Metalex finds kimberlites, needs gems
2008-11-21 16:21 ET - Street Wire
by Will Purcell
Chuck Fipke's public diamond company, Metalex Ventures Ltd., is having success finding kimberlites in the Chitamba district of Angola, but you would never know it from the company's woeful four-cent stock. Metalex's weary shareholders might reclaim some of their early enthusiasm if their company can start backing up its rosy optimism with some diamonds. Grumpy investors would also like to know it the Angolan government granted Metalex an extension, as it was short of its spending requirement when the original deadline passed several months ago.
The plan
In a Nov. 13 press release, Metalex touted the discovery of nine new kimberlites on its Angola play. The news sparked barely a ripple in the market and Metalex's shares lumbered along near a nickel, with no noticeable increase in volume. These days, even Mr. Fipke needs something more tangible than kimberlites and chemistry to stoke the promotional fires.
Diamonds might do the trick, but Metalex has recovered just three tiny microdiamonds so far, two from the Caicala pipe and one from another 2005 discovery. Metalex found more bodies in 2007 and early in 2008, bringing its total pipe count to 13 by the end of June. The latest nine discoveries bring the tally to 22 pipes. Samples weighing up to 200 kilograms from most of those bodies are apparently available for diamond recovery.
The company said it sent samples of varying sizes for processing, but there is no word of any gems in those pipes. That adds to the market's scepticism, as other groups making discoveries around the same time received their diamond counts months ago. Unlike those explorers, Metalex has the advantage of using Mr. Fipke's own lab. Presumably, Metalex's samples would not sit collecting dust in some Kelowna warehouse for very long.
There is also uncertainty about where those samples are -- another hitch in Metalex's sputtering promotion. At the end of June, Metalex said it was looking forward to getting its core sample results within two weeks from the first three kimberlites found this year, and its first heavy mineral samples. In August, the company said it was collecting at least 200 kilograms of kimberlite from each new discovery, and results from those batches were "expected shortly." In late September, Metalex offered the same optimistic timetable.
In early November, Mr. Fipke reminded investors that Metalex had diamond results from four of the 22 pipes -- the ones found a few years ago -- and samples from the remaining 18 pipes were just then being shipped to Canada for processing. Metalex's latest financials showed $200,000 spent on shipping and freight, so hopefully there was a bit of kimberlite sporting Kelowna baggage tags on its loading docks.
Meanwhile, Metalex missed its April 29 deadline to spend $10-million (U.S.) on the project and although the Angolan government said it would grant an extra year, the company had nothing in writing at last report. Metalex spent another $1.13-million on the play since the deadline and if it keeps spending, Metalex could meet the proposed new deadline. The company started August with a working capital deficiency of $1.35-million and has not sold any new shares since. Fortunately, Mr. Fipke has been willing to keep working and collect payment later, converting the debt to shares.
The Chitamba property does seem to be prime diamond country, as it is a likely source region for the wealth of alluvial diamonds that turn up in the Cuango River. Millions of carats have been pulled from the river and some miners average over $200 (U.S.) per carat for their gems. As a result, Mr. Fipke's cadre of faithful shareholders will be watching for the elusive diamond counts.
Metalex closed down one-half cent to four cents Thursday on 147,000 shares.
