Hello Frank
A few weeks back we had a brief discussion about diamond juniors with short to medium term potential and I promised to get back to you.
To preface my remarks, please note that I don’t follow many of the plays you listed in your post Message 20908869, therefore, while it is possible I’ve overlooked a few diamonds-in-the-rough so to speak, I am reasonably confident there aren’t too many (if any) with significant exploration/mine potential that haven’t caught my eye. I also haven’t considered any plays with principal diamond properties outside Canada for the reasons I have discussed at length in previous posts, but most particularly, because Canadian/US investors simply don’t reward them.
As most folks on the thread know, just about all diamond juniors active in the Canadian Shield will pop to some degree between December and May (and in some cases well into the summer) for one or more of the following reasons:
1. Tax loss selling season is over and many diamond juniors are preparing to commence their spring field seasons (narrow windows when temperatures are above –20, lake ice is thick enough to drill from and day light lasts more than four hours), and
2. For a number of promotional reasons, some plays are simply more popular, hence more closely followed and speculated in by an active investor community, and
3. Some share floats are limited and/or tightly held by large institutional investors thereby magnifying the pop potential on any exciting field results, and
4. For a number of reasons, some plays have inexplicably low MCs by comparison with piers offering the same and in many cases far less economic deposit potential, and
5. Some plays are managed and/or significantly owned by well recognized names who have previously found economic Kimberlite (pipes), and
6. Some plays are near, next to and on geologic trend with developed or developing mines of significance, thus suggesting targets are more likely to be economic pipes than pipes in unproven locals, and
7. Some plays have targets that do not appear to be on any previously identified craton (cool thick, undisturbed mantle root zones), and
8. Some plays have interesting even exciting economic deposit potential, however management either has little to commend it and/or has its focus elsewhere, and
9. Some plays have dikes as their principal resource while others have one or more small pipes making economic deposit more difficult to establish, and
10. A few plays have one or more larger pipe targets or pipes promising lower ore to waste stripping ratios, higher volume open pit operations, faster paybacks and greater takeover interest/potential, and
11. Some plays are nearer to well developed infrastructure than others and/or are able to be explored/developed over more than just a few months of supportive weather, and
12. Due to delayed completion of lab results on either DIM samples and/or core micro/macro diamond counts, exciting field results from last year are anticipated and/or will be announced between January and May, and
13. Multiple coincident mag/EM (and/or gravity) +2 to +8 hectre pipe targets immediately up-ice of outstanding mineral geochemistry trains, will be drilled later this spring or summer, and
14. Multiple coincident mag/EM (and/or gravity) +2 to +8 hectre pipe targets are currently being drilled immediately up-ice of outstanding mineral geo chemistry trains, and
15. Kimberlite fragments and/or boulders have been found and proven to contain outstanding G10’s and/or high micro and/or macro diamond counts, and
16. Near large circular mag/EM targets, RC cores have been pulled containing thick green Kimberlitic clays, Kimberlite fragments, Illmenites and/or excellent quality G10 pyropes exhibiting kelphitic(sp?) rims and several micro or macro diamonds, and
17. From several large circular targets, deep Kimberlite cores have been pulled exhibiting numerous large eclogitic nodules, little country rock and numerous obvious large pyropes (and/or diamonds :-)
18. Ten to fifty kilogram RC Kimberlite samples have been tested and found to contain micro/macro diamond count ratios suggestive of potential for diamond grades similar to operating and/or developing Canadian mines, and
19. Ten to fifty kilogram Kimberlite samples have been tested and found to contain the occasional or more than occasional yellow, pink or blue fancy macros…
20. A mini-bulk sample produced 1,000 to 25,000 carats examined by an established firm of diamontaires(sp?) who assigned a preliminary generalized value of approximately $75/carrat or better, and
21. A Feasibility Study is near completion and/or a Water Licence and other permitting has been issued, and
22. A major will be making a takeover offer for a junior or a buyout of one of its properties that has proven to offer excellent economic potential…:-)
23. And some plays are managed and/or partnered with major diamond miners who don’t make a habit of speculating in lost causes…
Like most speculators, I attempted to weigh the aforementioned against what I know about each play then narrowed my list to those few that I feel the market has failed as of mid December, to award appropriate share values and/or whose downside risk is far lower than their upside potential.
The most obvious of these undervalued plays has already been thoroughly discussed in numerous posts. Up until December, I thought it premature to speculate in MPV however with the impending completion of DB's FS and MPV’s continuing low MC, the timing is undeniable. There is little downside risk at current prices and while I don’t see potential for extreme appreciation, my back of the envelope guestimating suggests potential for a 3X pop upon or in anticipation of a DB’s offer. In that regard however, I don’t anticipate more than that and would be surprised to see a DB’s offer countered by another major as DB’s is in the catbird seat.
Based on a recently posted comment I suspect my second choice, MTX, will surprise you, however, I like it for a number of critical reasons related to Issues #1 + #3 through #7 and #10 through #13.
My third choice, SRM, is commended by Issues #1 + #3 + #4 and #10 through #16, and #23
My fourth, DDN, needs little discussion as it is heavily followed by the mining media and many on this thread. Having said that however, because DDN’s principal play is a dike with a few apparent blows and small pipes, their deposite would normally not draw my interest, however, management's consistent reporting that roughly 20% of recovered diamonds appear to be fancies many of which fall into the highly marketable “pink” category, suggests good potential for economic if not highly economic average carat valuations perhaps better than Snap Lake's $76/carat average. This combined with the fact that DDN is carried to production by Teck and is concurrently partnered with several majors on other highly prospective ground for economic pipes, offers good potential for the short and medium term. However, as DDN has already moved quite a bit, unless one of its Nunavut partners announces some pipe finds late this summer, I don't anticipate that its near term % pop potential will be as high as the others.
Finally, under the banner, “total speculation”, I currently hold one mid to long term play that recently announced very interesting kimberlite news, however, I must admit that I bought CD less for its Greenland diamond potential than for its Nevada Au and significant Far East massive sulphide deposits. At current prices I see little downside risk and like MTX, Chuck Fipke is a major participant and exploration director.
Using your MC comparison post Frank, I find the MC of MPV very interesting in comparison to say TAH or SGF’s. Concurrently, I find the MC of MTX very interesting in comparison to the elevated MC’s of SWY, ACA, DSP, TWG and SDM and I find the MC of SRM very interesting in comparison to the MC's of SWY, DDN & SDM.
In short, I find it difficult to see why MPV, MTX and SRM do not reflect the MC’s of their pier plays considering they have more potential to commend them.
Discounting what promotion and unforeseen buyout news may do to offset or augment the effect of field results, on a percentage basis, I believe these three plays offer the greatest short to medium term pop potential of any of your basket of Canadian diamond juniors. Of these three, I believe MTX has the greatest % pop potential due to a limited float, high institutional holding, current (as I write) drilling campaign consistently intersecting Kimberlite derived clays containing macros, nearby DB’s mine, Ontario local, phenomenal G10 geochemistry and larger mag/EM targets.
News of an MTX Kimberlite intersection will spike its share price faster and higher than anything we have previously seen on Canadian diamond plays.
My two cents.
Good luck,
Vaughn |
