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Gold/Mining/Energy : Trump's 12 Diamond Picks, Discussions Limited -- Ignore unavailable to you. Want to Upgrade?

To: Famularo who wrote (1305)	10/7/1998 11:56:00 AM
From: VAUGHN	Read Replies (2) \| Respond to of 2251

Hello Frank For those that follow WSP, this was on Cannacord's Morning Coffee this AM. ******** * Winspear Resources (WSP : VSE : $1.47 : Issued 33.9M) / Aber Resources (ABZ : TSE : $7.80 : Issued 48M f.d.) Late Monday, Winspear Resources released preliminary results of the scoping study on the NW kimberlite dike at Snap Lake. This study was prepared by MRDI Canada, a division of H.A. Simons, which was project manager of the BHP/Dia Met Ekati Mine, which will officially open next Wednesday. A "resource" of 1.348M tonnes has been estimated for the NW dike, underlying the peninsula where the summer, grid drill program was carried out. The modelling has assumed an ore value of C$400/tonne which reflects a 20%-plus dilution factor in comparison to the bulk sample value of US$343 ($301/carat x 1.14) or, say, C$527 at a $0.65 exchange rate. Two models were presented in the press release, the more likely of which in our view is the 1,000 tonne/day, 10-year mine based on 3.5M tonnes. Capital costs are estimated at 103.8M and operating costs at C$87/tonne: the after-tax, discounted, cash flow rate of return is estimated at 55.6% with payback within 12 months. These figures are consistent with our "back of the envelope" thoughts outlined in the June 24 Daily Letter. The assumed 3.5M tonnes of mineable reserve is well along in being outlined in the "resource" category, and this figure could be considerably higher following next winter's drill program from the ice on Snap Lake. Several salient points might be made: * Winspear's market cap. at $1.50 is about $51M for 67% of the project; Aber holds the balance, but its $396M market cap fully-diluted) likely reflects little or nothing for Snap Lake, and represents about 50% of our estimated net present value for its 40% interest in the advancing Diavik project to the north. Aber itself remains a STRONG BUY. * While a mine may well have been discovered at Snap Lake, it now has to be made. This will involve confirmatory bulk sampling for grade and carat valuation and grid drilling next year, but it seems likely that the prefeasibility stage could be entered in early 1999. * The NW dike dips to the east, and other dikes and breccia zones intersected to the E and SE suggest a radial dike/sill pattern at Snap Lake. Where is the feeder system/pipe that could contain a substantial resource tonnage? Drilling is underway on other targets at Snap Lake, but a blind pipe (one which did not come to surface) may be challenging to find and the fall drilling season is getting quite late: an enticing target for the future. * Some 500 kg of kimberlite remaining from this past winter's bulk sampling program is undergoing caustic fusion analysis at Lakefield Research with results expected in a week or so. These macro/microdiamond results may be useful in a general grade-to-microdiamond correlation. In a month or so, we should start to see caustic fusion results start to come in from the 78 holes into the NW dike drilled in 1997 and 1998, so that there should be an ongoing flow of news through year end leading up to the 1999 drill season. * Winspear and Aber remain on our BUY list of Canadian diamond stocks: our target on Aber remains $30, and if Snap Lake results hold together, we can project $5 for Winspear. David James (204) 988-9602 Regards