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Msg  65359 of 67696  at  7/11/2019 8:54:33 PM  by


Diamond & Specialty Minerals Summary - 11th

Diamond & Specialty Minerals Summary for July 11, 2019

2019-07-11 20:45 ET - Market Summary

by Will Purcell

The diamond and specialty minerals stocks box score on Thursday was a weak 55-76-163 as the TSX Venture Exchange fell five points to 580 and polished diamond prices inched higher. Katanga Mining Ltd. (KAT) added six cents to 51 cents on 1.07 million shares. The company is treading carefully between artisans illegally mining on and near its copper and cobalt property in the Democratic Republic of the Congo, and the DRC military, sent in to halt the activity. Vladimir Iorich's Cobalt 27 Capital Corp. (KBLT) lost three cents to $4.17 on 625,000 shares. Not all the company's shareholders are pleased with the plan to sell itself to Mr. Iorich's Pala Investments Ltd.

Stornoway Diamond Corp. (SWY) closed unchanged at two cents on 1.39 million shares. The company, increasingly a ward of the Quebec government, mined more diamonds at its Renard mine in its spring quarter than it did in the winter but it sold them for less. The mine, in the Otish Mountains area of north-central Quebec, produced 463,136 carats from 695,934 tonnes of kimberlite in the second quarter, averaging 67 carats per hundred tonnes. In the first quarter, the company produced 444,562 carats from 582,613 tonnes, averaging 76 carats per hundred tonnes.

Patrick Godin, who replaced Matt Manson as president and chief executive officer at the start of the year, attributed the increased carat count to strong performance from both the underground mine and the processing plant at Renard, although those improvements were partially countered by lower grades of kimberlite being mined. Not to worry, says Mr. Godin, the lower grade was an aberration and it is expected to increase for the rest of the year. Perhaps, but he offered no warning when he discussed Stornoway's first quarter results in April that the spring grade would be lower.

Some of those additional carats found their way into Stornoway's two spring sales. The company sold 460,832 carats for an average of $76 (U.S.) per carat, grossing $47-million in revenue. In the first quarter, Stornoway sold 429,506 carats for $83 (U.S.) per carat, also grossing $47-million in revenue. During 2018, the company sold 1.04 million carats for $93 (U.S.) per carat, grossing $145-million in revenue. That modest figure was a key reason why Stornoway racked up a $329-million loss last year.

Stornoway's 2019 guidance calls for it to mine between 1.8 million and 2.1 million carats and sell them for between $80 (U.S.) and $105 (U.S.) per carat. Through the first half of the year, the company has mined just over 900,000 carats and sold 890,000 carats, suggesting that it is on track to end the year at or just below the lower end of its prediction. Unfortunately, the average diamond price, just under $78 (U.S.) per carat, is tracking just below the company's low-end prediction and as a result, gross revenues are likely to be disappointing again this year. (The company sold $94-million of diamonds in the first two quarters, putting it on track for about $190-million in 2019 revenue.)

Mr. Godin says, ". . . the rough diamond market continues to be challenging" -- a promoter's euphemism for terrible -- with further deceases in diamond prices noted in the company's two spring sales. All signs suggest that the challenges will continue, or worsen, as rough diamond prices continue to sag this summer. Nevertheless, Mr. Godin, seeking any silver -- even grey -- lining that he can find, notes that Stornoway's gross revenue held steady in the second quarter thanks to the increased volume of diamonds mined.

Richard Kern's Iconic Minerals Ltd. (ICM), unchanged at 10.5 cents on 86,000 shares, is sending a drill and crew to its Bonnie Claire lithium project in Nevada. The company plans to drill five holes to depths of about 90 metres to collect samples. The company declared a maiden resource last fall, listing 5.57 billion tonnes of brine averaging 963 parts per million lithium, for an equivalent 28.6 million tonnes of lithium carbonate equivalent.

It is unclear what Iconic hopes to accomplish with the new drilling. Last fall, it said that another 10 holes would be needed to move the resource into an indicated or higher category. Now, it points out that the resource estimate covers just 300 hectares while the company's geophysics suggests a potential mineralized area of 2,700 hectares. Mr. Kern, president and CEO, says that Iconic is also completing metallurgical work to determine the best method for recovering the lithium from the brine.

Mark Smith's Largo Resources Ltd. (LGO), down five cents to $1.83 on 806,000 shares, produced 2,515 tonnes of vanadium oxide at its Maracas Menchen mine in Brazil during the second quarter. This is handily above the 2,099 tonnes the mine produced in the first quarter, a period hampered by maintenance work at the processing facility. The latest quarter also topped the mine's production a year ago by 57 tonnes. Mr. Smith, CEO, says that he was "quite pleased" with the mine's performance in the latest quarter, which included record-setting production in June.

More records are in the offing, as Largo is expanding the mine. Mr. Smith says that he is looking forward to completing the installation of a new ball mill at Maracas Menchen, and to completing the commissioning and ramp-up phase of the expansion during the third quarter. The improvements are expected to yield a nameplate capacity of 1,000 tonnes of vanadium oxide per month, up from 800 tonnes per month.

Adrian Hobkirk's NRG Metals Inc. (NRG), unchanged at 18 cents on 206,000 shares, has kept the wolf away from its door for another several months, issuing 750,000 shares to the vendor of the Hombre Muerto North property, As well, a senior NRG officer made the required $500,000 (U.S.) cash payment on behalf of the company. The next payments under the option arrangement come due next March, when NRG must pay $1-million (U.S.) in cash and issue 2.25 million shares. Similar payments are due the following year and the final payment, due in 2022, calls for $2-million (U.S.) in cash and 2.25 million shares.

NRG received a preliminary economic assessment of Hombre Muerto North in April. The dream sheet was based on a measured and indicated resource of 141.8 million cubic metres averaging 756 milligrams per litre, or about 571,000 tonnes of lithium carbonate equivalent. (There are also 1.84 million tonnes of potassium chloride equivalent.) The plan called for a 30-year mine that would cost $93-million to build, but which supports a discounted net present value of $217-million (U.S.) after taxes. Presumably, NRG will be eager to make its coming payments.

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