Partners rework Ontario diamond deal

Canabrava Diamond (CNB-V) and Paramount Ventures & Finance (PVF-V) have reworked a 1999 option agreement with Kennecott Canada Exploration to include about 400 sq. km of claims staked in north-central Ontario.

The new deal now includes the Rocky Island Lake project and the Pivot Lake claims. Canabrava has assumed operatorship from Kennecott and launched a summer exploration program.

Under the new deal, each company is allowed to explore outside the revised area of interest without obligation to the other party. However, any land in the original area of interest acquired by Kennecott or Canabrava before June 30, 2003, will be subject to a 1.5% gross overriding royalty (capped at $10 million) payable to the other party.

Canabrava and Paramount will split any share of the royalty based on their equity interest levels in the project. Currently, they each hold a 50% interest in the 11,500-sq.-km revised area of interest.

Kennecott has committed another $350,000 to the project in 2001. It has already spent $800,000 this year. Canabrava and Paramount will equally fund another $500,000. Kennecott has also committed another $500,000 for 2002 to drill or trench at least 10 targets. The funds will not be applied to Kennecott’s earn-in commitment.

Once it spends the additional $500,000, Kennecott can elect to resume as operator, with an option to earn a 60% interest in the project by spending $25 million before June 10, 2006, or by advancing the project to a production decision. To date, Kennecott has spent more than $2.5 million on the project.

Kennecott, a subsidiary of Rio Tinto (RTP-N), is exploring a package of properties held by Canabrava and Paramount along-trend of the Kapuskasing structural zone, northeast of Wawa. The joint venture covers Canabrava’s wholly owned Whitefish property, plus the KAP and Rocky Island Lake properties, which are owned 50-50 by Canabrava and Paramount.

Previous till sampling at Rocky Island Lake was designed to cut off the up-ice extension of 11 previously identified kimberlite indicator mineral trains. The work turned up two diamond-bearing kimberlite boulders in one of the well-defined indicator mineral trains.

The boulders are several kilometres apart. A 107-kg sample from one yielded four microdiamonds and two macrodiamonds. The stones are described as transparent white fragments. Three of the diamonds display remnant octahedral form, while the remaining three are irregular fragments. A 142-kg sample from the second boulder returned a single stone, which is unusual in that it is deep green.