Diamonds North finds more Victoria hope
Diamonds North Resources Ltd DDN
Shares issued 10,001,033 Dec 20 close $0.80
Mon 23 Dec 2002 Street Wire
by Will Purcell
The Victoria Island diamond play took another step forward, with an encouraging result from a kimberlite body on the Blue Ice property, which is owned by Mark Kolebaba's Diamonds North Resources Ltd. The company holds a large interest in the region, and although it has partners on much of its large land position, Diamonds North holds a 100-per-cent stake in the Blue Ice play. Nevertheless, the latest round of diamond counts appear to offer additional hope for the company's partners, including George Read's Canabrava Diamond Corporation, which is also awaiting additional diamond counts from the district. Although Diamonds North and its partners still have a long way to go to convince the market that the Victoria Island play is for real, the results to date suggest that the original explorer in the region may have walked away a bit prematurely. The latest development provides further hope for two diamond hunters that continued to believe in the region after their former employers called it quits on Victoria Island. Mr. Kolebaba worked as a senior geologist for BHP Billiton for several years, playing an active role with that company at its Ekati project. BHP inherited an option deal on Victoria Island when it took over Dia Met Minerals, but it quickly walked away from the play. Meanwhile, Mr. Kolebaba walked away from BHP, taking over as president of Diamonds North and its Victoria Island play early this year. Mr. Read is another diamond hunter whose interest in the region outlasted that of a former employer. He had explored in the region with De Beers in the early 1990s, until he moved on to become a consultant in 1996. De Beers poked away in the region until a few years ago, without much success. Diamonds North seems to be finding more hope in the region than De Beers had. The company has proved that three additional kimberlites on Blue Ice are diamondiferous, but it is the counts from the Sculptor body that rightfully caught the eye of speculators. Diamonds North processed about 209 kilograms of kimberlite, recovering 254 diamonds large enough to remain on a 0.10-millimetre mesh, or about 1,220 stones per tonne. That was a significant haul, but large numbers of microdiamonds can be meaningless if they are not supported by significant numbers of macrodiamonds. So far, Diamonds North and Canabrava have been able to demonstrate potentially favourable diamond size distributions with their earlier results, and once again, this appears to be the case. The Sculptor sample contained 68 macrodiamonds, and 45 of those were two-dimensional macros, or about 215 2-D macros per tonne. As well, there was an encouraging haul of still larger diamonds. One dozen of the stones were at least one millimetre in length, and half of those exceeded one millimetre in two dimensions, or about 29 stones per tonne. One of those diamonds exceeded two millimetres in two dimensions, and that stone likely weighed something close to 0.03 carat. A closer look at the Sculptor counts offers additional encouragement that the body has a coarse diamond size distribution, compared with other promising finds in Canada's North. One such find is Sue, near Yamba Lake, to the northwest of Lac de Gras. Chris Jennings's SouthernEra Resources Ltd. has been doggedly working away on the property for several years, and it recently went back to test Sue. A 717-kilogram sample from Sue produced only 214 diamonds, and only 22 of those stones were two-dimensional macros, well below the result obtained from Sculptor. Nevertheless, Mr. Jennings found enough hope in the proportion of larger stones that he touted the macrodiamond recoveries as being very encouraging. There are glimmers of hope in the Sue results, but the numbers from Sculptor seem superior. For instance, 67 of the Sculptor diamonds remained on a 0.30-millimetre mesh, or about 26 per cent of the parcel, while 28 of the Sue diamonds were sufficiently large to remain on the screen, or about 13 per cent. Things were just as hopeful at larger mesh sizes. A total of 34 of the Sculptor stones were large enough to remain on a 0.425-millimetre screen, or just over 13 per cent, while only 19 of the Sue diamonds clung to a similar screen, or less than 9 per cent of the stones. Sculptor's size distribution also holds up well in a comparison with the Snap Lake dike, which extends onto a property being explored by Randy Turner's Diamondex Resources Ltd. The company processed 56.5 kilograms of rock in 2001, recovering 346 stones larger than the 0.10-millimetre screen. Of those, 65 stones remained on a 0.3-millimetre screen, or a bit less than 19 per cent of the parcel, and 32 stones, or roughly 9 per cent, remained on a 0.425-millimetre mesh. There is no doubt that there is a healthy diamond size distribution in the Snap Lake deposit, which was discovered by Mr. Turner's Winspear Resources Ltd. but is now being developed by De Beers. At last word, Snap Lake had a grade close to two carats per tonne, with an abundance of diamonds larger than three carats. As a result, the numbers from Sculptor seem encouraging, but there are still tough questions that can only be answered by larger samples. Diamond counts from another Diamonds North kimberlite provide some interesting clues about the problems exploring in the region. So far, the company has received results for about 83 kilograms of rock from its Sand Piper kimberlite, also on the Blue Ice property. That material produced 148 diamonds, or about 1,750 stones per tonne, and 23 of the diamonds were two-dimensional macros, or about 275 such stones per tonne. Those recovery rates were significantly higher than what the company has obtained from Sculptor, and a further sign of the favourable diamond size distribution was the fact that nearly 24 per cent of the diamonds at Sand Piper were large enough to remain on a 0.30-millimetre screen and more than 11 per cent remained on a 0.425-millimetre screen. On the whole, the Sand Piper result seems rather promising, but as it turns out, most of the large diamonds came from a tiny 6.5-kilogram batch of rock, and the remaining 77 kilograms produced quite disappointing numbers. It was that tiny sample that really got the Victoria Island play back in business earlier this year The difference between the samples was considerable. For instance, 16 of the 118 diamonds in the tiny sample were large enough to remain on a 0.425-millimetre screen, or nearly 14 per cent, while just one of the 30 stones in the remaining portion was that large, representing just over 3 per cent of the parcel. As well, although the Sand Piper sample as a whole had contained eight stones larger than a 0.6-millimetre mesh, including two that were larger than the 1.18-millimetre screen, all of those diamonds had come from the one small batch. It will take more work to determine just what all that means, but the presence of potentially small but rich portions of kimberlite would not necessarily be bad news for Sand Piper, or any of the other kimberlites on Victoria Island. Two key questions would of course be just how rich those portions are, and just how prevalent they are among the much lower-grade portions of the kimberlites, and only large samples will truly answer those questions. Diamonds North combined its results from Sculptor into one cumulative sample, so it is not known just how much variation there was within the individual batches of kimberlite processed by caustic fusion. In the absence of any indication to the contrary, it seems reasonable to anticipate that similar variations might exist at Sculptor as were noted at Sand Piper, especially if there were different phases of kimberlite encountered, and similar differences could be present in at least some of the other bodies that have been tested to date. Sculptor is located just 2,500 metres to the west of Sand Piper, and it appears to be part of a large kimberlite dike system, the width of which is not yet known. Meanwhile, Diamonds North also received the results from another nearby find, Pegasus, which is about 100 metres to the north of Sculptor. The numbers were less encouraging, as only 52 stones were recovered from 337 kilograms of kimberlite. Only four of them were two-dimensional macros, and just six of the diamonds, or less than 12 per cent, were large enough to remain on a 0.30-millimetre screen. Nevertheless, Diamonds North remains hopeful that Pegasus remains a priority project, not all of the kimberlite phases have been tested. About 90 per cent of the sample was medium-grained kimberlite, with the remaining portion being coarse-grained material. As a result, Pegasus could end up having much richer areas as well, which would not be a big surprise, as the Sculptor rock was described as coarse-grained kimberlite as well. A third kimberlite also proved to be diamondiferous, although the result from Zeta was more modest than even Pegasus, and Diamonds North did not utter any words of hope for this body. The company processed 234 kilograms of medium-grained kimberlite, but the rock yielded just 20 stones, with only one two-dimensional macrodiamond in the mix. Zeta is about 4.5 kilometres to the west of Sand Piper All three of the new kimberlites are located near the central part of the Galaxy structure, although only Pegasus is directly on the structure itself, with the two other kimberlites lying parallel as discrete parallel bodies. The intriguing diamond counts from Sculptor and the earlier numbers from Sand Piper appear to make the two bodies and the surrounding area a top priority for the company next year, and it is no surprise that Mr. Kolebaba touts the district as being a major focus for exploration drilling during 2003. It is not known if Diamonds North will take some larger samples from Sculptor and Sand Piper as part of that focus, but it would seem a logical, although potentially more costly step if the company hopes to get a better handle on the diamond content of the two bodies. Alternatively, Diamonds North might decide to continue delineation drilling at the two bodies. That would give the company a much better notion of the size and shape of the kimberlites, as well as the different phases of rock, and it would allow the company a chance to determine if one of the phases does indeed have a much better diamond grade than the others. The coarse-grained kimberlite seems to be an intriguing phase at this stage.
The promising material at Sculptor was described as coarse-grained
hypabyssal kimberlite, and Mr. Kolebaba had described the one rich sample at Sand Piper as hypabyssal kimberlite, while the lower-grade material appeared to be less dense and less competent altered rock that appeared to be diatreme. The latest numbers revived the promotion of Diamonds North, which seemed to be sagging just a bit of late. The stock had hit a peak of 88 cents in late October, on the strength of more good news from the region, but it had drifted back to near the 60-cent mark of late. The Sculptor news breathed new life into the stock, which gained seven cents Thursday and eight more on Friday, closing at 80 cents.
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