NOTE 3 – BATOVI DIAMOND PROJECT

On November 20, 2014, we entered into a formal joint venture agreement (“the Joint Venture”) with Mineracao Batovi Ltda. (“Mineracao Batovi”), a Brazilian mineral exploration and mining company, which contemplates the Company acquiring partial ownership of Mineracao Batovi to develop, finance and operate the Batovi Diamond Project, north of Paranatinga in Mato Grosso, Brazil. This was superseded by an amended and restated joint venture agreement (the “Amended and Restated Joint Venture Agreement”) with Mineracao Batovi and Dr. Charles Fipke, the shareholder of Mineracao Batovi, dated January 25, 2017 which provided for us to have the right to acquire up to a 49% interest in Mineracao Batovi. As per the Amended and Restated Joint Venture Agreement, we will be required to contribute $1,000,000 in cash to Mineracao Batovi on or before June 30, 2017, in order to earn a 17.6% interest in Mineracao Batovi, this is in addition to our existing 2.4% equity interest which was acquired during the quarter ended January 31, 2017 from a former shareholder for $30,000. Mineracao Batovi holds the mineral claims underlying the Batovi Diamond Project. We may earn an additional 29% equity interest in Mineracao Batovi by funding a further $2,000,000 of exploration expenses no later than November 20, 2019. If we only fund a portion of the $1,000,000 or $2,000,000 referred to we will only acquire a pro rata portion of the equity interest available to be acquired.

As per the originally executed agreement, the Company issued 2,700,000 fully paid and non-assessable common shares valued at $7,992,000 to Kel-Ex Developments Ltd. To complete the acquisition of the 17.6% interest in Mineracao Batovi which this relates to, the Company must make its contribution to Mineracao Batovi for the project.

The Amended and Restated Joint Venture Agreement provides that, during the period from the date we acquire some portion of the initial 17.6% equity interest in Mineracao Batovi until the expiry of the period during which we can earn the additional 29% equity interest in Mineracao Batovi and from then on in circumstances where we hold at least a 40% equity interest in Mineracao Batovi, Mineracao Batovi shall be managed by a board of directors comprised of two (2) representatives from each of our Company and the existing shareholder of Mineracao Batovi. In circumstances where our interest in Mineracao Batovi at the end of the period during which we can earn the additional 29% equity interest is greater than 10% but less than 40%, the board of directors shall thereafter be comprised of three (3) representatives of the existing shareholder of Mineracao Batovi and one (1) of our Company. The board of directors shall be similarly constituted during the period which we can earn the additional 29% equity interest as long as the interest in Mineracao Batovi held by our Company is less than 10%. If at any time following the expiry of the period during which we can earn the additional 29% equity interest our interest in Mineracao Batovi is reduced to 10% or less, our Company shall thereafter not be entitled to any representation on the board of directors of Mineracao Batovi.

Under the Amended and Restated Joint Venture Agreement, upon funding our initial $1,000,000 contribution, our Company would be engaged to act as operator of the joint venture on terms whereby our Company will be entitled to charge a 10% administration fee on all exploration expenditures incurred under $50,000 and 5% on all exploration expenditures incurred over $50,000. Our Company has discretion to subcontract with third parties, including Kel-Ex Development Ltd. (“Kel-Ex”), to enable it to fulfill its role as operator. Kel-Ex is a privately-held British Columbia corporation that is under common control with Mineracao Batovi.