De Beers’ FalC claim dismissed (March 31, 2006)

The Court of Queen’s Bench for Saskatchewan has dismissed action commenced by De Beers Canada against its Fort la Corne (FalC) joint venture partners Shore Gold (SGF-T, SHGDF-O), Cameco (CCO-T, CCJ-N) and UEM.

De Beers had asked the court to void a voting agreement that gave Shore voting support from Cameco and UEM with regard to operating decisions at the joint venture for up to seven years. That support carried a $10-million price tag.

De Beers was also looking for the court to issue a restraining order preventing the joint venture’s management committee — now effectively controlled by Shore — from approving the 2006 exploration program and budget.

That meeting can now be called as soon as ten days after the court’s ruling, which was handed down on Mar. 30. In 2005, the project budget was a record $26 million.

The court also awarded costs to the defendants.

The 225-sq.-km FalC project is home to 63 known kimberlite bodies, with the largest measuring up to 200 hectares — on scale with some of the biggest in the world. The joint-venture partners are in the midst of a 3-year exploration and evaluation program designed to advance the project to a decision regarding prefeasibility in 2008, with the ultimate goal of outlining a resource of 70-100 million carats of diamonds.

Shore inherited its 42.245% stake in the FalC diamond project via its merger with Kensington Resources in October. Cameco holds a 5.51% stake in the project, with UEM at 10%; De Beers Canada owns the remaining 42.245% interest. UEM is jointly owned by Cameco and Cogema, a subsidiary of French energy giant Areva (ARVCF-O).

Star stones lose some glitter

At Shore’s nearby Star kimberlite, a recent bundle of 5,949.88 carats worth of diamond recently returned an average modelled value of US$102 per carat. The valuations were completed by R. Steinmetz and Sons, Rio Tinto Diamonds, and WWW International Diamond Consultants, and are based on the actual price a producer would currently receive for the parcel in Antwerp, Belgium. A valuation of a 3,050-carat parcel of Star diamonds in 2005 yielded an average value of US$110 per carat.

WWW’s estimate includes a modelled average of US$130 per carat (within a range of US$111-US$159) for 4,991.68 carats from the Early Joli Fou pyroclastic kimberlite and kimberlite breccia, which occur as alternating units throughout the Early Joli Fou kimberlite. The 1,992.6 carats from the breccia average US$173 apiece.

WWW pegged the value of a 572.29-carat batch of diamonds from the nearby Cantuar kimberlite at US$145 per carat. The sample size from which the stones were recovered was not disclosed.

The best stone of the recent batch is a 5.41-carat diamond form the EJF pryoclastic kimberlite. It is valued at US$4,400 per carat, or US$23,804. Cantuar yielded the next most valuable stone, with a 4.77-carat diamond running US$3,430 per carat, or US$16,361.

The Star kimberlite comprises five principal phases: Cantuar, Pense, Early Joli Fou, Mid Joli Fou and Late Joli Fou. The Early Joli Fou is the dominant phase.

Meanwhile, drilling has begun on the western part of the Star kimberlite, which falls within the FalC claims. Downhole geophysic and geotechnical measurements are of the holes is also planned. The drilling is aimed at defining the volume and internal structure of the kimberlite in anticipation of a prefeasibility study.

Shore lost $8.5 million (or 8 a share) during 2005, up from the $1.5 million (3 a share) lost in 2004. The bigger loss is mostly attributed to $9 million worth of expensed stock options. At the end of March, Shore had around $247 million in cash and equivalents.

Shares in Shore eased to sit 22 better at $7.05 in late afternoon trading in Toronto following the news on Mar. 31.