GGL's Doyle diamondsGGL's Doyle diamonds disappoint the market
2004-02-20 12:16 ET - Street Wire
by Will Purcell
The shares of Ray Hrkac's GGL Diamond Corporation took a tumble this week, after the company received a new set of diamond counts from a kimberlite sill on its Doyle Lake project. The small sample delivered a toutable array of microdiamonds, but just a single macro-sized stone, and that triggered a wave of selling that carried GGL's shares to an intraday low of 32 cents. The market had clearly been hoping for more, as GGL's shares had climbed from less than a quarter a year ago to hit a high of 60 cents in mid-January. Those market hopes seemed unrealistically high, as the latest result were comparable with what had been produced from the sill when it was first tested in the mid-1990s. In any case, the real potential of the Doyle Lake property comes from its prime location and the undiscovered sources of a number of mineral trains.
The diamond potential on the Doyle Lake property appears to lie beyond the confines of the Doyle Lake sill, but interest in the kimberlite body had been growing recently, after a seven-year legal tussle finally gave GGL ownership of the project last year. The sill lies on the northernmost part of the disputed ground, and that placed the kimberlite just beyond the reach of GGL and its partner on the play, De Beers. With the partners able to begin the first exploration program since 1996, the sill quickly sparked new enthusiasm from speculators.
Eight years ago, De Beers and GGL processed about 125 kilograms of kimberlite taken from several holes poked into the sill and the rock revealed 69 diamonds. That was a reasonable haul, although De Beers typically recovered microdiamonds smaller than what many of its rivals did, which would inflate comparisons with some rival bodies.
As well, all of the Doyle Lake stones were described as microdiamonds, which did not bode well for finding a significant number of commercial diamonds in the Doyle Lake kimberlite. De Beers typically used a higher hurdle to define a macrodiamond, but the lack of any diamonds large enough to remain on a 0.5-millimetre mesh was also a big disappointment in a sample weighing over 100 kilograms.
Against that backdrop, the latest diamond counts from the Doyle Lake sill might be considered a minor improvement over the initial batch, although the numbers of larger diamonds still offer little to support the notion of finding an abundance of commercial diamonds in the kimberlite sill.
In all, the partners processed 84.5 kilograms of kimberlite in their latest test and recovered 161 diamonds, a haul that was nearly four times larger than what would have been expected, based upon the earlier result. The latest test delivered just under 2,000 diamonds per tonne, while the first set of samples had barely managed to top the 500 mark.
At least part of that variation appears to be due to a significant amount of country rock dilution in the 1996 samples, which would have lowered the diamond content based on the weight of the entire rock sample. Even if the microdiamond parcel produced by the latest test is representative of the body as a whole, it would not change the story much, as microdiamond recoveries mean comparatively little and an abundance of tiny stones unsupported by encouraging proportions of larger diamonds usually leads to a big disappointment with larger tests.
There was a single larger diamond in the mix this time, which was a slight improvement over the earlier outcome. That stone was big enough to remain on a 0.85-millimetre mesh, and it was 1.4 millimetres long and also exceeded one millimetre in width. Still, the lonely macrodiamond offered little hope that the Doyle Lake sill would have a toutable grade.
GGL revealed that its latest diamond parcel weighed just under 0.017 carat, and speculators inclined to do the math would have come up with a diamond grade of just under 0.20 carat per tonne. That figure was well below any promotable threshold, and to make matters worse, the bulk of the tally came from tiny microdiamonds. The single macrodiamond, which weighed a minuscule 0.006 carat, was the only diamond likely to be recovered in a typical mini-bulk test. Based on that, the sample grade would plummet to just 0.07 carat per tonne.
Even that figure could be misleadingly high, as the initial batch of diamonds contained no macrodiamonds, and the diamond content of the cumulative sample would drop to about 0.03 carat per tonne. Furthermore, the single larger diamond stands out as far larger than the second largest diamond that had been recovered, and that makes the largest stone appear to be a bit of a fluke.
GGL put its best promotional spin forward, proclaiming itself "very encouraged" by the microdiamond tallies, considering the small size of the samples. Samples of about 100 kilograms would logically be expected to display a potentially large degree of statistical variation, and in fact, that could have also helped account for the higher microdiamond counts in the latest samples, but the continued rarity of larger stones in the Doyle Lake samples would also increase the likelihood that the macrodiamond population in the kimberlite is meagre.
In any case, the diamond counts from the Doyle Lake sill bear no resemblance to what would be required to make a mine in the region 275 kilometres east-northeast of Yellowknife and roughly 150 kilometres south-southeast of Diavik and Ekati. De Beers and its Gahcho Kue partners have found a number of potentially economic kimberlites about 10 kilometres northeast of the Doyle Lake sill, and the early diamond counts from those bodies provide a good picture of what a potentially economic body should produce at an early stage of exploration.
Larger diamonds were a key part of the mix with the Gahcho Kue pipes, even at the early stages. For instance, the first 300 kilograms of kimberlite from the Hearne pipe produced 763 diamonds, which worked out to about 2,500 stones per tonne. That was not a great deal higher than what came from the latest Doyle rock, but the recovery of larger stones was markedly different. A total of 83 of the Hearne diamonds met De Beers's measure of a macrodiamond, and there were 39 diamonds that weighed at least 0.01 carat. Included in the haul were at least two stones that weighed at least 0.20 carat.
De Beers and its Gahcho Kue partners have recently produced a series of promising diamond counts from the Faraday Lake and Kelvin Lake region that also provide a clear contrast with the results from Doyle Lake. For instance, the partners recovered 194 diamonds from just 65 kilograms of kimberlite at the Faraday-2 kimberlite, or just under 3,000 stones per tonne.
That was only 50 per cent more than what Doyle Lake produced with its latest sample, but things were far different with the recovery of larger diamonds. There were 11 diamonds in the Faraday test that were large enough to be recovered by a 0.85-millimetre sieve, and three of those stones were recovered by a 1.70-millimetre mesh.
The largest Faraday-2 diamond clung to a 2.36-millimetre screen, and it weighed a toutable 0.40 carat, exceeding the weight of the lone larger Doyle Lake diamond by a factor of more than 60. As well, there were at least 35 diamonds in the smaller Faraday batch that were larger than the second largest diamond recovered in the latest Doyle parcel.
The modest macrodiamond counts will matter little to the diamond prospects at Doyle, if De Beers and GGL can come up with some new kimberlite finds on the property. The northern portion of the property has seen several exploration programs through the years, but the disputed block to the south remains relatively unexplored territory, and that leaves the play with a promotable amount of potential if the partners are busy again this year.
Much of the Doyle potential is derived from the abundance of kimberlite finds just to the north, along a 12-kilometre line on the extreme southeastern corner of the Gahcho Kue property, and that potential is enhanced by the high proportion of those bodies that appear to have diamond grades in excess of one carat per tonne.
As well, the Doyle Lake property has produced a number of promotable diamond indicator mineral trains that appear to have sources on the GGL property. Finding those sources continues to be a challenge, but the chemistry of the mineral grains suggests the hunt could be worth the effort.
The Doyle partners have yet to make firm plans to explore at Doyle Lake, but there may well be additional work conducted on the sill, and it would be reasonable to anticipate that De Beers and GGL will expand their hunt across the remainder of the Doyle property, especially the portion that had been contested.
Although De Beers is the operator of the play, the Vancouver-based Mr. Hrkac has proven to be particularly dogged in his pursuit of diamonds, since he led GGL into the diamond hunt in the early 1990s, and that determination should help at Doyle.
Originally from Northwestern Ontario, Mr. Hrkac was bitten by the gold bug as a teenager, and he worked as a geologist, moving westward to British Columbia, and then to the North. In the early 1970s, Mr. Hrkac struck out on his own as a consultant, and he took up running and promoting his own public company, with the creation of GGL in the early 1980s.
Since then, Mr. Hrkac and GGL have caught the market's notice on a number of occasions. In 1987 and again in 1993, metal plays carried GGL's shares above the $1 mark for a time, but it was the Doyle Lake project that created the biggest speculative stir. In the spring of 1996, Mr. Hrkac's canny acquisition of the GGL claims and the early exploration promise helped the company's shares to a $3.75 crest. The promotion quickly came crashing back to earth, and the ownership dispute helped keep a lid on the story for the next several years.
Although the Doyle diamond counts were judged disappointing by the market, the recent interest in the sill offered Mr. Hrkac an opportunity to top up GGL's treasury without producing an excessive amount of dilution. The company added $1-million to its coffers by selling about 2.3 million units, priced at 45 cents. Last fall, Mr. Hrkac and GGL sold nearly $900,000 worth of shares at a similar price.
GGL stabilized on Thursday, closing unchanged at 34 cents.