Margaret Lake Diamonds‘ Latest Acquisition Kiyuk Lake Gold Property Could Prove To Be A Gamechanger

1. Introduction

Sometimes you see juniors switching from metal to metal, trying to catch the flavor of the day, riding the hypes with basically worthless projects. So now diamonds are out of favor, and gold is back in vogue, could it be that Margaret Lake Diamonds (DIA.V) is pulling the same trick with their latest acquisition? There are two important factors opposing this possibility in my view at least. First and foremost there is exploration legend Buddy Doyle who didn’t only discover diamond deposits but also 15Moz of gold deposits in the past. This all star geologist has a serious reputation to lose. Furthermore he isn’t the person to give away anything easily, as I experienced first hand when I tried in vain to assist with a financing of a UK fund at the end of 2013 for a cash strapped Amarillo Gold, where he was the CEO at the time. The money was on the table, but he refused to surrender to the pretty tough terms. I found it to be a pretty bold action at the time, but I also have to give him credit for being adamant on the share structure.

The second factor is the new Kiyuk Lake gold project itself, located in southern Nunavut, being acquired at the moment. Although nordic and remote, not too often do you see drill results like 249m of 1.6g/t almost from surface, and a serie of good results from 35-188m, meaning there could be significant open pit potential. With Doyle as VP Exploration endorsing this project, the company seems to have a good chance of finding out what exactly this potential could be.     

All presented tables are my own material, unless stated otherwise.

All pictures are company material, unless stated otherwise.

All currencies are in US Dollars, unless stated otherwise.

1. The company

Margaret Lake Diamonds Inc. (TSX.V: DIA) is a Canadian junior mining company focused on mineral exploration in Canada’s most prolific nordic mining districts. The company is earning in an 80% interest in the soon-to-be flagship high-grade Kiyuk Lake Gold Property located in southern Nunavut. They are optioning it from Cache Exploration (CAY.V), another tiny explorer, who can’t raise the necessary cash to advance it meaningfully. It also holds interests in two diamond exploration properties in the Northwest Territories, the first being the Margaret Lake project located adjacent to Mountain Province Diamond’s Kennady North project and close proximity to Gahcho Kué, the newest Canadian diamond mine owned by De Beers and Mountain Province Diamonds. The company also has a 60/40 joint venture with Arctic Star Exploration Corp. (TSX.V: ADD) to explore the Diagras property, which is comprised of 23 claims totaling 18,699 hectares located in the prolific Lac de Gras diamond field. Management is fully focusing on Kiyuk Lake now, and so will I in this article.  

Both jurisdictions have solid scores on the all-important Policy Perception Index (PPI) in the recently published 2018 Fraser Survey of Mining Companies. The PPI is the most important figure of this survey, as it indicates the mining friendliness of a jurisdiction, which encompasses corruption, permitting, speed of administrative processing, politics, local sentiment, etc. Nunavut scored position 16 out of 83, and Northwest Territories 14 out of 83. I do find it an interesting development that the number of jurisdictions is decreasing every year now since 2014, as before this year it was increasing.

The management team of Margaret Lake Diamonds is an interesting collection of characters. Leading the pack is new President and CEO Jared Lazerson, coming on board at December 17, 2018. I know Jared as the CEO and wild & visionairy deal maker, marketing specialist, trader and money raiser of advertiser MGX Minerals. Sometimes he is a tough act to follow and MGX Minerals is going through a rough period now as they face delays on their wastewater pilot plants, but he did raise over $30M for MGX in 2 years, so at the very least he has backing of some powerful players. One of the first things he did when coming on board was buying 4M shares of Margaret Lake Diamonds in the market, so it is safe to say that management has skin in the game here.  

As mentioned earlier, VP Exploration Buddy Doyle is somebody who doesn’t really need much introduction, but to be fair he led the team that discovered the Diavik Diamond deposits in the nineties, and was the former Exploration Manager for Kennecott/Rio Tinto. Mr. Doyle is recognized by his peers in the exploration industry as an authority on diamond exploration and kimberlite geology, and has authored/co-authored numerous papers on these subjects. He was awarded the 2007 Hugo Dummitt Award for excellence in Diamond exploration. Before all this, he was a key member of the team that discovered the Minifie deposits, that formed for the most part the monstrous Lihir Mine at Papua New Guinea, currently owned by Newcrest, which produced 0.955 Moz Au in FY 2018.

Another remarkable person on the Board is Don Huston, who worked for a decade in the family exploration business, and has had a 20 year long career after this in putting together and promoting mining deals for the last two decades or so, one more successful than the other. He is a director of 3 other junior mining companies, and lately he also has been involved in a blockchain deal called CUV Ventures, rolling out a blockchain based credit card application on Cuba. Another director is Darryl Sittler, a former NHL player and 1989 inductee to the Hockey Hall of Fame, also director of Frontline Gold and Wallbridge Mining. From my experience, these former sport legends in business usually have an excellent, slightly different network in the circles of power and finance, and can be a real value-add. The company has appointed Dr. Michael Reimann (PhD) as CFO, which is a familiar name from MGX Minerals.

Margaret Lake Diamonds has its main listing on the main board of the TSX Venture, where it’s trading with DIA.V as its ticker symbol. With an average volume of about 53,990 shares per day, the company’s trading pattern is moderately liquid at the moment, and I expect this to improve when drilling is about to start.

The company currently has 54.69M shares outstanding (fully diluted 63.65M), 8,96M warrants (C$0.20 exercise price, expiring on April 16 and May 31, 2021) and 2.05M options on average @ C$0.14, most of them expiring after October 1, 2021. Margaret Lake Diamonds sports a very tiny market capitalization of C$4.38M based on the April 15, 2019 share price of C$0.08. The company is looking to do a financing very soon, looking to raise about C$2M in order to get their exploration program for Kiyuk Lake going.

The company is basically controlled by management, as 45% is held closely by management, Board of Directors, insiders and former insiders with no intention of selling anytime soon. Former CEO Paul Brockington, who made a fortune by early investments in diamond plays like Diamet and Aber, owns directly and indirectly 11.6M shares (21.3%), CEO Jared Lazerson owns 4M shares (7.5%). Brockington is holding on to his shares according to management.  

The new gold story has slowly started to find its way to the market since mid February as can be seen by the first uptick in the chart, and rightly so as a share price of C$0.035 isn’t very useful to raise cash. I expect several catalysts in the coming weeks/months, so this could prove to be a nice entry point, especially considering the exploration potential, which I will discuss in the next paragraph.

1. Projects

The Kiyuk Lake gold project will be the sole focus of this article as mentioned, as management does the same now. On a sidenote, diamond exploration is many times more difficult as the diamond hosting rocks (kimberlites) are usually present in relatively small kimberlite pipes, which have to be detected first, and after this the exploring company has to actually hit diamonds, which are of course discrete, very tiny gems, widely spread in kimberlites, needing wide diameter drilling etc. The costs versus chances of success are much more disadvantageous compared to (precious) metal exploration, which is already difficult enough as it is, with an estimated 1-3 mines put into production out of every 1,000 exploration projects.   

The Kiyuk Lake gold project is located in Nunavut, and its huge land package consists of 70 contiguous mineral claims encompassing over 59,000 hectares and offers year-round accessibility to a 35-person base camp. Although Kiyuk is situated very nordic, according to management there is no winterbreak needed for exploration work, and there is hardly any overburden, which makes things easier for drilling. Also important to note is the number of significant projects and mines in this region, owned by familiar names (Agnico, Auryn) and much more nordic as well, although closer to water.

Please find more information in the attachment.