CMKM's Smeaton play a market favourite
2004-06-22 13:01 ET - Street Wire
Also Street Wire (C-KPG) Consolidated Pine Channel Gold Corp
Also Street Wire (C-UCA) United Carina Resources Corp
by Will Purcell
Four junior explorers managed to create quite a market stir with their diamond hunt in central Saskatchewan, but most of the attention has been garnered by Urban Casavant's swinging Pink Sheets promotion, CMKM Diamonds Inc. A CMKM share could be had for just one-100th of a U.S. cent though much of this year, but word of a diamondiferous kimberlite discovery near Smeaton had the company's faithful shareholders dreaming of dollars and a future beyond the mighty pinks, as trading volumes frequently topped the 10-billion mark and CMKM's shares crested above a glorious one-10th of a U.S. cent.
The enthusiasm cooled a bit last week, after more substantial news about the Smeaton find was produced by CMKM's two Canadian-listed partners, Rick Walker's United Carina Resources Corp. and Consolidated Pine Channel Gold Corp. Those diamond details initially proved unsettling to quite a number of CMKM's investors, but the company's microscopically priced shares found their second wind and still trade well above their recent range.
CMKM's Smeaton play began in March, when the company signed an agreement that would allow it to earn a one-quarter share in the property from Mr. Walker's two companies, along with U.S. Canadian Minerals Inc. Interest in the project took off about a week later, when CMKM touted what it called a "new kimberlite discovery" on the Smeaton property.
CMKM proclaimed that its Carolyn pipe was diamondiferous late on June 10, and with the markets closed the following day to mourn Ronald Reagan's passing, there was a rush of speculators trying to hop aboard Mr. Casavant's diamondiferous Smeaton bandwagon indirectly, by investing in CMKM's two Canadian-listed partners.
Those plans hit a big snag when the TSX Venture Exchange halted the shares of United Carina and Pine Channel, citing an imbalance of material information. The exchange also cancelled all of the day's trades, washing away some significant gains, due to the lack of solid news -- at least as "news" is defined by the bureaucrats at the TSX-V.
That imbalance was ultimately corrected when Mr. Walker's diamond juniors subsequently revealed that the Carolyn core samples were just marginally diamondiferous. One 40.1-kilogram sample had produced two tiny microdiamonds that apparently weighed just 0.000005 carat, a fraction even smaller than CMKM's recent share price.
Meanwhile, 11 other Carolyn samples had failed to produce any diamonds. There was no indication of just how much those barren samples weighed, but if they were comparable with the one diamondiferous batch, the Smeaton partners would have recovered just two microdiamonds from over 400 kilograms of Carolyn kimberlite.
Those details presented a far gloomier outlook for the pipe than had CMKM's brief proclamation that the lab results had confirmed Carolyn was diamondiferous, leaving a number of the company's more exuberant faithful to speculate loudly that the Canadian news had been faked. Based on earlier work on the Smeaton play, there should have been few surprises in any of the recent results form Smeaton.
In fact, it would have been quite a shock had CMKM's drill program failed to intersect kimberlite, as its drill holes were apparently positioned in an attempt to retest a kimberlite pipe that had first been hit in 1996, when a group led by Swannell Minerals Corp. scored a kimberlite hit by drilling a geophysical anomaly that was about 200 metres in diameter. As a result, what CMKM now calls its new Carolyn pipe is actually the old Smeaton kimberlite.
Swannell intersected kimberlite at a depth of 128 metres and ultimately cored over 90 metres of kimberlite in its RS-1 drill hole, so it was hardly a great surprise when CMKM's drill hit the top of the pipe at a depth of 125 metres and ultimately intersected about 130 metres of kimberlite. Three subsequent CMKM drill holes produced intersections that ranged from 63 metres to 75 metres thick.
Most of the kimberlites in Saskatchewan have proven to be diamondiferous, so it also seemed likely that there would be at least a mild smattering of microdiamonds in the pipe, whatever its name. Still, there was not much chance that the reincarnated Smeaton kimberlite would deliver a bounty of micros as Carolyn, based on the earlier test. Samples of Swannell's drill core had been sent for analysis, but no diamonds were recovered from a modest amount of kimberlite.
The Swannell group subsequently abandoned the Smeaton project and it was snapped up by United Carina and Pine Channel. Late in 2000, the new partners poked four holes into a series of anomalies that had been identified in close proximity to the old Smeaton pipe. A narrow zone of reworked kimberlite was encountered in one of the holes, but the remainder failed to produce any kimberlite hits and the Smeaton play began to gather dust once again.
In 2002, United Carina and Pine Channel managed to come up with a new partner on the play. Panterra Exploration Corp. decided the play had enough promotability to warrant a look, and it signed an option deal on the project. Panterra's promotion delivered a few opening salvos, but the company did not manage much in the way of exploration, and its option was subsequently abandoned. That left Mr. Walker's companies to hunt down a new partner for the struggling Smeaton project.
The arrival of Mr. Casavant and CMKM has made the old Smeaton play a hot topic with speculators once again, although the market reaction to United Carina and Pine Channel's side of the Smeaton story has been modest in comparison with CMKM's decidedly pink promotion, due to the presence of at least a minimal set of reporting standards on the TSX-V.
Although some speculators may have been skeptical about CMKM's motives in repackaging the old Smeaton kimberlite as the Carolyn pipe, further work had been recommended on the old find, as the initial investigation had been deemed insufficient. As well, additional work was proposed for the remainder of the Smeaton property, in the hope of properly defining some new drill targets.
The Saskatchewan diamond play has been attracting investors since the late 1980s. There currently are two advanced projects that have at least a shot at being economic, both of them in the Fort a la Corne region, about 30 kilometres to the south of Smeaton.
Shore Gold Inc. is now working on a 25,000-tonne bulk sample of its huge Star kimberlite, which could prove or kill the project. The company previously processed about 140 tonnes of material from one large drill hole, coming up with a grade of a bit over 0.06 carat per tonne.
Shore is hoping to produce at least 3,000 carats from its test, which would require a grade of about 0.12 carat per tonne, and in its more exuberant moments, the company has touted the possibility of coming up with at least 5,000 carats, or about 0.20 carat per tonne. The first results are expected soon.
A group led by De Beers Canada Corp. and Kensington Resources Ltd. has been busy testing the mammoth No. 141/140 kimberlite complex for several years. The partners have come up with an average grade of about 0.07 carat per tonne, based on a cumulative 2,400-tonne sample, with signs of a somewhat higher grade in portions of the pipe, which appears to be larger than the Star complex.
The latest diamond counts from No. 141/140 provide a reasonable basis for comparison with the CMKM results, and offer an indication of what would reasonably be required for a large kimberlite to demonstrate a reasonable degree of economic potential in the Smeaton area.
De Beers and its partners recovered 1,159 diamonds from 595 kilograms of kimberlite, or nearly two stones per kilogram. That was nearly 40 times greater than the rate that the one diamondiferous Carolyn sample had produced diamonds, and it may have been nearly 500 times greater when the 11 barren batches are added in.
Indications of larger stones are of greater importance than raw diamond counts in evaluating kimberlites, and there were some macrodiamonds in the No. 141/140 samples. Six of the diamonds were large enough to be recovered by a 0.425-millimetre sieve, including two that sat on a 0.85-millimetre mesh.
Not included in those counts is a 5.5-millimetre, 0.77-carat stone that had been found during the preparation of the sample. Meanwhile, the two diamonds recovered from the Carolyn sample had been recovered on a 0.106-millimetre sieve.
CMKM still has not matched Mr. Walker's more detailed diamond disclosure, but the company is still busy issuing news about less material matters, including the shutdown of its message board. The board was being used by unsavoury persons to sling racial slurs, said Mr. Casavant in a press release that read more like a typical message board offering, with the liberal use of capitalized nouns and multiple exclamation marks.
Entertaining press releases are not the only unusual quirk with CMKM. Last fall, the company retired large blocks of its shares, and although the exact number is far from clear, it appears that roughly 20 billion of its shares were retired in a series of moves that came just a few months after the company had declared a 2-for-1 split of its shares.
Just how many of CMKM's shares are issued is another unknown, but whatever the number, there is no doubt that the company's abundance of shares are in both great demand and great supply. Nearly 124 billion of them were traded through the first three weeks of June, worth a total of over $80-million (U.S.). A typical CMKM trade was for just over 2.5 million shares and was worth an average of just under $2,000 (U.S.).
فما 
