Diamonds North Resources Ltd (C-DDN) - Street Wire
Diamonds North finds larger macro at little Fornax
Diamonds North Resources Ltd DDN
Shares issued 13,047,885 Oct 30 2003 close $ 1.05
Friday October 31 2003 Street Wire
Also Teck Cominco Ltd (C-TEK) Street Wire
by Will Purcell
Diamonds North Resources and Teck Cominco have another set of hopeful diamond counts from a new kimberlite find on its Blue Ice property, on Victoria Island in Nunavut. The Fornax dike has produced a modest number of diamonds, but as with several other bodies in the area, there are signs that the diamond parcel has a favourable size distribution curve. Although Fornax appears to be a narrow dike at this stage, it will take several drill holes to get a reasonable understanding of its real geometry. Such a program could be in the works for next year, based on the initial diamond counts, said Diamonds North's manager of corporate communications, Nancy Curry.
The latest numbers seem modest at first glance, but there are encouraging signs in the results, and that helped carry the company's shares to an intraday peak of $1.14. The most hopeful result came from Fornax, where Diamonds North processed just over 28 kilograms of kimberlite, coming up with 16 diamonds, or about 570 stones per tonne. That number was roughly in line with what some of the other kimberlites along the Galaxy structure had delivered, but the best news was that one of the diamonds was longer than one millimetre in two dimensions.
In all, there were just two diamonds large enough to sit on a 0.30-millimetre mesh, but both of them had also clung to the 0.425-millimetre screen. Those two larger diamonds accounted for just over 12 per cent of the parcel, but tiny samples often produce lower numbers of larger diamonds than might be expected, and that makes the one larger diamond an encouraging find. The stone, which was 1.28 millimetres long and may have weighed close to 0.01 carat, was large enough to have remained on a 0.85-millimetre mesh, the minimum cutoff that has been used for many mini-bulk samples.
The inherent statistical error expected with a tiny sample size may have also accounted for a lack of any larger diamonds in a recent test of Carina, which was discovered last year by Diamonds North. Nearly 16 kilograms of kimberlite produced just three diamonds, and none of them were large enough to sit on a 0.30-millimetre mesh, which was disappointing at first glance.
Last year, nearly 24 kilograms of material from the upper portion of Carina had produced eight diamonds, including three that remained on a 0.30-millimetre screen. It was the lower portion of Carina that seemed to be of greatest interest during the 2002 program however. Diamonds North processed about 69 kilograms of kimberlite, coming up with 78 stones, including two that were large enough to remain on a 0.60-millimetre screen. In all, seven stones were recovered by a 0.30-millimetre sieve.
Poking several more holes into Carina would produce larger samples and possibly better diamond counts, but getting a better handle on Carina was not a high priority for Diamonds North and Teck during its recent program. The one hole drilled this year encountered nearly six metres of kimberlite, for a true width of 3.4 metres. That suggests that Carina is a relatively narrow dike, but the actual geometry remains an unknown quantity and Carina's geophysical anomaly is rather large, measuring 265 metres in length and about 140 metres wide.
The Fornax anomaly is also significant, measuring 240 metres long and 100 metres wide, and the kimberlite bodies in the central portion of the Galaxy structure may move up a notch on the priority list as a result of the larger diamond in the Fornax sample.
At this stage, Diamonds North and Teck appear to be concentrating much of their efforts on the northwestern and southeastern ends of the Galaxy feature. Ms. Curry said that the two top kimberlite priorities for Diamonds North and Teck were the Snow Goose and Sand Piper East bodies, and results from larger samples are expected from both bodies later this year as a result.
The partners shipped 565 kilograms of rock from Snow Goose to the lab and a slightly larger batch is being kept in reserve, while just over 275 kilograms of kimberlite from Sand Piper east was sent for processing, with 630 additional kilograms available for later testing. Ms. Curry said that the Snow Goose results are expected later in November, with the Sand Piper counts due the following month, if all goes well. As well, the partners shipped 656 kilograms of Sculptor material for processing, keeping another 300 kilograms in reserve.
Sand Piper East has become a priority due to the stellar results that a tiny sample delivered last year. A 6.49-kilogram batch of rock produced 118 diamonds, and there were signs galore that the diamond parcel had a coarse size distribution. Five diamonds remained on a 0.85-millimetre screen, including one that was over two millimetres long, and the total carat weight of the parcel indicated a diamond content of about 17 carats per tonne to speculators willing to perform long division.
Such calculations are quite meaningless for such tiny samples, but speculators did not seem to care, as the result triggered a new surge of interest in the slumbering Victoria Island diamond hunt. Things suddenly became quite hectic for Ms. Curry and Diamonds North, as the company's shares quickly surged from about 30 cents to more than 70 cents.
Diamonds North is hopeful that the stellar result indicates that the Sand Piper East kimberlite has much greater potential than the other Sand Piper samples, as the kimberlite is distinct from the material found in the main Sand Piper body. Ms. Curry said that the company did not expect the larger batch to produce a diamond content comparable with the tiny sample, but Diamonds North does think that Sand Piper East does have a higher diamond content and a coarser size distribution curve than the main Sand Piper body.
There are a number of signs that support the notion of a richer diamond content at Sand Piper East, and it would not be an unusual result, as many of the Victoria Island bodies appear to have varying diamond grades and distributions. The market has similar, if not markedly grander hopes for Sand Piper East, and promoting the Victoria Island play will be a tougher task without evidence of a higher grade as a result.
The Snow Goose body is also a priority target, but for a different reason. Ms. Curry said that Snow Goose was a pipe, and it offers encouragement in the form of tonnage as a result. Snow Goose has been providing some larger diamonds as well however. De Beers processed about 150 kilograms of Snow Goose kimberlite in the late 1990s, coming up with 55 diamonds, including three two-dimensional macrodiamonds. Most of the hope comes from a single 0.23-carat diamond, but the two additional stones appear to have weighed over 0.01 carat as well, and the much larger test will provide some valuable clues about the size distribution of the Snow Goose pipe.
Although Ms. Curry did not rank Sculptor among the priorities for Diamonds North and Teck, the size of the sample collected this year combined with the results obtained last year would seem to make it a key part of the project. Sculptor is roughly three kilometers to the northwest of Sand Piper, toward the central portion of the Galaxy structure that hosts Fornax and Carina.
Last year, about 209 kilograms of kimberlite yielded 254 diamonds. More than one-quarter of the stones had clung to a 0.30-millimetre sieve, and four of them were large enough to remain on a 0.85-millimetre mesh. Although it was the tiny Sand Piper East sample that received most of the attention, the Sculptor body was likely the best of the lot last year, based on the size of the sample, the number of stones recovered and the size distribution of the diamonds. As a result, Sculptor seems a likely candidate to see still larger tests next year.
Time is one additional reason for upping the priority of the Sand Piper East and the Snow Goose tests. Ms. Curry said that Teck has 60 days to decide whether to proceed with its option, starting when all of the data has been received. It seems unlikely that all of the diamond counts will be available and analyzed before early next year, and the 60-day period could well run into the early spring, and that would pose problems for planning next year's exploration program. As a result, the partners would most likely prefer to have a decision well before spring, and the results from Snow Goose and Sand Piper will have an important influence on the plans for next year. Getting those results as soon as possible could help Teck make its decision ahead of schedule.
Although Teck still has not formally elected to earn a 30-per-cent stake in the Blue Ice project, Ms. Curry said that all signs pointed toward an affirmative decision. "We really expect them to go forward," she said. To earn that initial share of Blue Ice, Teck is required to exercise $500,000 worth of Diamonds North warrants and spend $9.5-million on exploration over the next three years. Teck can ultimately increase its share in the project to 65 per cent by carrying Diamonds North to production.
Although it is the extremities of the Galaxy structure that have received most of the attention this year, the earlier Sculptor result and the latest numbers from Fornax could bring the central portion of the structure under closer scrutiny, as Diamonds North now thinks that the Fornax and Carina dikes are part of a multiple dike system that is over one kilometer in length. Although the widths of those dikes remain unknown quantities, the larger diamonds at Sculptor and Fornax may provide enough enticement to prompt a drill program next year. In the meantime, a continued flow of diamond counts from the 2002 samples will continue to provide grist for Ms. Curry's promotional mill.
Diamond North's good news lady has been helping junior explorers with their diamond promotions for the past several years, after spending nearly a decade in the securities industry. Ms. Curry studied political science and history at university, and she got her first taste of trading stocks during her second year, through a summer job with a broker. After she finished school, Ms. Curry went to work for Midland Walwyn, becoming a futures trader in Toronto.
The history student turned futures trader moved on, if not up, to Marleau Lemire Securities and subsequently moved westward to run the futures desk for Marleau Lemire in Vancouver. Several months later, the company laid plans to computerize its futures operation, prompting Ms. Curry to take up a new career.
She landed an investor relations job with Mountain Province Diamonds in the mid-1990s, a busy time for Mountain Province and its Kennady Lake diamond project, which was a hot topic with investors for several years. Much of the speculative attention evaporated after the project reached an advanced stage, and Ms. Curry again moved on, ultimately landing at Diamonds North last fall.
That was just days before the Victoria Island diamond hunt became big news with speculators, and Diamonds North and Ms. Curry have managed to keep up the revived diamond hunt in the market's eye for more than a year, helped along by a series of timely and toutable diamond counts.
Diamonds North gained six cents on Thursday, closing at $1.05.
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