Kensington's big rock sparks more gain
Kensington Resources Ltd (TSX-V:KRT)
Shares Issued 60,645,713
Last Close 3/9/2005 $3.05
Thursday March 10 2005 - Street Wire
by Will Purcell
With a big bulk sample by its rival Shore Gold Inc. all but complete, it is now the turn of Kensington Resources Ltd. to catch the market's eye with a mini-bulk test and some larger diamonds of its own. Shore was the market favourite for most of last year, as the company pulled over 3,000 carats from its Star kimberlite and came up with a promotable diamond grade and value. Kensington and its Fort a la Corne partners hope to find higher-grade zones within several of their pipes over the next few years. That program seems off to a good start, as the first two of 10 reverse circulation drill holes delivered promotable results.
The No. 140/141 test
Kensington now has the diamond tallies from one of the five holes that De Beers drilled into the mammoth No. 140/141 kimberlite complex, which is two kilometres northwest of Shore's Star pipe. Those five holes targeted the southern breccia beds that showed the best grades in earlier tests. The result fell a bit short of the modelled grade for the breccia unit, but there are promising signs in the outcome nevertheless.
De Beers extracted approximately 140 tonnes of kimberlite from that hole, although about 36 tonnes of that rock slipped through the 1.5-millimetre sieve that the partners used as the minimum cut-off. The kimberlite produced 15.455 carats of diamonds, which pointed to an average grade of about 0.11 carat per tonne.
The haul included no particularly large diamonds, but there were several stones that weighed around 0.5 carat. In all, the sample produced 16 diamonds larger than a 3.45-millimetre mesh, and those stones weighed 6.845 carats. That worked out to an average of 0.43 carat for the 16 largest diamonds, so it seems likely that several gems managed to top the one-half-carat mark.
In all, De Beers and Kensington recovered 125 diamonds larger than a 1.48-millimetre screen. Those stones weighed 15.4 carats in all. That works out to an average diamond weight of about 0.123 carat, which is encouragingly larger than what the company came up with in earlier tests across the pipe. That suggests that the breccia unit of No. 140/141 has a coarser diamond size distribution to go with its higher grade. That could bode well for the diamond value in the breccia zone.
A closer look suggests that an inefficient recovery in the smaller sieve sizes helped pad the hefty average diamond weight. Recoveries typically increase in each smaller size class, but the number of stones reached a maximum of 39 on the 1.83-millimetre screen. The 1.48-millimetre mesh held just 22 stones, while only 10 of the latest diamond haul were smaller than that. That is hardly a surprise, as only the kimberlite fragments larger than a 1.5-millimetre cut-off were kept. Still, the result would be a somewhat lower diamond haul and an average stone size a bit higher than would be the case.
Had the recoveries continued to increase in the smaller sieve sizes, it would be reasonable to expect that there would roughly be an extra 30 diamonds large enough to remain on the 1.48-millimetre sieve. Those missing stones would likely add an extra carat to the parcel. Based on that, the theoretical grade would grow to about 0.12 carat per tonne, although the average diamond weight would drop to about 0.105 carat.
Still, there may not be any size worries with the southern breccia. De Beers is still processing the second of the holes into No. 140/141, but it nevertheless became big news earlier this week. The partners recovered a 10.53-carat diamond from a 12-metre zone in the uppermost part of that second hole.
There were five other macrodiamonds in that sample, and one other diamond had a promotable size. That stone also topped the one-carat mark, weighing 1.32 carats. Perhaps the most promotable aspect of the 10-carat diamond is its quality. The stone is colourless and does not contain any significant inclusions. As a result, the diamond could carry a significant dollar value.
Word of the large find came at a fortunate time. Speculative interest in the Fort a la Corne region has surged in recent months, as Shore's grade matched or bettered the early expectations. Kensington's shares wallowed near the $1 mark through the fall and early winter, but Shore's diamond valuation sparked new market activity.
This time the enthusiasm managed to carry Kensington's shares along with Shore's surging tide, and Kensington's 10-carat find added to the buying frenzy. Helped along by encouraging words from industry analysts, Kensington's stock peaked at a lofty $4.06 in intraday trading on Monday, as over 5.4 million shares traded.
It is not the first time that speculative fanfare marked the recovery of a 10-carat diamond from No. 140/141. In the spring of 2003, the partners found a 10.23-carat stone as they were processing a final sample from their 2002 mini-bulk test. That stone was not as promotable, as it contained local concentrations of inclusions and was a complex stone with signs of internal twinning.
Investors nevertheless responded with enthusiasm to the discovery. Kensington's shares were trading for less than 75 cents before the big stone turned up, but the find provided instant promotability. The stock surged to an intraday high of $1.33 and topped out at $1.70 a few weeks later. Interest quickly subsided however, and a share cost less than $1 by mid-July.
The breccia projections
The No. 140/141 breccia unit is a key part of De Beers and Kensington's plans. The partners estimate that there are about 30 million tonnes of kimberlite in the breccia beds, and that rock has a modelled grade of about 0.16 carat per tonne. That predicted value is significantly higher than the first drill hole produced, but that could well be because of the presence of lower-grade rock in portions of the sample.
A second phase of kimberlite is also of interest to De Beers and Kensington. The partners believe there are about 105 million tonnes of coarse kimberlite lying in megagraded beds, and that rock has a grade modelled at about 0.09 carat per tonne. In all, the two prospective phases total about 134 million tonnes of kimberlite, with an average grade of about 0.11 carat per tonne. That figure is comparable with what the first drill hole delivered.
The current test should help the partners refine their model considerably, providing a better idea of the geometry of the richer phases. As well the results will provide a significantly larger carat crop that will help improve the confidence in the modelled grade and diamond value.
De Beers pegged a forecast diamond value of about $97 (U.S.) per carat on the diamonds in the breccia beds and the coarse kimberlite in the megagraded beds. The calculations are based on relatively small mini-bulk tests and even smaller diamond parcels, and that leaves a wide margin of potential error in the modelled values.
With an average grade of about 0.11 carat per tonne and a value of about $100 (U.S.) per carat, the rock would be worth about $11 (U.S.) per tonne. That modest value leaves little room for error. As a result, the current program will be key to the fate of No. 140/141. With one of its best grades so far and some larger diamonds in a second hole, the latest test does appear off to an encouraging start.
The Star wish
Shore's Star pipe still seems the best of the Fort a la Core region. The company's underground sample extracted over 25,000 tonnes of kimberlite and processing yielded about 3,500 carats from 24,500 tonnes of rock so far. That works out to an average of about 0.14 carat per tonne. The richer phase of kimberlite delivered an average grade of about 0.165 carat per tonne, and the diamonds in that early Joli Fou phase had a promising diamond size distribution.
Shore's test produced two stones weighing nearly 20 carats each, and at least 14 stones topped the seven-carat mark. The favourable size distribution of the sample seemed likely to produce a promotable diamond valuation, as about one-third of the diamond weight came from stones weighing at least one carat. Adding further promise, most of the diamonds were white and many had qualities favourable for gems.
As expected, the first 3,000-carat parcel yielded a promotable value. Several diamentaires appraised the gems at an average of about $110 (U.S.) per carat and Shore's consultant modelled a value of about $135 (U.S.) per carat for the Star diamonds. That value suggests that the richer rock within Star could be worth more than $20 (U.S.) per tonne.
With Shore pressing ahead with a prefeasibility study on its Star project, Kensington and De Beers now plan to poke a few holes in its general direction as well. The huge pipe is tucked into the northwestern corner of Shore's property and the pipe appears to slop across the western border onto Kensington's ground. In fact, Shore's underground test came from a site not far from the property line.
It seems that most of the pipe does lie on the Shore side of the line, but that is not certain and the partners think they could have a significant chunk of Star. As a result, De Beers and Kensington plan to drill a series of holes on their side of the line this year to settle the matter.
If that drilling shows that a substantial amount of early Joli Fou kimberlite exists on the western side of the line, it would be a welcome addition to the list of potentially economic sources of diamonds. Kensington and its partners hope to identify up to 70 million carats, spread across higher-grade regions in several pipes. That effort carries a $25.6-million budget this year, more than triple last year's busy effort.
Kensington added another seven cents on Wednesday, closing at $3.05 on 1.773 million shares. |
