Mr. Dan Weir reports

DNI UPDATE - ENVIRONMENTAL LICENSES, RESOURCE STUDY AND FINANCING

DNI Metals Inc. has provided information on the following.

Environmental licences

DNI and the Office National pour l'Environnement Madagascar (ONE) completed two days of technical reviews at Vohitsara and Marofody properties on Dec. 6 and Dec. 7.

As per DNI's press releases on Nov. 8 and Nov. 20, 2018, the ONE must complete two site visits, a technical review and a public consultation.

The ONE group consists of a panel of four people from the following government offices:

1. ONE co-ordinator;
2. Ministry of Mines;
3. Ministry of Environment;
4. Bureau des Directions Regionales de la Population (DRPPSPF).

As part of the technical review, the ONE will send an official letter to DNI, asking for clarity on certain items. DNI will respond quickly and complete this process before year-end or early in 2019.

The public consultation will be a two-day process, and will include three local community meetings consisting of one district meeting, one Vohitsara community meeting and one Marofody community meeting. These meetings will be scheduled for mid-January.

As part of the technical review, DNI and the ONE met with the mayor of the district, and the presidents of Vohitsara and Marofody.

DNI has entered into property purchase negotiations with selected Vohitsara land stakeholders required for mine development. Ninety-nine per cent of the people in the area want to see DNI develop a mine.

Resource estimate

DNI has engaged Micon to complete its maiden resource estimate for the Vohitsara graphite property. A site visit is being scheduled for early January, with a resource estimate completed around the end of January to mid-February.

Financing

The company has arranged anon-brokered private placement financing to secure up to $1-million of financing for its projects and operations by placement of up 1,000 convertible debentures with a face value of $1,000 per convertible debenture pursuant to a subscription agreement.

Each convertible debenture shall have the following terms:

1. Face value: $1,000;
2. Coupon: 12 per cent;
3. Term: 365 days;
4. Conversion price: eight cents (each $1,000 face value debentures converts to 12,500 units);
5. Each unit shall consist of one common share of the company and a one-half warrant to purchase a common share of the company;
6. If the debenture holder converts prior to maturity, the coupon payment will be forfeited;
7. Upon maturity, debenture holders have the following options:
   1. Convert face value and coupon into units;
   2. Receive the face value and coupon payment in cash.

Warrant terms

Each warrant entitles the bearer to purchase one common share of the company at an exercise price of 20 cents per share until July 27, 2022. If the closing market price of the common shares of the company on the Canadian Securities Exchange is equal to or greater than, 30 cents per common share for a period of 30 consecutive trading days, or upon the public announcement of a decision by the company's board of directors to build a commercial processing plant capable of producing at least 10,000 metric tonnes per year of graphite, then the company may accelerate the expiry date of the warrants by delivering a notice to the warrant holder notifying such warrant holder that the warrants must be exercised within 30 calendar days from the date of the acceleration notice, otherwise the warrants will expire at 4 p.m. Toronto time on the 30th calendar day after the date of acceleration notice.

Annual meeting

DNI has set its annual and special meeting date for Dec. 20, 2018.

The record date was Nov. 19, 2018.

Resolutions will include:

1. Election of directors;
2. Appointment of auditors;
3. Changing financial year-end to Dec. 31 to match the Malagasy and Mauritian subsidiary companies;
4. Continuing DNI as a Canadian company under the Canada Business Corporations Act, from its current domicile as a Quebec company.

Debt settlement

DNI has issued 1.4 million shares to settle debts of $70,000.

We seek Safe Harbor.