Owner
Post by Franko10 ™ on Feb 4, 2005 11:33:19 GMT -5
Diagem plans for Brazil production
2005-02-03 15:07 ET - Street Wire
by Will Purcell
Dr. Mousseau Tremblay, David Cohen and Richard Renaud's Diagem Inc. has a plan that will allow it to start producing diamonds from its Property 1000 project in Brazil. The company has an intriguing resource of diamond-bearing alluvial gravels outlined on the 900-hectare property, but regulatory difficulties gummed up its earlier plans. Diagem now thinks it has a way around those difficulties. The new plan will cost the company a share of the project, but should provide cash flow at a much faster pace. That will allow the company to keep plugging away on its other plays.
The project
The Property 1000 project lies in the northern part of Mato Grosso, in western Brazil, not far from the Bolivian border. The town of Juina is about 50 kilometres to the east, but the region is remote. "We are really in the boondocks," said Dr. Tremblay, until recently the president of Diagem.
Diagem picked up the Property 1000 play when it merged with Emerging Africa Gold Inc. in 2002. That company acquired a 51-per-cent interest in the project two years earlier, through an arrangement with Juina Mining Corp., a company listed on the mighty pinks in the United States, where it trades at a not-so-mighty six U.S. cents. Juina still holds a 49-per-cent slice of the property.
The project did not command a large purchase price. To acquire its share, Emerging Africa did agree to pay $500,000 (U.S.) to Juina, but the company earmarked the cash for paying off existing debts and for sufficient working capital to resume exploration on the property.
The play provided Emerging Africa with some instant promotability, despite the modest price. The company chatted up four anomalies thought to be kimberlites, including one that yielded a diamond grade that it described "in the multicarat per cubic metre range." As well, there was a known resource of alluvial gravels on the play.
It is the latter deposit that is now of particular importance to Diagem. Juina processed 2,163 cubic metres of gravel taken from 16 pits on Property 1000. The rock yielded 2,359 carats of diamonds, which was good for a grade of about 1.09 carats per cubic metre, or roughly 0.55 carat per tonne.
That was encouraging, and Diagem collected another 290 cubic metres of the material from an additional six pits during 2002. That rock was less lucrative, but it still coughed up 133.7 carats, which was good for a grade of 0.46 carat per cubic metre, or about 0.23 carat per tonne.
In all, the 22 pits produced nearly 2,500 carats from 2,453 cubic metres or rock, pointing to a grade of about 1.02 carat per cubic metre, or 0.51 carat per tonne. That cumulative result forms the basis for Diagem's indicated resource at Property 1000. The company believes it has about one million cubic metres of diamondiferous gravels, containing roughly one million carats of diamonds.
That seems an encouraging tally, as alluvial diamonds often command premium prices. Diamonds can have a rough ride during the erosion and transportation process, and that can be a key factor creating the premium price. Stones with flaws break easily, and a lengthy journey would enhance the process, destroying the poorer stones.
Because of that, an inordinate proportion of large, quality gems typically make up an alluvial deposit. As a result, many alluvial gravel layers contain diamonds worth well over $100 (U.S.) per carat, and occasionally more than triple that figure.
Diagem understandably touts the diamond grade at Property 1000, but the company is less chatty about the corresponding diamond value. The company pegged the value of its alluvial diamonds at a decidedly modest $30 (U.S.) per carat.
Dr. Tremblay said that "in our place, they are mostly industrial stones." He added that an evaluation of over 7,000 carats produced the $30 (U.S.) valuation, although he was hopeful that some larger stones would boost the figure significantly. He added that a 25-carat stone found during their first crack at production helped inflate the average value to at least $40 (U.S.) per carat. That is encouraging, but it remains unclear if that find was a fortunate fluke, or a harbinger of better things to come.
There was a considerable degree of variability within the diamond tallies from the 22 pits. One pit yielded a grade of just 0.02 carat per cubic metre, while another topped the three-carat-per-cubic-metre mark. In all, only five of the pits had a grade above one carat per cubic metre, while a similar number had a diamond content below 0.25 carat per cubic metre.
That latter figure could be significant. Dr. Tremblay said that he expected the break-even point for a Property 1000 mine would lie at about one-quarter of a carat per cubic metre. He stated that if the diamonds were worth $30 (U.S.), a grade of about one-third of a carat per cubic metre would result in revenues of approximately $10 (U.S.) per cubic metre. On the other side of the equation, Dr. Tremblay figured that operating costs would run around $7 (U.S.) per cubic metre.
He based his operating cost projection on the nature of the alluvial deposit, which lies close to the surface. He said the open pit operation would not require a deep dig, perhaps down to 10 metres at the most. Combined with cheap labour costs in Brazil, a mine should be able to run quite efficiently.
The plan
Still, Diagem encountered several twists in the road to production. Late in 2002, the company decided to sell back its interest in the play to Juina, this time for $700,000 (U.S.). Juina was unable to come up with the cash to complete the deal, and the two companies came to an alternate arrangement in the summer of 2003. As a result, Diagem eventually kept its piece of the project.
In mid-2002, Diagem and its partner received the required operating permits to process 15 mini-bulk samples from a series of pits. The partners completed only five of the tests by October, when they had to suspend the program. The stoppage was the result of an embargo that the environmental authorities in Brazil suddenly imposed. That ban on work remains in effect.
Nevertheless, Diagem and its partner think they have a way out of regulatory limbo. The partners applied for a mining licence on the play, and that will apparently end the embargo. Still, Dr. Tremblay said that it would take at least a year, and possibly more than two years for it to receive the licence.
Meanwhile, Diagem and Juina found a method to get a part of the project into production on a much faster pace. Dr. Tremblay said that the partners carved off a 50-hectare slice of the project and offered a joint venture arrangement to a small local company. That deal gives the Brazilian miner a 50-per-cent share of the little block, which is covered by a mining licence granted to small operators. That little company, Mineradora ECO, thinks it can solve the problem and start production this month.
That does not end the delay on the remaining 850 hectares of Property 1000, but Dr. Tremblay said that Diagem and its partner were considering adding some new arrangements with the same company, or possibly one or two others. As a result, Diagem and Juina could see production begin on about 15 per cent of the play much faster than if they waited for their own mining licence.
The downside to the move is that Diagem and its partners will have a reduced interest in the portions of the play covered by the local agreements. The joint venture arrangements require the local companies to pay half the costs, Dr. Tremblay said, but they also force the companies to give their Brazilian partner half of the revenues.
That will leave Diagem with just a one-quarter share of the cash flow from Property 1000 for the foreseeable future. Still, Dr. Tremblay was optimistic that Diagem would eventually be mining on its own. "Eventually the ban will be lifted," he said, adding that the environmental people could not keep the embargo forever.
The cash from the local deals should help the company with its sampling plans on several other targets. Dr. Tremblay said there were 16 kimberlite pipes on Diagem's properties and the company had plans to mini-bulk test several of the bodies. He said the tests could contain as much as 500 cubic metres, to come up with a good proportion of larger diamonds. Diagem plans to sample one pipe per month, according to Dr. Tremblay. As well, Diagem has several alluvial deposits elsewhere in the region. The company holds 100-per-cent interests in its other properties. Those plays will also be a priority for Diagem in the coming months.
The players
A geologist by trade, Dr. Tremblay has long been a diamond hunter. He worked for De Beers for nearly 15 years and set up the diamond giant's North American exploration program. He struck out on his own after that, running his own consulting operation.
Dr. Tremblay is also no stranger to the promotional side of things. In 1993, he became a director of KWG Resources Inc., which was an active diamond hunter at the time. He also served as a director of KWG's sister company, Spider Resources Inc., through the latter half of the 1990s. In 2000, he became a director and the president of Emerging Africa, another KWG sister. He moved into the top office of Diagem in the spring of 2003.
Dr. Tremblay stepped down as president late last year, but becomes chief executive officer and chairman of the company. Paulo Andreazza, another experienced diamond hunter, took his place as president. Mr. Andreazza explored for gems with Rio Tinto in Brazil until he became exploration manager for Diagem in 1998.
Diagem added two cents on Wednesday, closing at 21 cents.
2005-02-03 15:07 ET - Street Wire
by Will Purcell
Dr. Mousseau Tremblay, David Cohen and Richard Renaud's Diagem Inc. has a plan that will allow it to start producing diamonds from its Property 1000 project in Brazil. The company has an intriguing resource of diamond-bearing alluvial gravels outlined on the 900-hectare property, but regulatory difficulties gummed up its earlier plans. Diagem now thinks it has a way around those difficulties. The new plan will cost the company a share of the project, but should provide cash flow at a much faster pace. That will allow the company to keep plugging away on its other plays.
The project
The Property 1000 project lies in the northern part of Mato Grosso, in western Brazil, not far from the Bolivian border. The town of Juina is about 50 kilometres to the east, but the region is remote. "We are really in the boondocks," said Dr. Tremblay, until recently the president of Diagem.
Diagem picked up the Property 1000 play when it merged with Emerging Africa Gold Inc. in 2002. That company acquired a 51-per-cent interest in the project two years earlier, through an arrangement with Juina Mining Corp., a company listed on the mighty pinks in the United States, where it trades at a not-so-mighty six U.S. cents. Juina still holds a 49-per-cent slice of the property.
The project did not command a large purchase price. To acquire its share, Emerging Africa did agree to pay $500,000 (U.S.) to Juina, but the company earmarked the cash for paying off existing debts and for sufficient working capital to resume exploration on the property.
The play provided Emerging Africa with some instant promotability, despite the modest price. The company chatted up four anomalies thought to be kimberlites, including one that yielded a diamond grade that it described "in the multicarat per cubic metre range." As well, there was a known resource of alluvial gravels on the play.
It is the latter deposit that is now of particular importance to Diagem. Juina processed 2,163 cubic metres of gravel taken from 16 pits on Property 1000. The rock yielded 2,359 carats of diamonds, which was good for a grade of about 1.09 carats per cubic metre, or roughly 0.55 carat per tonne.
That was encouraging, and Diagem collected another 290 cubic metres of the material from an additional six pits during 2002. That rock was less lucrative, but it still coughed up 133.7 carats, which was good for a grade of 0.46 carat per cubic metre, or about 0.23 carat per tonne.
In all, the 22 pits produced nearly 2,500 carats from 2,453 cubic metres or rock, pointing to a grade of about 1.02 carat per cubic metre, or 0.51 carat per tonne. That cumulative result forms the basis for Diagem's indicated resource at Property 1000. The company believes it has about one million cubic metres of diamondiferous gravels, containing roughly one million carats of diamonds.
That seems an encouraging tally, as alluvial diamonds often command premium prices. Diamonds can have a rough ride during the erosion and transportation process, and that can be a key factor creating the premium price. Stones with flaws break easily, and a lengthy journey would enhance the process, destroying the poorer stones.
Because of that, an inordinate proportion of large, quality gems typically make up an alluvial deposit. As a result, many alluvial gravel layers contain diamonds worth well over $100 (U.S.) per carat, and occasionally more than triple that figure.
Diagem understandably touts the diamond grade at Property 1000, but the company is less chatty about the corresponding diamond value. The company pegged the value of its alluvial diamonds at a decidedly modest $30 (U.S.) per carat.
Dr. Tremblay said that "in our place, they are mostly industrial stones." He added that an evaluation of over 7,000 carats produced the $30 (U.S.) valuation, although he was hopeful that some larger stones would boost the figure significantly. He added that a 25-carat stone found during their first crack at production helped inflate the average value to at least $40 (U.S.) per carat. That is encouraging, but it remains unclear if that find was a fortunate fluke, or a harbinger of better things to come.
There was a considerable degree of variability within the diamond tallies from the 22 pits. One pit yielded a grade of just 0.02 carat per cubic metre, while another topped the three-carat-per-cubic-metre mark. In all, only five of the pits had a grade above one carat per cubic metre, while a similar number had a diamond content below 0.25 carat per cubic metre.
That latter figure could be significant. Dr. Tremblay said that he expected the break-even point for a Property 1000 mine would lie at about one-quarter of a carat per cubic metre. He stated that if the diamonds were worth $30 (U.S.), a grade of about one-third of a carat per cubic metre would result in revenues of approximately $10 (U.S.) per cubic metre. On the other side of the equation, Dr. Tremblay figured that operating costs would run around $7 (U.S.) per cubic metre.
He based his operating cost projection on the nature of the alluvial deposit, which lies close to the surface. He said the open pit operation would not require a deep dig, perhaps down to 10 metres at the most. Combined with cheap labour costs in Brazil, a mine should be able to run quite efficiently.
The plan
Still, Diagem encountered several twists in the road to production. Late in 2002, the company decided to sell back its interest in the play to Juina, this time for $700,000 (U.S.). Juina was unable to come up with the cash to complete the deal, and the two companies came to an alternate arrangement in the summer of 2003. As a result, Diagem eventually kept its piece of the project.
In mid-2002, Diagem and its partner received the required operating permits to process 15 mini-bulk samples from a series of pits. The partners completed only five of the tests by October, when they had to suspend the program. The stoppage was the result of an embargo that the environmental authorities in Brazil suddenly imposed. That ban on work remains in effect.
Nevertheless, Diagem and its partner think they have a way out of regulatory limbo. The partners applied for a mining licence on the play, and that will apparently end the embargo. Still, Dr. Tremblay said that it would take at least a year, and possibly more than two years for it to receive the licence.
Meanwhile, Diagem and Juina found a method to get a part of the project into production on a much faster pace. Dr. Tremblay said that the partners carved off a 50-hectare slice of the project and offered a joint venture arrangement to a small local company. That deal gives the Brazilian miner a 50-per-cent share of the little block, which is covered by a mining licence granted to small operators. That little company, Mineradora ECO, thinks it can solve the problem and start production this month.
That does not end the delay on the remaining 850 hectares of Property 1000, but Dr. Tremblay said that Diagem and its partner were considering adding some new arrangements with the same company, or possibly one or two others. As a result, Diagem and Juina could see production begin on about 15 per cent of the play much faster than if they waited for their own mining licence.
The downside to the move is that Diagem and its partners will have a reduced interest in the portions of the play covered by the local agreements. The joint venture arrangements require the local companies to pay half the costs, Dr. Tremblay said, but they also force the companies to give their Brazilian partner half of the revenues.
That will leave Diagem with just a one-quarter share of the cash flow from Property 1000 for the foreseeable future. Still, Dr. Tremblay was optimistic that Diagem would eventually be mining on its own. "Eventually the ban will be lifted," he said, adding that the environmental people could not keep the embargo forever.
The cash from the local deals should help the company with its sampling plans on several other targets. Dr. Tremblay said there were 16 kimberlite pipes on Diagem's properties and the company had plans to mini-bulk test several of the bodies. He said the tests could contain as much as 500 cubic metres, to come up with a good proportion of larger diamonds. Diagem plans to sample one pipe per month, according to Dr. Tremblay. As well, Diagem has several alluvial deposits elsewhere in the region. The company holds 100-per-cent interests in its other properties. Those plays will also be a priority for Diagem in the coming months.
The players
A geologist by trade, Dr. Tremblay has long been a diamond hunter. He worked for De Beers for nearly 15 years and set up the diamond giant's North American exploration program. He struck out on his own after that, running his own consulting operation.
Dr. Tremblay is also no stranger to the promotional side of things. In 1993, he became a director of KWG Resources Inc., which was an active diamond hunter at the time. He also served as a director of KWG's sister company, Spider Resources Inc., through the latter half of the 1990s. In 2000, he became a director and the president of Emerging Africa, another KWG sister. He moved into the top office of Diagem in the spring of 2003.
Dr. Tremblay stepped down as president late last year, but becomes chief executive officer and chairman of the company. Paulo Andreazza, another experienced diamond hunter, took his place as president. Mr. Andreazza explored for gems with Rio Tinto in Brazil until he became exploration manager for Diagem in 1998.
Diagem added two cents on Wednesday, closing at 21 cents.
