Treasure Hunters: The latest from Canadian-listed diamond explorers, developers and miners

The markets continue to be tough for diamond companies at nearly every stage, with diamond prices having taken a tumble in 2012. Here’s a look at how diamond companies are coping.

Afri-Can Marine Minerals

In March, Afri-Can Marine Minerals (AFA-V) announced it had signed an option agreement with Diamond Fields International to acquire a 90% interest in four diamond mining leases off the coast of Namibia. One of the leases, 111, hosts a historical resource of 950,000 carats of gem-quality diamonds.

To earn its interest over two years, Afri-Can must spend $800,000 on exploration in the first year and another $2.5 million in the second.

The company also holds 20% of the EPL 3403 seabed diamond project off the coast of Namibia, through its acquisition of 20% of the concession’s holder, Thyme Investments. Afri-Can has the option to acquire the remainder of Thyme’s shares if it completes a 30-day or 300-sample program at EPL 3403. At the end of last year, it had taken 222 samples.

Arctic Star Exploration

Last October, Arctic Star Exploration (ADD-V) announced that it had staked 100 sq. km of promising land in four separate claims in the Lac de Gras area of the Northwest Territories, after the claims came open. The junior’s Redemption project lies just east of land Arctic Star had explored between 2004 and 2010, only to find that mineral trains on the original claims originated on the adjacent land. The project lies within 32 km of the Ekati diamond mine.

A presstime, the company was about to start a drill program at Redemption. Several targets, including a 180 by 120-metre electromagnetic anomaly about 800 metres away from the head of the South Coppermine indicator mineral train, will be tested. Arctic Star says South Coppermine target has the characteristics of a pipe-like body.

Microdiamonds have been recovered from the South Coppermine train, and pointing to a nearby source, the indicator minerals are angular with soft alteration coats, some of them attached to kimberlite.

Debut Diamonds

In November, Debut Diamonds (DDI-V) finished its initial exploration program on the Nakina project, in northern Ontario. Drilling did not intercept kimberlite at any of the 18 targets tested, but it did intersect other types of mineralization and the company is working on a geological reinterpretation of the ground.

With the work program, Debut has earned a 70% interest in the project. The company is working on exploration agreements with local First Nations.

Delrand Resources

Delrand Resources (DRN-T, DRN-J) reported in February that Rio Tinto (RIO-N, RIO-L) has withdrawn from the two companies’ exploration joint venture on the Coexco and Bornilli projects in the northern Democratic Republic of the Congo (DRC), in Orientale Province.

In late 2012, the partners conducted a detailed stream-sampling program on nine targets identified through previous work. Results from only two of the targets had been received when Rio made its decision. Delrand is waiting for the remaining results before deciding on its next steps.

However, Delrand has identified other targets in the northern DRC that it will pursue in partnership with Rio.

In the Kasai region of the southern DRC, the two companies have signed an agreement that will see Delrand interpret a large diamond exploration data set that was compiled between 2004 and 2008 using modern exploration methods in the prospective Kasai Craton. Delrand will be able to earn into any resulting discoveries. The companies are also finalizing a second agreement that will cover additional ground in the area and for which Delrand will complement the data with its own extensive database.

Diamcor Mining

Diamcor Mining (DMI-V) completed its first diamond sale from its Krone-Endora alluvial project, in South Africa, in November. The company sold 3,579.58 carats of diamonds for US$510,829 or US$142.71 per carat.

Of a total of 362 stones, 264 were between 1 and 2 carats, and 58 were between 2 and 3 carats. The largest stones were 9.83 carats, 8.05 carats and 7.37 carats.

In a release, the company noted that the vast majority of the material that has been processed so far is from the +1 mm to -10 mm size fractions of the shallow, lower-grade portion of the K1 area of Krone-Endora.

The stones were all recovered during ongoing testing and commissioning exercises — Diamcor is waiting for a mining permit that will allow it to move to 24/7 operations from 10 hours a day, 5 days a week. In conjunction with that move, the company is planning to complete a bulk sample in order to increase resources at the project. While the company has not completed any economic studies on Krone-Endora, it is planning on moving to trial mining to achieve cash flow.

Diamcor acquired the project from De Beers, which owns the Venetia mine next door.

With the help of a $4-million financing from its strategic partner Tiffany & Co. (TIF-N) in November, Diamcor has ordered and installed dry-scrubbing, in-field screening and other equipment that should allow larger material (+10 mm size fraction) to be processed more efficiently.

Kennady Diamonds

Kennady Diamonds (KDI-V) says it could have an initial resource at its Kennady North project, just northwest of De Beers’ and Mountain Province Diamonds’ (MPV-T) Gahcho Kué development project by the end of the year.

In late March, the junior started a 5,000-metre drill program at Kennady North, hitting kimberlite in early April. Targets were selected based on last summer’s drill program and exploration work, as well as ground geophysics.

The first hole of the year, drilled 100 metres northwest of the Kelvin kimberlite, hit 33 metres of kimberlite from 62 metres down-hole depth, and then hit narrow seams of kimberlite from 207 to 215 metres depth.

A second hole was drilled from the same platform, but at a shallower angle. The hole hit kimberlite at 60 metres down-hole and was still being drilled at presstime.

The Kelvin-Faraday kimberlite cluster will see at least 3,000 metres of drilling to further define the Hobbes, Helvin and Faraday kimberlites. New targets will see about 2,000 metres of drilling.

Last year, a 394.4-kg sample from drilling on the Kelvin-Farraday kimberlites returned 1,889 diamonds weighing 0.92 carat.

Kennady president and CEO Patrick Evans noted late last year that the diamond count was “extraordinarily high,” with the potential for a grade of 2 carats per tonne or more, and that 70% of the diamonds were white and transparent.

Kennady is a spinoff of Mountain Province Diamonds, and was publicly listed last July. The company raised $3 million in a private-placement financing last October.

Metalex Ventures

Metalex Ventures (MTX-V) will have to delay its planned 10,000-ton bulk sample at its U2 diamond project in northern Ontario until next year due to permitting delays.

In mid-March, the company was still waiting on two permits that would allow it to build a 60-km winter road from De Beers’ Victor diamond mine to U2. The permit applications had been submitted in January and March of 2012.

Late last year, Metalex commissioned a 20-ton-per-hour processing plant to be built for the project.

The company also conducted geological and geotechnical logging on 25 pilot holes drilled at U2. In a promising sign for the project, an embedded diamond was found in the core by a geologist logging the core.

At its Quebec metals project, the company completed a program of heavy mineral sampling last year. Metalex has staked claim blocks totalling 201 sq. km on the ground, which is prospective for gold and base metals.

North Arrow Minerals

In March, Stornoway Diamond (SWY-T) cofounder and former CEO Eira Thomas signed a deal to option three exploration projects owned by the company.

Thomas is assigning the rights and obligations of the option to North Arrow Minerals (NAR-V), her father Grenville Thomas’ company.

Grenville Thomas founded Aber Resources (now Dominion Diamond [DDC-T, DDC-N]).

The deal, which will allow North Arrow to earn an 80% interest in three exploration projects, specifies the work that must be done on each one: Qilalugaq, in Nunavut; Pikoo in Saskatchewan; and Timiskaming, in Ontario.

North Arrow plans to complete a $3-million non-brokered private placement of 20 million shares at 15¢ apiece. A minimum $2-million financing is a condition of the deal.

The most advanced of the three projects is Qilalugaq, which has an inferred resource of 26 million carats in 48.8 million tonnes grading 53.6 carats per hundred tonnes in the Q1-4 kimberlite pipe. North Arrow must complete a surface bulk sample of 1,000 tonnes at Q1-4.

The work program at Pikoo will involve at least 2,000 metres of diamond drilling, while the option at Timiskaming will have North Arrow drilling one hole in three separate geophysical targets.

The bulk-sample program at Qilalugaq is designed to recover a large enough parcel of diamonds for a preliminary valuation and economic assessment.

Under the terms of the agreement, Stornoway has a one-time back in right to re-acquire a 20% interest (for 40% total) by reimbursing North Arrow three times the total exploration costs incurred.

North Arrow also holds an interest (with the right to earn up to 45%) in the Lac de Gras joint venture project near the Diavik diamond mine, where Dominion Diamond recently conducted an overburden drilling program to test for kimberlite indicator minerals. Results are expected in the fall.

After completing a 10-for-1 share consolidation in February, the company had 7.4 million shares outstanding. Also in February, North Arrow settled its outstanding debt of $1 million with Anglo Celtic, a private company owned by Grenville Thomas. North Arrow issued Anglo Celtic 21.6 million shares at a price of 5¢ apiece.

Olivut Resources

In March, Olivut Resources (OLV-V) announced a funding agreement with New York-based asset management firm Lind Partners for up to $18 million over three years. The securities purchase agreement will take place in tranches with Lind’s Canadian Special Opportunity Fund.

The structure of the financing is new to Canada, although Lind has used it to fund junior miners in other markets.

Lind will invest $500,000 initially, consisting of $200,000 in common shares and a $300,000 callable convertible security that may be converted into 689,655 units. The first 500,000 units will consist of a common share and a warrant that can be exercised at 59.6¢ within three years; the remaining units will be exercisable for one common share. The convertible security has a term of 36 months with a 0% interest rate and can be called at any time starting six months into the agreement.

After the initial investment, Lind will then invest $200,000 every month for the next 35 months. Tranches can be increased to $500,000 if both parties agree, or may be less than $200,000 if Olivut’s market cap is very low.

In mid-March, the junior had around $1.1 million in cash.

Pangolin Diamonds

In March, Pangolin Diamonds (PAN-V) completed a reverse-takeover of Key Gold Holding that had first been announced in February 2012.

Pangolin holds the Tsabong North diamond exploration project in southwestern Botswana, where 50 targets have been identified through aeromagnetic surveying. Before the merger with Key Gold, Pangolin spent $1 million on exploration, identifying 80 kimberlite drill targets, 50 of them situation on Tsabong North.

In April, it announced a $1.3-million non-brokered private placement financing to pay for exploration and for general working purposes.

The company also raised $2.2 million during the transaction process with Key Gold. Key Gold shareholders received one share in the new Pangolin for every two Key shares held and Pangolin shareholders received shares in the new company on a one-for one basis.

As a condition of the merger, the company issued 5.4 million shares, including 2.4 million to insiders of Key Gold, to settle $272,000 of Key Gold’s debt at a price of 5¢ a share.

In March, Pangolin announced that drilling, which is ongoing, has returned 45 mantle-derived indicator garnets, including high-pressure G1 and G9 garnets associated with diamonds, from a 568.5-gram core sample. The “fresh textures” of the garnets suggest the kimberlite source may be nearby.

The company has two diamond drills and a portable 1-tonne-per-hour dense media separation plant.

Soil sampling has shown “highly anomalous” concentrations of kimberlite indicator minerals at Tsabong North, which is on the western edge of the Archaean Kaapvaal Craton.

Pangolin also has several other projects in Botswana.

Peregrine Diamonds

Peregrine Diamonds (PGD-T) is working towards an initial resource estimate at its Chidliak project, in Nunavut, with the collection of a bulk sample this winter from its CH-6 kimberlite. The $3-million, 200-tonne bulk sample is part of a $5-million work program planned for this year.

The bulk sample, which will be taken via surface trenching from between 4 and 8 metres depth (after the overburden is stripped) was expected to be completed in April and should yield a big enough parcel of commercial-sized diamonds to establish a valuation for CH-6 stones. The sample will be shipped from Iqaluit to Montreal by sealift in July, and then to SRC facilities in Saskatchewan for processing.

Other work at Chidliak, including a desktop mining study, kimberlite pipe characterization study, ground geophysics and work to generate new targets, will be funded by a $2-million contribution from De Beers.

Last year, the junior struck an option deal with De Beers that could see the diamond giant earn a 50.1% interest in the project in return for spending of $58.5 million. De Beers has until the end of 2013 to make a decision. If it exercises its option, the $2 million in spending for this year’s program will count toward its total spending obligation.

In a release, Peregrine CEO Eric Friedland said that having a resource in conjunction with a comprehensive mining study could allow for the completion of a preliminary economic assessment in the first half of 2014.

Peregrine also announced that new microdiamond results from core taken in 2011 indicate a commercial size distribution of diamonds for CH-6. A sample of 251.3 kg collected from six holes returned 639 diamonds larger than the 0.106-mm sieve size, including 24 macro diamonds larger than the 0.85-mm sieve size weighing a total of 1.47 carats.

A mini-bulk sample (14.1 tonnes) at CH-6 in 2010 returned a grade of 2.84 carats per tonne. Peregrine has not yet delineated any resources at Chidliak, but its current geological model of CH-6 suggests it holds 5.7 million tonnes of kimberlite extending to a depth of 375 metres.

Rockwell Diamonds

South Africa-focused alluvial diamond miner Rockwell Diamonds (RDI-T, RDI-J) reported a net loss of $4.7 million and a comprehensive loss of $7.3 million for the quarter ended Nov. 30, the third quarter of the company’s fiscal 2013.

Rising costs — total cash costs were up 37% from the previous quarter to $9.6 — ate into its revenues of $7.1 million. Rockwell recorded revenues of $7 million in the second quarter.

As a result of rising costs, Rockwell switched to contract mining at its Klipdam mine, which has a three-year mine life left.

The Tirisano mine, which only achieved full production last summer, incurred an operating loss of $1 million during the quarter, and was put on care and maintenance in December.

In March, Rockwell completed the purchase of the Jasper mine, next door to its Saxendrift mine, in South Africa’s Middle Orange River Region.

Shear Diamonds

Shear Diamonds (SRM-V) has been under a cease-trade order since November. The company suspended production from stockpiles at its Jericho mine, in Nunavut, in September, due to weak diamond prices.

Shear had been trying to get the past-producing mine back up and running.

The CBC reported in April that Shear owes more than $2 million of a $3.4-million security bond that was supposed to cover cleanup costs for the site, and that regulators have been unable to contact company executives.

Shore Gold

Shore Gold (SGF-T) is working through the environmental permitting process at the Star-Orion South project in Saskatchewan at the same time it seeks investment from a partner to build the project.

The company has received 56 federal comments and information requests and 82 provincial comments since submitting a revised environmental impact assessment for the project last August. It has prepared responses to all of the provincial comments and is working on addressing the federal comments.

Shore completed a feasibility study in July 2011 that outlined a project with a preproduction capex of $1.9 billion, a net present value of $2.1 billion ($1.3 billion after taxes and royalties) and an internal rate of return of 16% (14% after taxes) using a discount rate of 7%.

Newmont Mining (NMC-T, NEM-N) owns 34% of the Orion South kimberlite, while Star is 100% owned by Shore. Newmont has not participated in the joint venture since early 2009.

For 2012, Shore reported a loss of $9.3 million or 4¢ per share. As of March 28, the company had $8.6 million in working capital.

Talmora Diamonds

Last summer at its Horton River property in the Lena West district of the Northwest Territories, Talmora Diamonds (TAI-C) conducted bulk till samples at 78 sites down-ice of airborne magnetic anomalies that may be kimberlite pipes.

A small Packsack drill was also used to sample and test the thickness of overburden near four anomalies. Three of five holes drilled penetrated the bouldery till to reach a rusty brown clay that contained fragments of dolomite. Cuttings from the clay were analyzed to test if it is an altered kimberlite.

In March, Talmora announced that no microdiamonds were found, but the cuttings show characteristics of kimberlite, including locally derived kimberlite indicator minerals.

True North Gems

In March, True North Gems (TGX-V) announced a deal that would see a private investment company, Lenomi Holdings, invest $15.75 million in True North at a price of 9¢ per share in return for a 45% shareholding. True North is advancing the Aappaluttoq ruby project in Greenland.

The brokered private placement, which will take place with Casimir Capital, is slated to occur in three transactions over four months.

The first tranche of 5.6 million shares for $500,000 closed in early April. A second tranche of 47.7 million shares for $4.8 million was expected to close in early May, and would give Lenomi 19.9% of True North shares.

The final tranche of 121.7 million shares for nearly $11 million requires shareholder as well as regulatory approvals. Assuming it is approved, it should take place in July, or August at the latest.

The deal follows a letter of intent with Greenland Mining Services on a partnership agreement in November. In return for a 20% shareholding in True North subsidiary True North Gems Greenland, which holds Aappaluttoq, GMS will engineer, build and complete mine support infrastructure. That represents an investment of US$23 million, or 60% of the project’s forecast capital costs.

The company will be responsible for the design and cost of the processing plant, gem sorting and grading, and gem marketing and sales.

Greenland private equity fund Greenland Venture also made an $800,000 loan and equity investment in the company in February.


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