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Uranium North (URNMF) And Diamonds North (DDNFF) Join Hands

 December 06, 2012 09:30 AM

I seldom compare two junior mining companies in the same article but maybe I should do that more often.  I'll examine Uranium North (URNMF / UNR.V) and Diamonds North (DDNFF / DDN.V) because they operate a joint venture called Minerals North LLC.

It's worth noting the same CEO and corporate secretary help run both Uranium Northand Diamonds North.  The CEO seems to have project generator experience so it boggles my mind that he would run two separate companies simultaneously and then have them JV a third project, rather than just fold all of their exploratory projects into one company.

Let's take Uranium North first.  They have three gold projects, five uranium projects, and one graphite project at present.  That Amer Lake graphite project gives them justification for continuing to explore for uranium there, but the property is 70km from the nearest all-season road.  Nunavut is a popular area for exploratory mining but miners need to figure the cost of grading winter ice roads into their capex before they estimate cash costs of production.  The company's grab samples from their gold projects look attractive at first glance but there needs to be a 43-101 report estimating 2P reserves for me to take those grades seriously.  Only Amer Lake has a 43-101 report at present, and it estimated the cost of continued drilling at about $2.2M as of September 2009.

Consider Uranium North's financial results since that NI 43-101 report was prepared in 2009.  They lost over $1.5M in FY 2009, lost $2.2M in FY 2010, lost $1.5M in FY 2011, and lost $5.4M in FY 2012 (their reporting year ends in February).  They raised and burned a lot of money with very little in the way of solid exploratory results to show for the number of properties they have open.

Now let's move on to Diamonds North, the CEO's other entity.  The Minerals North LLC entity contains the Poland China, Golden Reward, and Empire Creek properties.  They all have some decent gold grades after test drilling but I cannot find a 43-101 report.  It's fine for them plan to use a mill at a nearby Kinross property if they think that will reduce the cost of processing gold ore, but they need a complete PEA to know what those costs will be.  Their Esker gold property is showing better grades than the Minerals North sites, so I wonder when they will focus attention there.  Their Amaruk diamond project has some mineral chemistry results but frankly I have no idea how to interpret them since I'm not a diamond expert.

Diamonds North had an annual net loss of $3.3M as of December 2011.  What really stood out for me in their 2011 annual report was the retained earnings deficit of over $52M.  These guys have been a money sink since inception, so no matter how good their grades from test drilling appear to be they have been unable to turn those first-round results into properties a major producer would find desirable.

I'm skeptical of both of these companies and their JV.  Their "lottery ticket" approach to identifying economically viable ore bodies has not generated any shareholder value.  They won't be able to do so without completed drilling results suitable for a 43-101 report.  I think it's hilarious that these two stocks' OTC shares traded at more than a buck after their debuts years ago.The share prices of both companies now languish below a nickel for good reason.

Full disclosure:  No positions in Uranium North or Diamonds North at this time.



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