Answers from AFA CEO related to the agreement with IMDH:
“The cancellation clause is related to the full contract and not only one option. As it is the choice of Afri-Can to cancel or not it does not poses any problems because we don't have any reason to cancel the agreement. Furthermore, it is important to understand that if they elect to choose option 3, we have the capacity to block this one in paying the work in cash. Also, if they choose option 2, the agreement stipulates clearly that the existing joint-venture remains valid and cannot be modified. In choosing option 2 IMDH, will adhere to the joint-venture, which stipulates that Afri-can is the sole manager and operator of the development and that all financial and development decision is at the sole right of Afri-Can. This means that they will have to follow the cash calls but won't have a word on any development decisions. Also, if they don't follow the cash calls they will be diluted.
The vessel is still expected to be at port on the 25th. We are in discussion with the contractor in order to finalize the schedule and program details, which will be announced as soon as finalized. Furthermore, IMDH has to notify Afri-Can that the vessel is fully operational and to its optimal efficiency.
Looking forward to a successful sampling program.”
Answers from AFA CEO regarding calculation of SP potential:
“Yes, we can eliminate option 3 because if they choose this one, we will pay them in cash. Furthermore, option 2 is not likely to happen because they would be forced into a joint venture where they would be forced to continue to invest in future development and not having a word to say on the development decision. Their real choice will be cash or option 1 with the shares.
Concerning your calculation, it is very important to understand that the price of the shares to be issued will be the market price at the moment they elect their choice. They have 30 days after the end of the program to elect their choice and if the results of the program are good then the share price will be higher than the actual price but no one can really predict what will be the price at that time.
For the sake of calculation and as an example only: the market for offshore diamonds is currently at over US $ 200 per carats but let’s use the lower US $ 200 figure.
A buyer for the project would pay about 30% of the market value for an inferred and indicated resource. Therefore the buyer would value the project at about US $ 60 million per million carat of inferred and indicated resource
As in your example: 2 million carats would worth US $ 120 million x 70% (the share of Afri-Can in the Block) = US $ 84 million x 1.06 (current exchange rate) = CDN $ 89.04 million.
Divide this number by the number of shares issued and you will get the value per shares.
As above mentioned, the number of shares issued at that time is unknown but we can estimate that at the current number of shares issued of 160 million, the value per shares would be about CDN $ 0.55 per shares for 2 million carats.
Keep in mind also that the example value is not taking in consideration the other features that are still un-prospected on the Block J and the value of the Haib copper project.
I hope that the above answers your questions.”
Answers from AFA CEO regarding opportunity beyond the Sampling 2 exersice:
Currently, Afri-Can has the Block J and the Haib copper project. We had some other concessions but they have been left away in 2005 and 2006. The situation was that they are situated in completely unexplored territories and are part of a complete different geological context. The main targets are located at between 300 m and 500 m deep. The current technology can only sample down to 250 m. We follow the development of the technology very near and we will possibly re-apply to get them back when we will see that it will be possible to sample. Because they were costing over US $ 50,000 per year to maintain, we judged that it was financially right to not renew them but keep an eye to get them back at the right time.
This being said, it is important to keep in mind that there is 7 other features in Block J that have been proven diamondiferous and will be the object of exploration work in the future and are offering potential for additional resource. Also, as we are now arriving to our first goal of developing a base resource on the Block J, we intend to acquire more potential ground and add potential for further development.
Lastly, it is important to keep in mind that we still have an interest in the Haib copper project that is developed in joint venture with Teck Cominco. To that effect, Teck Cominco have completed their first round of valuation and prospecting and we should have some news from them before the end of the year.
Kind regards
Pierre Leveille
President & CEO
Afri-Can Marine Minerals Corp.
4444 Ste-Catherine West, # 201,
Montreal, Qc. Canada
H3Z 1R2
Tel: 1-514-846-2133
Fax: 1-514-846-1435
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