20-F 1 oromin20f120229.htm ANNUAL REPORT FOR THE FISCAL YEAR ENDED FEBRUARY 29, 2012 Filed by e3 Filing, Computershare 1-800-973-3274 - Oromin Explorations Ltd. - Form 20-F


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F

(Mark One)

[   ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

or

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended February 29, 2012

or

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________ 

Commission file number: 0-30614

or

[   ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report _______

Oromin Explorations Ltd.
(Exact name of Registrant as specified in its charter)

Not applicable
(Translation of Registrant’s name into English)

Province of British Columbia, Canada
(Jurisdiction of incorporation or organization)

Suite 2000, 1055 West Hastings Street, Vancouver, B.C., Canada, V6E 2E9
(Address of principal executive offices)

Ian Brown, 604-331-8772, IBrown@mine-tech.com, 604-331-8773, Suite 2000, 1055 West Hastings Street,
Vancouver, B.C., Canada, V6E 2E9
(Name, Telephone, E-mail, and/or Facsimile number and Address of Registrant Contact Person)

Page 1 of 60 Pages
The Exhibit Index is located on Page 58

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class Name of each exchange on which registered
None

Securities registered or to be registered pursuant to Section 12(g) of the Act.




2

Common Shares Without Par Value
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None
(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

136,563,218

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [   ] No [ X ]

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes [   ] No [ X ]

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [ X ] No [   ]

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [   ] Accelerated filer [ X ] Non-accelerated filer [   ]

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP [   ] International Financial Reporting Standards
by the International Accounting Standards Board [ X ]
Other [   ]

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 [   ] Item 18 [   ]

If this is an annual report, indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [   ] No [ X ]

The information set forth in this Annual Report on Form 20-F is as at February 29, 2012 unless an earlier or later date is indicated.




3

SECURITIES AND EXCHANGE COMMISSION
FORM 20-F

TABLE OF CONTENTS  
    Page No.
GLOSSARY AND DEFINED TERMS 7
PART I   9
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS 9
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE 9
ITEM 3. KEY INFORMATION 9
     
A. Selected Financial Data 9
B. Capitalization and Indebtedness 10
C. Reasons For The Offer and Use of Proceeds 10
D. Risk Factors 10
  THE MARKET VALUE OF OUR SHARES IN THE PUBLIC MARKETS ON WHICH THEY TRADE IS SUBJECT TO HIGH VOLATILITY AND TO UNPREDICTABLE CHANGES IN THE EVALUATIONS, PERCEPTIONS AND SENTIMENTS OF BUYERS AND SELLERS IN THOSE MARKETS 10
  OUR INTERNATIONAL OPERATIONS INVOLVE SIGNIFICANT RISKS NOT ASSOCIATED WITH OPERATIONS IN CANADA OR THE UNITED STATES 11
  OUR PROJECTS DO NOT PRODUCE ANY REVENUES OR CASH FLOWS, AND WE ARE DEPENDENT ON OUR ABILITY TO ACCESS THE CAPITAL MARKETS AND ISSUE ADDITIONAL EQUITY CAPITAL TO RAISE THE FUNDS NECESSARY TO CONTINUE OUR EXPLORATION. OUR ABILITY TO ACCESS THE CAPITAL MARKETS CANNOT BE ASSURED, AND IF WE ARE ABLE TO ACCESS THEM, EXISTING INVESTORS WILL HAVE THEIR OWNERSHIP INTERESTS DILUTED UPON THE ISSUE OF ADDITIONAL EQUITY 11
  OUR EXPLORATION EFFORTS ARE DIRECTED TO THE COMMODITY GOLD, AND THE MARKET PRICE FOR THIS IS SUBJECT TO HIGH VOLATILITY 11
  THE PRICES OF MANY SIGNIFICANT INPUTS TO OUR COSTS OF EXPLORING ARE SUBJECT TO HIGH VOLATILITY AND COULD RENDER OUR COSTS OF CONTINUING TO EXPLORE HIGHER THAN ANTICIPATED, PLANNED OR BUDGETED 11
  WE ARE HIGHLY DEPENDENT ON THE INDIVIDUAL SKILLS AND EXPERIENCE OF OUR CHIEF EXECUTIVE OFFICER AND OUR VICE-PRESIDENT OF MINERAL EXPLORATION 11
  WE HAVE A LONG HISTORY OF INCURRING NET LOSSES AND GENERATING NO OPERATING REVENUE 12
  WE HAVE LIMITED EXPERIENCE IN PLACING RESOURCE PROPERTIES INTO PRODUCTION 12
WE ARE SUBJECT TO SECURITIES REGULATORY RULES IN THE UNITED STATES WHICH MAY HAVE THE EFFECT OF REDUCING TRADING ACTIVITY, AND THEREFOR MAY REDUCE LIQUIDITY IN THE MARKET FOR OUR SHARES IN THE   

 




4

  UNITED STATES 12
  OUR BUSINESS INVOLVES NUMEROUS OPERATING HAZARDS, AND WE ARE NOT FULLY INSURED AGAINST ALL OPERATING HAZARDS 12
  OUR COMPETITORS IN THE MINERAL AND OIL AND GAS EXPLORATION INDUSTRIES INCLUDE NUMEROUS LARGER COMPANIES MOST OF WHICH HAVE BETTER ACCESS TO THE EXPERTISE AND FINANCING NECESSARY TO CARRY OUT ACTIVITIES 12
  WE ARE EXPLORING IN THE REPUBLIC OF SÉNÉGAL WHICH POSSESSES COMPLEX REGULATORY REGIMES WHICH MAY IMPOSE UNFAMILIAR AND CHALLENGING CONDITIONS AFFECTING OUR OPERATIONS 13
  OUR ACTIVITIES IN MINERAL EXPLORATION SUBJECT US TO A WIDE ARRAY OF ENVIRONMENTAL AND RELATED REGULATIONS WHICH CAN BE COSTLY AND TIME-CONSUMING TO COMPLY WITH 13
  WE DO NOT PLAN TO BE A DIVIDEND-PAYING COMPANY IN THE FORESEEABLE FUTURE 14
  THE TRADING PRICE OF OUR SHARES HAS BEEN AND IS LIKELY TO CONTINUE TO BE SUBJECT TO WIDE FLUCTUATIONS 14
  ALMOST ALL OF OUR DIRECTORS AND OFFICERS RESIDE OUTSIDE THE UNITED STATES WHICH COMPROMISES THE ENFORCEABILITY OF CIVIL LIABILITIES AND JUDGEMENTS 14
  UNITED STATES INVESTORS FACE THE RISK THE COMPANY COULD BE CLASSIFIED AS A PASSIVE FOREIGN INVESTMENT COMPANY FOR UNITED STATES TAX PURPOSES, WITH POSSIBLE ADVERSE TAX AND LIQUIDITY CONSEQUENCES 14
ITEM 4. INFORMATION ON THE COMPANY 15
A. History and Development of the Company 15
  OJVG Gold Property, Sénégal 15
  Santa Rosa Property, Argentina 16
B. Business Overview 16
C. Organizational Structure 17
D. Property, Plants and Equipment 18
  OJVG Gold Property, Sénégal 18
  Technical Summary 18
  Geology and Mineralization 19
  EXPLORATION 21
  Calendar Year 2011 - Fiscal Year Ended February 29, 2012 21
  Calendar Year 2010 - Fiscal Year Ended February 28, 2011 21
  Calendar Year Currently in Progress 22
  MINERAL RESERVE ESTIMATE 22
  Heap Leach Desktop Study 23
  Doing Business in Sénégal 23
ITEM 4A. UNRESOLVED STAFF COMMENTS 24
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS 24
A. Operating Results 24
  Fiscal Year Ended February 29, 2012 Compared to Fiscal Year Ended February 28, 2011 25
B. Liquidity and Capital Resources 25
  February 29, 2012 Compared to February 28, 2011 26
  February 28, 2011 Compared to March 1 , 2010 27

 




5

  Outlook 27
C. Research and Development, Patents and Licenses, etc. 27
D. Trend Information 27
E. Off-Balance Sheet Arrangements 27
F. Tabular Disclosure of Contractual Obligations 28
G. Safe Harbour 28
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES 28
A. Directors and Senior Management 28
B. Compensation 30
  Termination and Change of Control Benefits 31
  Description of Retention Agreements 32
C. Board Practices 34
D. Employees 34
E. Share Ownership 35
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 35
A. Major Shareholders 35
B. Related Party Transactions 36
C. Interests of Experts and Counsel 36
ITEM 8. FINANCIAL INFORMATION 37
A. Consolidated Statements and Other Financial Information 37
B. Significant Changes 37
ITEM 9. THE OFFER AND LISTING 37
A. Offer and Listing Details 37
B. Plan of Distribution 38
C. Markets 38
D. Selling Stockholders 39
E. Dilution 39
F. Expenses of the Issue 39
ITEM 10. ADDITIONAL INFORMATION 39
A. Share Capital 39
B. Memorandum and Articles of Association 39
C. Material Contracts 40
D. Exchange Controls 41
E. Taxation 43
  Material Canadian Federal Income Tax Consequences 43
  Dividends 43
  Capital Gains 43
  Material United States Federal Income Tax Consequences 44
  U.S. Holders 45
  Distributions on Common Shares of the Company 45
  Foreign Tax Credit 45
  Information Reporting and Backup Withholding 46
  Disposition of Common Shares of the Company 46
  Currency Exchange Gains or Losses 46
  Other Considerations 47
  Foreign Personal Holding Company 47
  Foreign Investment Company 47

 




6

  Passive Foreign Investment Company 47
  Controlled Foreign Corporation 48
F. Dividends and Paying Agents 49
G. Statements by Experts 49
H. Documents on Display 49
I. Subsidiary Information 49
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 49
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 50
PART II   50
ITEM 13. DEFAULTS, DIVIDEND ARREARS AND DELINQUENCIES 50
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS 50
ITEM 15. CONTROLS AND PROCEDURES 50
  EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES 51
  MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING 51
ITEM 16 [RESERVED] 52
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT 52
ITEM 16B. CODE OF ETHICS 52
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES 52
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES 53
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS 53
PART III   53
ITEM 17. FINANCIAL STATEMENTS 53
ITEM 18. FINANCIAL STATEMENTS 53
ITEM 19. EXHIBITS 53
SIGNATURES 57
EXHIBIT INDEX 58

 




7

GLOSSARY AND DEFINED TERMS

The following is a glossary of certain mining terms used in this 20-F document.

Birimian
A term used to describe the age of rocks formed 2.2 to 2.1 Ga that are considered highly prospective rocks for gold and diamond exploration in West Africa
CIL
Carbon In Leach (CIL) is a processing method for extracting and recovery of gold from crushed ore. The process involves creating a slurry of finely crushed ore and a cyanide bearing solution in large tanks. Gold is dissolved in the cyanide solution creating a pregnant solution. Activated carbon is introduced into the leaching circuit where it absorbs the gold from the pregnant solution. The gold bearing activated carbon or “loaded” carbon is then sent through a carbon strip circuit where gold is separated from the loaded carbon, recovered and subsequently refined.
Craton
A relatively immobile part of the earth, generally of large size
Dyke
A tabular body of igneous rock that cuts across the structure of adjacent rocks or cuts massive rocks.
Eburnean
A term used to describe an orogenic event 2.0-2.1 Ga
Fault
A term used to describe a large scale fracture or linear zone of fractures within a body of rock along which there has been displacement of the sides relative to each other. Often results in the formation of a shear zone.
Feldspar
A group of abundant rock forming minerals, often light coloured and hard
Felsic
A term used to describe light coloured igneous rocks.
Fuchsite
A bright green, chromium rich variety of a muscovite.
Ga
A billion years ago
Gneiss
A foliated metamorphic rock with alternating bands or lenses of granular minerals and preferentially elongated or flaky minerals.
Granitic
A term used to describe an intrusive igneous rock comprised largely of medium to coarse-grained quartz and feldspar. Granitic rocks generally have higher alkali feldspar and lower plagioclase feldspar content than granodioritic rocks.
Granodioritic
A term used to describe an intrusive igneous rock comprised largely of medium to coarse-grained quartz and feldspar. Granodioritic rocks have a higher plagioclase feldspar and lower alkali feldspar content than granitic rocks.
Greenstone
A term used to describe any metamorphic, mafic to ultra-mafic igneous rock
Heap Leach Processing
A low cost ore processing method used to extract gold (and other metals) from crushed ore. Low grade ore is stockpiled on lined pads and saturated with a cyanide bearing solution. The solution permeates and passes through the crushed ore pile, dissolving gold and then accumulating at the base of the pile on the lined pad. The pregnant solution is then collected and gold is extracted.
Inlier
An area of older rocks surrounded by younger rocks
Intermediate
Refers to igneous rocks that are transitional between mafic and felsic igneous rocks
Kakadian Batholith
A PaleoProterozoic granitic complex which intrudes rock of the Kedougou Kenieba Inlier
Kedougou-Kenieba Inlier
A belt of deformed rocks within the larger, 2.1 Ga PaleoProterozoic Birimian-Eburnean province of rocks within the West African craton
Lateritic
A term used to describe highly weathered residual surface and near surface rock and soil horizons, often found in tropical or forested warm to temperate climates. Lateritic horizons or "laterites" are often pale brown to reddish brown in colour and can be very hard.
Mafic
Refers to igneous rocks composed chiefly of dark, ferromagnesian minerals.
Mako Volcanic Group
A belt of mafic to ultra-mafic volcanic rocks within the Kedougou-Kenieba Inlier in western Sénégal.

 




8

Massive
A term used to describe an igneous rock with a homogenous texture ie. not foliated
Metamorphic
A term used to describe rocks that have undergone chemical and/or physical properties changes due to the effects of heat, pressure and fluid movement within the earth's crust.
Metasedimentary
A term used to describe a sedimentary rock that has had its chemical and/or physical properties altered due to the effects of heat, pressure and fluid movement within the earth's crust.
Metavolcanic
A term used to describe a volcanic rock that has had its chemical and/or physical properties altered due to the effects of heat, pressure and fluid movement within the earth's crust.
Mineral Reserves
Mineral reserves are indicated and measured resources that have been evaluated by either a Prefeasibility or Feasibility level engineering study which has demonstrated a portion of the indicated and measured resources are economically feasible for extraction. Reserves are classified as either Probable or Proven Reserves depending on the level of geological and economic knowledge and confidence.
Mineral Resources
Mineral resources are those economic mineral concentrations that have undergone enough scrutiny to quantify their contained metal to a certain degree. Mineral resources are classified as Inferred, Indicated and Measured depending on the increasing level of geological knowledge and confidence. Mineral resources are not considered ore because the economics of the mineral deposit may not have been fully evaluated.
Orogenic
A term used to describe the large-scale tectonic process of mountain formation or orogeny.
Orogenic Gold
Terminology used to describe gold deposits that have formed by the geological processes associated with orogeny.
Pyrite
A common pale bronze, or brass yellow, metallic mineral largely comprised of iron and sulphur.
Saprolite
A soft, earthy, clay-rich thoroughly decomposed rock formed in-place by chemical weathering. Commonly displays pre-weathering structures of original rock units. Occurs especially in humid, tropical environments.
Sericite
A fine grained, white potassium mica created by the alteration of pre-existing mineral by metamorphism
Shear zone
Narrow, sub parallel-sided zones of rock that have been crushed and brecciated as a result of shear strain.
Silicified
A term used to describe a rock that has been altered due to the introduction of or replacement by silica.
Supracrustal
Term used to describe younger rocks which overlie older basement rocks.
Syn-tectonic
A point or reference of time during a tectonic event.
Tectonic
A term used to describe the physical forces or events that move and deform the earth's crust. Volcanic eruptions, folding and faulting are examples of tectonic events.
Tuffs
Igneous, volcanoclastic rocks formed by the accumulation of volcanic ash and crystals that have been extruded from a volcanic vent and subsequently buried and lithified.
Ultramafic
Refers to igneous rocks composed almost entirely of dark, ferromagnesian minerals.

 




9

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

This Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

This Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.

ITEM 3. KEY INFORMATION

 

A. Selected Financial Data

The following tables summarize selected financial data for the Company (stated in Canadian dollars) prepared, in respect of the years ended February 29, 2012 and February 28, 2011, in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) (“IFRS-IASB”). The Company’s financial statements have been prepared in accordance with IFRS-IASB for the first time for the fiscal year ended February 29, 2012, together with comparative financial statements for the prior fiscal year also in accordance with IFRS-IASB. Pursuant to SEC Release 33-8567 this information is presented solely for these two years, and information based on US GAAP is not provided. The information in the table was extracted from the more detailed financial statements and related notes included herein and should be read in conjunction with these financial statements and with the information appearing under the heading “Item 5 – Operating And Financial Review And Prospects”. Results for the period ended February 29, 2012 are not necessarily indicative of results for future periods.

INFORMATION IN ACCORDANCE WITH IFRS-IASB

  Year Ended February 28 or 29
    2012 2011
(a) Total revenue $0 $0
(b) Earnings (loss) from continuing operations (1)    
    Total ($8,207,833) ($9,783,496)
    Per Share (1) ($0.06) ($0.08)
(c) Total assets $80,967,002 $85,178,886
(d) Total long-term debt $0 $0
(e) Capital stock $112,455,628 $111,298,040
(f) Total shareholders’ equity    
    $80,680,746 $84,827,782
(g) Cash dividends declared per share    
    n/a n/a
(h) Net earnings (loss) for the period    
    Total ($8,207,833) ($9,783,496)
    Per Share (1) ($0.06) ($0.08)
    Number of shares 135,716,443 117,491,838

 

(1) The effect of potential share issuances pursuant to the exercise of options and warrants would be anti-dilutive and, therefore, basic and diluted losses per share are the same.

 




10

The Company has not declared or paid any dividends in any of its last five financial years.

In this Annual Report on Form 20-F, unless otherwise specified, all monetary amounts are expressed in Canadian dollars. On July 11, 2012 the exchange rate, based on the noon buying rate published by The Bank of Canada for the conversion of Canadian dollars into United States dollars (the “Noon Rate of Exchange”) was $0.9809.

The following table sets out the high and low exchange rates for each of the last six months.

  2012
  June May April March February January
High for period 0.9825 1.0164 1.0197 1.0153 1.0136 1.0014
Low for period 0.9599 0.9663 0.9961 0.9985 0.9984 0.9735

The following table sets out the average Noon Rate of Exchange rates for the five most recent financial years as provided by the Bank of Canada.

Year Ended February 28 or 29
  2012 2011 2010 2009 2008
Average for the period 1.0091 0.9806 0.9036 0.9050 0.9560

 

B. Capitalization and Indebtedness

This Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.

C. Reasons for the Offer and Use of Proceeds

This Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.

D. Risk Factors

The following is a brief discussion of those distinctive or special characteristics of the Company’s operations and industry that may have a material impact on, or constitute risk factors in respect of, the Company’s future financial performance. The Company and its operations are subject to a significant number of such risk factors, in respect of which an adverse development in any one risk factor or any combination of risk factors could result in material adverse outcomes to the Company’s undertakings and to the interests of stakeholders in the Company including its investors. Readers are cautioned to take into account the risk factors to which the Company and its operations are exposed. The following description of risk factors is not exhaustive and is provided to alert users of this report to examples of the nature and types of risk factors inherent in the Company’s existence and operations.

THE MARKET VALUE OF OUR SHARES IN THE PUBLIC MARKETS ON WHICH THEY TRADE IS SUBJECT TO HIGH VOLATILITY AND TO UNPREDICTABLE CHANGES IN THE EVALUATIONS, PERCEPTIONS AND SENTIMENTS OF BUYERS AND SELLERS IN THOSE MARKETS

The Company’s securities trade on public markets and the trading value thereof is determined by the evaluations, perceptions and sentiments of both individual investors and the investment community taken as a whole. Such evaluations, perceptions and sentiments are subject to change, both in short term time horizons and longer term time horizons. An adverse change in investor evaluations, perceptions and sentiments could have a material adverse outcome on the Company and its securities.




11

OUR INTERNATIONAL OPERATIONS INVOLVE SIGNIFICANT RISKS NOT ASSOCIATED WITH OPERATIONS IN CANADA OR THE UNITED STATES

The Company’s project is located in the Republic of Sénégal in West Africa. Its tenure over its property rights and the conditions under which it operates, both during and after the exploration stage, are subject to the jurisdiction of the Republic of Sénégal and in some cases of political subdivisions within the Republic of Sénégal. The laws and regulations governing the Company’s tenure and operations are subject to alteration, and an adverse alteration to those laws and regulations could have a material adverse outcome on the Company and its securities. In addition, the exposure of the Company, its projects and its operations to political risk comprises part of the evaluations, perceptions and sentiments of investors as described above under “Market risks”. An adverse change in investors’ tolerance of political risk could have a material adverse outcome on the Company and its securities.

OUR PROJECTS DO NOT PRODUCE ANY REVENUES OR CASH FLOWS, AND WE ARE DEPENDENT ON OUR ABILITY TO ACCESS THE CAPITAL MARKETS AND ISSUE ADDITIONAL EQUITY CAPITAL TO RAISE THE FUNDS NECESSARY TO CONTINUE OUR EXPLORATION. OUR ABILITY TO ACCESS THE CAPITAL MARKETS CANNOT BE ASSURED, AND IF WE ARE ABLE TO ACCESS THEM, EXISTING INVESTORS WILL HAVE THEIR OWNERSHIP INTERESTS DILUTED UPON THE ISSUE OF ADDITIONAL EQUITY

Exploration and development of mineral deposits is an expensive process, and frequently the greater the level of interim stage success the more expensive it can become. The Company has no producing properties and generates no operating revenues; therefore, for the foreseeable future, it will be dependent upon selling equity in the capital markets to provide financing for its continuing substantial exploration budgets. While the capital markets have been favourable to the financing of mineral exploration during the past several years, and the Company has been successful in obtaining financing for its projects, there can be no assurance that the capital markets will remain favourable in the future, and/or that the Company will be able to raise the financing needed to continue its exploration programs on favourable terms, or at all. Restrictions on the Company’s ability to finance could have a material adverse outcome on the Company and its securities.

OUR EXPLORATION EFFORTS ARE DIRECTED TO THE COMMODITY GOLD, AND THE MARKET PRICE FOR GOLD IS SUBJECT TO HIGH VOLATILITY

The Company’s exploration project seeks gold at the OJVG Gold Project. While this commodity has recently been the subject of significant price increases from levels prevalent over the past five years, there can be no assurance that such price levels will continue, or that investors’ evaluations, perceptions, beliefs and sentiments will continue to favour this target commodity. An adverse change in this commodity’s price, or in investors’ beliefs about trends in this price, could have a material adverse outcome on the Company and its securities.

THE PRICES OF MANY SIGNIFICANT INPUTS TO OUR COSTS OF EXPLORING ARE SUBJECT TO HIGH VOLATILITY AND COULD RENDER OUR COSTS OF CONTINUING TO EXPLORE HIGHER THAN ANTICIPATED, PLANNED OR BUDGETED

The cost of numerous inputs to mineral exploration and development has been subject to significant increase in recent calendar quarters. These costs include the cost of infrastructure materials such as steel and concrete, the cost of fuel, and the compensation cost of technical and operating personnel. A continuation of cost escalation in these input prices could have a material adverse outcome on the Company and its securities.

WE ARE HIGHLY DEPENDENT ON THE INDIVIDUAL SKILLS AND EXPERIENCE OF OUR CHIEF EXECUTIVE OFFICER AND OUR VICE-PRESIDENT OF MINERAL EXPLORATION

The Company’s exploration efforts are dependent to a large degree on the skills and experience of certain of its key personnel, including Chet Idziszek the President and Chief Executive Officer and David Mallo the Vice President of Mineral Exploration. The Company does not maintain “key man” insurance policies on these individuals. Should the availability of these persons’ skills and experience be in any way reduced or curtailed, this could have a material adverse outcome on the Company and its securities.




12

WE HAVE A LONG HISTORY OF INCURRING NET LOSSES AND GENERATING NO OPERATING REVENUE

The Company has incurred net losses to date. Its deficit as of February 29, 2012 was $50,117,227. The Company has not yet had any revenue from the exploration activities on its property, nor has the Company yet made a production decision to proceed with development activity on its property. Even if the Company does undertake development activity on certain of its properties, the Company expects to continue to incur losses beyond the period of commencement of such activity. There is no certainty that the Company will produce revenue, operate profitably or provide a return on investment in the future.

WE HAVE LIMITED EXPERIENCE IN PLACING RESOURCE PROPERTIES INTO PRODUCTION

The Company has limited experience in placing resource properties into production, and its ability to do so will be dependent upon using the services of appropriately experienced personnel or entering into agreements with other contract service providers or resource companies that can provide such expertise. There can be no assurance that the Company will have available to it the necessary expertise when and if the Company places its resource properties into production.

WE ARE SUBJECT TO SECURITIES REGULATORY RULES IN THE UNITED STATES WHICH MAY HAVE THE EFFECT OF REDUCING TRADING ACTIVITY, AND THEREFOR MAY REDUCE LIQUIDITY IN THE MARKET FOR OUR SHARES IN THE UNITED STATES

The capital stock of the Company would be classified as “penny stock” as defined in Reg. § 240.3a51-1 promulgated under the Securities Exchange Act of 1934 (the “1934 Act”). In response to perceived abuse in the penny stock market generally, the 1934 Act was amended in 1990 to add new requirements in connection with penny stocks. In connection with effecting any transaction in a penny stock, a broker or dealer must give the customer a written risk disclosure document that (a) describes the nature and level of risk in the market for penny stocks in both public offerings and secondary trading, (b) describes the broker’s or dealer’s duties to the customer and the rights and remedies available to such customer with respect to violations of such duties, (c) describes the dealer market, including “bid” and “ask” prices for penny stock and the significance of the spread between the bid and ask prices, (d) contains a toll-free telephone number for inquiries on disciplinary histories of brokers and dealers, and (e) defines significant terms used in the disclosure document or the conduct of trading in penny stocks. In addition, the broker-dealer must provide to a penny stock customer a written monthly account statement that discloses the identity and number of shares of each penny stock held in the customer’s account, and the estimated market value of such shares. The extensive disclosure and other broker-dealer compliance related to penny stocks may result in reducing the level of trading activity in the secondary market for such stocks, thus limiting the ability of the holder to sell such stock.

OUR BUSINESS INVOLVES NUMEROUS OPERATING HAZARDS, AND WE ARE NOT FULLY INSURED AGAINST ALL OPERATING HAZARDS

Although management believes the operator of any properties in which the Company and its subsidiaries may acquire interests, will acquire and maintain appropriate insurance coverage in accordance with standard industry practice, the Company and its subsidiaries may suffer losses from uninsurable hazards or from hazards which the operator has chosen not to insure against because of high premium costs or other reasons. The payment of any liabilities arising from such losses may have a material, adverse effect on the Company's financial position.

OUR COMPETITORS IN THE MINERAL EXPLORATION AND DEVELOPMENT INDUSTRY INCLUDE NUMEROUS LARGER COMPANIES MOST OF WHICH HAVE BETTER ACCESS TO THE EXPERTISE AND FINANCING NECESSARY TO CARRY OUT ACTIVITIES

Significant and increasing competition exists for the limited number of mineral property acquisition opportunities available in Sénégal. As a result of this competition, some of which is with large established mining companies with substantial capabilities and greater financial and technical resources than the Company, the Company may be unable to acquire additional attractive mineral properties on terms it considers acceptable. Accordingly, there can be no assurance that the Company’s exploration and acquisition programs will result in any commercial mining operation.




13

WE ARE EXPLORING IN THE REPUBLIC OF SÉNÉGAL, A COUNTRY WITH A COMPLEX REGULATORY REGIME WHICH MAY IMPOSE UNFAMILIAR AND CHALLENGING CONDITIONS AFFECTING OUR OPERATIONS

Currently, the Company’s only active and material property is located in Sénégal. Consequently, the Company is subject to certain risks associated with foreign ownership, including currency fluctuations, inflation, political instability and political risk. Mineral exploration and mining activities in foreign countries may be affected in varying degrees by political stability and government regulations relating to the mining industry. Any changes in regulations or shifts in political conditions are beyond the control of the Company and may adversely affect its business. Operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, restriction of earnings, taxation laws, expropriation of property, environmental legislation, water use and workplace safety. In particular, the status of Sénégal as a developing country may make it more difficult for the Company to obtain any required production financing for its property from senior lending institutions.

The Company has entered into contractual arrangements with the Government of Sénégal that contain time-sensitive performance requirements. Further, the Company will be dependent on the receipt of government approvals or permits for the timely performance of its exploration and development activities and any delays in obtaining such approvals or permits could affect the status of the Company’s contractual arrangements or its ability to meet its contractual obligations and could result in the loss of its interest in mineral properties.

OUR ACTIVITIES IN MINERAL EXPLORATION AND DEVELOPMENT SUBJECT US TO A WIDE ARRAY OF ENVIRONMENTAL AND RELATED REGULATIONS WHICH CAN BE COSTLY AND TIME-CONSUMING TO COMPLY WITH

The current or future operations of the Company, including development activities and commencement of production on its properties, require permits from various governmental authorities and such operations are and will be subject to laws and regulations governing prospecting, development, mining, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, land use, environmental protection, safety and other matters. Companies engaged in the development and operation of mines and related facilities generally experience increased costs, and delays in production and other schedules as a result of the need to comply with applicable laws, regulations and permits. There can be no assurance that approvals and permits required to commence production on its properties will be obtained. Additional permits and studies, which may include environmental impact studies conducted before permits can be obtained, may be necessary prior to operation of the properties in which the Company has interests and there can be no assurance that the Company will be able to obtain or maintain all necessary permits that may be required to commence construction, development or operation of mining facilities at these properties on terms which enable operations to be conducted at economically justifiable costs.

The Company’s potential production operations and exploration activities in Sénégal are subject to various federal and local laws governing land use, the protection of the environment, prospecting, development, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, workplace safety and other matters. Such operations and exploration activities are also subject to substantial regulation under these laws by governmental agencies and may require that the Company obtain permits from various governmental agencies. The Company believes it is in substantial compliance with all material laws and regulations that currently apply to its activities. There can be no assurance, however, that all permits the Company may require for construction of mining facilities and conduct of mining operations will be obtainable on reasonable terms or that such laws and regulations would not have a material adverse effect on any mining project the Company might undertake.

Failure to comply with applicable laws, regulations, and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations or oil and gas exploration or extraction operations may be required to compensate those suffering loss or damage by reason of such activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.

Amendments to current laws, regulations and permits governing operations and activities of mining companies, or more stringent implementation thereof, could have a material adverse impact on the Company and cause increases in capital expenditures or production costs or reduction in levels of production at producing properties or abandonment or delays in development of new mineral exploration or oil and gas properties.

To the best of the Company's knowledge, it is currently operating in compliance with all applicable




14

environmental regulations.

WE DO NOT PLAN TO BE A DIVIDEND-PAYING COMPANY IN THE FORESEEABLE FUTURE

All of the Company's available funds will be invested to finance the growth of the Company's business and therefore investors cannot expect and should not anticipate receiving a dividend on the Company's common shares in the foreseeable future.

THE TRADING PRICE OF OUR SHARES HAS BEEN AND IS LIKELY TO CONTINUE TO BE SUBJECT TO WIDE FLUCTUATIONS

In recent years, the securities markets in Canada and the United States have experienced a high level of price and volume volatility, and the market prices of securities of many companies, particularly junior mineral exploration companies like the Company, have experienced wide fluctuations which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. In particular, the per share price on the TSX Venture Exchange or the Toronto Stock Exchange of the Company's common stock fluctuated from a high of $1.49 to a low of $0.47 in the period beginning March 1, 2010 and ending on the date of this Annual Report. There can be no assurance that these price fluctuations and volatility will not continue to occur.

ALMOST ALL OF OUR DIRECTORS AND OFFICERS RESIDE OUTSIDE THE UNITED STATES WHICH COMPROMISES THE ENFORCEABILITY OF CIVIL LIABILITIES AND JUDGMENTS

The Company and its officers and all but one of its directors are residents of countries other than the United States, and all of the Company's assets are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon such persons or enforce in the United States against such persons judgements obtained in United States courts, including judgements predicated upon the civil liability provisions of United States federal securities laws or state securities laws.

The Company believes that a judgement of a United States court predicated solely upon civil liability under United States securities laws would probably be enforceable in Canada if the United States court in which the judgement was obtained has a basis for jurisdiction in the matter that was recognised by a Canadian court for such purposes. However, there is doubt whether an action could be brought in Canada in the first instance on the basis of liability predicated solely upon such laws.

UNITED STATES INVESTORS FACE THE RISK THE COMPANY COULD BE CLASSIFIED AS A PASSIVE FOREIGN INVESTMENT COMPANY FOR UNITED STATES TAX PURPOSES, WITH POSSIBLE ADVERSE TAX AND LIQUIDITY CONSEQUENCES

The Company, as a foreign corporation with U.S. stockholders, could potentially be treated as a passive foreign investment company (“PFIC”) for U.S. tax purposes. U.S. stockholders owning shares of a PFIC can be subject to adverse tax consequences. In general, the Company would be considered a PFIC if: 75% or more of its gross income in a taxable year is passive income such as dividends and interest; or, the average percentage of the Company’s assets (by value) during the taxable year which produce passive income or which are held for production of same is at least 50%. A U.S. stockholder owing shares of a PFIC, who does not make certain elections for tax purposes, is subject to an additional tax and to an interest charge based on the value of deferral of tax for the period during which the common shares of the PFIC are owned. Also, gain realized on the disposition of common shares of the PFIC would be treated as ordinary income rather than capital gains. If U.S. stockholders are subject to adverse tax consequences related to their ownership of the Company’s stock, they might be less willing to acquire the stock, which could result in reduced market activity and liquidity for the stock.




15

ITEM 4. INFORMATION ON THE COMPANY

 

A. History and Development of the Company

Oromin Explorations Ltd. (the “Company”) is a British Columbia company in the business of exploring its resource properties. The Company was incorporated pursuant to the Company Act (British Columbia) on January 25, 1980 under the name “Maple Leaf Petroleum Ltd.”. On July 26, 1983, the Company’s Memorandum was amended to increase the authorized capital of the Company from 10,000,000 common shares without par value to 20,000,000 common shares without par value and the Company’s Articles were replaced in their entirety with new articles. There were no material changes to the Articles. On April 22, 1986, the Company’s Memorandum was further amended to change the name of the Company to “International Maple Leaf Resource Corporation”, to consolidate its common shares on a one-for-five basis and to increase the authorized capital back up to 20,000,000 common shares without par value. On September 11, 1989, the Company’s Memorandum was further amended to change the name of the Company to “Maple Resource Corp.”, to consolidate its common shares on a one-for-2.5 basis and to increase the authorized capital back up to 20,000,000 common shares without par value. On August 14, 1992, the Company’s Articles were replaced in their entirety with new articles. There were no material changes to the Articles. Also on August 14, 1992, the Company’s Memorandum was further amended to change the name of the Company to “Birchwood Ventures Ltd.”, to consolidate its common shares on a one-for-4.4 basis and to increase the authorized capital back up to 20,000,000 common shares without par value. On September 30, 1997, the Company’s Memorandum was further amended to change the name of the Company to “Oromin Explorations Ltd.”, to consolidate its common shares on a one-for-five basis and to increase the authorized capital to 100,000,000 common shares without par value. On February 25, 2002, it amalgamated with Fresco Developments Ltd. (“Fresco”) and its shares were exchanged for shares of the amalgamated company on a one for one basis, while the shares of Fresco were exchanged on the basis of one share of the amalgamated company for every two shares of Fresco. Pursuant to Notice of Articles altered February 28, 2008, the authorized capital was increased from 100,000,000 to unlimited.

The Company has one subsidiary. Sabodala Holding Limited (“SHL”) is incorporated in the British Virgin Islands and is wholly owned by the Company.

The head office and principal office address of the Company is Suite 2000, 1055 West Hastings Street, Vancouver, British Columbia, V6E 2E9, Canada. Its telephone number is 604-331-8772.

OJVG Gold Property, Sénégal

The Company holds via its ownership of SHL an interest in the OJVG Property (“OJVG Gold Property” or “OJVG Project” or “OJVG Gold Project” or “OJVG Golouma Project”), as more fully described under “Item 4 -Information on the Company - D. Property, Plants and Equipment” below. The Direction de Mines of Sénégal awarded the exploration concession to the Company on behalf of the Oromin Joint Venture Group through an international selection process concluded in October 2004. The Oromin Joint Venture Group (“OJVG”) was a joint venture between the Company and Bendon International Ltd. (“Bendon”), each as to 50% with the Company and Bendon each holding a 6.5% interest in trust for Badr Investment & Finance Company (“Badr”), a private company based in Saudi Arabia, pending its execution of a tripartite joint venture agreement on the same terms as the current joint venture agreement between the Company and Bendon, such joint venture interest to be transferred to Badr on execution of such tripartite agreement. In order to acquire its interest in the OJVG Property, the OJVG was required to spend at least USD$8 million on exploration of the OJVG Property by April 17, 2007, and this condition was fulfilled in October 2006. Under the terms of the OJVG agreement, Bendon provided the initial US$2.8 million in exploration expenditures with the Company providing the next US$5.2 million. Badr was to hold a free carried interest until the initial USD$8 million commitment was completed, at which time the three parties would bear all future costs associated with the exploration and development of the OJVG Project on a pro rata basis, or be subject to dilution.

By an agreement dated December 18, 2006, as amended, between Oromin Joint Venture Group Ltd. (“OJVG Ltd.”), SHL, Bendon and Badr, the OJVG was converted into a corporate form. SHL and Bendon each own a 43.5% interest and Badr owns a 13% interest in OJVG Ltd. SHL and Bendon have agreed to each fund 50% of the costs of exploration and development of the OJVG Property, with Badr’s interest being fully carried for as long as it owns an interest in OJVG Ltd. The exploration concession comprising the OJVG Property has been assigned to OJVG Ltd. SHL is the operator of OJVG Ltd. to which it provides exploration and management services. In March 2007, the Government of Sénégal granted a twenty month extension (to December 22, 2008) to the Mining Convention conditional on the joint venture spending an additional USD$12 million during the extension period. This expenditure requirement was met and in December 2008, OJVG Ltd. was granted a further twelve month extension, expiring on December 22, 2009.




16

In August 2009 the Company completed an initial preliminary Feasibility Study for its OJVG Project. This study was prepared by SRK Consulting (Canada) Inc. utilizing available exploration drilling data up to May 2009. The result of this initial study produced a negative net present value (NPV) and as such no mineral reserves could be quantified for the OJVG Property. To seek to improve the project economics, SRK recommended that OJVG (1) focus its exploration activities on identifying high-grade targets that might help in improved cash flows in the early years of the project as the property still has several interesting gold anomalies that, if exploration is successful, could add value to the project; (2) optimize the preliminary Feasibility Study to allow for the known opportunities to be investigated and new opportunities to be sought; and (3) continue drilling on the property and revise the preliminary Feasibility Study based on new information at a cost of approximately $15M.

OJVG adopted SRK’s recommendations, but elected to complete a full Feasibility Study rather than simply revise the preliminary study. As a result, on January 26, 2010, OJVG was granted a mining licence for the OJVG Project. The mining licence is for a term of fifteen years and will permit OJVG to begin mining operations in accordance with recommendations of a full Feasibility Study prepared by SRK Consulting and Ausenco Limited and publicly disseminated in July 2010. It is important to note that development of a mining operation is subject to the owners of OJVG making a production decision, a step which has not yet taken place. OJVG is in the process of establishing an operating company to undertake the development of the OJVG Project. The operating company will be owned by OJVG as to 90% and by the Government of Sénégal as to 10%. The interest owned by the Government of Sénégal is fully carried and the Government of Sénégal is also entitled to a royalty equal to 3% of net smelter returns. Under the terms of the Mining Convention, OJVG is obliged to offer to Sénégalese nationals the right to purchase 25% of such operating company at a price determined by an independent valuator.

OJVG received the final approval from the Government of Sénégal for its Environmental and Social Impact Assessment (“ESIA”) on May 24th, 2012. This process started with the first technical review committee meeting held in March 2011and culminated with blanket approval from all local stakeholders during the public audience held on-site in March 2012. OJVG submitted the final ESIA to government in November 2011 and it passed all three levels of review after minor amendments were incorporated.

Santa Rosa Property, Argentina

Up until November 30, 2011 the Company held an interest in an oil and gas concession in the Republic of Argentina known as the Santa Rosa Property. As set out in Note 7 to the accompanying financial statements, effective December 1, 2011 the Company disposed of this interest for nominal proceeds. An unsuccessful test well was drilled on the property in July 2009. Also as set out in Note 7, the Company wrote off $1,443,355 of costs carried in respect of this property during the year ended February 28, 2011 and a further $83,112 during the year ended February 29, 2012 in respect of the nine months during that fiscal year the property was held.

B. Business Overview

The Company has historically been involved in the exploration of mineral properties in various parts of the world. During the last three financial years the Company’s principal activity has been financing and carrying out exploration on the OJVG Property in Sénégal. In July 2009 the Company also drilled an unsuccessful test well on the Santa Rosa Property as set out above.

In October 2004, the Company was awarded an exploration concession known as the Sabodala Property in the Republic of Sénégal – which has subsequently been renamed the OJVG Property. The exploration concession granted the Company the sole right to acquire a 100% interest in the OJVG Property by spending at least USD$8 million on exploration of the OJVG Property by April 17, 2007, a condition which was met. The OJVG Property was held by the Oromin Joint Venture Group (“OJVG”), a joint venture between the Company and Bendon International Ltd. (“Bendon”), each as to 50% with the Company and Bendon each holding a 6.5% interest in trust for Badr Investment & Finance Company (“Badr”), a private company based in Saudi Arabia, pending its execution of a tripartite joint venture agreement on the same terms as the current joint venture agreement between the Company and Bendon, such joint venture interest to be transferred to Badr on execution of such tripartite agreement. By an agreement dated December 18, 2006, as amended, between Oromin Joint Venture Group Ltd. (“OJVG Ltd.”), Sabodala Holding Limited (“SHL”) (a wholly-owned subsidiary of the Company), Bendon and Badr, the OJVG was converted into a corporate form. SHL and Bendon each




17

own a 43.5% interest and Badr owns a 13% interest in OJVG Ltd. SHL and Bendon have agreed to each fund 50% of the costs of exploration and development of the OJVG Property, with Badr’s interest being fully carried for as long as it owns an interest in OJVG Ltd. The exploration concession comprising the OJVG Property has been assigned to OJVG Ltd. SHL is the operator of OJVG Ltd. to which it provides exploration and management services.

In March 2001, the Company acquired a 100% interest in the oil and gas exploration rights for the Santa Rosa Property in central Argentina. For a number of reasons, including the transfer of jurisdiction over oil and gas development from the federal government of Argentina to the provincial government of Mendoza, no meaningful exploration activities occurred until after April 2008 when the Province of Mendoza issued a decree recognizing the Company’s tenure rights. Pursuant to an agreement dated December 23, 2008, with Otto Energy Ltd. (“Otto”) the Company agreed to sell to Otto an effective 32.48% interest in its Santa Rosa Property by Otto funding exploration expenditures of USD$1,400,000. This transaction closed May 4, 2009. During the financial year ended February 28, 2010, in July 2009 the Company, as operator of the Santa Rosa property, drilled a wildcat test well at the first selected location on the concession but did not encounter any hydrocarbons. Thereafter, the Company reacquired from Otto, at nominal cost, Otto’s 32.48% interest in Cynthia. The Company subsequently sought third party participation in the concession, did not succeed in attracting any such, wrote off all its historical carrying costs in the project, and as set out in Note 7 to the accompanying financial statements sold its interest effective December 1, 2011 for nominal proceeds.

C.

Organizational Structure

The following chart sets out the Company’s corporate structure and the resource properties owned by each of the Company’s subsidiaries:


(1) 

The interest of Oromin Joint Venture Group Ltd. in the OJVG Property takes the form of its rights and interest in a Mining Convention to which it is a party with the Government of Sénégal dated February 17, 2005 as subsequently amended, as more completely set out under Item D. “Property Plants and Equipment – OJVG Property, Sénégal” below. These rights are incorporated in the Mining License for the OJVG Project issued by the Government of Sénégal January 26, 2010. This 100% interest is subject to a reduction to 90% in favour of the Government of Sénégal and, contingently, to 65%, as more completely set out under Item D. “Property Plants and Equipment – OJVG Property Sénégal” below.

 



18

D. Property, Plants and Equipment

The sole property of the Company is the OJVG Gold Project in the Republic of Sénégal. This project is currently in the exploration stage. However, it is the subject of a full Feasibility Study dated June 2010 and would graduate to the status of a development-stage project upon the making of a production decision by the owners. This step has not yet occurred. The Company has not had any revenue from any resource products in the last three fiscal years.

To view an OJVG Gold Project Location Map, please click on the link here:

OJVG Gold Property, Sénégal

The following technical information has been compiled and reviewed by Douglas Turnbull, P.Geo. Except as noted below, the following are the Company’s consulting firms and the associated geologists and qualified persons responsible for the preparation of the technical information concerning the OJVG Property (“OJVG Project” or “OJVG Gold Project” or “OJVG Golouma Project”) in this document. Mr. Turnbull is a director of the Company and is regarded by the Company as not independent. The persons listed below are independent.

  • SRK Consulting (Canada) Inc. under the direction of Gordon Doerksen, P.Eng. (overall project management, underground mining and reserve estimation, economic analysis, environmental review), Dr. Wayne Barnett, P. Nat. Sci., Nat. Sci. (mineral resource estimation, QA/QC, geology), David Rowe, CPG (mineral resource estimation), Fred Brown, CPG (mineral resource estimation), Marek Nowak, P. Eng. (geostatistics), and Dino Pilotto, P.Eng. (open pit mine engineering, open pit mineral reserve estimate)

  • Ausenco Solutions Canada Inc. under the direction of Clint Donkin, AusIMM (metallurgy, mineral processing and infrastructure) and David Brimage, AusIMM (metallurgy, mineral processing and infrastructure)

  • DRA Americas Inc., the DRA mineral resource estimate update was prepared by Dexter Ferreira, P. Nat. Sci.

Unless otherwise indicated, much of the following summary has been extracted or based on the Revised OJVG Golouma Project Updated Mineral Resources Technical Report (December 9, 2011) completed by SRK Consulting (Canada) Inc. (“SRK”) and the OJVG Golouma Project Heap Leach Preliminary Assessment (“PEA”) Technical Report (June 18, 2011) completed by Ausenco Solutions Canada Ltd. (“Ausenco”). References are also made to the June, 2010 OJVG Sabodala Project Feasibility Study Technical Report (“2010 Feasibility Study”) completed by SRK and Ausenco. All of these documents provide a comprehensive overview of the OJVG Gold Project as well as the parameters and engineering studies that were used to define the historic reserves and an overall mine plan for the proposed development of five of the OJVG deposits. The 2010 Feasibility Study and associated reserves are deemed to be historic and out of date as they have been superseded by the updated mineral resource estimate completed by SRK in 2011. Readers are advised that the all of the company’s technical reports have been filed and posted on SEDAR under the filing classification “Technical Report – NI 43-101”.

Technical Summary

OJVG holds a 15 year renewable mining license (“OJVG Gold Project”), covering approximately 212.6 km2 of land in the Tambacounda region of south-eastern Sénégal. Gold exploration on the property has been conducted by Oromin Explorations Ltd. (“Oromin”) on behalf of OJVG or a predecessor unincorporated joint venture (both of which are hereafter referred to as “OJVG”) since 2005. Oromin’s exploration work has progressed from property-wide soil geochemical sampling and geophysical surveys to more focussed trenching, reverse-circulation (“RC”) drilling and diamond drilling. Oromin has been successful in identifying numerous exploration targets and nine gold deposits: Masato, Golouma West, Golouma South, Kerekounda, Kourouloulou, Niakafiri Southeast, Niakafiri Southwest, Maki




19

Medina and Kobokoto. All of these deposits have been drilled to a level that supports classification of mineral resources. Five of the deposits (Masato, Golouma West, Golouma South, Kerekounda and Kourouloulou) have mineral reserves defined in the 2010 Feasibility Study.

OJVG’s Gold Project lies in a sparsely populated area of Sénégal approximately 650 km ESE of Dakar, a 12-hour journey by road. The property is 185 km ESE of Tambacounda and 65 km north of the district town of Kédougou. The border with Mali lies about 40 km to the east.

There is a paved airstrip that supports twin engine charter flights from Dakar. OJVG has access to the use of the airstrip. Road access to the property is via a paved road to Tambacounda and Kédougou and a combination of paved and dirt roads thereafter. Roads on the property have soil bases and can degrade substantially during heavy rains.

The property borders the Teranga Gold Corporation’s (“Teranga”) 20.3 km2 Sabodala mining concession. The OJVG Gold Project is situated on the divide between the Gambia and Falémé River catchments to the west and east respectively. The terrain is comprised of open savannah vegetation on gently rolling hills and is at an elevation of roughly 200 m above sea level. The climate of the region belongs to the Sudanic zone and is generally hot and humid. The rainy season, between June and September, brings heavy downpours that are generally short and intense and can cause disruption to transport. The estimated average annual rainfall on the property is 1,100 mm, the vast majority falling in the rainy season.

In October 2004, OJVG was awarded an exploration permit for the OJVG Gold Project, issued in accordance with the Mining Convention. The registered name of the exploration concession is the Golouma Concession, it has previously been referred to as OJVG’s Sabodala Project, and it is currently referred to as the OJVG Gold Project by Oromin. The exploration permit was formalized with the government in February 2005. OJVG spent USD $ 11 million on exploration during the first 22 month period to December 31, 2006, which was extended twice to December 22, 2009.

On January 26, 2010, OJVG was granted a mining licence for the OJVG Gold Project. The mining licence is for a term of fifteen years, renewable, and will permit OJVG to begin mining operations in accordance with recommendations of this Feasibility Study. OJVG is in the process of establishing an operating company to undertake the development of the Project.

The operating company will be 90% owned by OJVG and 10% by the Government of Sénégal. The interest owned by the Government of Sénégal is fully carried and the Government of Sénégal is also entitled to a royalty equal to 3% of net smelter returns. Under the terms of the Mining Convention, OJVG is obliged to offer to Sénégalese nationals the right to purchase 25% of such operating company at a price determined by an independent valuator.

The renewable mining licence allows for a minimum 8 years tax free benefit which commenced January 26, 2010, and can be extended for up to 15 years through Government negotiation.

Geology and Mineralization

The OJVG Gold Project lies within the Kédougou-Kéniéba Inlier; part of the highly deformed circa 2.1 Ga Paleoproterozoic Birimian-Eburnean province of the West African Craton. The Kédougou-Kéniéba Inlier is a triangular shaped area composed of felsic gneiss terranes separated by greenstone belts that consist of supracrustal metavolcanic and metasedimentary rocks, including the thick succession of Mako Volcanic Group mafic to ultramafic material, Kakadian Batholith granitic complex, and the Eburnean Syn-tectonic Granites comprising discrete granodioritic intrusives and possibly felsic dykes.

The concession straddles the Main Transcurrent Shear Zone (“MTSZ”), which is a regional-scale N-NE trending ductile fault that impacts all of the deposits that lie within rocks affected by this zone of NNE-SSW oriented shear.

The mineral deposits within the OJVG Gold Project (Golouma West, Golouma South, Kerekounda, Kourouloulou, Masato, Niakafiri Southeast, Niakafiri Southwest, Maki Medina and Kobokoto) and various gold prospects and targets fall within the broad classification of orogenic gold. The principal mineralized zones within the deposits are hosted by high strain areas within the prevailing shear zones. Gold mineralization is associated with zones of metavolcanics affected by intense Fe-carbonate-sericite±quartz±feldspar ±pyrite alteration, the intensity of which broadly correlates to the intensity of the deformation fabric and the presence of thicker quartz-carbonate veins. At Masato, fuchsite (Cr-mica) is also present, owing to the presence of ultramafic rocks. Multiple parallel zones comprise each deposit, with individual zones of anomalous gold values typically ranging from 2 to15 m in true thickness.




20

OJVG has further classified its deposits into two styles of mineralization hosted within the NNE trending, 8 km wide MTSZ that runs the entire 22 km length of the concession. The western side of the MTSZ structural corridor hosts OJVG’s lower grade, bulk mining style deposits collectively referred to as the “Masato Style” bulk tonnage deposits (Masato, Niakafiri Southeast, Niakafiri Southwest, Maki Medina and Kobokoto) while the eastern side hosts OJVG’s higher grade deposits, collectively referred to as the “Golouma Style” higher grade deposits (Golouma West, Golouma South, Kerekounda and Kourouloulou). Only the Golouma West, Golouma South, Masato, Kerekounda and Kourouloulou deposits host ore reserves.

The Golouma West deposit consists of two broadly E-W trending zones, which together have a total strike length of approximately 800 m and drilled-off to a depth of about 500 m, and one N-NE trending zone with a strike of over 250 m. A total of six steeply south-dipping shear zone-hosted sheet-like bodies of mineralization have been defined in the EW zones.

The Golouma South deposit occupies a NNE-oriented, moderately to steeply west-dipping ductile shear zone. Mineralization has been defined for a strike length of approximately 640 m and down to about 280 m below surface currently. It has been modelled within five shear zone-hosted sheet-like bodies of mineralization.

Recently the Company has commenced regarding the Golouma West and Golouma South deposits as a single deposit and from time to time refers to this single deposit as the Golouma deposit.

The Masato deposit has been defined over a 2,100 m strike length of a NNE-trending, moderately west-dipping shear zone. The zone consists of between two and six separate mineralized zones over a distance of up to 90 m, which have been drilled to a depth of about 220 m below surface.

Mineralization at the Kerekounda deposit occupies three relatively minor N-NW-trending shear zones, dipping 50-70° towards W-SW. Mineralization has been defined over a strike length of about 350 m and down-dip for approximately 430 m.

The Kourouloulou deposit has four E-SE striking shear zone-hosted sheet-like bodies of mineralization that dip at intermediate angles to the south. Although the strike length of this deposit is currently defined only to approximately 200 m, the gold grade is higher than at the other deposits.

Drilling at the Maki Medina deposit has defined the mineralization over a strike length of approximately 1,600 metres. Currently the mineralized shear zones have been drilled to depths shallower than 200 m below the surface.

The Niakafiri Southeast deposit is located within the central part of the Project, approximately 3 km northwest of the Golouma area. This area is interpreted to be a series of tectonic slices of altered and sheared mafic and ultramafic metavolcanic rocks intruded by minor felsic and mafic intrusives. Gold mineralization is hosted by mafic volcanic units and bound to the west by a package of mafic to intermediate composition epiclastic volcanic rocks. Structurally Niakafiri Southeast is situated in the same group of north-northeast trending shear zones of the MTSZ that host the Maki Medina and Masato deposits, 2.5 km to the S-SW and 4 km to the N-NE, respectively. As elsewhere, the shear zone dips steeply towards the west. Additionally, relatively short (<1 km) steeply-dipping, ENE-WSW trending shear zones appear to cross-cut the Niakafiri Southeast area and may have interacted with the NNE shear zones to control the mineralization.

The Niakafiri Southwest deposit is located approximately one kilometre west of and parallel to Niakafiri Southeast. This area is interpreted to be a 200-300m wide structural corridor consisting of a series of NNE trending, steeply west dipping, strongly sheared and altered intermediate and mafic metavolcanic rocks. This package has been intruded by two late, 20 to 30 m wide, NNE trending mafic dykes and a series of smaller felsic intrusives. Gold mineralization is hosted by the sheared and altered metavolcanic rocks and associated quartz veining.

The Kobokoto deposit is located approximately 1.5 kilometres southwest of the Maki Medina Deposit and approximately 4 kilometres southwest of the Niakafiri Southeast and Niakafiri Southwest deposits. The northeast trending Kobokoto deposit occurs within a variably sheared and altered NNE trending unit of massive mafic metavolcanics, bound to the east by a prominent intermediate to mafic epiclastic volcanic unit. The main mineralized zone consists of a shallow west dipping, variably sheared zone of quartz-carbonate (lesser Fe carbonate) alteration and associated quartz,+carbonate+tourmaline veining. The entire volcanic package is intruded by NNE trending mafic dykes and lesser intermediate to felsic dykes. Although Kobokoto is associated with the same NNE regional structural trend that is host to the Masato, Maki Medina, Niakafiri Southeast and Niakafiri Southwest deposits to the northeast, the




21

shallow dip of the Kobokoto mineralization is unique and possibly related to a local horizontal flexure within the regional NNE trending shear zone.

EXPLORATION

Calendar Year 2011 – Fiscal Year Ended February 29, 2012

The Company’s 2011 exploration program on the OJVG Gold Project, budgeted at USD$27,000,000 consisted largely of core and RC drilling. Drilling during the first half of 2011 focussed on extending the known limits of mineralization, particularly at depth at Golouma West, Golouma South and Kerekounda. In June of 2011, the company announced its Q3 and Q4 exploration budget and program consisting of approximately 13,000 metres of new core drilling in approximately 60 holes. Much of the drilling carried out in the second half of 2011 was directed at initial and follow-up drilling of new gold targets and recent discoveries. By the end of 2011 OJVG had completed 37,862 metres of core drilling in 149 drill holes and 16,131 metres of RC drilling in 109 holes. No drilling was carried out during January and February 2012. The 2011 drill campaign successfully expanded the known limits of mineralization, particularly at depth at Golouma West, Golouma South and Kerekounda while making new discoveries at Mamasato, Kotouniokolla, Kinemba, Saboraya, Sekoto and Kourouloulou South.

Based on the recommendation of the Ausenco heap leach desk-top study in the fall of 2010, the Company contracted Ausenco to conduct a Preliminary Economic Assessment (“PEA”) of the heap leach potential at the OJVG Gold Project. The study was based on previous modelling of the Maki Medina deposit, the re-modelled Kobokoto, Niakafiri Southeast and Niakafiri Southwest gold deposits using a 0.20 g/t Au cut-off grade in order to determine what portion of these indicated and inferred mineral resources could conceptually be economically recovered by heap leaching as well as an evaluation of mineralized material previously designated as waste from the proposed 2010 Feasibility Study Masato reserve pit. The positive outcome of the PEA was announced on May 5. 2011.

On May 12, 2011, the Company announced SRK’s mineral resource estimate updates for the Masato, Golouma West, Golouma South, Kerekounda and Kourouloulou deposits. As a result of the drilling in 2010 and early 2011, there was an overall increase in the Project’s mineral resources as well as confirmation of the continuity of gold mineralization at depth, giving even greater confidence in the down dip potential of the Golouma West, Golouma South, and Kerekounda deposits. The 2011 SRK mineral resource estimate update involved a complete re-interpretation by SRK of the geologic and mineralized models of all four Golouma Style deposits and the Masato deposit.

The Company’s investment on the equity basis of accounting in the OJVG Gold Project increased by $8,862,865 net of project administration for the fiscal year ended February 29, 2012.

Calendar Year 2010 – Fiscal Year Ended February 28, 2011

The Company’s 2010 exploration program on its OJVG Gold Project, budgeted at USD$30,000,000, was almost exclusively resource definition and engineering related drilling in support of SRK’s June 2010 Feasibility Study and the Ausenco Engineering optimization studies completed in the fall of 2010. The 2010 drilling consisted largely of infill and stepout Core and RC drilling at Golouma West, Golouma South, Kerekounda, Masato, Kourouloulou, Kobokoto, Maki Medina, Niakafiri Southeast and Niakafiri Southwest deposits as well as initial drilling at the Koulouqwinde, Kinemba and Koutouniokolla targets. A total of 80,493 metres of core drilling (DDH-SAB-10-619 to 948) and 22,527 metres of RC drilling (RC-SAB-10-663 to 846) were completed in FY 2010. The majority of reverse circulation and diamond drilling conducted by OJVG in 2010 focused on the lateral and vertical expansion and infill drilling for resource estimation purposes on the Golouma West, Golouma South, Masato, Kerekounda, Kourouloulou, Niakafiri Southeast, Niakafiri Southwest, and Kobokoto deposits. Systematic step-out holes at the Kerekounda prospect continued to intersect good intercepts of high-grade material, further indicating the potential for a resource with open-pit and underground mining possibilities, with a down-dip extent of at least 300 m and to as much as 600 m at Golouma West. A total of 22,408 metres of Reverse Air Blast (“RAB”) drill holes were also completed in 640 shallow holes as profiles across a number of laterite covered target areas on the Property including Mamakono, Maki Medina, Kinemba, Maleko and Kobokoto.




22

In July of 2010 the Company announced the results of a Feasibility Study (“2010 Feasibility Study”) on the OJVG Gold Project. This study was completed by SRK Consulting (Canada) Inc. (“SRK”) and Ausenco Solutions Canada Ltd. (“Ausenco”) and included drilling up to January 2010 and addressed a number of the recommendations from SRK’s 2009 PFS.

The results of the 2010 Feasibility Study were positive for the three economic cases evaluated in the study based on $880/oz, $1000/oz and $1200/oz gold prices. Using an $880/oz gold price, the economic analyses yielded a USD$74 million NPV at a 3% discount rate, 11.2% IRR and a 4 year payback period. Using a $1200/oz gold price, the study yielded a USD$361 million NPV at a 3% discount rate, 36.3% IRR and a 2 year payback period. The study outlined the OJVG Gold Project’s first mineral reserve estimate comprising 17.5 million tonnes, grading 2.52 g/t Au of combined open pit and underground Probable mineral reserves containing 1.42 million ounces of gold.

In August of 2010 the Company contracted Ausenco to complete optimization studies based on the recommendations of the 2010 Feasibility Study. These studies included an evaluation of the costs and benefits of installing a primary crush stockpile and reclaim system and increasing the leach tank size. In October of 2010, Oromin announced the positive outcome of these two separate plant optimization studies. Both of these optimizations are expected to increase the annual gold production and the project NPV above those defined in the 2010 Feasibility Study. The expected increase to the project NPV as a result of these two optimizations ranges from $US23M to $US37.2M.

In the fall of 2010 Ausenco was also engaged to examine the potential and viability of incorporating heap leach processing in paralle with the CIL plant proposed in the 2010 Feasibility Study. The outcome of the initial desk-top heap leach trade-off study would confirm whether there is sufficient heap leach material available on the OJVG Gold Project, to make this development option viable.

The Company’s investment on the equity basis of accounting in the OJVG Gold Project increased by $16,875,490 net of project administration for the fiscal year ended February 28, 2011.

Calendar year currently in progress

Changes expected to influence our business during the current financial year are set out below.

The OJVG shareholders have approved the calendar 2012 exploration budget as presented by Oromin Explorations Ltd., the Project Operator. For the January to December period of 2012, the total Project budget is set at US $ 6,365,000. Expenditures anticipated within this budget outline will include detailed soil geochemical sampling, prospecting and geological mapping at a number of recent and historic discoveries; updating of the Project’s mineral resources to include up to fourteen separate Deposits; and updating of the Project’s 2010 Feasibility Study for the four primary deposits of Golouma, Masato, Kerekounda and Kourouloulou. No significant amount of additional drilling is planned for the 2012 calendar year.

Based on drilling completed to the end of 2011, Oromin contracted SRK in May to carry out mineral resource updates on the Masato, Golouma (formerly Golouma West and Golouma South), Kerekounda, Kourouloulou, Kobokoto, Maki Medina, Niakafiri Southeast and Niakafiri Southwest deposits and first time mineral resource estimates for Mamasato, Sekoto, Kouroundi, Kinemba, Kotouniokolla and Koulouqwinde. Once the mineral resource updates and estimates have been completed, Oromin has retained SRK and Ausenco to update the 2010 Feasibility Study in the latter half of 2012.

During Q1 and Q2 of 2012, OJVG has conducted follow up surface exploration programs at a number of new and previously identified targets including Goumbati, Goumbati West, Masato Northeast, Dendifa West, Timtimol and Maki Medina East.

MINERAL RESERVE ESTIMATE

There are no current mineral reserves on the OJVG Gold Project. However the historical mineral reserve estimate completed as part of the 2010 Feasibility Study completed by SRK and Ausenco is still considered relevant. The 2010 Feasibility Study and associated reserves are deemed to be historic and out of date as they have been superseded by an updated mineral resource estimate completed by SRK in 2011. OJVG has engaged SRK and Ausenco to update the 2010 Feasibility Study. The expected completion date of the updated Feasibility Study is Q4, 2012.




23

Heap Leach Desktop Study

In the spring of 2011 Ausenco and SRK were contracted by OJVG to produce a Preliminary Economic Assessment (“PEA”) for a proposed heap leach operation to treat lower grade material that was not included in the 2010 Feasibility Study on the OJVG Gold Project. Inferred and Indicated lower grade oxide and fresh resources from five Masato Style Deposits (Niakafiri Southeast, Niakafiri Southwest, Maki Medina, Kobokoto and the low grade portion of the proposed Masato open pit) were assessed as potential sources of material that would be treated by heap leach methods. The PEA was completed during Q2, 2012 with the positive outcome announced on May 5, 2012.

Doing Business in Sénégal

The République du Sénégal gained independence from France in 1960 and has maintained a democratic political system. It is a secular republic with a strong presidency, a legislature with defined powers, an independent judiciary, and multiple political parties, and is notable as one of the few African states that has never experienced a coup d’état. In 2000, power was transferred peacefully in fully democratic elections, from former President Abdou Diouf to President Abdoulaye Wade, and in 2012 power was similarly transferred from President Wade to the new President, Macky Sall..

The president is elected by universal adult suffrage to a seven year term. The unicameral National Assembly has 120 members, who are elected separately from the president. The Cour de Cassation (the country’s highest appeals court) and the Constitutional Council, the justices of which are named by the president, are the nation's highest tribunals. Sénégal is divided into 14 administrative regions, each headed by a governor appointed by and responsible to the president. The law on decentralisation, which came into effect in January 1997, distributed significant central government authority to regional assemblies.

During the years 2000-2012, the administration advanced a liberal agenda for Sénégal, including privatisations and other market-opening measures. The country, nevertheless, has limited means with which to implement ambitious ideas. The liberalisation of the economy is proceeding. Sénégal continues to play a significant role in regional and international organisations. Recent administrations have made excellent relations with western democracies a high priority.

There are presently in excess of 16 political parties, some of which are marginal and little more than platforms for their leaders. The principal political parties, however, constitute a true multiparty, democratic political culture, and they have contributed to one of the most successful democratic transitions in Africa. A flourishing independent media, largely free from official or informal control, also contributes to the democratic politics of Sénégal. The country’s generally tolerant culture, largely free from ethnic or religious tensions, has provided a resilient base for democratic politics.

The former capital of French West Africa, Sénégal is a semi-arid country located on the westernmost point of Africa. Predominantly rural and with limited natural resources, the country earns foreign exchange from fish, phosphates, peanuts, tourism, and services. Its economy is vulnerable to variations in rainfall and changes in world commodity prices.

With an external debt of USD$4.38 billion, and with its economic reform program on track, Sénégal has attained several milestones in the Heavily Indebted Poor Countries (HIPC) debt relief program from 2004 to date. Sénégal continues to lead the West African Economic and Monetary Union (“WAEMU”) countries in macroeconomic performance. For 2011, inflation was at 3.4%, and in most indicators, Sénégal conformed to the WAEMU monetary convergence criteria with a tax revenue to gross domestic product ratio of 22.8%, public investment to GDP ratio of 24.7%, a current account deficit of USD $1.425 billion, and an industrial production growth rate of 4.9%.

Currently, there are no restrictions on the transfer or repatriation of capital and income earned, or investment financed with convertible foreign exchange. Economic assistance comes largely from France, the IMF, the World Bank, and the United States, with Canada, Italy, Japan, and Germany also providing assistance.




24

Sénégal has well-developed port facilities, an international airport that serves as a regional hub serving numerous international airlines, and an advanced telecommunications infrastructure, including a fibre optics backbone and cellular phone penetration exceeding 10% of the population.

Sénégal’s mining code is based on French civil law. The state owns all mineral rights, with the terms of exploration and mining established by contract between the concession holder and the state. Exploration concessions are generally granted for four years with rights of renewal. In the case of OJVG, its exploration concession was renewed from 2005 through 2009 and in January 2010 was converted into a Mining License with a life of 15 years renewable thereafter if renewal conditions set out in the mining code are met.

ITEM 4A. UNRESOLVED STAFF COMMENTS


None.


ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

A. Operating Results

The Company is in the business of exploring its resource properties, with the primary aim of developing them to a stage where they can be exploited at a profit. The Company does not currently have any producing properties and its current operations are exploratory searches for minerals.

During the fiscal year ended February 29, 2012, the Company’s principal activities consisted solely of continuing the exploration of its OJVG mineral property in Sénégal. As set out in Note 5 to the accompanying financial statements, on the equity accounting basis the Company increased its investment in the OJVG project by $8,862,865. Expenditure at this project reflected a continuing strong level of exploration. The level of expenditure diminished from that of the prior fiscal year reflecting the completion of extensive and expensive engineering studies associated with the Feasibility Study completed in July 2010 and a reduction in drilling activity commensurate with the completion of feasibility.

During the fiscal year ended February 28, 2011, the Company’s principal activities consisted solely of continuing the exploration of its OJVG mineral property in Sénégal. As set out in Note 5 to the accompanying financial statements, on the equity accounting basis the Company increased its investment in the OJVG project by $16,875,490. Levels of expenditure at this project reflected a continuation of a robust pace of exploration as that project reached the full Feasibility Study stage in July 2010.

As at February 29, 2012, the Company had recorded on the equity basis of accounting a total investment of $76,371,325 with respect to its OJVG Property in Sénégal, an increase of $8,862,865 from the prior year’s investment. The major components of fiscal 2012 expenditures are set out, in respect of the 100% combined project interest, in Note 5 to the accompanying financial statements of which the largest components are as follows: drilling costs of $7,383,802 or 34% of the total; camp operation costs of $2,383,514 or11% of the total; contractor and geological staff costs of $2,052,096 or 9% of the total; sample analysis costs of $1,744,286 or 8% of the total; and social program costs of $1,502,934 or 7% of the total. The exploration activities for 2011 (fiscal year ended February 29, 2012) were focused principally on drilling and related sample analysis/assaying, and the development of additional targets, both as to extensions of established deposits and as to identification of new areas of interest.

As at February 28, 2011, the Company had recorded on the equity basis of accounting a total investment of $67,508,460 with respect to its OJVG Property in Sénégal, an increase of $16,875,490 from the prior year’s investment. The major components of fiscal 2011 expenditures are set out, in respect of the 100% combined project interest, in Note 5 to the accompanying financial statements of which the largest components are as follows: drilling costs of $17,416,654 or 47% of the total; engineering costs of $5,602,991 or 15% of the total; sample analysis costs of $3,300,694 or 9% of the total; camp operation costs of $2,852,720 or 8% of the total; and contractor and geological staff costs of $2,245,250 or 6% of the total. The exploration activities for 2010 (fiscal year ended February 28, 2011) were focused principally on drilling and related sample analysis/assaying, and on engineering costs of the Feasibility Study completed in July 2010.




25

Fiscal Year Ended February 29, 2012 Compared to Fiscal Year Ended February 28, 2011

During the fiscal year ended February 29, 2012 the Company recorded a corporate advisory fee cost of ($1,941,571), an equity loss on its investment in OJVG of ($109,917), interest income of $105,565, a foreign exchange loss of ($1,948), project administration cost recoveries of $664,623 and a write-down of its oil and gas project of $(83,112). During the fiscal year ended February 28, 2011 the Company recorded a corporate advisory fee cost of ($2,807,405), an equity gain on its investment in OJVG of $123,000, interest income of $105,234, a foreign exchange loss of $(110,888), project administration fees of $495,647 and a write-down of its oil and gas project of $(1,443,355). The corporate advisory fee cost is highly variable and diminished in fiscal 2012 as agreed between the parties. The equity loss or gain in OJVG is largely dependent on foreign exchange effects in that entity’s accounting. Those FX effects tend to move in opposite directions in OJVG from those experienced in the Company’s FX transactions. Project administration fees increased due to higher levels of project costs and related administrative activities. Write-downs of project costs are highly variable depending on the results of impairment reviews.

Expenses for the fiscal year ended February 29, 2012 were $6,514,266, up six per cent from $6,145,729 for the fiscal year ended February 28, 2011. However, there were wide variances in the line items. By far the most significant decrease was in stock-based compensation costs. This cost is highly variable depending on numbers of options granted and market and exercise prices at and preceding the date or dates of grant, together with prevailing risk-free interest rates – factors which have a significant effect on the volatility inputs to the option pricing model on which the costs recognized are based. The principal increases in other cost centres were for professional and consulting fees, for salaries and benefits, and for office and rent. Professional and consulting fees increased reflecting extensive financing and corporate planning activities. Salaries and benefits costs were commensurate with the ongoing scope and scale of the Company’s exploration activities, and include a significant bonus paid to the Company’s CEO. Office and rent increases were commensurate with the ongoing scope and scale of the Company’s exploration activities.

Net loss for the fiscal year ended February 29, 2012 was $8,207,833 or $0.06 per share compared with a net loss for the fiscal year ended February 28, 2011 of $9,783,496 or $0.08 per share. The decrease in net loss is attributable principally to the reduction in write-down amount of the oil and gas project set out in Note 7 to the accompanying financial statements, to the reduction in the corporate advisory fee set out in Note 6, offset in part by increased operating expense as described in the preceding paragraph. The Company expects to continue to incur substantial net operating losses for the fiscal year ending February 28, 2013.

B. Liquidity and Capital Resources

As set out in the consolidated statements of changes in equity, during the previous 2011 financial year the Company completed two major financings for gross proceeds of $30.3 million. These financing proceeds are an example of the Company’s sole external source of liquidity, namely, equity financings. During the last six financial years, the Company has had the benefit of gross proceeds of capital stock placements issued for cash of $15.7 million in fiscal 2007, $24.6 million in fiscal 2008, $0.7 million in fiscal 2009, $26.9 million in fiscal 2010, $30.3 million in fiscal 2011 and 0.9 million in fiscal 2012. These financings total $99.1 million raised in the past six years, a period which in substantial part was characterized by difficult conditions in the capital markets.

In management's view, given the nature of the Company's activities, which consist of the acquisition and exploration of resource properties, financial information concerning the Company’s current liquidity and capital resources is highly meaningful and material. The Company does not currently own or have an interest in any producing resource properties and has not derived any revenues from the sale of resource products in the last three financial years. The Company's OJVG mineral project is located in Sénégal, and as a result the Company's operations may be subject to additional risks.

The Company's exploration activities have been funded through sales of common shares, and the Company expects that it will continue to be able to utilize this source of financing until it develops cash flow from its operations. There can be no assurance, however, that the Company will be able to obtain required financing in the future on acceptable terms, or at all. In the near term, the Company plans to continue its exploration activities on the OJVG gold project. The Company has not made use of any financial instruments for hedging purposes in the fiscal year ended




26

February 29, 2012 or to the date of this report. The Company had no material commitments for capital expenditures at the end of its most recent fiscal year, but plans and intends to continue with its share of exploration expenditures on the OJVG Property during the fiscal year ending February 28, 2013.

While the Company has been successful in raising the necessary funds to finance its exploration activities to date, there can be no assurance that it will be able to continue to do so. If such funds are not available or cannot be obtained or are insufficient to cover the costs of the Company's exploration and development activities, the Company will be forced to curtail its exploration and development activities to a level for which funding is available or can be obtained.

Other than as discussed herein, the Company is not aware of any trends, demands, commitments, events or uncertainties that may result in the Company's liquidity either materially increasing or decreasing at present, other than in the case where the owners were to make a production decision on the OJVG gold project. In that case, the associated capital and other start-up costs would be extremely material, and require a high level of confidence in related financing being put in place. Material increases or decreases in the Company's liquidity will be substantially determined by the scope of exploration and, on a production decision being made, of development costs, on the Company’s resource project, and on the state of the capital markets.

February 29, 2012 Compared to February 28, 2011

At February 29, 2012, the Company’s current assets totalled $4,351,095 compared to $17,415,376 at February 28, 2011, a decrease of $13.1 million. Of this decrease, $12.3 million or 94% is attributable to the changes in the Company’s cash balances as set out in the consolidated statement of cash flows. These in turn consist of net cash outflows for joint venture investments and joint venture advances, totalling $8.95 million; net cash consumed by operating activities of $4.3 million; and cash inflows of $0.9 million from the exercise of share purchase warrants and stock options. For the same periods, current liabilities reduced from $351,000 to $286,000, a change we do not regard as material. Included in the Company’s current liabilities were payables or accrued liabilities of $59,224 due to related parties as set out in Note 11 to the accompanying financial statements. The Company had working capital at February 29, 2012 of $4,064,839 compared to $17,064,272 at February 28, 2011. At both February 29, 2012 and February 28, 2011, the Company had no long-term debt.

At February 29, 2012, the Company had total assets of $80,967,002 compared to $85,178,886 at February 28, 2011. The decrease arises essentially from the $12.3 million draw-down in cash described above, offset in part by the $8.9 million increase in our investment in the OJVG joint venture.

Share capital as at February 29, 2012 was $112,455,628, a modest increase from $111,298,040 as at February 28, 2011, attributable to the transactions set out in the statement of changes in equity.

The Company's largest cash outflows in the fiscal year ended February 29, 2012 resulted, as is the case every year, from net joint venture investments; for the year ended February 29, 2012 these were $8,862,865 as set out in the first table in Note 5 to the accompanying financial statements. The decrease of 47% from the prior year is principally attributable to the reduced drilling and engineering costs at the OJVG gold project as also set out in Note 5. The cash inflows for the year ended February 29, 2012 arose from the exercise proceeds of warrants and stock options, in the relatively modest total of $873,000. During the preceding financial year ended February 28, 2011 major financings in the public markets generated $28.6 million. No such financings were necessary in fiscal 2012.

 




27

February 28, 2011 Compared to March 1, 2010

At February 28, 2011, the Company’s current assets totalled $17,415,376 compared to $10,318,584 at March 1, 2010 (the transition date to our commencing reporting our financial statements under IFRS). Of the increase of $7.1 million, $6.2 million or 87% is attributable to the changes in the Company’s cash balances as set out in the consolidated statement of cash flows. These in turn consist of net cash inflows of a net $28.6 million raised in two major financings in the public markets; net cash outflows for joint venture investments and joint venture advances totalling $17.0 million; and net cash consumed by operating activities of $5.0 million. Over the same periods, current liabilities reduced from $621,000 to $351,000. Included in the Company’s current liabilities were payables or accrued liabilities of $59,087 due to related parties as set out in Note 11 to the accompanying financial statements. The Company had working capital of at February 28, 2011 of $17,064,272 compared to $9,697,686 at March 1, 2010. At both February 28, 2011 and March 1, 2010, the Company had no long-term debt.

At February 28, 2011, the Company had total assets of $85,178,886 compared to $62,334,331 at March 1, 2010. The increase of $22.8 million arises essentially from the net proceeds of the two significant financings carried out in the fiscal year, reduced by the Company’s net loss, including the write-down of its oil and gas interests.

Share capital as at February 28, 2011 was $111,298,040, up from $82,876,200 as at March 1, 2010, attributable to the financings completed during the period, as set out in the statement of changes in equity.

The Company's largest cash outflows in the fiscal year ended February 28, 2011 resulted, as is the case every year, from increased investment in the OJVG joint venture; for the year ended February 28, 2011 these were $17.0 million. The cash inflows for the year ended February 28, 2011 were characterized primarily by two large financings summarized in the statement of changes in equity that generated net cash proceeds of $27.7 million. Warrant and stock option exercise proceeds added a further $870,000.

Outlook

In the near term, the Company plans to continue its exploration activities on its OJVG Property with a view to assisting the owners in reaching a possible production decision. Accordingly, principal activities under way during the new fiscal year currently in progress are completing a comprehensive environmental and social impact assessment (as announced May 24, 2012), conducting an updated resource estimate scheduled for completion in Q3, and completing an updated full feasibility study scheduled for completion in Q4. Based on its existing working capital as of the date of this report, and on no production decision being taken this year, the Company does not expect to require additional financing for its currently held property during the fiscal year currently under way. The Company had no material commitments for capital expenditures at the end of its most recent fiscal year, but plans and intends to continue with its share of exploration expenditures on the OJVG Property. The Company’s resource property is not in production and, therefore, does not produce any income.

C. Research and Development, Patents and Licenses, etc.

 As the Company is an exploration company with no producing properties, the information required by this section is inapplicable.

D Trend Information

As the Company is an exploration company with no producing properties, the information required by this section is inapplicable.

E. Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.




28

F. Tabular Disclosure of Contractual Obligations

The Company has no contractual obligations of the type required to be disclosed in this section.

G. Safe Harbour

This Annual Report on Form 20-F contains “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes’, or variations of such words and phrases or state that certain actions, events or results “may”, “can”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved”. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, levels of activity, performance or achievements of Oromin Explorations Ltd. to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: the risk factors described in Item 3.D of this report on Form 20-F; risks related to the exploration and potential development of the Company’s OJVG mineral project; risks related to international operations; the actual results of current exploration activities; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; futures prices of gold and other precious and base metals. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Oromin Explorations Ltd. does not undertake to update any forward-looking statements that are incorporated by reference herein, except in accordance with applicable securities laws. The Company’s mineral property is located in Sénégal and thus may be exposed to various and unpredictable levels of political, economic and other risks and uncertainties. The Company conducts operations through foreign subsidiaries which hold the rights to the mineral and hydrocarbon properties. Operations may be affected in varying degrees by government regulations with respect to, but not limited to, expropriation of property, maintenance of tenure, environmental legislation, land use and land claims. Failure to comply with applicable laws, regulations and local practices relating to mineral rights applications and tenure could result in loss, reduction or expropriation of entitlements.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

 

A. Directors and Senior Management

Derek Bartlett

Mr. Bartlett is a director of the Company and is the “lead director” of the independent directors. He has worked as a geologist and exploration manager for a number of international mining companies since 1966. Mr. Bartlett is a director of Cadman Resources Inc., Newport Gold Inc., Saville Resources Inc., and Waseco Resources Inc. and is currently the President of Newport Gold Inc. and Cadman Resources Inc. Mr. Bartlett is 72 years old.

Robert Brennan

Mr. Brennan is an independent director of the Company. He has been an investment advisor with CB Richard Ellis since 1987 and prior thereto was a staff accountant with Peat Marwick Mitchell, a predecessor firm of KPMG. Mr. Brennan is 51 years old.

Ian Brown

Mr. Brown is the Chief Financial Officer of the Company, appointed April 15, 2007. He holds a B.Comm. degree and is a Chartered Accountant, the Canadian equivalent of a CPA. He has been a financial executive with a wide array of public companies in the mining exploration industry since 1979. Mr. Brown is 64 years old.

Nell Dragovan

Ms. Dragovan is a director of the Company and is married to Mr. Idziszek. She is a financier with a long, successful history of organizing and financing junior resource companies in Canada. In 1980, she founded Corona Explorations which discovered the Hemlo gold deposits in Northern Ontario. Ms. Dragovan is also a director of Madison Minerals Inc. Ms. Dragovan is 62 years old.




29

Chet Idziszek

Mr. Idziszek is President and CEO and a director of the Company. Mr. Idziszek holds a Master of Applied Sciences degree from McGill University and has worked as an exploration geologist and exploration executive with numerous international mining companies for over 40 years. He has been recognized by his industry peers for his central role in the discovery and development of the Eskay Creek gold deposit in Canada, being designated “Mining Man of the Year” in 1990 and “Prospector of the Year” in 1994. He has also been recognized for his leadership of Adrian Resources Ltd. during its exploration and development of the Petaquilla copper-gold-molybdenum deposits in Panama. He was a director of Arequipa Resources Ltd. which discovered the Pierina gold deposit subsequently acquired by Barrick Gold Corp. in 1996 for USD $790 million. Since 2005 his principal focus has been the Company and its joint venture on the OJVG Gold Project in eastern Sénégal. This project reached the positive feasibility stage in 2010 and subsequently to date has established 3.32 million ounces of gold in indicated resources and 0.43 million ounces in inferred resources with ongoing and widespread scope for expansion. Mr. Idziszek is President, CEO and a director of Lund Gold Ltd. and Madison Minerals Inc. Mr. Idziszek is 64 years old and is the spouse of Ms. Dragovan.

Kenneth Kuchling

Mr. Kuchling is a Professional Engineer and is Vice President of Engineering for the Company. He holds a Bachelor of Engineering (Mining) degree from McGill University and a Masters of Engineering (Mining) degree from the University of British Columbia. His engineering background consists of 30 years experience with various commodities and in various locations globally. He has been employed both at mining operations and in the consulting industry and has previously been responsible for the management of scoping and feasibility studies. Mr. Kuchling is 54 years old.

David Mallo

Mr. Mallo is Vice-President, Exploration of the Company. He holds the degree Bachelor of Science from Brandon University, has extensive public company experience and has served as a director of several publicly traded junior resource companies. Mr. Mallo is 53 years old.

Robert Sibthorpe

Mr. Sibthorpe is a director of the Company. He holds a B.Sc. in geology and an MBA from the University of Toronto. He worked as a mining analyst and director of Yorkton Securities Inc. in Vancouver from 1986 to 1996. He was an independent mining consultant from 1996 to 1999 when he joined Canaccord Capital Corporation as a mining analyst from 1999 to 2001. Since 2001 he has worked as an independent mining consultant and exploration company executive. Mr. Sibthorpe is currently a director of Madison Minerals Inc, Midnight Sun Mining Corp. and TTM Resources Inc, and is currently CEO and a director of Roxgold Inc. Mr. Sibthorpe is 63 years old.

James G. Stewart

Mr. Stewart is a director and the Secretary of the Company. He is a lawyer who has practised law both in private practice and as corporate counsel since 1984 and has extensive experience in the fields of mining, corporate finance and securities law. Mr. Stewart is a director and senior officer of Lund Gold Ltd., Madison Minerals Inc. and Salmon River Resources Ltd. He is currently a director of Bayswater Uranium Corporation, Kingsman Resources Inc. and Paget Minerals Corp. Mr. Stewart is 54 years old.



30

Aziz Sy

Mr. Sy is the Vice President – Sénégal Operations of the Company. He is a geologist engineer who holds both an M.Sc and an MBA from the Université du Québec. He is a former Senior Manager for Lonmin Plc responsible for exploration and business development of PGE and gold projects in Gabon and West Africa. He also was formerly Randgold Resources Limited’s Country & Exploration Manager for Sénégal where he played a crucial role in establishing Randgold in Sénégal, building an all-Sénégalese exploration team and a quality portfolio of exploration permits that let to Randgold’s discovery of its Massawa gold deposit. He was also a member of the exploration team involved in Randgold’s discovery of the Morila gold deposit in southern Mali. Mr. Sy is 43 years old.

Douglas Turnbull

Mr. Turnbull is a director of the Company. He is a geologist and is the President of Lakehead Geological Services Inc. which provides geological consulting services for a number of Canadian private and public companies. Mr. Turnbull is a director of Astur Gold Corp., Comstock Metals Ltd., Grizzly Discoveries Inc., and La Ronge Gold Corp. He has been the President of Lakehead since 1992 and is 49 years old.

B. Compensation

The following table sets out compensation by way of salary or director’s fee, professional and consulting fees, and bonuses paid to the Company’s senior management and to its directors for the last full financial year.

    Salary or Professional and  
    director’s fee consulting fees Bonus
Name Position $ $ $
Derek Bartlett Lead director 39,000 nil nil
Robert Brennan Director 27,000 nil nil
Ian Brown Chief financial officer 183,648 nil 35,000
Nell Dragovan Director 170,952 nil 10,000
Chet Idziszek President, CEO and Chairman of the Board 211,968 nil 320,835
Ken Kuchling Vice President of Engineering nil 15,730 nil
David Mallo Vice President, Exploration nil 210,120 10,000
Robert Sibthorpe Director 27,000 nil nil
James Stewart Director and Corporate Secretary nil 344,250 10,000
Abdoul Aziz Sy Vice President of Sénégal Operations nil 232,400* 110,000*
Douglas Turnbull Director nil 139,090 10,000

*In US dollars
Professional and consulting fees are payable to professional service firms owned by the recipients. Bonuses are paid on an annual basis, or, at the discretion of the Board of Directors, more frequently, to employees and to service providers who provide a majority of their services to the Company. With the exception, in the financial year ended February 29, 2012 in the case of Messrs. Idziszek and Brown, the bonuses are a flat-rate year-end amount set by the Board of Directors annually reflecting overall achievement of the Company’s objectives. Mr. Brown’s bonus was set at a larger amount by the Board of Directors. Mr. Idziszek’s bonus for the financial year ended February 29, 2012 includes a) a year-end amount of $10,000, and b) the amount of $310,835 awarded by the Board on the recommendation of the Corporate Governance and Compensation Committee in recognition of the CEO’s exemplary performance in closing two financings with gross proceeds of $30,250,000 in August and November 2010.




31

The following sets out compensation effected by the grant of stock options for the last full financial year.

      Number of    
    Date of option common share Exercise price Expiration date of
Name Position grant options granted $ option
Derek Bartlett Lead director March 3, 2011 150,000 1.30 March 3, 2016
Robert Brennan Director March 3, 2011 250,000 1.30 March 3, 2016
Ian Brown Chief financial officer March 3, 2011 260,000 1.30 March 3, 2016
Nell Dragovan Director March 3, 2011 225,000 1.30 March 3, 2016
Chet Idziszek President, CEO and Chairman of the Board March 3, 2011 700,000 1.30 March 3, 2016
Ken Kuchling Vice President of Engineering March 3, 2011 115,000 1.30 March 3, 2016
David Mallo Vice President, Exploration March 3, 2011 335,000 1.30 March 3, 2016
Robert Sibthorpe Director March 3, 2011 150,000 1.30 March 3, 2016
James Stewart Director and Corporate Secretary March 3, 2011 275,000* 1.30 March 3, 2016
Abdoul Aziz Sy Vice President of Sénégal Operations March 3, 2011 200,000 1.30 March 3, 2016
Douglas Turnbull Director March 3, 2011 210,000 1.30 March 3, 2016

* - These options were granted in the name of J. G. Stewart Law Corporation Ltd.

Termination and Change of Control Benefits

The Company has entered into employee retention agreements with each of Chet Idziszek, Ian Brown, Nell Dragovan and David Mallo, and a consultant retention agreement with James Stewart (collectively, the “Retention Agreements”) which require disclosure in the Company’s home jurisdiction, the Province of British Columbia.

Each employee retention agreement also contains confidentiality and non-solicitation covenants in favour of the Company. A copy of each of these agreements is provided in the Exhibits appended to this annual report.




32

Description of Retention Agreements

Chet Idziszek

The employee retention agreement with Chet Idziszek will remain in effect for so long as Chet Idziszek remains an employee and afterwards to the extent specified under the terms of the employee retention agreement. The employee retention agreement will expire should Chet Idziszek resign his employment with the Company or be terminated for Cause (as defined in the employee retention agreement) by the Company prior to a Change in Control (as defined in the employee retention agreement).

In the event of a Change in Control (as defined in the employee retention agreement) which results in or leads to the termination of the employment of Chet Idziszek with the Company, and provided that Chet Idziszek is not offered employment or does not accept an offer of employment that is the same or similar to his employment with the Company (the “Comparable Employment”) with the person or persons that have acquired the Company as a result of a Change in Control (the “New Company Owner”), Chet Idziszek will receive from the Company a retention payment (“Retention Payment”) from the Company calculated as follows: a lump sum payment equal to 16 months’ base salary and the equivalent of 16 months of bonuses calculated by totalling the average of the annual bonuses paid to Chet Idziszek during the past three years of employment, dividing the total amount by 36 and multiplying the result by 16. The Retention Payment will be paid to Chet Idziszek in a lump sum after required statutory declarations within 15 days of the date of the Change in Control. Chet Idziszek will not be entitled to provision of the Retention Payment when he is offered and accepts Comparable Employment with the New Company Owner.

In the event that Chet Idziszek resigns from his employment with the New Company Owner, for any reason, and provided that the termination or resignation occurs within six months of the date of the Change in Control, Chet Idziszek will be provided by the Company with a separation payment (the “Separation Payment”). The Separation Payment will be calculated on the same basis as the Retention Payment but will be limited to a lump sum payment equal to 8 months of salary and bonuses. The Separation Payment will be paid to Chet Idziszek in a lump sum after required statutory deductions within 30 days of the Company being notified of the resignation of Chet Idziszek from his employment with the New Company Owner. In the event Chet Idziszek’s employment is terminated with or without cause by the New Company Owner, the Separation Payment will not be payable to Chet Idziszek.

James Stewart

The consultant retention agreement with James Stewart will remain in effect for so long as James Stewart remains a consultant to the Company and afterwards to the extent specified under the terms of the retention agreement. The consultant retention agreement will expire should James Stewart resign his consultancy with the Company or be terminated for Cause (as defined in the consultant retention agreement) by the Company prior to a Change in Control (as defined in the consultant retention agreement).

In the event of a Change in Control (as defined in the consultant retention agreement) which results in or leads to the termination of the consultancy of James Stewart with the Company, and provided that James Stewart is not offered a consultancy or does not accept an offer of consultancy in a position that is the same or similar to his consultancy with the Company (the “Comparable Consultancy”) with New Company Owner, James Stewart will receive a Retention Payment from the Company calculated as follows: a lump sum payment equal to 12.5 months’ base salary and the equivalent of 12.5 months of bonuses calculated by totalling the average of the annual bonuses paid to James Stewart during the past three years of employment, dividing the total amount by 36 and multiplying the result by 12.5. The Retention Payment will be paid to James Stewart in a lump sum after required statutory declarations within 15 days of the date of the Change in Control. James Stewart will not be entitled to provision of the Retention Payment when he is offered and accepts Comparable Consultancy with the New Company Owner.

In the event that James Stewart resigns from his employment with the New Company Owner, for any reason, and provided that the termination or resignation occurs within six months of the date of the Change in Control, James Stewart will be provided by the Company with a Separation. The Separation Payment will be calculated on the same basis as the Retention Payment but will be limited to a lump sum payment equal to 6 months of salary and bonuses. The Separation Payment will be paid to James Stewart in a lump sum after required statutory deductions within 30 days of the Company being notified of the resignation of James Stewart from his employment with the New Company Owner. In the event James Stewart’s employment is terminated with or without cause by the New Company Owner, the Separation Payment will not be payable to James Stewart.

Ian Brown

The employee retention agreement with Ian Brown will remain in effect for so long as Ian Brown remains an employee and afterwards to the extent specified under the terms of the employee retention agreement. The retention agreement will expire should Ian Brown resign his employment with the Company or be terminated for Cause (as defined in the employee retention agreement) by the Company prior to a Change in Control (as defined in the employee retention agreement).




33

In the event of a Change in Control (as defined in the employee retention agreement) which results in or leads to the termination of the employment of Ian Brown with the Company, and provided that Ian Brown is not offered Comparable Employment with the New Company Owner, Ian Brown will receive from the Company a Retention Payment from the Company calculated as follows: a lump sum payment equal to 6 months’ base salary and the equivalent of 6 months of bonuses calculated by totalling the average of the annual bonuses paid to Ian Brown during the past three years of employment, dividing the total amount by 36 and multiplying the result by 6. The Retention Payment will be paid to Ian Brown in a lump sum after required statutory declarations within 15 days of the date of the Change in Control. Ian Brown will not be entitled to provision of the Retention Payment when he is offered and accepts Comparable Employment with the New Company Owner.

In the event that Ian Brown resigns from his employment with the New Company Owner, for any reason, and provided that the termination or resignation occurs within six months of the date of the Change in Control, Ian Brown will be provided by the Company with a Separation. The Separation Payment will be calculated on the same basis as the Retention Payment but will be limited to a lump sum payment equal to 3 months of salary and bonuses. The Separation Payment will be paid to Ian Brown in a lump sum after required statutory deductions within 30 days of the Company being notified of the resignation of Ian Brown from his employment with the New Company Owner. In the event Ian Brown’s employment is terminated with or without cause by the New Company Owner, the Separation Payment will not be payable to Ian Brown.

Nell Dragovan

The employee retention agreement with Nell Dragovan will remain in effect for so long as Nell Dragovan remains an employee and afterwards to the extent specified under the terms of the employee retention agreement. The retention agreement will expire should Nell Dragovan resign her employment with the Company or be terminated for Cause (as defined in the employee retention agreement) by the Company prior to a Change in Control (as defined in the employee retention agreement).

In the event of a Change in Control (as defined in the employee retention agreement) which results in or leads to the termination of the employment of Nell Dragovan with the Company, and provided that Nell Dragovan is not offered Comparable Employment with the New Company Owner, Nell Dragovan will receive from the Company a Retention Payment from the Company, calculated as follows: a lump sum payment equal to 14 months’ base salary and the equivalent of 14 months of bonuses calculated by totalling the average of the annual bonuses paid to Nell Dragovan during the past three years of employment, dividing the total amount by 36 and multiplying the result by 14. The Retention Payment will be paid to Nell Dragovan in a lump sum after required statutory declarations within 15 days of the date of the Change in Control. Nell Dragovan will not be entitled to provision of the Retention Payment when she is offered and accepts Comparable Employment with the New Company Owner.

In the event that Nell Dragovan resigns from her employment with the New Company Owner, for any reason, and provided that the termination or resignation occurs within six months of the date of the Change in Control, Nell Dragovan will be provided by the Company with a Separation payment. The Separation Payment will be calculated on the same basis as the Retention Payment but will be limited to a lump sum payment equal to 7 months of salary and bonuses. The Separation Payment will be paid to Nell Dragovan in a lump sum after required statutory deductions within 30 days of the Company being notified of the resignation of Nell Dragovan from her employment with the New Company Owner. In the event Nell Dragovan’s employment is terminated with or without cause by the New Company Owner, the Separation Payment will not be payable to Nell Dragovan.

David Mallo

The employee retention agreement with David Mallo will remain in effect for so long as David Mallo remains an employee and afterwards to the extent specified under the terms of the employee retention agreement. The retention agreement will expire should David Mallo resign his employment with the Company or be terminated for Cause (as defined in the employee retention agreement) by the Company prior to a Change in Control (as defined in the employee retention agreement).

In the event of a Change in Control (as defined in the employee retention agreement) which results in or leads to the termination of the employment of David Mallo with the Company, and provided that David Mallo is not offered Comparable Employment with the New Company Owner, David Mallo will receive from the Company a Retention Payment from the Company, which is calculated as follows: a lump sum payment equal to 16 months’ base salary and the equivalent of 16 months of bonuses calculated by totalling the average of the annual bonuses paid to David




34

Mallo during the past three years of employment, dividing the total amount by 36 and multiplying the result by 14. The Retention Payment will be paid to David Mallo in a lump sum after required statutory declarations within 15 days of the date of the Change in Control. David Mallo will not be entitled to provision of the Retention Payment when he is offered and accepts Comparable Employment with the New Company Owner.

In the event that David Mallo resigns from his employment with the New Company Owner, for any reason, and provided that the termination or resignation occurs within six months of the date of the Change in Control, David Mallo will be provided by the Company with a Separation Payment. The Separation Payment will be calculated on the same basis as the Retention Payment but will be limited to a lump sum payment equal to 8 months of salary and bonuses. The Separation Payment will be paid to David Mallo in a lump sum after required statutory deductions within 30 days of the Company being notified of the resignation of David Mallo from his employment with the New Company Owner. In the event David Mallo’s employment is terminated with or without cause by the New Company Owner, the Separation Payment will not be payable to David Mallo.

C. Board Practices

The directors hold office for a term of one year or until the next annual general meeting of the Company, at which time all directors retire, and are eligible for re-election. Derek Bartlett and Douglas Turnbull have been directors of the Company since February 25, 2002. Robert Brennan has been a director of the Company since April 18, 2006. Nell Dragovan has been a director of the Company since January 22, 2004. Chet Idziszek has been a director of the Company since February 21, 1994 and the President of the Company since June 23, 1999. Robert Sibthorpe has been a director of the Company since June 4, 2004. J.G. Stewart has been a director of the Company since July 19, 1995 and the Secretary of the Company since August 23, 1996.

The Company’s Audit Committee is comprised of Derek Bartlett, Robert Brennan (Chairman) and Robert Sibthorpe. The Audit Committee is appointed by the Board of Directors and its members hold office until removed by the Board of Directors or until the next annual general meeting of the Company, at which time their appointments expire and they are then eligible for re-appointment. The Audit Committee operates under an Audit Committee Charter which provides for numerous factors such as establishing the independence of the Company’s auditors, review of the audited financial statements of the Company, liaising with the Company’s auditors and recommending to the Board of Directors whether or not to approve such statements. At the request of the Company’s auditors, the Audit Committee must convene a meeting to consider any matters which the auditor believes should be brought to the attention of the Committee, the Board of Directors or the shareholders of the Company.

D. Employees

During the fiscal years ended February 29, 2012 and February 28, 2011, the Company had an average of approximately 220 employees of whom ten worked out of the Company’s head office, ten worked out of the Company’s Dakar office and approximately 200 worked based at the Company’s OJVG exploration camp. Of the average of 220 employees, 20 worked in management and supervisory roles (4 in Canada and 16 in Sénégal), 7 in secretarial roles (3 in Canada and 4 in Sénégal), 5 in accounting roles (2 in Canada and 3 in Sénégal), 5 as support workers (in Sénégal) and the balance worked as mineral explorationists (1 in Canada and the rest in Sénégal). Of those, 6 were employed as geologists and 2 as medical personnel while the approximately 205 others were skilled, semi-skilled or unskilled labourers.

 



35

E. Share Ownership

The following table sets forth the share ownership of those persons listed in subsection 6.B above and includes the details of all options to purchase common shares of the Company held by such persons:

 

  Number of Common Number of Options Beneficial Exercise Expiry Date
  Shares Held at Outstanding at Percentage Price  
Name July 11, 2012 July 11, 2012 Ownership¹    
Derek Bartlett nil 325,000 0.35% $0.92 August 24, 2015
  150,000   $1.30 March 3, 2016
Robert Brennan 1,214,523 40,000 1.46% $0.65 March 31, 2015
  500,000 $0.92 August 24, 2015
  250,000 $1.30 March 3, 2016
Ian D. Brown nil 40,000 0.55% $0.65 March 31, 2015
  450,000 $0.92 August 24, 2015
  260,000 $1.30 March 3, 2016
Nell Dragovan 2,155,904 25,000 2.01% $0.65 March 31, 2015
  350,000 $0.92 August 24, 2015
  225,000 $1.30 March 3, 2016
Chet Idziszek 6,791,137 75,000 6.36% $0.65 March 31, 2015
  1,250,000 $0.92 August 24, 2015
  700,000 $1.30 March 3, 2016
Ken Kuchling nil 75,000 0.14% $0.90 October 7, 2014
  115,000 $1.30 March 3, 2016
David Mallo 81,500 40,000 0.75% $0.65 March 31, 2015
  575,000 $0.92 August 24, 2015
  335,000 $1.30 March 3, 2016
Robert Sibthorpe nil 325,000 0.35% $0.92 August 24, 2015
  150,000 $1.30 March 3, 2016
J.G. Stewart 746,377 50,000 1.05% $0.65 March 31, 2015
  375,000 $0.92 August 24, 2015
  275,000 $1.30 March 3, 2016
Abdoul Aziz Sy 1,000 100,000 0.22% $0.65 March 31, 2015
  200,000 $1.30 March 3, 2016
Douglas Turnbull 52,000 40,000 0.48% $0.65 March 31, 2015
  350,000 $0.92 August 24, 2015
    210,000   $1.30 March 3, 2016
Total: 11,042,441 7,855,000 13.72%    

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. In computing the number of shares owned by a person and the percentage ownership of that person, Common Shares subject to options and warrants held by that person that are currently exercisable or exercisable within 60 days of July 11, 2012 are deemed outstanding. Such shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person. This table has been prepared based on 136,563,218 Common Shares outstanding as of July 11, 2012.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

 

A. Major Shareholders

The following table sets forth the share ownership of those persons beneficially owning 5% or more of the Company’s common shares held by such persons:

  Number of Common Shares Held at Percentage of Common Shares
Name July 11, 2012 Outstanding at July 11, 2012
IAMGOLD Corporation 16,088,636 11.78%
Teranga Gold Corporation 18,699,500 13.69%

IAMGOLD Corporation acquired its shares pursuant to a private placement in the Company which closed June 19, 2009.

Teranga Gold Corporation acquired its shares in December 2010 as a result of a corporate reorganization of Mineral Deposits Limited (“MDL”) in which MDL transferred its shares to Teranga. MDL announced the acquisition of




36

its shares in August 2010 and the Company believes these shares were acquired in an off-market transaction. The current Teranga holding is unchanged from the number of shares announced by MDL in August 2010.

The Company’s major shareholders do not have different voting rights. To the knowledge of the Company, it is not controlled by another corporation, any foreign government or by any other natural or legal persons severally or jointly.

Based on the records of the Company's registrar and transfer agent, Computershare Investor Services Inc., of 3rd Floor, 510 Burrard Street, Vancouver, British Columbia, Canada, as at June 8, 2012 there were 136,563,218 common shares of the Company issued and outstanding. At such date there were 143 registered holders of the Company's common shares resident in the United States, holding an aggregate 15,721,499 common shares, including 13,008,597 shares held by Cede & Co. This number represents approximately 11.51% of the total issued and outstanding common shares of the Company as at June 8, 2012. Based on replies received by the Company from brokers, dealers, banks or nominees to enquiries as to the number of beneficial holders of the Company's common shares resident in the United States as at June 8, 2012 there were 1,645 beneficial holders, holding an aggregate 32,740,718 common shares. This number represents approximately 23.97% of the total issued and outstanding common shares of the Company as at June 8, 2012. Including the 13,008,597shares held by Cede & Co. the total number of registered and beneficial holders of the Company's common shares resident in the United States, therefore, is 1,788 holders holding an aggregate 48,462,217 common shares. This number represents approximately 35.49% of the total issued and outstanding common shares of the Company as at June 8, 2012.

B. Related Party Transactions

Other than as set out in Notes 11 and 18 to the accompanying financial statements, there were no material transactions in the fiscal year ended February 29, 2012 or to the date of this report, or proposed material transactions between the Company or any of its subsidiaries and:

(a)     

enterprises that directly or indirectly through one or more intermediaries, control or are controlled by, or are under common control with, the Company;

(b)     

associates;

(c)     

individuals owning, directly or indirectly, an interest in the voting power of the Company that gives them significant influence over the Company, and close members of any such individual’s family;

(d)     

key management personnel, that is, those persons having authority and responsibility for planning, directing and controlling the activities of the Company, including directors and senior management of companies and close members of such individuals’ families;

(e)     

enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (c) or (d) or over which such a person is able to exercise significant influence including enterprises owned by directors or major shareholders of the Company and enterprises that have a member of key management in common with the Company.

 
C. Interests of Experts and Counsel

This Form 20-F is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this section.




37

ITEM 8. FINANCIAL INFORMATION

 

A. Consolidated Statements and Other Financial Information

This Annual Report contains the consolidated financial statements for the Company for the fiscal year ended February 29, 2012 that contain an Independent Auditor’s Report dated July 11, 2012, Consolidated Statement of Financial Position as at February 29, 2012, February 28, 2011 and March 1, 2010, Consolidated Statements of Comprehensive Loss for the Fiscal Years Ended February 29, 2012 and February 28, 2011, Consolidated Statements of Changes in Equity for the Fiscal Years Ended February 29, 2012 and February 28, 2011, Consolidated Statements of Cash Flows for the Fiscal Years Ended February 29, 2012 and February 28, 2011, and Notes to the Consolidated Financial Statements.

This Annual Report also contains the financial statements for the Company’s significant equity investee, Oromin Joint Venture Group Ltd. (“OJVG”) for the fiscal year ended February 29, 2012 that contain an Independent Auditor’s Report dated July 11, 2012, Statement of Financial Position as at February 29, 2012 and February 28, 2011, Statements of Comprehensive Loss for the Fiscal Years Ended February 29, 2012 and February 28, 2011, Statements of Changes in Equity for the Fiscal Years Ended February 29, 2012 and February 28, 2011, Statements of Cash Flows for the Fiscal Years Ended February 29, 2012 and February 28, 2011, and Notes to the Financial Statements.

B. Significant Changes

No significant changes have occurred since the date of the annual financial statements included in this Annual Report on Form 20-F.

ITEM 9. THE OFFER AND LISTING

 

A. Offer and Listing Details

The high and low sale prices for the common shares of the Company on the Toronto Stock Exchange (“TSX”) for each of the most recent six months, each fiscal quarter in each of the last two full years and subsequent period and each of the last five full financial years are as follows:

  High Low
Fiscal year 2012-2013    
June 2012 $0.70 $0.49
May 2012 $0.74 $0.47
April 2012 $0.92 $0.71
March 2012 $0.95 $0.80
February 2012 $1.05 $0.82
January 2012 $1.15 $0.98
First Quarter $0.95 $0.47
2011 $1.36 $0.77
Fourth Quarter $1.20 $0.77
Third Quarter $1.24 $0.83
Second Quarter $1.19 $0.80
First Quarter $1.36 $0.95
2010 $1.43 $0.58
Fourth Quarter $0.93 $0.66
Third Quarter $1.02 $0.79
Second Quarter $1.43 $0.70
First Quarter $0.94 $0.58
2009 $3.42 $0.385
2008 $4.15 $2.07
2007 $4.18 $1.30

The closing price of the Company's common shares on the TSX Exchange on July 11, 2012 was $0.51.

The Company’s common shares were listed on the NASD Over-the-Counter Bulletin Board on October 5, 2006. The high and low sale prices for the common shares of the Company on the Over-the-Counter Bulletin Board for each of the most recent six months and each full financial quarter since the listing date are as follows:

High Low

 




38

  High Low
Fiscal year 2012-2013    
June 2012 US$0.6700 US$0.4800
May 2012 US$0.7445 US$0.4900
April 2012 US$0.9300 US$0.7260
March 2012 US$0.9200 US$0.8104
February 2012 US$1.0600 US$0.8310
January 2012 US$1.1200 US$0.9900
First Quarter US$0.9300 US$0.4900
2011 US$1.4000 US$0.7640
Fourth Quarter US$1.1900 US$0.7640
Third Quarter US$1.2396 US$0.7950
Second Quarter US$1.2100 US$0.8260
First Quarter US$1.4000 US$0.9900
2010 US$1.3000 US$0.4700
Fourth Quarter US$0.8900 US$0.6070
Third Quarter US$0.9700 US$0.7448
Second Quarter US$1.3000 US$0.6000
First Quarter US$0.7490 US$0.4700
2009 US$3.4800 US$0.3100
2008 US$4.1000 US$1.9800
Fourth Quarter 2007 US$3.6900 US$1.5200

The closing price of the Company’s common shares on the Over–the-Counter Bulletin Board on July 11, 2012 was US$0.51.

B. Plan of Distribution

This Form 20-F is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this section.

C. Markets

The common shares of the Company have traded on the TSX Venture Exchange or its predecessor exchanges, or on the Toronto Stock Exchange, since November 6, 1981. They traded under the symbol “OLE” on the TSX Venture Exchange until December 15, 2008. On December 16, 2008 the common shares of the Company commenced trading on the Toronto Stock Exchange, also under the symbol “OLE”. The common shares of the Company have traded on the NASD Over-the-Counter Bulletin Board since October 5, 2006 under the symbol “OLEPF”.




39

D. Selling Stockholders

This Form 20-F is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this section.

E. Dilution

This Form 20-F is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this section.

F. Expenses of the Issue

This Form 20-F is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this section.

ITEM 10. ADDITIONAL INFORMATION

 

A. Share Capital

This Form 20-F is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this section.

B. Memorandum and Articles of Association

The Company was amalgamated on February 25, 2002 pursuant to the Company Act (British Columbia) (the “Act”) and is registered with the Registrar of Companies for British Columbia under corporation number 642805. The Company is not limited in its objects and purposes.

With respect to directors, the Articles of the Company provide that a director who is, in any way, directly or indirectly interested in an existing or proposed contract or transaction with the Company, or who holds any office or possesses any property whereby, directly or indirectly, a duty or interest might be created to conflict with his duty or interest as a director, shall declare the nature and extent of his interest in such contract or transaction or the conflict or potential conflict with his duty and interest as a director, as the case may be, in accordance with the provisions of the Act and shall abstain from voting in respect thereof. This prohibition does not apply to:

(i)

any such contract or transaction relating to a loan to the Company, which a director or a specified corporation or a specific firm in which he has an interest has guaranteed or joined in guaranteeing the repayment of the loan or any part of the loan;

(ii)

any contract or transaction made or to be made with, or for the benefit of a holding corporation or a subsidiary corporation of which a director is a director;

(iii)

any contract by a director to subscribe for or underwrite shares or debentures to be issued by the Company or a subsidiary of the Company, or any contract, arrangement or transaction in which a director is, directly or indirectly interested if all the other directors are also, directly or indirectly interested in the contract, arrangement or transaction;

(iv)

determining the remuneration of the directors;

(v)

purchasing and maintaining insurance to cover directors against liability incurred by them as directors; or

(vi)     

the indemnification of any director by the Company.

The Articles of the Company also provide that the directors may from time to time on behalf of the Company borrow such money in such manner and amount, on such security, from such sources and upon such terms and conditions as they think fit; issue bonds, debentures and other debt obligations, either outright or as security for any liability or obligation of the Company, or any other person; and mortgage, charge, whether by way of specific or floating charge, or give other security on the undertaking, or on the whole or any part of the property and assets of the Company (both present and future). Variation of these borrowing powers would require an amendment to the Articles of the Company that would, in turn, require the approval of the shareholders of the Company by way of a Special Resolution. A Special Resolution means a resolution cast by a majority of not less than ¾ of the votes cast by shareholders of the Company who, being entitled to do so, vote in person or by proxy at a general meeting of the Company of which notice as the Articles of the Company provide and not being less than 21 days notice specifying the intention to propose the resolution as a special resolution, has been duly given (or, if every shareholder entitled to attend and vote at the meeting agrees, at a meeting of which less than 21 days notice has been given), or a resolution consented to in writing by every shareholder of the Company who would have been entitled to vote in person or by proxy at a general meeting of the Company, and a resolution so consented to is deemed to be a special resolution passed at a general meeting of the Company.

There is no requirement in the Articles of the Company or in the Act requiring retirement or non-retirement of directors under an age limit requirement, nor is there any minimum shareholding required for a director’s qualification.




40

Holders of common shares of the Company are entitled to vote at meetings of shareholders, and a Special Resolution, as described above, is required to effect a change in the rights of shareholders. Holders of common shares are not entitled to pre-emptive rights. Holders of common shares are entitled, rateably, to the remaining property of the Company upon liquidation, dissolution or winding up of the Company, and such holders receive dividends if, as, and when, declared by the directors of the Company. There are no restrictions on the purchase or redemption of common shares by the Company while there is an arrearage in the payment of dividends or sinking fund installments. There is no liability on the part of any shareholder to further capital calls by the Company nor any provision discriminating against any existing or prospective holder of securities of the Company as a result of such shareholder owning a substantial number of shares. There are no limitations on the rights to own securities, including the rights of non-resident or foreign shareholders to hold or exercise voting rights on the securities imposed by the Act or by the constating document of the Company.

The Company is required to give its registered shareholders not less than 21 days notice of any general meeting of the Company unless all such shareholders consent to reduce or waive the period. In addition, the Company is obliged to give notice to registrants and intermediaries who hold shares on behalf of the ultimate beneficial owners no fewer than 35 or more than 60 days prior to the date of the meeting. The Company then delivers, in bulk, proxy-related materials in amounts specified by the intermediaries. No shares of the Company owned by registrants or intermediaries may be voted at a general meeting of the Company unless all proxy-related materials are delivered to the ultimate beneficial owners of such shares. Such ultimate beneficial owner must then deliver a proxy to the Company within the time limited by the Company for the deposit of proxies in order to vote the shares in respect of which such person is the beneficial owner.

There is no provision in the Company's Articles that would have an effect of delaying, deferring or preventing a change in control of the Company and that would operate only with respect to a merger, acquisition or corporate restructuring involving the Company (or any of its subsidiaries).

Securities legislation in the Company’s home jurisdiction of British Columbia requires that shareholder ownership must be disclosed once a person owns beneficially or has control or direction over greater than 10% of the issued shares of the Company. This threshold is higher than the 5% threshold under U.S. securities legislation at which shareholders must report their share ownership.

C. Material Contracts

By a Mining Convention signed February 17, 2005 between the Company and the Government of Sénégal, the Company, on behalf of the Oromin Joint Venture Group (“OJVG”), was granted an exploration concession to explore the OJVG Property, a 230 square kilometre property in the Republic of Sénégal. The OJVG was a joint venture between the Company and Bendon International Ltd. (“Bendon”), each as to 50% with the Company and Bendon each holding a 6.5% interest in trust for Badr Investment & Finance Company (“Badr”), a private company based in Saudi Arabia, pending its execution of a tripartite joint venture agreement on the same terms as the current joint venture agreement between the Company and Bendon, such joint venture interest to be transferred to Badr on execution of such tripartite agreement. In order to acquire a 100% interest in the OJVG Property, the OJVG was required to spend at least USD$8 million on exploration of the OJVG Property by April 17, 2007 which it has done.

By an agreement dated December 18, 2006, as amended, between Oromin Joint Venture Group Ltd. (“OJVG Ltd.”), Sabodala Holding Limited (“SHL”) (a wholly-owned subsidiary of the Company), Bendon and Badr, the OJVG was converted into a corporate form. SHL and Bendon each own a 43.5% interest and Badr owns a 13% interest in OJVG Ltd. SHL and Bendon have agreed to each fund 50% of the costs of exploration and development of the OJVG Property, with Badr’s interest being fully carried for as long as it owns an interest in OJVG Ltd. The exploration concession comprising the OJVG Property has been assigned the OJVG Ltd. SHL is the operator of OJVG Ltd. to which it provides exploration and management services.

In March 2007, the Government of Sénégal granted a twenty month extension (to December 22, 2008) to the current Mining Convention by requiring the spending of an additional USD$12 million during the extension period –which condition has been met. Thereafter, OJVG Ltd. had ten months (to October 22, 2009) to complete a preliminary




41

Feasibility Study on the project, at which point the concession could be converted to an exploitation concession. The preliminary Feasibility Study was completed in August 2009, meeting this condition. Upon conversion of the concession from an exploration to an exploitation concession, OVJG Ltd. must establish an operating company to further develop the OJVG Property and is obliged to offer to Sénégalese nationals the right to purchase up to 25% of such operating company at a price determined by an independent valuator. On January 26, 2010, OJVG was granted a mining licence for the OJVG Property. The mining licence is for a term of fifteen years and will permit OJVG to begin mining operations in accordance with recommendations of the Feasibility Study authored by SRK Consulting and Ausenco Limited and completed in July 2010 – subject to the making of a production decision of the owners, a step which has not to date occurred. OJVG is in the process of establishing an operating company to undertake the development of the OJVG Property as required by the Mining Convention as disclosed above. The operating company will be owned by OJVG as to 90% and by the Government of Sénégal as to 10% subject to the requirement to offer to Sénégalese nationals the right to purchase up to 25% of such operating company set out above. The interest to be owned by the Government of Sénégal is fully carried and the Government of Sénégal is also entitled to royalties equal to 3% of net smelter returns.

D. Exchange Controls

There are no governmental laws, decrees or regulations in Canada relating to restrictions on the export or import of capital, or affecting the remittance of interest, dividends or other payments to non-resident holders of the Company’s common shares. Any remittances of dividends to United States residents are, however, subject to a 15% withholding tax (5% if the shareholder is a corporation owning at least 10% of the outstanding common shares of the Company) pursuant to Article X of the reciprocal tax treaty between Canada and the United States. See “Item 10 – Additional Information – E. Taxation”, below.

Except as provided in the Investment Canada Act (the “Act”), which has provisions which govern the acquisition of a control block of voting shares by non-Canadians of a corporation carrying on a Canadian business, there are no limitations specific to the rights of non-Canadians to hold or vote the common shares of the Company under the laws of Canada or the Province of British Columbia or in the charter documents of the Company.

Management of the Company considers that the following general summary fairly describes those provisions of the Act pertinent to an investment in the Company by a person who is not a Canadian resident (a “non-Canadian”).

The Act requires a non-Canadian making an investment which would result in the acquisition of control of the Canadian business to notify the Investment Review Division of Industry Canada, the federal agency created by the Act; or in the case of an acquisition of a Canadian business, the gross value of the assets of which exceeds certain threshold levels or the business activity of which is related to Canada’s cultural heritage of national identity, to file an application for review with the Investment Review Division.

The notification procedure involves a brief statement of information about the investment on a prescribed form that is required to be filed with Investment Canada by the investor at any time up to 30 days following implementation of the investment. Once the completed notice has been filed, a receipt bearing the certificate date will be issued to the non-Canadian investor. The receipt must advise the investor either that the investment proposal is unconditionally non-reviewable or that the proposal will not be reviewed as long as notice of review is not issued within 21 days of the date certified under the receipt. It is intended that investments requiring only notification will proceed without government intervention unless the investment is in a specific type of business activity related to Canada’s cultural heritage and national identity.

If an investment is reviewable under the Act, an order for review must be issued within 21 days after the certified date on which notice of investment was received. An application for review in the form prescribed is required to be filed with Investment Canada prior to the investment taking place. Once the application has been filed, a receipt will be issued to the applicant, certifying the date on which the application was received. For incomplete applications, a deficiency notice will be sent to the applicant, and if not done within 15 days of receipt of application, the application will be deemed to be complete as of the date it was received. Within 45 days after the complete application has been received, the Minister responsible for the Investment Canada Act must notify the potential investor that the Minister is satisfied that the investment is likely to be of net benefit to Canada. If within such 45-day period the Minister is unable




42

to complete the review, the Minister has an additional 30 days to complete the review, unless the applicant agrees to a longer period. Within such additional period, the Minister must advise either that he is satisfied or not satisfied that the investment is likely to be of net benefit to Canada. If the time limits have elapsed, the Minister will be deemed to be satisfied that the investment is likely to be of net benefit to Canada. The investment may not be implemented until the review has been completed and the Minister is satisfied that the investment is likely to be of net benefit to Canada.

If the Minister is not satisfied that the investment is likely to be of net benefit to Canada, the non-Canadian must not implement the investment or, if the investment has been implemented, could be penalized by being required to divest himself of control of the business that is the subject of the investment. To date, the only types of business activities which have been prescribed by regulation as related to Canada’s cultural heritage or national identity deal largely with publication, film and music industries. Because the Company’s total assets are less than the $5 million notification threshold, and because the Company’s business activities would likely not be deemed related to Canada’s cultural heritage or national identity, acquisition of a controlling interest in the Company by a non-Canadian investor would not be subject to even the notification requirements under the Investment Canada Act.

The following investments by non-Canadians are subject to notification under the Act:

1.     

an investment to establish a new Canadian business; and

2.     

an investment to acquire control of a Canadian business that is not reviewable pursuant to the Act.

   
 

The following investments by a non-Canadian are subject to review under the Act:

   
1.     

direct acquisition of control of Canadian businesses with assets of $5 million or more, unless the acquisition is being made by a World Trade Organization (“WTO”) member country investor (the United States being a member of the WTO);

2.     

direct acquisition of control of Canadian businesses with assets of $172,000,000 or more by a WTO investor;

3.     

indirect acquisition of control of Canadian business with assets of $5 million or more if such assets represent more than 50% of the total value of the assets of the entities, the control of which is being acquired, unless the acquisition is being made by a WTO investor, in which case there is no review;

4.     

indirect acquisition of control of Canadian businesses with assets of $50 million or more even if such assets represent less than 50% of the total value of the assets of the entities, the control of which is being acquired, unless the acquisition is being made by a WTO investor, in which case there is no review; and

5.     

an investment subject to notification that would not otherwise be reviewable if the Canadian business engages in the activity of publication, distribution or sale of books, magazines, periodicals, newspapers, film or video recordings, audio or video music recordings, or music in print or machine-readable form.

Generally speaking, an acquisition is direct if it involves the acquisition of control of the Canadian business or of its Canadian parent or grandparent and an acquisition is indirect if it involves the acquisition of control of a non-Canadian parent or grandparent of an entity carrying on the Canadian business. Control may be acquired through the acquisition of actual voting control by the acquisition of voting shares of a Canadian corporation or through the acquisition of substantially all of the assets of the Canadian business. No change of voting control will be deemed to have occurred if less than one-third of the voting control of a Canadian corporation is acquired by an investor.

A WTO investor, as defined in the Act, includes an individual who is a national of a member country of the World Trade Organization or who has the right of permanent residence in relation to that WTO member, a government or government agency of a WTO investor-controlled corporation, limited partnership, trust or joint venture and a corporation, limited partnership, trust or joint venture that is neither WTO-investor controlled or Canadian controlled of which two-thirds of its board of directors, general partners or trustees, as the case may be, or any combination of Canadians and WTO investors.

The higher thresholds for WTO investors do not apply if the Canadian business engages in activities in certain sectors such as uranium, financial services, transportation services or communications.




43

The Act specifically exempts certain transactions from either notification or review. Included among this category of transactions is the acquisition of voting shares or other voting interests by any person in the ordinary course of that person’s business as a trader or dealer in securities.

E. Taxation

Material Canadian Federal Income Tax Consequences

Through consultation with counsel, management of the Company believes that the following general summary accurately describes all material Canadian federal income tax consequences applicable to a holder of common shares of the Company who is a resident of the United States and who is not a resident of Canada and who does not use or hold, and is not deemed to use or hold, his common shares of the Company in connection with carrying on a business in Canada (a “non-resident holder”).

This summary is based upon the current provisions of the Income Tax Act (Canada) (the “ITA”), the regulations thereunder (the “Regulations”), the current publicly announced administrative and assessing policies of Canada, Customs and Revenue Agency, and all specific proposals (the “Tax Proposals”) to amend the ITA and Regulations announced by the Minister of Finance (Canada) prior to the date hereof. This summary assumes that the Tax Proposals will be enacted in their form as of the date of this Annual Report. This description, except for the Tax Proposals, does not take into account or anticipate any changes in law, whether by legislative, government or judicial action, nor does it take into account provincial, territorial, or foreign tax considerations which may differ significantly from those discussed herein.

Dividends

Dividends paid on the common shares of the Company to a non-resident holder will be subject to withholding tax. The Canada-U.S. Income Tax Convention (1980) (the “Treaty”) provides that the normal 25% withholding tax rate under the ITA is reduced to 15% on dividends paid on shares of a corporation resident in Canada (such as the Company) to beneficial owners of the dividends who are residents of the United States, and also provides for a further reduction of this rate to 5% where the beneficial owner of the dividends is a corporation that is a resident of the United States which owns at least 10% of the voting shares of the corporation paying the dividend.

Capital Gains

Under the ITA, a taxpayer’s capital gain or capital loss from a disposition of a share of the Company is the amount, if any, by which his proceeds of disposition exceed (or are exceeded by) the aggregate of his adjusted cost base of the share and reasonable expenses of disposition. One half of a capital gain (the “taxable capital gain”) is included in income, and one half of a capital loss in a year (the “allowable capital loss”) is deductible from taxable capital gains realized in the same year. The amount by which a shareholder’s allowable capital loss exceeds his taxable capital gains in a year may be deducted from a taxable capital gain realized by the shareholder in the three previous or any subsequent year, subject to certain restrictions in the case of a corporate shareholder.

A non-resident holder is not subject to tax under the ITA in respect of a capital gain realized upon the disposition of a share of a public corporation unless the share represents “taxable Canadian property” to the holder thereof. The Company is a public corporation for purposes of the ITA and a common share of the Company will be taxable Canadian property to a non-resident holder if, at any time during the period of five years immediately preceding the disposition, the non-resident holder, persons with whom the non-resident holder did not deal at arm’s length, or the non-resident holder and persons with whom he did not deal at arm’s length together owned not less than 25% of the issued shares of any class of shares of the Company.

Where a non-resident holder who is an individual ceased to be resident in Canada, and at the time he ceased to be a Canadian resident elected to have his Company shares treated as taxable Canadian property, he will be subject to Canadian tax on any capital gain realized on disposition of the Company’s shares, subject to the relieving provisions of the Treaty described below. Shares of the Company may also be taxable Canadian property to a holder if the holder




44

acquired them pursuant to certain tax-deferred “rollover” transactions whereby the holder exchanged property that was taxable Canadian property for shares of the Company.

Where the non-resident holder realized a capital gain on a disposition of the Company shares that constitute taxable Canadian property, the Treaty relieves the non-resident shareholder from liability for Canadian tax on such capital gains unless:

(a)     

the value of the shares is derived principally from “real property” in Canada, including the right to explore for or exploit natural resources and rights to amounts computed by reference to production from natural resources, which is the case for the Company,

(b)     

the non-resident holder is an individual who was resident in Canada for not less than 120 months during any period of 20 consecutive years preceding, and at any time during the 10 years immediately preceding, the disposition and the shares were owned by him when he ceased to be resident in Canada or are property substituted for property that was owned at that time, or

(c)     

the shares formed part of the business property of a “permanent establishment” or pertained to a fixed base used for the purpose of performing independent personal services that the shareholder has or had in Canada within the 12 months preceding the disposition.

Material United States Federal Income Tax Consequences

The following summary is a general discussion of the material United States Federal income tax considerations to U.S. holders of shares of the Company under current law. This discussion assumes that U.S. holders hold their shares of the Company’s common stock as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”). It does not discuss all the tax consequences that may be relevant to particular holders in light of their circumstances or to holders subject to special rules, such as tax-exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident alien individuals or foreign corporations whose ownership of shares of the Company is not effectively connected with the conduct of a trade or business in the United States, shareholders who acquired their stock through the exercise of employee stock options or otherwise as compensation, shareholders who hold their stock as ordinary assets and not capital assets and any other non-U.S. holders. In addition, U.S. holders may be subject to state, local or foreign tax consequences. No opinion or representation with respect to the United States Federal income tax consequences to any such holder or prospective holder is being made by the Company herein. Holders and prospective holders should therefore consult with their own tax advisors with respect to their particular circumstances. This discussion covers all material tax consequences.

The following discussion is based upon the sections of the Code, Treasury Regulations, published Internal Revenue Service (“IRS”) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time. This decision does not consider the potential effects, both adverse and beneficial, of any recently proposed legislation that, if enacted, could be applied, possibly on a retroactive basis, at any time. Accordingly, holders and prospective holders of shares of the Company should consult their own tax advisors about the Federal, state, local, estate, and foreign tax consequences of purchasing, owning and disposing of shares of the Company.




45

U.S. Holders

As used herein, a “U.S. Holder” includes a holder of shares of the Company who is a citizen or resident of the United States, a corporation created or organized in or under the laws of the United States or of any political subdivision thereof, any entity that is taxable as a corporation for U.S. tax purposes and any other person or entity whose ownership of shares of the Company is effectively connected with the conduct of a trade or business in the United States. A U.S. Holder does not include persons subject to special provisions of Federal income tax law, such as tax exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident alien individuals or foreign corporations whose ownership of shares of the Company is not effectively connected with conduct of trade or business in the United States, shareholders who acquired their stock through the exercise of employee stock options or otherwise as compensation and shareholders who hold their stock as ordinary assets and not as capital assets.

Distributions on Common Shares of the Company

U.S. Holders receiving dividend distribution (including constructive dividends) with respect to shares of the Company are required to include in gross income for United States Federal income tax purposes the gross amount of such distribution to the extent that the Company has current or accumulated earnings and profits as defined under U.S. Federal tax law, without reduction for any Canadian income tax withheld from such distributions. Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holder’s United States Federal income tax liability or, alternatively, may be deducted in computing the U.S. Holder’s United States Federal taxable income by those who itemize deductions. (See more detailed discussion at “Foreign Tax Credit” below). To the extent that distributions exceed current or accumulated earnings and profits of the Company, they will be treated first as a return of capital up to the U.S. Holder’s adjusted basis in the shares and thereafter as gain from the sale or exchange of the shares. Preferential tax rates for long-term net capital gains are applicable to a U.S. Holder that is an individual, estate or trust. There are currently no preferential tax rates for long-term capital gains for a U.S. Holder that is a corporation.

Dividends paid on the shares of the Company will not generally be eligible for the dividends received deduction provided to corporations receiving dividends from certain United States corporations. A U.S. Holder that is a corporation may, under certain circumstances, be entitled to a 70% deduction of the United States source portion of dividends received from the Company (unless the Company qualifies as a “foreign personal holding company” or a “passive foreign investment company”, as defined below) if such U.S. Holder owns shares representing at least 10% of the voting power and value of the Company. The availability of this deduction is subject to several complex limitations that are beyond the scope of this discussion.

In the case of foreign currency received as a dividend that is not converted by the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have a tax basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Generally, any gain or loss recognized upon a subsequent sale or other disposition of the foreign currency, including the exchange for U.S. dollars, will be ordinary income or loss. However, for tax years after 1997, an individual whose realized foreign exchange gain does not exceed U.S. $200 will not recognize that gain, to the extent that there are not expenses associated with the transaction that meet the requirement for deductibility as a trade or business expense other than travel expenses in connection with a business trip (or as an expense for the production of income).

Foreign Tax Credit

A U.S. Holder who pays (or has withheld from distribution) Canadian income tax with respect to the ownership of shares of the Company may be entitled, at the option of the U.S. Holder, to either a deduction or a tax credit for such foreign tax paid or withheld. Generally, it will be more advantageous to claim a credit because a credit reduces United States Federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer’s income subject to tax. This election is made on a year-by-year basis and applies to all foreign taxes paid by (or withheld from) the U.S. Holder during the year. There are significant and complex limitations that apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder’s United States Federal income tax liability that the U.S. Holder’s foreign source income bears to this or its worldwide taxable income. In the determination of the application of this limitation, the various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern this classification process. There are further limitations on the foreign tax credit for certain types of income such as “passive income”, “high withholding tax interest”, “financial services income”, “shipping income”, and certain other classifications of income. The availability of the foreign tax credit and the application of the limitations on the credit are fact specific and holders and prospective holders of shares of the Company should consult their own tax advisors regarding their individual circumstances.



46

Information Reporting and Backup Withholding

U.S information reporting requirements may apply with respect to the payment of dividends to U.S. Holders of the Company’s common shares. Under Treasury regulations currently in effect, non-corporate holders may be subject to backup withholding at a 31% rate with respect to dividends when such holder (1) fails to finish or certify a correct taxpayer identification number to the payor in the required manner, (2) is notified by the IRS that it has failed to report payments of interest or dividends properly or (3) fails, under certain circumstances, to certify that it has been notified by the IRS that it is subject to backup withholding for failure to report interest and dividend payments. Any amounts withheld under the backup withholding rules from a payment to a U.S. Holder generally will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability and may entitle the U.S. Holder to a refund, provided that the required information is furnished to the IRS. Certain U.S. Holders, including corporations, are not subject to backup withholding.

Disposition of Common Shares of the Company

A U.S. Holder will recognize a gain or loss upon the sale of shares of the Company equal to the difference, if any, between (i) the amount of cash plus the fair market value of any property received, and (ii) the shareholder’s tax basis in the shares of the Company. This gain or loss will be a capital gain or loss if the shares are a capital asset in the hands of the U.S. Holder, and will be a short-term or long-term capital gain or loss depending upon the holding period of the U.S. Holder. Gains and losses are netted and combined according to special rules in arriving at the overall capital gain or loss for a particular tax year. Deductions for net capital loss are subject to significant limitations. Corporate capital losses (other than losses of corporations electing under Subchapter S of the Code) are deductible to the extent of capital gains. Non-corporate taxpayers may deduct net capital losses, whether short-term or long-germ, up to U.S. $3,000 a year (U.S. $1,500 in the case of a married individual filing separately). For U.S. Holders who are individuals, any unused portion of such net capital loss may be carried over to be used in later tax years until such net capital loss is thereby exhausted. For U.S. Holders which are corporations (other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years from the loss year and carried forward five years from the loss year to be offset against capital gains until such net capital loss is thereby exhausted.

Currency Exchange Gains or Losses

U.S. holders generally are required to calculate their taxable incomes in United States dollars. Accordingly, a U.S. holder who purchases common shares of the Company with Canadian dollars will be required to determine the tax basis of such shares in United States dollars based on the exchange rate prevailing on the settlement date of the purchase (and may be required to recognize the unrealized gain or loss, if any, in the Canadian currency surrendered in the purchase transaction). Similarly, a U.S. holder receiving dividends or sales proceeds from common shares of the Company in Canadian dollars will be required to compute the dividend income or the amount realized on the sale, as the case may be, in United States dollars based on the exchange rate prevailing at the time of receipt in the case of dividends and on the settlement date in the case of sales on an established securities exchange. Gain or loss, if any, recognized on a disposition of Canadian currency in connection with the described transactions generally will be treated as ordinary gain or loss.




47

Other Considerations

In the following circumstances, the above sections of this discussion may not describe the United States Federal income tax consequences resulting from the holding and disposition of common shares of the Company (the Company does not believe that it will qualify in the next year, or has qualified within the past three fiscal years, as a “foreign personal holding company”, “foreign investment company”, “passive foreign investment company” or “controlled foreign corporation” as discussed below):

Foreign Personal Holding Company

If at any time during a taxable year more than 50% of the total combined voting power or the total value of the Company’s outstanding shares is owned, directly or indirectly, by five or fewer individuals who are citizens of the United States and 60% or more of the Company’s gross income for such year was derived from certain passive sources (e.g., from dividends received from its subsidiaries), the Company would be treated as a “foreign personal holding company”. In that event, U.S. Holders that hold common shares of the Company (on the earlier of the last day of the Company’s tax year or the last date in which the Company was a foreign personal holding company) would be required to include in gross income for such year their allocable portions of such passive income to the extent the Company does not actually distribute such income.

Foreign Investment Company

If 50% or more of the combined voting power or total value of the Company’s outstanding shares are held, directly or indirectly, by citizens or residents of the United States, United States domestic partnerships or corporations, or estates or trusts other than foreign estates or trusts (as defined by the Code Section 7701(a)(31)), and the Company is found to be engaged primarily in the business of investing, reinvesting, or trading in securities, commodities, or any interest therein, it is possible that the Company might be treated as a “foreign investment company” as defined in Section 1246 of the Code, causing all or part of any gain realized by a U.S. Holder selling or exchanging common shares of the Company to be treated as ordinary income rather than capital gains.

Passive Foreign Investment Company

As a foreign corporation with U.S. Holders, the Company could potentially be treated as a passive foreign investment company (“PFIC”), as defined in Section 1297 of the Code, depending upon the percentage of the Company’s income which is passive, or the percentage of the Company’s assets which are producing passive income (generally 75% or more of its gross income in a taxable year is passive income, or the average percentage of the Company’s assets (by value) during the taxable year which produce passive income or which are held for production of same is at least 50%). Passive income is generally defined to include gross income in the nature of dividends, interest, royalties, rents and annuities; excess of gains over losses from certain transactions in any commodities not arising inter alia from a PFIC whose business is actively involved in such commodities; certain foreign currency gains; and other similar types of income. U.S. Holders owning shares of a PFIC are subject to an additional tax and to an interest charge based on the value of deferral of tax for the period during which the common shares of the PFIC are owned, in addition to treatment of gain realized on the disposition of common shares of the PFIC as ordinary income rather than capital gain. However, if the U.S. Holder makes a timely election to treat a PFIC as a qualified electing fund (“QEF”) with respect to such shareholder’s interest therein, the above-described rules generally will not apply. Instead, the electing U.S. Holder would include annually in his gross income his pro rata share of the PFIC’s ordinary earnings and net capital gain regardless of whether such income or gain was actually distributed. A U.S. Holder of a QEF can, however, elect to defer the payment of United States Federal income tax on such income inclusions. Special rules apply to U.S. Holders who own their interests in a PFIC through intermediate entities or person.

Effective for tax years of U.S. Holders beginning after December 31, 1997, U.S. Holders who hold, actually or constructively, marketable stock of a foreign corporation that qualifies as a PFIC may elect to mark such stock to the market (a “mark-to-market election”). If such an election is made, such U.S. Holder will not be subject to the special taxation rules of PFIC described above for the taxable year for which the mark-to-market election is made. A U.S. Holder who makes such an election will include in income for the taxable year an amount equal to the excess, if any, of the fair market value of the shares of the Company as of the close of such tax year over such U.S. Holder’s adjusted basis in such shares. In addition, the U.S. Holder is allowed a deduction for the lesser of (i) the excess, if any, of such U.S. Holder’s adjusted tax basis in the shares over the fair market value of such shares as of the close of the tax year, or (ii) the excess, if any of (A) the mark-to-market gains for the shares in the Company included by such U.S. Holder for prior tax years, including any amount which would have been included for any prior year but for Section 1291 interest on tax deferral rules discussed above with respect to a U.S. Holder, who has not made a timely QEF election during the year in which he holds (or is deemed to have held) shares in the Company and the Company is a PFIC (“Non-Electing U.S. Holder”), over (B) the mark-to-market losses for shares that were allowed as deductions for prior tax years. A U.S. Holder’s adjusted tax basis in the shares of the Company will be increased or decreased to reflect the amount included or deducted as a result of mark-to-market election. A mark-to-market election will apply to the tax year for which the election is made and to all later tax years, unless the PFIC stock ceases to be marketable or the IRS consents to the revocation of the election.

The IRS has issued proposed regulations that, subject to certain exceptions, would treat as taxable certain transfers of PFIC stock by a Non-Electing U.S. Holder that are generally not otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death. Generally, in such cases, the basis of the Company’s shares in the hands of the transferee and the basis of any property received in the exchange for those shares would be increased by the amount of gain recognized. A U.S. Holder who has made a timely QEF election (as discussed below) will not be taxed on certain transfers of PFIC stock, such as gifts, exchanges pursuant to corporate reorganization, and transfers at death. The transferee’s basis in this case will depend on the manner of transfer. The specific tax effect to




48

the U.S. Holder and the transferee may vary based on the manner in which the shares of the Company are transferred. Each U.S. Holder should consult a tax advisor with respect to how the PFIC rules affect their tax situation.

The PFIC and QEF election rules are complex. U.S. Holders should consult a tax advisor regarding the availability and procedure for making the QEF election as well as the applicable method for recognizing gains or earnings and profits under the foregoing rules.

Controlled Foreign Corporation

If more than 50% of the voting power of all classes of stock or total value of the stock of the Company is owned, directly or indirectly, by citizens or residents of the United States, United States domestic partnerships and corporations or estates or trusts other than foreign estates or trusts, each of whom owns 10% or more of the total combined voting power of all classes of stock of the Company (“United States shareholder”), the Company could be treated as a “controlled foreign corporation” under Subpart F of the Code. This classification would effect many complex results including the required inclusion by such United States shareholders in income of their pro rata shares of “Subpart F income” (as specifically defined by the Code) of the Company. Subpart F requires current inclusions in the income of United States shareholders to the extent of a controlled foreign corporation’s accumulated earnings invested in “excess passive” assets (as defined by the Code). In addition, under Section 1248 of the Code, gain from sale or exchange of stock by a holder of common shares of the Company who is or was a United States shareholder at any time during the five year period ending with the sale or exchange is treated as ordinary dividend income to the extent of earnings and profits of the Company attributable to the stock sold or exchanged. Because of the complexity of Subpart F, and because it is not clear that Subpart F would apply to the holders of common shares of the Company, a more detailed review of these rules is outside the scope of this discussion.

If the Company is both a PFIC and controlled foreign corporation, the Company will generally not be treated as a PFIC with respect to United States shareholders of the controlled foreign corporation. This rule generally will be effective for taxable years of the Company ending with or within such taxable years of United States shareholders.

The foregoing summary is based upon the sections of the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations, published Internal Revenue Service (“IRS”) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time. This discussion does not consider the potential effects, both adverse and beneficial, of any recently proposed legislation that, if enacted, could be applied, possibly on a retroactive basis, at any time. Accordingly, holders and prospective holders of shares of the Company should consult their own tax advisors about the Federal, state, local, estate, and foreign tax consequences of purchasing, owning and disposing of shares of the Company.




49

F. Dividends and Paying Agents

This Form 20-F is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this section.

G. Statements by Experts

This Form 20-F is being filed as an Annual Report under the Exchange Act and, as such, there is no requirement to provide any information under this section.

H. Documents on Display

Any documents referred to in this Annual Report may be inspected at the head office of the Company, Suite 2000, 1055 West Hastings Street, Vancouver, British Columbia, Canada, V6E 2E9, during normal business hours.

I. Subsidiary Information

There is no information relating to the Company’s subsidiaries which must be provided in Canada and which is not otherwise called for by the body of generally accepted accounting principles used in preparing the financial statements.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company believes the disclosure requirements set out in this item of Form 20-F are sufficiently met by reproducing here the contents of Note 15 to the consolidated financial statements, “Financial Risk Management”. This content is as follows:

The Company is exposed to a variety of financial risks by virtue of its activities, including foreign currency risk, liquidity risk, equity market risk, interest rate risk and credit risk. The Company’s objective with respect to financial instrument risk management is to minimize potential adverse effects on the Company’s financial position and performance. Management is responsible to the Board of Directors for establishing controls and procedures with the objectives that financial instrument risks are mitigated to acceptable levels.

Foreign currency risk

Foreign currency risk is the risk that the fair values of financial assets and liabilities denominated and for settlement in currencies other than the Canadian dollar (CAD) may fluctuate because of changes in foreign exchange rates. The Company holds a portion of its cash in United States dollars (USD) however at February 29, 2012 the Company’s exposure to exchange rate changes for the USD was not material. To date the Company has elected not to hedge its USD exposures by futures or options strategies.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations as they become due. At February 29, 2012 the Company held cash resources of $3,927,251 and had accounts payable and accrued liabilities of $286,256 and was able to meet its obligations as they became due. The Company has no regular cash flow from its operating activities. To continue to be able to meet its obligations as they become due, the Company will depend on management’s ability to raise the funds required through future equity financings. If such funds cannot be raised, the Company would be required to postpone or curtail its operating and investing activities. The Company manages its liquidity risk by forecasting cash flow requirements for its planned joint venture investment and corporate activities and anticipating investing and financing activities. Management and the Board of Directors are actively involved in the review, planning and approval of annual budgets and of significant expenditures and commitments, and in monitoring the climate and opportunity for equity financings.

Equity market risk

The Company is exposed to equity price risk arising from its investments, which are marketable securities classified as available-for-sale. The Company’s maximum exposure to equity price risk is the carrying value of its investments.

Interest rate risk

The Company’s exposure to interest rate risk is not material. The natures of its financial instruments do not lead to any material risk that their fair values or future cash flows will fluctuate because of changes in market interest rates.

Credit risk

Credit risk is the risk of financial loss to the Company if a counter-party to a financial instrument fails to meet its contractual obligations. The Company has no material counter-parties to its financial instruments with the exception of the financial institutions which hold its cash deposits. The Company manages this credit risk by investing its cash in interest-bearing accounts at a major Canadian chartered bank. The Company’s material




50

receivables consist primarily of sales tax receivables due from the federal government of Canada. Because of these circumstances, the Company does not believe it has a material exposure to credit risk.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

This Form 20-F is being filed as an annual report under the Exchange Act and, as such, there is no requirement to provide any information under this item.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

There has not been a material default in the payment of principal, interest, a sinking or purchase fund installment, or any other material default not cured within thirty days, relating to indebtedness of the Company or any of its significant subsidiaries. There are no payments of dividends by the Company in arrears, nor has there been any other material delinquency relating to any class of preference shares of the Company.

ITEM 14.

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Neither the Company nor, to the best of its knowledge, anyone else has modified materially or qualified the rights evidenced by any class of registered securities.

ITEM 15. CONTROLS AND PROCEDURES

 




51

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company is collected and communicated to management, as appropriate, to allow timely decisions regarding required disclosure.

At the end of the period covered by this report, the fiscal year ended February 29, 2012 an evaluation was carried out under the supervision of, and with the participation of, the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operations of the Company’s disclosure controls and procedures (as defined in Rule 13a – 15(e) and Rule 15d – 15(e) under the Exchange Act). Based on that evaluation, the CEO and the CFO have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were adequately designed and effective in providing reasonable assurance that material information required to be disclosed in the reports that management files and submits under the Exchange Act, is recorded, processed summarized and reported within the time periods specified in the SEC rules and forms.

It should be noted that while the Company’s chief executive officer and chief financial officer believe that the Company’s disclosure controls and procedures provide a reasonable level of assurance that they are effective, they do not expect that the Company’s disclosure controls and procedures or internal control over financial reporting will prevent all errors and fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible to the Board of Directors for the preparation of financial statements of the Company. These financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the IASB and necessarily include some amounts based on estimates and judgments.

The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s management has employed a framework consistent with Exchange Act Rule 13a-15(c), to evaluate the Company’s internal control over financial reporting described below. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The Company’s management, including the CEO and CFO, does not expect that its disclosure controls and procedures or internal controls and procedures will prevent all error and all fraud.

Management has assessed the effectiveness of the Company’s internal control over financing reporting as at February 29, 2012. In making the assessment, management has used the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) to evaluate the Company’s internal control over financial reporting. Based on this assessment, management has identified the following material weaknesses and included in management’s assessment: (i) the Company’s entity-level controls, specifically its whistleblower process, is not appropriately designed nor implemented effectively and its code of conduct is not distributed to key employees; (ii) the financial reporting period end close process has a material weakness resulting from an aggregate of deficiencies related to the preparation, review and approval of account analyses, summaries and reconciliations.

A material weakness is a control deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. In order to remediate the first material weakness, the Company has commenced implementing a whistleblower policy to address how complaints can be communicated,




52

investigated and resolved, with the ability to provide for anonymity and protection for the complainant, and has initiated a process to distribute and require acknowledgment of its code of conduct on at least an annual basis to key employees. The second material weakness consisted of inadequate procedures to verify the appropriateness of period-end balances. In order to remediate the second material weakness, the Company will implement specific measures within its financial reporting process that will require detailed analysis, review and assessment of the reasonableness of period-end balances and use of estimates. Detailed project assessments will be conducted to ensure that those matters that may have accounting and financial disclosure impacts are identified appropriately. The Company has increased its use of contract professional accounting assistance in the fiscal year currently under way to support the remediation of this second material weakness.

As a result, management concluded that the Company’s internal control over financial reporting was not effective as at February 29, 2012.

The Company is required to provide an auditor’s attestation report on internal control over financial reporting for the fiscal year ended February 29, 2012. In this report, the Company’s independent registered public accounting firm, Davidson & Company LLP, Chartered Accountants, in Vancouver, BC, must state its opinion as to the effectiveness of the Company’s internal control over financial reporting for the fiscal year ended February 29, 2012. Davidson & Company LLP has audited the Company’s financial statements included in this Annual Report on Form 20-F and has issued an attestation report on the Company’s internal control over financial reporting. The Auditor’s Attestation Report is included in the Company’s financial statements, attached hereto as Exhibit page F-4.

Other than the findings described above, there were no significant changes in the Company’s internal control over financial reporting or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

ITEM 16. [RESERVED]
   
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERTS

The Company has determined that Robert Sibthorpe qualifies as an “audit committee financial expert” and is independent as that term is defined in the listing standards of the National Association of Securities Dealers. Mr. Sibthorpe holds a B.Sc. in geology and an MBA from the University of Toronto. He worked as a mining analyst and director of Yorkton Securities Inc. from 1986 to 1996. He was an independent mining consultant from 1996 to 1999 when he joined Canaccord Capital Corporation as a mining analyst from 1999 to 2001. Since 2001 he has worked as an independent mining consultant.

ITEM 16B. CODE OF ETHICS

The Company has adopted a Code of Ethics applicable to its directors, principal executive officer, principal financial officer, principal accounting officer, controller and persons performing similar functions. The Company undertakes to provide a copy of the Company’s Code of Ethics to any person, without charge, upon request in writing to the Secretary of the Company, whose address is Suite 2000, 1055 West Hastings Street, Vancouver, British Columbia, Canada, V6E 2E9.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

During the fiscal years ended February 29, 2012 and February 28, 2011, the Company was billed the following amounts of fees to Davidson & Company, the Company’s principal accountants, for the following categories of services:

Type of Fees Fiscal 2012 Amount Billed Fiscal 2011 Amount Billed
Audit fees $150,000 $130,000
Audit-related fees $20,000 $30,000
Tax fees $9,400 $14,700

 




53
All other fees nil nil
Total fees $179,400 $174,700

Audit-related fees were billed for the auditors’ participation in prospectus-related due diligence.

Tax fees were billed for tax compliance services including tax return preparation.

As required by Rule 2-01(c)(7)(i) of Regulation S-X, before the accountant was engaged by the Company to render audit or non-audit services, the Company’s audit committee approved the engagement.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

The information referred to in this Item is not required for the fiscal year ended February 29, 2012, which is the period covered by this Annual Report on Form 20-F.

ITEM 16E.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

There were no such purchases; accordingly, the information referred to in this Item is not required for the fiscal year ended February 29, 2012, which is the period covered by this Annual Report on Form 20-F.

PART III

ITEM 17. FINANCIAL STATEMENTS

See the Financial Statements and Exhibits listed in Item 19 hereof and filed as part of this Annual Report. These financial statements were prepared in accordance with IFRS as issued by the IASB and are expressed in Canadian dollars. For a history of exchange rates in effect for Canadian dollars as against U.S. dollars, see page 13 of this Annual Report.

ITEM 18. FINANCIAL STATEMENTS

Not applicable

ITEM 19. EXHIBITS

 

(a) Financial Statements

 

Description of Document Page No.
   
Oromin Explorations Ltd.  
Cover Sheet F-1
Independent Auditors’ Report dated July 11, 2012 F 2
Independent Auditors’ Report dated July 11, 2012 F-4
Consolidated Statements of Financial Position as at February 29, 2012, February 28, 2011 and March 1, 2010 F-6
Consolidated Statements of Comprehensive Loss for the Years Ended February 29, 2012 and February 28, 2011 F-7
Consolidated Statements of Changes in Equity for the Years Ended February 29, 2012 and February 28, 2011 F-8

 




54
Description of Document Page No.
Consolidated Statements of Cash Flows for the Years Ended February 29, 2012 and February 28, 2011 F-9
Notes to the Consolidated Financial Statements F-10
   

Oromin Joint Venture Group Ltd.

 

Cover Sheet

F-39

Independent Auditors’ Report dated July 11, 2012

F-40

Statements of Financial Position as at February 29, 2012 and February 28, 2011

F-42

Statements of Comprehensive Income (Loss) for the Years ended February 29, 2012 and February 28, 2011

F-43

Statements of Changes in Shareholders’ Deficiency for the years ended February 29, 2012 and February 28, 2011 F-44
Statements of Cash Flows for the Years ended February 29, 2012 and February 28, 2011 F-45
Notes to Financial Statements

F-46

 

(b)  Exhibits  
Exhibit Number Description of Document Page Number
*1.A. Certificate of British Columbia Registrar of Companies as to the incorporation of Maple Leaf Petroleum Ltd.  
*1.B. Certificate of British Columbia Registrar of Companies as to the change of name to International Maple Leaf Resource Corporation  
*1.C. Certificate of British Columbia Registrar of Companies as to the change of name to Maple Resource Corp.  
*1.D. Certificate of British Columbia Registrar of Companies as to the change of name to Birchwood Ventures Ltd.  
*1.E. Certificate of British Columbia Registrar of Companies as to the change of name to Oromin Explorations Ltd  
*1.F. Articles of the Company  
*4.A.  Option Agreement dated April 5, 1999 between the Company, Camnor Resources (USA) Inc. and Camnor Resources Ltd. regarding the South Salcha property  
*4.B. Option Agreement dated April 15, 1999 between the Company and Camnor Resources Ltd. regarding the Cirque property  
*4.C. Loan Agreement dated December 4, 2000 between the Company and Chet Idziszek  
*4.D. Resolution No. 2 of the Secretariat of Energy and Mining of the Republic of Argentina respecting the Santa Rosa property dated March 16, 2001  
*4.E. Letter agreement dated April 30, 2003 between Cynthia Holdings Limited, The Havana Group Inc., Bible Resources Limited and Irie Isle Limited regarding the Santa Rosa property  
*4.F. Letter agreement dated January 27, 2005 between the Company, Lund Gold Ltd. and Dirceu Santos F. Sobrinho regarding the Carneirinho Property  
*4.G. English Language Summary of the Mining Convention between the Company and the Government of Sénégal signed February 17, 2005 respecting the OJVG (formerly Sabodala) Property  
*4.H. Loan Agreement dated April 28, 2005 between the Company and Chet Idziszek  
*4.I. Loan Agreement dated April 28, 2005 between the Company and Nell Dragovan  

 




  55  
*4.J. Loan Agreement dated April 28, 2005 between the Company and J.G. Stewart Law Corporation Ltd.  
*4.K. Loan Agreement dated April 28, 2005 between the Company and David Scott  
*4.L. Loan Agreement dated August 9, 2005 between the Company and Naples Explorations, LLC  
*4.M. Joint Venture Agreement made as of the 20th day of September 2005 between the Company and Bendon International Ltd.  
*4.N. Letter of Intent dated November 15, 2005 between the Company and Ottoman Energy Limited  
*4.O. Shareholders Agreement dated December 18, 2006 between the Company, Badr Investment & Finance Company, Bendon International Ltd. and Sabodala Holding Limited  
*4.P. Amendment Agreement to the Shareholders Agreement, dated January 1, 2007 between the Company, Badr Investment & Finance Company, Bendon International Ltd. and Sabodala Holding Limited.  
*4.Q. Ministry of Energy and Mines, Republic of Sénégal, Transfer and Extension Decree, dated February 7, 2007 for the OJVG (formerly Sabodala) Property  
*4.R. Certificate of Incorporation – Sabodala Holding Limited  
*4.S. Letter Agreement dated March 12, 2007 between the Company and Lund Gold Ltd. on the Carneirinho Property, Brazil  
*4.T. Letter Agreement dated March 11, 2008 between the Company and Chet Idziszek regarding the Santa Rosa Property, Argentina  
*4.U. Final Decree dated April 30, 2008 from the Government of Mendoza on the Santa Rosa Property with the English sworn translation following directly behind  
*4.V. Shareholder Rights Plan dated June 27, 2008  
*4.W. Share Compensation Plan dated July 29, 2008  
*4.X. Stock Option Plan dated July 29, 2008  
*4.Y. Amended Stock Option Plan dated July 14, 2009  
*4.Z. Participation Agreement dated December 23, 2008 between Otto Energy Limited, Oromin Explorations Ltd., Irie Isle Limited, Cynthia Holdings Limited and Exploraciones Oromin, S.A.  
*4.AA. English translation of the Extension to the Mining Convention for the OJVG (formerly Sabodala) Project, dated December 31, 2008  
*4.BB English translation of the Mining License for the OJVG Project dated January 26, 2010  
* Official French Version, in pdf format only, of the Mining License for the OJVG Project, dated January 26, 2010 is attached as a link in the Exhibit Index
5.A Stock Option Plan dated July 14, 2009 (as amended March 1, 2011) E-462

 




  56  
5.B. English translation of Rider Number 1 to the Mining Convention, dated March 28, 2011 E-485
  Official French version, in pdf format only, of Rider Number 1 to the Mining Convention, dated March 28, 2011 is attached as a link in the Exhibit Index  
     
5.C. English translation of Rider Number 2 to the Mining Convention, dated September 23, 2011 E-492
  Official French version, in pdf format only, of Rider Number 2 to the Mining Convention, dated September 28, 2011 is attached as a link in the Exhibit Index  
5.D. 2011 Employee Retention Agreement between Oromin Explorations Ltd. and Ian Brown, dated October 28, 2011 E-497
5.E. 2011 Employee Retention Agreement between Oromin Explorations Ltd. and Nell Dragovan, dated October 28, 2011 E-504
5.F. 2011 Employee Retention Agreement between Oromin Explorations Ltd. and Chet Idziszek, dated October 28, 2011 E-511
5.G. 2011 Employee Retention Agreement between Oromin Explorations Ltd. and David Mallo, dated October 28, 2011 E-518
5.H. 2011 Employee Retention Agreement between Oromin Explorations Ltd. and James G. Stewart, dated October 28, 2011 E-525
12.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 E-12.1
12.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 E-12.2
13.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. 99.1 Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 E-13.1
13.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. 99.1 Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 E-13.2

 




57

SIGNATURES

The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and has duly caused and authorized the undersigned to sign this Annual Report on its behalf.

Dated at Vancouver, British Columbia, this 11th day of July, 2012

OROMIN EXPLORATIONS LTD.

“Chet Idziszek”

Per: (signed) Chet Idziszek
Title: President




 
58
 
EXHIBIT INDEX    
     
Exhibit Number Description of Document Page Number
*1.A. Certificate of British Columbia Registrar of Companies as to the incorporation of Maple Leaf Petroleum Ltd.  
*1.B. Certificate of British Columbia Registrar of Companies as to the change of name to International Maple Leaf Resource Corporation  
*1.C. Certificate of British Columbia Registrar of Companies as to the change of name to Maple Resource Corp.  
*1.D. Certificate of British Columbia Registrar of Companies as to the change of name to Birchwood Ventures Ltd.  
*1.E. Certificate of British Columbia Registrar of Companies as to the change of name to Oromin Explorations Ltd.  
*1.F. Articles of the Company  
*4.A. Option Agreement dated April 5, 1999 between the Company, Camnor Resources (USA) Inc. and Camnor Resources Ltd. regarding the South Salcha property  
*4.B. Option Agreement dated April 15, 1999 between the Company and Camnor Resources Ltd. regarding the Cirque property  
*4.C. Loan Agreement dated December 4, 2000 between the Company and Chet Idziszek  
*4.D. Resolution No. 2 of the Secretariat of Energy and Mining of the Republic of Argentina respecting the Santa Rosa property dated March 16, 2001  
*4.E. Letter agreement dated April 30, 2003 between Cynthia Holdings Limited, The Havana Group Inc., Bible Resources Limited and Irie Isle Limited regarding the Santa Rosa property  
*4.F. Letter agreement dated January 27, 2005 between the Company, Lund Gold Ltd. and Dirceu Santos F. Sobrinho regarding the Carneirinho Property  
*4.G. English Language Summary of the Mining Convention between the Company and the Government of Sénégal signed February 17, 2005 respecting the OJVG (formerly Sabodala) Property  
*4.H. Loan Agreement dated April 28, 2005 between the Company and Chet Idziszek  
*4.I. Loan Agreement dated April 28, 2005 between the Company and Nell Dragovan  
*4.J. Loan Agreement dated April 28, 2005 between the Company and J.G. Stewart Law Corporation Ltd.  
*4.K. Loan Agreement dated April 28, 2005 between the Company and David Scott  
*4.L. Loan Agreement dated August 9, 2005 between the Company and Naples Explorations, LLC  
*4.M. Joint Venture Agreement made as of the 20th day of September 2005 between the Company and Bendon International Ltd.  
*4.N. Letter of Intent dated November 15, 2005 between the Company and Ottoman Energy Limited  
*4.O. Shareholders Agreement dated December 18, 2006 between the Company, Badr Investment & Finance Company, Bendon International Ltd. and Sabodala Holding Limited  
*4.P. Amendment Agreement to the Shareholders Agreement, dated January 1, 2007 between the Company, Badr Investment & Finance Company, Bendon International Ltd. and Sabodala Holding Limited  
*4.Q. Ministry of Energy and Mines, Republic of Sénégal, Transfer and Extension Decree, dated February 7, 2007 for the OJVG (formerly Sabodala) Property  

 




  59  
*4.R. Certificate of Incorporation – Sabodala Holding Limited  
*4.S. Letter Agreement dated March 12, 2007 between the Company and Lund Gold Ltd. on the Carneirinho Property, Brazil  
*4.T. Letter Agreement dated March 11, 2008 between the Company and Chet Idziszek regarding the Santa Rosa Property, Argentina  
*4.U. Final Decree dated April 30, 2008 from the Government of Mendoza on the Santa Rosa Property with the English sworn translation following directly behind  
*4.V. Shareholder Rights Plan dated June 27, 2008  
*4.W. Share Compensation Plan dated July 29, 2008  
*4.X. Stock Option Plan dated July 29, 2008  
*4.Y. Amended Stock Option Plan dated July 14, 2009  
*4.Z. Participation Agreement dated December 23, 2008 between Otto Energy Limited, Oromin Explorations Ltd., Irie Isle Limited, Cynthia Holdings Limited and Exploraciones Oromin, S.A.  
*4.AA. English translation of the Extension to the Mining Convention for the OJVG (formerly Sabodala) Project, dated December 31, 2008  
*4.BB English translation of the Mining License for the OJVG Project, dated January 26, 2010  
* Official French Version, in pdf format only, of the Mining License for theOJVG Project, dated January 26, 2010 is attached here as a link.  
5.A Stock Option Plan dated July 14, 2009 (as amended March 1, 2011) E-462
5.B. English translation of Rider Number 1 to the Mining Convention, dated March 28, 2011 E-485
  Official French version, in pdf format only, of Rider Number 1 to the Mining Convention, dated March 28, 2011 is attached as a link in the Exhibit Index  
5.C. English translation of Rider Number 2 to the Mining Convention, dated September 28, 2011 E-492
  Official French version, in pdf format only, of Rider Number 2 to the Mining Convention, dated September 23, 2011 is attached as a link in the Exhibit Index  
5.D. 2011 Employee Retention Agreement between Oromin Explorations Ltd. and Ian Brown, dated October 28, 2011 E-497
5.E. 2011 Employee Retention Agreement between Oromin Explorations Ltd. and Nell Dragovan, dated October 28, 2011 E-504
5.F. 2011 Employee Retention Agreement between Oromin Explorations Ltd. and Chet Idziszek, dated October 28, 2011 E-511

 




  60  
5.G. 2011 Employee Retention Agreement between Oromin Explorations Ltd. and David Mallo, dated October 28, 2011 E-518
5.H. 2011 Employee Retention Agreement between Oromin Explorations Ltd. and James G. Stewart, dated October 28, 2011 E-525
12.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 E-12.1
12.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 E-12.2
13.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. 99.1 Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 E-13.1
13.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. 99.1 Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 E-13.2
* These exhibits were previously filed with the Company’s Registration Statement or a previous Annual Report on Form 20-F (file no. 30614).  





Oromin Explorations Ltd.

Consolidated Financial Statements

February 29, 2012

Expressed in Canadian Dollars

F-1



INDEPENDENT AUDITORS' REPORT

To the Shareholders of
Oromin Explorations Ltd.

We have audited the accompanying consolidated financial statements of Oromin Explorations Ltd. which comprise the consolidated statements of financial position as at February 29, 2012, February 28, 2011 and March 1, 2010, and the consolidated statements of comprehensive loss, changes in equity and cash flows for the years ended February 29, 2012 and February 28, 2011, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of Oromin Explorations Ltd. as at February 29, 2012, February 28, 2011 and March 1, 2010 and its financial performance and its cash flows for the years ended February 29, 2012 and February 28, 2011 in accordance with International Financial Reporting Standards.

F-2

 




Emphasis of Matter

Without qualifying our opinion, we draw attention to Note 1 in the consolidated financial statements which describes conditions and matters that indicate the existence of a material uncertainty that may cast significant doubt about the ability of Oromin Explorations Ltd. to continue as a going concern.

Other Matters

We have also audited, in accordance with the standards of the Public Accountability Oversight Board (United States), the effectiveness of Oromin Exploration Ltd.’s internal control over financial reporting as of February 29, 2012, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations on the Treadway Commission (COSO), and our report dated July 11, 2012 expressed an adverse option on Oromin Explorations Ltd.’s internal controls over financial reporting because of material weaknesses.

“DAVIDSON & COMPANY LLP”

Vancouver, Canada Chartered Accountants
July 11, 2012  

F-3


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of
Oromin Explorations Ltd.

We have audited Oromin Explorations Ltd.'s internal control over financial reporting as of February 29, 2012, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Oromin Explorations Ltd.'s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on Oromin Exploration Ltd.’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

F-4




A material weakness is a control deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of Oromin Explorations Ltd.’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management’s assessment: (i) Oromin Explorations Ltd.’s entity-level controls, specifically their whistleblower process is not appropriately designed nor implemented effectively and their code of conduct is not distributed to key employees. (ii) The financial reporting period end close process has a material weakness resulting from an aggregate of deficiencies related to the preparation, review and approval of account analyses, summaries and reconciliations. These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the financial statements, and this report does not affect our report dated July 11, 2012 on those financial statements.

In our opinion, because of the effect of the material weaknesses described above on the achievement of the objectives of the control criteria, Oromin Explorations Ltd. has not maintained effective internal control over financial reporting as of February 29, 2012, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of financial position as at February 29, 2012, February 28, 2011 and March 1, 2010 and the related consolidated statements of comprehensive loss, changes in equity and cash flows of Oromin Explorations Ltd. and our report dated July 11, 2012, expressed an unqualified opinion.

“DAVIDSON & COMPANY LLP”

Vancouver, Canada Chartered Accountants
July 11, 2012  

F-5



OROMIN EXPLORATIONS LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in Canadian Dollars, unless otherwise stated)

    February 29,       February 28,       March 1,  
    2012       2011       2010  
          (Note 19)     (Note 19)  
ASSETS                  
Current Assets                  

Cash

$ 3,927,251   $ 16,230,612   $ 10,003,721  

Receivables (Note 3)

  101,475     303,078     166,345  

Marketable securities (Note 4)

  41,927     89,843     89,843  

Deposits and prepaid expenses

  280,442     791,843     58,675  

Total current assets

  4,351,095     17,415,376     10,318,584  
Non-Current Assets                  

Investment in Oromin Joint Venture Group Ltd. (Note 5)

  76,371,325     67,508,460     50,632,970  

Exploration and evaluation assets (Note 7)

  -     -     1,103,033  

Property, plant and equipment (Note 8)

  63,700     114,235     163,971  

Advances to joint venture

  180,882     114,276     72,748  

Performance bond – restricted cash

  -     26,539     43,025  
 

Total non-current assets

  76,615,907      67,763,510     52,015,747  
 
Total Assets $ 80,967,002      $ 85,178,886     $ 62,334,331  
LIABILITIES AND EQUITY                  
Current Liabilities                  

Trade and other payables (Note 9)

$ 286,256   $ 351,104   $ 620,898  
Equity                  

Share capital (Note 10)

  112,455,628     111,298,040     82,876,200  

Share-based payments reserve (Note 10)

  18,342,345     15,720,643     11,244,638  

Investment revaluation reserve (Note 4)

  -     (281,507 )   (281,507 )

Deficit

  (50,117,227 )   (41,909,394 )   (32,125,898 )

Total equity

  80,680,746     84,827,782     61,713,433  

Total Liabilities and Equity

$ 80,967,002      $ 85,178,886     $ 62,334,331  
Nature and continuance of operations (Note 1)                  
Commitments (Note 13)                  
Contingency (Note 18)                  

The accompanying notes are an integral part of these consolidated financial statements.

These financial statements are authorized for issue by the Board of Directors on May 28, 2012.

F-6



OROMIN EXPLORATIONS LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)

    2012        2011  
          (Note 19)  
EXPENSES            

Amortization

$ 50,535   $ 50,535  

Filing and transfer agent fees

  93,457     69,150  

Office and rent

  482,840     352,214  

Professional and consulting fees

  1,392,014     397,424  

Salaries and benefits

  1,295,852     690,397  

Share-based payments (Note 10)

  2,905,335     4,313,421  

Travel and public relations

  294,233     272,588  
    (6,514,266 )   (6,145,729 )
OTHER INCOME (LOSS)            

Corporate advisory fee (Note 6)

  (1,941,571 )   (2,807,405 )

Equity income (loss) from investment in Oromin Joint Venture Group Ltd. (Note 5)

  (109,917 )   123,000  

Foreign exchange loss

  (1,948 )   (110,888 )

Gain on sale of subsidiaries (Note 7)

  2,216     -  

Interest income

  105,565     105,234  

Write-off of exploration and evaluation assets (Note 7)

  (83,112 )   (1,443,355 )

Write-down of investment revaluation reserve (Note 4)

  (329,423 )   -  

Project administration cost recoveries

  664,623     495,647  
    (1,693,567 )   (3,637,767 )
Loss for the year   (8,207,833 )   (9,783,496 )
Other comprehensive income (loss)            

Unrealized loss on marketable securities (Note 4)

  (47,916 )   -  

Write-down of investment revaluation reserve (Note 4)

  329,423     -  
    281,507     (9,783,496 )
Total comprehensive loss of the year $ (7,926,326 )   $ (9,783,496 )
Basic and diluted loss per common share $ (0.06 )   $ (0.08 )
Weighted average number of common shares outstanding   135,716,443        117,491,838  

The accompanying notes are an integral part of these consolidated financial statements.

F-7



OROMIN EXPLORATIONS LTD
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)

                             
  Share capital     Reserves              
  Number of         Share-based     Investment              
  shares        Amount        payments        revaluation       Deficit        Total equity  
Balance at March 1, 2010 102,834,885 $ 82,876,200   $ 11,244,638   $ (281,507 ) $ (32,125,898 ) $ 61,713,433  

Shares issued on prospectus offering

31,562,500   30,250,000     -     -     -     30,250,000  

Shares issuance costs

-   (2,540,081 )   -     -     -     (2,540,081 )

Shares issued on exercise of stock options

651,000   403,200     -     -     -     403,200  

Shares issued on exercise of warrants

517,500   465,750     -     -     -     465,750  

Shares issued for resource property services

6,944   5,555     -     -     -     5,555  

Share-based payments

-   -     4,313,421     -     -     4,313,421  

Fair value of stock options allocated to shares issued on exercise

-   285,267     (285,267 )   -     -     -  

Fair value of warrants allocated to shares issued on exercise

-   134,520     (134,520 )   -     -     -  

Warrants issued for underwriter’s compensation

-   (582,371 )   582,371     -     -     -  

Loss for the year

-       -     -       -       (9,783,496 )     (9,783,496 )
Balance at February 28, 2011 135,572,829     $ 111,298,040   $ 15,720,643     $ (281,507 )   $ (41,909,394 )   $ 84,827,782  
Balance at February 28, 2011 135,572,829 $ 111,298,040   $ 15,720,643   $ (281,507 ) $ (41,909,394 ) $ 84,827,782  

Shares issued on exercise of stock options

14,000   9,100     -     -     -     9,100  

Shares issued on exercise of warrants

976,389   864,855     -     -     -     864,855  

Share-based payments (Note 10)

-   -     2,905,335     -     -     2,905,335  

Fair value of stock options allocated to shares issued on exercise

-   5,246     (5,246 )   -     -     -  

Fair value of warrants allocated to shares issued on exercise

-   278,387     (278,387 )   -     -     -  

Unrealized loss on marketable securities (Note 4)

-   -     -     (47,916 )   -     (47,916 )

Write-down of investment revaluation reserve (Note 4)

-   -     -     329,423     -     329,423  

Loss for the year

-       -       -       -       (8,207,833 )     (8,207,833 )
Balance at February 29, 2012 136,563,218     $ 112,455,628     $ 18,342,345     $ -     $ (50,117,227 )   $ 80,680,746  

The accompanying notes are an integral part of these consolidated financial statements.

F-8



OROMIN EXPLORATIONS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)

  2012       2011  
        (Note 19)  
CASH FLOWS FROM OPERATING ACTIVITIES          

Loss for the year

(8,207,833 ) $ (9,783,496 )

Items not affecting cash:

         

Share-based payments

2,905,335     4,313,421  

Amortization

50,535     50,535  

Non-cash portion of foreign exchange loss

13,496     -  

Write-down of investment revaluation reserve (Note 4)

329,423     -  

Gain on sale of subsidiaries (Note 7)

(2,216 )   -  

Write-off of exploration and evaluation assets (Note 7)

-     1,443,355  

Changes in non-cash working capital items:

         

Receivables

201,603     (136,733 )

Deposits and prepaid expenses

511,401     (733,168 )

Trade and other payables

(64,848 )   (189,935 )

Net cash used in operating activities

(4,263,104 )   (5,036,021 )
CASH FLOWS FROM INVESTING ACTIVITIES          

Investment in Oromin Joint Venture Group Ltd., net of recoveries

(8,862,865 )   (16,980,459 )

Advances to joint venture

(66,606 )   (41,528 )

Proceeds from sale of subsidiaries, net (Note 7)

2,216     -  

Exploration and evaluation assets

-     (309,657 )

Purchase of property, plant and equipment

-     (799 )

Net cash used in investing activities

(8,927,255 )   (17,332,443 )
CASH FLOWS FROM FINANCING ACTIVITIES          

Common shares issued for cash

873,955     31,118,950  

Share issue costs

-     (2,540,081 )

Proceeds from performance bond – restricted cash

13,043     16,486  

Net cash provided by financing activities

886,998     28,595,355  
Change in cash (12,303,361 )   6,226,891  
Cash, beginning of year 16,230,612     10,003,721  
Cash, end of year 3,927,251       16,230,612  

Supplemental disclosure with respect to cash flows (Note 16)

The accompanying notes are an integral part of these consolidated financial statements.

F-9



OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 
 
1. NATURE AND CONTINUANCE OF OPERATIONS

Oromin Explorations Ltd. (the “Company”) was incorporated on January 25, 1980 under the Company Act of British Columbia. The address of the Company’s registered office is 2000 - 1055 West Hastings Street, Vancouver, BC, Canada. The consolidated financial statements of the Company as at and for the year ended February 29, 2012 include the accounts of the Company, its subsidiary and the Company’s interest in a jointly controlled entity. The Company is the ultimate parent. The Company owns a 43.5% share in Oromin Joint Venture Group Ltd. ("OJVG") (note 5). OJVG owns the exploration concession and mining license in Senegal known as the "OJVG Project", OJVG’s sole mineral property interest.

On December 1, 2011, the Company sold the following subsidiaries in an arm’s length transaction (note 7): Exploraciones Oromin, S.A., which is incorporated under the laws of Argentina, and Irie Isle Limited and Cynthia Holdings Limited, both of which are incorporated under the laws of the British Virgin Islands. At the year ended February 29, 2012, the Company’s subsidiary includes Sabodala Holding Ltd.

The Company is in the business of exploring its resource properties and its current exploration activities are in the pre-production stage. Consequently, the Company defines itself to be in the exploration stage. The recoverability of the Company’s expenditures on resource properties is dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete the exploration and future profitable commercial production or proceeds from the disposition thereof.

These consolidated financial statements have been prepared with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business rather than through a process of forced liquidation. However, the Company has sustained substantial losses from operations since inception and has no current source of revenue. Continued operations of the Company are dependent upon its ability to receive continued financial support, complete public or private equity financings, or generate profits from the operation or disposition of investments in the future. While management of the Company has been successful in completing equity financings in various conditions in the capital markets in the past, restrictions on the Company’s ability to finance in the future could have a material adverse effect on the Company.

These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

2. SIGNIFICANT ACCOUNTING POLICIES

 

A. Statement of compliance and conversion to International Financing Reporting Standards

The consolidated financial statements have been prepared in accordance with International Accounting Standard 1, Presentation of Financial Statements (“IAS 1”) using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). These are the Company’s first consolidated annual financial statements prepared in accordance with IFRS and IFRS 1, First-time Adoption of International Financial Reporting Standards (“IFRS 1”), has been applied. Previously, the Company prepared its consolidated annual financial statements in accordance with Canadian generally accepted accounting principles (“GAAP”). Reconciliations between the Company's previously reported statement of financial position, statement of comprehensive loss and statement of cash flows under GAAP and those reported under IFRS are presented in note 19.

F-10



OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 
 
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

B. Basis of preparation

These consolidated financial statements have been prepared on a historical cost basis except for financial instruments classified as financial assets or financial liabilities at fair value through profit and loss and available–for-sale financial assets, which are measured at fair value, as explained in the accounting policies note set out below. The comparative figures presented in the consolidated financial statements are in accordance with IFRS.

The policies applied in these consolidated financial statements are based on IFRS issued and outstanding as of the date the statements were issued.

The accounting policies set out below have been applied consistently to all periods presented in preparing the opening balance sheet at March 1, 2010 for purposes of transition to IFRS. The accounting policies have been applied consistently by the Company, its subsidiary and the Company’s interest in a jointly controlled entity.

C. Basis of consolidation

These consolidated financial statements include the accounts of the Company, its subsidiaries and the Company’s interest in a jointly controlled entity (note 5).

The Company has determined that its investment in OJVG, a company incorporated in the British Virgin Islands and owned 43.5% by Sabodala Holding Ltd., a company wholly-owned by the Company, 43.5% by Bendon International Ltd., an arm’s length private company incorporated in the British Virgin Islands, and 13% by Badr Investment & Finance Company, an arm’s length private company based in Saudi Arabia, qualifies as a jointly controlled entity since the Company has joint control, established by contractual agreements and requires majority consent for most strategic financial and operating decisions. The Company has elected to apply the equity method to account for its interest in OJVG (note 5). The investment is carried in the statement of financial position at cost and adjusted by post-acquisition changes in the Company’s share of the net assets of the joint venture, less any impairments.

Significant inter-company balances and transactions, including any unrealized income and expenses arising from inter-company transactions, are eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Company's interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

D. Functional currency

Items included in the financial statements of each of the entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The functional and presentation currency of the Company, its subsidiary, and the Company’s interest in a jointly controlled entity is the Canadian dollar.

Transactions in foreign currencies are translated to the functional currency at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate at that date and non-monetary assets and liabilities are translated at historical rates. Foreign currency gains and losses arising from translation are included in profit or loss.

E. Financial assets and liabilities

The Company classifies its financial instruments in the following categories: financial assets at fair value through profit or loss, loans and receivables, available for sale financial assets, financial liabilities at fair value through profit or loss, and other financial liabilities at amortized cost. The classification depends on the purpose for which the financial instruments were acquired. Management determines the classification of its financial instruments at initial recognition.

F-11



OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

 

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

E. Financial assets and liabilities (continued)

Financial assets at fair value through profit or loss (“FVTPL”)

The Company’s FVTPL comprise cash. A financial asset is classified at fair value through profit or loss if it is classified as held for trading or is designated as such upon initial recognition. Financial assets are designated as at FVTPL if the Company manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Company’s risk management strategy. Attributable transaction costs are recognized in the statement of comprehensive loss when incurred. FVTPL are measured at fair value, and changes are recognized in the statement of comprehensive loss.

Available-for-sale financial assets

The Company’s investments in marketable securities are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency differences, are recognized in other comprehensive income or loss and presented in the investment revaluation reserve in equity. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognized in the investment revaluation reserve is included in profit or loss.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Company’s loans and receivables comprise receivables. Loans and receivables are measured at amortized cost using the effective interest method, less any impairment.

Financial liabilities at fair value through profit or loss

This category comprises of derivatives, or liabilities acquired or incurred principally for the purpose of selling or repurchasing it in the near term. They are carried in the statement of financial position at fair value with the changes in fair value recognized in the statement of comprehensive loss.

Other financial liabilities at amortized cost

The Company’s trade and other payables are classified as other financial liabilities at amortized cost and are initially measured at fair value and subsequently measured at amortized cost.

Transaction costs incurred upon the issuance of debt instruments or modification of a financial liability are deducted from the financial liability and are amortized using the effective interest method over the expected life of the related liability.

Impairment of financial instruments

Financial assets or a group of financial assets are assessed for indicators of impairment at each statement of financial position reporting date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. Objective evidence of impairment could include:

  • significant financial difficulty of the issuer or counterparty; or

  • default or delinquency in interest or principal payments; or

  • it becoming probable that the borrower will enter bankruptcy or financial re-organization.

F-12



OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

 

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

E. Financial assets and liabilities (continued)


For loans and receivables carried at amortized cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the asset’s original effective interest rate. The carrying amount of the asset is reduced by the impairment loss through the use of a provision account. Subsequent recoveries of amounts previously written off are credited against the provision account. Changes in the carrying amount of the provision account are recognized in profit or loss.

With the exception of available-for-sale financial assets, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. In respect of available-for-sale financial assets, impairment losses previously recognized through profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized directly in equity.

The Company does not have any derivative financial instruments.

F. Exploration and evaluation

 

Oil and gas properties

The Company follows the full cost method of accounting for oil and gas properties whereby exploration and evaluation expenditures are capitalized and accumulated in cost centres. Such costs include lease acquisition costs, geological and geophysical expenses, lease rentals on undeveloped properties, costs of drilling both productive and non-productive wells, technical consulting costs directly related to exploration and development activities and capitalized financing costs. These costs do not include general prospecting or evaluation costs incurred prior to having obtained the legal rights to explore an area, which are expensed directly to the statement of comprehensive income or loss as they are incurred.

Depletion of exploration and evaluation expenditures and depreciation of production equipment are provided on the unit-of-production method based upon estimated proven oil and gas reserves before royalties in each cost centre, as determined by independent engineers. For purposes of this calculation, reserves and production of natural gas are converted to common units based on their approximate relative energy content. Undeveloped properties are excluded from the depletion calculation until the quantities of proven reserves can be determined.

Impairment of exploration and evaluation assets

Exploration and evaluation assets are assessed for impairment if (i) sufficient data exists to determine technical feasibility and commercial viability, and (ii) facts and circumstances suggest that the carrying amount exceeds the recoverable amount. The recoverable amount of the exploration and evaluation asset is estimated to determine the extent of the impairment loss (if any).

G. Interest in joint ventures

 

A joint venture is a contractual arrangement whereby the Company and other parties undertake an economic activity that is subject to joint control (i.e. when the strategic, financial, and operating policy decisions relating to the activities of the joint venture require the unanimous consent of the parties sharing control).

Joint venture arrangements that involve the establishment of a separate entity in which each venture has an interest are referred to as jointly controlled entities. The Company reports its interest in a jointly controlled entity (“JCE”), under the equity method of accounting. Under the equity method, an interest in a JCE is initially recorded at cost and adjusted thereafter for the post-acquisition change in the Company’s share of net assets of the JCE. The statement of comprehensive income or loss reflects the Company’s share of the results of operations of the joint venture.

F-13



OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

 

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

G. Interest in joint ventures (continued)

 

When the Company transacts with a JCE of the Company, unrealized profit and losses are eliminated to the extent of the Company’s interest in the joint venture.

The financial statements of the JCEs are prepared for the same reporting period as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Company.

Reimbursement of the joint venture operator’s costs

When the Company, acting as an operator, receives reimbursement of direct costs recharged to the joint venture, such recharges represent reimbursements of costs that the operator incurred as an agent for the joint venture and therefore have no effect on the statement of comprehensive income or loss.

In many cases, the Company also incurs certain general overhead expenses in carrying out activities on behalf of the joint venture. As these costs can often not be specifically identified, joint venture agreements allow the operator to recover the general overhead expenses incurred by passing through its overhead costs incurred in the form of a project administration cost recovery. Although the purpose of this recharge is very similar to the reimbursement of direct costs, the Company is not acting as an agent in this case. Therefore, the general overhead expenses and the overhead fee are recognized in the statement of comprehensive income or loss as an expense and income respectively.

H. Property, plant, and equipment

 

Property, plant and equipment (“PPE”) are carried at cost, less accumulated depreciation and accumulated impairment losses. The cost of an item of PPE consists of the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for its intended use and an initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

When parts of an item of PPE have different useful lives, they are accounted for as separate items (major components) of PPE.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the consolidated statement of comprehensive income or loss during the financial period in which they are incurred.

Depreciation is calculated at the following rates:

Office furniture Straight line over five years
Computer equipment Straight line over five years
Leasehold improvements Straight line over the life of lease

 

An item of PPE is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal of the asset, determined as the difference between the net disposal proceeds and the carrying amount of the asset, is recognized in profit or loss in the consolidated statement of comprehensive income or loss.

I. Trade and other payables

 

Trade and other payables are obligations to pay for goods or services that have been acquired in the ordinary course of business. Trade and other payables are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade and other payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. F-14



OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

 

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

J. Restoration and rehabilitation provision

 

A provision for restoration and rehabilitation is recognized when there is a present legal or constructive obligation, as a result of exploration, development, or production activities undertaken, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the provision can be measured reliably. The estimated future obligations include the costs of removing facilities, abandoning sites and restoring the affected areas. The restoration and rehabilitation provision is the best estimate of the present value of the expenditure required to settle the restoration obligation at the reporting date, based on current legal requirements. Future restoration costs are reviewed at least annually and any changes in the estimate are reflected in the present value of the restoration and rehabilitation provision at each reporting date. To date the Company does not have any significant restoration obligations.

K. Impairment

 

At each financial position reporting date the carrying amounts of the Company’s assets are reviewed to determine whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any.

The recoverable amount is the higher of fair value less costs to sell and value in use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in the profit or loss for the period. For the purposes of impairment testing, each resource property is considered a cash-generating unit and assets are allocated to each cash-generating unit to which the exploration activity relates. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

L. Share-based payment transactions

 

Share-based payments to employees are measured at the fair value of the instruments issued and each tranche is recognized on a straight-line basis over the vesting period. An individual is classified as an employee when the individual is an employee for legal or tax purposes (“direct employee”) or provides services similar to those performed by a direct employee. Share-based payments to non-employees are measured at the fair value of the goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. Fair value of the equity instruments issued is determined using the Black-Scholes option pricing model. The offset to the recorded cost is to share-based payments reserve. Consideration received on the exercise of stock options is recorded as share capital and the related share-based payments reserve is transferred to share capital. Upon expiry, the recorded value is transferred to deficit. The Company estimates the number of equity instruments that are expected to vest and then, at each reporting date, makes adjustments to the actual number that vests unless forfeitures are due to market-based conditions.

F-15



OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

 

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

M. Income taxes

 

Income tax expenses comprises current and deferred tax. Current and deferred tax are recognized in net income except to the extent that it relates to a business combination or items recognized directly in equity or in other comprehensive loss/income.

Current income taxes are recognized for the estimated income taxes payable or receivable on taxable income or loss for the current year and any adjustment to income taxes payable in respect of previous years. Current income taxes are determined using tax rates and tax laws that have been enacted or substantively enacted by the year-end date.

Deferred tax is accounted for using the statement of financial position liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred taxes are not recognized for temporary differences related to the initial recognition of assets or liabilities that affect neither accounting nor taxable profit nor investments in subsidiaries, associates and interests in joint ventures to the extent it is probable that they will not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner and expected date of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the statement of financial position date. A deferred tax asset is recognized only to the extent that it is probable that future taxable amounts will be available against which the asset can be utilized.

N. Loss per share

 

The Company uses the treasury stock method to compute the dilutive effect of options, warrants and similar instruments. Under this method, the dilutive effect on loss per share is recognized on the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments. It assumes that the proceeds would be used to purchase common shares at the average market price during the period. For the periods presented, this calculation proved to be anti-dilutive.

Basic and diluted loss per share is calculated using the weighted average number of common shares outstanding during the year.

O. Segment Reporting

 

The Company operates in a single reportable operating segment – the acquisition, exploration and development of mineral properties.

P. Use of Judgements and Estimates

 

The preparation of consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of income and expenses during the reporting periods.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and further periods if the review affects both current and future periods.

F-16



OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

 

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

P. Use of Judgements and Estimates (continued)

 

Critical judgments in applying accounting policies:

The following are critical judgements that management has made in the process of applying accounting policies and that have the most significant effect on the amounts recognized in the consolidated financial statements:

Determination of share-based payments:

The assumptions used in determining the fair value of share options granted include judgments in respect of length of service together with share price volatility, dividend, interest yields and exercise patterns. Also, the Company estimates the fair value using the Black-Scholes option pricing model but recognizes that other valuation models could provide differing results. Management believes that the current model provides a fair valuation measure.

Q. New Standards Not Yet Adopted

 

  • IAS 1, Presentation of Financial Statements – The IASB has amended the disclosure requirement of items presented in other comprehensive income (“OCI”), including a requirement to separate items presented in OCI into two groups based on whether or not they may be recycled to profit or loss in the future. This amendment is effective for annual periods beginning on or after July 1, 2012. The Company is currently evaluating the impact the final standard is expected to have on its consolidated financial statements.

  • IFRS 7, Financial Instruments: Disclosures - In December 2011, the IASB amended IFRS 7 (Financial Instruments: Disclosures) requiring additional disclosures on offsetting of financial assets and financial liabilities. This amendment is effective for annual periods beginning on or after January 1, 2013. This standard also requires additional disclosures about the initial application of IFRS 9. This amendment is effective for annual periods beginning on or after January 1, 2015 (or otherwise when IFRS 9 is first applied). IAS 32, Financial Instruments: Presentation, was amended in December 2011 relating to application guidance on the offsetting of financial assets and financial liabilities. This standard is effective for annual periods beginning on or after January 1, 2014. The Company is currently evaluating the impact the final standard is expected to have on its consolidated financial statements.

  • IFRS 9, Financial Instruments - The IASB intends to replace IAS 39, Financial Instruments: Recognition and Measurement (“IAS 39”), in its entirety with IFRS 9, Financial Instruments (“IFRS 9”) in three main phases. IFRS 9 will be the new standard for the financial reporting of financial instruments that is principles-based and less complex than IAS 39, and is effective for annual periods beginning on or after January 1, 2015, with earlier adoption permitted. IFRS 9 requires that all financial assets be classified as subsequently measured at amortized cost or at fair value based on the Company’s business model for managing financial assets and the contractual cash flow characteristics of the financial assets. Financial liabilities are classified as subsequently measured at amortized cost except for financial liabilities classified as at fair value through profit or loss, financial guarantees and certain other exceptions. The Company is currently evaluating the impact the final standard is expected to have on its consolidated financial statements.

  • IFRS 10, Consolidated Financial Statements – This standard establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. This standard (i) requires a parent entity (an entity that controls one or more other entities) to present consolidated financial statements; (ii) defines the principle of control, and establishes control as the basis for consolidation; (iii) sets out how to apply the principle of control to identify whether an investor controls an investee and therefore must consolidate the investee; and (iv) sets out the accounting requirements for the preparation of consolidated financial statements. IFRS 10 supersedes IAS 27, Consolidated and Separate Financial Statements and SIC-12, Consolidation – Special Purpose Entities and is effective for annual periods beginning on or after January 1, 2013, with early application permitted. The Company is currently evaluating the impact the final standard is expected to have on its consolidated financial statements.

F-17



OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

 

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Q. New Standards Not Yet Adopted (continued)

 

  • IFRS 11, Joint Arrangements – This standard establishes the core principle that a party to a joint arrangement determines the type of joint arrangement in which it is involved by assessing its rights and obligations and accounts for those rights and obligations in accordance with that type of joint arrangement. This standard is effective for annual periods beginning on or after January 1, 2013, with early application permitted. The Company has early adopted this standard as set out in Note 2(G).

  • IFRS 12, Disclosure of Involvement with Other Entities – This standard requires the disclosure of information that enables users of financial statements to evaluate the nature of, and risks associated with, its interests in other entities and the effects of those interests on its financial position, financial performance and cash flows.
    This standard is effective for annual periods beginning on or after January 1, 2013, with early application permitted. The Company is currently evaluating the impact the final standard is expected to have on its consolidated financial statements.

  • IFRS 13, Fair Value Measurement – This standard defines fair value, sets out in a single IFRS a framework for measuring fair value and requires disclosures about fair value measurements. IFRS 13 applies when another IFRS requires or permits fair value measurements or disclosures about fair value measurements (and measurements, such as fair value less costs to sell, based on fair value or disclosures about those measurements), except for: share-based payment transactions within the scope of IFRS 2, Share-based Payment; leasing transactions within the scope of IAS 17, Leases; measurements that have some similarities to fair value but that are not fair value, such as net realizable value in IAS 2, Inventories or value in use in IAS 36, Impairment of Assets. This standard is effective for annual periods beginning on or after January 1, 2013, with early application permitted. The Company is currently evaluating the impact the final standard is expected to have on its consolidated financial statements.

3. RECEIVABLES

 

                         
    February 29,   February 28,   March 1,
    2012     2011     2010  
Accounts receivable $ 2,564 $ 45,805 $ 79,976
Accrued interest receivable   11,248   58,197   -
HST receivable   87,663     199,076     86,369  
Receivables $ 101,475   $ 303,078   $ 166,345  

 

4. MARKETABLE SECURITIES

 

The Company’s investments consist of 1,197,906 shares of Lund Gold Ltd. (“Lund”) with a quoted market value at February 29, 2012 of $0.035 per share or $41,927 in the aggregate. The Company classifies these shares as available for sale financial assets, and accordingly any revaluation gains and losses in fair value are included in total comprehensive income or loss in investment revaluation reserve for the period until the asset is removed from the statement of financial position. During the year ended February 29, 2012, the Company recognized a loss in fair value attributable to the shares of Lund totaling $47,916 charged to other comprehensive loss in investment revaluation reserve. Also, based on the Company’s assessment of Lund’s estimated future value, an impairment charge of $329,423 has been recognized in the statement of comprehensive loss as at February 29, 2012 with an off-setting adjustment to investment revaluation reserve.

The Lund shares trade on the TSX Venture Exchange and fair values are readily determinable from this active public market. Lund is related to the Company, having a number of directors in common.

F-18



OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

 

5. INVESTMENT IN OROMIN JOINT VENTURE GROUP LTD.

 

In October 2004 the Company was awarded an exploration concession in Sénégal known as the Sabodala Project (since renamed the “OJVG Project”), and the Company’s rights were formalized in a Mining Convention with the government of Sénégal dated February 17, 2005 and updated thereafter. The Mining Convention granted the Company the sole right to acquire a 100% interest in this project, subject to a 10% free carried interest, after repayment of capital and accrued interest thereon, held in favour of the government of Sénégal. The OJVG Project was subsequently transferred by the Company to Oromin Joint Venture Group Ltd. (“OJVG”), a company incorporated in the British Virgin Islands and owned 43.5% by Sabodala Holding Limited (“SHL”), a company wholly-owned by the Company, 43.5% by Bendon International Ltd. (“Bendon”), an arm’s length private company incorporated in the British Virgin Islands, and 13.0% by Badr Investment & Finance Company (“Badr”), an arm’s length private company based in Saudi Arabia. The Company provides exploration and management services to OJVG for which it may recover a portion of its administration costs. In order to acquire and maintain in good standing its interest in the OJVG Project, OJVG was obliged to spend at least US$32 million on exploration of the OJVG Project through December 2009 through a series of expenditure milestones, conditions which were met on schedule. Having met these milestone conditions, on January 26, 2010 OJVG was granted a mining licence for the OJVG Project for a term of fifteen years. This licence allows OJVG to carry out mining operations once feasibility is established. Under the Mining Code of Sénégal, the mining licence must be held by a Sénégalese company and accordingly OJVG is in the process of establishing an operating company under the laws of Sénégal. The operating company will be owned by OJVG as to 90% and by the Government of Sénégal as to 10%. The interest of the Government of Sénégal is fully carried, subject to the capital and accrued interest recoveries set out above, and the government is also entitled to a royalty equal to 3% of net smelter returns. Under the terms of the Mining Convention, OJVG is obliged to offer to Sénégalese nationals the right to purchase 25% of such operating company at a price determined by an independent valuator.

OJVG was incorporated in August 2006 in anticipation of the completion of an initial expenditure obligation, and in December 2006, SHL, Bendon and Badr completed a shareholders agreement governing the conduct of OJVG and the OJVG Project. Under the terms of a prior agreement which was superseded by the establishment of OJVG, Bendon provided an initial US$2.8 million in exploration expenditures with the Company providing the next US$5.2 million. Following the completion of the initial US$8 million obligation in October 2006, SHL and Bendon were required to fund and have been funding further exploration and related costs of the OJVG Project equally; Badr has a free carried interest through the commencement of production, subject to repayment of capital and accrued interest thereon.

Effective March 28, 2011, the Mining Convention in respect of the OJVG Project was altered by a rider agreement. Among other matters, this agreement: 1] committed the Company to invest USD $450,000 per year for the social development of local communities until the date of first commercial production, increasing to USD $800,000 per year from the date of first commercial production; 2] established the Company’s holiday from most forms of taxation in Sénégal to be eight years from the date of issue of its mining license, which is January 26, 2010; and 3] committed the Company to contribute up to USD $150,000 per year starting from the date of first commercial production for mining-related training of Sénégalese nationals.

The Company has determined that its investment in OJVG qualifies as an interest in a jointly controlled entity under IAS 31, Interests in Joint Ventures, and has elected to apply the equity method of accounting for its interest in OJVG. For accounting purposes, no recognition of Badr's interest in the equity of OJVG will be made until the commencement of production and the repayment of capital and accrued interest to Bendon and SHL and prior to that point each of Bendon and SHL are ascribed a 50 per cent interest in the equity of OJVG.

F-19



OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

 

5. INVESTMENT IN OROMIN JOINT VENTURE GROUP LTD. (CONTINUED)

 

             
Investment in Oromin Joint Venture Group Ltd.   Year ended February   Year ended February
    29, 2012     28, 2011  
Balance, beginning of year $ 67,508,460 $ 50,632,970
Exploration and evaluation costs capitalized   8,862,865     16,875,490  
Balance, end of year $ 76,371,325   $ 67,508,460  

 

Summary financial information for the equity accounted investee, OJVG, not adjusted for the percentage ownership held by the Company, is as follows as at:

                   
    February 29,     February 28,     March 1,  
    2012     2011     2010  
ASSETS                  
Current Assets                  

Cash

$ 237,371   $ 4,556,596   $ 6,202,494  

Deposits and prepaid expenses

  29,572     23,837     189,964  

Total current assets

  266,943     4,580,433     6,392,458  
Non-Current Assets                  

Resource properties

  155,503,549     133,562,338     96,459,272  

Contractor deposits

  -     -     368,410  

Total non-current assets

  155,503,549     133,562,338     96,827,682  
Total Assets $ 155,770,492   $ 138,142,771   $ 103,220,140  
LIABILITIES AND EQUITY                  
Current liabilities                  

Trade and other payables

$ 1,942,849   $ 3,370,102   $ 3,161,615  
Non-Current liabilities                  

Shareholder advances

  143,273,607     122,175,316     96,049,276  

Accrued interest on shareholder advances

  34,209,145     22,623,819     15,078,081  

Total non-current liabilities

  177,482,752     144,799,135     111,127,357  
Equity                  

Deficit

  (23,655,109 )   (10,026,466 )   (11,068,832 )
Total Liabilities and Equity $ 155,770,492   $ 138,142,771   $ 103,220,140  


F-20




OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

 

5. INVESTMENT IN OROMIN JOINT VENTURE GROUP LTD. (CONTINUED)

 

             
    Year ended     Year ended  
    February 29, 2012     February 28, 2011  
Income $ 4,579   $ 10,128,929  
Expenses   (13,633,222 )   (9,086,563 )
Net income (loss)   (13,628,643 )   1,042,366  
Less: amounts related to shareholder advances   13,408,809     (796,366 )
    (219,834 )   246,000  
The Company’s equity income from investment in OJVG at 50% $ (109,917 ) $ 123,000  
             
    Year ended     Year ended  
    February 29, 2012     February 28, 2011  
Cash flows provided by (used in):            

Operating activities

$ (158,963 ) $ 168,325  

Financing activities

$ 19,274,808   $ 34,714,852  

Investing activities

$ (23,435,070 ) $ (36,529,075 )

 

The reconciliation of OJVG’s equity to the Company’s net interest in the joint venture as at February 29, 2012, February 28, 2011 and March 1, 2010 is as follows:

                   
    February 29,     February 28,     March 1,  
    2012     2011     2010  

OJVG’s equity

$ (23,655,109 ) $ (10,026,466 ) $ (11,068,832 )

Add: shareholder advances

  143,273,607     122,175,316     96,049,276  

Add: accrued interest on shareholder advances

  34,209,145     22,623,819     15,078,081  

Add: adjustment for difference in initial shareholder advances

  2,956,659     2,956,659     2,956,659  

Add: other adjustments

  198,401     198,401     198,401  

Less: accumulated project administration cost recovery

  (4,240,053 )   (2,910,809 )   (1,947,645 )
    152,742,650     135,016,920     101,265,940  

The Company’s net interest in the joint venture at 50%

$ 76,371,325   $ 67,508,461   $ 50,632,970  


F-21




OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

 

5. INVESTMENT IN OROMIN JOINT VENTURE GROUP LTD. (CONTINUED)

 

Exploration and evaluation costs capitalized by OJVG are summarized as follows:

       
Balance, March 1, 2010 $ 96,459,272  

Camp operation

  2,852,720

Contractors and geological staff

  2,245,250

Drilling

  17,416,654

Engineering

  5,602,991

Exploration office

  731,859

Land and legal

  256,946

Mining concession fee

  216,888

Sample analysis

  3,300,694

Social programs

  471,413

Travel and accommodation

  1,086,338

Wages and benefits

  1,788,142

Project administration cost recoveries

  1,133,171  
    37,103,066  
Balance, February 28, 2011   133,562,338  

Camp operation

  2,383,514

Contractors and geological staff

  2,052,096

Drilling

  7,383,802

Engineering

  1,482,560

Exploration office

  703,536

Land and legal

  290,672

Sample analysis

  1,744,286

Social programs

  1,502,934

Travel and accommodation

  1,454,985

Wages and benefits

  1,497,454

Project administration cost recoveries

  1,445,372  
    21,941,211  
Balance, February 29, 2012 $ 155,503,549
       

 

6. CORPORATE ADVISORY FEE

 

Pursuant to a series of corporate advisory agreements with Bendon, the Company paid Bendon annual fees including $2,807,405 (US$2,755,000) during the year ended February 28, 2011. Effective November 26, 2010 the Company agreed to a further renewal of the corporate advisory agreement, and committed to make payments totaling US$2,000,000 for the period November 2010 to July 2011. On June 1, 2011 the Company entered into a new corporate advisory agreement which provides for the payment of US$1,000,000 for the 12 month period ending June 1, 2012 with two payments of US$500,000 each to be paid June 1 and September 1, 2011. During the year ended February 29, 2012, the Company incurred fees of $1,941,571 (US$1,990,000) of which $1,195,186 (US$1,240,000) related to the previous corporate advisory agreement and $746,385 (US$750,000) related to the current corporate advisory agreement.

F-22



OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

 

7. EXPLORATION AND EVALUATION ASSETS

 

       
    Santa Rosa,
    Argentina  
Balance, March 1, 2010 $ 1,103,033  

Exploration office

  83,825

Land and legal

  57,947

Presumptive minimum tax

  51,807

Tenure payments

  136,062

Travel and accommodation

  10,681  
    340,322  
    1,443,355

Write-off of exploration and evaluation assets

  (1,443,355
Balance, February 28, 2011   -  

Exploration office

  59,407

Land and legal

  14,484

Travel and accommodation

  827

Value added tax

  8,394  
    83,112  
    83,112

Write-off of exploration and evaluation assets

  (83,112
Balance, February 29, 2012 $ -  

 

The Company, through its subsidiary Exploraciones Oromin, S.A. (“EOSA”), held a 100% interest in certain oil and gas exploration rights located in the Province of Mendoza, Argentina (the “Santa Rosa Property”). As at February 28, 2011 the Company determined the fair value of the Santa Rosa Property to be $nil and recognized an impairment charge of $1,443,355 for the year then ended.

Effective December 1, 2011 the Company sold its subsidiary Irie Isle Limited (“Irie”), to an arm’s length party for cash proceeds of $5,000. Irie wholly-owned Cynthia Holdings Limited which wholly-owned EOSA. This sale had the effect of disposing of all the Company’s right, title and interest in and to the Santa Rosa Property. The combined net current assets and liabilities of Irie and its subsidiaries at the time of sale was $2,784. Accordingly, the Company recorded a gain on sale of $2,216.

F-23



OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

 

8. PROPERTY, PLANT AND EQUIPMENT

 

                         
    Leasehold   Office   Computer    
  improvements      furniture      equipment      Total  
Cost                
Balance at March 1, 2010 $ 197,521 $ 52,067 $ 2,289 $ 251,877
Additions   -   -   799   799
Disposals   -     -     -     -  
Balance at February 28, 2011   197,521   52,067   3,088   252,676
Additions   -   -   -   -
Disposals   -     -     -     -  
Balance at February 29, 2012 $ 197,521   $ 52,067   $ 3,088   $ 252,676  
Accumulated Amortization                
Balance at March 1, 2010 $ 68,827 $ 17,935 $ 1,144 $ 87,906
Depreciation   39,504   10,413   618   50,535
Disposals   -     -     -     -  
Balance at February 28, 2011   108,331   28,348   1,762   138,441
Depreciation   39,504   10,413   618   50,535
Disposals   -     -     -     -  
Balance at February 29, 2012 $ 147,835   $ 38,761   $ 2,380   $ 188,976  
Net Book Value                  
March 1, 2010 $ 128,694   $ 34,132   $ 1,145   $ 163,971  
February 28, 2011 $ 89,190   $ 23,719   $ 1,326   $ 114,235  
February 29, 2012 $ 49,686   $ 13,306   $ 708   $ 63,700  

 

9. TRADE AND OTHER PAYABLES

 

                   
    February 29,   February 28,   March 1,
    2012     2011     2010  
Accounts payable $ 3,096 $ 171,104 $ 203,702
Accrued payable   283,160     180,000     417,196  
Trade and other payables $ 286,256   $ 351,104   $ 620,898  

 

10. SHARE CAPITAL AND RESERVES

 

(a)     

Authorized:

 

As at February 29, 2012, the authorized share capital of the Company was an unlimited number of common shares without par value.

(b)     

Issued:

 

Common shares: 136,563,218 (February 28, 2011 - 135,572,829)

(c)     

Financing:

 

In August 2010 the Company closed an offering by prospectus of 21,562,500 common shares at a price of $0.80 per share for gross proceeds of $17,250,000 subject to share issue costs totaling $1,294,646. In addition, the Company issued 1,293,750 compensation warrants to the underwriters, exercisable at a price of $0.90 for an 18-month term. The estimated fair value of $336,300 has been deducted from share capital and recorded as share-based payments reserve. This fair value was estimated using the Black-Scholes option pricing model, with the following assumptions: expected life of 18 months, volatility of 73.7 per cent, risk-free equivalent yield of 1.36 per cent and no dividends.

F-24



OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

 

10. SHARE CAPITAL AND RESERVES (CONTINUED)

 

(c)     

Financing (continued):

 

In November 2010 the Company closed an offering by prospectus of 10,000,000 common shares at a price of $1.30 per share for gross proceeds of $13,000,000 subject to share issue costs totaling $1,245,435. In addition, the Company issued 600,000 compensation warrants to the underwriters, exercisable at a price of $1.40 for a two year term. The estimated fair value of $246,071 has been deducted from share capital and recorded as share-based payments reserve. This fair value was estimated using the Black-Scholes option pricing model, with the following assumptions: expected life of two years, volatility of 106 per cent, risk-free equivalent yield of 1.57 per cent and no dividends.

(d)     

Stock options:

 

The Company has a stock option plan under which it is authorized to grant options to directors, officers, employees and consultants, enabling them to acquire up to 10% of the issued and outstanding common shares of the Company. Under the plan, the exercise price of each option granted must not be less than the market price of the Company’s shares. Options granted under the plan typically will vest immediately and are exercisable over five years.

Stock option transactions are summarized as follows:

                
  Number of Stock   Weighted Average
    Options   Exercise Price  
Outstanding at March 1, 2010 9,420,000   $ 1.92

Granted

8,431,000     0.89

Exercised

(651,000 )   0.62

Expired or cancelled

  (8,376,000 )   2.00  
Outstanding at February 28, 2011 8,824,000   $ 0.96

Granted

4,649,000     1.30

Exercised

(14,000 )   0.65

Expired or cancelled

  -     -  
Outstanding and exercisable at February 29, 2012   13,459,000   $ 1.08  

 

As at February 29, 2012, the following stock options were outstanding and exercisable:

           
Expiry Date Number of Stock Options Remaining Contractual   Exercise Price
    Life (Years)      
May 9, 2012 * 100,000 0.19 $ 2.91
May 14, 2013 150,000 1.21   3.00
July 10, 2014 200,000 2.36   1.12
October 7, 2014 75,000 2.61   0.90
March 31, 2015 714,000 3.08   0.65
August 24 2015 7,571,000 3.48   0.92
March 3, 2016 4,649,000 4.01   1.30  
  13,459,000 3.57      

 

* Expired unexercised

F-25



OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

 

10. SHARE CAPITAL AND RESERVES (CONTINUED)

 

(d)     

Stock options (continued):

 

During the year ended February 29, 2012, the Company granted fully-vested options to acquire 4,649,000 common shares with a weighted average fair value of $0.62 per option resulting in share-based payments expense of $2,901,822. An additional $3,513 in share-based payments was recognized in respect of the vesting of options granted in prior years for a total of $2,905,335 in share-based payments expensed during the year ended February 29, 2012.

 

The following assumptions were used for the Black-Scholes valuation of options granted during the years:

     
  2012 2011
Risk-free interest rate 2.4 % 2.1 – 2.9 %
Expected life 3.55 years 5 years
Annualized volatility 67 % 67 – 68 %
Dividend rate 0 % 0 %

 

(e)     

Warrants:

 

Share purchase warrant transactions are summarized as follows:

           
  Number of Warrants Weighted Average
        Exercise Price  
Outstanding at March 1, 2010 487,071 $ 0.85

Issued

1,893,750   1.06

Exercised

(517,500 )   0.90

Expired

  -     -  
Outstanding at February 28, 2011 1,863,321 $ 1.05

Issued

-   -

Exercised

(976,389 )   0.89

Expired

  (286,932 )   0.86  
Outstanding and exercisable at February 29, 2012   600,000   $ 1.40  

 

As at February 29, 2012, the following share purchase warrants were outstanding and exercisable:

       
Expiry Date Number of Warrants Exercise Price  
November 16, 2012 600,000 $ 1.40  


F-26




OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

 

11. RELATED PARTY TRANSACTIONS


The Company incurred costs with directors and companies related by directors in common as follows:


             
    Year ended February   Year ended February
    29, 2012     28, 2011  
Professional and consulting fees $ 483,340 $ 513,780
Salaries and benefits $ 850,277   $ 629,611  


Professional and consulting fees and salaries and benefits have been expensed to operations, or capitalized to Investment in Oromin Joint Venture Group Ltd., based on the nature of the expenditure.

Included in trade and other payables at February 29, 2012 is $59,224 (February 28, 2011 - $59,087) due to directors and companies with common directors.

Compensation of key management personnel

The remuneration of directors and other members of key management personnel, including the CEO, CFO, and Directors, are as follows:

             
    Year ended February   Year ended February
    29, 2012     28, 2011  
Salaries and other short-term benefits $ 1,572,859 $ 1,261,204
Share-based payments $ 1,385,682   $ 2,207,715  

 

12. SEGMENT INFORMATION

 

The Company has one operating segment, being the exploration of resource properties. The Company’s investment in Oromin Joint Venture Group Ltd., exploration and evaluation assets, and property, plant and equipment are located in the following geographic areas:

                   
    As at February   As at February   As at March
    29, 2012     28, 2011     1, 2010  
Sénégal $ 76,371,325 $ 67,508,460 $ 50,632,970
Canada   63,700     114,235     163,971  
  $ 76,435,025   $ 67,622,695   $ 50,796,941  

 

13. COMMITMENTS

 

Effective April 1, 2009 the Company became a joint party to a lease on its office premises in Vancouver, Canada, which terminates May 31, 2013. Jointly with a company related by having a number of common directors, the Company is committed to annual lease payments as follows:

2013 $ 241,280 For the 12 month fiscal year
2014 $ 60,828 For the three months from March 1, 2013 to termination


F-27




OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

14. FINANCIAL INSTRUMENTS

 

The Company’s financial instruments include cash, receivables, marketable securities, and trade and other payables.

(a) Financial assets and liabilities by category

 

                               
At February 29, 2012                
             Other  
    FVTPL   Loans and   Available-   financial Total
          receivables     for-sale     liabilities        
Financial assets                  
Cash $ 3,927,251 $ - $ - $ - $ 3,927,251
Receivables   -   101,475   -   - 101,475
Marketable securities   -     -      41,927      -      41,927  
Total financial assets   3,927,251     101,475      41,927      -      4,070,653  
Financial liabilities                              
Trade and other payables $ -   $ -    $ -    $ 286,256      $ 286,256  
                               
At February 29, 2011                
             Other  
    FVTPL    Loans and    Available-   financial Total
          receivables     for-sale     liabilities        
Financial assets                  
Cash $ 16,230,612 $ - $ - $ - $ 16,230,612
Receivables   -   303,078   -   - 303,078
Marketable securities   -     -     89,843     -     89,843  
Total financial assets   16,230,612     303,078     89,843     -     16,623,533  
Financial liabilities                              
Trade and other payables $ -   $ -   $ -   $ 351,104     $ 351,104  
                               
At March 1, 2010                
             Other  
    FVTPL   Loans and   Available-   financial Total
          receivables     for-sale     liabilities        
Financial assets                  
Cash $ 10,003,721 $ - $ - $ - $ 10,003,721
Receivables   -   166,345   -   - 166,345
Marketable securities   -     -     89,843     -     89,843  
Total financial assets   10,003,721     166,345     89,843     -     10,259,909  
Financial liabilities                              
Trade and other payables $ -   $ -   $ -   $ 620,898     $ 620,898  

 

(b)     

Fair value of financial instruments

 

The carry values of receivables and trade and other payables approximate their fair values due to their relatively short maturity.

F-28



OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

 

14. FINANCIAL INSTRUMENTS (CONTINUED)

 

(c) Fair value hierarchy

IFRS requires disclosures about the inputs to fair value measurements, including their classification within a hierarchy that prioritizes the inputs to fair value measurement. The three levels of the fair value hierarchy are:

  • Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;

  • Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and

  • Level 3 – Inputs that are not based on observable market data

The following tables illustrate the valuation method of the Company’s financial instruments carried at fair value as at February 29, 2012, February 28, 2011 and March 1, 2010:

At February 29, 2012   Level 1     Level 2     Level 3     Total  
Cash $ 3,927,251 $ - $ - $ 3,927,251
Marketable securities $ 41,927   $ -   $ -   $ 41,927  

 

At February 28, 2011   Level 1     Level 2     Level 3     Total  
Cash $ 16,230,612 $ - $ - $ 16,230,612
Marketable securities $ 89,843   $ -   $ -   $ 89,843  

 

At March 1, 2010   Level 1     Level 2     Level 3     Total  
Cash $ 10,003,721 $ - $ - $ 10,003,721
Marketable securities $ 89,843   $ -   $ -   $ 89,843  

 

15. FINANCIAL RISK MANAGEMENT

The Company is exposed to a variety of financial risks by virtue of its activities, including foreign currency risk, liquidity risk, equity market risk, interest rate risk and credit risk. The Company’s objective with respect to financial risk management is to minimize potential adverse effects on the Company’s financial position and performance. Management is responsible to the Board of Directors for establishing controls and procedures with the objectives that financial risks are mitigated to acceptable levels.

(a) Foreign currency risk

Foreign currency risk is the risk that the fair values of financial assets and liabilities denominated and for settlement in currencies other than the Canadian dollar (CAD) may fluctuate because of changes in foreign exchange rates. The Company holds a portion of its cash in United States dollars (USD), however, at February 29, 2012 the Company’s exposure to exchange rate changes for the USD was not material. To date the Company has elected not to hedge its USD exposures by futures or options strategies.

F-29



OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

15. FINANCIAL RISK MANAGEMENT (CONTINUED)

 

(b) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations as they become due. At February 29, 2012 the Company held cash resources of $3,927,251 and had trade and other payables of $286,256 and was able to meet its obligations as they became due. The Company has no regular cash flow from its operating activities. To continue to be able to meet its obligations as they become due, the Company will depend on management’s ability to raise the funds required through future equity financings. If such funds cannot be raised, the Company would be required to postpone or curtail its operating and investing activities. The Company manages its liquidity risk by forecasting cash flow requirements for its planned exploration and corporate activities and anticipating investing and financing activities. Management and the Board of Directors are actively involved in the review, planning and approval of annual budgets and of significant expenditures and commitments, and in monitoring the climate and opportunity for equity financings.

(c) Equity market risk

The Company is exposed to equity price risk arising from its investments, which are marketable securities classified as available-for-sale. The Company’s maximum exposure to equity price risk is the carrying value of its investments.

(d) Interest rate risk

The Company’s exposure to interest rate risk is not material. The nature of its financial instruments do not lead to any material risk that their fair values or future cash flows will fluctuate because of changes in market interest rates.

(e) Credit risk

Credit risk is the risk of financial loss to the Company if a counter-party to a financial instrument fails to meet its contractual obligations. The Company has no material counter-parties to its financial instruments with the exception of the financial institutions which hold its cash deposits. The Company manages this credit risk by investing its cash in interest-bearing accounts at a major Canadian chartered bank, or, to a lesser extent, at major banks in Sénégal. The Company’s material receivables consist primarily of sales tax receivables due from the federal government of Canada. Because of these circumstances, the Company does not believe it has a material exposure to credit risk.

F-30



OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

15. FINANCIAL RISK MANAGEMENT (CONTINUED)

 

(f) Capital Management

The capital of the Company consists of the items included in equity. The Company manages its capital structure and makes adjustments to it based on the funds required by and available to the Company. The Company’s objective for capital management is to plan for the capital required to support the Company’s ongoing acquisition and exploration of its mineral properties and to provide sufficient funds for its corporate activities.

The Company’s mineral properties are in the exploration stage. As an exploration stage company, the Company is currently unable to self-finance its operations. The Company has historically relied on equity financings to finance operations. In order to carry out the Company’s planned exploration programs and to pay for administrative costs, the Company will spend its existing working capital and raise additional funds as required. The Company uses a planning and budgeting process to manage its capital requirements.

16. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS

 

    Year ended       Year ended  
    February 29, 2012       February 28, 2011  
          (Note 19)  
Non-cash operating activities            

Accounts payable incurred for resource property expenditures

$ -     $ 98,998  
Non-cash financing activities            

Exercise of stock options

$ (5,246 ) $ (285,267 )

Share-based payments reserve allocated to share capital on

           

exercise of stock options

  5,246     285,267  

Shares issued for exploration and evaluation assets

  -     5,555  

Warrants issued for underwriter’s compensation

  -     582,371  

Share-based payments reserve arising from underwriter’s

           

compensation warrants

  -     (582,371 )

Exercise of underwriter’s compensation warrants

  (278,387 )   (134,520 )

Share-based payments reserve allocated to share capital on exercise of underwriter’s compensation warrants

  278,387       134,520  
  $ -     $ 5,555  
Non-cash investing activities            

Expenditures on exploration and evaluations assets incurred through shares issued

$ -     $ (5,555 )
Interest paid during the year $ -   $ -  
Income taxes paid during the year $ -     $ -  

F-31



OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

17. INCOME TAXES

A reconciliation of income taxes at statutory rates with reported taxes is as follows:

    Year ended       Year ended  
    February 29, 2012       February 28, 2011  
Loss for the year before income taxes $ (8,207,833 ) $ (9,783,496 )
Expected income tax recovery $ 2,155,000   $ 2,757,000  
Non-deductible expenditures   (609,000 )   (1,988,000 )
Impact of different tax rates and other   (107,000 )   (106,000 )
Changes in unrecognized deductible temporary differences   (1,439,000 )   (663,000 )
Income tax (expense) recovery $ -     $ -  

The Canadian income tax rate declined during the year due to changes in the law that reduced corporate income tax rates in Canada.

The deductible temporary differences and unused tax losses that are not recognized as deferred tax assets are as follows:

    Year ended   Expiry dates   Year ended  
    February 29,     February 28,
    2012       2011  
Equipment and cumulative eligible capital $ 343,000 Not applicable $ 228,000
Exploration and evaluation assets   6,075,000 Not applicable   6,075,000
Financing costs   2,504,000 2033 to 2036   3,787,000
Marketable securities and other   49,000 Not applicable   -
Capital losses available for future periods   2,941,000 Not applicable   41,000
Non-capital losses available for future periods   11,965,000   2015 to 2032   7,908,000  

 

Tax attributes are subject to review, and potential adjustments, by tax authorities.

 

18.     

CONTINGENCY

In October 2011 the Company entered into a series of retention agreements with a number of its officers, employees and key consultants providing for the possibility of certain payments to be made to those parties upon the conclusion of a change in control transaction, as that term is normally understood in the Company’s industry. In the event of such a change in control transaction, the Company could become liable for the payment of up to a total of $2,274,000 in termination payments. Of this amount, a total of up to $1,546,500 could become payable to senior officers and directors.

19. TRANSITION TO IFRS

As stated in note 2, these are the Company's first consolidated annual financial statements prepared in accordance with IFRS. An explanation of how the transition from previous GAAP to IFRS has affected the Company’s financial position, financial performance and cash flows is set out in this note.

The accounting policies in note 2 have been applied in preparing the consolidated financial statements for the year ended February 29, 2012, the comparative information for the year ended February 28, 2011, and the preparation of an opening IFRS statement of financial position on the transition date, being March 1, 2010.

In preparing the consolidated financial statements for the year ended February 29, 2012, comparative information for the year ended February 28, 2011 have been adjusted from amounts reported previously in the financial statements prepared in accordance with GAAP.

F-32



OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

19. TRANSITION TO IFRS (CONTINUED)

The guidance for the first time adoption of IFRS is set out in IFRS 1. IFRS 1 provides for certain mandatory exceptions and optional exemptions for first time adopters of IFRS. The Company elected to apply the following IFRS 1 optional exemptions:

  • IFRS 2, Share-Based Payments, has not been applied to equity instruments granted after November 7, 2002 which had not vested as of the transition date.

  • IFRS 3, Business Combinations, has not been applied to acquisitions of subsidiaries or of interests in associates and joint ventures that occurred before January 1, 2010.

  • The Company has applied the transitional provision in IFRIC 4, Determining whether an Arrangement contains a Lease, and has assessed all arrangements as at the transition date.

F-33



OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

19. TRANSITION TO IFRS (CONTINUED)

The reconciliation between the GAAP and IFRS consolidated statement of financial position as at March 1, 2010 is provided below:

            As at March 1, 2010          
          Effect of        
          transition to        
    GAAP       IFRS       IFRS  
ASSETS                  
Current Assets                  

Cash

$ 13,104,968   $ (3,101,247 ) $ 10,003,721  

Receivables

  222,815     (56,470 )   166,345  

Marketable securities

  89,843     -     89,843  

Deposits and prepaid expenses

  63,855       (5,180 )     58,675  

Total current assets

  13,481,481       (3,162,897 )     10,318,584  
Non-Current Assets                  

Investment in Oromin Joint Venture Group Ltd.

  -     50,632,970     50,632,970  

Exploration and evaluation assets

  54,013,565     (52,910,532 )   1,103,033  

Property, plant and equipment

  163,971     -     163,971  

Advances to joint venture

  36,374     36,374     72,748  

Deposits

  274,007     (274,007 )   -  

Performance bond – restricted cash

  43,025       -       43,025  

Total non-current assets

  54,530,942       (2,515,195 )     52,015,747  
Total Assets $ 68,012,423     $ (5,678,092 )   $ 62,334,331  
LIABILITIES AND EQUITY                  
Current Liabilities:                  

Trade and other payables

$ 1,700,992     $ (1,080,094 )   $ 620,898  
Equity                  

Share capital

  82,876,200     -     82,876,200  

Share-based payments reserve

  11,244,638     -     11,244,638  

Investment revaluation reserve

  (281,507 )   -     (281,507 )

Deficit

  (27,527,900 )     (4,597,998 )     (32,125,898 )

Total equity

  66,311,431       (4,597,998 )     61,713,433  
Total Liabilities and Equity $ 68,012,423     $ (5,678,092 )   $ 62,334,331  

F-34



OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

19. TRANSITION TO IFRS (CONTINUED)

The reconciliation between the GAAP and IFRS consolidated statement of financial position as at February 28, 2011 is provided below:

    As at February 28, 2011  
          Effect of        
    GAAP       transition to IFRS       IFRS  
ASSETS                  
Current Assets                  

Cash

$ 18,508,910   $ (2,278,298 ) $ 16,230,612  

Receivables

  503,784     (200,706 )   303,078  

Marketable securities

  89,843     -     89,843  

Deposits and prepaid expenses

  83,076       708,767       791,843  

Total current assets

  19,185,613        (1,770,237 )     17,415,376  
Non-Current Assets                  

Investment in Oromin Joint Venture Group Ltd.

  -     67,508,460     67,508,460  

Exploration and evaluation assets

  73,563,978     (73,563,978 )   -  

Property, plant and equipment

  114,235     -     114,235  

Deposits

  720,686     (720,686 )   -  

Advances to joint venture

  57,138     57,138     114,276  

Performance bond - restricted cash

  26,539       -       26,539  

Total non-current assets

  74,482,576       (6,719,066 )     67,763,510  
Total Assets $ 93,668,189     $ (8,489,303 )   $ 85,178,886  
LIABILITIES AND EQUITY                  
Current Liabilities                  

Trade and other payables

$ 1,435,004     $ (1,083,900 )   $ 351,104  
Equity                  

Share capital

  111,298,040     -     111,298,040  

Share-based payments reserve

  15,710,104     10,539     15,720,643  

Investment revaluation reserve

  (281,507 )   -     (281,507 )

Deficit

  (34,493,452 )     (7,415,942 )     (41,909,394 )

Total equity

  92,233,185       (7,405,403 )     84,827,782  
Total Liabilities and Equity $ 93,668,189     $ (8,489,303 )   $ 85,178,886  

F-35



OROMIN EXPLORATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 29, 2012 and February 28, 2011
(Expressed in Canadian Dollars, unless otherwise stated)
 

19. TRANSITION TO IFRS (CONTINUED)

The reconciliation between the GAAP and IFRS total comprehensive loss for the year ended February 28, 2011 is provided below:

    Year ended February 28, 2011  
          Effect of        
    GAAP     transition to IFRS       IFRS  
EXPENSES                  

Amortization

$ 50,535   $ -   $ 50,535  

Filing and transfer agent fees

  69,150     -