Snowfield dusts off its piece of the DrybonesSnowfield dusts off its piece of the Drybones diamond play
Snowfield Development Corp SNO
Shares issued 23,441,892 Jan 14 2004 close $ 0.21
Thursday January 15 2004 Street Wire
by Will Purcell
Robert Paterson's Snowfield Development Corporation is adding to its Ticho diamond play in the Drybones Bay region, about 50 kilometres southeast of Yellowknife and near the northern shore of Great Slave Lake, with the acquisition of another property in the region. The tiny Wire claim block covers just 170 hectares, but it is close to the Mud Lake kimberlite that Snowfield discovered early last year, and there could be a promotable target or two on the property. The Drybones diamond hunt was briefly big news in the mid-1990s, and it had a bit of a resurgence early last year, before speculators seemed to lose interest once again as activity in the region wound down. Nevertheless, there are signs of encouragement in the area, but it will take a bigger effort to attract much interest in the coming months.
Snowfield can earn a 25-per-cent stake in the Wire property by making a token cash and share payment to the vendor and spending $25,000 on exploration by the end of March. That share can be increased to 51 per cent by making an additional payment and spending an additional $75,000 on the property by the end of this year. Through a further payment and an outlay of another $150,000 on exploration next year, Snowfield can acquire a 100-per-cent share of the property.
Snowfield discovered kimberlite on its portion of the Drybones play early last year, and the resulting market interest carried the company's stock from just a dozen pennies to a peak of 60 cents in mid-March. The promotion sputtered after that and Snowfield's shares quickly dipped back to 30 cents, and the lack of toutable news over the remainder of 2003 cut Snowfield's share price in half yet again, and a share could be had for just 15 cents early this month.
A key reason for the lack of interest was the fact that Snowfield did not have any diamond counts to tout, although that was due to the company's decision not to process any of its Mud Lake kimberlite, rather than rock samples having been tested and found to be barren. With its shares worth less than a quarter in mid-July, Snowfield told the market that it had elected to assess the diamond content of its kimberlite body by a bulk sample, rather than by sending small samples of core off for microdiamond recovery by caustic dissolution.
Mr. Paterson said that a large bulk sample was preferred over a smaller sample, since the distribution of diamonds within a kimberlite tends to be variable and large samples are required to obtain a representative parcel of diamonds. That is true, but nearly all diamond explorers have opted to process representative samples of their drill cores to determine if there are any diamonds present, as well as to ascertain the diamond distribution at the smallest end of the size curve, and the promotional opportunities offered by an abundance of microdiamonds likely adds to the enticement.
Most explorers leave larger samples to the advanced stages of exploration at just the most prospective kimberlites, for reasons of accessibility and cost, but Mr. Paterson and Snowfield believed that those factors were not a major concern at Mud Lake. As a result, the company touted a Mud Lake bulk sample as a feasible way to assess the diamond content of the kimberlite, with a higher degree of precision than what caustic dissolution of small core samples would have offered.
Speculators did not appear receptive to the news that Snowfield would not have any diamond counts from Mud Lake, and they did not appear particularly impressed with the possibility of a Mud Lake bulk sampling program, as Snowfield's shares continued their decline through the summer and fall.
Without even a modest number of microdiamonds to tout, Snowfield has had to rely on its geochemical work to provide promotability for its portion of the Drybones Bay play. There was encouragement to be had from the initial surface sampling work in the area, and the Mud Lake core samples provided Snowfield with more mineral promise.
In all, nearly 1,000 indicator mineral grains from the Mud Lake core samples were analyzed, and the results did suggest the rock could be diamondiferous. A significant proportion of the pyrope garnets were classified as G-10s, and about one-fifth of the eclogitic garnets had a sodium oxide content that supported the diamond promise as well.
Mr. Paterson and Snowfield continued to tout their mineral chemistry through the fall, comparing the results with those at some legendary diamond-bearing kimberlites, including the Premier pipe in South Africa and the Udachnaya kimberlite in Russia. The company's promotion fell largely upon deaf ears however, as Snowfield's main rival in the Drybones region had found just a modest quantity of diamonds in its one new find of last year, and Mr. Paterson and his crew had no Mud Lake parcel of their own to counter the increasing pessimism.
That will change if Snowfield can complete its bulk sample and deliver a promising crop of carats from Mud Lake, but there have been few signs of activity since the summer, when the company touted plans to extract about 500 tonnes of material that would be transported across an ice road this spring.
Snowfield poked a series of holes into the Mud Lake kimberlite last year, and that work suggested the body was a complex body, with multiple sheets that seemed to have shallow dips. The thickness of the individual sheets remain unknown quantities, although the company's first drill program indicated that the first sheet varied between four metres and six metres thick, and there are signs that the sheet outcrops just below the glacial till cover in some areas.
If so, that would allow the company to collect several hundred tonnes of kimberlite, at a limited expense, much like Winspear Resources was able to collect a 200-tonne batch of rock from its Snap Lake dike, near an outcrop on the northwestern peninsula of the lake.
The Snap Lake test was completed in the spring of 1998, and Winspear incurred costs of $661,940 for collecting the bulk sample. The company also shelled out another $285,139 for sample processing, and a significant portion of that amount is believed to have gone for the cost of processing the mini-bulk sample at the Diavik plant in Yellowknife. The Snap Lake sample had to be transported a greater distance to reach Yellowknife, but the cost of that program provides a good indication of just what a comparable sample from Mud Lake might cost.
Cost is a big concern for Snowfield, which does not have a particularly well-endowed treasury. The company reported a working capital deficiency of about $150,000 at the end of October, and things may not be much better today, although the company has managed to come up with some new cash since then that could have cleared away the red ink from its current account.
The company also has plans for another private placement that could bring in an additional $262,500, but less than $40,000 of that is specifically earmarked for the Ticho diamond project. Nevertheless, it seems likely that the company will be in a position to at least match the money it spent over the past year, although Snowfield may have to step up its spending beyond that level if it hopes to complete its bulk test and drum up renewed interest in its Ticho play.
There has been no word about Snowfield's planned bulk sample since July, and the decreasing likelihood that the company will attempt the test this year has added to Snowfield's share price woes through the fall. Things took a turn for the better last week however, as the market's interest in Snowfield's shares perked up dramatically, and that carried the shares to a brief crest of 29 cents, as investors seemed to anticipate that Mr. Paterson and his crew would soon have some toutable news from the Drybones Bay area.
The Vancouver-based Mr. Paterson has been involved with resource sector companies since the mid-1980s, when he gave up a career in aviation to try his hand at promoting mineral plays, and those exploration projects have included diamonds since the early 1990s. Mr. Paterson was an early believer in some diamond districts that were off the beaten path, and although his exploration efforts never delivered a particularly sparkling result, some of the plays were sufficiently promotable that they caught the market's eye for a time.
Some of Mr. Paterson's initial diamond forays came with Falcon Ventures, which tried its hand in the Fort a la Corne region of Saskatchewan and near Humpy Lake in Canada's North. As well, Falcon was an early arrival in Alberta, well before Ashton Mining of Canada made it a hot play at least temporarily in the late 1990s. Mr. Paterson's first cracks at gems carried Falcon's shares to a 75-cent crest during the 1993 diamond frenzy, a mark that was not topped until mid-1996, when Mr. Paterson abandoned diamonds for Voisey Bay and Indonesia, two hot new bandwagons.
Accountant John Nagy has been with Mr. Paterson at Snowfield since 1987, but the Richmond-based bean counter who serves as the company's chief financial officer would seem to have little diamond exploration expertise. That is not the case with geophysicist Gennen McDowall, a 2003 arrival to Snowfield's board, who has been involved with diamond exploration for many years and has been doing gem deals with Mr. Paterson more recently.
In 2002, Mr. McDowall's Virgin Diamonds dealt off some diamond ground in Quebec to Mr. Paterson's Snowfield, and just months later, he was added to the company's board. Mr. McDowall has plied his geophysical trade across the world for a number of explorers, as well as the governments of Canada and Botswana, but he can also give Mr. Paterson a hand with Snowfield's promotion.
In 1987, Mr. McDowall became involved with the business end of things with Poplar Resources, and he served as president of that company until 2002. During that stretch, Poplar's shares responded favourably to a number of promotional efforts built around diamond exploration programs in South Africa and Scandinavia.
Rounding out Snowfield's board is a Vancouver-based geological engineer, Marvin Mitchell. He has been working in the resource sector for more than 40 years and has been consulting for a variety of mineral explorers since the mid-1980s. Mr. Mitchell has been popping up on the boards of a number of companies over the years, and he joined Snowfield in 1998.
That was not Mr. Mitchell's fist crack at a diamond promotion however, as he had been a director of Island Arc Mining since the mid-1980s. Island Arc had a stake in the Back River property that was big news for Chris Jennings's SouthernEra Resources and Bert Applegath's Kalahari Resources through much of the 1990s, and the Back Lake property on the southern part of the Slave craton still retains some promotability.
Early this fall, Mr. Mitchell was added as a director of another diamond company, Consolidated New Sage Resources, but his stint lasted just a few months.
In the absence of diamond counts or immediate news of a bulk sampling program, Mr. Paterson and Snowfield's shareholders can use some promotional help from Mr. Mitchell and Mr. McDowall. The company's shares have been retreating from their 29-cent peak of last week, and the stock dropped another 3.5 cents on Wednesday, closing at 20.5 cents.