Hi Marcos,
I remember you from the old WSP thread:)
Here's the latest on Diamondex DSP.V by Will Purcell. Oh the memories it all brings back:)
Diamondex continues the hunt at King
Diamondex Resources Ltd DSP
Shares issued 20,806,257 Dec 6 close $0.70
Thu 6 Dec 2001 Street Wire
by Will Purcell
Randy Turner's Diamondex Resources has a potentially hot new diamond play
in the North Slave region of southern Nunavut, and the company still has
high hopes that it will find an economic slice of the Snap Lake dike system
on its King property. The dike was discovered in 1996 by Mr. Turner's
Winspear Resources and acquired by De Beers through a hostile takeover bid
for Winspear. Since then, Mr. Turner has been hunting for another slice of
the rich dike.
A frantic round of drilling by Winspear in the summer of 2000 allowed the
company to double its global tonnage by extending the dike to the north and
east, and it also sparked hopes that the dike would extend northeast across
the property line, onto ground held by Kalahari Resources and SouthernEra
Resources, and to the north onto the King property, which was owned by
Diamondex.
Little had happened at King in recent years, but once Mr. Turner agreed to
accept a revised offer by De Beers, that changed. Hopes were high for
Diamondex early this year, even though SouthernEra's drilling program had
failed to provide an encouraging intersection. SouthernEra drilled one hole
near the southwestern corner of the MacKay Lake property and hit a
20-centimetre section of the dike, but a second hole about 800 metres to
the east came up empty.
Nevertheless, speculators hoped that Diamondex would fare far better with
its drill program, and Diamondex shares traded at $2 during the winter
months, as the drill program began. Diamondex hit kimberlite with its first
two holes, but the intersections were not as wide as Winspear had been
finding to the south. The first hole encountered 17 very narrow dikes,
varying in width between two and 33 centimetres. In all the intersections
added up to about 1.66 metres, but that was over an interval of about 60
metres. The second hole brought better news, as eight dikes intersections
were encountered. Once again, most of them were quite narrow, but one of
them was 1.63 metres thick, and all eight added up to 2.56 metres. That
provided hope that holes further to the west and north would provide still
thicker intersections. Diamondex shares drifted lower on the news, as
shareholders began losing faith -- and interest -- in King.
Things did not get any better through the summer and fall, as Diamondex
continued to hit kimberlite, but without the thicker intersection that most
were hoping for. The third hole encountered a 1.21-metre dike, as well as
seven others that were just a few centimetres thick. Three additional holes
were drilled through the summer, but the results remained lacklustre. One
hole was abandoned due to drilling problems, and the remaining two hit
kimberlite dikes, but they apparently were not worth touting. When all was
said and done, Diamondex had core samples from four holes that were worthy
of being shipped off for microdiamond recovery by caustic fusion.
The diamond counts from those samples would seem to confirm that the dikes
encountered by Diamondex are part of the Snap Lake dike system. In all, the
Diamondex samples weighed 56.52 kilograms, and 346 diamonds were recovered.
Of those, 235 were large enough to remain on a 0.15-millimetre mesh, or
about 4,150 stones per tonne. That result is strikingly similar to the
initial diamond counts from the Winspear portion of Snap Lake. By early in
1999, a total of 5,413 of the 0.15-millimetre stones had been recovered
from 1,416 kilograms of kimberlite, or about 3,820 per tonne.
The diamond recoveries seemed similar with larger stone sizes as well. A
total of 65 of the Diamondex diamonds remained on a 0.30-millimetre screen,
or about 1,150 stones per tonne. That compares with 1,330 diamonds
recovered by Winspear, or an average of 940 per tonne. The results are
quite similar even at the largest sieve size, although the numbers are so
small that the chance for error is large. Diamondex recovered two diamonds
that remained on a 1.18-millimetre mesh, which mathematically suggests that
the kimberlite would contain about 35 stones per tonne. Winspear recovered
51 diamonds that remained on the largest screen, or about 36 stones per
tonne.
Some of those 51 larger macrodiamonds were quite large. In its initial 1.4
tonnes of core samples, Winspear recovered three larger diamonds. The
largest weighed 0.747 carat and the three stones weighed a total of 1.9
carats. That result seemed to confirm that the result of the mini-bulk
sample was no fluke, and that the grade of the Snap Lake dike was quite
consistent.
That continues to be the case. Subsequent samples provided a sufficient
array of diamonds that an estimate of the grade of Snap Lake was prepared,
based on the microdiamond recoveries and the bulk samples that had been
completed. In all, the grade of Snap Lake was estimated to be about two
carats per tonne.
That was a bit higher than the result of a 6,000-tonne bulk sample. Part of
the increase was likely due to the inefficient recovery of the smallest
diamonds, but a second reason for the increase seemed to be a trend toward
higher grades at depth. Although the information available is rather
sparse, that trend is apparent in the recovery of 0.30-millimetre diamonds
by Winspear. The company recovered those stones at the rate of about 940
per tonne over the northwest peninsula, but the rate of recovery increased
along the northern portion of Winspear's dike. Samples taken from the
portion of the dike along and north of the northern shore of Snap Lake
contained about 1,080 of the 0.30-millimetre diamonds per tonne of
kimberlite, an increase of about 15 per cent.
The latest Diamondex diamond counts are from a region about two to three
kilometres to the north of Snap Lake, and although the samples are small,
the trend toward higher diamond counts is evident. The population of
0.30-millimetre stones seems about 20 per cent higher at King than on the
northwest peninsula, with about 1,150 of the 0.30-millimetre diamonds per
tonne.
All of that would seem to suggest that the grade of the King portion of the
Snap Lake dike system is also two carats per tonne, or a bit more. That
would be good news for Diamondex and its shareholders, if the dike were
actually thick enough and extensive enough to be mined economically. With
just the narrow intersections over an area 1,500 metres from east to west
and 1,000 metres north to south, the market failed to show any signs of
excitement at the results.
Nevertheless, Mr. Turner remains a believer in the chances of King.
Although the drills failed to find a thicker portion of the dike, Diamondex
is still waiting for the results of the seismic survey that was completed
earlier this year. Those results are now expected in the first half of
January, and Mr. Turner thinks that seismic surveys will ultimately be the
key that unlocks the mystery of Snap Lake.
The two dimensional seismic survey was a joint project with de Beers, in an
attempt to see if the survey can identify the dike at depth. If that proves
successful, the next step would be a three dimensional seismic survey. Mr.
Turner said that he believed that a 3-D survey would identify areas where
the dike pinches and swells, and it could prove to be effective at locating
the elusive source of the Snap Lake kimberlite, as well as any significant
bulges or blows in the dike. All of that seems to be pointing toward
another round of drilling at King next spring, with the location of the
holes selected as a result of the seismic work, rather than simply drilling
on a grid and blindly hoping for the best.
With diamond counts as good as or better than most of the Winspear cores
provided, and with high hopes that the seismic work will point the way, the
tenacious Mr. Turner is now making plans to throw a few more million
dollars at his Snap Lake hunt. That might come as a bit of a surprise to
some of the company's shareholders who believed that the King project was
drawing to a close, but Mr. Turner is not likely to abandon the play until
all avenues have been explored. "I like what I see," he said. "It is there,
the source is there." Whether Diamondex can turn up the elusive source for
all of Snap Lake's kimberlite, or even a few blows and swells with suitable
tonnages remains to be seen, but history would suggest that Mr. Turner is
unlikely to walk away from King at this stage.
That stubborn streak paid off with Winspear. Mr. Turner pursued the
possibility that a kimberlite dike might be an economic source of diamonds,
although believers in the play were few and far between. Winspear had
discovered the Snap Lake dike almost by accident. In the fall of 1995, a
promising train of indicator minerals led the company to the area, and a
shallow drilling program turned Snap Lake into Swiss cheese hunting for a
kimberlite pipe, to no avail. What Winspear's drill ultimately turned up
was a number of kimberlite dike intersections in the spring of 1996, and a
number of kimberlite boulders scattered around the shore of Snap Lake.
Mr. Turner seemed to be a believer in Snap Lake from the start. The
boulders proved to be significantly diamondiferous and the hunt continued.
Winspear originally owned a one-third share of the property, but that grew
to 57.3 per cent when Winspear merged with Antler Resources. That deal put
Winspear and Mr. Turner in the driver's seat, and exploration continued at
a steady pace.
The Snap Lake dike was just beginning to look like it might be an extensive
sheet of kimberlite by the spring of 1998, and Winspear laid plans to take
a 200-tonne mini-bulk sample of kimberlite to test the dike for its
macrodiamond content. By then, Winspear had spent about $4-million on the
Camsell Lake property with little to show for it and the patience of
analysts and shareholders was beginning to wear thin. Newsletter writer Bob
Bishop had long been a supporter of Winspear, but by the spring of 1998 he
had had enough as his frustration with the lack of results took its toll.
Also fed up with the Snap Lake exploration program was Winspear's partner,
Aber Diamond Corporation. When Mr. Turner laid plans to spend another
$2.7-million on drilling and the mini-bulk sample, Aber begged off, leaving
Winspear to go it alone. As a result of Aber's reluctance to pony up
another $1.1-million, the company gave up about 11 per cent of its interest
in the project. That came back to haunt Aber, as the mini-bulk sample was
successful beyond expectations, and subsequent work indicated that the Snap
Lake dike would support a very profitable diamond mine for decades. Aber
ultimately sold its interest to De Beers for $173-million, and the price
tag suggested that the 11-per-cent share would have been valued at about
$60-million.
Aber was not alone in its pessimism. Winspear's shareholders were also
dropping like flies at the time, and the stock slumped to a low of just 43
cents in June of 1998, less than two weeks before the initial results of
the mini-bulk sample were released. By the end of June, Winspear had hit a
high of $2.04, and suddenly the market abounded with believers in the
potential of the Snap Lake dike.
The current crop of Diamondex shareholders undoubtedly hopes that history
will repeat itself, but finding an economic supply of kimberlite on King
could be a difficult, time consuming and expensive task. Nevertheless, Mr.
Turner seems as committed to the attempt as ever. Diamondex closed
unchanged Thursday, at 70 cents.
(c) Copyright 2001 Canjex Publishing Ltd. stockwatch.com |
