Shore Gold proves up Saskatchewan diamonds (June 16, 2008)

VANCOUVER — A recent resource estimate for Shore Gold’s (SGF-T, SHGDF-O) Star kimberlite project in northern Saskatchewan failed to halt the junior’s slow but steady share price slide.

According to the new report, Star is home to 122.7 million tonnes of diamond-bearing kimberlite grading 13.6 carats per hundred tonnes for 16.6 million carats. Inferred resources add 30.3 million tonnes at a grade of 13.1 carats per hundred tonnes for 4 million carats.

The Star kimberlite resources are divided between the Star diamond project, which Shore Gold holds outright, and the Star West property, of which the company holds 60% and Newmont Mining (NMC-T, NEM-N) 40%. The report estimates that 63% of the kimberlite’s indicated resources and 61% of the inferred amounts fall within the Star project, while the remainder lies in Star West.

In addition to the mineral resource, the report designated a further 100 to 120 million tonnes of Star kimberlite as a “potential mineral deposit” carrying a similar grade, based on available data that suggest the inferred resource continues into this part of kimberlite. The kimberlite structure in its entirety comprises 276 million tonnes, according to a geological model.

Data were collected from 270 surface core holes, 211 underground core holes, underground bulk sampling, and mini-bulk samples from 88 large-diameter drill holes.

To establish the deposit as one with reasonable prospects of economic extraction, the report assumed a process and overhead cost of $5.08 per tonne processed and estimated mining costs at 99 per tonne for overburden and $1.34 per tonne kimberlite.

The estimated worth of the Star diamonds varies considerably from one lithology to the next. The kimberlite averages 90 metres in thickness and is covered by an equal thickness of overburden.

The Cantuar layer yields the highest-value stones, averaging US$420 per carat, but Cantuar adds only 10.5 million tonnes to the resource. The early Joli Fou lithology provides most of the resource tonnage — 90 million tonnes — and its stones warrant the second-highest per carat pricing: US$216 per carat. The Pense kimberlite, which sits below the Joli Fou layers, hosts stones of poorer quality, reflected in an average price of US$126 per carat.

Shore Gold has just completed a 211-metre shaft at the Orion South kimberlite, part of the Star West joint venture, with the aim of recovering substantial, representative diamond parcels from each lithology for bet- ter diamond grade and price determinations. The company evaluated the material removed in sinking the shaft as bulk samples and in late May, released the third set of bulk-sampling results.

The final bulk sample produced 136.7 carats from 3,467 dry tons of Pense kimberlite. Of the 1,310 commercial- sized diamonds (greater than 1.18 mm) recovered, 10 weighed in at more than 1 carat. An earlier batch, from the Joli Fou layer, returned 363.1 carats from 2,144.8 dry tons of kimberlite, an average of 16.9 carats per hundred tonnes and including a 15.88-carat diamond.

Shore and Newmont are together spending $86.8 million at Star West this year. The project hosts multiple kimberlite clusters.

Shore Gold has a 2008 budget of $7.9 million for the Star property — expected to take the project to full feasibility by year-end.

The project is located some 60 km east of Prince Albert, in a burned portion of the Fort la Corne forest.

On news of the Star kimberlite resource, Shore Gold lost 8 or 2.4% to close at $3.20 on 3.8 million shares traded. The company’s share price has fallen fairly steadily since mid- November, when it traded around $5.40 for a few days. Shore Gold has a 52-week trading range of $2.90-5.61 and has 182.7 million shares issued.