In a strange twist of fate,
Under two separate option agreements, Inco is earning a majority interest in
At time of writing, the partners were awaiting results from Inco’s first drilling campaign on the properties. Diamond Fields has not disclosed the size, depth or exact target of the program, but says it will publish any material information when Inco makes assay results available.
Diamond Fields was created by the spin off of the diamond assets of Diamond Fields Resources (DFR) after Inco fought off rival Falconbridge to buy DFR in 1996. The nickel producer paid $4.3 billion for the junior in order to gain control of the massive Voisey’s Bay nickel deposit in Labrador, discovered by two prospectors hired to find diamonds for DFR.
Inco recently poured its first nickel concentrate at Voisey’s Bay after several years of delay. Annual production is forecast at 50,000 tonnes nickel, 38,600 tonnes copper and 2,270 tonnes cobalt over a mine life of at least 30 years.
The new Diamond Fields is run by many of the same people who steered DFR through the difficult negotiations leading to Inco’s takeover, including President and CEO Gregg Sedun and directors Jack McQuat and Norman Roderic Baker. The junior’s major shareholders are former DFR co-chairmen Jean-Raymond Boulle (who holds roughly 20% of the company) and Robert Friedland.
Although primarily a diamond producer with marine assets off the coast of Namibia, the company retains its ties to nickel. Diamond Fields has grassroots nickel prospects in Madagascar and, in 2003, purchased the Greenland properties from a company controlled by Boulle.
“It was originally diamonds that took Jean-Raymond Boulle to Greenland, but when (DFR) found nickel in Labrador, he began to look at Greenland as a potential nickel source as well,” says Greg Girdler, manager of investor relations for Diamond Fields.
In fact, the Voisey’s Bay discovery sparked a mini-rush to Greenland in the mid-1990s as geologists recognized the similarities between the rocks in Greenland’s Precambrian shield and those in eastern Canada, where the Voisey’s Bay deposit was formed. Although exploration in western Greenland has not turned up any major base metal deposits, eastern Greenland remains relatively virgin territory.
There is “a correlation across the Davis Strait with specific emphasis on settings resembling the Palaeoproterozoic Voisey’s Bay deposit,” says a summary on the island’s nickel occurrences published by the Geological Survey of Denmark and Greenland. “Although the correlation is generally accepted, there has so far been no break in locating similar sulphide bodies on the Greenland side.”
The Ammassalik project covers about 634 sq. km of gneiss and supracrustal rocks within an igneous diorite complex composed of three separate plutons and exposed for more than 500 km. The rocks on the land package contain banded iron formation and pods of serpentinized ultramafic rocks similar to those found within Manitoba’s Thompson nickel belt in terms of age, structure, geochemistry and petrography.
The initial discovery at Ammassalik was the result of a chip-sampling program on the deeply weathered surface of a mineralized outcrop. The sampling yielded average grades of 1% nickel and 0.3% copper as well as significant quantities of platinum group metals, gold and silver.
Since that discovery, geophysics has identified a trail of ultramafic pods over a distance of 2.5 km between two mineralized outcrops. Field observations have confirmed a second, thin layer of ultramafic pods at a higher level within the stratigraphy and initial field work has traced nickel-bearing massive sulphide boulders in scree for over 9 km along strike.
Inco signed its first option agreement with Diamond Fields in June. The agreement grants Inco the option to earn 65% in the Ammassalik Island land package by spending up to US$3 million before the end of 2008.
The second agreement, signed in August, is more complicated. It allows Inco to earn a 51% interest in 160 sq. km of a 410-sq-km property Diamond Fields holds as part of a joint venture with
Greenland is the world’s largest island, but 85% of it is covered by ice. A thin ribbon around the edge of the island remains ice-free but highly variable in terms of climate, landscape and geology. Most of the country’s several thousand residents are clustered on the west side of Greenland, where ships can operate up to six months of the year. On the eastern coast, where the Diamond Fields property is located, severe ice conditions limit the navigation season to two months.
The country has both ample mineral potential and legislation that encourages exploration and mining. A one-stop system of administering mining interests streamlines the application and operating process.
Diamond Fields, which dropped its nickel holdings in western Greenland earlier this year, recently released its financial results for the year ended June 30, 2005. The company reported a net loss of $3.8 million (6 per share) on revenue of $5.39 million from the sale of diamonds from its Luderitz sea diamond concession.
Last year, Diamond Fields operated under a joint venture that recovered 31,910 carats from the marine concession during the period June-October 2004. The company resumed mining in June after purchasing its own mining vessel late last year.
But to the end of September 2005, Diamond Fields had recovered just 6,365 carats, citing poor weather and equipment problems. For the same period, the sale of three parcels of rough diamonds at an average price of US$194 per carat yielded gross proceeds of US$961,000.
Diamond Fields is now pursuing a listing on the London Stock Exchange’s Alternative Investment Market (AIM) is order to pay off debts related to the ship purchase and finance its business plan, including the potential acquisition of a second marine mining ship. Shares recently traded at 24 in a 52-week range of 22-58 on the Toronto Stock Exchange.
Ultimately, the company hopes to use cash flow from its diamond operations to fund exploration projects such as Ammassalik Island.
— The author is a freelance writer specializing in mining issues, and principal of Toronto-based GeoPen Communications (www.geopen.com).
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