Research Capital report highlights...
Shore owns 100% of a very large, diamond-bearing kimberlite in central Saskatchewan, which hosts more than 250 million tonnes of material (the Star Kimberlite). Results of a 25,000-tonne bulk sample have yielded large, high-quality diamonds with an indicated average value that we estimate lies between US$100 - US$150/ct.
Indicated average diamond values released by explorers on adjacent intrusions range from US$133/carat to US$179/carat, additional confirmation of the high-quality nature of diamond-bearing intrusions within the Fort a la Corne kimberlite field.
The Star Kimberlite may be amenable to a large scale, open-pit mining operation, using mining equipment to realize economies-of-scale. Infrastructure is excellent, and labour is readily available. We estimate a 45,000 tpd mine may be constructed for C$550 million, potentially starting late in 2009.
The challenge facing Shore is proving resource/reserves to 43-101 standards. Extensive additional drilling and sampling will be required, ultimately taking up to two years to complete, and costing in the order of C$40 million. A significant risk to the project is whether or not the bulk sample taken is indicative of the entire intrusion. A more reliable estimate will be required for feasibility assessment.
We think Shore represents a good investment opportunity with an acceptable risk/reward ratio. Our target price of C$6.36 is based on the indicated discounted cash flow potential of the Star Kimberlite. We are initiating coverage with a BUY recommendation. The Potential for a World-Class Diamond Mine
