from stockwatch 2022-08-02 17:21 ET - Market Summary
by Will Purcell
The diamond and specialty minerals stocks box score on Tuesday was a so-so 104-98-108 as the TSX Venture Exchange regained eight points to 654. Grenville Thomas and Ken Armstrong's North Arrow Minerals Inc. (NAR) lost one-half cent to 7.5 cents on 11,000 shares.
The company now has the last diamond counts from its 2021 bulk sampling program of its Q1-4 kimberlite, just north of Naujaat in central Nunavut. The latest results, from nearly 500 tonnes of kimberlite extracted from the surface of the A88 lobe of the large, horseshoe-shaped pipe, continue to support the company's theory that a population of orange and yellow fancy diamonds have a sufficiently coarse size distribution profile to suggest the project could be economically viable.
North Arrow recovered 99 diamonds on a De Beers No. 9 sieve, which limited the test to gems weighing roughly 0.18 carat or more. (Grade assessment was not part of the plan; instead, the company sought to flesh out the size distribution profiles of its two main diamond populations -- the desirable fancies and the other, standard gems.) Even so, the latest test averaged 11.2 carats per hundred tonnes (cpht), matching what a smaller test of the lobe managed in 2017. That earlier test graded 30.5 cpht on a No. 1 sieve, so using the larger sieve lost nearly 40 per cent of the tiniest diamonds.
What matters is the size distribution of the fancies, and once again North Arrow's latest test delivered as hoped. While two of the three largest diamonds were decidedly unfancy -- a seven-carat chunk of grey boart and a 2.02-carat off-white stone -- a 2.17-carat diamond was deemed a fancy light orange gem, although not with top-flight characteristics. Further, the 10 fancy diamonds recovered averaged nearly 0.72 carat, while the 89 other diamonds averaged less than 0.55 carat.
That continues the trend noted in the significantly larger test of the A28 lobe completed this year. About 1,316 tonnes of kimberlite graded nine cpht, slightly less than the 9.3 cpht that a 1,353-tonne test managed in 2014. The average weight of the 48 fancy diamonds recovered was over 0.51 carat, compared with just 0.42 carat for the 220 other diamonds recovered.
Making sense of it all is a challenge, in part because North Arrow changed its criteria for segregating its sought-after gems. Yes, the bait and switch tactic is a promotional ploy older than Howe Street, but in this case the company tightened its criteria, not loosened them: North Arrow now only counts diamonds grading as fancies, while its earlier requirement was that they merely be diamonds deemed "yellow, representing a range of hues and tones."
In fact, based on the current, more stringent requirement, one might question what North Arrow ever saw in the data to warrant the $5.6-million larger test. The original tests of the two lobes, adjusted for the No. 9 sieve cut-off and the new criteria, showed that the fancies graded just 1.05 cpht and had an average diamond weight of 0.385 carat, while the other diamonds graded 8.5 cpht with an average stone size actually a bit larger, at 0.387 carat.
What North Arrow saw in the data was that the yellows did appear to have a coarser size distribution profile, since they accounted for three of the four largest gems recovered, and so the crux of the gamble was determining whether that trend would show up among the far more desirable fancies. (In the end, it was Peter Ravenscroft's Australia-based Burgundy Diamonds Ltd. that took the bet, wagering the $5.6-million cost of the sample in exchange for a 40-per-cent interest in the project.)
It appears to have paid off, as the 2021 test delivered the fancies. While the average grade of the lesser diamonds dropped to 7.8 cpht, the fancy grade increased substantially, to 1.75 cpht. One key reason is the coarser size distribution: The fancies weighed an average of nearly 0.55 carat, compared with less than 0.46 carat for the other stones. Further, it now appears that the fancy diamonds are more orange than they are yellow -- another promising turn of events.
Mr. Armstrong, North Arrow's president and chief executive officer, cheered that the sampling "has confirmed the presence of an important, potentially high value population of fancy orange and yellow diamonds in both the A28 and A88 units of the Q1-4 diamond deposit" -- words echoed by Mr. Ravenscroft. Now, Mr. Armstrong says, North Arrow will model its diamond populations based on the new data and will consider options for cutting and polishing its fancies to better understand their colour characteristics.
It appears that the 2021 program was enough of a success to make a proposed 10,000-tonne test to assess diamond value the logical next step. If so, Mr. Ravenscroft has a decision to make: Burgundy can increase its share of the Naujaat project to 60 per cent by paying for that larger test, which could cost north of $20-million. At this point, it is unclear if he will press on with the option or be content to be North Arrow's minority co-venturer.