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Respectable Showing For the Diamond Sector at PDAC 2011

Posted by David

Last week Monday’s technical session at the PDAC on diamonds was titled: “21 years of Canadian diamonds: Coming of age?”. Five talks were given and three were based on Canadian diamond projects. The remaining two were on the Bunder project in India with Rio Tinto, and the development of Petra Diamonds to being a major producer in Africa.

While not full to capacity, the seating room approached that mark during a few of the talks and significant figures in the diamond industry were present. Including the discoverers (or co-discoverer) of Canada’s first two diamond mines: Chuck Fipke (Ekati, with Stu Blusson), and Eira Thomas (Diavik). Also present were academics, geology students, financial analysts, independent investors, and representatives from most senior and junior diamond exploration/mining companies.

The award for most entertaining talk goes to Jim Davidson of Petra Diamonds (AIM:PDL), for his repeated well-placed, but thinly veiled stabs at sector giant De Beers for buying some of their declared “unprofitable” mines (e.g., the Cullinan in South Africa) and turning them to the opposite within a few years. Technical award goes to Robin Hopkins for going into detail on how macrodiamond (the economic stones) grades are extrapolated from the microdiamond grades. This was during his talk on what has been developing at the Renard project as it progresses towards a Mineral Resource update for this year as part of Stornoway’s feasibility study for mine at that location within a few years. The most notable aspects of Stornoway’s recent work (aside from buying out partner SOQUEM’s 50% share in the project in exchange for equity) is the increase of the project to a 25 year mine life with a NPV of $885 million and pre-tax IRR of 24.8%.

De Beers geologist Brad Wood gave a fine synopsis of the discovery, evaluation, development, and starting in 2008, production of the Victor deposit in northern Ontario. He discussed the challenges in the natural environment and in working with the affected communities in realizing the mine. Much of the talk dealt with the hurdles of construction. A lot of lessons were learned in the process, mainly technical ones that he passed on to the audience. An example is how the company utilized the large diameter drill holes left over from the deposit evaluation stage as wells to keep the mine drained as it is suitated in Muskeg.

Peregrine Diamonds updated the audience with further news of more kimberlite and more diamond finds at Chidliak (51% owned by BHP Billiton) on Baffin Island. Chief geoscientist Jennifer Pell noted that fifty kimberlite bodies have been discovered, about half by surface prospecting. Many of the kimberlites not exposed have been found by geophysics using aeromagnetic surveys as they typically exhibit a clear “bullseye” pattern. One of the more recently discovered bodies was in fact, found by accident by a university student sponsored by Peregrine doing fieldwork on the glacial terranes of the area. More kimberlite discoveries are bound to follow with the drilling season starting this month.

Although diamond shares (and really, most companies worldwide) have taken a major hit this week with the Sendai earthquake in Japan, the sector seems able to continue capitalizing on new discoveries and mines nearing production as investors again take notice. If anything, the recent recession did the sector a small favour in driving out diamond companies with below-average/extremely speculative prospects to bankruptcy or at least to other commodities. In regards to this, it will be interesting to watch Shear Minerals in the coming months. Their efforts to resurrect the Jericho mine in Nunavut may renew some investor interest in higher-risk diamond stocks.

Disclaimer: The author holds shares of SWY, SRM, and PGD. Relevant comments are welcome and encouraged. Spam comments will be deleted. This article is based on the opinions and experience of the author. Please conduct due diligence when investing. ©KIM Report 2011 www.kimreport.com


Diamonds, General Comments(0) March 15, 2011 9:33 pm

PDAC 2011 – this March

Posted by David

Hello and happy New Year!

Sorry for the delay in posts.

This year’s Prospectors and Developers Association of Canada’s (PDAC) main convention is March 6th to 9th. It is at the Metro Toronto Convention Centre’s south building. Delegates can register HERE for the conference. For the non-student or non-senior, the convention can be a little pricey, but day passes can be had for ~$81 and the Investor’s Exchange portion is free.

For those of you who purchase full access to the convention be sure to check out the Technical Sessions. They are often quite good and have excellent speakers on relevant topics. A list of the sessions is HERE. Other sessions include the CSR Event Series, the Aboriginal Program, an Open Session, and an Innovation Forum. Ten short courses/workshops also occur just before and after the convention itself.

Sessions mentioning diamond exploration/mining are:

  • 21 years of Canadian diamonds: Coming of age? – room 716, Monday March 7th, 2-4 pm
  • New geoscience in support of exploration in the Canadian Shield North of 60⁰ – room 716, Tuesday March 8th, 9 am-noon
  • Africa – room 713, Tuesday March 8th, 10 am

Major and minor diamond producers/explorers typically have booths at the PDAC. Some of the usual suspects from past years include Rio Tinto, Harry Winston, Stornoway, Shear, Shore Gold, Peregrine, and BHP Billiton. For those unfamiliar with this convention, it is the premier mining and exploration convention in North America and is not to be missed for those working in or investing in the industry.

Make sure to sign up by this Friday (February 4th) as the prices for most admission types go up after that. Happy investing.

Disclaimer: Relevant comments are welcome and encouraged. Spam comments will be deleted. This article is based on the opinions and experience of the author. Please conduct due diligence when investing. ©KIM Report 2011 www.kimreport.com


Diamonds, General Comments(0) February 1, 2011 4:47 pm

Stornoway Diamond Corp. Works to Expand Resources at Renard Project

Posted by David

Last week, Stornoway Diamond Corporation released the results of their latest drilling program at their Renard project (part of the Foxtrot property) in central Quebec. The dimensions of three diamond-bearing kimberlite bodies were expanded beyond those expected by the previous models.

Renard 1, 3, 4, and 65 Models Expanded

Although the density of drill-holes is too low to properly resolve the bodies at depth at a resolution that is suitable to be deemed an indicated or even inferred resource under NI 43-101 standards, the upside is promising. Three drill-holes each were put into Renard 3, 4, and 65. These data  increase the previously modeled dimensions of the kimberlite pipes. The maximum lower cut-off for Renard 3 was extended from the depth of 395m established in the existing NI 43-101 report to 439m. The same was done for Renard 4, going from 380m to 759m. No previous 43-101-compliant resource values existed for Renard 65, but drilling encountered kimberlite a a maximum vertical depth of 513m. One drill hole was also put into Renard 1 and further confirmed multiple lithologies and a maximum depth of 370m. The increase in tonnage for the project is not as large or as certain as with the reported increase in Renard 2 earlier this year, but it is substantial and unexpected (see above image of a geological model of R-4 with 3 drill-holes showing kimberlite outside of the modeled dimensions (PMD: potential mineral deposit).

Renard 65 (geological model above) stands apart from the other two bodies (R3 and 4) as it is entirely classified as PMD  and cannot be included in the 43-101 feasibility study recently contracted out to SNC-Lavalin. R65 is quite large in terms of ore tonnage, but lower grade than other bodies. The body would potentially add to the mine life or throughput of ore at the mine as extra reserves, but not significantly affect overall mine grade or diamond valuation as it is believed to be one of the least economic bodies in the cluster. Renard 1 would be classified in the same group as 65. Also adding to the potential reserves at the future Quebec mine would be the 4+ km long Lynx dyke, and smaller Hibou dyke. However, the diamonds from these kimberlite dykes are typically more brownish in colour than the ones from the Renard pipes and thus have a lower average valuation (US$/c).

Other Projects Put on Hold

Stornoway’s increasing focus on Renard has left its other lower-stage targets on the back-burner. Aviat on the Melville peninsula in Nunavut is the next most promising after Renard.  Though less-studied and containing smaller white diamonds, its high grade (~2c/t) and unknown extent holds significant potential. Completion of a mine at Renard should provide an income stream to fund the next necessary step of bulk sampling.

The only remaining project of relative significance held by Stornoway is its minority share in the Churchill kimberlite project operated by Shear Minerals. Although a portion of the project has attracted the attention of Rio Tinto, it appears to be doomed to languish as Shear Minerals has become preoccupied by its purchase of the Jericho mine and Stornoway’s lack of funds for non-priorities.

Coins Remaining in the Piggy Bank

As of its last quarterly report, the company had $14 million in cash. From this, Stornoway must fund its 50% share of the upcoming Renard mine feasibility study (the other half belongs to SOQUEM). A secondary study is in the works to examine bringing hydroelectric power lines into the camp from the north. If possible, attaching the mine to the electric grid would occur a few years into the mine-life. The earlier pre-feasibility study from over a year ago assumed on-site electric generation. Access to Quebec’s cheap hydroelectricity would significantly lower operating costs and avoid vulnerability to high oil prices.

Given that the third generation of Canadian diamond mines (Renard, Fort à la Corne, and maybe even Gahcho Kue) are coming on-line in the next few years, diamond stocks are rising. A half-decade of disinterest and bad luck (see Tahera and Jericho) is hopefully over, and investors: individual and institutional, will begin to see the value in the long wait for a diamond mine to reach production.

Disclaimer: The author holds shares of SWY and SRM. Relevant comments are welcome and encouraged. Spam comments will be deleted. This article is based on the opinions and experience of the author. Please conduct due diligence when investing. ©KIM Report 2010 www.kimreport.com


Diamonds, General Comments(1) October 19, 2010 11:41 am

Improved Outlook to be Seen at PDAC 2010

Posted by David

This Sunday March 7th to Wednesday March 10th will see the Metro Toronto Convention Centre and its environs overrun with geologists, students, executives, reporters, salesmen, and the much-maligned investor relations personnel at this year’s PDAC International Convention.

While the trade show section is prohibitively expensive for most ($210-$710, seniors and students get in cheap), the other half of the show, the Investor’s Exchange is free. This sections is where all of the publicly traded mining companies have their booths. They range in size from independent prospectors, exploration-juniors (PC Gold, Diamonds North Resources, Terrane Metals), near-production juniors (Stornoway Diamond Corporation, Shore Gold), producing intermediates (Yamana Gold, New Gold, Harry Winston, Thompson Creek Metals), and large-caps (Rio Tinto, Goldcorp, Vale). For an idea of participating companies and the show layout, check out their Virtual PDAC Interactive Floorplan and Event Planner. Booth space in both sections of the event are completely sold out. I suppose the minerals industry hasn’t imploded after all.

As an independent investor, this is your chance to speak with company management face-to-face, handle the rocks (see the Core Shack exhibit), and meet other investor’s and geologists. Whether you are happy or displeased with a company’s performance, this is the event in the mining and minerals exploration industry. Though, from a student’s point of view, I routinely recommend not eating at the convention as the food is typically awful and overpriced in my experience. Check out the Royal York Hotel in the evenings for any after-hours festivities.

For diamond bugs, drop in on the Monday afternoon series of talks 2-4pm in room 716. Some true gems (pardon the pun) are there to spread their wisdom. Kimberlite petrologists, gemologists, and CEOs make an appearance.

Let me know how you did at the PDAC…


General Comments(1) February 25, 2010 7:12 pm

Chidliak: Peregrine Diamonds Discovers New Hope for Arctic Diamond Exploration

Posted by David

The one diamond discovery that commanded the most attention at this year’s PDAC convention was Peregrine Diamondskimberlite (and subsequent diamond) discovery on its Chidliak property in south Baffin Island, Nunavut. Chidliak is 9800 km2, and since the discovery of diamonds on the property, Peregrine has added a buffer claim around the property of ~3200 km2 in area called Qilaq this February. BHP-Billiton has earn-in rights of up to 51% in Chidliak if they spend $22.3 million on the property over the next five years. Although BHP is spending five times what Peregrine is, Peregrine remains the operator for 2009′s program.

Chidliak was the focus of two talks in two separate diamond sessions at this year’s PDAC. What is so interesting about Chidliak is the sequence of events that led to the discovery of three kimberlite bodies: CH-1, -2, and -3, on the property.

Till sampling of kimberlite indicator minerals from 2005 to 2007 confirmed that kimberlite was present in the area. These samples indicated that 10% of the garnets found were G10. Last year, an aeromagnetic survey that covered less than 15% of the property resulted in a number of magnetic anomalies. These are commonly associated with kimberlite, but not always. Field geologists sent out to investigate the three most promising anomalies encountered kimberlite rock at the surface. Approximately 1100 kg mini-bulk surface samples from the CH-1 and CH-2 kimberlites gave back 2.17 c/t and 0.9 c/t, respectively. This includes a 2.01 c gem-quality colourless resorbed octahedron from the CH-1 sample.

These are in no way statistical samples of the diamond potential of the kimberlites, but they are superb returns from a grassroots exploration program that has yet to put a drill hole into the ground. Considering these encouraging results, there is significant upside to this project. Over 170 magnetic anomalies remain from the aeromagnetic survey for investigation and the bulk of the claim remains yet to be surveyed. Consider that the size of the Chidliak and Qilaq claims are much larger than the Ekati (BHP-Billiton) or Diavik (Rio Tinto and Harry Winston) mine camps in the Northwest Territories.

Another long-term benefit for the project is its proximity to infrastructure. That is of course a relative term when in the arctic. The property is less than 100 km from the territorial capital of Iqaluit and even closer to the coast, unlike the land-locked and isolated Lac de Gras mines that are ~400 km from Yellowknife by ice road.

Considering that current mines in the pipeline are either modest in comparison to Ekati and Diavik: e.g. Snap Lake (De Beers), Renard (Stornoway and SOQUEM), DO-27 (Peregrine), or have slowed in their development: e.g. Fort a la Corne (Shore Gold and Newmont), Gahcho Kue (Mountain Province and DeBeers); Chidliak hopefully represents a large part of a new period of Canadian diamond exploration.

Disclaimer: The author holds 4000 shares of SWY and 20 of HW. This article is based on the personal opinions and experience of the author. Please conduct due diligence when investing. ©KIM Report 2009 www.kimreport.com


Diamonds Comments(0) March 8, 2009 6:39 pm

Selling Diamonds at the PDAC

Posted by David

Diamonds were the focus of two sets of talks at the PDAC. The first was a more general discussion that dealt with varied topics such as threats to producers in the form of treated and synthetic stones, science in diamond exploration, the new Chidliak (Peregrine & BHP) discovery, and the diamond industry and its relation the to market in general. The second was a series of presentations by various diamond juniors and their properties.

Turnout for the first talk was surprisingly low, considering the reputation of the speakers, less surprisingly was the even lower turnout to the second series. However, some very good presentations were given and some interesting trends began to appear in the nature of the industry:

1. The diamond industry IS hurting. That is a no-brainer considering how every other mining sector is doing (with the possible exception of gold right now). Currently there is a glut of diamonds in the possession of the cutters right now and the consumer, -you, are not buying. Yes people continue to get married even in tough economic times, but that diamond on the engagement ring will be smaller. Less disposable income = lower consumer spending.

2. The aforementioned hurt has led to a serious slowdown in the discovery and development of diamond deposits. The collapsed diamond prices have led to a short term situation where long term supply will be affected.

3. In regards to that long term view, diamond mines are painstaking to develop. They require more proving-work than any metal commodity and have a discovery to production timeline of at least ten years.

4. This slowdown in the development process is coupled with the lack of world-class discoveries/openings since Diavik (Rio Tinto & Harry Winston) in 2001. The two biggest resources in terms of report value in the pipeline now are Grib (Lukoil & Archangel: TSX.V-AAD), Russia, and Fort a la Corne (Shore Gold & Newmont), Canada. Other developments include the reopening of the Letseng (Gem Diamonds: LSE-GMD) diamond mine, and the sampling of the Mothae kimberlite (Motapa: TSX.V-MTP), both in Lesotho, and the continuing development of the Renard project in Quebec into a mine (Stornoway & SOQUEM).

5. These projects are still 2-8 years before any chance of production, but that may be a good thing as it will be at least 3 years until diamond prices recover from their recent 40% drop. Imagine what would happen if gold went below $600/oz. in a few months.

6. These low diamond prices also mean that companies are holding off on having their projects evaluated in terms of US$/carat.

7. Two types of deposits that did see some focus at the conference are deposits with low grade, but very high diamond value, and those with very low production costs. Diamonds from Letseng are quite rare, but typically high quality. Values can reach up to $2000/c. Motapa and Shore Gold are hoping to enter this low grade – high value club as well. An interesting thing about these rare diamonds is that they appeal to the extremely wealthy, who are more insulated from economic cycles. Companies with low-mining cost projects include Dianor (TSX.V-DOR), who are developing their paleoplacer (old river deposit) Leadbetter diamond resource near Wawa, Ontario, and Mexivada (TSX.V-MNV, Frankfurt-M2Q) with younger placer projects in Sierra Leone. Placer deposits are usually alluvial (river-related) and can concentrate other heavy minerals, such as gold. Placer diamonds are typically higher in value than ones from kimberlites because transport tends to destroy brittle/cracked/included ones.

The key thing now is that companies are balancing keeping in the black with continuing to add value to their projects. The long development time for diamond deposits means that these companies cannot afford to waste 1-2 years due to market conditions. Smart companies are focusing their resources for their most promising resources. Ones that will ensure cash flow as soon as possible.

The lack of attention given to the diamond industry by institutional investors has led to extreme undervaluation in some cases, even at current diamond prices. This represents an opportunity for the individual investor with a 2-4 year outlook to make some serious coin. However, there are a number of diamond juniors out there that have extremely speculative projects and consumers must carefully weigh their expected returns with the risk they are undertaking. More advanced projects carry less risk, but also less expected return. Investors have to take advantage of mispricing by the market due to short term concerns and engage in due diligence to maximize their profits

Disclaimer: The author holds 4000 shares of SWY and 20 shares of HW. He wishes he bought some PGD shares a few months back, but life is far from perfect. This article is based on the opinions and experience of the author. Please conduct due diligence when investing.


Bending Clifford’s Rule

Posted by David

In his famed 1966 paper, T.S. Clifford noted that diamond-bearing kimberlite pipes were always ones that intruded regions of ancient continental crust. To be more specific, these regions are Archean in age (>2.5 billion years old) and formed the tectonically stable cores of continents known as cratons. Thus “Clifford’s Rule” states that diamondiferous kimberlites occur in geologic regions that have been tectonically stable (i.e. cratons) since the Archean and that diamond exploration should focus on those areas.

 

However, over the past forty years these regions of high diamond potential have been thoroughly investigated for diamond deposits and a number of world class deposits have been found in this manner, such as those in the Canadian arctic. As time passes, there are fewer and fewer areas of apparent diamond potential that remain unexplored. Diamond prospectors must start looking in places that appear at first not to follow Clifford’s rule. More diamond discoveries are being made in regions where Archean craton is not obvious.

 

Attending this August’s 9th International Kimberlite Conference, a prevalent theme was diamond exploration and discoveries in atypical areas falling outside of Clifford’s rule. For example, one presentation was regarding the nature of the Arygle mine, owned by Rio Tinto plc. Although situated in a Proterozoic (between 2.5 and 0.542 billion years old) mountain belt, Argyle has probably the highest diamond grade of all operating diamond mines. This presentation suggested the possibility of Archean mantle existing kilometers below the younger material at surface and thus providing the conditions optimal for diamond stability. Another example of developing properties in non-Archean areas is the diamondiferous Carolina kimberlite in Brazil. Located in the 1.8-1.2 billion year old Amazon craton, this kimberlite and others near it are being investigated by Sola Resource Corporation (TSX.V-SL). The characteristics of this kimberlite discovered thus far show no significant deviation from those of kimberlites situated in Archean cratons.

 

Regardless of how the current market environment is treating diamond stocks, the increasing core demand for diamonds has pushed diamond exploration to looking at areas previously considered to be at the fringes. Examples of significant discoveries in these areas include those mentioned above, plus Fort a la Corne, Saskatchewan; and Guaniamo, Venezuela.

 

The rising demand for diamonds has caused the small group of large companies who control the bulk of the rough supply (De Beers, Rio Tinto, BHP Billiton) to raise prices. As with any commodity, when price rises, new technology and new exploration philosophies are employed to discover deposits in previously unexplored areas.


Diamonds Comments(7) August 28, 2008 7:08 pm

Conference-Induced Hiatus

Posted by David

Sorry for the lack of updates the past few weeks. My time had been taken up in preparing my research for presentation at the aforementioned 9th International Kimberlite Conference in Frankfurt, Germany.

The conference was a big success. Canadians made up about a third of the ~450 participants, with Russia, Australia, the U.K., the U.S.A., Japan, South Africa, and Germany also making large contributions. Although mainly an academic conference, representatives of companies such as Rio Tinto, Diamondex (TSX.V-DSP), BHP Billiton, Metalex (TSX.V-MTX), Indicator Minerals (TSX.V-IME), Teck Cominco, Shear Minerals, and Shore Gold were present. Private company De Beers also have a strong presence through both its exploration/mining arms and the Diamond Trading Company (DTC). Topics of discussion included diamonds and their formation, kimberlite emplacement, exploration techniques, and the mantle.

More information on the highlights of the conference to come…


Diamonds, General Comments(2) August 18, 2008 9:13 am

More potash for Marifil Mines Ltd.

Posted by David

Yesterday, Marifil Mines Ltd. (TSX-MFM) announced that it had expanded upon its Potash discovery on its K-2 project in Argentina. The K-2 project is 100% owned by MFM and covers 100,000 hectares in the Neuquen basin. As mentioned in a previous article, MFM first announced that it had discovered two potash horizons during petrophysical logging of an abandoned oil well drill hole on their property close to Rio Tinto‘s Rio Colorado potash mine. The data from the logs from the two drill holes suggests that the two horizons extend along strike for at least 13 km. The grade of the newer hole varies between 11% and 20% K2O. The intecepts of potash recorded by the most recent logging activity were 5.8 m and 5.4 m thick. MFM expects a NI 43-101 complaint report on the deposit within the next couple of weeks.


Diamond report from New Nadina needs some polish

Posted by David

Last Monday, New Nadina Explorations Ltd. (TSX.V-NNA), a diamond explorer, published results from a microdiamond assay of core from the optimistically named “Bling” kimberlite in the Lac De Gras region of the Northwest Territories. The Lac De Gras Region was the site of the first significant diamond discoveries in Canada, and is home to the Ekati (BHP Billiton) and Diavik (Rio Tinto and Harry Winston) diamond mines. The Bling kimberlite is located on the Monument Diamond Project in the Blue Pearl Cluster, and is the sixth such body to be discovered there. NNA owns 57.49% of the project. Chris Jennings, famous for his diamond finds in southern Africa and somewhat mixed results Canada, owns 22.11% along with his wife, Jeanne. Archon Minerals Ltd. (TSX.V-ACS), run by Stewart Blusson, co-discoverer of the Ekati Mine with Chuck Fipke, owns the remaining 20.4%.

 

Petrologically, the Bling kimberlite is pyroclastic (diatreme/crater) facies kimberlite, i.e. post-eruption/non-magmatic. The kimberlite was intersected during drilling of a 45º angled core hole from 171 m to 203 m. It contains abundant coarse olivine, pyrope, and chromium-rich diopside, minerals strongly associated with the mantle. But are they associated with diamonds in this case? The large size of many of crystals, up to 2 cm in diameter, indicates that they are possibly not fragments of diamondiferous peridotite xenoliths brought up by the kimberlite, but rather they are related to the kimberlite. Such grains are often termed megacrysts. Ergo, this information does not say much about potential for diamond abundance or lack thereof, although chemical analysis of said megacrysts could (but that is for another article).

 

However, upon later correspondence with Mr. Kivi, the P.Geo. in charge of the project,  it was stated that these large crystals are likely not to be megacrysts as stated above, but rather that they are likely to be from deep mantle origins, ~200 km depth. If this is the cases, then Bling would have sampled a very large column of mantle in the diamond stability field, greatly increasing the chances of entraining diamonds upon the kimberlites ascent. It still remains, however, that chemical analysis of these grains is required to prove things either way.

 

What is interesting, are the 23 mantle xenoliths of lherzolite and harzburgite, incorrectly spelt in the report as “lhertzolite” and “hartzburgite”, respectively. Harzburgite (G10 garnet association), and to a lesser extent lherzolite (G9 garnet association), are the major parent rocks that diamond forms in, prior to ascent to the surface in a kimberlite (most cases) or lamproite (rare cases, e.g. Argyle in Australia). The presence of potential parent rocks for diamonds as xenoliths in a kimberlite is a good indicator for diamonds.

 

The best indicator for diamond in a kimberlite is diamond itself. The concentration of diamond is so low in kimberlite (0.2 g/t is considered a good mining grade as 0.2 g = 1 c) that microscopic (<1 mm) diamond counts are used to extrapolate the larger diamond content of a kimberlite when dealing with small sample sizes, such as drill core. The 120.25 kg sample of core assayed in the report held 67 diamonds greater than 0.106 mm in size. By plotting the microdiamond counts against the size classes, it is possible to extrapolate the distribution of diamonds towards higher sizes (see below; data from the 0.6, 1.18, 1.7, and 2.36 sieves have been omitted to correctly fit the trend line as they were zero values).

 

The power-type trend line here produced a fairly good fit with the data and has an R2 value of 0.9897 (1 is perfect). Extrapolating to the 1 mm size class gives ~1.56 diamonds of that size. It is possible to take this estimation a little further. The mass of a roughly spherical diamond 1 mm in diameter is 0.0000092 carats. Thus there are ~0.0000143 carats of diamond in this size class. With respect to diamonds of this size, the grade for the sample is 0.00012 c/t. A full grade estimate could be obtained by repeating this process for every significant (i.e. economic) size class and adding the grades together. Although the grades would become rapidly smaller with increasing diamond size due to the nature of the distribution. The problem with this particular sample is that not enough data exists to get a strong estimate of the diamond population. The sample is not large enough. Small samples are extremely vulnerable to the “nugget effect” were the presence or absence of one or two larger stones can totally skew the numbers away from the actual value. As things stand now, this sample is useful for showing that the Bling kimberlite is diamondiferous to some degree, but inconclusive beyond that. The next step for NNA and its JV partners is to try and obtain a mini-bulk sample in the 10’s of tonnes.

 

Looking at this company as a potential investor with some background in the field, there are a number of troubling issues:

 

1. The insinuation that the presence of megacrysts is indicative of diamond potential. As mentioned above, this is not true. Research suggests that megacrysts are a product of crystallization of the “proto-kimberlite” at depth in the mantle prior to ascent, and not the product of disaggregation on mantle xenoliths, diamondiferous or otherwise. Even with Mr. Kivi’s argument that these are not megacrysts, but indeed deep xenocrysts/xenoliths, the company has yet to publish any evidence either way. If this was the case, then why was this explanation not included in the press release? The company would have likely been better off not mentioning these characteristics of the kimberlite at all until they had determined their exact relevance. These crystals may turn out to be indicative of bling at Bling, or be a red herring.

 

2. The incorrect spelling of geologic terms such as harzburgite and lherzolite. Also using the term “chrome diopside” when in fact chromium-rich or chromian diopside is the proper term. Chrome is what you get when you plate chromium or an alloy of it onto another metal, e.g. steel. Yes, it seems like a small thing, and it may be just the fault of the fellow they hire to run IR, but where is the P.Geo. who is supposed to look over and sign off on each report? If the trained, accredited professional is not catching these obvious mistakes in material released to the public, what about the stuff that is not made public?

 

3. The mediocre results on the monument property. Finding a diamondiferous kimberlite is not terribly news-breaking anymore. Please see an earlier article on Diamonds North regarding this. Many other juniors out there, Stornoway, Peregrine, and Shear Minerals to name a few, have far more established properties. Some of these have established grades and even diamond valuations.

 

Concerning items (1) and (2), it is tempting to regard these as oversights, as Mr. Blusson and Mr. Jennings have years of experience and have both found diamond mines in the past. They also are not part of NNA, but only JV partners on the project. With regards to (3) I do realize that this is a very small junior and is working diligently to find and expand upon potential diamond deposits. It is impressive to note that NNA did manage to get assays back in less than two months from the discovery of the Bling kimberlite. Given the current harsh market for diamond explorers and producers NNA cannot afford to even make small mistakes that would possibly dampen the interest of potential investors. It may be that further work on the Monument Project or one of their other properties will bear fruit, but NNA’s lack of oversight on minor things that are easy to catch could leave some investors eyeing the competency of the people in charge with some suspicion.

 

Disclaimer: The author holds no shares of NNA. This article is based on the personal opinions and experience of the author. Please do your own due diligence when investing.

 

 

 

 


Diamonds Comments(0) June 23, 2008 4:45 pm

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