EDITORIAL PAGE — Diamond standard needed

The Australians did it. American regulators followed suit. And Canadians should do it, too . . .

. . . Introduce diamond reporting standards, that is. In the early 1990s, a group of Australian diamond experts responded to growing concerns about standards of public reporting by some companies looking for diamonds — in particular, those reporting the recovery of diamonds without providing details which would enable investors to make an intelligent assessment of the report.

A committee was formed to draft a policy dealing specifically with public reporting of diamond exploration results, mineral resources and ore reserves. The goal was to provide guidelines for reporting standards and to educate the public (particularly the investing public) about characteristics specific to diamond exploration and mining.

It was pointed out, for example, that the diamond content of most commercial deposits is extremely low, usually in the range of 0.05-2.0 carats per tonne (equivalent to 0.01-0.4 parts per million). This means that the presence of a few large diamonds can have a more extreme effect on the evaluation of diamond deposits than the presence of a few coarse gold particles can have on the evaluation of gold deposits.

Of equal or greater importance to grade is diamond value, which reflects the overall quality (including size distribution) of the contained diamonds in the deposit. This value can range from a few pennies to thousands of dollars per carat.

It was also pointed out that meaningful evaluation is only possible on parcels containing an appropriate number of macrodiamonds (typically 2,000 carats from a single deposit). The huge variation in quality from one deposit to the next, and sometimes from one part of a deposit to another, makes evaluation a complicated process. It is highly specialized too, and only experts can give meaningful opinions as to the value of a parcel of diamonds. Mindful of these factors, the committee drafted a code which has since been approved by the Australasian Institute of Mining and Metallurgy, the Australian Institute of Geoscientists and the Australian Mining Industry Council. It was also endorsed by the Australian Stock Exchange, and all companies are required to comply with it when making public statements about their diamond projects.

Exploration reports must now specify the number of recovered diamonds and their total weight in carats (although weights may be omitted in the case of microdiamonds). Details of the type and size of samples that provided the diamonds must be specified, along with information relating to the nature of the primary or secondary rock source. The end result is that reported results can be compared with those from other prospects.

Significantly, the code has been adopted by the U.S. Securities and Exchange Commission as its standard. Regulators in Canada, however, have not formally addressed the issue; nor have the country’s mining organizations. Perhaps the time has come.

Over decades, Canadian mining organizations and securities regulators have endorsed reporting standards for gold and base metals, which allow most investors to understand the significance of discoveries.

Diamond reporting standards might ensure investors are equally sophisticated in interpreting reports about diamond exploration. After all, Canada is poised to become a major player in this unique and exciting industry.