Diamonds North's Vega yields a toutable tally of gems
Diamonds North Resources Ltd DDN
Shares issued 13,047,885 Nov 3 close $1.08
Tue 4 Nov 2003 Street Wire
Also (TEK)
by Will Purcell
The shares of Diamonds North Resources hit a new high on Monday, just after
the Victoria Island gem hunter revealed its latest set of diamond counts
from another of the many kimberlite bodies along the Galaxy structure, on
its Blue Ice property. The diamond content of the Vega kimberlite dike
managed to top the numbers posted by a tiny sample processed last year,
although the size distribution of the diamond parcel still lags behind what
some of its sister kimberlites have delivered. That could be due to the
small size of the sample however, and speculators found more hope than
disappointment in the latest numbers, carrying Diamonds North's shares to
an intraday high of $1.19, which topped the previous best by a nickel.
The company processed nearly 69 kilograms of kimberlite from Vega this
year, coming up with 96 diamonds larger than the 0.10-millimetre cutoff,
which worked out to 1,400 stones per tonne. That was one of the best
results obtained from Victoria Island to date, and it seemed to confirm the
initial test, which produced 22 diamonds from 22 kilograms of rock that had
been drilled up last year.
The size distribution of the diamonds did not show much variation between
the 2002 and 2003 samples however. Last year, just three of the diamonds
were large enough to remain on a 0.30-millimetre screen, or just over 13
per cent of the sample, while a dozen of the 96 latest stones recovered had
remained on the 0.3-millimetre sieve, again nearly 13 per cent of the
diamond parcel.
The kimberlite sample was larger this year, and that did bring some larger
diamonds. One of the stones had been recovered by a 0.60-millimetre screen,
and the four diamonds that remained on the 0.425-millimetre mesh accounted
for about 4 per cent of the parcel. Finding the larger stones in the mix
was a hopeful sign, but some of the other Galaxy kimberlites have been
decidedly more generous, yielding a significantly higher proportion of
larger diamonds.
Nevertheless, Diamonds North director and the company's vice-president in
charge of exploration, Bernard Kahlert, was suitably pleased with the
latest set of numbers, although the bulk of his enthusiasm was directed at
the quantity of the Vega diamonds, not the size of the stones. Mr. Kahlert
described the Vega result as "stronger and better," and although the ratio
of macrodiamonds to micros was lower at Vega than at some of the other
Galaxy finds, that could well be explained away by the small sample size.
As well, Mr. Kahlert touted the recovery of a one-millimetre diamond in the
current sample as a benchmark sign of hope in the small sample.
Mark Kolebaba has been playing the lead role with Diamonds North's Victoria
Island diamond hunt since he came over from BHP Billiton early last year to
become president of the fledgling company, but Mr. Kahlert knows a few
things about searching for gems as well. His first taste for diamonds came
in the late 1970s in Australia, when he did some background work in the
Kimberley region of Australia for Amoco Minerals. The large metals company
was not a big fan of looking for gems, and Mr. Kahlert found it hard to get
enough support to conduct any big regional exploration programs, but he was
able to get an initial understanding of the complexities of diamond
exploration nevertheless.
In the mid-1980s, Mr. Kahlert left Amoco and set up shop as a consulting
geologist, still concentrating his efforts on the pursuit of metals. In the
late 1980s, Mr. Kahlert began popping up on the boards of some junior
explorers, and in 1990, he was made the exploration manager for Major
General Resources. He was still primarily a metals man, but he played a key
role in nudging the junior toward the Canadian diamond hunt after the first
big find in 1991.
"We had to get involved after Lac de Gras," Mr. Kahlert said, and although
Major General was a bit late on the scene, missing out on the big 1993
diamond exploration frenzy, the company's shares still managed to attract
attention with two big runs in the mid-1990s, peaking at $1.40 in the
spring of 1996.
Major General started acquiring diamond ground in 1994, and it was those
gem projects that were spun off into a new company last year, creating
Diamonds North. It was Major General's ground in the southern portion of
the Slave craton that had triggered the initial rounds of speculative
interest in the mid-1990s, and the company was never able to effectively
promote its Victoria Island hunt through the latter portion of the 1990s,
despite a flurry of kimberlite finds of its own as well as several that
were made by De Beers.
It is now the Victoria Island plays that are proving far more promotable
for Mr. Kolebaba and Mr. Kahlert, thanks to a series of new and far more
toutable diamond counts. Diamonds North's share price is now edging closer
to the previous high-water mark set several years ago by its parent.
The steady stream of diamond counts from the Galaxy structure has given
Diamonds North a big helping hand with its promotion, but the company will
have to take produce progressively better results to maintain the market's
interest and ultimately prove or kill the best of its Galaxy structure
kimberlites.
As a result, the next logical step would be to collect significantly larger
samples of kimberlite from at least one of the most promising finds, and
that work is expected for next year. Mr. Kahlert said that the likely size
of such a sample would be on the order of two to 10 tonnes, and something
toward the upper limit of that range would provide a better idea of the
diamond content of the kimberlite.
Just which of the Galaxy kimberlites would be tested will depend upon the
final results of the current program. Mr. Kahlert said that they would have
to wait until all of the samples had been completed and reviewed, and that
could take a few more months, depending on the pace of processing the
material. The larger samples from the most prospective bodies are still
outstanding, including Sculptor, Sand Piper East and Snow Goose, and those
results will undoubtedly have a major impact on the direction of the 2004
program.
Determining the diamond content will be the most important aspect of the
program for eager speculators, but Mr. Kahlert is also looking for a much
better idea of the geometry and distinctive phases of the kimberlite within
the bodies. He said that he would prefer to collect the larger samples with
a large-core drill, sampling through the bodies with angled holes to get as
much information as possible.
Most of the Galaxy structure kimberlites appear to have multiple phases of
kimberlite, each with its own distinct diamond content, and additional
drilling could well identify some higher-grade zones within some of the
bodies. Much of the material recovered so far has been described as
hypabyssal kimberlite, but the presence of wood fragments in Snow Goose is
indicative of a crater facies of kimberlite.
Collecting larger samples, whether by trenching or drilling should not be a
major problem, as most of the bodies are quite shallow. In fact, at least
four of the bodies outcrop on surface, including Sand Piper, Fornax and
Sculptor. Elsewhere, the overburden that covers the Galaxy kimberlites is
thought to be just a few metres deep over the southeastern bodies,
thickening to about 20 metres over the Snow Goose pipe at the northwestern
end. Even there however, collecting a 10-tonne sample should not prove to
be an expensive proposition.
Diamonds North's Blue Ice partner, Teck Cominco, will have a big say in
just what work will be completed along the Galaxy structure next year, but
the company is expected to continue with the project next year, barring any
unpleasant surprise in the results that are yet to come. Diamonds North and
Teck had been sharing the costs of the program this year, but if Teck
continues, it will be paying for the cost of the 2004 program in accordance
with the option deal between the two companies.
If all goes well, that could make for a busy year on Victoria Island. If
Teck pays the bills at Blue Ice, the larger company could explore at a
somewhat faster pace next summer, and Diamonds North would also be free to
spend some of its cash reserve elsewhere. Mr. Kahlert said that if Teck
pays the shot at Blue Ice next year, it would change the financial
obligations for Diamonds North substantially, and as a result of the
lessened burden, the company would be able to "create blue sky with its
cash."
Blue sky aside, Mr. Kahlert would also prefer to make a greater effort next
year on the Hadley Bay project, especially along the King Eider feature,
about 25 kilometres north of the Galaxy structure. Last year, Diamonds
North had a partner at Hadley Bay in Canabrava Diamond, but the struggling
junior abruptly called it quits this spring. As a result, there has been
little work completed this year on the Hadley Bay ground, and Diamonds
North would seem to be on the prowl for a new partner.
Not so, says Mr. Kahlert. He said that finding a new partner for Hadley was
clearly an option, but he added that it was an option that was not
currently being considered. Mr. Kahlert thinks that owning all of the
Hadley Bay property would be advantageous for Diamonds North, should some
of the Galaxy structure kimberlites prove to be potentially economic.
As a result, more drilling and possibly some larger samples could be in the
works for the King Eider kimberlite, as well as Jaeger and some other, as
yet untested, anomalies in the area. Like the Galaxy finds, the initial
results from Hadley Bay were decidedly modest, but subsequent samples have
provided a different picture, making larger samples more likely.
Mr. Kolebaba, Mr. Kahlert and Diamonds North have long been hopeful of
finding diamonds on Victoria Island. The presence of both eclogitic and
peridotitic indicator minerals in the kimberlites was an encouraging early
sign, but the meagre diamond hauls from most of the initial tests was
enough to nearly kill the diamond hunt a few years ago. Things have been
decidedly better since then however, as the company's persistence has been
rewarded with higher diamond counts and some larger macrodiamonds from many
of the old finds, along with some of the new discoveries.
An increasing number of investors have been buying into the notion of Blue
Ice diamonds as a result. Diamonds North closed unchanged on Tuesday, at
$1.08.
(c) Copyright 2003 Canjex Publishing Ltd. stockwatch.com
Click here for company snapshot:
new.stockwatch.com
Click here for recent SEDAR documents:
new.stockwatch.com |
