MINING MARKETS AND INVESTMENT NEWS – Investment Commentary — Canaccord watches diamond development in Russia

A Russian diamond project involving Archangel Diamond (AAD-V) is being closely watched by Canaccord Capital’s resident diamond expert, David James.

James rates the company a “speculative buy” and is particularly intrigued by a recent US$10-million investment by Task Holdings, Archangel’s largest single shareholder. Task represents the family interests of Harry Oppenheimer, the patriarch of the De Beers empire. This latest transaction will bring Task’s interest in Archangel to about 37% (from its current level of about 17%).

Task’s investment, combined with $3.4 million previously raised, will allow Archangel to continue the evaluation of the Grib pipe (previously known as Pipe 441) and to explore for more pipes at the large Verkhotina diamond project in northwestern Russia. The company must complete a feasibility study before earning its 40% interest in the project.

James notes that Task’s decision to increase its stake in Archangel was based on a technical report by South African-based De Beers Consolidated Mines that evaluated the resources found in both the crater and diatreme facies of Grib.

De Beers estimates that the Grib pipe consists of about 73 million tonnes of kimberlite, down to 500 metres, containing an estimated 51 million carats of diamonds at an average grade of 70 carats per 100 tonnes. The estimated value of the stones is US$72 per carat.

James sees more upside at Grib, the first new target to be tested by Archangel and its Russian partner in some time. “We believe that there may be in the order of 90 geophysical anomalies yet to be tested at Verkhotina; exploration is part of the current budget, and a new discovery would undoubtedly have a material impact on Archangel’s capitalization.” Nevada’s Sleeper mine may soon waken

Having paid a visit to the Sleeper mine project in Nevada’s Slumbering Hills, a gold analyst from HSBC James Capel sees some upside for long slumbering X-Cal Resources (XCL-T).

Analyst Brian Christie and associate Yannick Archambault describe X-Cal as a “speculative buy,” with a 12-month target price of $2. The junior is currently trading at the 49cents level.

HSBC visited X-Cal’s Sleeper property, which includes Amax Gold’s past-producing Sleeper mine. The 23,000-acre land package is believed to cover the previously unrecognized northwestern extension of the Battle Mountain gold trend. The Sleeper mine produced nearly 1.7 million oz. gold and 2.3 million oz. silver while in operation from 1986 to 1996.

X-Cal has rights to earn a 100% interest in the mine property by paying Amax US$10 million in 1998, US$15 million in 1999, or US$20 million in 2000. The major retains both a 1% net smelter return royalty and the existing mine infrastructure.

Christie says the Sleeper property has a low-grade resource, the bulk of which is under the mill and leach pads, plus additional gold still on the pads. But he sees far more promise in the new gold targets generated by recent exploration programs, and the fact that several majors have expressed interest in the project.

“We view the Sleeper project as one of the best exploration bets in Nevada,” Christie notes in a recent report. “X-Cal personnel have come up with an exciting new interpretation of the regional geology in the Sleeper area, generating at least 31 new gold targets.”