Donlin Creek, metals and hype

El Nino is suppressing the gold price. [Mining.com]  Drought in India => no income for farmers => poor gold sales.


Chinese copper smelters to slash production by 5% in 2016.  [Mining.com]   Happy New Year.

Copper


World Platinum Investment Council says the PGE market will be in balance next year. [MetalMiner]   Despite the Volkswagon scandal.

VW


Iron ore futures plummet to <$40 / t as new Australian production comes on line. [Mining Weekly]   Gina Rinehart’s Roy Hill comes on stream just in time to kill the iron ore market for the year.   It’s now a game of chicken in the producer’s end; who will blink first?


Rough diamond prices may have bottomed.  [Paul Zimnisky]  You decide.

Rough prices


IKN on why you should never take career advice from academics. [IKN]

“It’s never been a better time to become an economic geologist, working with a mining company. It’s one of the better-kept secrets of employment in a recession-hit world.”

teacher


Man the pumps

Lithium X Energy hits the board today.  [CEO.ca]  All Howe Street hands on deck for this one.  They’ve got it all: Flashy space-age name name, ~$1.4 M financing, Frank Guistra and other notables on the board.   And the property?   Don’t worry – details will follow.  It’s right next to Ablemarle’s operation so it has to be good.  If this exercise in Howe Street promotional onanism goes limp, it will be a sign of real investor capitulation.


Brent Cook interview from the Silver Summit in  San Francisco. [Korelin Report]

  • He’s adding to his portfolio and looking at maybe hiring another geologist-analyst.
  • Most juniors are broke and the first money will be made in the mid-tier producers.  These will be the first take-out targets.    Richmont and Premier mentioned.
  • Cash rich prospect generators are attractive.  Mirasol mentioned as an attractive junior.
  • Area plays are an idea from the past; don’t expect them to save us soon.

It isn’t China or the post-Lehman hangover: Rio Tinto and Vale killed the commodities supercycle. [Forbes / Republic of Mining]  The view from that center of mining insight, Wall Street.  This is like blaming garbage on garbage men.


Hot hole at NexGen’s Arrow. [Junior Mining Network]  31.5 m @ 10% U3O8 including 5.0 m @ 49.6% U3O8.   Everybody into the lead suits.

Hot suits


Northquest takeover possible. [Stockwatch]  On the heels of announcing its Pistol Bay results, partner Nordgold NV up its  ante to 52% of the company.

Dr. Jon North’s Northquest Ltd. (NQ), up one cent to 15 cents on 115,000 shares, is expecting an imminent takeover bid from its majority shareholder, Nikolai Zelenski’s Netherlands-based Nordgold NV. Nordgold has just exercised 1.39 million warrants at 24 cents, five million at 27 cents and another 11.1 million at 30 cents, giving it 55.6 million shares, or 52.3 per cent of the company’s stock. Dr. North, chairman and chief executive officer of Northquest, says that according to a deal between the two companies, Nordgold must now offer to buy out the minority shareholders at a price of approximately 25 cents per share.

Mr. Zelenski has officially said nothing about an offer, and in the company’s early warning report it said it “may increase or decrease” its ownership of Northquest depending on the evolution of Northquest’s  business and other factors. He does speak highly of Northquest’s main project at Pistol Bay, in Nunavut. Mr. Zelenski says the positive results obtained this year confirmed the potential of the project and Nordgold is “pleased to provide continuing support” to the project through its $5-million exercise of the warrants.

The fate of Dr. North and his $250,000-a-year salary is unclear in the event Mr. Zelenski proceeds with a full takeover bid for Northquest. Unlike many of his peers, Northquest is Dr. North’s only source of income, but he would apparently be in line for a $600,000 lump sum payment if he is fired as a result of a takeover.


Hawkeye closes $250K raise. [Canadian Financing Bulletin]  What the heck is happening here?   Hawkeye has been poking around the Yukon for several years (since Carmacks Caldera days) and the last news of them doing anything was in April when they picked up a wanna-be Pt-Pd-Ni prospect (Rex) near Wellgreen.  There’s been a repricing of warrants down to $0.10 at the AGM as well.   Prez Greg Neeld spent 10 years playing for the Canucks before trying mining.   They’ve been the ultimate zombie junior of late but hope springs eternal:

Mr. Neeld will apply the entrepreneurial skills and knowledge derived from his industry-diverse commerce’s to assist in transforming HAWKEYE from a junior exploration company to a revered mine-producing-concern at the forefront of the mining industry.

Revered?


Barrick and Novagold submit draft EIS on Donlin Creek. [Marketwired]   Let the games begin.

Donlin

Metals and Victoria Gold

Tin, moly & tungsten. [InfoMine]  Same situation here as for the headline base metals, except that there is a ray of hope for tin.  The tin market is in deficit (again) as production drops by 8%. [Mining.com]

Sn-Mo-W


If there are any nickel bulls left out there, this won’t cheer them up.  China’s nickel smelters agree to cut production by 20% in 2016. [Reuters]  They’ve also asked the Chinese government to buy up and stockpile their 2015 surplus nickel.  [China Mining]

Nickel


President Obama signs the space mining bill. [Mining.com]  CBC sounds the alarm. [CBC.ca]

Obama in space


Time for a field trip!  Northern Miner visits Kaminak.    Eira Thomas explains why they’ve avoided the Casino Trail and opted for the northern route through Dawson:

“It wasn’t a simple matter of hitching Coffee to [the Casino] wagon, because we have different logistic needs and different First Nation politics,” Thomas says, as she points out the area where the road would access Kaminak’s camp.

A wise choice.

Over the cliff


An Alaska update from Curt Freeman. [Petroleum News of Alaska]  An upbeat summary of exploration progress from the Great Land’s best mining booster.

Curt Freeman


The Resource Maven opines on December resource stock market action.  How about tax loss buying? [Resourcemaven.ca]  Don’t see it but her remarks about the recent Barrick sale and Waterton’s appetite for picking up Nevada prospects have a hopeful ring:

So Waterton is leading the way among private equity firms interested in making money mining, with this Barrick deal its biggest to date. Kinross is signaling that prices are as good as they’re going to get. Both suggest these experienced technical teams think the worst is over.


Victoria Gold completes a $1.75M flow-through financing. [Junior Mining Network]

“This flow-through financing enables Victoria to continue to explore the high priority Olive and Shamrock targets while preserving the hard dollars in the Company treasury,” said John McConnell, President & CEO. He further noted that, “This financing, Victoria’s first since November 2011, offers a significant premium and minimal dilution to our shareholders.”


Stockwatch’s Will Purcell on Canterra and Crystal Exploration. [Stockwatch]

Randy Turner’s Canterra Minerals Corp. (CTM) closed unchanged at 3.5 cents on 17,000 shares. The company, which has raised $500,000 of the $1-million it has been seeking, is hoping to sell another $500,000 of flow-through shares at eight cents and regular shares at six cents before a Dec. 18 deadline. This is the placement that the tenacious Mr. Turner put together in July and has extended several times since then “to allow investors further time to complete and deliver their subscription agreements.” Unfortunately, even Mr. Turner’s most loyal backers will be reluctant to put pen to paper at Canterra’s 3.5-cent share price.

Canterra did manage to get a crew in the field this fall, although they managed little more than geological busywork. The company collected another 204 till samples over the Marlin property, west of Gahcho Kue and Kennady North, about 250 kilometres northeast of Yellowknife. These samples follow the nearly 700 tests the company completed in 2014. As well, Canterra managed a modest field program at Hilltop, west of Snap Lake, in anticipation of a modest geophysical program planned for early next year. That work is a follow-up program to a geophysical survey earlier this year that identified several targets for further investigation. In bygone years that would mean some quick calls to Mr. Turner’s backers to support a big drill program. Now, it just means more geophysics.

Jim Greig’s Crystal Exploration Inc. (CEI: $0.10) has closed its acquisition of eight prospecting permits covering 115,000 hectares of ground in the North Slave district of western Nunavut. The company agreed to pay two prospectors, Michael Dufresne and Rob L’Heureux, $75,000 and one million shares, with more cash and stock payments contingent upon exploration milestones. The two prospectors are just the latest to hold the properties, which were called Muskox and Hood River when they were explored by De Beers Canada, Lytton Minerals Ltd. and later Tahera Diamond Corp. from the early 1990s until the late 2000s.

Mr. Greig says he is “extremely excited to work and develop these projects where tens of millions of dollars of exceptional geological work was performed in the past.” Unfortunately, the expensive work did not lead to any exceptional finds — just a few ho-hum discoveries that were just good enough to prompt Tahera to throw good money after bad. The target of Tahera’s misplaced optimism was the Muskox pipe, which never lived up to the microdiamond enthusiasm of earlier tests. The best result was a 0.53-carat-per-tonne grade obtained in an 865-tonne test in 2006.

Mr. Greig, Crystal’s chief executive officer, nevertheless touts Muskox. He says rough diamond prices have increased nearly 200 per cent since the historical bulk tests, although none of the earlier parcels had ever been valued. Diamonds from the nearby Jericho pipe were worth about $70 (U.S.) per carat at the time and gems from the JD-03 pipe, between Muskox and Jericho, were appraised at less than $40 (U.S.) per carat, so the fact that Tahera never bothered to appraise the Muskox diamonds is not a good sign. Just in case, Mr. Greig is also touting 113 anomalies where De Beers originally reported 15 high-priority drill targets. Whether Crystal will get to drill any targets next year will depend of Mr. Greig’s ability to promote his new play as the company was essentially broke at last report

Faro, Howards Pass and a mine YCS can live with.

BC and Alaska ink a deal to scrutinize each other’s mining projects. [Resource Clips]  Details not included.


Faro Mine cleanup slowed by “complications”. [CBC.ca]  The NDP critic Jim Tredger asks a really important question:

“What does Yukon have to show for the millions of dollars spent on the Faro remediation project?”

The Feds and YTG should be asked how they burned through $60M that past operators posted to execute an approved reclamation plan – by working on a new plan.  Now things are not going according to plan so we’ll have to plan on revising the plan.  There is an unholy feedback loop here which does not serve the public interest:

  1. Mining company develops a low grade pig or restarts a past producer with limited marginal ore left.
  2. There’s a closure plan in place developed by industry experts to reclaim the mine.  It may or may not be fully funded.
  3. The mine goes poof and the Feds (or now YTG) take it over.
  4. They refer their project to their “Assessment and Abandoned Mines Branch” – an unaccountable, first class, gold-plated boondoggle bureaucracy intent on feathering its nest by prolonging any mine reclamation ad infinitum.
  5. Gasps of horror when they look at the remediation plan.  They leak the news to environmental groups who also chime in.  “The plan is deficient and there isn’t near enough money!”.
  6. They “study the project”, working on serial plans;  repeating all sorts of environmental studies and surveys; conducting endless workshops; and consulting the public to death and alarming them in the process.  They burn through all the money the mining company posted for reclamation on this and other goodies.
  7. They have another series of workshops to let the environmental groups know about how huge the problem is, how little progress has been made and how much more money will be needed to clean it up.
  8. Environmentalists howl about the huge, expensive, unreclaimed mess and accuse the government of cutting cozy deals to put mines in production without getting adequate security.
  9. Government refunds the Assessment and Abandoned Mines Branch to make the whole problem go away.
  10. Repeat steps  6 to 9.

Funny how this doesn’t happen when the government isn’t involved in the cleanup (eg. Sa Dena Hes or Brewery Creek).


Kaska Dene not so sure about Howards Pass.  [CBC.ca]  After Faro, sounds like they have their doubts about the benefits of lead-zinc mining.  They have to ratify an IBA or this project is likely DOA at YESAA .


Yukon Conservation Society issues a report card on future Yukon mines. [Yukon News]

Kaminak’s Coffee Creek:   Teacher’s pet.  “While the devil will always be in the details, this project does not at first glance seem too bad.”

Victoria Gold’s Dublin Gulch:   Satisfactory.   “The site is in a region that has been heavily explored for decades, which means there is already habitat fragmentation due to seismic lines, drilling pads and access roads.”  A little hyperbole here as the nearest “seismic line” is 150 miles away on the north side of the Werneckes.

Selwyn Chihong’s Howard’s Pass:  Fail.  “…the scale and size of this project are certainly raising eyebrows in the environmental community. This is yet another massive proposal that will require a long access road, this time along the N.W.T. border down to Tungsten; then lead and zinc concentrate trucks would flow through Watson Lake to Stewart, B.C. That’s right, a 1,000 km road trip for low value products just to get to tidewater. And we are talking a lot of trucks; about 94 large highway trucks every day transporting ore and supplies.”  

Western Copper’s Casino:  Expel immediately!  “Now let us look at some projects that, from the environmental community’s perspective, are complete non-starters, or as YCS likes to call them: environmental horror shows. As always, the massive Casino copper-silver-gold-molybdenum mine heads the list.”  They flunk the project on size, killing the Klaza caribou, using lots of LNG and destroying the climate, etc. etc.  They’re very concerned about remediation and have thoroughly drunk the Kool Aid on Faro:  “Faro is estimated to take 400 years – and one billion taxpayer dollars – to clean up.”  

(How long is it going to take to clean up Assessment and Abandoned Mines?)

Marg, Sabina and the Basin

Rio Tinto thinks copper will not rebound for at least two more years. [Bloomberg]

Doom


Arrow, NexGen and the Basin. [CEO.ca]  If you haven’t been following uranium much (aside from the Fission dust-up), this article on NexGen Energy’s Arrow discovery in the west end of the Athabasca Basin is worth reading.  It’s an interview with the retired no-nonsense ex-Cameco engineer who was the lead engineer in designing the mining methods used at the very high grade McArthur River mine.  He puts Patterson Lake South and Arrow in perspective:

I would put Arrow firmly in the top five of undeveloped projects worldwide.

I think Cameco should be viewing the whole trend as a twin to Rabbit Lake, which has been in production for 40 years now.

I am a shareholder of NXE. I have a very low risk tolerance which therefore excludes 99.5% of exploration companies. But what NXE is currently drilling in my opinion only comes around once every 20 years. The timing is a shame.


Minquest releases a scoping study on Marg. [Mining Weekly]   They estimate it will cost $174M to put this VMS deposit northeast of Mayo into production for a 7 year mine life.  They plan on starting a feasibility study during spring 2016.   Something odd here.  The PR lists resources of 9.8 Mt but GPY lists only 4.0 Mt of indicated resources and 7.8 Mt inferred.   Whole lotta drilling gonna have to happen here before this is going anywhere.

Marg


Sabina raises $2.2M in flow-through. [Marketwired]  Bruce McLeod pulls it off – and  at $0.77 a share.  They’ll have $19M in the bank by year end including this raise.

Prospectors of the Year

Roger & Farrell

Roger and Farrell well armed in Alaska.

The Yukon Prospectors Association is pleased to announce the Yukon Prospectors of the Year for 2015.  Roger Hulstein and Farrell Andersen, two Whitehorse-based prospectors, are being recognized for their part in the discovery of gold on Gorilla Minerals Corporation’s WELS property in the western Yukon.

Roger Hulstein grew up in Cape Breton and earned a degree in geology from St. Mary’s University.  In 1981, he followed his future wife Nicole to the Yukon where they moved permanently in 1987.  In the early 1980’s, he worked with AGIP Canada on their Mount Skukum gold project and regional exploration programs from McMillan Pass to Mount Nansen. In 1985 as a founding partner in Aurum Geological Consultants, he helped identify the Skukum Creek gold – silver deposit for Omni Resources. While with Aurum he conducted exploration on behalf of many clients throughout the Yukon. In the 1990’s he worked for Kennecott Canada, where he acquired and tested a number of gold properties including Scheelite Dome near Mayo, Antimony Mountain near Dawson City and the Sixtymile district. Most of these properties remain staked and in play. After Kennecott terminated their gold exploration projects and after yet another layoff, Roger struck out on his own as an independent consultant and prospector, working on projects from Alaska to Nevada.

Farrell Andersen grew up in a placer mining family, working on operations in Yukon and California.  His interest in prospecting was sparked at age 15 when he and his step-father rafted down the Yukon River to Ballarat Creek and discovered a placer deposit by shaft sinking.  Farrell earned a geology degree from UBC in in 1989 and  since then worked on gold, diamond, base metal and industrial mineral programs in western Canada, Alaska, northern Europe, South America and eastern Australia for numerous companies including Archer Cathro & Associates; Rimfire Minerals; Kennecott  and Aurora Geosciences.  He always prospected independently on the side between jobs and was an early believer in the potential of the White Gold district, staking claims and exploring there since the 1990’s.

The Wels Gold Property is in a poorly explored region of the Yukon east of Beaver Creek and north of Kluane Lake.  Roger and Farrell’s interest in the area was sparked by a 2006 Yukon Geological Survey data release in which they noted gold in soil and stream sediment samples from this area.  They were particularly intrigued that arsenic and antimony were associated with the gold as these are pathfinder elements in some gold deposits.  They staked the WELS Claims covering the anomalies and optioned the property to Gorilla Minerals Corporation in 2011.   Initial exploration by Gorilla returned spectacular trench results including 8.8 grams per tonne gold over 45 metres and the company began drilling the showing this summer.   The Wels discovery has focused attention on this hitherto overlooked part of the Yukon and numerous other claims have been staked in the area.

The WELS discovery is a new or “grass-roots” discovery, made by following up indirect indicators to locate hitherto unknown bedrock mineralization.  They are particularly important for the future of Yukon’s mining industry.  Similar recent grass roots discoveries at Coffee Creek south of Dawson, and at the Rau and Rackla projects north of Mayo show great promise of eventually becoming producing mines.

Drill results and De Beers rumours

Barclays says the copper price will stay low for a while. [Mining.com]

Copper & oil


Cri de coeur from Martin Rappaport. [Diamonds.net]  A leading voice in the diamond trade calls on De Beers to get rid of their CEO and slash rough prices.

Rough & polished


While we’re on the subject:  Anglo may be mulling selling De Beers. [Bloomberg]  They could raise $10B if they decide to sell to the hoi polloi.

Over my dead body.

Over my dead body.


Constantine announces final results from Palmer Project drilling. [Junior Mining Network]  8 holes & 7,736 m of drilling.  Results look a little lean; hopefully Dowa has the nerve to remain in the hunt.


Aura Silver reports results from Greyhound. [Junior Mining Network]  Agnico Eagle drilled 8 holes (1,557 m) into this VMS prospect near Baker Lake this summer.  Now there’s no peep about base metals values – it’s all gold.  The PR sounds like it might be also addressed to Agnico’s management, citing what might be recommendations from the project geo as findings of note.  You can bet a case of beer he’ll be keen on the project.  Whether senior management wants to chase 3 to 6 g/t Au over 1.5 to 2.7 m when they’ve got what appears to be new (wholly owned) deposit shaping up north of nearby Meadowbank is really the question Aura needs answered.


Northquest drilling results are out. [Northquest] They drilled east and west of the Vickers Zone and in a new hanging wall zone (Defender Target).  The best results came from the east zone with the headline hole cutting 39 m @ 2.57 g/t Au.  Jon North’s meaty talk at the YK Geoscience Forum today highlighted the width of the mineralization and how good the metallurgy is.  It’s clear from the PR why grade wasn’t the theme; reported interval assays ranged from 0.4 to 2.88 g/t Au.  Still open to the east and at depth but some intersections are getting deep (300 to 400 m).   Market reaction yesterday was interesting; a lot of stock changed hands but that’s about it.

NQ

And this morning we hear…. Nord Gold NV increases it’s stake in NQ to 52%. [Stockwatch]

Nikolai Zelenski, Chief Executive Officer of Nordgold, said: “After positive results of the exploration program at Pistol Bay in 2015, which confirmed its potential of being a high quality deposit of substantial scale with high grade ore, a moderate stripping ratio and excellent metallurgy, we are pleased to provide continuing support to the project development with this additional investment.


Fission ends the season with a big hit. [Market Wired]  6.0 m @ 26% U3O8.


Crystal Exploration closes its deal on diamond permits near Jericho. [Stockwatch]  And now to raise some money…

Alaska high grade and diamonds

Copper miners playing bloody knuckles. [Bloomberg]  First major  to quit and shut in production loses.

Fortunately, the largest producers are protected from the price collapse by local currencies depreciating just as fast against the dollar. [Bloomberg]  The new break even price for Chilean producers?  Somewhere around $1.70.   If you’re producing in Yukon however, you might be underwater.

Producer costs


The marriage is off: Ethos Gold cans the deal with Zootly. [Marketwired]  Zootly was a private co set to become the Uber of movers in New York.  Yeah!  Like you’d entrust your beloved earthly possessions to a bunch of free-lance goons summoned by an app?  Looks like Gary Freeman won’t entrust shareholders money to these guys either.

Cake


Another massive gold deposit discovered in China’s Shangdong Province.  [China Mining]  But wait – there’s more!  This one – at a mere 328 tons (9.1M ounces) – is the 31st mine discovered this year in the province!   Gosh – they make it look so darn easy.

Thumbs up


Canadian diamond producers are best positioned to weather the diamond price crunch. [Mining Weekly]


Peak Gold reports high grade hits from their Tetlin Project near Tok. [Petroleum News of Alaska]  16.8 m @ 17.94 g/t Au and 68.47 m @ 5.46 g/t Au were among the more interesting hits reported from the Peak West and Blue Moon targets.  They completed 61 holes / 14,059 m this year.


Dunnedin releases photos of their diamonds. [Resource Clips]  These are from the  PST target bulk sample which returned a reported grade  three times higher than historic grades from much larger bulk samples.  The secret?

Dunnedin attributes PST’s considerably higher sample grade to superior recovery at the lab of Canadian diamond pioneer Chuck Fipke, a company adviser.

There was a lab like this up North about 20 years ago….

[PS.  Dear Resource Clips: The sample was 820 not 820,000 kg.  It was small but need not be reported in grams.   This is a second notice.]


Stockwatch’s Will Purcell on Kennady Diamonds North Lobe bulk sample results: 

Patrick Evans’s Kennady Diamonds Inc. (KDI), up one cent to $2.75 on 6,000 shares, has the diamond counts from a first batch of drill core taken from the north lobe at Kelvin, 250 kilometres northeast of Yellowknife. Approximately 970 kilograms of kimberlite produced 76 diamonds larger than a 0.85-millimetre sieve. They weighed 2.46 carats, suggesting a diamond content of 2.53 carats per tonne. The sample produced three gems weighing between 0.15 and 0.21 carat, all of them off-white stones with varying degrees of inclusions. The result sent Kennady’s stock up 24 cents Friday to $2.74 and higher again today although the new counts merely confirmed the company’s previous work.

Six weeks ago Kennady received the results of a 2.4-tonne test, also processed by caustic fusion. It produced 196 diamonds larger than a 0.85-millimetre screen and their 6.29-carat weight implied a grade of 2.6 carats per tonne. The four largest diamonds looked much like the three largest in the latest test, all of them off-white with varying inclusions, and weighing between 0.17 and 0.23 carat apiece. In June, caustic fusion of a 2.69-tonne test produced 207 diamonds on a similar sieve. They weighed 7.37 carats, about 2.74 carats per tonne. The two largest gems were off-whites with inclusions, but they were somewhat larger, weighing 0.47 and 0.39 carat. A third weighed 0.25 carat; it was colorless with minor inclusions. A five-tonne test processed in January yielded 12.85 carats on a 0.85-millimetre sieve, for a grade of 2.57 carats per tonne. That test produced the best stones so far, including a 0.73-carat off-white and two whites with minor inclusions, weighing 0.61 and 0.48 carat.

Mr. Evans says his company’s latest samples “continue to return excellent diamond recovery results,” adding that combined with the lower-grade southern lobe at Kelvin, which tested at 2.02 carats per tonne in a 443-tonne test this year, Kelvin has the potential to average between two and 2.5 carats per tonne. He said nothing about the potential for a noteworthy diamond value, probably because the market was not impressed with the company’s mid-October valuation of nearly 1,000 carats. The modelled values for the two main areas tested were just $56 (U.S.) per carat in Zone A and $70 (U.S.) per carat in Zone B.

Getting a promotably high valuation from the North lobe of Kelvin could be a challenge. Mr. Evans had been touting the colours of the north lobe gems, pointing out that over 95 per cent of them were either white or off-whites. Unfortunately, a majority of them were off-whites, and the proportion of off-whites may increase in the larger size categories: of the company’s 13 reported largest diamonds, only three were deemed colourless. Mr. Evans hopes to have a better idea next year, as Kennady will collect a 500-tonne test of the northern lobe this winter.

Metals and Peregrine’s financing

Metals slump resumes.  [Kitco Metals]

Base metals

Analyst cites the impending Fed hike and weak Chinese demand. [Bloomberg]

Chinese traders load up on cheap zinc. [Bloomberg]  Looks like short term noise only however:

“Traders purchased large volume because the arbitrage window widened and the momentum could continue in November,” Xu Yongqi, an investment manager at the commodity-trading department of Ningbo Yinyi Group Co., said by phone.

Goldman Sachs says commodity prices have not bottomed yet.  [Mining.com]  But what do they care?  They somehow make money no matter which way this goes and know they can nudge the market too.

VS


De Beers refuses to buy its own diamonds. [Mining North]

Diamond industry analyst Chaim Even-Zohar has published an analysis of the steps that led to, and the potential results of, De Beers’ (DB) deferral of contractually obligated purchases from its own rough supplier in Botswana – Debswana (DW). Suddenly, the standard – bearing producer of rough diamonds is behaving like any other rough trader further downstream, refusing to purchase rough diamonds that are overpriced.

Finding more ore at Pogo. [Petroleum News of Alaska]  Once you start mining it’s amazing what turns up.  First there was East Deep in 2010 and now there seems to be another zone or two in sight.

Ultimately, the goal is to replenish the gold mined out of reserves at Pogo this year.  Though not all of the results are in, Kennedy said it looks “very, very good” that this year’s drilling will not only replenish about 340,000 ounces of gold expected to be mined at Pogo this year, but also will add to the mine’s life.

Millrock seems well positioned to get in on the action too.


On Peregrine’s recent financing. [Stockhouse]  John Kaiser’s take on PGD’s recent Hail Mary financing, posted on the bull board.  Worth a read if for nothing else to appreciate (for free!) JK’s typical detailed analysis, complete with an interesting digression into King Rat.    Some excerpts in case you can’t:

Resource sector capitulation washout spooks Friedlands into desperado financing for Peregrine.   If anybody harbored doubts about the severity of the resource sector capitulation washout underway that can only escalate as we approach the 2015 year-end deadline for institutions to get rid of embarrassing resource stock positions, or, in the case of resource sector themed hedge funds, to undertake all out liquidation to meet the redemption calls that constitute the final solution for exposure to the resource sector, the Friedlands took a major step to purge those doubts by announcing a $7 million rights offering on November 19, 2015 at a 39% discount to the closing $0.165 stock price on Wednesday.
…for the moment the market is inclined to believe that the Friedlands are still flush with cash and do not resemble the skeletons that represent many of the movers and shakers of the past decade. I am not so sure.  This rights offering is about the naked fear Robert and Eric Friedland are experiencing in the face of the worst resource sector bear market in half a century, a fear made palpable by the realization that the institutional sheep that used to respond to the wave of wands have become unresponsive, no longer pushing to get sheared for their wool or slaughtered for their meat.
BTW he recommends getting the stock before Nov 26 to enjoy the full benefits of this giveaway.
PGD

Nighthawk gets the message, replenishing their hard dollars with debt. [Junior Mining Network]  Secured notes paying a nose-bleeding 12% interest.   Tells you what they think of how Mr. Market values Colomac.

Skeena releases their final 17 holes of the season. [Skeena Resources]  Headline is 18 m @ 6.13 g/t Au  with 11 holes hitting something worth reporting.

Low Grade Pigs

Grade is king: A polemic.   There is a particular class of deposits found in the North which are a swamp for investors.  They hang out in lower right corner corner of global grade-tonnage scatter plots:

GT curve

They are very large tonnage but very low grade.  For brevity’s sake, let’s call them Low Grade Pigs .   These are well known deposits which have been repeatedly drilled and dropped; usually first by a major and then by a succession of juniors.   They should not be confused with mines.

They have a peculiar life cycle:

1.  They are usually picked up just after the bottom of a commodity cycle or during the early days of the following price ramp and stuck in a dormant shell.

2.  During a metal price boom and at the peak of investor frenzy, the shells are financed; typically to the tune of $20 to $35M.  They can be refinanced in  Stage 3 by selling a royalty but by this time the jig is usually up and management is bleeding the corpse.

3. Their management spends the next 10 years permitting, consulting, promoting, running workshops and study groups, donating small sums to local community groups, and – of course – paying themselves handsomely.  Most will fritter away the cash and die off.  The really dangerous ones make it to the next step.

4.  They find a foolish banker and go into production.  They are sickly children however, often in the red and frequently  on the verge of bankruptcy.  They don’t generate steady profits.

5.  They go bankrupt, often not long after starting production, leaving a big un-reclaimed mess and a trail of unpaid bills.

During Steps 2 and 3, there are a number of strategies for resuscitating and promoting them.   Some taglines noticed over the years:

1.  Larger diameter core reveals higher grades!   Yes – those old timers were pretty stupid drilling them off with BQ when NQ or HQ dramatically increases the grade by say 10% through better recovery.

2. An innovative mining or processing  approach will make this a winner!   And they might be right if you could consistently count on engineers to skillfully execute complicated mine plans and / or successfully mill the ore with brand new technology.  Is this a safe bet?

3. New zone discovered!   Unfortunately it is smaller and about the same grade as the Low Grade Pig.  It just makes the project bigger not better.

4. The largest undeveloped deposit in the [world or fill in the region]!    This line seems to work on big investment houses making a bet that the commodity in question is going to shoot up in price long enough for them to make a killing.  Also works well on local politicians when you’re scrounging for free power or a road.  Local investors who know nothing about mining but everything about where the deposit is located seem susceptible to this one.

5. Previous operators never considered the value of [fill in the element]!  A characteristic of these deposits is the low grade that never gets better.  Your alternative is to hunt around and find some other commodity in the ppb or ppm range that no one in their right mind would ever mine alone at ten times the grade reported.  This is a great place to introduce investors to your version of copper or gold equivalents, calculated with optimistic prices that are rarely revised.

Environmentalists hate these deposits, with good reason.   They have a large footprint and make a big mess.   Locals should be wary of them.  Aside from the almost inevitable bankruptcy and trail of unpaid bills, they often  afterwards end up in the hands of the Federal / Territorial government who waste millions more on them doing nothing.  Regulators love these projects.  They can plan their careers to retirement – looking forward to endless meetings, writing letters, consulting with various groups, and dealing with numerous revised pie-in-the-sky plans.

For what it’s worth, here’s an entirely unscientific, not-always-applicable rule of thumb for northern deposits:  Grade should be at least 5 g/t Au or cash equivalent.  Above this, deposits seem generally safe.   Below this, they can be iffy.  Way below this you might be looking at a Low Grade Pig.

Caveat emptor.

Hey! That's my money you've eaten!

Hey! That’s my money you’ve eaten!

NAT RIP

North American Tungsten is toast. [Whitehorse Star]   The Cantung Mine is again an orphan, in the tender hands of the Feds.  GNWT is buying MacTung.   A victim of the commodity crash, this is likely not the last time Cantung will produce:

Despite forecasts the mine would run out of proven sources of ore by now, NATC board of director member Allan Krasnick told the Star last year he was confident more tungsten could be found. “We think there is a lot of life left in that old mine,” he said at the time from Vancouver. “We have been operating for 52 years on a one-year mine life.”

Cantung