Diamond & Specialty Minerals Summary for Oct. 11, 2017
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.