GGL and Diamonds North revive old plays
GGL Diamond Corp GGL
Shares issued 43,722,510 Aug 18 2003 close $ 0.48
Tuesday August 19 2003 Street Wire
Also Diamonds North Resources Ltd (C-DDN) Street Wire
by Will Purcell
Ray Hrkac's GGL Diamond Corporation has been getting most of the attention, after a seven-year dispute surrounding claims just south of the Kennady Lake diamond project was settled, but the decision also could benefit Mark Kolebaba's Diamonds North Resources in a big way as well. Both companies have stakes in significant chunks of ground that appear to be in a choice location, and there has not been much prior disappointment, as the legal wrangle kept exploration crews off the properties since the mid-1990s. As a result, speculators have high hopes that new diamond deposits await discovery by GGL and Diamonds North in the South Slave district. If so, there could be a positive impact for a project just to the north, at Kennady Lake.
Mr. Hrkac has seen interest in GGL's stock surge this year, after a few quiet years. A GGL share that went for just 13 pennies late last fall hit a peak of 57 cents last month, its highest level in more than five years, as the company and its partner, De Beers, got ready to resume exploration on the southern portion of the Doyle Lake claims, which had been tied up by the ownership battle.
The disputed ground appears to lie in a favourable location. Portions of the claims are within 10 kilometres of the potentially economic kimberlite pipes at Kennady Lake, as a southwestern extension of a trend line that passes through the Kennady pipes also traverses the Doyle Lake property. The northeastern portion of that line also contains Kelvin and Faraday, two more recent finds that are up to 12 kilometres to the northeast of Kennady Lake.
GGL and De Beers had been working the more northerly Doyle Lake claims quite extensively through the latter half of the 1990s, but with no real success. With the ownership of the southern six claims uncertain, there has been little work on the southern portion of the property since the discovery of a diamondiferous kimberlite sill whetted the market's appetite in 1996.
That is about to change. The sill is about nine kilometres to the southwest of Kennady Lake, tantalizingly close to the northern fringe of the disputed ground. During the initial exploration program, about 125 kilograms of rock was processed, and 67 microdiamonds were recovered. Just what that means is uncertain, however. GGL now says that there was country rock dilution within its kimberlite samples, but De Beers also used a 0.075-millimetre cutoff for its diamond recoveries, which is significantly smaller than what has been used by most other explorers. That would allow for significantly more microdiamonds to have been recovered. There was no mention of macrodiamonds in the sample, but De Beers has traditionally used a tougher definition of such stones, and no firm conclusions can be drawn from the diamond recoveries at this stage.
De Beers now plans to concentrate on the area surrounding the sill, drilling up more core samples of the kimberlite body itself, as well as conducting additional ground geophysics in the area, which could identify extensions to the body. The initial exploration program traced the sill over a strike length of at least 1.300 metres, and its thickness varied from a meagre 20 centimetres to a far healthier 5.7 metres, with a shallow dip of about 10 degrees.
Those dimensions are somewhat reminiscent of the Snap Lake dike, at least in early days. In 1996, selling the merits of a kimberlite sill or dike to the market was a tough task, although the success of Snap Lake has subsequently changed all that, making the Doyle Lake sill potentially big news if it can deliver some toutable diamond counts as a result of the current program, and if additional work expands its dimensions significantly.
The partners had originally been led to the Doyle Lake sill by a promising train of indicator minerals that led to the site. Till samples from sites along the swath had produced a high number of indicators, along with what is generally believed to have been a promising geochemical result. As well, there are other targets in what is now known as the T-Lake region of the Doyle Lake property, based on that earlier surface sampling program.
The revival of the program on the southern portion of the Doyle Lake ground is possibly the best diamond news in years for Mr. Hrkac, who has been searching for gems in Canada's North since the early days of the hunt. He got his prospecting start while still a high school student in Northwestern Ontario, moving westward to pursue a geology degree from the University of British Columbia.
Mr. Hrkac got his promotional career rolling in 1981, with the creation of GGL, which was then known as Gerle Gold, named after two old prospectors, John Gerlitzki and John Leontowich, who had been working the McConnell Creek gold prospect in British Columbia, which Mr. Hrkac picked as the company's first mineral play. GGL poked around its gold project for a decade, and managed to land Placer Dome as a partner for a time. Placer called it quits after a few years, but the dogged Mr. Hrkac soldiered on, until the northern diamond hunt presented a more glittering opportunity.
GGL has been an active diamond hunter across much of the Slave region since the early 1990s, but kimberlite finds have been few and far between, and diamonds have been an even rarer commodity. The company has yet to officially find a macrodiamond, and its few recent kimberlite finds have proven to be barren. Meanwhile, the Doyle Lake sill sat teasingly just outside the company's reach for seven years, but Mr. Hrkac's tenaciousness managed to outlast the federal government and the court system, which flip-flopped a number of times on the ownership issue, until the matter was finally resolved earlier this year.
Meanwhile, Diamonds North and its partner, Southern Era Resources Ltd., are spooling up their exploration efforts on another patch of the disputed territory, just to the south of the Doyle Lake property. Diamonds North holds a 40-per-cent stake in the 32,000-hectare Kidme property, parts of which are also within 10 kilometres of the Kennady Lake kimberlites.
Earlier this month, the partners began a program of geophysics over the entire Kidme property, flying a helicopter-borne magnetic and electromagnetic survey, at a line spacing of 100 metres. That is a much finer resolution than the early geophysical work that had been conducted in the region during the early days, and it should provide a considerable number of potential drill targets.
The two companies also conducted some till sampling over the Kidme ground in the mid-1990s, coming up with an array of indicator minerals in some of its regional samples. The work identified several potential areas of interest, which were slated for a closer look, but that work has been on hold for several years. That initial sampling program was apparently conducted along fences, and Mr. Kolebaba said that there appeared to be four areas that contained anomalous numbers of indicator minerals.
Diamonds North and Southern Era do have some geophysical anomalies that remain untested from the early days. Mr. Kolebaba said that a survey early in 1996 had produced several drill targets that were under lakes, but the ownership battle flared up before any of them were tested. If the partners choose to drill any of those lake-based targets, based on the early data, it will not be until next spring.
After the new geophysical survey is complete and evaluated, Mr. Kolebaba said that a new surface sampling program would be competed in the area surrounding the more promising anomalies. That should produce some new drill targets, all of which should culminate in what will be the first drill program at Kidme. Mr. Kolebaba said that they were working toward a drill program beginning next March.
The Kidme partners are working across the entire property, but much of their effort may well be concentrated on the westernmost portion of the claims, which contains the extension of the trend line that runs southwesterly from Faraday, through Kelvin and the Kennady Lake cluster, along with the Doyle Lake sill. The southwestward extension of that line runs across the Kidme claims for more than 10 kilometres, before it exits the property near its southwestern corner, where Kidme borders on the 29,000-hectare Misty Lake property.
Misty Lake is also shared by Southern Era and Diamonds North, but the partners have not had much luck on that more westerly chunk of the South Slave diamond play. Misty had enough going for it that both De Beers and BHP Billiton spent some time poking around on the property. The claim block was substantially larger in the mid-1990s, and it has seen a significant amount of work through the years, including a few drill programs, but nothing has come from those efforts.
The latest drill program took place this spring, when SouthernEra tested five anomalies, but none of them were kimberlites. Despite the lack of success at Misty, there are some encouraging signs on the more easterly Kidme ground, and its relatively unexplored state is a further enticement for speculators.
Now known as the Gahcho Kue project, the three key Kennady Lake pipes contain over $2-billion (U.S.) in diamonds, and De Beers continues to work to make a mine from the finds. The economics of the project would be enhanced if additional finds are made, and more work around Faraday and Kelvin is in the works for this year. Meanwhile, if either of the GGL or Diamonds North properties were to yield a diamondiferous kimberlite, it could add to the potential economics of the Kennady Lake play.
A find on the Doyle Lake ground would be more straightforward, as De Beers owns a 60-per-cent stake in the Doyle ground, and it would be a relatively simple matter to incorporate a find on that property into a Gahcho Kue mine. It would be a bit more involved, should SouthernEra and Diamonds North come up with a promising find on the Kidme ground, as De Beers has no interest in that property. A promising Kidme discovery would likely not be economic on its own, unless it were very rich, or very large, but an additional amount of diamondiferous kimberlite could add to the viability of Gahcho Kue.
In any case, the southeastern portion of the South Slave district is shaping up to be a busy spot this year, and the activity has caught the market's eye. The shares of De Beers's partner at Gahcho Kue, Mountain Province Diamonds Inc., have shown new signs of life of late, recovering from a 60-cent low this spring to a $1.70 peak late last month. Much of the recovery is due to a decision by De Beers to examine the costs of a feasibility study at Gahcho Kue, but the revival of the Doyle and Kidme plays has had a positive impact on the company's share price as well.
GGL closed up two cents on Monday, at 48 cents, while Diamonds North dropped three cents, closing at 73 cents.
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