Kwanika

2020 Exploration Drilling Program

During the 2020 exploration season, Serengeti, on behalf of Kwanika Copper Corp., is conducting an exploration drilling program at Kwanika. The program is testing targets that have largely remained on the back burner since resource development drilling began soon after the discovery of the Central Zone by Serengeti in 2006/2007. The 2020 drilling program is focussing on both proximal and distal targets around the Central and South Zones with the goal of discovering a new mineralized system at Kwanika.

2019 Kwanika Mineral Resource Estimate

Expands Kwanika Central Zone Mineral Resource

NI 43-101 Technical Report for the Kwanika Project Resource Estimate Update 2019

A new resource estimate was published for the Central Zone in March 2019. The Measured and Indicated (M&I) Mineral Resource is estimated to contain 1.32 billion pounds of Cu and 1.83 million ounces of Au in addition to a significant Inferred Resource (see table below). Importantly, the new resource estimate has identified coherent higher-grade domains within the open pit and underground M&I resources. Highlights of the resource include:

• A substantial increase in resource tonnes in all categories compared to the 2016 resource;
• Combined Measured and Indicated (M+I) Resource of 223.6 million tonnes grading 0.27% copper, 0.25 g/t gold and 0.87 g/t silver containing 1.32 billion pounds of Cu, 1.83 million ounces of Au and 6.27 million ounces of Ag as summarized in the table below;
• An overall increase in contained metal from the 2016 resource estimate, including increases of 44% for Cu, 32% for Au, and 52% for Ag in the M+I categories;
• Conversion of 42.9 million tonnes of Indicated Resources to Measured category, representing approximately 20% of the combined open pit and underground M+I Resource;
• Identification of higher-grade domains within both the open pit and underground resource (see Figure 1), as outlined in the Sensitivity Table below. At higher cut-off grades for the open pit, and at a higher-grade confining shell for underground mineral resources, the higher-grade domains remain coherent, which suggests that mining should be able to target these areas as the Kwanika mine plan is developed. 
• The new model is now based on more realistic open-pit and underground mining shapes. 

Readers are cautioned that any disclosure relating to the Kwanika Project Preliminary Economic Assessment Report previously filed on April 20, 2017 on SEDAR, which is considered a previous report, is no longer current because it was based on a different resource estimate than the current resource estimate which was filed on SEDAR on April 18, 2019.

Reasonable Prospects of Eventual Economic Extraction and Reporting Methods

• Total Resources are reported within combined open pit and underground shapes to define “reasonable prospects of eventual economic extraction”.
• Open-pit constrained mineral resources are confined to a Lerchs-Grossman shell above the potential block cave and created using Net Smelter Prices (NSPs) and an NSR cut-off grade of CAD$11.30.
• Open pit planning would consider mining a higher grade starter pit while underground development was in progress and would use a selective cut-off grade strategy to increase mill feed grades at the start of the project and stockpile lower grades to supplement underground production to ensure processing rates at mill capacity. Grade bin distribution for the open pit resource is provided in Table 2 below.
• Underground resources reported in Table 1 contain all material confined within a potentially minable shape defined by a 0.27% CuEq, or above and NSR of CAD$20.12. This total underground resource contains the material for the PFS study plus additional areas which are the exploration targets at depth, to the north and northwest of the current shape.
• Underground resources reported in Table 2 contain all material confined within a potentially mineable shape defined by the 0.40% CuEq (or NSR=CAD$29.80), which will be considered for the ongoing PFS study.
• The CuEq block grades and potentially mineable confining shapes described above are illustrated in the section below at 351500E (Figure 1).

Central Zone Resource Notes

The updated resource estimate was completed by Moose Mountain Technical Services (MMTS) of Victoria, British Columbia under the direction of Sue Bird, P. Eng., an independent Qualified Person as defined by NI 43-101. Sue Bird, P. Eng. completed a site visit to the Kwanika property from July 13 – 16, 2018 and reviewed and advised the geological modeling input to the current study.

*Resources are reported within a combined open pit and underground shape to define “reasonable prospects of eventual economic extraction”. Open-pit constrained mineral resources are confined to an open pit shell above the potential block cave and created using an NSR cut-off grade of CAD$11.30. Underground resources contain all material confined within a shape defined by the 0.27% CuEq cut-off. Mineral resources are not mineral reserves and do not have demonstrated economic viability. All figures are rounded to reflect the relative accuracy of the estimate.

** Open pit constrained mineral resources are reported at a copper equivalent cut-off of 0.13% and underground resources report all material within shapes defined by the 0.27% CuEq grade shell. The cut-offs are based on prices of US$3.25/lb of copper, US$1,350/oz of gold, US$17/oz of silver and assumed recoveries of 91% for copper, 75% for gold, 75% for silver.

*** Copper equivalents are calculated using the formula below based on metal prices of US$3.25/lb of copper, US$1,350/oz of gold and US$17/oz of silver. Metal recoveries of 91% for copper, 75% for gold and 75% for silver have been applied to the copper equivalent calculations. 

CuEq = Cu_% + ((Au_gpt/31.1034*Au_Price*Au_Recovery) + (Ag_gpt/31.1034*Ag_Price*Ag_Recovery)) / (Cu_Price*Cu_Recovery*22.0462)

The 2019 Central Zone resource was based on 143 holes totaling 65,695 metres drilled at the Central Zone by Serengeti Resources since 2006 and incorporated drilling results from the 2018 program at Kwanika. Revised grade trends for copper and gold were modelled separately reflecting the presence of multiple mineralizing events and enrichment in gold and copper, resulting in a wider mineralized envelope extending deeper within the Central Zone compared with the 2016 resource estimate. A revised 3D geological model created in 2018 provided a key input for the new resource model. Furthermore, the 2019 resource was based on more reasonable confining shapes drawing on the 2017 PEA mining shapes for guidance. A total of six (6) resource domains were developed which were based on the geological model and included revised copper mineral speciation modelling as well as trend modelling for gold and copper. Copper and gold were modelled using independent variographic parameters within domains to accurately reflect the grade trends for each metal. Kriging interpolation was used to develop the resource for both gold and copper and was checked against nearest-neighbour (NN) and inverse-distance-cubed (ID³) for each metal to ensure consistency, precision and accuracy.   

The 2016 South Zone resource reported 33.3 million tonnes grading 0.26% copper and 0.08 g/t gold at 0.13% copper equivalent cut-off (Serengeti press release dated November 14th, 2016). The 2016 South Zone resource was based on 58 holes, totaling 17,958 meters drilled at the South Zone by Serengeti, between 2008-2010.

South Zone Resource Notes

The South Zone resource estimate was completed in 2016 by SRK Consulting (Canada) Inc., of Vancouver, British Columbia under the direction of Marek Nowak P. Eng., an independent Qualified Person as defined by NI 43-101. Chad Yuhaz, P. Geo., also of SRK and also a QP, completed the site visit to the Kwanika property in 2016 and was involved with the geological modeling input for this re-stated 2016 South Zone resource estimate.

*Open-pit constrained mineral resources are reported in relation to a conceptual Whittle pit shell. Mineral resources are not mineral reserves and do not have demonstrated economic viability. All figures are rounded to reflect the relative accuracy of the estimate. All composites have been capped where appropriate.

** Open-pit constrained mineral resources are reported at a copper equivalent cut-off of 0.13%. The cut-offs are based on prices of US$3.00/lb of copper, US$1,300/oz of gold, US$20/oz of silver, US$9.00/lb of molybdenum and assumed recoveries of 89% for copper, 70% for gold, 75% for silver, and 60% for molybdenum.

*** Copper equivalents are calculated using the formula below based on metal prices of US$3.00/lb of copper, US$1,300/oz of gold, US$20/oz of silver and US$9.00/lb of molybdenum. Metal recoveries of 89% for copper, 70% for gold, 75% for silver and 60% for molybdenum have been applied to the copper equivalent calculations.

CuEq = Cu_% + ((Au_gpt/31.1034*Au_Price*Au_Recovery) + (Ag_gpt/31.1034*Ag_Price*Ag_Recovery) + (Mo_%*Mo_Price*Cu_Recovery*22.0462)) / (Cu_Price*Cu_Recovery*22.0462

Prefeasibility Study Deferred

KCC is not completing the Kwanika Prefeasibility Study (PFS) at this time due to lack of funding and instead will focus on completing an Interim Study Report. The PFS is a complex undertaking, involving many different disciplines including resource estimation, underground and open-pit mine engineering, geotechnical engineering, tailings, waste and water management, project infrastructure and environmental monitoring.  The $7 million original budget for the study funded by PIC has been fully expended. The partners have also jointly funded a further $590,000 on a pro-rata basis.

The partners have concluded that although well advanced, the Kwanika project mine plan is not fully optimized to a level such that upon its completion, the best path to feasibility and ultimately a construction decision would be achieved. A number of opportunities have been recognized as the PFS has progressed that could add value to the project, however additional funding would be required to pursue these opportunities. 

The partners in KCC have therefore elected to wrap up the current study using the balance of the available funds to complete an Interim Study Report.  It will document the extensive work completed to date in order to best facilitate future advancement of the project.  

Serengeti’s management believe that a number of upside opportunities exist for the Kwanika project and the large associated land package, which have potential to add significant value. The Company is of the opinion that the following steps, amongst others, should be considered as part of any future development plan for the project.

• Further investigation of mineral sorting to pursue initial limited work already completed. This has yielded encouraging results which point to the potential to upgrade mill feed head grades;
• Investigation through additional drilling of the potential for a deeper underground extraction level for the western portion of the Central Zone block cave.  If positive, this could lead to increased heights of draw and improved capital utilization.
• Drill testing of several other near deposit prospective areas, including follow-up of the south edge of the Central Zone where the final hole of the 2018 program yielded good results and which point to an open direction;
• Investigation of the western fringe of the nearby South Zone where prior drilling by Serengeti demonstrated that the best grades occur; 
• Drill testing the Central Fault North target where Serengeti is of the opinion that a hole drilled in 2016 skimmed the upper envelope of a potentially buried system 600m north of the Central Zone.
• Additional exploration of the large property position. There are several early stage opportunities that require geophysics to properly outline drill targets for future testing.

Serengeti has recently proposed a budget to PIC to fund a 2020 program to pursue these opportunities, and the Company intends to work with its partner in the coming months regarding the next phase of advancement of the Kwanika project.

Metallurgical Testwork

A metallurgical test program was conducted to investigate metallurgical performances of various mineral samples to a conventional flowsheet. The locked cycle test (LCT) results show that the sample constructed from the proposed open pit area responded well to the conventional processing flowsheet tested. On average, approximately 88.3% of the copper and 73.5% of the gold are recovered into a Cu-Au concentrate containing approximately 25.1% Cu and 23.4 g/t Au. Impurity levels of the concentrate are low.

The processing flowsheet includes rougher and scavenger flotation followed by regrinding of the rougher concentrate and four stages of cleaner flotation. The primary grind size was targeted at 80% passing 75 um. A number of samples were tested in the program including:

• Three composite samples, representing the proposed open pit, west underground area and east underground area comprised of coarse assay reject material from the 2018 drill program.
• Approximately 15 variability samples, representing various head grade, spatial location and lithological variations and sample type, including coarse assay rejects vs drill core.

Initial test results from a pair of duplicate samples from the open pit composite sample are summarized in the table below.

The Au-Cu concentrate produced from the LCT 1 test was assayed for main impurities which may affect concentrate quality. The assay indicates that in general the impurity levels of the concentrate are low. Most of the impurity levels are expected to be much lower than the penalty thresholds specified by most of the smelters, excluding fluorine which may be close or slightly higher than the requirement of some smelters.

The metallurgical test work was conducted by Metallurgical Division, Bureau Veritas Commodities Canada Ltd., located in Richmond, British Columbia and supervised by Dr. John Huang, a Senior Metallurgist with Tetra Tech Canada Inc. The technical information in this section of the Kwanika project page has been prepared in accordance with Canadian regulatory requirements as set out in National Instrument 43-101, and reviewed by the Company’s qualified person, David W. Moore, P. Geo., President and CEO of Serengeti Resources Inc who has supervised the preparation of and approved the scientific and technical information.

Disclaimer

Readers are cautioned that any disclosure relating to the Kwanika Project Preliminary Economic Assessment Report previously filed on April 20, 2017 on SEDAR, which is considered a previous report, is no longer current because it was based on a different resource estimate than the current resource estimate which was filed on SEDAR on April 18, 2019.