WAAAAAAAAAAAY OFF TOPIC...
DOG'S BALLS ......ROTFLMAOTHEHARDESTEVER
Kettle River Resources Ltd -
DHK contemplates revisiting the dream
Kettle River Resources Ltd KRR
Shares issued 4,653,611 1999-05-06 close $0.5
Thursday May 13 1999
See Dentonia Resources Ltd (DTA) Street Wire
TLI KWI CHO - DOG'S BALLS OR DIAMONDS?
by Will Purcell
Dentonia Resources Ltd. announced in mid-January that that DHK Resources Ltd. syndicate was conducting a study to determine the feasibility of retesting the DO-27 complex. This kimberlite body is better known as Tli Kwi Cho, (translation: dog's balls) and stands to this day as the biggest disappointment in Canada's northern diamond play.
LOLOLOLOLOL...With the name DOG'S BALLS for their property I can see why is was the biggest disappointment.....ROTFAGAIN....
The DHK syndicate was formed by Dentonia, Horseshoe Gold Mining Inc., and Kettle River Resources Ltd. in early 1992, with each holding a one third interest. The objective of the group was to acquire prospective diamond properties in the Lac de Gras region. This was achieved a few months later, when DHK acquired three blocks of claims from Barren Lands Services for $81,000 and 224,500 shares of the three participating companies. These properties were identified as the WI, DHK, and WO blocks. A preliminary exploration program was undertaken in 1992 and 24 targets were identified.
That fall, the syndicate announced that Kennecott Canada Inc. and its associates had acquired an option to acquire a 65 per cent interest in the properties. To earn the option, Kennecott was required to spend $1.5-million on exploration, and make a cash payment of $590,000 to the three syndicate members. The associates of Kennecott were Chris Jennings's SouthernEra Resources and Aber Resources, each with a 10 per cent interest, and Commonwealth Gold Corp., with a five per cent share. These minority interests were acquired under separate agreements with Kennecott, which would hold the remaining 40 per cent and be the project operator. DHK with its 35 per cent would be carried to production under the terms of the deal.
It rapidly became apparent that the WO block contained the most interesting targets, when it was promptly announced that a number of promising garnets had been recovered from till samples, and that one significant geophysical anomaly existed six kilometres up ice from the sample sites.
Drilling of this large twin anomaly began in March 1993, and within a month success had been achieved when the drill cored kimberlite in the first hole. The initial caustic fusion results revealed 83 diamonds, including 21 macros, from a sample of 86.4 kilograms. Of the diamonds recovered, only 65 per cent were described as clear and colourless.
The summer of 1993 was a hectic time. The results of several more drill holes were released and Kennecott announced that other kimberlite bodies had been found as well. By late summer, Kennecott had decided against conducting a minibulk sampling program and instead chose the much riskier course of taking a 5,000 tonne bulk sample from the Tli Kwi Cho pipe. Success at this stage would rapidly advance the project and the battle was joined with BHP to establish the first Canadian diamond mine.
A curious event occurred in early December of 1993. Kennecott revealed a large number of previously unpublished drill results at the Northwest Mining Convention held in Spokane. An enterprising individual copied the results and they were subsequently released by Canada Stockwatch. A total of 1,739 kilograms of kimberlite had contained 1682 diamonds. Of these, 343 were considered macrodiamonds. There was no indication of larger stones being present. The Stockwatch article surmised that an upcoming Yellowknife meeting of the participants was called in an attempt to consolidate the Tli Kwi Cho interests under one publicly traded Canadian entity. Although this did not happen, the months that followed could only be described as a time of mergers, and rumours of mergers.
Aber's Grenville Thomas and Jordan Ethans of Commonwealth were first off the mark in mid-December. They struck a deal through which Aber would effectively acquire Commonwealth by issuing one Aber share for every three Commonwealth share held. At the time this appeared to be a less than satisfactory deal for Commonwealth shareholders. The primary holding of each was believed to be their interest in the WO claims, and a two for one exchange would have been more appropriate on that basis. Nevertheless, the deal was completed in mid-April of 1994 with the approval of both Aber and Commonwealth shareholders.
A flurry of attempted mergers followed. In mid-March of 1994, Aber announced it would offer to acquire the assets of Dentonia. Shareholders of Dentonia would receive two Aber shares for each one Dentonia share held. The deal would have increased Aber's shares outstanding by almost 60 per cent but expanded their interest in the WO block by over 75 per cent. Dentonia was not amused.
A week later, Dentonia and Horseshoe Gold announced their intention to merge on an equal basis. Dentonia also announced their intention to adopt a shareholder rights plan, or poison pill, that would reduce the risk of a hostile takeover. Within a few weeks the talks expanded to include SouthernEra Resources. In early May, the participants announced that agreement had been reached to form NorthernEra Diamonds. SouthernEra shareholders would receive one share, and Dentonia and Horseshoe shareholders were to receive 1.25 for each share held in their respective companies.
By the end of May, Aber had announced it was reconsidering its original proposal to acquire Dentonia, effectively ending the merger plans. At that point, drills were already turning on the A154 and A21 targets on Aber's Diavik property, and major discoveries were soon to be announced from that drill program.
Dentonia's president, Adolf Petancic, announced in mid-July that the proposal to form NorthernEra had been deferred until after the bulk sample results were available from Tli Kwi Cho. Apparently at least one of the participants had developed cold feet. Those cold feet clearly did not belong to Mr. Petancic, as just days later Dentonia, Horseshoe, and Kettle River announced their plans to merge to form DHK Diamonds Inc.
The results of the bulk sample were revealed after the market close on Thursday, August 4th. Two separate phases of kimberlite were encountered. The diatreme phase sample, weighing 1,258 tonnes, contained only 226 diamonds weighing 16.4 carats. The resulting grade was only 0.013 carats per tonne. A sample of 3,003 tonnes taken from the pyroclastic phase offered somewhat better results. A total of 13,888 diamonds were recovered, with a total weight of 1079 carats. The grade for this phase was still a disappointment, at only 0.36 carats per tonne.
The prospects for the recovered diamonds having a high value appeared dismal as well. The average stone size was very small at 0.077 carats, and one third of the total weight contained in stones less than two millimetres in size. Only 30 per cent of all stones larger than two millimetres were considered to be of gem quality. Kennecott effectively passed sentence on the project with the announcement that "These results are not considered sufficiently encouraging to justify further bulk sampling of DO-27".
The market reacted accordingly. Dentonia, which had traded as high as $7 on Thursday, touched a low of $1.18 on Friday. The stock drifted lower during the fall and winter, reaching a low of 40 cents. Horseshoe, which had also traded at $7 on Thursday, reached an intraday low of $1.06 on Friday, and had fallen to only 36 cents by the late fall. Kettle River fared just as poorly, dropping from $12 to $2.41 and hitting a winter low of $1. Aber and SouthernEra, with their additional prospects, fared somewhat better. Aber dropped from $14.625 to as low as $8.75 on Friday, and reached a low of $5.50 in early December, largely as a result of tax loss selling. SouthernEra dropped from $7.625 to $3.00 on the news, and reached a mid-winter low of 95 cents in the absence of news from its other projects. Dog's balls indeed.
Valuation of the recovered stones was completed in the fall and the results confirmed the low expectations. The pyroclastic phase stones were priced at $21.70 (U.S.) per carat, and the tiny diatreme parcel was valued at $33.50 (U.S.) per carat. The richer pyroclastic phase kimberlite was worth only $7.80 per tonne, and each tonne of the diatreme rock was valued at an embarrassingly low 44 cents. The size of the largest stone recovered was never formally offered, however there have been pictures of stones in excess of one carat gracing a few annual reports. The largest stone so displayed weighed a reported 1.72 carats.
All talk of mergers halted abruptly. Following the disappointment, the six Tli Kwi Cho participants drifted off in different directions. Kennecott and Aber concentrated on their Diavik ground and scored one success after another in the following years. The Diavik joint venture is currently awaiting federal Cabinet approval and final permitting for Canada's second diamond mine. SouthernEra turned its attention to southern Africa and now has a 40 per cent interest in the producing Marsfontein joint venture, in addition to several other prospective projects.
Dentonia took another direction, abandoning diamonds for metals. The company acquired properties in Indonesia in the quest for gold, and moved into Labrador in the quest for a share of Voisey Bay nickel and copper. Kettle River concentrated its efforts on gold projects in British Columbia, while Horseshoe continued to concentrate on diamonds by investigating northern Alberta prospects. None of the DHK participants have achieved notable success to date.
Attention has returned to the Tli Kwi Cho complex on occasion. In 1996, Kennecott undertook to complete a large diameter coring minibulk sample of the land based north lobe, or DO-18 pipe. The results were not encouraging. A sample of 6.88 tonnes contained 0.1 carats, for a grade of only 0.015 carats per tonne.
A one year agreement was reached with Archon Minerals last fall, covering portions of the WO property. Archon would attempt to identify prospective targets and drill at least one hole in each, in order to earn a 25 per cent interest in the claim block. Claims containing promising indicator mineral trains over the southern portion of the property were excluded from this agreement, as were the claims containing the Tli Kwi Cho complex. The latter exclusion suggests that DHK was still unwilling to abandon all hope in this area.
Questions about the accuracy of the bulk sample results have lingered to this day. The sample was taken at what appears to be the western margin of the large pipe, and the lack of drilled minibulk samples in other areas leaves the result open to question, in some minds at least. The current study being undertaken by DHK hopes to identify a region of higher grade and greater value within the Tli Kwi Cho complex.
A recent study by Kennecott revealed that the complex contains three distinct facies having different diamond populations. Interestingly, Kennecott also estimated that up to 25 per cent of the diamonds recovered came from a super deep origin. Kennecott also noted that resorption of the Tli Kwi Cho diamonds was significant, accounting for a loss of between 25 and 65 per cent of the diamonds original rate. It does appear likely that higher grade zones exist within the complex, estimated to contain in excess of 70 million tonnes of kimberlite. It is likely that zones of higher value diamonds exist as well. It is entirely another matter to suggest a suitable combination of higher grade and value can be found, that would achieve economic values throughout a sufficiently large segment of the body.
The results of this study will not spark much interest among Aber or SouthernEra shareholders who appear to have put Tli Kwi Cho behind them. A successful conclusion may create greater interest with investors in the DHK group of companies.
The Tli Kwi Cho story would not be complete without an analysis of what might have been. Had the NorthernEra merger been concluded, the amalgamated company would likely trade today in the $2.75 range on the strengths of SouthernEra assets, significantly lower than the $4.50 range of SouthernEra today. If Aber had been successful in its takeover of Dentonia, an additional 18 million shares would have been created, and Aber would trade today near $7.00. In retrospect, the merger would have been an excellent deal for Dentonia shareholders. A holding of 1,000 Dentonia shares is worth approximately $150 today. Had the merger been completed, that holding would be valued at close to $14,000 today and would have peaked at nearly $40,000 in early 1997.
For years, it appeared that the shareholders of Commonwealth Gold Corp. were fortunate to have approved the merger with Aber. Commonwealth had no interest in the ground on which the four rich Diavik pipes were discovered, and for years Commonwealth's biggest contribution to Aber's success was simply the addition of the shrewd Mr. Ethans to the board of directors. Recent discoveries at Snap Lake suggest the deal may not be so lopsided, as Aber's interest in the property was originally a Commonwealth asset.
Five years after the disappointment, the name Tli Kwi Cho still evokes memories of the dreams that turned suddenly to despair. For some, those dreams are not quite dead yet. If Dentonia's revivalist study is positive, hearts may go pitter-patter, but the baggage from the earlier effort will not be forgotten.
(c) Copyright 1999 Canjex Publishing Ltd. canada-stockwatch.com
MM
P.S DOG'S BALLS??....
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