Di­a­mond & Spe­cialty Min­er­als Sum­mary for July 17, 2017

Stockwatch Daily - - MINES & METALS - by Will Pur­cell

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.


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