KWG plots new Attawapiskat debut

2008-09-25 15:13 ET - Street Wire

by Will Purcell

KWG Resources Inc. expects to have its diamond spinoff listed and trading before the end of the year, says president, Frank Smeenk. The Toronto-based penny stock promoter, known in some circles as Five-Cent Frank for obvious reasons, will also be the head of Debuts Diamonds Inc. The new company will draw on some other KWG people, including its gem consultant, Dr. Mousseau Tremblay. He is a fan of the company's MacFadyen play in Northern Ontario, so it will stay a priority.

The plan

Mr. Smeenk, now 60, said KWG was pressing ahead with the Debuts spinoff despite the tough market conditions. KWG's shares are trading at barely three pennies, below even Mr. Smeenk's moniker. The former lawyer said investors were not crediting KWG with any value for its diamond prospects. With its market capitalization recently down to barely $5-million, investors do not appear to be giving KWG much credit for its metal prospects either. Perhaps all the valuation is for Mr. Smeenk himself; $5-million for a 60-year-old, according to actuarial tables, is quite generous.

Despite the investor apathy, Mr. Smeenk says the MacFadyen play is too promising to abandon. It certainly had its moments of promotional glory in the early 1990s, and KWG revived the hunt a few years ago, when it drilled up some new samples from several Attawapiskat-area pipes. The results of the tiny tests held enough sparkle to warrant larger tests, but KWG was unable to complete its three planned 110-tonne samples last spring.

Completing at least one test will be a priority for Debuts next spring, says Mr. Smeenk. He said Debuts has already spent much of its cash on preliminary work looking for new kimberlites on its Attawapiskat properties this year, so the company will need to top up its treasury over the next several months. Mr. Smeenk said he was assessing a number of options to keep Debuts busy exploring.

KWG picked the Attawapiskat play to be its sole priority when the company arranged a trial separation agreement from Spider Resources Inc. a few years ago. The company drew its optimism for the project from Dr. Tremblay. "Mousseau has been chasing this dream for 50 years," said Mr. Smeenk. That is no exaggeration. Mr. Tremblay is pushing 80 and has been chasing gems around the world since he graduated in 1956.

The encouragement

This summer, KWG produced its largest gem yet when it processed its remaining core from the Good Friday pipe. Approximately 1.17 tonnes of rock yielded just two diamonds, but one weighed 0.425 carat and the second weighed 0.115 carat. The two solitary rocks are not flukes, as the company pulled a 0.23-carat gem from an earlier 1.17 tonnes of Good Friday kimberlite. So far, the company has 0.67 carat from 2.34 tonnes of rock, or about 0.29 carat per tonne.

That makes the Good Friday pipe, named after its discovery date in 2004, the top candidate for a larger test, but the company's other Attawapiskat pipe could be equally diamondiferous. The company processed a cumulative 3.5 tonnes of rock from MacFadyen-1, MacFadyen-2 and MacFadyen-2S, but the only diamond was a 0.053-carat gem from 436 kilograms of material from MacFadyen-2S.

The very coarse size distribution pattern and lower grades of the Attawapiskat pipes make tiny samples misleading, and the cumulative grade may be more meaningful. Over the years, about 5.7 tonnes of kimberlite yielded 0.9 carat of diamonds, for a theoretical content of 0.16 carat.

So far, the numbers from Good Friday and possibly some of the company's other pipes seem comparable with the Victor mine, where De Beers spent $1-billion to exploit 30 million tonnes of kimberlite averaging barely 0.23 carat per tonne, but Victor's gems are worth close to $500 (U.S.) per carat. The value of the Debuts gems is unknown, but the coarse size pattern is an encouraging start, of which KWG has had many.

KWG closed up one-half cent to three cents Wednesday on 1.31 million shares.