Following a brief period of peace in the battle for the promising Snap Lake diamondiferous kimberlite system in the Northwest Territories, the directors of
Armed with the results from six drill holes, the junior says the offer is financially inadequate. “Winspear’s board of directors is very pleased with these results, which reinforce its view that the De Beers offer significantly undervalues Winspear,” states Randy Turner, Winspear’s president.
Three of the new holes were stepouts from the established resource. The other three represented infill drilling, designed to upgrade the resource classification.
The stepout holes, which were collared up to 800 metres from the previous drilling, cut 3.37, 1.33 and 1.32 metres of kimberlite. The infill holes cut 4.1, 2.09 and 3.61 metres of kimberlite.
The NW diamond-bearing dyke has now been outlined over a 3.2-by-3.1-km area and to a vertical depth of 1 km.
Three additional stepout holes are being drilled to explore beyond the limits of the July 2000 scoping study. Winspear will continue to drill infill holes in an attempt to upgrade the inferred portion of its resources to the “indicated” category.
Winspear has commissioned MRDI Canada, a division of Agra Simons, to update its September 1999 resource study. The new calculation is expected in August and will include microdiamond analysis of kimberlite recovered from drill core since June 1999.
The resource is expected to support a 6,000-tonne-per-day mining operation, in excess of 21 years at a discounted cash-flow rate of return of 39.4%.
The latest analysis confirmed the consistency of microdiamond distribution throughout the NW dyke, which, based on the September 1999 study, came in at 1.97 carats per tonne for a mineral resource of 21.3 million tonnes.
Grades estimates were based on microdiamond data of all kimberlite samples collected to June 1999, including data obtained from the processing of a 6,000-tonne bulk sample. The results indicate that the diamond grade increases downdip and north and east of pits 3 and 4. At this stage, the NW dyke remains open to the north, east and southeast.
The ongoing 2,000-tonne underground bulk-sampling program is on schedule and on budget, and, by late August, Winspear expects to advance the decline to 1,015 metres and thereby intersect the kimberlite.
At presstime, the decline had been driven 831 metres from the portal and was 105 metres below the surface of Snap Lake. Ground conditions are said to be good, and there is no indication of ground water.
A bulk-sample processing plant has been built, and three bulk samples are scheduled to be processed in the coming months.
In early July, De Beers launched a hostile takeover bid for Winspear, offering $4.25 for each share of the junior. Winspear considered the offer too low and immediately launched a “value recognition program” over Snap Lake, including an updating scoping study and an aggressive drilling program.
According to Winspear, the scoping study valued its 68% interest in the Snap Lake project at $1.35 billion. The April prefeasibility study pegged the after-tax net present value at $500 million.
Despite its takeover bid, De Beers has cited some risks involved in the promising project: lack of data confirming grade and diamond value; high capital costs and low confidence limits on capital and mining cost estimates; and potential environmental and permitting problems.
De Beers and Winspear recently reached an agreement that allows the offer to be extended to Aug. 15 from July 28. As well, Winspear will waive the application of its shareholder rights protection plan, and both companies have vowed, for the time being, not to proceed with legal matters regarding the takeover offer.
Snap Lake is 220 km northeast of Yellowknife and is part of the Camsell Lake diamond property, held 68% by Winspear and 32% by
In related news, De Beers has launched a separate takeover bid for
The A$522.2-million offer breaks down to A$1.62 per share, or 20% more than Ashton’s closing price on the preceeding business day. Malaysia Mining, which holds a 49.9% interest in the company, has already committed to tendering 19.9% of its shares.
Ashton’s main asset is a 40.1% interest in the Argyle diamond mine in Australia. The remaining stake is held by London-based
Argyle is the largest producer of diamonds, supplying around a quarter of the world’s annual output. In 1999, it churned out 29.7 million carats, most of which were small coloured stones, with some rare pink ones weighing more than 1 carat.
Currently, the western ridge of the open pit is being pushed back to expose additional ore at depth. Consequently, access to higher-grade material in the south will be hindered this year and the next, causing production to fall by a projected 10-20%. This is in addition to shortfalls in the past two years.
Ashton also holds a 68.2% interest in
Last winter, the Canadian explorer discovered three more kimberlites in Alberta, plus one sill-like kimberlite body on the Roundrock property in the Territories. The results proved discouraging, and no further work is planned at the BH-225 kimberlite in Alberta (T.N.M, July 3/00).
Ashton of Canada owns a 53.3% interest in the Roundrock property.
The De Beers offer is subject to regulatory approval in Australia. It does not extend to the minority shareholders of Ashton of Canada.
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