2023-08-16 16:42 ET - Market Summary
by Will Purcell
The diamond and specialty minerals stocks box score for Wednesday was a bleak 66-106-138 as the TSX Venture Exchange rose one point to 591. Dermot Desmond and Mark Wall's Mountain Province Diamonds Inc. (MPVD) lost one-half cent to 45.5 cents on 56,000 shares.
Mountain Province had a solid quarter mining diamonds at its 49-per-cent-owned Gahcho Kue mine at Kennady Lake, 250 kilometres northeast of Yellowknife in the Northwest Territories, but the company is looking beyond a steadily shrinking reserve to extend the life of the operation. Exploration around the three main kimberlite pipes being mined continues and as well, the company continues talks with majority co-venturer, De Beers Canada, about adding the Kennady North kimberlites to the plan.
Gahcho Kue has grown since mining began in the fall of 2016, with the discovery of satellite deposits and extensions to the main pipes. Including the latest of those finds, the Hearne Northwest Extension, is now a hot topic for discussion thanks to drilling this year that outlines a significant amount of kimberlite. That kimberlite looks to have grades and diamond values roughly in line with those in the main Hearne body currently being mined from surface.
While most of the new kimberlite turned up when the open-pit miners encountered ore where there should have been waste rock, there is renewed interest in the area farther east of Gahcho Kue. In June, Mountain Province hit a 40-metre interval of kimberlite in a single hole drilled southeastward from a site just east of the Tuzo pipe.
That hit was deemed "very interesting" by Mr. Wall, president and chief executive officer, and he and his crew appeared intrigued when that hole encountered what appeared to be a feeder dike at depth. That hit left Mountain Province and De Beers "optimistic that further systems to the east could exist," cheered Mr. Wall. Unfortunately, if those systems exist, they may not show themselves eagerly. Mr. Wall says that the co-venturers drilled another hole farther to the east but did not hit any kimberlite. Therefore, he concludes, "we have more work to do to understand this eastern zone."
There is economic kimberlite beyond Gahcho Kue, as Mountain Province holds a 100-per-cent interest in the Kennady North project, about 10 kilometres northeast of the mine. Kennady North is not new -- De Beers and Mountain Province discovered the Kelvin and Faraday kimberlites about 20 years ago. De Beers thought them too small to be of interest, so it turned them over to Mountain Province. Mountain Province then did some preliminary work and found enough to spin the project off as a new company, Kennady Diamonds Inc. in 2012.
Kennady did well enough over the next five years that Mountain Province rethought the spinoff -- purportedly at the behest of Mr. Desmond, who was a major shareholder of both companies. In 2018, Mountain Province reacquired Kennady, but at the cost of just over 51 million shares -- giving Kennady's shareholders roughly 25 per cent of the expanded Mountain Province.
While Kennady North holds a significant resource, getting those carats into the Gahcho Kue mine plan has not been an easy task. De Beers presumably has been unwilling to buy a 51-per-cent interest in the Kennady North property -- no surprise since it previously gave it away -- and Mountain Province is likely reluctant to return the favour.
And then there is the challenge of mining Kelvin and the two Faraday kimberlites, which are complex bodies compared with the Gahcho Kue pipes. All three bodies appear to be typical kimberlites that are tilted from the usual vertical profile, suggesting that underground mining might be more favourable than open-pit mining.
The Kelvin kimberlite is home to 8.5 million tonnes indicated at 1.6 carats per tonne, about 13.6 million carats last valued at about $63 (U.S.) per carat. Faraday 2 is smaller, but economically richer, with just 2.07 million tonnes inferred at 2.63 carats per tonne, diamonds valued at $140 (U.S.) per carat. Faraday 1-3 hosts 1.87 million tonnes inferred at 1.9 carats per tonne and a diamond value of $75 (U.S.) per carat.
Those values are based on small samples, as are the grades, and so at this stage it may be most accurate to say only that Kennady North's grades and diamond values are comparable with what Gahcho Kue has been yielding for the past several years. And so, talks continue. There is increasing urgency, as it will take time to craft a plan and build a mine at Kennady. Meanwhile, Gahcho Kue is lumbering onward through a mid-life crisis, toward an end that is perhaps six to eight years distant.