Diamonds North continues Amaruk kimberlite hunt

2008-07-15 14:13 ET - Street Wire

by Will Purcell

Mark Kolebaba's Diamonds North Resources Ltd. continues a multimillion-dollar exploration drill program on its Amaruk property, near Kugaaruk in central Nunavut. The company expects to add a significant number of discoveries to its pipe tally while it delineates and mini-bulk tests some earlier finds. The work will continue until winter starts again, likely late in September. Diamonds North is still looking for its first big Amaruk diamond, and it has a lock on the remnants of hope among diamond investors. The company's shares remain above $1 and its five-year trend is struggling upward, a rarity these days.

The plan

Diamonds North has been drilling targets on its Amaruk property for three years with an increasing number of successes. The company found one body in 2005, but that was an outcropping pipe discovered by prospecting. In 2006, the company drilled into four new pipes in a modest drill program. It hit 17 more during a busy 2007, when it tested nearly 60 new anomalies.

A comparable number of new finds is possible again this year, as Diamonds North plans to test another 60 geophysical targets, culled from a list containing hundreds of anomalies. The program got off to a good start this spring, with three new finds boosting the Amaruk kimberlite count to 25. Once again, the company is using a reverse circulation drill to test the anomalies. The equipment will quickly determine if the targets are kimberlites, but it will need a conventional core rig to assess the diamond potential.

Most of the bodies are diamondiferous. Between six and 10 of the best pipes are worth closer looks, based on the numbers of microdiamonds found in the small chips of kimberlite produced by the reverse circulation drill. The company has a core drill on the property and it will use it to collect larger samples of the best pipes. As well, Diamonds North will complete delineation drilling on those bodies.

Diamonds North plans to spend at least $5-million on Amaruk this year. It now has over $17-million, with the prospect of adding to the total.

Exploration will need to produce the larger diamonds that will prove some of the Amaruk pipes have potentially worthwhile size distribution profiles. There is no doubt that several of its pipes carry hefty microdiamond counts. The Tuktu-2 pipe produced diamonds at rates well above 5,000 stones per tonne, as did Tuktu-1.

The company now thinks that those two bodies combine with Tuktu-3 into one large kimberlite. If it gets the larger gems it expects from core samples this year, the company could be spending significantly more money in 2009 on Amaruk.

Diamonds North closed down a penny to $1.09 Monday on 77,600 shares.