Diamond & Specialty Minerals Summary for July 17, 2017
THE DIAMOND and specialty minerals stocks box score for Mon day was an up beat 70-55-132. The TSX Venture Exchange gained four points to 762 while polished diamond prices edged lower. Ken MacNeill and George Read’s Shore Gold Inc. (SGF), which soared from its 18-cent perch to a 44-cent high in early June, has been making its way back since the company signed a deal giving Rio Tinto an option to earn a 60-per-cent interest in the company’s Saskatchewan diamond projects. Robin Goad’s Fortune Minerals Ltd. (FT) gained 1.5 cents to 24 cents on 2.07 million shares. The company, which is working on an updated feasibility study of its Nico cobalt, bismuth, gold an copper project
in the Northwest Territories, has nothing new to say.
Dominion Diamond Corp. added another 94 cents to $17.85 on 13.07 million shares, on word that its has agreed to a friendly takeover by the private Washington Group. Dominion’s stock jumped 69 cents to $16.91 on 228,000 shares in a few hours Friday before it tripped a regulatory circuit breaker and was halted. (The stock continued to trade in New York, where circuit breakers handle higher currents, closing the day up 72 U.S. cents to $13.48 (U.S.) on an uncharacteristically high volume of 4.01 million shares.) Friday’s surge followed a report by Reuters that the Washington Group of companies was supposedly sweetening its February hostile offer to buy the company at $13.50 (U.S.).
The unnamed sources added that a formal, friendly offer could be made within weeks, but just before the end of Friday’s session, Dominion Diamond responded to the TSX’s request for a comment, sticking to its story that it has formed a special committee to consider its “potential strategic alternatives.” As it turned out, the deal needed just hours, not weeks, but the sweetening was merely a quick dusting of aspartame: Washington’s new bid, $14.25 (U.S.) per share, is the equivalent of $18 per share in Canadian dollars, matching the earlier offer that Dominion brusquely brushed off in March.
That was apparently the best offer on the table, although four other groups had been rumoured or confirmed to have been granted access to Dominion’s data room under confidentiality agreements. Those groups included the Canada Pension Plan Investment Board (CPPIB), Canada’s largest pension fund, and Stornoway Diamond Corp. (SWY: $0.82). (A deal with Stornoway would have been a consolidation of the two Canadian diamond miners; a deal with CPPIB would presumably require a group familiar with mining diamonds.)
Dominion has improved its ability to generate cash and has extended the life of its mines considerably since the late Robert Gannicott engineered the purchase of Ekati and its surrounding Buffer claims in 2012. Development of A-21 at Diavik is likely to extend that mine to about 2025, while a big push-back of the Misery open-pit mine and the development of new ore supplies at Lynx, Sable and Pigeon — and probably at Leslie, Fox Deep and Jay — could extend the life of Ekati well into the 2030s, if not beyond. Those additions have increased the company’s attractiveness to the Washington Group, which says it will “deploy capital to develop both the Jay and Fox Deep projects.”
Washington Group will pay Dominion’s shareholders in cash, although some of that cash will be coming indirectly from their own pockets. While Washington has obtained debt financing to cover a big part of the payout, it also says the balance of the consideration will come from an equity commitment from Washington and “cash on Dominion’s balance sheet.” Indeed, in a key condition of the deal, Dominion must have $150-million (U.S.) in cash on hand if the deal closes before the end of November, and $200-million (U.S.) should the closing be delayed until later.
Dominion’s chairman, Jim Gowans, says the Washington offer “delivers compelling and immediate value” to his shareholders at an “attractive premium that recognizes the intrinsic value” of Dominion and provides certainty through an al l-cash of fer, adding that the company’s board unanimously recommends the offer be accepted. Meanwhile, Lawrence Simkins, Washington’s president, apparently finds Dominion’s “excellent collection of mining assets” and its “talented and experienced management team and workforce” to be equally compelling.
Adrian Lamoureux’s 92 Resources Corp. (NTY), down one cent to seven cents on 40,000 shares, is dropping its option on the Mitchell Lake uranium prospect in Northern Saskatchewan to focus on its Hidden Lake lithium prospect in the Northwest Territories, the Pontax lithium project in Quebec and the Zim frac sand project in British Columbia. (Pontax was deemed a secondary property when 92 Resources acquired it last fall and nothing that has occurred over the past three years suggests that Zim is has been a priority.)
Mr. Lamoureux has been touting Hidden Lake at every opportunity, however, and that seems likely to continue. A month ago, the company got a $140,000 grant from the Northwest Territories government to help with exploration at Hidden Lake. At the time, 92 Resources was planning mapping and channel sampling of the HL6 and HL8 spodumene pegmatites that it discovered late last year. An earlier grab sample of the HL6 dike assayed 1.86 per cent lithium oxide. If all goes well, Mr. Lamoureux has been musing about a maiden drill program “target for the latter half of 2017.”
Jason Walsh’s Global Li-Ion Graphite Corp. (LION), unchanged at 33.5 cents on 10,000 shares, has begun trading on the Canadian Securities Exchange. (The company — hardly a king of beasts even in the Howe Street jungle — picked a ticker symbol to associate the company with the promotionally hot lithium-ion battery sector.) Global has nothing to do with lithium exploration, but Mr. Walsh, president, helpfully points out that lithium-ion batteries require graphite as well as lithium, and Global’s Chedic graphite project is just a few miles from the “newly built and commissioned Giga factory” built by Tesla Motors Inc. (The factory, dubbed a gigafactory because of its huge size and $5-billion (U.S.) cost, makes electric car batteries, not gigas.)
Chedic is named for Walter Chedic, who operated a modest open-pit graphite mine on the property in the 1920s. Global says that the mineralization “grades up to 22 per cent carbon,” has a strike length of about 1.5 kilometres and a width of about 1.5 metres. Mr. Walsh adds that the Chedic enriched structure “has the potential to contain over one million tonnes of graphite mineralization.” He has yet to say how he intends to prove the point.