Issue link: http://resourceworld.uberflip.com/i/318453
44 www.resourceworld.com j u n e / j u l y 2 0 1 4 Chalice Gold & GeoCrystal Jv seeking Webb Project diamonds When Chalice Gold Mines Ltd. [CXN- TSX; CHN-ASX] found itself with AUS $55 million sitting in its treasury after selling its flagship Zara gold project in Eritrea in September 2012 to a Chinese and Eritrean government consortium, the company turned its attention to diamonds, as well as new gold projects. The Webb diamond project in Western Australia, which has been on Chalice Gold's books since September 2013, is highly prospective. The Webb diamond project is a joint venture between Meteoric Resources [MEI-ASX] and unlisted company GeoCrystal and is located in the remote Gibson Desert which straddles the Western Australian and Northern Territory border. GeoCrystal has a 51% interest in the proj- ect and is set to earn 70% of the project. In September 2013, Chalice Gold took a place- ment in GeoCrystal to give it 10.1% of that company. In April this year, after another successful drilling campaign, Chalice Gold has increased that stake to 24%. The Webb diamond project commenced at 400 km 2 and now covers 1,777 km 2 and has the potential to be a large kimberlite field. GeoCrystal's latest exploration pro- gram, the results of which were announced in February 2014, included a number of highlights. These highlights included nine kim- berlite occurrences from drill testing of 15 kimberlite targets; four microdiamonds identified in a loam sampling program and one microdiamond found in an aircore drill sample over a magnetic kimberlite target. Three of these five microdiamonds exhibit crystalline habits of diamonds typically derived from kimberlite. Another major highlight of the recent drilling campaign is that the microdiamond and kimberlite indicator minerals contained in the loam samples outline a large 20-km long anomaly of around 3 to 5 km wide trending to the northeast and coincident with a number of kimberlite targets. On April 14 2014, Chalice Gold announced two new phases for the Webb diamond project to be undertaken over the next six months. They are in Phase I flying an "8,000 line-km of 100-metre line spaced aeromagnetics over those parts of the proj- ect not already covered by detailed data to obtain tighter definition of the existing 80+ aeromagnetic targets and assist in prioritiz- ing the drill targets. In addition, a further 150 loam heavy mineral samples will be collected on a broad grid pattern over the kimberlite field to analyze for kimberlite indicator minerals and micro diamonds." Phase II is "completion of up to 6,000 metres of reverse circulation (RC) drilling aimed at testing an additional 50 priori- tized potential kimberlite targets out of the 80+ magnetic anomalies identified to date. The Webb project is the 'new kid' on the Australian diamond scene. As seasoned Australian mining writer Barry Fitzgerald noted in November 2012, "the Webb Project area has never been explored for diamonds on the ground but it is home to a cluster of 50 discrete, circular magnetic features, identified from airborne magnetic surveys, which may or may not represent a field of kimberlites, a host rock for diamonds." The results achieved by Chalice Gold, GeoCrystal and Meteoric Resources so far bear out the faith that some have in the Webb diamond project. Diamonds are, of course, the stuff of legends about their provenance. When GeoCrystal launched an initial public offer- ing on the ASX in 2012, it wasn't successful mainly due to the global financial crisis hangover; there was speculation that the Webb Project might have been the source of a 25-carat diamond said to have been found in the possession of a diamond pros- pector called Stansmore who died in 1896 in the Western Australian desert when he accidently shot himself. So far, the legend remains just that, but who knows what the Webb Diamond project might yield. n a u s t r a l i a n u p d at e G r e g B a r n s are economic at different cut-off grades and depths and to figure out if they are connected so they could be economically mined or not. If the company does not present (on their website) multi- ple relevant cross-sections or does not have a Corebox-type model, then one might consider them a bad investment. The type of ore is also important as oxide and sulphide ores necessitate different met- allurgical processes which translate to the need to build two different preparation plants and related infrastructure. The rule of thumb is that sulphide ore preparation is more expensive and an investor should look at similar operations to figure out a cut-off grade for the proposed mine. When the mineral resource features min- eralization described as oxide, sulphide and a transitional zone sandwiched in between them then it gets more complicated. If the cheaper to process oxide ore is touted as being more important, then the lay investor should start by dismissing the sulphide and transitional ore and taking into consider- ation the oxide ore related ounces only and then figure out if a mining operation would still be feasible in this case. If not, it might mean that the company needs to find/drill more ounces in the ground (and supplemen- tary engineering studies) so capital raising and dilution is on the way. The junior miner's millions of ounces/ pounds in the ground in mineral resources should have little bearing on an investment decision if treated separately from all other parameters that matter – location, geology, metallurgy, commodity prices, legal, geo- political risk and a host of other technical factors. As mineral resource estimation is a highly specialized undertaking, other than getting the opinions of some of the indus- try analysts, lay investors should educate themselves in order to be able to make informed investment decisions. n