Diamond North-Street Wire-Diamonds North to drill Amaruk
Diamonds North Resources Ltd (C:DDN)
Shares Issued 39,547,148
Last Close 4/21/2006 $0.95
Monday April 24 2006 - Street Wire
by Will Purcell
Mark Kolebaba's Diamonds North Resources Ltd. is planning a busy year on its Amaruk property. The company continues to rank the sprawling Nunavut play highly, despite the loss of its major partner, BHP Billiton Diamonds Inc. In 2003, BHP grabbed a large block of ground surrounding Diamonds North's first acquisition in the area, and the two companies quickly agreed to combine their hunts. BHP's unexpected departure leaves Mr. Kolebaba's company paying the exploration bills this year, but it also gives Diamonds North a 100-per-cent stake in the entire play. The company also plans to spend a significant amount of cash on a second grassroots play that is now ready for drilling. Investor expectations for both hunts are keeping its shares hovering near $1.
The Amaruk play
"We are going full bore on Amaruk," Mr. Kolebaba said, adding the project was now a top priority for the company. Diamonds North has about $6-million in its treasury and one-third of that sum is already earmarked for the play that covers about two million hectares surrounding Kugaaruk, a small community formerly called Pelly Bay.
Interest in the area sprang up a year after Stornoway Diamond Corp. began finding kimberlites on Melville Peninsula, a few hundred kilometres to the east. Diamonds North already has its first diamondiferous bedrock kimberlite, but Mr. Kolebaba thinks he is close to making greater finds. The company found several areas with kimberlite float on the property and samples yielded toutable tallies of diamonds.
The big push is an encouraging sign for a play abandoned by a diamond major just a few months earlier. Diamonds North suddenly has a bounty of drill targets, with many in promising spots. "It obviously snuck up on us," Mr. Kolebaba said, adding that the hunt was coming together surprisingly well after BHP took its leave.
The encouragement
Diamonds North is chasing drill targets along a lengthy swath of indicator minerals, and its kimberlite boulders dangled a sparkling enticement. The company gathered nearly 170 kilograms of kimberlite from a site it dubbed WCA, and the rock yielded 150 diamonds. That works out to about 900 stones per tonne.
The parcel included 20 diamonds that clung to a 0.30-millimetre sieve, and those larger stones account for about 13.3 per cent of the full haul. As well, a dozen gems sat on a 0.425-millimetre mesh, and they provided 8.0 per cent of the total parcel. None of the diamonds remained on a 0.85-millimetre screen, but six of the diamonds were larger than a 0.60-millimetre sieve. That suggests that Diamonds North likely had a bit of bad luck on the largest sieves.
The WCA numbers are intriguing, although they fall well short of what Stornoway is finding on Melville Peninsula. The AV-1 kimberlite delivers diamonds at a rate of about 1,400 stones per tonne, and the size proportions are roughly double what Diamonds North found with its WCA float.
Stornoway processed just over 10 tonnes of kimberlite from AV-1 in two mini-bulk tests, which resulted in an average grade of about 0.82 carat per tonne. If the WCA tallies are representative of their source kimberlite, the body seems unlikely to have a grade close to the AV-1 result. Still, it is reasonable to expect it to have a modest commercial grade. For a random find on a prospecting mission, the WCA tallies are a promising first step on Amaruk.
Diamonds North also found promotability at a second spot, about 25 kilometres west of WCA. The company processed just under 100 kilograms of kimberlite from its WMC sample site, recovering 148 diamonds. That works out to about 1,500 stones per tonne. That compares favourably with WCA and AV-1, but the size distribution was generally a disappointment.
The WMC parcel included just 11 stones that clung to a 0.30-millimetre sieve, or about 7.4 per cent of the parcel. Just three gems remained on a 0.425-millimetre mesh, making up barely 2 per cent of the 148-stone haul. Those are disappointing proportions, but the company had a bit of good fortune, recovering a single diamond on the 0.85-millimetre screen. That find proves the source of the second sample to be capable of delivering diamonds in a mini-bulk test.
Tests from two float sites nearly 20 kilometres to the west of WCA also proved diamondiferous, although the stone counts were somewhat less promising. The company also proved its first bedrock kimberlite find on Amaruk to be diamondiferous, although there was little to cheer in the test of Umingmak. Just over 600 kilograms of kimberlite revealed 167 diamonds, or about 275 stones per tonne. Just over 10 per cent of them remained on a 0.30-millimetre screen and 3.6 per cent sat on a 0.425-millimetre mesh. None remained on a 0.85-millimetre sieve.
Although the numbers do not spark images of a large Nunavut diamond mine at first glance, they do support Diamonds North's continued faith in the Amaruk hunt. The significantly diamondiferous samples come from sites about 40 kilometres apart, along a mineral corridor that spans a distance of nearly 80 kilometres. Further, although indicator mineral grain counts led the company to the float sites, the company did not select the samples based on geochemistry. As a result, the chance of finding far better samples seems good.
The plan
Mr. Kolebaba now thinks the Amaruk play is ready for drilling. The company has more than enough targets and it plans some added work to pare its list down to a workable number. The scope of the program will depend on what kind of drill Diamonds North lines up, but several anomalies seem certain targets for this year.
Unlike Victoria Island, where large kimberlites now seem unlikely, Amaruk could be hiding a cluster of large pipes. In fact, the geometry Umingmak suggests that new finds could be large by Nunavut standards. The first Amaruk find measures about 275 metres long and 120 metres wide, covering a surface area of about three hectares.
With its success at finding float and kimberlite occurrences, Diamonds North now plans a prospecting program along a grid covering the indicator mineral swath. That could give the company some significant new samples for processing, even if its drill program fails to hit it big.
Diamonds North has indicator minerals with promotable chemistry across much of its remaining ground, and BHP gave the company 1,100 more surface samples when it quit. Results from those samples are pending. Much of the budget will go to developing more drill targets in the other areas. That will take more detailed sampling and geophysics.
Still, the drilling and diamond counts will drive the market interest this year. Drilling will likely start in July, but Diamonds North could have more kimberlite samples by then. Mr. Kolebaba said there were significant amounts of kimberlite float at other sites, and he expects the prospecting program will turn up more.
Hepburn targets
Diamonds North plans to throw $1-million at its Hepburn property this year. The play, on the western fringe of the Slave district, seemed an afterthought until this year. Mr. Kolebaba said that project also snuck up on the company. "We did not see it coming until January."
When Diamonds North did see it coming, it had the form of a magnetic low coincident with a circular lake, at a break in a diabase dike structure. As well, the feature offers geochemical encouragement. That sounds reminiscent of many a kimberlite on the Slave craton.
Mr. Kolebaba touts Hepburn as having as good a setting for diamonds as Ekati or Diavik, which sounds reminiscent of many a promotion beyond the Lac de Gras area. Still, he has the geochemistry to support his claim and a kimberlite hit on the intriguing target would stir quick interest in an area that never saw any exploration during the Slave frenzy.
Diamonds North also has swaths of encouraging indicator minerals elsewhere on Hepburn, and some of its exploration dollars will go to refining more targets for drilling. Based on its work so far, the company thinks it is chasing two separate clusters of pipes in the play.
Diamonds North added two cents Friday, closing at 95 cents on 6,000 shares.
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