RE:RE:Friday’s Diamond & Specialty Minerals Diamond & Specialty Minerals Summary for April 6, 2023
2023-04-06 18:45 ET - Market Summary
by Will Purcell
The diamond and specialty minerals stocks box score on Thursday was a mediocre 81-92-137 as the TSX Venture Exchange rose three points to 625. Rough diamond prices rose another 0.2 per cent this week, matching last week's modest increase and eliminating a similar drop over the previous two weeks. This leaves prices up perhaps 0.1 per cent over the past month. Rough diamond prices had bubbled to an all-time high in early 2022 and although that bubble burst, prices remain just 10.8 per cent below that record, a recovery of 2.5 per cent from the 52-week low set during the first week of 2003.
Unfortunately -- as veteran diamond investors discovered to their near universal chagrin -- when it comes to diamond prices, index disappointment is as common as boart on the business end of a drill bit. (Boart, as diamond promoters know all too well, is a synonym for junk -- just as junk has become a synonym for many of their stocks.) Another index, touted by a Connecticut-based jeweller on behalf of Diamond Search Engine (Diamond SE), puts polished diamond prices 10 per cent below a 10-year high set a year ago -- and below where they averaged over the past 15 years, save for brief dips lower in the COVID collapse in 2020 and the Great Recession in 2009.
The good news is that index is more of an outlier -- just not as much as promoters and analysts might like. The International Diamond Exchange (IDEX) index puts polished diamond prices a whopping 28 per cent lower than a year ago, but its early 2022 peak looks like a mountain crag that would give Sir Edmund Hillary the shivers, not the gentle rolling hill presented by Diamond SE.
Crag or crevasse aside, IDEX has polished prices about 5 per cent higher now than during the latter half of the 2010s but lower than a decade ago. And so, little wonder that diamond promoters still struggle to raise cash for exploration. Chuck Fipke and Chad Ulansky's Metalex Ventures Ltd. (MTX), unchanged at five cents on 62,000 shares today, has not said a new word about its several diamond project in months -- and in most cases, years.
That is not entirely correct: In its latest quarterly report, Metalex finally acknowledged that its 72-per-cent interest in the Big Red Diamond and Dumont joint venture properties in the Attawapiskat district of Northern Ontario "were allowed to lapse" as they were no longer a focus of the company. It is unclear when the two properties were last a focus -- 20 years ago seems about right -- as while Metalex still doggedly declared the book value of the Attawapiskat play at nearly $9.5-million until the very end, it had spent barely $1-million since 2004 and only about $2,000 over the past decade.
Indeed, even with that nearly $10-million write-off in the most recent quarter, Metalex is still carrying a book value of $64.66-million for its four remaining projects. The bulk of that value -- $47.5-million -- resides at Kyle Lake in Northern Ontario, where the company had lined up everything save drill permits and aboriginal agreement for a 10,000-tonne bulk sample in 2012.
Unfortunately, there still is no agreement with the locals, and by the time the permits arrived in 2015, the company's $50-million backer, Dundee Corp. (DC.A: $1.24) had pulled out of the project. Mr. Ulansky, president and chief executive officer, and Mr. Fipke, chairman, say -- as they have religiously uttered each quarter for several years now -- that "preliminary discussions with interested parties have been undertaken in regard to financing," adding that the company "also continues in its efforts to negotiate" with the first nations bands. They also say that no further work is planned until deals are in place, so one should not hold their breath.
And then there is the Wemindji diamond property in Quebec, which arguably has been as silent as the others, but for Metalex having developed an alternate story surrounding gold and scandium. The company spent nearly $120,000 on Wemindji in the most recent quarter and about $400,000 through the last three quarters. That is the good news. On the downside, Metalex says it collected 1,250 heavy mineral samples, cheering that "at the time of writing these results are being received." Unfortunately, the time of the writing -- not merely the latest cutting and pasting -- took place over a year ago.