The competition heats up

Since our last issue of Diamonds in Canada in May, fears that the global economic recovery might be derailed have started to ease. Diamond retailers and miners continued to regain their footing in the second quarter of the year, with revenues for Tiffany & Co., Harry Winston Diamond and for the diamond division of BHP Billiton all rising (by 9%, 62% and 42%, respectively).

Accordingly, the focus in Canada has turned back to the work our diamond explorers and developers are carrying out on the ground. And the competition for which project will become Canada’s next diamond mine is heating up once again.

A leading contender is De Beers and Mountain Province Diamonds’ Gahcho Kué project, in the Northwest Territories (see page 25). But in Quebec, Stornoway Diamond and its partner Soquem (page 22) are also fighting hard to make the short list, aiming to finish a feasibility study and make a production decision by the end of next year.

Perhaps the dark horse of the race is the Jericho mine in Nunavut — a past-producer owned by Tahera Diamond until it went bust in 2008.

Junior Shear Minerals announced this summer that it was buying the operation for just $2 million and 80 million shares — or, in the words of one analyst, “dirt cheap.”

Although the mine failed its first time around — it was put on care and maintenance two years after the start of commercial production in 2006 — Shear believes there’s still promise in Jericho.

The company made the decision after a year of due diligence, but it isn’t rushing the mine back into production. During the next 12-18 months, it will be conducting further exploration and continuing to evaluate the operation and dissect what went wrong there.

However, there is a sense that many of the problems that plagued Jericho had been worked out, or at least identified, by the time it went under. As diamond consultant Martin Irving points out in “Shear moxie” (page 6), the deconstruction of the fiasco may help to point Shear in the right direction at Jericho.

Whether Shear can ultimately make the little mine work, the move is a bold one that has earned the junior a second look among investors that most diamond juniors trading at under 10¢ would otherwise be hard-pressed to get.

In the diamond exploration game, when you win, more often than not, you win big. That promise has tempted many metal miners into investing in exploration and development in Canadian projects over the years —including in Jericho. In “A major gamble” (page 18), freelance writer Virginia Heffernan reviews the majors’ mixed record of getting a return on their investment in Canadian diamond projects.

And Peregrine Diamonds’ and BHP Billiton’s Chidliak project has a long way to go before its mining potential can be assessed, but it has been one of Canada’s most-watched exploration projects ever since its CH-6 kimberlite yielded microdiamond results last year that rivalled those from the earliest days of the Ekati discovery.

In August, I had the honour of visiting the joint-venture project, on Baffin Island, in Nunavut. The tour (see “Peregrine’s ‘quantum leap’ at Chidliak,” on page 10) was a real education on the difficult logistics and planning involved in working at a remote, arctic fly-in operation, as well as the safety hazards — unpredictable weather and polar bear sightings among them.

It was also a rare chance to witness the nitty-gritty details of diamond exploration up close. Peregrine, the operator of the project, has enjoyed major success, so far identifying 50 kimberlites at Chidliak. Of the 17 kimberlites the company has tested, four warrant follow-up work, with results from another 33 (all discovered this year) pending at presstime. While the market’s current focus is on the pending bulk-sample results from CH-6, taken this summer, clearly, it’s still early in the Chidliak story.

As always, I welcome your feedback at ahiyate@northernminer.com.