newsRock tries again at Temagami
Rock Resources Inc (2) RCK
Shares issued 18,258,831 Jan 26 close $0.065
Tue 27 Jan 2004 Street Wire
by Will Purcell
Graeme Rowland's Rock Resources is having some success coming up with new
exploration cash and the struggling company is now touting plans to renew
work on the three diamond properties that the company optioned from Tres-Or
Resources over the past two years. Deals covering two other exploration
projects seemed to fall apart on Rock last year, after the explorer was
unable to make some required property payments, but Mr. Rowland's company
still seems to have high hopes for its Temagami diamond play in
Northeastern Ontario. It will likely take a diamondiferous discovery in the
region south and west of Lake Timiskaming to attract much attention to
Rock's play, but there have been signs of hope from nearby diamond
projects.
Rock made its first Temagami move in the spring of 2002, just a few months
after Mr. Rowland took over as president of the company. The terms of that
deal with Tres-Or allowed Rock to earn a two-thirds share of the Temagami
North property, in exchange for spending $300,000 on exploration and making
payments of stock and cash to Laura Lee Duffett's Tres-Or.
A few months later, Rock picked up an option on the significantly larger
Temagami East property. The arrangement would allow Rock to earn a
two-thirds stake in the property, but the exploration requirement was
considerably greater than the first agreement, requiring little Rock to
spend in excess of $6-million over several years.
Last year, Rock added Tres-Or's Cobalt South property to the Temagami North
deal, which was also revised to some extent. Renegotiations or not, Rock
apparently was unable to meet all of the requirements of the agreements at
last report, but Tres-Or has been a patient partner while Rock works to get
its affairs in order.
A significant exploration program has not been possible due to the sad
state of Rock's treasury. Early in 2002, the company had a working capital
deficiency of nearly $200,000, and that figure grew to about $250,000 a
year later. Rock's working capital situation worsened through the first
quarter of its latest fiscal year, and the deficiency swelled to nearly
$350,000 by the end of August.
The company managed to bring in about $3-million through private placements
and issuing shares for debts during the 18-month stretch that began when
Mr. Rowland took over.
Coming up with the new money and Rock's slumping share price have caused
the company's shares to balloon over that stretch. Rock had just over 2.8
million shares outstanding early in 2002, not long after the company had
rolled back its shares on a 1-for-20 basis, but the tally swelled to more
than 18 million by last summer.
As a result, Rock is once again planning to turn back the odometer on its
struggling stock, this time at a 1-for-10 rate. That would make Rock's
eight-cent shares worth a more toutable 80 cents, but it will also send the
stock's 81-cent high that was set early in 2000 to a lofty $162 per share,
after what would be a cumulative 1-for-200 consolidation.
The latest rollback would again reduce recent Rock's share count to less
than two million, but the total is already begun to swell, as the company
works to improve its financial situation. Rock will issue 800,000 of its
postconsolidated shares through an over-subscribed private placement that
will bring in $300,000, and it is issuing nearly 1.2 million more to settle
about $437,000 in outstanding debts. Those two transactions will
effectively double Rock's share count.
It will be worth it if Rock manages to come up with a diamondiferous find
on its diamond plays to the south and west of Lake Timiskaming. The
Temagami North properties are perhaps the most promotable of the three
projects in the shorter term. The claims are scattered along an area west
of the lake in close proximity to the cluster of kimberlite finds that dot
the area west of New Liskeard and Haileybury.
The region was big news with speculators in the early 1990s and the
district is once again drumming up a bit of attention, after Sudbury
Contact Mines revived one of its old projects. The company discovered the
95-2 kimberlite in 1995 and although the diamond counts were low, there
were signs of a potentially coarse stone size distribution curve.
Sudbury Contact lost interest nevertheless, and the play grew cobwebs for
several years. Things abruptly changed in 2002 when the company processed
some old core samples and began drilling several new holes. That work
continues to suggest a modest grade but a fairly coarse size distribution,
and the company is now working on a 500-tonne mini-bulk test of the fairly
large pipe.
The cumulative weight of Sudbury Contact's 0.85-millimetre macrodiamonds is
just under 0.40 carat, gleaned from just over four tonnes of kimberlite,
and that would suggest a grade of just less than 0.10 carat per tonne. That
figure could be skewed higher by the recovery of one diamond that weighed
0.14 carat, but a larger sample might also be statistically expected to
deliver somewhat higher grades. As a result, the likely outcome of Sudbury
Contact's mini-bulk test is largely an unknown quantity, although it seems
certain to top the previous mini-bulk results from the region.
Those earlier tests had demonstrated that quite a few of the Timiskaming
and Kirkland Lake kimberlites were diamondiferous, but just marginally so
at best. The Bucke pipe, also in close proximity to Rock's Temagami North
properties, produced a grade of about 0.004 carat form a 25-tonne test in
the mid-1990s. That figure matched what had been obtained from the Clifford
pipe near Kirkland Lake, where 123 tonnes of kimberlite produced diamonds
weighing just over one-half carat.
Nevertheless, there were glimmers of hope in those microscopic grades, as
some of the diamonds were large enough to support hopes of a coarse size
distribution. That would mean little for Bucke or Clifford, but it offered
promise that other finds in the region might have much better grades, and a
project could be worthwhile if it was combined with a similar size
distribution. As a result, Sudbury Contact's sample could have a boom or
bust impact on the area play.
Rock and Tres-Or could stir up some interest of their own in the region by
making a kimberlite find. Tres-Or completed some preliminary work on the
Temagami North property, including some surface sampling and geophysics,
and at least one of the claim blocks appears to contain a kimberlite.
As well, about 30 magnetic targets have been located on the claim blocks,
and with the tight cluster of pipes already found in the immediate
vicinity, it would be no great surprise if the Temagami North and Cobalt
South ground contained a few more. There have also been signs of indicator
mineral promise that offer hope that the diamond content of any finds might
be closer to that of 95-2, rather than Bucke, or one of the barren pipes.
Although there was nothing particularly special about the pyrope garnets
found at Temagami North, Tres-Or has touted its eclogitic garnet recoveries
as better than those of its rivals.
There have been diamonds recovered from rock in close proximity to the
Cobalt South property as well. In 2002, John Versfelt's Cabo Mining came up
with 95 diamonds in a 9.5-kilogram batch of lamprophyre rock, and some of
them were of a promotable size.
That caught the eye of Kennecott Canada for a time, but subsequent samples
failed to match the initial promise, and interest in the Cabo play quickly
evaporated. Nevertheless, the result does again dangle the possibility of a
much higher diamond contend and a coarse size distribution curve as a
promotional hook, as Rock's Cobalt South property is adjacent to the Cabo
find.
The Temagami East property, just south of Lake Timiskaming, is at the
northeastern end of an area that contains the bulk of Tres-Or's Temagami
properties. There have not been any kimberlite finds in the immediate
vicinity of the property, but Tres-Or and a host of other explorers
continue to have great expectations for their projects, although their
promotions have faltered with the lack of drill success to date.
Rock's financial woes have been compounded by a steady turnover on its
board and in its executive offices over the past few years. The revolving
door began about two years ago, when the Europe-based Mr. Rowland was added
to Rock's board. The business consultant quickly became chief financial
officer and he replaced Tom Kennedy as president a few months later. Mr.
Kennedy lingered as a director for a few more months, but he was asked to
resign before the end of 2002.
Late last year, Rock added United Kingdom-based businessman and former
stockbroker, Anthony Balme, to its board. A few months earlier, Bruce
Hirsche, an Edmonton-based securities lawyer and Richmond engineer, Elston
Johnston, were replaced by an accountant, William Jung, and Mr. Versvelt in
a board spat that also cost bean counter Allan Rose his position as a
director and chief financial officer. Mr. Rose had been appointed to Rock's
board in the summer of 2002, replacing Malcolm Bradley, who served a stint
of less than five months.
A commercial banker, James Watt, is the fifth member of Rock's board. He
was appointed in the summer of 2002, along with Richard Poulden, who did
not last long. To make room for the pair, geologists Chris Sampson and John
Kowalchuk resigned, and although Rock said that Mr. Kowalchuk would
continue to "channel his geological expertise into a plan of property
growth" on Rock's advisory board, he promptly channelled his way out the
door just six months later.
Rock's shares managed to trade as high as $1.10 in the spring of 2002, but
the working capital deficiency and the management turmoil has taken its
toll on things since then. A share has cost less than a dime for much of
the past year, and occasionally less than a nickel.
Rock's pebble-sized shares dipped 1.5 cents on Monday, closing at 6.5
cents.
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