Looks like an updated version from previous. Its a fair reflection of where we sit today. Bottom line is they need to prove up diamonds in their drilling. If they can find prove up 1.5 carats/tonne than we're back in business, if not we're sunk. It really isn't more complicated than that.

Snowfield drills for microdiamonds

2008-05-21 09:29 ET - Street Wire

by Will Purcell

Its shares and its treasury are in tatters, but Snowfield Development Corp. refuses to abandon its so far unrewarding Mud Lake kimberlite project in the Northwest Territories. The company thought enough of the diamond potential of its kimberlite sill on the north shore of Great Slave Lake that it did little microdiamond testing. Instead it chose to complete a 500-tonne test of a body it touted as comparable with Snap Lake.

Far from being another Snap, the sample grade fell well short of results obtained at the Ranch Lake and Torrie pipes, two renowned kimberlite flops in Canada's North back in the 1990s. Snowfield spun some novel excuses and dangled some new plans, but skeptical speculators are still unwilling to pay even a dime for shares that went for as much as 54 cents earlier this year.

The flop

Snowfield drilled its first holes into the Mud Lake sill late in 2002, and word of the new find got the market's speculative juices running like sap. Snowfield's shares leapt from a dime to a crest of 60 cents, and the company fuelled the rally with gushing words about the mineral chemistry of the kimberlite. In the summer of 2003, Snowfield first touted plans to forego caustic fusion analysis for microdiamonds and proceed immediately with a 500-tonne mini-bulk sample.

Immediately turned into a four-year ordeal, as permitting woes, cash shortages, warm weather and a series of excavation problems resulted in delay upon delay. Speculators abhor waiting nearly as much as they hate bad news, and with its shares clinging precariously to a dime in 2006, Snowfield partially relented on its decision not to test for microdiamonds.

The company sent approximately 232 kilograms of material for processing and recovered 49 diamonds, or barely 210 stones per tonne. The rate was unimpressive, but nearly all the gems came from one batch of rock from the lower of the two main sills at Mud Lake. About 24 kilograms of material yielded 40 gems, or about 1,650 stones per tonne. Further, the haul included three gems that weighed a total of 0.036 carat.

A few quick punches on a calculator points to a grade of 1.5 carats per tonne, and the latest crop of Mud Lake believers are banking on that result still being representative of the lower sill. Of course, winning bets based on tiny tests with gaudy counts are as rare as diamonds. Further, there is no indication of how much of the barren rock came from the lower sill.

Investors were predictably disappointed when Snowfield revealed that the first 100 tonnes of its mini-bulk test produced 11 diamonds weighing 0.68 carat, for a grade of 0.007 carat per tonne. Speculators hopped aboard Snowfield's promotional train in huge numbers on its northbound leg, snapping up over 38 million shares at an average of 42 cents through the first two months of the year. They then hurled themselves from the southbound leg in greater numbers, selling over 45 million shares at an average of 16 cents each.

The plan

Snowfield's first theory had the hematite-rich kimberlite at Mud Lake being overly protective of its diamonds, perhaps shielding most of the gems from the probing X-rays in the recovery plants. Now, the company hopes its lower sill will yield much higher grades.

To find out, Snowfield will send kimberlite from the 38 new holes it drilled into the Mud Lake kimberlite this year. The company expects results within a month and is clearly hoping that the diamond counts will show the one 2006 sample was no fluke. To spark much enthusiasm, it will need to show the higher counts cover a worthwhile amount of kimberlite. Meanwhile, Snowfield will spend the summer seeking new targets in the area. The patient and the faithful can take solace from the obvious: they can only lose another 8.5 cents.

Snowfield closed unchanged at 8.5 cents Wednesday on 220,300 shares.