North Arrow Minerals (NAR-V), on word its 383.6-carat parcel of diamonds from the Q1-4 pipe at Qilalugaq in central Nunavut was appraised at just $36 (U.S.) per carat. These are the diamonds North Arrow dug out of the ground last fall and recovered earlier this spring in a 1,353-tonne bulk sample that carried a $3.7-million budget. The modelled diamond values were higher, as they generally are with small parcels, but the best spin that North Arrow's consultants could muster was a "possible high" model price of $92 (U.S.) per carat. The "possible low" valuation was $43 (U.S.) per carat.
North Arrow did not say what value its consultants, WWW International Diamond Consultants, modelled as a mean estimate, but it presumably was close to the average of the two, perhaps just under $70 (U.S.) per carat. If so, the average rock value at Q1-4 is barely $35 (U.S.) per tonne, based on the inferred resource estimate grade of 0.54 carat per tonne, or perhaps just under $20 (U.S.) per tonne if the bulk sample grade of 0.28 carat per tonne proves closer to reality. Mr. Armstrong, CEO, said the Q1-4 diamond parcel was very small and as a result, WWW concluded that the appraisal and modelled diamond values "should be treated with considerable caution" when it comes to assessing the Qilalugaq project.
A rush to caution comes a bit late for those investors who paid up to $1.34 per share in mid-April, after North Arrow touted the geochemical qualities of the yellow diamonds that accounted for nearly one-fifth the weight of the total parcel. Mr. Armstrong went on (and on) about the "intense yellow colours" within the Q1-4 parcel being "consistent with highly coveted canary yellow diamonds." Unfortunately, those intense yellows did not yield an impressive valuation: WWW appraised the 24.5 carats at just $46 (U.S.) per carat. (Perhaps those investors who were unimpressed with the pictures North Arrow posted of its Q1-4 diamonds in April, did exercise caution and sold for a tidy profit: North Arrow traded in the 50-cent range for much of last fall.)
Mr. Armstrong says North Arrow will "review options" for the cost-effective collection of a larger bulk test of Q1-4, which would allow the company to produce a "more confident assessment." There are precedents for larger samples yielding better diamond values. A 90-carat appraisal of the diamonds in Diavik's A-21 pipe averaged just $33 (U.S.) per carat -- perhaps $70 (U.S.) today -- but the current Diavik estimate is $145 (U.S.) per carat, based upon a significantly larger test. That is North Arrow's continuing hope: that a much larger sample will produce enough of the rare canary yellow gems will turn up to substantially boost the diamond valuation. Unfortunately, proving the point just got harder, as Mr. Armstrong will have to raise several millions of dollars from currently disappointed investors to collect a much larger sample.
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