Attawapiskat readDiadem looks to Attawapiskat area
2004-12-06 15:39 ET - Street Wire
Also Street Wire (C-VMI) Vault Minerals Inc
by Will Purcell
Paul Carroll's Diadem Resources Ltd. picked up a new diamond play, through an option deal with Dr. Andy Chater's Vault Minerals Inc. The agreement covers a large property in the Attawapiskat region of Northern Ontario, where several plays continue to attract speculative interest. The Attawapiskat property provided the struggling Vault with some promotional appeal, but the company has paid little more than lip service to the project over the past few years. That could change next year, if Diadem decides to tackle the play.
The property
The option deal will allow Diadem to earn a 51-per-cent stake in the 53,000-hectare Attawapiskat project, should it elect to continue after taking a look at the existing data. Diadem must spend $500,000 on exploration by the end of next November and a further $500,000 by Dec. 1, 2006, for it to earn the interest. The two companies would then share further costs, with Diadem acting as operator of the joint venture.
A private Ontario company, Goldaur Resources Inc., staked the core claims of the Attawapiskat property in 2000. The region saw an exploration frenzy through the late 1980s and early 1990s, but the play petered out after that. The region caught its second wind a few years ago, and Goldaur was one of the early arrivals.
As a result, the company got a jump on the main explorers in the area. A group led by Chuck Fipke began picking up claims in the area the following year, staking ground close to the Goldaur claims. Vault arrived on the scene early in 2003, when it bought all the shares of Goldaur, in exchange for 2.5 million of its shares.
The property runs for about 65 kilometres in a northwesterly direction and has a width of up to 30 kilometres in places. The project is about 30 kilometres southeast of a line of kimberlite finds that extends about 35 kilometres farther to the northwest.
De Beers Canada Corp. discovered most of those pipes in the late 1980s. As well, two of promoter Pierre Gauthier's companies, Spider Resources Inc. and KWG Resources Inc., found a few more at the northwestern end of the line in the early 1990s. Spider and KWG recently added to their finds in that area, sparking more interest in the region.
The encouragement
Much of the current interest in the Attawapiskat region stems from one of the De Beers finds. The big Victor kimberlite complex lies about 60 kilometres northwest of the Vault property, and the diamond giant is slowly nudging the project toward becoming Ontario's first diamond mine.
Victor was one of the 1980s discoveries, but it took De Beers a decade to decide that the diamond promise warranted a mini-bulk test. The company collected about 300 tonnes of kimberlite and although the grade was just one-third of a carat per tonne, the diamond quality and size distribution was encouraging.
De Beers completed a 10,000-tonne bulk sample in 2000 and 2001. The result confirmed that Victor had a decidedly modest grade combined with an impressive diamond value. The company mulled over its options for a while, but it seems committed to building a mine in the formidable Attawapiskat swamplands.
The company has a tentative mine plan based on nearly 30 million tonnes of kimberlite, which has an average grade of just 0.23 carat per tonne. That works out to about six million carats, which would result in an annual production of 600,000 carats, based on a 7,000-tonne-per-day mine.
The real Victor story is the diamond value. One of the kimberlite phases has a particularly impressive assortment of diamonds, and that inflates the average stone value to nearly $300 (U.S.) per carat. As a result, the Victor kimberlite is worth about $70 (U.S.) per tonne. De Beers thinks it will achieve annual revenues of about $225-million, against operating costs of about $100-million. That would be more than enough to offset the full capital cost of the project, pegged at nearly $1-billion over the life of the project.
A few of De Beers's other finds produced intriguing results, and a Victor mine could make a closer look a those bodies a worthwhile project. The Tango Extension, Delta and India kimberlites could be among those worth a mini-bulk test. The India kimberlite is at the southern end of the cluster, just 30 kilometres from the Vault property that Diadem is optioning.
The promotion
The De Beers project sparked some investor interest in the region, but the arrival of Mr. Fipke created a much larger stir early in 2003. The man credited with starting Canada's diamond rush was quietly poking around in Northern Ontario, and in 2001 his private Kel-Ex Development Ltd. began parceling off interests in its Attawapiskat project to public companies, including his Metalex Ventures Ltd.
Metalex crafted an effective promotion out of its new project. The company' shares surged to a $5.60 crest early in 2003, as speculators rushed to join Mr. Fipke's new venture. There were some later surges of interest since then, but the shares of Metalex and its partners have been on a downhill slide for the past year. A Metalex share cost just 80 cents recently.
Nevertheless, there is a willing band of believers in Mr. Fipke's project. Metalex and its partners spent over $12-million on their Attawapiskat play over the past few years, coming up with plenty of mineral encouragement. Metalex and its partners produced some large geophysical targets believed worthy of drilling and a few kimberlite hits resulted. Still, a big diamondiferous kimberlite discovery continues to elude Mr. Fipke.
Unfortunately, Mr. Fipke has a penchant for secrecy on a par with that of De Beers. That makes it difficult to sustain an effective promotion without a toutable haul of diamonds. Nevertheless, Metalex and its partners continue to work on finding the sources of its indicator mineral promise.
Metalex and its partners plan another round of auger sampling and core drilling on their Attawapiskat properties, some of which border on the Vault property. Previous drill plans began with fanfare but ended with a whimper. Still, if Metalex manages to make a big find in the coming months, speculators would be quick to hop back aboard Mr. Fipke's bandwagon.
A big find would also provide a boost to Vault and Diadem's Attawapiskat promotion, as the two companies are quite chatty about their rival's Attawapiskat plans. A key reason for that is the lack of work so far on Vault's own play. A limited amount of indicator sampling took place in 2001, resulting in the identification of some promising mineral chemistry. The following year, a magnetic survey covered a small part of the property.
That was before Vault bought Goldaur. Since then, the company managed just a modest exploration effort. Vault spent $74,402 during 2003 and a further $26,149 through the first nine months of 2004. As a result, the tentative option deal with Diadem would be the first real look for the property.
The players
Vault had a changing of the guard this summer, when Dr. Chater replaced Michael Mackey as president and chief executive officer of the company. The company also revealed that Mr. Mackey, David Rees, Barry Hemsworth and William Schmidt did not stand for re-election at the company's annual general meeting. That probably came as a surprise to shareholders. Just a few months before, Vault's proxy circular listed the four departed directors as board nominees for the mid-June meeting.
Dr. Chater, a Toronto-based geologist, became a director of Vault in the spring of 2003. He began exploring for minerals more than 30 years ago, with an emphasis on gold, uranium and base metals. He was a senior geologist with BP Minerals Ltd. through the 1970s and Newmont Exploration of Canada Ltd. during much of the 1980s.
Dr. Chater is also the president of Teddy Bear Mines Ltd. The company made news in the mind-1990s with its Holloway gold mine in Northeastern Ontario, but it fell on hard times a few years later, after the gold sector hit the skids. International CHS Resource Corp. recently appointed Dr. Chater as a director, and he became a director of MacDonald Mines Exploration Ltd. just over a year ago.
Vault added two new directors in June to replace the old crew. The Kirkland Lake-based Daniel McCormack is also a geologist, but he also has experience on the environmental side of things. He worked on several mining and exploration projects and was the general manager of a big waste recycling company, before he struck out on his own. In 2001, Mr. McCormack helped found Kirnova Corp., a private company specializing in managing mineral projects. Vault plans to use Kirnova to help manage its mineral projects.
Mr. McCormack's partner at Kirnova is Joseph Horne, so not surprisingly Vault added him to its board as its third director. He also has an exploration background that spans more than two decades. Mr. Horne and Mr. McCormack popped up on the board of Becker Gold Mines Ltd. just over a year ago. They did not have a long stay however, as the pair resigned less than two months later.
The three Vault directors have not had much to do with diamonds over the years, but Diadem is an active gem hunter since Mr. Carroll took over last year. Mr. Carroll is a corporate lawyer by trade who first tweaked to the potential profits of gems in the late 1980s, as a director of Repadre Capital Corp.
Vault added two cents on Friday, closing at 15 cents, while Diadem added one-half of a cent, ending at 12.5 cents.