Diamond & Specialty Minerals Summary for Sept. 28, 2022
2022-09-28 20:41 ET - Market Summary
by Will Purcell
The diamond and specialty minerals stocks box score on Wednesday was an upbeat 105-78-117 as the TSX Venture Exchange added 13 points to 587. It was not upbeat for shareholders of Star Diamond Corp. (DIAM), which lost another one-half cent to 10 cents on 983,000 shares.
Chuck Fipke and Chad Ulansky's Metalex Ventures Ltd. (MTX) closed unchanged at six cents on 20,000 shares. The company, a long-time diamond explorer, has been touting a Quebec property south of Chibougamau for its gold and scandium potential, but it still clings to its Kyle Lake diamond property, about 60 kilometres west-northwest of Victor, the old De Beers mine in northern Ontario that closed a few years back after a 10-year run.
Enthusiasm for the Kyle Lake project peaked in 2011, just after the company completed 450-tonne mini-bulk samples of two kimberlites, T1 and U2 -- and just as it was arranging a big option deal covering the project with Ned Goodman's Dundee Corp. (DC.A: $1.26). Metalex's stock worked its way to a high of $1.34 that year and the Dundee arrangement confirmed that valuation, as it required Dundee to spend $51-million on the project to secure a 51-per-cent interest in the U2 and T1 pipes.
It was not to be, of course. The Ontario government dithered for years about granting Metalex permits for a 10,000-tonne bulk sample that Metalex proposed. The bureaucrats did grant the permits a few years later, but about a year too late, as Dundee got tired of waiting. (It also suffered enough financial setbacks that by then, spending $51-million on a diamond venture appeared ill-advised.)
Fast forward to today, and Mr. Ulansky, Metalex's president and chief executive officer, and Mr. Fipke, chairman, say that their company "must now secure funding for the bulk sample" and secure a signed agreement with the First Nations in the area -- whose grumpiness about exploration was purportedly the reason the politicians and their minions dragged their feet. "Preliminary discussions with interested parties have been undertaken," say Mr. Ulansky and his crew, adding that negotiations also continue with the local bands, but they plan no further work until an agreement is in place.
Meanwhile, investors stumbling across the story today might be left wondering what Metalex -- and certainly what Dundee -- saw in the project. Metalex completed 450-tonne tests of both T1 and U2, and the results were decidedly modest. At U2, the company recovered nearly 30 carats of diamonds at a 0.85-millimetre cut-off, barely six carats per hundred tonnes, while the T1 test managed just under 50 carats, perhaps 11 carats per hundred tonnes.
Accordingly, it was no shock that Metalex deemed T1 not worth a further look, as its grade was just half of Victor, but it deemed U2 worthy of a major bulk sample, despite it having a sample grade barely one-quarter of Victor's anemic 23 carats-per-hundred-tonne grade.
Why, you ask? Well, the size distribution profile at U2 was far coarser than at T1, sufficiently so that the U2 diamond count, which was barely one-quarter of the T1 count on the 0.6-millimetre sieve, overtakes the T1 diamond rate just before the 2.36-millimetre sieve -- and so, considering all diamonds larger than that sieve size, the U2 pipe has a higher grade. The differences in the curve are such that U2 might well produce 40-carat diamonds at about 10 times the rate as might T1, and large diamonds account for most of the diamond value in a deposit.
Further, larger sample sizes have a better chance of hitting pockets of higher-grade kimberlite, but even so, Metalex was anticipating a grade of just 10 carats per hundred tonnes when it proposed its 10,000-tonne test a decade ago. Therefore, Mr. Fipke and Mr. Ulansky were expecting -- and had convinced the Goodman clan there would be -- a hefty diamond value to bolster the economics of U2. They also had reason for good cheer beyond the size distribution curve, as U2 had an unusually high proportion of gem-quality diamonds. And so, U2 is unlikely to fade to black, even if exploration looks to remain stalled indefinitely.
Arno Brand's Gratomic Inc. (GRAT) lost 1.5 cents to 39.5 cents on 349,000 shares on word that it has trenched a four-metre stretch averaging 9.35 per cent graphite at its Capim Grosso project in Brazil. The trenching sought to "unveil the extension of a second graphite deposit" southeast of the main deposit on the property, says Mr. Brand, president and CEO.
"Our plans transition Capim Grosso from a local to a district-scale graphite project," Mr. Brand enthuses, adding that the company's effort is supported by the positive laboratory results that continue to roll in. "We look forward to further development on the project and growing our footprint in Brazil," he concluded.
Next up to cheer was Nico Scholtz, chief operating officer of graphite marketing and sales -- try fitting that on a business card in a readable font -- who said the lab results provide important evidence of how much potential Capim Grosso has. "It is really beginning to look like it could become the next major graphite province in Brazil" he gushed, although given his hedging, that district's provincial rodent may be the weasel.
Cliff Hale-Sanders's Voyager Metals Inc. (VONE) closed unchanged at 11.5 cents on 7,000 shares. The company has hired a company to act as "project integrator" -- whatever that is -- for its coming bankable feasibility study of the Mont Sorcier iron and vanadium project near Chibougamau in north-central Quebec. Expect the study by the end of next June, says Mr. Hale-Sanders, president and CEO.
Mr. Hale-Sanders got to cheer a revised resource estimate for Mont Sorcier just a few months ago. The estimate delineated 678.6 million tonnes indicated, rock containing about 195 million tonnes of magnetite concentrate averaging at least 65 per cent iron and 0.52 per cent vanadium oxide. Another 596 million tonnes are inferred, containing 158 million tonnes of concentrate with comparable grades.
The coming feasibility study can only consider rock classified as indicated or measured, so Mr. Hale-Sanders and his crew have a lot of upgrading to do if Voyager is to include the currently inferred rock in its new study. Nevertheless, investors will not be disappointed if the coming study does not include the inferred rock, as the company's preliminary economic assessment, completed in July, also ignored the inferred rock.
That dream sheet proposed a $574-million mine that would run for 21 years, producing about five million tonnes of payable magnetite concentrate per year. The bottom line was encouraging, with an internal rate of return of 43 per cent and a discounted net present value of $1.61-billion but sustaining those numbers with a more rigorous study could be a challenge. |
