Hi Al and Red, My pick had me doing some dd on it after I posted it here. Kinda like the way I trade sometimes, buy first check it out later. It would probably work because the buy was based on momo and the sell should be also but once I start the dd it screws things up and I get involved and hold the darn thing. LOL Anyway, I don't own this one so the dd is non biased <ggg> Ok here goes, The results indicating several 2+ carat stones have been released before but they did not include any further breakdown or indicate color or clarity. They have so far failed to get the attention of the market. The area play has produced a couple of stones up to 28 carats and has produced the 5th largest rock in the US. Most of the kimberlite in the area is of low grade although some has been mined due to the promise of large diamonds. So far all of the mines have failed. The grade of kimberlite at George Creek appears to be better then that found in the past. Can these guys make it go? We'll see. Due to the sudden volume spike the past few days they seem to have attracted some players.
Sorry for the long post but I'll just cap it off by includeing a PR from stockwatch.
Cons Pacific Bay Minerals Ltd - Street Wire
Cons Pacific Bay in odd juxtaposition with McKenzie Bay
Cons Pacific Bay Minerals Ltd CBP
Shares issued 3,106,409 2001-02-02 close $0.2
Monday Feb 5 2001 Street Wire
Also (U:MKBY)
by Will Purcell
A diamond play in the United States is showing new signs of life, but once again it seems that it will be Canadian explorers that demonstrate the primary interest in Colorado diamonds. One company has moved in to acquire a number of prospects, while another is rumoured to be waiting in the wings to buy a nearly complete mine.
The State Line region, along the border between Colorado and Wyoming has been explored off and on for several decades, and in the mid 1990s, the district was actually the site of North America's first larger scale, commercial diamond mine. About 100 kimberlites have been discovered in the area, and many have been proved to be diamondiferous. The Colorado kimberlites generally possess a tiny grade, quite similar to the kimberlites of Alberta or Saskatchewan, but they have a very robust size distribution curve. It is the prospect of large gemstones that keeps interest alive in the Colorado diamond play.
Consolidated Pacific Bay Minerals Ltd. began the new year by acquiring an option to acquire three diamond prospects in the State Line district, from a private, Denver-based company. The three prospects are the George Creek, Pearl Creek and Sand Creek properties, which have received varying degrees of attention through the years. The deal marks the return of an active Canadian presence in the region, landing properties that have been explored for about a quarter of a century.
Cominco Ltd., Lac Minerals Ltd. and Superior Oil carried out the first major diamond exploration program, back in the 1970s. The joint venture built a small processing plant at Fort Collins and took a number of minibulk samples from several kimberlites in the area. A larger sample was collected from the George Creek kimberlite, a steeply dipping dike at least two kilometres long and about 1.5 metres in width. In all, about 89,000 macrodiamonds were recovered from about 2,700 tonnes of material. Although no carat weight is available, the sample seems likely to have had a very modest grade, as the kimberlite contained barely more than 30 macrodiamonds per tonne. Nevertheless, some of the diamonds were quite large, as the largest diamond recovered weighed just over two carats.
A kimberlite on the Pearl Creek property was also sampled, but on a much smaller scale. The vertical dike is also about two kilometres long, and averages about one metre in width. Small samples were taken along the dike, and three microdiamonds were recovered from about 52 kilograms of material. The result would suggest that the kimberlite is marginally diamondiferous, but larger samples would be required to determine the potential for larger stones. Preliminary work at Sand Creek suggests that there may be diamondiferous kimberlite present as well, although a trenching program was never completed, and the kimberlite was never sampled.
Although Cominco and its partners ultimately lost interest in Colorado diamonds, others came along to take their place. Chuck Fipke and Dia Met Minerals Ltd. were next on the scene, and the company bought the Fort Collins processing plant in the 1980s. The plant was actually used to process a number of samples taken from the Lac de Gras area that ultimately led to the construction of the Ekati mine, and the company generated revenue by processing samples for others.
As well, Dia Met took an interest in the Sloan property. The ground had passed to a U.S.-based company, but Royalstar Resources Ltd. acquired it in 1993. The early Cominco program had tested about 2,400 tonnes of kimberlite taken from two large diatremes deposits, and recovered just over 20,000 macrodiamonds, weighing about 310 carats, which indicated an average grade of about 0.13 carat per tonne. The largest stone weighed 1.24 carats, and most of the stones were classed as gems or near gems, which was encouraging.
With Dia Met's plant close at hand, the company teamed up with Royalstar to take a further series of samples. The partners collected a 2,710-tonne sample from the Sloan-2 body -- which contains about 25 million tonnes of kimberlite -- and recovered 8,842 macrodiamonds weighing a total of 327.52 carats, indicating an average macrodiamond grade of 0.12 carat per tonne. The grade was higher at depth in a portion of the kimberlite, ranging as high as 0.23 carat per tonne. That seemed encouraging, as did the size of the largest diamond, which exceeded 5.5 carats. As a result, the partners laid plans to evaluate the higher-grade section, but the program never came to pass.
Ironically, the region's one diamond mine possessed a much lower grade. In 1993, Redaurum Red Lake Mines Ltd. acquired the Kelsey Lake property. Prior to that, about 1,000 tonnes of kimberlite had been extracted from six pits on the KL-1 and KL-2 kimberlites. The material was processed, yielding 160 diamonds ranging from 0.04 to 2.23 carats in size. The total weight of the diamonds is believed to have been about 50 carats. The company began its own exploration program, and subsequently collected samples of 2,500 tonnes and 10,000 tonnes. Within a few years, the Kelsey Lake mine was producing diamonds.
The development created a minor stir among several other Canadian explorers, who flocked to the region. One of those was Jim Lenec's Anvil Resources Ltd., which poked around the Chicken Park property that had previously been explored by Cominco, and the company also acquired the Maxwell kimberlite, with high hopes of completing a bulk sample. That did not come to pass, and Redaurum ultimately latched on to Maxwell, as it was just two kilometres from its Kelsey project.
Kelsey Lake never managed to run at full production, which was hoped to be around 25,000 carats annually, but it did produce 12,000 carats of diamonds in about one year, running at half capacity. A significant amount of the production was contained in stones weighing more than one carat, and included among the larger stones were two that weighed just over 28.2 carats. One was subsequently cut into a five-carat gem that sold for $80,000 (U.S.), and the second was ultimately cut into a 16.9-carat diamond. Although it was only the fifth-largest rough diamond found in the United States, the finished diamond was the largest ever cut from an American rough stone.
The robust size of the Kelsey diamonds combined with their overall quality led to a rather robust value for the diamonds as a whole, with sales running as high as $180 (U.S.) per carat. The mine did not recover diamonds smaller than two millimetres, which boosted the average value, but lowered the grade of the mine, which apparently averaged just 0.04 carat per tonne. Despite the modest production, it seemed that Colorado diamonds had arrived.
The sales of Mile High gems created a bit of a frenzy in the American jewelry market for a time, but the notion of a U.S.-based diamond mine seemed much harder for many investors to accept, and Redaurum stock continued to languish as a result. The Kelsey mine did not generate a large cash flow, and the small amount of cash was quickly consumed by a costly legal battle with Union Pacific Corp. over ownership of the property. The litigation was ultimately settled, but the company mothballed the Kelsey mine, which needed improvements to the processing plant to improve its efficiency. As a result, the mine sat idle until Redaurum ultimately decided to sell off all of its diamond mines.
Enter McKenzie Bay International Ltd. The U.S.-based company bought the Kelsey property from Redaurum in 1999 and promptly laid plans to place the mine back in production. McKenzie planned to do a few things differently and held optimistic hopes for a profit. The company hoped to reduce the minimum size of the diamonds recovered to 1.5 millimetres, which would certainly add to the modest grade and provide a minor increase in overall revenues.
McKenzie apparently hoped to process about 1.5 million tonnes of kimberlite per year and produce about 60,000 carats annually, if the 0.04-carat-per-tonne grade continued to hold up. If McKenzie could sell its typical production for about $120 (U.S.) per carat, it would generate revenues of about $7-million (U.S.) annually, with the promise of additional revenues from larger diamonds. Nevertheless, the company would have to keep a very tight rein on its operating cost to make a go of it.
McKenzie pressed on. The deal to acquire the mine closed last spring, and the company arranged to acquire $3-million (U.S.) worth of new equipment to place the mine back in operation, including an X-ray recovery device, a primary crusher, screeners and a conveyor system. A further $2-million (U.S.) of equipment was acquired through the purchase of the mine itself. By the beginning of September, McKenzie had succeeded in commencing limited production from Kelsey, but problems still persisted.
The new crew at Kelsey managed to recover a 9.4-carat gem from a limited amount of kimberlite, but modifications to the recovery plant were not completed prior to the winter shutdown. Furthermore, the limited operation identified additional modifications that would be required before full production could begin.
McKenzie may now have soured a bit on the notion of Colorado diamonds, and that might spell a return of the mine to Canadian hands. In November, president Gary Westerholm stated that a Canadian-listed company had expressed an interest in acquiring the Kelsey Lake mine, adding that a second party was also interested. McKenzie seems interested in a sale as well, as the company provided information to the two unidentified parties, subject to confidentiality agreements.
McKenzie Bay had been attempting to discourage the short selling of its stock last year, but without much success. Mr. Westerholm stated that there were a number of possible developments that might arise that would likely have a possible impact on the company's share price, forcing the short sellers to cover their positions at a higher cost. One of those potentially positive developments, according to Mr. Westerholm, might well be the sale of the Kelsey Lake mine. That the sale of a mine that it had just acquired and refurbished would be considered a positive move seems a clear indication that Kelsey Lake is not highly regarded by many of the company's shareholders.
Whatever the fate of the Kelsey Lake mine, Mr. Westerholm is likely much happier with the state of the market today, shorts and all. McKenzie Bay stock sagged for much of last year, hitting a low of 32.8 cents (U.S.) in mid-December. There has not been any news since November, but the stock has been on a tear of late, hitting a high of $2.45 (U.S.) at the end of January, closing Friday at $2.203 (U.S.). Meanwhile, the acquisition has done little for Consolidated Pacific, which continues to trade in a narrow range near 20 cents, losing one cent on Friday to close at 20 cents.
(c) Copyright 2001 Canjex Publishing Ltd. canada-stockwatch.com |
