2023-06-19 16:52 PT - Market Summary
by Will Purcell
The diamond and specialty minerals stocks box score for Monday was an upbeat 95-72-143 as the TSX Venture Exchange fell one point to 612. Dermot Desmond and Mark Wall's Mountain Province Diamonds Inc. (MPVD) added one cent to 47.5 cents on just 3,000 shares.
Mountain Province and De Beers Canada, its majority co-venturer at the Gahcho Kue mine in the Northwest Territories, have found kimberlite just northeast of the Tuzo pipe, slated to be the last of three big pipes to be mined at the project. The find occurred about 40 metres from Tuzo, but at considerable depth, as the 40-metre intercept occurred at a 670 metres down-hole, a vertical distance of perhaps 630 metres.
Mr. Wall, president and chief executive officer of Mountain Province, was encouraged by the width of the intersection and the similarities of the core with kimberlite found in the main Tuzo pipe. Still, his enthusiasm came with a gaggle of weasels. The drilling, he says, "is early stage and is still under way," adding that his company and De Beers will consider further drilling if the detailed work on this hole continues to return positive results.
There are reasons for Mr. Wall's cautionary enthusiasm: Tuzo ranks as a big pipe in Canada's North, but it has been the black sheep among the three main Gahcho Kue pipes. It has a lower grade than Hearne and the 5034 pipe, largely because its upper portion contains a significant amount of country rock dilution Its modelled diamond value has been lower than at the other pipes as well, to the point where it was slated to be mined last, if at all.
On the other hand, there is a substantial amount of kimberlite deep within Tuzo -- an area unimaginatively dubbed Tuzo Deep -- that hosts an inferred resource of about 10.7 million tonnes grading 1.74 carats per tonne, good for about 18.6 million carats. The main reserve at Tuzo averages just 1.3 carats per tonne across 14.6 million tonnes, about 19 million carats. Further, there is the potential for more carats deeper still -- not to mention within this potential new extension.
Getting at all those deep carats will be the challenge. The most recent mine plan, now over a year old, had the co-venturers nibbling away at Tuzo last year, with major open-pit mining at the pipe dominating Gahcho Kue production this year and next. Following a two-year breather, the mine would exclusively mine Tuzo starting in 2027 until the reserve is exhausted in 2029.
And so, the Tuzo Deep resource and anything that turns up in the extension would be welcomed -- so long as it proves economic. As to the question of economics, the most recent modelling suggests it is, but remember that the modellers continue to build in an escalator that ramps up rough diamond prices 2 per cent annually above inflation, a move that has been the downfall of many a well-laid mine plan -- and the backers who supported it -- over the past decade.
On the other hand, Mountain Province and De Beers continue getting good news from the Hearne Deep and Northwest Extension areas of the Hearne pipe, which ranked second among the three Gahcho Kue bodies. Discovered late in 2021, the Northwest Extension tonnage is looking more substantial by the day. The co-venturers cheered hits in 10 of 16 holes drilled in 2022 and this year they managed 10 intercepts in 11 tries, with one of them producing a 287-metre intersection.
Mark Wall managed more enthusiasm with fewer weasels for the Hearne results. He cheered the latest drilling results, which "confirm a significant volume of kimberlite exists in the Northwest Extension," adding that when combined with the earlier results, 21 drill holes now define the additional kimberlite both below the final pit and to the northwest of it. Therefore, he concludes, he and his crew are "actively engaged with our operating partner De Beers to look at ways to recover this deeper kimberlite by underground mining."
And there, by implication it appears, is the biggest, surliest weasel of all, gnawing at the enthusiasm for Tuzo. If converting a substantial amount of kimberlite with a higher grade and diamond value at Hearne is still a head-scratcher for the co-venturers, then making a mine deep within a Tuzo extension looks to be a greater challenge. Still, Gahcho Kue has usually managed to buck the risks, if not the odds, over the past quarter century, so stay tuned.