Dia Met report cools speculation, raises questions

Results from a summer drilling program on the diamond property of BHP Minerals Canada and Dia Met Minerals (VSE) in the Northwest Territories fell short of market expectations when Dia Met issued an update that raised more questions than it answered.

Investors, who had pushed Dia Met to as high as $22.38 from $18 on speculation that a second, larger kimberlite pipe would make the Point Lake discovery look like child’s play, beat the stock down to $20.13 in the days following news of another diamond find on the property.

The junior reports that, since the beginning of the summer, the joint venture has found nine new kimberlites through drilling or mapping. A 40-kg sample taken from one of the new pipes returned at least 10 microdiamonds (by BHP’s measure, a diamond less than 0.5 mm in diameter) and one macrodiamond (greater than 0.5 mm).

This compares to the 59-kg sample taken from Point Lake pipe last year, which returned 81 small diamonds, some of gem quality, and pushed Dia Met, then a Vancouver penny stock, to $9.

“The results are not as spectacular as those from the discovery pipe,” says John Hainey, analyst for L.O.M. & Associates. “But they do point out that there’s a genuine kimberlite field there.”

Relevant questions about the weight and quality of the diamonds, the size and location of the second diamond-bearing pipe, and the sampling method remain unanswered. Calling the release “tenuous,” “misleading” and “a mixed signal to investors,” analysts and investors alike say they hope further information will be forthcoming.

“I anticipate that there will be a little more comprehension in the future,” responded Charles Fipke, chairman of Dia Met. Testing of additional core samples and small bulk samples from the property is ongoing. Meanwhile, a fourth international major has joined BHP, Kennecott and Monopros in the hunt for diamonds in the Northwest Territories. Under an agreement with Pure Gold Resources (TSE), Ashton Mining of Australia will fund target evaluation, drilling and bulk sampling of up to 20 tons of material per kimberlite.

Pure Gold will finance sample collection and airborne geophysical surveys and negotiate third-party agreements. Pure Gold has already signed third-party agreements with Winslow Gold (VSE), ATNA Resources (VSE) and Magna Carta Resources (ASE) for about 130,000 additional acres.

Ashton Mining has a 38% interest in the Argyle mine in Australia, the world’s largest diamond mine.

Other developments on the North American diamond front include: — The DHK syndicate, consisting of Dentonia Resources (VSE), Horseshoe Gold Mining (ASE) and Kettle River Resources (VSE), has reached an agreement with Kennecott Canada and Associates. A minor interest in the option will be held by Aber Resources (TSE), SouthernEra Resources (TSE) and Commonwealth Gold (VSE).

Although details have yet to be released, the agreement calls for Kennecott to earn a 65% interest in DHK’s three claim blocks totalling 208,000 acres in the Lac de Gras area. DHK would retain a 35% interest carried through to production.

— A group consisting of Almaden Resources (VSE), Williams Creek Explorations (VSE) and Troymin Resources (ASE), having recently increased its land position in the Lac de Gras area to 144,000 acres, has signed a similar joint venture agreement with Kennecott and Associates. Heavy mineral sampling is expected to begin on both properties shortly.

— Falconbridge has acquired additional claims around a barren kimberlite pipe that it tested in the Snow Lake area of Manitoba in 1983. An unidentified junior company will explore the 45-square-mile area near Wekuso Lake under a joint venture with Falconbridge.

— Barexor Minerals (ME) reports that a heavy mineral sampling program is under way on the 33,670-acre Aylmer Lake project, 45 miles southeast of the Point Lake discovery. The goal of the program is to determine the diamond potential of inferred diatremes in preparation for post-freeze-up drilling and possibly bulk sampling.

Barexor has an option to acquire a 100% interest in the project over a 3-year period by making cash payments of $50,000, issuing 800,000 shares and spending $750,000.

— Kingswood Resources (ASE) is sampling several geophysical targets that could represent kimberlite pipes on property optioned from Acadia Mineral Ventures (TSE) and Contwoyto Goldfields (ASE) just east of the Lupin mine. The company also has an 880-acre property in Bernhardt Twp., just north of Kirkland Lake, Ont.

— Golconda Resources (ASE) has found an outcrop of heavy, yellow, clay alteration containing large phlogopite crystals on its property in the western U.S. Golconda, which previously found a microdiamond and other favorable indicator minerals in the area, suspects the outcrop may be a lamproite pipe.