Will Purcell 2019-11-13 21:00 ET - Market Summary
by Will Purcell
Dermot Desmond and Stuart Brown's Mountain Province Diamonds Inc. (MPVD), down three cents to $1.12 on 32,000 shares, says that a coming mine plan update from De Beers Canada, its 51-per-cent partner, will add a few years to the life of their Gahcho Kue diamond mine, 250 kilometres northeast of Yellowknife in the Northwest Territories. Mr. Brown, president and chief executive officer, says that his company has received a copy of the report from De Beers, but they are now "running a couple of different scenarios" and "taking a bit more time to work through a couple of options" that they think could change the cost structure and processing plan.
The most recent version of the plan, now a few years old,would have kept Gahcho Kue going until 2028, based on a now dated reserve. Mr. Brown now says that the new version takes the life of the mine into the 2030s by adding additional kimberlite around the three main pipes, Hearne, 5034 and Tuzo, including the northeast extension zone between 5034 and Tuzo. Vagueness is never an investor's friend, and Mr. Brown later suggests that by "into the 2030s," he means the start of that decade, as he later concedes that the revised plan "takes us into the next ... 11 years," a run that suggests an end date of 2030 or 2031.
As for the numbers, investors will have to wait. Mr. Brown says that the plan will be completed in January, but he adds that the details will be provided in Mountain Province's year-end disclosure material, likely in March. Also coming in March is a new technical report covering Gahcho Kue, presumably with updated reserve and resource estimates. As well, Mr. Brown says that Mountain Province will update its three-year production guidance for the mine before the end of December.
Still in the lurch is a growing resource at Kennady North, a project that Mountain Province spun off in 2012, only to buy it back in early 2018 for nearly a quarter of its outstanding stock. The Kelvin kimberlite now hosts 8.5 million tonnes at 1.6 carats per tonne, about 13.6 million carats, while the Faraday 1-3 and Faraday 2 kimberlites hold 3.27 million tonnes inferred at 1.54 carats per tonne, another five million carats. Unfortunately, the 18.6 million carats at Kennady North are probably worth the same as the Gahcho Kue diamonds -- in other words, not enough to support a mine of its own -- so the project is at the mercy of the Gahcho Kue joint venture and therefore De Beers.
When Mr. Brown talks about the 11 years of the revised mine plan, he adds that run is without looking at Kelvin and Faraday. He says that the mine has improved its plant capacity, allowing it to handle more tonnes. Mr. Brown says that the partners are looking in the long term where we could get those tonnes from, adding that "we have not yet solved the problem." Not De Beers, apparently, but Mr. Brown eagerly points to "the first easy answer" -- Kelvin and Faraday -- adding that the hunt for tonnes is the key reason the updated mine plan is being delayed.
While adding Kelvin and Faraday to the mine plan may be the easy answer from Mountain Province's perspective, coming to an accommodation with De Beers is proving to be anything but easy. The stock acquisition of Kennady North implied a $176-million value for the Kennady North project, but since then Mountain Province's market value has shrunk to just $235-million covering both its share of Gahcho Kue, and Kennady North. As a result, De Beers is balking at paying Mountain Province much for a 51-per-cent interest in Kelvin and Faraday.
Jonathan Evans, George Ireland and John Kanellitsas's Lithium Americas Corp. (LAC), down seven cents to $3.81 on 107,000 shares, expects to start production at its Cauchari-Olaroz lithium brine project in northern Argentina in early 2021. Construction of the big operation is about one-quarter complete, say Mr. Evans, CEO, and Mr. Kanellitsas, executive vice-chairman, adding that 13 of the 40 production wells are now complete and another seven are under way. The final cost of Cauchari-Olaroz is still expected to be about $565-million (U.S.).
The plan calls for Cauchari-Olaroz to produce 40,000 tonnes of lithium carbonate annually for 40 years, from an available reserve of 1.1 billion cubic metres averaging 607 milligrams of lithium per litre -- enough to sustain the planned production rate for closer to 50 years. Lithium Americas holds a 50-per-cent interest in the big project, with Ganfeng Lithium Co. Ltd. owning the rest, although the Argentine government has the right to acquire an 8.5 per cent interest.
Trent Mell's First Cobalt Corp. (FCC), up one-half cent to 13.5 cents on 786,000 shares, is taking its cobalt promotion on the road. Mr. Mell will be at the Benchmark Minerals Cathodes Conference in California this week to tout the company's plan to resurrect a mothballed cobalt refinery in Northeastern Ontario. He will be telling all who will listen about America's vulnerability, given its 100-per-cent reliance on imports of cobalt sulphate, and about the "emerging domestic champion" -- by which he means First Cobalt.
The company's scoping study, completed this year, proposes a $37.5-million expansion to the plant, which would be able to run at 55 tonnes per day and produce 5,000 tonnes of cobalt annually. The study put the operating cost at a modest $2.29 (U.S.) per pound and if a coming feasibility study confirms the numbers, Mr. Mell and his company could be producing cobalt in about a year. It is not doing all this on its own: Glencore AG is providing cash to get the plan rolling, in exchange for an equity interest and an offtake deal.