I N C A N A D A
Photo credit: Shore Gold
A 22-carat gem from Shore Gold’s Star kimberlite.
BY BRIAN SYLVESTER duction by 2014, but to do so it would more signs of life,” Read says, adding that
et’s say for a moment that you are a need to start building work by late 2010. Shore could take on a partner, and has
conservative investor with $1.6 billion That means Shore needs to spend, accord- looked at debt financing.
to invest. You might be pleased to re- ing to the prefeasibility study, $123 million He’s right. Rio Tinto (RTP-N) recently
ceive a guaranteed 10% return on your cash. at Star next year. raised by 15% the price it receives for dia-
After all, that’s about $160 million annually. Shore got the ball rolling on its fundrais- monds mined in Canada. Rio also resumed
But if that modest rate of return was ing push in October with an equity financ- a $1.8-billion expansion of its Argyle mine
subject to fluctuating commodity prices ing that netted $27.5 million – 14.3 million in Western Australia, the largest diamond
and highly sensitive to a U.S. to Canadian common shares at $1.05 each, and another mine in the world by volume.
dollar exchange rate, perhaps you would 10 million flow-through shares at $1.25 But lenders and project partners de-
seek other, less dicey options. apiece. mand substantial rates of return because of
That’s pretty much the choice Shore With 224.5 million shares outstanding the intrinsic optimism that often finds its
Gold (SGF-T) laid before investors after a (234 million fully diluted) as of mid-October, way into mining project economics. His-
209-page prefeasibility study on Shore’s and with its shares trading at $0.82 apiece, tory has shown revenues, especially those of
wholly owned Star kimberlite in Saskatch- Shore had a market cap of $200 million. diamond projects, often fall shy of expecta-
ewan said a mine would cost $1.67-billion The odds do not seem to favour Shore tions and operating costs typically exceed
and generate a return of 10% over 12 years but don’t tell that to George Read, Shore prefeasibility estimates.
(though it would take 5.2 years to recover Gold’s senior vice-president of exploration One recent example is the crippled Ta-
capital costs and contingencies). – and, largely, the face of the company. hera mine in Nunavut, where much lower
What’s more, Shore wants to be in pro- “The diamond market is showing a lot than expected diamond grades and rapidly
November 2009 Diamonds in Canada 9
I N C A N A D A
escalating production costs forced the clo-
sure of what was Canada’s third diamond
‘The important thing is that diamond price wasn’t chosen by Shore Gold, that mine.
Even at the venerable Diavik, Canada’s
diamond price was chosen by the consulting engineers. They thought that that second diamond mine in the Northwest
was very reasonable in light of the behaviour of the diamond price over the last Territories, grades have averaged around
number of years.’ 10% less than prefeasibility estimates, while
costs continue to exceed projections.
— George Read, Shore Gold’s senior vice-president of exploration
Like Diavik, Star would be an open-pit
operation. The study calls for the world’s
largest processing plant, which would be
capable of processing ore at a rate of 40,000
tonnes per day.
Star’s after tax net present value, using
a 7% discount rate, is $291 million. The
economics are so marginal that if revenue
falls 15% below the base-case level, the net
present value of Star becomes negative, and
that is certainly not outside the realm of
possibility. In fact, there are several ways it
One is a sharp rise in the Canadian
Shore’s study assumes an exchange rate
of US$0.85. At presstime, the U.S. to Ca-
nadian exchange rate was about US$0.94.
A lower Canadian dollar means higher mar-
gins for Shore because its production costs
would be in loonies, while it would sell
NEW TECHNOLOGIES FOR THE FUTURE
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created almost 12,000 person years of employment and have directly funded
numerous training initiatives from which many Northerners have beneﬁted.
Our commitment to building a sustainable future is demonstrated in our new
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innovative mining techniques that could extend EKATI’s mine life.
Surface mining technology, originally developed from road milling machines,
is becoming an integral part of the resource development industry across the
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With our sights ﬁrmly set on lowering our operating costs to $50 per tonne
by 2012, these new surface miners could unlock much potential for EKATI,
and possibly extend our mine life well beyond 2021, to our vision of 2040.
Photo credit: Shore Gold
A parcel of Star diamonds is graded and analyzed
at a lab in Anterwerp, Belgium.
10 Diamonds in Canada November 2009
I N C A N A D A
gems for greenbacks.
Read admits the prefeasibility study
numbers are most sensitive to the exchange
rate but says history is on his side.
“The US$0.85 exchange rate is a 50-year
average and, if you want to tell me what
the exchange rate is going to be hopefully
in 2014 when we start selling, then (go
ahead),” Read says.
Secondly, the study uses a modelled
diamond price of US$225 per carat, the
highest in a range set by U.K.-based WWW
Diamond Consultants in its March 2008
price book. The low end of WWW’s range
was US$141 per carat.
“The important thing is that diamond
price wasn’t chosen by Shore Gold, that di-
amond price was chosen by the consulting
engineers (P&E),” Read says. “They thought
that that was very reasonable in light of the
behaviour of the diamond price over the
last number of years.”
Since WWW’s valuation, the global dia-
mond market, in lockstep with the global
recession, has seen rough prices dip by as
much as 40% after reaching all-time highs
in August 2008.
WWW Diamond Consultants reports
that diamond prices are now between 10-
15% lower than in March 2008, owing
to a rise in diamond prices during recent
months. Read explains that the decline in
diamond prices was mostly offset by gains
made by the Canadian dollar over the same
“Our sensitivity studies have shown that
(the economics) are most sensitive to ex-
change rate and diamond pricing But, if
you look at what the difference is if we use
the high or the low modelled values for
the different diamond prices, then there
isn’t an enormous difference (in the overall
economics),” Read argues.
The study says Star boasts reserves of
171 million tonnes at a weighted average
grade of 12 carats per hundred tonnes (0.12
Photo credit: Shore Gold carat per tonne), for a total of roughly 20
Rock bolts are inserted into the ceiling of an underground shaft at Star. The shaft was used to million carats. The only problem is that
access bulk sample material. Shore boosted the grades on all of its large-
diameter drilling tests by factors “that range
‘Our sensitivity studies have shown that (the economics) are most sensitive to from 1.62 to 1.67,” as published in an April
exchange rate and diamond pricing But, if you look at what the difference is if we release.
The grade boost was based on diamond
use the high or the low modelled values for the different diamond prices, then losses and breakage Shore believes occurred
there isn’t an enormous difference (in the overall economics).’ during large-diameter drilling. The deter-
— George Read mination was made after more impressive
diamond grades were recovered from an
underground bulk sample taken from the
November 2009 Diamonds in Canada 11
I N C A N A D A
Photo credit: Shore Gold
A bulk sample processing plant sits atop the Star
kimberlite. The plant would need to be moved if Shore
decided to begin production there.
same area where the drilling had been done.
Shore’s “boost” left many in the Canadian
diamond industry scratching their heads.
“Are they allowed to do that?” asked a
president and CEO of a Canadian diamond
junior, who preferred to remain nameless.
Skepticism abounds until you look at
what could prove to be Read’s ace in the
hole, just north of Star. There lies the Orion
South kimberlite, 40% of which is owned
by Newmont Mining (NMC-T) under the
terms of the Fort à la Corne Joint Venture
(Newmont recently raised $2.1 billion
by selling bonds and was contacted for com-
ment on the Star story but declined.)
P&E Mining Consultants calculates
the mineral resource at Orion South at 84
million tonnes averaging 13.83 carats per
hundred tonnes (cpht). Another 98 million
12 Diamonds in Canada November 2009
I N C A N A D A
Photo credit: Shore Gold
Cut and polished diamonds from Star.
tonnes running 12.83 cpht are in the in- that would provide Saskatchewan Power we will ultimately plug into the Saskatch-
ferred category (but inferred material can’t with up to $500,000 to carry out prelimi- ewan power grid is extremely favourable,”
be included in the resource under National nary engineering and environmental studies Read says.
Instrument 43-101 guidelines). to determine a preferred route of trans- Read estimates that if Star were situ-
Orion South is one of the largest di- mission lines between the project and the ated in a location similar to Diavik’s in the
amond-bearing kimberlites in the world, provincial power grid. The study says the Northwest Territories, one could add an-
with a surface area totalling some 403 230-kilovolt transmission line would span other billion dollars to the project’s capital
hectares. 16 km. The work should be done by the costs.
Shore handed over its Star and Orion end of June 2010. Then again, what Read wouldn’t give for
South data to P&E this fall and the firm “Certainly accessibility and the fact that Diavik’s grade.
will complete a prefeasibility study on the
economics of a combined operation. The
results should be out by early 2010.
A positive decision could lead to a bank-
able feasibility study on both projects by
“We could spend time doing the com-
bined detailed feasibility study on Star and
Orion South next year and then still get
into production in 2014 or sooner because
of the more amenable stratigraphy on Ori-
on South,” Read says. “The stratigraphy on
Orion South is probably easier to mine than
it is on Star.”
Another positive for Read and his team
is Star’s location, about 60 km east of Prince
Albert, Sask., a supply centre for northern
Saskatchewan. A paved highway, and a net-
work of forestry roads provide year-round
access to the Fort à la Corne Joint Venture.
Shore recently signed a letter of intent
November 2009 Diamonds in Canada 13
Patrick F.N. Anderson helped make some Aurelian shareholders
very wealthy and others, it would seem, not wealthy enough
Rarely has mining seen a company-maker Fruta del Norte
more polarizing figure than Patrick deposit, in Ecuador (see sidebar
F. N. Anderson, the former president on Page 28).
and CEO of Aurelian Resources. Shortly after the news became
Those initials represent Fer- public in late July of last year, a se-
gus and Neill, the sort of middle lect group of Aurelian sharehold-
names that Irish immigrants from ers started to beat the drum about
Belfast bestow upon their only how they had been “taken to the
son. But it was probably lost on cleaners.” Phone calls were made.
BY BRIAN SYLVESTER Anderson’s parents how appropri- Form-letter campaigns launched.
Mining Markets ate those initials would become, Word of the “injustice” reached
especially for disgruntled Aureli- editors at the Globe and Mail, Na-
an shareholders bitter about what tional Post, and here, to Mining
they perceived to be an insuffi- Markets’ parent publication, The
cient price paid by Kinross Gold Northern Miner.
(K-T) for mining’s biggest Cinder- One letter sent to this office
ella story in a decade. reads: “Patrick Anderson and the
When Kinross executives ap- Aurelian board of directors gave the
proached Aurelian’s board about company away to Kinross Gold Cor-
a takeover in June 2008, no one poration for a small fraction of its
knew, least of all Anderson, the value. To be sure, the officers of Au-
kind of vitriol that would be un- relian were well compensated. They
leashed by Aurelian shareholders received millions of stock options
when the dust had settled. while the rest of the shareholders
In late July, Kinross offered were taken to the cleaners.”
Aurelian shareholders about $1.2 The Globe called Anderson but
billion (the deal was worth a little never printed a story. The Post
less than $1 billion when it closed called, too, and printed a story but it
Former Aurelian Resources president and in late September) in shares and was more about shareholder angst
CEO Patrick Anderson warrants, or about US$85 for each than the supposed rotten deal.
ounce in the 13.7-million-oz. “It’s really a minority. It’s a
24 – MINING MARKETS – MARCH 2009 –
Digitally signed by Paula Andrea
DN: cn=Paula Andrea, c=CA,
o=GSL, ou=26 01 09,
Date: 2009.01.26 10:16:28 -08'00'
small, very vocal group of vitriolic shareholders who the discovery toward production, I with flying colours. I think we ran
feel they got screwed on the deal. As time goes on I came to a realization about myself: a public company well. I think I
think they are beginning to realize – and most are – that I really enjoy and know about ran a public company well.”
that people didn’t get screwed on this deal. The rea- exploration. I really don’t know Maybe, but other money men
sons we did the deal are unfolding…and it’s turned much about production but I know went as far as to launch a lawsuit
out to be a very good deal for Aurelian shareholders,” enough to know that I prefer explo- after they watched their warrants
Anderson explains. “It is the best deal we could have ration.” expire while, from their perspec-
done.” Newsletter writer John Kaiser tive, Aurelian sat idle.
He adds: “I think expectations were very high… followed the Aurelian story from In July 2006, Robert Cudney’s
That group of shareholders was envisioning a share the beginning but never invested Northfield Capital, Jonpol In-
price for Aurelian in the hundreds of dollars. There in the junior. Kaiser watched the vestments, Morrie Tobin, Mark
was this 200 Club group of shareholders who were all remarkable story unfold and con- Monaghan and Kevin Everingham
going to hold on until the stock reached two-hundred tends that Anderson and the Au- filed a $3-million claim against Au-
dollars. They had sold themselves on this dream of relian board were the victims of relian in the Ontario Superior Court.
another rocketing share price like we saw from the circumstance. The suit purported that Aurelian did
forty cents to the forty-dollar level, which, barring an- “The Aurelian discovery was a not do what it could to get listed on
other discovery on the property, I don’t see how that grassroots discovery of a world- the top tier of Vancouver’s TSX Ven-
could have happened.” class deposit. Unfortunately, geo- ture Exchange. Such a listing would
Anderson, though, was playing against the odds political problems prevented (Au- have allowed Aurelian to petition
from the beginning and despite the obvious success relian) from getting acquired at full the TSX for a two-year extension of
of delineating the biggest gold discovery in a genera- value,” Kaiser told Mining Markets. warrants that were owned by the
tion, he did not hold the right cards. The Ecuadorian But for every mining industry plaintiffs. The listing did not happen
government, meanwhile, led with a pair of aces. man in his corner, Anderson prob- in time, however, and the warrants
In January 2008, the government levied a new 70% ably counts two on the other side, expired. The suit is ongoing but is
commodity price-based windfall tax on miners and some of them big-time players. now Kinross’s property.
almost simultaneously revoked hundreds of mining One executive with Toronto- “If we were still Aurelian, and
licences. based Dundee Securities, a firm there had been no transaction, we
By April, Ecuador’s government, led by Rafael Cor- that fronted some Aurelian financ- would never settle on that lawsuit.
rea, had suspended all mining and exploration in the ings, once deemed Anderson “un- I don’t know what Kinross’s inten-
country until a new mining law was in place. Ander- fit to run a public company.” tions are,” Anderson says.
son could read the tea leaves and Kinross had a decent “I think they’re wrong,” An- Anderson ruffled more feath-
offer on the table — a soft landing, even if it didn’t derson says, returning fire. “We ers among mining’s “old boys”
come with a boardroom view. were conscientious. We were as network as part of a group that
“I don’t know if I would have added much to the transparent as possible. We stood toppled the board of high-profile
Kinross board,” Anderson admits. “As we were moving up under investigation and passed junior Noront Resources (NOT-V).
• Angostura Gold/Silver Deposit, Colombia TSX: GSL
• Over 926 core holes (301,000 metres) AIM: GSL
• Feasibility Study underway
• 11.55 million ounces M & I “one of the world's
largest gold resources"
• 3.5 million ounces Inferred COLOMBIA
Resources Ltd. www.greystarresources.com
– MINING MARKETS – MARCH 2009 – 25
Popular former Noront CEO Richard Nemis stepped other on the Gulf Coast, settling in
down in late October after a proxy war for control Pascagoula, Miss., a port city east
was launched by Rosseau Asset Management, a hedge of New Orleans. That’s where An-
fund that owns just less than 10% of Noront. Backed derson grew up.
by Rosseau, Anderson is now a Noront director. His family remains in Missis-
After living in Vancouver at the time of Anderson’s sippi but Anderson returned to
birth, his parents traded life on the Left Coast for an- Canada in 1986 to earn a bache-
lor’s degree in geology from the
University of Toronto. He would
eventually graduate, but not be-
fore a detour found him trying his
hand at the culinary arts in 1988.
In 1994, after his last exam
but before graduation, he headed
to Venezuela for a field-based job
and remained there for years. It
was where he would work with
Keith Barron, who helped Ander-
son found Aurelian.
The junior’s story is the stuff of
legend; part folklore, part reality.
Anderson and Barron applied
for their first concession in Ecua-
dor’s Cordillera del Condor in Feb-
ruary 2001, following six weeks
of prospecting in some remote re-
gions of the country.
Two months later, in a turn of
good fortune, the Ecuadorian gov-
ernment announced new mining
rules that gave individuals and
companies one month to con-
vert their outstanding concession
applications – some more than
10 years old – into titles and be-
26 – MINING MARKETS – MARCH 2009 –
Aurelian’s former exploration manager Steve Leary (left) and Tim Warman,
vice-president of corporate development, above the camp at Fruta del Norte.
gin paying patents. In May 2001, about Peñas and outlined 500,000 oz. gold at a
80% of the country’s concessions were grade of slightly more than 1 gram gold
declared void, giving Aurelian the rare per tonne, certainly far less than bonanza
chance to acquire a large, contiguous grade.
land package. By the end of 2005, Aurelian was
Seeing the opportunity, Aurelian per- wrapping up almost two years of region-
sonnel took turns waiting in line at the al sampling that had outlined another
patent office for weeks to be near the 33 gold targets at Condor. Those targets
front when concessions became avail- were ranked and slated to be systemati-
able. cally drilled in 2006 but Aurelian had lit-
Aurelian augmented its land position tle cash left. Anderson says this was the
by purchasing the La Zarza concession low point of his career.
from private interests in July 2002 and “We were nearly out of money…We
the concession became the core of the had no audience. The phone calls weren’t
Condor project – 950 sq. km of mining being returned. That was very frustrat-
concessions and home to Fruta del Norte, ing,” Anderson recalls. “The defining
the epic gold-silver deposit. Aurelian Re- moment, of course, is when we made the
sources went public in 2003, raising $3 discovery.”
million at $0.50 a share. Earlier in 2005, Steve Leary had joined
Going back a little further, exploration the company as exploration manager,
on La Zarza by Australia’s Climax Min- bringing along experience in epithermal
ing from late 1996 through mid-1998 systems. He reinterpreted a pull-apart
turned up the Ubewdy, Bonza and Las basin identified by Climax, and decided
Peñas prospects. But after minor drilling that the basin infill conglomerate was
on other prospects returned only modest mostly post-mineralization and, there-
grades, Climax let its concessions lapse. fore, epithermal deposits could lie buried
In 2004, Aurelian sunk 28 holes to- below the basin sediments.
talling 6,900 metres into Bonza and Las Leary and Anderson took the revised
– MINING MARKETS – MARCH 2009 – 27
Kinross Gold’s Takeover Offer for Aurelian
On July 24, 2008, Kinross Gold (K-T) offered for each Aurelian common share, 0.317 of a Kinross
common share, plus 0.1429 of a warrant, with each warrant entitling the holder to acquire one Kinross
The Kinross warrants have an exercise price of $32.00 per Kinross common share and will expire five
years after the date on which Kinross first pays for Aurelian common shares tendered to the offer.
Kinross issued about 47 million common shares related to the transaction or about 8% of Kinross’s
outstanding common shares at the time (Kinross issued another 24 million shares as part of an equity
financing in January 2009).
Based on the preceding 20-day volume-weighted average price (prior to the date of the bid) of
Kinross’s common shares on the Toronto Stock Exchange (TSX), and assuming a value of C$0.92 per
fractional warrant, the value of the offer is C$8.20 per Aurelian common share, which at the time
represented a premium of roughly 63% over the preceding 20-day volume-weighted average price of
Aurelian common shares.
Visible gold in core from Fruta del About 94% of Aurelian shareholders tendered to Kinross’s offer.
interpretation and exploration “I checked (the assay results). surfed in Costa Rica, and Anderson now owns a sea kay-
model to the board and pitched the Re-checked them. Called up the ak. Anderson, in many ways a child at heart, has anoth-
members on spending Aurelian’s lab to make sure there weren’t any er hobby – sharing a growing collection of remote-con-
remaining treasury to drill one of errors,” Anderson recollects. “I was trol helicopters with Aurelian’s former vice-president of
Condor’s most favourable targets, terrified, terrified that we screwed corporate development, Tim Warman. The helicopters
Fruta del Norte. up somehow.” are something Anderson describes as “just fun.”
The deposit is an intermediate When everything checked out, When he’s not toying, Anderson serves as direc-
sulphidation epithermal gold-sil- he ran into the street to share the tor of several juniors: U3O8 Corp. (UWE-V), Colossus
ver system, hosted in andesitic vol- news with anyone he could find Minerals (CSI-T) and Noront.
canics and buried inside a Jurassic until he had a sudden revelation. “I’m generating a few other projects in the back-
pull-apart basin that basically pre- “I had two different shoes on,” room, exploration projects in other parts of the
served most of the epithermal sys- he recalls. world,” Anderson says. “I usually invest in an industry
tem. The third hole into Fruta Del Since that moment Anderson I know, our industry. I look at the projects and I look
Norte hit the buried, gold-rich sys- has been on something of a roll. at the people. I look at the philosophy behind the ex-
tem. One intersection returned 8.4 He recently turned 40 and lives ploration and the discovery.”
grams gold per tonne uncut across in English Bay in Vancouver with Chances are he will never find another discovery
205 metres. Another hit 189 me- his new wife, a former mining ana- like Fruta del Norte, but investors, disgruntled or oth-
tres averaging 24 grams gold per lyst with Genuity Capital Markets. erwise, might be wise to follow Anderson on his next
tonne uncut. They have travelled to Spain, adventure. MM
28 – MINING MARKETS – MARCH 2009 –
and CEO Sean Boyd at
his company’s Kittila
gold project in Finland.
Photo credit: The
BY BOYD Agnico-Eagle’s Sean Boyd may be Canada’s
most unassuming company builder
BY BRIAN SYLVESTER
don’t make a statement; his off-the- to the University of Toronto, where
rack suits are invariably pressed he earned a bachelor of com-
Sean Boyd will never be mis- and tidy. He’s not about to change. merce degree, in 1981.
taken for the world’s most memo- “I live a mile from where I grew During his “off” summers, Boyd
rable CEO. Until recently, even up,” Boyd says. learned the ins and outs of the bro-
some close family members did Boyd was born in Scarborough, kerage business at AE Ames but the
not know what he did for a living. an eastern suburb of Toronto. But “big time” was around the corner
“My mother-in-law didn’t really when Sean was still young, Boyd’s — articling at Clarkson, Gordon
know what I did until a few years father, an Irish police officer partial and Co., a popular accounting firm
ago,” Boyd says, with a shy grin. to discipline, decided to move the among the miners.
But if you are an Agnico-Eagle family to the countryside, settling on There, he learned to crunch
Mines (AEM-T) shareholder, that’s Stouffville, about 45 minutes north. mining numbers from the inside
probably just how you like it. Boyd and his wife, Peta, still live out, mostly by combing through
You are more than content to in Stouffville where they raised four Noranda’s books, as well as some
let the world’s Ian Telfers and children. In fact, the 49-year-old brokerage firms’.
Robert Friedlands hog the spot- Boyd passes the 800-sq.-ft. Boyd In 1982, Clarkson Gordon
light, while you quietly and reli- family farmhouse (now his brother’s added a client to the roster: Paul
ably squirrel away your Agnico property) on his drive to the office. Penna’s Agnico-Eagle. With his
dividends — a plum in investors’ Is there a better measure for a experience auditing mining com-
pudding for 26 straight years. CEO of a multi-billon-dollar com- panies, the new account went to
As a chartered accountant and pany to keep his ego in check than Boyd’s audit team and for the next
chief executive of the steadfast gold seeing the modest family home- three years the Agnico books were
company that he has helped shape stead every morning? under his methodical, meticulous
into a mid-tier producer within After going to high school in care — by then a Boyd trademark.
earshot of being a major, Boyd has Aurora, when it was still mostly a “I was over (in the Agnico
been more measured and method- community of farmers, he made offices) for months and months
ical than bold and brash. His ties the pilgrimage down Yonge Street and months, and finally they just
36 — MINING MARKETS — SEPTEMBER 2008 –
said: ‘You’re here everyday any- mining was concerned but management was doing to market forces and this sum-
ways, why don’t you just come things foreign to most companies of its size, such as mer’s relentless punishment of
and work here?’” recalls Boyd. “I listing on New York’s Nasdaq exchange. The American gold stocks. Agnico shares were
left on the Friday as an employee listing provided Boyd, then Agnico’s controller, with trading at around $50 at presstime
of Clarkson Gordon and I returned ample exposure to the U.S. markets, and more impor- — a staggering plunge considering
on the Monday as an employee of tantly, its regulatory framework. that just a few months ago,
Agnico-Eagle. Same office, same Penna also eschewed the bought-deal in favour of National Bank Financial issued a
desk, didn’t miss a beat.” market financings but this meant taking Agnico’s “go “buy” recommendation for Agnico
That was 1985. He wouldn’t slow” road show to the banks, fund managers and bro- with a $92 target price.
miss many over the next 23 years, kers for weeks at a time. What’s more, Penna shunned Gold investors, it seems, have
either. the limelight, leaving Boyd to tell the Agnico story to not been as enthusiastic about
In 1998, when Boyd was well-heeled Canadians, Americans and Europeans, investing in gold equities as they
named CEO after a time as chief again and again. . . and again. have about exchange-traded funds,
financial officer, Agnico had about “You got to do a lot more than you otherwise which has created some competi-
1 million oz. gold in reserves; would have if you had joined a bigger company,” tion for investment dollars. “I think
today, the number is close to 17 explains Boyd. that’s positive because that forces
million. The share price reached But perhaps Penna’s most lasting impact was the the mining companies to be more
$4.40 in 1998; in late March 2008, way he sweated the details. He took his own calls (a disciplined,” explains Boyd, who is
Agnico shares peaked at $82.80. custom Boyd continues), knew his staff, and often more than familiar with discipline.
The company’s market cap was added his personal touch to things. Boyd has sidestepped offers to
around $250 million 10 years ago; “He was a guy that if you said ‘I like lemon pies,’ the be on the boards of other compa-
as of early August, the company next day he’d show up with ten lemon pies and every- nies (he is on the World Gold
was worth about $7.5 billion. one in the office would get lemon pie,” says Boyd. Council board), choosing instead
But maybe even more impres- The core group of Agnico’s management team, to focus on building Agnico-Eagle.
sive is what Boyd and his team including president Eberhard “Ebe” Scherkus, chairman Boyd predicts another round of
have done for shareholder value. James Nasso, and senior vice-president of exploration consolidation during the next few
In a 2007 ranking of Canadian Alain Blackburn, and others — many of whom were years will leave names without
companies, Agnico was 40th in hired by Penna — has been in place for about 20 years. companies. Will Agnico remain
terms of market cap, but only Penna died in 1996 following a lengthy fight with standing when the dust has set-
three other companies in the top lung cancer. tled? It doesn’t matter — Agnico,
50 — Research in Motion (RIM-T), “He was the driving force,” says Boyd, who was much like Boyd himself, will not
Potash Corp. of Saskatchewan clearly taking notes during Penna’s time. veer from its “go slow” course.
(POT-T) and Fording Canadian But since Boyd took the helm, Agnico has reached Investors will do well either way.
Coal Trust (FDG.UN-T) — beat heights Paul Penna likely thought unimaginable. It’s the measured and methodi-
Agnico in return on investment. Despite its success, though, Agnico is not immune cal approach. MM
“We’re patient. We’re very @COMPANYINARTICLE:025042467; 019760215;
@ARTICLECATEGORY:2403; 1398; 2411;
patient,” says Boyd.
He adds: “We had opportunities
over the last ten years to really
leapfrog our competitors and we
chose not to do those deals
because they were not going to
create a lot of value for a our
shareholders — even though we
would have been bigger. . . We
took the ‘go-slow approach’ and
that fits our style.”
Much of the style Boyd refers to
can be traced back to Paul Penna.
In the Penna era, Agnico was a
fairly small company as far as
— MINING MARKETS — SEPTEMBER 2008 — 37
The McFauld’s Lake
Ring of Fire
This highly mineralized region in the James Bay Lowlands of Northern Ontario
appears to be on its way to becoming one of Canada’s major mining camps.
by Brian Sylvester
The Noront Resources Esker exploration camp
that services the company’s various Ring of Fire
projects in the McFauld’s Lake region of the James
Bay Lowlands of northern Ontario. Photo courtesy
Noront Resources Ltd.
6 www.resourceworld.com M AY 2 0 1 0
old mining sage Pierre Lassonde told bearing kimberlites below 30-130 metres published the news after staking 64 square
the National Post in 2008 that the of sandstone and limestone. De Beers was kilometres around the discovery hole in
Ring of Fire camp in far northern targeting prospective diamond anomalies late October.
Ontario was the “most exciting” discovery using the Spider-KWG geophysical and “We staked (64 square kilometres)
of the last 10 years in Canada. geochemical database Novak had assem- around that discovery and that’s all we
It still is. Six years before Lassonde uttered bled a few years earlier. could afford,” Novak recalls. “I wish we
those prophetic words, geologist Neil Novak, In May 2002, on land optioned from could have staked the whole area.”
then vice-president of Spider Resources Spider-KWG, a De Beers reverse-circula- Novak told business associate and friend
Inc. [SPQ-TSXV], entered into a joint ven- tion drill tested what was thought to be Richard Nemis, then President and CEO of
ture with De Beers Canada Exploration a kimberlite anomaly. Instead it cut mas- Noront Resources Ltd. [NOT-TSX] and he
to help the diamond titan seek diamonds in sive sulphide mineralization. The hole immediately hired contractor Greenstone
Ontario’s James Bay Lowlands. returned 8 metres grading 1.61% copper, Exploration to stake claims in the Ring of
Novak and his joint venture partner, including a 0.5-metre section running 7% Fire based on a map derived from an airborne
KWG Resources Inc. [KWG-TSX], had copper and almost 5% zinc. The find was magnetic survey flown by the Geological
found five 1.1-billion-year-old, diamond- kept quiet until November when Spider Survey of Canada in 1959-60.
M AY 2 0 1 0 www.resourceworld.com 7
outlined earlier by Novak.
Nemis’s move to secure the claims even-
tually proved vital. In August 2007, an
angle hole into the Condor claims, later
dubbed Eagle One, returned 1.1% nickel,
0.9% copper and 2.1 grams palladium/
tonne over 71.5 metres of magmatic rock.
A second hole at Eagle One found more
mineralization, but two holes east and
west of the discovery hole came up empty.
With costs exceeding $100,000 per hole,
Nemis paused drilling and flew in long-
time friend and ex-Falconbridge executive
John Harvey. Harvey examined the evi-
dence and recommended the anomaly be
“I suggested that they drill a verti-
cal hole down through the centre of the
anomaly. That was hole number five and
The PDAC Bill Dennis Prospector of the Year Award honours the memory of past PDAC president
that turned out to be the best one to
Bill Dennis. Left to right, Ed Thompson, Past President of PDAC, presents the 2010 Prospectors of the that date,” says Harvey, who would later
Year awards to Mac Watson, President, Freewest Resources Canada, Dick Nemis, former President become Noront’s Chief Operating Officer.
of Noront Resources, John Harvey, former COO of Noront Resources, Don Hoy, VP Exploration for
Freewest, and Neil Novak, President of Spider Resources. The men were honoured for their Ring of Hole 5 went straight down and returned
Fire discoveries. Source: Envisiondigitalphoto.com 117 metres averaging 4.1% nickel and
2.2% copper, plus platinum and palladium
In the fall of 2003, Mac Watson, then discoveries, three if you count Novak’s values. Within six weeks of that discovery
President/CEO of Freewest Resources kimberlites. Nemis says the GSC map, more than 100,000 hectares were staked
Canada Inc. [FWR-TSXV], staked nine known as 1009G Grieg Lake, outlined along the Archean-age greenstone belt
claims based on an airborne geophysi- some “unusual geophysical signatures” that forms a kind of ring in the vicinity of
cal survey flown by Inco years earlier. along trend and contiguous to claims McFauld’s Lake. Not long afterward Nemis
In exchange for the map and other geo- Nemis had already staked west of the and Harvey were at a downtown Toronto
physical data, Inco received an off-take Spider-KWG land. Nemis set his sights watering hole when they dubbed the
agreement on any nickel or copper on two particular claims held by Condor camp the Ring of Fire after the song made
Freewest discovered. Diamonds, a junior that was in the camp famous by country music legend Johnny
Four of those Freewest claims were hoping to piggyback on Spider’s diamond Cash.
optioned to Noront, which in turn exploration success. “We were thinking of calling it the Rim
optioned them to Probe Mines Ltd. [PRB- “I knew I wanted those [Condor] claims,” [of Fire],” Nemis recalls. “We decided to
TSXV]. The other five were optioned to the Nemis says. “These claims were punched call it the Ring of Fire …[the name] turned
Spider-KWG joint venture in 2005. into a computer so we were well aware of out to be very good because it really
In March 2006, Novak was on-site with the status of the claims at all times.” caught on.” Noront even named the two
the Spider-KWG joint venture, drilling Fate favoured Nemis when Condor filed drills at the camp Johnny and June after
claims optioned from Freewest, when a for bankruptcy. Following some litiga- the late Cash and his wife.
hole returned two intersections containing tion, the claims were awarded to two Further drilling at Eagle One, since
a deep black mineral. Condor investors, who, of course, wanted rebranded the Eagle’s Nest due to its series
“This other geologist and I, Howard to sell. Prior to the litigation, Novak had of repeating mineralized lenses at depth,
Lahti, kind of scratched our heads,” Novak worked on Condor’s claims as a consultant has outlined an indicated resource of 6.9
says. “We eventually convinced ourselves to maintain their good standing. Once the million tonnes grading 2.04% nickel,
that it was chromite.” courts settled the dispute, Novak brokered 0.95% copper, 1.3 grams platinum/tonne
Originally known as the SKF (which a deal with Nemis on behalf of the court and 3.4 grams palladium/tonne; another
stood for Spider-KWG-Freewest) property, appointed claim winners. Nemis took title 4.3 million tonnes grading 1.42% nickel,
the find was renamed Big Daddy. of the claims after agreeing to drill at least 0.87% copper, 0.8 gram platinum/tonne
The camp now had two significant one hole to test an anomaly that had been and 3.4 grams palladium/tonne are in the
8 www.resourceworld.com M AY 2 0 1 0
But that’s not the camp’s biggest dis-
covery. That title belongs to Black Thor,
possibly the richest chromite deposit on
the planet. “It’s a world-class chromite
deposit. Very large, very high grade,” says
Don Hoy, the former Vice-President of
Exploration with Freewest.
In September 2008, Freewest conducted
a ground gravity survey along a magneti-
cally distinct ultramafic sill. Hoy ranked
the gravity targets, which he thought
could be nickel-copper deposits, using
Inco’s airborne geophysical survey data.
Drilling on the first target intersected more
than 100 metres of high-grade chromite
mineralization in the hanging wall of the
nickel-copper target. After the second hole
hit chromite, Hoy decided to test another A helicopter brings in supplies and equipment to the Noront Resources Esker exploration camp in
anomaly along trend, 1.6 kilometres away. Northern Ontario’s Ring of Fire region. Photo courtesy Noront Resources Ltd.
That hole intersected almost 100 metres
grading roughly 30% chromite. Follow-up a number of reasons to undertake the bid travel about 75 kilometres west of Marten
drilling defined the deposit over a 1.6-km for Freewest. It wasn’t solely driven by Falls. Hanson says First Nations chiefs in
strike length. chromite.” the area were confused by the mixed mes-
Black Thor contains an inferred mineral He says it was part of an effort to con- sages they received from camp players.
resource of 69.5 million tonnes grading solidate the camp and augment its other Cliffs is proposing a one-kilometre-long
32% chromite, which is transformed into assets, most notably two smaller chromite open-pit chromite mine, whereas Noront
ferrochrome and then alloyed with steel to deposits, known as Blackbird One and Two. says its development – even the chromite
make stainless steel. He adds: “It’s not very often you get a col- deposits -- would be mined exclusively
American steel maker and coal miner laborative effort from a half a dozen mining underground. The blockade was lifted on
Cliffs Natural Resources [CLF-NYSE] liked companies in a developing camp. It’s highly March 19.
Black Thor’s size and grade enough to competitive and the people with the eco- “The blockade was never specifically
launch a friendly takeover bid for Freewest nomic deposits generally make the rules.” directed at Noront. We carried the burden
in the fall of 2009. The bid trumped a hos- The rules changed this winter when of the blockade because we were the only
tile offer from Noront, which was under members from the Marten Falls and ones planning any work,” Hanson says.
new management after Nemis decided to Webequie First Nations blockaded two ice “I think at the end of the day the block-
step down following a coup attempt by airstrips serving the isolated McFauld’s ade will end up being a benefit to Noront
institutional investors in the fall of 2008. Lake area. The groups were protesting the because we have broken through to the
After several escalating bids from both lack of consultation on development, espe- (First Nations) communities. We have dem-
sides, Cliffs landed Freewest for $240 mil- cially a proposed 350-kilometre railroad onstrated to them that we’re willing to
lion in February 2010. that would extend north from Nakina, work with them to improve their future.”
Noront President and CEO Wes Hanson, Ontario, where the rail line now ends. Noront hired Missanabie Cree Chief
who took the helm of the promising junior A railroad would be used to haul ore Glenn Nolan as its Vice-President of
in June 2009, describes Noront’s relation- from mines in the McFauld’s Lake area. Aboriginal Affairs. He is also in line
ship with Cliffs as “cordial.” Rail or road are the only cost-effective to become the future president of the
“The Noront story has gotten cloudy means of shipping ore from such a remote influential Prospectors and Developers
because of our bid for Freewest. I think location. Association of Canada. Noront has also
a lot of people thought that it meant that The Marten Falls First Nation wants secured a government lobbying firm based
we were removing our focus and starting any railroad or road development to go in Ottawa.
to think that chromite was the be-all and through Marten Falls, which, in their The Ring of Fire is certainly on the
end-all in the Ring of Fire and that’s not view, would encourage development. Ontario government’s radar. In a March 29
the case,” Hanson explains. “There were Under the current proposal, the line would speech, Ontario Finance Minister Dwight
M AY 2 0 1 0 www.resourceworld.com 9
Duncan called the Ring of Fire “one of earn up to a 60% interest (30% each) in Big
the most exciting opportunities for all of Daddy from Cliffs. Each junior now owns
Ontario… This could be as exciting as the 26.5% of Big Daddy.
discovery of nickel in the 19th century (in Probe Mines is planning its most exten-
the Sudbury basin).” sive exploration program yet, where all of
The Ontario government has set aside its McFauld’s Lake properties will see con-
$45 million to train members of First current work programs. Phase III drilling
Nations and other northerners to become is planned on its high grade Black Creek
skilled tradesmen such as carpenters, Chromite discovery, as well as additional
mechanics and heavy equipment operators exploration on the nickel-copper potential
– the kinds of jobs necessary to develop on claims adjacent to Noront’s Eagle’s Nest
a camp without any infrastructure. The Deposit. (see sidebar P for more details)
Ontario government will also introduce Fancamp has launched a 3,000-metre drill
apprenticeship programs and other train- program on its McFauld’s property. Initial
ing initiatives in the coming years. targets include the shallow nickel mineral-
Hanson says he is not expecting much ization encountered in holes FN-08-02 and
more support than that – yet. “The FN-08-10 at a vertical depth of 45 metres.
government’s role is to develop infrastruc- Drilling is also planned on a major gravity
ture – roads, highways, hospitals and anomaly, which is believed to be an offset
power lines. It’s too early for government extension of the Big Daddy and Black Thor
involvement. They have to be to able to con- chromite deposits, situated immediately
ceptualize the future and it’s good that they east.
recognize that development of the Ring of While the drilling in the Ring continues
Fire as potentially something that’s coming and discoveries add up, Hanson cautions
down the track,” Hanson says. those who think development is around
Noront will spend between $20 and $25 the corner.
million on drilling in 2010. Most of that “There is still nobody (in the Ring of
will be spent upgrading the resource in the Fire) who has demonstrated that they have
upper 1,200 metres of Eagle’s Nest nickel- a reserve up there. There’s lots of miner-
copper-gold-PGMs project. Noront also alization, lots of exciting discoveries but
hired consulting firm Micon International nobody has proven that they can bring it
to conduct a feasibility study on the project. to market at a profitable rate,” Hanson said.
Cliffs, meanwhile, plans to do some drill- However, that may only be a matter of
ing of its own. Cliffs will upgrade its Black time as further drilling is upgrading min-
Thor resource to the measured and indi- eral resources to the reserve category and
cated category by the end of 2010 through feasibility studies get underway. n
an $8 million, 20,000-metre drilling pro-
gram employing as many as three drills.
“The immediate goal at Black Thor
would be to upgrade our inferred resource
to measured and indicated,” says Hoy, who
is now Vice-President of Exploration and
Development with Cliffs. “We expect that
to begin in July.”
The Spider-KWG JV has wrapped up
drilling on the Big Daddy Chromite Project,
situated roughly six kilometres west of
Black Thor, and is about to publish a mea-
sured and indicated resource estimate. The
early read is that Big Daddy won’t be the
biggest but could be the highest-grade chro-
mite deposit in the camp. Spider-KWG can
10 www.resourceworld.com M AY 2 0 1 0
by Brian Sylvester
Three dig rigs at work on the Pumpkin
Hollow Copper Project located 100 miles
southeast of Reno, Nevada. Photo courtesy
Nevada Copper Corp.
NEvAdA COPPEr IS IN TAlkS wITH TwO CHINESE COMPANIES ANd A NOrTH AMErICAN ‘MAJOr’
ABOUT POSSIBlE TAkEOvEr BIdS. CAPSTONE MINING ANd A CHINESE COMPANY AlrEAdY OwN
SIZEABlE STAkES. THAT lEAvES ONlY TwO qUESTIONS – wHEN ANd HOw MUCH?
To listen to Nevada Copper Corp. [NCU- shares, it would amount to just slightly the same deal, Capstone promised Nevada
TSX] President and CEO Giulio Bonifacio tell less than a 5% stake. ZTS also secured the Copper that it would not push its stake in the
it, there are plenty of well-heeled companies right to take a direct interest in Nevada junior beyond 20% without Nevada’s board
kicking the tires of his company’s flagship Copper down the road. approval. Nevada Copper, in turn, would
Pumpkin Hollow copper-gold-silver-iron Then there are the discussions Bonifacio drop the Capstone takeover stipulation if
project in Nevada. He should know; he’s has had with a North American major about another company took a run at it. Capstone
the one shopping it. Bonifacio flew to China a possible takeover. One North American- operates the Cozamin Mine in Mexico and
about a dozen times in 2009 and readily based producer, Capstone Mining Corp. the Minto Mine in the Yukon. The combined
admits he’s courting the Chinese. [CS-TSX], already owns a significant chunk production from both mines is roughly 100
“It’s in our best interest to have and of Nevada Copper. In late October 2009, million lbs. of copper per year, which would
nurture discussion with Chinese groups,” Capstone bought a 10% stake in the junior almost double if it acquired Nevada Copper.
Bonifacio says, noting that at least two of for $11.3 million, or 4.5 million units at The deal with Nevada Copper certainly
those groups are taking a serious look at $2.50 each. The units consist of one share places Capstone in a favourable position for
Pumpkin Hollow. and half a warrant, with each whole warrant an eventual takeover bid.
One state-owned Chinese company has exercisable at $3 for two years. If Capstone, “That’s why [the deal with Capstone]
already plowed some cash into Nevada exercises its options, and that certainly was done. [Capstone] obviously wants
Copper. In June 2009, Zhongtiaoshan Non- seems likely, Nevada Copper would net to do something, probably on a grander
ferrous Metals Group, or ZTS, bought an another $6.8 million. scale,” Bonifiacio says. “Anytime you do a
equity stake in the company via a US $2 That would give Capstone almost 17% deal that’s got non-aggression clauses on it
million convertible debenture, which is of Nevada Copper, roughly 2% shy of the and a director’s seat at a certain percentage
earning 7% per year and matures in late 19% it needs to get a board seat and access [of ownership] there’s a reason for that.”
2010. If ZTS converts the debenture into to all of Nevada Copper’s internal data. In Bonifacio says the deal gives Nevada
52 www.resourceworld.com February 2010
Copper almost enough cash to finance Another development scenario that leaves
operations through to a feasibility study out the open pit would cost US $162 million.
on Pumpkin Hollow, slated to be finished The mine life would be shaved by two years
by late 2010 or early 2011. A prefeasibility to 12 and production would increase in each
study is currently under way. of the first four years, from 2,500 tonnes per
Pumpkin Hollow, near Yerington, day in the first year to reach peak produc-
Nevada, in the walker lane mineralized tion of 7,500 tonnes per day in year four.
belt southeast of reno, is an iron oxide The company would mine 26 million
copper gold deposit (IOCG). It’s basically tonnes grading 1.95% copper to produce
a skarn system associated with a cluster 853 million lbs. copper. The cash costs
of porphyries. Most of the mineralization would be slightly lower at US $1.03 per
Giulio Bonifacio, President and
is in limestone, largely environmentally lb. At US $2.50 per lb. copper, the Irr is CEO of Nevada Copper Corp.
friendly waste rock. The site is also close 42%, and the NPv reaches US $414 mil- Photo by Jeremy Neiuwkirk.
to rail and power infrastructure. lion, using an 8% discount. The payback
resources at Pumpkin Hollow use a 0.20% period would be 2.6 years. probably the most-mining friendly state in
copper cut-off and are as follows: 125 million “The beauty of this asset is that it’s got America.
tonnes grading 0.67% copper for 1.671 bil- ‘optionality’… we can do it on a staged “The one negative I look at relative to
lion lbs. copper, 331,000 oz. gold, and 9.78 basis. You’ve got the ability to take it for- state-owned [Chinese] companies is that
million oz. silver in the measured category. ward in an underground scenario at a they take a long, long time [to make a deci-
Another 363 million tonnes running 0.54% significantly lower cap-ex – less than US sion],” Bonifacio says. “If you look at the
copper for 3.947 billion lbs. copper, 652,000 $200 million – and you could be very Corriente deal, that deal was ongoing for
oz. gold, 23.983 million oz. silver are clas- profitable at copper prices below US $2.00 a lengthy period of time, but at the end
sified as indicated. The inferred resource is a pound,” says Bonifacio. of the day, shareholders have been served
440 million tonnes grading 0.42% copper A study in March 2008 looked at a very well by that transaction.”
for 3.695 billion lbs. copper, 468,000 oz. 60,000-tonne-per-day combined open pit Others, too. when the Chinese firm
gold and 21.214 million oz. silver. The total and underground operation. In that case, Jinchuan bought Tyler resources’ and its
resource tallies to 9.3 billion lbs. copper, the NPv was US $552 million at US $1.75 Bahuerachi deposit in Mexico in 2008, it
1.45 million oz. gold, 55 million oz. silver per lb. copper or US $1.7 billion at US $3.00 paid about US 4.5¢ per lb. copper. Chinalco
and 130 million tonnes of contained iron per lb. copper. Both scenarios used an 8% paid about US 3.5¢ per lb. when it bought
in 361 million tonnes at an average grade of discount rate. The capital costs, though, Peru Copper in 2007. At presstime, shares
36% iron at a 20% iron cut-off. were estimated at US $780 million. in Nevada Copper were trading at around
An ongoing drill program is expected Bonifacio is a certified general accoun- $3.20, or roughly 1.5¢ per lb. of copper.
to convert a large portion of the inferred tant, and learned from Goldcorp’s Ian Telfer “This project is grossly undervalued,”
resources into the measured and indicated with vengold, a junior that had properties Bonifacio says, perhaps not taking into
categories. in the kilometre 88 district of venezuela. account that U.S. Steel Corp. [X-NYSE]
A recent study on Pumpkin Hollow Two other members of Nevada Copper’s has a 6% NSr on Pumpkin Hollow. The
examined a 7,500-tonne-per-day operation board, Joe kircher and Brian kirwin, were steel producer found Pumpkin Hollow
that would employ a high-grade starter also with vengold. The management team in 1960 using airborne geophysics, but
pit during the first three years of a 14-year at American Bonanza Gold is remarkably the major never developed the deposit.
mine life. The capital cost was US $192 mil- similar to that of Nevada Copper, if you A private company bought it from U.S.
lion at US $2.50 per lb. copper. The capital change some titles. kircher was once on Steel and in 2005 sold it to Bonifacio and
costs were also the same at US $2.00 per lb. the board, too. The recent sale of Corriente private interests, which then took it pub-
copper and US $3.00 per lb. copper. resources and its Mirador and Panantza-San lic through a shell company listed on the
In total, Nevada Copper would mine 34 mil- Carlos copper projects to China’s Tongling TSX venture Exchange known as a CPC.
lion tonnes grading 1.88% copper at a cash Nonferrous Metals Group Holdings Co. and The betting here is that it Pumpkin
cost of US $1.06 per lb. (including byproduct China railway Construction Corp. (through Hollow will see yet another owner before
credits). That would amount to almost 1.1 their jointly owned subsidiary CrCC- long, shopping or no shopping. n
billion lbs. copper. At US $2.50-per-lb. cop- Tongguan Investment Co.) bodes well for
per, the internal rate of return (Irr) is 44% Nevada Copper.
and the net present value (NPv) is US $498 Chinese investors are looking with
million at an 8% discount. It would take 2.4 increasingly regularity at large base metals
years to repay the capital costs. projects in safe jurisdictions, and Nevada is
February 2010 www.resourceworld.com 53
I N C A N A D A
BY BRIAN SYLVESTER in 2008 when Diamonds North drilled an hedging.
t was July 29 when an email appeared area with nickel potential. One hole re- “Anybody who was buying the stock
in my inbox from Diamonds North Re- turned roughly 2.5% nickel over 9 metres was getting a shot at diamonds but also a
sources (DDN-V). in a 35-metre zone containing 1.05% nickel shot at nickel,” Kolebaba says. “It diversifies
The junior had sent out a message from and 0.26% copper. (investors) within the company.”
president Mark Kolebaba telling sharehold- “Diamonds are not the most exciting
ers that while Diamonds North still consid- thing on the market right now,” Kolebaba
ered the Amaruk diamond project its top continues. “The majority of our sharehold-
priority, that the cash-starved junior would ers are 100% diamond-based, they don’t
continue to assess its “extensive diamond care about any other commodities. But they
property portfolio” for other commodi- do like that they have a shot at something
ties in these “unprecedented” economic else because they know (diamond explora-
conditions. tion is) high risk.”
And why not, in 2006 the junior spun During the previous five years, Dia-
out 1.62 million hectares of uranium po- monds North has outlined a copper-silver
tential in Nunavut to form Uranium North opportunity, 20 gold occurrences, about 10
Resources (UNR-V). nickel-copper prospects, and a couple more
The land Diamonds North gave up had that could host rare earth elements.
already been explored for diamonds and Diamonds North fed the market more
seemed to offer little gem potential. fruit from its commodity leveraging plan in
“When uranium was taking off, (raising mid-October when the junior announced
money for) diamonds was still quite tough. Photo Credit: Diamond North Resources that it had found gold in surface samples
And for us to have some uranium interests Mark Kolebaba, president, Diamond North (see story on page 22) at its PB1 gold pros-
got people looking at the stock again. It al- Resources pect at Amaruk.
lowed us finance and do what we do on the A continuous rock chip sample across
diamond side, as well as spin out a uranium Diamonds North dubbed it Tunerq and an oxidized sulphide zone on PB1 yielded
company,” Kolebaba explains. suddenly the diamond junior had a nickel 9.4 grams gold per tonne over 3 metres.
Uranium North has since completed play. The junior recently raised $500,000 A nearby grab sample offered more than
a National Instrument 43-101-compliant and Kolebaba says the nickel prospects twice that grade.
inferred mineral resource of 19.3 million helped get him the money. The news sent the shares to $0.32 on
lbs. uranium at a grade of 0.04% U3O8 “When we find something, we have two Oct. 19 from a close of $0.28 on Oct. 16,
(at a cutoff of 0.01% U3O8) for the Main choices: take it and try to add value for our and volume increased about tenfold. But
Zone deposit on its Amer Lake property shareholders, or leave it for somebody else,” after briefly flirting with $0.40, Diamonds
in Nunavut. Kolebaba argues. North shares closed the week at about the
The junior believes Main Zone is part Not every junior diamond explorer is same place they started.
of a much larger deposit on the property. spinning out companies but others, like While Kolebaba argues that this sort of
If that theory holds true, it would be good Arctic Star Diamond (ADD-V), are following leveraging pays dividends, other explorers
for both juniors. in the path of Diamonds North and giving prefer to steer clear of commodity lever-
Diamonds North once held about 10% base metals and gold discoveries top billing aging or risk alienating diehard diamond
of Uranium North (Kolebaba is president on press releases. investors.
and CEO of it, too) but has sold some That means some of Canada’s most “We never got to the stage where we
shares to help fund ongoing exploration promising diamond explorers are spending wanted to change strategy and start go-
work. Most of that cash — but not all of a lot of time and as much as one-quarter of ing after things other than diamonds,” ex-
it — went toward advancing Amaruk. Most their limited funds searching for commodi- plains Matt Manson, president and CEO
of the rest was spent examining the mam- ties that are not diamonds. of Stornoway Diamond (SWY-V). “We are
moth Amaruk claims for signs of nickel, Kolebaba doesn’t see it that way. To a diamond explorer and that’s what we do.
copper-silver and gold. him, leveraging other commodities on his Our shareholders invest in us because we’re
And those efforts paid modest dividends property is strategic, something akin to chasing after diamonds.”
16 Diamonds in Canada November 2009