Will's Streetwire
Diamonds North finds new Hadley hope
Diamonds North Resources Ltd DDN
Shares issued 13,047,885 Sep 4 close $0.75
Fri 5 Sept 2003 Street Wire
by Will Purcell
Diamonds North Resources has added to the diamond potential of the King Eider structure, on its Victoria Island Hadley Bay property, in Canada's far North. King Eider and a few other kimberlites were discovered by De Beers in the district during the heyday of the Victoria Island play in the latter half of the 1990s, but the diamond giant gave up on its hunt a few years ago. Nevertheless, the directors of Diamonds North have remained believers in the region, and the company successfully revived the market's interest in the play last year, with some toutable diamond counts from a string of kimberlites to the south of the King Eider structure. There were signs of promise from King Eider as well, but the company's partner on that play, Canabrava Diamond Corporation, decided to walk away from the region earlier this year, leaving Diamonds North with a 100-per-cent stake in the Hadley Bay project. Mark Kolebaba has been Diamonds North's president since the company was spun off early last year from what was originally Major General Resources, and he has played a big role in reactivating the Victoria Island diamond hunt and successfully selling the old story to a new crop of investors. In addition to Mr. Kolebaba, who was formerly a senior geologist with BHP Diamonds, there have been a few other believers that have been associated with the Victoria Island hunt since its early days, and they continue to play an active role with Diamonds North. Bernard Kahlert has been with Major General since 1990, and he was added to the company's board in 1997. Diamonds were not a big part of Mr. Kahlert's early career as an exploration geologist, which began in the mid-1960s with Canadian Superior Exploration. Mr. Kahlert spent the first few years looking for base metal deposits in Western Canada, but he got his first taste for diamonds when he became a manager of the mineral hunt in Australia for Amoco Minerals. Much of his tome with Amoco was directed at finding metal and gold deposits, but in the late 1970s, he was involved in the search for gems in the Kimberly district of Australia. Mr. Kahlert left Amoco and struck out on his own in the mid-1980s, working
as a consulting geologist for several years, but he became the
vice-president of exploration for Major General in 1990. With his earlier taste for diamonds and with the commodity being a hot item in the 1990s, Mr. Kahlert played a key role in leading Major General into the diamond hunt on the Slave region, where the company picked up slices of a number of properties. In 1994, the company acquired its first ground in the North Slave region, on Victoria Island. Major General managed to mount two effective promotions through the mid-1990s, but the Victoria Island play did not figure prominently in either story. In the spring of 1995, it was Mr. Kahlert's diamond projects on the southern part of the Slave craton that carried the company's stock to a peak of $1.20, and the following spring, it took $1.40 to buy a Major General share, again due to the more southerly diamond hunt, along with some metal plays in Eastern Canada. From there it was all downhill however, and even the discovery of several diamondiferous kimberlites on the company's Victoria ground did little to slow a continued decline in Major General's stock, which bottomed at six cents in the fall of 2001. The recent resurrection of the Victoria Island play has fared much better at attracting attention, as Diamonds North's shares hit a peak of 95 cents early this year and continue to trade in a range near the 75-cent mark, as usually hasty speculators wait patiently for the diamond counts from the company's current exploration programs. Much of the new notice was based on signs of coarse diamond size distributions in a few kimberlites along the Galaxy structure, about 25 kilometres south and roughly parallel to the King Eider feature, but there were hopeful signs from the more northerly line as well. Diamonds North and Canabrava processed about 390 kilograms of kimberlite from King Eider, coming up with just 64 diamonds. The total count was decidedly modest, but there were several larger diamonds in the mix, and a favourable diamond size distribution curve is often a more important factor than the total number of stones present in a sample. A total of 14 diamonds remained on a 0.30-millimetre mesh, accounting for about 22 per cent of the entire parcel, and about 16 per cent of the stones clung to the 0.425-millimetre screen. Two of the diamonds were large enough to remain on a 0.85-millimetre sieve, which is the minimum cutoff used in many mini-bulk samples. Two of the diamonds exceeded one millimetre in two dimensions, adding an additional glimmer of hope. None of that necessarily points to a particularly promising grade, but the nature of the Victoria Island kimberlites suggests that it will take significantly larger samples to provide a true indication of the diamond potential. Another Hadley kimberlite that offered a possible sign of a coarse size distribution was Turnstone, another De Beers find from 1997. Diamonds North and Canabrava processed just 20.3 kilograms of rock from the find last year, coming up with three diamonds. Two were tiny micros, but the third stone was large enough to remain on a 0.60-millimetre screen. Turnstone appears to be a dike, but it has an impressive strike length, running for at least 1,400 metres. Diamonds North and Canabrava turned up several new kimberlites along the line last year, but the former partners failed to drill up any diamond hope. Nearly 100 kilograms of kimberlite from the Apollo body was barren, as were a 41-kilogram batch from Pluto and an 18-kilogram portion from Diana. No diamonds were recovered from the Neptune kimberlite, while the sample from the Juno dike was considered to be too small to warrant testing. There are three additional kimberlites on the Hadley Bay structure that were discovered by De Beers in 1997 and the following year. Little is known about the Jaeger, Pintail and Sanderling kimberlites however, and Diamonds North has no real plans to test them again at this stage. The company has made at least one new find this year however, and it appears to be hot on the trail of a few others on the King Eider structure, which has now been extended to about 25 kilometres in length, with a new find on the southeastern portion of the line. An airborne geophysical survey identified a magnetic anomaly suggestive of a dike, and subsequent prospecting has come up with two separate kimberlite occurrences along the feature. Diamonds North has scooped up about 90 kilograms of the material for processing. That success increases the odds that Diamonds North will come up with more
finds later this year along the King Eider structure. Additional
geophysical surveying along the northwestern portion of the structure has produced at least three new magnetic anomalies. Two of the features could be kimberlite pipes of a promising size, as the circular anomalies are up to 200 metres in diameter. The third feature could be another dike, but the anomaly measures about one kilometre in length, and up to 100 metres in width. The company plans detailed ground work and the targets may well be drilled before the exploration program wraps up for the year. Mr. Kahlert, the old Major General man, also played a role in the reorganization of Goldcap Inc. in 1993, along with a group that included a fellow Diamonds North director, geologist Yale Simpson, and diamond hunter John Robins. The company got its new start in the hunt for Alberta gems, but the search quickly expanded to Saskatchewan and the Lac de Gras area in the North. Just over a year later, Goldcap consolidated its shares on a 1-for-2 basis, becoming Durandel Minerals Corporation. The consolidation did not improve the company's fortunes however, and in 1996 it tried again, rolling back its shares once again on a 1-for-2 basis becoming Caliope Metals. By then, the company had changed its focus to a metal play in Australia, and although that was Mr. Kahlert's former stomping ground, he moved on to other ventures shortly after the latest reorganization. With the departure of Canabrava, Diamonds North is again shelling out its own cash on the Hadley Bay property, but that should not be a big problem for the company, as it has a well-heeled partner, Teck Cominco, paying the bills on the Blue Ice ground that has been the most promising Victoria Island property so far. The company has partners on its other Victoria Island plays as well,
although their wallets are somewhat thinner than Teck's. Serengeti
Resources has plans to spend at least $200,000 on the Holman portion of the region, just west of Blue Ice and Hadley Bay, while Majescor Resources is currently working on the Washburn ground, to the southeast of Blue Ice and Hadley Bay. Hawkeye Gold had been earning an interest in the Yankee project, southwest of the main Victoria Island finds, but it converted its stake to a 10-per-cent-carried interest this spring. As well, Diamonds North has a 100-per-cent share in its new White Ice project, which is immediately west of the Galaxy and King Eider structures, and could contain northwestern extensions of both features. That could make it attractive to Teck or another partner, should anything worthwhile turn up on the northwestern ends of either structure. The company also has a 52-per-cent share of Washburn, the other key Victoria Island property. In any case, cash is not a big concern for Diamonds North at this stage, as the company had nearly $3-million in the bank at the end of June, and about $2.5-million in working capital, as Mr. Kolebaba, Mr. Kahlert and Diamonds North have been effective at stocking the company's coffers. Just a few weeks ago, the company completed another placement that brought in just over $2-million, and with its loftier share price of late, about two million existing warrants were exercised this summer, adding another $1.17-million in cash. Diamonds North's shares dipped to a low of 63 cents in late July, but the
stock has slowly been gaining strength since then, as speculators
anticipate a steady stream of new diamond counts in the coming months. Diamonds North closed up five pennies on Friday, closing at 80 cents.
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