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Bull market for mining in the cards
Diamond exploration company Kensington Resources could be involved in a stock frenzy like that of Dia Met, says Kensington project manager Brent Jellicoe. STEVE MacNAULL/The Daily Courier
By Steve MacNaull
The Daily Courier
After five years in the doldrums, mining company shares should take off later this year and next, says analyst John Kaiser.
“It’s been a bear market for mining since 1997 and the Bre-X fiasco,” Kaiser said at the Kelowna Investment Conference at The Grand hotel.
“But we’re on the cusp of a bull market in mining and that includes all types of mining stock from diamonds and gold to base metals.”
During 2003, especially, as the Canadian and U.S. economies get fully on track, gold prices will rise and base metal prices will soar, says Kaiser.
“It will also result in a bunch of mine startups,” said Kaiser, who publishes a by-subscription-only investing newsletter called The Bottom Fishing Report.
He was one of 25 speakers at the one-day investment conference, which also featured booths featuring 23 publicly-traded mining, energy and technology companies.
One of them was Kensington Resources (in partnership with South African diamond giant DeBeers), which is finding diamonds in Saskatchewan.
“We’re in the advanced evaluation stage,” said geologist and project manager Brent Jellicoe.
“Over 14 years, we’ve spent $22 million there in exploration and we’ve made the largest macro-diamond kimberlite find in the world.”
However, that doesn’t mean a mine opening is imminent or that the company’s stock is soaring.
An open-pit mine is a strong possibility, but is at least four years away.
And Kensington stock on the Canadian Venture Exchange is trading at 80 cents.
“That 80 cents doesn’t reflect what we have in the ground,” said Kensington investor relations officer William Callahan.
“The best money-making potential for shareholders is during the feasibility studies (for mine startup). That was proven with Dia Met,” he said.
“Feasibility is the honeymoon and the most exciting. Production is more like the marriage.”
Dia Met is famous in Kelowna because the diamond exploration company was based here and headed by local geologist Chuck Fipke.
Dia Met was a penny stock in the early 1980s, but with spectacular finds, shot up to $20 as feasibility studies were done for what became the Ekati Mine in the Northwest Territories.
Ekati has been in production since 1996 with an expected revenue of $8 billion over its 20-25 year life.
Fipke still lives in Kelowna where he analyzes mineral samples and is a 10-per-cent owner of Ekati, making him a billionaire.
Ekati diamonds have found success on the international market because they are branded as quality gems from the Canadian Arctic, given an identity number and certificates.
“This is a marketing coup for Canadian diamonds because they are certified not to be blood or conflict diamonds,” said Kaiser.
“To some people, the origin of a diamond is very important.”
Some diamonds from Africa and Russia can come with mafia, money laundering and environmentally-questionable ties, says Kaiser.
However, he predicts Canada could be a world leader in 20 years as more mines come on stream in the North, Quebec and Saskatchewan.
Some 150 companies are looking for diamonds inCanada and 12 are in the advanced evaluation stages.
RANKINGS
Ekati is the only diamond mine in Canada and it’s a big producer, accounting for five per cent of all diamonds mined in the world.
Canada’s diamond-production will increase as another mines come on stream.
This is the way the top-seven diamond producing countries are ranked, based on the overall annual output of $7.9 billion in gemstones:
– Botswana, 27 per cent
– Russia, 20 per cent
– South Africa, 14 per cent
– Angola, nine per cent
– Congo, seven per cent
– Canada, five per cent
– Australia, four per cent
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