A note passed on from Buddy:
we have a guest writer tonight. i received a call
from david stone asking that i post the following
on s.i. any new news that comes from or through
me is sent to the KINGS first and then s.i. so
here it is..... it is hot off the press because it is
dated 5/1/98.... :-) all typos are my fault. if some-
thing doesn't sound right, it is my fault.....
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KENSINGTON RESOURCES LTD
(KRT: VANCOUVER) AN ANALYSIS
may 1st, 1998
i have been hearing a lot of rumors about kensington
resources ltd. from a number of sources and i thought
i would check into them to determine the facts. i personally
have done the primary research into documents that are
public record on this company and i am solely responsible
for the interpretations and conclusions.
kensington resources's fort a la corne project (kensington
owns a 30% stake in the joint venture) is potentially the biggest
diamond project in the world. the reasons are listed below:
1) 71 kimberlite pipes (diamond bearing structures) are held by
the partners.
2) 70 pipes have been drilled and tested with 34 pipes containing
macro diamonds larger than 1 millimeter.
3) many of these pipes have in excess of 100 million tons of diamond
bearing material. one has almost 1 billion tons.
4) 1 cluster (5 pipes touching each other) has 2 billion tons.
5) as a comparison, diamet's average pipe size in the NWT find is
15-20 million tons.
6) kensington's maximum cost to process kimberlite material is $15 c
per ton. the diamond value recovery price, according to luc rombouts,
a famous expert diamond appraiser (adjusted for micro diamond
grades) is between $50 and $100 u.s. per carat. let's use $75 on
average per carat. the mine will produce on average 25 carats per
every 100 tons or 1/4 carat per ton. this equals $18 u.s. per ton or $25
canadian per ton. revenue of $25 per ton less our processing cost of
$15 per ton gives us a net profit of $10 per ton. we will process 60,000
tons per day for a profit of $600,000 per day. that's $18 million per month
or $216 million per year. 30% of this or $64.8 million is kensington's share.
7) when production starts 60,000 tons per day will be processed (diamond
grades are 70% gem quality and 30% industrial quality). to process the
5 pipe cluster which contains 2 billion tons at this rate will take 91 years
working 365 days of the year.
8) kensington's partners are debeers (actually monopros which is debeers'
exploration unit) and cameco who is closely associated with the sask
provincial government . cameco has recently offered to buy uranerz for
$483 million. uranerz is the operator of the project and is also a partner.
9) debeers has been in the diamond business in south africa and around the
world for over a hundred years. they control the world market and are very
wealthy . they do not take positions in worthless projects. they have been
involved in this project and have invested in it for 9 years. they are in it
because they know it is the biggest diamond project in the world. these
people know what they are doing and are in for the long haul.
10)the diamond market is strengthening due to the increased demand caused
by the world's population growth. however, the asian market is coming of
age and china alone will ensure the sale of gem quality stones in quantities
larger than the u.s. and japan combined. this project is located in an easy
place to mine. there are paved roads to the property, hydro electric power
is in place as is a willing workforce. the non-sensitive ecological location
minimizes operation costs in that regard.
11)the 1997 tracer diamond program points out that approx 100 drill holes were
under estimated in value of recovered diamonds. the latest news release
approved by all the partners, if analyzed, says that the diamonds recovered
from the past years drilling have been under reported. i take that to mean that
there were more diamonds in the holes than were reported. as an analyst i
must explore this very closely. under reported by how much? what does this
mean? my off the record questions have uncovered information that indicates
that approximately 80% of the test diamonds were lost in the drilling/testing
procedure. this means that for every 100 test tracer stones put in the holes
only 20 were recovered! could this also mean that approx 80% of the natural
diamonds in the hole were not reported?? if this is the case and we run the
numbers it means that this project now has between six and eight pipes that
can be put into production economically. this would make it the biggest diamond
mine in the world.
12)management of kensington is very conservative and reliable. the directors are
successful business people who run the firm very competently.
my personal position: i have put my money where my mouth is and have acquired
over 100,000 shares of krt and i am still buying. who would not take a position
in this firm for a share price of under $5?
written by:
murray tildesley, victoria, bc
publisher (former financial analyst, bank of montreal, head office)
a note from me.... there is no truth to the rumor that mr. tildesley
is also known as currahee..... :-) i just couldn't resist....
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