- The Quiet Summer of 2011, and Honest Work
- Respectable Showing For the Diamond Sector at PDAC 2011
- PDAC 2011 – this March
- Promising Diamond Find by Metalex in Northern Ontario, Plus Grades from Chidliak and Movement at Renard
- Peregrine Finds 1.15 Carat Diamond at Chidliak
- Stornoway Diamond Corp. Works to Expand Resources at Renard Project
- 2010 Toronto Resource Investment Conference
- Newsworthy Week For Canadian Diamond Companies
- Different Types of Diamonds at Fort à la Corne
- Kimberlites and Diamonds of Western Canada
5034 AAD Aappaluttoq Aber Diamonds ABX ACS AEM Ag Agnico-Eagle Mines Agrium Alberta Alto Ventures Amarillo Amaruk AMEC Amerigo Archangel Diamond Archon Minerals Ltd. Arctic Arctic Star Diamond ARG Argentina Argyle Ashton Mining Canada Attawapiskat ATV ATW ATW Venture Corp. Au Australia AUY Avalon Rare Metals Avanti Mining Corp. Aviat AVL Baffin Island Barrick Bathurst Beluga BHP BHP Billiton Birch Mountains Bling Blue Note Mining Blue Pearl Cluster BN BRIC Buenaventura Buffalo Head Hills Bunder Burnstone Ventures Inc. BVE BVN Canada Candente Candle Lake Canterra carbonatite Caribou Castillian CCE Chariot Resources CHD Chidliak Chile Chris Jennings Chuck Fipke Churchill Churchill craton CL CLF Cliffs Co Codelco Coloured Gemstones Commerce Resources Contact Diamond Corporation copper CTM Cu Cullinan DDN DeBeers Diamond Diamondex Diamonds Diamonds North Dianor Diavik Diopside dividend DNT DO-27 DOR DSP Eastmain Resources Ekati El Teniente emerald EnCana Corp. ER EuroZinc Exotic Metals FALC FGE FGT First Nickel Inc. Fiskenaesset FNI FNV Forest Gate Fort a la Corne Foxtrot Franco-Nevada G Gahcho Gahcho Kue Gem Diamonds geologic terms glossary gold Goldcorp GPR Great Panther Resources Great Panther Silver Greenland Grib Grizzly Discoveries Inc. Gualcamayo Guanajuato Guaniamo GZD Harry Winston Hawthorne Gold Hearne HGC Hibou HUD Hudson Resources Hunter Exploration HW HWD IME In Indicator Minerals indium interview iron Jericho Jericho Diamond Mine Jigsaw K K-2 Kahuna Kennady Lake Killiq kimberlite Kinross KWG Kyle Lake Lac De Gras Las Aguilas lead Leadbetter Lesotho Letseng Li limestone lithium Lockerby LUC Lucara Lukoil LUN Lundin Mining Lynas Lynx Mapimi Marifil Mines Ltd. market hype MAT Matamec Exploration Inc. Metalex Ventures Mexico Mexivada MFM Mina El Carmen Mo molybdenum Monument Diamond Project Motapa Mothae Mountain Province Diamonds MPV MTC MTP MTX Muskox Kimberlite natural gas Nb NEM Neuqen Basin New Gold Newmont New Nadina Diamonds Ltd. NGD Ni NI 43-101 nickel niobium NMC NNA Noront NOT Notch Nunaminerals Nunavut oil Orion Otish Pascua Llama Pb PC Gold Pd PDAC Pedernal Peregrine Peregrine Diamonds Petra Diamonds PGD PGE PGM PKL placer platinum Pogo Mine potash Potash Corp. pre-feasibility PST003 Pt Punta Colorado Qavvik Qilaq QUA Quadra Mining QUC Quebec Quebect Quest Rare Metals Quest Uranium rare earth elements Rare Element Resources Raytech Metals Corp. Re REE Renard RES Restigouche rhenium Rio Colorado Rio Narcea Rio Tinto RSC RTP ruby San Antonio San Juan San Roque sapphire Saskatchewan SGF Shear Diamonds Shear Minerals Shore Gold silver SL Snap Lake Sola Resource Corp Soltoro SOQUEM Inc. SRM Star Stewart Blusson stockhouse.com Stornoway Stornoway Diamonds Strange Lake Strateco Resources SWY Ta TAH Tahera tantalum TCK.A TCK.B TCM Teck Cominco Terrane Metals Tesla TGX Thompson Creek Metals Thor Lake TIF Tiffany & Co. Topia Topia Mine Toronto Resource Investment Conference Triex True North Gems TRX Tsa Da Glisza Tuktu Tuktu-1 Tunerq tungsten Tuzo Type IIa U uranium VAA Vaaldiam Mining Inc. VALE-INCO Veladero Venezuela Victor WDO Wesdome Western Troy Capital Resources WRY WWW International Diamond Consultants Ltd. Yamana Gold Inc. YRI zinc Zn
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Posted by David
Sorry I have not been updating much this year. I am currently finishing my PhD and working on an exploration project for a junior company. This does not leave much time for blogging on Canadian juniors, and as a result, the KIM Report will only be intermittently updated with new content.
I hope you continue to find use of the glossary and older articles. Though things are relatively quite now, a number of projects are steadily developing into what will likely be a new generation of mines.
In the diamond sector, a few stories to watch over the next two years:
- Stornoway Diamond Corporation’s continued development of the Renard project into a mine now that they hold 100% (at the expense of the Quebec government becoming a major shareholder).
- The attempted revitalization of the Jericho mine in Nunavut by Shear Diamonds Limited.
- Peregrine Diamonds Limited’s addition of kimberlite bodies in the diamondiferous Chidliak-Qiliaq area of southern Baffin Island.
Aside from diamond companies, other sectors to watch are the rare/exotic metals: Ta, Li, Nb, Y, Sc, and the REEs are all gaining interest (and perhaps well-deserved hype) due to the expansion of the high-technology industries, China’s geopolotics, and a serious production vacuum in the western world. For more information, look into Avalon Rare Metals, Commerce Resources, Lynas Corp., Matamec, MolyCorp, Quest Rare Metals, and Rare Element Resources.
The development of producing mines for these commodities is an economic and political necessity. Expect to see even more news about these and other companies as public awareness about the situation grows.
I hope you all continue to have an good summer and thank you for reading.
Posted by David
Last week Monday’s technical session at the PDAC on diamonds was titled: “21 years of Canadian diamonds: Coming of age?”. Five talks were given and three were based on Canadian diamond projects. The remaining two were on the Bunder project in India with Rio Tinto, and the development of Petra Diamonds to being a major producer in Africa.
While not full to capacity, the seating room approached that mark during a few of the talks and significant figures in the diamond industry were present. Including the discoverers (or co-discoverer) of Canada’s first two diamond mines: Chuck Fipke (Ekati, with Stu Blusson), and Eira Thomas (Diavik). Also present were academics, geology students, financial analysts, independent investors, and representatives from most senior and junior diamond exploration/mining companies.
The award for most entertaining talk goes to Jim Davidson of Petra Diamonds (AIM:PDL), for his repeated well-placed, but thinly veiled stabs at sector giant De Beers for buying some of their declared “unprofitable” mines (e.g., the Cullinan in South Africa) and turning them to the opposite within a few years. Technical award goes to Robin Hopkins for going into detail on how macrodiamond (the economic stones) grades are extrapolated from the microdiamond grades. This was during his talk on what has been developing at the Renard project as it progresses towards a Mineral Resource update for this year as part of Stornoway’s feasibility study for mine at that location within a few years. The most notable aspects of Stornoway’s recent work (aside from buying out partner SOQUEM’s 50% share in the project in exchange for equity) is the increase of the project to a 25 year mine life with a NPV of $885 million and pre-tax IRR of 24.8%.
De Beers geologist Brad Wood gave a fine synopsis of the discovery, evaluation, development, and starting in 2008, production of the Victor deposit in northern Ontario. He discussed the challenges in the natural environment and in working with the affected communities in realizing the mine. Much of the talk dealt with the hurdles of construction. A lot of lessons were learned in the process, mainly technical ones that he passed on to the audience. An example is how the company utilized the large diameter drill holes left over from the deposit evaluation stage as wells to keep the mine drained as it is suitated in Muskeg.
Peregrine Diamonds updated the audience with further news of more kimberlite and more diamond finds at Chidliak (51% owned by BHP Billiton) on Baffin Island. Chief geoscientist Jennifer Pell noted that fifty kimberlite bodies have been discovered, about half by surface prospecting. Many of the kimberlites not exposed have been found by geophysics using aeromagnetic surveys as they typically exhibit a clear “bullseye” pattern. One of the more recently discovered bodies was in fact, found by accident by a university student sponsored by Peregrine doing fieldwork on the glacial terranes of the area. More kimberlite discoveries are bound to follow with the drilling season starting this month.
Although diamond shares (and really, most companies worldwide) have taken a major hit this week with the Sendai earthquake in Japan, the sector seems able to continue capitalizing on new discoveries and mines nearing production as investors again take notice. If anything, the recent recession did the sector a small favour in driving out diamond companies with below-average/extremely speculative prospects to bankruptcy or at least to other commodities. In regards to this, it will be interesting to watch Shear Minerals in the coming months. Their efforts to resurrect the Jericho mine in Nunavut may renew some investor interest in higher-risk diamond stocks.
Disclaimer: The author holds shares of SWY, SRM, and PGD. Relevant comments are welcome and encouraged. Spam comments will be deleted. This article is based on the opinions and experience of the author. Please conduct due diligence when investing. ©KIM Report 2011 www.kimreport.com
Posted by David
Hello and happy New Year!
Sorry for the delay in posts.
This year’s Prospectors and Developers Association of Canada’s (PDAC) main convention is March 6th to 9th. It is at the Metro Toronto Convention Centre’s south building. Delegates can register HERE for the conference. For the non-student or non-senior, the convention can be a little pricey, but day passes can be had for ~$81 and the Investor’s Exchange portion is free.
For those of you who purchase full access to the convention be sure to check out the Technical Sessions. They are often quite good and have excellent speakers on relevant topics. A list of the sessions is HERE. Other sessions include the CSR Event Series, the Aboriginal Program, an Open Session, and an Innovation Forum. Ten short courses/workshops also occur just before and after the convention itself.
Sessions mentioning diamond exploration/mining are:
- 21 years of Canadian diamonds: Coming of age? – room 716, Monday March 7th, 2-4 pm
- New geoscience in support of exploration in the Canadian Shield North of 60⁰ – room 716, Tuesday March 8th, 9 am-noon
- Africa – room 713, Tuesday March 8th, 10 am
Major and minor diamond producers/explorers typically have booths at the PDAC. Some of the usual suspects from past years include Rio Tinto, Harry Winston, Stornoway, Shear, Shore Gold, Peregrine, and BHP Billiton. For those unfamiliar with this convention, it is the premier mining and exploration convention in North America and is not to be missed for those working in or investing in the industry.
Make sure to sign up by this Friday (February 4th) as the prices for most admission types go up after that. Happy investing.
Promising Diamond Find by Metalex in Northern Ontario, Plus Grades from Chidliak and Movement at Renard
Posted by David
High Counts from the James Bay Lowlands
Metalex Ventures Ltd. reported recovery of 800+ relatively coarse (0.425-0.85 mm) diamonds in part of a RC drill sample from the T1 kimberlite in the James Bay lowlands. The kimberlite is part of the Kyle Lake project and is 94.2% owned by MTX and 5.8% owned by Arctic Star Diamond Corp.: TSX-ADD.
The Kyle Lake project is near the ” Ring of Fire” chromium and PGE metals region of northern Ontario. This region has been the focus of exploration by companies such as Cliffs Natural Recources (NYSE-CLF), Noront Resources Ltd (TSX.V-NOT), and KWG Resources Inc (TSX.V-KWG). Although the region has been the focus for diamond exploration since the 1990′s and is home to De Beers’ Victor (Attawapiskat) diamond mine.
What is interesting aside from the high number of coarse diamonds is that it came from a small section of the T1 kimberlite: 138-153 m depth. The company is awaiting detailed results, particularly on analysis of the coarser (>0.85mm) portions of the sample. Complete diamond counts will be released when all samples from the hole have been processed.
As a bit of speculation, that this hole is RC could mean that the true diamond distribution of this zone in the kimberlite could be coarser than what is seen in this sample. This is due to the fact that diamond breakage is rather high in RC drill-hole samples. The mechanics of the process is such that the drill bit: usually tri-cone or drag-bit, and the circulation process is quite rough on the hard, yet brittle diamonds. This is compared to traditional diamond drill core sampling followed by caustic fusion that typically has better preservation of large stones. The advantages to RC drilling is that it is far cheaper and often faster.
Investors should keep in mind that it is really the two factors of diamond valuation and diamond grade, and not diamond counts, that determine the economics of a diamond mine. In addition to working on the final results from the T1 kimberlite, MTX is also having a bulk sample from the nearby U2 pipe assessed.
Diamond Grade News Out of Chidliak
Yesterday morning, Peregrine Diamonds Ltd. released that they had determined a grade of 1.04 c/t from their mini-bulk sample of the CH-7 kimberlite from the Chidliak property. The 47.2 t (dry) sample returned 49.07 c of stones larger than 0.85 mm. The largest three diamond crystals were 6.53, 2.18, and 1.24 c. The sample was collected by trenching the kimberlite outcrop to a depth of 2 m.
Eric Friedland, CEO, is quoted in the press release: “We are pleased to see a grade of one carat per tonne and a population of gem quality diamonds in this mini-bulk sample from CH-7, results that certainly justify a large bulk sample of this pipe and are another illustration of the excellent potential forChidliak to host a diamond mine. We now have five kimberlites with economic potential in Arctic settings at Chidliak, and four of those are clustered within an area that has only an eight kilometre radius: CH-1, CH-6, CH-7 and CH-31. We hope to add to this growing list of potentially economic kimberlites as more microdiamond results from the 34 kimberlites discovered this year are received. As we await all the results from the 2010 exploration programme, including a 14 tonne sample collected from CH-6, we are completing our 2011 exploration strategy which will entail the further evaluation of known kimberlites with economic potential, including the planning for larger bulk samples, as well as the discovery of more diamondiferous pipes starting next March with the drilling of a number of compelling lake-based targets.”
Firm Contracted for Environmental and Social Impact Assessment of Renard
Also yesterday, Stornoway Diamond Corp. awarded a contract to Roche ltd. Groupe-conseil to investigate the environmental and social impact of the future Renard diamond mine in central Quebec. The Renard mine will be Quebec’s first diamond mine and has a current NPV of $885 million (CAN). The engineering and environmental consulting firm will investigate the corporate social responsibility (CSR) factors that surround the project. Attention to CSR by communities, governments, and companies has increased over the past ten years to the point where having a social license to operate is almost as important as having an economic deposit. Understanding the CSR issues surrounding a project has become a necessity for companies with assets in the first world. Signing on an experienced group such as Roche is an important step in the processes to obtaining all of the necessary permits for the Renard mine.
Disclaimer: The author holds shares of SWY. Relevant comments are welcome and encouraged. Spam comments will be deleted. This article is based on the opinions and experience of the author. Please conduct due diligence when investing. ©KIM Report 2010 www.kimreport.com
Posted by David
Peregrine Diamonds Ltd. added to their exceptional track record last week when they found a 1.15 c macrodiamond. It was in an 840 kg total microdiamond sample from the CH-31 kimberlite in the Chidliak project, Baffin Island, Nunavut. CH-31 is the largest kimberlite in terms of surface area (5 ha) in the Chidliak project that is a JV between PGD (49%) and BHP Billiton (51%).
CH-31 is just the latest of many kimberlite pipes found at Chidliak since 2008 in what has been a textbook study of how to prospect for diamonds.
Kimberlite Pipe Characteristics
Being more specific, the 1.15 c stone is an off-white tetrahexahedroid recovered from the CH-31D sample that comprised 201 kg of the total sample (see above table). This find is impressive as PGD found CH-31 last August when prospecting an anomalously low zone on an aeromagnetic survey. Samples A and B are surface samples collected from the margins of the kimberlite. Samples C and D are from drill core collected from the same angled drill core at depth ranges of 6-328 m and 328-416 m, respectively. This kimberlite is being considered for the next step: a mini-bulk sample (usually >100 t), in 2011.
The kimberlite itself is volcaniclastic facies, the type typical of the upper regions within kimberlite pipes. Both crustal (e.g., carbonate rocks, gneisses, etc.) and mantle (e.g., peridotite and eclogite; the parent rocks for diamond formation) xenoliths were found in some abundance in the kimberlite. At first glance, the kimberlite appears to consist of only one eruptive phase, although these are only preliminary observations.
This find has possibly buoyed management’s confidence in the project and they have increased their earlier private placement of 2 million shares by 800,000 at $2.50/share. This will bring in about $12 million (not including warrants).
PGD’s management is well-versed in diamond exploration. The company’s early days were focused on the DO-27 kimberlite in the Lac de Gras region. Before that, many of the geologists had experience with other projects. Brooke Clements, President, was part of the Ashton Mining Canada team that found the Renard kimberlite cluster that is now being developed into Quebec’s first diamond mine by Stornoway and SOQUEM. The VP Exploration, Peter Holmes, was previously with De Beers and participated in evaluating the Lomonosov diamond deposit (now a mine as of 2005) in northwest Russia (close to the massive V. Grib deposit and subject to legal strife between LUKOIL, De Beers, and the now defunct Archangel Diamond Corporation).
This past month seems to have been a very good one for PGD as it began with their October 3rd press release of their confirmation of diamondiferous kimberlites in the Qilaq property. This property surrounds Chidliak and is 100% owned by Peregrine (see above map). The challenge now is to keep the project’s momentum going by following investors’ expectations after this spate of successes.
Disclaimer: The author holds shares of SWY. Relevant comments are welcome and encouraged. Spam comments will be deleted. This article is based on the opinions and experience of the author. Please conduct due diligence when investing. ©KIM Report 2010 www.kimreport.com
Posted by David
It has been an exciting week thus far for the Canadian diamond industry. A few major news releases from junior Canadian diamond exploration companies has shown that the industry is climbing out of its stagnation from the past couple of years.
A New Mine for Nunavut, Again
A curious development in the Canadian diamond scene occurred with Shear Minerals‘ announcement that they were purchasing 100% of the Jericho diamond mine in Nunavut. Shear will purchase the mine for $2,000,000 and 80,000,000 common shares. The bulk of this will be paid to the main creditor of Jericho’s bankrupt owner (Tahera Diamonds). The main creditor is CAZ Petroleum Ltd. Other terms of the deal is that CAZ will get a 2% royalty on mine production and be allowed to appoint one member of Shear’s board of directors. Though extremely dilutive (they are looking to raise funds of $15 million by private placement), this move may give Shear an income stream within a couple of years. The problem with the Jericho mine is that $/ton value is somewhat lower than at Ekati or Diavik. Grade ranges from 0.34 to 1.49 c/t and average diamond value from (US) $78/c to $112/c as given in the NI 43-101 report. It is also significantly further north than the other mines. Narrow margins mean that diamond prices must remain high, the ice-road season be lengthy, a stronger US dollar, and mining be problem-free in order to draw a profit from Jericho and avoid Tahera’s fate. However, Shear does benefit from Tahera’s case study example in what a junior should avoid in operating an Arctic diamond mine. Should the economy remain strong, SRM should have a decent chance at making the mine work.
More Kimberlites at Chidliak
The other bit of significant news this week comes from Peregrine Diamonds where they continue to find new kimberlites with relative ease at their Chidliak property (Baffin Island). The company reports eight new kimberlite finds: two by drilling and six by surface prospecting. The latter discoveries seem to characterize the direction of this project as PGD continues to make textbook finds with ease in southwest Baffin Island. They also report mini-bulk samples taken from two earlier finds. The company continues this summer with their plan to investigate further geophysical anomalies in tandem with kimberlite indicator mineral data.
Renard Moves Towards Production
Moving away from Arctic diamond projects, Stornoway Diamond Corp. has added to this week’s mix with the formal commencement of the feasibility study for a mine at the Renard Diamond Project (central Quebec). This involves looking at how the proposed mine would affect the environment and local communities, increasing the capacity of the proposed mine from 5 kt/day to 8 kt/day, and a separate project to tie the mine into the electric power grid; amongst other items. The issues regarding corporate environmental and social responsibility are important as it shows that local stakeholders, i.e. the Quebec government and the local aboriginal (Cree) and non-aboriginal communities are on board with the project. The Impact and Benefits Agreement that the feasibility study considers is an important step in cementing this relationship.
As an addendum, the company announced that it had reached a pre-development agreement with the local Cree nation shortly after the initial publication of this article. This is an important step towards working out the Impact and Benefits Agreement necessary for the mine to develop.
In terms of exploration, SWY will continue expanding on the Foxtrot property that the Renard cluster is a part of. Winter drilling has already expanded the resources at Renard 3, 4, and 65. More drilling is happening this summer on these three kimberlite pipes.
While the economic recovery has reinvigorated consumer appetite for pretty carbon, the market still treats diamond juniors with some trepidation, being burnt by failures such as Tahera and lengthy lead times to production (e.g. Shore Gold and Fort à la Corne-Star). Only prolonged stable economic growth and the development of some good projects to profitable production will see investors flock back to the diamond sector.
Disclaimer: The author holds shares of SWY, and SRM. Relevant comments are welcome and encouraged. Spam comments will be not posted and deleted. This article is based on the opinions and experience of the author. Please conduct due diligence when investing. ©KIM Report 2010 www.kimreport.com
Posted by David
Early last month, Shore Gold (SGF) announced that a high proportion (26%) of diamonds >2.7 c retrieved from the underground bulk sample at its 100% owned Star kimberlite in Saskatchewan are type IIa. This is a category of diamond that is typical of many “large special” diamonds >10.8 carats in size.
In terms of impurities in their crystal structure, diamond can substitute nitrogen (N), boron (B), and/or hydrogen (H) for carbon. Nitrogen is the most abundant and well-studied impurity and can range from concentrations of 0 to >10,000 ppm (~1%). Diamonds with significant nitrogen (>10 ppm) are termed Type I and those without are Type II. N-bearing diamonds are further categorized into those where the substituting N is organized as single atoms (Type Ib) or as aggregates of more than one atom (Type Ia). These aggregates are classified into paired N atoms (Type IaA) or quartets (Type IaB), or a mix of both (Type IaAB).
Diamonds that are relatively free of N are Type II. Those with no N and some B are Type IIb. Type IIa diamonds are more common and have no N or B. Type Ib and IIb diamonds are relatively rare. Type Ia diamonds are the most common.
How Diamond Types Are Determined
How impurities such as nitrogen are arranged in a diamond can be determined in a non-destructive manner using Fourier-transform infra-Red (FTIR) spectroscopy. Simply, light of a lower energy than visible light (infra-red) is shone through the diamond. By measuring the exact amount of light of a given energy that comes out the other side of the diamond (i.e. how much light is absorbed), it is possible to learn things about the diamond’s molecular structure. For example, how much nitrogen is in the diamond, and if it is in atomic pairs, or quartets. Fourier-transform is a mathematical and instrumental technique applied to infrared spectrometry to speed up analyses.
Issues With The Report’s Interpretation
In their news release, SGF refers to the Letšeng-la-Terae (Letšeng) mine in Lesotho (operated by Gem Diamonds, LSE-GEMD). This mine is considered quite unique as its low grade – <0.04 c/t, but has diamonds impressive quality and size. Average diamond value for this mine is >US$2000/c. This means a revenue of ~$80/t (2008 values).
However, the report’s suggestion that Type IIa equates to higher value stones cannot be considered absolute fact. This is because the mine they are comparing their diamonds to – Letšeng, is an anomaly in terms of its diamond population. While it is possible that with further valuation of parcels for SGF pipes a higher valuation could be realized, the current one is only about 10% (~$225/c) of Letšeng’s.
The diamonds shown by SGF in the full report (see above image for an example)- while large, are typically yellow-brown and some appear to contain large inclusions (internal cracks or non-diamond minerals). The report goes on to compare Letšeng and Star diamonds in terms of size class and % Type IIa. While Letšeng does show a marked increase in % Type IIa with increasing size, Star shows only a marginal increase, if at all.
The FTIR report commissioned by SGF also makes an error when referring to the trend of increasing percentage of Type IIa diamonds with increasing carat size for Star as comparable to that of Letšeng. The trends for each pipe are in fact rather different. Letšeng shows a significant increase of the proportion of Type IIa diamonds with size, whereas Star shows only a marginal increase (see plot below).
The SGF report states that the above figure “shows explicity that the abundance of Type II diamonds increases with increasing diamond size.” This statement is misleading as it is really only true for Letšeng diamonds. The academic study on Letšeng diamonds that SGF references for this report was based on less than 500 diamond samples (large stones of value being hard to obtain even for non-destructive studies). This relatively small number means that care must be taken when applying this study on a small number of diamonds from one kimberlite to the entire potential production of another. Granted, not that many large diamonds have been made available for such studies, but such over-reaching statements should not be made.
While the results of the report are interesting, and parallels can be made with the academic paper on Letšeng, there does not appear to be much evidence at this point for increased financial prospects of the Star project in terms of diamond type. Star still has one tenth the average diamond valuation of Letšeng without having close to ten times the grade. Though this does not in any way forestall a diamond mine in Saskatchewan, far better numbers have to come out of the Fort à la Corne area kimberlites for it to approach the level of Letšeng.
Disclaimer: The author does not hold shares of any company mentioned in this article. Relevant comments are welcome and encouraged. Spam comments will be deleted. This article is based on the opinions and experience of the author. Please conduct due diligence when investing. ©KIM Report 2010 www.kimreport.com
Posted by David
This year’s GeoCanada conference and related workshops saw some attention to diamonds and kimberlites. Specifically those located in the western Canadian sedimentary basin (WCSB), covering Alberta and Saskatchewan.
The two main kimberlite clusters in this region are the well-known Fort a la Corne (FalC), and the lesser known Buffalo Head Hills (BHH) occurrences. The former cluster is in Saskatchewan and has been the focus of a major JV between Shore Gold (operator) and Newmont, the background of which was discussed in previous KIM Report posts. On the technical aspect of things, Shore Gold has done a lot of work in characterizing the complex structure of their two most economic kimberlite pipes: Orion South and Star (both are ~100 Ma). These pipes are composed of multiple units each formed during a separate volcanic eruption millions of years ago on the margins of an ancient shallow inland sea that covered most of what is today called the Great Plains. There are at least five main units: Pense, Viking, Early Joli Fou, Late Joli Fou, and Cantuar (see the 3D model of the Star kimberlite below: different colours represent different petrological units). These units each erupted at a different time over many thousand of years, and differ in petrology, diamond grade and diamond size distribution. To further complicate things, these eruptions occurred over a timespan during which the inland sea was alternately expanding and contracting. The effect of these sedimentary processes (e.g. erosion, transportation, deposition) on the erupted kimberlite material led to the concentration of diamonds in some rock units and the removal of diamonds from others.
The other less-studied cluster is the ~65-85 Ma BHH in Alberta. Both barren and diamond-bearing pipes occur, also with variable geology and diamond grades as with the FalC pipes, although the extent of the complexity is unknown. The highest grade pulled from a BHH sample so far is close to 0.9 c/t (K252). Most of the pipes are a JV between Canterra Minerals Corporation (TSX.V-CTM; 28.5%, operator), Shore Gold (28.5%), and EnCana Corporation (43%). Shore Gold and Canterra each carry 50% of the operating costs. Canterra is the result of the business arrangement between Diamondex Resources Ltd. (TSX.V-DSP) and Triex Minerals Corporation (TSX.V-TKM) in 2009. Diamondex and Shore Gold bought their shares in a deal with Stornoway Diamond Corp. back in 2007. They later purchased another 12% from Burnstone Ventures Inc. (CNSX-BVE, formerly Pure Diamonds). A smaller subset of diamond-bearing pipes has been discovered by Grizzly Discoveries Inc. (TSX.V-GZD). These kimberlites: BE-02 and BE-03, are in the southeast region of the BHH cluster, previously thought to be barren. Grizzly also owns interest in a couple of much smaller diamond plays to the ENE in the Birch Mountains area of Alberta, as does Shear Minerals.
A couple of other companies have diamond interests in the WCSB: Vaaldiam Mining Inc. (TSX-VAA – Candle Lake, Saskatchewan) and Forest Gate Energy (TSX.V-FGE, formerly Forest Gate Resources – Fort a la Corne, Saskatchewan). However, activity on these properties has been fairly light (see map image of kimberlites in the WCSB below).
Both the BHH and FalC clusters were initially discovered by activities relating to energy exploration – petroleum and uranium, respectively. The BHH pipes were discovered by re-evaluating aeromagnetic survey maps that had classified the anomalies caused by the pipes to be well-heads for the oil fields that clutter the region. Some diamonds from these pipes have even been found to be coated with petroleum when recovered. The FalC cluster was found during aeromagnetic surveys. These pipes are located under 80-100 m of gravel, sand, and clay.
Though in comparison to other diamond mining regions (e.g. the Northwest Territories or the Otish Mountains in Quebec) current grade numbers are rather low, diamond valuations that do exist (only from FalC at this point) are higher than average for Canadian kimberlites. Access to infrastructure is also better, particularly when compared to Arctic kimberlites. This bolsters the revenue $/t kimberlite coming from those pipes. The main hurdle with this is the geological complexity of the FalC (and to a lesser extent BHH). Overcoming this problem has taken Shore Gold and the previous owners of the FalC pipes the better part of 20 years to overcome with exhaustive drilling and geophysics. The amount of detail given in recent reports indicates that their geology and diamond characteristics are becoming less vague, at least for the Orion South and Star bodies. Now having more information where and how rich the higher-grade zones are at Orion and Star, have allowed Shore Gold (and Newmont) to almost finalize their mine plan. Mr. George Read, Shore Gold’s senior VP exploration and development, confidently expects a full net profit after all costs and taxes of ~$25/t (CAN) ore from the project as it stands. The 50+ other kimberlite pipes remaining at FalC, along with those at BHH represent possible future resources for Shore Gold and its partners beyond the two currently gearing up for production.
On an ending note, Shore Gold reported re-valuation (April 2010) of the diamond parcels it had originally sent out and had valuated in March 2008. Price increases (in US$/c) since then are 10-20% higher for every parcel. What to keep in mind here is how the American dollar (what the revenues come in) fares against the Canadian dollar (what the costs come in). Over the past two years, the exchange rate has fluctuated from about $1 (US) buying $0.98 (CAN) to $1.30 (CAN). How much of that price increase is due to supply/demand and not currency adjustment is uncertain.
Disclaimer: The author holds shares of SWY, SRM, and FGE. Relevant comments are welcome and encouraged. Spam comments will be not posted and deleted. This article is based on the opinions and experience of the author. Please conduct due diligence when investing. ©KIM Report 2010 www.kimreport.com
Posted by David
The 2010 annual PDAC convention this week was resoundingly more vibrant and bustling than last year’s. The nice thing about commodity downturns is that they are often self-correcting given time. The excess of supply that leads to commodity price drops and mine closures also ceases mine development. With no new resources coming onto the pipeline, supply drops as existing deposits are tapped out. This drop in supply leads to an increase in the commodity price, beginning the cycle all over again.
This current resurgence is much to early to be mainly due to this process, lack of exploration typically takes years to manifest into resource shortages. Whatever the cause, the mood of exhibitors, investors, and geologists was significantly improved over 2009′s show. Though there are still many companies out there just hanging on, both those with quality and questionable properties.
Gold was still king of the commodities this year, unsurprising considering it has remained at ~$1100 for some time in spite of the predictions of certain pundits. Though keep in mind that price is in American dollars. Well-run gold producers such as Barrick, Goldcorp, and Wesdome, have been reporting steady and strong profits. The Wesdome booth at PDAC had some impressive display samples of quartz-vein ore containing visible gold mineralization from their Kiena mine. Although some producers are still struggling, e.g. Yamana.
The buzz about exotic metals such as yttrium, niobium, and the rare earth elements has died down a little since the excitement of last fall. Leading juniors in that field, such as Avalon and Matamec, were still well represented at the show. In terms of fundamentals, however, nothing has changed, our increased dependence on technologies is leading to a demand that will continue to ramp up with each passing year and the Chinese control virtually all production. Not a pretty picture from either an economic, strategic, or political view (for everyone but the Chinese that is).
Copper, nickel, and other base and ferrous metal prices have all climbed back up significantly. The earthquake in Chile barely caused a blip in copper prices (Chile produces about one third of the world’s copper), and metal producers like Amerigo and Lundin are starting to see their first real profits in over a year. Speaking with Amerigo reps at the PDAC, they predict a return of their one-vaunted dividend should copper prices hold close to their current levels.
The investment talks for the junior diamond sector saw increased attendance this year. The best was saved for the last for talks by Peregrine, Shear Minerals, Shore Gold, and Stornoway, discussing the most promising Canadian diamond projects and their various stages of development. Peregrine’s Chidliak project on Baffin Island continues to steal the spotlight with preliminary results from CH-6 that indicate the potential for the highest grade diamond find since A-154 South at Diavik in the 1990′s.
Chidliak is still many years from and possible mine. The Renard and Fort a la Corne deposits of Stornoway and Shore Gold, respectively, are each within five years of a potential mine. Last fall’s announcement by Stornoway regarding the expanded resource at Renard-2 is putting the company at odds with Shore Gold for the title of owner of Canada’s (and for that matter, the world) largest undeveloped diamond deposit (video interview with SWY founder Eira Thomas HERE). Shear Minerals, though somewhat stagnated by lack of funds, had returned a promising grade of 0.862 c/t from the Notch kimberlite in the Churchill property.
The repeated message from all diamond companies is that world diamond prices have recovered, and possibly then some. Unlike metals, getting firm numbers on world diamond demand and pricing is difficult, but some estimates put current diamond prices as high as 25% over those of pre-crash 2008. With the recovery as of yet incomplete, this could spell a significant jump in share prices for quality diamond stocks over the next 12 months.
Disclaimer: The author holds shares of SWY, YRI, SRM, ARG, and LUN. This article is based on the personal opinions and experience of the author. Please conduct due diligence when investing. ©KIM Report 2010 www.kimreport.com
Posted by David
The recent plea from the Dubai sovereign wealth fund, Dubai World, for a moratorium on payments to their $59 billion (USD) debt underscores that there are still plenty of skeletons in the closet to be found as the world economy races and stalls back to recovery. Sometimes this engine even goes backwards for a bit in the face of surprising news such as this.
Is this revelation really so surprising? Perhaps in the particular details and that it involves a supposedly wealthy country backed by decades of high oil production revenues. Or at least it was before it invested a good bit of that money to finance the hyper-development of a previously sleepy Arabian emirate. However, it is not surprising that large negative developments continue to come to light as the financial systems recover and consolidate. It took many years of unchecked greed and financial short-sightedness to create the crisis (crises?) that started in 2007. It is only logical that it will be a few years until we are free of this baggage.
What does this mean for commodities? The “good times” are gone and many investors/developers now have to deal with an annoying factor known as “reality” when they are interpreting the market, supply/demand trends, and so forth.
This whole topic is too big for one article and it would be redundant, not to mention exhausting, to focus on an all-encompassing review of things as they stand and look to do so in the future. Following the news of Dubai World’s troubles made me think of all the discretionary luxury goods (haute couture, man-made islands shaped-like things, and particularly jewellery) that are disproportionately consumed by such a rather small population, and how that allegory can be expanded to the world at large.
Are those we previously thought to be ultra-rich truly immune to economic fluctuations? It really is a relative matter, but it appears that the 2007-2009 meltdown(s) has (have) even touched those we thought to be dependable for the consumption of commodities of limited practicality. Diamonds (and other gems) are perhaps the best example of such an item. They can be synthesized easily now for aesthetic and industrial purposes, leaving natural diamonds of no particular commercial use aside from vanity and symbolism.
However, it is the rarity, history, and symbolism/mystique surrounding natural diamonds that makes them so sought after, even in troubled economic times such as now.
This recent reprieve in the markets over the past six months has been accompanied by bursts of positive news releases from a previously lacklustre Canadian diamond exploration sector. This recovery was second to only that seen by rare earth metals in the past few months.
Peregrine First Out of the Gate
The major catalyst for this renewed interest in diamond properties in 2009 was the Chidliak discovery on Baffin Island. Although the most recent news from Peregrine (and JV partner BHP Billiton) was less than stellar compared to previous developments, the Chidliak-Qilaq project is the first diamondiferous kimberlite discovery in Canada in years to hold significant economic potential. PGD stock has relaxed from its surprising highs in September-October stable levels at well over $1. The nature of the Chidliak find was covered in an earlier article back in March. What is interesting in recent months is the lag time for the market to acknowledge this find: about six months since its first real publicity at a sparsely attended PDAC session on diamond exploration.
Shore Pushes Onwards
Two other major players in the Canadian diamond junior sector have seen stock jumps more closely tied to news releases. Shore Gold released its most recent NI 43-101 complaint report concerning the Orion South kimberlite body in the Fort a la Corne (FalC) JV project with Newmont in Saskatchewan (not to be confused with the adjacent Star property wholly owned by SGF). This technical report and resource estimate is lengthy at 108 pages, as it should be considering the complex geology found in the FalC pipe compared to some other Canadian kimberlites (e.g. Snap Lake, Lynx). The bulk of the geological characteristics of the FalC kimberlites were covered in an earlier KIM Report article. The main issues indicated with that article over a year ago was for SGF to up their average diamond valuations due to grades well below 1 ct/t (100 cpht), and to give a reasonable estimate of the total mining cost per ton. The proximity of local communities and their infrastructure (power, roads, etc.) will bring costs down well below those of Arctic projects. But by how much? P&E Mining Consultants do a very thorough job of considering all technical aspects of the most promising body of the 70+ in the FalC project.
SGF and NEM commissioned WWW International Diamond Consultants Ltd. to evaluate the diamonds recovered from underground and LDDH samples. 2320.2 c was priced at $199495 (US), or $86/c (using the March 11 2008 pricing). The most promising units of the Orion South kimberlite: EJF and P-2 had price ranges of $100-166/c and $91-123/c, respectively. Diamonds from other lithologies of Orion South have lower valuations. P&E optimistically use the high end values for their modelling of the resource. This is significantly lower than the $225/c valuation at Star, located 2.5 km to the SE. Grades range from 0.128-0.147c/t depending on the case used. Tonnage (minimum case) is 76.8 Mt indicated and 86.3 Mt inferred.
The mining plan for Orion South suggests an open pit. Slope of the pit wall would be 30º for the ore/waste rock and 18º for the overburden due to its unconsolidated nature.
Mining costs are hard to put together from just reading the report. It assumes that the exchange rate will be US$0.85/CAD$. Stripping costs for the overburden (glacial till) will be $1/t overburden, with mining, processing, and general/administrative costs pegged at $6.54/t kimberlite. Thus using the absolute minimum values SGF and NEM look to clear about $4/t (rough estimate for overburden clearance) from Orion. Though should aspects such as US-CAD exchange rates, rough diamond prices, and/or fuel prices strongly fluctuate, this number could go much higher or lower. The key assumption being made here -as with all deposits, is that the modelled resource accurately reflects the real resource in the ground closely enough that it remains economic. The major difficulty with the FalC kimberlites is that their petrological/lithological heterogeneity (i.e. changes in diamond grade throughout zones in the kimberlite body) is difficult to pin down. The overall low grade of the pipe and mediocre diamond valuation (compared to other pipes with grades <0.5c/t) leaves little room for mistakes, mistakes that SGF and NEM have spent years and millions of dollars to avoid.
At its conclusion the Orion South/Star project requires a further $4.5 million to bring things to the feasibility stage, not all that much compared to the aggregate amount spent on developing the FalC kimberlites since their discovery in the late 1980s.
Last, But Not Least
The second major junior in the Canadian sector is Stornoway. This has followed the trend set by Peregrine and then Shore Gold in a resurgent Canadian diamond exploration sector. First reporting 4x the original tonnage for the Renard-2 kimberlite property in early October and then expanding on that find this month by reporting revised numbers for entire Foxtrot (Renard, Lynx, and Hibou bodies) property (aka the Renard Diamond Project) that effectively triple the contained carats compared to estimates published last year. 23.0 Mc are indicated and 13.3 Mc are inferred with further upside as some bodies remain not fully studied. Grades at Renard-2 for indicated (1.03 c/t) and inferred (1.2 c/t) resources are up 27% and 39% respectively.
There is a bit of cloud to this silver lining though in that diamond valuations from Renard-2 and -3 are down 3% to US$117/c and for Lynx down 14% to $57/c (“Base Case” estimates). The NI 43-101 compliant technical report covering this release will be out in less than 45 days.
Considering these developments it is curious if any other diamond juniors will be lucky enough to come across some positive news in order to be next in line to capitalize on this new, but fragile, enthusiasm. With the tax-loss selling season approaching, that enthusiasm is fragile indeed.
Disclaimer: The author owns 4000 shares of SWY. This article is based on the personal opinions and experience of the author. Please conduct due diligence when investing. ©KIM Report 2009 www.kimreport.com