The company recently completed final adjustments to the newly installed X-ray diamond recovery machine, allowing limited production to begin. The company has also ordered material for a new pre-treatment plant from Svedala Industries. It will include a primary crusher, screens, conveyors and materials handling equipment. The order will also include slurry pumps for the main processing plant.
McKenzie Bay has spent US$2 million since it acquired Kelsey Lake last year. It has also successfully negotiated a payment arrangement for US$950,000 of the US$1.3-million debt assumed in the purchase agreement. The balance will be converted into 240,900 shares of the company. In the last 12 months, the company has raised US$950,000 from private placement and secured a US$50,000 credit line from Wells Fargo Bank.
Kelsey Lake began operations in late 1996 under the direction of Redaurum, though production continued for only a year before being shut down. Redaurum spent up to US$28 million developing the project, but was unable to produce diamonds at a profit.
The assets acquired by McKenzie Bay inlcude the permits and mining licences, equipment and a diamond recovery plant. The licences cover nine known kimberlites, three of which have been tested for diamond content. Mining is permitted from the KL-1 and KL-2 pipes, each 10.5 acres in size, situated one-half mile apart. A resource of 18.7 million tons has been indicated, with grades of 3.4 to 4.6 carats per 100 tons.
McKenzie Bay also controls an 80% interest in the Lac Dore vanadium project in the Chibougamau camp of Quebec. The property contains a measured, indicated and inferred resource of 450 million tonnes averaging 0.5% vanadium pentoxide.
On the corporate front, McKenzie Bay issued shareholders of record a dividend of one warrant for every 10 shares held. The warrants, which will not be listed and non-transferable, are exercisable over the next two years at a 20% discount to the prevailing market price. The company reportedly made the move after suspecting that a significant number of shares had been sold short.
In all, the company has 14.8 million shares issued before the warrant dividend, with management controlling 70% of the shares.
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