Shore Gold tops its carat target
2005-01-17 16:19 ET - Street Wire
by Will Purcell
Shore Gold Inc. has its 12th diamond parcel from a large bulk sample of its Star kimberlite. The latest haul produced an average grade that was somewhat lower than the most recent sets and there were fewer large diamonds in the mix. Such a combination might have triggered an adverse market reaction had it come last fall, but the numbers now have little impact on the company's full sample, which now tops 3,000 carats. Despite the lower recoveries, there are some encouraging aspects to the latest samples. That could bode well for the project.
The 12th set
Shore Gold processed another eight batches of kimberlite in its latest set, all from the 235-metre level of the mammoth pipe. The rock weighed about 2,257 tonnes and delivered 354.61 carats of diamonds, with nearly all the stones larger than a 1.18-millimetre sieve. That worked out to a grade of about 0.157 carat per tonne.
One of the diamonds exceeded five carats, weighing 5.15 carats. Most of Shore's earlier sets delivered stones significantly larger than that, and one contained two stones weighing more than 10 carats. Still, there were several larger diamonds in the latest eight batches of kimberlite. Shore recovered 11 stones weighing at least two carats and another 35 that topped the one-carat mark.
One clear sign that the latest set of samples had a less favourable size distribution was the average diamond weight, which was about 0.109 carat. That figure is about 15 per cent below the average of 0.127 carat for the entire kimberlite sample taken from the 235-metre level so far.
Nevertheless, the 12th set of samples still had a healthy size distribution. Just a bit less than one-quarter of the weight of the diamond parcel came from stones weighing at least one carat. About 10 per cent of the weight of the parcel came from stones weighing at least two carats.
Those proportions are significantly lower than the average for what Shore is getting from its early Joli Fou kimberlite, but they still compare favourably with many economic deposits. That favourable proportion of large diamonds is one reason that Shore Gold has particularly high hopes for the value of its Star diamonds.
Meanwhile, the breakdown of the individual sample grades within the latest set of samples continues to offer encouragement. That new hope is strongest in the area along its northern drive at the 235-metre level. Shore processed four batches of rock taken from the northern zone, weighing about 954 tonnes. That material produced 182.2 carats of diamonds, for a grade of about 0.191 carat per tonne. That handily topped what four batches from the southeastern zone produced. That rock weighed 1,302 tonnes and it delivered 172.4 carats, good for a grade of just 0.132 carat per tonne.
The stone size distribution was also markedly healthier in the latest samples from the north drive. The average diamond from the four northern batches weighed nearly 0.122 carat, while the four southeastern portions of kimberlite could muster an average stone weighing 0.098 carat.
The sample so far
Shore now has 3,093 carats from just under 22,000 tonnes of Star kimberlite, which results in an average grade of about 0.14 carat per tonne and an average diamond weight of 0.117 carat. Still, those average values do not reflect the major variation between the two main phases of kimberlite within the huge pipe.
The late Joli Fou kimberlite, which accounts for about 20 per cent of the Star kimberlite, lies in the uppermost parts of the body. Shore processed roughly 2,700 tonnes of that material to come up with about 65 carats from the low-grade phase. That worked out to a grade of about 0.024 carat per tonne and an average diamond weight of 0.062 carat.
Things are much better in the richer early Joli Fou phase. Shore recovered nearly 2,900 carats from 17,440 tonnes of the rock, which points to a grade of about 0.166 carat per tonne and an average diamond weight of 0.118 carat. The situation is even rosier with the rock coming from the 235-metre level. That area now accounts for 13,735 tonnes of the sample and 2,471 of the carats, which works out to a grade of 0.18 carat per tonne.
A hopeful twist
After several sets of samples, it seemed that the southeastern drive had the best grades by far, with some individual samples delivering grades above 0.3 carat per tonne. Meanwhile, the rock from the northern zone was lagging behind. That sparked concern that the inordinate amount of rock from the richer area might be inflating the grade of the sample.
The last few sets brought added signs that there is a higher-grade region to the north that Shore Gold is now sampling. As a result, there is now little difference between the averages for the two areas. Shore's southeastern sample accounts for nearly 9,100 tonnes of kimberlite. That rock has an average grade of about 0.184 carat and an average stone weight of 0.127 carat.
The material from the northern drive now accounts for about 4,650 tonnes of the company's sample. That kimberlite has an average grade of 0.172 carat and the average diamond weighs 0.127 carat, identical with the result from the southeastern zone.
There have been 18 batches of rock from the north, with grades that vary from about 0.1 carat per tonne to 0.25 carat per tonne. The 36 southeastern samples vary from 0.1 carat per tonne to a high of 0.33 carat per tonne. Most of the individual samples from both areas typically have grades falling within a range that varies from 0.12 carat per tonne to 0.18 carat per tonne. As a result, that range could be typical for a wider portion of the early Joli Fou kimberlite.
Meanwhile, some richer regions randomly scattered about the pipe could inflate the grade of the body in other areas. Isolated pockets of richer rock could make other parts of Star comparable with the southeastern region, just as now seems the case in the northern zone.
If so, that could bode well for the other parts of the pipe containing early Joli Fou kimberlite. Until recently, the kimberlite from the 235-metre level appeared to have a markedly better grade than the rock from Shore's shaft produced, but that could be the result of bad luck.
Shore processed 3,705 tonnes of early Joli Fou kimberlite taken from the shaft and stations. That rock yielded an average diamond grade of just 0.115 carat per tonne, with an average stones size of 0.086 carat. That grade was nearly 40 per cent lower than what the company recovered from the 235-metre drives, and the average stone size from the shaft rock lagged the 235-metre kimberlite by over 30 per cent.
At least some of that lower grade could be the result of bad luck. Ten individual samples came from the shaft, and their grades varied from just under 0.1 carat per tonne to nearly 0.16 carat per tonne. The lower figure is comparable with what Shore found at the 235-metre level and most of the shaft grades fall within the 0.12-to-0.18-carat-per-tonne range evident in the samples from the two drives.
Missing in the material from the shaft and stations are samples with significantly higher grades. That could obviously be due to the absence of high-grade zones elsewhere in the pipe, but it is equally possible that Shore just had some bad luck.
So far, about 30 per cent of the rock from the 235-metre level produced grades above 0.2 carat per tonne. If a comparable proportion of the shaft material subsequently yields a comparable result, the average grade of that sample would grow to about 0.15 carat per tonne.
Such an assumption is clearly risky at this stage. Still, it would be equally risky to assume that Shore's test of the early Joli Fou kimberlite is yielding an unrepresentatively high grade. Either way, it will take a considerable amount of delineation drilling to come up with a grade estimate beyond the confines of the current sample.
The value question
Something around the 0.16-carat-per-tonne average for the early Joli Fou material could wind up being representative of a fairly wide zone within the pipe. With a production grade near that mark and an average diamond value of more than $125 (U.S.) per carat, Shore's Star project would have an economically intriguing rock value above $20 (U.S.) per tonne.
Shore now hopes to reveal its diamond value in February, but even that mark could leave investors with questions. Shore now has 14 diamonds weighing more than seven carats and it would be reasonable to expect some of those stones to be valuable. The actual number of larger gems could significantly skew the diamond value, providing an unrealistic boost or a disappointing drag, depending on the luck of the draw.
For instance, De Beers Canada Corp. recovered a 10-carat gem worth $60,000 (U.S.) from one of its Gahcho Kue pipes, but the diamond giant discounted the find when it modelled its diamond value. Even one such stone in Shore's parcel could inflate the average value by $20 (U.S.) per carat. On the other hand, it is normal for most of the diamond value to come from a tiny proportion of the carat crop. As a result, some bad luck could result in an appraisal that is lower than a mine would produce.
The potential error between appraised and model values normally shrinks with larger diamond parcels, which is one reason that Shore collected its big bulk test. The appraisal of the Star diamonds will go a long way toward providing answers, but there may still be some wiggle room in the outcome. Meanwhile, although value remains a big unknown, the large diamonds are a source of encouragement.
