Canada lacks diamond-savvy investors

When Bruce Counts, president and CEO of Indicator Minerals (IME-V), was in university, his professors merely glossed over diamond exploration.

I think we spent a half-hour in one lecture discussing kimberlites, he says.

Counts says that the academic community didnt know much about diamonds because they werent known to occur in Canada.

Diamonds were something you found in Africa, Counts says.

That was before 1991 when Dia Met Minerals discovered kimberlite in the Northwest Territories, which led to Canadas first diamond mine – Ekati now 80%-owned by BHP Billiton (BHP-N, BLT-L) and 10%-owned by Chuck Fipke and Stewart Blusson, who were a part of Dia Met.

Kimberlite is a volcanic rock that works as an elevator to transport diamonds to the earths surface, often in clusters, but only about 1 in 25 are diamond bearing and 1 in 250 are economic.

Now Canada is the third-largest producer of rough diamonds in the world and Indicator Minerals is one of many junior companies searching for diamond-bearing kimberlite in Canadas North.

Just yesterday Indicator reported that it had intersected kimberlite at its Darby project in Nunavut about 120 km southwest of the community Kugaaruk.

The intersection was made between 90.7 metres and 171.9 metres on a 60-degree angle. The company says the intersection is a matrix-supported macrocryst kimberlite. Samples are being evaluated at a lab for diamond recovery. The company will also test for certain indicator minerals and do a petrologic description.

Counts, who got involved in diamonds in 1992, says that because the diamond industry is relatively new to Canada, many investors lack information about diamond exploration.

In the fall of 2006, the companys stock price plummeted from above 70 apiece to the mid-30 range after positive results from its Darby project were released.

Indicator had found 24 diamonds, including 3 macro-diamonds, in a 462-kg sample of kimberlite.

It was pretty demoralizing, Counts says.

While a ratio of one diamond per kg would get Counts excited, he says at that stage the company was merely trying to establish that it was in a kimberlite field.

We werent looking for the one yet, he says.

Diamond exploration is costly and time consuming but the pay-off can be huge, Counts says.

The drop in market capitalization didnt mean anything for Indicator from an exploration perspective.

Teck Cominco, the operator of the project, can earn a 51% interest by spending $14 million before June 20, 2010. Hunter Exploration Group, a private explorer, has a 20% interest. If Teck forms a joint venture with Indicator, Indicator will have the right to have its 29% interest carried to production on a project loan basis.

Teck is spending $8.5 million on exploration this year.

Counts says results should be out by mid-September for the Darby project.

Indicator will receive lab results for its Barrow project by mid-October. Barrow is located 15 km south of Kugaaruck, Nunavut.

The company has 17,000 sq. km of land in the Canadian arctic in total, which includes several earlier-stage exploration properties.

Indicator shares slipped a penny in Toronto today to 45 on a trading volume of 3000 shares.