Kensington's tonnage-toutable pipes cause hope
Kensington Resources Ltd KRT
Shares issued 30,977,019 Aug 28 close $0.55
Mon 28 Aug 2000 Street Wire
by Will Purcell
Kensington Resources Ltd. said last week that drilling had begun on
kimberlite body 122, on its Fort a la Corne diamond joint venture. The 2000
exploration program is expected to consist of two large-diameter holes into
the 122 pipe and a further two holes will be drilled into kimberlite body
141. Both bodies have apparently been tested in the past, with discouraging
results, but recent developments have called into question all of the
earlier work. Those questions and a plethora of Internet hype have brought
the moribund Saskatchewan diamond play back from the dead.
Last fall, the project operator, Monopros Ltd., revealed that X-ray Sortex
processing had recovered only a portion of the macrodiamonds, a fact that
became apparent only when the tailings from the plant were sorted by hand
and a substantial number of diamonds were found. The tailings from the 1997
program were also examined, and additional diamonds were found as well.
Based on that development, Monopros decided to evaluate the method of
processing used for all of the earlier samples, presumably dating back to
1989.
As a result, it is back to square one for the partners, who have perhaps
spent as much as $20-million on the project over the years. The complete
results of the hand sorting and evaluation programs have conveniently not
been revealed, but it now seems likely that the partners now believe that
at least a substantial number of the earlier samples were processed in a
flawed manner. As a result, they have agreed to conduct the current
program, which carries a hefty $2.26-million price tag, to retest a number
of the pipes looked at in years gone by.
Neither of the pipes included in the current program were listed among the
better kimberlites at Fort a la Corne. Early in 1997, Luc Rombouts had
reviewed all of the data available, and prepared grade estimated for 64 of
the bodies tested. Mr. Rombouts identified six pipes that he believed had
the most interesting grades, but bodies 122 and 141 were not among them.
Mr. Rombouts did state that the diamonds from kimberlite 122 had been
valued as high as $50 (U.S.) per carat.
Nevertheless, kimberlites 122 and 141 were apparently selected for sampling
on the basis of the size distribution of the diamonds recovered in the
earlier programs, which apparently suggests that the two kimberlites have
the greatest potential for producing larger, commercial-sized diamonds.
Little is known about the 141 pipe, but it seems likely that it was tested
prior to Kensington's arrival on the scene in 1995.
Kimberlite 122 is believed to be one of the larger pipes at Fort a la
Corne, an area where even the smaller bodies are massive. The pipe is
believed to contain about 540 million tonnes of kimberlite, an amount that
would be sufficient to keep a mine the size of Ekati churning away for more
than 150 years. The smaller 141 body is estimated to contain 395 million
tonnes, again an impressive amount of kimberlite. Indeed, it is likely that
the sheer size of these two pipes was a factor in their being selected for
the current drill program. Unfortunately, kimberlite is worthless on its
own, and the rock carries value only if there is an economic supply of
diamonds embedded within. It is on that front that the tonnage-toutable
kimberlites are far less impressive.
Kimberlite 122 was tested prior to 1996, and minibulk testing by
large-diameter drilling revealed a microscopic macrodiamond grade of 0.044
carat per tonne. Although only a very tiny parcel of diamonds was
recovered, the partners nevertheless managed to pull a diamond valuation
out of the air, suggesting that $44 (U.S.) was a possible value of the
parcel. That valuation may have been helped along by the recovery of one
larger stone, weighing 0.73 carat, not far removed from the largest Fort a
la Corne diamond, which weighed 0.985 carat. In combination, the results
were far from economic, suggesting that one tonne of kimberlite from body
122 carried a value of under $2 (U.S.) per tonne.
The result was undoubtedly distressing for the partners, as samples
weighing 533.0 kilograms had been submitted for caustic dissolution, and
the process suggested that a macrodiamond grade of 0.145 carat per tonne
was likely, again for stones greater than one millimetre in length. The
minibulk sample result was a mere 30 per cent of the value predicted by the
caustic dissolution process, clearly a disappointing result. That same
disappointment repeatedly occurred as the partners sampled one pipe after
another.
Some of the difference might suitably be explained away by the small sample
size used in the caustic dissolution process, although it is statistically
unlikely that the process would consistently yield results two to five
times higher than subsequent minibulk sampling recoveries. As a result, the
possibility that the minibulk X-ray recovery process was flawed is real,
and it is certainly a happy hope for the partners friends on which to hang
their promoters' hats.
Based on the reported 1999 results, that excuse could indeed explain away
most of the discrepancy. The initial processing revealed only 58
macrodiamonds in the 1999 samples, but a further 69 stones were recovered
when the tailings were hand sorted. Therefore, only 45 per cent of the
diamonds were recovered in the initial processing, a result that could well
account for most of the difference between the predicted and actual grades
from the earlier work.
A key piece of information is missing however. The 1999 report did not
reveal the sizes of diamonds recovered by the X-ray process, or the sizes
of the diamonds that were subsequently discovered by hand. It is quite
possible that the X-ray device missed only smaller macrodiamonds, a result
that would be hardly unique. In 1998, Winspear Resources Ltd. processed two
100-tonne samples at the Diavik plant in Yellowknife. The first sample was
diluted with country rock, but the second sample was clean and returned a
grade of about 1.47 carats per tonne. A subsequent bulk sample that was
taken in the same area and processed using Tahera Corporation's plant,
revealed a grade of 1.79 carats per tonne. The increase was largely
attributed to the much more efficient recovery of small diamonds. The
Diavik plant also seemed to miss some of the smallest diamonds when it was
processing the early Diavik minibulk samples, but with a reported diamond
grade near 5.0 carats per tonne nobody cared much.
As a result, the current Fort a la Corne program is heading into unknown
territory. Even if the earlier results missed a majority of diamonds of all
sizes, the grade is unlikely to increase much above 0.10 carat per tonne, a
point seemingly conceded by the partners. In announcing the current work
program, Kensington said that it hopes to recover about 400 tonnes of
kimberlite from the two pipes, with the intention of obtaining 40 to 50
carats of diamond from two kimberlites for stone valuation. That clearly
suggests that the company hopes the average macrodiamond grade of the two
pipes will be just over 0.10 carat per tonne, for stones exceeding one
millimetre in length.
Such a result might well be achievable, but it would be far removed from
the fantasy spouted by some of the more fanatic followers of the Fort a la
Corne diamond plays. Recent Internet hype and rumour suggests that the
company hopes to achieve grades of up to 12 carats per tonne, a figure that
is clearly inflated by two orders of magnitude according to Kensington's
own pronouncements. Another favourite, but just as equally unlikely
Internet concoction has combined the story of the missed diamonds and
Monopros's involvement, creating a conspiracy theory suggesting that De
Beers has intentionally hidden the true worth of the Fort a la Corne
project, and yet another has even attempted to link the recent explosion
that shut down the CDNX to unknown conspirators intent upon disrupting the
Fort a la Corne diamond plays. As the power disruption started on the
executive floor of Canaccord Investment Corp.'s offices, it may not be long
before some wild Internet imagination links the outage to Canaccord itself.
Rumours aside, if Kensington and its partners are successful in obtaining a
grade in excess of 0.125 carat per tonne, and the diamonds are subsequently
valued at close to $100 (U.S.) per carat, then the Fort a la Corne
exploration program realistically could have a new lease on life. However,
if the earlier results mean anything at all, achieving either of those
targets is likely to be a formidable task.
Kensington continues to give its shareholders a wild ride, although the
stock is far removed from the glory days of 1996, when it briefly flirted
with the $5 mark. From a 16-cent low last fall, the stock rallied to a
March high of 80 cents, before falling back below 25 cents this spring. A
subsequent rally coincided with the announcement of the new drilling
program, and the stock again touched 80 cents recently, before easing off
somewhat. Kensington closed up one cent on Friday, to end the week at 62
cents, but slipped seven cents to 55 cents on Monday.
(c) Copyright 2000 Canjex Publishing Ltd. stockwatch.com |
