Bobby, wake up!, Poplar just got what they were waiting for a long time, an endorsement from David James at Cannacord, Diamond analyst. HEre is the detail
Poplar Resources Ltd -
Canaccord says buy
Poplar Resources Ltd
PPX
Shares issued 20748679
1998-04-27 close $0.28
Tuesday Apr 28 1998
David James says why
RECOMMENDATION
For about the past year we have monitored Poplar Resources' diamond
exploration activities in Finland and Sweden, which may still be considered early
stage projects, but more recently have become interested in the company's
kimberlite fissure/blow project interests in South Africa. The balance of this report
is descriptive. It would be misleading to represent that there is any economic
tonnage blocked off in conventionally acceptable terms on Poplar's projects in
South Africa. This is why the term "special situation" is applied to this report.
What can be seen is the potential for a total of perhaps 30km of kimberlite fissures
on the properties, some of which lie on strike with current producers and others
where past production has occurred. Record keeping for small scale, privately
owned, diamond fissure/blow mines is poor, and perhaps intentional in some
cases. In the past, most "exploration" was limited to manual prospecting;
conventional geophysical surveying such as low level, high sensitivity airborne
magnetics on closely spaced (75m) flight lines, followed up by ground surveys,
trenching, and/or drilling, have just not been done despite the low cost of this type
of work, particularly in South Africa.
Having got to know some of the Poplar Resources' personnel and briefly visiting
some of the fissure projects described here, Poplar appears to be a low priced,
speculative, "special situation" buy with a dedication to the diamond exploration
game.
INTRODUCTION
Through an affiliated company, Savannah Diamondfields (Pty) Ltd., Poplar has
exposure to two principal property packages that host substantial strike lengths of
confirmed and potential kimberlite fissures:
The Aardvark project covers some 7,556 ha along strike with the operating Star
mine of Messina Diamond Corp. and the Rex mine of Rex Diamond Mining, north
of the town of Theunissen (about 250km southwest of Johannesburg): five fissures
are known on the property with a combined strike length of over 20km.
The Darkly West project is about 45km north-northwest of Kimberley, where
two farms host 78km of potential fissure strike length. The Barkly West district
hosts Rex's Bellsbank and Ardo mines and numerous previous producers.
Poplar's third fissure/blow project is the 100 per cent owned Karmel project in
the southern Free State near the Lesotho border. The Karmel property hosts a
kimberlite fissure system with an 8km potential strike length, and was a producer
from a small pipe and a portion of a fissure.
While Savannah Diamonds' Aardvark-Theunissen project has seen limited past
production at what was known as the Lovedale pipe, essentially no
comprehensive geophysical surveying or exploration drilling has been carried out
to tie the fissure system(s) in with the two existing operations, and to possibly
confirm the existence of parallel/subparallel fissures not exposed in this
predominantly flat, agricultural terrain. Similarly, the Karmel property has not been
systematically explored (although De Beers has done indicator mineral work on
the fissure kimberlite), and the exposures seen are reminiscent of those at
SouthernEra's Klipspringer Leopard fissure, which we first visited in early 1996
(about one year after its "re"discovery).
We visited both the Aardvark-Theunissen area and Karmel projects early in
February. As exploration projects, a relatively small budget could upgrade the
economic potential of these fissures by detailed airborne and ground magnetic
surveying, diamond drilling, and mini-bulk sampling. Compared to certain of the
grassroots projects under way in the recently reviewed Alberta diamond "play",
Poplar's projects are already beginning with confirmed diamondiferous
kimberlites.
ABOUT FISSURES
Kimberlite fissures or dikes are intrusive bodies occurring along structural
weaknesses in the country rocks. The fissures or dikes studied in detail in South
Africa are systems or groups of en echelon to anastomosing (braided), interwoven
lenses that pinch and swell along strike. When one lens pinches out, the next is
found offset by several metres to the side of the first. Generally, the economic,
diamond-bearing kimberlite fissures in South Africa average 60-80 cm in width
and may be traced well in excess of 5km in strike length. The deepest mine
workings are over 600m below surface (limited largely by logistics), although the
kimberlites tend to maintain their size and grade to depth.
Since much of the above is poor plagiarism of work by J.J. Gurney and M.B.
Kirkley, Kimberlite Dyke (sic) Mining in South Africa (1996), a portion of the
mining description is lifted directly:
"Calcite veinlets which parallel the dyke margins, and kimberlite veinlets which
extend beyond the ends of lenses are locally used as tracers leading to
neighbouring lenses. Slickensides in kimberlite near the contacts with host rocks,
and fractures in host rock parallel to the contacts, cause the kimberlite to readily
fall out of the slopes as soon as material beneath has been removed. Although this
makes mining relatively easy (i.e., the dykes are said to mine themselves), dilution
of the ore by host rock is also a problem. Mining therefore is usually carried out
by driving tunnels in the host rocks parallel to the strike of the dykes, then running
crosscuts from the tunnels to access the dykes. Crosscuts are commonly 4-6m in
length and spaced 5m apart on levels at approximate 30m intervals.
Although small pipes and blows occur on some of the dykes described here, the
dykes have no direct associations with major kimberlite pipes. These dykes,
therefore, may represent feeders to pipes that have been eroded away, kimberlite
volumes and/or volatile contents which were too limited for pipe development,
and/or intrusions into host rock structures which were not conducive to pipe
development."
The question of mining dilution is something one wants to have articulated, as the
grade of the kimberlite fissure material is commonly diluted by a factor of 50 per
cent (grade is halved) by the time it reaches the plant. The fissure width and the
host-rock competency have most bearing on the dilution factor; the discovery of
an along-strike blow not only provides a tonnage boost but lowers dilution as well.
The Canadian diamond experience has seen diamond grades quoted in
carats/tonne (c/t) whereas most South African grades will be quoted as carats per
100 tonnes (cpht). Average carat values vary widely. Currently, the Star mine
production averages about $115 (U.S.)/carat, and Bellsbank/Ardo about $240.
An apparently widely accepted, traditional, all-in cash cost for fissure mining is
$25 (U.S.)/tonne. Simply put, a diluted grade of 25 cpht (100 per cent recovery)
and an average carat value of $100 might be about break-even before capital or
corporate considerations.
Most South African fissure mines are small, were developed with minimal capital,
and are currently running at break-even at best. The operations of Rex Diamond
Mining and Messina are undergoing modernization programs, and SouthernEra's
new Klipspringer project will hopefully be a model for medium-scale and
decidedly profitable fissure mining. The Poplar-Savannah projects are early stage
exploration ventures.
AARDVARK (THEUNISSEN) & BARKLY WEST FISSURE PROJECTS
(OPTION TO EARN 60 PER CENT)
Poplar Resources' project interests in the Theunissen and Barkly West areas are
through an affiliated company, Savannah Diamondfields (Pty.) Ltd. Poplar will
initially acquire a 45 per cent interest in Savannah by paying Minexco (Minx) and
Holland Park Holdings 1.0 million Poplar shares and spending $440,000 (U.S.)
on exploration. If Poplar proceeds, it will issue a further 1.0 million shares to Minx
and HPH and spend $1.5-million (U.S.) to increase its interest in Savannah to 49
per cent. By carrying out a bankable feasibility study, Poplar will increase its
interest to 60 per cent. (We would estimate the value of the shares issued plus the
required expenditures to total about $2.4-million (U.S.) to earn 49 per cent of
Savannah, and in the order of $6.0-million (U.S.) to complete a bankable
feasibility study, thereby increasing its interest to 60 per cent.)
The terms dike and fissure tend to be interchangeable when discussing the narrow
kimberlite intrusions which have pervasive strike and depth dimensions; in some
mining respects, diamondiferous kimberlite fissures are analogous to narrow,
vein-type gold deposits, with the exception that, although generally made up of
offset-lenses, the average widths and grades are maintained to depth. Individual
fissures have been traced for kilometres along strike and the continuing exploration
on SouthernEra's Klipspringer project in the Northern Province is demonstrating
that fissure systems can persist for tens of kilometres.
The Aardvark (Theunissen) Project
The Aardvark project is in an area about 14km north of the town of Theunissen,
where there are two mines currently operating, Rex Diamonds' Rex mine, and
10-12km to the east, Messina Diamond's Star mine. Savannah's property consists
of 39 farms covering parts or all of five, main (known), diamondiferous fissure
structures. The Rex mine began operating in 1986, and in recent years has been in
a development phase. In the year ending March 31, 1997, total production
amounted to just 5,156 carats, although plans were to increase ore production
significantly. The fissure material itself is believed to grade 50 cpht in situ, but is
diluted to a 20-25 cpht feed grade; carat values are believed to average over$200
(U.S.).
The Star mine is undergoing a two-year expansion/modernization phase. In 1997,
production is believed to have amounted to 13-15,000-plus carats, and 19,000
carats are targeted for 1998. Average carat values are near $115 (U.S.). The Star
mine is now being developed on the 440m level with new sloping taking place in
the upper levels of the East Star fissure to supplement production from the Byrnes
dike. Grades (diluted) run in the 38-45 cpht range. (The lowest working level had
been the 10th L at 400m; most fissure mines have not been worked below 600m
principally due to mining logistics).
Savannah's former Lovedale (or Theron) mine adjoins the Star property on the
east, with this past producer appearing to be the direct on-strike extension of the
Star fissures. The Lovedale pipe was mined as an open pit between 1923-1929
to a depth of about 45m, and had dimensions of 15-34m wide and 125m long.
Grade from the pipe (or blow) is not documented, but a 300-tonne sample taken
in 1965 from underground is believed to have yielded 75.5 carats. A reserve
estimate circa 1975 suggested a tonnage of over 2.0 million tonnes to a 365m
depth.
While the Lovedale property (aka Wynandsfontein option) may host as much as
4km of the main Byrne (Burns) fissure from the Star mine property, this remains
the subject of future exploration. It is also possible that undiscovered parallel
fissures also exist. Detailed magnetic surveying followed by drilling would be
straightforward and inexpensive. Currently, work has just begun on the
refurbishment of the lined 100m shaft at Lovedale with the view to dewatering and
extracting a 100-tonne sample for grade confirmation. It might be possible to use
the neighbouring Star plant for bulk testing. From our observations, the Lovedale
portion of the Aardvark project package might represent an early source of
production.
To the west of the Lovedale property is the Star mine (also on the Farm
Wynandfontein) with its three principal fissures: the Wynandfontein, East Star, and
Byrnes, along about 4km of strike length. West along strike from Star is the
Phoenix pipe, then another 3km is the Monte Leo pipe and the Rex property. The
Rex fissure system crosses the property for about 3.5km to Savannah's Farm
Sweethome, with the Thor blow in its eastern extreme.
Savannah's main group of farms, which hosts the Brak Laagte, Leliesdal,
Driekoppies, Retreat, and Hendriena fissures, are bounded on the north and east
by Gencor's Oryx and Beatrix gold mines and the Star property, and on the south
by Rex and the Farm Erfbloem. These fissure structures trend east-west to
east-southeast, and each may have potential strike lengths of over 5km on the
Savannah holdings. The terrain is basically flat-lying farmland and the definition of
the fissures is from air photo interpretation and old workings. Grade and
production figures are typically somewhat spotty from the small, privately run past
operations. What can be concluded is that the fissures are diamond bearing (from
limited mining of fissures and blows to limited depths), and that little or no
exploration has been carried out to trace the fissures across the property.
Savannah/Poplar has carried out a preliminary, ground, magnetic survey traverse
which shows that the fissures demonstrate distinctive, magnetic high signatures
against the background of the fairly benign, Karoo shale host rocks.
Low level, high-sensitivity, airborne magnetic surveying on perhaps 75m spacings,
followed up by ground surveying and diamond drilling, would be an inexpensive
approach to identifying fissure and fissure system locations, potential blows or
pipes, and width variability leading up to the bulk sampling stage. In the past,
exploration was limited to conventional prospecting: geophysics and drilling could
potentially quickly develop a resource picture at only a nominal cost.
The Barkly West Project
Savannah's Barkly West property consists of the Holsdam farm 5km northeast of
the town of Barkly West, and the Trenham farm 4km further to the east. (The area
is roughly 45km by road from Kimberley.) On the Holsdam farm, a kimberlite
fissure with a 3.6km minimum length and a 1.25-2.5m width is hosted by
Ventersdorp lavas. The fissure was partly mined between 1968-1975 to a depth
of 122m, and a previous mine manager suggested that the recovered grade was
between 14.5-18 cpht, of which 40 per cent was gem quality. It appears that over
300,000 tonnes were mined and closure resulted when falling diamond prices, and
consequently a lack of development, brought mining to an end; a familiar ending
for many small mining ventures. Recovered grades in the 1973-75 period are
believed to have been in the 19 cpht region, and considering that a 1996 tailings
recovery program yielded 8-15 cpht, the diluted head grade in this latter period of
mining may have been in the 27-34 cpht range. An "updated" carat value figure is
not available, but if one assumed $100 (U.S.)/carat, a small mine operating profit
might be achievable at, say, 30 cpht.
For comparison, Rex Diamond Mining's Bellsbank and Ardo (or Loxton) mines in
the area (both now in modernization programs) together produced 39,060 carats
at an average of $244 (U.S.)/carat in the fiscal year ending March 31, 1997. The
modernization programs involve increased security measures and increased ore
production through installation of locomotive ore transportation, (short) long-hole
sloping, a shortening of stope stabilization after blasting, improved access/egress
for labour, general labour reduction, and a centralized (localized) mine
management system. A new fresh-start mining development would involve
significant development capital, but could avert the problems inherited from
minimally financed private developments of the past: SouthernEra's Klipspringer
fissure/blow development in the Northern Province now in start-up hopefully will
prove this out.
Savannah's Trentham farm has old workings and (at least) two fissures which
intersect: a combined strike length of approximately 4.2km is present. Little is
known of these fissures; the property remains very much an exploration
proposition. Both the Holsdam and Trentham farms are prime candidates for
detailed geophysical surveying followed by delineation drilling, trenching, and bulk
sampling. Attendant costs would be nominal by Canadian standards, and if
successful, it is possible that established processing facilities in the Barkly West
district might be used.
KARMEL PROJECT, SOUTHERN FREE STATE (100 PER CENT
POPLAR)
Had one stood beside the two trenches that exposed SouthernEra's Leopard
fissure at Klipspringer two years ago, a sense of deja vu might have been
experienced in visiting Poplar's new Karmel fissure/blow project in the southern
Free State last month. The 7,500 ha Karmel property is east of the agricultural
community of Bloemfontein, almost to the Lesotho border. The terrain is rolling
farmland (currently an ostrich ranch), with an interspersion of rocky Lops
(hillocks). Poplar holds a 100 per cent interest in the Karmel project through a
wholly owned South African subsidiary, Karmel Diamond Holdings (Pty.), under
a three year prospecting agreement which entails an annual payment equivalent to
about $60,000; under an option to enter into a mineral lease agreement, the
mineral rights holders would have a 4 percent interest in pre-tax mine operating
profits.
The project can be described as a complex kimberlite fissure system with potential
to host 8km of fissure strike length, and a small previously mined pipe and a
potential blow. There are two east-west fissures exposed on the property: the
Southern fissure where limited small-scale mining was carried out by an open cut,
and the Dundee fissure which is exposed 5km to the east in a creek bed. The
Dundee fissure outcrop has a width of about 2m and does not appear to have
been test sampled. A small pipe (known as the Carmel pipe) was mined circa
1950 to a relatively shallow (yet to be determined) depth, but typically very little
information is available. To management's knowledge, no geophysical surveying
was carried out to trace the strike extent of the known fissures or to attempt to
identify new fissures/blows/pipes on the property. Low level, high sensitivity,
airborne and/or ground magnetic surveying would entail only a nominal cost. Bulk
sampling of the known Southern and Dundee fissures could also be completed
easily, with material possibly processed in one of the Barkly West or Theunissen
plants. Drilling off the depth extension of the Karmel pipe could also be an early
endeavour in this project.
When we look at the funds being spent at the grassroots, moose pasture stage in
the Alberta diamond play, the Karmel project, with annual prospecting fees of
$8/ha for ground with known, diamondiferous, kimberlite exposures, stands out in
sharp contrast and again we recall where Klipspringer was all of two to three
years ago.
SCANDINAVIAN/FINNISH DIAMOND PROJECTS
Prior to the acquisition of Calendonia Mining's mineral holdings in Norway,
Sweden, and Finland in November 1996, Poplar was principally in the oil and gas
business. About one year later, Poplar transferred all of its Scandinavian/Finnish
assets into a new, fully financed Norwegian subsidiary, North Star Diamonds A.S.
Poplar retains a 65 per cent controlling interest in this entity, and a group of
Norwegian investors have acquired the remaining 35 per cent in exchange for the
equivalent of 1.1 million.
In Sweden, North Star and its joint venture partner, Alcaston Mining of Australia,
have an application pending for exploration rights to 270,000 sq km of northern
Sweden. In early January, North Star entered an exploration agreement with two
prospectors who had discovered the first diamonds in Sweden in a lamproitic
glacial till boulder.
In Finland, North Star holds 100 per cent interests in 45 mining claims from which
till samples have been taken and are now being processed. Ashton Mining has
been exploring in Finland for over 10 years, and in February, Dia Met Minerals
announced a joint venture with Ashton covering two large exploration areas in the
eastern part of the country where 24 kimberlites (16 of which are diamond
bearing) have been discovered.
CORPORATE BACKGROUND/MANAGEMENT PROFILE
In November 1996, Poplar took over the Scandinavian diamond interests of
Calendonia Mining in exchange for 3.3 million shares. These shares subsequently
were acquired by a small group of private investors who remain supportive of
Poplar's diamond exploration efforts.
J. Lewis Dillman, Chairman
Mr. Dillman has 15 years experience in financing public companies in the resource
sector in both the U.S. and Canada. His current responsibilities include raising
capital for Poplar. He has a masters degree in international affairs from Columbia
University in New York, with a specialization in international banking and finance.
He is the founder, chairman, and director of Poplar Resources.
Cennen McDowall, President and CEO
Mr. McDowall is a geophysicist with extensive experience in diamond exploration.
His responsibilities include the development and direction of Poplar's global
exploration strategy for diamonds. He has worked primarily in Europe and Africa
for the past 23 years as senior geophysicist for Exploration Consultants (U.K.)
and as divisional geophysicist at Anglo American/De Beers, where he was
instrumental in the discovery of the Robijin gold deposit in the Orange Free State.
Previously he was principal geophysicist with the Geological Survey of Botswana
and was instrumental in the creation of a major kimberlite database.
Alvin Jackson, Director (Geologist)
Mr. Jackson advises on exploration and acquisitions, and directs Poplar's gold
and base metal projects. A geologist with 25 years of exploration experience in
North America and abroad, he worked for Cyprus Minerals and its predecessor
Amoco Minerals for 22 years, holding the position of exploration manager in
Canada, Norway, and New Zealand. He is directly involved with two major gold
deposits currently in production and is currently president of Auspex Minerals Ltd.
Mr. Tore Birkeland, Director (Geologist)
Mr. Birkeland has had a distinguished career as a professor of geology before
forming his own mining companies in Europe, South America, and Canada. He
advises Poplar on exploration and acquisitions. He holds a masters degree in
geology; has taught at several European universities between 1966 and 1973, and
was exploration manager for Union Carbide in Norway and Spain from 1973 to
1975. Since 1975, he has directed exploration activities on five continents. In
addition, he is currently a director of Zappa Resources and manager director of
Prominex S.A., Ecuador.
Beret Honeth, Director (Mining Engineer)
Mr. Honeth has had a long career as a mining engineer and consultant in southern
Africa and Scandinavia. He is responsible for advancing Poplar's Aardvark and
Barkly West projects in South Africa. He holds a masters degree in science
(mining) from the Royal School of Technology, Stockholm, Sweden; a diploma in
business administration from McGill University; and is a professional engineer
(Ontario). Previously, he worked as a consulting engineer to De Beers (Boart
International) with Sala South Africa and numerous other companies. He is the
founder, chairman, and mining director of Savannah Diamondfields Ltd., South
Africa.
Jan-Ola Larsson, Managing Director (Geologist)
Dr. Larsson is a highly respected geologist who has written a text on diamond
exploration in the Baltic Shield region. As managing director of North Star
Diamonds (Poplar's European subsidiary), he represents Poplar's interests in
Northern Europe. He has a doctorate from Imperial College, England, and was
the former head of the geochemistry department at the Geological Survey of
Sweden. He also was senior geochemist and exploration manager for Tetron
Mineracao S/A, Brazil; LKAB Exploration Co., Sweden; and Barringer Research
Ltd.
Jouko Jylanki, Exploration Manager (Geologist)
Mr. Jylanki is responsible for Poplar's diamond exploration programs in Northern
Europe. He holds a masters degree in Geology from the university of Oulu in
Finland. He has worked as a geologist with various departments of the Geological
Survey of Finland, the university of Oulu, and the Finnish National Road
Administration. |
