Diamonds North plans busy summer in Nunavut

2008-04-22 16:15 ET - Street Wire

by Will Purcell

Mark Kolebaba's Diamonds North Resources Ltd. plans a big year on its Amaruk project in central Nunavut. The company has an ambitious list of drill targets to explore and it will take closer looks at several pipes discovered last year. No mini-bulk tests are likely this year, but good diamond counts from last year's finds could make a larger sample a priority for 2009. Diamonds North's shareholders had a little tease earlier this year. The shares popped above $2 in January, but there they found themselves uncomfortably short of oxygen, so they hurried straight home to the 90-cent range where they are more comfortable. The shareholders have their fingers crossed for more of that excitement.

The plan

Diamonds North has hundreds of geophysical anomalies on Amaruk and it selected another sixty of the features for drilling this year. Last year, the company found 17 kimberlites from a comparable program, a success rate of about 25 per cent. Weather and logistical woes in 2006 limited the company to 26 drill tests, which produced five kimberlites, a hit rate of nearly 20 per cent.

Dawn arrives early and dusk comes late by mid-spring, but the weather along the Arctic coastline southwest of Kugaaruk can be challenging even in summer. The mercury hid below freezing until the first week of June last year and the last traces of snow remained until mid-month. The first snows of winter arrived early in September and winter checked in for an extended stay with a 15-centimetre blizzard a few weeks later. The short summer season saw daytime highs poke above 20 C on occasion, good weather for drilling, but better for breeding mosquitoes.

Diamonds North has several years of experience at Amaruk and bad weather is usually more of an annoyance than a showstopper for the drill crews. Further, the company has enough equipment at the site that problems with one of the rigs will not derail the drill program.

The company will again be using core rigs to test its existing kimberlites, besides the light reverse-circulation drills that it will use to test its new targets. It plans to use the core drills to collect larger samples of the best of the pipes found last year, which would likely include Tuktu-1, Tuktu-2, Tuktu-3, Qavvik-3 and Qavvik-4. Diamonds North's core drilling typically tries to recover several hundred kilograms to over one tonne of kimberlite for microdiamond recovery.

If any of the bodies yield good counts and larger stones, Diamonds North would move to the mini-bulk stage. Based on the initial tallies and the size potential of the bodies, an encouraging result this year would prompt the company to collect between 50 and 200 tonnes of kimberlite from the best pipe. Based on the short summer season and the long wait for diamond counts, that would not occur until 2009.

The encouragement

Diamonds North's run north of $2 occurred when the company revealed it found 550 diamonds in 81.75 kilograms of Tuktu-1 kimberlite, nearly 7,000 stones per tonne. Since then, a few other bodies also produced microdiamonds at prodigious rates. The company obtained 607 gems from 107 kilograms of kimberlite cuttings from Tuktu-2, or just under 6,000 stones per tonne. Tuktu-3 produced stones at a comparable rate from 37.85 kilograms of cuttings. Tests of Qavvik-3 and Qavvik-4 produced gems at rates of 2,000 stones per tonne or more.

Mr. Kolebaba, a former Ekati man with BHP Billiton Diamonds Inc., is using that project as a model for Amaruk. The indicator mineral chemistry is encouraging, and the pipes in the Tuktu area are a good size and are full of microdiamonds. That makes the area a priority this year. Now, the company needs to prove it can find diamonds with commercially appealing weights.

Diamonds North closed unchanged at 88 cents Monday on 35,800 shares.