Hamsters love beer.
As far as drilling at you know where, if that is Yamba, this WillP review is revealing,...
Tanqueray et al keep the faith at Yamba
SouthernEra Resources Ltd SUF
Shares issued 29,666,865 Apr 22 close $4.73
Tue 23 Apr 2002 Street Wire
See Tanqueray Resources Ltd (TQY) Street Wire
by Will Purcell
One of Canada's oldest diamond plays has a new lease on life, thanks more
to the tenacity of SouthernEra Resources than any newfound encouragement.
The company first started looking around the Yamba Lake property in 1998,
taking up the challenge after several other explorers had failed to find
much promise on the 60,000-hectare block, about 40 kilometres
north-northwest of the Ekati diamond mine.
SouthernEra recently reworked its deal with the property owners, Mill City
International, Tanqueray Resources and Techsite Strategies Corporation, and
that deal could ensure that SouthernEra will maintain at least a nominal
presence at Yamba for the next few years. SouthernEra can now earn a
60-per-cent stake in the project by delivering a bankable feasibility study
by the end of 2006 and an additional 5 per cent by arranging the financing
required for a mine, but a key aspect of the agreement requires SouthernEra
to spend at least $300,000 per year over the five-year life of the deal.
Under the previous arrangement, which was made in the summer of 1998,
SouthernEra was required to spend $10-million on exploration by the end of
this year, in order to earn a 51-per-cent share in the Yamba play. Although
the company had started off with its financial guns blazing, SouthernEra's
effort had dwindled in recent years, and its cumulative exploration bills
at Yamba had reached about $3.5-million by the end of 2001. As a result, it
seemed certain that the company would fall far short of the required
expenditure, but the rejigged deal suggests that the company still sees
glimmers of hope for the Yamba project.
The Yamba play lies in the gap between the successful Lac de Gras region,
which will soon have two highly profitable diamond mines in operation, and
the developing North Slave region in Nunavut, which hosts the potentially
economic Jericho pipe, as well as several new kimberlite finds further to
the northwest, near the Coronation Gulf, which recently stirred the
market's interest. In comparison, the area to the north of Lac de Gras and
just south of the Nunavut border is now fairly quiet.
It was not always that way however. In the early 1990s, the Ranch Lake and
Yamba plays were big news with speculators. For a time at least, the market
bought into the two promotions in a big way, and waves of interest
propelled Ranch Lake and Yamba to a stature that challenged the Diavik
project to the southeast, at least until the wheels fell off the
promotional machines of Tanqueray and Mill City, as well as Lytton
Minerals, which owned the Ranch play.
The Ranch Lake play took wing in the spring of 1993, when Lytton teased the
market with frequent updates about a new kimberlite find about 75
kilometres to the northwest of the main Ekati pipes. The peak of the
largely European promotion coincided with news that the large Ranch Lake
pipe was diamondiferous. Lytton was clearly bubbling with enthusiasm when
it revealed that it had recovered 44 small diamonds from a kimberlite
sample that weighed about 208 kilograms. At first, Lytton neglected to
mention the size of the sample, but the regulatory authorities soon
corrected the oversight, and the Ranch promotion began a long, gradual
decline. At its peak, just before the diamond counts were revealed, it cost
$6.75 for a Lytton share. That was promotional nirvana, as there were about
80 million Lytton shares outstanding, which gave the company a market
capitalization of about $540-million on little more than hope and hype.
The death knell appeared to sound for the Ranch Lake play in the spring of
1994, when Lytton's 28.45-tonne mini-bulk sample returned 112 diamonds
weighing just 5.384 carats, which indicated a grade of only 0.19 carat per
tonne. Lytton's Desmond Alexander put the customary spin on the
disappointment, suggesting that a larger bulk sample might still be
warranted. One of the reasons offered for Lytton's continued optimism at
Ranch Lake were the results of its geochemical program. In particular,
Lytton held up the garnets from Ranch Lake as evidence that the pipe could
have a grade of up to 0.50 carat per tonne. The larger bulk sample never
came to pass, at least not yet, but talk of promising indicator mineral
chemistry was to become a familiar refrain from a number of explorers in
the region for several years to come, and it is a chant that sustains the
Yamba play to this day.
Lytton was certainly not the only company that met with promotional success
in the region. Mill City and Tanqueray managed to get a great deal of
mileage out of the Torrie pipe, which was discovered on the Yamba Lake
property in the summer of 1993. The initial diamond counts from Torrie
seemed encouraging, and more promising than what the first sample from
Ranch Lake was to provide. The Torrie sample yielded 191 diamonds,
including 39 macro-sized stones, and the partners did not have to be
prodded to reveal that the rock weighed 160 kilograms.
That provided a bit of excitement, and the discovery of a few more
kimberlites in the immediate vicinity of Torrie added to the apparent
prospects. Charles MacDonald's Tanqueray and James Brown's Mill City
promptly stoked their promotions and investors were certainly in a
receptive mood to receive their pitches. Mill City's stock hit a peak of
$2.75 in the early summer of 1994, and with about 33 million shares
outstanding, that gave Mill City a market capitalization of about
$90-million. Meanwhile, Tanqueray's shares soared even further, hitting a
high of $5.37, although its promotion seemed to lag behind that of its
partner. With about 10 million shares outstanding, Tanqueray had a market
value of about $50-million, just a bit better than half of the value of
Mill City at its peak, although at least a part of the difference probably
came from a number of other quite promotable plays that Mill City had on
the go at the time.
It was not just investors that were attracted to Yamba Lake by the promise
of diamonds. Whether it was the initial diamond counts, or the geochemistry
of the indicator minerals, De Beers was sufficiently enamoured with the
play that it agreed to what seemed a sweet deal for Tanqueray and Mill
City. In exchange for a 51-per-cent share of Yamba, the diamond giant
agreed to pay the way and to buy $4-million of Tanqueray and Mill City's
stock.
As part of its preliminary work, De Beers took a 24.5-tonne mini-bulk
sample from Torrie, but the program was a dismal failure. Just 19 stones
were recovered, weighing a total of 0.635 carat, which indicated a grade of
about 0.026 carat. Coming just a few weeks after the Tli Kwi Cho bust, the
diamond play in Canada's North took another beating. De Beers first imposed
harsher terms on its partners, then it walked away entirely, and Yamba
seemed ready to fade away.
It did not turn out that way however. Yamba Lake got a new partner in the
summer of 1996, when Cypango Ventures, now known as Techsite Strategies,
took up the challenge. Cypango was never mistaken for De Beers, but the
company did manage to make another discovery on the Yamba property. As
well, Cypango poked around the Torrie find one more time, hoping that De
Beers had missed something. Cypango did manage to get a good promotion
rolling with several northern diamond plays. The stock peaked at $3.79 in
the spring of 1996, but there was little good news from the Yamba play to
help sustain that momentum. None of the diamond counts from Torrie or any
of the other pipes offered much hope.
Once again, Yamba seemed about to expire, but in the summer of 1998,
SouthernEra decided to take up the challenge. The Cypango option deal was
not set to expire for more than a year, although it seemed unlikely that
the company would meet the $5-million expenditure required to earn its
interest. Nevertheless, the three partners were eager to add a fourth that
had deeper pockets, and Cypango took a 22-per-cent share of the play in
exchange for canceling its option.
Since then, talk of Yamba's excellent geochemistry has been a rite of
passage for SouthernEra's shareholders, as each spring, the company has set
out to solve the riddle of the great indicator minerals juxtaposed with the
meagre haul of diamonds from all of the Yamba pipes. SouthernEra set out
like it might actually spend the required $10-million, collecting more than
1,000 till samples through the remainder of 1998, which led to more
sampling, a round of geophysics and drilling the following year.
SouthernEra's drill program added to the mystery. A new pipe was
discovered, but it yielded just one microdiamond. Two older finds were
tested yet again, as though the company refused to accept the disappointing
results obtained by others. The new drilling fared no better however, as
just a few diamonds were recovered.
SouthernEra spent about $2.5-million on Yamba in its first 18 months, but
things slowed down after that. Nevertheless, the company did manage to
spend another $1-million over the following two years, although it received
little for its effort. SouthernEra did turn up a tiny kimberlite dike in
2000, when it drilled six targets. The dike did not warrant a closer look,
and the five other targets were duds. The company drilled four new targets
in the summer of 2001, but all of them came up empty.
Through it all, SouthernEra managed to keep a brave face, and it continued
to tout the apparent great geochemistry as its official reason for
persisting at Yamba. That persistence now seems likely to continue at least
a modest pace into the future. The company has six new targets that are now
being drilled, as hope springs eternal at Yamba Lake.
Hope has also been renewed at Ranch Lake. Lytton has now become Tahera
Corporation, which managed to entice BHP Billiton into taking a look at
Ranch and the rest of the ICE property. BHP can earn a 55-per-cent stake in
Ranch Lake by starting a 200-tonne mini-bulk sample by next summer and
advancing the project to feasibility. As well, BHP can earn up to a
65-per-cent share in any new finds on the remainder of the property, if it
completes a feasibility study on a new discovery.
Back at Yamba, a new diamondiferous kimberlite would certainly be great
news for the three junior partners, who are in dire need of a good
promotion these days. Mill City closed down one cent on Friday, at just
four cents. The company's shares last had a bit of a run in early 2000 when
Mill City tried its hand at selling diamonds over the Internet. That sent
its shares to a high of 33 cents, and the venture achieved a tiny bit of
success, providing net income of about $150,000 in about a year. Mill City
had to shut down the operation last summer, when it was sued over some
apparent faulty credit card transactions. Late last year, Mill City settled
the dispute out of court.
Tanqueray has not been faring much better of late, although its stock
jumped five cents on Friday, closing at 10 cents, it gave four cents back
on Monday. The company has recently joined the Nunavut diamond play,
although it will have to come up with some cash if it actually hopes to
mount a serious exploration program on its Coronation property. Techsite
also managed to post a gain on Friday, adding three cents to close at 10
cents. It too came back to earth on Monday, giving back every one of the
three pennies it added on Friday. |
