Canada Nickel to option ‘Ring of Fire’ property from Diamondex

Privately held Canada Nickel Corp. has signed an option agreement with Diamondex Resources (DSP-V, DMDXF-O) to earn up to a 51% interest in the James Bay lowlands nickel project, in northern Ontario.

To earn in, Canada Nickel will make an immediate payment of $5 million in cash and spend $20 million on exploration before July 2011.

In addition, Canada Nickel will issue 250,000 share purchase warrants to Diamondex.

The James Bay Lowlands nickel project is in the “Ring of Fire” — host to Noront Resources’ (NOT-V, NOSOF-O) Double Eagle property and the McFauld’s Lake VMS deposits.

Diamondex’s land package is about 20 km north of Ogoki, Ont., at its southernmost point and stretches (discontinuously) over a strike length of more than 250 km, with portions within 12 km of both the Double Eagle deposit and the McFauld’s Lake VMS deposit.

The property lies within the Kyle Lake kimberlite cluster, about 65 km southwest of De Beers’ Victor diamond mine, and has demonstrated nickel, platinum group elements, copper, zinc and diamond potential.

What’s more, the area includes positive magnetic anomalies, the company says, typical of mafic and ultramafic lithologies and prospective for nickel mineralization along the entire length of the newly interpreted volcano-sedimentary belt.

Diamondex recently completed a 5,105 line-km geophysical survey (VTEM) over the eastern block of the project.

That survey revealed 35 discrete late time basement conductors, which the company says indicate excellent targets for magmatic sulphide exploration. The interpreted strike lengths of the conductors range from 300-1,600 metres.

Geotech has been contracted to fly VTEM surveys over the remaining southwest and northwest extension claim blocks.

The two companies will then follow up high-priority airborne anomalies with ground geophysical surveys to assist conductor characterization and ranking (including width, dip, depth, and ultra-low frequency EM response).

The initial diamond-drill test program is expected to begin during the fourth quarter and finish early next year. The company estimates that about 16 targets will be tested during this period.

Diamondex is the largest property holder in the James Bay lowlands, with more than 1,647 sq. km within 724 claims.

Its shares recently traded at about 15 and the Canadian junior has a 52-week trading window of 15-38 a share with 173.8 million shares outstanding.