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DRN - Delrand Resources Limited - Interim condensed consolidated financial

Release Date: 18/05/2012 17:00:03      Code(s): DRN
DRN - Delrand Resources Limited - Interim condensed consolidated financial      
statements(UNAUDITED) 31 March 2012 (Expressed in Canadian dollars)             
DELRAND RESOURCES LIMITED                                                       
(formerly BRC DIAMONDCORE LTD.)                                                 
(Incorporated in Canada)                                                        
(Corporation number 627115-4)                                                   
Share code: DRN    ISIN Number: CA2472671072                                    
("Delrand" or the "Company")                                                    
31 MARCH 2012 (Expressed in Canadian dollars)                                   
NOTICE TO READER                                                                
These interim condensed consolidated financial statements of Delrand Resources  
Limited (the "Company") as at and for the three month period ended March 31,    
2012 have been prepared by and are the responsibility of the Company`s          
management.  These interim condensed consolidated financial statements have not 
been audited or reviewed by the Company`s auditors.                             
                                  Notes   December 31, 2011  December           
                                                          31, 2011              
                                          $                  $                  
Current Assets                                                                  
Cash                                      144,993            88,068             
Other receivable                  5b      -                  26,145             
Prepaid expenses and other assets         51,203             38,342             
Total Current Assets                      196,196            152,555            
Non-Current Assets                                                              
Exploration and evaluation        5       5,072,986          5,121,486          
Total Non-Current Assets                  5,072,986          5,121,486          
Total Assets                              5,269,182          5,274,041          

Liabilities and Shareholders`                                                   
Current Liabilities                                                             
Accounts payable and accrued              573,737            530,024            
Notes payable                             -                  -                  
Income taxes payable                      11,076             ,076               
Due to related parties            6       194,430            144,646            
Total Current Liabilities                 685,746            685,746            
Income taxes payable                      20,502             20,502             
Total Liabilities                         779,2438           706,248            
Shareholders` Equity                                                            
Share capital                     7       115,939,566        115,939,566        
Contributed surplus                       8,159,644          8,159,644          
Deficit                                   (119,629,773)      (119,531,41        
Total Shareholders` Equity                4,469,437          4,567,793          
Total Liabilities and Shareholders`      5,269,182          5,274,041           
Going Concern                     1                                             
Common shares                                                                   
Authorized                                Unlimited          Unlimited          
Issued and outstanding                    49,704,341         49,704,341         
                                  Notes   Three months       Three              
ended March 31,    months               
                                        2012               ended March          
                                                          31, 2011              
                                          $                  $                  
Consulting and professional fees          59,475             105,122            
General and admistrative                  55,964             70,410             
Foreign exchange (gain) loss              1,414              2,243              
Loss from operations                      (101,405)          (177,775)          
Other revenue                             18,497             -                  
                                          (98,356)           (177,775)          
Headline loss                                                                   
Net loss and comprehensive loss            (98,356)          (177,775)          
for the year                                                                    
Basic and diluted loss per share          (0.00)             (0.00)             
Weighted average number of common         49,704,341         47,855,026         
shares outstanding                                                              
                Notes   Common shares           Contribute Deficit     Total    
                                              d Surplus             Shareholde  
r`s equity   
                        Number of   Amount                                      
                      (Note 11)                                                 

Balance at                                                                      
January 1, 2011         44,704,320  115,457,876 7,815,398  (119,408,1  3,865,171
Net loss for the                                                                
period                  -           -           -          (177,775)   (177,775)
Balance at March                                                                
31, 2011                44,704,320  115,457,876 7,815,398  (119,585,8  3,687,396
Net incomes for          -                                                      
the period                         -           -          54,461      54,461    
Share issuance   7                                          -           481,690 
(net of costs)          5,000,000   481,690     -                               
Warrant issuance 7       -           -           344,246    -           344,246 
(net of costs)                                                                  
Fractional       7a      21          -           -          -           -       
shares due to                                                                   
Balance at                                                                      
December 31,            49,704,341  115,939,566 8,159,644  (119,531,4  4,567,793
2011                                                      17)                   
Net loss for the         -           -           -          (98,536)    (98,536)
Balance at March                                                                
31, 2011                49,704,341  115,939,566 8,159,644  (119,629,7  4,469,437
                                           For the three months ended           
Notes    March 31,    March 31, 2011          
                                           $            $                       
Cash flows from operating                                                       
Net loss for the period                                  (177,775)              
Adjustments to reconcile loss to net                                            
cash used in operating activities                                               
Interest paid - Note payable                -            (4,931)                
Changes in non-cash working                                                     
  Prepaid expenses and other                            11,436                  
current assets                              (12,860)                            
  Accounts receivable                                                           
(26,144)     -                       
  Accounts payable and accrued             43,713       8,904                   
Net cash flows used in operating                                                
activities                                  (41,359)     (152,504)              
Cash flows from investing                                                       
Expenditures on exploration and                          (181,275)              
evaluation                                  (66,606)                            
Funds received from Rio Tinto                            191,263                
Net cash provided by investing                                                  
activities                                  48,500       9,988                  
Cash flows from financing                                                       
Due to related parties                                   163,417                
Net cash provided by financing                                                  
activities                                  49,784       163,417                
Net increase in cash during the                          20,901                 
year                                        56,925                              
Cash, beginning of the year                              126,931                
Cash, end of the year                                                           
                                           144,993      147,832                 
1    Corporate Information and Continuation of the Business                     
    Corporate Information                                                       
    The principal business of Delrand Resources Limited ("Delrand" or the       
    "Company") is the acquisition and exploration of mineral properties in the  
Democratic Republic of the Congo ("DRC"). In June 2011, the Company         
    effected a change in the name of the Company from BRC Diamond Core Ltd. to  
    Delrand Resources Limited and a consolidation of the outstanding common     
    shares of the Company on a two to one basis. As a result of the share       
consolidation, all of the issued and outstanding share amounts included in  
    these financial statements have been restated to reflect the consolidation. 
    These interim condensed consolidated financial statements as at and for the 
    three months ended March 31, 2012 include the accounts of the Company and   
of its wholly-owned subsidiaries incorporated in the DRC, BRC Diamond Core  
    Congo SPRL, and in South Africa, BRC Diamond South Africa (Proprietary)     
    The Company is a publicly traded company whose outstanding common shares    
are listed for trading on the Toronto Stock Exchange and the JSE Limited in 
    Johannesburg, South Africa. The head office of the Company is located at 1  
    First Canadian Place, 100 King St. West, Suite 707O, Toronto, Ontario, M5X  
    1E3, Canada.                                                                
Continuation of the business                                                
    These interim condensed consolidated financial statements are prepared on a 
    going concern basis, which assumes that the Company will continue in        
    operation for a reasonable period of time and will be able to realize its   
assets and discharge its liabilities in the normal course of operations.    
    The Company has not generated revenues from operations. The Company         
    incurred a net loss of $98,356 during the three months ended March 31, 2012 
    and, as of that date, the Company`s deficit was $119,629,773. These         
conditions along with other matters indicate the existence of material      
    uncertainties that may cast significant doubt about the Company`s ability   
    to continue as a going concern. As such, the Company`s ability to continue  
    as a going concern depends on its ability to successfully raise additional  
financing for development of the mineral properties. Although the Company   
    has been successful in the past in obtaining financing and subsequently     
    raised financing, there is no assurance that it will be able to obtain      
    adequate financing in the future or that such financing will be available   
on acceptable terms.                                                        
2    Basis of Preparation                                                       
a)   Statement of compliance                                                    
    These interim condensed consolidated financial statements as at and for the 
three months ended March 31, 2012, including comparatives, have been        
    prepared in accordance with International Accounting Standards ("IAS") 34   
    `Interim Financial Reporting` ("IAS 34") using accounting policies          
    consistent with the International Financial Reporting Standards ("IFRS")    
issued by the International Accounting Standards Board ("IASB").            
    Accordingly, certain information and footnote disclosure normally included  
    in the annual financial statements prepared in accordance with IFRS, have   
    been omitted or condensed.                                                  
b)   Basis of measurement                                                       
    These interim condensed consolidated financial statements have been         
    prepared on a going concern basis, under the historical cost convention,    
    except for certain financial assets and liabilities which are presented at  
fair value.                                                                 
3    Summary of Significant Accounting Policies                                 
    These interim condensed consolidated financial statements have been         
    prepared using the same accounting policies and methods of computation as   
the annual consolidated financial statements of Delrand for the year ended  
    December 31, 2011. The disclosure contained in these interim condensed      
    consolidated financial statements does not include all the requirements in  
    IAS 1 Presentation of Financial Statements ("IAS 1"). Accordingly, these    
interim condensed consolidated financial statements should be read in       
    conjunction with the Company`s consolidated financial statements for the    
    year ended December 31, 2011.                                               
    The accounting policies set out below have been applied consistently to all 
periods presented in these interim condensed consolidated financial         
a)   Basis of Consolidation                                                     
i.   Subsidiaries                                                               
Subsidiaries are entities controlled by the Company. Control exists         
    when the Company has the power, directly or indirectly, to govern the       
    financial and operating policies of an entity so as to obtain benefits      
    from its activities. This control is evidenced through owning more          
than 50% of the voting rights or currently exercisable potential voting     
    rights of a company`s share capital. The financial statements of            
    subsidiaries are included in the interim condensed consolidated             
    financial statements of the Company from the date that control              
commences until the date that control ceases. Consolidation accounting      
    is applied for all of the Company`s wholly-owned subsidiaries.              
Ii   Associate                                                                  
    Where the Company has the power to significantly influence but not control  
the financial and operating policy decisions of another entity, it is       
    classified as an associate. Associates are initially recognized in the      
    consolidated statements of financial position at cost and adjusted          
    thereafter for the post-acquisition changes in the Company`s share of the   
net assets of the associate, under the equity method of accounting. The     
    Company`s share of post-acquisition profits and losses is recognized in the 
    consolidated statement of comprehensive loss, except that losses in excess  
    of the Company`s investment in the associate are not recognized unless      
there is a legal or constructive obligation to recognize such losses. If    
    the associate subsequently reports profits, the Company`s share of profits  
    is recognized only after the Company`s share of the profits equals the      
    share of losses not recognized.                                             
Profits and losses arising on transactions between the Company and its      
    associates are recognized only to the extent of unrelated investor`s        
    interests in the associate. The investor`s share in the associate`s profits 
    and losses resulting from these transactions is eliminated against the      
carrying value of the associate.                                            
    Any premium paid for an associate above the fair value of the Company`s     
    share of the identifiable assets, liabilities and contingent liabilities    
    acquired is capitalized and included in the carrying amount of the          
Company`s investment in an associate. Where there is objective evidence     
    that the investment in an associate has been impaired, the carrying amount  
    of the investment is tested for impairment in the same way as other non-    
    financial assets.                                                           
iii. Transactions eliminated on consolidation                                   
    Inter-company balances, transactions, and any unrealized income and         
    expenses, are eliminated in preparing the interim condensed consolidated    
    financial statements.                                                       
Unrealized gains arising from transactions with associates are eliminated   
    against the investment to the extent of the Company`s interest in the       
    investee. Unrealized losses are eliminated in the same way as unrealized    
    gains, but only to the extent that there is no evidence of impairment.      

Delrand Resources Limited                 March 31,2012  December 31, 2011      

Percentage of ownership interest          25.00%         25.00%                 
Common shares held                                                              
                                         250            250                     
Total investment                          $-             $-                     
On January 26, 2010, the Company entered into an agreement (the "Iron Ore       
Agreement") with Rio Tinto Minerals Development Limited ("Rio Tinto Minerals")  
for the exploration for iron ore in areas within the Orientale Province of the  
DRC.  These areas are covered by exploration permits (the "Permits") which had  
been controlled by the Company.  Under the Iron Ore Agreement, which is in the  
form of a shareholders` agreement, the Company owns 25% and Rio Tinto Minerals  
owns 75% of the capital stock of Holdco, which owns a DRC registered company    
called Rio Tinto Exploration RDC Orientale SPRL. The registered company holds   
the Permits.   The Company`s investment in Holdco is accounted for in the       
consolidated financial statements using the equity method. For the years ended  
December 31, 2011 and December 31, 2010, Holdco was an inactive company which   
did not have any significant assets or liabilities and had no significant       
balances in the statement of comprehensive income. As such, there has been no   
change in the value of the investment since the date of acquisition.            
Under the Iron Ore Agreement, all iron ore exploration up to and including the  
completion of any pre-feasibility study, as required to obtain an exploitation  
permit, will be funded by Rio Tinto Minerals.  The Company will not suffer any  
dilution during this period, such that the Company`s 25% interest in the        
properties will be maintained during this period.  The exploration will be      
carried out by Rio Tinto Minerals or one of its affiliates as the operator.     
After the completion of the pre-feasibility study, funding for the project is to
be provided by Rio Tinto Minerals and the Company based on their proportionate  
respective interests in Holdco.                                                 
Exploration and Evaluation Assets                                               
The following table summarizes the Company`s tangible exploration and evaluation
expenditures with respect to its properties in the DRC:                         
                    Notes   Tshikapa         Northern DRC   Total               
Project          Project                            
Balance as at                 $2,608,499      $2,510,768     $5,119,267         
December 31, 2011                                                               
Balance as at                                 2,510,768      5,119,267          
January 1, 2012              2,608,499                                          
Additions                                     (90,564)       (48,500)           
Balance as at March                           2,420,204      5,070,767          
31, 2012                     2,650,563                                          
There is $2,219 of intangible exploration and evaluation expenditures as at     
March 31, 2012 (December 31, 2011: $2,219). There have not been any additions or
disposals to intangible assets since January 1, 2010.                           
a    Tshikapa Project                                                           
    The Tshikapa project is located in the south-western part of the Kasai      
    Occidental province of the DRC near the town of Tshikapa. The Tshikapa      
project is located within the so-called Tshikapa triangle, bordering the    
    Kasai River in the east, the Loange River in the west and the Angolan       
    border in the south. The properties also lie within the broader kimberlite  
    emplacement corridor which extends from known kimberlite pipes located in   
Angola. The Tshikapa diamond field has been extensively mined by alluvial   
    diamond companies and small-scale miners, and it is estimated that it has   
    produced over 100 million carats of diamonds since 1912. The Company has    
    focused its attention on the Tshikapa triangle through nine exploration     
permits covering an area of 1,429 kmSquared.  One of these permits is held  
    by the Company`s wholly-owned DRC subsidiary and the other eight permits    
    are controlled through option agreements with the permit holders. Six of    
    the option agreement permits relate to Acacia SPRL, which has advised the   
Company of its wish to modify the option agreement with the Company. The    
    remaining two option agreement permits relate to Caspian Oil & Gas.         
b    Northern DRC Project                                                       
    The Company`s northern DRC diamond project is located in Orientale Province 
of the DRC and consists of 46 exploration permits, two of which are held by 
    the Company directly through its DRC subsidiary and the balance of which    
    are held through an option agreement with the holder of the permits.  Rio   
    Tinto Mining and Exploration Limited ("Rio Tinto") is also party to this    
agreement. Under this agreement, funding for the exploration of the areas   
    covered by the permits is provided by Rio Tinto. Funds received from Rio    
    Tinto under this agreement are deducted from exploration and evaluation     
    expenditures in the Company`s statement of financial position.  Assuming    
ongoing satisfactory exploration results, the Company will acquire a 30%    
    interest in the said permits subject to certain conditions. The 44          
    exploration permits under option cover an area of 7,313 kmSquared. The two  
    additional exploration permits held by the Company`s DRC subsidiary cover   
an area of 749 kmSquared directly north of the optioned ground.             
4    Related Party Transactions                                                 
a    Key Management Remuneration                                                
    The Company`s related parties include key management.  Key management       
includes executive directors and non-executive directors.  The remuneration 
    of the key management of the Company as defined above, during the three     
    months ended March 31, 2012 and 2011 was as follows:                        
                             Years ended                                        
March 31, 2012         March 31, 2011              
 Salaries                    $65,468                $87,745                     
b    Other Related Parties                                                      
    As at March 31, 2012, an amount of $183,333 (December 31, 2011 - $133,333)  
was owed to two directors of the Company representing consulting fees.      
    During the three months ended March 31, 2012, consulting fees of $50,000    
    were incurred to the two directors (three months ended March 31, 2011:      
    $50,000 to the two directors).                                              
As at March 31, 2012, an amount of $11,097 (December 31, 2011 - $11,313)    
    was owed to Banro Corporation ("Banro").  Banro owns 17,716,994 common      
    shares of the Company, representing a 35.64% interest in the Company        
    All amounts due to related parties are unsecured, non-interest bearing and  
due on demand. All transactions are in the normal course of operations and  
    are measured at the exchange value.                                         
5    Share Capital                                                              
a    Authorized                                                                 
The Company`s authorized share capital consists of an unlimited number of   
    common shares with no par value.                                            
    The holders of the common shares are entitled to receive notice of and to   
    attend all meetings of the shareholders of the Company and shall have one   
vote for each common share held at all meetings of the shareholders of the  
    Company. The holders of the common shares are entitled to (a) receive any   
    dividends as and when declared by the board of directors, out of the assets 
    of the Company properly applicable to the payment of dividends, in such     
amount and in such form as the board of directors may from time to time     
    determine, and (b) receive the remaining property of the Company in the     
    event of any liquidation, dissolution or winding-up of the Company.         
    As of March 31, 2012, the Company had 49,704,341 common shares issued and   
outstanding (December 31, 2011 - 49,704,341) and no preference shares       
    issued and outstanding.                                                     
B    Share purchase warrants                                                    
    As at March 31, 2012, the Company had outstanding warrants to purchase      
15,000,000 (December 31, 2011: 15,000,000) common shares of the Company. Of 
    the 15,000,000 warrants outstanding, 10,000,000 are exercisable at a price  
    of $0.132 per share until November 2013 and the remaining 5,000,000 are     
    exercisable at a price of $0.22 per share until May 2014.                   
c    Loss per share                                                             
    Loss per share was calculated on the basis of the weighted average number   
    of common shares outstanding for three months ended March 31, 2012,         
    amounting to 49,704,341 (three months ended March 31, 2011: 44,704,230)     
common shares.  Diluted loss per share was calculated using the treasury    
    stock method. For the three months ended March 31, 2012, total stock        
    options of 1,061,771 (three-months ended March 31 2011: 1,140,000) and      
    warrants of 15,000,000 (three months ended March 31, 2011: 10,000,000) were 
excluded from the calculation of diluted loss per share as their effect     
    would have been anti-dilutive.                                              
6    Share-Based Payments                                                       
    In August 2011, the Company`s board of directors established a new stock    
option plan for the Company (the "New Plan").   In establishing the New     
    Plan, the Board of Directors also provided that no additional stock options 
    may be granted under the Company`s other stock option plan (the "Old Plan") 
    and terminated the Old Plan effective upon the exercise, expiry,            
termination or cancellation of all of the currently outstanding stock       
    options that were granted under the Old Plan.                               
    Under the New Plan, non-transferable options to purchase common shares of   
    the Company may be granted by the Company`s Board of Directors to any       
director, officer, employee or consultant of the Company or any subsidiary  
    of the Company.  The New Plan contains provisions providing that the term   
    of an option may not be longer than ten years and the exercise price of an  
    option shall not be lower than the last closing price of the Company`s      
shares on the Toronto Stock Exchange prior to the date the stock option is  
    granted.  Unless the Board of Directors makes a specific determination      
    otherwise, stock options granted under the New Plan and all rights to       
    purchase Company shares pursuant thereto shall expire and terminate         
immediately upon the optionee who holds such stock options ceasing to be at 
    least one of a director, officer or employee of or consultant to the        
    Company or a subsidiary of the Company, as the case may be.  Stock options  
    granted pursuant to the New Plan vest as follows: 75% of the stock options  
vest on the 12 month anniversary of their grant date and the remaining 25%  
    of such stock options vest on the 18 month anniversary of their grant date. 
    The total number of common shares of the Company issuable upon the exercise 
    of all outstanding stock options granted under the New Plan shall not at    
any time exceed 12% of the total number of outstanding common shares of the 
    Company, from time to time.                                                 
    The Company`s outstanding stock options have been adjusted to reflect the   
    two to one share consolidation that was implemented by the Company in June  
2011. As at March 31, 2012, the Company had outstanding under the Old Plan  
    stock options to acquire 1,040,000 (December 31, 2010 - 1,040,000) common   
    shares of the Company at a weighted-average exercise price of $4.59         
    (December 31, 2010 - $4.59) per share. There are currently no stock options 
outstanding under the New Plan.                                             
    The following tables summarize information regarding outstanding stock      
    options (post-consolidation):                                               
    For three months ended March 31, 2012:                                      
Exercise  Opening  During the Year             Closing  Weighted  Veste  Unve   
Price     Balance                              Balance  average   d &    sted   
Range                                                   remaining Exerc         
(Cdn$)                                                  contractu isabl         
al life   e              
                  Gran  Exerci  Expir  Forfe                                    
                  ted   sed     ed     ited                                     
2.10-     800,000                              800,000  1.41      800,0         
7.51               -     -       -      -                         00     -      
7.52-     240,000                              240,000  0.14      240,0         
16.00              -     -       -      -                         00     -      
1,140,0                -                                               
         00       -     -              -      1,040,0            1,040  -       
                                              00                 ,000           
Weighted   $ 4.59   $     $ -     $ -    $  -   $ 4.59             $      $     
Average            -                                              4.59   -      
For the three months ended March 31, 2011 (pre-consolidation):                  
Exercise    Opening  During the Year            Closing  Weighted  Vested  Unve 
Price       Balance                             Balance  average   &       sted 
Range                                                    remainin  Exerci       
(Cdn$)                                                   g         sable        
                                                        ual life                
Gran  Exerci  Expir  Forfe                                  
                    ted   sed     ed     ited                                   
1.05- 2.50  1,600,0                             1,600,0  2.41      1,600,       
           00       -     -       -      -     00                 000     -     
2.60 -      200,000                             200,000  0.25      200,00       
3.75                 -     -       -      -                        0       -    
3.76 -      480,000                             480,000  1.15      480,00       
8.00                 -     -       -      -                        0       -    
           00       -     -       -      -     1,140,0            1,140,  -     
                                               00                 000           
Weighted     $                      $      $     $                  $           
Average     2.42     -     -       -      -     2.42               2.42    -    
The fair value at grant date is determined using a Black-Scholes option     
    pricing model that takes into account the exercise price, the term of the   
    option, the impact of dilution, the share price at grant date and expected  
    price volatility of the underlying share, the expected dividend yield and   
the risk free interest rate for the term of the option. The contractual     
    life of all options on the date of grant is 5 years.                        
    The expected price volatility is based on the historic volatility (based on 
    the remaining life of the options), adjusted for any expected changes to    
future volatility due to publicly available information.                    
    Replacement options                                                         
    In connection with the acquisition by the Company of all of the outstanding 
    shares of Diamond Core Resources Limited ("Diamond Core") on February 11,   
2008, 617,710 (the "Replacement Options") stock options were issued by the  
    Company to employees of Diamond Core to substitute for their stock options  
    in Diamond Core.  Diamond Core was subsequently disposed of by the Company. 
    As at March 31, 2012, there were 21,771 replacement options outstanding     
(December 31, 2011: 21,771).                                                
7    Segmented Reporting                                                        
    The Company has one operating segment: the acquisition, exploration and     
    development of mineral properties located in the DRC. The operations of the 
Company are located in two geographic locations, Canada and the DRC.        
    Geographic segmentation of non-current assets is as follows:                
                 March 31,               December 31,                           
                 2012                    2011                                   
Cash         $      144,993          $      88,068                          
    Share         $115,939,566            $115,939,566                          
    Deficit       $(119,629,773)          $(119,531,417)                        
Contributed   $  8,159,644            $  8,159,644                          
8    Financial Risk Management Objectives and Policies                          
a    Fair value of financial assets and liabilities                             
The consolidated statements of financial position carrying amounts for      
    cash, other assets and accounts payable and accrued liabilities approximate 
    fair value due to their short-term nature.  Due to the use of subjective    
    judgments and uncertainties in the determination of fair values these       
values should not be interpreted as being realizable in an immediate        
    settlement of the financial instruments.                                    
    Fair value hierarchy                                                        
    The following provides a description of financial instruments that are      
measured subsequent to initial recognition at fair value, grouped into      
    Levels 1 to 3 based on the degree to which the fair value is observable:    
    *    Level 1 fair value measurements are those derived from quoted prices   
         (unadjusted) in active markets for identical assets or liabilities;    
*    Level 2 fair value measurements are those derived from inputs other    
         than quoted prices included within Level 1 that are observable for the 
         asset or liability, either directly (i.e. as prices) or indirectly     
         (i.e. derived from prices); and                                        
*    Level 3 fair value measurements are those derived from valuation       
         techniques that include inputs for the asset or liability that are not 
         based on observable market data (unobservable inputs).                 
    The fair values of financial assets and liabilities carried at amortized    
cost are approximated by their carrying values.  Cash is ranked level 2 as  
    it is based on similar loans in the market.                                 
b)   Risk Management Policies                                                   
    The Company is sensitive to changes in commodity prices and foreign-        
exchange. The Company`s Board of Directors has overall responsibility for   
    the establishment and oversight of the Company`s risk management framework. 
    Although the Company has the ability to address its price-related exposures 
    through the use of options, futures and forward contacts, it does not       
generally enter into such arrangements.                                     
c)   Foreign Currency Risk                                                      
    Foreign currency risk is the risk that a variation in exchange rates        
    between the Canadian dollar and United States dollar or other foreign       
currencies will affect the Company`s operations and financial results. A    
    portion of the Company`s transactions are denominated in United States      
    dollars, Congolese francs and South African rand. The Company is also       
    exposed to the impact of currency fluctuations on its monetary assets and   
liabilities.  The Company`s functional currency is the Canadian dollar. The 
    majority of major expenditures are transacted in US dollars.  The Company   
    maintains the majority of its cash in Canadian dollars but it does hold     
    balances in US dollars.  Significant foreign exchange gains or losses are   
reflected as a separate component of the consolidated statement of          
    comprehensive loss. The Company does not use derivative instruments to      
    reduce its exposure to foreign currency risk.                               
    The following table indicates the impact of foreign currency exchange risk  
on net working capital as at March 31, 2012. The table below also provides  
    a sensitivity analysis of a 10 percent strengthening of the Canadian dollar 
    against foreign currencies as identified which would have increased         
    (decreased) the Company`s net loss by the amounts shown in the table below. 
A 10 percent weakening of the Canadian dollar against the same foreign      
    currencies would have had the equal but opposite effect as at March 31,     
Prepaid expenses                                                                
Accounts payable                                                                
Total foreign currency financial assets and                                     
liabilities                                           (11,396)                  
Foreign exchange rate at December 31, 2011                                      
Total foreign currency financial assets and                                     
liabilities in CDN $                                  (11,424)                  
Impact of a 10% strengthening of the CDN $ on net                               
loss                                                  (1,142)                   
d    Credit Risk                                                                
    Financial instruments which are potentially subject to credit risk for the  
    Company consist primarily of cash. Cash is maintained with several          
    financial institutions of reputable credit in Canada, the DRC and South     
Africa and may be redeemed upon demand.  It is therefore the Company`s      
    opinion that such credit risk is subject to normal industry risks and is    
    considered minimal.                                                         
e    Liquidity Risk                                                             
Liquidity risk is the risk that the Company will not be able to meet its    
    financial obligations as they become due. The Company attempts to ensure    
    that there is sufficient cash to meet its liabilities when they are due and 
    manages this risk by regularly evaluating its liquid financial resources to 
fund current and long-term obligations and to meet its capital commitments  
    in a cost-effective manner. The key to success in managing liquidity is the 
    degree of certainty in the cash flow projections. If future cash flows are  
    fairly uncertain, the liquidity risk increases. The Company`s liquidity     
requirements are met through a variety of sources, including cash, existing 
    credit facilities and equity capital markets.  In light of market           
    conditions, the Company initiated a series of measures to bring its         
    spending in line with the projected cash flows from its operations and      
available project specific facilities in order to preserve its financial    
    position and maintain its liquidity position. Accounts payable and accrued  
    liabilities of $573,737 and amounts due to related parties of $194,430 are  
    due within one year and represent all significant contractual commitments,  
obligations, and interest and principal repayments on financial             
    liabilities. Please refer to Note 1, Continuation of the Business.          
f    Mineral Property Risk                                                      
    The Company`s operations in the DRC are exposed to various levels of        
political risk and uncertainties, including political and economic          
    instability, government regulations relating to exploration and mining,     
    military repression and civil disorder, all or any of which may have a      
    material adverse impact on the Company`s activities or may result in        
impairment in or loss of part or all of the Company`s assets.               
g    Market Risk                                                                
    Market risk is the potential for financial loss from adverse changes in     
    underlying market factors, including foreign-exchange rates, commodity      
prices, interest rates and stock based compensation costs.                  
h    Interest rate risk                                                         
    Interest rate risk is the potential impact on any Company earnings due to   
    changes in bank lending rates and short term deposit rates. The Company is  
not exposed to significant interest rate risk other than cash flow interest 
    rate risk on its cash. The Company does not use derivative instruments to   
    reduce its exposure to interest rate risk. A fluctuation of interest rates  
    of 1% would not affect significantly the fair value of cash.                
i    Title risk                                                                 
    Title to mineral properties involves certain inherent risks due to the      
    difficulties of determining the validity of certain claims as well as the   
    potential for problems arising from the frequently ambiguous conveyancing   
history characteristic of many mining properties.  Although the Company has 
    investigated title to all of its mineral properties for which it holds      
    concessions or other mineral licenses, the Company cannot give any          
    assurance that title to such properties will not be challenged or impugned  
and cannot be certain that it will have valid title to its mineral          
    properties.  The Company relies on title opinions by legal counsel who base 
    such opinions on the laws of countries in which the Company operates.       
j    Country risk                                                               
The DRC is a developing country and as such, the Company`s exploration      
    projects in the DRC could be adversely affected by uncertain political or   
    economic environments, war, civil or other disturbances, and a changing     
    fiscal regime and by DRC`s underdeveloped industrial and economic           
    The Company`s operations in the DRC may be effected by economic pressures   
    on the DRC. Any changes to regulations or shifts in political attitudes are 
    beyond the control of the Company and may adversely affect its business.    
Operations may be affected in varying degrees by factors such as DRC        
    government regulations with respect to foreign currency conversion,         
    production, price controls, export controls, income taxes or reinvestment   
    credits, expropriation of property, environmental legislation, land use,    
water use and mine safety.                                                  
    There can be no assurance that policies towards foreign investment and      
    profit repatriation will continue or that a change in economic conditions   
    will not result in a change in the policies of the DRC government or the    
imposition of more stringent foreign investment restrictions. Such changes  
    cannot be accurately predicted.                                             
k    Capital Management                                                         
    The Company manages its cash, common shares, warrants and stock options as  
capital. The Company`s main objectives when managing its capital are:       
    *    to maintain a flexible capital structure which optimizes the cost of   
         capital at acceptable risk while providing  an appropriate return to   
         its shareholders;                                                      
*    to maintain a sufficient capital base so as to maintain investor,      
         creditor and market confidence and to sustain future development of    
         the business;                                                          
    *    to safeguard the Company`s ability to obtain financing; and            
*    to maintain financial flexibility in order to have access to capital   
         in the event of future acquisitions.                                   
    The Company manages its capital structure and makes adjustments to it in    
    accordance with the objectives stated above, as well as responds to changes 
in economic conditions and the risk characteristics of the underlying       
    There were no significant changes to the Company`s approach to capital      
    management during the period ended March 31, 2012.                          
Neither the Company nor any of its subsidiaries are subject to externally   
    imposed capital requirements.                                               
March 31, 2012                   December 31,           
Cash                      $          144,993               $                    
Share capital             $     115,939,566                $                    
Deficit                   $   (119,629,773)                $                    
Contributed surplus       $       8,159,644                $                    
9    Supplemental Cash Flow Information                                         
    During the years indicated the Company undertook the following significant  
non-cash transactions:                                                      
                                Note  March 31,    March 31, 2011               
Depreciation included in         7      $    -       $ 2,289                    
exploration and evaluation                                                      
10   Commitments and Contingencies                                              
    Six of the exploration permits comprising part of the Company`s Tshikapa    
project in the DRC are held through an option agreement with Acacia SPRL.   
    Acacia SPRL has advised the Company of its wish to modify the option        
    agreement.  The Company continues its discussions with Acacia SPRL and      
    believes it can reach an agreement that is satisfactory for both parties.   
The Company and its subsidiaries are subject to routine legal proceedings   
    and tax audits. The Company does not believe that the outcome of any of     
    these matters, individually or in aggregate, would have a material adverse  
    effect on its consolidated losses, cash flow or financial position.         
Labour disputes                                                             
    The Company is in dispute with two of its previous directors and officers.  
    One of the individuals had applied in 2008 for a summary judgment against   
    the Company in the Witwatersrand Local Division of the High Court of South  
Africa in respect of a dispute relating to a settlement agreement           
    pertaining to his departure.  The application for summary judgment was      
    dismissed and the Company was granted leave to defend the claim.  This      
    individual has not taken further steps to progress that matter. However, in 
October 2010, almost two years after the original claim, the same former    
    director and officer instituted fresh proceedings against the Company. He   
    has repeated the claim made previously, but this time in a summons lodged   
    before the North Gauteng High Court in South Africa.  This former director  
and officer is claiming he is owed payment of 1.2 million South African     
    rand plus interest.  The trial date for this matter has been set down for   
    September 10, 2012.  The other individual has referred two disputes to the  
    Commission for Conciliation Mediation and Arbitration in Johannesburg,      
South Africa and an action to the High Court in that same jurisdiction.  He 
    elected to withdraw an application for summary judgment.  The Company is    
    unable to determine and estimate an amount as the probability and liability 
    amount is uncertain. The Company is defending all these actions.            
18 May 2012                                                                     
Arcay Moela Sponsors (Proprietary) Limited                                      
Date: 18/05/2012 17:00:02 Supplied by www.sharenet.co.za                     
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