Diamond & Spe­cialty Min­er­als Sum­mary for Oct. 12, 2018

Stockwatch Daily - - MINES & METALS - By Will Pur­cell

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.


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