CANADIAN STOCK EXCHANGES - 2014
E. A. SCHILLER
DIAMONDS LOOK GOOD - BUT NOTHING LOOKS BETTER
Diamonds are still my favourite subject and as we fold up our tent for 2014 I am going to report on the most active diamond exploration area in Canada, as I have in previous epistles, situated 300 kms northeast of Yellowknife, Northwest Territories. The stock market continues to have its uncertainties as we move from the Ukraine situation to Hong Kong and Ebola and search for market direction - up, sideways or down. But back to diamonds as gold and silver prices falter and display disinteresting symptoms. Two recent reports on the state of the diamond industry by De Beers and McKinsey Global Institute paint a rather optimistic picture on diamonds indicating a short fall in production over future predicted demand. Diamond mines are tough to find and where found seem to be located in inclement parts of the world, like Arctic Canada and Russia where conditions are harsh and expensive to work in. The Gaucho Kue project of Mountain Province Diamond Inc. (MPV-TSX-V) and De Beers Canada received approval of the Type A water license by the Minister of Environment and Natural Resources of the NWT government. This milestone event now allows full speed ahead for the project and the expected start-up of operations in 2016 to yield 55 million carats from resources of 35.4 million tonnes at a grade of 1.57 carats/tonne. To fund their portion of the production costs the company announced on September 30, 2014 on a bought deal basis of a private placement by a syndicated underwriting of $75,000,000.00 with the sale of 15,000,000 common shares at a price of C$5.00/share. Concurrent with this offering a non-brokered private placement with Bottin (International Investments Ltd.) and other qualified investors of 5,000,000 shares at a price of C $5.00 was sold to yield another C$25,000,000.00 for a total of C$100,000,000.00. The estimated Gaucho Kue diamond value is $182.00 US per carat with a value per tonne of $286.00 at a mining cost of $65.00 US per tonne. When in full production the operation will yield 4.5 million carats per year. As the fourth producing mine to come stream in the NWT in 2016 it currently employs 700 construction workers and will employ about 400 people during its operational phase. As the current three producing diamond mines, Ekati, Diavik and Snap Lake that commenced in 1998, 2003 and 2008 respectively show minor production reductions Gaucho Kue will bolster total NWT diamond production revenues. MPV stock trades in the $5.40 range.
Next door neighbor Kennady Diamonds Inc. (KDI.TSX-V) continues to steam roll along with impressive kimberlite intersections on their Kennady kimberlite. Hole KDI-14-055 intersected 129 metres of kimberlite in a diagonal hole on the far north part of the Kelvin kimberlite and thereby increasing the dimension and volume of the Kelvin kimberlite. Encouraged by this intersection additional drilling to enlarge the kimberlite northward is to be done. To facilitate drilling at their Faraday, MZ and Doyle kimberlites as well as other exploration targets the main Kennady camp is to be expanded to provide support for the drilling of these kimberlites. Kennady stock trades in the $7.80 range.
Destined to become Canada’s sixth producing diamond mine is the Stornoway Diamond Corporation (SWY-TSX-V) project at Renard 350 km north of Chibougamou in the James Bay region of north-central Quebec. Stornoway announced the completion of a $946 million project financing transaction to fully fund the project to production scheduled to commence in 2016 and full production scheduled for 2017. Mineral resources/reserves stand at 27.1 million carats with a further 16.85 million carats of inferred mineral resources, and 25.7 to 47.8 additional carats in the non-resource exploration category. Annual diamond production is forcast at 1.6 million carats/year over the first 11 years at an average valuation of US$190.carat. Whereas the current three producing mines in the NWT and developing Gaucho Kue are fly in operations and dependant on limited winter road access as is the Victor mine in Ontario, Renard will have year round road access and a cost saving advantage.
Saskatchewan has its CFL football Roughriders, uranium and potash and yes it has some diamonds and Stornoway is peeking at them on their Pikoo project with North Arrow Minerals Inc. (NAR-TSX-V) in central-eastern part of the province. At this time the program is still kind of grassy rooty but encouraging indicator mineral sampling provides some degree of optimism that diamond-bearing kimberlites might be lurking here. Kimberlite discoveries are found by finding indicator minerals derived from kimberlites with the right chemical composition. All the diamond-bearing kimberlites in Canada and elsewhere have been found using indicator mineral geochemical sampling. North Arrow trades in the 60 cent range.
A recent subject of interest “are diamonds a commodity” is being bantered around again and should they treated like metals or oil in a Commodities Exchange? Diamonds are not consistent - i.e. the 4 C’s cut, colour, clarity and carat weight whereas an ounce of gold is an ounce of gold but a barrel of oil can be light or heavy and variable in grade. The benefits and non-benefits of a diamond commodities exchange are being extolled and the final call is yet to be decided.
I will be attending the Silver Summit meeting in Spokane, Washington October 22-24 and will report next issue of on the status of silver and those companies mining and exploring silver and related metals.