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| | Wed Mar 26, 2008
Tracker 2008-15: Is "too small" the inevitable outcome for Kwanika?
Publisher: Kaiser Research Online
Author: Copyright 2008 John A Kaiser
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| Key People: David Moore |  |
Issued
44,217,722 |
Diluted
53,551,630 |
Price
$0.58 |
Insiders
4.9% |
Working Capital
$19,095,022 |
As of
11/30/2007 |
| Synopsis: Serengeti Resources Inc is focused on grassroots exploration of copper-gold porphyry prospects in the Quesnel Trough of north-central British Columbia. The junior has assembled a portfolio of a dozen or so prospects since 2004 consisting largely of blind, overburden covered IP anomalies generated by others during the Mt Milligan exploration wave and abandoned when the NDP party came to power. Kwanika emerged as the flagship story in early 2007 when drilling revealed a new copper-gold zone with a high grade supergene component. Seregenti has drilled 24,000 m on Kwanika and is drilling another 15,000 m in 2008 to produce a resource calculation and test the theory that a significant high grade underground mineable resource is present. |
| Date |
Price |
|
Recommendation |
Action |
Net
Cash |
Net
Stock |
Gain |
New Status |
| 3/26/2008 |
$0.58 |
 |
New BF TP Buy $0.50-$0.75 |
Buy 1,333 @ $0.75 |
$0 |
1,333 |
-23% |
BF TP Buy $0.50-$0.75 |
| Bottom-Fish Cycle: | -23% |
Spec Value Hunter Cycle: | N/A |
| Recommendation Strategy as of March 25, 2008: Serengeti Resources Inc is recommended a top priority bottom-fish buy in the $0.50-$0.75 range effective March 26, 2008 based on its strong working capital position of $16.5 million, the potential to develop a medium grade copper-gold deposit on its Kwanika project with a $500 million dream target, and a geologically strong management team headed by David Moore. Following a 15:1 rollback in 2001 Serengeti had focused its efforts on a Victoria Island diamond project optioned from Diamonds North until 2004 when David Moore and his team of former Teck-Cominco employees joined the company and sold it the portfolio of copper-gold alkaline porphyry prospects they had assembled in the northern part of the Quesnel Trough. The Kwanika deposit occupied a small portion of an elongated north-south 5 km IP anomaly whose northern over-burden covered portion Serengeti drilled in 2006. The discovery hole K 06-09 grading 111 m of 0.69% copper and 0.54 g/t gold ($71 per tonne rock value at $935/oz gold and $3.60/lb copper) woke the stock up, and even better followup drill holes led to a $20 million financing in June 2007 in the $3.00-$3.75 range. By Q1 2008 Serengeti had drilled 24,000 metres and was embarking on an additional 15,000 metre drill program whose completion would reduce working capital to about $8 million by the end of the year. The stock, however, sold off sharply during the summer of 2007 as it became apparent that high grade mineralization was constrained to a core area with a footprint of less than 100 million tonnes, and the stock has been in a downtrend ever since as the market assumed that Serengeti would spend all its money without bringing Kwanika's in situ gross metal value to the minimum development threshold. New hope has arisen as a result of recent holes (48.5 m of 1.43% copper 2.3 g/t gold in #55 starting at 340 m) which suggest that the western boundary of the 500 m wide IP anomaly is an artificial one associated with a sedimentary basin that lies unconformably over the westwards dipping mineralized porphyry system. Drilling is now testing the theory that the supergene enrichment encountered in the discovery area extends for considerable distance westwards thanks to the protection from glaciation provided by the basin sediments. This mineralization would have to be mined underground, which is conceivable given hole #55's rock value of $183 per tonne. A mining scenario where lower grade open pit ore is blended with higher grade underground ore may be a possibility. With 53.6 million shares fully diluted and a 100% interest the $0.58 Serengeti price translates into an IPV of only $31 million, which offers tripling potential for a $100 million dream target and 15 fold upside for a $500 million dream target. Serengeti plans to have a resource calculation and scoping study done by the end of 2008. Even if Kwanika falls short of development critical mass, Serengeti will still be in a strong financial position to explore its other dozen or so Quesnel Trough copper-gold prospects in 2009. Because drill confirmation of significant lateral extent for the supergene zone during the next 3-6 months would have a high impact on the stock price, while further downside is limited, Serengeti is a top priority bottom-fish buy. *JK does not own shares in Serengeti. |
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