Diamond & Specialty Minerals Summary for Dec. 6, 2018
THE DIAMOND and specialty minerals stocks box score for Thursday was a lacklustre 59-85-146. The TSX Venture Exchange added two points to 566 while polished diamond prices were flat. Dermot Desmond’s Mountain Province Diamonds Inc. (MPVD) gained one cent to $1.64 on 93,000 shares. The company is trading far below its 2016 high of $7.18, thanks to disappointing rough diamond prices achieved by its Gahcho Kue mine in the Northwest Territories.
Benoit Gascon’s Mason Graphite Inc. (LLG), down two cents to 57 cents on 81,000 shares, has received an updated feasibility study of its Lac Gueret graphite project in north-central Quebec. The study pegs the discounted net present value at $278-million after taxes for a 25-year mine that would cost $258.2-million to build. (The old study put the value at $352-million and the capital cost at just $165.8-million.) The scale of the mine is unchanged, with projected annual production of 51,900
tonnes of concentrate per year.
The revised study is based on the same reserve estimate used in the earlier version that recently passed its third anniversary, i.e., a total of 4.74 million tonnes averaging 27.8 per cent graphite. The resource estimate edged up a bit thanks to a slightly lower cut-off grade of 5.75 per cent. Lac Gueret now hosts 65.5 million tonnes measured and indicated at 17.2 per cent, with another 17.6 million tonnes inferred at 17.3 per cent graphite.
Mr. Gascon, president and chief executive officer, says that the company has “started receiving equipment and has begun preconstruction work” at the mine site, so it has updated the economics of the project. He says that the new study, like the old one, shows once again that Lac Gueret remains financially robust, adding that it is “becoming a reality at the dawn of an imminent and unique growth period for natural graphite,” thanks to the demand from the battery and electric vehicle sectors. (Flowery prose is often used to distract from looming financial hurdles.) Mason Graphite had nearly $25-million in working capital at the end of September, but it needs much more to start actual construction and reach production. Mr. Gascon says that the company “has been receiving financing interest from both existing and potentially new investors regarding various financial instruments” — a b it of bafflegab suggesting that while the company may have some proposals to consider, they may not sit well with shareholders. (When Mr. Gascon says that Mason is reviewing its financing options with the objective of maximizing shareholder value, he means, of course, that he hopes to minimize the shareholder dilution that raising a few hundred million dollars at 50 cents would incur.)
Greg Andrews’s Search Minerals Inc. (SMY), up one-half cent to four cents on 10,000 shares, has received assays of up to 1.07 per cent total rare earth elements (TREE) over a true width of 21.66 metres from the final eight holes drilled in its first phase of drilling at the Deep Fox critical rare earth element project in southeastern Labrador. A second phase of drilling is now complete with assays pending from those eight additional holes. Once all the assays are in hand, the company plans to prepare an initial resource estimate for Deep Fox.
Search Minerals has a more advanced rare earth project in Labrador, called Foxtrot, but it has been on the shelf for the past few years. Foxtrot hosts 7.39 million tonnes indicated at 0.91 per cent TREE and another 1.96 million tonnes inferred at 0.97 per cent TREE. A now two-year-old preliminary economic assessment pegged Foxtrot with a discounted net present value of $48-million after taxes, based on a $152-million, 1,000tonne-per-day mine. (The whiff of mothballs is directly related to that modest valuation.) The odor is likely to linger longer, as the assays from Deep Fox have been running about 15 per cent above what Foxtrot managed. Nevertheless, Mr. Andrews is reportedly pondering combining both deposits into one new study.
Mark Ireton’s Noram Ventures Inc. (NRM), down one cent to 30 cents on 26,000 shares, has completed seven of the planned 17 new holes into the Zeus lithium project in the Clayton Valley area of southern Nevada. Most of the holes, which are being drilled to about 30 metres, are in the area northeast of an existing resource estimate. (The first hole of the program was drilled 350 metres northwest of the deposit.) That resource estimate, de clared a ye ar ago, lists 17.1 million tonnes inferred at 1,060 parts per million lithium.
Mr. Ireton, president and CEO, says that Noram is “already seeing similarities” between the core from this third phase of drilling and that obtained from the resource area. He says that as the drilling progresses, they expect to see more of the olive-green claystone in the new drill holes, adding that further exploration will be needed at depth to fully delineate the lithium clay resource at Zeus. Investors looking for numbers, not colours and similar sights, may not have long to wait: Mr. Ireton is promising the first assays “in the near future.”
Boris Kamstra’s Alphamin Resources Corp. (AFM), unchanged at 25 cents on 20,000 shares, has approval to draw down the final $20-million (U.S.) of the $80-million (U.S.) credit facility that it set up a year ago. Mr. Kamstra, CEO, says that the cash should be enough to “see the company into production” at its Bisie tin mine in the eastern Democratic Republic of the Congo.
How lucrative that production might be is unclear. While there is no problem with the rock value — Bisie hosts a reserve of 4.67 million tonnes averaging 3.58 per cent tin — the company now believes that rock conditions will force it to change its min-
ing met hod. In stead of sublevel caving, Alphamin is looking at cut-and-fill mining and, if approved, the change would alter the operating costs, grades and tonnages at Bisie. Accordingly, an updated reserve statement and new study are expected early next year.
NextSource Materials Inc. (NEXT), down one-half cent to 9.5 cents on 634,000 shares, has shareholder approval to roll back its stock at a ratio of up to 1:10 over the coming year. The company has been seeking offtake deals and financing for its plan to mine graphite at Molo, in Madagascar. The project stalled three years ago, after the company, then called Energizer Resources Inc., rolled out a feasibility study based on a $188-million (U.S.) mine plan. Now, NextSource is proposing a modular mine that would cost just $18.4-million (U.S.) to get running at a production rate of 17,000 tonnes of concentrate per year.