Kaiser Express 99-05
Premium Release: July 7, 1999
Bargain Release: July 14, 1999
Copyright 1999 by John A Kaiser
Leicester: platinum-palladium play in the Shetlands
Synopsis: Leicester Diamond Mines Ltd (LCD-V: $0.33), halted since June 3
pending an announcement, is set to resume trading Wednesday morning on July 7
having released details about what appears to be a very significant
platinum-palladium prospect in the Shetland Islands of Scotland. If the stock
opens weakly below $0.30, it should be bought as a bottom-fish about to begin
a new speculation cycle. If it opens strongly, leave it alone until we have a
sense about what sort of promotional muscle has hitched itself to this wagon.
As of this writing management had not yet figured out its financing strategy.
But judging by the recent flurry of activity, there may be a small burst of
market action that quickly fades. Leicester had spent the past two years
drifting at the $0.10 level with light volume when the stock started to rise
on May 26, jumping to $0.33 on June 3 and trading 127,500 shares before
management requested a halt. During the halt Leicester nailed down
exploration rights to 1,000 ha covering 17 old quarries from which chromite
had been intermittently mined from 1820 until 1944. Leicester also collected
additional samples from mine dumps and conducted check assays to confirm
extremely high grade platinum and palladium values running as high as 138 g/t
for platinum (US $1,300 rock) and 273.46 g/t for palladium (US $2,500 rock).
The ratio of palladium to platinum runs 1.5-2.0:1. The high values came from
16 samples plucked from the Cliff quarry, all but two of which graded in
excess of combined 60 g/t platinum-palladium. A further 175 samples collected
from the 16 other quarry dumps ran 0.2-0.5 g/t total platinum group elements.
In all cases Leicester selected only greenish coloured and obviously
serpentinized samples which frequently included disseminated chromite
mineralization. Most likely the miners had stripped this material from the
black coloured chromite ore. The geological setting is one of peridotites
within the basal part of a thick ophiolite sequence that hosts small lenses
of high grade chromite (typical size is 40 m by 20 m by 5 m). Ophiolites
consist of mantle rock brought to the surface at mid-oceanic spreading
centres. Instead of getting subducted back into the earth's melting pot at
the continental margins, these chunks of oceanic crust somehow rafted over
the subduction zone and jammed into the continental crust or island arcs from
where they frequently ended up on the top of mountains such as the Alps
thanks to the mountain building effects of continental collisions. Scotland's
Shetland Islands are host to this sort of geology, which also yields talc and
asbestos deposits. What Leicester at this stage does not know is the
relationship of the PGE mineralization to the podiform chromite deposits. Is
it confined to a rind surrounding the chromite lenses, which has minimal
tonnage implications, or are there stratigraphic and structural controls
independent of the chromite that have significant tonnage implications? In
the latter case an extensive exploration program might uncover a substantial
platinum-palladium deposit. Compounding the problem is that ophiolites and
Alpine peridotites, unlike ultramafic layered intrusive complexes such as
Bushveld and Stillwater, are not known for economic concentrations of
platinum-palladium. The high PGE content at the Cliff quarry was noted by
academic studies of the chromite deposits, but was never commercially
exploited or even examined from an exploration standpoint. The only
systematic exploration attempt, by Esso Minerals, appears to have focused on
the unproductive footwall of the system. Leicester plans to conduct a shallow
drill program (50-70 metre holes) in the area of the Cliff quarry in order to
establish the stratigraphic and structural controls. Drilling would take
place in late August to late fall. Title is 100% subject to royalties
Leicester will have to negotiate with the Department of Rural Affairs. Unst
Island is environmentally sensitive in terms of bird-nesting grounds, though
that has not prevented talc quarries from operating with local support. What
we have here is a situation where 1) a junior has latched onto an old mining
camp that is yielding extremely high values for metals not previously
exploited, 2) the metals in question, platinum and palladium, have suffered
the least during the metals bear market, and 3) a new geological model for
economic PGE deposits in an ophiolite setting may be on the threshold of
revealing itself. On the other hand, Leicester could be chasing just a
geological curiousity. The risk-reward potential, however, is very good.
Leicester has less than $100,000 working capital, 20,727,805 shares issued
and 22,177,805 fully diluted (1,450,000 options at $0.15), and a management
team backed by John Toffan, who made enough money on Eskay Creek to afford
him the luxury of disavowing stock promotion. The company was formed in 1993
through the amalgamation of Dryden and Stow, which had acquired a South
African diamond mining project that bombed out in 1994. The stock has been a
bottom-fish since early 1998 when it recruited Ralph Noyes to poke around
Mexico for silver deposits. Ken Carter has since resumed in the role as
president, and has drawn upon an old university and Cominco acquaintance to
generate the Shetland prospect. Toffan owns about 2.4 million shares, while
Ken Carter and Ron Nichols own 260,000 shares. Leicester is the sort of late
life cycle, toiling geologist bottom-fish that performs a miracle in what
looks like a hopeless bear market. Tel #: (604) 685-5015.
[No statement or expression of opinion, or any other matter herein, directly
or indirectly, is an offer to buy or sell the securities mentioned. While we
believe the sources of information to be reliable, we in no way represent or
guarantee the accuracy thereof, nor the statements contained herein. Canspec
Research, PO Box 6456, Moraga, CA, 94570-6456. Tel: (925) 631-9748. Fax:
(925) 631-9753. Email: kaiser@value.net. Web: www.canspecresearch.com. Kaiser
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