Di­a­mond & Spe­cialty Min­er­als Sum­mary for Dec. 6, 2018

Stockwatch Daily - - MINES & METALS - By Will Pur­cell

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.

Brent Nyko­li­a­tion’s

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.


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