Spec Value Hunter Comment - December 22, 2011: Mountain Province has targets on its 100% owned Kennady North project
Mountain Province Diamonds Inc announced on December 22, 2011 that it had identified 29 high priority geophysical targets on its 100% owned Kennady North property adjoining the 49:51 Gahcho Kue joint venture with De Beers in the Northwest Territories. According to CEO Patrick Evans most of the targets are covered by water, correlate well with unresolved indicator mineral trains generated through till sampling prior to 2002 when De Beers shifted its exploration focus to developing the main Gahcho Kue pipes, have pipe like or blow style surface impressions with a size range of smaller to somewhat larger than the Gahcho Kue pipes, and coincide well with anomalies interpreted from previously collected electromagnetic geophysical data. Mountain province has applied for a land use permit which is unlikely to be received in time to mobilize a winter drilling program, but the junior does plan to initiate a $2 million summer drilling program that will use angled holes to test near shore water covered targets. The targets were generated through a Falcon airborne gravity gradiometry survey flown by Fugro during the fall. De Beers is still evaluating the results of a similar survey flown on the joint venture ground; it will be interesting to see what sort of targets De Beers deems worthy of followup. Evans is particularly intrigued by what the gravity survey has revealed about the northeast-southwest trend that hosts the Kelvin, Hobbes and Faraday kimberlites, hitherto interpreted as blows on a dyke system. Micro diamond results from fairly small samples indicated macro grade potential in excess of 100 cpht, but for unexplained reasons De Beers chose not to follow the results with further work, and eventually decided not to include these claims in its mining lease application. As a result Mountain Province was allowed to keep the claims alive on a 100% ownership basis. The survey suggests that the Faraday drilling knicked the edge of what might qualify as a pipe rather than a blow. For now Mountain Province receives zero value for this potential, but management has indicated that it is considering spinning off the Kennady North project as a separate company prior to hunkering down in the Gahcho Kue construction phase. The permitting cycle has now closed the review registration stage; oddly, no NGO's have registered, just various government departments and First Nations groups who are actual stakeholders in the development of a diamond mine in the Arctic. Evans indicates that a worst case scenario would be mine approval in mid 2013, but is hopeful it could come by the end of 2012.
Mountain Province has been an open bottom-fish position since being recommended as a top priority bottom-fish buy in the $0.50-$0.75 range on December 20, 2001, and it is now time to close out the bottom-fish cycle at $3.98 to record a 430% gain from the $0.75 bottom-fish buy limit with an interim peak of $6.65 in late 2010. On June 2, 2009 I issued a Good Absolute Spec Value Buy at $1.52 after Mountain Province secured a deal with De Beers that clarified its entitlement to receive diamonds in kind and its status as a 49% working interest partner. The diamond marketing rights were a significant milestone because this made ownership of Mountain Province's 49% stake in Gahcho Kue commercially interesting to downstream participants in the diamond supply pipeline, especially given evidence that the Gahcho Kue kimberlites have a sub-population of large, very high quality diamonds of the sort that upscale diamond retailer Harry Winston wishes Diavik would produce. Mountain Province's status as a funding partner, but not operator of Gahcho Kue, makes it of interest to downstream entities such as Hong Kong based Chow Tai Fook Jewelry Group, which on December 14 completed an IPO at $15 HK that raised US $2 billion and valued the world's largest jewelry retailer at $19 billion, more than double the value of Tiffany. There have been rumblings that Chow Tai Fook undertook this IPO to raise capital for a move upstream; since it has no operational experience, but apparently ranks among De Beers' biggest sight holders, making a bid for Mountain Province to become a 49% partner in a new De Beers run Canadian diamond mine that spits out the sort of diamonds in high diamond in Asia would be a plausible possibility. I am maintaining my Good Absolute Spec Value Buy at $3.98 with a two year target in the $10-$12 range based on timely approval of the Gahcho Kue mine, possible extension of the overall mine life by the Tuzo Deep drilling still underway, and an escalation of interest in the diamond sector as new players jockey for a role as BHP Billiton exits the diamond business. Furthermore, while waiting for the permitting and construction stages of the diamond cycle to unfold ranks with watching paint dry, exploration of new targets on the 100% owned Kennady North claims and possibly on the joint venture ground could inject a level of excitement that has been missing from this play since 2005 when De Beers shifted into development mode.
*JK owns shares in Mountain Province Diamonds Inc