Tsodilo Resources Limited
Annual Report 2009

Plain-text annual report

Annual Report 2009 d tsodilo esources resources esources limited President’s Message Fellow Shareholders, On behalf of the board of directors, I am pleased to provide this report of Tsodilo Resources Limited (“Tsodilo”) or “the Company”) progress together with the audited financials for the year ended December 31, 2009. 2009 was a challenging yet defining year for the Company. During the year we focused on positioning the Company for the future by diligently executing the strategic initiatives outlined in the beginning of the year. The recession continued into 2009 and its impact on the global capital markets impacted the entire resource sector. Commodity prices began to recover during the year but this has not yet translated into increased exploration activities as the capital markets have not yet recovered, many other companies’ exploration programs have been effectively abandoned due to lack of funds. However, our decision in 2006 to acquire our own drill rig and geophysical survey equipment allowed us to continue our exploration activities without delay or interruption during these difficult economic times. We expect to accelerate our exploration, analysis and evaluation activities in 2010. The planned acquisition of an additional drill rig will allow us to more than double our current meters drilled and we expect to test five to seven kimberlites for micro-diamonds in the first half of the year. Sample preparation, petrography and assaying are all ongoing on our metals projects and an active exploration program is planned on those projects. the Company the past year, During funded exploration activity by raising funds in the capital markets through the successful issuance of stock by way of private placements. This process will continue in the coming year. Our current share base consists of 19,710,603 issued and outstanding (25,225,278 on a fully diluted basis) common shares. Tsodilo has a 95% interest in our Botswana Newdico (Pty) Limited project and a 100% interest in our Botswana Gcwihaba Resources (Pty) Limited projects. The Company is a much stronger organization now than it was a year ago and we are confident in our ability to meet the challenges in the upcoming year and for the years’ thereafter. Please follow our progress carefully and remain informed by regular visits to our website, www.TsodiloResources.com. On behalf of the Board, half of the board, James M. Bruchs President and Chief Executive Officer March 19, 2010 Contents President’s Message to Shareholders Management’s Discussion and Analysis of Financial Results Financial Reporting Responsibility of Management Auditors’ Report to the Shareholders Consolidated Financial Statements / Notes Corporate Information 1 2 13 14 15 IBC 1 tsodilo resources limited Management’s Discussion and Analysis This management’s discussion and analysis (“MD&A”) should be read in conjunction with the Consolidated Annual Financial Statements for the year ended December 31, 2009 and comments on the factors that affected the Company’s performance during the periods covered by the Consolidated Annual Financial Statements as well as the Company’s financial condition and future prospects. The Company’s functional and reporting currency is United States dollars and all amounts stated are in United States dollar unless otherwise noted. This management’s discussion and analysis has been prepared as at March 19, 2010. OVERVIEW Tsodilo Resources Limited (“Tsodilo” or “the Company”) was organized under the laws of the Province of Ontario in 1996 and continued under the laws of the Yukon in 2002. The shares of the Company are listed and posted for trading on the TSX Venture Exchange under the symbol: TSD. Tsodilo is an international diamond exploration company with the majority interest in a kimberlite exploration project in northwest Botswana. The Company has not yet determined whether these properties contain reserves that can be economically mined. As an exploration stage company, the recoverability of amounts shown for exploration expenditures is dependent upon the discovery of reserves that can be economically mined, the securing and maintenance of the interests in the properties, the ability of the Company to obtain the necessary financing to complete the development, and future production or proceeds from the disposition thereof. The Company is also actively reviewing additional diamond and base and precious metal opportunities within southern Africa. Corporate At a special meeting of the holders of common shares of the Company held on April 9, 2002 shareholders approved a restructuring of the Company that incorporated the sale of substantially all of the Company’s assets. The assets were transferred in settlement on debt due of $612,783 and owing to Trans Hex Group Limited (“Trans Hex Group”), the principal shareholder and creditor of the Company prior to restructuring. The Company retained an interest in all future dividends that may be paid by either Northbank Diamonds Limited, Hoanib Diamonds (Proprietary) Limited or Trans Hex (Zimbabwe) Limited. In addition, the Company was released from the long-term loans due to Trans Hex Group by the subsidiaries being sold, of $3,341,690, and Trans Hex Group agreed to return the 10,688,137 common shares in the capital of the Company, representing 73.22% of the issued and outstanding shares of the Company at that time, to treasury for cancellation. The special meeting of shareholders also approved the discontinuance of the Company from the Province of Ontario and its continuance under the Business Corporations Act (Yukon), the change of name of the Company from Trans Hex International Ltd. to Tsodilo Resources Limited, the election of new directors and the repeal of the existing stock option plan of the Company and adoption of a new stock option plan. Following the restructuring of the Company, as approved by shareholders in April 2002, Tsodilo has no long-term debt. Outstanding Share Data As of March 19, 2010, 19,710,603 common shares of the Company were outstanding. Of the options to purchase common shares issued to eligible persons under the stock option plan of the Company, 2,335,000 options remain outstanding of which 1,827,500 are exercisable at exercise prices ranging from CAD $0.55 - $1.25. If all options were vested and exercised, 2,335,000 common shares of the Company would be issued. As of March 19, 2010, 4,292,821 warrants are outstanding. The warrants were issued by way of the private placements utilized by the Company for financing purposes. Each warrant entitles the holder thereof to purchase one common share of the Company at purchase prices ranging from Canadian $0.55 - $1.00 for a period of two years from the date of issuance (11/14/2008 - 1/21/2010). If all warrants were converted, 4,292,821 common shares of the Company would be issued. 2 tsodilo resources limited Principal Shareholders of the Company The principal shareholders of the Company as of March 19, 2010 are as follows: Name Description Shares / Owns, Controls or Directs % of the Issued and Outstanding Shares Preston Trust Private Investment Vehicle James M. Bruchs Director, President & CEO David J. Cushing Director 3,923,995 2,695,983 1,915,882 19.90% 13.67% 9.72% Subsidiaries The Company has a 95% operating interest in its Botswana subsidiary, Newdico (Proprietary) Limited (“Newdico”), which holds ten prospecting licenses covering approximately 9,402 square kilometers in northwest Botswana on which there is encouragement for the existence of undiscovered kimberlites in at least three separate areas of the property. The Company’s minority partner (5%) in this project, Trans Hex Group, is an established South African diamond mining company. The Company has a 100% interest in its wholly owned Botswana subsidiary, Gcwihaba Resources (Proprietary) Limited (“Gcwihaba”), which has nine diamond prospecting licenses covering approximately 6,859 square kilometers and twenty metals (base, precious, platinum group, and rare earth) licenses covering 13,533 square kilometers. The Company holds a 100% interest in Tsodilo Resources Bermuda Limited to which the shares of its operating subsidiaries, Newdico and Gcwihaba, are registered. Exploration Activities Diamond Projects The Company’s Botswana licenses are proximal to two major unexplained surface concentrations of diamonds and G10 garnets across the border in Namibia, one near the village of Tsumkwe and another in the area known as Omatako. The characteristics of these kimberlite pathfinder mineral anomalies indicate that they are secondary concentrations derived from respective primary high-grade kimberlite sources located elsewhere. The geomorphological model envisages that the Tsumkwe and Omatako pathfinder anomalies were formed by ancient rivers transporting diamonds and garnets derived from kimberlites located in the Company’s license blocks. Prior to the deposition of the superficial Kalahari sand that covers much of Ngamiland, this area formed a topographic high. Rivers rising off this high ground flowed westward into a major inland sea located in the north of present-day Namibia. The Company’s diamond targets cover former headwaters of this ancient river system and lie within the southern margin of the Congo craton. Newdico holds ten (10) diamond Prospecting Licenses covering an area of some 9,402 square kilometers in the northern Ngamiland Project area. Tsodilo has a 95% stake in Newdico, while Trans Hex Group, a South African diamond mining and marketing company, holds the remaining 5%. The Company’s wholly owned 100% owned subsidiary, Gcwihaba holds nine (9) diamond prospecting licenses covering an area of some 6,859 square kilometers immediately north and adjoining the Newdico licenses. In 2009, the Company drilled 26 holes over eight (8) primary targets and confirmed discovery of three (3) kimberlites. In addition, a ground magnetic geophysical survey totaling 1,800 line kilometers was performed during the year. An extensive review of the petrography and chemical chemistry of kimberlite indicator minerals (“KIM”) from sixteen kimberlites was performed during the year and continues in 2010 for the purpose of determining their diamond carrying capacity. A decision is expected in the second quarter as to which kimberlites will be tested for diamond. 3 tsodilo resources limited In 2009, the Company commissioned a review of the aeromagnetic data for both the Newdico and Gcwihaba projects in order to enhance target selection. The report is expected to be presented in its entirety in the second quarter of 2010. Our target selection is based on our strategy of using a combination of indicator mineral sampling, magnetic and gravity data to generate individual targets for drill evaluation and our regional strategy of evaluating possible transport corridors giving rise to the alluvial secondary kimberlite indicator minerals (“KIM”) and diamond deposits at Tsumkwe and Omatako. The favorable chemistry and diamond preservation potential of the kimberlites in our license blocks together with the known secondary alluvial diamond discoveries down slope across the border in Namibia establish the greater Nxau Nxau field as highly prospective with the possibility of several economic kimberlites present within our ground. To date, 18% of the kimberlites discovered and tested for diamond in the Nxau Nxau field are known to be diamondiferous. Metals (Base, Precious, Platinum group, and Rare Earth) Projects In 2005, the Company initiated an internal investigation with respect to the location of the sulphide rich Matchless Amphibolite Belt (“MAB”) comprising mineralized meta-ophiolites that stretches from Namibia into Botswana and most likely beyond. Copper (Cu), cobalt (Cu) and nickel (Ni) mineralization along this Matchless Belt has been known for more than a century. Our work has indicated that the MAB traverses our license blocks in northwest Botswana linking the Damaran Belt to the Lufilian Arc. The Lufilian Arc, better known as the Zambian copper belt (>25 million tons of copper produced in Zambia), and its extension into Katanga (Democratic Republic of Congo), is a major source of mineral wealth that has captured the minds of exploration geologists and mining magnates ever since the discovery of this huge metallogenic province revealed its copper, cobalt and uranium riches, more than 80 years ago. Drilling in 2008 located a large mineralized zone containing Cu, Ni and Co similar to the Zambian copper-cobalt fields and the mafic- ultramafic rocks of the Matchless-Mwembshi Belt as well as the marked similarities that characterize all major Proterozoic polymetalic stratiform deposits in Africa, Australia and North America. The Company’s new discovery in northwest Botswana has a rich potential for an extensive new base metal field. Gcwihaba has been granted 18 prospecting licenses for metals covering an area of some 13,533 square kilometers. The prospecting licenses are located within the nascent Okavango Rift System which is part of the East African Rift System. The Okavango Rift System takes advantage of the pre-existing structures of the northeast trending NeoProterozoic Pan African Orogenic Belt known as the Damara Belt. The metals prospecting licenses are located in the northwestern part of Botswana and can be divided into three (3) main areas: • • • The area west of the Panhandle portion of the Okavango Delta - The Panhandle Prospect The area southwest of the Okavango Delta - The Nokaneng Prospect The area northeast of the Okavango Delta - The Lenyanti / Kwando Prospect The southern part of Panhandle Prospect was an obvious target as the mineralization encountered through soil sampling was significantly elevated. The northern part of the license area was targeted purely on the basis of the structural fabric as interpreted from the aeromagnetic data while magnetic anomalies were targeted in the middle section The Nokaneng prospect primarily targets are believed to be an extension of the Matchless Amphibolite in Namibia which hosts significant copper mineralization. The Lenyanti / Kwando Prospect is a continuation of targeting circular magnetic intrusions in the hope that they may host mineralization as discovered in the southern part of the Panhandle Prospect. 4 tsodilo resources limited The Damara Belt is largely hidden beneath younger sediments in northwest Botswana, such that our knowledge of much of the geological and tectonical evolution relies on observations of the well-exposed lithological correlatives in Namibia. The Damara belt is known as the inland branch of the Damara Orogeny in Namibia, formed during a high angle collision of the Kalahari and Congo cratons, with the Kalahari sub- ducting northwards below the Congo Craton. The belt is estimated to have evolved within a period spanning from 580Ma to 505Ma. The aeromagnetic data shows that the Damara structural trend is deflected from a northeast to a north to northwest trend in the area around the Panhandle Prospect. This deflection, as well as our drill results, indicates that this area is part of the Lufilian Arc structure. The Lufilian Arc hosts the world’s largest copper- nickel-cobalt deposits in both Zambia and the Democratic Republic of Congo. Although the geology in the study area is mostly unexposed isolated outcrops, lithological information from boreholes and airborne geophysical data have been used by previous workers to infer the geology underlying the Kalahari sediments. The main basement geological units are: Phanerozoic: the clastic (mainly diamictites, shales and sandstones) and volcanic (flood basalts) Carboniferous to Jurassic Karoo sequences in the southeastern part of the delta area. Neoproterozoic: siliclastic, shale, pelite and carbonate sequences of the Ghanzi Formation in the southeast and Damara rocks in the northwest. Mesoproterozoic: metavolcanics and metarhyolites of the Kgwebe Formation in the southeast and granite- gneiss basement of the Kwando Complex in the central part. The Kwando Complex is not exposed; it is only recovered from borehole logs. Palaeoproterozoic: granitic-gneiss basement of the Quangwadum Complex in the northwest. The Mesoproterozoic Kgwebe Formation and the Neoproterozoic Ghanzi Formation rocks form what is known as the Ghanzi-Chobe Fold Belt in the southeastern part of the Delta, with the Kgwebe appearing at the core of the anticlines. Our drilling efforts have mainly concentrated in the Panhandle Prospect in license areas PL386/2008, PL387/2008, PL388/2008 and Pl390/2008. This is primarily because of the availability of the airborne time domain electromagnetic data which is very important for locating conductive sulfide bearing structures. The drilling results to date can be summarized as follows: • • • • • • • 23 holes were drilled in the metal licenses in 2008 totaling 4,353 meters 21 holes were drilled in 2009, totaling 3,795 meters 4 holes have been drilled to date (2010) totaling 1,200 meters In 2008, target selection was based on magnetic anomalies In 2009 and 2010, target selection was based on the conjunctive use of airborne electromagnetic and magnetic data sets. 35 holes have encountered signifi cant sulphide mineralization Identifi ed sulphides: pyrrhotite, chalcopyrite, bornite and pyrite The conjunctive use of airborne electromagnetic and magnetic data sets has been very successful in drilling sulfide bearing targets. Through the use of airborne electromagnetic (VTEM) data, we have been able to delineate a belt bearing carbonaceous black shales and meta-pelites within the Damara rocks in the 5 tsodilo resources limited northwestern Botswana. It is within this belt that we encounter sulfide mineralization within the shales and the meta-pelites. Our drill cores bear strong similarities with those of the nickel-cobalt-copper deposits of the Kalumbila project in Zambia. Here, the mineralization is found within the pyrrhotite-pyrite bearing carbonaceous shales. These shales have been correlated to the Ore Shale of the Zambian Copperbelt. The abundance of pyrrhotite in the northern part of our Lower Panhandle Prospect is particularly promising since this sulfide mineralization is often associated with economic nickel and cobalt deposits. Seven hundred and fifty-two (752) samples, comprising two and one-half tons of core, have been submitted for assays analysis and other samples have been sent out for petrography. Our targets are aimed at both the carbonaceous shales / metapelites and circular magnetic targets (modeled as IOCG type deposits). To this end we have an on-going high resolution ground magnetic survey (20m line spacing) in our Lower Panhandle Prospect to reveal not only to better resolve the basement structure but also possible igneous intrusions. We have so far completed 3,500 line kilometers of magnetic data acquisition and preliminary data results indeed show that we are able to better map the basement fabric and igneous intrusions. General During the year, the Company continued its stewardship membership with AEON (Africa Earth Observatory Network) at the University of Cape Town, Cape Town, South Africa. AEON under the direction of Dr. Maarten de Wit is a center for Earth-systems science that provides a research and educational environment for consilience between earth and life sciences, engineering, resource economics and the human sciences. AEON is developing earth stewardship as a science and cultivates cutting-edge globally competitive research and analytical learning, using advanced tools and technologies to promote an interdisciplinary view and exploration of our Earth and society, particularly in Africa. The AEON science advisory group comprises 18 members spread across four continents, five South African universities and from industry. LIQUIDITY AND CAPITAL RESOURCES As at December 31, 2009, the Company had net working capital (deficiency) of $102,932 (2008: ($471,355), which included cash and equivalents $108,341 (2008: $61,827). These funds are managed in-house in accordance with specific investment criteria approved by the board of directors, the primary objective being the preservation of capital to assure funding for exploration activities. The Company completed a private placement for an additional $452,000 in January 2010, see discussion in Financing Activities below. The Company does not hedge its activities or otherwise use derivatives. At year end, the Company did not have any material contractual obligations except for minimum spending requirements on exploration licenses. The Company is required to spend a minimum on prospecting over the period of its licenses. On licenses current as of December 31, 2009, the expenditure requirements inclusive of license fees from the date of grant to and if held to their full term as well as actual and attributed expenditures with respect thereto as of December 31, 2009, are as follows: Project Description Required Expenditure Actual Expenditure Attributed Expenditure * Botswana Pula USD Botswana Pula USD Botswana Pula USD Newdico 1,594,070 $234,386 8,052,290 $1,183,980 8,052,290 $1,183,980 Gcwihaba Diamond Gcwihaba Metals 2,882,888 6,593,456 $423,888 $969,475 1,965,239 955,955 $288,961 $140,560 6,453,727 6,670,825 $948,930 $980,852 * The Company’s Newdico subsidiary provides drilling services for the Company’s Gcwihaba subsidiary. Services performed are accounted for at below market rates for similar services performed by third party contractors. These attributed amounts for services are used in calculating required license expenditures. 6 tsodilo resources limited Financial Instruments The carrying amounts reflected in the consolidated balance sheets for cash and equivalents, accounts receivable and accounts payable and accrued liabilities approximate their fair values due to the short maturities of these instruments. The company does not hold financial derivatives. Due to the nature of the Company’s operations, there is no significant credit or interest rate risk. Operating Activities Cash outflow used in operating activities before changes in working capital increased from $164,324 in fiscal December 31, 2008 to $183,029 for the year ended December 31, 2009. The increase was due primarily to office and administration expenses in 2009 being greater than 2008. ANNUAL INFORMATION (in US dollars) Total Revenues Loss before Non-controlling Interest Basic and diluted loss per share Non-controlling Interest Net Loss for the Year Basic and diluted loss per share Total Assets Total long term liabilities Cash dividends declared QUARTERLY INFORMATION (in US Dollars) Fiscal Year 2008 (ended December 31, 2008) Total Revenues Loss for the period Basic and diluted loss per share Total Assets Total long term liabilities Fiscal Year 2009 (ended December 31, 2009) Total Revenues Loss for the period Basic and diluted loss per share Total Assets Total long term liabilities Fiscal Year Dec.31 2009 -- (331,162) ($0.02) (4,040) (327,122) ($0.02) Fiscal Year Dec.31 2008 -- (363,486) ($0.02) -- (363,486) ($0.02) 5,885,208 210,814 4,725,290 214,854 -- -- Quarter 1 Quarter 2 Quarter 3 Quarter 4 -- (163,734) ($0.01) 4,246,648 228,395 -- (82,214) -- 4,989,799 211,615 -- (234,045) ($0.02) 4,220,483 228,395 -- (161,337) ($0.01) 5,151,428 262,361 -- (111,688) ($0.01) 4,337,120 228,395 -- (107,449) ($0.01) 5,339,383 277,661 -- 145,981 $0.02 4,725,290 214,854 -- 23,878 -- 5,885,208 210,814 See accompanying notes to the consolidate fi nancial statements Investing Activities Cash flow applied in investing activities increased to $1,051,584 for the year ended December 31, 2009 (2008: $682,200). 7 tsodilo resources limited Total actual expenditures of $1,038,859 on exploration properties for the period ended December 31, 2009 were attributable to the Newdico and Gcwihaba projects in northwest Botswana. Included in this amount is the proportionate contributory share, ranging from 6.36% to 5.59% attributed to the Trans Hex Group for the Newdico project. There were no material disposals of capital assets or investments during the year. In December 2009, the board of directors of Newdico approved an exploration program and budget for the period January 1, to December 31, 2010 that calls for expenditures totaling approximately Pula 9.8 million (approximately $1.45 million as of December 31, 2009). The 2010 budget envisions a micro-diamond sampling program and analysis for up to seven different kimberlites. Trans Hex Group is presently responsible for funding 5% of the expenses of this company. The approved exploration program includes provision for additional drilling, soil sampling, ground geophysical surveys, processing and analysis. Financing Activities Following the restructuring of Tsodilo in April 2002 and the cancellation of the shares formerly held by Trans Hex, the source of financing for the Company’s activities changed from debt (related party) finance to equity, through the issue of units by way of non-brokered private placements. Each unit has consisted of one common share of the Company and one or one-half a warrant with each full such warrant entitling the holder to purchase one common share of the Company for a purchase price equal to the unit price for a period of two years from the date of issuance. During the year ended December 31, 2009, the Company received gross proceeds in the amount of $1,736,400 from the issuance of units consisting of one common share and one warrant related to private placements. Private Placement Date No. of Units Price per Unit February 26, 2009 June 8, 2009 August 5, 2009 728,061 331,386 201,519 2,102,758 December 22, 2009 * $85,000 was deposited in December 2008 $0.56 $0.60 $0.60 $0.52 Proceeds $405,000 * $200,000   $121,400 $1,095,000 Subsequent to the fiscal period end, the Company issued, through a non-brokered private placement 465,245 units at a price of $0.97 (CAD$1.00) per unit for gross proceeds of $452,000. Each unit consists of one common share of the Company and one warrant of the Company, each warrant entitling the holder to purchase one common share of the Company at a price of C$1.00 for a period of two years. The common shares, warrants and warrant shares are subject to a hold period of 12 months, as agreed to by the parties, expiring on January 22, 2011. On March 1, 2010, 457,901 warrants were exercised at a price of C$0.70 for proceeds to the Company of $304,896. Tsodilo expects to raise the amounts required to fund its 95% share of the Newdico project, the Gcwihaba projects and corporate general and administration expenses, by way of non-brokered private placements. RESULTS OF OPERATIONS On a consolidated basis, Tsodilo recorded a net loss of $327,122 in the fiscal year ended December 31, 2009 ($0.02 cents per common share) compared to a net loss of $363,486 in the fiscal period ended December 31, 2008 ($0.02 cents per common share). The Company experienced an increase in office and administration with offsets by decreases in remuneration, investor relations and stock option expenses reflecting general corporate activity. The decrease in stock option expense reflects the timing of option grants. 8 tsodilo resources limited Exploration expenditures including amortization of property, plant and equipment used in exploration activities on all projects amounted to $1,202,652 during the year ended December 31, 2009 compared to $820,118 for the year ended December 31, 2008. Exploration expenditures incurred on the Newdico project for the year ended December 31, 2009 was $892,032 compared to $685,235 for the year ended December 31, 2008. The principal components of the Newdico exploration program were: (a) additional soil sampling and the completion of the processing and analysis of the soil samples; (b) commissioning of further ground magnetic surveys of selected aeromagnetic anomalies; (c) analyzing detailed proprietary aeromagnetic maps covering the target areas; and (d) commencement of a diamond core drilling program on selected targets. Exploration expenditures incurred on the Gcwihaba project for the year ended December 31, 2009 were $310,620 compared to $134,883 for the year ended December 31, 2008. PERSONNEL At December 31, 2009, the Company and its subsidiaries employed twenty-five (25) individuals compared to twenty-three (23) at December 31, 2008, including senior officers, administrative and operations personnel including those on a short-term service basis. FOURTH QUARTER – 2009 The fourth quarter was a normal operating period for a quarter and year end. Having acquired drilling equipment and geophysical equipment in 2006 and an additional magnetometer in 2008, the Company was able to continue its drilling program and its geophysical surveys to the end of the year without interruption. Operating expenses were at normal levels for the last quarter of the year and were offset by a gain in foreign exchange. RISKS AND UNCERTAINTIES Tsodilo’s primary objective is the discovery of an economic kimberlite diamond deposit capable of rapid advancement to feasibility stage and ultimate development as a producing property. The discovery of a kimberlite is only the first step in the exploration process. Subsequent evaluation begins with caustic fusion diamond analysis of the kimberlite and, if results warrant, continues through progressively larger mini-bulk and bulk samples in order to make an increasingly accurate determination of the content and quality of the diamonds. Early stages of kimberlite evaluation provide an initial qualitative assessment rather than an accurate indication of either the grade of the ore body or the value per carat of the diamonds. Collection of larger bulk samples and formal appraisal of a commercial-size parcel of diamonds are necessary to make an accurate determination of these parameters. At any stage in the process, the results may indicate that the deposit lacks the required economic value. Capital Requirements In the absence of cash flow from operations, Tsodilo relies on capital markets to fund its operations. The ongoing exploration and eventual successful development of a diamond mine would require significant additional financing. There can be no assurance that adequate funding will be available, or available under terms favorable to the Company, for these purposes when ultimately required. The exploration and development of mineral deposits involve significant financial risks over an extended period of time. Even a combination of careful evaluation, experience and knowledge may not eliminate these risks. While discovery of a diamond or base and precious metal deposit may result in substantial rewards, few exploration properties ultimately become producing mines. 9 tsodilo resources limited Off-Balance Sheet Arrangements The Company has not entered into any off-balance sheet financing arrangements., such as guarantee contracts, contingent interest in assets transferred to an entity, derivative instrument obligations or any obligations that trigger liquidity market or credit risk to the Company. Exploration Risks The Company’s operations are subject to all the hazards and risks normally incident to the exploration, development and mining of diamond deposits, any of which could result in damage to life or property, environmental damage and possible legal liability for any or all damage. Whether a diamond deposit will ultimately be commercially viable depends on a number of factors, including the particular attributes of the deposit such as the deposit’s size; the quality and quantity of the diamonds; its proximity to existing infrastructure; financing costs and the prevailing prices for diamonds. Also of key importance are government regulations, including those relating to prices, taxes, royalties, land tenure, land use, the importing and exporting of diamonds and production plant and equipment, and environmental protection. The effects of these factors cannot be accurately predicted, but any combination of them may impede the development of a deposit or render it uneconomic. CRITICAL RISK FACTORS Currency Risks The Company’s financing has generally been received in United States Dollars (USD) while significant portions of its operating expenses has been and will be incurred in Botswana Pula (BWP). The current USD/BWP currency exchange is favorable to the Company. While currency fluctuations will certainly occur throughout 2010 as the world economic and credit crisis seeks stabilization, it is anticipated that the USD/BWP exchange rate will remain advantageous to the Company on a historical basis in 2010. Key Personnel The Company is dependent upon on a relatively small number of key employees, the loss of any of whom could have an adverse effect on the Company. The Company currently does not have key personal insurance on these individuals. ACCOUNTING STANDARDS Tsodilo follows Canadian generally accepted accounting principles. The Company has adopted the policy of deferring property specific acquisition and exploration costs. Deferred costs relating to properties that are relinquished, or where continued exploration is deemed inappropriate, are written off in the year such assessment is made (no such write-offs were incurred in 2008 and 2009). If Tsodilo adopted a policy of expensing all exploration costs, the Company’s asset base, shareholders’ equity, and loss from operations would be materially different. The Company evaluates its license properties on a project basis as opposed to treating each individual license block as a separate project. ADOPTION OF NEW ACCOUNTING STANDARDS New Accounting Pronouncements Goodwill and Intangible Assets In February 2008, the CICA issued Handbook Section 3064, Goodwill and Intangible Assets, replacing CICA 3062, Goodwill and Other Intangible Assets and CICA 3450, Research and Development Costs. New section 3064 addresses when an internally developed intangible asset meets the criteria for recognition as an asset. The CICA also issued amendments to Section 1000, Financial Statement Concepts, and Accounting Guideline AcG-11, Enterprises in the Development Stage. EIC-27, Revenues and Expenditures during the Pre-operating 10 tsodilo resources limited Period, will not apply to entities that have adopted Section 3064. These changes are effective for fiscal years beginning on or after October 1, 2008, with earlier adoption permitted, and were adopted by the Company effective January 1, 2009. Collectively, these changes bring Canadian practice closer to International Financial Reporting Standards (“IFRS”) and generally accepted accounting principles in the United States (“U.S. GAAP”) by eliminating the practice of recognizing as assets a variety of start up, pre-production and similar costs that do not meet the definition and recognition criteria of an asset. The adoption of this standard did not have any impact on the consolidated financial statements of the Company. Effective January 1, 2009, the Company adopted the EIC-174, “Mining Exploration Costs.” This EIC provides guidance on accounting for capitalization and impairment of exploration costs. This standard was effective for the fiscal year beginning January 1, 2009. The adoption of this EIC did not have a significant impact on the financial statements. Future Changes in Accounting Policies International Financial Reporting Standards (“IFRS”) On February 13, 2008, the Canadian Accounting Standards Board (“AcSB”) confirmed the use of International Financial Reporting Standards (“IFRS”) to commence in 2011 for publicly accountable profit-oriented enterprises. IFRS will replace Canada’s Generally Accepted Accounting Principles (“GAAP”) and the official changeover date is for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. The Company’s Botswana subsidiaries already report using IFRS and Tsodilo Resources Limited will adopt IFRS according to requirements outlined by the AcSB, and is in the process of preparing for the adoption of IFRS on January 1, 2011. Impact of Adoption of International Financial Reporting Standards (“IFRS”) IFRS are premised on a conceptual framework similar to Canadian GAAP, however, significant differences exist in certain matters of recognition, measurement and disclosure. The Company’s IFRS conversion project consists of four phases: raise awareness; assessment; design; and implementation. The Company is currently in the process of identifying the significant differences between Canadian GAAP and IFRS as it relates to Tsodilo Resources Limited. Tsodilo has begun the planning phase of the conversion. Existing Canadian GAAP and IFRS differences have been identified, staff are being trained, and business impacts have not yet been determined. Business combinations and related sections In January 2009, the CICA issued Section 1582 “Business Combinations” to replace Section 1581. Prospective application of the standard is effective January 1, 2011, with early adoption permitted. This new standard effectively harmonizes the business combinations standard under Canadian GAAP with International Financial Reporting Standards (“IFRS”). The new standard revises guidance on the determination of the carrying amount of the assets acquired and liabilities assumed, goodwill and accounting for non-controlling interests at the time of a business combination. The CICA concurrently issued Section 1601 “Consolidated Financial Statements” and Section 1602 “Non- Controlling Interests,” which replace Section 1600 “Consolidated Financial Statements.” Section 1601 provides revised guidance on the preparation of consolidated financial statements and Section 1602 addresses accounting for non-controlling interests in consolidated financial statements subsequent to a business combination. These standards are effective January 1, 2011 unless they are early adopted at the same time as Section 1582 “Business Combinations”. 11 tsodilo resources limited  RELATED PARTY TRANSACTIONS The Company borrowed funds from a person who is an officer and director of the Company in fiscal years 2008 and 2007. The loans were interest free, payable upon demand and had no other terms of repayment. The outstanding loans were paid throughout the year. The amount of borrowing and repayment for fiscal years 2009, 2008 and 2007 are as follows: Total Amount Borrowed Total Amount Repaid 2009 2008 $ -0 - $55,000 $105,000 $75,000 Amount Outstanding at year end $ -0 - $105,000 As at December 31,2008 the Company had incurred salary payable to an officer and director of the company amounting to $294,650. This amount was paid to the officer and director during the year ended December 31, 2009. During the years ended December 31, 2009 and 2008, the Company incurred leave benefits (2009: $19,024, 2008: $19,024) payable to an officer and director of the Company amounting to $38,048. OUTLOOK Diamond and metal exploration remains a high-risk undertaking requiring patience and persistence. Despite difficult capital markets in the junior resource sector, the Company remains committed to international commodity exploration through carefully managed programs. ADDITIONAL INFORMATION Additional information relating to Tsodilo Resources Limited is available on its website www.TsodiloResources. com or through SEDAR at www.sedar.com. FORWARD-LOOKING STATEMENTS The Annual Report, including this MD&A, contains certain forward-looking statements related to, among other things, expected future events and the financial and operating results of the Company. Forward- looking statements are subject to inherent risks and uncertainties including, but not limited to, market and general economic conditions, changes in regulatory environments affecting the Company’s business and the availability and terms of financing. Other risks are outlined in the Uncertainties and Risk Factors section of this MD&A. Consequently, actual results and events may differ materially from those included in, contemplated or implied by such forward looking statements for a variety of reasons. Readers are therefore cautioned not to place undue reliance on any forward-looking statement. The Company disclaims any intention and assumes no obligation to update any forward-looking statement even if such information becomes available as a result of future events or for any other reason. James M. Bruchs President & CEO March 19, 2010 Gary A. Bojes Chief Financial Officer March 19, 2010 12 tsodilo resources limited Financial Reporting Responsibility of Management financial financial consolidated in this annual report report and consolidated The annual financial statements have been prepared by management. The consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles and include amounts that are based on informed judgments information and best estimates. The is consistent presented statements. the with Management acknowledges responsibility for the fairness, integrity and objectivity of all information contained including the consolidated financial statements. Management is also responsible for the maintenance of financial and operating systems, which include effective controls to provide reasonable assurance that assets are properly protected and that relevant and reliable financial information is produced. Our independent auditors have the responsibility of auditing the consolidated financial statements and expressing an opinion on them. in the annual report for The Board of Directors, through its Audit Committee, is responsible for ensuring that management fulfills its responsibilities financial reporting and internal control. The Audit Committee is composed of three directors, all of whom qualify as unrelated directors and are independent of management and free from any interest or business relationship which could, or could be perceived to materially interfere with their ability to act in the best interests of the Company. This committee meets periodically with management and the external auditors to review accounting, auditing, internal control and financial reporting matters. The Audit Committee reviews the annual financial statements before they are presented to the Board of Directors for approval and considers the independence of the auditors. The financial statements for the periods ended December 31, 2009, and December 31, 2008 have been audited by Ernst & Young, the external auditors, in accordance with Canadian generally accepted auditing standards on behalf of the shareholders. Their report follows hereafter. James M. Bruchs President and Chief Executive Offi cer March 19, 2010 Gary A. Bojes Chief Financial Offi cer March 19, 2010 13 tsodilo resources limited Auditors’ Report To the Shareholders of Tsodilo Resources Limited: We have audited the consolidated balance sheets of Tsodilo Resources Limited as at December 31, 2009 and 2008 and the consolidated statements of operations and comprehensive loss, deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also financial statements are includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. these consolidated financial In our opinion, statements present fairly, in all material respects, the financial position of the Company as at December 31, 2009 and 2008 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles. Vancouver, Canada March 19, 2010 Chartered Accountants 14 tsodilo resources limited  Tsodilo Resources Limited Consolidated Balance Sheets As at December 31, 2009 and 2008 (in United States dollars) ASSETS Current Cash Accounts receivable and prepaid expenses Exploration Properties (note 3) Property, Plant and Equipment (note 4) LIABILITIES Current 2009 2008 $ 108,341 67,640 175,981 5,361,645 347,582 $ 5,885,208 $ 61,827 19,491 81,318 4,158,993 484,979 $ 4,725,290 Accounts payable and accrued liabilities $ 73,050 $ 362,673 Notes payable (note 8) Capital subscriptions (note 13) Non-Controlling Interest (note 3) SHAREHOLDERS’ EQUITY Share Capital (note 5) Warrants (note 5b) Contributed Surplus (note 5c) Accumulated Other Comprehensive Income Defi cit Nature of operations and going concern (note 1) Subsequent events (note 13) Commitments (note 11) See accompanying notes to the consolidate fi nancial statements APPROVED ON BEHALF OF THE BOARD OF DIRECTORS -- -- 73,050 210,814 28,696,445 1,131,904 8,221,288 (837,425) (31,610,868) 5,601,344 $ 5,885,208 105,000 85,000 552,673 214,854 27,862,864 417,815 7,798,255 (837,425) (31,283,746) 3,957,763 $ 4,725,290 Patrick C. McGinley Chairman, of the Audit Committee James M. Bruchs Director 15 tsodilo resources limited         Tsodilo Resources Limited Consolidated Statements of Operations and Comprehensive Loss For the years ended December 31, 2009 and 2008 (in United States dollars) 2009 2008 $ 16,194 $ 25,026 1,332 9,028 36,058 20,470 117,769 1,421 (17,822) 146,712 (331,162) (4,040) $(327,122) $(0.02) 784 13,924 42,519 23,390 80,344 2,552 (21,663) 196,610 (363,486) - $(363,486) $(0.02) Expenses Corporate remuneration Corporate travel and subsistence Investor relations Legal and audit Filings & regulatory fees Offi ce and administration Amortization Foreign exchange gain Stock-based compensation Loss before non-controlling interest Non-controlling interest Loss and comprehensive loss for the year Basic and diluted loss per share - cents (note 7) See accompanying notes to the consolidate fi nancial statements Tsodilo Resources Limited Consolidated Statements of Defi cit For the years ended December 31, 2009 and 2008 (in United States dollars) Defi cit – Beginning of period $(31,283,746) $(30,920,260) Comprehensive loss for the year (327,122) (363,486) 2009 2008 Defi cit - End of year $(31,610,868) $(31,283,746) The accompanying notes are an integral part of these consolidated fi nancial statements. 16 tsodilo resources limited       Tsodilo Resources Limited Consolidated Statements of Cash Flows For the years ended December 31, 2009 and 2008 (in United States dollars) Cash provided by (used in): Operating Activities Loss for the year Adjustments for non-cash items: Amortization Non-controlling interest Stock-based compensation Net change in non-cash working capital balances (note 12) Investing Activities Additions to exploration properties Additions to property, plant and equipment Financing Activities Proceeds from shareholder loan Repayment of shareholder loan Capital subscriptions Shares issued for cash, net of cost Change in non-controlling interest Change in cash - For the year Cash - beginning of year Cash - end of year 2009 2008 $ (327,122) $ (363,486) 1,421 (4,040) 146,712 (183,029) (337,772) (520,801) (1,038,859) (12,725) (1,051,584) - (105,000) - 1,723,899 - 1,618,899 46,514 61,827 $ 108,341 2,552 -- 196,610 (164,324) 207,829 43,505 (659,714) (22,486) (682,200) 55,000 (75,000) 85,000 595,866 (13,541) 647,325 8,630 53,197 $ 61,827 The accompanying notes are an integral part of these consolidated fi nancial statements. 17 tsodilo resources limited                   Tsodilo Resources Limited Notes to the Consolidated Financial Statements For the years ended December 31, 2009 and 2008 1. NATURE OF OPERATIONS AND GOING CONCERN Tsodilo Resources Limited (“Tsodilo” or “the Company”) is an exploration stage company which is engaged principally in the acquisition, exploration and development of mineral properties in the Republic of Botswana. The recovery of the Company’s investment in exploration properties and the attainment of profitable operations are dependent upon the discovery, development and sale of ore reserves, and the renewal of licenses, the ultimate outcome of which cannot presently be determined as they are contingent on future events. The Company along with its subsidiaries operates internationally with projects in continental Africa. These financial statements have been prepared using Canadian generally accepted accounting principles applicable to a going concern, which assumes continuity of operations, realization of assets, and settlement of liabilities in the normal course of business. As at December 31, 2009, the Company reported an accumulated deficit of $31,610,868 [2008: $31,283,746] and negative net cash outflows from operations before changes in working capital of $183,029 [2008: $164,324] for the year then ended and current required exploration property license commitments (which may be reduced by relinquishing licenses prior to the expiry of their call term) of approximately $1.7 million. Accordingly, the cash position of the Company is insufficient to finance continued exploration. Management believes that it will be able to secure the necessary financing through a combination of the issue of new equity or debt instruments, the entering into of joint venture arrangements or the exercise of warrants and options for the purchase of common shares. However, there is no assurance that the Company will be successful in these actions. These financial statements do not reflect the adjustments, which could be material, to the carrying value of assets and liabilities, the reported revenues and expenses and balance sheet classifications that would be necessary were the going concern assumption inappropriate or if the necessary financing cannot be raised. 2. SIGNIFICANT ACCOUNTING POLICIES Basis of consolidation and preparation of the consolidated fi nancial statements The consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“GAAP”) and include the accounts of the Company and its direct and the following direct and indirect subsidiaries: Tsodilo Resources Bermuda Limited (TRBL) [Bermuda] Gcwihaba Resources (Proprietary) Ltd (“Gcwihaba”) [Botswana] Newdico (Proprietary) Limited (“Newdico”) [Botswana] All intercompany transactions have been eliminated on consolidation. 2009 100% 100% 95% 2008 100% 100% 94% 18 tsodilo resources limited 2. SIGNIFICANT ACCOUNTING POLICIES (continued) Earnings (loss) per share Basic loss per share is calculated using the weighted average number of shares outstanding during the year. Earnings per share calculations are based on the weighted average number of common shares and common shares equivalents issued and outstanding during the year. Diluted earnings per share are calculated using the treasury method which requires the calculation of diluted earnings per share by assuming that outstanding stock options and warrants with the average market price that exceeds the average exercise prices of the options and warrants for the year are exercised and the assumed proceeds are used to repurchase shares of the Company at the average market price of common shares for the year. Use of estimates The preparation of financial statements in accordance with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Significant accounts that require estimates relate to the possible impairment of property, plant and equipment and mineral property interest, the useful life of property, plant and equipment, valuation allowances for future income taxes, valuation of investments, valuation of stock-based compensation and warrants in private placements and valuations of asset retirement obligations. Exploration properties All direct and indirect costs relating to the acquisition, exploration and development of non-producing mining properties are capitalized as incurred. The amounts capitalized represent costs to be charged to operations in the future and do not necessarily reflect the present or future values of the particular properties. Exploration costs that do not relate to specific non-producing mining properties are expensed as incurred. If a property proceeds to development, these costs become part of preproduction and development costs of the mine and will be amortized over the expected life of the mine. If a property is abandoned, sold or continued exploration is not deemed appropriate in the foreseeable future or when other events and circumstances indicate that the carrying amount may not be recovered, the related costs and expenditures are written down to the net recoverable amount at the time the determination is made. Proceeds from the sale of exploration properties are credited to the costs of the relevant property. On an ongoing basis the capitalized costs are reviewed to consider if there is any impairment on the subject mineral property interest. The Company conducts this evaluation on a project specific basis as opposed to treating each individual license block as a separate project. If a property is deemed impaired, an impairment loss is measured and recorded based on the net recoverable value of the asset. Property, Plant and Equipment Property, plant and equipment is amortized on a straight-line basis over its estimated useful life of three to five years. 19 tsodilo resources limited 2. SIGNIFICANT ACCOUNTING POLICIES (continued) Cash Cash consist of cash held in banks. Foreign Currency Translation The Company’s functional and reporting currency is the US dollar. The Company’s subsidiaries are accounted for as integrated foreign operations and are translated into the US dollar equivalent using the temporal method. Transactions of the Company and its subsidiaries originating in foreign currencies are translated at the rates in effect at the time of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to at the exchange rate in effect at the balance sheet date and non-monetary items are translated at rates of exchange in effect when the assets were acquired or obligations incurred. Revenue and expense items are translated rates approximating those in effect at the time of the transaction. Foreign exchange gains and losses are included in the statement of operations. Income Taxes The Company uses the asset and liability method of accounting for income taxes. Assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is recorded against any future income asset if it is more than likely than not that the asset will not be realized. Future income tax assets and liabilities are measured using tax rates in effect for the period in which those temporary differences are expected to be recovered or settled. The effect on future income tax assets and liabilities of a change in tax rates or laws is recognized as part of the provision for income taxes in the period the changes are considered substantively enacted. Stock-Based Compensation Plans The Company has a Stock Option Plan (refer to note 5). Under the Stock Option Plan, the Company may grant options to directors, officers and employees for up to 2,715,471 shares of common stock. The exercise price is determined by the Chairman of the Compensation Committee and the President and CEO in consultation with the board of directors, but is not less than the market price of the Company’s stock on the date of the grant. An option’s maximum term is 5 years. The Company uses the fair value method of accounting for stock options. Under the fair value method stock-based payments are measured at the fair value of the equity investments and are amortized over the vesting period. Consideration paid on exercise of stock options is credited to common share capital. Asset Retirement Obligations An asset retirement obligation is a legal obligation associated with the retirement of tangible long-lived assets that the Company is required to settle. The Company recognizes the fair value of the liability for an asset retirement obligation in the year in which it is incurred and when a reasonable estimate of fair value can be made. The carrying amount of the related long-lived asset is increased by the same amount as the liability. The Company currently does not have any material asset retirement obligations. Financial Instruments and Comprehensive Income Financial instruments are classified into one of five categories: held-for-trading, held-to-maturity, loans and receivables, available-for-sale financial assets or other financial liabilities. All financial instruments, 20 tsodilo resources limited 2. SIGNIFICANT ACCOUNTING POLICIES (continued) including derivatives, are measured in the balance sheet at fair value at the date of acquisition. Subsequent measurement and accounting for changes in fair value will depend on the initial classification, as follows: (i) held-for-trading fi nancial assets are measured at fair value and changes in fair value are recognized in net income; (ii) available-for-sale fi nancial instruments are measured at fair value with changes in fair value recorded in other comprehensive income until the investment is no longer recognized or impaired, at which time the amounts would be recorded in net income (loss); and (iii) loans and receivables, held-to-maturity investments and other fi nancial liabilities, are measured at amortized cost. The Company designated its cash as held-for-trading, which is measured at fair value. Amounts receivable are classified as loans and receivables, which are measured at amortized cost. Accounts payable and accrued liabilities are classified as other financial liabilities, which are measured at amortized cost. Transaction costs directly attributable to the acquisition or issuance of financial instruments are recognized in net income (loss) in the period incurred. ADOPTION OF NEW ACCOUNTING STANDARDS New Accounting Pronouncements Goodwill and Intangible Assets In February 2008, the CICA issued Handbook Section 3064, Goodwill and Intangible Assets, replacing CICA 3062, Goodwill and Other Intangible Assets and CICA 3450, Research and Development Costs. New section 3064 addresses when an internally developed intangible asset meets the criteria for recognition as an asset. The CICA also issued amendments to Section 1000, Financial Statement Concepts, and Accounting Guideline AcG-11, Enterprises in the Development Stage. EIC-27, Revenues and Expenditures during the Pre-operating Period, will not apply to entities that have adopted Section 3064. These changes are effective for fiscal years beginning on or after October 1, 2008, with earlier adoption permitted, and were adopted by the Company effective January 1, 2009. Collectively, these changes bring Canadian practice closer to International Financial Reporting Standards (“IFRS”) and generally accepted accounting principles in the United States (“U.S. GAAP”) by eliminating the practice of recognizing as assets a variety of start up, pre-production and similar costs that do not meet the definition and recognition criteria of an asset. The adoption of this standard did not have any impact on the consolidated financial statements of the Company. Effective January 1, 2009, the Company adopted the EIC-174, “Mining Exploration Costs.” This EIC provides guidance on accounting for capitalization and impairment of exploration costs. This standard was effective for the fiscal year beginning January 1, 2009. The adoption of this EIC did not have a significant impact on the Company’s consolidated financial statements. Future Changes in Accounting Policies Business combinations and related sections In January 2009, the CICA issued Section 1582 “Business Combinations” to replace Section 1581. Prospective application of the standard is effective January 1, 2011, with early adoption permitted. This new standard 21 tsodilo resources limited 2. SIGNIFICANT ACCOUNTING POLICIES (continued) effectively harmonizes the business combinations standard under Canadian GAAP with International Financial Reporting Standards (“IFRS”). The new standard revises guidance on the determination of the carrying amount of the assets acquired and liabilities assumed, goodwill and accounting for non-controlling interests at the time of a business combination. The CICA concurrently issued Section 1601 “Consolidated Financial Statements” and Section 1602 “Non- Controlling Interests,” which replace Section 1600 “Consolidated Financial Statements.” Section 1601 provides revised guidance on the preparation of consolidated financial statements and Section 1602 addresses accounting for non-controlling interests in consolidated financial statements subsequent to a business combination. These standards are effective January 1, 2011 unless they are early adopted at the same time as Section 1582 “Business Combinations”. 3 . EXPLORATION PROPERTIES Exploration properties are summarized as follows: Newdico Botswana Gcwihaba Botswana Total Balance at December 31, 2007 $3,101,767 $237,108 $3,338,875 Jan. to Dec 2008 expenditures 685,235 134,883 820,118 Balance at December 31, 2008 $ 3,787,002 $ 371,991 $ 4,158,993 Jan. to Dec 2009 expenditures 892,032 310,620 1,202,652 Balance at December 31, 2009 $4,679,034 682,611 $5,361,645 A summary of the significant agreements entered into by the Company is as follows: Newdico (Proprietary) Limited (“Newdico”) - Botswana Newdico holds prospecting licenses in the Ngamiland District of northwest Botswana. The Company acquired the various licenses in 1999, 2001 and 2003. In 2005, the Company was reissued its prospecting licenses for an initial term of three years expiring  June 30, 2008, renewable for 2 two year periods upon application and which have a final expiry of 2012. In June of 2008, Newdico relinquished approximately 7,400 square kilometers of the then outstanding 16,800 square kilometers under license. The licenses relinquished were evaluated and determine to be non-prospective for an economic kimberlite discovery. The relinquishment of this portion of the overall licenses did not cause a reduction or change in the continuing overall exploration program nor impact the chances of the overall success of the program. The balance of the licenses totaling 9,400 square kilometers were renewed for 2 two year periods. The terms of the licenses require Newdico to spend a minimum of Botswana Pula 1.6 million (approximately $234,386 as at 12/31/09) inclusive of license fees from the date of grant to and if the licenses were held to their full term. 22 tsodilo resources limited     3. EXPLORATION PROPERTIES (continued) Originally, as a result of an agreement completed on March 31, 2002, Newdico was held 75% by Tsodilo and 25% by Trans Hex Group Limited (“THG”) with Tsodilo being the operator. Both Tsodilo and THG funded their initial investments in the Ngami property held by Newdico through a combination of an equity interest and a primary loan interest. Based on the terms of the equity and primary loan interests, THG’s interest in Newdico has been accounted for as a non-controlling interest. At December 31, 2009, the amount reflected ass non-controlling interest was $210,814 (2008: $214,854). Starting in 2005, THG decided not to fund its proportionate share of expenditures on certain cash calls. Accordingly, the Company’s interest in Newdico increased from 75% to 94% at December 31, 2008. During the year ended December 31, 2009, THG did not fund its proportionate share of expenditures on cash calls, and therefore, the Company’s interest in Newdico increased to 95% at December 31, 2009 in accordance with the agreement between the two parties. Trans Hex Group has also advanced funds, designated as a secondary loan, amounting to $287,270 CAD ($273,750 as at 12/31/09; 2008: $234,938) to Newdico, relating to exploration properties which had been written off prior to March 31, 2002. This liability has not been recorded in these financial statements as it is repayable only from Trans Hex Group’s share of any future earnings of Newdico after repayment of loans relating to the Newdico project. Gcwihaba Resources (Proprietary) Limited (“Gcwihaba”) – Botswana Gcwihaba, a wholly owned subsidiary of the Company, holds prospecting licenses in the Ngamiland project area. Diamond Exploration Gcwihaba holds eight precious stone – diamond prospecting licenses in the Ngamiland District of northwest Botswana. The Company acquired the various licenses in 2007, 2008 and 2009. The combined area totaled approximately 6,860 square kilometers as of December 31, 2009. The terms of the licenses require Gcwihaba to spend a minimum of Botswana Pula 2.88 million (approximately $423,888 as at 12/31/09) inclusive of license fees from the date of grant to and if the licenses were held to their full term. Base and Precious Metal Exploration Gcwihaba holds eighteen metal (base, precious, platinum group, and rare earth) prospecting licenses in the Ngamiland District of northwest Botswana. The Company acquired the various licenses in 2008 and 2009. In total, the company holds twenty licenses totaling 13,500 square kilometers. The terms of the licenses require Gcwihaba to spend a minimum of Botswana Pula 6.6 million (approximately $969,475 as at 12/31/09) inclusive of license fees from the date of grant to and if the licenses were held to their full term. General Title to mineral properties involves certain inherent risks due to the difficulties of determining the validity of permits and the potential for problems arising from government conveyance accuracy, prior unregistered agreements or transfers, native land claims, confirmation of physical boundaries, and title may be affected by undetected defects. The Company does not carry title insurance. The Company has evaluated title to all of its mineral properties and believes, to the best of its knowledge, that evidence of title is adequate and acceptable given the current stage of exploration. 23 tsodilo resources limited 4. PROPERTY, PLANT AND EQUIPMENT December 31, 2009 Amortization Rate in Years Accumulated Cost amortization Book value Vehicles 5 Years $887,855 $571,018 $ 316,837 Furniture and Equipment 3 Years 123,819 93,074 30,745 $ 1,011,674 $ 664,092 $ 347,582 December 31, 2008 Vehicles Furniture and Equipment 5 Years 3 Years $ 887,855 $ 436,503 $ 451,352 111,094 $ 998,949 77,467 $ 513,970 33,627 $ 484,979 For the year ended 2009 an amount of $147,952 (2008: $160,404) of amortization has been capitalized under exploration properties. 5. SHARE CAPITAL (a) Common Shares Authorized The authorized capital stock of the Company comprises an unlimited number of common shares with no par value. Issued and outstanding Details of the issued and outstanding common shares are as follows: Issued and outstanding at December 31, 2007 On private placement for cash (i) On private placement for cash (ii) Share issue costs Ascribed to warrants issued in 2008 Issued and outstanding at December 31, 2008 On private placement for cash (iii) On private placement for cash (iv) On private placement for cash (v) On private placement for cash (vi) Share issue costs Ascribed to warrants issued in 2009 Issued and outstanding at December 31, 2009 24 tsodilo resources limited Shares (number) 14,502,340 457,901 463,492 - - 15,423,733 728,061 331,386 201,519 2,102,758 - - 18,787,457 Amount $ 27,423,585 325,000 275,000 (4,135) (156,586) 27,862,864 405,000 200,000 121,400 1,095,000 (12,501) (975,318) 28,696,445       5. SHARE CAPITAL (continued) (i) Private Placement On March 11, 2008, the Company completed a non-brokered private placement, 457,901 units of the Company (the “Units”) were issued at a price of $0.71 (C $0.70) per Unit for proceeds to the Company of $325,000. Each Unit consists of one common share of the Company and one warrant of the Company, each such warrant entitling the holder to purchase one common share of the Company at a price of C$0.70 for a period of two years. (ii) Private Placement On November 14, 2008, the Company issued, through a non-brokered private placement, 463,492 units of the Company at a price of $0.59 (C$0.70) per unit for gross proceeds to the Company of $275,000. Each unit consists of one common share of the Company and one warrant of the Company, each warrant entitling the holder to purchase one common share of the Company at a price of (C$0.70) for a period of two years. (iii) Private Placement On February 26, 2009, the Company issued, through a non-brokered private placement, 728,061 units of the Company at a price of $0.56 (C$0.70) per unit for gross proceeds to the Company of $405,000. Each unit consists of one common share of the Company and one warrant of the Company, each warrant entitling the holder to purchase one common share of the Company at a price of (C$0.70) for a period of two years. (iv) Private Placement On June 8, 2009, the Company issued, through a non-brokered private placement, 331,386 units of the Company at a price of $0.60 (C$0.70) per unit for gross proceeds to the Company of $200,000. Each unit consists of one common share of the Company and one warrant of the Company, each warrant entitling the holder to purchase one common share of the Company at a price of (C$0.70) for a period of two years. (v) Private Placement On August 5, 2009, the Company issued, through a non-brokered private placement, 201,519 units of the Company at a price of $0.60 (C$0.70) per unit for gross proceeds to the Company of $121,400. Each unit consists of one common share of the Company and one warrant of the Company, each warrant entitling the holder to purchase one common share of the Company at a price of (C$0.70) for a period of two years. (vi) Private Placement On December 22, 2009, the Company issued, through a non-brokered private placement, 2,102,758 units of the Company at a price of $0.52 (C$0.55) per unit for gross proceeds to the Company of $1,095,000. Each unit consists of one common share of the Company and one warrant of the Company, each warrant entitling the holder to purchase one common share of the Company at a price of (C$0.55) for a period of two years. 25 tsodilo resources limited 5. SHARE CAPITAL (CONTINUED) (b) Warrants As at December 31, 2009, the following warrants were outstanding: Number of Warrants Value December 31, 2008 Exercise Price Issued [Exercised] (Expired) December 31, 2009 December 31,2008 December 31, 2009 Issued [Exercised] (Expired) Expiry Feb ruary 13, 2009 C$0.80 141,516 (141,516) May 18, 2009 C$0.80 167,146 (167,146) June 29, 2009 C$0.80 231,714 (231,714) December 19, 2009 C$0.70 326,126 (326,126) -- -- -- -- $55,047 $(55,047) $ -- 40,408 (40,408) 67,829 (67,829) 97,945 (97,945) -- -- -- March 10, 2010 C$0.70 457,901 November 14, 2010 C$0.70 463,852 -- -- 457,901 104,958 463,852 51,628 -- -- 104,958 51,628 February 26, 2011 C$0.70 June 3, 2011 C$0.70 August 4, 2011 C$0.70 December 22, 2011 C$0.55 -- -- -- -- 728,061 728,061 331,386 331,386 201,519 201,519 2,102,758 2,102,758 -- -- -- -- 157,751 157,751 104,159 104,159 60,056 60,056 653,352 653,352 1,788,255 2,497,222 4,285,477 $417,815 $714,089 $1,131,904 On February 13, 2009, 141,516 warrants expired. On May 18, 2009, 167,146 warrants expired. On June 29, 2009, 231,714 warrants expired. On December 19, 2009, 326,126 warrants expired. During the year ended December 31, 2009, warrants were valued using the Black-Scholes model, using key assumptions of volatility ranging from 139% to 170% (2008: 101% to 116%), a risk-free interest rate ranging from approximately 0.9% to 1.42% (2008: 2%), a term equivalent to the life of the warrant, and a dividend rate of zero percent. (c) Contributed Surplus As at December 31, 2007 Relating to the expiry of warrants Relating to stock based compensation As at December 31, 2008 Relating to the expiry of warrants Relating to stock based compensation As at December 31, 2009 $6,668,132 933,513 196,610 7,798,255 261,229 161,804 $8,221,288 26 tsodilo resources limited               5. SHARE CAPITAL (CONTINUED) (d) Stock Option Plan Outstanding stock options granted to directors, officers and employees at December 31, 2009, were as follows: Outstanding Granted Outstanding Outstanding Exercisable December [Cancelled] December Granted [Cancelled] December December Expiry Price 31, 2007 (Exercised) 31, 2008 (Exercised) 31, 2009 31, 2009 July 8, 2008 C$0.50 100,000 [100,000] January 1, 2009 C$0.75 50,000 [50,000] August 31, 2009 C$0.75 200,000 [200,000] 0 0 0 January 3, 2010 C$1.85 60,000 [10,000] 50,000 August 15, 2010 C$1.25 260,000 [100,000] 160,000 January 3, 2011 C$1.25 60,000 [10,000] 50,000 April 24, 2011 C$0.70 300,000 [150,000] 150,000 August 15, 2011 C$0.70 65,000 0 65,000 January 2, 2012 C$1.00 85,000 [10,000] 75,000 May 8, 2012 C$0.80 550,000 [150,000] 400,000 January 2, 2013 C$0.70 May 8, 2013 C$0.70 January 2, 2014 C$0.70 May 3, 2014 C$0.70 November1, 2014 C$0.55 - - - - - 210,000 210,000 350,000 350,000 - - - - - - 225,000 360,000 100,000 (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (ii) (ii) (ii) 0 0 0 0 0 0 50,000 50,000 160,000 160,000 50,000 50,000 150,000 150,000 65,000 65,000 75,000 75,000 400,000 400,000 210,000 210,000 350,000 350,000 225,000 112,500 360,000 180,000 100,000 25,000 Total 1,730,000 [220,000] 1,510,000 685,000 0 2,195,000 1,827,500 Options exercisable at end of year 1,396,250 1,480,000 Weighted average exercise price - issued - outstanding - exercisable C$0.79 C$0.88 C$0.90 C$0.83 C$0.91 C$0.94 All options have a term of five years. 27 tsodilo resources limited 1,827,500 C$0.68 C$0.80 C$0.83     5. SHARE CAPITAL (CONTINUED) These common share purchase options vest as to one-quarter immediately and one-quarter on each (i) of the six-month, 12-month and 18-month anniversaries of the date granted. On January 2, 2009, May 4, 2009, and November 1, 2009 the Company under its Stock Option Plan (ii) issued 225,000 options at C$0.70, 360,000 options at C$0.70, and 100,000 options at C$0.55 respectfully to persons who are directors, officers and employees of the Company. The Company recognized an expense of $146,712 (2008: $196,610) relating to the fair value of options granted and vesting during the year. In addition, $15,092 of stock-based compensation was capitalized into exploration properties. The fair value of options granted was calculated using the Black-Scholes model, using key assumptions of volatility ranging from 115% to 133%, risk-free interest rates ranging from approximately 1.7% to 2.3%, a term equivalent to the life of the option, and a dividend rate of zero percent. 6. INCOME TAXES The recovery of income taxes varies from the amounts that would be computed by applying the Canadian federal and provincial statutory rate of approximately 33.00% (Dec. 2008 – 33.50%) to income before taxes as follows: Net loss for the period Income tax (recovery) provision at Canadian statutory Income tax rates Eff ect of statutory tax rate change Foreign operation taxed at lower rates Permanent diff erences Change in valuation allowances Expiry of tax Losses True up and foreign exchange Other Dec-31 2009 $(327,122) 33.00% (107,950) 84,820 7,924 41,200 254,376 271,477 (547,723) (4,124) Dec-31 2008 $(363,486) 33.50% (121,768) 254,534 - 65,864 (666,424) 484,232 - (16,438) Provision for (recovery of ) income taxes $ - $ - The following summarizes the principal temporary diff erences and related future tax eff ect: Property, Plant and Equipment - Canada Property, Plant and Equipment - Botswana Exploration & Development - Canada Exploration & Development - Botswana Losses carried forward - Canada Losses carried forward - Botswana Other Subtotal – future income tax asset Valuation allowance Dec-31 2009 Dec-31 2008 $ 16,000 $ 29,000 51,000 20,000 (1,227,000) 626,000 1,485,000 38,000 1,009,000 (1,009,000) - 20,000 (1,348,000) 539,000 1,480,000 35,000 755,000 (755,000) Net future income tax asset recorded $ - $ - 28 tsodilo resources limited   6. INCOME TAXES (CONTINUED) At December 31, 2009, the Company has Canadian net operating losses carried forward that expire as follows: Loss 371,000 436,000 855,000 335,000 235,000 124,000 133,000 Year of Expiry 2013 2014 2015 2026 2027 2028 2029 Total assessable losses relating to the activity in Botswana as at December 31, 2009 were $5,939,979 (December 31, 2008: $5,148,331). 7. LOSS PER SHARE Loss per share is computed on the basis of the loss of ($327,122) for the year ended December 31, 2009 [2008: ($363,486)] and the weighted average number of common or equivalent shares outstanding during period, December 31, 2009: 16,366,665 (2008: 14,993,408). The effects of stock options and warrants in computing diluted per share amounts for December 31, 2009 and December 31, 2008 are anti-dilutive. 8. RELATED PARTY TRANSACTIONS The Company borrowed funds from a person who is an officer and director of the Company in fiscal years 2008 and 2007. The loans were interest free, payable upon demand and had no other terms of repayment. The outstanding loans were paid throughout the year. The amount of borrowing and repayment for fiscal years 2009, 2008 and 2007 are as follows: Total Amount Borrowed Total Amount Repaid Amount Outstanding at year end 2009 2008 $ -0 - $55,000 $105,000 $75,000 $ -0 - $105,000 As at December 31, 2008 the Company had incurred salary payable to an officer and director of the company amounting to $294,650. This amount was paid to the officer and director during the year ended December 31, 2009. During the years ended December 31, 2009 and 2008, the Company incurred leave benefits (2009: $19,024, 2008: $19,024) payable to an officer and director of the Company amounting to $38,048. 29 tsodilo resources limited 9. SEGMENTED INFORMATION Materially all of the Company’s property plant and equipment at December 31, 2009 is located in North America of $442 (2008: $1,862) and Botswana of $347,140 (2008: $483,117).The geographic distribution of the property acquisition costs and exploration expenditures is outlined in note 3. 10. FINANCIAL INSTRUMENTS The carrying amounts reflected in the consolidated balance sheets for cash and equivalents (classified by the Company as held for trading), accounts receivable and accounts payable and accrued liabilities approximate their fair values due to the short maturities of these instruments. The Company does not have any financial derivatives. Risk Exposure and Management The Company is exposed to various financial instrument risks and assesses the impact and likelihood of this exposure. These risks include liquidity risk, credit risk, and interest rate risk. Where material these risks are reviewed and monitored by the Board of Directors. a. Capital Management The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue the development and exploration of its mineral properties and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk. The Company depends on external financing to fund its activities. The capital structure of the Company currently consists of common shares, stock options and share purchase warrants. The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, acquire or dispose of assets or adjust the amount of cash on hand. In order to facilitate the management if its capital requirements, the Company prepares annual expenditure budgets, which are approved by the Board of Directors and updated as necessary depending on various factors, including capital deployment and general industry conditions. The Company anticipates continuing to access equity markets to fund continued exploration of its mineral properties and the future growth of the business. b. Liquidity Risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company maintains sufficient cash balances to meet current working capital requirements. The Company is considered to be in the exploration stage. Thus, it is dependent on obtaining regular financings in order to continue its exploration programs. Despite previous success in acquiring these financings, there is no guarantee of obtaining future financings. The Company’s cash is invested in business accounts with 30 tsodilo resources limited 10 FINANCIAL INSTRUMENTS (CONTINUED) quality financial institutions and which is available on demand for the Company’s programs, and is not invested in any asset backed commercial paper. c. Credit Risk Credit risk is the risk of potential loss to the Company if the counterparty to a financial instrument fails to meet it contractual obligations. The Company’s credit risk is primarily attributable to its liquid financial assets including cash and equivalents and amounts receivable. The Company limits exposure to credit risk on liquid financial assets through maintaining its cash and equivalents with high-credit quality financial institutions. The majority of the Company’s cash and cash equivalents and short term investment are held with a major Canadian based financial institution. d. Interest Rate Risk The Company’s exposure to interest rate risk arises from the interest rate impact on its cash. Because the cash is held on deposit at financial institutions and may be withdrawn at any time, the Company’s exposure to interest rate risk is not significant. 11. COMMITMENTS All operating leases that are for a period of no longer than one year are prepaid. The aggregate minimum lease payments are $150,858 as follows: 2011   2012 2013 2014 2015 24,530 24,530 25,756 25,756 25,756 * Payment for 2010 lease obligation was made in December 2009 The lease commitment is for storage space in Maun, Botswana at an annual rental of BWP 166,824 per year for 2010 through 2012 and BWP 175,165 for years 2013 through 2015 converted at an exchange rate as of December 31, 2009 to US dollar. The Company holds prospecting licenses which require the Company to spend a specified minimum amount on prospecting over the period of the terms as outlined in note 3. 31 tsodilo resources limited     12. NOTES TO THE CASH FLOW Net change in non-working Capital balances Decrease / (Increase) in accounts receivable and prepaid expenses $ (48,149) Increase in accounts payable and accrued liabilities Total (289,623) $ (337,772) $ 13,803 194,026 $ 207,829 December 31 December 31 2009 2008 13. SUBSEQUENT EVENTS Private Placement On January 22, 2010, the Company issued, through a non-brokered private placement, 465,245 units of the Company at a price of $0.97 (C$1.00) per unit for gross proceeds to the Company of $452,000. Each unit consists of one common share of the Company and one warrant of the Company, each warrant entitling the holder to purchase one common share of the Company at a price of (C$1.00) for a period of two years. Warrants On January 22, 2010, 465,245 warrants were issued pursuant to the private placement of the same date. On March 1, 2010, 457,901 warrants were exercised at a price of C$0.70 for proceeds to the Company of $304,896. Stock Option Plan On January 10, 2010, the Company issued 190,000 options at C$1.00 under its Stock Option Plan to persons who are officers and employees of the Company. 32 tsodilo resources limited CCCCoorrrrpppppoooooorrrrraaaaaatttttttteeeeee IIIIIIIIIIInnnnnnnnnnnnffffffffffffffooooooorrrmmmmaaaaaaaaaaaaaaaaaaaaatttttttttttttttttttttiiiiiiiiiiiiiioooooooooooooooooooonnnnnnnn Corporate Information DIDIID REREREECTCTCTTOROROORRORORSSS SSS S SS SS DIRECTORS James M. Bruchs JaJaJ mememees sss M.M.M.M.MMM.. B BB BBB BB rururururururrur cchchcchhhhhhhchsss WaWaWaWashshshshhininnninngtgtgtgggtgttononnon, ,, DCDCDCDDDCCCCDCCCDCD Washington, DC Appointed as director in 2002 2222 2 222000000000000000000000000000000000000000222222222222222222222222222 ApApAppopopoooininintetetetetett d ddddd ddd d d asasasasasasaasasas d d d ddddiiririrrrrirrecececcececeeeee ttototototototorr r innnini Patrick C. McGinley leleleleeeyyy yyy cGcGcGcGGcGcccccGGinininininiiii PaPaPPaP trtrtrtrtriccicicck kkkk C.CC.C.C.. MMMMMMMMMMMMM WaWaWaWaashshshshs ininingtgtgtgttg ooononnnooo , ,,,,, DDDDD..D.DD.DDDD CC.C.CC.C Washington, D.C. Appointed as director in 2002 ApApppopopopopoiinininini tettetetteddd dddd asaasasassa dd dddddddddiriiririririiirireeeceecccccccccce tototoooototooootototor rrrrrrrr r iinininninnnniiiii 2 22 22222222 2 2 2 2 2 00000000000000000000000022222222222222 R. Stuart Angus R.R.R.R. S S S SSStuttututuuuuarararaarrrt tt t AAnnnnnAnAAnAAAAAA gugugugugguuguguguusssssssssss VaVaVaVaVancncncncncn ouououuuouuuveveveveeveer,r,rrr,r, B B BBBBBBBBBBriririririrrritttttiiittiitititishshshshshhshss CCC C CCCCC CCooloololololumumummmmmmmmmmmmmmbibibbibibibiiibibibibib aa a aaaaaaaaaaaa aaaaaaa Vancouver, British Columbia Appointed as director in 2004 ApApApAApAA popopopopopoopopp ininnininini teteeteetett d dddd ddd asasasasasassasasas d d d d dddd d diiirirriririirrrrirecececececececctototototott rrr r r iininin 2 22222222222222200000000000000000000000000000000000 4444444444444444 Jonathan R. KeLafant . KKeKeKeKeKeKKeKKeK LaLaLaLaLaLaLLaLaaL ffafafafafafaff ntnttn JoJJJoJJoJoJ nannnnan ththhhthhhananananan R RRRRRR ArArArArArAArrrrAA lililll ngngngngngnggggggtotototooonnn,nn,n V V VV VVVViriririrrrrii gigiggigigggig nininininiiiniiniiaaaaaaaaaa Arlington, Virginia Appointed as director in 2007 ApApApApApAAppopopopopoininininnninnnteteteteteteed d d ddd aasassasasaassasas dd dddddddirirririrrrececececeececccttototooottttot r r r iniiiniinnnninniin 2 2 2222 2222222200000000000000000000000000000000000000000000000077777777777777777777 DDaDaDaDaDaDaDaDaDaDaDaD vivivivivivivviivid dd dd d dd J.JJ.J.JJ.J CCC C CCC Cuusssssusssssssussssshihihihhhihihiiihhhiingnngngngngnngn David J. Cushing hChChChChChheveveveveve yy yy y y ChChCCChChChChChChasasassssasssasaaaa e,eeeeeee,e,e,e,,,, M M MMMMMMMMarararararararaaaarylylylylyyylyly aaaananannnnananaa d d d ddd d Chevy Chase, Maryland Appointed as director in 2008 ApApAApAppopopopopooininininnnteteteteed d d d d ddd asasassasass ddddddddddd d diririrrrirrreeeeecececceccectototototootor rrr r inininininnnnniininininn 2 2 2 222 222222 200000000000000 888 MMiMiMiMMiMiM chchchcchcchchieieieiieeiieeeiel l l l C.C.C.C.C. J JJ .. deddedededdd W W W W WWWWitititititiit Michiel C. J. de Wit PrPrPPrPrPrPPPP etetetetetetoooorororiaaaiaia, , , SoSoSoSoSoSoooooututuuuuttuu h h hh AAfAfAfAfAfAfAA ririrrir cacacacacaaaa Pretoria, South Africa ApAppApAppppopopopoppp ininininteteteted d d d d asaaaaasasasas d dddd dddiririrririreceececcece tototoootoootooor rr rr rrrrr ininininnnnn 22 222222 2220000000000000000000000000000 9999 Appointed as director in 2009 OFFICERS OFOOFOFFFOFFOFO FIFIIIFIF CECECECECECECECEERRRRSRSRSRSRSRSRSSSSSSSSSS James M. Bruchs, B.Sc., J.D. JJaJaJaJJamemememememees s ss M.MMM.MM.MMM.MMM. B B BBB BBB BBBrurrrruruuuuururururrrruucchchhchchcc ss,s, BBBBBBB B.S.S.SSSScccc.cccc.c., ,,,, J.J.J.J.J.JJJJ DD.D.D.DDDD PrPrPrrresesesesesee ididididdddenenenenenenenent ttt tt t ananananaand dd d d ChChChChhCCChC ieieeieeef ffff ExEExEExE eececce ututututututtttivivivivivivivvvvvvvvvee e eeeeeee OOOfOfOOOfOOfOfOfOOfOffiffififififffffifficeccececececececececececeeeeecececceeceec r r rrrrrrrrrrr rrrrr President and Chief Executive Officer ApAppApApppppppopopoppopopopop iniiniini ttetetetedd dd d ininininnn 2 2 22 2 200000000002 22 22 22 22 Appointed in 2002 Gary A. Bojes, CPA, Ph.D. .. BoBoBoBoooBooBoB jejejejjees,ss, CC CCPAPAPAAAAAA,, , ,, PhPhPhhhhPhhh.D.DDDDDDDDDDDDD.D.D.DD..D.... GGGaaGGGG ryryyyryy AA A A ChChChCC ieieieief f fff FiFiFiFiFiiF nananaann ncncncncn iaiaial ll ll OfOfOfOfOfOOffifififififf cececceeecer rr rr r r Chief Financial Officer ApApAAppApApApAAA popoopoppop ininnintetetetetet ddd d ininininnn 2 2 22 2222 2200000000000000000000000 7777777 Appointed in 2007 GGGGGGaGaGaGGaGaGaGaGaGaGaGGGaGGGailililili MMMM M M MMMMMcGcGGcGcGGcGGcccGGGc inininniniiiniiininiininleleleleley yy yyyy Gail McGinley CCoCCoCCCoCooCoCoCCCCoooCoCooorprpprprrprrprrprrprprprpprrpppppppppoorooorororooooooooo atatatatatatatttataaaaaatee ee e e ee eee SeSSSeSeSeSeSSeeSeSeSeSSS cccrcrcrcccccc eeteteetete araarararyyyyyyy Corporate Secretary Appointed in 2005 ApApApAAAAAApAA popopopoopopoopopooooooooininininnnininininninintetttetetetetteetttttttettetteettteteeteted d ddd dd dd dddd ininininiinininininnn 2222 2 2 2 2 22220000000000000000000000055555555555555555 COCOCOCOCOCOOOCOOOORPRPRPRPRPRPRR OROROOROROOROO ATATATATATATTTTTTATE E E E EE EEE HEHEHEHEHEHHEHHH ADADADADADADADADADDDADDDDDD O O O O OOOOOOFFFFFFFFFFFFFFFF ICICICICICICICICICICCICI E E E EEEEEE E CORPORATE HEAD OFFICE CaCaCaCCaCaCananananananan dadadadadad TT TT TTTTTTTrurururururuuustststststs TT T TTTT owowowowowoowo ererererererr -- ------- B BBB B B B BB CECECECECCE P P PPlalalaacecececeeeceeeeeee Canada Trust Tower - BCE Place 11 1 1 1111616161616161 B B BBBBBBBayayayaya SS S SSSStttrtrtrttrt eeeeeeeeeeeeeet,t,tt,tt, B BBBBB Boxoxoxoxxox 5 555508080888 161 Bay Street, Box 508 ToToToToToToTooTTTT rorrorororor ntntntntnttoooo,o,o,o,oo O O O OOnntntntntntntarararaarrioioioio M M MM5J5J5J5J5J55J5J 2 2 22 22S1S1S1S11 Toronto, Ontario M5J 2S1 TeTeTeTeTeleleleleephphphphhhphhphononononononooo e:e:ee:e:e ( ( ( ((4141414414 6)6)6)6)66) 5 5 5 5 5 572727272227 -2-2-2- 0303030300333 3 33 3333 33 Telephone: (416) 572-2033 FFaFaFaF cscsssimimimimilililili e:e:e:e:ee:ee:e ( ( ( ( (((((4141414141414144 6)6)6)6)) 9 9 9 99987878787877-4-4-444443636363666363 9 999999 Facsimile: (416) 987-4369 Website: www.TsodiloResources.com WeWeWeWeWeeeebsbsbsbsbsbssbsbsitititititttttttttte:e:e:ee: wwwwwwwwwwwwwwww.w.w.w.w.ww.www.w TsTsTsTsTsTTsTT odoodddodoooo ililililililiililoRoRoRoRoRoRResesesese ouououououurcrrrcrcesesesesse .c.c.cc.ccomomommmmommommmm E-E-E-E-E-E-MaMaMaMaMaMMaMaiililililii : : ::: : inininininnnnnfofofoofofooo@T@@T@T@@@@T@@T@T@T@@@ sososososossodidididididdidididdd lolllololololl ReReReReResosososoourururuuuru ceceeececeec s.s.s.s.s.cococococoommmmm E-Mail: info@TsodiloResources.com AUDITORS AUAUAUAUAUAUUAAAAUDIDIDIDIDDDIDIDIDD TOTOTOTOTOTOTOOOOTTOORSRSRSRSRSRSRRSR ErErErErErErErnsnsnsnsnsnsnst t t t t & & & &&& && YoYoYoYoYooYoYYYoYYYYYYY uuuununuununnnnunuununnuunuungg,ggg,g,g,g,gggg,g,gg,g,, L LLLLL LLL LLLLLPLPLPLPLPLLPPLLPLLPPPPLP Ernst & Young, LLP VaVaVaVaVaVaVaaanncncncncncnccououououo veveveveveveveeeveeeer,r,r,r,r,rr,,, CCCCCC CCCCCCananaananananaanannannnnadadadaddadaddadaddaaaaaaaaaaaaaa aaaaaaaaaaaaa Vancouver, Canada LEGAL COUNSEL LELLELELLELEELELLEEEEEEEEEGAGAGAGAGAAGAGAGAGAGAGGGGG LLL LLL L COCOCOCOCOOCOCOUNUNUNUNUNUNUUNNNNNNNUNNUUNSESESSSESESESEEEEEESS LLLL LLLL LL FaFaFFaFFaFaFaFaFFaskskskskskskskskeneneneneneeen M M MMM M MMararararararaarttittiiiitititititiiiinennenenenenennenenenneeeneenn auauauauauauaaaaaa D DD D DD DuMuMuMuMuMuMMoououoououououououooouououlilililiilin n n n LLLLLLLLLLLLLLLLLLLLLLLLLLLP PPPPP P PPPP Fasken Martineau DuMoulin LLP ToToToToToTooTooooooooooToororororororororororrr ntntntntntntntttntttttnto,o,o,o,oo,oooo,o,oo,o,o,oo,oo, OO OOOO O ntntntntntttntttttttaraaararrararararararaaaa ioioioiooiooioioiioooooooiooo Toronto, Ontario REGISTRAR AND TRANSFER AGENT RERERERERERREERREREER GIGIGIGIGIGIGIGIGIGIIISTSTSTSTTSTSTTTTTSTSTTSTTTSTTRARARARARRAAAARARAARARARARRRARRR R RRRRR ANANANNNANANNANANANNAAANDD D D D DDDDD TRTRTRTRTRTRTRTTTTRRANANANANANANANANNANANANNNNNNNNNNNSFFSFSFSFSFFSFSSFSSFSSFSFSFSSSSSSS ERERERERERERERRERERERRRERREEREEREREEEEERREERRE AA A AA A AAAAAAGEGEGGEGEGEGEGGEGEGGEGEGGENNNTNTNTNTNTNTNTNTNNNTNNN CCoCooCoCoCoCooCompmpmpmpmpmpmpmpmpmpmmpmmpmppmmmmppputuutttutututuu erererererrreeershshshshshshsshshhshs aararararaaraaraaa eeeeee e eeee T TTTTTTTTTT TTTrururuuuuuuuruuururuuuuurr stststststststststttsttttststttstststtsttststtstst CCC CCCC CCC CCCCCCCCCCCCCCCCCComomomomomommommoomomomommommmmmmmmmmmmmpppapapapapapapapapapappppapaapapaanynynynynynynynynynynny o o oooo oooooooooooooooof ffff fffffff ffffffffff CaCaCaCaCaCaCaCaCaCaCaCaaaaaaaaaCaannnannnnanananaanananannaannnann dadadadadaddadad Computershare Trust Company of Canada ToToToToToToToToTooooooTTooooorororororooorooooroontntnnnntntntntntntnntn o,o,o,o,ooo,o, OO OOOO O ntntntntntntntnntnttnnntnnnnnntnn araaraaraararara ioioiiiooioioioooooooooooioooooooo Toronto, Ontario STSTSTSTSTSTTTTTSTOCOCOCOCOCOCOCOCCOCCOCOCCCOCOCCOOCCCOCKKK KKKKKK KKKK KK EXEXEXEEXEXXXEXEEXEEXXEXXXXXXXXXXXXCHCHCHCHCHCHCCHCHCCHHHCCHCHCCHHCCCC ANANAANANANANAANAAAAANAANANANNAANANNNGEGEGEGGGEGEGGEGEGEGEGGGEGGGGGGGEGGEE L LL LL LLLLLLISISISISSISSSSSISSSTITTITTITITITTTT NGNGNGNGNGNGNNNGNGNNGNNNNNGGGGNNGGNG STOCK EXCHANGE LISTING TTSTSTSTSTSTSTTSTSTSTSTTTTTST XXXX X XX X XXXXXXXXXXXXX VeVeVeVVeVeVeVeVeVeVeVeVVVeVeVVVVeVVeVV nntnntnntntnttntntntntnttnntttntturuurururuurrururuuu e ee eeeeee eeee ExExExExExEExxEExxEExchchchchchhhchhchchhananananananananananngegegegegegegeeg TSX Venture Exchange TrTTTrTTrTrTrTTrrTrTrrrTTrT adadadaddadadadadaddadddddddada ininnninninininnninininnninniniiniiiiinni gggggggggggggggg ggggg gggggggggg gggggg gg ggg SySySySySySSySySySySySyyySySyySyySySySSSSSSymbmbmbmbmbmbmbmbmmbmbmbmbmbmmmbmbbbmbbbmbbbbbmmbbolololollolololooloo ::: :::: TSTSTSTSTSTSTSTSSSSTSTSTSTTTTSTST D DDD D DDD D DDDDDDDDD Trading Symbol: TSD 33333333333333333333 33 tstststststsssstststststtststsodododododododdoodoodililililoooo rerererererrreresosososososourururuuuuururccecececececes ss s s s lilililillililil mimimimimimmmm teteteteteteeeeeddddddddddddddddd tsodilo resources limited 

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