Roughing it: A roundup of diamond juniors

Afri-Can Marine Minerals (AFA-V) completed a sampling program last April at the EPL 3403 seabed diamond project off the coast of Namibia. The company recovered 84 diamonds, 15 of which were 0.5 carat or more. The largest stones weighed 1.6 and 1.3 carats, with two stones coming in at 1.15 carats. The company took 304 samples from three deposit areas in the southern portion of EPL 3403, 45 of which contained diamonds.

The three deposit areas had been previously tested, returning a total of 33 stones. Five diamonds were also recovered from outside of the identified deposit areas.

The next stage is a geophysical survey to outline the three deposit areas and another  prospective area where diamonds were found, to prepare for a resource sampling program.

In April, Afri-Can announced a private placement financing of $3 million with a Mauritius-based company. The financing is contingent on a four-to-one rollback of the junior’s shares, among other conditions. It will allow the company to complete the survey as planned.

Afri-Can is earning up to a 100% indirect interest in EPL 3403 through Thyme Investments, owned by International Dredging
and Holding and BV Investments Four Hundred and Nine. EPL 3403 is a former concession of Namdeb Diamond, a joint  venture of De Beers and the government of Namibia, and is located next to Namdeb’s producing Atlantic One Mining Lease.

Delrand Resources
Last June, BRC Diamondcore changed its name to Delrand Resources (DRN-T, DRN-J). The company also completed a two-for-one share consolidation and now has 49.7 million shares outstanding.

The company has diamond and iron ore exploration jointventures with Rio Tinto (RIO-N, RIO-L) in the Democratic Republic of  Congo. Rio Tinto is funding exploration up to a prefeasibility at the DRC North project, which saw sampling last year, for up to a  70% stake. In last year’s third quarter, Delrand collected 97 stream samples (one sample per 4.1 sq. km) at DRC North over 400 sq. km.

During the second quarter of 2011, the company collected 40 stream samples at its Tshikapa project at a density of one sample per 5 sq. km.

No results had been reported at presstime.

Debut Diamonds
Debut Diamonds (DDI-C), a spinoff of KWG Resources (KWG-V) listed on the Canadian National Stock Exchange in December. In connection with the listing, it raised $1.5 million in a private placement of 4.3 million units.

At presstime, the company was working on an exploration agreement with First Nations near its Nakina project, in northern  Ontario. It hopes to complete a drill program there this summer, after completing an archaeological study on the Nakina targets in the spring.

The company has $2.8 million in flow-through funds that must be spent on exploration this year.

Debut also holds a 58.35% interest in the MacFadyen kimberlites, three pipes adjacent to De Beers’ Victor mine, in Ontario. Cliffs Chromite Far North holds the remainder. The results of mini-bulk samples conducted on the pipes in 2007 compared favourably to grades at Victor (0.33 carats per tonne).

Debut is in the process of renewing its exploration agreement with the Attawapiskat First Nation and is planning to resume work at MacFadyen in early 2013.

Diamcor Mining
Installation of a modular processing plant is under way at Diamcor Mining’s (DMI-V) Krone-Endora project, in South Africa. The company has already recovered its first diamonds from the project, which is located next to De Beers’ Venetia mine, while  completing intitial testing and commissioning work on some of the equipment being installed. The unprocessed concentrate that Diamcor used in the test was the product of previous drilling and bulk sampling by De Beers. From the 3 tons processed, 1,877  diamonds with a total weight of 143.96 carats were recovered. The largest stones were 3.93 carats and 2.09 carats, with a total  of six weighing more than 1 carat.

At the same time as it gets its plant up to speed for trial mining at its 70%-owned Krone-Endora (the remainder is owned by  Nozala Investments, a black economic empowerment partner), Diamcor is working to prove up resources and establish a  current valuation for diamonds from the project.

Infill and expansion drilling at Krone-Endora last year helped Diamcor boost the amount of richer basal gravel it estimates at the project by 97% to 20 million tonnes. Grade values for the tonnage can’t be estimated until bulk sampling of that tonnage is completed.

Krone-Endora has inferred resources of 54.3 million tonnes of gravel containing 1.3 million carats. The resource is limited to a small 310-hectare area of Krone-Endora, dubbed K1. Diamcor signed a deal with Tiffany & Co. (TIF-N) last year that gives the jeweller the right to purchase up to 100% of production from Krone-Endora in return for $5.5 million in longterm financing.

Diamonds North
Last summer, Diamonds North (DDN-V) completed a detailed till sampling program at its Amaruk project in Nunavut. The  sample sites were identified through an innovative electromagnetic geophysical program that targets kimberlites that are strong  EM conductors with weak magnetic signatures. The sampling program also extended onto Bluestone Minerals’ (BSR-V)  adjacent Barrow property. Diamonds North has the option to earn up to 60% of any diamond discovery on the property. At  presstime, results of the program had not been released.

The company also carried out exploration at its gold and other prospects in the Far North.

In November, Minerals and Metals Group withdrew from the Tunerq project, where it had the option to earn up to 75% of any  base metals deposits on the property. Tunerq remains 100% owned by Diamonds North.

Dianor Resources
Lacking the funds to pay the mortgage on the surface rights to its Leadbetter diamond property, in Ontario, Dianor Resources  (DOR-V) signed a forbearance agreement with the owner of the property. It owes $2.5 million plus interest and other fees, out of a total $5 million it agreed to pay in 2008.

It also signed a forbearance agreement with Third Eye Capital for $1.3 million it has borrowed. In March, the company signed a  term letter for a $5-million secured bridge loan with an undisclosed “U.S. entity.” The loan term will be one to three years at 12% interest and will allow Dianor to pay off the senior debt it owes.

The company is continuing to pursue options to finance a bulk sample at Leadbetter.

Lucara Diamond
Lucara Diamond (LUC-T) reported that it would start commissioning its 100%-owned Karowe (formerly AK6) mine, in Botswana, in April. Ramp up was expected to continue through the second quarter using ore that has already been stockpiled at the mine.

Capital costs are in line with the US$120 million projected in a 2010 feasibility study. The company scored a $25-million revolving credit facility with the Bank of Nova Scotia in February that will allow it to finish commissioning and avoid dilution of its shares.

Production is forecast to reach 2.5 million tonnes per year in the third quarter for an annualized 400,000 carats.

The open-pit mine is projected to have an 11-year mine life, an IRR of 29%, and an NPV of US$164 million at an 8% discount  rate.

Since 2010, diamond values at Karowe have increased by 24% to US$304 per carat.

Lucara also owns 75% of the Mothae project, in Lesotho, where trial mining of 720,000 tonnes of kimberlite is expected to wrap up in the third quarter. A preliminary economic assessment is due out in late 2012. The company is also conducting a 6,100-metre drill program to define the geology of the Mothae kimberlite, and extend it from 200 metres depth to 320 metres.

In December, sales of 7,190 carats of diamonds from Mothae fetched an average of US$893 per carat for a total of US$6.4 million. The highest-value stones were all Type IIa, including a 28.89-carat stone that sold for US$1.6 million and a 56.51-carat  gem that sold for $2.1 million.

Metalex Ventures
Metalex Ventures (MTX-V) secured both a joint-venture partner and the funding it needs to conduct a 10,000-tonne bulk  sample next year at its wholly owned U2 kimberlite, in northern Ontario. The junior announced a deal with a private equity fund  managed by Dundee Corp. that will give it up to $51 million to bring the project to the feasibility stage, if warranted, in return for a 51% interest in U2 and the nearby T1 kimberlite.

Dundee has advanced a $5-million convertible loan, plus $10 million to allow bulk-sample preparations to begin. Metalex is aiming to collect a 1,000-2,000-carat parcel for valuation through the drilling of 48 large-diameter reverse-circulation holes.

At presstime, the company was pursuing permits needed for the program and was in ongoing talks with the Marten Falls and Attawapiskat First Nations regarding an exploration agreement.

U2 is a 9.3-hectare pipe located about 62 km west of De Beers’ Victor mine.

The company plans to bring in the equipment needed for the bulk sample, including a processing plant, via the Victor winter  road in early 2013. Drilling and processing will take about a year.

Metalex has received a shipment of amphibious vehicles at its project in Angola that will help it explore several large kimberlite  pipes that lie under the Cuango River, a prolific site of alluvial diamonds. It also recently completed an airborne magnetic and  radiometric survey on its project in Morocco.

Mountain Province Diamond
In April, Mountain Province Diamond (MPV-T, MDM-X) announced drill results from its 49%-owned Gahcho Kué joint venture  with De Beers. The five-hole deep-drilling program on the Tuzo kimberlite was meant to define the pipe below the current  resource, which extends from surface to 350 metres depth. Tuzo is an unusual shape, widening at depth. Grade also increases  with depth.

An updated estimate for the volume of kimberlite at Tuzo is expected by the end of the second quarter with an updated resource estimate to follow later.

Probable reserves at Gahcho Kué, which is in the permitting stage, come to 31.3 million tonnes grading 1.57 carats per tonne  (fully diluted) for 49 million carats. A feasibility study completed in 2010 showed that Gahcho Kué could produce 4.5 million  carats per year over an 11-year mine life.

Initial capital costs were estimated at $549.5 million, the IRR at 20.7% (33.9% before sunk costs), and the NPV at $135.9 million  ($277.4 million excluding sunk costs).

The company is spinning off its wholly owned 123.6-sq.- km Kennady North project, just northwest of Gahcho Kué. The new  company, Kennady Diamonds, will receive $3 million in working capital and one share will be distributed for every five Mountain  Province shares held. A shareholder vote on the spinoff was expected to be take place in late April.

Mountain Province recently conducted airborne gravity gradiometry and magnetic field ground surveys over Kennady North.  Targets identified through the surveys will be drilled once the company receives a land use permit. Three diamondiferous  kimberlites, Kelvin, Faraday and Hobbes, were discovered at Kennady North in the 1990s.

Olivut Resources
Olivut Resources (OLV-V) completed a sampling program at the Itapoty diamond project in Paraguay, in July. It has an option  to earn up to 50% of the project from Latin American Minerals (LAT-V). From 65 samples taken, 14 stream samples returned  22 diamonds of between 0.5 mm and 2.4 mm, the largest weighing 0.07 carat.

Olivut carried out a detailed magnetic survey on the property in the fall, and planned a stream-sediment sampling program to narrow down the potential source area of diamonds found by it and in previous programs by Latin American Minerals.

Olivut planned to conduct follow-up drilling in the first quarter.

At its wholly owned HOAM project, in the Northwest Territories, Olivut discovered three new kimberlites last year through drilling of four magnetic anomalies. It also conducted detailed airborne surveys over 27 target areas and conducted some soil  sampling. Olivut plans more drilling at HOAM in 2012.

Olivut is also earning an interest in the Rivera project, in Uruguay, from Orosur Mining (OMI-V). It conducted a ground magnetic survey over 17 aeromagnetic and geomorphological targets late last year. No kimberlites have yet been found on the  property, but the abundance of kimberlite indicator minerals (including diamonds), and its location on the Rio de la Plata craton are promising.

Olivut raised $2.2 million in a private placement financing in December. Pierre Lassonde owns about 18% of  Olivut’s shares.

Peregrine Diamonds
Peregrine Diamonds (PGD-T) made a deal to buy out 51% partner BHP Billiton (BHP-N, BLT-L) from the Chidliak joint venture project in December, about a month after the major announced it was reviewing its diamond assets. In return, Peregrine will make staged payments totalling $9 million. BHP retains a 2% royalty on future mineral production.

While Peregrine president Brooke Clements says BHP was a good partner at Chidliak, and that the 51% contribution of funding for the project was “nice to have,” he says that in the long run, it’s better for Peregrine to retain control of it.

The loss of a partner with deep pockets has prompted Peregrine to slow its plans for a bulk sample at Chidliak, located on Baffin Island in Nunavut. Instead of flying a reverse-circulation drill to the project to conduct the program this year, the rig will be  shipped more economically by barge from Montreal for a bulk sample program in 2013. The company expects to collect a few  hundred carats of diamonds from several kimberlites, including CH-6, CH-7 and CH-44, likely CH-1, and potentially CH-45 and  CH-31.

Peregrine will use the extra time to better delineate its most promising kimberlites ahead of bulk sampling.

The company has so far discovered 59 kimberlites at Chidliak.

The company plans to spend $10 million this year at Chidliak. Recent microdiamond results from CH-6 and CH-7 confirm the potential for respective grades of 2.84 carats per tonne and 1.04 carats per tonne from previous mini-bulk samples. In addition,  a tonnage estimate for CH-6 of 5.7 million tonnes to a depth of 375 metres (it remains open at depth) confirms that if the  mini-bulk sample grade holds up with further testing, the kimberlite’s “rich rock” could be the anchor for a mining operation at  Chidliak. The tonnage estimate is not a resource.

The company is also revisiting its ground about 27 km southeast of the Diavik mine, in the Lac de Gras region of the Northwest Territories. It’s spending $1.5 million on exploration in the area, which holds its 71.9%-owned, 18-million-carat DO-27 kimberlite, as well as wholly-owned prospects.

Peregrine is also pursuing a revaluation of diamonds from DO-27, which, in 2007, were valued at US$70 per carat.

In April, Peregrine reported the discovery of two new kimberlites in the Lac de Gras area after drilling the first two of five geophysical targets it’s investigating this year.

Rockwell Diamonds
South Africa-focused Rockwell Diamonds (RDI-T, RDI-J) is working to ramp up its Tirisano mine, in South Africa to full  production by the end of July. And while Tirisano only contributed 535 carats of production during Rockwell’s most recent  quarter, ended Feb. 29, 2012, overall production was up 77% over the same quarter last year to 4,022 carats.

The results show that “fine-tuning” of its Saxendrift and Klipdam operations is paying off. At Saxendrift, the company reported 41% greater volume than the comparable quarter a year earlier, and a 50% increase in carats produced for a total of 1,437. At Klipdam, production volume was off 14%, but mined carats up 57% to 2,050.

Shear Diamonds
Shear Diamonds (SRM-V) is hoping to prove the viability of its past-producing Jericho mine, in Nunavut, this year and in the process, achieve positive cash flow.

The company planned to begin processing of 18,000 tonnes of stockpiles at the project in April. The stockpiles are coarse recovery rejects which went through the mill when now-defunct Tahera Diamond operated the mine between 2006 and 2008, but weren’t properly processed. Shear believes it has sorted out problems with the recovery process.

The company plans to restart full production in 2013, and will need around $25 million to invest in the processing plant to do so. Shear estimates it could produce 380,000 carats a year once in full production.

An estimate completed in 2010 pegs indicated resources at Jericho at 1.8 million tonnes grading 1.06 carats per tonne for 1.9 million carats and inferred resources at 1.7 million tonnes grading 0.65 carat per tonne for 1.1 million carats.

In February, Shear received an eight-year water licence for the operation.

The company raised $2.9 million in a private placement in March, short of its goal of $5 million. In December, it signed an  agreement with diamantaire Taché for a US$2-million term loan and US$3-million revolving credit facility. As part of the deal,  Taché will buy production from Jericho and Shear will “participate in final net profits” from Taché’s sale of rough or polished Jericho diamonds.

Shear founder Pamela Strand has resigned as president but remains a director. CEO Julie Lassonde has taken over as  president.

Shore Gold
Shore Gold (SGF-T) is in twin pursuit of permitting and funding needed to build a mine at its Star-Orion project, in  Saskatchewan. To conserve cash, in February, the company laid off all but 15 staff. That number will allow it to move forward  with permitting, which Shore expects to complete this year. The company is working to finalize the project’s environmental  impact assessment.

Shore had working capital of $15.9 million at the end of 2011, enough to last into 2014 if necessary, says senior vice-president of exploration and development George Read.

The company owns 100% of Star and 66% of Orion South, which is part of its Fort à la Corne (FalC) joint venture with Newmont Mining (NMC-T, NEM-N).

The company was forced to write down the $208.4-million carrying value of the FalC project at the end of 2011, and recorded a total net loss of $219.9 million for the year.

During 2011, Shore’s share price fell, causing its market capitalization to fall below the carrying value of the company’s net assets. Shore therefore had to assess its assets by comparing their carrying value to estimated discounted future cash flows.  Because of the uncertainty surrounding project finance, the company couldn’t come up with a sound weighted average cost of  capital to do the calculation, and had to write off FalC’s value entirely.

Shore released a positive feasibility study on Star-Orion last July that outlined an operation with a 20-year life, a preproduction capital cost of $1.9 billion, a pretax IRR of 16% (14% after taxes and royalties), and a net present value of $2.1 billion ($1.3 billion after taxes and royalties). The study used a discount rate of 7%.

The project contains probable reserves of 279 million tonnes grading 12.3 cpht. Shore says further upside exists in inferred resources of 80.3 million tonnes at 11.3 cpht for 9.1 million carats. The cost of mining the inferred resource was included in the feasibility, but not the cost of processing it or the revenue it would generate.

In order to stick to the schedule outlined in the feasibility, with construction starting in the third quarter of 2012 and production in  early 2017, Shore needs to raise some money by mid-year. George Read, the company’s senior vice-president of exploration  and development, says that’s “not totally out of the question,” and that the company is “aggressively” looking for financing,  including during a recent trip to Hong Kong.

While Shore disclosed that it recently came close to a financing deal, it ultimately wasn’t closed “due to current world economic  uncertainties.” Read says that due to a confidentiality agreement with the other party, he can’t reveal any details.

Stornoway Diamond
In November, Stornoway Diamond (SWY-T) released a positive feasibility study for its Renard project, in Quebec.

The study, which projects Renard could be in commercial production by early 2016, outlined an operation with an 11-year mine  life, capital costs of $802 million and production of 1.7 million carats per year.

In the base case considered, the largely underground mine has a pretax net present value of $672 million ($376 million after taxes) and an internal rate of return of 18.7% (14.9% after taxes). The study used a discount rate of 7%. At $54.71 per tonne,  operating costs give a 68% operating margin.

Renard hosts probable reserves of 18 million carats contained in 23 million tonnes grading 78 carats per hundred tonnes (cpht).

Inferred resources (totalling 17.5 million carats in 31.1 million tonnes grading 56 cpht) add potential upside. At presstime, a feasibility study on building a power line to the project rather than relying on diesel generators, conducted by Hydro Quebec, was under way. The line is expected to reduce operating costs to $8-10 per tonne while adding to capital costs.

Construction of a  road to the project by the government of Quebec, part of the province’s Plan Nord policy to stimulate investment, has begun.  Depending on the progress of the road, construction at Renard is expected to begin in mid-2013, when the road should be  accessible as a construction zone.

The project is located 350 km north of Chibougamau in the James Bay region.

The company has a leg up on financing, with a $100-million, undrawn debt facility with provincial agency Investissment Québec (which owns 37% of Stornoway). The company is looking at a combination of debt and equity, as well as the possibility of an offtake agreement, to fund the rest.

Company president and CEO Matt Manson is confident that Renard will find financing and says that despite the grim equity markets, the debt markets are currently quite healthy.

In the meantime, Stornoway raised $15 million in a bought-deal financing in March.

The permitting process is under way at Renard, and the company recently signed an impact benefits agreement with the Cree Nation of Mistissini and the Grand Council of the Crees/Cree Regional Authority.

Talmora Diamond
Talmora Diamond (TAI-C) reports that it was close to raising $1.2 million in a private placement last year when the Greek crisis struck and two thirds of Talmora’s would-be investors cancelled their subscriptions. It raised $400,000 instead, and another  $150,000 this April.

The company needs at least $1 million to conduct a firstever drill program on its Horton River property, in the Lena West region  of the Northwest Territories. The company’s drill targets were identified through airborne magnetic surveys and till sampling.  Talmora’s project is surrounded by other properties where numerous kimberlite indicator minerals and diamonds have been  found in till samples, but not their source.

True North Gems
True North Gems (TGX-V) is advancing its Aappaluttoq ruby and pink sapphire project, in Greenland, toward production. Last May, the company released a prefeasibility study that showed an initial capital investment of $37.4 million would yield an  open-pit operation with a nine-year mine life, a pretax internal rate of return (IRR) of 19.1% (16.5% after taxes), and a net  present value of $25.7 million ($17.5 million after taxes). The study used a discount rate of 8%.

Probable reserves at Aappaluttoq total 161,000 tonnes grading 350 grams per tonne of corundum (the mineral that contains rubies and pink sapphires). The deposit contains another 77,200 tonnes of inferred resources grading 283 grams per tonne,  most of which lies within the pit shell. The deposit is still open along strike and at depth.

The study looked at a production rate of 1,100 tonnes in the year the project is built, ramping up to an average of 22,000 tonnes  per year by year three.

The company has applied for mining permits at the project and is working on final socioeconomic and environmental impact assessments. True North needs a mining permit in order to extract enough gems to sell for valuation purposes, so it plans to proceed to production without a full feasibility study.

Vaaldiam Mining
Following the announcement of a review of its projects in November, Brazil-focused Vaaldiam Mining (VAA-T) sold its Duas  Barras project and plant, and its plant and equipment from the Chapada mine. Production at both mines had been suspended  previously.

Last September, Vaaldiam converted its equity interest in the Braúna diamond project to a 1% gross sales royalty on diamond production. That means it no longer has to fund its share of development at the project. It had previously owned 100% of  Braúna but was forced to sell 80% during the financial crisis to a group of Belgian diamantaires and was earning back a total of  51% when it bowed out. The junior delivered a positive scoping study for Braúna last spring. Vaaldiam retains a 100% interest in  a gold deposit at Braúna and the right to explore the property for gold.