Diamonds North tackles Northern Manitoba
Diamonds North Resources Ltd DDN
Shares issued 24,606,527 Jun 16 close $1.08
Thu 17 Jun 2004 Street Wire
by Will Purcell
Mark Kolebaba's Diamonds North Resources Ltd. has added a new spark of life to the struggling Manitoba diamond hunt, with the acquisition of a large property in the northeastern corner of the province. The new gem project is on higher ground near the Kaskattama River, to the south of Hudson Bay and just west of the Ontario border. That places the project well to the north of the region that had been heavily explored a few years ago. Those earlier efforts were based on the discovery of some promising indicator minerals, but no kimberlite sources were found and the play subsequently faltered. Nevertheless, there are signs of encouragement that the mineral hope may have originated in the area near Diamonds North's new property. Diamonds North acquired the 360,000-hectare project earlier this spring, part of it through a deal with Indicator Explorations Ltd. That arrangement will require the company to make about $530,000 in cash payments over the next four years, along with a token payment of shares. The rights to the remaining ground were obtained directly by Diamonds North. Diamonds North's spokesperson, Nancy Curry, said that her company's new project lies between two blocks of ground that were acquired by Steve Masson's Foran Mining Corp. starting in early 2002. Mr. Masson has long been a believer in the diamond prospects of the region, and he apparently is not alone, as Mr. Kolebaba is another diamond hunter who is willing to try a new spin on an old play. Ms. Curry said that the Manitoba project was acquired because "it really fits into our business model," which is based upon geological concepts, but also places a priority upon projects that can be explored without running up some big bills. According to Ms. Curry, the company's new Manitoba play fits both of those requirements. She cited the elevation of the new property as one of the attractive features of the property, along with a relatively thin layer of overburden in the region that would leave any bedrock-based kimberlites fairly close to the surface. As well, the Diamonds North property lies along the northwestern extension of the Winisk fault, which the company believes extends into Manitoba. There are several diamondiferous kimberlites along the Winisk fault in Northwestern Ontario, including the Victor pipe that De Beers Canada Corp. hopes to make into Canada's first diamond mine. The pipe has a grade of a bit less than one-quarter of a carat per tonne, but a very coarse size distribution curve is believed to make the Victor diamonds worth something approaching $300 (U.S.) per carat, which is thought to be enough to overcome the modest grade and high costs of the Attawapiskat region of Ontario. The Kaskattama region of Manitoba is several hundred kilometres to the northwest of Victor, but it also lies on the Superior craton and is apparently along the same geological fault. As a result, there could be a cluster of kimberlites awaiting discovery, and if the indicator minerals found in the Gods Lake region originated from the area, there is a good chance that any finds could be diamondiferous. Ms. Curry said that Diamonds North planned to complete some preliminary exploration this year, conducting surface sediment sampling and geophysics over its property. Based on its rival's effort, Diamonds North should be able to produce a number of drill targets from its program, although the company is likely still some time away from testing any potential targets. Not so with little Foran, which is poised to drill three of its nine geophysical targets this month, and if that effort produces any kimberlite finds, it would give the Diamonds North play a big assist. Mr. Masson also cited the elevation of Foran's more southern property and its location along the Winisk fault as prime reasons for his hope that the Kaskattama region is the source of much of the Manitoba mineral promise, but there are also some key differences in Foran's exploration approach to the area. Mr. Masson said that although a lot of companies typically spent a considerable amount of cash conducting indicator mineral surveys, the approach was not likely to be effective over Foran's property, which he described as being primarily swampy ground with little in the way of exposed till. That makes it very difficult to collect samples. As a result, Mr. Masson and Foran are relying heavily on a geophysical survey that was recently flown over their southern property, on a 100-metre spacing. There is an iron formation farther to the north that makes interpreting geophysics a tougher task, but the magnetic background over Foran's southern block was fairly low and quiet. As a result, Mr. Masson is quite hopeful that some of the company's targets will prove to be kimberlites. Although it seems that Mr. Masson and Foran have a geophysical focus, things were markedly different through the mid-1990s, when he was managing the field exploration effort for Granges Inc., across Northern Manitoba and Northwestern Ontario. Granges was looking for metals, but the company was run by John Auston, who had been poking around the Lac de Gras region before the first big gem find and had remained intrigued by diamonds. During Mr. Auston's stint with Granges, Mr. Masson's field crews were told to keep their eyes open for any signs of gem promise. As a result, Granges is believed to be the first company to find the wealth of indicator minerals in the region north of Gods Lake. The presence of those minerals was subsequently noted by the Manitoba government, as well as by the regional exploration efforts of a number of diamond majors, including De Beers Canada Corp., BHP Billiton Ltd. and Kennecott Canada Exploration Inc. The three companies led a concerted hunt through the latter half of the 1990s and into the early 2000s that saw about $20-million spent on the quest for a kimberlite source for the minerals, primarily in the area encompassing Gods Lake, Knee Lake and Gillam The play attracted quite a number of junior explorers in addition to the three majors, but Mr. Masson was not among them. "We never staked a single claim," he said, adding that he had told anyone willing to listen that the play had sprung up in the wrong area. They were basically drilling the scrapings brought south by the glaciers, he stated. Granges abandoned any interest it had in the diamond play when the company amalgamated with another metal explorer and went looking for Nevada gold as Vista Gold Corp. Mr. Masson acquired the old mineral data from Vista just after he became head of Foran, and he continued tracing the minerals farther north, toward the Kaskattama district. If he is right, Mr. Kolebaba and Diamonds North could quickly find their new project at the centre of a new Manitoba play, rather than on the fringes of what appears to have been a failed hunt to the south. Mr. Masson has high hopes for his own company's chances of course, but Foran's president also thinks his new rival has scooped up some promising ground. "Unfortunately for us, we did not get as much property as we should have," he stated, adding that Diamonds North also appears to have a piece of what he thinks is a large kimberlite field. In any case, Mr. Masson appears happy to have Diamonds North as a neighbour. "We need more than one drum pounding up there," he said. Mr. Kolebaba has been effective at pounding drums since he became president of Diamonds North early in 2002. The company was created through the spinoff of several old diamond properties held by what is now Commander Resources Ltd., and the former senior geologist for BHP has had good success at reviving a few of the old plays. The Victoria Island play was big news for a brief time during the late 1990s, after De Beers had come up with a series of kimberlite finds, but there was not enough promise to keep the diamond giant interested. Mr. Kolebaba thought otherwise, and Diamonds North has managed to produce some promotable diamond counts from some new discoveries on the old properties, and some of the old finds have delivered some added promise. Mr. Kolebaba worked with BHP on the Ekati project, but in 1997 he became involved in the company's regional exploration effort across the eastern part of Canada, presumably on the Superior craton. The Manitoba play hit its peak during Mr. Kolebaba's stint with BHP, and that may have triggered his interest in tracing down the source of the indicator minerals that supported the original hunt. Mr. Kolebaba and Diamonds North could use a new diamond play, as the company's key projects are now being explored by others, under a series of option deals. Teck Cominco is earning a stake in a big piece of the Victoria Island play, and BHP is now paying the bills on the huge Amaruk project, near Pelly Bay in Nunavut. As a result, Diamonds North should have more than enough cash to start its geophysical surveying and surface sampling efforts on the Manitoba project. Although there is no drilling planned in the immediate future, a success by Mr. Masson and Foran would give the Diamonds North play a quick boost. Diamonds North added four cents on Wednesday, closing at $1.08.
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