Diamond & Specialty Minerals Summary for Sept. 14, 2023
2023-09-14 17:38 ET - Market Summary
by Will Purcell
The diamond and specialty minerals stocks box score on Thursday was an upbeat 101-73-136 as the TSX Venture Exchange added five points to 588. Dr. Michael Gunning's VR Resources Ltd. (VRR), which surged to an intraday high of 24.5 cents on 2.4 million shares Tuesday and remained buoyant at the 20-cent mark on Wednesday, rose 1.5 cents to 21.5 cents on 171,000 shares today. The sudden surge was the result of news -- but few details -- about a diamond recovery from processing the first small batch of kimberlite recovered from the company's Northway pipe in Northern Ontario.
A lack of detail is usually bad news, and while gung-ho investors typically overreact to news --leaping before they look -- the second wave of buyers remain optimistic, despite not finding some key details upon taking a closer look to better understand the result. Among the information missing about the recovery of a single microdiamond is a key detail that would allow investors to assess its significance. Indeed, when promoters fail to say how long or wide a diamond is, or how much it weighs, it is best to take it as a Howe Street signal that the recovered gem was tiny.
Further, the silence regarding the weight of material processed is perplexing, since Dr. Gunning, president and chief executive officer, and his crew say that they have "complete results" from the caustic fusion and mineralogical testing performed on rock obtained from the first of three drill holes. For now, investors know that the lone microdiamond came from about 30 metres of kimberlitic material encountered on the eastern fringe of Northway, and so the full weight of the sample was likely about 80 kilograms.
After gushing that "Northway is fertile," Dr. Gunning allowed that "discovery is a process, not an event" -- a comment that typically translates to "be patient, this is just the start." Fortunately, the processing to come will include testing and microdiamond counts from most of the Northway kimberlite sent to the lab -- about 600 kilograms recovered from each of the two subsequent holes drilled into the core of the big pipe -- rock that should be far more representative.
The good news is that the first hole diamond count is likely not representative of what the two far larger samples might contain. The small size and fringe location of the first test aside, remember that VR Resources described the bulk of the material processed from the first hole as kimberlitic mudstone. That suggests it was a diluted form of the material likely to be found in the heart of the pipe.
Even so, mudstone fringes elsewhere have occasionally yielded worthwhile quantities of diamonds, and at Northway, the recovery of the one diamond works out to about 12 stones per tonne -- a paltry rate by any measure. Yes, it was diluted rock and yes, Ontario kimberlites are notorious for being poor providers of microdiamonds, even in the cases where the kimberlites are of economic interest. Still, it is a worry.
For instance, Victor, the province's only diamond mine, produced about 130 microdiamonds per tonne in preliminary testing by De Beers in the 1990s. Bulk sampling showed a macrodiamond grade just short of one-quarter carat per tonne, and the company ran its billion-dollar mine for about a decade based on the high value of the recovered gems.
As well, Laura Lee Duffett's Tres-Or Resources Ltd. (TRS: $0.11) recovered 58 microdiamonds from 511.6 kilograms of kimberlite taken from its Guigues pipe, just across the border in northwestern Quebec -- a rate of about 110 micros per tonne. That left Tres-Or sufficiently buoyed that it launched a more energetic drill program to recover several tonnes of kimberlite for macrodiamond recovery in 2021. The drilling was successful -- Tres-Or recovered about 10 tonnes of rock for testing -- but its desire may be lacking, as two years later, the kimberlite sits untested.
Ultimately, the fate of VR Resources' Northway project will depend on what Dr. Gunning's discovery process at the two larger holes delivers. While it is unlikely that the rock hosts large numbers of microdiamonds, numbers like Tres-Or's counts with signs of a coarse distribution are needed to carry investor interest. And so, stay tuned -- the counts should come soon.