Di­a­mond & Spe­cialty Min­er­als Sum­mary for Oct. 11, 2017

Stockwatch Daily - - MINES & METALS - By Will Pur­cell

THE DI­A­MOND and spe­cialty min­er­als stocks box score for Wedne sday was a ble ak 53-86-124. The TSX Ven­ture Ex­change fell two points to 791 while pol­ished di­a­mond prices gained 0.2 per cent. Try as it might, Ken MacNeill and Ge­orge Read’s Shore Gold

Inc. (SGF) can­not break free of its 20-cent tether. Shore dropped one-half cent to 20 cents on 423,000 shares to­day.

Matt Man­son’s Stornoway Di­a­mond Corp. (SWY), down one cent to 79 cents on 256,000 shares, had a so-so third quar­ter at its Re­nard di­a­mond mine in North­ern Que­bec. The com­pany pro­duced 442,154 carats dur­ing the sum­mer quar­ter, av­er­ag­ing 0.87 carat per tonne from the 506,381 tonnes of kim­ber­lite that it pro­cessed. The kim­ber­lite pro­cessed was about 6 per cent less than the 540,000 tonnes pro­jected, but the carat crop was 5 per cent higher than the 422,475 carats Stornoway had been ex­pect­ing dur­ing the quar­ter. This pleas­ing re­sult was be­cause of what Mr. Man­son, pres­i­dent and chief ex­ec­u­tive of­fi­cer, called a “12 per cent beat on re­cov­ered grade.”

Un­for­tu­nately, while there are glim­mers of hope to be had — at least by op­ti­mists — Stornoway is still tak­ing a

beat­ing on its di­a­mond val­ues. The com­pany sold just un­der 440,000 carats dur­ing the third quar­ter for $51.6-mil­lion, which works out to $94 (U.S.) per carat. (Stornoway re­ports its fi­nan­cials in Cana­dian dol­lars, but dia­man­taires pay U.S. dol­lars for its gems.)

The price is bet­ter than the $87 (U.S.) per carat that Stornoway man­aged in the spring quar­ter and sig­nif­i­cantly bet­ter than the $81 (U.S.) per carat that Re­nard de­liv­ered in the first three months of 2017. Nev­er­the­less, there was a down­ward trend dur­ing the sum­mer. Stornoway’s first sale of the quar­ter av­er­aged $101 (U.S.) per carat in July, but its sec­ond and sig­nif­i­cantly larger of­fer­ing in Septem­ber av­er­aged just $90 (U.S.) per carat. Mr. Man­son said that the rough di­a­mond market “ex­pe­ri­enced a price cor­rec­tion after sev­eral months of gains,” a drop that the com­pany es­ti­mated at up to 8 per cent. (Stornoway ne­glected to men­tion that the sev­eral months of gains had come on the heels of a few years of de­cline that peeled about 20 per cent off the av­er­ages achieved in 2014.)

While Re­nard re­mains prof­itable, the mine does have enough prob­lems that Mr. Man­son and his crew have aban­doned their cheery pre­dic­tion laid out ear­lier this year. They now say that “de­spite the steady in­crease in pric­ing achieved dur­ing the course of the year” — they are care­ful to say quar­ter by quar­ter, not sale by sale — Stornoway will fall short of its fore­cast of at least $100 (U.S.) per carat for 2017. (The high end of that es­ti­mate, $132 (U.S.) per carat, has been out of reach for some time.)

The big­gest prob­lem at Re­nard is the ab­nor­mally high di­a­mond break­age that oc­curs in the pro­cess­ing plant. The com­pany has laid out a $22-mil­lion bud­get for plant ad­di­tions and im­prove­ments to give the di­a­monds an eas­ier ride. The com­mis­sion­ing of the changes will not oc­cur un­til early next year, so in­vestors will have to en­dure an­other quar­ter with lower than ex­pected di­a­mond val­ues. Nev­er­the­less, Re­nard should re­main in the black, bar­ring ex­tra­or­di­nary ex­pen­di­tures. The mine man­aged a net in­come of $2.3-mil­lion in its sec­ond quar­ter, and the higher num­ber of di­a­monds sold and the higher price au­gur well for a de­cent third quar­ter.

Martin Stephan’s Rock Tech Lithium Inc. (RCK), up one cent to $1.36 on 16,000 shares, has re­ceived as­says from grab sam­ples col­lected in the Nama Creek re­gion on its Ge­or­gia Lake lithium pro­ject in North­west­ern On­tario. Five sam­ples col­lected in ar­eas sam­pled last year pro­duced the best re­sults, with four of them top­ping 2 per cent lithium ox­ide. That was no sur­prise, since the crews got to pick what they wanted in an area where the com­pany did well be­fore, but the grades of the four sam­ples col­lected in pre­vi­ously untested ar­eas were promis­ing as well, with one test yield­ing 1.88 per cent lithium ox­ide.

Mr. Stephan, CEO, says that the high grades en­coun­tered ad­ja­cent to the main re­source zone at Ge­or­gia Lake will help Rock Tech pri­or­i­tize ar­eas for follow up test­ing. He says that this por­tion of the sam­pling pro­gram tar­geted peg­matites that were mapped in the 1950s but were never sam­pled, save for the area tested last year. Rock Tech al­ready has a re­source in the Nama Creek area, with 2.47 mil­lion tonnes in­di­cated at 1.11 per cent lithium ox­ide and 2.5 mil­lion tonnes in­ferred at 0.98 per cent.

Barry Brown’s Fort St. James Nickel Corp. (FTJ.H), last at 21.5 cents, re­sumed trad­ing to­day fol­low­ing a two-month halt. The com­pany has an op­tion to ac­quire a 100-per-cent in­ter­est in the Por­cu­pine pro­ject in cen­tral New Brunswick from Chris An­der­son’s Great At­lantic Re­sources Corp. (GR: $0.145). Por­cu­pine is touted as a pre­cious met­als, base met­als and rare earth prop­erty — the fo­cus typ­i­cally de­pends on which com­mod­ity is more pro­motable. Fort St. John Nickel must spend $1-mil­lion on ex­plo­ration over four years and make staged pay­ments of cash and stock over the same pe­riod.

Guy Bourassa’s Ne­maska Lithium Inc. (NMX), down two cents to $1.42 on 1.82 mil­lion shares, is “cur­rently eval­u­at­ing a num­ber of fi­nanc­ing al­ter­na­tives” for its Whabouchi lithium pro­ject in north-cen­tral Que­bec. Mr. Bourassa, pres­i­dent and CEO, says the op­tions in­clude debt — loans of­fered by large banks and pri­vate in­di­vid­u­als — and a “strate­gic in­vest­ment” at ei­ther the com­pany or pro­ject level. Mr. Bourassa and his crew need a lot of cash, as Ne­maska’s fea­si­bil­ity pegged the cost of the mine at nearly $550-mil­lion.

Ne­maska also has its phase 1 plant op­er­at­ing. The com­pany has pro­duced about 20 tonnes of bat­tery grade lithium hy­drox­ide us­ing lithium sul­phide pro­vided by a cus­tomer. (The buyer has ap­par­ently ap­proved the qual­ity of Ne­maska’s prod­uct.) M r. Bourassa says that he and his crew are “now on the cusp of

start­ing our most im­por­tant mile­stone,” which is qual­i­fy­ing the com­pany’s prod­ucts with cus­tomers. This cus­p­ing and start­ing — and hope­fully the qual­i­fy­ing — will take sev­eral months, dur­ing which Mr. Bourassa says that Ne­maska will be “en­ter­ing into a pe­riod of ac­tive dis­cus­sions with clients.”

At last re­port, Whabouchi held 20 mil­lion tonnes of open-pit re­serves, av­er­ag­ing 1.53 per cent lithium ox­ide, with an­other 7.3 mil­lion tonnes avail­able for un­der­ground min­ing at an av­er­age of 1.28 per cent. The com­pany has con­verted nearly all its mea­sured and in­di­cated re­sources to a re­serve, with just a largely in­ferred re­source of just over five mil­lion tonnes at 1.51 per cent lithium ox­ide re­main­ing out­side the cal­cu­la­tion.


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