2023-09-12 17:45 ET - Market Summary
by Will Purcell
The diamond and specialty minerals stocks box score for Tuesday was a weak 69-99-142 as the TSX Venture Exchange fell four points to 576. Dr. Michael Gunning's VR Resources Ltd. (VRR) rose 5.5 cents to 20.5 cents on 2.43 million shares. The company has been quiet of late, but it teased the market today with the diamond counts from the first of three holes it drilled into the Northway kimberlite in Northern Ontario.
Dr. Gunning, president and chief executive officer, did not say how large the sample was, but it was just a small portion of the rock the company recovered from the pipe. The count was one -- a single stone -- but VR Resources cheered the find as a fragment of a larger diamond, one that was clear, colourless and free of inclusions. Dr. Gunning was predictably enthused: "Northway is fertile," he gushed applauding the characteristics of the find, noting that it came from the pyroclastic mudstone crater facies at the top of the breccia pipe, presumably whetting the market for what is to come.
Northway was a surprise when VR Resources revealed it had discovered kimberlite deep within an initial hole drilled into a big magnetic low target. That hole had been drilled last fall on what was presumed to be a rare earth project associated with the company's nearby Hecla-Kilmer property, 15 kilometres northward. Indeed, Dr. Gunning said that he and his crew had staked Northway in mid-2022 as a direct extension of their work at Hecla-Kilmer.
VR Resources said nothing about the test until February, when Dr. Gunning revealed the hole drilled on the fringe of the anomaly had nicked the "absolute top and easternmost edge" of a potentially large kimberlite pipe, returning about 40 metres of kimberlitic material. The news sparked but a blip of market interest at the time, but when VR Resources returned in spring to complete a second -- and then a third -- hole into the pipe, the usual speculators propelled the company's stock as high as 34 cents by early summer.
Those speculators then flapped off to other promotional destinations, leaving VR's stock nestled back near the 15-cent mark. The results from the fringe hole kicked the promotion back into gear, and investors are eagerly awaiting results from the two remaining holes that produced more than 10 times the amount of kimberlite tested so far. The "sheer volume of drill core," Dr. Gunning has enthused, "will provide for a robust evaluation of microdiamonds."
One should remember that Northern Ontario kimberlites have been notorious disappointments over the past three decades -- either through their low diamond counts or by their massive abundance of micros. In the latter instances, many thousands of micros were recovered from rock found near Wawa two decades ago, with only a few gems being larger than a flyspeck. Meanwhile, even at the one economic discovery -- De Beers's Victor mine in the Attawapiskat district -- microdiamond counts barely reached 100 stones per tonne.
Dr. Gunning does offer hope that this time will be different. He points to the age of the Northway kimberlite -- it erupted over 400 million years ago -- compared with the 170-million-year-old eruptions that dominate in Northern Ontario. As well, he enthuses, Northway is a magnetic low, while Victor and all the surrounding duds were magnetic high targets.
Counts aside, there is a downside to his pitch. Victor and its fellow youngsters -- geologically speaking of course -- erupted long after a thick limestone cover was laid down. That makes for a geophysicist's delight -- the younger kimberlite eruptions stand out in sharp contrast against the "quiet" sedimentary background.
Unfortunately for Northway, that cover muffled Northway beneath an unusually thick layer of overburden. All three holes drilled by VR Resources encountered the kimberlite 240 metres below surface, which would make designing a mine a monumental challenge for the engineers. Underground mining might be the only realistic way to mine Northway, and that adds considerably to operating costs and typically limits mining rates.
Indeed, one need only imagine the size of an open pit needed to extract several hundred metres of kimberlite lying 240 metres deep, given the 1,200-metre diameter of the anomaly. (And if you can imagine that, try your luck at imagining the reactions of the environmentalists, aboriginals and bureaucrats to such a gaping hole.) Perhaps one need not worry -- Ontario kimberlites nearly always disappoint -- but stay tuned just in case Northway is an exception. You should know more from the rest of the holes.