Diamond & Specialty Minerals Summary for Nov. 13, 2015 Ken MacNeill and George Read's Shore Gold Inc. (SGF) lost one cent to 19 cents on 219,000 shares. The company's stock jumped to 23 cents from 17 cents earlier this week on stunning news that the company's resource estimates for the Star and Orion South pipes in central Saskatchewan had increased substantially in size and grade. The rally petered out faster than the company's loyal but long-suffering retail shareholders had expected, perhaps because potential new shareholders viewed the news skeptically. (The suffering has not only been long, it has been particularly painful: Shore's stock traded as high as $8.75 in 2007.) The most perplexing part of Shore's resource increase occurred at the Star pipe, which has not seen any bulk sampling since the company completed its 2009 resource estimate at the depth of the recession.
The changes within the dominant Early Joli Fou (EJF) phase are particularly baffling. In 2009, Shore said it had 83.2 million tonnes of EJF Inner kimberlite, nearly all of it indicated, at a grade of .165 carat per tonne. Now, the company lists 84.4 million tonnes -- a minor tweak -- but the grade inexplicably increased to 0.187 carat per tonne. Curiously, Shore's 2009 final tallies for its Star bulk samples showed the EJF Inner kimberlite mined underground averaged just 0.175 carat per tonne. The company's large diameter drilling (LDD) in the EJF Inner rock averaged about 0.11 carat per tonne, although Mr. Read "reconciled" this grade upward by a factor of 1.7 to 0.18 carat per tonne, because he believed the LDD program destroyed or damaged many of the diamonds.
Shore has also boosted its EJF Outer resource at Star considerably. In 2009 the company had a combined 52 million tonnes at an average of just over 0.10 carat per tonne. It now lists over 77 million tonnes at 0.14 carat per tonne. Both resource estimates were calculated using bulk sampling data, all of it from the LDD program, in which Shore averaged just 0.07 carat per tonne, or 0.11 carat per tonne with Mr. Read's upward boost applied. Mr. Read, Shore's senior-vice president, attributes the increases in tonnage and grade to rigorous preparation and a meticulous review of the old data, but since the resource grade is now considerably higher than the bulk sample grades, it appears Shore has factored upward Mr. Read's upward multiplication factor.
Shore's unusual methods are probably what cost it a partner. Newmont Mining Corp. (NEM: $17.50 (U.S.)) invested over $200-million to acquire a stake in Shore Gold, and a 40-per-cent interest in the Fort a la Corne project, including Orion South and the western part of Star. Early in 2009 Newmont abruptly said it would "cease funding" its share of the costs, citing "2008 geologic results and potential project economics" as the reason why.
Newmont never got into specifics, but its unhappiness can perhaps be traced to mid-2008, when Shore dutifully began appending to its news releases the boilerplate comment that "Newmont did not participate in the preparation, supervision or review of the work associated with this exercise and takes no responsibility for the content." The first release to include that caution was Shore's 2008 resource calculation for Star, in which it unveiled its method of using a multiplication factor to "reconcile" the lower-grade LDD results with the higher-grade underground bulk samples. If Mr. Read is right, he will have the last laugh at Newmont's expense, but lately it has been impossible to find anyone at Newmont's head office willing to admit knowing about their company's foray into prairie diamonds.
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