CNB-b...in the news:
Canabrava still sees a Brazilian long shot
Fri 15 Feb 2002
Street Wire
by Will Purcell
Most of the speculative excitement surrounding Canabrava Diamond
Corporation is centred on the company's Otish Mountains diamond play,
although many investors are still hopeful that the company's Ontario
diamond projects will provide some good news this year. Meanwhile,
Canabrava's Brazilian properties seem caught in a deep sleep, although they
were the prime reason the company was created, back in the mid-1990s.
A number of companies have taken a shot at cracking the Brazilian diamond
riddle in general, and the Canabrava project in particular, through the
years, with little success. The latest company to try its luck on the
Canabrava project, which is located in the Coromandel district of the state
of Minas Gerais, was SouthernEra, which signed an option deal in the spring
of 1999 but abandoned the play less than two years later. Nevertheless, the
South American project could still spring to life, as Canabrava's
vice-president in charge of exploration, George Read, refuses to call it
quits.
Mr. Read has been hunting diamonds around the world for nearly 20 years,
more than a dozen of which were spent in the employ of De Beers in South
Africa and Canada. He quit the company late in 1996 and immigrated to
Canada, where he set himself up as a consultant. He was involved with
several diamond projects in Ontario, Quebec, Saskatchewan and Canada's
North, but it has been Brazil that has occupied his attention of late.
In fact, Mr. Reid seems quite dogged in his pursuit of a primary source to
Brazil's wealth of alluvial diamonds. SouthernEra hired him in 1999, and he
served as manager for the Brazil play for the duration of the company's
involvement. SouthernEra may have abandoned the project, but Mr. Read did
not. He promptly signed on with Canabrava as vice-president of exploration,
with Brazil remaining his primary focus.
The total land package has shrunk considerably through the years to the
current 120,000 hectares, but Mr. Read's optimism is undiminished. "Brazil
is not dead," he proclaimed, adding that his goal was to reactivate the
project and "pull something out of the hat." Mr. Read, who is hoping for
diamonds, not rabbits, bases his optimism on science, rather than magic.
No amount of science has yet led to the discovery of any primary diamond
sources worthy of mining in Brazil, but Mr. Read believes that his company
is getting close. He said that Canabrava had carefully completed
stratigraphy studies, geochronology and detailed geologic mapping,
identifying where the diamonds had first occurred in the various rivers.
Because of all that work, Mr. Read said that he believed Canabrava was
ahead of the game in its understanding of the geologic data and had the
best available model for providing answers to the many questions. Based on
that work, Canabrava hopes to narrow down the search to a number of small
target areas where exploration for a primary source was most likely to pay
off.
In fact, Canabrava has just completed a review of the project, and that
work has identified about 10 subprojects, some of which apparently are
almost ready to be drilled. Almost seems to be the operative word, however.
Mr. Read said that although Canabrava had come a long way, it was still a
step or two away from actually drilling the targets. As a result, Canabrava
is hopeful that it can entice another company to come in and do the
additional work. Mr. Read said that the company had plans to tout the
merits of the Brazilian play, with the aim of bringing in a major as a
partner. Presumably, that major would foot the bills, leaving Canabrava
free to spend its cash on the Quebec and Ontario plays.
SouthernEra apparently did not share the hope displayed by their former
manager, although Mr. Read said that he felt the company simply needed to
cut back, due to the financial burden of its Messina platinum project. He
said that SouthernEra had gone a long way toward developing the current
model, but apparently the project was shut down before much of it could
actually be put to the test. SouthernEra had identified two separate areas
over which an airborne geophysical survey would be flown, but that work was
never completed.
Mr. Read said that he had wanted to complete high resolution helimag
surveys that eliminated the effects of the landscape in the anomalies,
adding that he thought that such a program had a very good shot at success.
As well, he said that he believed that they would get a good return with
the Falcon system if it were used in Brazil. The Falcon gravity gradiometer
system is proprietary technology developed by BHP Billiton. The system has
proven quite effective in identifying kimberlites that had otherwise eluded
in Canada's North. There has been gravity work completed over a known
kimberlite target on the Brazilian property, and Mr. Read said that it had
indeed shown a gravity low coincident with a magnetic high. That the
explorationist is high on the prospect of using the Falcon system might be
interpreted as a sign that Canabrava will have BHP high on its shopping
list of potential new partners.
Although a number of companies have been unsuccessful as partners with
Canabrava's Brazilian play, the company may not jump at just any offer. Mr.
Read's company would like a say in how the project was operated, due to the
company's prior work and analysis, and due to the fact that it has a
substantial facility in the region. That facility includes a laboratory and
a sampling plant, suitable for processing samples up to about 20 tonnes.
The facility was set up several years ago, but it was substantially
upgraded a few years ago.
The Canabrava project began in the 1980s, when Southwestern Gold first
acquired an interest in the property. A series of deals in the early 1990s
created Canabrava, with Southwestern as the company's major shareholder.
That relationship continues today, as Southwestern owns nearly half the
outstanding Canabrava shares and holds a majority of the seats on
Canabrava's board, with Southwestern's president, John Patterson, and
Canabrava's president, Rory Moore, and George Plewes, who is chairman of
both companies, all having seats on both boardrooms.
Canabrava did a bit of poking around on its own at first, but the company
soon enticed Teck Corporation to strike an option deal on what was then an
850,000-hectare project. That seemed like big news, but the market paid
comparatively little notice to the event, as Canabrava shares continued to
trade just above the $2.50 mark.
Teck seemed an unlikely diamond hunter, but the company nevertheless set to
work in a big way, spending several millions of dollars over the following
two years. The company completed stream sediment sampling and ground
geophysics, coming up with no less than 2,000 targets, including 700 that
were deemed top priorities. Many of those targets were drilled in 1996 and
the following year, and many kimberlite and lamproites pipes were
discovered. The act of drilling, combined with some timely promotion,
brought speculators to Canabrava in droves. The stock surged through the
spring of 1996, hitting a high of $7.45.
Several of the bodies proved to be at least marginally diamondiferous.
About 500 kilograms of rock from pipe KX-277 produced 167 microdiamonds,
and a slightly smaller sample from RX-181 produced over 200 micros. Not all
of Teck's diamonds were micros. An 80-kilogram sample from pipe X-270
produced a 0.10-carat diamond, and at least two additional kimberlites on
the area also yielded macrodiamonds as well.
Despite that small success, Teck lost enthusiasm for the project, placing
it on hold early in 1998, pending a review to refocus its efforts. Teck
walked away completely later that year, leaving Canabrava the sole owner of
the project. Undaunted, Canabrava proclaimed the review to have been
encouraging, and like now, it set off in pursuit of a new partner with deep
pockets. The initial news of diamonds and continued promotion kept
Canabrava's shares riding high for some time, but the share price slumped
through 1998 as Teck showed no signs of interest, hitting a low of just 42
cents late that year.
Enter Chris Jennings's SouthernEra. It may not have been particularly tough
to sell the play to the globe-trotting diamond hunter, as Teck is believed
to have drilled just over 200 of its targets, coming up with about 130
kimberlite or lamproites pipes and dikes, several of which were
diamondiferous. In any case, just months after Teck left, SouthernEra
decided to try its hand at solving the Brazilian riddle. Curiously, the new
deal did little for Canabrava's share price, although two earlier deals did
give the stock a 60-cent boost, to a high of $1.45.
Under Mr. Read's lead, the company reprocessed airborne geophysical data
that had been acquired in 1994, and a number of targets were checked out on
the ground and sampled for indicator minerals. As well, small mini-bulk
samples were taken from two kimberlites late in 1999 and two more in 2000.
Nothing particularly promotable came of that work, although a number of
small diamonds were recovered from one of the samples.
SouthernEra managed to spend over $2-million on the Brazilian project, but
the hope and hype surrounding the South American venture rapidly seemed to
wane during 2000. As the year drew to a close, it seemed that the company
was poised to take one last crack at the project. Mr. Jennings said that
the play had reached the stage where any potential sources had been
narrowed down to relatively small areas, and as a result, the company
planned to complete airborne surveys over the two regions. "If we don't
find the primary source in this survey; that will be about it," Mr.
Jennings said at the time, but as things turned out, the end arrived before
the surveys began.
The SouthernEra deal brought Canabrava another few million dollars worth of
answers for free, but through the two-year period, there was little news to
actually excite the market and Canabrava looked to other projects to
support its sagging share price. The company's Ontario plays were a much
easier sell, and the stock hit a high of $2.60 in March of 2000 in the
afterglow of a new joint venture with Navigator Exploration in the
Attawapiskat region of Northwestern Ontario.
Canabrava's Ontario plays kept the stock afloat early into last year, but
the company was never able to produce much in the way of encouragement. As
a result, the stock price slumped most of last year, until just three
months ago, a Canabrava share could be had for 15 cents. Things seemed to
change for the better in December, when the company struck a deal with
Majescor Resources, giving Canabrava an option to earn an interest in the
Mistassini project, in the Otish Mountains region. That was enough to send
Canabrava' stock to a high of 50 cents in early February, but a sustained
rally will require good news from the company's exploration programs.
The ever-optimistic Mr. Read remains a believer that Brazil can deliver
that news. He claimed that whoever gets the prize in Brazil will make it
big, adding, "It is an interesting problem and I would very much like to
solve it." Canabrava's shareholders undoubtedly hope he can solve the
Brazilian riddle, but speculators are likely to remain focused on the
hotter Quebec play, at least until drills actually begin turning in the
Coromandel district. |
