Page 1
Deutsche Bank Secl
VSE S3.06 _
Winspear Resources Ltd. Phone#-
Initiating Coverage
+ Snap Lake Coming into Focus
+ Caustic Fusion Data Support Consistency of Grade
+ 6,000 tonne Bulk SampIe this winter, Resusts by June?
_ George V. Albino 416 682-81 77
Curr. Rel, Speculative
OUTPERFORM Shares Basic (MM) 39.1 Wof king Cfffp ~ jlZ4
Shares FDIT (Mln) 44.7 Wot knn ~itp _ ~Er
Market cap FDITM($Min): $137.8 LT ,Debt & r
EquA~.fs Yof~n) _ _
HIGHLIGHTS
+ WINSPEAR’s principal asset is an approximatly 68% interest in the
CamselI Lake dianond project (32% - Aber Resources - ABZ TSE: $10,30)
located in the Northwest Territorie.
+ ExpIoration over the past 2 years has focused on the Snap Lake
portion of the property, where a subhorizontal kimberlite sill (with an
average thickness of 2.7 m) has been encountered in driIl holes over an
area of 200 ha
+ Aportion of the siIl has been drilled in detail , outlining a likely
l.35MM tonnes of kimberlitr (65O,OOO tonnes open-pittable)
+ A mini-bulk sample of approximately 200 tonnes taken from 2 plts 250
m apart yielded an average grade of 1 . 1 4 carats/ tonne.
+ An eva1uation of the 227 carats from this sample was made by several
diamataires giving an estimated average value for the parcel of
$301/carat.
- + Widely spaced drilling suggests the possibility of we11 in excess of I 0
MM tonnes of kimberlite
+ Micro diamond results from drilling are consistent with those from
the mini-bulk samples, supporting extrapolation of grade to the larger
tonnage.
+ A 6,000 tonne bulk sample is planned for this year and the eompany
and Aber are more than adequately funded for this program.
* Despite the stock’ s strong performance over the past 4 months the
possibility of a large high-value orebody at Snap La ke leaves potential for
significant upside for WSP
Snap Lake * History
Wmspear and its joint venture padners hive beerl exploring ~e Camsell Lake
properry for 7 years iind previoush- dis sipif cant diamandiferous kkberlite
pipe CCL 25) ~at laltirrlatdy vwas judged roo loT grade to wacaot f~gr work.
The back to life irL iate 1996 ho vever vvith dle companv a anno~eement that
it had dise~ vered highly diaiTlondifetaus greu woli as kimberlig boulders
near Snap Lal~ 1O aTed near ~e V eaem edge of the Camsell Lake propery
(page 2, Winspear
Subiequent drilHng ar Snap Lake was, on e face of it, disappointins, with no
large kirnDYlite pipcs locad, dthough an apparentlyblind pipe-like body was
eneounrred at anomaly CL186 (the kimberlite is diamondiferous and the story
+nay not be over there yet.). Most of the kimberlite intersetions were
narrow (less than 3-4m) apparantly dikes. Tt was only arter geologioal
interpretation by the company suggested that a large number of these
intersections on the west and north shores of Snsp Lake (see map) saemed to
hang together, that the idea of a large, coatinuous flat-lying "Sill" came
to the fore. Winspear then had thc confidence, based m inly on encouraging
microdiamond counts from drill core, to pursue exploration of the sill in
the face of \videspread skeptieism (thr stock traded down to $0 43 in iane,
1995) This mainly involved collecting and procesing approxmetdv 200 tonnes
in two "mini-bulk" samples from the siill (from sites now referred to as
"Pit 1" and "Pit 2").
Interest in Winspear began to piek up with the anouncement, in mid-Jtme
1998, that the 200 tonne sample had an average grade of just over 1
carat/tonne - encouraging certainly, but given the nature of the kimberlite
(i.e. a sill asopposed to a larger pipe) this news did not ignite the market
despite the company indicating that three large gem diamonds were included
in the sample. The next news release, however did get people ‘s
ayyention In this release (June 22, 1998) Winspear indicated that the 226
carats recovered from the mini-imnlk sumple had an averag value of over
$300/carat(. Tllis - suggesting as iy did
posible ore " with a value over $300 (US) - made the market sit up aad take
notice, and the stoek quickly reached $2 before settling baek to about Sl.00
whereit stayed rhrough most of the fall of 1998.
We began following the stoek closely at this point, but were wairing for
some key data before formally beginning coverage, namely microdiamond data
that could tie together the mini-bulk samples and the rest of the sill. What
we were looking for was reassurance that the two sites that had yielded the
226cts were representative of the drilled extent of the sill. We knew that
Winspear had taken approximately 500kg of samples from pit 1 and Pit 2, aud
were planning to proeess these using "caustic fuslon", the technique
typically used for microdiamond sanmpling of drill core. These data would
put the mini-bulk samples and those fron the expIoradon drill core on a
level playing field, and allow comparison between the two types of sample.
Unfortunately the 500 kg of kimberlite was behind the gate at the
strike-bound Con mine (owned by by Miramar Mining MAE.TSE)
inYellowkniiferand and the cornpany was forced to negotiate with the union
to liberate the samples. Between this delay and the long time Taken to
process aod then interpret the samples, we have waited almost 6 months for
the microdiamond daa.
Several weeks ago the company released the microdiamond data for the
mini-hulk samples and for 87 core drill holes. As we discuss in detail
below, the new data suggest that the silI is remarkably uniform ia its
microdiamond content, and that the size distribution of the diamonds is also
very uniform. The drill hole data, which we believe represents a kimberlite
body well in excess of 10mm tonnes, agrees well with the data from the
mini-bulk samples. If anything comparison of the drill hole data with that
from. Pits 1 and 2 suggests that diamond grades could inaease.
1999 Plans
We will knuw the answer co the grade question, probably by May or June.
Winspear aad Aber have comrnitted to a Sl2 mm program to take bulk samples
totalling approximately 6.000 tonnes from three sites (two on the northwst
peninsula, and a third on the north shore of Snap Lake). Ihe kmberlite will
be trucked to an off-site processing facility, which we suspect may be the
idle Lyiton Minerals (LTL - TSE) plant located at the Lupin mine site. We
estimate that the sarriple will be taken and processed by MaY or June, and
the diamonds valued by July or August. We are unsure if tne company will
release grade data as soon as it isavailable, to be followed later by the
diamond valuation or or whether it will release ail the informationa
together in July or August.
CPage 3, Winspear)
The Snap Lake Sill System - Tonnage Potential
Aproximately 90 core holes have been drilled to date at Snap Lake, defining
a shallow-dipping sheet (sill) over an area (possibly up to 1,600m by 2,000
m) (see map). Within this body the nature of the kimberlite (including rock
texture and mineralogy ) as well as information on geomtry (e.g. thickness,
depth in the drill holes) are all consistent with the body which Winspear
has christened the "northwest dike" being a single, continuous sheet. In
part of this area of Winspear has drilled 79 holes on the shore of Snap
Lake. providing an average spacing of about 70 m, and confirming tbe
silI’s cortinuity in this section (the
northwest peninsula).
The area of detailed drilling is estimated by MRDI (part of Simons
Engineering) to contain a resource of approximately 1.35 MM tonnes
kimberlite (all on land), The big prize, however, is rhe much larger
part of the sill projected under Snap Lake. If the sill is continuous
between the existing drill holes we estimate that a total resource of
15.5 MM tonnes is possible (1,0O0 m by 2,000 m by 2.7 m thick, and
assuming a density of 2.9 tonnes/cubic meter).
A second dike/sill set located under the southeastern part of Snap Lake
(referred to by the sornpany as the Southeast dikes) seems to be
geologically similar to the Northwest dike. The dikes located thus far could
contain several million tonnes of kimberlite based on the drilling to date.
As noted below, the microdiamond population of the Southeastern dikes seems
to be indistinguishable from that of the Northwest dike. The Southeastern
dikes dip to the northwest (i.e. the opposite direction to the Norchwest
dike), and it has been suggested that the different dikes couid have a
common source. The CL 186 area (where drilling in 1997 intersected
kimberlite breccia) lies more or less shere the Southeastern and Northwest
dikes would be projected to intersect, and potentialy represents the source
area or feeder for the kimberlite sills.
Leaving aside any discusion of the known bodies forming part of o much
larger "cone sheet", we believe that tiie drilling through the end of 1998
suggests a tonnage of kimberlite in excess of 15 MM tonnes, and in excess of
20 MM tonnes if the Southeast siIls are considered. This is clearly
sufficient to support a 3,000 tonnes/day mine (the geometry of the
kiaberlite and +he issue of the lake would make anything larger difficult) -
the key variables that are tougher to define are: 1) the grade of kimbalite
(i.e. carats per tonne, and: 2) the value of the diamonds ($/carat). We
think that there is already good reason to be
optimistic on the first point, but that establishing the value of the
diamonds to the extent that the kimberlite can be classed as reserve will be
difficult. This has implications for timing of projet advancement, how the
project ean he financed, and tberefore the ultmate value of Wmspear shares.
Minibulk Sample Results - Grade and Valuation
As Winspear reported in June of last year, the mini-bulk sample program at
Snap Lake involved collection of 105.7 tonnes from Pit 1 and 94 tonnes from
Pit 2, the two sites separated by 25Om (see detailed map of NW Pcninsuld.
The two sites yielded 90 7 carats frorn and 138.2 carats, from Pits 1 abd 2,
respectively giving grades of 0.86 and 1.47 carats/tonne.
Although full details of the stone size distribution have not bem provided
the eornspany did report that three diamonds 1arger than 5 carats (10.8, 8.
4, and 6.04 carats) were recovered. An additional 22 stones greater than 1
carat, vith a total weight of 42.4 carats (for an average of I.9 carats)
were also found. Winipear indicated that of the Iarge diamonds (the lO.8
carat stone) was found in pit 1 and the other two in Piy 2. Seven of the l
to 5 carat stones came from pit l and l5 from pit 2.
Using these data we infer that in each of the pits between 25% and 35% of
the total carats corne from the +l carat diamonds, with an average of about
30% fur the two pits combined Thii is indicative of a stone populadon
weighted towards the very coarse side , but is not unprecedented. A
reasonable parallel is Klipspringer project of SouthernEra Resources (SUF -
TSE: $7.05), where the exploration results from the Leopard Fissure (28% > 1
carat), thc Sugarbird Blow (30% > 1 carat), the Kudu Blow (38% > l carat),
and the M- 1 Pipe (38% > 1 carat) are companble vith dlose from Snap Lake. |
