Diamonds North Resources Ltd (C-DDN) - News Release
Diamonds North partners with Teck on Blue Ice project
Diamonds North Resources Ltd DDN
Shares issued 13,047,885 Jun 24 2003 close $ 0.75
Wednesday June 25 2003 News Release
Also Teck Cominco Ltd (C-TEK) News Release
Mr. Mark Kolebaba of Diamonds North reports
DIAMONDS NORTH RESOURCES LTD.: CANADIAN MAJOR JOINS BLUE ICE DIAMOND PROJECT
Diamonds North Resources has entered into a participation agreement with Teck Cominco whereunder Teck Cominco will complete a $1-million private placement for 909,091 units at $1.10 per unit and jointly finance a $3-million 2003 exploration program on Diamonds North's Blue Ice property, Nunavut and Northwest Territories, Canada. On completion of the 2003 program, Teck Cominco shall have the right to elect to earn an initial 30-per-cent interest in the Blue Ice project.
The private placement by Teck Cominco will close immediately on TSX Venture Exchange acceptance and each unit purchased will consist of one common share and one-half of one share purchase warrant, with each whole warrant entitling Teck Cominco to purchase one additional common share of Diamonds North at a price of $1.10 within one year of closing of the placement. During the currency of the participation agreement, Teck Cominco has been granted the right to participate in future equity financings of Diamonds North to a level of 10 per cent, provided that the right to participate will expire at Diamonds North's option, if Teck Cominco fails to participate in any financing to a level of at least 6 per cent of the total equity financing.
The Blue Ice project, consisting of 450,000 acres of staked claims, is located 240 kilometres west-northwest of Cambridge Bay in the central portion of Victoria Island, in Canada's Arctic. It is underlain by the Slave craton, which is host to the Ekati and Diavik diamond mines. In 2002, Diamonds North identified a 20-kilometre trend of semi-continuous kimberlite named the Galaxy structure on which nine kimberlites have been identified to date, eight of which are known to be diamondiferous.
The $3-million 2003 program will consist mainly of extensive drill testing along the Blue Ice Galaxy structure concentrating on the collection of larger samples from selected diamondiferous bodies discovered in 2002. These kimberlites demonstrated high diamond counts with the presence of larger stones. It is anticipated that 2.5 to three tonnes of kimberlite will be recovered. A number of high-priority geophysical targets will also be drilled to test for new kimberlites along the Galaxy structure. In addition, extensive aeromagnetic surveying will be conducted in other portions of the project area considered favourable for new kimberlites based on geochemistry and structural interpretation. To date only 25 per cent of the Blue Ice project has been aeromagnetically surveyed.
The diamond count in several kimberlites along the Galaxy structure is high with five kimberlites ranging from nine stones per 10 kilograms to 180 stones per 10 kilograms. Large macrodiamonds were recovered, with many stones exceeding one millimetre in three axes and several nearing or exceeding two millimetres in one or two axes. The diamond size distribution plots of several of these kimberlites compares favourably with known Canadian kimberlites which exceed one carat per tonne in grade.
The following is a summary of additional material terms of the participation agreement.
The 2003 program will be jointly financed as a firm commitment of Diamonds North and Teck Cominco as to $1.5-million each. Diamonds North will be the operator of the 2003 program.
On completion of the 2003 program, Teck Cominco will have the option to earn an initial 30-per-cent interest in the Blue Ice project by exercising the warrants for a price of $500,000 and by incurring an additional $9.5-million in expenditures over three years as follows:
(a) by Dec. 31, 2004 -- a minimum of $2-million in expenditures;
(b) by Dec. 31, 2005 -- a minimum of $5-million in expenditures in total; and
(c) by Dec. 31, 2006 -- a minimum of $9.5-million in expenditures in total.
Teck Cominco shall have a one-time right to extend the above dates for completion of expenditures by one year by making a cash payment to Diamonds North of $200,000 and maintaining assessment on the claims.
If Teck Cominco earns a 30-per-cent interest in the Blue Ice project, Teck Cominco may increase its interest to a total 50-per-cent interest by incurring an additional $5-million in expenditures (of which $2-million would be a guaranteed commitment) by the end of the year subsequent to that in which Teck Cominco earned the initial 30-per-cent interest.
If Teck Cominco earns the additional 20 per cent (for a total 50-per-cent interest), Teck Cominco may increase its interest to a total 65-per-cent interest by financing all continuing exploration expenditures to the completion of a feasibility study with respect to developing a mine on the Blue Ice project.
If Teck Cominco has not commenced a feasibility study within three years of electing to earn the additional 15-per-cent interest, Teck Cominco may either:
(a) extend the period for commencing a feasibility study by three years by committing to incurring $6-million in expenditures over such three year period; or
(b) give Diamonds North the right to terminate Teck Cominco's right to earn the additional 15-per-cent interest by paying Teck Cominco 35 per cent of the expenditures incurred from Teck Cominco's election to earn the additional 15-per-cent interest, at which time a joint venture would be formed with Diamonds North acting as operator. Diamonds North may elect to exercise this right or grant Teck Cominco an extension of three years to commence a feasibility study with no minimum yearly expenditure requirements.
Upon earning a 65-per-cent interest, Teck Cominco may earn an additional 5-per-cent interest in the Blue Ice project by arranging or providing all project financing. In consideration for the financing, Diamonds North shall also provide Teck Cominco with the right (but not the obligation) to market Diamonds North's share of production until one year after the payback of the initial development cost.
Once Teck Cominco has ceased to solely finance expenditures as above, the parties shall operate the Blue Ice project on a joint venture basis. Except as noted above, assuming Teck Cominco holds a minimum 50-per-cent interest at the commencement of the joint venture, Teck Cominco shall be the operator.
WARNING: The company relies upon litigation protection for "forward-looking" statements.
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