Pele lures De Beers to Wawa (August 05, 2003)

Toronto-based Pele Mountain Resources (GEM-V) has attracted De Beers‘ Canadian exploration arm into an option agreement at the junior’s wholly owned 101-sq.-km Festival diamond property, situated 25 km north of Wawa, Ont.

Previously, De Beers’ only involvement at Festival had been its processing — at no charge to Pele — of a 100-tonne bulk sample from the Cristal volcanic complex in late 2001. The sample returned 96 small but commercial-sized diamonds, including some clear, well-preserved octahedrals with sharp edges.

This latest deal is another vindication for the merit of the Wawa diamond exploration play, which is unusual in that claims in the area contain diamonds hosted by 2.7-billion-year-old volcaniclastic ultramafic flows rather than the better-known kimberlite pipes and dykes being explored elsewhere in Canada (T.N.M., Dec. 2-8/02).

In total, De Beers must spend $25 million to earn a vested 51% participating interest in the Festival property, though Pele will maintain the right to carry out prospecting, exploration and development work.

Further details include:

* De Beers must spend $10 million before 2007 to earn an initial 51% participating interest and to form a joint venture, and must spend no less than $1.5 million per year on exploration;

* the 51% interest will be vested upon spending $25 million or completing an approved feasibility study, whichever comes first;

* the major’s exploration work this year must cost at least $500,000 and include the taking of a minimum 300-tonne bulk sample;

* De Beers will make $500,000 annual share subscriptions in Pele through 2008 at a minimum 50 per share (Pele shares were trading at 23~ prior to the deal, and then jumped to 35 after the announcement);

* Pele will be carried through to an approved feasibility study, after which De Beers will have earned an additional 4% participating interest in the joint venture;

* Pele may elect to receive a 45% share of diamonds in kind by funding its share of mine construction and exploration costs, or, alternatively, Pele may elect to be carried through to commercial production and receive a 40% participating interest.

De Beers has already made an initial payment of $150,500 in cash to Pele to reimburse it for certain costs incurred and has subscribed for 1 million Pele shares at 50 per share.

Early this year, Pele recovered a white, 0.72-carat gem-quality diamond from the Cristal showing at Festival. The stone, which was recovered from a 13-tonne sample of bedrock extracted in late 2001, measured 4.42 by 4.28 by 3.58 mm, making it the largest ever recovered in the Wawa region.

In March, initial drilling by Pele cut a wide intersection of diamond-bearing volcanic rock at the Cristal diamond occurrence. A single, angled hole designed to the thickness and down-dip continuity of the occurrence cut a true width of 90-100 metres, beginning at a depth of 21.5 metres below surface. The hole also confirmed that the Cristal occurrence dips to the northeast onto Pele’s property.

South of Festival, Band-Ore Resources (BAN-T) signed an option agreement in 2002 with Rio Tinto (RTP-N) subsidiary Kennecott, whereby the major can earn a 70% interest in Band-Ore’s GQ diamond property by spending a minimum of $15 million on exploration and by completing and financing all work on the property until a production decision has been made.

Other companies active in the Wawa diamond play include Spider Resources (SPQ-V), Oasis Diamond Exploration (CSI-V), Arctic Star Diamond (ADD-V), Iciena Ventures (IIE-V).

In other news, Pele has acquired five mining claim blocks within and adjacent to the Attawapiskat cluster of diamond-bearing kimberlite pipes, within a 20-km radius of De Beers’ Victor pipe. Pele’s new holdings, dubbed the “Attawapiskat River project”, cover 89 sq. km and constitute the second-largest land position in the area.

Pele has also been active in Ontario’s Shebandowan greenstone belt at its revived, wholly owned Ardeen gold-silver mine project, 110 km west of Thunder Bay.