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Delrand Resources Limited - Mda Of Financial Condition & Results Of Operations As At & For The Three Months Ended 30 September 2012

Release Date: 16/11/2012 16:33:00      Code(s): DRN     
DELRAND RESOURCES LIMITED
(formerly BRC DIAMONDCORE LTD.)
(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
AS AT AND FOR THE THREE MONTHS ENDED SEPTEMBER 30, 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?) issued by the International Accounting Standards Board. 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 September 30, 2012 (the
?Interim Financial Statements?) together with the MD&A and audited consolidated
financial statements of the Company as at and for the six month period ended June 30,
2012. All amounts are expressed in Canadian dollars unless otherwise stated.

This MD&A is dated November 14, 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 commodity 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.
                                             2


COMPANY OVERVIEW

The Company is engaged in the acquisition and exploration of diamond properties in known
diamond producing areas in the DRC. The Company also has a 25% interest in an iron ore
exploration project in the DRC.

For the three months ended September 30, 2012, the Company reported a net loss of
$74,234 (three months ended September 30, 2011: $69,212). The net asset value of the
Company was $4,654,131 as at September 30, 2012 (June 30, 2012: $4,728,364)

The Company?s accumulated deficit as at September 30, 2012 was $119,845,080 (June 30,
2012: $119,770,846). The Company had a working capital deficit of $466,119 as at
September 30, 2012 (June 30, 2012: $421,063) and had a net decrease in cash of
$342,818 during the three months ended September 30, 2012 (three months ended
September 30, 2011: decrease of $118,378).

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.


DIAMOND PROJECTS

The Company?s present operations consist of the exploration and evaluation of several
mineral properties for diamonds in the DRC. During the three months ended September 30,
2012, the Company?s exploration programs in the DRC have focused on the Coexco and
Bomili exploration permit areas in the Bafwasende region in the northern DRC.

During the three months ended September 30, 2012, the Company continued discussions
on two separate agreements with third parties to start detailed exploration programmes
over the Caspian exploration permit areas and other properties both in the Tshikapa area in
the southern DRC. It is hoped to finalise these shortly. A detailed follow-up sampling
program over the Coexco and Bomili exploration permit areas in the Bafwasende region in
the northern DRC commenced in July 2012 and continued during the three months ended
September 30, 2012. This program is based on the follow-up results received during the
three month period ended June 30, 2012. The follow-up sampling program identified 22 of
the 44 Coexco permits as most prospective and hence the other 22 permits have been
                                              3


relinquished. A detailed follow-up programme is focussed on six targets over the remaining
Coexco permit areas and on three targets on the Bomili permit areas.

Northern DRC Project (24 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 km?
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 22 Coexco and
the 2 Delrand exploration permits. The former is referred to as the Coexco project and the
latter is referred to as the Bomili project. The 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 4.7km? and 1 in 4.1km? 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 six months of 2012.

The number of positive samples from both the reconnaissance and follow-up stream
sampling are limited to six targets within the Coexco permit areas. These six blocks have
been earmarked for detailed stream sampling with samples taken between 100 and 500
metres apart from each other depending on the trap sites. This program should provide
sufficient grains for meaningful mineral chemistry and possibly geophysics as the next step
to define drill targets.

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 ilmenites (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 due to the etching and dissolution of silicate
minerals by the unique chemical conditions of the thick (at least 10 metres) laterite which is
exposed in several road burrow pits. 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 15
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
                                              4


indicate that there is no obvious sign of wear or breakage. The 48 diamonds recovered from
the follow-up work have been sent to infra-red studies but no results have as yet been
received. During the three month period ended September 30, 2012, four of the six targets
identified on the 22 remaining Coexco permit areas were covered by detailed follow-up
stream sampling. Blocks 1, 2, 3 and 6 were covered and 129 samples were collected
covering 366.8km?. All samples were concentrated using the Company?s mechanical jig in
Kinshasa, DRC. Samples from blocks 1 and 2 were dispatched to the Rio Tinto heavy
mineral laboratory in Perth Australia for analysis.

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 particularly in respect of
permit number 1174. The mineral chemistry suggests that these ilmenites have defined 2
and possibly 3 separate kimberlite sources. These three targets have been covered by
detailed follow-up stream sampling during the three months ended September 30, 2012
and 54 and 35 samples were taken over the three targets on permit numbers 1174 and
1175 respectively. The samples have as yet not been treated through the Company?s
treatment station in Kinshasa, DRC.

Tshikapa Project (9 exploration permits)

The first project in the Tshikapa area is to complete the prospecting over the two Caspian
exploration permit areas. The permits have been reduced by 50% as per the DRC mining
law requirements and now cumulatively cover 178km?. Detailed stream samples were
collected over the Caspian permit areas (exploration permit numbers 976 and 977) during
the second quarter of 2011. In total 40 samples were collected over the area on a density of
1 sample per 4.5km?. 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. The
Company is finalizing its agreement with Rio Tinto so that processing the samples can
commence. No results have been received to date.

Delrand is also negotiating with a third party to access some other diamond properties in
the Tshikapa triangle.

Security of Tenure

The exploration program in the DRC is focused 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. The Company, in consultation with its partners, reduced the Coexco ground from
44 permits to 22 permits based on the results from the follow-up stream sampling program.
Two exploration permit applications are still at CAMI for consideration and Delrand is looking
                                             5


to make additional applications in the near future. Delrand holds the following permits
directly or by partners through various option agreements: Acacia (6), Delrand (3), Coexco
(22) and Caspian Oil & Gas (2).

   Status of Exploration Permits of Delrand and Partners in the DRC as of June 30, 2012

                                                                       Permits at June
         Company (Project)                  PR Numbers                    30, 2012
                                                                    Permits           Km?
    Delrand (2 DRC North, 1           1174, 1175, 9083                    3        1,166
    Tshikapa)
    Acacia (Tshikapa)              1175,1176,1177,1180,                   6        1,055
                                            1188, 1187
    Caspian Oil & Gas (Tshikapa)              976, 977                    2          178
    Coexco                        6014-6015, 6021-6022,                  22        4,155
                                 6025-6028, 6032, 6036,
                                  6889-6894, 6897-6901,
                                                  6906
    Total                                                                33        6,554


IRON ORE PROJECT

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. This iron ore exploration was
funded and operated 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 at the iron ore
project during the three months ended September 30, 2012.
                                            6


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 months ended September 30, 2012, the Company reported a net loss of
$74,234 (or $0.00 per share), compared to a net loss of $69,212 (or $0.00 per share)
incurred during the three months ended September 30, 2011.

SUMMARY OF QUARTERLY RESULTS

The following table sets out certain unaudited consolidated financial information of the
Company for each of the last eight quarters. In June 2012, the Company changed its
financial year end from December 31 to June 30. The Company?s reporting and
measurement currency is the Canadian dollar. The financial information is reported in
accordance with IFRS.

                               Three months
                                      ended
                              September 30,            2012           2012           2011
                                       2012      2nd quarter    1st quarter    4th quarter

  Net gain or Net (loss)
  ($'000)                              $(74)           $(141)          $(98)          $293
  Net gain or Net (loss)
  per share (basic and
  diluted)                             $0.00           $0.00          $0.00          $0.00



                              Three months
                           ended September             2011           2011           2010
                                   30, 2011      2nd quarter    1st quarter    4th quarter

  Net loss ($'000)                       $(69)         $(169)        $(178)         $(920)
  Net loss per share
  (basic and diluted)                    $0.00          $0.00         $0.00          $0.01


During the three month period ended September 30, 2012, the Company recorded a net
loss of $74,234 compared to a net loss of $141,073 in the second quarter of 2012. This
decrease in net loss was primarily due to a decrease in consulting and professional fees of
$65,948 as audit fees were incurred in the second quarter of 2012 due to the change in
year end.
                                              7



During the second quarter of 2012, the Company recorded a net loss of $141,073 compared
to a net loss of $98,356 in the first quarter of 2012. This increase in net loss was primarily
due to an increase in consulting and professional fees of $34,080 as audit fees were
incurred due to the change in year end.

During the first quarter of 2012, the Company recorded a net loss of $98,356 compared to
net income in the fourth quarter of 2011 of $293,117. There was a gain on disposal of
property, plant and equipment in the fourth quarter of 2011 of $430,085 which enabled the
net income for the fourth quarter of 2011.

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 three months ended September 30,2011, the Company?s net loss decreased to
$69,212 compared to a net loss in the second quarter of 2011 of $169,444. The decrease
in the loss was due to decreased consulting and professional fees as well as a foreign
exchange gain of $10,478 (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 $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).

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.


LIQUIDITY AND CAPITAL RESOURCES

As at September 30, 2012, the Company had cash of $97,837 and a working capital deficit
of $466,119 compared to cash of $440,655 and a working capital deficit of $421,063 as at
June 30, 2012.

During the three months ended June 30, 2012 the Company issued 3,030,302 common
shares upon the exercise of 3,030,302 warrants of the Company at a price of $0.132 per
share for proceeds of $400,000. The two individuals who exercised the warrants are
directors of the Company.

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 has funded all of the exploration at the Company?s DRC North diamond project
and all of the exploration at the DRC iron ore project.
                                             8


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 Interim Financial Statements have been prepared in accordance with IFRS applicable to
a going concern.

As at September 30, 2012 and June 30, 2012, 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 involved in litigation with a former director and officer of the Company
relating to a settlement agreement pertaining to his departure. The former director and
officer is claiming that he is owed payment of 1.2 million South African rand plus interest,
and the Company has instituted counterclaims against him. A trial date for this litigation,
which is before the South Gauteng High Court in South Africa, has been set for May 2013.
                                               9



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 September 30, 2012:

                                    Tshikapa       Northern DRC              Total


Balance June 30, 2012         $     3,085,581    $    2,077,887     $    5,165,687


Operating expenses
Funds received from Rio Tinto               -          (181,559)          (181,559)
Admin and office support                7,144            93,017            100,161
Amortization                                -                  -                 -
Field camps expenses                      788            18,033             18,821
Remote sensing                              -                  -                 -
Drilling                                    -                  -                 -
Geology                                     -                  -                 -
Professional fees                           -                  -                 -
Business promotion                          -                  -                 -
Travel                                  2,904            33,682             36,586
Stock based compensation                    -                  -                 -
Permits and surface taxes                   -                  -                 -
Foreign exchange                       (1,593)          (1,593)             (3,186)
Total Operating Expenses                9,243          (38,420)            (29,177)



Balance September 30, 2012           3,094,824         2,039,466         5,136,509

OUTSTANDING SHARE DATA

The authorized share capital of the Company consists of an unlimited number of common
shares. As at November 14, 2012, the Company had outstanding 52,734,643 common
shares, stock options to purchase an aggregate of 800,000 common shares of the Company
and warrants to purchase an aggregate of 11,969,698 common shares of the Company.

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 September 30, 2012 and
September 30, 2011 was as follows:
                                              10


                          Three months ended
                      September 30,     September 30,
                              2012              2011
Salaries             $      66,411     $      65,930
                     $      66,411     $      65,930


   b) Other Related Parties

As at September 30, 2012, an amount of $91,473 (June 30, 2012 - $242,793) was owed to
two directors of the Company representing consulting fees. During the three months ended
September 30, 2012, consulting fees of $50,000 were incurred to the two directors (three
months ended September 30, 2011- $50,000 to the two directors).

As at September 30, 2012, an amount of $1,193 (June 30, 2012: $11,326 was owed to
Banro) was owed from Banro Corporation (?Banro?). Banro owns 17,716,994 common
shares of the Company, representing a 33.6% interest in the Company.

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.
                                              11


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.


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.
                                              12


CRITICAL ACCOUNTING ESTIMATES

The preparation of the Company?s 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 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 loss during the period the new information becomes
available.

Impairment

Assets, including any property, plant and equipment and exploration and evaluation assets,
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.
                                              13


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.
                                                14


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

a) Fair value of financial assets and liabilities

The consolidated statements of financial position carrying amounts for cash, prepaid expenses
and other assets, 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:
                                             15


   ?   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.

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. 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
   Interim Financial Statements for additional details.


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.
                                              16


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.


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. 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.

h) 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.
                                            17




i) 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.

j) 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 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 assets.

  There were no significant changes to the Company?s approach to capital management
  during the three months ended September 30, 2012.

  Neither the Company nor any of its subsidiaries are subject to externally imposed capital
  requirements.
                                                   18



                             As at September 30, 2012   As at June 30, 2012

Cash                         $                 97,837   $           440,655
Share c apital               $            116,339,566   $       116,339,566
Defic it                     $           (119,845,080)  $      (119,770,846)
Contributed surplus          $              8,159,644   $         8,159,644



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:

As at September 30, 2012
                           Property, plant    Exploration and
                             and equipment         evaluation        Total Assets
DRC                                      -         $5,136,509          $5,136,509
Canada                                   -                  -                   -
                                         -         $5,136,509          $5,136,509

As at June 30, 2012
                           Property, plant    Exploration and
                           and equipment           evaluation       Total Assets
DRC                                      -         $5,165,687         $5,165,687
Canada                                   -                  -                  -
                                         -         $5,165,687         $5,165,687

Date: 16/11/2012 04:33:00 Supplied by www.sharenet.co.za                     
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