Spider rethinking Ont (Attawapiskat)
See Spider Resources Inc (SPQ) Street Wire
RETHINKING KYLE DYKE
by Will Purcell
Spider Resources Ltd. and KWG Resources Ltd. once again are looking to the
James Bay lowlands in an attempt to revitalize investor interest in their
companies. During the first half of the 1990s, the project was a newsmaker,
but in recent years the play has been all but abandoned as the two
companies looked elsewhere, and fell upon troubled times. Spider recently
announced its intention to raise $450,000 in equity financing to fund
additional exploration on the project. Neil Novak, vice president in charge
of exploration for Spider, said that $200,000 of the financing had already
closed, and he expected the remaining $250,000 would be easily be raised in
the coming weeks, due to the favourable tax consequences of the flow
through shares. Mr. Novak said that their joint venture partner would also
be required to contribute their pro-rata share to the budget, or suffer
dilution of their interest. He stated that KWG was now working toward
raising the funds, and he added that KWG should be able to easily raise the
required funds. As a result, he said: "We expect to have about $800,000
available for exploration during 2000. I would like to see the exploration
program start in the winter, but it is not necessary. It is so much easier
to move around in the winter, but Kyle No. 3 is not in swampland, it is on
dry land and is accessible in the summer as well. It's much easier to
operate in the winter." Mr. Novak also stated that the planned exploration
program would be easier on the pocketbook if another major operator were
working in the area.
Spider does indeed appear to have company in the area. Monopros Ltd., a
wholly owned exploration arm of De Beers, has been exploring for diamonds
in the James Bay lowlands for more than a decade, and the company has
apparently decided to take a sizeable bulk sample from its prospective V,
or Victory pipe. The company plans to take a bulk sample of up to 10,000
tonnes, and will operate a dense media separation plant at the site.
Construction of a camp to house up to 80 workers, a winter airstrip, and an
extension of a winter road are also in the works. Rumours abound that the
pipe could grade up to three carats per tonnea, although this guess is
probably in excess of the actual grade. Mr. Novak said, "Monopros confirmed
they would be doing a bulk test this winter, pending the results of a 300
tonne sample they took last winter." He added that they had been waiting on
the results from a concentrate they sent down to their diamond sorting
laboratory in Johannesburg. If the results from that sample were positive,
he said, they would be proceeding with the bulk sample and construction.
The recent applications appear to suggest that a positive result has indeed
been obtained. Mr. Novak said that Monopros had identified nine kimberlites
in the area, but only the large Victory pipe was potentially economic. He
stated, "The magnetics that I have looked at on that particular pipe, and
all of the original drilling that they did in 1988 and 1989 would suggest
it is around 14 to 15 hectares in area." If his estimate is accurate, such
a size could imply a total resource of 50 million tonnes of kimberlite, or
more. A large body would make even a fairly low-grade pipe attractive. Mr.
Novak did not have any information on the suspected grade of the Victory
pipe, but he said: "They probably have sufficient grade there to go back in
and do some additional work. They have payable and nonpayable, that's how
they define things." He added that Monopros believed that one of their
kimberlites was payable in the Attawapiskat, while the rest were
nonpayable.
Mr. Novak said that the move by Monopros was expected. He stated that: "In
the province of Ontario, you have 11 years that you can maintain a property
without doing any work, as long as you spend sufficient money to carry it.
Once 11 years have gone by, you have to reapply under a different format.
So we knew that sometime in early 2000, they would have to make a major
application to do something there. You can't sit on it, you can't do that
in this province. They had to either drop it, or bring it to a lease
status. You can't just maintain it as an active claim, you have to advance
it to the next level." Monopros appears to have made that decision, and as
a result, at least part of their secret is now out of the bag.
KWG began its own search for Ontario diamonds in the summer of 1992,
acquiring a 70-per-cent stake in claims in the Kirkland Lake area of that
province, and in neighbouring Quebec. This joint venture would ultimately
be referred to as the Spider No. 2 project. A kimberlite was discovered on
the Guigues portion of the property, and a 25-tonne minibulk sample was
extracted late in 1992. A single macrodiamond was recovered, measuring two
millimetres in length. KWG also acquired an option on the C-14 kimberlite
pipe from Regal Goldfields, and recovered seven macrodiamonds from a
123-tonne kimberlite sample. Neither result was particularly promising, and
the search turned elsewhere.
Later that year, KWG and Spider acquired the Spider No. 1 claims, located
to the west of James Bay, in northern Ontario. The original terms of the
deal gave Spider a 30-per-cent share of the play, but the company
subsequently increased its stake to the current 47 per cent level. The
acquisition seems to have resulted from some successful investigative work
by Mr. Novak. He said that the Monopros claims were held in the names of
individual geologists, but he was able to determine that Monopros in fact
owned them. KWG examined a 12,000-square-kilometre area, and selected about
1,000 square kilometres on the basis of prospective magnetics. The property
is located in a remote area, centred about 300 kilometres north northeast
of Nakina, 220 kilometres to the east of Lansdowne House, and 160
kilometres to the west of Attawapiskat, on the James Bay coast.
Early in 1993, the joint venture acquired another partner. Ashton Mining
Ltd. of Australia agreed to spend up to $3-million over three years, in
order to earn a 50-per-cent interest in the property. The agreement was
subsequently amended, whereby KWG would pay for preliminary exploration,
and Ashton's subsidiary, Ashton Mining of Canada Ltd., would fund the
evaluation of any discoveries and complete a full feasibility study, if
warranted. KWG and Spider began an aggressive multimillion-dollar
exploration program, and results quickly began to flow.
In the spring of 1994, the partners discovered their first diamondiferous
kimberlite in the region. Analysis of the drill core from the MacFadyen No.
1 kimberlite revealed nine diamonds, including two macrodiamonds, in 163.6
kilograms of kimberlite. As a result of the find, Ashton and the partners
continued to acquire ground in the vicinity, and the drills continued to
turn. Weeks later, a second, more promising discovery was announced. Sample
weighing 106.6 kilograms was extracted from the Kyle No. 1 kimberlite, and
found to contain 101 diamonds, of which 25 were macros, and 10 of these
were longer than 0.5 millimetres in two dimensions. As well, it appeared
that 44 of the microdiamonds were fragments of one or more larger stones. A
third kimberlite body was also encountered, and the MacFadyen No. 2 was
proven marginally diamondiferous as well, when three microdiamonds were
recovered from a 145-kilogram sample. Mr. Novak said that the two MacFadyen
kimberlite dykes are in close proximity to the potentially economic
Monopros pipe. He stated that the Victory pipe actually abuts against the
MacFadyen No. 1 kimberlite, which is apparently several kilometres in
length, and added that the Victory appeared to be a big blow on the dyke.
MacFadyen No. 2 is just northwest of MacFadyen No. 1, and appears to be a
little blow. The Kyle No. 1 pipe is located well to the west of the Victory
area, about 160 kilometres distant.
As a result of the finds, Ashton announced it would be proceeding with an
exploration program on the first two discoveries. In the spring of 1995,
results were reported from a 429-metre hole drilled into the Kyle No. 1
body. Selective samples weighing 70.64 kilograms were found to contain a
total of 230 diamonds, including 52 macros, for a reported total diamond
grade of 5.16 carats per tonne. The core as a whole contained 370 diamonds
in 283 kilograms of kimberlite, of which 79 were macrodiamonds, and 21
exceeded 0.8 millimetres in length. The two largest stones were more than
two millimetres in length. The reported grade of the entire sample was a
much more modest 1.59 carats per tonne, and furthermore, the grade included
all diamonds, not just those sufficiently large to be of commercial
interest. Grade estimates based on the total diamond content can be very
misleading, as only those stones larger than 1.5 millimetres are
commercially recovered, and smaller stones carry little or no value.
The result was encouraging enough for Ashton to decide to take a larger
bulk sample, which was extracted during 1995. Late in September, Ashton
quietly announced that a 1.8-tonne sample taken from Kyle No. 1 had
contained only seven diamonds larger than 0.85 millimetres in length, and a
0.8-tonne sample from the MacFadyen No. 1 body did not contain any
recoverable diamonds. The writing appeared to be on the wall, when Ashton
announced in the spring of 1996 that it had sold its entitlement in the
project back to KWG for $1-million. Under the terms of the deal, Ashton
retained a claw back interest, whereby the company could have a 25-per-cent
stake in any find other than the Kyle No. 1 pipe, if it repaid KWG triple
the funds that were spent on making the discovery. Ashton's departure may
have had less to do with the disappointing results than it appeared to have
at the time. Mr. Novak said: "We ran into disfavour with Ashton. At the
time we were more aggressive, more promotional, much more than they were
willing to put up with. So we ran into a personality conflict between our
promoter, Pierre Gauthier, and their management out of Australia. They
ended up backing off the project and signing it back to us."
With Ashton Canada now on its way to Alberta, KWG and Spider soldiered on
together. In the spring of 1995 the partners had found two new kimberlites,
and one of them appeared to have promise. Sample from the Kyle No. 2
kimberlite was only marginally diamondiferous, with four macrodiamonds and
14 micros recovered from a 552-kilogram sample. The Kyle No. 3 results were
better, with three macrodiamonds and 45 micros found in a 153.7-kilogram
sample.
Meanwhile, KWG and Spider continued pouring over the results from Kyle No.
1. The partners rummaged through the rejected tailings from Ashton's
minibulk sample test, and came up with additional diamonds. In all, they
reported a total of 744 diamonds, including 171 macros and 38 commercial
sized stones, from 1,704 kilograms of kimberlite. The joint venture
partners proceeded with their own minibulk sample, and extracted an
additional 15 tonnes of material from the pipe. The processing was complete
early in 1997, but the results were not encouraging. A grand total of 12.17
tonnes of Kyle No. 1 kimberlite had now been processed over the years, with
the recovery of 4,665 diamonds, of which 875 were macrodiamonds. The
reported grade was 0.63 carats per tonne, and again included diamonds of
all sizes. The largest stone was never formally revealed, however one clear
complex crystal stone did weigh 0.094 carats.
KWG and Spider drilled a few additional holes into the Kyle No. 3
kimberlite, and also managed two additional finds. The Kyle No. 4 and Kyle
No. 5 kimberlites were found during 1996, and appear to be only marginally
diamondiferous. Little work was completed after 1997, as KWG faced
bankruptcy, and Spider was also severely hampered by the misfortune that
plagued Mr. Gauthier's St. Genevieve group of companies, and the general
malaise that afflicted the resource sector in general. What little funds
Spider could raise were directed to the Alto Paranaiba diamond play in
Brazil, and the James Bay lowlands were nearly forgotten. The joint venture
partners are now attempting to resurrect the project, through a more
detailed look at the Kyle No. 3 body.
Mr. Novak said that the Kyle series kimberlites were quite distant from the
MacFadyen and Victory bodies. He stated, "The Kyle No. 3 is located
upstream along the Attawapiskat River, by about 35 kilometres, at the
junction of the Attawapiskat with another major river." The remaining four
Kyle kimberlites are fairly well spread out further to the west. He
described the Kyle series kimberlites as Proterozoic, about 1.1 billion
years old, and said that the MacFadyen dykes were Jurassic in age, and had
pierced the Paleozoic limestone cover rock, which covers the much older
Kyle pipes.
The Kyle No. 3 body appears to be a deeply dipping dyke, and has been drill
tested for about 460 metres along strike. Mr. Novak said that the
geophysically interpreted length appears to be 650 metres, and the dyke
appears to wane, or elude magnetic detection beyond that. He stated that
the limits "could be a function of depth, or the width of the body has gone
below the detection limit. It could peter out into one or two metre wide
dykes that we can't detect by geophysics." He went on to say that, "From
the airborne work, and the ground magnetic follow up, I would be
comfortable with about 650 metres."
Mr. Novak said that the 1995 discovery hole was drilled into a blow on the
main dyke, about 150 metres from the east end, and it was up to 200 metres
wide. He stated, "I put a vertical hole into it, it had a very thin
overburden, about three metres, and an additional four metres of
limestone-sandstone mix, then we went into kimberlite. We were into
kimberlite for the rest of the 200-metre vertical hole. That was the
discovery hole." He said that Ashton then elected to drill another vertical
hole prior to their departure, about 100 metres east of the discovery hole.
Ashton processed the results in their lab, he said, and they provided KWG
and Spider with only limited results.
After Ashton quit, the partners elected to drill a few more holes on their
own, drilling a series of angle holes in an attempt to crosscut the dyke.
The first hole undercut the discovery hole, and was drilled at a 60-degree
angle. It intersected a kimberlite width of 110 metres at that point. Mr.
Novak said the results suggested the body tapered with depth at the point
of the main blow. The next angle hole was drilled 300 metres to the west,
and it intersected kimberlite for a true width of 20 metres, at a depth of
about 150 metres. Mr. Novak said that a zone of high-grade kimberlite was
encountered within the two angle holes, and within the Ashton hole, on the
southern wall of the east to west dyke. He described the zone as having a
true width of 4.2 metres, and a grade of 2.25 carats per tonne. Mr. Novak
confirmed that the grade represented all recovered diamonds, including
micros, but stressed that the bulk of the weight of the diamonds was
contained in the macrodiamond population. In the first angle hole, the
largest macrodiamond measured 1.36 millimetres in length, and was described
as a broken dodecahedron weighing 0.0058 carats. In the westerly hole, the
largest diamond measured 1.51 millimetres in length, with all three
dimensions exceeding one millimetre. The clear, white complex crystal
weighed 0.029 carats.
The determination of the high-grade zone is based on very limited data.
High-grade sample from the two angle holes weighed a modest 29.1 kilograms,
and contained only 46 stones, of which 16 were macrodiamonds. The total
weight of diamonds was 0.0694 carats, almost half of it contained in the
two largest diamonds. The lower grade portion of the dyke contained 50
stones, of which four were macros, in 207.5 kilograms of kimberlite. The
diamonds weighed 0.017 carats, for a total grade of 0.08 carats per tonne.
The size of the high-grade zone is also difficult to ascertain. Should it
continue with a 4.2-metre true width over the entire 650-metre strike
length, and to a depth of 300 metres, it could theoretically contain as
much as two million tonnes of kimberlite, although this figure is most
likely optimistic.
Mr. Novak said that KWG and Spider have spent about $9-million on the
project over the years, and Ashton had thrown in about $2.5-million as
well. Of that amount, nearly $4-million was spent on geophysical data
acquisition. During the glory years, the three partners were spending in
excess of $2-million annually, but they decided to put the project on ice,
waiting to see what developed with Monopros. Mr. Novak said that they
almost pooled properties and became partners with Monopros, after Ashton
walked away, but the amount of exploration money offered by Monopros was
not enough. He said: "We have established a whopping database over the
whole James Bay lowlands, which is what Monopros wanted to get their hands
on. Most of the money we spent was collecting geophysics." Mr. Novak added
that they maintain a good relationship with Monopros, and went on to say
that, "The door is open to carry on discussions with them." He said that
they might arrange to use some of their equipment to further advance their
project, but added that they hadn't discussed the matter yet.
With sufficient funds in hand, Spider and KWG appear ready to resume the
hunt for Attawapiskat ice. The recent move by Monopros may provide a much
needed boost in the form of lower exploration costs, and a higher profile.
Additional drilling will provide a clearer picture of the grade, and
dimensions of the high-grade zone. As well, additional targets exist, and
the partners have had considerable success in finding new bodies, with
nearly 20 per cent of the wildcat drill holes intersecting new kimberlite
bodies.
Beleaguered shareholders would certainly welcome some unexpected good news
from the Attawapiskat. Spider hit seasonal highs above 50 cents in the
springs through the mid-1990s, reaching a peak of 66 cents in March, 1997.
The troubles took Spider sharply lower, reaching a low of 3.5 cents late in
1998. Spider closed at eight cents Tuesday, unchanged on the day. KWG
shareholders had a far rougher time of it. A KWG share was worth $21 early
in 1996, but the subsequent financial difficulty took the share price to as
low as one cent late in 1997. KWG closed Tuesday at 15 cents, up two cents
on the day.
(c) Copyright 2000 Canjex Publishing Ltd. canada-stockwatch.com |
