“Erica Bonhomme, environmental manager at Snap Lake Mine, told the board that 684 milligrams per litre would result in closure of the mine and cannot be met.”
Game of Thrones 2015 – NWT style
- PDAC interview with Brent Cook and a callow Sprottling about mining exploration in general and the crummy situation with the juniors in particular.[Exploration Insights]
..worst since 2009
Kelvin bulk sampling
News items of interest in an otherwise quiet news day….
The headframe will go over here.
- Rick Rule on uranium and the junior markets. Uranium prices will remain low for a while because the Japanese got a 50% cut in their energy prices courtesy of the oil price drop. On the juniors: he’s waiting for a 2000-like capitulation when they roll over and offer their stock at bargain basement valuations. [Mining.com]
- IWATTOS calls the end of the US$ bull market.. which hasn’t been helping metal prices. [My Own Market Narrative]
- Stockwatch’s Will Purcell on Sandstorm’s acquisition of the Diavik royalty; a bet on Diavik upside…. [Stockwatch]
Nolan Watson’s Sandstorm Gold Ltd. (SSL), up 13 cents to $4.16 on 443,000 shares, has indirectly joined the diamond sector. It has paid $52.5-million (U.S.) to Iamgold Corp. (IMG: $2.69) for a 1-per-cent gross proceeds royalty on production from the Diavik mine at Lac de Gras. (Iamgold also receives three million Sandstorm warrants, exercisable at $4.50 (U.S.) once A-21 reaches production.) Whether the move pays off will depend on the long-term future of Diavik. The mine has been in production for a dozen years and analysts say its best years are behind it. Iamgold has been receiving between $7-million (U.S.) and $8-million (U.S.) annually from the royalty in recent years and Mr. Nolan, Sandstorm’s president and CEO, says it will add “additional long-term stable cash flows to Sandstorm’s portfolio.”
How long that cash will flow depends on the A-21 mine plan put together last year by Rio Tinto PLC and its minority partner, Dominion Diamond Corp. (DDC: $22.30). A-21 hosts four million tonnes measured and indicated at nearly 2.8 carats per tonne, with another 800,000 tonnes inferred at 3.0 carats per tonne. Rio Tinto now says A-21’s resource “is well understood,” but several earlier misunderstandings resulted in it being jockeyed in and out of previous Diavik mine plans. One of those fuzzy points, the diamond value, has apparently been resolved. Rio Tinto and Dominion now say the A-21 gems are worth an average of $135 (U.S.) per carat, the same as those in A-154 South. The second hurdle was the capital cost for a massive water retention dike; considerable progress has been made there as well. The Diavik co-venturers say they can put A-21 into production for $350-million (U.S.) and have the first gems by the end of the decade.
If so, Diavik’s production could remain fairly constant through 2023. Another nine years of royalties at current levels would probably amount to between $65-million (U.S.) and $70-million (U.S.), which considering the risks still inherent at A-21, suggests Sandstorm thinks there is additional upside at Diavik. Mr. Nolan describes Diavik’s diamonds as being sufficient to last until “at least 2023,” so Sandstorm probably expects additional gems will be added to the mine plan. The other upside opportunity for Sandstorm is the underlying diamond value. Most diamantaires and analysts predict that rough prices will handily outstrip inflation over the remaining life of Diavik. If they are eventually proven right — so far they have been quite wrong — then Sandstorm’s annual Diavik royalty could grow considerably.
- Stockwatch (Will Purcell) on KDI:
Patrick Evans’s Kennady Diamonds Inc. (KDI), down 15 cents to $3.40 on 31,000 shares, has drilled 32 metres of kimberlite in the first of 14 drill holes to be completed this spring at Faraday, just north of the company’s Kelvin kimberlite at Kennady North. (Kennady North is 10 kilometres northeast of the rich Gahcho Kue project, where De Beers Canada and Kennady’s sister company, Mountain Province Diamonds Inc. (MPV: $4.10) are building an $860-million mine.) Mr. Evans, CEO of Mountain Province since 2007 and of Kennady since he spun it off from Mountain Province in 2012, says ground geophysics at Faraday shows anomalies comparable in size with Kelvin. “This leads us to believe,” he says, that “the potential exists for substantial tonnage at the high-grade Faraday kimberlite.” (He presumably would like investors to believe that Faraday will prove comparable to Kelvin, where Kennady touts a tonnage potential of between 10 million and 13 million tonnes.)
He would also like investors to believe that the Faraday grade will remain close to the 4.54-carat-per-tonne result obtained in 2013 from about one tonne of kimberlite. While possible, it seems far more likely that the Faraday grade will fall in line with the latest cumulative test for Kelvin, which also started out with a particularly high grade that subsequently retreated with larger samples. So far, 53.1 tonnes of Kelvin kimberlite has produced 124.9 carats using a 0.85-millimetre sieve, or 2.35 carats per tonne. The grade drops closer to two carats per tonne when the cut-off is raised to 1.18-millimetre, the usual limit for a commercial operation. That is in line with — although slightly superior to — the average grade at Gahcho Kue.
Some stories of interest so far this week….
- Yukon Zinc gets court protection. So the “shutdown” is bankruptcy. Aside from the $595M they owe to themselves, creditors owed more than $1M include Royal Gold (royalty), Sandvik (mining supplies), Procon (mining), AFD (fuel) and Compass (catering). What they owe YTG for their environmental bond is not shown on the statement. [CBC North]
- Over in the NWT, things are going well on the winter road….Patrick Evans’s Mountain Province Diamonds Inc. (MPV), unchanged at $4.14 on 169,000 shares, is wrapping up its supply run to Gahcho Kue, 250 kilometres northeast of Yellowknife. Mountain Province and its co-venturer, De Beers Canada, are building their mine, estimated to cost $860-million, based on three kimberlites discovered in the 1990s. To do so, they must deliver 2,150 truckloads of goods up the first 220 kilometres of the Tibbett-to-Contwoyto winter ice road, then another 150 kilometres along a spur road leading to Snap Lake and Gahcho Kue. Those shipments are now 80 per cent complete and Mr. Evans anticipates no problems in completing the supply run, thanks to De Beers’s “high level of preparedness” and favourable weather conditions. (Yellowknife temperatures are still dipping below minus 30 C on occasion, a condition only those with a mountain of goods to ship on an ice road would consider favourable.)This looks like a record year for the Tibbett-to-Contwoyto ice road, as 335,000 tonnes of goods are expected to be delivered by 9,500 northbound hauls before it closes in another few weeks. That would top the 330,000 tonnes delivered in 2007, when 10,922 northbound trips were made. That was the year after the ice road closed early, without having reached its maximum weight limit, leaving the mines with half their vital supplies still sitting in Yellowknife. After incurring massive air transportation costs that summer, they took no chances the following year, shipping lighter loads early in the season, just in case. Fortunately, global warming, in the Slave district at least, appears to be on hiatus.Mr. Evans, Mountain Province’s CEO since 2007, says construction of Gahcho Kue is on schedule and within budget. The build should be complete and first production should commence next spring. The “on budget” is important, as Mr. Evans is still working on raising Mountain Province’s 49-per-cent share of the capital cost. He says “good progress continues to be made” on a $370-million (U.S.) term loan facility. In other words it is not yet in place. One major holdup is the bankers’ demand that Mountain Province have a $75-million (U.S.) cost overrun facility in place, which the company intends to satisfy through a $95-million rights offering at $4 per share. With Mountain Province’s major shareholder, Dermot Desmond, promising to exercise his rights and all those left unexercised by lesser shareholders, the overrun facility should be set up within a few weeks. [Stockwatch – Will Purcell]
- Rick Rule and Bill Sheriff tell us why the zombie juniors have to go… [Mining.com]
- It’s been a bad week on the Venture Exchange with lots of negative volume since PDAC [Stockwatch]:
- De Beers says Snap Lake will close soon if they can’t dump mine water… De Beers says they haven’t made a nickel at Snap Lake but – if you let them go over limit – they will continue operating and pump another $1BN into the NWT economy until they shut down. Since they sell the diamonds to themselves, it’s tough to know what they’re making. The water problem is real, caused by Winspear failing to cement their diamond drill holes during exploration and breccias (blows) off the kimberlite dyke. [CBC North and thanks for background to Etienne Tardif].