News from The Globe and Mail
Diamonds regain sparkle
New discoveries in Quebec, Nunavut fuel speculation
Peter Kennedy
06:48 EST Wednesday, January 16, 2002
VANCOUVER -- New diamond finds in Quebec and Nunavut have recently breathed some life into
a sector that investors have largely ignored since Winspear Resources Ltd. was acquired by
South African colossus De Beers Consolidated Mines Ltd. 16 months ago.
Analysts attribute the renewed interest to recent discoveries by Ashton Mining of Canada Inc.,
whose stock price soared more than $4 a share last month on the Toronto Stock Exchange from
less than 50 cents in October. It rose 13 cents yesterday to close at $3.73 a share.
Speculation, analysts say, has also been fuelled by indications that major international giants
such as Ashton's British parent, Rio Tinto Ltd. and BHP Billiton Ltd. of Australia, remain
committed to diamond exploration.
Although it is developing a diamond mine in Lac de Gras, NWT, in partnership with Aber Diamond
Corp. of Toronto, Rio Tinto appears to have changed its mind about selling its 64-per-cent interest
in Vancouver-based Ashton.
It has opted instead to back Ashton's activities in Canada by participating in a series of recent
financings that helped the company raise about $8-million for exploration on its properties.
Meanwhile, news that BHP Billiton is continuing to fund projects that include a joint venture in
Quebec with Majescor Resources Inc. has also sparked interest in the sector.
"Nobody has found anything that looks like a mine," said Raymond Ashley, vice-president of
explorations at Dia Met Minerals Ltd., which is winding up its operations in Kelowna, B.C., after
being acquired by BHP Billiton last year.
"But all of the recent exploration may lead to something [new]," said Mr. Ashley, who worked
closely with Charles Fipke, the former Dia Met chairman who discovered Canada's first
commercial diamond mine 10 years ago. Mr. Fipke, known as the father of Canada's modern
diamond industry, still owns a 10-per-cent interest in the Ekati diamond mine at Lac de Gras,
NWT.
Geologists who explore for diamonds typically focus their effort on volcanic rock-like structures
known as kimberlite pipes.
In mid December, Ashton's stock price jumped sharply when the company reported high diamond
counts in a north-central Quebec property it is exploring in equal partnership with Soquem Inc., a
Quebec Crown corporation.
Ashton said results from its Otish Mountains property included a 163 kilogram sample containing
29 macrodiamonds, measuring more than 0.5 millimetres in diameter. Art Ettlinger, a diamond
mining analyst at Yorkton Securities Inc. in Calgary, said that's good enough to warrant further
exploration.
Analysts are also bullish on results from Ashton's 90-per-cent owned Kim property in Nunavut,
which is located about 200 kilometres northwest of BHP Billiton's Ekati mine.
Last November, Ashton said a 103.2-kilogram rock sample from the Artemisia kimberlite pipe
contained 342 diamonds, including 38 macrodiamonds that measured more than 0.5 millimetres
in diameter.
"These are some of the best early stage macrodiamond counts since Lac de Gras," Mr. Ettlinger
said.
Based on these results, Mr. Ettlinger recently raised his target price for Ashton to $5 a share from
$2.25. He also has a speculative buy rating on Pure Gold Minerals Inc., which has a 10-per-cent
stake in the Kim property. Pure Gold closed at 19 cents on the Toronto Stock Exchange
yesterday.
Graeme Currie, a mining analyst at Canaccord Capital Corp. in Vancouver, also has a buy rating
on Ashton.
Mr. Currie is familiar with Ashton's activities because Canaccord, along with another Vancouver
brokerage firm, Haywood Securities Inc., acted as underwriters in financings that helped Ashton
raise $8-million last year.
Mr. Currie said he does not have a target price for the stock. Mr. Ettlinger also warned that setting
his own target price was tricky, given the fact that Ashton is focused on exploration and is not
generating any cash flow.
But it is a target he is comfortable with. "It's feasible given the stage they are at," he said.
Mr. Ettlinger also has buy ratings on a number of Canadian Venture Exchange-listed juniors that
are exploring for diamonds near Ashton's Quebec and Nunavut properties.
They include Majescor Resources Inc., Blackstone Ventures Inc., Canabrava Diamond Corp., and
Northern Empire Minerals Ltd., the company that retains a 30-per-cent stake in Ashton's Kikerk
Lake diamond property in Nunavut.
While he is impressed with results from Nunavut, Mr. Ettlinger said investors will likely pay more
attention to future exploration results at Otish Mountain. That's because it is located near power
lines and other vital infrastructure that will be needed if the company can justify developing a
mine. "That's my gut feeling," he said.
Ashton has the funds to carry out exploration on its properties after recently raising about
$8-million in two separate financings consisting of units that were priced at between $1.10 and
$1.40 each.
This week, the company said it plans to raise an additional $850,000 from the sale of 243,000
units priced at $3.50 a unit.
Each unit consists of one common share and one-half of a warrant. Each whole warrant can be
exercised, not later than June 30, 2003, to purchase one common share for $4.50. |
