Major General Resources Ltd MGJ
Shares issued 39,262,163 Sep 9 close $0.16
Thu 9 Sept 99 Street Wire
Also Ascot Resources Ltd (AOT)
MAJOR GENERAL UPDATES SNOWY OWL
by Will Purcell
Major General Resources and Ascot Resources Ltd. recently received the initial results of the spring drill program undertaken on their Snowy Owl pipe on Victoria Island, Nunavut. The Victoria Island diamond project is operated by Monopros Ltd., who can earn a 51-per-cent interest by spending $2-million in exploration by early 2001. Should Monopros complete its earn-in, Major General and Ascot would each retain a 24.5-per-cent share. A total of four holes were completed into the Snowy Owl kimberlite this spring, to a maximum depth of about 150 metres, resulting in 438 kilograms of sample being submitted for microdiamond recovery by acid dissolution. A total of 790 diamonds were recovered, but over half of them originated in one 22 kilogram batch. The De Beers processing laboratory suggested that these 417 microdiamond fragments may have resulted from a larger stone being crushed. The joint venture also stated that a total of four macrodiamonds were recovered which were sufficiently large not to fall through a 0.5-millimetre square mesh.
Earlier results from Snowy Owl were quite similar. Sample weighing 88 kilograms was found to contain 90 diamonds, of which five were considered macrodiamonds. In this case, the joint venture was using the more common Canadian definition, whereby any diamond with one dimension in excess of 0.5 millimetres was classified as a macro. It is not known if any of these macrodiamonds would meet the more stringent criteria used for the current results.
The earlier results, with drilling confined to the topmost 20 metres of the body, suggested that just over one diamond was present per kilogram. The current results suggest a higher rate, with 1.8 diamonds recovered for every kilogram of kimberlite processed. If the 417 fragments are discounted however, the rate declines to 0.85 diamonds per kilogram. The 1998 results indicated that one macrodiamond was present for every 18 kilograms of sample, but the current results show only one macro per 110 kilograms of kimberlite. Much of the difference is due to the different definitions used, however. Given the size of the sample, the lack of any larger macros being reported is certainly a disappointment. The image of over 400 diamond fragments might immediately conjure up the image of a large gemstone in some minds, but the reality is that the fragments may well have originated from a fairly modest sized macrodiamond, perhaps even smaller than 0.05 carats. Until further information is released, speculation as to what size the stone may have been is pointless.
Major General director and senior technical advisor, Bernard Kahlert, described the current results as being very consistent, and noted that the large number of fragments from one 20-kilogram sample may indeed have been a larger stone that had been crushed in the recovery process. He had no comment as to how big such a stone might have been. Mr. Kahlert said that the company was waiting for more detailed information on the Snowy Owl results, and noted that, ?Monopros?s objective this year was to get enough microdiamonds to do a statistical analysis.? He believes that the number of diamonds recovered will be sufficient to perform a meaningful analysis. The statistical process involves plotting the frequency of occurrence of different diamond sizes, and projecting the curve to larger sizes. In this fashion, Monopros will have a general idea of the rate of occurrence of larger, commercial sized, diamonds in the Snowy Owl pipe, without having recovered any such stones. Mr. Kahlert stated that Major General may well perform such a statistical calculation themselves, once sufficient data is available. The current results did not contain a breakdown of the diamond recovery by size classes. Mr. Kahlert said that the release of the results was approved by Monopros, which might suggest that a more detailed offering, such as was released last year, should not be expected. Based on the current results, and those released earlier, the chance of Snowy Owl hosting an economic deposit appear slim. On a combined basis, the total numbers of diamonds remains a healthy 8.8 diamonds per 10 kilograms. This value compares to 14.8 diamonds per 10 kilograms for the Diavik A-154 south pipe, which has an overall diamond grade approaching five carats per tonne. Two tonnes of A-154 south kimberlite, a sample only four times larger than that from Snowy Owl, contained nearly 1,100 macro diamonds however, and the kimberlite clearly displayed its ability to produce commercial sized stones, with 11 diamonds recovered that were larger than 0.2 carats, including three larger than one carat. A 1.38-tonne sample from the multiple-phase Diavik A-21 pipe contained only 7.9 diamonds per 10 kilograms, but 300 macros were recovered, including three larger than 0.2 carats. It appears very unlikely that any diamonds larger than 0.2 carats were recovered from 526 kilograms of Snowy Owl kimberlite, and the number of diamonds recovered with one dimension exceeding 0.5 millimetres was probably less than 30. The hopes for Snowy Owl may well ride on the ability of Monopros to reconstruct the broken diamond, a process Mr. Kahlert described as ?putting Humpty Dumpty together again.? The Snowy Owl results were the first of a series of microdiamond recovery results expected over the next few months, and were apparently processed first as the pipe had produced the most encouraging results from the Victoria Island project to date. Mr. Kahlert said that the De Beers laboratory in Kimberley, South Africa, processes samples from around the world, and can only process a certain amount on any one day. The samples are prioritized by De Beers, and processed in order. He said that he was hoping further results would be available by the end of September, but there were no promises from Monopros as to when the results would be available.
The recently completed diamond drill program had consisted of eight holes, totalling 854 metres. The Golden Plover and Longspur kimberlites were each tested with one drill hole each, and the remaining two holes were drilled into new targets, which resulted in the discovery of two new bodies. One of these targets appears intriguing. The Horned Lark kimberlite is located about 2.5 kilometres east of Snowy Owl. The one drill hole was drilled to a depth of 97 metres and intersected 78 metres of kimberlite. The vertical hole was abandoned in kimberlite, due to difficult drilling conditions. The second discovery, the Arctic Tern kimberlite, was apparently a dyke, and the holes drilled into the Golden Plover and Longspur kimberlites apparently intersected only dykes as well. Major General noted that an extensive kimberlite dyke system exists in the area, with seven separate northwest trending dykes found, totalling 15 kilometres in length. Mr. Kahlert said that he expects additional geological information to become available as well. The drilling last year was conducted with percussion drilling, which recovered only kimberlite chips, rather than the solid cores recovered by diamond drilling this year. Nevertheless, he said that the Snowy Owl kimberlite appeared to be from two facies, with both hypabyssal and crater, or pyroclastic kimberlite being present. Major General has been active elsewhere on Victoria Island. Ascot and the company signed a joint venture agreement with Dia Met Minerals Ltd. whereby Dia Met can earn a 51-per-cent interest in a portion of their large land holdings on the island. To earn its interest, Dia Met was required to pay $32,500 in cash, and must spend $7-million on exploration over the next five years. The 161,000 acre Mariner property block is currently equally owned by Ascot and Major General, while the remaining 480,000 acres which make up the Homerun blocks of claims are currently held solely by Major General. Dia Met is required to spend $2.5-million on the Mariner property, of which only $300,000 is required by the end of April, 2000. The company is required to spend the remaining $4.5-million on the Homerun claims, but only $200,000 of this amount is required by April 30, 2000. Earlier this year, Major General had optioned its 90,000 acre Yankee property to Hawkeye Gold International Ltd. Hawkeye had previously been conducting diamond exploration in Alberta, but chose to abandon the area in favour of better prospects on Victoria Island. The company can earn a one-third interest in the property, by spending up to $180,000 on exploration. The company could ultimately increase its holding to 50 per cent, by financing additional exploration in subsequent years. Mr. Kahlert said that his company was a little more bullish on the area than was Ascot, and had extended its claims in the area accordingly. Nevertheless, the objective of the joint venture with Ascot was to come up with a partnership with a senior company such as Dia Met. He said ?I think it?s great to have Chuck Fipke involved.? He noted that this was the first time that Dia Met was involved in such a deal, and he stated that Dia Met had conducted a fair bit of due diligence before entering into the deal. Mr. Kahlert said the current year?s program should see till sampling, and perhaps some magnetics being undertaken. He noted that Dia Met was very strong on geochemistry, and assessing how the kimberlites may have evolved in the mantle, stating that ?Chuck Fipke?s background is in indicator mineral chemistry?.
Mr. Kahlert said that the properties subject to the Dia Met option are located to the east, south, and northwest of the joint venture ground with Monopros, and added that portions of the properties were within 10 kilometres of the pipes discovered to date. He said that it was still an early time on Victoria Island, and stated that the prospect was at the same position as the Lac de Gras play was at in 1992. This appears to be so. The results from Snowy Owl were not a surprise, and considerable interest continues to exist in the area. The Major General properties are very large, not well explored, and have already demonstrated that they host a number of diamondiferous kimberlites. ?There is still a long ways to go?, said Mr. Kahlert, adding, ?I think we?re all happy.? Ascot and Major General may be happy, but the market appeared lukewarm at best to the news from Snowy Owl. Major General stock had been trading near 30 cents for much of last summer and fall, but rallied to as high as 47 cents in mid-May, on the news of the 1998 drill program, and of a potential gold prospect in Quebec. The stock subsequently slumped, trading below 22 cents for much of the summer. Major General closed Wednesday at 18 cents, down three cents on the day. Ascot shares rallied from a yearly low of 16 cents last September, reaching 46 cents in late April, but has also experienced a summer drop, reaching a mid-August low of 20 cents. Ascot closed Wednesday at 25 cents, unchanged on the day.
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