Shore Gold’s future slow, but favourable

By Sarah Stone
April 2, 2013 - 12:07pm Updated: April 3, 2013 - 11:06am

Shore Gold recently released their year-end financial and operating results and their Star-Orion South Diamond Project is still seeking third-party investors.

For the past few years the company has been pursuing options for financing of the Project development at the Fort a la Corne mining site east of Prince Albert and in 2012 they thought they had it.

“In early 2012 one of these financing options reached an advanced stage of negotiation but was not concluded due to world economic uncertainties,” Shore Gold Inc. wrote in a news release.
Since then they’ve had to look at other options of conserving money until investors can be found.

“In light of this development, the management and directors of Shore deemed it necessary to make changes to meet corporate priorities. These measure included reductions in Company Directors, Officers and personnel as well postponement of all arrangements with SaskPower,” the release stated.

Shore Gold recorded a net loss of $9.3 million or $0.04 per share, leaving the company with about $7.4 million in cash, cash equivalents and short-term investments.

President of Canadian Diamond Consultants Pierre Leblanc said the world-wide recession and sovereignty debts significantly reduced exploration in Canada making it very difficult for not just Shore Gold to raise funds, but many junior exploration companies.

However, despite the lack of investors in the company, Leblanc said a change in the diamond market currently taking place can put the Star-Orion South Diamond Project in an upcoming favourable position.

China and India join the diamond dash

“Up to about 10 years from now there is going to be a shortage of diamonds principally because of the new entrance in the market that is China and India,” he said. “Those two countries didn’t used to buy diamonds as jewellery items, but have been doing so over the last few years.”

Leblanc explained China is now the second largest consumer of diamonds, adding the population total between the two countries is around 2.5 billion people. With Canada the third largest producer of gems diamonds in the world, this puts mining companies in a strong position.

“Even though the [Chinese and Indian] middle class is only a fraction of that it is still a huge amount in compared to the American or Canadian markets,” he said.

As these middle class citizens demand diamond luxury items and the current life of diamond mines coming to end, Shore Gold may find new opportunities.

“As the value of the rough diamond continues to increase eventually there should be a business case to be made to actually do the mining of those diamonds and since there hasn’t been a discovery of a world class diamond mine since 1994, [many of] the present mines are reaching the end of their natural life, so there’s going to be more and more incentive if you wish to access the diamonds of the Star and Orion South projects.”

Evert Botha chief operating officer of Embee Diamonds in Prince Albert said he’d like to see diamonds finally be produced out of Fort a la Corne mine and he anticipates it in roughly five years.

“I think we’re going to reach a tipping point probably 2016 or 2018 where we’re going to need more diamond mines and I think the race is on to see who’s going to be the next Canadian diamond mine,” Botha said.

Botha continued, adding Saskatchewan is a mining and exploration friendly environment should investors actually recognize the opportunity. He said this becoming increasingly true as Canadian consumers look more towards Canadian mined diamonds.

“Consumers are supportive they want to know that it’s a Canadian diamond … and I think as and when the market continues to grow and continues to recover we’ll be cutting diamonds here in Saskatchewan,” Botha said.

“At the end of the day somebody’s got to see the value and potential in the Fort a la Corne deposit, which I think the market sees, but it’s all in the economics, it’s all in the cost per carat from the mining point of view, as well as from a sales point of view.”

The roadblocks

Even with the surge in market demand, Shore Gold has a challenge or two at the Fort a la Corne mine site, Leblanc said.

“There is a couple of challenges that Shore Gold faces. One is the fact that there is a very large over burden on top of the ore body, the body that holds the diamonds,” Leblanc said.

He explained this burden has to be removed before getting access to the diamonds and that is going to be a significant expense. Another challenge that may burden the company is the low carats per tonne ratio compared to international standards.

Even with the challenges Leblanc said the Star-Orion South Diamond Project could potentially be successful and lucrative.

“I think there is a future for Star, certainly not an immediate future because of the financing difficulties, but as I’ve indicated as the price of rough diamonds continues to increase eventually it will be somewhat attractive to invest in this ore body.”

Shore Gold has spent the last decade working to prove the diamond mine is feasible.

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