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Drn - Delrand Resources Limited - Management`s Discussion And Analysis Of

Release Date: 18/05/2012 17:01:02      Code(s): DRN
DRN - Delrand Resources Limited - Management`s discussion and analysis of       
financial condition and results of operations for the three month period ended  
March 31, 2012                                                                  
DELRAND RESOURCES LIMITED                                                       
(Formerly BRC Diamondcore Limited)                                              
(Incorporated in Canada)                                                        
(Corporation number 627115-4)                                                   
Share code: DRN ISIN Number: CA2472671072                                       
("Delrand" or the "Company")                                                    
MANAGEMENT`S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF      
OPERATIONS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2012                      
The following management`s discussion and analysis of financial condition and   
results of operations (the "MD&A") has been prepared by management and provides 
a review of the activities, results of operations and financial condition of    
Delrand Resources Limited (the "Company" or "Delrand") based upon International 
Financial Reporting Standards ("IFRS").  This MD&A should be read in conjunction
with the unaudited interim condensed consolidated financial statements of the   
Company as at and for the three month period ended March 31, 2012 (the "First   
Quarter Financial Statements"), as well as the notes thereto, the audited       
consolidated financial statements of the Company as at and for the financial    
year ended December 31, 2011 ("fiscal 2011") and the notes thereto and the      
annual MD&A for fiscal 2011. All amounts are expressed in Canadian dollars      
unless otherwise stated.                                                        
This MD&A is dated May 15, 2012.  Additional information relating to the        
Company, including the Company`s annual information form, is available on SEDAR 
at www.sedar.com.                                                               
FORWARD-LOOKING STATEMENTS                                                      
The following MD&A contains forward-looking statements.  All statements, other  
than statements of historical fact, that address activities, events or          
developments that the Company believes, expects or anticipates will or may occur
in the future (including, without limitation, statements relating to exploration
results, potential mineralization and future plans and objectives of the        
Company) are forward-looking statements.  These forward-looking statements      
reflect the current expectations or beliefs of the Company based on information 
currently available to the Company.  Forward-looking statements are subject to a
number of risks and uncertainties that may cause the actual results of the      
Company to differ materially from those discussed in the forward-looking        
statements, and even if such actual results are realized or substantially       
realized, there can be no assurance that they will have the expected            
consequences to, or effects on the Company.  Factors that could cause actual    
results or events to differ materially from current expectations include, among 
other things, uncertainties relating to the availability and costs of financing 
needed in the future, the possibility that future exploration results will not  
be consistent with the Company`s expectations, changes in equity markets,       
changes in diamond markets, foreign currency fluctuations, political            
developments in the Democratic Republic of the Congo (the "DRC"), changes to    
regulations affecting the Company`s activities, delays in obtaining or failure  
to obtain required project approvals, the uncertainties involved in interpreting
geological data and the other risks involved in the mineral exploration         
business.  Any forward-looking statement speaks only as of the date on which it 
is made and, except as may be required by applicable securities laws, the       
Company disclaims any intent or obligation to update any forward-looking        
statement, whether as a result of new information, future events or results or  
otherwise.  Although the Company believes that the assumptions inherent in the  
forward-looking statements are reasonable, forward-looking statements are not   
guarantees of future performance and accordingly undue reliance should not be   
put on such statements due to the inherent uncertainty therein.                 
COMPANY OVERVIEW                                                                
The Company is engaged in the acquisition and exploration of diamond properties 
in known diamond producing areas in the DRC.                                    
For the three month period ended March 31, 2012, the Company reported a net loss
of $98,356 (compared to a net loss of $177,775 for the three month period ended 
March 31, 2011).  The net asset value of the Company was $4,469,437 as at March 
31, 2012 (December 31, 2011: $4,567,793)                                        
The Company`s accumulated deficit as at March 31, 2012 was $119,629,773         
(December 31, 2011: $119,531,417).  The Company had a working capital deficit of
$583,047 as at March 31, 2011 (December 31, 2011 - $533,191) and had a net      
increase in cash of $56,925 during the three months ended March 31, 2012.       
While the Company`s financial statements have been prepared on the basis of IFRS
accounting principles applicable to a going concern, adverse conditions may cast
substantial doubt upon the validity of this assumption.  In the event the       
Company is unable to identify recoverable resources, receive the necessary      
permitting, or arrange appropriate financing, the carrying value of the         
Company`s assets could be subject to further material adjustment.  Furthermore, 
the volatile global economic environment and its impact on certain market       
conditions may cast significant doubt upon the validity of this assumption.     
The Company`s ability to continue operations in the normal course of business is
dependent on several factors, including its ability to secure additional        
funding.  Management has been exploring all available options to secure         
additional funding, including equity financing and strategic partnerships.  In  
addition, the recoverability of amounts shown for exploration and evaluation    
assets is dependent upon the existence of economically recoverable reserves, the
ability of the Company to obtain financing to complete the development of the   
properties where necessary, or, alternatively, upon the Company`s ability to    
recover its spent costs through a disposition of its interests, all of which are
uncertain.                                                                      
DRC PROJECTS                                                                    
The Company`s operations consist of the exploration and evaluation of several   
mineral properties for diamonds in the DRC.  During the first quarter of 2012,  
the Company has been focussed on finalising arrangements in order to commence a 
detailed exploration program over parts of the Company`s Tshikapa project area  
in the southern DRC.  The results of the follow-up program over the Coexco and  
Bomili permit areas in the Bafwasende region in the northern DRC have now been  
received and have been collated.                                                
Northern DRC Project (46 exploration permits)                                   
Results from the reconnaissance stream samples, which were collected over the 44
Coexco and two Delrand exploration permit areas on a spacing of one sample to   
every 20 to 25 kmSquared in 2009, received from Rio Tinto`s heavy mineral       
laboratory in Perth (Australia) reported 5 ilmenites, 27 chrome spinels, 1      
eclogitic garnet and 15 micro-diamonds. The Coexco ground was under `force      
majeur` due to security issues since 2009 but the area was cleared of any       
security risks at the end of 2010 and Coexco had the `force majeur` order lifted
early in 2011. The follow-up program over the positive areas was narrowed down  
to 16 Coexco and the 2 Delrand exploration permit areas. The former is referred 
to as the Coexco project and the latter as the Bomili project. This follow-up   
sampling program was initiated in the first quarter of 2011. In total 490 and 97
follow-up stream samples were collected on a sample density of 1 in 4.7kmSquared
and 1 in 4.1kmSquared over the Coexco and Bomili project areas respectively. All
samples were concentrated by the Company`s mechanical jig in Kinshasa, DRC      
before being consigned to Rio Tinto`s heavy mineral laboratory in Perth. The    
results of these follow-up samples were completed during the first quarter of   
2012.                                                                           
The Coexco project area is dominated by almost horizontally bedded              
Neoproterozoic Lindian Group sediments (shale, sandstone and conglomerate)      
overlying what has been referred to as the Mbomou Archaean Craton. The entire   
Coexco project area is covered by a thick and mature laterite crust masking most
of the rock formations of the area. The laterites are prone to depress the      
occurrences of kimberlitic satellite minerals significantly particularly such   
minerals as garnet and spinel, and to a lesser degree ilmenite. Artisanal       
diamond diggings were observed among others in and along the Makombe, Mopamu,   
Aniede, Efule and Lobilo Rivers and its tributaries, all within the target area.
Several other isolated and sporadic diggings were seen scattered within the     
project area. The follow-up program produced 48 diamonds in the 0.4 to 0.7 mm   
fraction, 12 kimberlitic ilmenite (picro-ilmenite), 21 chromites and 7 garnets  
that have a marginal mantle signature (G3 and G5) over the reduced area.        
Although the follow-up work failed to focus any specific targets, the depressed 
distribution of the mantle minerals is characteristic of the effects of thick   
(at least 10 meters) laterite which is exposed in several road burrow pits. The 
Company believes that the abundance of diamonds which are not affected by the   
chemical etching of the laterite, makes this a promising target and other       
exploration techniques may have to be utilised.  The conclusion from infra-red  
work of the initial 19 diamonds recovered from the reconnaissance work suggests 
that these are derived from several sources. Visual observations of the diamonds
recovered from the follow-up samples indicate that there is no obvious sign of  
wear or breakage. The follow-up diamonds have as yet not been subjected to infra
red studies.                                                                    
In the Bomili project area there is no cover of Neoproterozoic sediments and the
permit areas are underlain by basement rocks of the Mbomou Craton. The follow-up
program produced no garnets, a few chromites but an abundance of ilmenite that  
from a mineral chemistry point of view have defined two and possibly three      
separate kimberlite sources. Further detailed stream sampling is planned to     
resolve these kimberlitic targets.                                              
Tshikapa Project (9 exploration permits)                                        
Detailed stream sampling was conducted over the Caspian Oil & Gas exploration   
permit areas (exploration permit numbers 976 and 977) during the second quarter 
of 2011. The permits have been reduced by 50% as per the applicable DRC mining  
law requirements and now measure 178kmSquared. In total 40 samples were         
collected over the area on a density of 1 sample per 4.5kmSquared. The screened 
stream samples were concentrated using the Company`s mechanical jig in Kinshasa,
DRC before being dispatched to Rio Tinto`s heavy mineral sorting laboratory in  
Perth (Australia) for sorting and the positive grains for microprobe analysis.  
Diamonds and kimberlitic minerals (garnet and ilmenite) are especially visible  
and abundant in samples from three small drainage basins (Matshibola, Ngombe and
Kamukala), much of which are being exploited by artisanal miners for macro      
diamonds. No results have been received to date.                                
Security of Tenure                                                              
The exploration program in the DRC is focussed on two areas: one in the northern
DRC around Bafwasende and one in the southern part of the country south of      
Tshikapa.  Exploration permits have been secured in both areas and are in good  
standing.  Two exploration permit applications are still at CAMI for            
consideration and Delrand expects to make further applications in the near      
future.  The following exploration permits are held by Delrand directly or by   
third parties with whom Delrand has entered into option agreements: Acacia (6), 
Delrand (3), Coexco (44) and Caspian Oil & Gas (2).                             
Status of Exploration Permits in the DRC as of March 31, 2012                   
Company (Project)      Exploration Permit                                       
                     Numbers                                                    
Permits   KmSquared                 
Delrand (2 DRC North,  1174, 1175, 9083      3         1,166                    
1 Tshikapa)                                                                     
Acacia (Tshikapa)      1175,1176,1177,1180,  6         1,055                    
1188, 1187                                                 
Caspian Oil & Gas      976, 977              2         178                      
(Tshikapa)                                                                      
Coexco (DRC North)     6013-6016, 6018-6036, 44        7,313                    
6887-6906, 6909                                            
Total                                        55        9,712                    
Iron Ore Exploration                                                            
In May 2011, the Company announced the discovery of high grade haematite (a form
of iron ore) in its exploration areas within Province Orientale, DRC, through   
its joint venture with Rio Tinto Minerals Development Limited ("Rio Tinto").    
Additional iron ore results were announced by the Company in November 2011. The 
drilling results for 1,117 metres of diamond drill holes, which are detailed    
below, revealed average grades from the mineralized intercepts ranging from     
62.5% to 68.5% iron.  The iron ore exploration is being funded by Rio Tinto.    
Initial geological research and exploration had indicated that the exploration  
permit areas, which hitherto had been largely unexplored using modern           
exploration methods, were highly prospective for the discovery of iron ore      
deposits.  This assessment is supported by these initial drill results.  Mapping
and first pass drilling has been completed on the Zatua 01 and 02 target areas  
with 11 diamond drill holes, one of which had to be abandoned, totaling 1,117   
meters.  Seven of these holes intercepted high grade haematite mineralization.  
The mineralized package was not present in the remaining holes despite their    
central location.                                                               
The target areas had been selected after a regional airborne magnetic survey had
identified geophysical anomalies which subsequent ground follow up indicated to 
be associated with outcropping haematite mineralization.  Mineralized intervals,
where intercepted by a drill hole, range in thickness from 37 meters to 121     
meters with both friable and massive textures being observed.                   
Analytical results have been received for all seven holes with values of 62.5%- 
68.5% for Fe; 0.56% to 4.78% for Al2O3; 0.48% to 6.36% for SiO2 and 0.040% to   
0.148% for P, with the elevated high phosphorous values appearing to be         
associated with recent weathering. Despite limited thicknesses in some of the   
holes, the results give encouragement that high-grade haematite is present in   
the area.                                                                       
No further work was conducted over the iron ore project area during the first   
quarter of 2012.                                                                
QUALIFIED PERSON AND TECHNICAL REPORT                                           
Dr. Michiel C. J. de Wit, the Company`s President and a "qualified person" as   
such term is defined in National Instrument 43-101, has reviewed and approved   
the technical information in this MD&A.                                         
Additional information with respect to the Company`s Tshikapa project is        
contained in the technical report prepared by Dr. Michiel C. J. de Wit and      
Fabrice Matheys, dated March 31, 2009 and titled "National Instrument 43-101    
Technical Report on the Tshikapa Project of BRC DiamondCore Ltd. in the         
Democratic Republic of the Congo".  A copy of this report can be obtained from  
SEDAR at www.sedar.com.                                                         
RESULTS OF OPERATIONS                                                           
For the three month period ended March 31, 2012, the Company reported a net loss
of $98,356 (or $0.00 per share), compared to a net loss of $177,775 (or $0.00   
per share) incurred during the three month period ended March 31, 2011.         
The reduction in losses was a result of a reduction of $45,647 in consulting and
professional fees, a reduction of general and administrative costs of $14,446   
and the recovery of legal expenses from South African litigation in the form of 
other income of $18,497.                                                        
SUMMARY OF QUARTERLY RESULTS                                                    
The following table sets out certain unaudited consolidated financial           
information of the Company for each of the last eight quarters, beginning with  
the first quarter of 2012.  The Company`s reporting and measurement currency is 
the Canadian dollar.  The financial information is reported in accordance with  
IFRS.                                                                           

                  2012       2011       2011      2011                          
                  1st        4th        3rd       2nd                           
                  quarter    quarter    quarter   quarter                       

Net loss ($`000)  $(98)      $293       $(69)     $(169)                        
Net loss per      0.00       0.00       0.00      0.00                          
share (basic and                                                                
diluted)                                                                        
                                                                                
                  2011       2010       2010      2010                          
                  1st        4th        3rd       2nd                           
quarter    quarter    quarter   quarter                       
                                                                                
Net loss ($`000)  $(178)     $(920)     $(260)    $(99)                         
Net loss per      0.00       $0.01      $0.01     $0.00                         
share (basic and                                                                
diluted)                                                                        
During the first quarter of 2012, the Company recorded a net loss of $98,356    
compared to a gain in the fourth quarter of $293,117.  There was a gain on      
disposal of property, plant and equipment in the fourth quarter of 2011 of      
$430,085.                                                                       
During the fourth quarter of 2011, the Company recorded net income of $293,117  
compared to a net loss in the third quarter of 2011 of $69,212.  The income in  
the fourth quarter of 2011 was due to a gain on disposal of property, plant and 
equipment of $430,085.                                                          
During the third quarter of 2011, the Company`s net loss decreased to $69,212   
compared to a net loss in the second quarter of 2011 of $169,444.  The lower    
loss in the third quarter of 2011 was due to decreased consulting and           
professional fees as well as a foreign exchange gain of $10,478 in the third    
quarter (as compared to the $2,756 gain that occurred in the second quarter of  
2011).                                                                          
During the second quarter of 2011, the Company`s net loss decreased to $169,444 
compared to a net loss in the first quarter of 2011 of $177,775.  The lower loss
in the second quarter of 2011 was due to decreased consulting and professional  
fees as well as a foreign exchange loss of $2,243 in the first quarter (as      
compared to the $2,756 gain that occurred in the second quarter of 2011).       
During the first quarter of 2011, the Company`s net loss decreased to $177,775  
compared to a net loss in the fourth quarter of 2010 of $920,280.  The greater  
loss in the fourth quarter of 2010 was due to an impairment loss of $740,975    
related to the discontinuation of the Lubao and Candore projects as well as a   
write off of a receivable for rental of the Kwango plant in the amount of       
$105,009.                                                                       
During the fourth quarter of 2010, the Company`s net loss increased to $920,280 
compared to a net loss of $260,133 in the third quarter of 2010.  This increase 
was primarily due to an impairment loss related to the discontinuation of the   
Lubao and Candore projects of $740,975.                                         
During the third quarter of 2010, the Company`s net loss increased to $260,133  
compared to a net loss of $98,794 in the second quarter of 2010.  This increase 
was primarily due to an increase in professional fees which related to the      
Diamond Core liquidation proceedings in South Africa. General and administrative
costs also increased in the third quarter of 2010 as a result of fees relating  
to the Company`s secondary listing on the JSE Limited in South Africa.          
LIQUIDITY AND CAPITAL RESOURCES                                                 
As at March 31, 2012, the Company had cash of $144,993 and a working capital    
deficit of $583,047 compared to cash of $88,068 and a working capital deficit of
$533,191 as at December 31, 2011.                                               
The Company has no operating revenues and is wholly reliant upon external       
financing to fund its activities.  There is no assurance that such financing    
will be available on acceptable terms, if at all.                               
Rio Tinto is currently funding all of the exploration at the Company`s Northern 
DRC diamond project and all of the exploration at the DRC iron ore project.     
In general, market conditions have limited the availability of funds.  Given the
Company`s financial position and available resources, the Company currently     
expects a need to access equity markets for financing over the next twelve      
months.  In light of current conditions, the Company has continued a series of  
measures to bring its spending in line with the projected cash flows from its   
operations in order to preserve its balance sheet and maintain its liquidity    
position.  Management believes that based on its current financial position and 
liquidity profile, the Company will be able to satisfy its current and long-term
obligations.  The unaudited consolidated financial statements of the Company as 
at and for the three months ended March 31, 2012 have been prepared in          
accordance with IFRS applicable to a going concern.                             
As at March 31, 2012 and December 31, 2011, there were no contractual           
obligations (that are not on the statement of financial position) entered into  
by the Company.                                                                 
The Company has an option agreement to secure an equity interest in prospective 
ground held in six exploration permits in the DRC with ACACIA sprl, which 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 to both parties.                                 
The Company is in a dispute with two of its previous directors and officers.    
One of these 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 that 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 defending these actions.                                             
EXPLORATION AND EVALUATION EXPENDITURES                                         
The following table provides a breakdown of the Company`s exploration and       
evaluation expenditures in the DRC for the three month period ended March 31,   
2012:                                                                           
                      Tshikapa    Northern   Total                              
                                  DRC                                           
Balance 12/31/2011     $2,610,718  $2,510,76                                    
                                  8          $5,121,486                         
                                                                                
Operating expenses                                                              
Funds Received from                (115,106)   (115,106)                        
Rio Tinto           -                                                           
Admin and office                      14,228  41,927                            
support             27,699                                                      
-               1,843                         
Field camps         1,843                                                       
expenses                                                                        
                                        -         3,739                         
Professional fees   3,739                                                       
                                      1,068      10,672                         
Travel              9,064                                                       
                   -                                                            
Permits and surface                10,067     10,067                            
taxes                                                                           
                                                                                
Foreign exchange    (821)          (821)      (1,642)                           
Total Operating                                                                 
Expenses               42,064      (90,564)   (48,500)                          
Balance March 31, 2012                                                          
                      2,652,782   2,420,204  5,072,986                          
OUTSTANDING SHARE DATA                                                          
The authorized share capital of the Company consists of an unlimited number of  
common shares.  As at May 15, 2012, the Company had outstanding 49,704,341      
common shares, stock options to purchase an aggregate of 911,771 common shares  
of the Company and warrants to purchase an aggregate of 15,000,000 common shares
of the Company.                                                                 
RELATED PARTY TRANSACTIONS                                                      
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                                       
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.                                                 
FUTURE ACCOUNTING STANDARDS                                                     
The Company has reviewed new and revised accounting pronouncements that have    
been issued but are not yet effective and determined that the following may have
an impact on the Company:                                                       
IFRS 9 Financial instruments ("IFRS 9") was issued by the International         
Accounting Standards Board (the "IASB") on November 12, 2009 and will replace   
International Accounting Standards ("IAS") 39 Financial Instruments: Recognition
and Measurement ("IAS 39").  IFRS 9 replaces the multiple rules in IAS 39 with a
single approach to determine whether a financial asset is measured at amortized 
cost or fair value and a new mixed measurement model for debt instruments having
only two categories: amortized cost and fair value.  The approach in IFRS 9 is  
based on how an entity manages its financial instruments in the context of its  
business model and the contractual cash flow characteristics of the financial   
assets.  The new standard also requires a single impairment method to be used,  
replacing the multiple impairment methods in IAS 39.  IFRS 9 is effective for   
annual periods beginning on or after January 1, 2013.  The Company is currently 
evaluating the impact of IFRS 9 on its consolidated financial statements.       
IFRS 10 Consolidated Financial Statements ("IFRS 10") establishes principles for
the presentation and preparation of consolidated financial statements when an   
entity controls one or more other entities.  IFRS 10 supersedes IAS 27          
"Consolidated and Separate Financial Statements" and SIC-12 "Consolidated -     
Special Purpose Entities" and is effective for annual periods beginning on or   
after January 1, 2013.  Earlier application is permitted.  The Company is       
currently evaluating the impact of this standard on its consolidated financial  
statements.                                                                     
IFRS 11 Joint Arrangements ("IFRS 11") establishes principles for financial     
reporting by parties to a joint arrangement. IFRS 11 supersedes the current IAS 
31 "Interests in Joint Ventures" and SIC-13 "Jointly Controlled Entities - Non- 
Monetary Contributions by Venturers" and is effective for annual periods        
beginning on or after January 1, 2013.  Earlier application is permitted.  The  
Company is currently evaluating the impact of this standard on its consolidated 
financial statements.                                                           
IFRS 12 Disclosure of Interests in Other Entities ("IFRS 12") applies to        
entities that have an interest in a subsidiary, a joint arrangement, an         
associate or an unconsolidated structured entity. IFRS 12 is effective for      
annual periods beginning on or after January 1, 2013.  Earlier application is   
permitted.  The Company is currently evaluating the impact of this standard on  
its consolidated financial statements.                                          
IFRS 13 Fair Value Measurements ("IFRS 13") defines fair value, sets out in a   
single IFRS framework for measuring fair value and requires disclosures about   
fair value measurements. IFRS 13 applies to IFRSs that require or permit fair   
value measurements or disclosures about fair value measurements (and            
measurements, such as fair value less costs to sell, based on fair value or     
disclosures about those measurements), except in specified circumstances. IFRS  
13 is to be applied for annual periods beginning on or after January 1, 2013.   
Earlier application is permitted.  The Company is currently evaluating the      
impact of this standard on its consolidated financial statements.               
An amendment to IAS 1, Presentation of financial statements was issued by the   
IASB in June 2011. The amendment requires separate presentation for items of    
other comprehensive income that would be reclassified to profit or loss in the  
future, such as foreign currency differences on disposal of a foreign operation,
if certain conditions are met from those that would never be reclassified to    
profit or loss. The effective date is July 1, 2012 and earlier adoption is      
permitted. The Company is currently evaluating the impact of this amendment on  
its consolidated financial statements.                                          
An amendment to IAS 12, Income Taxes ("IAS 12") was issued by the IASB in June  
2011. The amendment requires that deferred tax on non-depreciable assets should 
always be measured on a sale basis. The amendments to IAS 12 are effective for  
annual periods beginning on or after January 1, 2012. The Company is currently  
evaluating the impact of the amendments on its consolidated financial           
statements.                                                                     
IAS 19, Employee Benefits ("IAS 19") was re-issued by the IASB in June 2011. IAS
continues to prescribe the accounting for employee benefits, but amendments make
the OCI presentation changes in respect of pensions (and similar items) only,   
but all other long term benefits are required to be measured in the same way    
even though changes in the recognised amount are fully reflected in profit or   
loss. Also changed in IAS 19 is the treatment for termination benefits,         
specifically the point in time when an entity would recognise a liability for   
termination benefits. The amendments to IAS 19 are effective for annual periods 
beginning on or after January 1, 2013. The Company is currently evaluating the  
impact of the amendments on its consolidated financial statements.              
IAS 27, Separate financial statements ("IAS 27") was re-issued by the IASB in   
May 2011 to only prescribe the accounting and disclosure requirements for       
investments in subsidiaries, joint ventures and associates when an entity       
prepares separate financial statements. The consolidation guidance will now be  
included in IFRS 10. The amendments to IAS 27 are effective for annual periods  
beginning on or after January 1, 2013. The Company is currently evaluating the  
impact of the amendments on its consolidated financial statements.              
IAS 28, Investments in associates and joint ventures ("IAS 28") was re-issued by
the IASB in May 2011. IAS 28 continues to prescribe the accounting for          
investments in associates, but is now the only source of guidance describing the
application of the equity method. The amended IAS 28 will be applied by all     
entities that have an ownership interest with joint control of, or significant  
influence over, an investee. The amendments to IAS 28 are effective for annual  
periods beginning on or after January 1, 2013. The Company is currently         
evaluating the impact of the amendments on its consolidated financial           
statements.                                                                     
IFRIC 20, Stripping costs in the production phase of a surface mine ("IFRIC 20")
was issued by the IASB in October 2011 clarifying the requirements for          
accounting for stripping costs in the production phase of a surface mine. The   
interpretation is effective for annual periods beginning on or after January 1, 
2013. The Company is currently evaluating the impact of the interpretation on   
its consolidated financial statements.                                          
CRITICAL ACCOUNTING ESTIMATES                                                   
The preparation of the interim condensed consolidated financial statements in   
conformity with IFRS requires management to make judgments, estimates and       
assumptions that affect the application of accounting policies and the reported 
amounts of assets, liabilities, income and expenses.  Actual results may differ 
from these estimates.  Estimates and underlying assumptions are reviewed on an  
ongoing basis. Information about critical judgments in applying accounting      
policies that have the most significant effect on the amounts recognized in the 
interim financial statements included the following:                            
Provisions and contingencies                                                    
The amount recognized as provision, including legal, contractual and other      
exposures or obligations, is the best estimate of the consideration required to 
settle the related liability, including any related interest charges, taking    
into account the risks and uncertainties surrounding the obligation.  In        
addition, contingencies will only be resolved when one or more future events    
occur or fail to occur.  Therefore assessment of contingencies inherently       
involves the exercise of significant judgment and estimates of the outcome of   
future events.  The Company assesses its liabilities and contingencies based    
upon the best information available, relevant tax laws and other appropriate    
requirements.                                                                   
Exploration and evaluation expenditure                                          
The application of the Company`s accounting policy for exploration and          
evaluation expenditure requires judgment in determining whether it is likely    
that future economic benefits will flow to the Company, which may be based on   
assumptions about future events or circumstances.  Estimates and assumptions    
made may change if new information becomes available.  If, after expenditure is 
capitalized, information becomes available suggesting that the recovery of      
expenditure is unlikely, the amount capitalized is written off in the statement 
of comprehensive income (loss) during the period the new information becomes    
available.                                                                      
Impairment                                                                      
Assets, including exploration and evaluation assets and any property, plant and 
equipment, are reviewed for impairment whenever events or changes in            
circumstances indicate that their carrying amounts exceed their recoverable     
amounts.  The assessment of the fair value often requires estimates and         
assumptions such as discount rates, exchange rates, commodity prices,           
rehabilitation and restoration costs, future capital requirements and future    
operating performance.  Changes in such estimates could impact recoverable      
values of these assets.  Estimates are reviewed regularly by management.        
Share-based payment transactions                                                
The Company measures the cost of equity-settled transactions with employees by  
reference to the fair value of the equity instruments at the date at which they 
are granted.  Estimating fair value for share-based payment transactions        
requires determining the most appropriate valuation model, which is dependent on
the terms and conditions of the grant.  This estimate also requires determining 
the most appropriate inputs to the valuation model including the expected life  
of the share option, volatility and dividend yield and making assumptions about 
them.  Under IFRS, the Company is required to estimate the number of forfeitures
likely to occur on grant date and reflect this in the share-based payment       
expense revising for actual experiences in subsequent periods.                  
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.  Under IFRS, the Company is required to        
estimate the number of forfeitures likely to occur on grant date and reflect    
this in the share-based payment expense revising for actual experiences in      
subsequent periods.                                                             
RISKS AND UNCERTAINTIES                                                         
The Company is subject to a number of risks and uncertainties that could        
significantly impact on its operations and future prospects.  The following     
discussion pertains to certain principal risks and uncertainties but is not, by 
its nature, all inclusive.                                                      
The only sources of future funds for further exploration programs which are     
presently available to the Company are the sale of equity capital, or the       
offering by the Company of an interest in its properties to be earned by another
party carrying out further exploration.  There is no assurance that such sources
of financing will be available on acceptable terms, if at all.  In the event    
that commercial quantities of minerals are found on the Company`s properties,   
the Company does not have the financial resources at this time to bring a mine  
into production.                                                                
The current financial climate is characterized by volatile and uncertain times. 
The uncertainty of forward looking statements is therefore greater.  Diamond    
prices were reduced significantly as a result of the economic downturn and the  
recovery could be accompanied by volatility.                                    
All of the Company`s projects are located in the DRC  The assets and operations 
of the Company are therefore subject to various political, economic and other   
uncertainties, including, among other things, the risks of war and civil unrest,
hostage taking, military repression, labor unrest, illegal mining,              
expropriation, nationalization, renegotiation or nullification of existing      
licenses, permits, approvals and contracts, taxation policies, foreign exchange 
and repatriation restrictions, changing political conditions, international     
monetary fluctuations, currency controls and foreign governmental regulations   
that favor or require the awarding of contracts to local contractors or require 
foreign contractors to employ citizens of, or purchase supplies from, a         
particular jurisdiction.  Changes, if any, in mining or investment policies or  
shifts in political attitude in the DRC may adversely affect the Company`s      
operations.  Operations may be affected in varying degrees by government        
regulations with respect to, but not limited to, restrictions on production,    
price controls, export controls, currency remittance, income taxes, foreign     
investment, maintenance of claims, environmental legislation, land use, land    
claims of local people, water use and mine safety.  Failure to comply strictly  
with applicable laws, regulations and local practices relating to mineral rights
could result in loss, reduction or expropriation of entitlements.  In addition, 
in the event of a dispute arising from operations in the DRC, the Company may be
subject to the exclusive jurisdiction of foreign courts or may not be successful
in subjecting foreign persons to the jurisdiction of courts in Canada.  The     
Company also may be hindered or prevented from enforcing its rights with respect
to a governmental instrumentality because of the doctrine of sovereign immunity.
It is not possible for the Company to accurately predict such developments or   
changes in laws or policy or to what extent any such developments or changes may
have a material adverse effect on the Company`s operations.                     
The DRC is a developing nation emerging from a period of civil war and conflict.
Physical and institutional infrastructure throughout the DRC is in a debilitated
condition.  The DRC is in transition from a largely state controlled economy to 
one based on free market principles, and from a non-democratic political system 
with a centralized ethnic power base, to one based on more democratic           
principles.  There can be no assurance that these changes will be effected or   
that the achievement of these objectives will not have material adverse         
consequences for the Company and its operations.  The DRC continues to          
experience violence and significant instability in parts of the country due to  
certain militia and criminal elements.  While the government and United Nations 
forces are working to support the extension of central government authority     
throughout the country, there can be no assurance that such efforts will be     
successful.                                                                     
All of the Company`s properties are in the exploration stage only and none of   
the properties contain a known body of commercial ore.  The Company currently   
operates at a loss and does not generate any revenue from operations.  The      
exploration and development of mineral deposits involve significant financial   
risks over a significant period of time which even a combination of careful     
evaluation, experience and knowledge may not eliminate.  Few properties which   
are explored are ultimately developed into producing mines.  Major expenditures 
may be required to establish reserves by drilling and to construct mining and   
processing facilities at a site.  It is impossible to ensure that the Company`s 
exploration programs will result in a profitable commercial mining operation.   
The Company is exposed to currency risk as its principal business is conducted  
in foreign currencies.  Unfavorable changes in the applicable exchange rate may 
result in a decrease or increase in foreign exchange gains or losses.  The      
Company does not use derivative instruments to reduce its exposure to foreign   
currency risk.                                                                  
The Company`s exploration and, if such exploration is successful, development of
its properties is subject to all of the hazards and risks normally incident to  
mineral exploration and development, any of which could result in damage to life
or property, environmental damage and possible legal liability for any or all   
damage.                                                                         
The natural resource industry is intensely competitive in all of its phases, and
the Company competes with many companies possessing greater financial resources 
and technical facilities than itself.                                           
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES                               
Fair value of financial assets and liabilities                                  
The consolidated statements of financial position carrying amounts for cash,    
prepaid expenses and other assets and accounts payable and accrued liabilities  
approximate their 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.                                                   
The following presents the fair value and carrying value of the Company`s       
financial instruments:                                                          
Fair value hierarchy                                                            
The following table provides an analysis 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).                                              
There were no transfers between Level 1 and 2 during the reporting period. The  
fair values of financial assets and liabilities carried at amortized cost are   
approximated by their carrying values.  Cash is ranked Level 1 as the market    
value is readily observable. The carrying value of cash approximates fair value 
as maturities are less than three months.                                       
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.                                                              
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. Different portions 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.  See    
Note 10 (c) of the First Quarter Financial Statements for additional details.   
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.             
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.   
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.                                                           
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.  The Company manages the     
market risk associated with commodity prices by establishing and monitoring     
parameters that limit the types and degree of market risk that may be           
undertaken.                                                                     
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.                                    
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.                                        
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, a changing fiscal regime and by 
DRC`s underdeveloped industrial and economic infrastructure.                    
The Company`s operations in the DRC may be affected 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.                                                           
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 
an acceptable level of risk while providing  an appropriate return to its       
shareholders;                                                                   
to maintain a strong 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 assets.      
There were no significant changes to the Company`s approach to capital          
management during the three months ended March 31, 2012.                        
Neither the Company nor any of its subsidiaries are subject to externally       
imposed capital requirements.                                                   
            March 31,      December 31,                                         
            2012           2011                                                 
Cash         $      144,993 $      88,068                                       
Share         $115,939,566   $115,939,566                                       
capital                                                                         
Deficit                      $(119,531,417)                                     
            $(119,629,773)                                                      
Contributed   $  8,159,644   $  8,159,644                                       
surplus                                                                         
SEGMENTED INFORMATION                                                           
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,                                                                      
2012                                                                           
             Property, plant   Exploration and    Total Assets                  
             and equipment     evaluation                                       
 DRC         $0                $5,072,986         $5,072,986                    
Canada                  -               -                  -                   
             $0                $5,072,986         $5,072,986                    
 December                                                                       
 31, 2010                                                                       
Property, plant   Exploration and    Total Assets                  
             and equipment     evaluation                                       
 DRC         $4,100            $5,075,041         $5,079,141                    
 Canada                  -               -                  -                   
$4,100            $5,075,041         $5,079,141                    
18 May 2012                                                                     
Sponsor                                                                         
Arcay Moela Sponsors                                                            
Date: 18/05/2012 17:01:01 Supplied by www.sharenet.co.za                     
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