Stock sheds $9 on news — Dia Met results not positive

The latest results from the Dia Met-BHP property support previous declarations that the Northwest Territories may host one of the highest-grade diamond fields in the world, analysts say. But until further information about the size, color and clarity of the stones is released, estimates of the field’s economic potential will remain purely speculative.

Dia Met Minerals (TSE) and BHP Minerals Canada say all four of the pipes that were bulk-sampled earlier this year contain gem-quality diamonds, several of which fall into the 1-to-3-carat range. Only diamonds greater than 0.5 millimetres in diameter are included in the release.

The best sample, a 49.6-tonne parcel taken from “Pipe 4,” carries a grade almost twice that of the bulk sample taken from the Point Lake pipe: 62.1 carats of diamonds, 31% of which are gem-quality.

Samples from Pipes 1, 2 and 3 were less impressive.

“In the Western World, you won’t find much better,” says Dominick and Dominick’s John Eidt of Pipe 4. “I view this as enormously positive news.” Encouraged themselves, Dia Met and BHP will launch a 5,000-tonne sampling program early next year.

But investors who had pushed the stock up to $66 in anticipation of the results clearly did not share Eidt’s enthusiasm. The stock lost $9 per share on the day to close at $57.

Analysts John Kaiser and Andrew Muir of Pacific International say Pipe 4 has a grade approaching that of the Jwaneng Pipe in Botswana, though Botswana, thought to be one of the world’s most profitable. “But until Dia Met produces a valuation of the diamonds in its pipes, there is no way to tell whether or not Dia Met has a Jwaneng Pipe on its hands,” they add.

The joint venture says some of the bulk-samples will be evaluated for their commercial worth in the next few months.

The partners do not release macro and microdiamond counts with bulk sample results for “purely competitive” reasons. “We don’t want to indicate what we have in terms of sizes, etc.,” says Dia Met President James Eccott. Both Pipe 3, which yielded 61.3 carats (33% gem quality) from 179.7 tonnes, and Pipe 4 contain “multiple phases” that were not segregated when the results were reported.

Considering that different phases tend to carry different grades, the results must be taken for what they are: statistically insignificant averages of highly variable pipes.

To increase confidence, the partners plan to take at least 5,000 tonnes from one or two of the five pipes (including Point Lake) bulk-sampled to date. The program, which will begin in early 1994, will include the acquisition and erection of a pilot diamond recovery plant at a cost of $3-4 million. The partners say six more kimberlites have been drilled on its property, bringing the known total to 16, and core samples are being processed. Summer work will include delineation and bulk-sample drilling on known pipes as well as geophysical and geochemical prospecting and exploration drilling for new pipes.

BHP is earning a 51% interest in the Dia Met properties by spending a minimum of US$2 million on exploration and delivering a feasibility study. The senior will arrange financing of up to US$500 million for the first mining operation. Dia Met will retain a 29% interest with Chairman Charles Fipke and partner Stewart Blusson each retaining a 10% interest.

Dia Met bulk sample results to date:

Pipe Sample weight Carats % Gems

tonnes

Point Lake 145.2 101 25

Pipe 1 151.5 65.37 17

Pipe 2 21.2 17.99 6

Pipe 3 179.7 61.28 33

Pipe 4 49.6 62.11 31