Lytton stock plummets on preliminary results

Investors slashed more than $150 million from the market value of Lytton Minerals (TSE) after the company announced the recovery of 44 diamonds from a kimberlite pipe on one of its properties in the Northwest Territories.

The stones, including 6 macrodiamonds and 38 microdiamonds, were recovered from samples weighing a total of 208.1 kilograms. The Ranch Lake kimberlite lies within Lytton’s 1.1 million-acre claim block about 80 miles northwest of Dia Met’s Point Lake discovery.

Although the results are considered significant and would likely have been greeted with enthusiasm a year ago, analysts at Pacific International say the numbers pale beside preliminary results from some of the other diamondiferous pipes along the “corridor of hope” that trends northwest-southeast through the Lac de Gras area.

Dia Met Mineral’s Point Lake discovery pipe, for instance, yielded 16 macrodiamonds and 65 microdiamonds from 59 kilograms of drill core. But before reliable grade comparisons can be made, bulk samples must be taken from all the pipes. A reserve estimate requires a sample of up to 30,000 tonnes.

“We’re not making a judgment on this pipe. Other people may do so but they might turn out to be very misleading,” said Lytton President Desmond Alexander. “If each sample result is going to affect market values by hundreds of millions of dollars, this is just going to become a race to see who can find the most microdiamonds.”

Before the results were announced, Lytton’s market capitalization exceeded $600 million — higher than Dia Met’s — on the basis of its ground position, one kimberlite discovery, and a number of wildly optimistic rumors. After the announcement, Lytton stock plummeted to as low as $4.10 from $6.38 before First Marathon Securities — which helped raise financing for Lytton — and other buyers stepped in and pushed the stock back up to the $4.50-level.

To date, 21 “pipes” (as opposed to dykes and sills) are known to have been found in the Lac de Gras area of which 15, or 71%, are diamondiferous. Worldwide, about 20-25% of the 2,000 known pipes contain diamonds and about 1.5% have been economical.

Lytton is taking a 60-ton sample from the Ranch Lake pipe using two 6-inch diameter core rigs. Based on delineation drilling, the steep-walled pipe has an estimated surface area of 35 acres.

With access to about $11 million, Lytton is also launching a “major” summer exploration program covering the nine million acres of wholly-owned or joint-ventured ground. The company’s vice-president of exploration is Raymond Davies, a former Monopros manager.