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Brazilian Diamonds Ltd (C-BDY) - Street Wire
Brazilian Diamonds drills for high-grade zone

2006-11-22 20:18 ET - Street Wire
Shares issued 143,462,770
BDY Close 2006-11-21 C$ 0.17


by Will Purcell

Brazilian Diamonds Ltd. is starting a new $400,000 drill program on its Regis kimberlite in Brazil. The new tests will provide more kimberlite for diamond recovery and will show the size potential of the body. Larger stones will be key to the play.

The plan

Brazilian Diamonds president, Ken Judge, said two drill rigs were now running, with plans for each to complete two new holes. The plan calls for each test to extend 75 metres into the Regis pipe, enough for a few hundred kilograms of kimberlite core that can be tested for diamonds.

The Regis pipe covers about 120 hectares at the surface, making it a match with the huge pipes in the Fort a la Corne district of Saskatchewan. "We are trying to work out whether we have multiple zones of diamondiferous kimberlite," Mr. Judge said. Unfortunately, four quick tests into such a large pipe seem mere pinpricks that may settle little.

Brazilian Diamonds put two holes into the central core of Regis earlier this year. The first one delivered promotable diamond counts and the company is banking on a comparable result from the second test. The central zone, which covers about 20 hectares at the surface, is a priority because of its encouraging mineral chemistry.

The cash

The company reported just over $1-million in working capital at the end of September, but raising more will be necessary if the new diamond counts are encouraging. Regis will then need much more drilling and larger tests to assess its chances.

The pipe lies in western Minas Gerais, about 350 kilometres southeast of Brasilia. The country is open savannah making for easy access, but the land is amenable to farming, which might complicate plans for a mine. Parts of the pipe outcrop at surface and Brazilian Diamonds thinks the dimensions of the body are favourable to open pit mining.

The encouragement

Regis probably flares out at its top like the Fort a la Corne pipes, but the core area does appear to contain a large amount of kimberlite. Proving a large tonnage will be vital, as the diamond counts point to a modest grade. The first hole produced 129 diamonds from 348.75 kilograms of drill core, and none of the stones sat on a 0.60-millimetre screen. Brazilian Diamonds will need some larger stones in its subsequent tests for its Regis play to gain traction with investors.

A nearby kimberlite suggests Regis could have multiple zones with markedly different diamond grades. The Tucano-1 pipe, about 25 kilometres northwest of Regis, delivered 164 diamonds from a 67-kilogram batch of kimberlite. A further 422 kilograms of rock mustered just 13 gems. Tucano-1 appears less than two hectares in size, yet it contains multiple phases of kimberlite.

Brazilian Diamonds has a third kimberlite in the area. The Bananal body is about 20 kilometres east-northeast of Regis, and early work suggests there are a few pipes and multiple phases of kimberlite present there as well.

Although the Regis pipe has size on its side, Brazilian Diamonds will need to prove at portion of the pipe has a worthwhile grade. The company is making no predictions at this stage, but Mr. Judge touts the high diamond values obtained in the area as a good sign. The quality of the Minas Gerais gems supports average prices of about $175 (U.S.) per carat.

That lowers the grade requirement, but even a huge mine would need a grade topping 0.1 carat per tonne. Skeptics still suspect the big Star pipe of Shore Gold Inc. may be uneconomic with a grade of about 0.15 carat per tonne and a diamond value of $135 (U.S.) per carat.

Brazilian Diamonds gained one-half penny to 17 cents Tuesday on 14,600 shares.