Diamonds & Specialty Minerals Summary for March 10, 2015

2015-03-10 20:46 ET - Market Summary

by Will Purcell

The diamond and specialty minerals stocks box score for Tuesday was a poor 36-64-151. The TSX Venture Exchange fell 11 points to 669 while polished diamond prices were flat. Robert Gannicott'sDominion Diamond Corp. (DDC) avoided today's slump, gaining 25 cents to $20.88 on 340,000 shares. The company is expecting a good year at its Ekati mine and a decent one at Diavik; shareholders are expecting the company to resume paying dividends for the first time since 2008. The payment is unlikely to be anywhere near the $1 (U.S.) it paid annually in the mid-2000s as the company is facing some big capital costs at Jay and A-21, two pipes that will add years to both of its mines. Peter Dickie and Mark Smith's Niocorp Developments Ltd. (NB) gained 17 cents to $1.46 on 2.15 million shares. Niocorp, which moved to the TSX from the TSX-V on Monday, has jumped 57 cents since it traded at 89 cents on Thursday.

Eric Friedland's Peregrine Diamonds Ltd. (PGD) fell one-half cent to 19 cents on 1.03 million shares. Peregrine had good news today, although one would not know it from a glance at the company's stock chart. Peregrine has the diamond counts from its 2014 core drilling at four kimberlites at Chidliak, its rich diamond project on southeastern Baffin Island. All the pipes are old news, but the diamond counts are more impressive than earlier sets, especially at CH-7, which could add more diamonds to the company's resource estimate. Of course Tom Peregoodoff, Peregrine's new president and CEO, juiced that prediction with the usual Howe Street adjectives, gushing that there is "tremendous potential to add significant carats."

The most significant of those carats may turn up at CH-7, where 810.5 kilograms of kimberlite produced 2,355 diamonds, including 68 that sat on a 0.85-millimetre sieve. The latter stones weighed 2.4 carats, suggesting a diamond content of 3.0 carats per tonne. The core samples collected in 2011 from CH-7 produced 915 diamonds from 413.9 kilograms of kimberlite. That haul included 30 0.85-millimetre diamonds that weighed 0.54 carat, or 1.3 carats per tonne. A 47-tonne mini-bulk test in 2010 averaged 1.04 carats per tonne, a haul bolstered by a 6.53-carat gem. That find seemed a stroke of good luck but the latest numbers negate worries that the one big diamond unduly inflated the sample grade.

Peregrine's crew attribute their latest good fortune to heretofore unrecognized phases of kimberlite within CH-7, a geological domain that has the potential to exceed the resource grade of 2.58 carats per tonne at CH-6. (Today's sellers perhaps see it from another perspective: the other geological domains within CH-7 lack that potential.) In fact, four of the five kimberlite phases found within CH-7 are at least comparable with KIM-1, the pipe's first phase that yielded the 1.04-carat-per-tonne result. Peregrine says KIM-5 produced diamond counts "substantively exceeding" KIM-1, while counts from KIM-3 and KIM-4 were similar with the KIM-1 benchmark. (Peregrine deftly avoided a comparison with KIM-2, which appears to have fallen short of KIM-1's counts.)

Peregrine also achieved a promotable result at CH-44, where it postulated a grade comparable to CH-7 based on earlier sampling. Those tests produced 13 of the 0.85-millimetre diamonds from 535 kilograms of kimberlite, or 0.37 carat per tonne. The company tested 146 kilograms of rock from last year's drilling and recovered nine more gems weighing 0.23 carat, or 1.6 carats per tonne. Mr. Peregoodoff and his crew say that corresponds well with Peregrine's KIM-1 benchmark data. Peregrine also processed 206 kilograms of kimberlite from a fourth pipe, CH-46 and it says the results "confirm the economic potential" of the pipe. (They probably do, but not all confirmations of potential are cheerful. The rock produced just 118 diamonds, including just one larger than the 0.85-millimetre sieve, resulting in a grade of just 0.05 carat per tonne.)

Meanwhile, Peregrine is almost ready to start its bulk sampling of CH-6, CH-7 and CH-44, where Mr. Peregoodoff expects to drill at least 250 tonnes of kimberlite from each pipe. That would be enough to provide a crude diamond valuation and allow the company to expand its resource estimate for Chidliak ahead of a 2016 dream sheet.