DIAMOND PAGE — Investors in diamond play experienced highs

The Great Canadian Diamond Play gave investors a heart-stopping ride in 1994. The rise to a speculative peak in the summer followed by the diamond market’s subsequent crash to its current depressed levels left many investors understandably shaken.

Reports of discoveries of indicator minerals, or even of intersections of kimberlite, are no longer greeted with wild buying. The market interest generated by such reports is now comparable to the interest generated by news that a company has discovered a gold anomaly or intersected an iron formation with the potential for gold values. All iron formations do not necessarily contain gold, and investors are now painfully aware that not all kimberlites contain diamonds; nor are all diamond-bearing kimberlites economic. Contributing to the speculative fever is the fact that it takes months to receive an estimate on a dollar value for a diamondiferous kimberlite discovery, compared with the relatively short lead time for fire-assay results.

The deflation of the diamond market can be traced to the release of disappointing results from the DO-27 pipe on the WO claim block in the Lac de Gras region of the Northwest Territories.

Kennecott, which holds rights to a 40% interest in the project, sent shock waves through the market in early August after announcing that results from a bulk-sampling program did not justify further work on the pipe. The bulk sample returned 0.359 carats per tonne in the lower pyroclastic phase and 0.013 carats per tonne from the upper diatreme phase. Dollar values for the bulk sample were released in November, with the pyroclastic phase returning a diamond value of $33.50 per carat, or about $9.76 per tonne. The lag from the release of initial drill results to a dollar-value-per-tonne figure represents a considerable amount of time. The first drill results at the DO-27 pipe were released in April, 1993, with three holes returning 39 microdiamonds and 15 macros from a total of 89.4 kg of core. Additional positive drill results prompted Kennecott to skip the intermediate “mini-bulk” sample using large-diameter drilling; it collared the bulk-sample decline in the fall of 1993.

The DHK companies — Dentonia Resources (VSE), Horseshoe Gold Mining (ASE) and Kettle River Resources (VSE) — equally share a 35% interest in the WO claims, with Aber Resources (TSE) holding a 15% interest and SouthernEra Resources (TSE) owning the remaining 10%.

Work is continuing on the claims and Kennecott may proceed with a large-diametre mini-bulk sample on the DO-18 pipe next spring. One of the most-watched diamond exploration projects this past year was Aber Resources’ Diavik 40-60 joint venture with Kennecott, near Lac de Gras. The companies reported a diamond-bearing kimberlite intersection on the A154 target in June, and subsequent drilling identified a second diamondiferous pipe at the same location. The drilling returned diamond counts ranging from 12.5 to 17.3 diamonds per 10 kg. Pending the review of complete results, the joint venture plans to extract a mini-bulk sample using large-diametre drilling in the new year.

The most advanced project, however, remains the N.W.T. diamond project held 51% by BHP Minerals Canada and 29% by Dia Met Minerals (TSE). The remainder is held privately. This project is currently at the feasibility stage.