WillP article on Rhonda and the Knife Rhonda not dead yet
2005-03-09 13:33 ET - Street Wire
Shares issued 51,374,911
by Will Purcell
John Alston and Glen Alston's Rhonda Corp. has some encouraging news from its Knife project in Nunavut that De Beers Canada Corp. is exploring. A 2003 drill program expanded both the size and the potential grade of the kimberlite pipe. That could bode well for another look later this year, but most of the new promotability is lost on the Alston's struggling diamond hunter. The company failed to file its financials on time last year, prompting a trading halt last spring. Rhonda initially hoped the issue would be a short one, but it continues to drag on and recently passed the nine-month mark. As a result, Rhonda is not likely to press for a faster pace until it gets back on its feet. De Beers has higher priorities as well, but it would be a surprise if the partners do not eventually decide to take a closer look at the big pipe.
The Knife pipe
De Beers spent a busy 2004 on Knife, drilling 11 holes and extracting 15 tonnes of kimberlite. The company sent about one tonne of the material to the Saskatchewan Research Council (SRC) lab for microdiamond recovery. Those results were available late last year, but a recent audit of the counts produced some significant differences.
The latest tallies show that 1005.55 kilograms of rock produced 742 diamonds, although only 472 of the stones were large enough to cling to a 0.106-millimetre cut-off. Based on that lower number, Knife contained about 470 stones per tonne. In all, 80 of the diamonds sat on a 0.30-millimetre mesh, accounting for about 17 per cent of the 0.106-millimetre parcel.
That offers hope that Knife has an encouraging diamond size distribution, and some larger diamonds add to that encouragement. Five stones sat on a one-millimetre sieve and one clung to a two-millimetre screen. In all, the carat crop weighed about 0.46 carat, which suggests a microdiamond grade of about 0.45 carat per tonne.
The SRC results were more generous in most of the sieve classes and that had a big impact on the size distribution. Those tallies revealed that a 0.106-millimetre cut-off held 647 diamonds, or about 645 stones per tonne. That value is about 37 per cent higher than the De Beers audit yielded.
The SRC tallies suggested there were 197 diamonds large enough to remain on a 0.30-millimetre screen, or about 30 per cent of the 647-stone parcel. That particularly promotable value did not survive the latest De Beers audit, but even the lower proportion offers encouragement that Knife contains a toutable size distribution.
Knife is a multiphased kimberlite pipe and a closer look at the audited diamond counts offers hope that a larger part of Knife has a potentially higher grade than an earlier test signalled. The brown kimberlite accounted for about 437 kilograms of the 2004 material and it yielded 178 diamonds larger than a 0.106-millimetre screen.
That worked out to about 400 stones per tonne, with about 16 per cent of the parcel clinging to a 0.30-millimetre mesh. The microdiamond haul weighed nearly 0.2 carat, helped along by some larger stones. That pointed to a microdiamond grade of about 0.45 carat per tonne.
The best result came from the shardy grey volcaniclastic kimberlite, where De Beers found 140 diamonds larger than a 0.104-millimetre cut-off, in 244 kilograms of rock. That was about 575 stones per tonne. The size distribution was encouraging as well, with 20 per cent of the parcel remaining on a 0.30-millimetre mesh. Once again, some larger stones padded the carat count. The parcel weighed nearly 0.18 carat per tonne, suggesting a microdiamond grade of about 0.73 carat per tonne.
The grey volcaniclastic kimberlite produced the poorest outcome. About 324 kilograms of rock yielded 154 diamonds larger than the cut-off, or about 475 stones per tonne. About 15 per cent of the stones clung to a 0.30-millimetre sieve. There were no larger diamonds in the mix and the carat count suffered as a result. With a parcel weight of just 0.08 carat, the result revealed a microdiamond grade of about 0.25 carat per tonne.
The Knife model
Geometry offers the most promotable aspect of the latest drill results. Once thought to cover about five hectares at the surface, De Beers and Rhonda later upped their estimate to about 6.5 hectares. The size calculation now tops the 10-hectare mark and the partners think there are over 35 million tonnes of kimberlite to a depth of 260 metres. That hefty size could make a modest grade potentially economic, if it combines with a promotable rock value.
De Beers now has enough data to produce a model grade for the main rock types within Knife, although the partners are still a long way from producing a formal resource estimate. De Beers calculated a modelled grade of 0.25 carat per tonne for three of the four main phases, based on a 1.5-millimetre cut-off. The diamond giant thinks the fourth phase has a lower diamond content, which it modelled at 0.13 carat per tonne.
The shardy grey rock is the dominant phase within Knife. De Beers believes that the rock accounts for just one-quarter of the surface area of the pipe, but it dominates at depth. As a result, the tonnage estimate for the shardy grey material is nearly 22 million tonnes. The other grey volcaniclastic rock has a similar surface area, but De Beers pegs the tonnage of that lower-grade phase at just 3.5 million tonnes.
There is nearly six million tonnes of the brown kimberlite within the top 260 metres of Knife. It covers the largest area at the surface, accounting for nearly one-third of the uppermost region of the pipe. That could be good news, as it appears that De Beers credits the brown rock as having the coarsest size distribution.
The company estimates the material has a grade of 0.27 carat per tonne using a one-millimetre cut-off. That drops to 0.25 carat per tonne at a 1.5-millimetre limit. That decline is the smallest of any of the kimberlite phases, implying that larger diamonds provide most of the grade contribution.
The fourth kimberlite phase also lies close to the surface. De Beers models about five million tonnes of the mantle xenolithic material. That material suffered the largest grade decline between the two cut-offs, suggesting it may have a less favourable size distribution. The partners think the rock has a grade of 0.31 carat per tonne using the smaller sieve, but it decreases to 0.25 carat per tonne using the larger limit.
The plan
John Alston, Rhonda's chief executive officer and a Calgary-based geologist, said they were fortunate to have what he termed pleasing results from the Knife project. Still, De Beers and Rhonda will have to take significantly larger samples to get a better handle of the geometry and grade of the Knife kimberlite. As well, it will take a large mini-bulk test to provide the first real inkling of the diamond value. Mr. Alston said that De Beers still did not have a sufficiently large sample to come out with a dollar value on the Knife diamonds.
De Beers typically uses a larger reverse circulation drill to collect its larger mini-bulk tests, but such a program would cost several millions of dollars. As a result, the partners may do some more preliminary work before moving on to a much larger test. De Beers and Rhonda will soon meet, and that could result in some firm plans for the coming year.
Rhonda does not expect a busy summer. A shallow lake covers much of the Knife pipe and that will likely rule out a big reverse circulation drill program until early next year. As well, the needed equipment is in high demand, making a quick program unlikely. De Beers exploration crews are also in high demand on several projects this year, and Knife would appear to be a lower priority than some of the company's more advanced plays. Nevertheless, it would be a surprise if Knife does not manage to produce at least a bit of news this year.
Trading woes
If De Beers does take a slow pace on the Knife project, it would not be a big disappointment for Rhonda, as any promotable news would be lost on the company's halted shares. The Alberta Securities Commission (ASC) continues to examine Rhonda's financial documents in fine detail, with much of the interest surrounding a failed high-tech deal.
The company became a significant investor in Carmina Technologies Inc. in 2000, near the crest of the technology boom. "We lost our shirt on that, not only Rhonda, but everyone else that invested in it," said the father of Glen Alston, Rhonda's president since 1999.
The elder Mr. Alston was busy last year, trying to cobble together a new plan for Carmina. That arrangement came together last summer, through a 200-for-1 consolidation and a reverse takeover of Advanced Integrated Management Services Inc., another technology company listed on the OTC Bulletin Board. The company's current moniker is AIMST Technologies Inc. AIMST recently traded for 30 U.S. cents.
Rhonda and the Alston clan tried keeping the old Carmina afloat for a few years prior to that, and the ASC is slowly sorting through all the related party transactions involving Rhonda and Carmina. Despite the lengthy wait, Rhonda believes it has all the right answers for the commission and is optimistic that its shares will soon resume trading.
Knife could figure prominently in a revived Rhonda promotion. Despite the seemingly slow pace and modest grade, the project intrigues De Beers. The company mounted drill programs in three of the past five years. De Beers also fought a legal battle with Rhonda to secure its share of the play, and that Knife fight was responsible for the two quiet years. Any reports of Rhonda's demise seem premature.
Rhonda last traded at 14 cents on June 1, 2004.