Interim Results Management Discussion and Analysis

FORWARD-LOOKING STATEMENT

The following discussion of the results of operations, financial condition and cash flows of Touchstone Gold Limited and its wholly-owned subsidiaries (collectively the "Company") was prepared as at August 14, 2013 and should be read in conjunction with the Company's unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2013 and 2012 and the consolidated financial statements and the management's discussion and analysis for the years ended December 31, 2012 and 2011 prepared in accordance with International Financial Reporting Standards ("IFRS") as well as the annual information form. All amounts disclosed are in United States dollars unless otherwise stated.

This Management's Discussion and Analysis contains "forward‑looking statements" which may include, but are not limited to, statements with respect to the future financial or operating performance of the Company and its projects, the estimation of mineral resources, capital, operating and exploration expenditures, costs and timing of the development of new acquisitions, costs and timing of future exploration, requirements for additional capital, government regulation of mining operations, environmental risks, reclamation expenses, title disputes or claims, limitations of insurance coverage and the timing and possible outcome of regulatory matters. Often, but not always, forward‑looking statements can be identified by the use of words such as "plans," "expects," "is expected," "budget," "scheduled," "estimates," "forecasts," "intends," "anticipates," or "believes" or variations (including negative variations) of such words and phrases, or statements that certain actions, events or results "may," "could," "would," "might" or "will" be taken, occur or be achieved. Forward-looking statements are based on the reasonable assumptions, estimates, analysis and opinions of management made in light of its experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable at the date that such statements are made. Forward‑looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward‑looking statements. Such factors include, but are not limited to, the factors discussed in the section entitled "Business environment and Risks". Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward‑looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward‑looking statements contained herein are made as at the date of this management discussion and analysis. There can be no assurance that forward‑looking 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. The Company does not undertake to update any forward-looking statements except as required by applicable securities laws.

OVERVIEW

The Company was incorporated under the laws of the British Virgin Islands on June 29, 2009 and existed under the provisions of British Virgin Islands Companies Act, 2004, as Company number 1536599. The Company's registered office is Akara Building, 24 De Castro Street, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands.

On September 7, 2012, after the approval of a resolution by the Company's shareholders, the Company was redomiciled via a continuance of the Company from the British Virgin Islands to the province of Ontario, Canada, where a majority of the Board of Directors and the Company's officers are located.

The Company is listed on the AIM under the ticker TGL and on the Toronto Stock Exchange under the ticker TCH.

HIGHLIGHTS

§ For the three months ended June 30, 2013 the Company recorded a net loss of $15,054,747 or $0.07 per share compared with a loss of $2,184,769 or $0.02 per share for the three months ended June 30, 2012. For the six months ended June 30, 2013 the Company recorded a net loss of $16,405,243 or $0.08 per share compared with a loss of $5,372,242 or $0.05 per share for the six months ended June 30, 2012.

§ At June 30, 2013, the Company had cash and cash equivalents of $823,940.

§ During the three and six months ended June 30, 2013, the Company commenced its Stage 4 drilling program as well as identified a new target zone (the "Bern" zone). The program was to focus on on three zones; the 1141 Zone, Tagual Zone and the Bern zone, however, only the 1141 zone saw drilling. Additionally, the Company achieved positive results from metallurgical tests conducted on several samples, Pepas #1 and Pepas #2. Initial results indicated recoveries from 87.9% to 95% gold in floatation concentrate with Cyanide leaching providing recoveries ranging from 40.5% to 90.7%.

§ During the period ended June 30, 2013, the Company made a surface discovery of a new gold zone 350m west of the Pepas and Filodehombre trends.

§ Subsequent to June 30, 2013, the Company's President and Chief Executive Officer, David Wiley resigned. In addition, Lord Clanwilliam Patrick James Gillford also resigned from the Company's Board of Directors.

RESULTS OF OPERATIONS

Operating Activity

For the three and six months ended June 30, 2013, the Company incurred exploration expenditures of $886,161 and $1,550,244, respectively not including geologist consulting costs and supply reimbursements. This compares with $$1,072,586 and $2,969,946, respectively, for the three and six months ended June 30, 2012. During the six months ended June 30, 2013, the Company commenced its Stage 4 drilling program as well as identified a new target zone (the "Bern" zone). The program focused on the 1141 Zone.

In addition to the exploration expenditures noted above, for the three months ended June 30, 2013 and 2012, the Company incurred $142,634 and $361,339, respectively in geologic consulting costs and supply reimbursements. For the six months ended June 30, 2013 and 2012 the Company incurred $352,267 and $864,205, respectively. These amounts are recorded in professional and consulting costs in the statement of operations.

The decrease for the three and six months ended June 30, 2013 compared with the June 30, 2012, was primarily due to the fact that during 2012, the Company was utilising three drills during its drill program. The use of fewer drills resulted in lower exploration expenditures.

A breakdown of exploration expenditures for the three and six months ended June 30, 2013 and 2012 is noted in the table below.

In addition to the exploration expenditures noted above, for the three months ended June 30, 2013 and 2012, the Company incurred $142,634 and $361,339, respectively in geologic consulting costs and supply reimbursements. For the six months ended June 30, 2013 and 2012 the Company incurred $352,267 and $864,205, respectively. These amounts are recorded in professional and consulting costs in the statement of operations.

Impairment of mineral interests

As at June 30, 2013, the Company identified the recent and continued decline in metal prices as well as the tightening of financing conditions for exploration stage companies as indicators of impairment. As a result of the identification of these indicators, the Company assessed the carrying amount of mineral interests in the statement of financial position. Based on the Company's existing cash and the cash required to undertake an exploration program the Company has recorded an impairment of $13,632,773. The mineral interest was initially acquired as a result of the acquisition of Atlantis Gold Mines Corp.

Share-based payment expense

During the three months ended June 30, 2013, the Company incurred share-based payment expense of $155,237, compared with $295,277 for the three months ended June 30, 2012. For the six months ended June 30, 2013, the Company incurred $331,486 compared with $635,190 for the six months ended June 30, 2012. The decrease was the result of most of the vesting of the options as the majority of the share-based payment expense for the options outstanding had been recognized during 2013 compared with the same periods 2012.

Professional and consulting fees

Professional and consulting fees were $366,380 and $557,564, respectively for the three months ended June 30, 2013 and 2012. For the six months ended June 30, professional fees were $760,068 in 2013 and $1,363,220 in 2012. Professional and consulting fees were lower in the current year periods as a result of a lower level of operating and corporate activity during the first quarter of 2013.

Travel

Travel for the three months ended June 30, 2013 were $106,705 compared with $54,626 for the three months ended June 30, 2012. The Company incurred travel costs of $149,280 for the six months ended June 30, 2013 compared with $93,826 for the six months ended June 30, 2012. Travel expenses were higher due to costs incurred with respect to marketing.

Salaries

For the three months ended June 30, 2013 salaries expense was $107,273 compared with $81,113 for the three months ended June 30, 2012. Salaries were $214,847 for the six months ended June 30, 2013 compared with $151,195 for the six months ended June 30, 2012. Salaries expense was higher in the current quarter compared with the same period in the prior year due to two more employees in the current year periods.

Other operating costs

Other operating costs include non-refundable value added taxes paid during the period. Other operating costs for the three and six month periods in ended June 30, 2013 were largely consistent with the comparable periods in 2012.

Foreign exchange and Financial and other income

During the three and six months ended June 30, 2013 the Company recognized a foreign exchange loss of $32,891 and $115,229 respectively, primarily on the revaluation of cash as the US dollar strengthened relative to the Canadian dollar and British pound. The Company incurred a foreign exchange loss of $38,142 for the three months ended June 30, 2012, due to the strengthening of the US dollar. During the six months ended June 30, 2012, the Company recognized a foreign exchange gain of $5,638 on the revaluation of cash.

Financial income was lower for the three and six months ended June 30, 2013 compared with the same periods ended June 30, 2012 primarily due to lower interest income received as cash balances were lower during the current quarter compared with the prior year quarter.

During the three and six month ended June 30, 2013 the Company recognized a gain on the change in the fair value of the derivative liability as the derivative liability decreased during the quarter. No amount was recognized during the three and six months ended June 30, 2012, as the common share purchase warrants considered a derivative liability were not issued until later in 2012.

Net loss

For the three months ended June 30, 2013 the Company recorded a net loss of $15,054,747 or $0.07 per share compared with a loss of $2,184,769 or $0.02 per share for the three months ended June 30, 2012. For the six months ended June 30, 2013 the Company recorded a net loss of $16,405,243 or $0.08 per share compared with a loss of $5,372,242 or $0.05 per share for the six months ended June 30, 2012.

Quarterly review

The Company's quarterly results have been impacted by the level of exploration activity occurring in Colombia.

During the second quarter of 2013, the Company recognized an impairment of mineral interests. During the first quarter and second quarter of 2013, share-based payment expense decreased compared with prior periods as the majority of the expense for the options outstanding had previously been recognized. Other expenses decreased due to lower operating and corporate activity compared with prior quarters. The Company recognized a gain on the change in the fair value of the derivative liability as the derivative liability decreased during the quarter. No amount was recognized prior to the fourth quarter of 2012, as the common share purchase warrants considered a derivative liability were not issued until later in 2012.

During the fourth quarter of 2012, the Company's exploration expenditures decreased largely due to the conclusion of the Company's drilling campaign. Profession and consulting fees increased largely due fees incurred due to increased Corporate activity including, the Company's listing on the Toronto Stock Exchange. Travel increased during the fourth quarter of 2012 as a result of increased shareholder related trips during the quarter. Salaries increased during the fourth quarter primarily the result of additional employee related compensation costs incurred. Financial and other income increased during the fourth quarter of 2012 primarily due to the revaluation of the derivative liability.

From the second quarter of 2011, the Company incurred share-based payment expense related to options issued as part of the Company's placing in June 2011, and the re-pricing of the Company's existing options, which were re-priced as part of the Company's placing and options issued to officers and employees of the Company in July 2011.

Liquidity and Capital Resources

As at June 30, 2013, the Company had cash and cash equivalents of $823,940 compared with $4,087,940 at December 31, 2012.

The Company's primary source of additional liquidity is financing transactions. The Company's primary use of cash to June 30, 2013 included transaction costs in respect of previous acquisitions and exploration and evaluation expenses as well as general and administrative expenses.

At June 30, 2013, the Company had a positive working capital balance of $310,794 compared with $3,207,362 at December 31, 2012. While the cash requirements are largely dependent on the Company's level of activity, the Company believes it has sufficient cash on hand to meet its obligations and for the next twelve months. Should activity increase, the Company may seek additional funds through financing transactions. It is not possible to predict whether financing efforts will be successful or sufficient in the future.

Operating Activities

For the three months ended June 30, 2013, and 2012, cash used in operating activities was $1,577,668 and $2,340,158, respectively. For the six months ended June 30, 2013 and 2012, the cash used in operating activities was $3,133,755 and $5,051,938, respectively. The primary use of cash was exploration, general and administrative and other operating expenses incurred. The decrease in cash used in operations was largely related to lower operating and corporate activity.

Investing Activities

During the three and six months ended June 30, 2012 $264,454 and $299,739, was used in investing activities due to the purchases of equipment and other assets.

Outstanding Share Data

As at August 14, 2013, the Company had 201,329,267, common shares issued and outstanding. Additionally, the Company had 16,066,840 stock options and 26,439,231 common share purchase warrants outstanding. If all warrants, were exercised and issued, it would bring the fully diluted issued Ordinary Shares to a total of 243,835,338 and would generate cash of approximately $7.20 million.

Related Party Transactions

Compensation of Directors and management

For the three months ended June 30, 2013 and 2012, the Company paid $62,975 and $57,773, respectively, in salaries and consulting costs to the Chief Executive Officer and Chief Financial Officer of the Company.

For the six months ended June 30, 2013 and 2012, the Company paid $132,929 and $127,855, respectively, in salaries and consulting costs to the Chief Executive Officer and Chief Financial Officer of the Company.

For the three months ended June 30, 2013 and 2012, the Company incurred $142,634 and $361,339, respectively in geologic consulting costs and supply reimbursements to a Company owned and controlled by an officer of the Company. For the six months ended June 30, 2013 and 2012 the Company incurred $352,267 and $864,205, respectively. These transactions were in the normal course of operations and all transactions are measured at the exchange amount, which is the amount agreed to by the related parties and is recorded in professional and consulting fees. A total of $428,096 was owing at June 30, 2013 (December 31, 2012 - $55,723).

For the three months ended June 30, 2013 and 2012, the Company paid $18,241 and $31,181, respectively in fees to a Director of the Company. For the six months ended June 30, 2013 and 2012 the Company paid $46,025 and $52,040, respectively.

A total of $98,648 and $144,408 in share-based payment expense was recognized in respect of options granted to Officers and Directors of the Company for the three months ended June 30, 2013 and 2012. For the six months ended June 30, 2013 and 2012 a total of $205,521 and $484,321 in share-based payments expense to Officers and Directors was incurred.

Commitments

In 2009, the Company entered into a contract with an employee of the Company for the purchase of a mining interest payable over a five-year period as of the date of the registration of the mining interest on behalf of the Company. The total payable under the contract is $587,500 of which approximately $50,000 has been paid by December 31, 2012.

In 2009, the Company entered into a contract for the purchase of a mining interest payable over a five-year period as of the date of the registration of the mining interest on behalf of the Company. The total payable under the contract is $2,000,000 of which approximately $250,000 has been paid by December 31, 2012.

Under the contract, the Company reserves the right to continue the agreement based on the results obtained from exploration, economical assessment and construction. At any time while the contract is in force the agreement may be terminated by the Company with no further payments required.

BUSINESS ENVIRONMENT AND RISKS

The Company has exposure to various business and financial risks including credit risk, liquidity risk, interest rate risk, and foreign currency risk. The Company's risk management objective is to protect cash flow and, ultimately, shareholder value. The risks applicable to the Company are described below as well as the Company's management discussion and analysis for the years ended December 31, 2013 and 2012 and the annual information form, which are available at www.sedar.com.

The Company has exposure to liquidity risk and foreign currency risk. The Company's risk management objective is to protect cash flow and, ultimately, shareholder value. Risk management strategies, as discussed below, are designed and implemented to ensure the Company's risks and the related exposure are consistent with the business objectives and risk tolerance.

Liquidity Risk: Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company manages its liquidity by ensuring that there is sufficient capital to meet short and long-term business requirements, after taking into account cash flows from operations and the Company's holdings of cash, cash equivalents, and short-term investments. The Company also strives to maintain sufficient financial liquidity at all times in order to participate in investment opportunities as they arise, as well as to withstand sudden adverse changes in economic circumstances.

The Company's primary source of additional liquidity is financing transactions. The Company's primary use of cash to June 30, 2013 was exploration and evaluation expenses at the Rio Pescado project as well as general and administrative expenses.

Management forecasts cash flows for its current and subsequent fiscal years to predict future financing requirements. Future requirements may be met through a combination of credit and access to capital markets. The Company's cash requirements are dependent on the level of operating activity, a large portion of which is discretionary. Should management decide to increase its operating activity more funds, then what is currently in place would be required. It is not possible to predict whether financing efforts will be successful or sufficient in the future. At June 30, 2013 the Company had $823,940 (December 31, 2012 - $4,087,940) in cash and cash equivalents

Currency risk: The Company's expenditures are incurred in Colombian peso, British pounds, U.S. dollars and Canadian dollars. The results of the Company's operations are subject to currency transaction risk. The Company mitigates foreign exchange risk through forecasting its foreign currency denominated expenditures and maintaining an appropriate balance of cash in each currency to meet the expenditures. As the Company's reporting currency is the U.S. dollar, fluctuations in the Colombian peso, British pound and Canadian dollar relative to the U.S. dollar will affect the results of the Company.

Credit risk: Credit risk is the risk of loss associated with a counterparty's inability to fulfill its payment obligations. As at June 30, 2013, the Company's credit risk is primarily attributable to cash. At June 30, 2013, the majority of the Company's cash was held with a reputable bank with a Standard and Poor's investment rating of AA-.

Interest rate risk: Interest rate risk is the risk borne by an interest-bearing asset or liability as a result of fluctuations in interest rates. Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk. The Company's most significant interest rate risk arises from its investments in cash equivalents. However, the maturity on these investments is less than ninety days, thereby mitigating the exposure to the impact of changing interest rates. As at June 30, 2013, $500,000 in Banker's Acceptances.

There have been no material changes to the Company's other business risks which were disclosed in the management's discussion and analysis and annual information form for the year ended December 31, 2012.

CRITICAL ACCOUNTING ESTIMATES

The Company's interim unaudited condensed consolidated financial statements are prepared in accordance with International Financial Reporting Standards. In preparing these statements, management must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. The estimates and assumptions are believed to be reasonable under the circumstances and are based on historical experience and current conditions. The use of other assumptions could result in different estimates, and actual results may vary from results based on these estimates. As events occur and additional information is obtained, these estimates may be subject to change. Estimates are deemed critical when the Company's financial condition or results of operations could be materially impacted by a change in estimate. Since December 31, 2012, there have been no changes to the areas where management has made significant judgements. The areas where management has made significant judgements include: reserves and resources, future income taxes and share-based payments expense

The Company's significant accounting policies are discussed in its consolidated financial statements for the years ended December 31, 2012 and 2011.

DISCLOSURE CONTROLS AND PROCEDURES

Management is responsible for the design and effectiveness of disclosure controls and procedures to provide reasonable assurance that material information related to the Company, including its consolidated subsidiaries, is made known to the Company's certifying officers. The Company has considered the effectiveness of the Company's disclosure controls and procedures as at June 30, 2013 and have concluded that these controls and procedures are effective, given the Company's size. It should be noted that while the Company believes that the design of the Company's disclosure controls and procedures provide a reasonable level of assurance that they are effective, they do not expect that the disclosure controls and procedures or internal controls 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.

INTERNAL CONTROLS OVER FINANCIAL REPORTING

Management is responsible for the design of internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements in accordance with International Financial Reporting Standards. Based on a review of its internal control procedures at the end of the period covered by this management's discussion and analysis, management believes, given the size of the Company, that its internal controls and procedures are appropriately designed as at June 30, 2013.