Management’s Discussion and Analysis

2.0 Mineral Projects and Exploration Areas

Democratic Republic of Congo – Copper and Cobalt Project

Kalumines Copper-Cobalt Project – TEAL 60%

TEAL has focussed to date on the Lupoto prospect area where exploration drilling commenced in early 2007 and it was announced on May 15, 2007 that mining at Lupoto had started. The Lupoto resource remains an historical inferred resource. However, TEAL is targeting a previously drilled portion of this estimated mineral resource, totaling 560,000 tonnes of run-of-mine copper mineralization, for immediate mining. In May 2007, the Company was anticipating a mining operation at a rate of 70,000m³ per month to produce over 20,000 tonnes per year of concentrate, grading 25% copper, containing at least 5,000 tonnes of copper. These targets have subsequently been revised and monthly planned production is now building-up to 110,000m³, producing 40,000 tonnes of mineralized material a month. From this, 3,200 tonnes a month of concentrate will be produced grading between 20% and 25% copper, containing approximately 10,000 tonnes of copper a year.

TEAL Metals will purchase all the concentrates from Kalumines and feed its furnace at a rate of 1,800 tonnes a month. This furnace, which is in the process of being commissioned, has a capacity to produce approximately 5,000 tonnes per year of ‘black copper’ ingots with a grading of 85% to 95% copper. The surplus concentrates, some 1,400 tonnes a month, will be sold to various other smelter operators in the DRC, in particular, to Société Miniére du Katanga s.p.r.l. (Somika) with whom TEAL Metals has formed a joint venture to process the material at Somika’s facilities until December 2007. TEAL Metals will contribute the concentrate, while Somika will contribute all costs of operation, and all profits will be shared on an equal basis.

From January 2008, Gécamines will have the option to purchase copper concentrate from Kalumines in proportion to its shareholding.

Mining is building up to the planned full production rate and current mined copper grades are in line with expectations. Management expects productive capacity to be achieved over the next few weeks. There are two styles of copper mineralization being hand-sorted: (i) the malachite veins of variable thickness; and (ii) intensely disseminated copper mineralization. The malachite veins yield high grade concentrates of greater than 25% copper, while the disseminated copper mineralization is grading 10% to 15% copper.

In order to increase the recovery, the disseminated copper mineralization is blended with malachite vein material. The sorting process to increase efficiencies is being mechanized.

A feasibility study on a larger open pit mining operation together with a dedicated processing facility at Lupoto is in progress and is scheduled for completion after the verification and in-fill resource drilling, as well as the metallurgical test-work, have been concluded.

The first set of copper drilling results from the exploration program at Lupoto was announced on July 11, 2007. TEAL is conducting a 5,200 metre exploration drilling program on the property to verify and update the historical inferred resource, which was previously defined through drilling done by Union Miniére Haut Katanga, and later Gécamines. TEAL has drilled nearly 4,200 metres to date on the Lupoto area comprising 31 reverse circulation and 23 diamond core boreholes. The drilling information is being geologically logged, interpreted and sampled. Initial analytical results are now being received by TEAL.Table 1 below indicates the recent analytical results from section lines N000 and N550.

Table 1:

Additional results will be communicated as and when they are available, and following the completion of TEAL’s internal quality control process.

Figure 1 shows the location of the Kalumines mining licence 25 kilometres to the northwest of Lubumbashi, within the Katanga Province of the DRC. The inset in Figure 1 illustrates the position of the four known areas of copper-cobalt mineralization within the Kalumines property.

Figure 2 depicts the generalized geology of the main Lupoto structure and the location of the phase 1 mining activities. The borehole collars shown on the geological map are those for which results have been received. The location of section line N550 is indicated and refers to the results in Table 1 and Figure 3. Borehole R-001 has confirmed the historical interpretation of the upper zones of mineralization as 2.7m grading 11.20% copper, and 13m at 6.44% copper on the eastern limb of the main Lupoto structure.

Figure 3 (above) shows a section through line N550 where the initial analytical results have been received. This mineralization is developed on the overturned limb of the main Lupoto synform structure.

TEAL believes the mineralization is open ended at depth and on strike. Current drilling is targeting the shallow (above approximately 100m depth) and predominately oxide copper enrichment. Drilling is continuing to test copper mineralization that occurs around the entire Lupoto structure (refer to Figure 2).

Geological modelling is in progress to integrate the results of the drilling program, as they become available, into the historical database which includes the historical data and the twinning as well as other recent TEAL drilling data. Geological and statistical validation of new and historical data is in progress. Further borehole analytical results will be disclosed as they are received from the laboratory and TEAL’s internal quality control and assessment has been completed. A revised Canadian National Instrument 43-101 compliant resource estimate is also being undertaken and will be completed when all the data has been validated.

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