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Msg  65626 of 66871  at  8/20/2019 8:58:54 PM  by


Diamond 💎 & Specialty Minerals Summary - 20th

Diamond & Specialty Minerals Summary for Aug. 20, 2019

2019-08-20 19:49 ET - Market Summary

by Will Purcell

The diamond and specialty minerals stocks box score on Tuesday was a ho-hum 65-63-172 as the TSX Venture Exchange added six points to 576. Polished diamond prices rose 0.15 per cent, although it takes a fertile imagination to see a hockey stick developing at the end of what is otherwise a dismal one-year chart.

The blip had no impact on Mountain Province Diamonds Inc. (MPVD) today, as it dropped six cents to $1.13 on 199,000 shares, keeping it just above its multiyear low of $1.07, set in May. The stock was as high as $7.18 three years ago, when production began at its Gahcho Kue mine in the Northwest Territories, and it traded to $9.75 in early 1996, based on early enthusiasm for the discovery of the first Gahcho Kue pipe. (On Howe Street, early-bird buyers rarely get the worm -- and when they do, it is usually unappetizing.)

James Bruchs's Tsodilo Resources Ltd. (TSD), up two cents to 14 cents on 3.14 million shares, has received a two-year renewal of its exploration licence for the BK-16 kimberlite project in Botswana. The permit was set to expire at the end of September; it now runs to the end of September, 2021. Extension in hand, Mr. Bruchs president and chief executive officer, says that the emphasis over the next two years will be the phase 2 surface bulk sampling program that Tsodilo has been musing about for the past year.

The bulk sample plan calls for the extraction, processing and diamond recovery of 20,000 tonnes of kimberlite, which should be enough rock to produce between 800 and 1,600 carats of diamonds. Mr. Bruchs points out that the envisioned phase 2 surface bulk sampling of this type constitutes standard industry practice, whereby enough carats are needed for a realistic diamond valuation. (Such a program will be costly, so at this stage it is the geologists doing the envisioning, not the accountants.)

Tsodilo undoubtedly is hoping for something at the high end of its carat range, and it further hopes that enough Type 2a diamond pop up to confirm its value hypothesis. That theory has BK-16 producing enough Type 2a diamonds that the pipe will have a healthy supply of large and top-quality diamonds to boost the average diamond value to something approaching what the nearby Karowe mine achieves for Lucara Diamond Corp. (LUC: $1.11). Tsodilo is also looking toward producing a maiden resource estimate for the pipe at the end of its sampling and valuation program.

Tsodilo mused for some time about completing its phase 1 program at BK-16, and once it collected the 2,077-tonne test, it took nearly as long to process the rock and collect the modest parcel of diamonds. The test ultimately produced 77.9 carats, or about 3.75 carats per hundred tonnes, just beneath the floor of the expected range. Tsodilo's modellers projected BK-16 with a grade between four and eight carats per hundred tonnes, which is the basis for the phase 2 program target range.

Tsodilo had the 78-carat parcel appraised and modelled, resulting in an estimate of between $281 (U.S.) and $792 (U.S.) per carat. Naturally, the wide range of values and grades makes BK-16 something between the next Karowe and a complete bust, so the 20,000-tonne test will help prove or kill the project. While it is unlikely that the test will yield any of the huge gems that Karowe occasionally coughs up during full-scale mining, Mr. Bruchs and his crew will presumably look to the recovered proportion of Type 2a gems for guidance on that score.

Mr. Bruchs is looking to complete the coming bulk sample as efficiently as possible -- no surprise since the company's current accounts were $500,000 (U.S.) in the red at the end of March and the big test, no matter how efficient, is likely to cost several million dollars. Tsodilo is apparently planning a box-cut-style dig -- sort of a small open-pit trench -- which will require the company to strip away about 25 metres of overburden to allow it to cut out about five to 10 metres of kimberlite from the top of the pipe.

William Dawes and Alexander Lemon's Mkango Resources Ltd. (MKA: $0.115) continues to plod along with its feasibility study of the resurrected Songwe Hill rare earth project in Malawi. Songwe Hill was news several years ago during the peak of the last rare-earth price cycle, but it fell silent until early this year, when Mkango got seven million British pounds from Talaxis Ltd. for a feasibility study of the project. As a result of the cash injection into the project, Mkango's interest drops to 51 per cent from 80 per cent.

In a bit of prose that would be at home on Howe Street, Malawi's natural resources minister, Binton Kutsaira, said he was "overwhelmed with the progress" at Songwe Hill, adding that Mkango was "exemplary in the field of corporate social responsibility" and transparent with all stakeholders regarding its operations, as it continues to fast-track exploration and the feasibility study. (Perhaps trains run slowly in Malawi: Songwe Hill received a prefeasibility study five years ago and the company immediately began touting its plan for a full feasibility study.)

The now dated prefeasibility study showed a discounted net present value of $293-million (U.S.) after taxes for a $217-million (U.S.) mine that would process nearly 8.5 million tonnes of ore, grading 1.6 per cent total rare earth oxides, over an 18-year period. The company updated the prefeasibility study the following year, leaving the capital cost unchanged but boosting the value to $345-million (U.S.), thanks to juiced price estimates for certain key rare earth oxides. Silence ensued thereafter, as rare earth prices continued to fall, but new worries about Chinese supply have rare earth promoters back on the hustings.

Jon Evans's Lithium Americas Corp. (LAC), down one cent to $4.72 on 56,000 shares, is cheering word that Ganfeng Lithium Co. Ltd. has invested $160-million (U.S.) into the Cauchari-Olaroz lithium brine project in Argentina. The investment cuts Lithium America's interest in the project to 50 per cent from 62.5 per cent. Mr. Evans, president and CEO since May, says that construction of the operation is on schedule, a schedule that calls for production to commence before the end of next year.

Further, the company should have a feasibility study in about a month, which will call for production of 40,000 tonnes per year of battery-grade lithium carbonate. The 2017 feasibility study upon which the project is based called for production of 25,000 tonnes per year over a 40-year run. The $425-million (U.S.) project supported a discounted net present value of $803-million (U.S.) per tonne at the time.

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