Tomato,
Author: teevee -- Date:1999-02-12
18:39:47
Subject: coffer dams and damn permits
Hi WillP, I haven't met Nick, but I bet
he has lots of good "war stories" to tell
over the camp fire.
Regarding your little story about Gren
Thomas and A154-south, it appears that
about 1280 carats recovered were
worth about $440 per carat average
value, and the other 11,520 carats
averaged about $21 per carat.
Hmmmm....sounds like Indian trade
goods to me. The "pundits" are saying,
buy Aber, to get exposure to Snap Lake
for "free". Now I know why the hair
stood up on the back of my neck....As
usual, if the market "pundits" are saying
one thing, I'm better off if I do the
opposite. $21/carat isn't that far off from
Argyle prices. Notably, RTP has
extended the life of Argyle. Do you think
RTP would want two deposits, each rich
in low quality, low value diamond in
production at the same time? There is a
limit to the number of Indian goods that
even a Wallmart can sell.
Supposedly, the three large stones from
Winspears sample averaged about
$1800 per carat for a total of about 25
carats for 75% of the value of the
parcel(I'm not entirely certain, but I
believe that one of the three stones is
worth over $5000 per carat). The
remainder of the parcel averages $85
per carat(well above the
$US50.00/carat cut off for gem quality).
All things being equal, which deposit
would you like to own?
Earlier the rumors circulated that the
"Nevada's" were buying Winspear, and
it turned out they werre buying Aber.
Now we hear that Aber has its
exploration interests and interest in Snap
Lake for sale, in order to concentrate on
Diavik. Is this story going to end up
being the other way around too?
After reading the Deutsche Banke report
on Winspear by George Albino, I would
say the "cat is out of the bag".
regards, teevee
PS: I will probably receive many hostile
responses to the above comments.....I
probably should have learned a long
time ago that if "you don't have anything
good to say, don't say anthing at all".
Top
Reply
Author: WillP --
Date:1999-02-12 20:48:39
Subject: Cowboys & Indian
Goods
Teevee:
Of all the nationalities I've met
over the years, Russians are by
far the 'neatest'...not counting the
Mafia types that have come lately.
Slava, for those unaware, is short
for Vyacheslav...which is 'William'
in Russian. They also commonly
address their friends with a
modified form of the father's first
name...hence I am:
Vyacheslav Karlovich
But I digress. When do I not? :-)
It is my understanding that a gem,
or 'gem quality' refers to any
stone worth over $50. Not per
carat. Quickly scanning here, I
see that John Kaiser agrees with
me. (If that counts for anything.)
'Indian Goods' is another
interesting term. The name derives
from the nation where many small
diamonds are cut. (Are their
fingers smaller or more dextrous
than Belgians, etc?) Previous to
this industry starting
in...well...India, the stones were
considered too small to be useful
to the jewellery industry. It does
not imply inferior stones. Just
small.
The largest gem recovered from
A-154 South was roughly six
carats, and an eight carat gem
was recovered from A-418.
Those from a total of 6,000
tonnes, roughly. They 'may' have
only been worth $50 a piece.
Maybe not...we don't know. At
$50, they sure didn't end up in the
shot glass.
Both pipes have an extreme
abundance of smaller stones, and
a sufficient abundance of larger
stones. Behemoths? Probably
pretty rare. The largest diamond
recovered was just under 15
carats.
So. This is shaky mathematically,
but good for intuition. The
'average' price we calculated for
the shot glass stones was $440
per carat. Remember, too that I
was being a wee bit generous
with the size of the shotglass and
how many carats it could hold.
Nevertheless... Using my
handy-dandy compare the stone
price to Winspear's three gems
chart....I see that an average
stone size around 0.75 carats.
Certainly a reasonable figure for
the shot glass diamonds. None of
these are 'Indian goods'.
The average stone size recovered
from a significant (majority?)
tonnage of the A-154 South pipe
was 0.10 carats. The median
would be a bit less than this...but
screw mathematics. :-)
An average value for a diamond
of this size...equal in calibre to
Winspear's gems would be
around $110. You figured $21.
Hmmm. Giving a near zero
value...hell...a zero value to the
junk, this implies a junk to gem
ratio of 0.19. That is...19% of
these stones are equal in calibre
to WSPs three biggies....the rest
are junk. The majority of those
gems...although very fine...would
be worth less than $50. That
makes them Indian goods.
But now I'm started. Of Aber's
12,800 carats...1280 are fine
gems valued at $565,000
contained in 1700 stones. Of the
remaining 11,520 carats
contained in 123,000 stones, only
23,427 are gems of exactly WSP
calibre.
So to compare, using this 2 class
(and not 5000+) classification
system.
Aber has 25,000 gems totaling
3700 carats absolutely equivalent
to Winspear's finest stone quality.
A week ago I posted Winspear's
numbers for gem
percentage...25% if you ignore
the top three, and 33% if you
accept them. Teevee, you accept
them so let's use the 33%.
Let's assume the diamonds came
from 2800 tonnes which would
equate to the stated pipe grade
today. So...
Aber's grade is 1.32 ct/tonne of
diamonds of the same quality as
the best Winspear has to offer.
Using just their best stones...the
shot glass stones, Aber's grade is
0.46 ct/tonne. By comparison,
Winspear's grade is 0.38 carats
per tonne, at a 33% rate.
Aber's diamonds are considerably
smaller, however. Therefore they
are worth significantly less.
As a comparison: Aber's average
recovered stone size is just over
0.10 carats. Winspear's is stated
as 0.16. This is a significant
difference.
It's significance is in the gem price
for the 2 class calculation: roughly
$900 per carat for Winspear,
roughly $218 for Aber. Ignoring
2/3 of the three WSP gems, and
their value would drop to would
drop to $450. This is remarkably
similar to the $440 you calculated
earlier.
The bottom line of all this is: Aber
has a high grade but lower gem
percentage than Winspear hopes
to have.
A few more corrections: Argyle
produces almost entirely
'industrial' diamonds. Their
average per carat value is, what?
$6 to 8? Very, very few gems or
Indian goods. Their prime raisons
d'etre are pink fancies.
The price of 'Indian goods' has
stablized and begun to increase
over the past two years. It's the
price of gems that is under
pressure at the moment, but I
don't think DeBeers has caved in
to lowering the price.
I'd like to repeat that it's not
$50/carat, but $50. This is not
directed at your slip, but rather at
the chantings of the Kaiserites
here and on SI..who can't even
quote their master correctly. :-)
The great Aber rumour has high
connections, but isn't exactly as
stated...to my ears. I believe the
proposal is to separate Diavik
from Aber's exploration projects.
While sales in theory could be
involved, it's not the reason. I
strongly suggest it is because
some of those exploration
projects of Aber have a potent
market value, and is not being
reflected in Aber's share price.
Aber would, like the witches
broom....split into two. I would
well imagine that most of Aber's
braintrust would transfer to
Aber-X. That is what they're
good at, after all.
But who knows.
All I can realistically say is that
calling the richest *proven*
deposit of over 20 million tonnes
in Canada and I believe the
world...a producer of 'Indian
goods'...is unjust.
Remember (and this would have
made this post alot shorter) that
A154-South's value per tonne
value is over $210 ... *just* on
the stuff that fills the shot glass at
$440 per carat.
If Winspear proves up ore at a
value equivalent to A154-South's
$300 per tonne, I'm going to be
pretty damned cheerful.
Actually...now that I think of
it...he didn't say "fill a shot glass to
overflowing"...he said "would fit in
a shot glass".
But it's only numbers. :-)
You want to find a diamond
producer that would be hurt in a
25% price war? Look north of
Diavik.
Cheers.
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