Prospects of finding economic diamond deposits lure

While gold may have lost some of its traditional lustre, the prospects of discovering economic diamond deposits is luring investors back to western markets.

The Vancouver Stock Exchange composite index gained more than five points to finish the week ended May 26 at 617.97, while the resource index jumped 18.12 points to close at 529.29.

The Alberta Stock Exchange composite index added a more modest 3.08 points to close the week at 813.82.

Crude oil’s run to US$22 a barrel wasn’t enough to budge bullion prices, with gold posting a US$2-per-oz. drop to the US$338 level. The market doesn’t appear particularly interested in gold prices for the time being, anyway. Andrew Muir, mining analyst at Pacific International Securities, says most of the market action revolves around diamond plays, particularly in the Lac de Gras region of the Northwest Territories where Dia Met Minerals and BHP-Utah Mines recently announced a discovery.

The companies estimate the 160-ton bulk sample drilled from the Point Lake property earlier this year contains at least 90 carats of diamonds. Dia Met managed a high of $17.50 following release of the news before finishing the period at $14.88.

Numerous companies have announced property acquisitions in the region of the find, hoping to cash in on the excitement.

Winspear Resources, which now has more than 54,000 acres in the area, managed to add 24 cents to close at 58 cents.

Bellex Mining recently acquired a 100% interest in the MacKay Lake property, which covers more than 40,000 acres about 30 miles south of the Dia Met play. The issue added 6 cents to close at 28 cents.

An interest in claims adjoining the Point Lake property gave Commonwealth Gold a boost, with the issue posting a 14 cents gain to 34 cents. The acquisition of three claim blocks in the Lac de Gras area by joint venture partners Dentonia Resources, Kettle River Resources and Horseshoe Gold Mining helped all three issues. Dentonia closed up 13 cents to 28 cents, Kettle River more than doubled to finish at 55 cents and Horseshoe edged up a nickel at 85 cents.

A number of companies have announced they are in negotiations to acquire ground in the area, including Teryl Resources, Galico Resources and Hyder Gold. Teryl finished the period up 8 cents at 23 cents while Galico and Hyder remained little changed.

Excitement over diamond exploration is not limited to the Northwest Territories find. Texas Star, which is acquiring a 10% interest in an exploration joint venture in the Crater of Diamonds State Park in Arkansas, continued to gain ground, touching a high of $1.83 before closing up 81 cents at $1.65. The exploration joint venture expects to start drilling on the property in early June.

Diamond fever is somewhat less intense for two other diamond explorers, Hemisphere Development and Canadian Overseas Exploration.

Hemisphere is now testing a 1,100-ton bulk sample from its 80% owned Leopold Downs property in northern Australia. The issue added 6 cents to finish at 71 cents.

Canadian Overseas is attempting to locate diamonds off the coast of Namibia that could be recovered by dredges. The issue closed down 2 cents to 49 cents. Riviera Explorations jumped $1.03 to close at $2.28. Reynolds Metals is expected to start a diamond drilling program on Riviera’s Black Wonder gold property in northwestern Arizona shortly.

The failure of major shareholder Rio Algom to exercise share purchase options of 500,000 shares at $3 didn’t help St. Philips Resources. The issue finished down 40 cents at $2.30.