Kennady sees 2.6 carats
CEO says results give 'increased confidence'
Karen K. Ho
Northern News Services
Friday, October 16, 2015
NORTHWEST TERRITORIES
Kennady Diamonds Inc.'s latest diamond recovery results show a sample grade of 2.6 carats per tonne of commercial size diamonds.
Diamonds extracted from Kennady's Kelvin kimberlite, a kind of rock that sometimes contains diamonds, are showing sample grade results of 2.6 carats per tonne, according to Kennady Diamonds. - photo courtesy of Kennady Diamonds
|
"This gives us increased confidence that we're talking about a region that averages 2.6 carats per tonne," said CEO Patrick Evans, adding that the latest results from Kelvin were important in that they ranged closely to the three previous samples taken from the site which yielded grades of 2.57 carats per tonne, 2.74 carats per tonne and 2.59 carats per tonne.
The sample came from 2.4 tonnes of kimberlite, a kind of rock that sometimes contains diamonds, taken from their spring core drilling program from a site called the Kelvin north lobe.
By comparison, the nearby Gahcho Kue diamond mine being constructed in a joint partnership between De Beers Canada and Mountain Province Diamonds currently has a grade of 1.5 carats per tonne.
Evans said the company is now planning to gather a 500-tonne bulk sample from the same site through drilling during the winter of next year and its expects similar diamond sample grade results.
"We're also going to do a 200-tonne bulk sample on Faraday 2," he said.
When it comes to the economic viability of a project, Evans said the three variables are grade, expected revenue per carat and operating costs.
"Because Gahcho Kue is so very far advanced we have a very good idea of what the operating costs will be at Kennady," he said. "With the current exchange rate we expect the operating costs to be $55 USD a tonne. That's the critical starting point - how much is it going to cost for you to mine and extract the diamond from the tonne of kimberlite?"
With a base cost of $55 USD a tonne, Evans said if Kennady was to take 2.5 carats per tonne as their grade for the project overall, and take in a low revenue assumption of $50 a carat, the high grade would give a "rock value" of $125 per tonne which is the value of the commodities to be extracted. This would mean each tonne would bring $70 per tonne after the costs of extraction are factored in. That number is defined as the operating margin.
"That's really how the economics of a mine are calculated," he said. "What your rock value is per tonne and what it costs to mine that."
"If the diamond value came in at the same value as Gahcho Kue which is $150 per carat, then of course the profit margin just skyrockets," he said. "The high grade gives us the potential for a very high operating margin even at low diamond prices. That's why people always say at the end of the day the most important thing is grade."
Evans said having a high grade also gives a project "a tremendous amount of operating flexibility," even in periods when diamonds prices are quite low because companies will still be able to be profitable.
Kennady Diamonds expects to report a resource statement as part of it's obligation to fundraisers for the Kelvin kimberlite before the end of 2015. The resource statement will state specific measurements and estimations of the amount of diamonds contained within the Kelvin kimberlite.
Kennady also recently announced it had completed a round of fundraising totalling more than $48 million. The company did so through the closure of the second and final portion of its previously announced private sale of common shares. Through both portions, Kennady issued 15.4 million common shares and 1.7 million flow-through common shares for total gross proceeds of $48.1 million. Flow-through shares entitle the shareholder to claim tax deductions or credits.
Evans said funds from the private placement will be used to finance all parts of the company's Kennady North Project until the end of 2017, including drilling and bulk sampling, site evaluation, a preliminary economic assessment to be done early next year, a definitive feasibility study in the second half of 2016, permitting and for general corporate purposes.
"All of that will put us in a position by the end of 2017 to make a decision to build," he said.
The drilling program includes exploration, and geotechnical drilling at the Kelvin, Faraday, MZ and Doyle kimberlites, sites of rock that sometimes contain diamonds. The bulk sampling includes bulk sampling of the Kelvin north lobe and the Faraday kimberlites. The evaluation program includes processing of kimberlite and the valuation of diamond parcels.
When it comes to spending the funds, Evans said that the location of Kennady North being adjacent to Gahcho Kue "helps immensely" in terms of infrastructure.
"We've got an ice road going right past Kennady for at least the next 20 years," he said.
