Nora dreams of jewels in the briney deep
Nora Exploration Inc NXI
Shares issued 26,570,106 Nov 5 close $0.30
Fri 5 Nov 99 Street Wire
NORA LOOKS TO THE NAMIBIAN DEEPS
by Will Purcell
Nora Exploration Ltd. announced Wednesday that it had completed an option
and joint venture agreement with Woduna Mining Holding Ltd. whereby the
company can earn a 70-per-cent interest in the offshore Block J property,
located in water between 100 and 200 metres deep, off the coast of Namibia.
Nora will earn a 30-per-cent stake by paying a total of $375,000, and
conducting a $250,000 exploration program, and can earn the additional 40
per cent by making additional payments totalling $825,000. The deal adds to
Nora's holdings of Namibian marine diamond prospects, as the company
continues its quest to become a significant diamond producer.
Nora was formed in early 1991 through a 1 for 4 consolidation of the shares
of Alain Champagne's Anodor Minerals Inc., a Montreal-listed junior mining
explorer with a few properties in Quebec. Mr. Champagne took the first
tentative steps to make Nora a diamond explorer by acquiring interests in
Ghana, but it was a 1994 change of control began to make things happen.
Current Nora president, Pierre Leveille, arrived on the scene in the spring
of 1994, and Nora's interest in diamonds grew rapidly.
Today, Nora's high-priority project is an offshore Namibian play. The
company acquired a 10-per-cent interest in 23 deep-water concessions in the
summer of 1997 from Namibian Gemstones Mining Corp. Ltd. for $552,000. Nora
subsequently increased its interest to 30 per cent by financing a
$1.2-million (U.S.) detailed geological survey over the concessions. Late
in 1998, a further payment of $720,000 (U.S.) increased Nora's interest 40
per cent. Nora continued its acquisition through 1999, issuing 1.1 million
shares and making a further $648,000 (U.S.) payment to Namibian Gemstones.
As a result of these deals, the company now holds a 60-per-cent stake in
the concessions.
The geological survey, conducted during 1998, focused on determining the
thickness and composition of the sediments on the ocean floor, the sea
floor topography and surface geology of the area, and the identification of
areas where detailed surveying might define possible diamond reserves. The
results suggested that the area of highest potential lay along the eastern
side of the concession, in areas with extensive bedrock outcrops, or with
sediments less than five metres thick. These prospective areas account for
about 20 per cent of the total area of the concessions.
Mr. Leveille said that the Namibian Gemstone concessions are favourably
placed, extending as far south as the Orange River. He said, "the more near
to the Orange River you are, the bigger and better the diamonds." The
downside to the project is clearly the water depth over the concessions,
which stretch northward from the South African border along the outer edge
of the continental shelf on the continental slope itself. The shoreward
border of the concessions corresponds to a water depth of 200 metres, and
the concessions extend out to a depth of 500 metres. Mr. Leveille said that
the water depth closest to shore was in fact only 160 metres. He
acknowledged that mining marine deposits at these depths was far more
complex than in shallower waters, but he said that the technology was
continuously being improved. "Right now, 160 metres to 220 metres can be
mined right now," he said, and added that he expected that deeper mining
would be possible in the future.
Mr. Leveille said that Nora now plans to conduct an exploration program on
the concessions. He stated that the company has a three-phase exploration
program planned. Early next year, Nora will conduct preliminary sampling
over a grid, estimated to cost $500,000 (U.S.). The grab sampling will be
conducted using a Wirth drill, the same equipment used by De Beers, Mr.
Leveille said. If the grab samples yield a favourable result, a tighter
geophysical survey will be conducted over selected areas. Mr. Leveille said
that another $500,000 (U.S.) was budgeted for this work. If all continues
to go well, Nora would then proceed to the more costly third phase,
conducting a $2-million (U.S.) bulk sample.
Mr. Leveille said that Nora was presently negotiating with a company to
take the samples, and he had hopes that they would be able to utilize
technology that would ultimately be optimal for bulk sampling the
deep-water concessions. He said that Namibian Minerals Corp. had developed
a tool, which was perfect for their area, and De Beers and Diamond Fields
International used technology, which was best for their deposits.
If the exploration program and bulk sample yielded favourable results, Mr.
Leveille said that he believed Nora could produce 500,000 carats of
high-quality diamonds annually. He estimated the capital cost to set up a
mining operation would be about $25-million (U.S.), but this figure was
subject to change. He said that De Beers had spent roughly $100-million
(U.S.), and Namibian Minerals had cut this figure in half. "We estimate we
can cut the cost to half of what Namibian did, but that is hypothetical,"
he said.
Nora has great plans, but remains a junior with limited resources. Mr.
Leveille said that he expects the company "will sell some assets and get
back cash for the grab samples and geophysical survey." He added that the
results of that work would hopefully create added share value and Nora
would raise additional capital through a share issue at higher prices. Mr.
Leveille also said that "some majors are looking at the project, and we
might do a deal with a major." He added that, at this point, they would
prefer to go into production on their own. Mr. Leveille conceded that a
weakness of Nora lay in its technical expertise, but stressed that the
company was addressing this shortcoming on a step-by-step basis, by hiring
the appropriate personnel. A step in that direction came Wednesday, when
the company announced it had hired Kim Lord as a consultant. Mr. Lord has
considerable experience with marine exploration.
Nora has a substantial interest in an intriguing property, but there are
many questions and as yet, very few answers. The water depth and underlying
terrain are obstacles that will have to be overcome by advances in
technology, and the learning curve may prove to be steep. All indications
suggest that at least some diamonds are probably present, but that remains
to be confirmed through testing, and grade and value figures are as yet
total unknowns.
Questions and uncertainty aside, the company holds out great hope for the
Namibian Gem concessions, and refers to them as "our marine jewel". Nora
has another self-proclaimed jewel, a 47-per-cent stake in Otjua Minerals
Ltd. Otjua owns a minority interest in Diaz Point Exploration Ltd., which
has been contracted by a Namibian government and De Beers joint venture
company, Namdeb, to develop the alluvial deposits stretching along the
Namibian coastline from North Rock to Grosse Bucht. The property has been
in production at modest rates since 1990, and could conceivably contain a
diamond resource of 3.5 million carats, valued in excess of $150 (U.S.) per
carat. This particular "jewel" appears a bit flawed these days, however.
Diamond production for 1998 fell well short of Nora's modest expectation of
35,000 carats, and a detailed investigation of the situation identified a
number of serious deficiencies in the operation. Mr. Leveille was very
blunt in describing the problem. He said, "the rate of production from
Otjua was very bad," and he stated that their partner in the operation had
refused to participate in a facility upgrade. As a result, Mr. Leveille
said that the Namibian Gem property was now Nora's main priority.
In addition to the recently acquired Block J concession, Nora is also
negotiating with Karas Mineral Holdings Ltd. to acquire a stake in the
Block N concessions, located in the same general area as the Block J
property. An exploration program has yet to be undertaken by Nora on either
property.
The company has two other mining properties which have a distinctly lower
priority at the present. In 1997, Nora acquired a 100-per-cent interest in
a gold concession adjacent to the Refugio mine, in the Maricunja district
of Chile, from Dania Gold S.A. Nora subsequently optioned a 75-per-cent
share to Orex Exploration Inc., but Orex later walked away from the deal,
due to the declining gold price. It now appears that Nora intends to follow
Orex's lead. Mr. Leveille dismissed the Chile project, stating that the
company hoped to divest itself of the property.
The Ghana diamond property is similarly inactive, but not likely to share a
similar fate. Mr. Leveille said that the project was "on the shelf for now,
but we plan to do something with it in the next year." The Ghana properties
include two blocks straddling the Birim River, in the centre of Ghana's
most prolific diamond region, about 15 kilometres south of the Akwatia
mine. Nora commenced work on the 49-square-kilometre Kade concession in
1994, and originally had great plans to place the diamond and gold property
into production. Initial sampling suggested a grade of 0.29 grams of gold
and 0.62 carats of diamonds per cubic metre, and implied a rock value of
about $25 (U.S.) per tonne. A further sampling program was conducted during
1996, and a lower grade of 0.31 carats per cubic metre was obtained. On the
brighter side, the diamonds appeared to be of significantly better quality
than most Ghana stones, and their size distribution favoured larger size
classes much more than other Ghana deposits. Nora estimated that 18 per
cent of the weight was contained in stones weighing more than 0.5 carats.
No formal valuation of the stones was announced, although the Kade diamonds
were estimated to be worth $65 (U.S.) per carat in the mid-1990s. What Nora
plans to do with the property remains uncertain. Mr. Leveille said, "There
is a mineable resource there, but we are looking for partners." Based on
the work to date, Nora estimates a resource of 540,000 carats may be
present at Kade and the neighbouring Pramkese concession, but the economics
of the project appear to be marginal at best.
The ambitious property acquisition and exploration program has required a
significant cash outlay, and much of that has been raised through private
placements of Nora shares. The company had less than two million shares
outstanding in 1991, but the number had swelled to nearly 26 million by
last summer, and an additional 12.5 million shares have since been placed,
accompanied by 8.4 million warrants. As well, nearly four million options
and warrants were outstanding, although their exercise price is well above
the current share value. Nora has also raised funds through debt financing,
but it does not appear to have been a satisfactory experience. In 1997, the
company borrowed $400,000 (U.S.) from Hartor Investment Ltd., a company
controlled by a then director of Nora, Peter Bond. Under the terms of the
loan, Nora was required to issue 450,000 shares to Hartor to cover interest
and other services. Later, Hartor loaned Nora an additional $744,800
(U.S.). Hartor apparently requested changes in the nature and terms of the
two loan agreements, and Nora refused the request. Hartor proceeded to file
suit in April of 1999, and Nora subsequently filed a counterclaim. The
matter remains before the court.
Nora's search for diamonds caught the attention of investors during 1996,
and the company's shares climbed from 65 cents in April to an all-time high
of $2.96 by the end of September, as the results from Kade trickled in, and
the marine play began to take shape. The steadily worsening climate for
junior explorers began to take its toll on Nora shares by mid-1997, and the
stock steadily declined, reaching a low of 17.5 cents by early August of
this year. A brief rally carried the share price back to 48 cents within
weeks, as investors seemed to warm to the marine play. The interest may
have been short lived, as Nora closed Thursday at 26.5 cents, down 5.5
cents on the day. Mr. Leveille remains optimistic of Nora's chances,
stating, "There's a chance that Nora could develop a massive resource."
Investors remain decidedly less optimistic, quite unsure of just how good a
chance that might ultimately prove to be.
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