as the outer arc of the Sukumaland Greenstone Belt) while the 45

51 latter is the extension of the Rwamagaza Greenstone Belt (sometimes referred to with the Lunguya belt as the inner arc of the Sukumaland Greenstone Belt). The name Ushirombo Greenstone Belt has been used to refer to the most westerly part of the Kahama belt, the western extension of West Kahama. The West Kahama segment, west of the Bulyanhulu Mine, is separated from the Rwamagaza belt further west by the intrusion of the Bukoli Granite, a coarse-grained post-kinematic biotite-granite. Figure 6.4. Mabale, Kahama and East Ushirombo Greenstone Belts (after Hester, 1998) 46

52 The East Kahama segment consists of Nyanzian banded iron-formation and cherts within largely mafic volcanics, in a northwest to southwest arcuate belt. This includes the prominent iron-formation ridge of the Siga Hills, host to the Golden Ridge deposit and the past-producing Jubilee Reef Mine. The West Kahama segment, including the Ushirombo belt, is essentially mafic volcanic rocks with minor felsic units and banded iron-formation and has the shape of a recumbent J extending west for at least 120 km from the Siga Hills past the village of Ushirombo towards the Bukoban hills. The West Kahama segment has been interpreted (Hester, 1998) to underlie the East Kahama segment. The gold mineralization found within the belt generally occurs in structurally-controlled narrow quartz veins. The most significant gold deposit found to date in the belt is Resolute s Nyakafura property. There is little outcrop between the principal parts of West Kahama and East Kahama, and the relationships (or connections) between the two segments of the Kahama Belt are unclear. The largest gold producer in Tanzania, the Bulyanhulu Mine, is located near the northwest end of the West Kahama segment. The gold mineralization at Bulyanhulu is associated with major quartz vein systems at the contact between mafic-intermediate flows and felsic pyroclastics, locally with lenses of argillite. Bulyanhulu is unusual in the Lake Victoria Goldfields in having chalcopyrite and pyrite, some 42% of the gold being recovered in a copper concentrate. 6.3 Geology of the Lunguya Project The Lunguya Project has very limited outcrop, hence much of the geological interpretation has been based on airborne geophysical data. Lunguya is located within the Lower Nyanzian, inner arc, or West Kahama Belt, which has a general north-south trend on the property. The underlying geology interpreted by Barth (1990) is shown on Figure 6.5, the interpretation by Klein (2002) from the airborne geophysics on Figure 6.6 and the 2003 regional compilation of the core licences by Tanzanian Royalty on Figure 6.7. A major granite-greenstone contact runs roughly north-south across the property. The principal gold-bearing zones appear to strike obliquely to this contact at about 030º. There is also some evidence of the 320 Bulyanhulu trend, though there is insufficient outcrop to determine if this is significant structurally or stratigraphically at Lunguya. Oliver (2003) interpreted two 330 trending faults to offset the Nyamakwenge vein into repeated segments of approximately 180 and 300 m strike length. The Nyamakwenge veins have been exploited by artisanal miners to at least 30 m depth. The Nyikoboko Reefs, about 12 km to the south, had smaller artisanal workings and dumps that were largely inactive at the time of Oliver s 2002 visit. The main granitic intrusive underlying the western half of the Lunguya property is a medium to light cream, well-foliated synorogenic G4 granodiorite to granite with abundant plagioclase +/- quartz phenocrysts. Lesser potassic feldspar occurs throughout as irregular patches, most of which appear to be primary in origin (Oliver, 2003). The northeast corner of the property (HQ- P18233) is mostly underlain by a medium to coarse-grained, massive, equigranular to porphyritic 47

53 granite that may be G5 or post-mineralization. The northern licences (PLs 5127/2008 and 5277/2008) are described by BEAL as predominantly underlain by post-tectonic G5 granites, with the eastern edge underlain by Archaean greenstones of the West Kahama Belt. The eastern part of the property appears to be largely underlain by mafic volcanics. These are dark green, probably basalts, with a moderate to strong chloritic foliation and an absence of feldspar phenocrysts. Traces of disseminated pyrite are present throughout. An east-west to northeast striking band of highly magnetic rocks cuts the extreme southeast corner of PL 2472/2004, interpreted by Klein (2002) as possibly banded iron-formation. Minor felsic dykes occur on the property, mostly feldspar porphyry or haematitic syenite. The former contains 10% euhedral feldspar phenocrysts in a granodioritic matrix, with weaker foliation than the main granite. The latter are a series of narrow (less than 5.0 m wide) dykes that likely post-date the main granite rather than being a minor contemporaneous phase of the main intrusion. Within the original Shilela (PL 1307/99), Shilela North (PL 1320/99) and Lunguya (PL 1766/2001) licences, gold mineralization has been identified within quartz veins in a series of planar, brittle-ductile strain zones. These veins occur in or very close to the contact between the granodiorite and the mafic volcanics and range in thickness from <1.0 to >8.0 m. The Nyamakwenge Reefs at Lunguya strike 030 to 040 and dip northwest. The footwall and sometimes the hanging wall contacts have a well-developed chlorite-sericite alteration. Gold includes coarse visible grains, commonly associated with haematitic fractures, with the highest grades often towards the footwall contact. Diamond drilling and structural analysis (Oliver, 2003) suggests that a single vein with a strike of approximately 475 m has been offset along 330 trending dextral and reverse faults. Gold grades within the vein appear quite erratic and range from <1.0 g/t to >40 g/t Au over widths of < 1.0 m. The Nyikoboko Reefs on the Shilela property, approximately 12 km south of Nyamakwenge, also occur proximal to the granitegreenstone contact. These north-south veins appear to have a westerly dip of Gold grades within the veins range from <1.0 g/t Au to >7.0 g/t Au over similarly narrow widths. 48

54 Figure 6.5. Regional Geology of the Lunguya Project (after Barth, 1990) 49

55 Figure 6.6. Geology of the Lunguya Project Area. (after Klein, 2002) 50

56 Figure 6.7 Regional Compilation, Central Lunguya. (after Bernier, 2003) 51

57 6.3.1 PL 2059/2002, HQ-P17760, PL 4074/ HQ-P20718 PL 2059/2002 straddles the interpreted contact between greenstones to the east and the G5 granite to the west. No outcrops were found by Tanzanian Royalty but the contact could be approximated from the soil sampling data. The application area to the east, HQ- P17760, is covered by mbuga but interpreted to be underlain by greenstones. The Nyikoboko reef is a quartz vein system adjacent to the contact, immediately south of PL 2059/2002. PL 4074/2006 adjoins PL 2059/2002 to the west and is entirely underlain by the granite intrusives, as is HQ-P20718 on its western side PL 2472/2004, HQ-P PL 5289/2008 Regional mapping used soil type (sandy granitic soils, brown clayey soils) to define a granite-greenstone contact oriented NE-SW across PL 5289/2008 in the west of the property. Two small granitic plugs were interpreted in the southern part of the property PL 2193/2003, PL 4273/ HQ-P17986 Regional mapping carried out over the property in May 2003 showed that granitic sands cover most of the area with about 5% scattered granitic outcrops. A small pod of orange/brown soil is present in the northern central portion of HQ-P17986 suggests an underlying more mafic rock type, possibly a gabbroic intrusion PL 3273/2005, HQ-P PL 5123/2008 Granite soils and scattered outcrops of medium to coarse-grained, massive, equigranular to porphyritic granite cover most of HQ-P18233 in the northeast of the property. The granite is apparently post-tectonic (G5) and is probably post-mineralization. The remainder of the property was interpreted by Tanzam 2000 to be underlain by greenstones, predominantly mafic metavolcanics. At least 45% of the property is covered by mbuga with the balance of the greenstone area by reddish lateritic soils PL 4594/ HQ-P18934 Regional mapping used soil type (sandy granitic soils, brown clayey soils) to define an arcuate, generally north-trending granite-greenstone contact. The Nyamakwenge Reefs are an active artisanal mining site located near the northern boundary of the property where quartz veins are hosted in sheared granodiorite immediately west of the granitegreenstone contact. Diamond drilling confirmed the presence of two main zones of quartz veining at Nyamakwenge, trending with moderate dips of about 30 NW. The two veins have en echelon geometry and were interpreted by Tanzam 2000 to be the same vein displaced by late cross-faulting. 52

58 6.3.7 PL 5127/ PL 5277/2008 The area is predominantly (more than 90%) underlain by granites, with the eastern edge underlain by Archaean greenstones of the West Kahama Belt. The greenstones are predominantly basalts with minor quartz-feldspar porphyries and mafic intrusives and a sheared unit of fine-to medium-grained felsic tuffs. Black argillite with quartz veining occurs at or near the contacts between mafic flows. The granites are essentially posttectonic, unfoliated G5 intrusions, with minor sheared older granite (G3?) outcrops observed by BEAL along the Kabhanda River that runs east through the property. The geology is described in more detail in section 5.1.5, under the geological mapping work done by BEAL. 53

59 7.0 DEPOSIT TYPES At Lunguya, the known gold mineralization occurs within granite, developed in a classical brittle-ductile strain zone proximal to a granite-greenstone contact. 7.1 Introduction The granite-greenstone sequences of the Tanzanian craton show many features that are typical of other Archaean cratons around the world, including the existence of numerous granitoids within and around substantial masses of greenstones, a predominance of greenschist facies regional metamorphism, regional scale crustal deformation and the existence of numerous gold deposits. Most of the giant gold deposits in the world are spatially associated with regional first-order structures, the deposits usually hosted by late-tectonic splay faults or shear zones. The first-order structures may have acted as major conduits for fluid transport from deep in the crust while the secondary structures acted as the loci for mineral deposition with locally-reduced fluid pressure. Although granites typically occupy more than 50% of the exposed Archaean cratons, where they are in proximity to the greenstone belts they also host significant gold deposits containing over 1 million ounces (e.g. Buzwagi and North Mara in Tanzania, Renabie in Ontario, Woodcutters, Tarmoola and Granny Smith in Western Australia, and Freda-Rebecca in Zimbabwe). The dominant orientation of gold-bearing structures in the Tanzanian craton is northwest (e.g. Bulyanhulu, Tulawaka and Buck Reef) and structures with this general orientation can be traced across the Tanzanian and Ugandan cratons and into the Democratic Republic of Congo. More subtle northeast trends may control the mineralization in banded iron-formation at Geita and Golden Ridge and are also clearly visible on airborne magnetic maps west of Bulyanhulu. North-south structures appear to be significant at the Nyakafura deposit as are east-west structures at Golden Pride. Mining of bedrock gold was recorded as early as 1898 in the Lake Victoria Goldfields and continued intermittently into the 1970s in the Mara, Musoma, Serengeti, Iramba Plateau and Geita areas. These operations were primarily on mesothermal lode-type deposits within the greenstone belts, most of the veins being associated with faults and shear zones though no major regional shear zones like the Cadillac Break of the Abitibi Belt in Canada have been recognized. Some mineralized zones are sub-parallel to lithologic layering in the greenstones, and others cut across layering, especially in the more competent units. Dilational openings along shear zones are common hosts for the mineralization, which is often open space filling accompanied by replacement of adjacent wallrock at some sites. In his 1990 compilation, Barth listed 237 gold mines and occurrences in the area to the south and east of Lake Victoria, some of which remain the focus of small-scale artisanal mining. This is particularly of eluvial and alluvial deposits and, locally, quartz veins within the upper weathering profile. With the advent of widespread modern exploration in the 1990s, several major gold discoveries have been made. By the end of 2008 four new large-scale gold mines had been put into production (Golden Pride, Geita, Bulyanhulu and North Mara) as well as the smaller 54

60 Tulawaka Mine, while other projects were at an advanced stage and the Buzwagi Mine was commissioned in the second quarter of Golden Pride Mine The Golden Pride Mine, located north of the town of Nzega, is owned and operated by Resolute (Tanzania) Ltd., the Tanzanian subsidiary of Resolute Mining Limited of Australia and was the first major gold mine in Tanzania when it was officially opened in February The feasibility study had defined a reserve of 10.9 million 3.1 g/t Au for 1.08 million ounces of gold derived from a global resource of 33.4 million 2.56 g/t Au for 2.7 million ounces. In 2008 the plant throughput was 2.5 million tonnes at a head grade of 2.04 g/t Au, the mill recovery of 90% producing 150,000 ounces for the year at a cost of $449/oz. Since commissioning the mine has produced in excess of 1.55 million ounces of gold is expected to see a decrease in gold production with completion of mining in the western (main) pit and the central pit coming on stream later in the year. The mine lies within the Nzega Greenstone Belt and the area is underlain by intermediate to felsic tuffaceous volcanics and intercalated terrigenous sediments of Nyanzian age, with minor banded iron formation units (to the north of the mine). The Nyanzian is intruded by various granitic rocks and overlain by Kavirondian shales, sandstones and conglomerates. South of the deposit is a pile of rhyolitic volcanics lying on granitic basement, while to the north the volcanics are more dominantly extrusive and interfingered with the terrigenous sediments. Within the mine area, the ratio of volcaniclastics to sediments is approximately 1:1. The mine sequence is m wide and consists of sheared metasediments, metatuffs and volcaniclastics, along with some feldspar (quartz) porphyry and diorite. The Golden Pride deposit is about 3 km long and the mineralization lies within a major shear zone, some 200 metres wide and approximately 15º to the strike of the local stratigraphy. The shear zone strikes with a steep south dip to the foliation. The bedding dips 70-80º S. There are no apparent chemical controls on the mineralization; rather it appears that the competency contrast between the tuffs and sediments has resulted in cracking during shear movements. The saprolite zone extends down to about 90 m below surface, and there is no apparent change in gold grade within the saprolite. A narrow graphitic zone lies along the footwall of much of the significant mineralization, though it is not a clear indicator of the edge of the ore zone. Mineralization comprises silica flooding, quartz veining and hydrothermal breccia that is best developed in the more competent coarser-grained siltstones and volcaniclastics. Quartz is predominantly thin veinlets, but veins up to 1.5 m thick occur. The gold mineralization completely crosses lithologic boundaries and it is very hard to visually correlate between sections with no preferential direction to the mineralization. Pyrrhotite is very common throughout the sequence and is associated with gold where the silicification is present. Local massive pyrrhotite can be completely barren. Arsenopyrite is common throughout the shear 55

61 zone, usually as an envelope around the quartz veinlets and usually associated with the better gold grades, but there is no direct correlation between gold and arsenic values. A second, minor, ore type consists of chlorite-pyrrhotite veining, which is best developed in the intermediate to mafic lithologies approaching (and sometimes within) the hanging-wall. Narrow subvertical quartz veins occur within the main shears and may contain higher grade gold mineralization. Their overall effect on the gold resource, however, is minor. Banded iron formation has little effect on the deposit and is only important where BIF units are folded into the main shear. Small drag folds within the shear zone may suggest larger-scale folding within the shear zone, but no further evidence has been noted in the pit. Mineralization occurs as lenses conformable with the steeply S dipping structural fabric. Multiple lenses are present and in the west part of the deposit, the cumulative thickness of ore material can reach 100 m. In the eastern part of the deposit, the ore lenses tend to be thinner, i.e. more stretched out. Thicker and higher-grade ore in the western part of the mine appears to be related to a dilational flexure zone. The main high-grade ore shoot has a plunge of about 30 E, is about 50 x 50 m and has been mined for about 400 m length. Proximal to distal alteration that is indicative of nearby gold mineralization includes biotite and extensive carbonate (calcite > dolomite > ankerite). Oxidation extends at least 75 m vertically in the mine sequence, at least 75 m vertical below surface and there is no obvious enrichment. Soil samples taken at around 50 cm depth basically outline the boundary of the present pit at 50 ppb Au contour and gave a good As signature using a 50 ppm contour. 7.3 Bulyanhulu Mine The Bulyanhulu Mine is owned and operated by Kahama Mining, a 100%-owned subsidiary of Barrick Gold Corporation of Canada, and was officially opened in July Bulyanhulu is the only major underground gold mine in Tanzania and had proven+probable reserves of Mt averaging g/t Au or Moz Au plus contained copper at 0.589% or million lb Cu as of December 31, production was 200,000 oz at a cash cost of US$ 620/oz. Mill gold recoveries are approximately 89%, 42% by gravity and 47% in a copper concentrate. No outcrops are known on the property. The main rock types in the mine area are bimodal mafic and felsic volcanics rocks of the West Kahama segment of the Nyanzian age Kahama Greenstone Belt. The mafic rocks are predominantly flows, overlain by a series of felsic pyroclastics and ash tuffs. Argillites occur within the mafic flows and at the mafic/felsic contact and are the principal host for the mineralization. Mafic dykes/sills, commonly lensoid along their northwest strike, are a significant part of the lithological package southwest of the deposit itself. The Bukoli Granite, which separates the Kahama belt from the Rwamagaza belt to the west, lies approximately 3 km southwest of the mine. Together with regional faults, the Bukoli Granite forms the bounds of a rhomboid-shaped greenstone domain at Bulyanhulu. The gold mineralization, together with copper sulphides and silver, occurs in quartz veins localized along steeply-dipping structures parallel to the regional northwest strike. Nine of these 56

62 extensive quartz vein systems have been discovered so far with Reef 1, hosted by a shear zone developed preferentially along the most extensive sedimentary unit, the most significant. The ore is characterized by sub-continuous lenses and veins of black quartz concentrated in narrow shear zones. An initial stage of syn-depositional barren clastic pyrite has been identified, overprinted by a polymetallic hydrothermal event associated with gold and copper mineralization. Alteration, dominantly carbonatization with the major introduction of Fe, Ca, As, Zn and S, is largely restricted to <5 m around the mineralized quartz veins. Initial fluid inclusion studies suggest the mineralizing fluid was carbonic and methane-bearing at ºC. Three separate deposits have been outlined within Reef 1, the Main, East and West Zones, extending over a strike length of at least 5 km and downdip for at least 2 km. The bulk of the current reserves are contained within the Main Zone, which has the highest average grade at more than 14 g/t Au and is open to depth. A 1,090 m shaft in the centre of the Main Zone provides the principal underground access, with three internal ramps. The East Zone contains at least 1.2 Moz in reserves averaging 12 g/t Au, close enough to surface to be mined from a ramp access. The West Zone contains at least 2.0 Moz of gold in reserves averaging 14.0 g/t Au, in deeper mineralization that was discovered beneath a series of earlier shallow, barren drill holes. Development in 2009 is focussing on Reef 2 and Reef 0, east and west of Reef 1 respectively. Additional mineralization has been discovered west of the Bulyanhulu River, west of the West Zone, in what is termed the Far West Zone. The gold mineralization is unusually continuous, and limited deep drilling to about 2,000 m below surface suggests the continuity along strike at that depth may be similar to that demonstrated by the more detailed drilling closer to surface. Mining width varies from 2-6 m, depending on the orientation of the quartz vein. A 138 km powerline carrying 220 kv was brought in from the national grid, but the power is dependent on good seasonal rains so Barrick installed stand-by generators to meet the 14.5 MW required. A water pipeline was constructed between the mine and Lake Victoria and the existing airstrip has been upgraded to 1,700 m. A dedicated satellite link provides communications. 7.4 Tulawaka Mine The Tulawaka Mine is owned 70 % by Pangaea Minerals Ltd. (100% owned by Barrick Gold) and 30% by MDN Inc. The project is located about 160 km southwest of Mwanza, towards the western end of the Rwamagaza Greenstone Belt. Airborne geophysical data has been interpreted to show the western extensions of the Rwamagaza, Kahama and Geita greenstone belts may come together in the general vicinity of Tulawaka, although there is no other evidence to confirm this suggestion or how it might affect the location and style of the Tulawaka deposit. Previous workers in the area have suggested that a major east-southeast-trending dislocation, the 200 kmlong Tulawaka-Nzega Shear, may have a controlling influence on the gold mineralization of the Golden Pride Mine as well as the Tulawaka deposit and other gold prospects in between. Geological interpretation of the area is hampered as very little outcrop is present in the greenstone belts within 20 km of the Tulawaka deposit. The lithologies hosting the main East Zone deposit were initially described as a sequence of dominantly intermediate tuffs and their derived sedimentary rocks, with minor intermediate 57

63 flows, felsic volcanics and sedimentary rocks of chemical origin. These units have undergone relatively high regional metamorphism, from upper greenschist to lower amphibolite facies, as indicated by the mineral assemblages that include chlorite, sericite, biotite, magnesian garnets, staurolite and sillimanite. Petrographic work in 2002 by P.G. Thompson (described in l Etoile, 2002) suggests all of the lithologies are metasediments. Several generations of mafic to felsic dykes cut the metamorphosed host rocks, and a major granitic intrusive occurs within 2 km southwest of the East Zone deposit. The sediments define a Z-shaped fold pattern plunging gently south, breached on an overturned anticlinal limb by a narrow shear zone, possibly a thrust fault. This shear contains syn-tectonic porphyry dykes around which dislocations developed that focussed auriferous quartz veining. These flat lenses are preferentially aligned in a series of sub-horizontal shoots. The intersection of the highly-strained porphyry bodies with ferruginous sediments (e.g. silicate iron-formation) for the highest and most extensive gold grades. The gold largely occurs in a free state in fine sericitic partings within the quartz veins or finely disseminated between the quartz grains. The mine was made its first gold pour in March 2005 as an open-pit operation and, by the time the open pit closed in August 2008, had produced over 600,000 oz Au. For the balance of 2008 mill feed consisted of production from underground as that part of the operation was developed, supplemented by low-grade stockpile material. Total production through December 31, 2008, was 654,367 oz. Remaining reserves were 430, g/t Au in the stockpiles plus 170, g/t underground. At the current milling rate of 1,100 tonnes per day the reserves would be exhausted in Q The area of the deposit has no outcrop. Typically a very thin soil is underlain by m of silty sand, previously believed to have originated from weathering essentially in place of the underlying bedrock. A reassessment of the soil profile by Barrick suggests the sand is transported, derived from Bukoban sediments that outcrop to the west. The sand covers a discontinuous layer up to 4 m thick of lateritic ferricrete that includes pisolitic material and lateritic gravels. It commonly contains angular fragments of white quartz that are more abundant at the base of the ferricrete and can be described as a quartz rubble zone. Over two parts of the deposit the laterite, and the rubble zone in particular, contained detrital or chemically remobilized gold which represented a significant resource. These quartz-rubble zones were initially estimated at 246,000 tonnes grading 7.29 g/t Au, or 57,700 oz gold. Drill-evaluation of this sort of resource is difficult as the gold can be both coarse and irregularly distributed, and fine gold might not be entirely recovered from the RC cyclone in the first few metres of drilling. The estimation at the exploration stage of Tulawaka was that the grade of this resource could be under-estimated by up to 20% and verbal communication in the early stages of mining tended to confirm this supposition. Drill hole data suggests that the weathering profile beneath the ferricrete typically consists of 5-10 m of bleached, clay-rich upper saprolite within which most minerals of the protolith plus the foliation and other structures have been destroyed or masked. Beneath the upper saprolite relict minerals and structures are recognizable, though the rock is still intensely weathered, and this lower saprolite typically extends to a depth of 25 m. Below this and to the typical base of 58

64 weathering at a depth of 45 m, the rock is progressively less weathered and can be termed a saprock or transition zone. Weathering along individual fractures has been commonly noted to a depth of m. 7.5 Nyakafura Deposit The Nyakafura deposit is located 50 km west-northwest of Kahama, 9 km north of the village of Masumbwe and about 30 km south-southwest of the Lunguya Project. The area is underlain by a sequence of intercalated mafic volcanics, volcaniclastic sediments, minor banded iron-formation and intrusive porphyries and late granites, forming part of the East Kahama segment of the Kahama Greenstone Belt. The deposit occurs within an area of structural complexity, with a number of strong north-trending structures defined by late dolerite dykes as well as more subtle northeast and northwest-trending structures. The area has poor surface exposure, with a ferricrete layer typically 5-8 m thick developed over the mafic volcanic package. The greenstone-granite contact tends to be low-lying and covered with mbuga. At Nyakafura itself the gold mineralization is associated with several north-trending vein systems within steeply-dipping shear zones. The vein systems are typically a series of silicified and carbonatized zones with extensive quartz veining plus variable pyrite, uncommon arsenopyrite, and minor copper sulphides and galena. The gold largely occurs as fine particles in pyrite, and there appears to be a good correlation between pyrite content and the grade of the gold mineralization. The project is operated by Resolute Tanzania Ltd. who have published a resource estimate within Reefs 2E, 2W, 6, 3 and 1 of 3.58 million tonnes at 6.29 g/t Au (730,000 oz Au). The resources are primarily within Reef 2, which remains open on strike and to depth. 59

65 8.0 MINERALIZATION The gold mineralization in the Lake Victoria Goldfields in northwestern Tanzania occurs in all units of the Nyanzian greenstone belts as well as certain of the major felsic intrusives as at Buzwagi and North Mara. The known gold mineralization within the area of the Lunguya Project occurs in the immediate vicinity of a major granite/greenstone contact and is largely restricted to past or present artisanal mining activity, due at least in part to the general lack of outcrop across the property. At Nyamakwenge in the northern part of HQ-P18934 gold is associated with a principal faultoffset vein that comprises two segments, the West and East Reefs. The veins fill tension gashes and appear to strike 030º to 040º with a northwest dip of and vary in width from 8.0 m to less than 1.0 m. A sericitic alteration envelope may carry significant grades giving gold-bearing drill intersections up to 5-6 m. Known strike length is of the order of 475 m. The Nyamakwenge site contains more than 200 artisanal pits up to 20 m deep (Oliver, 2003). Veins are typically cream to light grey in colour and often contain irregular haematitic fracture surfaces which are sometimes lined with small aggregates of free gold. Artisanal workings at the Nyikoboko Reef (in HQ-P20036 about 12 km south of Nyamakwenge), consist of pits about 3-20 m deep. The muck piles adjacent to the pits indicate a northerly strike of at least 100 m and an in-situ sub-vertical vein, 1-3 m wide, was reported by Tanzam 2000 in the most northerly pit. In the regolith the workings target quartz rubble in ferricrete while the bedrock host was described as a monzonite. Oliver (2003) describes at least two generations of quartz veins at Lunguya. A gold-bearing set is characterized by light cream, euhedral quartz flanked by a sericite +/- chlorite alteration envelope and with low sulphide contents (pyrite <0.5%). A second vein set is defined by extremely finegrained grey quartz, flanked by potassium feldspar or haematitic silica selvages. Abandoned artisanal workings at the Shilela showing in the southeast corner of PL 2193/2003 occur over about 50 m along a 100 trend. The veins are hosted in granite/granodiorite that locally shows a weak to moderate shear fabric and weak to moderate sericite alteration. 60

66 9.0 EXPLORATION by Tanzanian Royalty Exploration Corporation In 2000 a regional airborne magnetic and radiometric survey was flown by Geodass of South Africa on behalf of Tan Range (now Tanzanian Royalty). The survey covered the entire area of the Lunguya Project (Figure 9.1) on flight lines trending 000º and 250 m apart. The data was reviewed by a Consulting Geophysicist, J. Klein (2002), based on map sets of: total field magnetic data reduced to the pole; shadow image of the total magnetics; digital topography; total count radiometrics; potassium count and thorium count radiometrics. Subsequently Tanzanian Royalty, through its subsidiaries Tanzam 2000 and TANCAN Mining, carried out diamond exploration based on airborne magnetic anomalies but with no kimberlites being detected. The principal focus by Tanzanian Royalty, however, was on gold exploration which comprised: conventional soil and auger sampling; biogeochemical (BGC) sampling; geological mapping and rock sampling; ground magnetic and IP surveys; and RAB, RC and limited diamond drilling. Table 9.1 Lunguya Project Expenditures by Tanzanian Royalty Item Total Camp, Field, Travel 5,497 15,687 5,528 4,432 3,110 13,163 5,020 52,437 Exploration o heads 140, , ,371 29,945 29,337 8,706 40,114 36, ,017 Consulting 47,786 47,786 Geophys, Geochem 8,572 80,985 60,625 42, ,813 13, ,138 Trenching+drilling 77, , ,661 Sub-Total 232, , ,524 77,309 32,873 8,706 57,090 54,589 1,109,039 Property Acquisition 1,945,732 1,945,732 Total 2,177, , ,524 77,309 32,873 8,706 57,090 54,589 3,054,771 Note: Tanzanian Royalty year end is August figures are through May 31. Figures above are in Canadian Dollars and are derived from Tanzanian Royalty Annual Reports. The northernmost licence of the project (PL 1308/99, now 5127/2008 and 5277/2008) was optioned to BEAL who carried out gold exploration in before returning the property to Tanzanian Royalty. Subsequent to this TANCAN Mining carried out follow-up exploration on this area. 61

67 Figure 9.1 Lunguya Project Area RTP Magnetics 62

68 Figure 9.2 Lunguya Northeast Shadow Image of RTP Magnetics 63

69 9.1 Summary of Biogeochemical (BGC) Sampling In July 2008 Tanzanian Royalty reviewed and analyzed the BGC data from the entire Lunguya Project. The BGC sampling was carried out in August 2004, in the dry season, on 400 m x 200 m spacing with the exception of Lunguya West (PL 2193/2003) which was sampled at 100 m x 100 m. The sampling was carried out over mbuga and other areas not previously covered by soil and/or BLEG sampling. Overall 75% of the samples were from species MLJ, 23% from NTG and 2% from MZM+MSN. Soil and geological data were used to break down the species into soil/rock types. While MLJ is the dominant sampling species, large areas within the central mbuga area, particularly PL 5123/2008, are dominated by NTG (Piliostigma thonningii). On other properties MLJ is typically associated with mbugas as it appears to be tolerant of seasonally waterlogged clayey soil conditions. NTG is a deep rooting species that is preferentially found on heavy clayey soil or medium loamy soils. It is tolerant of acid conditions and prefers deep fluvisols or ferrasols. As MLJ is preferentially located in the southern mbuga area and along the edges this may be due to changing overburden thickness and/or Eh/pH conditions. The highest gold analysis was 27 ppb Au from an NTG species in the central western mbuga. High Au analyses were returned from the area around Nyamakwenge Reef in the north of HQ- P Anomalous Au assays were mainly returned from the central mbuga area (Figure 9.4). Within the main part of the project, the elements with elevated and anomalous values almost exclusively outside mbuga area: over sandy & lateritic soil, Se (MLJ), Zn (MLJ); over sandy soil, Pb; over lateritic soil, Mo (MLJ), Mn (MLJ), La (MLJ+NTG), Co (MLJ), V (MLJ), Ni, Ag (high single point). Elements with elevated and anomalous values almost exclusively within main mbuga area: As, B, Cs, Ba, Cd, Mg, Sr, Tl, Ca, W, Sc, Ti, P, Fe. Elements with elevated and anomalous values over mbuga/non-mbuga but mostly scattered anomalies: mbuga/laterites, Au, Sb (MLJ south only), Ni, Sc, Ti (weak), Fe, Ga, Na (in south), Ag, Ca, Au, Th; mbuga/granites, Au, Tl (MLJ/NTG), S (weak), Hg (weak) Ni (weak), Sc, Th, Ca, Au, Cr (in south). Most of the delineated BGC trends occur within the NTG-dominated mbuga area (Figure 9.5), possibly due to species-related biogeochemical uptake capabilities. However, anomalous values for various elements were observed within the NTG population, are reflected by the trends. Nearly all of the BGC trends (Figure 9.6) are located on mbuga over mafic volcanics (greenstones). The circular trend (striped blue) just south of Nyamakwenge Reef is partially located lateritic soils overlying mafic volcanics (greenstones). Within the mbuga area, the total count radiometrics (Figure 9.7) outline the drainage pattern. In the central west and northeastern mbuga areas the BGC trends mirror the high radiometric count, although the BGC K does not reflect the radiometric pattern. BGC U was anomalously picked up in the northeast. 64

70 Figure 9.3 Lunguya BGC reconnaissance program sampling species distribution. 65

71 Figure 9.4 BGC Au contour map for all Lunguya BGC reconnaissance. 66

72 Figure 9.5 Lunguya BGC trends over mbuga. PL 2193/03 not included in BGC analysis. 67

73 Figure 9.6 Lunguya BGC trends over geology PL 2193/03 not included in BGC analysis. 68

74 Figure 9.7 Lunguya BGC trends over total count radiometric image. 69

75 9.2 Kimberlite Exploration PL 2059/2002, HQ-P17760, PL 4074/ HQ-P20718 Three auger samples were taken on the Shilela North property in May 2004, with the presence of a shallow ferricrete horizon hindering deep penetration. No kimberlite indicator minerals were detected. A single RC hole was drilled on August 21, 2006 into magnetic target LG36DIA02. This hole, LG36RC001, was drilled to a depth of 90 m and terminated in gabbro that was first intersected at 74 m. The magnetic susceptibility rose significantly in the gabbro, to a maximum of 52.4 SI at 78 m. Given the amplitude of the magnetic anomaly and the level of the magnetic susceptibility, Tanzanian Royalty concluded the gabbro was the cause of the anomaly and no further work was planned. TANZANIAN ROYALTY EXPLORATION CORP KIMBERLITE EXPLORATION PROGRAMME LUNGUYA PROJECT AREA /02 DRILL HOLE OVER LG36DIA LG36RC LEGEND Drill Hole By A. Mwijage _ 2006 Figure 9.8. RC Drill Hole on LG36DIA02 70

76 9.2.2 PL 2193/2003, PL 4273/ HQ-P17986 On the Lunguya West property 10 auger samples were collected in May 2004, mostly from gravel layers close to bedrock. One sample, LG30HMS2, contained unclassified garnets and ilmenites. Two RC holes totalling 108 m were drilled in August 2006 on target LG30DIA06 and two holes totalling 201 m on target LG30DIA02. The first pair of holes, LG30RC001 and LG30RC004, intersected lateritic gravels underlain by a coarse-grained granodiorite intercalated with fine-grained dolerite. The bedrock was intersected at 13 m in both holes and showed a rise in the magnetic susceptibility. Hole LG30RC001 was terminated at 75 m and LG30RC004 at 33 m. Given the amplitude of the magnetic anomaly and the magnetic susceptibility recorded (up to a maximum of 15.1 SI at 25 m in LG30RC004), Tanzanian Royalty concluded that the intercalated granodiorite and dolerite were the cause of the anomaly. No further work was planned. TANZANIAN ROYALTY EXPLORATION CORP KIMBERLITE EXPLORATION PROGRAMME LUNGUYA PROJECT AREA /03 DRILL HOLES OVER LG30DIA LG30RC004 LG30RC001 LEGEND Drill Holes By A. Mwijage _ 2006 Figure 9.9. RC drill holes on LG30DIA06 71

77 In holes LG30RC002 and LG30RC003 a highly weathered granite was intersected at 7 m beneath lateritic gravels. The holes were terminated in the granodiorite at 105 m and 96 m respectively and the highest magnetic susceptibility recorded was 3.0 SI. Given the amplitude of the magnetic anomaly and the low magnetic susceptibility readings, Tanzanian Royalty concluded that the causative lithology had not been reached and probably occurred at m below surface. The initial recommendation was to redrill LG30RC002 at a later date, but no deeper drilling was apparently done TANZANIAN ROYALTY EXPLORATION CORP KIMBERLITE EXPLORATION PROGRAMME LUNGUYA PROJECT AREA /03 DRILL HOLES OVER LG30DIA LG30RC LG30RC LEGEND Drill Holes By A. Mwijage _ 2006 Figure 9.10 RC drill holes on LG30DIA PL 2472/2004, HQ-P PL 5289/2008 Four auger samples were collected from the Shilela property in May The holes intersected greenstone gravels and pebbles close to the bedrock that hindered deeper penetration. No kimberlites indicator minerals were found. 72

78 9.2.4 PL 3273/2005, HQ-P PL 5123/2008 On the Lunguya East property, originally PL 1887/2002, one possible kimberlite target was drilled with a single RC hole in August This magnetic anomaly (LG21DIA01) is centrally located on the western edge of the property in what is now PL 5123/2008. RC hole LG21RC001 was drilled to 84 m and a fine-grained dolerite was intersected from 25 m to the base of the hole. The maximum magnetic susceptibility of 36SI was recorded at 76 m and, given the amplitude of the anomaly, Tanzanian Royalty concluded that the dolerite was the cause of the anomaly. No further work was planned. TANZANIAN ROYALTY EXPLORATION CORP KIMBERLITE EXPLORATION PROGRAMME LUNGUYA PROJECT AREA - PL 1887/02 DRILL HOLE OVER LG21DIA LG21RC LEGEND Drilled RC Hole By Aspon Mwijage_2006 Figure 9.11 RC drill hole on LG21DIA01 73

79 9.2.5 PL 4594/ HQ-P18934 In the fourth quarter of 2003 five airborne magnetic targets were followed up with detailed ground magnetic surveys. Each target was covered with a survey grid of up to 500 m x 500 m and 20 kg of loam was collected from each target for heavy minerals testing. LG28DIA06, where a nearly circular, high-amplitude, reverse-polarized dipole anomaly was tested, was the only one of the five targets considered worth additional work and none of the loam samples contained any diamond indicator minerals. In May 2004 six palaeochannel/stream sampling points were located within the Lunguya property, former PL 1766/2001. One sample was collected from each site with a handauger and sent for heavy mineral analysis. No diamond indicator minerals were detected. In August 2006 a single RC hole was drilled to 56 m on target LG28DIA06. A weathered gabbro was intersected at 30 m and the hole was terminated in the same lithology once fresh bedrock was reached. The maximum magnetic susceptibility was only 4.34 SI but Tanzanian Royalty concluded that the gabbro was the cause of the magnetic anomaly and no further work was carried out. TANZANIAN ROYALTY EXPLORATION CORP KIMBERLITE EXPLORATION PROGRAMME LUNGUYA PROJECT AREA - PL 1766/01 DRILL HOLE OVER LG28DIA LG28RC LEGEND Drilled RC Hole By Aspon Mwijage_2006 Figure 9.12 RC drill hole on LG28DIA06 74

80 9.2.6 PL 5127/ PL 5277/2008 In June 2003 six airborne magnetic targets were followed up with detailed ground magnetic surveys. Each target was covered with a grid of up to 500 m x 500 m and 20 kg of loam was collected from each target for heavy minerals testing. None of the samples contained any diamond indicator minerals. Tanzam 2000 reported some encouragement from the ground magnetic results but no targets were recommended for drilling. 9.3 Gold Exploration PL 2059/2002, HQ-P17760, PL 4074/2006 and HQ-P Soil Sampling Regional conventional soil sampling was done over the entire property on 400 m by 400 m spacing in November A total of 124 samples were collected and submitted to Humac Laboratories in Mwanza for gold analysis. Anomalous values of 16 to 28 ppb Au were returned from the vicinity of the volcanic/granite contact. A follow-up program in February 2003 checked 13 single-point anomalies, with 5 samples taken on each anomaly on a 25 m cross pattern with the original sample site being the centre of the cross. Anomalies A, B and C, in granite at or close to the contact with the volcanics, returned low anomalous gold values with the exception of 228 ppb Au from one sample in Anomaly B. In March 2003 a total of 118 BLEG samples were collected at 400 m x 400 m spacing over areas not suitable for conventional soil sampling. Approximately 500 g of -80 mesh material was collected and sent to SGS in Mwanza for cyanide leach and AA analysis for gold. Three strongly anomalous samples returned values of 11.3, 22.0 and 26.0 ppb Au. In April 2005 an auger sampling program was carried out to test the 2002/3 soil anomalies as well as biogeochemical sites sampled in Eight holes totalling 30.2 m were drilled and 12 samples collected and sent to ALS-Chemex for 50-element ICP analysis. One hole intersected granitic bedrock while the other seven stopped above the lateritic gravels or ferricrete. Six of the twelve samples reported gold values above 10 ppb Au, with a high of 25 ppb Au from the last metre of hole LG36AUG07. In July 2008 a total of 62 soil samples were collected and processed to give a -80 mesh sample for analysis. This was carried out to give data consistency with the remainder of the property Mapping and Rock Sampling Regolith/outcrop mapping was carried out in late October 2002 across the property, with the interpreted geophysical contact between the granite and the volcanics as the main target. Traverse spacing was about 1 to 1.5 km, using the existing motorable or foot trails 75

81 where possible. A total of approximately 15 line km was mapped. Less than 1% of the Shilela North property exhibits outcropping bedrock and mbuga covers approximately 30% of the property area. Three main regolith types were recognized: a light grey pinkish soil containing 70-90% quartz grains and rarely weakly magnetic, interpreted as residual over granite; a light/medium-brown lateritic soil, moderately to strongly magnetic, probably of mafic volcanic origin; and mbuga, a medium/dark grey to brown colour. Four grab samples of quartz rubble in laterite were collected and analyzed for gold but no significant results were recorded Biogeochemical (BGC) Sampling Tanzam2000 carried out a biogeochemical sampling program in August 2004 on the Shilela North licence. Two different species of plant were sampled, 206 MLJ and 65 NTG. Samples were collected at 200 m spacing along east-west lines 400 m apart and were shipped to Mwanza for washing and processing. The processed samples, including quality control, were submitted for 38-element ICP-MS analysis at Acme Laboratories in Vancouver. Field duplicates were collected after approximately every 20 th field sample and laboratory and laboratory duplicates were inserted by TANCAN Mining after every 20 samples prepared. At Acme, external standards were inserted every samples, together with laboratory duplicates inserted by Acme themselves. Separate threshold values were used for each plant species. Simple scatter plots were generated for each of the pathfinder elements, to include the values exceeding the 95 th and 99 th percentiles. The 95 th percentile for MLJ is 0.60 ppb Au, whilst that for NTG is 1.80 ppb Au, but it was not known at the time of sampling if there were any differences in ionic uptake rates between species. As the distribution of the minority species (NTG) appeared to be fairly random, the percentile values were computed for all species combined. For gold, the 95 th percentile for the entire population is 0.80 ppb Au. The gold analyses were generally low with a maximum of 6.2 ppb Au. Most of the results range from 0.1 ppb to 0.6 ppb Au. A total of 17 Au values equalled or exceeded the 95 th percentile. Spatial distribution analysis by Tanzam 2000 showed a high degree of variability in trends for different elements. A general E-W bias was attributed to the rectangular shape of the licence and a line effect caused by E-W oriented traverses. For Au, the 95 th percentile scatter plot using a regional search distance of 10,000 m showed a fairly random distribution pattern, with a strong E-W trend (sample line effect) and weakly defined 060 o and 320 o trends. With a relatively short search distance of 2,000 m, trends were well-defined at 325 o and 080 o. There appears to be little support for the BGC Au anomalies with any of the pathfinder elements. The 080º trends are sub-parallel to a major E-W trending structure interpreted by Tanzanian Royalty. 76

82 Figure 9.13 Au > 80 th percentile value contour map for Shilela North PL 2059/ IP Surveys In the third quarter of 2008 a single IP gradient grid was surveyed on what is now PL 4074/2006, to cover a possible BGC response ratio trend. A high chargeability zone is present in the north of the grid and a low chargeability zone trending northeast occurs across the centre of the grid. A small abandoned artisanal working was discovered in the north of the grid and two samples of quartz vein and granite host were taken. The samples returned 0.02 and 0.25 g/t Au. In October 2008 a further 15 line-km was surveyed with the IP gradient method, covering BGC targets and the soil trend within PL 2059/2002. Two anomalously chargeable zones were detected with the IP. The highest chargeability was 3.7 mv/v, coinciding with an artisanal pit that gave g/t Au from one sample. 77

83 Figure 9.14 IP Chargeability Grid C1578, PL 4074/2006 Figure 9.15 IP Chargeability and Au-in-soils, PL 2059/

84 9.3.2 PL 2472/2004, HQ-P20036 and PL 5289/ Soil Sampling Conventional soil sampling was carried out in November 2002 on 400 m x 400 m spacing. A total of 263 samples were collected and submitted to Humac Laboratories in Mwanza for gold analysis. Included were the samples taken at 50 m intervals along a 400 m E-W line crossing the Nyikoboko Reef. The maximum gold value reported was 20 ppb Au, from the Nyikoboko Reef and surprisingly low for a gold showing that returned rock grab sample results up to 8 g/t Au. Four anomalous zones (A, B, C and D) were identified on the Shilela property and were followed up in January and February 2003 with sampling at 200 m x 100 m. In total 1,017 follow-up samples were collected. The Nyikoboko Reef, shows up as a small north-trending anomaly that can be traced over about 500 m. The rest of the anomaly A area showed small clusters of 2 and 3 point anomalies. The detail sampling on Anomaly B did not confirm the previous anomalous gold values. Anomaly C consists of a broad zone of low order values (up to 9ppb), following the interpreted contact of the main granite to the west with the volcanic rocks. The largest anomaly cluster occurs in the southeast corner of the property over anomaly D. The core of the anomaly extends across two lines (200 m apart) and for at least 700 m on a northerly strike, with gold values ranging from 12 to 25 ppb Au. This anomaly is also in close proximity to a granite contact zone. In March 2003 a total of 85 BLEG soil samples were collected at 400 m x 400 m over areas unsuitable for conventional soil sampling. Three samples returned anomalous values of 19, 12 and 10 ppb Au. In April 2005 eleven auger holes were drilled; 6 to validate BGC anomalies, 4 to test soil anomalies and 1 on an aeromagnetic anomaly. A total of 22.0 m were drilled and 15 samples collected and sent to ALS-Chemex for 50-element ICP analysis. All holes terminated in a ferricrete layer. Two elevated values of 11 and 26 ppb Au were returned Mapping and Rock Sampling Regolith/outcrop mapping was carried out in late October 2002 across the property, with the interpreted geophysical contact between the granite and the volcanics as the main target. Traverse spacing was about 1 to 1.5 km, using the existing motorable or foot trails where possible. A total of approximately 15 line km was mapped. Less than 1% of the Shilela property exhibits outcropping bedrock and mbuga covers approximately 30% of the property area. Soils were used to outline a granite-greenstone contact but most of the area interpreted to be underlain by greenstones is covered by mbuga. Three main regolith types were recognized: a light grey soil containing 70-90% quartz grains and rarely weakly magnetic, interpreted as residual over granite; a light/mediumbrown lateritic soil, moderately to strongly magnetic, probably of mafic volcanic origin; 79

85 and mbuga, a medium/dark grey to brown colour. Four grab samples of quartz rubble in laterite were collected and analyzed for gold but no significant results were recorded. The Nyikoboko Reef area was mapped in detail at 1:500 scale and confirmed the eastnortheast-trending volcanics/granite contact about 50 m south of the reef. About 250 m further east the strike of the contact turns to the north. The quartz reef, observed by Tanzam 2000 in the muck piles and in pits to the north, can be traced over about 100 m. At surface the reef consists of a quartz-rubble zone in ferricrete. The apparent host rock, exposed on muck piles surrounding certain pits, was described as a weakly-magnetic monzonite composed of 40-45% plagioclase feldspar (kaolinized), 10-15% quartz and 30-45% of a dark green mineral (pyroxene). A total of 50 grab samples were collected from the muck piles and sent for gold assay at SGS in Mwanza. Eight of the samples returned gold grades in excess of 1 g/t Au. Table 9.2. Significant Gold assays from Nyikoboko Reef Grab Samples Sample UTM E UTM N Description Au g/t F Wh qz v. in kaol. Material. V.G 5% hem fract. Muck pile 3.72 F White qz sugary, 5% haematitic fractures. Muck pile F Wh qz sugary, 3% haematitic fractures, tr. PyCp. Muck pile F White qz, V.G.?,10% haematitic fractures, tr. Py. Muck pile F White/light grey qz sugary, <2% haematitic fract.. Muck pile F White/light grey qz sugary, <3% haematitic fract.. Muck pile F Light grey qz, <3% haematitic fract.. ±in situ F Light grey, 5% haematitic fract, tr. PyCp. Muck pile F White/light grey, <3% haematitic fract. Muck pile F White/light grey qz sugary, <35 haematitic fract.. Muck pile Biogeochemical (BGC) Sampling Tanzam2000 carried out a biogeochemical sampling program in August 2004 on the Shilela licence. Two different species of plant were sampled, 383 MLJ and 24 NTG. Samples were collected at 200 m spacing along east-west lines 400 m apart and were shipped to Mwanza for washing and processing. The processed samples, including quality control, were submitted for 38-element ICP-MS analysis at Acme Laboratories in Vancouver. Field duplicates were collected after approximately every 20 th field sample and laboratory and laboratory duplicates were inserted by TANCAN Mining after every 20 samples prepared. At Acme, external standards were inserted every samples, together with laboratory duplicates inserted by Acme themselves. Separate threshold values were used for each plant species. Simple scatter plots were generated for each of the pathfinder elements, to include the values exceeding the 95 th and 99 th percentiles. The 95 th percentile for MLJ is 0.70 ppb Au, whilst that for NTG is 1.57 ppb Au, but it was not known at the time of sampling if there were any differences 80

86 in ionic uptake rates between species. As the distribution of the minority species (NTG) appeared to be fairly random, the percentile values were computed for all species combined. For gold, the 95 th percentile for the entire population is 0.70 ppb Au. The gold analyses were generally low, from 0.1 to 0.6 ppb Au, with a maximum of 3.1 ppb Au. Nineteen samples exceeded the 95 th percentile for gold Spatial distribution analysis by Tanzam 2000 showed a high degree of variability in trends for different elements. A general E-W bias was attributed to the rectangular shape of the licence and a line effect caused by E-W oriented traverses. For Au, the 95 th percentile scatter plot using a regional search distance of 10,000 m showed a strong northwest trend (sub-parallel to the structural/lithological trend at Bulyanhulu). There is also a well-defined secondary east trend (sample line effect) and a weakly-defined 045 o trend. Using a shorter search distance of 4,000 m, Tanzam 2000 showed the gold distribution to be dominated by a strong northwest trend. The copper values showed a similar pattern at 8,000 m search distance, as well as a weak northerly trend parallel to the Nyikoboko Reef) not detected by the gold values. Uranium also shows a regional and local northwest trend. Gold was not confirmed by any of the pathfinder elements. Fig BGC Au > 80 th percentile, Shilela PL 2472/

87 IP Surveys In August 2008 five contiguous IP gradient grids totalling 37.5 line km were surveyed on PL2472/2004. The grids targeted BGC gold anomalies, geological trends, soil anomalies, aeromagnetic interpretations and BGC response ratios. Other than the strong chargeability anomaly in the southeast corner of the grid (which corresponds with a BLEG, soil and BGC response ratio anomaly), there were no significant IP responses. The chargeability and the resistivity appear to map different lithological units within the greenstone but did not confirm the granite/greenstone contacts inferred from field regolith mapping Diamond Drilling Figure 9.17 IP Chargeability PL 2472/2004 Late in December 2002 a short diamond drill test of the Nyikoboko Reef was initiated. Three holes totalling m were collared on the down-dip projection of the mineralized quartz vein exposed in the artisanal workings. All three holes intersected the Nyikoboko Reef over a northerly strike length of approximately 110 m. The Nyikoboko Reef appears to have a thickness of about 2.0 m and dips to the west at 85º. A second smaller, parallel, quartz vein was intersected 15 m east of the main reef. The first two 82

88 holes (SHDD-01 and SHDD-02), 30 m apart and drilled west at -50º, targeted the southern part of the known reef where the best gold grades of up to 8.25 g/t Au had been obtained from grab samples. Hole SHDD-03 was collared 65 m north of SHDD-01 where the reef was thickest in the artisanal workings and was drilled east at -50º. Figure Location of Drill Holes, Nyikoboko Reef PL 2472/ samples were cut from the drill core and submitted with 6 standards to SGS in Mwanza for gold analysis by 50 g fire assay with AA finish. The available assay database, however, made no mention of the standards nor were analyses available for them. Quartz veining in feldspar porphyry was intersected in all three holes at m vertical depth. Table 9.3. Significant Diamond Drilling Results, Nyikoboko Reef Hole From To Length (m) Au g/t SHDD SHDD SHDD

89 Figure Cross-Section SHDD-01 Nyikoboko Reef 84

90 Figure Cross-Section SHDD-02 Nyikoboko Reef 85

91 Figure Cross-Section SHDD-03 Nyikoboko Reef 86

92 9.3.3 PL 2193/2003, HQ-P17986 and PL 4273/ Soil Sampling In February-March 2003 a total of 513 BLEG soil samples were collected from the Lunguya West property. The results were low with only three single-point weak anomalies 5 ppb Au and a maximum value of 7 ppb Au. One of these weak anomalies occurs in the southeast corner of the property, associated with artisanal pits from which grab samples returned assays up to 11 g/t Au. The low BLEG results, however, may be due to transported soils having been sampled. A second anomaly occurs along the southern boundary of the property, corresponding to the granite/greenstone contact shown on Barth s 1990 map (though field mapping by Tanzam 2000 showed the area to be entirely granite). Follow-up BLEG sampling was done in June-July 2003 over the first anomaly with 213 samples collected at 200 m x 200 m spacing. These follow-up samples were taken with hand augers to get deeper penetration in the drainage floodplains in an attempt to reach saprolite or basal regolith for sampling. Other anomalies were sampled in a cross pattern, with an additional 54 samples collected. The results of the follow-up sampling were also disappointing, with a maximum value of 10 ppb Au Mapping and Rock Sampling Old artisanal workings occur in the southeast of the property and 29 samples were taken from quartz veins within sheared granite. The samples were sent to Humac Laboratories in Mwanza for 50 g fire assay with gravimetric finish. The 1:500,000 scale geological map produced by the BGR in 1990 (Barth, 1990) interpreted this area as being close to a major granite/greenstone contact. Field mapping by Tanzam 2000, however, showed that the entire Lunguya West property was underlain by granites. A preliminary interpretation of the aeromagnetic data by Tanzam 2000 suggested four northeast-trending structures cross the property, with four northwest-trending structures in the west (now PL 4273/2007). West-northwest magnetic features in the northeast of the property may represent dykes. The property appears to be essentially underlain by granite, with minor magnetic features in the centre of the property that may represent remnant greenstone material. In May 2003, five days were spent mapping the licence along 120 line-km of traverses. The surficial environment is dominated by granitic sands with two large granite outcrop areas along the northern licence boundary. The granite is medium grained, massive and equigranular composing of quartz+feldspar+biotite. Minor K-feldspar alteration is locally present, with <1% sulphides throughout. The dykes interpreted from the aeromagnetics were locally identified by subtle soil colour changes but do not outcrop. A fine grained, weakly foliated gabbro was found in a muck pile from a 5 m pit that corresponds with a greenstone signature seen on the aeromagnetics. A small area of 87

93 orange-brown soil occurs around this pit, typical of a more mafic rock type beneath. In the southeast corner of the property a series of 9 artisanal pits (Shilela Reef) occur over 50 m along a strike of 277º. The muck piles examined by Tanzam 2000 suggest the pits contained quartz veining with iron films and about 2% sulphides within a moderatelysheared, bleached granitic rock. Moderate sericite and silica alteration is present within the granite. About 20% coarse muscovite crystals occur within fractures and along shear planes within the sheared granite. The veins were sampled in May 2003 and returned results up to 11.8 g/t Au while the granite host returned values less than 0.1 g/t Au. Table 9.4. Grab Sample Results PL 2193/2003 Type Sample UTM N UTM E Au g/t Sample Description Grab E Sampled from muck pile, hematite altered quartz vein with disseminated pyrite on fractures. Grab E Quartz vein with hematite alteration along fractures. Grab E Quartz vein with hematite alteration along fractures. Grab E Quartz vein with hematite alteration along fractures. Grab E Moderately weathered granite containing 1% quartz veining, with minor disseminated pyrite along foliation planes. Minor sericite alteration throughout. Sampled from abandoned pit muck pile. Grab E Quartz vein with hematite alteration along fractures. Grab E Grab E Grab E Quartz vein with hematite alteration along fractures and minor disseminated pyrite throughout. White/grey translucent quartz vein containing hematite and disseminated pyrite on fractures. Sampled from abandoned pit muck pile. White/grey translucent quartz vein containing hematite and disseminated pyrite on fractures. Sampled from abandoned pit muck pile. Grab F Translucent, Fe rich quartz vein containing <1% pyrite. Grab F Fine grained, moderately foliated, felsic intrusive rock, possible granite, with moderate silica and sericite alteration along quartz vein selvages. K-spar alteration occurs within the quartz veining. Grab F Milky white quartz vein, with Fe staining on fractures. Grab F Translucent, Fe rich quartz vein. 88

94 Biogeochemical (BGC) Sampling In August 2004 the eastern quarter of the property (now the remnant of PL 2193/2003) was covered with BGC sampling at approximately 100 m x 100 m spacing. A total of 631 samples were collected and prepared in the TANCAN Mining facility in Mwanza before being shipped to Acme Laboratories in Vancouver for analysis. MLJ was the dominant species sampled (556) plus 16 MSN, 31 MZM and 28 NTG. The gold results were low with a maximum value of 3.20 ppb Au. Seven samples scattered over the sampling area exceeded the 99 th percentile of 1.25 ppb Au while 22 samples exceeded the 95 th percentile of 0.70 ppb Au. Gold appears to have a moderate correlation with As and Ag while the other pathfinder elements show a high degree of scatter. Spatial distribution analysis by Tanzam 2000 shows an apparent east-west bias, probably caused by the rectangular shape of the sampled area and an east-west sampling bias. The Au 95 th percentile scatter plot suggests weak northwest and east trends, the former parallel to Bulyanhulu and the latter to the Shilela Reef. Figure Au > 80 th percentile plot for Lunguya West PL 2193/

95 IP Surveys In August 2008 an IP gradient grid was surveyed over the eastern part of PL 2193/2003. An east-trending high chargeability zone occurs across the centre of the grid, coinciding with a single-point BGC anomaly with a value of 2.2 ppb Au (Figure 9.23). This chargeability anomaly cuts across the northwest-trending dykes that are apparent on the aeromagnetics and the resistivity results. In October 2008 a similar grid was added to the west (Figure 9.24) and extended the strike of the east-trending high-chargeability zone to at least 1,500 m. Figure IP Chargeability PL 2193/

96 Figure IP Gradient Interpretation PL 2193/ PL 4594/2007 and HQ-P Soil Sampling In July 2002 soil BLEG sampling was carried out over the original PL 1766/ of these samples were collected from the retained eastern half that now consists of PL 4594/2007 and HQ-P The results outlined two anomalous zones, a northeast trend passing close by the Nyamakwenge workings in the north of the property and a northwest trend. The mean was 3.69 ppb Au with an anomaly threshold of 8.88 ppb Au. Nine samples returned gold values above this threshold with a maximum of 14 ppb Au. Samples taken adjacent to the artisanal mining area (at about 100 m distance) returned BLEG values of only 3 and 5 ppb Au. In September 2002 a soil orientation survey was conducted at Nyamakwenge Reef in view of the low results obtained in the vicinity from the BLEG survey. A total of 22 sites at 25 m intervals along a line were sampled. Three samples were collected at each site: one was sent to Humac for sieving to -80 mesh and fire assay; one to SGS for BLEG cyanidation; and one to ALS-Chemex for Leachwell analysis. All three methods clearly outlined the West Reef with maximum results of 330 to 785 ppb Au while the East Reef 91

97 had a weaker signature with maximum results of 51 to 65 ppb Au. In October 2002 a detailed 80 mesh conventional soil sampling program was completed over the Nyamakwenge Reef area. A total of 1,063 samples were collected at 25 m x 25 m spacing (1,017 samples plus 46 duplicates) and were sent to Humac Laboratories in Mwanza for gold analysis. 55 samples returned anomalous values 30 ppb Au, with a maximum of 1,900 ppb Au. Both West and East reefs were highlighted by the results with the best anomaly being the (then untested) south-southeast extension of the East Reef. Eight of the anomalous values were rejected after field checks showed their sites were probably contaminated by the artisanal washing plant. The maximum accepted value was therefore 588 ppb Au. 17 BLEG anomalies in the east of the property, ranging from 7 to 14 ppb Au, were field checked in November The new samples collected were sent for -80 mesh analysis by Aqua Regia/AA. None of the BLEG anomalies were duplicated. In April 2005 six auger holes totalling 20.7 m were drilled. One hole was to validate a BGC anomaly, four to check the soil anomalies and one on an aeromagnetic anomaly. 12 samples were collected and sent to ALS-Chemex for 50-element ICP analysis. One hole reached saprolite while the others were terminated before reaching either ferricrete or bedrock. The results were low, with a maximum of 20 ppb Au from lateritic soil. In July 2008 follow-up soil sampling was carried out on the remnant of PL 1766/2001 that was reapplied for in August 2008 as HQ-P The area sampled was misidentified in Tanzanian Royalty monthly reports as PL 4594/2007 which is the southeast quadrant of the original PL 1766/2001, not the northeast as described in the reports. A total of 351 samples were collected at 100 m x 200 m spacing. The results confirmed the westward extension of the original gold anomaly, with a total apparent strike of 1,800 m. A weaker anomalous trend, with a west-southwest strike of over 4,000 m, straddles the grid and merges with the eastern end of the stronger anomaly (Figure 9.25). The sampled area is underlain by greenstone lithologies. Granite occurs on the western end of the grid (whitish zone on image). The cobalt distribution confirms the granite/greenstone contact with background values on the granite. 92

98 Figure July 2008 Soil Sampling Gold Results HQ-P Mapping and Rock Sampling The Lunguya property is situated in the West Kahama greenstone belt. The eastern twothirds of the property is largely covered by laterites and red brown residual clay soils capping Nyanzian volcanic rocks, while the western third is covered by sandy granitic soils. The structural model used for gold mineralization is the granite/greenstone contact type and the Nyamakwenge reefs, located in the north of the property, are an example of this style. Pitting by Reunion Diamonds in the 1990s established the presence of a large peridotite intrusion cutting the Nyanzian rocks near the western boundary of the property. This can be seen clearly on the airborne magnetic data. The mapping of the regolith/outcrop on the Lunguya property was completed in November 2002 with about 18 km of traverses. Nine grab samples were collected with the best assay, 1.24 g/t Au, coming from quartz veins in mafic volcanics at an artisanal working. The artisanal workings at Nyamakwenge were also mapped and sampled, with a total of 125 grabs collected from the workings and muck piles. From the examination of the workings and the subsequent RC and diamond drilling (see sections and ) 93

99 the ferricrete and lateritic gravels are typically 2-3 m thick. Most of the artisanal workings focus on this regolith material, especially updip of the quartz veins where erosion has added gold-bearing quartz fragments to the regolith. Test pits and shafts occur over about 300 m of west-southwest strike from immediately west of the greenstone/granite contact (see Figure 9.28) within which there are two areas of intense shallow workings over about 75 m x 50 m and 100 m x m. Plate 9.1 Nyamakwenge Artisanal Workings (Tanzanian Royalty picture) The rocks identified on the muck piles were primarily granite and mafic volcanics, with minor banded iron-formation and quartz veins. The gold-bearing quartz veins all occur within the granite and contain occasional coarse visible gold as well as pyrite and chalcopyrite. These grabs returned gold values up to 191 g/t Au. Nyamakwenge is an active artisanal site located close to the northern boundary of HQ-P Quartz veins are hosted in sheared granite/ granodiorite immediately west of the granite-greenstone contact. Contouring of the grab sample results by Tanzam 2000 showed the East and West reefs trending 020º. Quartz veins in place gave strikes ranging from northnorthwest to northeast with variable dips from 30 W to vertical. Mafic volcanics were mapped in barren pits east of the veins. J. Oliver commented from a field visit that the veins were related to a shear-hosted normal fault. 94

100 Biogeochemical (BGC) Sampling In August 2004 Tanzam 2000 carried out a biogeochemical sampling program on the Lunguya property. MLJ (333) and NTG (94) were the species sampled, at 200 m spacing along east-west lines 400 m apart. Samples were prepared at TANCAN Mining s facility in Mwanza and shipped to Acme Laboratories in Vancouver for 38-element ICP analysis. Separate threshold values were used for each plant species. Simple scatter plots were generated by Tanzam 2000 for each of the pathfinder elements, to include the values exceeding the 95 th and 99 th percentiles i.e. those considered anomalous and highly anomalous. The gold plot showed a strong north-northwest trend and an east-trending linear was evident over the Nyamakwenge reefs despite an east-west sample line effect. The gold values were generally moderate with most values below 0.6 ppb Au and a maximum of 27 ppb Au. Twenty-two samples exceeded the 95 th percentile of 1 ppb Au. Gold pathfinder elements showed poor correlation with gold, though this may in part be a function of ion mobility. 95

101 Figure Au > 80 th percentile value contour map for Lunguya PL 1766/ IP Surveys In July 2008 an IP gradient grid was surveyed across the Nyamakwenge reefs, to establish the chargeability and resistivity signatures for comparison elsewhere. A second grid was surveyed in August 2008 adjacent to the workings, to cover several intersecting east and north-trending lineaments supported by a weak BLEG anomaly. The initial grid showed a north-south chargeability trend with values of up to 4 mv/v across the workings, coinciding with the highest gold results from the diamond drilling program. The high chargeability in the west of the grid is related to the granite bedrock. No chargeability anomaly was detected in the second grid. 96

102 Figure IP Chargeability Results, Nyamakwenge Area, HQ-P RC Drilling Seven RC holes totalling 535 m were drilled at 110º under the Nyamakwenge workings in August The first six holes tested 220 m of strike directly beneath the workings and the seventh hole tested the granite contact zone. In total 251 were submitted to SGS for analysis together with 10 standards. Table 9.5. Significant RC Results Hole From To Length (m) Au g/t LGRC LGRC LGRC LGRC LGRC Including LGRC

103 Diamond Drilling A diamond drilling program totalling 1,020 m in 12 holes was carried out at Nyamakwenge from November 9 to December 2, The holes targeted the East and West reefs at m vertically below surface and at 25 m spacing along strike. Both holes LGDD-10 and its re-drill, LGDD-10A, were abandoned when they intersected underground workings. 663 samples were taken from the cut core and were sent to SGS in Mwanza together with 35 standards for gold analysis by 50 g fire assay. Core recovery in fresh rock was generally above 90%, including most of the mineralized quartz veins, but usually less in the weathered zone. The primary lithology intersected in all the holes was a granodiorite, with minor syenitic dykes. Both showed a well-developed schistosity. A chlorite-sericite schist was noted only at the margins of the main quartz reefs, possibly a sheared dyke along which the quartz was injected. The main type of vein quartz, forming the East and West Reefs, is opaque, light grey to white with haematitic fractures, scattered visible gold and chloritesericite films on fractures. The second type is translucent light grey and associated with potassic alteration of the host rock. Ten of the twelve holes intersected significant quartz veins: holes LGDD-02, 03, 07, 08 and 09 intersected the East Reef and holes LGDD-04, 05 06, 10 and 11 intersected the West Reef. A relatively constant thickness of about 1m was observed by Tanzam 2000 for both reefs, with a dip of about 40 W and a strike of N20 E. The two veins have an en echelon geometry and were interpreted by Tanzam 2000 (Oliver, 2003) to be the same vein in a shear displaced by cross-faulting (trending 330º) with a normal movement. This faulting might explain the quartz veining attaining a thickness of 8.4 m in hole LGDD-11 together with 3.1 m of chlorite-sericite schist. Table 9.6. Significant Diamond Drilling Results Hole From To Length (m) Au g/t Comments LGDD East Reef quartz veins LGDD East Reef, chlorite-sericite schist + QV including Quartz vein LGDD West Reef quartz veins LGDD West Reef quartz vein LGDD West Reef, chlorite-sericite schist + QV LGDD East Reef quartz vein LGDD East Reef chlorite-sericite schist East Reef quartz vein LGDD East Reef quartz vein LGDD * West Reef quartz vein 24.00* West Reef quartz vein LGDD West Reef quartz vein Chlorite-sericite schist + quartz veins * Note LGDD-10 no recovery due to artisanal workings 98

104 Figure 9.28 Plan of Diamond and RC Drilling Nyamakwenge Reefs 99

105 Downhole surveys using an Eastman single-shot instrument were done when possible on longer holes. Orientated core samples were used, using a weighted marker, on intact core and vein samples. Core recovery measurements were made on site by a company geotechnician. The location of all drill collars were marked with concrete monuments. Comments below are edited from Oliver (2003). Figure Drill Section LGDD &LGRC-02 Four diamond holes and one RC hole are shown on Section A (Figure 9.29), cutting the southwest end of the Nyamakwenge Reefs. It appears that a series of steeply northwestdipping felsic dykes are emplaced into the granodiorite. The quartz vein (West Reef) has an apparent down-dip extent of about 80 m and is probably terminated by a fault striking 330º and dipping 40ºNE. The thickness of the vein varies from 2 8 m. A thin chlorite schist often occurs on the footwall of the vein. 100

106 Figure Drill Section LGDD

107 Section B on Figure 9.30 is about 40 m northeast of Figure 9.29 and shows the West Reef as a planar 1-2 m wide quartz vein in all three holes. The footwall chlorite schist is a similar thickness and tends to contain higher gold grades than the quartz vein. The two RC holes on Section C (Figure 9.31) are each projected about 20 m onto a common plane. LGRC-01 appears to cut the faulted repetition of the West and East Reefs. A quartz vein zone at m is interpreted by Tanzam 2000 as the position of the northwest-dipping fault that displaces the two reefs. The six holes on Section D (Figure 9.32) cut the granodiorite/mafic volcanic contact in addition to a 120 m down-dip section through the East Reef. Oliver (2003) projected the contact to be subvertical or steep west-dipping based on the drilling and surface data. The quartz vein has an apparent northwest dip of 40º and varies in width from 2-6 m. Again a chlorite-sericite schist occurs at the footwall contact where the better gold grades tend to occur. Thin felsic dykes are common in the western half of the section and a feldspar porphyry dyke was cut near the bottom of LGRC-06. The four holes (LGDD-01, 02, 03 and LGRC-05) on Section E (Figure 9.33) provide the most northerly intersections on the East Reef, 60 m north of Section D. There is apparent down-dip continuity of the quartz vein over about 130 m with a northwest dip of 40º. Better gold grades tend to occur towards and into the footwall chlorite-sericite schist, though continuity of grade between holes is weak. There is a possible bifurcation of the reef in hole LGRC-05 but there is no support for this interpretation in the adjacent hole (LGDD-01). 102

108 Figure Drill Section LGRC01,

109 Figure Drill Section LGDD , LGRC04, 06,

110 Figure Drill Section LGDD , LGRC

111 9.3.5 PL 3273/2005, HQ-P18233 and PL 5123/ Soil Sampling In 2002 soil BLEG sampling was carried out across the Lunguya East property on what was then PL 1887/2002. A total of 287 samples plus 9 duplicates were taken at 400 m x 400 m spacing. Results from the eastern half of the property were essentially background while a weak anomaly was detected in the northwest of what is now PL 5123/2008. Follow-up -80 mesh soil sampling was carried out at 200 m x 100 m and confirmed the northwestern anomaly with a maximum value of 81 ppb Au. This anomaly extends into the Lunguya property to the west. In April 2005 three auger holes totalling 14.2 m were drilled and three samples were collected for 50-element ICP analysis at ALS-Chemex. Two holes targeted BGC anomalies and one an aeromagnetic anomaly. One hole reached bedrock while the other two were terminated above the ferricrete. The hole that reached bedrock was in a mbuga area, suggesting ferricrete is either absent or highly weathered below the mbuga. Results ranged between 4 and 7 ppb Au Mapping and Rock Sampling The regolith and outcrop were mapped in October 2002 along about 18 km of traverses about 1 km apart. The principal focus was the interpreted contact between the granite and the mafic volcanics. Less than 1% of the property has outcropping bedrock while mbuga covers approximately 60% of the property area. The three main regolith types recognized were: a residual granite soil, light grey to pink, containing up to 90% quartz grains and rarely weakly magnetic; a brown to red lateritic soil, moderately to strongly magnetic and probably of mafic volcanic origin; mbuga, dark grey-brown clays. The two bedrock lithologies mapped were granite in the northeast part of the property and felsic lapilli tuff on the northern boundary. The granite was potassic and massive with no schistosity. The tuff was light grey, fine-grained and massive with 10-20% monomict lapilli and traces of disseminated pyrite. The soils were used to outline the granite/greenstone contact, which suggests most of the property is underlain by greenstones. During the mapping 7 grab samples were collected but no significant results were returned Biogeochemical (BGC) Sampling Tanzam 2000 carried out a biogeochemical sampling program in August 2004 on the Lunguya East property. A total of 559 samples were collected at 200 m intervals along east-west lines 400 m apart from two species (MLJ 245 samples and NTG 314 samples). The samples were prepared at the company facility in Mwanza and were sent with quality control samples to Acme Laboratories in Vancouver for 38-element ICP analysis. 106

112 Based on the 95 th percentile of the gold results, three distinct trends were identified at 015º, 070º and 035º. On this property, in contrast to other areas of the Lunguya Project, the 95 th percentiles and hence the anomalous thresholds for the two sampled species were essentially the same at 0.90 for MLJ and 0.94 for NTG. The maximum value was 12.5 ppb Au, with 28 samples exceeding the 95 th percentile. The entire population shows a fairly strong east-west bias, at least in part due to a sample line effect. Using a search distance of 10,000 m the 070º trend is clear, while a more local search distance of 3,000 m a strong 015º trend and weaker 035º and 070º trends. There appears to be little correlation between gold and its pathfinder elements though there is some similarity between the regional trends for Au and Ag, Cu, Pb, Mo. These four pathfinders, however, do suggest there is a 900 m wide trend striking 315º (parallel to Bulyanhulu) across the property. This corridor includes the anomalous gold-in-soil area in the northwest. Figure Au > 80 th percentile plot for Lunguya East. 107

113 IP Surveys In August 2008 three IP gradient grids were surveyed on the eastern part of the Lunguya East property. These grids covered BGC anomalies as well as interpreted airborne magnetic lineaments under the mbuga. The thickness of the mbuga, at least 9 m, could explain the weak signature of the anomalies. The calculated resistivity shows a low that is possibly a shear zone coincident with the chargeability and BGC anomaly. A double grid was surveyed to the west on PL 5123/2008 in September A weak IP anomaly coincides with the BGC anomaly. A resistivity low at the south end of the grid aligns with those on the grids to the east, trending east-northeast. Figure IP Chargeability Lunguya East PL 3273/

114 Figure IP Chargeability Lunguya East Figure IP Resistivity showing possible shear zone 109

115 9.3.6 PL 5127/2008 and PL 5277/ Review of BEAL Data During August 2008 the results of the programs carried out by BEAL when the Ilogi property was under option were reviewed. On the primary soil anomaly in the east of the property, covered by sampling at 100 x 50 m spacing, RAB drilling had given several mineralized intersections. A detailed IP grid was planned to assess this zone. The northern soil anomaly had only been tested with CBI drilling at 800 x 200 m spacing, which did not repeat the soil anomalies. However, the wide spacing of CBI holes could easily have missed a narrow mineralized zone as was shown at the eastern anomaly where only background CBI results were obtained over mineralized RAB intersections IP Surveys Figure IP Chargeability over East soil anomaly, PL 5277/

116 Two IP gradient grids were surveyed by Tanzanian Royalty in Q4 2008, over the two soil anomalies at the east of the property. The primary, eastern, anomaly showed a strong chargeability anomaly with a maximum value of 18 mv/v, clearly suggesting a Bulyanhulu-parallel 315º trend (Figure 9.38). On the northern soil anomaly the correlation between high chargeability trends and the gold-in-soil anomalies was less clear-cut (Figure 9.39). Figure IP Chargeability over North soil anomaly, PL 5277/