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Ashton boosts its diamond hopes
2005-01-28 13:56 ET - Street Wire
by Will Purcell
Ashton Mining of Canada Inc. has a big new diamond haul. The company completed a mini-bulk test of its promising Renard-3 pipe and the numbers did not disappoint. The small kimberlitic pipe delivered promising grades and stone sizes in smaller tests and the latest batch of rock confirms that result. Ashton now seems certain to surpass its 300-carat target by a good margin, adding to the parcel of stones available for valuation. The largest Renard-3 gems seem likely to boost the average value of the Renard diamonds, but there will still be many questions that the company will have to answer over the next year. Ashton and its partner, Soquem Inc., have much more to do in the coming years to actually prove their Otish project.
The results
Ashton's Renard-3 sample weighed 146 tonnes and the rock delivered 184 carats of diamonds larger than a 1.18-millimetre sieve. That worked out to a grade of 1.26 carats per tonne. That is significantly better than that which a much smaller batch of rock delivered late last year, but less than that which two small samples produced before that.
Just before Christmas, Ashton recovered 5.89 carats from 8.6 tonnes of Renard-3 kimberlite, suggesting a grade of about 0.68 carat per tonne. That was mildly disappointing. Earlier, two five-tonne batches of rock handily topped the one-carat-per-tonne mark.
Late in 2002, Ashton came up with 6.54 carats using a 0.85-millimetre cut-off, good for a grade of 1.34 carats per tonne. Things were even rosier last spring, when Ashton recovered 7.81 carats using the larger cut-off. That pointed to a grade of 1.53 carats per tonne.
In all, Ashton and Soquem recovered 204.24 carats of diamonds from 164.6 tonnes of Renard-3 kimberlite. That indicates an average grade of about 1.24 carats per tonne, making Renard-3 the best of the Otish kimberlites so far. The partners still have a mini-bulk test from Renard-2 to hear from, but the body has just a slim shot of topping the tally from its smaller sister.
Renard-3 has the best grades, and it clearly has the best size distribution so far. The latest test produced a 4.30-carat diamond that likely exceeded the weight of a four-carat stone that Ashton found in rock taken from Renard-65 in 2003.
That latter find seems a bit of a fluke, unlike the Renard-3 gem. Ashton recovered two more diamonds from Renard-3 that weighed in excess of two carats and seven other stones weighed more than one carat. That should not have been a big surprise. Ashton recovered two diamonds that weighed more than one carat during its earlier tests, and one of the stones weighed 1.82 carat.
So far, Ashton has at least three diamonds larger than two carats from Renard-3. Those stones weigh 9.29 carats and account for about 4.5 per cent of the total weight of the Renard-3 parcel. Ashton did not say how much the nine additional one-carat gems weighed, but something around 12 carats seems a reasonable expectation.
Based on that, Ashton would have a total of 12 diamonds larger than one carat, weighing a bit more than 21 carats. That suggests that one-carat diamonds account for about 10 per cent of the Renard-3 parcel. That is a more substantial fraction than that which the other Renard bodies delivered, although it falls short of some other potentially economic pipes in Canada.
The comparison
The Renard-3 size distribution is clearly superior to what Ashton produced from 123 tonnes of kimberlite from Renard-4. That material contained 55.6 carats, and only one of the diamonds was larger than one carat. That stone did weigh an impressive 2.9 carats, but none of the other diamonds weighed over 0.7 carat, making the find seem a stroke of luck.
Based on that one stone, about 5 per cent of the diamond parcel at Renard-4 came from diamonds weighing over one carat. Still, barring some pleasant surprises in the remaining 50 tonnes of material yet to come, the value appears optimistic.
It was a similar story at Renard-65, where Ashton recovered 40.8 carats of diamonds from 159 tonnes of kimberlitic rock. The largest stone weighed about four carats and it accounts for about 10 per cent of the parcel weight, but that is clearly skewed by the one fortunate find. None of the other diamonds at Renard-65 weighed over one carat, although five stones did manage to top the 0.7-carat mark.
Far less certain is the situation at Renard-2, where Ashton recovered 22 carats from 25 tonnes of rock. Only one diamond weighed in excess of one carat, and that 1.18-carat stone accounted for about 5 per cent of the parcel. That find was no fluke however, as Ashton also recovered two stones weighing 0.94 carat and 0.91 carat. It will take the tallies from the remaining 150 tonnes of kimberlite to provide a clearer picture of the size distribution at Renard-2. Still, the earlier results do offer hints of hope.
Ashton now has nearly 323 carats from the 472 tonnes of kimberlite extracted from the four main Renard pipes. The 15 one-carat diamonds account for nearly 30 carats of the diamond weight, or roughly 9 per cent of the entire parcel. The five two-carat diamonds weighed 16.2 carats, accounting for 5 per cent of the diamond weight. There is a good chance that those proportions are mildly skewed by the few fortunate finds, as well as an unrepresentatively larger sample from Renard-3, which is by far the smallest of the Otish pipes.
The Renard results fall short of some other key projects in Canada. For instance, Shore Gold Inc. is nearly finished with its 25,000-tonne test of its Star pipe in Saskatchewan. The diamond tally recently topped the 3,000-carat mark, with most of the stones coming from a higher-grade phase of rock. About 20 per cent of the diamond weight comes from stones weighing in excess of two carats, with one-carat gems accounting for about one-third of the Star diamonds.
The Star parcel is still awaiting an assessment, but Shore is hoping the diamond value will top $125 (U.S.) per carat. That seems a reasonable hope, as size is a powerful influence on diamond value. As well, the proportion of white diamonds is high at Star.
Tahera Diamond Corp. also has a particularly promotable size distribution at its Jericho pipe, where the company processed a 9,000-tonne test in the latter half of the 1990s. The sample yielded some large stones, including a 40-carat diamond. A few others topped the 20-carat mark.
Like Star, one-carat diamonds at Jericho account for about one-third of the weight of the diamond parcel. Five-carat stones produced about 7 per cent of the carat crop. Tahera now thinks its diamonds are worth something approaching $100 (U.S.) per carat.
The Snap Lake dike is also a prolific producer of larger diamonds. A 6,000-tonne test produced over 10,000 carats, and about 20 per cent of the weight came from one-carat diamonds. Five-carat stones accounting for roughly 4 per cent of the tally. Winspear's diamonds produced an appraisal of $118 (U.S.) per carat, although De Beers Canada Corp., which now owns the project, has a value of about $75 (U.S.) per carat at last report.
Those comparisons would seem to augur poorly for the Renard bodies, but things are rarely that simple. Some deposits have healthy diamond valuations without a particularly coarse stone size distribution. For instance, De Beers pegs the diamond value of its Gahcho Kue at nearly $80 (U.S.) per carat at its AK-5034 pipe and about $65 (U.S.) at Hearne.
The company mini-bulk tested the two bodies several times since the late 1990s, and the carat tallies include modest quantities of larger diamonds. One-carat diamonds account for about 10 per cent of the diamonds from the western lobe of AK-5034, while similar stones at Hearne and the eastern lobe of AK-5034 produced just 7 per cent of the diamond weight. Two-carat diamonds at AK-5034 may account for up to 5 per cent of the full diamond parcel. Those recoveries seem roughly comparable with what Ashton is coming up with in its Renard pipes.
The implications
The improving grade and size distribution of the cumulative mini-bulk test are boosting expectations for the value of the Renard rock. Although size is an important consideration, it is only one of several influences on the value of a diamond.
Ashton has had little to say about the general quality of its stones, but the company has been a bit chatty about the characteristics of its largest stones. Those descriptions have triggered some concern that the Renard diamonds will not produce a promotable appraisal, but the latest Renard-3 results should help lessen those worries.
The 4.3-carat stone was a clear and colourless octahedron, as was the 2.29-carat stone that ranks third. The 2.7-carat diamond was also clear and colourless and it had a tetrahexahedral shape. Prior to that, many of Ashton's larger diamonds were brown or grey in colour, and a significant portion were composite stones. Some of the other large diamonds also have a favourable description. The four-carat stone from Renard-65 appears to be a potentially valuable diamond, and the 2.9-carat stone from Renard-4 was a clear and colourless octahedron.
If Ashton ends up with a 400-carat parcel, the diamonds would require an appraisal of about $40,000 (U.S.) to achieve the average of $100 (U.S.) per carat that many speculators are hoping for. That might seem a tall order, based on many of the diamond descriptions and the relatively modest size distribution, but it typically takes a small collection of valuable gems to account for most of the value. As a result, it is too soon to jump to conclusions.
Investors were in a buying mood, as Ashton gained 15 cents on Thursday, closing at $1.05.
