The diamond and specialty minerals stocks box score on Friday was a positive 89-83-138 as the TSX Venture Exchange rose one point to 604. Rough diamond prices continue to stagnate in the wake of the all-time high set early in 2022. New York-based diamond analyst, Paul Zimnisky, says that his global rough diamond price index dropped another 0.1 per cent this week. Worse, late-to-arrive data prompted Mr. Zimnisky to lower the recent weeks on his chart, such that prices are now 12.9 per cent lower than the record high, a decline of 1.5 per cent from where the index stood two weeks ago. In fact, current rough diamond prices are barely higher than their 52-week low, set in the first week of January. The long-term chart offers an explanation about why diamonds are a tough sell with investors. Although prices are within hailing distance of their all-time high, long-term gains have been modest. From the previous peak set in 2011 to the 2022 high, prices added perhaps 15 per cent at best over the 11-year stretch. Meanwhile, Mr. Zimnisky's current calculations show that prices are now 15 per cent higher than in the spring of 2018 and 15 per cent above where they were in the spring of 2013. And so, all signs suggest that rough diamond price increases have fallen short of inflationary increases in prices, especially with inflationary costs associated with exploration and mining. And so, the rosy price escalation factors that nearly all diamond miners, explorers and promoters eagerly built into their dream sheets and feasibility studies for the past 15 years have woefully gone wrong, which in turn has led to disappointing performances by those companies -- and their shareholders -- banking on the studies. One company, Dermot Desmond's Mountain Province Diamonds Inc. (MPVD), was a $7 stock when its 49-per-cent-owned Gahcho Kue mine began production in the fall of 2016. Today, it fell 1.5 cents to 45.5 cents on 104,000 shares, as its average rough diamond prices remain well short of initial predictions. Mountain Province was lucky -- it had Mr. Desmond, an Irish billionaire, willing to carry the company through the dark days of 2020 -- but rival Stornoway Diamond Corp. was not so fortunate. Stornoway succumbed to bankruptcy three years ago, with its secured creditors taking over its Renard mine in Quebec. Renard is doing better now, but that is the result of a modest increase in rough diamond prices and the disappearance of the mountains of interest that Stornoway had to pay each year, rather than to Renard's rough prices coming anywhere near to the initial feasibility price forecasts. Rob Shewchuk's LithiumBank Resources Corp. (LBNK) leapt 33 cents to $1.55 on 1.2 million shares. The company has received a preliminary economic assessment of its Boardwalk lithium brine project in west-central Alberta, one of the company's two major deposits in the area. The study is based on an indicated resource of 1.03 billion cubic metres of brine at 71.6 milligrams of lithium per litre and another 16 billion cubic metres inferred at a slightly lower grade, about 6.2 million tonnes of lithium carbonate equivalent. And so, the plan is an energetic one, although as one would expect it comes with a capital cost not for the faint of heart, at nearly $2.1-billion (U.S.). That is the beauty of such studies -- and in part why they are called dream sheets -- as one can merely project numbers on a spreadsheet without worry about where the cash needed to build such a mine might be found. LithiumBank proposes a 20-year operation handling 250,000 cubic metres of brine per day -- or about 1.75 billion cubic metres, which would yield nearly 32,000 tonnes of battery-grade lithium hydroxide monohydrate per year, generating $813-million (U.S.) in revenue at projected prices. Despite the eyepopping revenues, the high costs and lower grades limit the bottom line to a discounted net present value (NPV) of $1.66-billion (U.S.) and an internal rate of return (IRR) of 17.8 per cent, after taxes. Mr. Shewchuk, chief executive officer, deems the study "a significant milestone for LithiumBank," adding that it sets the stage for him and his crew to "now pursue lithium resource development in Western Canada" with a significantly enhanced environmental, social and governance profile compared to other forms of lithium mining. When one is dreaming, one may as well dream big, and so Mr. Shewchuk plans to leverage this study to expedite another one covering the company's Park Place project, 50 kilometres to the south. (Park Place does not yet have a formal resource estimate, but it appears big as well.) And so, Mr. Shewchuk, head of a company with $2.7-million in working capital at the end of 2022, and which just raised $6.9-million in a recent charity flow-through placement, will be contemplating two multibillion-dollar projects. By the end of 2023, he says, LithiumBank expects to begin pilot plant studies on both Boardwalk and Park Place in tandem while he and his crew will also be "working to capture the near-term enhancement opportunities" that he expects will "drive significant incremental NPV and IRR performance." Mark Smith's Niocorp Developments Ltd. (NB) rose nine cents to $7.10 on 20,000 shares. Niocorp fell 38 cents Thursday to $6.98 on 34,000 shares on word its demonstration plant testing in Trois Rivieres has successfully demonstrated the ability to recover greater amounts of critical mineral niobium from each tonne of ore that the company hopes to mine at Elk Creek in Nebraska. Essentially, the new process boosts recovery rates by about 4 per cent into the high eighties. Mr. Smith, CEO and executive chairman, was "very pleased" with the results, which, he says, "point strongly to the likelihood of Niocorp producing more niobium from each tonne of ... ore." This, he cheers, could have a positive effect on the anticipated overall financial returns. (More niobium means more revenue, the question is what the new method does on the cost side of the equation.) When Elk Creek cleared feasibility nearly a year ago, based on the old process, the project listed a reserve of 36.7 million tonnes grading 0.81 per cent niobium oxide, 2.92 per cent titanium oxide and 70.2 grams of scandium per tonne. Veteran shareholders will recall Elk Creek was initially a niobium project, but Mr. Smith added scandium and titanium later. Most recently, he has also been touting the potential to extract rare earth elements from the rock. The study proposed a mine running at 3,000 tonnes per day for 38 years -- and perhaps centuries if the operation expands to consume the full resource of nearly 300 million tonnes of lower-grade rock. The bottom line of just the reserve was pleasant, with a discounted net present value of $2.35-billion (U.S.) and an internal rate of return of 27.6 per cent after taxes. The rare earths and improved niobium recoveries could boost the bottom line, but it could also juice the $1.14-billion (U.S.) capital cost. |
