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Gold/Mining/Energy : Winspear Resources -- Ignore unavailable to you. Want to Upgrade?

To: Berry Picker who wrote (21464)	6/21/1999 10:50:00 AM
From: Andrew	Read Replies (3) \| Respond to of 26850

Winspear Resources (WSP : VSE : $4.05 halt) UPDATE 12-month target price: $5.00-10.00 52-week price range: $5.30-0.74 Shares O/S: fully diluted 47M Cash on hand: $13M Long-term debt: nil Market capitalization: $190.4M First 1999 Bulk Sample Results from Snap Lake, NWT Winspear was halted Thursday and Friday, followed by a release on Friday that stated about half of the 1999 bulk sample results from the West Peninsula at Snap Lake, NWT. In 1998, 199.7 t taken from two pits on the West Peninsula returned a cleaned grade of 1.14 c/t, and three Antwerp diamantaires produced an average carat value of US$301.43/carat. A slotted screen mesh of 1.0 mm x 0.9 mm was used in the 1998 processing at the Kennecott/Con Mine pilot plant and the mesh cut-off size for the 1999 sample was the same. Basically, the first half of the 1999, bulk sample (3,003.9 t) graded 1.845 c/t and seven independent diamantaires in Antwerp and Canada produced an average valuation of US$98.82 (within what we believe is a very narrow valuation range). Ekati's bulk sample result indicated an average carat value of US$84.00/carat (initial result from the Panda pipe results are 20% above expectations) and for the Rio Tinto/Aber Diavik project US$56.00/carat. What is important to recognize is that even in a single phase kimberlite event diamond distribution can vary considerably: some of the South African fissure kimberlites have quite consistent grades and others range widely. In the 1998 ~200 tonne-two pit bulk sampling program, Pit 1 graded 0.848 c/t with two stones over three carats and no special or >10.8 carat stones. These first 1999 results are from Pit 4, adjacent to and down-dip to last year's Pit 1, and it produced 88 stones over three carats including six specials. Pit 3 material (about the same tonnage) is now being processed and was extracted from a location some 260 m south of Pit 4 and adjacent to Pit 2, which yielded 138.21 carats from 94.0 t for a grade of 1.47 c/t in 1998. There had been a concern in the 1998 bulk sampling program that due to weather and limited daylight conditions, the kimberlite sample taken had been diluted to a degree by host rock. Earlier this year, the bulk sampling program was extremely articulate in sampling kimberlite only: obviously, in a mining configuration dilution is to be expected. Perhaps, as we have seen at Ekati, the chance of large stones increases with larger tonnages extracted. At say, 1,000 tpd, 1.8 c/t, and $100.00/carat, Snap Lake would have an annual pre-tax operating profit of US$45-50M. Last year, the H.A. Simons scoping study put the capital cost of this scale of operation at about C$100M. Friday's release notes that the dike extends approximately 2.0 km in a northerly direction and is about 2.5 km down-dip (to the ENE) with an average thickness of 2.5 m (or 8.2 feet). Winspear stated that the 5M t resource, for the basis of a feasiblity study, has been confirmed in the 1998/99 drill program. Within the bounds of the dimensions above, we believe that a dimension of 1,000 m x 1,000 m x 2.3 m would generate a geologic resource in the order of 8-10M t of kimberlite with an in-situ value of US$1.8B, and this may only be a portion of the story. There have been prognostications that below Snap Lake the diamond stability field is in the order of 300-350 km; at Lac de Gras, it is postulated to be 200-220 km (some of us may visit these terrains in our later days). It is also thought that diamond growth patterns are enhanced at such great depths beneath the deep-keeled crustal cratons. The next results, from Pit 3, are anticipated by late July (260 m south of Pit 2 - 1.47 c/t). One might speculate that in view of the 1998 results, Pit 3 results might be quite interesting. All said, we think we have a new diamond mine for the Northwest Territories with some interesting neighbours to the east (Monopros-De Beers/Mountain Province, etc.) and a joint venture partner in Aber Resources (ABZ : TSE : $11.00). The phenomena of Internet-day traders, et. al., may result in a correction in Winspear and possibly Aber, but that is not our game. After Ekati, we potentially see another four diamond developments in the NWT- the only games in town. We recommend buying Winspear and Aber on any pending weakness. David James, P.Eng (204) 988-9602