WillP on Kyle
Metalex drills up some Ontario encouragement
2005-05-05 09:23 ET - Street Wire
Also Street Wire (C-ADD) Arctic Star Diamond Corp
by Will Purcell
Chuck Fipke's Metalex Ventures Ltd. scored a drill success on its Kyle Lake diamond play. The news of the probable kimberlite find attracted little notice from speculators, although Metalex's share briefly touched the $1 mark following the hit. There was a bit more interest in the play a year ago, when Metalex drilled into two Kyle kimberlites. Those results proved disappointing, making the project a tougher tout. Still, the area produced signs of hope over the past decade, and Metalex could have a hot play if it can produce some promotable diamond counts.
The new hit
Metalex and its partners now have a third kimberlitic intersection on the Kyle play. The latest drill effort tested a magnetic target about 180 metres in diameter, hitting a diatreme breccia at a depth of nearly 140 metres. Metalex ended the hole at 167 metres, while still in the rock.
Mr. Fipke and Metalex do not clearly call their new find a kimberlite pipe. Instead, the partners stated that the suite of indicators within the material "indicates an affinity to kimberlite." That was enough to prompt Metalex to ship nearly 50 kilograms of the material off to CF Mineral Research Ltd., Mr. Fipke's private laboratory.
The muted market reaction was a result of the earlier disappointment. Nevertheless, if Metalex's new rock displays an affinity for diamonds, speculators would be quick to hop back aboard Mr. Fipke's Kyle bandwagon. As well as the microdiamond recoveries, the partners will examine the latest batches of Kyle rock for indicator minerals. If the contained grains offer encouraging chemistry and the material produces an encouraging array of micros, further drilling seems likely.
The Kyle project
Mr. Fipke began working in Northern Ontario several years ago and his Attawapiskat project became a hot topic with investors in the fall of 2002. De Beers began planning to turn its Victor pipe into Ontario's first diamond mine and Mr. Fipke's arrival in the region gave the area play an added boost. Metalex's shares ran from pennies to a high of $5.60 in early 2003, but interest cooled as months passed without any big finds.
Mr. Fipke and his partners kept plugging away and the hunt expanded westward in the spring of 2004. Metalex staked 34 claim blocks scattered about an area 90 kilometres to the west of Victor. The company's new ground covered circular magnetic anomalies that it believed would make priority drill targets. The Kyle play expanded last fall, when Metalex and its partners added 12 more claim blocks.
The claims had a favourable address, as the play is close to five kimberlite finds near Kyle Lake. Those earlier discoveries proved promotable for two of Pierre Gauthier's companies, Spider Resources Inc. and KWG Resources Inc. The two companies were market darlings in the mid-1990s and two of the Kyle pipes were a key part of their stories.
Last summer, Metalex's Attawapiskat partner picked up a piece of the Kyle project. Patrick Power's Arctic Star Diamond Corp. bought a 20-per-cent stake in the play from Metalex for $100,000. As well, Arctic Star agreed to repay Metalex for its one-fifth share of earlier work on the property. For future efforts, Arctic Star would be responsible not only for its 20-per-cent share of costs, but it must also pay an extra 2 per cent to cover its portion of the 10-per-cent carried interest held by Mr. Fipke's Kel-Ex Development Ltd.
Metalex and its partners completed another round of airborne geophysics over the property early this year, coming up with several more targets. The count of untested anomalies remains near 40 as a result. The Kyle partners plan to drill 11 of the features this spring. As well, ground geophysics over the other 26 anomalies will establish a priority list and identify suitable drill sites. That suggests that Mr. Fipke is still a believer in the Kyle play.
The earlier effort
The Kyle partners completed ground geophysics over most of the geophysical anomalies and set out to drill several of the features last year. Late last summer, Metalex and its partners poked a hole into a magnetic high that was roughly 150 metres in diameter. The drill hit a green breccia at a depth of 76 metres and was still in the kimberlitic rock at an end depth of 147 metres.
There was another dose of good news just a week later, when Mr. Fipke's drill poked into a second target about 260 metres north-northwest of the first find. That magnetic high appears associated with the first hit, making a broad anomaly measuring about 400 metres long and up to 180 metres wide. Metalex sent over 100 kilograms of rock from each of the finds off to Mr. Fipke's Kelowna-based lab for processing.
The two strikes stirred some interest in the Kyle play. Metalex's shares climbed from less than $1 to a peak of $1.50 and the new Kyle kimberlites halted Arctic Star's steady slide for a few weeks. Metalex and its partners then fell silent about the Kyle finds. Speculators interpreted Mr. Fipke's silence as a harbinger of bad news and they quickly lost interest in the Kyle play.
As things turned out, they were right. Late in February, Metalex revealed that 232 kilograms of the Kyle material produced plenty of indicator minerals, but poor chemistry that suggested the bodies did not sample the diamond stability field. Processing revealed 16 diamonds, but their synthetic origin indicated they had come from the drill bits.
The barren samples were not the only bits of bad news from the Kyle play. Metalex and its partners drilled 10 other targets, but none of the features were kimberlites. Nine of the duds were explained by the magnetic nature of the basement rocks, while the other target remains unexplained. As a result, speculators grew increasingly disappointed with the Kyle play.
Mr. Power's opinion of Kyle also seemed to falter a fit. Arctic Star decided not to contribute to the Kyle program from November, 2004 until the end of April, electing to dilute its interest in the project. Metalex covered its partner's share of the program and now holds an 87.31-per-cent working interest in Kyle. Arctic Star's share drops to 12.69 per cent.
The Kyle promise
Although it is De Beers, Victor and Mr. Fipke that attracted much of the market interest to the diamond hunt in Northern Ontario, it is the old Kyle kimberlites that offer much of the encouragement. Spider and KWG found five kimberlite bodies along a rough line running about 100 kilometres, from Kyle-1 in the south to Kyle-3 in the north. All five of the finds produced diamonds, although three of the pipes were just marginally diamondiferous.
Most of the interest in the area stemmed from Kyle No. 1, which lies about 120 kilometres west-southwest of Victor. Spider and KWG completed about 20 drill holes into the pipe, which spans 2.6 hectares at the surface. A thick layer of overburden and limestone covers the pipe to a depth of 130 metres and the pipe tapers at depth. Still, the size of Kyle No. 1 supports an estimated 15 million tonnes of kimberlite, to a depth of 510 metres.
Spider and KWG completed a series of tests on the pipe, including a 6.2-tonne mini-bulk sample. That work produced 4,395 diamonds of various sizes, indicating a microdiamond grade of about 0.6 carat per tonne. Most of the diamonds were micros, as just 793 stones were longer than 0.5 millimetre and 111 exceeded one millimetre in length. As a result, much of the diamond content came from the micros.
Still, it seemed possible that Kyle No. 1 had a grade that approaches that of Victor. As well, Kyle No. 1 contains several phases of kimberlite. Each has a distinct diamond content and Spider touted grades as high as eight carats per tonne in one of the phases. That was undoubtedly the result of a tiny sample, but it highlights the variability within the complex pipe.
There was enough early promise that Ashton Mining of Canada Inc. took a crack at the play in the mid-1990s. The company collected its own small mini-bulk test, which weighed less than two tonnes. The result was disappointing and Ashton walked, as the macrodiamond content was less than 0.1 carat per tonne. Still, the tiny size of the samples and the variability within the pipe leave large margins of error and slim glimmers of hope.
Spider also gained some promotable mileage from Kyle No. 3, although it was not until 1999 that the company touted a higher-grade zone in earnest. A later drill program did not match the early promise, although it still delivered some higher stone counts. That richer zone does not seem of much interest, but it does add encouragement to the Kyle hunt.
The Attawapiskat play also adds sparkle to Mr. Fipke's Kyle play. De Beers and Spider found over 20 kimberlites along a line about 90 kilometres west of Metalex's project, and most are diamondiferous. The grades of the bodies are modest at best, but the stone size distributions seem particularly coarse. As a result, the Attawapiskat area could contain some large gems.
Victor seems the best of the Attawapiskat lot. De Beers bases its mine plan for the complex kimberlite on about 29 million tonnes of kimberlite. That rock has an average grade of about 0.22 carat per tonne, which at first glance seems below any reasonable economic threshold in the remote Attawapiskat region. The diamond quality makes up for the modest grade, as the Victor diamonds are worth something between $150 (U.S.) per carat and $300 (U.S.) per carat. That high value adds to the interest in the Attawapiskat and Kyle plays.
Metalex lost a penny on Wednesday, closing at 89 cents on 33,000 shares; Arctic Star was unchanged at 25 cents on 34,000 shares.