Shore harvests more carats
Sorry if this is a repost been away and not caught up yet to the several thousand posts I missed....
2004-08-18 13:16 ET - Street Wire
Also Street Wire (C-SGF) Shore Gold Inc
by Will Purcell
Ken MacNeill's Shore Gold Inc. has produced the best grades yet from deep within its Star kimberlite pipe, with two of the latest batches of rock producing grades in excess of one-quarter of a carat per tonne. The latest haul increases the likelihood that Shore will exceed its goal of 3,000 carats from 25,000 tonnes of rock. Adding to the Star promise was another toutable haul of large diamonds, and that should bode well for the results of a subsequent valuation of the complete diamond parcel, which is the primary purpose of Shore's big test.
Despite the latest batch of rosy news, Shore's shares went into a bit of a slump. The stock traded as high as $2.05 early this month, but it dipped to an intraday low of $1.55 on Monday, as investors who had eagerly been buying on hope over the past year seemed more than willing to sell on the news.
The slump did seem an unusual reaction, as the latest numbers delivered more promise than had the previous set, which had triggered a buying spree at the end of July. The presence of a 20-carat diamond in that earlier crop of carats likely spurred that speculative frenzy, but there were several promotable stones in the latest batch. "People can not comprehend that something so good can come out of Saskatchewan," said George Read, who became Shore's vice-president of exploration less than a year ago.
Shore processed another 1,256 tonnes of kimberlite, all of it from the 235-metre level of the mammoth pipe. The rock produced 223.6 carats of diamonds larger than a 1.18-millimetre cut-off, which is good enough for a grade of nearly 0.18 carat per tonne. Included in the haul were another four diamonds that were larger than five carats, including a stone that weighed 8.12 carats, and a second diamond that was nearly as large.
In all, Shore has processed over 9,300 tonnes of Star kimberlite, coming up with a bit over 900 carats, for an indicated grade of just under 0.10 carat per tonne. That would seem to suggest that Shore Gold will fall well short of its 3,000-carat goal, but the remaining rock will all be coming from the early Joli Fou kimberlite phase, which has produced an average diamond grade of about 0.15 carat per tonne to date.
If that trend continues, Shore's remaining 15,000 tonnes of kimberlite might be expected to yield about 2,350 more carats, which would bring the final tally to about 3,250 carats. Things could be even better than that, as the bulk of the rock will apparently be coming from the 235-metre level, which has delivered a grade of nearly 0.19 carat per tonne.
That would appear to bode well for the grade of the lower portions of Star, but the most promising news was the continued recovery of larger diamonds. Although the latest samples did not produce any stones that would pique the markets interest to the same degree as the 19.71-carat stone that turned up a few weeks ago, there were several large diamonds that add to the confidence that the early Joli Fou kimberlite has a particularly coarse diamond size distribution.
Shore has processed 2,365 tonnes of material from the 235-metre level over the past few weeks, recovering nearly 450 carats of diamonds. The indicated grade of 0.19 carat per tonne has a considerable amount of promotional value on its own, but it is the recovery of 65 diamonds larger than one carat that delivers the most encouragement. Shore did not reveal how much that parcel of larger diamonds weighed, but the collection of one-carat stones may have weighed about 170 carats.
If so, the larger diamonds would account for more than one-third of the weight of the entire parcel, and that proportion compares favourably with most potentially economic diamond deposits found in Canada to date. Size is an important factor in determining the value of a diamond, so the seemingly coarse size distribution curve is a promising sign that the value of the Star diamonds will meet or beat Shore's hopes.
After Shore recovered its first batch of diamonds in June, Mr. Read said he was optimistic that the per-carat value of the Star gems would top the $100 (U.S.) mark, although he added that any predictions would be purely speculative. Mr. Read continues to qualify his optimism with similar cautions, but he now says that the frequency of recovery of larger diamonds has increased his view of the value of Shore's diamonds. "We are happy that what we are producing now is going to have what it takes," Mr. Read said, although he added that the success of the Star project would ultimately depend upon the valuation exercise.
Speculators may not have that long a wait for the results of that exercise. Mr. Read said that mining was proceeding at a promising pace, with about 100 two-tonne batches of rock excavated on a daily basis. At that rate, Mr. Read thinks that the entire sample will have been mined during September, and the material will have been run through its processing plant by the end of October. Samples are continually being sent to Lakefield Research's laboratory for final diamond recovery, and Mr. Read was pleased with the flow of results on that end as well.
Investors have occasionally been somewhat grumpy about short delays in Shore's flow of information, but the somewhat slower pace is likely due to the greater diamond content in the more recent batches of concentrate sent to Lakefield. "The more diamonds they find, the longer it takes them to report," Mr. Read said, adding that it was a problem his company was certainly willing to live with.
If all goes according to plan, and the numbers of diamonds remains within manageable proportions, Shore should be able to reveal the final tallies and the resulting appraisals of its complete diamond parcel by the end of this year. That would leave Shore to mull things over for a bit and then start work on a prefeasibility or feasibility study early next year.
Determining the grade of Star as a whole will be one challenge. The early Joli Fou kimberlite in the vicinity of Shore's shaft has measured up to Mr. Read's hopes, but the company will now have to demonstrate that the material being processed is comparable with the rock in other parts of the mammoth pipe.
There clearly are fundamental differences between the late and early Joli Fou phases of kimberlite. The later material at the top of the pipe has produced an average grade of about 0.025 carat per tonne, nearly an order of magnitude less than what has come from the earlier material at greater depths.
There appear to be some grade variations within the high-grade phases as well, but none of that is a surprise to Mr. Read. He said that he expected to see grades varying between 0.1 and 0.3 carat per tonne, and maybe more. "That is absolutely situation normal for any kimberlite," Mr. Read stated, adding that what Shore was finding during its bulk sampling program had been expected, based on the company's earlier drilling efforts.
Mr. Read believes that what Shore is coming up with on the 235-metre level "will be very representative of the early Joli Fou in general." If he is right it would be great news for the Star project, as that kimberlite phase accounts for about 80 per cent of the kimberlite within the pipe, which is estimated to contain as much as 500 million tonnes of kimberlite in total.
Shore will still have to come up with something more tangible than Mr. Read's opinion during the feasibility work, and such an effort is under way. Shore has submitted samples of kimberlite from its larger batches for microdiamond recovery, and those results will be matched with the recoveries of larger diamonds to come up with a good understanding of the complete diamond distribution curves for each lot of rock.
That information will then be used to come up with approximate grade estimates for other parts of Star, based on past and future drilling programs. The approach is a common one within the industry. In 2000, Winspear Diamond Corp. used a similar technique to come up with an indicated and inferred resource for the bulk of its Snap Lake dike, despite the fact that just the western fringe of the body had actually been bulk sampled.
Shore has already drilled quite a number of holes into a large part of Star, and Mr. Read should already have a good idea of how the diamond recoveries within the remaining parts of the pipe compare with the site the company selected for its bulk sample. As well, continued drilling from the depths of the pipe and from the surface of the body will provide additional information.
Mr. Read said that Shore would also be drilling some new targets on the company's Fort a la Corne property. The targets were selected on the basis of an electromagnetic survey that outlined some features that had previously been overlooked, including one about 10 kilometres to the northwest of Star.
Another of the targets is the first anomaly that Shore tested in the area. In 1996, the company drilled two holes into a target just northeast of Star, and the core samples produced a modest number of microdiamonds. Things were better just to the west, and the company concentrated its efforts on what became Star, but Mr. Read thinks the original target now warrants a new look, as it appears to be larger than first thought.
If all goes well, Mr. Read's exploration program could produce some added news that could sustain the promotability of the project after Shore's big bulk sample is complete.
Shore added a dime on Tuesday, closing at $1.70.
