Diamond & Specialty Minerals Summary for Oct. 12, 2018
THE DIAMOND and specialty minerals stocks box score for Friday was a positive 84-67-139 as the TSX Venture Exchange gained 7.14 points to 698.60 and polished diamond prices were unchanged. Mark Smith’s Largo Resources Ltd. (LGO) lost 16 cents to $3.52 on 2.89 million shares. Largo, which traded at $4.25 on Tuesday dipped as low as $3.17 Wednesday but the company said it had no idea why. Largo’s Maracas Menchen vanadium mine is setting production records and the price of vanadium oxide has soared tenfold in the last few years.
Matt Manson’s Stornoway Diamond Corp. (SWY), unchanged at 33 cents on 377,000 shares, is gradually righting its Renard diamond mine in the Otish Mountains of Northern Quebec. Unfortunately, slumping rough diamond prices are masking improvements to the company’s bottom line. Nevertheless, Mr. Manson, president and chief executive officer, says that a successful ramp-up of the company’s underground mine and improvements to its processing plant should bode well for Renard’s fourth quarter performance.
Renard produced 329,306 carats of diamonds during the third quarter from 597,761 tonnes of kimberlite, or about 55 carats per hundred tonnes. That was markedly better than what the mine achieved in the second quarter, when it pulled 223,351 carats from 562,060 tonnes of kimberlite, or 40 carats per hundred tonnes. The lower production in the spring quarter was the result of much of the kimberlite having come from lower-grade parts of the underground mine, from low-grade stockpiles and from the lower-grade Renard 65 open pit.
Grades from underground improved during the latest quarter, and that part of the mine achieved its design capacity of 6,000 tonnes per day during August, allowing the company to draw less ore from its stockpiles and the Renard-65 pit. Mr. Manson acknowledged that the ramp-up of the underground mine had been “challenging,” but he cheered the improving grades as the company opened mining panels in the higher-grade parts of Renard-2. He said that the carat recoveries improved each month during the quarter, a trend he predicted would continue into the fall quarter.
Mr. Manson was also more enthused than ever with the performance of Stornoway’s improvements to its processing plant. A new ore sorting circuit, which cost over $20-million, was designed to improve diamond recovery rates and provide the gems a softer ride through the plant, easing the problem of excessive diamond breakage that had plagued Renard since it began producing diamonds in mid-2016. Mr. Manson says the new circuit is performing well, with “lower levels of diamond breakage and higher levels of diamond liberation,” both of which bode well for future value recovery.
Not boding as well for Renard are slumping prices for the smaller and lower quality rough diamonds that account for a significant portion of the company’s produc--
tion. Mr. Manson said that diamond sales are strong in North America, but they are being “impacted” — a euphemism for “hurt” or even “hammered” — by currency weakness in emerging markets amidst global trade concerns. Indeed, Stornoway sold 184,620 carats during the third quarter for an average of $103 (U.S.) per carat, compared with the 201,283 carats it sold in the spring quarter for $109 (U.S.) per carat. In the first quarter of 2018, Stornoway sold nearly 400,000 carats for $112 (U.S.) per carat, so the company’s average price is off 8 per cent over the past two quarters.
While the company’s production for the rest of 2018 should benefit from the improved recoveries, higher mining rates underground and better grades, Stornoway is not expecting any help from an improving rough diamond market this year. Mr. Manson says that weaker pricing in the cheaper items is expected to continue through the rest of 2018. Still, he can point to an improvement of 18 per cent from the company’s initial rough tender in late 2016 to the end of the last quarter.
Jared Lazerson’s MGX Minerals Inc. (XMG), up one cent to 55 cents on 346,000 shares, says that independent metallurgical testing of quartzite from its Gibraltar silica project in southeastern British Columbia shows that the material is “chemically suitable as medium-quality feedstock” for metallurgical grade silicon production. When MGX acquired Gibraltar in May to complement its two other silica projects in the area, Wonah and Koot, initial sampling had produced silicon oxide grades of up to 99.2 per cent. Mr. Lazerson, president and CEO, now says the quartzite at Gibraltar consists of snow-white coloured silica containing over 98.8 per cent silicon oxide.
Tyrone Docherty’s Deer Horn Capital Inc. (DHC), up two cents to 40 cents on 8,000 shares, is doubling down on its tellurium promotion by acquiring an option on the Colorado Klondike tellurium property in south-central Colorado. Mr. Docherty, president and CEO, says the project is a “potential primary source of tellurium,” based on results obtained a decade ago by First Solar Inc. (That company dropped the project and its management acquired it through Colorado Klondike LLC in 2013.) Public data covering the project reveals that surface sampling produced grades of up to 33,000 parts per million tellurium.
Mr. Docherty says that Deer Horn is very happy to be expanding its tellurium property portfolio at a time when important new uses of the metal are being developed. He adds that it is also important that the project is an asset that can be explored for most of the year. (He was presumably comparing it with his company’s Deer Horn project in northwestern British Columbia, which sits at an elevation of 1,300 metres, with heavy winter snowfall making it essentially a summer-only project.) The tellurium grades at Deer Horn are also notably unspectacular, with just 160 ppm tellurium present in the 414,000-tonne indicated resource.
Darryl Jones’s Voltaic Minerals Corp. (VLT: $0.15) has agreed to purchase the private L2 Cobalt Inc. for 4.8 million shares. L2’s primary asset is an option to acquire the Soap Gulch cobalt project in Montana. (To complete the option arrangement, Voltaic will have to pay $250,000 in cash and issue over $750,000 worth of stock.) Historical drilling at Soap Gulch returned assays of up to 1.2 per cent copper, 0.04 per cent cobalt and 0.2 gram of gold per tonne over 11.7 metres. Mr. Jones, Voltaic’s president and CEO and a shareholder of L2, says that recent geophysics reveals numerous anomalies that warrant drilling. He just does not say when that work might occur.