Wednesday, March 01, 2006 11:50:08 AM
ALLAN BARRY REPORT ON
CANADIAN DIAMOND EXPLORATION
4th EDITION
February 28/2006
Welcome to the fourth edition of our report on Canadian Diamond Exploration. In our previous editions we have outlined our view of why we follow the Canadian Diamond industry so closely. We have also described the key tools used in the industry to explore for diamonds and what we look for when kimberlite is found. In this edition we will again feature all of the companies that we have featured in our past editions and their exploration efforts in the near term in the section entitled “Our Diamonds in the Rough”. Before the “Diamonds in the Rough” section there will be a discussion of our view of the industry in general.
Since our premier edition went out, we have received a number of email messages and phone calls from our readers. Thank you for your encouraging comments. As a new publication, we truly appreciate feedback from our readers and we feel this will help improve future reports - keep them coming!
The Canadian diamond mining industry in general
The Canadian diamond mining industry is currently going through growing pains; as a group, the diamond exploration companies are not performing very well. There are many more companies trading near multi-year low stock prices than there are trading at the high end of their ranges.
We don’t mention this to cause alarm amongst investors; in fact we feel it is a very bullish indicator. When the crowd thinks that an industry is not worth investing in, that is precisely the time when there is the least amount of risk and the potential for the largest percentage growth when that industry gains strength.
While it’s putting it mildly to say that diamond exploration stocks are currently out of favour, we are starting to see signs that the industry is beginning to improve. There are currently some companies starting to recover from multi-year lows. It’s starting to look like there is increased interest returning to the sector.
We think that there is a very good reason to look closely at diamond exploration companies. If a diamond exploration company is successful they can see large increases in their market value. This is due to the value of diamonds found in a kimberlite can be in the billions.
In the rough diamond market demand is very strong and supply (especially in stones larger than a half carat) is weak. For evidence of how strong the rough market is, one can look to De Beers’ record profits this year as an indicator. In fact in the last few years they have been consistently experiencing new record profits. Other mining companies involved in mining diamonds are also seeing their diamond divisions performing very well.
There are two important facts to keep in mind that the performance of the major diamond producers can teach us. One: they are reducing reserves and as they are doing this the group is unable to keep up with demand, especially in the larger stone sizes. And two: the majors that mine diamonds are flush with cash and are in need of new deposits to replace what is being mined out.
We feel that all of the companies we have featured in our past reports all meet our 4 key factors that we evaluate when considering featuring a company in our report. 1. They have quality projects based on drilling results and outstanding diamond indicator minerals found at their projects. 2. Key people with significant experience in diamond exploration. 3. Reasonable or, even better, undervalued market values. 4. The potential of their market value increasing.
Because all the companies we have featured in our past editions have the qualities we just described, we are going to feature all of the companies again in this edition. The next section is our “Our Diamonds In the Rough”.
Our Diamonds In The Rough
This section of the report is dedicated to discussing companies that we feel have quality projects that offer significant potential to grow into companies with higher market values.
We are either shareholders, or planning to become shareholders, of all of the companies included in this section. At times we offer our consulting services to companies we own shares in. We are only interested in offering those services to companies we first and foremost want to be shareholders of, as well as being able to provide service that will assist the company in unlocking value to the shareholders.
At the beginning of the discussion of each company we will indicate if we are a shareholder or a consultant to the company. We also advise readers to look at our disclaimer at the end of this report. The following companies are listed alphabetically.
Aber Diamond Corp.
Aber is one of our favourite companies in any industry. When looking at larger companies, the main driver of the stock valuation is profitability and Aber is a very profitable company with a very good earnings outlook for many years into the future. We are not a shareholder of Aber but feel that it has a very promising future with potential for above average market value growth.
We originally featured Aber in our first edition as a model for success for a junior diamond exploration company.
Their rise from humble beginnings as a junior exploration company followed by the discovery of what is now the Diavik diamond mine is a model for success for companies involved in diamond exploration. Having gone through all phases from discovery through to economic evaluation and now mining diamonds is a phenomenal success story.
Not only is Aber a diamond producer but recently they purchased a large interest in Harry Winston Jewelers, one of the world leaders in high end jewelry. This acquisition gives Aber a direct buyer of the rough diamonds they produce and also allows them to participate in the profits of retailing finished diamonds.
In our past edition we have described the process that happens after a diamond is mined from kimberlite (the primary rock that diamonds are found in), and then is passed through several hands. It can be bought and sold several times as a rough stone before it is cut into a gem that goes into jewelry. During these steps there is a mark up at each level before it is sold to a retailer, and then sold to a customer. Aber can now remove several of these middlemen and go directly from the mine to the retail market – this adding significant value to the diamonds they produce from the Diavik mine.
The profit from mining diamonds and the added value of retailing these diamonds is why the company is seeing strong earnings. The net result in our opinion will be a company that can pay a meaningful dividend and can offer potential for large capital gains over the next decade.
Aber’s stock symbol is ABZ and the shares trade on the Toronto Stock Exchange. Their website is www.aber.ca. Their website contains past news releases and additional information to do your own due diligence.
Arctic Star Diamond Corp.
Arctic Star was featured in our first edition of our report on Canadian Diamond Exploration. Our main reason for featuring the company was the key technical people involved with the company. Buddy Doyle leads the team exploring the company’s 100% owned project in the Northwest Territories of Canada called the Credit Lake project. Since we first featured the company they have delivered a very pleasant surprise from their joint venture project with Metalex Ventures in the Kyle Lake region of Ontario. We are a shareholder of this company and are considering increasing our shareholdings in the future.
Later in this report we will be featuring Metalex and will discuss the new diamond discovery in more detail. Arctic Star has an 8.5% working interest in this project, which means that they are required to pay for 8.5% of the development costs. This project shows outstanding potential of hosting a significant diamond discovery. The 200 tonne test they are taking shortly will reveal a great deal about the realistic potential of this diamond discovery.
As we mentioned in the first edition, we featured the company because of the technical team and the Credit Lake project. The Credit Lake project was acquired from Kennecott Canada and is in close proximity to the Diavik Diamond Mine. Kennecott had done a great deal of exploration work on this project but had not done any drilling to look for kimberlite. Kennecott’s work included geophysics and geochemical sampling, which is the work done prior to drilling.
Based on Arctic Star’s two key projects in the Kyle Lake and Credit Lake areas, we feel the company is well positioned for a breakthrough year. Recently the company reported the results of geochemical work resulting in a clearer picture on where to drill on the Credit Lake project. These results include 4 key diamond indicator mineral trains with elevated counts of these minerals in areas where no prior drilling has been done. As well Arctic Star and Metalex have announced that they will be taking a 200 tonne test of kimberlite from their new diamond discovery in the Kyle Lake area.
We feel that it is reasonable to expect a significant increase in the market value of the company with success at either of these projects. The diamond indicator minerals found at Credit Lake indicate that the kimberlite that these minerals came from has the potential of being diamond bearing. Diamond bearing kimberlite has already been found at Kyle Lake with indications of a good potential for a good grade of carats per tonne and high valuations per carat.
Arctic Star’s stock symbol is ADD and the shares trade on the Toronto Stock Exchange Venture Market. Their website is www.arcticstardiamond.com on the website you will find all direct contact information for the company.
Ashton Mining of Canada
Ashton was first featured in the 2nd edition of our report on Canadian Diamond Exploration. The main reason we featured them is because of a group of diamond bearing kimberlites the company has found on their Otish Mountain project in Quebec. We are not a shareholder of the company but do feel Ashton offers excellent potential to increase its market value and are considering buying shares in the company in the future.
As we said earlier the company has found a group of diamond bearing kimberlites that collectively have a tonnage of over 20 million tonnes and an average grade of 0.80 carat per tonne with a modeled value of $88.00 per carat. When we discussed Ashton in our 2nd edition we indicated that based on past experience in the diamond industry, as a company does larger samples it is reasonable to expect the carat per tonne and value per carat will increase because these early estimates on many occasions have proven to be conservative. In addition, the company has good potential of finding new kimberlites on their property. Further drilling on the known kimberlites also has the potential of increasing the overall tonnage.
The company recently announced that they are shipping a dense media separation plant to the property. Having this plant on the property will help the company reduce the costs of testing larger amounts of kimberlite for diamond recovery. The upcoming plans include a bulk sample that should yield at least 5000 carats of diamonds.
This kind of yield will give the company a high confidence level of the grade per tonne and the value per carat. The minimum amount of diamonds that need to be evaluated in order to do a bankable feasibility study is 5000 carats; the company will have at least that amount out of their upcoming efforts.
We feel that based on past results that this project is moving toward proving that it is an economically mine-able diamond discovery and will be one of Canada’s future diamond mines.
Ashton’s stock symbol is ACA and the shares trade on the Toronto Stock Exchange. Their website is www.ashton.ca. On their website you can find past news releases and additional information to do your own due diligence.
Contact Diamond Corp.
Contact was first featured in our 2nd edition of this report on Canadian Diamond Exploration. The main thing that interests us about Contact is the diamond indicator minerals that have been found in the area they are exploring. We are a shareholder of the company and are considering increasing our shareholdings in the future.
Since we first featured the company they have had a couple of news releases that we would like to update our readers on. They announced the diamond results of the kimberlites they found last year. Those kimberlites are not diamond bearing; however, we don’t take that necessarily as a big negative. What they have really done is determined that these are not the kimberlites that the high quality diamond indicator minerals in the area came from. More drilling is needed and they are planning a great deal of drilling throughout this year.
Another announcement was that Matt Manson has been appointed President and CEO of the company. Since he left Aber Diamonds he has taken on an ever increasing role with Contact Diamonds. He is putting his name behind this project and based on his past experience it seems that he thinks there is something significant with the projects the company is involved with.
The basic story with this company is they have a very large shareholder in Agnico-Eagle Mining. Agnico is a large mining company with a great deal of mining experience in the area that Contact Diamonds is involved. The projects are located in an area that has known diamond bearing kimberlites and diamond indicator minerals that suggest that the kimberlite they came from should be diamond bearing. As well the company has other joint venture projects but the one we are focussed on following at this time are the projects in the Timiskaming area bordering Ontario and Quebec.
The company is involved in an area where a cluster of kimberlites has been found. Further drilling is focused on finding new kimberlites, and they are preparing for a busy schedule of drilling this year. They have a strong technical team, experienced in all levels from exploration to mining. We look forward to this upcoming drilling due to the potential of finding kimberlite and that the kimberlites in the area have the potential of being diamond bearing based on the diamond indicators found in the region.
Contact’s stock symbol is CO and the shares trade on the Toronto Stock Exchange. Their website is www.contactdiamond.com. On their website you can find past news releases and additional information to do your own due diligence.
Metalex Ventures
Metalex was featured in the 3rd edition of our report on Canadian Diamond Exploration. The reason we featured the company was because of a new diamond bearing kimberlite they have discovered in the Kyle Lake region of Ontario. This area is located about 100 kilometres west of the Victor Diamond Mine being developed by De Beers in the Attawapiskat region. We are a shareholder of this company and are considering increasing our shareholdings in the future.
This new diamond bearing kimberlite is called the T1 kimberlite. The company has announced a very promising count of diamonds from their preliminary testing of this kimberlite. These results are important to us for two reasons: 1. The diamond distribution curve is very good and is suggesting that they could be looking at a healthy grade of diamonds per tonne, and 2. Over 70% of the diamonds are white and free of inclusions – this is a very good indicator that the value of the diamonds will be high.
Since that announcement the company has also added more information on the chemistry of the diamond indicator minerals. The president of the company is Chuck Fipke. He was instrumental in putting Canada on the global diamond scene because of the discovery of what would become Canada’s first diamond mine. He is also one of the premier geochemists in the world and knows a great deal about diamond indicator minerals. This knowledge is backed up by a large database of diamond indicator mineral data from all over the world.
He is known as being a pretty secretive guy and tends to play his cards very close to his vest. The news releases are starting to show the hand he is playing. One of the indicators that have us believing he is onto something big is that they have made some very strong statements in their news releases. They have discussed the diamond indicator minerals in general being the kind that suggest they are sitting on a highly diamond bearing kimberlite. The one thing they have mentioned that really stands out is they have found diamond indicators that have the same kind of chemistry as indicators that have been found in 100 carat plus sized diamonds from the Ekati mine in Canada and the Premier Mine in South Africa.
Recently the company and its joint venture partner Arctic Star have announced that they are preparing for a 200 tonne bulk sample of the T1 kimberlite for the recovery of diamonds. This is a very important development because to properly assess the potential of a diamond bearing kimberlite, large samples are needed to get a realistic evaluation. This 200 tonne sample should result in recovery of enough stones to get a clearer picture on the carats per tonne and possibly preliminary indications on the value per carat.
We feel that this new discovery gives Chuck Fipke and his team the opportunity to prove his critics wrong and deliver another major diamond discovery. We think they are well on their way and we look forward to the results of their upcoming work.
Metalex’s stock symbol is MTX and the shares trade on the Toronto Stock Exchange Venture Market. Their website is www.metalexventures.com. Their website contains past news releases and additional information to do your own due diligence.
Shear Minerals
Shear has been featured in our first three reports on Canadian Diamond Exploration. The main reason we have been featuring them is due to the technical merits of the project they are exploring in the Eastern Arctic Region of Canada. We are a shareholder of the company and are considering increasing our shareholdings in the future.
There are two things that make this project interesting to us. They have found a very large number of kimberlites. Kimberlites are always found in clusters and the world average is around 20 kimberlites per cluster but can be higher than 100 in some fields. Shear has a cluster of kimberlites that is much higher than the world average of kimberlites per field. We feel that Shear is onto one of these large fields. Having numerous kimberlites can be a double edged sword because a lot of them will be non-diamond bearing. They have found diamonds in several of the kimberlites already found but to date they have not been highly diamond bearing. The other side of that sword is that there can also be a few kimberlites that are highly diamond bearing.
They have strong indications from the vast amount of diamond indicator minerals they have found on their ground that there is a strong potential of finding significantly diamond bearing kimberlites. The upcoming exploration season is quickly approaching – it usually begins around April each year.
Past work has given them a sort of blueprint of what they don’t want to focus on and by default should lead them toward the more promising kimberlites in their cluster.
Shear’s stock symbol is SRM and the shares trade on the Toronto Stock Exchange Venture Market. Their website is www.shearminerals.com. On their website you can find past news releases and additional information to do your own due diligence.
Snowfield Development Corp.
Snowfield has been featured in the 1st and 3rd editions of our report on Canadian Diamond Exploration. We featured them because of a kimberlite the company has found within 30 miles of Yellowknife and the potential of finding more in this relatively inexpensive place to explore. We are a shareholder and a consultant to the company and are considering increasing our shareholdings in the future.
Recently, Snowfield announced the results of its preliminary testing for diamonds of a small amount of drill core from the company’s first kimberlite discovery on their Ticho Diamond project. The highlight of these results is the presence of a macro-diamond found in this drill core. A small test of core is neither a representative sample of the entire kimberlite nor does it provide a definitive answer to the diamond potential of any kimberlite including this one.
What it does indicate is that the kimberlite is diamond bearing and that it has the capacity to carry macro-diamonds. The presence of a macro-diamond is an indicator that there is the potential of commercial sized stones also being present.
It is also worth noting that the previous drilling that provided this drill core was focused on testing the outer edge of the kimberlite to find a suitable place to take 500 tonnes of kimberlite for diamond testing. It was not designed to delineate the entire body nor provide a representative sample of the diamond potential of the entire kimberlite.
In kimberlites it has been found that you can get different grades in different parts of a kimberlite. The further from the primary part of kimberlite, the weaker the grade will be in most cases. A perfect example of this is the DO-27 kimberlite being re-evaluated by Peregrine Diamonds and their partners. The DO-27 kimberlite was tested back in 1994 by Kennecott Canada and their partners. This testing was very large but it only really tested the outer edges of the kimberlite, not the primary portion. Last year Peregrine went in and drilled a significant amount of kimberlite from the primary portion of the kimberlite and the grade was 3 times higher than the past testing work done by Kennecott had indicated.
There are kimberlites that have low counts of micro-diamonds that also have macro-diamonds and commercial sized stones. One of those is the Victor Diamond Deposit that is being brought into production by De Beers. That deposit is rumoured to have low counts of micro-diamonds. It also has a healthy amount of commercial sized stones that have a high value per carat and is going to be one of Canada’s future diamond mines. Another interesting indicator that is relevant is a strong similarity between Victor and Snowfield’s discovery in the diamond indicator minerals found at both these diamond discoveries.
Snowfield is planning to further test the realistic potential of this diamond bearing kimberlite. More work is needed and, based on the presence of a macro-diamond in a small sample, this further evaluation is warranted. This work will include two efforts to further evaluate the potential of this diamond discovery. One of those efforts is the taking of a 500 tonne sample from the area that the previous drill holes have indicated where the kimberlite comes closest to the surface. The second effort will be to drill into other parts of the kimberlite to test diamond potential of these areas as well and it will give the company a better understanding of the size and shape of this kimberite.
We look forward to the upcoming work to further test the diamond grade potential of Snowfields diamond bearing kimberlite.
Snowfield’s stock symbol is SNO and the shares trade on the Toronto Stock Exchange Venture Market. Their website is www.snowfield.com. Their website contains past news releases and additional information to do your own due diligence.
Stornoway Diamond Corp.
Stornoway was featured for the first time in the third edition of our report on Canadian Diamond Exploration. Since that report was published, the company has announced additional diamond results and a plan for a thorough examination of the various diamond bearing kimberlites on their Aviat project. We are a shareholder of the company and are considering increasing our shareholdings in the future.
The Aviat project is emerging as a major diamond exploration project in Canada and Stornoway looks to be aggressively testing the diamond bearing kimberlites they have found on this property. Nine kimberlites have been found and they are all diamond bearing.
Results to date have come from small samples of kimberlite; larger samples are needed to properly assess the diamond grade potential. Plans are in the works to take much larger samples from this project. The main benefit of this larger sampling is a better understanding of the carat per tonne potential of their various diamond bearing kimberlites.
These nine diamond bearing kimberlites are located within close proximity of each other and could all be used in a mine plan if they prove to be economically mine-able.
More work is needed to test the shape and size of these various kimberlites and to thoroughly test these diamond bearing kimberlites. This work will give indications of the tonnage potential of the known kimberlites. It will also give better representation of the carat per tonne potential.
Another important development is the result of testing several boulders where they have found a fairly large macro diamond as well as many other diamonds in these boulders. However, they have not found the source kimberlite that these boulders came from. The description of the diamond indicator minerals found in these boulders suggest that the kimberlite these boulders came from have excellent carrying capacity and could be highly diamond bearing. The search for the source of these kimberlite boulders is very exciting and could really be a major breakthrough for the company.
Stornoway is coming into a very busy season of work, including the testing of the known diamond bearing kimberlites and the search for the source of the outstanding boulder trains. We will be following the developments of the company very closely and will do our best to keep our readers informed as these developments are reported.
Stornoway’s stock symbol is SWY and the shares trade on the Toronto Stock Exchange. Their website is www.stornowaydiamonds.com. Their website contains past news releases and additional information to do your own due diligence.
WHAT MAKES THE ALLAN BARRY REPORT UNIQUE
For the last 12 years, the editor of this report has had a career as a consultant to publicly traded junior exploration companies. Services provided to these companies include investor relations, corporate communications, strategic planning, and fund-raising.
As an investor relations consultant to a small company one has to wear several hats:
* communicating the company’s efforts to the investing community;
* communicating technical aspects of those efforts;
* being involved in raising funds for drilling and exploration;
* being involved in the technical analysis;
* and reporting of what has been found.
These efforts have provided a unique opportunity to learn, from an insider’s perspective, the challenges that junior exploration companies face. Additionally it has opened doors to meeting a very accomplished group of technical people.
Spending this time as a consultant to junior exploration companies has provided a unique perspective that is an asset few analysts or newsletter writers possess.
In Closing
We would like to take this opportunity to thank you for taking the time to read this report. We hope this information proves to be informative and helpful. We ask the reader not to post this report on any website for at least three days after you receive it and that if it is posted to post the entire report without any editing. We invite our readers to pass on our contact information to anybody they feel may be interested in receiving this report or future reports and we would be glad to add them to our email list for future publications.
There is no charge for this publication. In order to be added to our email list we prefer to have your name, phone number and email address. You can call us on our toll free number at 1-877-574-4575 or locally at 604-574-4575 or email allanbl@shaw.ca with the above information.
Regards,
Allan Barry Laboucan,
Editor & Writer
Allan Barry Reports
Disclaimer: The information included in this Allan Barry Report on Canadian Diamond Exploration, is for information purposes only. No statement or expression of opinion, or any other matters herein, directly or indirectly, is an offer, solicitation or recommendation to buy or sell any securities mentioned. The information contained in this e-mail is drawn from sources believed to be reliable, but the accuracy and completeness of the information is not guaranteed, nor in providing it does the editor Allan Barry Laboucan or his companies, or affiliated companies, assume any liability. We do not receive or request compensation in any form in order to feature companies mentioned herein. The editor may have equity positions in companies referenced in this newsletter, or plans on taking a position, or offers consulting services to these companies and will notify the reader of these positions or services provided to the company in the section of the report on each individual company. The editor his personal company or affiliated companies, disclaims all responsibility and accepts no liability (including negligence) for the consequences for any person acting, or refraining from acting, on the information provided in this publication.
CANADIAN DIAMOND EXPLORATION
4th EDITION
February 28/2006
Welcome to the fourth edition of our report on Canadian Diamond Exploration. In our previous editions we have outlined our view of why we follow the Canadian Diamond industry so closely. We have also described the key tools used in the industry to explore for diamonds and what we look for when kimberlite is found. In this edition we will again feature all of the companies that we have featured in our past editions and their exploration efforts in the near term in the section entitled “Our Diamonds in the Rough”. Before the “Diamonds in the Rough” section there will be a discussion of our view of the industry in general.
Since our premier edition went out, we have received a number of email messages and phone calls from our readers. Thank you for your encouraging comments. As a new publication, we truly appreciate feedback from our readers and we feel this will help improve future reports - keep them coming!
The Canadian diamond mining industry in general
The Canadian diamond mining industry is currently going through growing pains; as a group, the diamond exploration companies are not performing very well. There are many more companies trading near multi-year low stock prices than there are trading at the high end of their ranges.
We don’t mention this to cause alarm amongst investors; in fact we feel it is a very bullish indicator. When the crowd thinks that an industry is not worth investing in, that is precisely the time when there is the least amount of risk and the potential for the largest percentage growth when that industry gains strength.
While it’s putting it mildly to say that diamond exploration stocks are currently out of favour, we are starting to see signs that the industry is beginning to improve. There are currently some companies starting to recover from multi-year lows. It’s starting to look like there is increased interest returning to the sector.
We think that there is a very good reason to look closely at diamond exploration companies. If a diamond exploration company is successful they can see large increases in their market value. This is due to the value of diamonds found in a kimberlite can be in the billions.
In the rough diamond market demand is very strong and supply (especially in stones larger than a half carat) is weak. For evidence of how strong the rough market is, one can look to De Beers’ record profits this year as an indicator. In fact in the last few years they have been consistently experiencing new record profits. Other mining companies involved in mining diamonds are also seeing their diamond divisions performing very well.
There are two important facts to keep in mind that the performance of the major diamond producers can teach us. One: they are reducing reserves and as they are doing this the group is unable to keep up with demand, especially in the larger stone sizes. And two: the majors that mine diamonds are flush with cash and are in need of new deposits to replace what is being mined out.
We feel that all of the companies we have featured in our past reports all meet our 4 key factors that we evaluate when considering featuring a company in our report. 1. They have quality projects based on drilling results and outstanding diamond indicator minerals found at their projects. 2. Key people with significant experience in diamond exploration. 3. Reasonable or, even better, undervalued market values. 4. The potential of their market value increasing.
Because all the companies we have featured in our past editions have the qualities we just described, we are going to feature all of the companies again in this edition. The next section is our “Our Diamonds In the Rough”.
Our Diamonds In The Rough
This section of the report is dedicated to discussing companies that we feel have quality projects that offer significant potential to grow into companies with higher market values.
We are either shareholders, or planning to become shareholders, of all of the companies included in this section. At times we offer our consulting services to companies we own shares in. We are only interested in offering those services to companies we first and foremost want to be shareholders of, as well as being able to provide service that will assist the company in unlocking value to the shareholders.
At the beginning of the discussion of each company we will indicate if we are a shareholder or a consultant to the company. We also advise readers to look at our disclaimer at the end of this report. The following companies are listed alphabetically.
Aber Diamond Corp.
Aber is one of our favourite companies in any industry. When looking at larger companies, the main driver of the stock valuation is profitability and Aber is a very profitable company with a very good earnings outlook for many years into the future. We are not a shareholder of Aber but feel that it has a very promising future with potential for above average market value growth.
We originally featured Aber in our first edition as a model for success for a junior diamond exploration company.
Their rise from humble beginnings as a junior exploration company followed by the discovery of what is now the Diavik diamond mine is a model for success for companies involved in diamond exploration. Having gone through all phases from discovery through to economic evaluation and now mining diamonds is a phenomenal success story.
Not only is Aber a diamond producer but recently they purchased a large interest in Harry Winston Jewelers, one of the world leaders in high end jewelry. This acquisition gives Aber a direct buyer of the rough diamonds they produce and also allows them to participate in the profits of retailing finished diamonds.
In our past edition we have described the process that happens after a diamond is mined from kimberlite (the primary rock that diamonds are found in), and then is passed through several hands. It can be bought and sold several times as a rough stone before it is cut into a gem that goes into jewelry. During these steps there is a mark up at each level before it is sold to a retailer, and then sold to a customer. Aber can now remove several of these middlemen and go directly from the mine to the retail market – this adding significant value to the diamonds they produce from the Diavik mine.
The profit from mining diamonds and the added value of retailing these diamonds is why the company is seeing strong earnings. The net result in our opinion will be a company that can pay a meaningful dividend and can offer potential for large capital gains over the next decade.
Aber’s stock symbol is ABZ and the shares trade on the Toronto Stock Exchange. Their website is www.aber.ca. Their website contains past news releases and additional information to do your own due diligence.
Arctic Star Diamond Corp.
Arctic Star was featured in our first edition of our report on Canadian Diamond Exploration. Our main reason for featuring the company was the key technical people involved with the company. Buddy Doyle leads the team exploring the company’s 100% owned project in the Northwest Territories of Canada called the Credit Lake project. Since we first featured the company they have delivered a very pleasant surprise from their joint venture project with Metalex Ventures in the Kyle Lake region of Ontario. We are a shareholder of this company and are considering increasing our shareholdings in the future.
Later in this report we will be featuring Metalex and will discuss the new diamond discovery in more detail. Arctic Star has an 8.5% working interest in this project, which means that they are required to pay for 8.5% of the development costs. This project shows outstanding potential of hosting a significant diamond discovery. The 200 tonne test they are taking shortly will reveal a great deal about the realistic potential of this diamond discovery.
As we mentioned in the first edition, we featured the company because of the technical team and the Credit Lake project. The Credit Lake project was acquired from Kennecott Canada and is in close proximity to the Diavik Diamond Mine. Kennecott had done a great deal of exploration work on this project but had not done any drilling to look for kimberlite. Kennecott’s work included geophysics and geochemical sampling, which is the work done prior to drilling.
Based on Arctic Star’s two key projects in the Kyle Lake and Credit Lake areas, we feel the company is well positioned for a breakthrough year. Recently the company reported the results of geochemical work resulting in a clearer picture on where to drill on the Credit Lake project. These results include 4 key diamond indicator mineral trains with elevated counts of these minerals in areas where no prior drilling has been done. As well Arctic Star and Metalex have announced that they will be taking a 200 tonne test of kimberlite from their new diamond discovery in the Kyle Lake area.
We feel that it is reasonable to expect a significant increase in the market value of the company with success at either of these projects. The diamond indicator minerals found at Credit Lake indicate that the kimberlite that these minerals came from has the potential of being diamond bearing. Diamond bearing kimberlite has already been found at Kyle Lake with indications of a good potential for a good grade of carats per tonne and high valuations per carat.
Arctic Star’s stock symbol is ADD and the shares trade on the Toronto Stock Exchange Venture Market. Their website is www.arcticstardiamond.com on the website you will find all direct contact information for the company.
Ashton Mining of Canada
Ashton was first featured in the 2nd edition of our report on Canadian Diamond Exploration. The main reason we featured them is because of a group of diamond bearing kimberlites the company has found on their Otish Mountain project in Quebec. We are not a shareholder of the company but do feel Ashton offers excellent potential to increase its market value and are considering buying shares in the company in the future.
As we said earlier the company has found a group of diamond bearing kimberlites that collectively have a tonnage of over 20 million tonnes and an average grade of 0.80 carat per tonne with a modeled value of $88.00 per carat. When we discussed Ashton in our 2nd edition we indicated that based on past experience in the diamond industry, as a company does larger samples it is reasonable to expect the carat per tonne and value per carat will increase because these early estimates on many occasions have proven to be conservative. In addition, the company has good potential of finding new kimberlites on their property. Further drilling on the known kimberlites also has the potential of increasing the overall tonnage.
The company recently announced that they are shipping a dense media separation plant to the property. Having this plant on the property will help the company reduce the costs of testing larger amounts of kimberlite for diamond recovery. The upcoming plans include a bulk sample that should yield at least 5000 carats of diamonds.
This kind of yield will give the company a high confidence level of the grade per tonne and the value per carat. The minimum amount of diamonds that need to be evaluated in order to do a bankable feasibility study is 5000 carats; the company will have at least that amount out of their upcoming efforts.
We feel that based on past results that this project is moving toward proving that it is an economically mine-able diamond discovery and will be one of Canada’s future diamond mines.
Ashton’s stock symbol is ACA and the shares trade on the Toronto Stock Exchange. Their website is www.ashton.ca. On their website you can find past news releases and additional information to do your own due diligence.
Contact Diamond Corp.
Contact was first featured in our 2nd edition of this report on Canadian Diamond Exploration. The main thing that interests us about Contact is the diamond indicator minerals that have been found in the area they are exploring. We are a shareholder of the company and are considering increasing our shareholdings in the future.
Since we first featured the company they have had a couple of news releases that we would like to update our readers on. They announced the diamond results of the kimberlites they found last year. Those kimberlites are not diamond bearing; however, we don’t take that necessarily as a big negative. What they have really done is determined that these are not the kimberlites that the high quality diamond indicator minerals in the area came from. More drilling is needed and they are planning a great deal of drilling throughout this year.
Another announcement was that Matt Manson has been appointed President and CEO of the company. Since he left Aber Diamonds he has taken on an ever increasing role with Contact Diamonds. He is putting his name behind this project and based on his past experience it seems that he thinks there is something significant with the projects the company is involved with.
The basic story with this company is they have a very large shareholder in Agnico-Eagle Mining. Agnico is a large mining company with a great deal of mining experience in the area that Contact Diamonds is involved. The projects are located in an area that has known diamond bearing kimberlites and diamond indicator minerals that suggest that the kimberlite they came from should be diamond bearing. As well the company has other joint venture projects but the one we are focussed on following at this time are the projects in the Timiskaming area bordering Ontario and Quebec.
The company is involved in an area where a cluster of kimberlites has been found. Further drilling is focused on finding new kimberlites, and they are preparing for a busy schedule of drilling this year. They have a strong technical team, experienced in all levels from exploration to mining. We look forward to this upcoming drilling due to the potential of finding kimberlite and that the kimberlites in the area have the potential of being diamond bearing based on the diamond indicators found in the region.
Contact’s stock symbol is CO and the shares trade on the Toronto Stock Exchange. Their website is www.contactdiamond.com. On their website you can find past news releases and additional information to do your own due diligence.
Metalex Ventures
Metalex was featured in the 3rd edition of our report on Canadian Diamond Exploration. The reason we featured the company was because of a new diamond bearing kimberlite they have discovered in the Kyle Lake region of Ontario. This area is located about 100 kilometres west of the Victor Diamond Mine being developed by De Beers in the Attawapiskat region. We are a shareholder of this company and are considering increasing our shareholdings in the future.
This new diamond bearing kimberlite is called the T1 kimberlite. The company has announced a very promising count of diamonds from their preliminary testing of this kimberlite. These results are important to us for two reasons: 1. The diamond distribution curve is very good and is suggesting that they could be looking at a healthy grade of diamonds per tonne, and 2. Over 70% of the diamonds are white and free of inclusions – this is a very good indicator that the value of the diamonds will be high.
Since that announcement the company has also added more information on the chemistry of the diamond indicator minerals. The president of the company is Chuck Fipke. He was instrumental in putting Canada on the global diamond scene because of the discovery of what would become Canada’s first diamond mine. He is also one of the premier geochemists in the world and knows a great deal about diamond indicator minerals. This knowledge is backed up by a large database of diamond indicator mineral data from all over the world.
He is known as being a pretty secretive guy and tends to play his cards very close to his vest. The news releases are starting to show the hand he is playing. One of the indicators that have us believing he is onto something big is that they have made some very strong statements in their news releases. They have discussed the diamond indicator minerals in general being the kind that suggest they are sitting on a highly diamond bearing kimberlite. The one thing they have mentioned that really stands out is they have found diamond indicators that have the same kind of chemistry as indicators that have been found in 100 carat plus sized diamonds from the Ekati mine in Canada and the Premier Mine in South Africa.
Recently the company and its joint venture partner Arctic Star have announced that they are preparing for a 200 tonne bulk sample of the T1 kimberlite for the recovery of diamonds. This is a very important development because to properly assess the potential of a diamond bearing kimberlite, large samples are needed to get a realistic evaluation. This 200 tonne sample should result in recovery of enough stones to get a clearer picture on the carats per tonne and possibly preliminary indications on the value per carat.
We feel that this new discovery gives Chuck Fipke and his team the opportunity to prove his critics wrong and deliver another major diamond discovery. We think they are well on their way and we look forward to the results of their upcoming work.
Metalex’s stock symbol is MTX and the shares trade on the Toronto Stock Exchange Venture Market. Their website is www.metalexventures.com. Their website contains past news releases and additional information to do your own due diligence.
Shear Minerals
Shear has been featured in our first three reports on Canadian Diamond Exploration. The main reason we have been featuring them is due to the technical merits of the project they are exploring in the Eastern Arctic Region of Canada. We are a shareholder of the company and are considering increasing our shareholdings in the future.
There are two things that make this project interesting to us. They have found a very large number of kimberlites. Kimberlites are always found in clusters and the world average is around 20 kimberlites per cluster but can be higher than 100 in some fields. Shear has a cluster of kimberlites that is much higher than the world average of kimberlites per field. We feel that Shear is onto one of these large fields. Having numerous kimberlites can be a double edged sword because a lot of them will be non-diamond bearing. They have found diamonds in several of the kimberlites already found but to date they have not been highly diamond bearing. The other side of that sword is that there can also be a few kimberlites that are highly diamond bearing.
They have strong indications from the vast amount of diamond indicator minerals they have found on their ground that there is a strong potential of finding significantly diamond bearing kimberlites. The upcoming exploration season is quickly approaching – it usually begins around April each year.
Past work has given them a sort of blueprint of what they don’t want to focus on and by default should lead them toward the more promising kimberlites in their cluster.
Shear’s stock symbol is SRM and the shares trade on the Toronto Stock Exchange Venture Market. Their website is www.shearminerals.com. On their website you can find past news releases and additional information to do your own due diligence.
Snowfield Development Corp.
Snowfield has been featured in the 1st and 3rd editions of our report on Canadian Diamond Exploration. We featured them because of a kimberlite the company has found within 30 miles of Yellowknife and the potential of finding more in this relatively inexpensive place to explore. We are a shareholder and a consultant to the company and are considering increasing our shareholdings in the future.
Recently, Snowfield announced the results of its preliminary testing for diamonds of a small amount of drill core from the company’s first kimberlite discovery on their Ticho Diamond project. The highlight of these results is the presence of a macro-diamond found in this drill core. A small test of core is neither a representative sample of the entire kimberlite nor does it provide a definitive answer to the diamond potential of any kimberlite including this one.
What it does indicate is that the kimberlite is diamond bearing and that it has the capacity to carry macro-diamonds. The presence of a macro-diamond is an indicator that there is the potential of commercial sized stones also being present.
It is also worth noting that the previous drilling that provided this drill core was focused on testing the outer edge of the kimberlite to find a suitable place to take 500 tonnes of kimberlite for diamond testing. It was not designed to delineate the entire body nor provide a representative sample of the diamond potential of the entire kimberlite.
In kimberlites it has been found that you can get different grades in different parts of a kimberlite. The further from the primary part of kimberlite, the weaker the grade will be in most cases. A perfect example of this is the DO-27 kimberlite being re-evaluated by Peregrine Diamonds and their partners. The DO-27 kimberlite was tested back in 1994 by Kennecott Canada and their partners. This testing was very large but it only really tested the outer edges of the kimberlite, not the primary portion. Last year Peregrine went in and drilled a significant amount of kimberlite from the primary portion of the kimberlite and the grade was 3 times higher than the past testing work done by Kennecott had indicated.
There are kimberlites that have low counts of micro-diamonds that also have macro-diamonds and commercial sized stones. One of those is the Victor Diamond Deposit that is being brought into production by De Beers. That deposit is rumoured to have low counts of micro-diamonds. It also has a healthy amount of commercial sized stones that have a high value per carat and is going to be one of Canada’s future diamond mines. Another interesting indicator that is relevant is a strong similarity between Victor and Snowfield’s discovery in the diamond indicator minerals found at both these diamond discoveries.
Snowfield is planning to further test the realistic potential of this diamond bearing kimberlite. More work is needed and, based on the presence of a macro-diamond in a small sample, this further evaluation is warranted. This work will include two efforts to further evaluate the potential of this diamond discovery. One of those efforts is the taking of a 500 tonne sample from the area that the previous drill holes have indicated where the kimberlite comes closest to the surface. The second effort will be to drill into other parts of the kimberlite to test diamond potential of these areas as well and it will give the company a better understanding of the size and shape of this kimberite.
We look forward to the upcoming work to further test the diamond grade potential of Snowfields diamond bearing kimberlite.
Snowfield’s stock symbol is SNO and the shares trade on the Toronto Stock Exchange Venture Market. Their website is www.snowfield.com. Their website contains past news releases and additional information to do your own due diligence.
Stornoway Diamond Corp.
Stornoway was featured for the first time in the third edition of our report on Canadian Diamond Exploration. Since that report was published, the company has announced additional diamond results and a plan for a thorough examination of the various diamond bearing kimberlites on their Aviat project. We are a shareholder of the company and are considering increasing our shareholdings in the future.
The Aviat project is emerging as a major diamond exploration project in Canada and Stornoway looks to be aggressively testing the diamond bearing kimberlites they have found on this property. Nine kimberlites have been found and they are all diamond bearing.
Results to date have come from small samples of kimberlite; larger samples are needed to properly assess the diamond grade potential. Plans are in the works to take much larger samples from this project. The main benefit of this larger sampling is a better understanding of the carat per tonne potential of their various diamond bearing kimberlites.
These nine diamond bearing kimberlites are located within close proximity of each other and could all be used in a mine plan if they prove to be economically mine-able.
More work is needed to test the shape and size of these various kimberlites and to thoroughly test these diamond bearing kimberlites. This work will give indications of the tonnage potential of the known kimberlites. It will also give better representation of the carat per tonne potential.
Another important development is the result of testing several boulders where they have found a fairly large macro diamond as well as many other diamonds in these boulders. However, they have not found the source kimberlite that these boulders came from. The description of the diamond indicator minerals found in these boulders suggest that the kimberlite these boulders came from have excellent carrying capacity and could be highly diamond bearing. The search for the source of these kimberlite boulders is very exciting and could really be a major breakthrough for the company.
Stornoway is coming into a very busy season of work, including the testing of the known diamond bearing kimberlites and the search for the source of the outstanding boulder trains. We will be following the developments of the company very closely and will do our best to keep our readers informed as these developments are reported.
Stornoway’s stock symbol is SWY and the shares trade on the Toronto Stock Exchange. Their website is www.stornowaydiamonds.com. Their website contains past news releases and additional information to do your own due diligence.
WHAT MAKES THE ALLAN BARRY REPORT UNIQUE
For the last 12 years, the editor of this report has had a career as a consultant to publicly traded junior exploration companies. Services provided to these companies include investor relations, corporate communications, strategic planning, and fund-raising.
As an investor relations consultant to a small company one has to wear several hats:
* communicating the company’s efforts to the investing community;
* communicating technical aspects of those efforts;
* being involved in raising funds for drilling and exploration;
* being involved in the technical analysis;
* and reporting of what has been found.
These efforts have provided a unique opportunity to learn, from an insider’s perspective, the challenges that junior exploration companies face. Additionally it has opened doors to meeting a very accomplished group of technical people.
Spending this time as a consultant to junior exploration companies has provided a unique perspective that is an asset few analysts or newsletter writers possess.
In Closing
We would like to take this opportunity to thank you for taking the time to read this report. We hope this information proves to be informative and helpful. We ask the reader not to post this report on any website for at least three days after you receive it and that if it is posted to post the entire report without any editing. We invite our readers to pass on our contact information to anybody they feel may be interested in receiving this report or future reports and we would be glad to add them to our email list for future publications.
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Regards,
Allan Barry Laboucan,
Editor & Writer
Allan Barry Reports
Disclaimer: The information included in this Allan Barry Report on Canadian Diamond Exploration, is for information purposes only. No statement or expression of opinion, or any other matters herein, directly or indirectly, is an offer, solicitation or recommendation to buy or sell any securities mentioned. The information contained in this e-mail is drawn from sources believed to be reliable, but the accuracy and completeness of the information is not guaranteed, nor in providing it does the editor Allan Barry Laboucan or his companies, or affiliated companies, assume any liability. We do not receive or request compensation in any form in order to feature companies mentioned herein. The editor may have equity positions in companies referenced in this newsletter, or plans on taking a position, or offers consulting services to these companies and will notify the reader of these positions or services provided to the company in the section of the report on each individual company. The editor his personal company or affiliated companies, disclaims all responsibility and accepts no liability (including negligence) for the consequences for any person acting, or refraining from acting, on the information provided in this publication.
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