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Diamond & Specialty Minerals Summary for January 27, 2023

by Will Purcell

The diamond and specialty minerals stocks box score on Friday was a positive 113-81-116 as the TSX Venture Exchange rose fractionally to 622. Oops -- that was a short-lived rally in rough diamond prices. Paul Zimnisky's global rough diamond price index followed last week's 0.6-per-cent increase with a 0.2-per-cent drop this week.

And that is not all: The New York-based Mr. Zimnisky regularly readjusts his chart with late-to-arrive data, and that tardy new information wiped out most of the previous week's gain. And so, Mr. Zimnisky's index is now down 12.5 per cent from its all-time high, set in mid-February last year. The good news is that is still a full percentage point better than two weeks ago, when the readjustment pushed his index to 13.5 per cent below the high.

Where to from here, weary diamond promoters and miners undoubtedly ask, but there is little solace in the chart, other than a hint of a flattening in the decline if one squints long and hard at its squiggly, southbound line. Indeed, longer-term trends in rough diamond prices no longer look as enticing now as they did a year earlier, when they were at least matching inflation. Mr. Zimnisky now says prices are just 17.5 per cent higher than in early 2018, roughly on pace with inflation, but are up only 14.3 per cent over their early 2013 level.

The regular sales of rough diamond production by De Beers show a disquieting pattern. The company had a marked increase with its first sale of 2022, and sales peaked during the summer with three consecutive offerings averaging over $640-million (U.S.). Revenues have been declining since then, falling to just $410-million (U.S.) in its last sale of 2022. Analysts attributed the decline to China's economic slowdown and to the high cost of rough translating into less demand for jewellery.

On the mining front, Rio Tinto's now 100-per-cent-owned Diavik mine is shuffling inexorably toward its demise. Nevertheless, while its carat haul is a far cry from the glory days 15 years earlier, a rebound in production and last year's surge in prices both did well for the company. (Montana-based billionaire, Dennis Washington, may wish to look away now: He is the fellow who spent several hundred million dollars of his own money -- and incurred several hundred million more in debt -- to take Dominion Diamonds Inc. private in a $1.2-billion (U.S.) going private acquisition six years ago, only to have the company succumb to bankruptcy in 2020.)

Arctic Canada Diamonds Co., an entity created by Dominion's primary unsecured creditors, rescued the Ekati mine from the throes of Dominion's bankruptcy, but it chose not to bid for Dominion's 40-per-cent share of the Diavik mine, which was left like an orphan at the window, watching forlornly for a new family. Even Rio Tinto, which owned the remaining 60-per-cent, had refused to bid on acquiring the rest because of the looming closure costs, but it was eventually obliged to do so.

So far it is looking like a worthwhile arrangement. Diavik produced 4.65 million carats in 2022, within its guidance of 4.5 million to five million carats but well short of the 5.84 million carats it produced in 2021 and less than half the record 12 million carats the mine produced in 2008. The tonnage of kimberlite processed was one reason for the drop -- Diavik handled just 2.16 million tonnes last year, down from 2.54 million tonnes in 2021 -- but grade was another factor as mining progressively shifted to lower-grade areas.

Diavik averaged just 215 carats per hundred tonnes in 2022, compared with 230 carats per hundred tonnes the year before, although shifts in production areas yielded a variable result. The mine achieved 247 carats per hundred tonnes in the last quarter of 2022,compared with a low of 200 carats per hundred tonnes in the first and third quarters of the year.

Nevertheless, Rio Tinto sold $465-million (U.S.) of diamonds in the first half of 2022, which suggests, given that the company sold 2.14 million carats from Diavik, that it averaged about $217 (U.S.) per carat. If so, then most of the Diavik diamonds would appear to be coming from the lower-grade but higher value A-154 North pipe, now on the last legs of underground mining, rather than from the higher-grade but lower-value A-21 pipe. At last report -- late last year -- Diavik was to meet its maker in 2025.

Nikolaos Cacos's Argentina Lithium & Energy Corp. (LIT) lost one cent to 32 cents on 219,000 shares on word it has received "positive lithium brine values" from its Rincon West project in northern Argentina. While lithium values cannot be negative in the mathematical sense, Mr. Cacos, president and chief executive officer, uses the term in a promotional context, one where most any value can be spun as positive, so long as sufficient enthusiasm is applied to the wheel.

This new hole, the sixth so far, returned up to 393 milligrams per litre of lithium over a 153-metre interval, and Miles Rideout, vice-president of exploration, led the cheering. He says the new hole was drilled as a 960-metre stepout from the company's fourth hole, previously its best so far. No more: Mr. Rideout now gushes that this new "remarkable interval" is the best to date.

The company also has results from its fifth hole, drilled 1,700 metres farther southwest to test the western limit of the brine. It did hit lithium, but nothing worthy of Mr. Rideout's enthusiasm. He will have more chances to spout gushers of excitement, as a seventh hole is nearly complete and an eighth and ninth are planned. These holes, he concludes, will be located to further delineate the brine aquifer.

George Sookochoff's Belmont Resources Inc. (BEA) closed unchanged at five cents on 13,000 shares. The company has the last assays from drilling at its Kibby basin lithium brine project in Nevada. (The work is being done by Australia-based Marquee Resources Ltd. under an option arrangement that would allow it to earn an 80-per-cent interest in the project.)

Mr. Sookochoff, Belmont's president and CEO, did not qualify his assays as positive, despite values in the two holes ranging being nearly triple those of Argentina Lithium in both thickness and maximum grade. A 487-metre interval in the first hole averaged 383 ppm and managed 771 pm lithium across a 79-metre subsection. The second hole, drilled 2,000 metres away, did much the same -- or arguably better -- with a 169-metre subsection averaging 558 ppm lithium.

With the mineralized intervals in the first two drill holes showing good and consistent grades over thick intervals across a two-kilometre horizontal distance, Mr. Mr. Sookochoff matter-of-factly says the results suggest "extensive lateral occurrence across the basin" -- stilted prose that a more-at-ease promoter might cheer as "there could be a lot of lithium here." Naturally, Mr. Sookochoff is eagerly looking forward to Marquee getting back to work this year at Kibby.

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