CEO.CA Chairman's Briefing

Serengeti Resources is a junior mining company focused on the Kwanika Project. It has 78.6M shares outstanding with 93.9M shares fully diluted, as in the recent presentation deck. The market cap is approximately $12M with $0.4M cash and no debt. The company is listed as $SIR.V on the TSX-Venture. See more on the company’s website: https://www.serengetiresources.com/

Please note, I was not compensated to prepare and disseminate this material. This document contains forward-looking statements.

Peter: Hello there, Mr. Moore.

David: Good morning, Peter.

Peter: Pleasure to be with you, David. This is the first time I have been able to talk with you and I look forward to it.

David: As do I. It's always great to have an opportunity to get the Serengeti story out there to our investors and the broader audience out there for junior resource companies. As we run through our corporate slide deck here today, please ask questions freely as we go along.

Peter: Great, thank you. One to start off, is it true that you won the 2010 Prospector of the Year Award?

David: Yes, thank you. That was a recognition of myself and my partner at the time, Myron Osatenko, from the Association of Mineral Exploration of British Columbia for the Kwanika Discovery. We received that award in 2010, but the discovery was actually made back in 2006-2007. It was a prospective area, but a completely grass roots discovery. It was covered by overburden and was a grassroots discovery.

David: Myron and I received the award for the discovery of the Central Zone of Kwanika. This was clearly a significant event for our public company, Serengeti Resources, but I believe it also revitalized porphyry copper-gold exploration in British Columbia. Particularly in the Quesnel Trough in north-central and northern British Columbia. A big chunk of the Quesnel Trough is actually hidden or covered, so the discovery of Kwanika was important for showing that grass roots discoveries are still possible in the region. And I think the discovery helped remind people that the Province of British Columbia has some important geological regions and this is one of them.

Peter: Thank you, David. I can imagine how Kwanika helped get the word out there about mining in BC. Let’s hope it can do so again in the future! Now, I do not immediately recognize the word “Kwanika” as being from British Columbia. Maybe because I am more familiar with the coast than the interior. Beautiful country up there, though. Is there anything you can tell me about the name?

David: Sure, Kwanika broadly refers to a region and specifically to a creek that was prospected initially back in the 1930s. It saw very limited gold production from placer workings along the creek. There was prospecting done in the area since then, but it was also limited. Nonetheless, this historical activity was helpful to our discovery of the Central Zone of the Kwanika deposit. We believe that the Central Zone is the source of some of that placer gold.

Peter: Wow. Very interesting to hear, thank you. I was not aware of placer gold mining in that part of the province at that time. I enjoy leaning new history, though.

David: Well, there was not that much actual gold mining in this part of the province. There were indications of placer gold and smalltime prospecting, but it was limited. We believed it was a good area to be looking because it is part of a major structure that runs through this part of the province. This structure is called the Pinchi Fault and it has received much attention for good reason. We considered areas across this large structure, but we liked the Kwanika project for several reasons. We like it even more now.

David: There was an initial discovery of copper in the Kwanika area made back in the 1960s that we now know as the South Zone. That discovery was made based on outcrop exposure and it is a lower-grade polymetallic zone. The Kwanika Central Zone is a separate deposit from the South Zone and is located about two kilometers north of the outcrop there. As I just described, there was good reason to be in this part of BC based on regional geology. There was also good reason to be exploring at Kwanika specifically based on this work from the 1960s. We acquired the ground back in 2004.

Peter: Thanks, I look forward to hearing more about all that. I am looking at a map of British Columbia and see you are near the Mount Milligan area.

David: The Mount Milligan copper-gold deposit is a large and active mine site and is one of Centerra Gold’s newest mines. It is located about 85 kilometers to the south east of Kwanika. We are located partway between the Mount Milligan deposit and the Kemess mine project, which are both in the Quesnel Terrane. It is encouraging to see others doing well with mines in the area. This is a highly prospective part of the belt with indications of mineralization, but the potential is somewhat hidden because of the extensive glacial overburden.

Peter: OK. Well, thank you for indulging me on a brief tangent there to start with. I’m sure we could keep talking about this, but I’m happy to go back to the company’s presentation deck. Could we talk briefly about the picture there on that first slide?

David: The cover slide shows how we generate prospects. We get out and look at rocks. In this particular instance, the picture shows work we did in the northwestern part of B.C. It doesn't reflect what the country around Kwanika looks like. Kwanika is located on the northern edge of the interior plateau, so it's tree-covered and not nearly as picturesque as this picture. The picture in the first slide was taken on a barren hillside and that is where you get the clearest view of a geologist walking along a ridge line, looking for rocks. We get boots on the ground. Our geologists get out there, look at prospects, and put data together to come up with new ideas that lead to discoveries.

Peter: Well said, David. Thank you. And a brief, related question for you -- how many different projects are you involved with?

David: We list 11 properties in the presentation, but we have been focused on the Kwanika Project as our flagship. Particularly since our deal with the large Korean trading company, POSCO Daewoo back in early 2016. We don't usually generate prospects for others as we would sooner own as much of our existing properties as possible when there is a discovery made. That's where we see the best potential for us create value for the company and our shareholders. It can be a powerful thing to own a property outright when you drill a great new discovery. We even have a slide on that further in the presentation. The “Power of Discovery”.

Peter: OK. That relationship with Daewoo was a very significant development for you.

David: Yes, it certainly was.

David: If you look at slide 3, Peter, you see how we summarize the Serengeti investment case. First off, note that our valuation is approximately C$12 million right now. We believe that valuation creates a compelling opportunity for potential investors.

David: We have the team here, who have made discoveries. The most significant discovery for the company was the Central Zone at Kwanika back in 2006-2007. We now have targets at a couple other projects that we think have the potential to generate the next discovery for us. We're excited to go out and do some exploration drilling on a couple of these properties that are outside the Daewoo deal, which pertains to Kwanika.

David: Kwanika is now at the PEA stage and we continue to see significant strengths in the project. It is what's called an alkaline copper-gold porphyry with high gold content. We’re in the north-central part of the province, where there is good infrastructure. I’m sure you will want to talk about that slide at some point. When we drilled the resource for Kwanika, the results attracted POSCO Daewoo. Since 2016, we have really got the project on track. It was partner-funded through last year and we are now imminently expecting a decision from POSCO Daewoo to elect to earn in to the next stage of the project. This strategic partner at the Kwanika Project has already been very beneficial to us. And we also have a big portfolio of properties with two that are drill-ready. We are excited to go out there, drill, and find another one -- that's the real fun part of this business.

Peter: Well, I hope that Kwanika becomes wildly successful and gives you a steady source of funding to do that type of work. Can I ask briefly about the arrangements with Daewoo? How much are they involved in preparing drill plans?

David: We certainly take guidance from them, as they are a very sophisticated group. We developed the exploration budget together with the Daewoo Minerals Canada as the subsidiary of the larger POSCO Daewoo group. Serengeti has excellent geologists and resource-modelers, and they do too. They have experience doing this and it's been a very good partnership so far. We anticipate a good partnership off into the future. There is a slide a little further on in the deck that provides more detail on the deal terms. Over this past year, Daewoo invested $1.2 million into Serengeti, with about $400,000 going into treasury and $800,000 going into the project, including three deep drill holes at Kwanika. Although that was a modest-sized program, it came with some really interesting results that led to a resource update published in January 2017 and then an update to the PEA or scoping study incorporating those drill results. We have benefited from some new thinking on potential development scenarios reported in the PEA completed in April 2017. All of that work was funded by the Daewoo investment.

Peter: Great to hear. I would imagine that having those updated technical reports including the PEA would be much appreciated by the analysts at Daewoo.

David: Yes, and what it demonstrated was that this a project of merit here. Slides 4 and 5 explain the project economics for Kwanika. In slide 4, you can see the NPV is $324 million, pre-tax at a 7% discount rate. We think that is reasonable discount rate to use because of the high gold content in the project. In fact, gold generates about 60% of the revenue in the first eight years of mining. Kwanika is a gold-rich porphyry copper deposit. The internal rate of return of 21%, pretax, and a 3.7 year payback period are in the ballpark of what many global investors are looking for. We believe that we've generated a project that fits well into Daewoo’s targets for investing.

David: Kwanika is a project of merit, even at reasonable metal price assumptions. The economics are generated at a copper price assumption of $2.90, $1270 gold, $19 silver, and the Canadian/US exchange rate of $0.77. It's attractive from an economic standpoint at these current prices. One of the numbers that really stands out is on slide 6, the net cost of production or C1 cost. This is an industry standard measurement for copper projects and we report an estimated C1 cost of $0.70 per pound. That production cost is net of gold as a byproduct, which mainly occurs in the first eight years of the project when the highest grade material is mined.

David: Now, $0.70 is a very attractive production cost for copper in BC. POSCO Daewoo is a trading company and the reason they come into the deal was because they saw the potential for copper concentrate off-take opportunities. That's their motivator.

David: If you go back to slide 5, then you can see some of the capital and sustaining costs estimates. This was a well-done PEA. I would say it was done conservatively based on the assumptions for capital costs and operating costs. The capital cost of $476 million includes a significant sum, almost $60 million dollars, for a water management and tailings storage facility. It is conservative, but I think is essential to do that these days. To move a project through a permitting timeline, you must have reasonable assumptions.

David: There is a diagram that I think you will like on slide 7, which shows the production summary and production profile for the 15-year project. You can see that there are several different phases of mining. First is an initial open pit developed on the Central Zone. It is quite short in duration, only the first couple of years. Second is a phase of underground production in the Central Zone, which starts with the highest-grade part of the zone. We target the material with highest copper-gold grades very early in the life of the project. There are some good copper and gold grades for us there, with 0.4% copper and 0.5 g/t gold over the first eight years production. There is a relatively large overall resource base here with about 200 million tonnes and we have focused on the highest grade portion, which has 75-80 million tonnes with the best grades. We've taken a larger resource and focused on the best portion of it to generate these attractive economics.

Peter: Yes, thank you. I took pen to paper and tried to calculate some of my own numbers around annual cash flows based on the summary tables in pages 5 and 6, but I had to pause when I first saw slide on page 7. And then the block model on slide 8 made me very intrigued. As you said before we started recording, it is almost like you have flipped this deposit upside down with your mining plan. What fun. Now, you just mentioned a number that I didn't see in the deck, the total size of the deposit. Did you say Kwanika has approximately 200 million tons of mineralized material?

David: Yes. We have details on that in a later slide, which outlines our most recent resource update. It is slide 25 and it shows the current overall mineral resource. Add all those numbers up and there is about 200 million tonnes between the Central Zone and the South Zone. Rather than try to develop a mine plan for the whole thing, we have targeted the very best part of that 200 million tonnes. You can see how the production schedule on slide 6 and the life of mine production is 78 million tonnes through the mill, with the highest grade 43 million tonnes mined in the first 8 years.

David: We've chosen a subset of the resource overall and then targeted the very highest-grade part that subset. You can see that we separate the first 8 years in the production schedule on slide 6. We plan to mill 43 million tonnes of material in the first eight years of production. That is why we have generated such a rapid payback and attractive economics.

David: It's one thing to find these deposits, but it is another matter to advance them to production. We've generated a project that looks attractive with some smart engineering and clever mine scheduling. We're confident that the potential is not lost on our partners. As I mentioned, they have an option to put their hand up for another 30% earn-in on the project between now and the end of July. We are confident that will be a positive decision.

Peter: I am pleased to hear that that they are taking a stake in the Kwanika Project itself rather than the company, Serengeti.

David: Yes, junior companies do have a choice to make when progressing a deal with a strategic partner. You can either dilute the company or dilute an interest in the project. It became clear to us a couple of years ago that we should seek a partner on Kwanika and that has turned out to be the right decision. It has really got things back on track.

David: If we go back to the slide deck, Peter, there is another diagram that is a companion to the production schedule that speaks to your question about the open-pit and underground production. Slide 8 shows a cross section through the Central Zone, where we have focused our mine plan on higher grade material. You can see a relatively small pit at the top, which actually produces for a couple of years in a small 2-stage pit. It provides some good material initially, but the best grades and most consistent large volume of good grade is found at depth. We are accessing it underground. We envisage mining that by block cave methods and in fact targeting the Western part, marked as “WW” in the block model on slide 8 there. We plan to start at the western edge of the deposit and then work back over an 8-year timeframe, ultimately coming back to underneath the pit with the stope area marked as “Tall” in the diagram. You can see that there is excellent grade material there. The hot colors in that diagram reflect blocks that are estimated to be worth over $70 a tonne after net backs. It is attractive material from an underground mining standpoint.

Peter: And it sounds so simple to hear you say that, “Well, we're mining the high-grade material first.” But that's actually pretty unique thing to be able to do. Particularly when the high-grade is not at the top of the deposit! Sometimes you can start with higher grade material because of a gift of geology, but sometimes it's a triumph of engineering. This is clearly a case of bold mine engineering! Looking at the diagram, it looks like the initial pit is about 100 meters deep.

David: Yes.

Peter: And then you plan to drive underground all the way to the WW area?

David: The initial underground production will come from the far western edge of the deposit at WW where the highest grades are located. As I said, scheduling the best grades early in the mine life has a big, positive impact on the project economics. While we are mining that near-surface material in the first two years, we will actually be driving our ramp down concurrently. Development of the ramp starts with the pre-strip on the pit. There’s a little bit of pre-strip on the pit, but not much.

David: We start the pre-strip on the pit and driving the ramp to get to that far western edge, the deepest part of the deposit early on. It means a little bit of extra early stage mind development but it accesses the very best grades. I think this mine development scenario is the 10th iteration of the plan. It has taken some creative engineering to come up with this concept and it is well-thought out and well-studied for a project at the PEA stage.

Peter: Starting in the WW section and then moving back towards the Tall section is very interesting.

David: It would be difficult to develop underground immediately below a pit concurrently with mining the pit because these block caves generate subsidence, but it is not an issue to extract ore from beneath the pit 100 meters to the west. We took a crack at this back in 2013 and modelled a much larger pit at that time with less underground development. That study identified the opportunity for this approach and, on further detailed study, we believe this is the best way to proceed.

Peter: Great to hear that the ramp will be built alongside the pre-strip of the pit, rather than going in at the bottom of the pit two years down the line.

David: Yes, it might be more conventional to mine the pit and then ramp from the bottom of the pit but we want to liberate the highest grades early on in the production schedule. This causes slightly longer underground development timeline because you're not going from the bottom of a pit, but it ultimately allows us to liberate the highest grades first and that provides the best economics for the project.

David: You could say that we are high-grading the deposit. Keep in mind that the best material is 45 million tonnes out of the 80 million tonnes that we propose for mining, which is itself part of a larger 200 million tonne deposit. There is great potential to extend the life of the project here. We can discuss the details later in the presentation, but rest assured that there is good expansion potential at Kwanika.

Peter: Certainly, thank you. You may have just alluded to it there, but I will briefly ask about potential to do some exploration drilling from the underground workings? I’m sure you have thought about it and I am sure that your somewhat unique mine plan provides some opportunities to do that. Great long-term potential, in my opinion.

David: You’ve got it, Peter. We do have a slide in the presentation that addresses that. We can skip over the economics and the deal terms here for now and discuss that if you’d like. There are several slides following here that address the exploration upside here and I think you will like to discuss them in some detail.

David: What we show in slide 11 is a longitudinal section, a long section of the geophysical model that we've superimposed here on the resource shell. We drilled three holes last year that are shown in slide 11. Hole #177 was drilled through the deposit and it was an absolute barnburner of a hole. A 430-meter intercept with terrific grades, approximately 0.7% copper and 0.8-odd g/t gold. We’ve got that slide further down on the deck.

David: Hole #179 is also shown in slide 11. It was drilled on the northwest corner of the deposit and showed that the deposit is open in that direction. There, the best grades were present at the bottom of the hole. We will come back and look at that section.

David: We also show hole #178, which indicates a target depth about 500 meters north of the Central Zone. We think there's a lot of potential to expand the known zone and potentially discover another deposit to the north.

David: Again, hole #179 is shown in slide 12 as well. Here we have a drill cross-section for the deepest hole that we have ever drilled on the property. Hole #179 was just over 900 meters long and showed that there are highly prospective areas at depth. We encountered three intercepts in the hole and, as I mentioned, we found tht the best grades are at the bottom of the hole. We stopped drilling because we ran out of drill rods and money last year, but we think we're just getting into the mineral system – the heart of the mineral system there. The hole ends in a 58-meter intercept of 0.26% copper, 0.29 g/t gold. We would like to see those grades increase by 50% or even 100% again to justify going after that area underground. However, we think there is a reasonable target at depth there. That target will be the first thing that we're going to recommend in the follow-up drill program, to deepen hole #179.

David: We've actually left the drill casing in this hole and our intention is to re-enter that hole and drill it to about 1,200-1,300-meter depth. This may begin to demonstrate a significant expansion of the high-grade core of the Central Zone, which is real upside.

David: Slide 13 shows the next hole, the cross section of hole #178. Again, this was an encouraging hole. It demonstrated a strong vector from some shallow drilling that we had done previously. In terms of the rock-type alteration, there is a cloud of geochemically-elevated levels of gold. For example, we had a 245-meter intercept of 0.1 g/t gold and that is the sort of thing that we see right around the deposit elsewhere in the Central Zone. We may be situated above a third deposit that is buried below this intercept. This is another target for us. We will be proposing a 1,000-meter hole here to test the heart of this deep IP geophysical anomaly.

David: There is significant potential here. It's deep, but that fits with the engineering scenario we've scoped out. It makes the most sense to go after these areas underground with the best grades.

Peter: Wow. A couple of questions for you.

David: Sure.

Peter: I am trying to look at both the cross section of hole #178 and the geophysics on slide 11. What is going on with hole #178 there?

David: The longitudinal section for holes #177 and #179 were in the same plane as the geophysics there, which was an IP chargeability survey. Keep in mind that the image on slide 11 is a longitudinal section of ground-penetrating IP technology. That place where hole #178 pierced the NW Deep Target is where we stopped drilling. It was drilled in an east-west orientation and we show the pierce point on this longitudinal section. Hole #178 was drilled across this view, whereas the other two holes are drilled parallel to this view.

Peter: Wow. OK.

David: Yes.

Peter: This plane, the one in the cross section of the geophysics on slide 11 and the drill hole from slide 12 – is this the same plane as the block model of the deposit on slide 8?

David: No, but they are related. The block model on slide 8 is looking to the North across this view. The two views are actually perpendicular to each other.

Peter: OK. I was looking at them and wondering if we had 3 dimensions covered across some combination of the different diagrams. I am stunned to consider the similarity between the area marked WW on slide 8 and the NW Deep Target on slide 11.

David: Yes, it is becoming a nice deposit.

David: Briefly now to the back of the slide deck, slide 27. This was the barnburner hole that I mentioned, hole #177. You can see it on slide 11, as well. This hole was drilled right across the high-grade domain of the Kwanika Central Zone. It was drilled in a north-south orientation across the high-grade domain and we came up with a heck of an intercept there. There were 438 meters of 0.7% copper and 0.83 g/t gold, and including 233 meters at 1.2% copper at 1.3 g/t gold. We believe that is the heart of the deposit and that is what is generating these great economics.

David: Hole #177 was the first hole that we had drilled in this particular orientation. This hole was drilled more or less north-south across this east-west oriented high-grade domain. The same high grade that we saw back in the block model section on slide 8 with the stope outlines. Now, what was really interesting about hole #177 is that it showed about 20% above what we expected for the gold grade based on other holes nearby. We have drilled extensively in this area, but it has been in different orientations. Most of the holes that we've drilled here are vertical or drilled on east-west sections. This hole was drilled north-south and came up with significantly higher than predicted gold grade. We will be drilling more holes in this orientation to determine if this hole is more representative of the gold grade within the deposit. If we can get a 20% lift in gold grade, then we could see a further improvement in the economics. Even a minor increase in gold grades can have a significant impact on the bottom line. We believe it is another demonstration of the upside potential here at Kwanika.

Peter: Great, thank you. And this cross section on slide, that is quite the diagram. Do the high-grade areas there map onto the WW area in slide 8?

David: This relates to the pierce points again. Hole #177 was significant because it pierced through what believe is an extension of known high-grade mineralization at depth. The mineralization in this hole was greater than we expected. That hot intercept could be seen as hole through the Tall stope shown on slide 8. I think I may include that in future versions of this deck. There is so much great information for us to use here and it continues to get better. Hole #177 was drilled perpendicular to the view in slide 8 and drills right through the middle of the Tall stope from south-north.

Peter: OK, thanks. Looking at slide 27 gives me a sense for the extent of the Tall zone from the block model. That will be one of the last places you plan to mine, closer to the pit. The cross section of hole #177 helps me understand the vertical extent here. Very interesting to hear that it intersects the Tall zone.

David: The height of mineralization in this area is on the order of 500 meters vertically at its maximum extent and somewhere on the order of 500 meters east-west. You can derive that from slide 8. Then, look at slide 27, Peter. Slide 27 shows that the high-grade domain is something on the order of 200 meters or more in a north-south direction.

Peter: And this is the Tall zone?

David: Yes.

Peter: And you are planning to start lower down at the WW, then move up to the Tall Zone later in the mine life. I wonder if this would change your plan there at all.

David: Well, we will see.

Peter: Indeed! And you're up to hole 177 here?

David: Yes, we are. It’s good to step back and appreciate that. We have drilled 179 holes at Kwanika. And our last three holes have been some of the most exciting we’ve seen.

David: We have drilled on the order of 76,000 meters on the property and spent on the order of $21 million on this project. It was a very significant investment that allowed us to do all the drilling that we've done. These porphyries take a lot of drilling and a lot of money to outline a resource.

David: The work made possible by that investment is what attracted Daewoo to the deal last year. We provide some info the Daewoo deal in slide 9, which is the next slide in the deck. Slide 9 demonstrates graphically just what Daewoo is facing here at this point. We believe it is clear that they should make the next selection.

David: There are two diagrams on slide 9. The one on the left hand is a pie chart. The total size of the pie is $191 million and it represents after-tax net present value at a 7% discount rate. At this point, Daewoo has earned a 5% interest in the project through their $1.2 million investment last year. Their interest is strictly in the project, there’s no equity interest in Serengeti. That 5% interest of the project represents $9-10 million of the estimated NPV. By electing to fund the next investment of $7 million into expenditures on Kwanika, they can earn another 30% interest in the project and capture another $55 million in after-tax NPV. Why wouldn't they make that positive decision? Have a look at those pie charts, Peter, I think you’ll like those too.

David: Another significant part of the deal is that Serengeti will remain operator of the project. If the election is made and we receive $7 million to be spent over the next two years, then we will be able to step in as 65% owners in the project and proceed on that basis. It could be jointly funded. At that point, we would be jointly funding a significantly de-risked project. That could be very interesting for us.

David: The contract for Kwanika allows us to remain as operators as long as we own more than 50% of the project. If we are eventually diluted below 50%, then ownership would revert to the majority owner. We are currently operators and will continue to remain so, even if the next election is made.

David: Note also that we receive a 10% management fee from the partnership, which is significant to us financially. We also retain the mineral exploration tax credit, which is significant. Daewoo’s interest in the deal was off-take rights for concentrate, but we have retained the ability to enter into streaming transactions. We have rights to enter into streaming contracts for all metals, but it is most relevant to gold. That very well may be how we raise some financing to fund our contributions to the eventual development of the project alongside with Daewoo. Regardless, it gives us an option on raising money and it may help us stay at the table. Do you have any questions on the joint venture?

Peter: Certainly, many occur to me. It looks like a very well-crafted deal, good work. One question to begin, how much experience do you have doing these kinds of deals in particular or the things you are describing here in general?

David: Well, this deal took a lot of patience. Negotiations have been ongoing or over two years to get to this point. In the context of the gold market at that time, this was a particularly good deal for us. It's a good deal for Daewoo as well. Their interest was concentrate off-take and it is a bit of a give from us there, but it was important for keeping the deal alive. Plus, we feel it was fair that we retain the ability to enter into streaming transactions. It is a win-win deal.

David: A few years ago, we had basically run out of ability to advance this project. As I said, these are expensive projects to advance. We were able to get to where we are today on the back of a well-timed financing. Immediately after the discovery in 2007, we raised $20 million in a bought-deal financing. We would love to be able to do that again, and that's why we are so excited to go out and drill one of our other properties.

David: Carefully deploying that $20 million of capital we raised was very important to us. Our 76,000 meters of drilling at Kwanika, project engineering, and conceptual work on the project was possible because of that equity financing. The results of that work brought Daewoo to the table. We continue to develop that partnership with Daewoo.

Peter: Well, I hope that your long-term shareholders recognize the value of our efforts, regardless of the current share price in the secondary markets. It would be clear that you certainly have been able to stay at the table with this project and you haven’t been slacking with all 11 properties you mentioned before. Great, thanks David.

Peter: And just to briefly point out that Daewoo is getting around 10 times their money as a fraction of NPV compared with their initial contribution, based on my reading of the relevant numbers from that pie chart. And you mentioned that the NPV was done conservatively, which makes me think the upside for Daewoo is even greater than 10x!

Peter: It is amazing to hear that you have spent $20 million advancing Kwanika, but you can still generate exciting new results with $1.2 million in the first year of funded-activities with your strategic partner. Wow. Still finding new things at hole #177 there. I imagine that your long-term shareholders are also very pleased to hear that new money, whether into the company or the project, really has a significant impact on your understanding of the project. I can only imagine what you could do with an additional $7 million.

David: Well, the objective now is to move the project forward. If we get this positive decision from Daewoo, then we will move the project into pre-feasibility. There will be more drilling, additional metallurgical test work, and engineering work to help design the underground stopes. We have to look at block caving parameters and that sort of thing. We will start this fall with baseline environmental work and all of the activities to go into advancing project towards development.

Peter: And doing it in British Columbia in the modern times.

David: Yes, it is now a multi-disciplinary activity. Lots of smart people working hard together.

Peter: One number that jumped out at me in the past was the capital cost of $476 million and I wonder how to compare that number with the $7 million financing from Daewoo?

David: Well, $476 million is a lot of money to come up with. No doubt about it. We think it is a reasonable number thought, given the location of the project. Its road accessible at this point, but it would require upgrading of about 30 kilometers of road and 75 kilometers of new power line to tie into an existing power line that is connected to the grid. It is a big number though and we will see what Serengeti’s position is in the future when it comes to making that production decision.

Peter: Can we put that into context with the mine life? With the large size of the deposits you're dealing with, it is amazing how much you can do with exploration.

David: It is a complicated business. With the mineral resource, the conceptual engineering studies, forecast economics, scoping level study, and everything else represents a lot of work. What we need to do now is upgrade some of the resources categorized as inferred at present. A lot of the deposit is in the indicated category at this point and we will upgrade the resource further as we start to gather all this additional engineering and environmental data. We have done an initial metallurgical test on the Central Zone and it shows potential to generate a good high-grade, clean copper concentrate with high gold in it. It's going to be a desirable concentrate on the market.

Peter: Having a premium product and an international partner sounds like a great place to be! I would imagine that you can benefit from their balance sheet to some degree in marketing.

David: Yes, they won't have any trouble putting up their 35% of the project financing. We will have to be clever to stay at the table as long as possible with as large a percentage interest in the project as we can, but we think we have maintained that optionality through the deal structure. There’s a number of other elements in the deal here too, for instance if we get diluted below 50% interest we get a 1% NSR; if we get diluted below a one third interest, we get an additional half a percent NSR in addition to keeping our project level interest. We built in a number of aspects that will give us the possibility of raising money in the future to stay in the project with as big a piece of it as we can.

Peter: Wow. Now, we are past the one-hour mark here and we should probably take a break.

David: Great, thanks Peter. We have covered a lot of ground with Kwanika and I would be keen to tell you about the discovery potential on a couple of our other exploration targets.

Peter: It’s been great to talk with you today. Thank you very much, David.

David: You are welcome, Peter. Thanks for all the questions. Until next time.