Kensington hopeful as ever
Kensington Resources Ltd KRT
Shares issued 24,670,435 Apr 30 close $0.53
Mon 3 May 99 Street Wire
HUNT FOR SASKATCHEWAN ICE CONTINUES
by Will Purcell
The market awaits results from the 1999 exploration program undertaken at
Fort a la Corne, in east central Saskatchewan, by Monopros Ltd. and
Kensington Resources Ltd. The project is a joint venture between
Kensington, Monopros, and Cameco Corporation, each with a 30 per cent
interest. Uranerz Exploration and Mining Ltd. holds the remaining 10 per
cent interest in the project. The current program will bulk sample
kimberlite bodies 147 and 220. These pipes were sampled in prior years, and
those results were among the best produced by the project to date.
An independent evaluation was undertaken by Dr. Luc Rombouts of Antwerp
based Terraconsult in early 1997. A key part of his evaluation projected
diamond grades for several pipes, based on micro and macrodiamonds
recovered by caustic fusion. He also performed a valuation on all of the
diamonds recovered to date. Kensington presented some key results of his
studies which implied that some of the bodies tested might contain higher
zone grades ranging from 0.2 to 0.75 carats per tonne. It was further
suggested that the diamonds recovered to date might reach values
approaching $100 (U.S.) per carat. If accurate, this would cast the project
in more favourable light. Unfortunately, minibulk testing to date has not
borne out these conclusions.
The presence of kimberlite bodies was confirmed by drilling in 1989. The
project was developed by Uranerz, with Cameco earning a 50 per cent
interest in 1989. Results of the early exploration are sparse, however.
Indeed, annual updates were initiated by Cameco in 1993, at the request of
the Toronto and Montreal exchanges. The first update included minibulk
results from the 1992 program and indicated that 138 microdiamonds were
recovered, weighing 7.61 carats. There was no indication of the size of the
samples. This information did not meet the expectations of the TSE, and a
month later Cameco revealed the diamonds were recovered from 131.7 tonnes
of sample. This sample was collected from three separate but undisclosed
kimberlite bodies. The overall grade from the three pipes would be 0.058
carats per tonne. The largest stone recovered in the 1992 campaign was
0.985 carats.
The best results from an individual drill hole implied a somewhat higher
grade. A total of 28 diamonds weighing 2.72 carats were recovered from
11.59 tonnes, for a grade of 0.23 carats per tonne. A second hole in the
same body did not confirm the higher grade, however. Only 0.28 carats were
recovered from 18.09 tonnes, giving a grade of 0.015 carats per tonne.
The 1993 exploration program resulted in the recovery of 63 macrodiamonds
weighing 2.34 carats. The stones were recovered from minibulk material
weighing 243 tonnes, implying an overall grade of 0.01 carats per tonne.
The largest stone recovered weighed 0.41 carats. The best result from any
of the 31 holes drilled graded 0.09 carats per tonne.
The following year saw a total of 147 macro diamonds, weighing 10.08
carats, recovered from 306 tonnes of kimberlite. Again the overall grade
value was very low, at only 0.033 carats per tonne. The largest stone
recovered in 1994 was 0.73 carats. This stone appears to have been found in
pipe 122. At the time, Cameco indicated that the best grade from any of the
22 diamondiferous bodies tested since 1989 was 0.077 carats per tonne.
Monopros earned its interest in the property by the end of 1994,
contributing expertise and exploration funds. The property was split
equally into thirds between the three partners, with Uranerz remaining the
operator.
Kensington came on board in 1995, acquiring a 25 per cent interest for a
consideration of $3.4-million. The joint venture partners each held a
quarter share in the project, with Uranerz again remaining as operator. It
was at this point that the information flow greatly increased. The format
of this information varied greatly however, and the resulting grade values
were reported in changing formats. Grades were interchangeably presented as
carats per tonne, carats per hundred tonnes, and on some occasions, carats
per 10 kilograms.
The results of the 1995 program were broken down by kimberlite body for the
first time. The best minibulk results came from kimberlite 147, where 20
tonnes of sample had an overall grade of 0.075 carats per tonne. Bodies 140
and 145 returned grades of 0.025 and 0.028 respectively, with the remaining
bodies having very few or no diamonds recovered. In all, 266 tonnes were
extracted from nine separate kimberlites.
The 1995 summary issued by Kensington included a review of the more
prospective bodies. This review suggested that the estimated 540 million
tonne body 122 had an overall minibulk sample grade of 0.044 carats per
tonne, worth $44 (U.S.) per tonne. Without question, this valuation would
be based on a very small number of recovered diamonds. The summary also
suggested a grade of 0.145 carats per tonne had been calculated based on
microdiamond samples. It must be noted that this higher figure clearly had
not been supported by the subsequent minibulk sample results. Similar
calculations were performed for bodies 140 and 145. The latter summary gave
an estimated mass exceeding 200 million tonnes grading 0.556 carats per
tonne, based on extrapolation of the microdiamond content. The actual grade
returned by minibulk sampling of the body was roughly 40 times less than
this value, at 0.0125 carats per tonne. Kensington indicated the diamonds
recovered from body 145 were valued at a very high $184 (U.S.) per carat.
Again, the parcel of diamonds would be very tiny indeed.
Caustic fusion results based on small samples were available in the spring
of 1996. One sample weighing 42.5 kilograms, taken from body 123, was found
to contain a macro diamond weighing 0.2747 carats. The release noted this,
and computed a grade of 0.0648 carats per 10 kilograms. This implied a
grade of 6.48 carats per tonne, based on a minute sample. Releases of this
nature, while mathematically accurate, often cause misconceptions in the
investment community. At the time, the result was described in some circles
as representing some of the highest grades yet seen in Canada.
By late summer, a clearer picture was available. An additional 40 kilograms
of sample contained no macrodiamonds, and the grade was therefore cut in
two. The minibulk sample analysis released that fall once again did not
break down the results individually, but they indicated that 66 macros were
recovered from 55.3 tonnes of kimberlite. Curiously, there was no total
weight of these diamonds given, but it is estimated to be approximately
four carats, implying an approximate grade of 0.07 carats per tonne. The
results from 122 were most likely significantly lower than this, as the
body is not considered among the priority targets of the joint venture.
Further exploration took place in 1997, without the participation of
Uranerz. As a result, Monopros, Cameco, and Kensington saw their interest
increase to 30 per cent, while Uranerz was diluted to a 10 per cent
interest. The program tested two new bodies, 605 and 612, and retested the
150, 176, and 220 kimberlites which were suggested to have promise.
Dr. Rombouts estimated body 220 to have a macrodiamond grade of 0.25 carats
per tonne, and suggested that kimberlite 176 could have a higher grade zone
approaching 0.5 carats per tonne. He estimated a higher grade zone in body
150 existed, with a grade of 0.15 carats per tonne. These estimates were
based on small samples, and may have been skewed by the presence of larger
macrodiamonds.
Minibulk sample results were available in early 1998. A 59.7 tonne sample
from body 150 contained three macrodiamonds weighing 0.475 carats. The
resulting grade, 0.008 carats per tonne, was disappointing. The other two
bodies did not fare well either. A total of 42.7 tonnes were extracted from
kimberlite 176. Eight diamonds weighing 0.775 carats were recovered, for a
grade of 0.031 carats per tonne. The best results came from body 220, where
20 macrodiamonds were recovered from 27.5 tonnes, weighing 1.27 carats. The
grade was computed as 0.046 carats per tonne. One of the diamonds recovered
from the 220 kimberlite weighed 0.7 carats.
The joint venture addressed the apparent discrepancy between the low
minibulk grades and the estimates of Dr. Rombouts. Simulated diamonds were
introduced into the drilling system, and lower than expected recovery was
noted. It is possible that some diamonds were lost during recovery, but the
significance of this loss is unknown. Presumably, other explorers using
similar methods would suffer the same losses. As well, other natural
processes may have taken place during the emplacement of the kimberlite
which would render the estimates based on caustic fusion results
inaccurate.
A total of 720 macro diamonds have been recovered from Fort a la Corne
kimberlite, since the inception of the project. These stones weigh a total
of 37.3 carats, with the largest stone weighing a reported 0.985 carats.
The average recovered stone weighs only 0.05 carats, which is roughly half
of the value achieved by the Diavik bulk sample at the A-154 south pipe.
Dr. Rombouts estimated that some of the kimberlites could have diamond
values in the range of $50 to $100 (U.S.) per carat. Results so far suggest
that the lower range might be more realistic. The overall value of all of
recovered macrodiamonds is approximately $1,200, or an average of $32
(U.S.) per carat. This low value appears primarily due to the small size of
the diamonds rather than poor quality. It appears that the percentage of
these stones that could be classed as clear and colourless is relatively
high.
The average per carat price for individual bodies varies from $3 to $89
(U.S.) per carat. Clearly, the number of carats valued for each pipe must
be very low, and most individual parcels would be much smaller than 10
carats. The highest value per carat was achieved from body 150, where a
total of 36 stones were recovered. It must be noted that approximately 50
per cent of this value was contained in one stone. If this stone is
discounted, the diamond value would drop to $45 (U.S.) per carat.
Incomplete and inconsistent reporting over the years prevents the
calculation of an overall grade or individual grades for each body. It is
clear that at least 1,000 tonnes have been extracted from Fort a la Corne
kimberlites over the past 10 years. This would imply an overall grade
around 0.04 carats per tonne. Certainly, some individual bodies would have
grades higher than this. Results to date indicate that kimberlite 220 has a
minibulk grade of 0.067 carats per tonne, and the much larger body 150 has
a grade of 0.049 carats per tonne. Body 147 was previously tested to have a
similar grade, perhaps in the 0.07 carats per tonne range.
It has been estimated that open pit mining costs could be as low as $15 to
$20 per tonne, assuming a high rate of mining, and a capital expenditure of
approximately $500-million. Certainly, the cost of production would be much
lower than that experienced in the Northwest Territories, given the
location of the Fort a la Corne project. If one optimistically assumed a
$50 (U.S.) per carat value, and a grade of 0.10 carats per tonne, the
resulting revenue of $5 (U.S.) per tonne would still be far below required
levels. To reach economic levels, minibulk sample results must show a
significant increase in diamond value, and a major increase in grade.
The Fort a la Corne project has long been attractive to the participants
due to the sheer size of many of the kimberlite bodies present. A
sedimentary layer topping the pipes has apparently kept them free from much
erosion, and several of the bodies have total masses exceeding 100 million
tonnes. The two bodies being retested this year, 147 and 220, are thought
to have in excess of 490 million and 80 million tonnes of kimberlite
respectively.
It appears that some of the partners are losing faith. Cameco has
apparently elected not to contribute to this years exploration program. As
a result, Monopros and Kensington will fund the $680,000 program on an
equal basis. There is no indication as yet as to whether Cameco will have
its interest in the project diluted as a result of this decision.
The market does appear hopeful that good news will surface, nevertheless.
Kensington closed Friday at 53 cents, up five cents on the day and 22 cents
on the week. The stock traded as low as 12 cents last fall, but recovered
steadily to a February high of 40 cents as speculative fever took hold.
Kensington fell back to the 25 cent level by mid April, prior to last
week's surge.
(c) Copyright 1999 Canjex Publishing Ltd. canada-stockwatch.com
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