Spec Value Hunter Comment - May 22, 2012: Update on KDI spinout and Tuzo Deep
Further to my May 11, 2012 comment on Mountain Province Diamonds Inc, the spinout of Kennady Diamonds Inc on a 1 KDI for 5 MPV is now in the hands of the TSXV. Once the TSXV assigns a conditional listing management will set the record date for the spinout, with trading of KDI expected to start on the effective date, possibly by the end of May. KDI also expects that its land use permit application for Kennady North will be dealt with by the NWT regulators on June 6, with crew mobilization underway shortly thereafter if approval is received. KDI plans to focus this summer and winter on testing new targets and delineating the Kelvin-Faraday-Hobbes system before considering other projects. With regard to the Tuzo Deep volume estimate, it has been delayed from the end of May to the end of June because the contacts between kimberlite and country rock do not appear to have been properly logged; in other words, the kimberlite intercepts reported on April 12 may be less than is actually the case. Several batches of core have already undergone caustic fusion for micro diamonds, so this will not delay news about macro grade potential. In my May 11, 2012 Spec Value Hunter Comment I provided estimates based on reported drill intercepts and the assumption that the holes were drilled at a 50 degree angle. I have since discovered that the azimuth and inclination data for the holes was in the original Mountain Province news release, but these columns were missing in the table in the Stockwatch news release. So, lesson learned, when a news release matters, rely only on the Stockwatch version as the cue to seek out the original, which is unfortunate because juniors rarely post the original news releases on SEDAR and their web sites as swiftly as Stockwatch provides its rendition of the news release (though that excuse does not apply in this case of an older news release).
The holes were drilled at 55 to 65 degree angles, which changes the calculated range of pipe diameters to 106.3 - 123.6 metres compared to 136.3 - 138.6 metres using a 50 degree angle. This calculation assumes the pipe is vertically cylindrical at depth and was hit dead centre by the holes. According to Patrick Evans only a couple holes appear to have hit dead centre, #324C which hit at a vertical depth of 320.3 m for a calculated width of 121.6 m, and #328C at a vertical depth of 671 m whose calculated width worked out to 123.7 m. However, Evans also indicated that the angle of the drill holes flattened as they entered the kimberlite. This flattening coupled with the possibility that the kimberlite intercepts are longer than reported would increase the calculated width. In any case, the angle adjustments reduce the worst case extra tonnage estimate from 10.9 million to 9 million tonnes, with room for improvement once the intercepts have been surveyed and properly logged. The key milestone will be micro diamond confirmation that Tuzo Deep has the same 175 cpht plus grade as the 300-350 m portion of the pipe where country rock inclusions no longer play a dilutionary role.
With regard to the exploratory targets on the Gahcho Kue joint venture ground, Patrick Evans informs me while he wished he could claim otherwise, the ideas for both the airborne ground gravity survey and Tuzo Deep came from within De Beers, not the junior. It is not clear when De Beers will mobilize a drill program, but the instigation for the geophysical survey was concern that facilities or waste dumps might be built on top of lucrative diamond pipes. Since mine approval is hoped for by mid 2013, one can expect De Beers to drill the joint venture targets sooner than later.
*JK owns shares in Mountain Province Diamonds Inc