President's Letter to Shareholders
Kwanika Central Zone Indicated Mineral Resources |
|||||||
CuEq* |
Tonnage |
Au |
Au |
Cu |
Cu |
Cu* |
Au Eq* |
0.40 |
75 |
0.42 |
1.02 |
0.41 |
684 |
0.69 |
1.05 |
0.25 |
183 |
0.28 |
1.62 |
0.29 |
1,153 |
0.47 |
0.71 |
Inferred Mineral Resources |
|||||||
0.25 |
29 |
0.20 |
0.18 |
0.20 |
123 |
0.32 |
0.49 |
Cu Eq = Cu % + [Au g/t x ( 900 / 31.1 / 2.00) / 22.06]
Au Eq = Au g/t + [Cu % x ( 22.06 x 2.00) / ( 900 / 31.1)]
*Note: CIM definitions were followed for mineral resource estimation and classification. By prescribed definition Mineral Resources do not have demonstrated economic viability and Indicated Resources have a higher degree of confidence than do Inferred Resources. The mineral resources fall within a volume or shell defined by long term metal price estimates of US $2.00/lb for copper and $900/oz for gold. A 0.25% Cu Eq cut-off is considered to be reasonable for a porphyry deposit open pit in this location.
This resource estimate was incorporated into an NI 43-101 compliant independent technical report which was completed in April 2009 and filed on SEDAR, where it can be accessed at www.sedar.com or via our website at http://www.serengetiresources.com/i/pdf/Serengeti-Resources-NI-43-101.pdf
Serengeti's strong financial position, with working capital of approximately $11.0 million at the end of Q1
(May 30, 2009), has enabled the company to plan a significant exploration program for 2009. The objective of this 27 hole, 6,750 meter drill program is to test for significant extensions of the copper-molybdenum-gold South Zone, and to add to the Kwanika resource by locating new mineralized centers as well as testing a number of additional attractive targets on other properties in the area.
The 2009 exploration program got underway on June 20th at Kwanika and, at the time of writing, several follow-up holes have been added to the program based on positive geological indications from the initial holes drilled this year along the west edge of the South Zone. After Kwanika, the drill will move in early August to test a well defined, combined geochemical and geophysical copper-gold-silver target at Osilinka, 35 km to the north, then test additional targets on Kwanika South, Choo, and Mil properties. The drill program is slated for completion around mid-September. Results will be released in batches as they become available from the laboratory. All of the properties being drilled this year are road accessible and given our strong finances we are in a position to follow-up encouragement from the current program.
Regarding First Nations' relations, the company presented a draft Memorandum of Understanding for the Kwanika project to the Takla Lake First Nation in March 2009, and we are currently awaiting feedback on this document. Elsewhere, First Nation access issues have delayed the start of the Croy Bloom project where a drill program funded by Newcrest Mining Limited, and fully permitted by the BC Government, was scheduled to start in late June. We continue to work on this issue in the hope that the planned program can still be carried out this season.
On the communication and investor relations front, we have made more than 30 broker presentations and participated in a number of trade shows since January 2009. We have also been featured in numerous media pieces both in print and electronic,
(see http://www.serengetiresources.com/s/AnalystCoverage.asp for a complete listing).
These communication efforts have paid off with an improving share price into mid-June when seasonal market weakness affected Serengeti as well as many of our peers. Having said that, SIR remains a well traded stock with an average daily volume of 112,000 shares over the most recent 200 day period. General investor sentiment also seems to have improved, to the point that share prices of peer companies react positively to encouraging drill results. We are doing our best to deliver these, however in this business of course, we cannot guarantee them.
Serengeti also continues to actively review opportunities both in British Columbia and elsewhere in the America's with a view to finding new projects or opportunities to maintain the growth potential of the company and increase shareholder value. We are in the fortunate situation of having a strong working capital position which enables us to pursue success within our existing property portfolio or take advantage of new opportunities created by current market conditions.
Thank you for your support over the past year. This is one of an ongoing series of regular communications aimed at keeping you informed as to our plans and progress. Please visit our website at www.serengetiresources.com, and we always welcome your calls and emails.
Yours truly,
/s/ David W. Moore
David W. Moore
President & CEO
SERENGETI RESOURCES INC.
| A mineral exploration company creating shareholder value through exploration and discovery. |
This document contains "forward-looking statements" within the meaning of applicable Canadian securities regulations. All statements other than statements of historical fact herein, including, without limitation, statements regarding exploration plans and other future plans and objectives, are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and future events and actual results could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from our expectations are disclosed in the Company's documents filed from time to time via SEDAR with the Canadian regulatory agencies to whose policies we are bound. Readers are advised not to place undue reliance on forward-looking statements.
President's Letter to Shareholders
Serengeti achieved a significant milestone in late February with the release of the initial resource estimate from the Central Copper-Gold Zone at our 100% owned Kwanika property . The independent N.I. 43-101 compliant report backing up this estimate has just recently been filed on SEDAR and is available on our website at
http://www.serengetiresources.com/s/Updates.asp?ReportID=344368
Reproduced below is an extract from the key table in the report outlining the Indicated Resource at two different copper-equivalent (CuEq) cutoffs plus a less well defined extension to the zone that falls in the Inferred Resource category.
Central Zone Indicated Mineral Resources |
||||||||
CuEq |
Tonnage |
Au |
Au |
Cu |
Cu |
Cu |
Au Eq |
|
% Cut-off |
Mt |
g/t |
M oz |
% |
M lb |
Eq % |
g/t |
|
0.40 |
75.07 |
0.42 |
1.015 |
0.41 |
684.0 |
0.69 |
1.05 |
|
0.25 |
182.63 |
0.28 |
1.616 |
0.29 |
1,152.6 |
0.47 |
0.71 |
|
Central Zone Inferred Mineral Resources |
||||||||
0.25 |
28.54 |
0.20 |
0.181 |
0.20 |
122.5 |
0.32 |
0.49 |
|
At the lower cut-off, the zone is estimated to contain 1.6 million ounces of gold and 1.1 billion pounds of copper within which a higher grade, 75 million tonne zone averages 0.42 g/t Au, 0.41% Cu, containing 1 million ounces of gold and 684 million pounds of copper. We are particularly pleased to have advanced the project to this point in a relatively short time frame since the discovery in late 2006. Excellent potential also remains to expand the resource and make new discoveries in the immediate Kwanika area as outlined below.
With the resource estimate in hand, we can rank ourselves against our peers in terms of contained copper and gold. The following charts, one looked at in terms of copper equivalent and a second in terms of gold equivalent compare Serengeti to a peer group of companies with bulk tonnage copper-gold or gold-copper projects mostly in the Americas. In both plots, enterprise value (EV) is calculated by subtracting a company's cash from its market capitalization. EV is a measure used by analysts to estimate the underlying value of a company's assets.
Click to Enlarge
Click to Enlarge
As one can see the market is currently attributing little value to Serengeti's Kwanika asset given that our cash position essentially equals our market capitalization. This is not a reasonable valuation for the Kwanika asset. We therefore believe there is significant potential for price appreciation when this is recognized in the market place.
Serengeti's strong financial position ($8.9 million in working capital at March 31, 2009) will enable us to conduct a significant drilling program this summer, exploring for extensions to the Kwanika mineralized system and potentially making new discoveries on several of our other properties. We plan a 27 hole, 6,000 meter program starting in June 2009.
Property |
# of Holes |
# of Targets |
Commodity |
Kwanika Central |
12 |
4 |
Cu Au Mo |
Kwanika South |
5 |
2 |
Cu Au Mo |
Osilinka |
5 |
1 |
Cu Au Ag |
Mil |
3 |
1 |
Au |
Choo |
2 |
1 |
Cu Au |
Total |
27 |
9 |
Cu Au Mo Ag |
In addition to the drilling outlined above, we are pleased to have a partner, Newcrest Mining Limited of Australia, funding a C$ 1-1.5 million follow-up drill program on our Croy Bloom property this coming summer. Finally, a refundable tax credit of approximately $2.5 million is expected from the BC government in 2010 which will essentially replace our 2009 exploration budget.
To summarize we have a key copper-gold asset at Kwanika and we have the cash, a plan and the people to give us the opportunity to succeed. Whereas the price of gold has demonstrated some volatility of late, the price of copper has shown remarkable strength and the stock market is starting to show some signs of recovery. When that recovery comes, Serengeti will be well positioned to seize this opportunity.
This is one of an ongoing series of regular communications aimed at keeping you informed as to our plans and progress. Please visit our website at www.serengetiresources.com and we always welcome your calls and emails.
Yours truly,
D.W. Moore
President & CEO
SERENGETI RESOURCES INC.
President's Letter to Shareholders
TSX-V: SIR
What reassurances can a mineral exploration company offer its shareholders in these turbulent times?
- A robust treasury and a plan to keep it that way...?
- Well located quality projects...?
- An appropriate strategy in place...?
- An experienced management team that has prevailed through previous market ups and downs...?
Let us start by examining Serengeti's current strong financial situation:
We expect to complete 2008 with approximately $9.0 million in working capital. Additionally as a result of 2008 exploration expenditures, we expect to receive a refundable tax credit next year of between $2.5 and $3.0 million bringing our total working capital to a robust $11.5 to $12.0 million. Conservation of our strong treasury will continue to be of utmost importance. We have implemented a number of cost cutting measures to ensure our continued financial strength. Some of these initiatives are as follows:
- Completion of our active field exploration program in the fall of 2008.
- Completion of drilling at Kwanika in early August with the camp shut down and fully winterized leaving us with minimal holding costs.
- Brought our Investor Relations function in-house thereby reducing monthly overhead costs and optimizing marketing dollars.
- Reduced use of ongoing contract personnel by bringing our geological function in-house.
- Continuous review of G&A expenses with a view to reducing costs wherever possible.
On our Croy Bloom Davie Creek project, Newcrest Mining of Australia has recently completed a $1.3 million drill program totaling 2,473 meters testing four deep targets. Assay results from this drilling are expected in late December and will be released when available. Newcrest has indicated that they currently intend to conduct a significant follow-up drill program on the property in 2009. In these uncertain times we are pleased to have one of Australia's largest gold-copper producers as a partner on this project. As a reminder, the option agreement with Newcrest requires them to spend $10 million over four years to earn a 51% interest in Croy Bloom/Davie Creek. Newcrest may also potentially spend an additional $25 million to earn an additional 14% interest.
Our recent announcement (see NR 2008-20 dated November 18th, 2008) of the identification of an extremely attractive drill target on our Mil property which is part of 50%/50% Quest JV with Fjordland Exploration, is one of the highlights of our 2008 regional exploration program in the Quesnel Trough of Central BC. Our work here combined with that of previous explorers in the area points to an exceptional gold target at Mil, which lies in a road-accessible area, 15 kilometers southwest of Terrane Metals Mt Milligan copper-gold development project. Drilling is planned for this target in 2009.
Elsewhere on our extensive property portfolio we will actively consider joint ventures with mid-tier or major companies to minimize expenditure levels and maximize potential return.
With regards to budget levels and cash "burn rate" we currently estimate a budget on the order of $5 million for 2009, including funds to continue to advance and add value to the Kwanika project. If we assume a similar budget for 2010, it is evident that we will "still have the lights on" two years from now without having to do any additional financing in the event that markets have not improved by then.
In summary, we have positioned Serengeti not only to survive but thrive in today's challenging market environment. We have a significant copper-gold discovery at Kwanika, we have sufficient cash resources to actively advance Kwanika, and the very best of our exploration targets for at least two years. Finally we have the dedicated team of people to make this happen. This strength has been recognized by such third party market observers as Lawrence Roulston's Resource Opportunities (August 2008-1 Volume 11 #14) and John Kaiser's Kaiser Bottom Fish Report (Oct 19 to Nov 15, 2008).
This is the third in a series of regular updates aimed at keeping you informed as to our plans and progress. Please visit our website at www.serengetiresources.com as we do keep it updated, and if you would like to send us any comments, questions, or concerns please contact us through: http://www.serengetiresources.com/s/SendMessage.asp
Yours truly,
D.W. Moore
D.W. Moore
President & CEO
SERENGETI RESOURCES INC.
A mineral exploration company creating shareholder value through grassroots discovery.
President's Letter to Shareholders
As management and significant shareholders of your company, we share your frustration with the erosion of the company's share price and market capitalization. We are not alone of course, with the TSX-Venture Exchange having declined 69% over the last year. To put the deterioration of our share price into perspective, our current market capitalization of $8.5 million represents a 15% discount to our working capital of $9.7 million. We expect to finish 2008 with approximately $8.5 million in the treasury. In addition, in the future, we anticipate receiving a refund of 30% of our estimated $10 million (2008) qualifying exploration expenditures. All of this puts us in a very favorable position in these uncertain times.
Where are we at Kwanika?
In early August 2008 we completed the drilling program at Kwanika, thereby reducing our expenditure burn rate to a modest level to respond to the difficult market conditions. To date we have completed and reported results on 56,037 meters of drilling in 123 holes outlining a significant body of copper-gold mineralization in the Central Zone, partially defining a copper-molybdenum +/-gold bearing South Zone and recently indicating a potential third copper zone to the North. For up to date drill results go to www.corebox.net or select the link on Serengeti's homepage.
We are currently working with the respected firm, Scott Wilson RPA on the completion of a resource estimate at Kwanika for incorporation into an independent NI 43-101 report scheduled for completion by year end. We have also recently initiated a metallurgical test program on a representative sample from Kwanika with SGS Minerals Services. Serengeti also plans to complete a scoping study and preliminary economic assessment for the project in the first half of 2009. This strategy will bring us to a decision point on how we can best maximize our shareholders investment in the project. Alternatives at that point may include seeking a strategic investor, vending a minority interest in the project, a royalty or concentrate off-take financing agreement or a joint venture with a major mining company. The activities outlined above represent modest incremental expenditures that should be accretive in terms of project value. Also, one of the attractive features of Kwanika is the exceptional copper-gold grade that is present locally within the Central Zone which may allow significant flexibility in terms of scaling a potential future mining operation.
Where are we at on the balance of the exploration portfolio?
While we have been focused on Kwanika over the past two years, we have also continued to advance a number of properties to the drill stage within our extensive portfolio (now exceeding 2,400 square km) in the mineral rich Quesnel Trough of BC. With our partner, Fjordland Exploration Inc. (FEX) (joint funding) we recently announced the identification of six priority IP geophysical targets as a result of a 110 kilometer reconnaissance induced polarization survey within the QUEST Joint Venture. At our Croy Bloom/Davie Creek property, Newcrest Mining Limited (a major Australian gold-copper mining company), is currently drilling four long holes targeting deep porphyry systems in a program budgeted at $1.4 million. The option agreement with Newcrest requires them to spend $10 million in order to earn a 51% interest. Newcrest may potentially acquire an additional 14% interest to bring their holding to 65% by spending an additional $25 million. This deal with Newcrest is a validation of the merits of the exploration properties within Serengeti's portfolio. In the current climate we will certainly consider doing additional deals to leverage our exploration efforts, although we may choose to fund future drilling of some of the very highest probability targets ourselves. British Columbia continues to be one of the best jurisdictions in the world to discover and develop mineral deposits and we intend to take full advantage of this opportunity.
In Summary ...
We have positioned Serengeti not only to survive, but thrive in today's challenging market environment. To quote John Kaiser in a recent Bottom Fish Report, who outlined the following criteria for thriving in the current environment "...Sufficient working capital to keep projects alive for at least another year, a project with pounds and/or ounces in the ground whose rock value at current metal prices is still higher than the associated cost of mining such ore, a well rounded management team committed to the company and each other, and evidence of significant third party shareholders with long term vision and which are supportive of management..."
We are proud of what we have achieved at Serengeti, we have the cash, the people, and the asset base to unlock our full potential.
This is the second in a series of regular updates aimed at keeping you informed as to our plans and progress. Please visit our website at www.serengetiresources.com as we do keep it updated, and if you would like to send us any comments, questions, or concerns contact us thru: http://www.serengetiresources.com/s/SendMessage.asp
Yours truly,
D.W. Moore President & CEO
SERENGETI RESOURCES INC.
Our Vision Statement:
A mineral exploration company creating shareholder value through grassroots discovery.
A mineral exploration company creating shareholder value through grassroots discovery.
President's Letter to Shareholders
July 28, 2008 The last 18 months
- Results released of discovery drill hole K-06-9 (111 meters @ 0.69% Cu, 0.54g/t Au);
- Serengeti closes a $5.2 million financing at a weighted average price of $0.84 per share;
- Kwanika drill results released, including K-07-15 (328 meters @ 0.61% Cu, 0.72g/t Au);
- Serengeti closes a $20 million financing at a weighted average price of $3.22 per share;
- Additional drill results released from Kwanika, including K-07-20 (107 meters@ 0.76% Cu, 0.91g/t Au);
- US "Subprime Mortgage Crisis" and Canadian "ABCP" woes negatively impact the markets;
- Teck Cominco Ltd. and NovaGold Resources Inc. announce suspension of construction at Galore Creek project due to high capital cost estimates;
- Drill results released from Kwanika, including K-08-62 (610 meters @ 0.74% Cu, 0.78g/t Au). 18.5 million shares trade in a three day period;
- Serengeti announces major option agreement with Newcrest Mining Limited for the Croy-Bloom/Davie Creek property.
As you know our share price has been very volatile over the last 18 months since we announced the discovery of significant copper-gold mineralization at Kwanika in December 2006. The investor interest created by a series of positive drill hole announcements through the winter and spring of 2007 led to Serengeti's share price running up to an intra-day high of $4.80 and enabled the Company to complete two major financings: $5.2 million at an average price of $0.84 in February 2007; and $20 million at an average price of $3.22 in June 2007.
Investor sentiment turned negative in August 2007 with the US "Subprime Crisis" and its Canadian "ABCP" equivalent. Arguably we have been in a bear market since that time. Several events through the fall of 2007 including Teck Cominco Ltd. and NovaGold Resources stepping back from the Galore Creek project contributed to this negative sentiment not just in the junior markets, but across the mining world.
Meanwhile we continued drilling at Kwanika and in late March 2008 and released a spectacular drill hole, K-08-62 which graded 0.74% Cu, 0.78g/t Au over 610 meters. This release rekindled investor interest with 18.5 million shares changing hands in three days! The recent announcement of a very significant option agreement with Newcrest Mining Limited possibly investing up to CDN $35 million in Serengeti's Croy-Bloom/Davie Creek properties also had a positive effect on the stock.
In terms of metal prices for the principal commodities we explore for, copper and gold, both have appreciated significantly over the period. Gold, which began 2007 at $636/oz, traded over $1,000/oz and is currently at $929/oz. Copper began the period at $2.50/lb, traded as high as over $4.00/lb and is currently at $3.72/lb.
We cannot do much about all these external factors, but......
Where are we now?
To the end of June 2008 we had invested $13 million in the Kwanika property. To date we have completed more than 50,000 meters of drilling in 118 holes outlining a significant body of copper-gold mineralization in the main zone as well as a potential copper-molybdenum zone about 2.5 km to the south. We will be wrapping up this current phase of drilling at Kwanika in early August and through the fall will be moving towards a resource calculation.
We continue to be very active delineating drill targets on our extensive property portfolio which now exceeds 2,000 square kilometers in the mineral rich Quesnel Trough of North-Central British Columbia. Some of this activity is jointly funded with our partners Fjordland Exploration Inc. on the Quest JV, or in the case of the recent option agreement for the Croy-Bloom/Davie Creek property, fully funded by our partner Newcrest Mining.
Fortunately, we are well financed with $12 million in the treasury at the end of June and estimate we will close out 2008 with approximately $8 million. We have a very reasonable share structure with 44.8 million shares outstanding. At a recent closing price of $0.41 per share, our market capitalization is approximately $18.4 million. Given what we have invested at Kwanika, the quality of the project, its favorable location with respect to infrastructure, the discovery potential within the balance of the extensive property portfolio and the cash on hand, I believe Serengeti currently represents a compelling value proposition, so....
Where to next?
We believe we have a high quality copper-gold asset at Kwanika. As mentioned, above it is our intention to complete a resource calculation by year end 2008 at Kwanika with the assistance of the respected firm of Scott Wilson RPA who will also complete an independent N.I.43-101 report on the property.
We will also complete an initial VEC (environmental) study at Kwanika by year end, as well as continue discussions with the local First Nations as we move towards a memorandum of understanding for a potential mining project. In addition, an initial metallurgical test program will be commissioned this fall.
We will then take all of this project information and advance towards a scoping study/preliminary economic assessment of the Kwanika project in the first half of 2009. Meanwhile we will continue to advance the balance of the exploration portfolio either alone or with partners and may consider additional partnerships on these other properties to meet this objective.
Thank-you for your patience and support over the past year.
Sincerely,
D.W. Moore
President & CEO
SERENGETI RESOURCES INC.