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Gahcho Kue partner looks to new diamond project
Mountain Province Diamonds Inc. creating spin-off to focus on Kennady North Project, adjacent to De Beers joint-venture Gahcho KueThandiwe Vela Northern News Services Published Thursday, January 19, 2012
The junior exploration company announced last week it plans to create a spin-off company to focus on advancing its wholly-owned Kennady North Project, located immediately to the north and west of the Gahcho Kue reserve, which is 80 km southeast of De Beers' Snap Lake Mine, and about 280 km northeast of Yellowknife. On Jan. 12, the day Mountain Province announced the proposed spin-off, Kennady Diamonds Inc., its share price went up by $0.39 on the Toronto Stock Exchange. "In a sense, when we announced the spin-off our market capitalization went up by about $40 million dollars," president and CEO Patrick Evans said. "So you could say that the market value of Kennady North is about $40 million dollars. We're spinning Kennady Diamonds (Inc.) off tentatively to realize value for our shareholders in Kennady North ... They see value that Kennady North has the potential perhaps to become a mine one day and that's value that they hadn't prepared to give to Kennady North before. Everyone's attention was on Gahcho Kue." Tom Hoefer, executive director of the NWT and Nunavut Chamber of Mines, said the spin-off strategy being proposed by Mountain Province is not uncommon when a company wants to focus on a new exploration play, which is dwarfed by a much bigger ongoing project. "When you got this great big project, in comparison to this grassroots exploration, what can happen is the grassroots stuff kind of gets lost in that story," Hoefer said, noting what is material to shareholders is different to different companies, depending on size. "If they kept mixing that news in with their Gahcho Kue news, shareholders might not even read it. They might not read that far down because they're paying attention to the Gahcho Kue stuff. But now when they spin it off into a separate company, everything (the new company) does on that property will be material. And they'll be issuing press releases on it and they'll be generating news on it." The spin-off will bring higher profile to Kennady North, Hoefer said, and because it will be listed, they can raise money through that company specifically for their 100 per cent-owned project. Kennady North is part of the original area staked by Mountain Province from the early 1990s until 2004. In 1995, when Mountain Province discovered 5034 -- the first kimberlite at Gahcho Kue -- De Beers became a joint partner on that project, but that will not be the case this time, Evans said. "We don't need to bring in a partner to advance the Kennady North project, we can do that independently," Evans said. "That's 100 per cent Mountain Province and we intend to keep it 100 per cent Mountain Province." Kennady North is comprised of 13 leases across about 123 square km, and contains three known kimberlites, or diamond-bearing formations. A recent airborne gravity survey indicated 70 potential kimberlites, of which 29 are high priority targets, the company reported last December. Yellowknife-based Aurora Geosciences Ltd. has been retained to manage the Kennady North exploration program, which will tentatively include a 2012 drill program with a budget between $1 million and $1.5 million. The creation of the spin-off company has been approved by Mountain Province's board of directors and is subject to regulatory and court approval, in addition to shareholder approval at a special meeting set for April. Shares of Toronto-based Mountain Province Diamonds Inc. closed at $4.69 on Wednesday on the Toronto Stock Exchange.
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