Will PurcellArctic Star hopes to cash in on Credit
2008-04-15 17:03 ET - Street Wire
by Will Purcell
Arctic Star Diamond Corp. is busy drilling targets on its Credit Lake property west of Lac de Gras in the Northwest Territories. The property has yet to produce a bedrock source of some sparkling mineral chemistry, but the company thinks it has finally found the right area. Shareholders are hoping their company has the geology right, as their shares are flatlining near the 12-cent mark. Arctic Star's shares managed springtime forays above the 40-cent mark in 2006 and again in 2007, but the faithful have found no new friends to help lift their spirits so far this year.
The plan
Arctic Star began drilling in early April and it is making good progress, knocking off a new target every few days. The company has at least 17 features it would like to test, but it is in a race with the spring melt. The company has just one drill at the site, and in a typical year, the ice will become unsafe by early May. That leaves Arctic Star with three or four weeks to wrap up its drilling.
Some of its rivals will push their drilling right to the end of the season, but Arctic Star does not own its equipment and it is not planning to pay to keep the drill at the site through the summer. As a result, the drill crews will hastily pack up the rig and supplies in time to ensure a safe retreat to Yellowknife. The company uses a twin-engine turboprop airplane to ferry in people and supplies once a week. Its last missions for the year will be to bring the drill back to civilization.
A cool spring followed a cold winter, which allowed the ice to grow to impressive thicknesses across the lakes dotting the Slave district. Daytime temperatures are only just now beginning to climb above freezing, but the ice can quickly rot from above and below over the span of several warm, sunny days. As a result, there are no guarantees that the company will hit all its planned targets.
If it does, Arctic Star thinks the Credit drill program would cost about $1.2-million. The company spent much of the winter topping up its treasury, most recently completing a $3-million brokered private placement. A smaller portion of that, about $500,000 will go to chasing nickel targets on the same property. Northern nickel and copper plays now hold far more sparkle for investors these days. (That could change once bureaucrats, environmentalists and the local residents start voicing their opinion of a volcanic massive sulphide development in their midst.)
The encouragement
Although base metals are all the rage, Arctic Star is still a believer in the diamond potential of Credit Lake. The company spent over $10-million on the project since it acquired it from Kennecott Canada Exploration Inc. in 2004. Some quick kimberlite finds would sustain the enthusiasm displayed by the company's geologists, if not its shareholders.
A discovery this year would also confirm the latest geological theory. Most indicator mineral trains trail away from their sources in the direction the glaciers moved during the last Ice Age, and ice sheets are harder to turn than an ocean liner. After its latest sampling, Arctic Star thinks its indicator mineral grains dipsy-doodled their way across the tundra, successfully drawing its geologists astray for the past few years.
The new tests suggest the indicator grains took a 45-degree turn not far from the pipes, presumably for a geological reason other than to tease speculators for yet another year. As a result, Arctic Star is now testing targets about 1,200 metres southeast of the area it thought was the sure-fire zone just last spring. The latest haul of indicators had bits of kimberlite attached, suggesting their journey had been short, whatever their direction.
Arctic Star closed up one-half cent to 13.5 cents Monday on 90,000 shares.