Sarnoff KOed in Las Vegas diamond debate

It was supposed to have been The Great Diamond Debate. But Paul Sarnoff, editor of Gold Stocks Advisory and noted diamond play skeptic, was thrown onto the ropes during a panel discussion sponsored by a mining investment conference held here Sept. 15-18.

Christopher Jennings, president of SouthernEra Resources (TSE), and Robert Bishop, editor of Gold Mining Stock Report, both expressed the view that the Lac de Gras region of the Northwest Territories could have a producing diamond mine by the end of this century.

Peter Miller, head of research for Yorkton Securities, was a bit more cautious, stating that the year 2000 would be “the earliest we will see commercial production from the Territories.” All backed their comments with the fact that two competing groups — BHP Minerals and Kennecott — have started major, 5,000-tonne bulk-sampling programs to test diamondiferous kimberlites in the region.

Taking all this on the chin was Sarnoff, who expressed little confidence that the majors would have enough information to make a production decision until as much as five years from now.

“The diamonds may even be a ploy for them (BHP and Kennecott) to come into this unexplored area and look for other metals,” Sarnoff said. “No one knows what those drills are going to come up with. They talk about diamonds and diamonds, but there is a lot of other stuff up there. In fact, there is even some oil up there.”

Both Miller and Sarnoff said proposals to mine diamonds in the Territories may be opposed by environmental groups or natives in the region. They also pointed out that the discoveries have been made in a region noted for its harsh climate.

Bishop and Jennings responded by saying Canadians have operated gold and base metal mines in the North for decades, without environmental problems, and in co-operation with native groups.

Sarnoff scored points, however, with his comments that the share prices of many juniors active in diamond exploration have soared to unrealistic levels. Bishop said the race to prove up an economic diamond deposit has narrowed to two large groups — BHP Minerals and Kennecott — with a small handful of juniors holding less advanced prospects nearby. “Most of the companies involved in diamond exploration will be out of the game a year from now,” Bishop predicted. “We have come to a more mature stage where some of these stocks will need more information to justify their share prices.” cents Editor’s Note: All comments were made before Dia Met’s recent results were released. See Page 1.]

Jennings conceded that the market “ran away with itself” during the earlier phases of speculative interest in diamond exploration. But he hinted that interest in diamond exploration will remain strong as new discoveries are made in the Territories and in other parts of Canada.

Jennings estimated about $50 million will be spent in the Lac de Gras camp this year, excluding bulk-sampling programs. The emergence of other exploration projects in other parts of Canada is expected to raise the total spent on diamond exploration this year to about $100 million.