Ashton Mining of Canada Inc - Yorkton says buy
Ashton Mining of Canada Inc
ACA
Shares issued 20836399
1998-02-16 close $4
Tuesday Feb 17 1998
Art Ettlinger and Douglas Leishman say why
The company has experienced early and rapid success as operator of the
Buffalo Hills exploration program and has set the standard by which
other junior explorers working in Alberta will be judged. Since
December 1996, when Ashton, Pure Gold Minerals Inc (PUG TSE) and
Alberta Energy Company Ltd (AEC TSE) agreed to explore for diamonds
in the Buffalo Hills area of north central Alberta, 14 kimberlites have
been discovered for less than $6 million of expenditures. All but four of
these occurrences are diamond bearing. Furthermore, these initial
discoveries were made on geophysical targets prioritized principally on
logistical considerations, meaning the highest priority targets likely
remain to be tested.
Ashton became interested in exploring for diamonds within the Buffalo
Head terrane after a geologist with the Alberta Energy Company
identified several airborne magnetic anomalies suggestive of kimberlite
intrusions. A check of seismic records led further credence to this
theory. As an experienced diamond explorer Ashton also realized that
the location of these anomalies, near the centre of a possible craton with
a deep penetrating structure (the Peace River Arch), was a valid geologic
environment for diamond-bearing pipes. Detailed geophysical
(magnetic) interpretation led Ashton to drill 10 initial anomalies
resulting in the discovery of ten pipes. Further drilling has led to the
present known total of 14 pipes with more than 50 geophysical targets
remaining to be tested. Both positive and negative magnetic anomalies
have been identified as kimberlite pipes.
The kimberlites discovered to date by Ashton are located near the axis of
the Peace River Arch and occur in two loosely defined clusters. The
northern cluster of pipes show a possible north-south alignment while
the cluster to the south may be controlled by a northeast striking
structure. Whether these apparent structural controls are real and related
to the Peace River Arch is not clear. Younger (?) northwest trending
structures may also contribute to kimberlite emplacement. Kimberlitic
material recovered from the pipes is interpreted by Ashton to consist
dominantly of crater facies, the fragmented, uppermost portion of a
kimberlite pipe. This suggests that the pipes in the Buffalo Hills are
largely intact and untouched by glaciation. Surrounding the initial
discoveries within the 1.45 million acre Buffalo Hills property, at least
13 priority 1 and 10 priority 2 geophysical targets remain to be tested.
During the second half of 1997 Ashton began mini bulk sampling of the
K-14 pipe cluster. The company has stated that the object of current
mini bulk sampling is to "look for qualitative evidence that there is a
population of larger stones" within the pipe. This mandate is unlikely to
change in the near future. Thus a final determination of pipe economics
from Alberta could be several years away.
Initial bulk sampling results from the K-14 kimberlite have been erratic,
with potentially economic and clearly uneconomic diamond counts
reported. The economic importance of K-14 is still unknown. But more
importantly, less than 50 tonnes of material have been recovered to date
from K-14, and it is only the first pipe that Ashton has systematically
sampled. For comparison, Dia Met Minerals' initial discovery at Point
Lake in the Northwest Territories, which was bulk sampled in 1992 and
sparked that area play, does not appear to be economic as it is not
included in its current mine plan.
We anticipate Ashton and their joint venture partners will spend
approximately $15-20 million exploring the Buffalo Head terrane over
the coming year. This amount does not include further bulk sampling of
the K-14 pipe cluster or mini bulk sampling of pipe K-91. Final results
from 1997 sampling of pipe K-6, which yielded a bright yellow, 0.76
carat diamond crystal from a small preliminary sample, are pending. We
anticipate further sampling of this pipe in 1998. Exploration drilling of
untested geophysical targets will run concurrently to sampling and could
possibly result in new kimberlite discoveries. At the same time, it is
likely new targets will be generated as additional airborne and ground
magnetic surveys are completed and Ashton develops and refines its
exploration techniques.
Alberta is still clearly an exploration play and will remain so until
Ashton demonstrates it has discovered an economically viable diamond
deposit. Similarly, investor interest in the Alberta diamond play will
continue until it is systematically demonstrated on a repeated basis that
the kimberlites discovered in the province are uneconomic to mine.
We recommend Ashton based on its solid management capabilities,
remarkable exploration success, and large strategic land position within
the BHT. Ashton's diamond projects elsewhere in Canada and the US
also offer the investor both blue sky exploration potential and some
measure of downside risk protection.
(c) Copyright 1997 Canjex Publishing Ltd.
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