CGW Street Wire

New Shoshoni finds some hope at Drybones

2003-02-26 11:52 ET - Street Wire

by Will Purcell

Ralf Hillebrand's New Shoshoni Ventures Ltd. has come up with a new kimberlite find in the Drybones Bay region on the northern shore of Great Slave Lake, about 50 kilometres southeast of Yellowknife. The find initially caught the market's eye, but it will take some toutable diamond counts to keep speculators interested in the old play in the longer term. The original Drybones kimberlite was big news briefly during the mid-1990s, but the project drifted off to sleep after the diamond counts from the large pipe failed to sustain the promotion of Ian Lambert and Rocky McNabb's Trade Winds Resources Ltd. As a result, speculators had long forgotten about the region by the end of the 1990s, but the district now has a new lease on life, with two new kimberlite finds in recent weeks.

The first find attracted just a bit of notice, when Snowfield Resources Ltd. hit kimberlite at Mud Lake, about four kilometres southeast of the Drybones pipe, but the second discovery made a bigger market splash, when New Shoshoni turned up a kimberlite body about 750 metres southwest of the original Drybones pipe. New Shoshoni's shares got a head start on the news, as the stock jumped from 40 cents to an intraday peak of 65 cents in the days immediately preceding word that two New Shoshoni drill holes had intersected kimberlite in target DB-02. That stock hit an intraday peak of 74 cents following the news, but New Shoshoni's shares drifted lower to close last week, as investors seemed to take a wait and see attitude.

The DB-02 discovery comes just a month after New Shoshoni shuffled things in its executive offices. Mr. Hillebrand took over as president and a director from Tsawwassen-based realtor, George Erskine, who had been in charge since the mid-1990s. It is not the first time that Mr. Hillebrand has been on the board. The management consultant was briefly a director and secretary of the company in 1996, when it was known as Consolidated Shoshoni Gold Inc. Mark Tommasi, who also has past experience with New Shoshoni, and who frequently cropped up in other ventures run by Mr. Erskine and Mr. Hillebrand, is also a director.

Diamonds are a relatively new interest for Mr. Hillebrand, who was busy with a pizza play in the early 1990s, when the Canadian diamond hunt and the Drybones district first became big news. The Great Slave diamond play is not new Mr. Erskine however, as he first took a crack at gems with Consolidated Shoshoni and Sunstate Resources Ltd. in the spring of 1995. The two companies acquired ground in an area about 75 kilometres northeast of Drybones Bay, and Mr. Erskine touted the new projects as part of a developing area play. The plans quickly fizzled out, and it was several years before Mr. Erskine took another serious crack at gems with New Shoshoni. Meanwhile, although Mr. Hillebrand was not on the board of either company during the short-lived diamond venture, he remained an active shareholder of Sunstate during that time. New Shoshoni's move to gems began late in 2001, when the company acquired an option to earn a 100-per-cent interest in the Drybones Bay property from Yellowknife prospector David Smith, who kicked off the diamond hunt southeast of Yellowknife in the early 1990s, with the discovery of the Drybones kimberlite, which was quickly optioned to Trade Winds.

Although the Drybones kimberlite has since been abandoned as just marginally diamondiferous, New Shoshoni thinks it still has a chance, and there were a few encouraging signs in the original results that offers glimmers of hope for the new discoveries in the area as well. Trade Winds gleefully touted its modest diamond counts through the mid-1990s, and some timely touts and rumours were largely responsible for driving the company's stock to a high of $1.86, but the promotion and the project had breathed its last by 1998. Trade Winds called it quits, with Mr. Lambert taking a parting shot at the Drybones project. He noted that in three years of drilling, his company had come up with less than 100 macrodiamonds from more than 10 tonnes of kimberlite, and he declared that result insufficient to warrant continuing with the project. Most investors had already reached that conclusion by then, as a Trade Winds share could be had for just seven pennies. Nevertheless, New Shoshoni has a much more optimistic spin on those earlier results, although the renewed hope is in the details, not in the cumulative diamond counts for the large kimberlite pipe.

Unfortunately, the earlier samples were processed in a rather haphazard fashion. The confusion fuels New Shoshoni's interest, and some of those hopes now extend to the DB-02 discovery. The largest test at Drybones was completed in 1996, when Ashton Mining of Canada processed about 7.5 tonnes of kimberlite for Trade Winds. The macrodiamond parcel weighed just 0.48 carat, indicating a grade of just over 0.06 carat per tonne, for stones that remained on a 0.8-millimetre mesh. That modest result was in line with an earlier test of 1.78 tonnes of kimberlite, which produced a grade of 0.066 carat per tonne. Such low grades were disappointing to Trade Winds and its investors, but now there are hopes that a higher-grade zone exists within the large pipe.

Those hopes are based upon one particular batch of kimberlite that was processed by Ashton. The sample weighed 1.03 tonnes, and it produced diamonds weighing 0.207 carat, which would imply a grade of 0.20 carat per tonne. As well, the sample seemed to have a reasonably favourable diamond size distribution curve, as half of the diamonds recovered were longer than one millimetre in two dimensions. Also adding to the hope was the fact that the largest diamond weighed 0.07 carat, and it may not have been a fluke, as a second stone weighed nearly as much. Such tiny samples are subject to a considerable amount of statistical variation, but small samples with coarse diamond size distributions generally understate the actual grade of a sample, and taking a closer look could be worthwhile.

Unfortunately, it is not exactly certain just where to look, although there are some decent clues. The best sample, TDN-11, came from two drill holes, but kimberlite from those holes was also processed in other batches. Sample TDN-10 also had an encouraging grade, and it contained material from the two holes as well. Sample TDN-13 also seemed to produce a result that was above average, and it included kimberlite from the same two holes, as well as rock from a poorer location. As a result, the chances seem good that holes 96-15 and 96-16 were drilled into a richer portion of the Drybones pipe. In fact, the two holes penetrated a diatreme facies of kimberlite that appeared fresher than at other locations, and it contained large peridotitic and eclogitic mantle nodules.

Meanwhile, New Shoshoni's DB-02 kimberlite was described as a greenish rock that crumbled easily, containing numerous small and large fragments of country rock and other exotic rocks, as well as garnets. The elevated diamond grades in part of the Drybones pipe might be good news for New Shoshoni's most recent find, but at this stage there is nothing to suggest that the rock in the DB-02 kimberlite body bears a great deal of similarity with the higher-grade zone at Drybones, and even if it does, the diamond content could be vastly different.

The size of the new find seems considerably less impressive than that of the Drybones pipe, but New Shoshoni's drills may have just caught an edge of a larger kimberlite, and more drilling will be required to adequately determine the geometry of the new body. The first hole encountered kimberlite dikes near the bottom, but the hole was terminated before it hit the estimated depth of the target. The second hole had better luck. The 45-degree hole encountered kimberlite at a depth of about 150 metres, and passed back into granite at about 240 metres. A third hole is in progress, and that should offer more insight into the size of DB-02.

The DB-02 kimberlite was one of four targets that New Shoshoni planned to drill this year, and at least one of the company's rivals has been busy as well, poking holes into targets in the region. About a month ago, Robert Paterson's Snowfield Resources struck kimberlite at Mud Lake, about four kilometres southeast of the original Drybones find and about five kilometres southeast of DB-02. The Snowfield discovery was the first find in the area in nearly a decade, but the initial intersection was somewhat less impressive than at DB-02. Snowfield's 45-degree hole hit kimberlite at 34 metres, but left it at a depth of 39 metres. The 5.2-metre zone was described as an altered kimberlite diatreme breccia, and samples have been sent off for analysis. Snowfield found enough hope in its find that it brought a second drill to the property, and Mr. Paterson's company hopes to complete a 1,000-metre drill program by the end of February. Speculators have not rushed to embrace Snowfield's slice of the revived Drybones play however. The company's stock briefly traded to a 22-cent high after the find, but it subsequently has retreated to the 16-cent mark.

The Drybones play has slowly been gaining notice, and earlier this month, Consolidated Gold Win Ventures Ltd. nibbled off a piece of New Shoshoni's ground in the region, through an option deal, and the company has touted its proximity to the original Drybones pipe, as well as the latest find. Gold Win has some anomalies that may be similar to the DB-02 target, but there is no word of a planned drill program at this stage. The company has had some meagre success with its promotion, as over the past three weeks, its stock has jumped from a nickel to a high of nine cents on Monday.

Meanwhile, although New Shoshoni's pace may not be fast enough to please impatient speculators, the company has managed to come up with a bit of cash. At the end of November, New Shoshoni had a working capital deficiency of about $130,000, but since then, the company has been able to complete a $500,000 private placement, and a significant number of options and warrants are now in the money. After driving New Shoshoni's shares to a 74-cent peak last week, speculators now seem to be taking a breather, as the stock has dipped below the 60 cent mark, closing down seven cents Tuesday, at 51 cents.