Management’s Discussion and Analysis

3. Financial overview

The consolidated results for the three and 12 months ended June 30, as well as corresponding periods, are shown in the table below:

Segmented exploration and development expenses

The Company recorded a consolidated net loss for the three months ended June 30, 2007 of $8.6 million, or $0.16 cents a share, which compares to a net loss for March 31, 2007 of $9.6 million, or $0.18 loss per share. Over the 12 month period, TEAL reported a net loss of $27.3 million or $0.51 cents a share. This compares to a net loss of $9.0 million, or $0.27 cents a share, for the 12 months ended June 30, 2006. This year-on-year increase is indicative of the accelerated expenditure that occurred over the last year on exploration drilling programs, project feasibility studies and developments and the commencement of mining in the DRC.

The $1.7 million decrease on the quarter-on-quarter Exploration and Development Costs relates largely to a ramping-up of work on the Kalumines project in the DRC in the preceding three-month period.

The Company is organized and managed geographically: this includes the DRC, Zambia and Namibia. The table above is a summary of Exploration and Development Costs incurred by the Company related to its mineral property interests for the three and 12 months ended June 30,2007.

DRC

An amount of $7.6 million was spent over the financial year, largely at Kalumines, and this resulted in:

• Detailed discussions and involvement with the government and local authorities leading to securing the site from artisanal miners and re-hiring certain of the miners, previously active on the property;
  
• Advancing a feasibility study for the larger mining operation at Kalumines, which was completed in May 2007 and presented to and accepted by Gécamines, but which indicated that additional resource drilling is required;
  
• The continued work, with associated services, for the resource evaluation and expansion drilling program, which will form part of an updated feasibility study;
  
• The implementation of initial mining operations on the Lupoto prospect of the Kalumines property to ramp-up to production of approximately 10,000 tonnes a year of copper contained through the mining of nearly 40,000 tonnes of mineralized material a month, grading 25% copper, which is sold to TEAL Metals; and
  
• The installation of a smelter at TEAL Metals in Lubumbashi to treat high-grade copper mined at Kalumines to ramp-up to production of approximately 5,000 tonnes of ‘black’ copper a year through its own facility and from sales to other furnace operators.

ZAMBIA

The majority of costs, over both the three and 12 month periods, were directed at activities related to advancing the studies of the various copper projects, as well as other exploration programs. The $12.2 million spent in Zambia over the last year resulted in the following:

• The completion of the Mwambashi Copper Project feasibility study, which remains dependent on securing a suitable off-take agreement, as well as expenditure on certain risk capital items and securing a mining licence on the property;
  
• Site establishment at the Konkola North Copper Project, including re-equipping the existing shaft for underground access and underground exploration drilling to upgrade resource categories, to ensure completion of the technical aspects of the feasibility study;
  
• Upgrading the resource through additional drilling at the Mwambashi Copper Project to a measured and indicated category, as well as exploration drilling within the surrounding mining licence area; and
  
• Advancing exploration work on Teal's other copper prospects as well as on nickel and zinc exploration targets on various other licences.
  

This work necessitated an increase in personnel and associated costs, travel expenditures, analytical, mineralogical and metallurgical testing.

NAMIBIA

The $4.3 million spent in Namibia over the last 12 months was directed at Drilling, and Other Exploration and Development Costs (largely analytical work by independent laboratories) at the Otjikoto Gold Project. This has resulted in the following:

• A 460,000 ounce, or 35%, increase in the inferred mineral resource base from 1.30Moz to 1.76Moz of gold;
  
• The start of a pre-feasibility study to assess the probability of open-pit mining on the project;
  
• Continued drilling, and associated costs, within the Otjikoto Gold Project area and the Greater Otjikoto Area to increase this resource further and upgrade the resource to categories with a high-level of confidence; and
  
• Exploration activities, including the completion of a second airborne survey, undertaken over a significant portion of the 3,800km² licence area, referred to as the Otavi Exploration Area, to assess the potential for further gold mineralization.
  

4. Related Party Transactions and Commitments

At the end of the year the Company owed ARM $32,000. This represents expenditure incurred on behalf of the Company and is payable within 30 days. TEAL’s current commitments are set out below:

a) The Company is committed to future minimum annual rent payments under operating lease agreements over the next five years as follows:

b) Commitments in respect of capital expenditure is as follows:

Approved by the directors

5. Liquidity and Capital Resources

The consolidated audited balance sheet as at June 30, 2007 is shown below:

As at June 30, 2007, the Company had available resources of $16 million. Over the quarter, the Company recorded $7.5 million net cash outflows on operating activities compared to net cash outflows of $7.4 million for the previous quarter. The cash was mainly used for exploration, feasibility studies, activities to advance the Company’s projects, including resource expansion drilling, and expenses related to mining at Kalumines in the DRC.

Funding in the form of an additional $30 million on the ‘bridge’ loan facility of $20 million is being negotiated with a commercial bank. ARM has agreed to guarantee the extended facility.

As TEAL currently has one mine in start-up phase and has negative operating cash flow, TEAL expects that additional funding requirements will, in future, be met by a combination of additional equity capital and project financing. TEAL has a substantial accumulated deficit and working capital deficiency and will require additional funds to maintain its exploration activities. Adverse market conditions, geological results or other adverse occurrences could impair the Company’s ability to raise financing. See “Risk factors”.

6. Off-balance sheet arrangements

TEAL has not entered into any off-balance sheet transactions.

7. Material agreements

The Company has not entered into any material agreements during the reporting quarter. TEAL’s material agreements are outlined in TEAL’s final prospectus issued in November 2005 and other public documents filed on SEDAR (www.sedar.com).

8. Risk factors

The risks related to TEAL and its businesses include, but are not limited to:

• The high degree of risk associated with mineral exploration, development and mining;
  
• The risk associated with the fluctuations of commodity prices, specifically copper and gold prices, which directly affect the viability of the Company’s projects;
  
• Adverse changes in governmental regulations, including those relating to prices, taxes, royalties, land tenure and use, the environment (including the renewal of permits), remittability of foreign currency, and the importing and exporting of goods and services;
  
• The uncertainty in the estimation of mineral resources, and the uncertainty that mineral resources will be successfully converted to minerals reserves;
  
• Due to its inherent limitations, internal controls 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;

• TEAL’s dependence upon capital, which it may or may not be able to obtain, in order to fund its operating costs, to service existing and future indebtedness and to carry out plans to develop its existing and future projects;
  
• The competitiveness of the mining industry with respect to, among other things, the retention of personnel;
  
• The risk of fluctuations in exchange rates between the Canadian dollar, the United States dollar, the Namibian dollar, the Zambian kwacha, the South African rand and other foreign currencies;
  
• TEAL has taken reasonable steps to attempt to ensure that proper title to its mineral licences and projects in the DRC, Zambia and Namibia have been obtained and that all grants of mineral rights for its properties have been registered in the appropriate deeds offices. There is no guarantee that title to such mineral rights held by TEAL will not be challenged or impugned;
  
• The residual risk of property taxes that may be imposed in Zambia arising as part of the completion of the transaction to incorporate TEAL; and
  
• Cost elements outside of the control of the Company, including fuel and third-party processing costs.
  

For a comprehensive list of Risk Factors, reference should be made to TEAL’s Annual Information Form dated September 28, 2006, which can be found at www.sedar.com.

9. Financial instruments

TEAL’s financial instruments consist of cash and cash equivalents, loans from related parties, payables and accruals. It is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from its financial instruments and that their fair values approximated their carrying value.

10. Outstanding share data

TEAL’s common shares outstanding as at June 30, 2007, comprise 53,910,910 common shares.

11. Disclosure Controls and Procedures and Internal Controls over Financial Reporting

Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management, including the Company’s President and Chief Executive Officer (“CEO”) as well as the Chief Financial Officer (“CFO”), on a timely basis so that appropriate decisions can be made regarding public disclosure. The Company’s system of disclosure controls and procedures includes, but is not limited to, the Board’s corporate governance guidelines, effective operation of the Audit Committee and procedures in place to systematically identify matters warranting disclosure by the Audit Committee.

As at the end of the period covered by this MD&A, management has evaluated the effectiveness of the Company’s disclosure controls and procedures and internal controls over financial reporting as required by applicable Canadian securities laws. Such modifications or enhancements as determined necessary to obtain reasonable assurance, as to the effectiveness of such controls at this time, have been designed. The evaluation included documentation review, enquiries and other procedures considered by management to be appropriate in the circumstances.

Based on that evaluation, the CEO and CFO have concluded that, as of the end of the period covered by this MD&A, the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the Company’s annual filings and interim filings (as such terms are defined under Multilateral Instrument 52-109 - Certification of Disclosure in Issuers' Annual and Interim Filings) and other reports filed or submitted under applicable Canadian securities laws, is recorded, processed, summarized and reported within time periods specified by those laws and that material information is accumulated and communicated to management of the Company, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Item 4(c) of Form 52-109F1 Certification of Annual Filings requires the Company’s CEO and CFO to certify that they have designed the Company’s internal controls over financial reporting, or caused it to be designed under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Canadian GAAP applied in the Company’s financial statements. While the Company’s certifying officers have concluded that they are able to make those certifications as required by applicable Canadian Securities Laws, management of the Company wishes to provide additional disclosure in this MD&A regarding the condition of the design of the Company’s internal controls over financial reporting in view of certain weaknesses that were identified by management. These weaknesses were identified when management, with the participation of the Company’s CEO, CFO and the Audit Committee, evaluated the condition of the Company’s design of internal control over financial reporting as at the end of the period covered by this MD&A, as contemplated by CSA Staff Notice 52-316 Certification of Design of Internal Control over Financial Reporting.

SEGREGATION OF DUTIES

While management believes that control over bank accounts and Company assets is adequate, it is also aware that internal control weaknesses were identified in respect of a lack of segregation of duties, and a high risk of management override of controls and procedures. It is management’s opinion that these weaknesses in internal controls over financial reporting are inherently related to the small size of the Company.

DRC operations

Management has noted some areas of weakness in the internal controls over financial reporting in the Company’s DRC operations. In the past year the activity in the DRC has increased significantly as the Company approaches a production phase on its Kalumines property. Management is continually updating its systems to address the ongoing evolution of the Company’s activities and is committed to improving its internal controls over financial reporting to reduce the risk of material misstatement. To date, management has designed and implemented controls and conducted procedures to ensure that the risk of a significant misappropriation of resources is kept to an acceptably low level.

Information systems

Management is also in the process of implementing a fully-integrated enterprise resource and production system in all operations. This system will add automated controls and procedures to ensure compliance to the Company’s designed controls.

Policies and procedures

The Company has not maintained a complete set of policies and procedures governing decision and authorization processes. As such, reliance was placed on management’s substantive review to detect errors and ensure that financial statements do not contain material misstatements. The Company has assigned dedicated staff to formulate a plan, to document key processes and controls, and initiated the creation of a comprehensive set of policies and procedures. The completion of documentation and implementation of the initiative will continue in 2008.

12. Critical Accounting Estimates

The following is a discussion of the critical accounting policies and estimates which management believes are important for an understanding of the Company’s financial results:

USE OF ESTIMATES

The preparation of the consolidated financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions which affect the reported assets and liabilities at that date of the financial statements and revenues and expenses for the periods reported. By their nature, these estimates are subject to measurement uncertainty and the effect of the combined financial statements of changes in such estimates in future periods could be significant. Actual results will likely differ from those estimates.

FOREIGN CURRENCY TRANSACTIONS AND BALANCES

Monetary assets and liabilities denominated in foreign currencies are translated into United States dollars at the period end exchange rates. All other assets and liabilities denominated in foreign currencies are translated at the exchange rate, effective at the transaction date. Income and expense items are translated at the exchange rate, effective on the date of the transaction. Exchange gains and losses resulting from the translation are included in the consolidated statements of losses and deficit.

MINERAL PROPERTY ACQUISITION, EXPLORATION AND DEVELOPMENT COSTS

Mineral property acquisition costs are capitalized until the viability of the mineral interest is determined. Exploration, evaluation and feasibility costs are expensed in the period incurred until such time as it has been determined that a property has economically recoverable reserves, in which case subsequent exploration costs and the costs incurred to develop a property are capitalized. Exploration costs include value added taxes incurred in foreign jurisdictions when recoverability of those taxes is uncertain. TEAL reviews the carrying values of its mineral property interests whenever events or changes in circumstances indicate that their carrying values may exceed their estimated net recoverable amounts. An impairment loss is recognized when the carrying value of those assets is not recoverable and exceeds their fair value.

FUTURE INCOME TAX

Future income tax assets and liabilities are computed based on differences between the carrying amounts of assets and liabilities on the balance sheet and their corresponding tax values, using the enacted or substantially enacted, as applicable, income tax rates at each balance sheet date. Future income tax assets also result from unused loss carry forwards and other deductions. The valuation of future income tax assets is reviewed quarterly and adjusted, if necessary, by use of a valuation allowance to reflect the estimated realizable amount.

13. Recent Accounting Pronouncements

On January 27, 2005, the Canadian Institute of Chartered Accountants (“CICA”) issued Section 3855 of the Handbook entitled Financial Instruments – Recognition and Measurement. It expands Handbook Section 3860, Financial Instruments – Disclosure and Presentation, by prescribing when a financial instrument is to be recognized on the balance sheet and at what amount. It also specifies how gains and losses on financial instrument are to be presented.

All financial instruments will be required to be classified into various categories. Held to maturity investments, loans and receivables will be measured at amortized cost, with amortization of premiums or discounts, losses and impairment included in current period interest income or expense. Held for trading financial assets and liabilities will be measured at fair market value with all gains and losses included in net income in the period in which they arise. All available for sale financial assets will be measured at fair market value with revaluation gains and losses included in other comprehensive income until the asset is removed from the balance sheet, and losses due to impairment will be included in net income. All other financial liabilities are to be carried at amortized cost.

The mandatory effective date of Section 3855 is for fiscal years beginning on or after October 1, 2006, with optional early recognition for fiscal years beginning on or after December 31,2004. At present, TEAL’s most significant financial instruments are cash, accounts receivable and accounts payable. This new section will require no difference in accounting for these financial instruments from past standards.

The new Handbook Section 1530 – Comprehensive Income introduces a new requirement to temporarily present certain gains and losses outside of net income. Section 1530 defines comprehensive income as a change in value of net assets that is no longer due to owner activities. Assets that are classified as available for sale will have revaluation gains and losses included in other comprehensive income until the asset is removed from the balance sheet. The effective date of this new Section is for fiscal years beginning on or after October 1,2006,with optional early recognition for fiscal years beginning on or after December 31, 2004.At present, TEAL does not have any “available for sale” investments, and as such no Statement of Other Comprehensive Income would be required.

14. Forward-Looking Statements

Certain statements contained in this MD&A are forward-looking statements. Examples of such statements include: all statements, trend analysis and other information contained in this report and the documents incorporated herein relative to markets for TEAL’s trends in revenue, gross margin and anticipated expense levels, as well as other statements about anticipated future events or results, constitute forward-looking statements. Forward-looking statements often, but not always, are identified by the use of words such as “see”, “anticipate”, “believe”, “plan”, “estimate”, “expect” and “intend” and statements that an event or result “may”, “will”, “should”, “could” or “might” occur or be achieved and other similar expressions. Forward-looking statements are subject to business and economic risks and uncertainties and other factors that could cause actual results of operations to differ materially from those contained in the forward-looking statements. Forward-looking statements are based on estimates and opinions of management at the date the statements are made. Some of these risks, uncertainties and other factors are described herein under the heading “Risk Factors”. Forward-looking statements included in this MD&A represent the Company’s views as of the date of this MD&A. While TEAL anticipates that subsequent events and developments may cause these views to change, the Company specifically disclaims any obligation to update forward-looking statements. These forward-looking statements should not be relied upon as representing management’s views as of any date subsequent to the date of the MD&A. Investors should not place undue reliance on forward-looking statements.

15. Outlook

KALUMINES COPPER-COBALT PROJECT – TEAL 60%

Current activities are focussed on two main areas: fully commissioning the new mining operation to its planned full production rate, and continuing the resource confirmation and expansion drilling program. The feasibility study for a larger mining operation is also continuing: the most important data input required is the geological and assay data from the ongoing resource exploration drilling and this will be included in the study when the results have been received and verified.

TEAL METALS (DRC) S.P.R.L. – TEAL 100%

It is expected that the furnace will complete the ‘hot’commissioning phase over the next few weeks and the ‘blister’ or ‘black’ copper will be delivered to an agent contracted to sell the copper on behalf of TEAL Metals.

KONKOLA NORTH COPPER PROJECT – TEAL 100%

TEAL expects to complete the remaining aspects of the feasibility study for the South and East Limbs and to enter into discussions with various institutions on funding possibilities for the project.

TEAL will continue the phase 1 exploration drilling program, comprising 6,000m, over Area ‘A’ Extension. Pending positive results, phase 2 drilling will start immediately thereafter with another 12,000m being planned.

MWAMBASHI COPPER PROJECT – TEAL 70%

Given that a suitable off-take agreement has not been secured for the open-pit mining of predominately copper oxide material, TEAL will continue its assessment of other alternatives.

OTJIKOTO GOLD PROJECT AND OTAVI EXPLORATION AREA –TEAL 100%

A pre-feasibility study has commenced to further scope the critical environmental, mining, metallurgical and financial aspects of the project based on the current resource. The conclusions of this study will dictate the detailed design and the nature of subsequent feasibility work.

TEAL is continuing its focus on completing the infill drilling program of the defined resource block, as well as undertaking further core drilling to delineate further the zones of higher grade gold intersections, and further resource expansion drilling will continue. Further exploration activities in the immediate vicinity of the current Otjikoto resource will be undertaken. Appropriate levels of regional exploration work, specifically targeting high priority geophysical targets, will be conducted within the Otavi exploration licence area.

Discussions with the broad-based Namibian stakeholder grouping, EVI Mining Company Limited (“EVI”), to enable EVI to acquire a 10% equity interest in TEAL’s wholly-owned Namibian affiliate company, Avdale Namibia (Pty) Limited, will be progressed to a conclusion over the coming months.

COPPERBELT JOINT VENTURE EXPLORATION AREA – TEAL 70%

A scout drilling program has been designed for the Kawiri area, to the east of Konkola North, within TEAL’s large scale prospecting licence number 72. This work will commence towards the end of the dry season. Further geological assessment, including drilling, is planned pending positive results.

LUSAKA WEST JOINT VENTURE EXPLORATION AREA – TEAL 51%

The Lusaka West Joint Venture Exploration Area is subject to a joint venture agreement with Billiton Development (Zambia) Limited, a subsidiary company of BHP Billiton plc. The joint venture reviewed the interpretation of the various geochemical and geophysical surveys undertaken and recommended that a follow-up helicopter-borne survey be conducted. Details of the mobilization time-frame for the helicopter are awaited. These targets are considered prospective for nickel sulphide mineralization.

KABWE WEST AND KABWE MINE (“KAFUE JOINT VENTURE”) EXPLORATION AREAS – TEAL 100%

A detailed re-evaluation of the existing data is being completed on specific copper and zinc target areas within the licence holding.

LUSAKA NORTH EXPLORATION AREA – TEAL 100%

Following the identification of a Zambian consortium that is ideally suited to partner TEAL on its zinc prospect on this area, discussions are now also underway with the owner of a competing small-scale mining licence holder on this property. The objective is to advance discussions to a point where all parties can agree on equity holdings for the formation of a new entity that will assess the viability and potential of the zinc mineralization known to occur on the licence area.

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