Diamonds & Specialty Minerals Summary for June 17, 2015
2015-06-17 17:33 ET - Market Summary
by Will Purcell
The diamond and specialty minerals stocks box score for Wednesday was a positive 50-44-157. The TSX Venture Exchange gained two points to 681 while polished gem prices inched upward. Robert Gannicott's Dominion Diamond Corp. (DDC) fell 37 cents to $19.28 on 821,000 shares. The stock, $24.60 in early May and above $24 until it released its first quarter report on June 10, has been falling relentlessly since then. There were no nasty shocks in the report, but there were none of the pleasant surprises that investors have come to expect. Don O'Sullivan's Pacific Wildcat Resources Corp. gained one-half cent to one cent on 2.37 million shares. The company has -- or used to have -- a big and rich rare earth project at Mrima Hill in Kenya. The Kenyan government revoked the company's licence in 2013 and Pacific's yearlong court case to overturn the revocation ended in failure in March. The company is appealing the decision and expects to present its arguments in mid-July.
Patrick Evans's Kennady Diamonds Inc. (KDI), down four cents to $5.20 on 62,000 shares, has two new drill hits at Faraday-2, a part of its Kelvin-Faraday kimberlite complex 250 kilometres northeast of Yellowknife. The tests, drilled into the northwestern lobe of Faraday-2, produced 47 and 40 metre kimberlite intersections. The company has now delineated Faraday-2 over a 200-metre strike length, showing a vertical thickness of 70 metres and a 50-metre width. Mr. Evans says it is apparent that Faraday 2 increases in volume as it trends northwestward, adding that it appears "remarkably similar to the Kelvin kimberlite." Kelvin, once described as a dike, now appears to be a carrot-shaped pipe lying more horizontal than vertical. It is also considerably larger than Faraday 2, with drill hits of up to 200 metres. That could change, as Mr. Evans says Faraday-2 is increasing in volume as it trends northwestward.
That could provide more good news for the company's Kennady North project, where Mr. Evans was touting a potential target of between 10 million and 13 million tonnes of kimberlite at last report -- most of it within Kelvin. Kennady Diamonds expects to produce a maiden resource estimate for its project this year and its big drill programs will yield several sets of diamond counts this summer. The first, a 2.7-tonne batch of Kelvin North kimberlite, is less than two weeks away. The most important, a 436-tonne test of Kelvin, will be available before the end of September. Perhaps the most intriguing, a one-tonne test of Faraday-2, is expected in early July. The results notwithstanding, all signs suggest the Kelvin-Faraday complex has a grade topping two carats per tonne, with a diamond value perhaps comparable with the $118 (U.S.) per carat modelled at the nearby Gahcho Kue deposit. (Mr. Evans's main diamond company, Mountain Province Diamonds Inc. (MPV: $5.14), is building a billion-dollar diamond mine with De Beers Canada at Gahcho Kue.)
Ken MacNeill and George Read's Shore Gold Inc. (SGF), up 1.5 cents to 20 cents on 669,000 shares, has completed its $2-million private placement and says there is renewed interest in its Star-Orion South diamond project in central Saskatchewan. The company sold all 10 million shares it was offering at 20 cents, thanks to the 1.3 million bought by insiders. Mr. MacNeill led the way as usual, buying 924,650 of the shares. He now holds over 1.7 million directly and nearly 3.5 million more indirectly. The company's six other insiders were more frugal. (Mr. Read, a token shareholder at best, holding just 30,000 shares since 2008, bought 50,000 shares in the placement.)
Shore now has enough cash to cover its costs for the year. It now hopes to finally entice a willing backer for its $2-billion Star-Orion South mine plan. The company reportedly has confidentiality agreements with a few potential partners or bankers. It had similar agreements several years ago, and Shore insisted that discussions with one of those interested parties -- never named but widely rumoured to have been Rio Tinto PLC -- had reached an advanced stage before collapsing. Mr. Read hopes that Shore's recently completed large diameter drilling at Orion South will allow the company to rejig its plan to begin mining Orion South, rather than the deeper Star pipe, in order to cut its capital costs. Regardless, Shore is likely to be newsworthy for the rest of the year.
Paul Gorman's Great Lakes Graphite Inc. (GLK) lost two cents to 9.5 cents on 930,000 shares following a three-hour halt called so the company could reveal its maiden resource estimate for the Lochaber graphite deposit in southwestern Quebec. Lochaber, which had been drilled incessantly two years ago by its former owner, Rock Tech Lithium Inc. (RCK: $0.05), and by Great Lakes late last fall and early this year, hosts 4.09 million tonnes of 4.01 per cent graphite. (A majority of the graphite comes in the more desirable jumbo or large flakes.) It might appear a tiny resource considering the long intersections Rock Tech racked up, but the grades of many of those tests fall short of the subsequently determined 2.45-per-cent cut-off. Mr. Gorman, CEO, says the company hopes to build a quarry-style, shallow-pit mine at Lochaber that will employ a "modular, scalable plant." The mine suggested by all those qualifiers would carry a modest capital cost, one that he hopes might be internally financed by the company's planned graphite micronization facility in Northern Ontario.
Chris Grove and David Hodge's Commerce Resources Corp. (CCE), down one-half cent to eight cents on 185,000 shares, has assayed 1.91 per cent total rare earth oxides (TREO) across 217 metres at its Ashram deposit in Northern Quebec. The intersection was not a surprise: the new drilling is needed to upgrade Ashram's huge inferred resource to a higher classification. The deposit currently hosts 29.3 million tonnes measured and indicated at 1.90 per cent TREO, with 220 million tonnes inferred at 1.88 per cent. Mr. Grove, president, and Mr. Hodge, CEO, tout Ashram as having "enrichment in the light, middle and heavy rare earth elements," a classic bit of Howe Street obfuscation that muddies the fact that barely 6 per cent of Ashram's rare earth oxides are the more desirable middle and heavy rare earth oxides.
Commerce completed a preliminary economic assessment of Ashram in 2012, resulting in a discounted net present value of $2.32-billion before taxes for a mine projected to cost $763-million to build. The company revised its dream sheet early this year, but only to add some cautionary language to appease the regulators. (The main change: Commerce now prominently discloses that its study is "preliminary in nature." Apparently calling it a preliminary economic assessment was insufficient disclosure.) Commerce also had to caution investors that most of the Ashram rock is inferred and therefore "there is no certainty that the preliminary economic assessment will be realized." (That should go without saying. The proportion of deposits with dream sheets is large; the proportion of those that become mines is discouragingly low.)
James Calaway's Orocobre Ltd. (ORL), down 11 cents to $2.22 on 26,000 shares, says the ramping up of its Olaroz lithium mine in Argentina is going slower than hoped. David Hall, business development manager, blames the delay on "equipment limitations and early operational issues," adding that all the production bottlenecks have been rectified -- bar one. (In other words, production is still lagging badly.) Orocobre hopes to produce just 100 tonnes of lithium carbonate in June -- this is more than double the May rate, mind you -- but the company still hopes to achieve 1,450 tonnes per month by the end of the year. |
