Diamond explorer Rhonda (RDM-V) and the Canadian exploration division of De Beers have agreed to suspend litigation proceedings concerning the Knife Lake project in Nunavut for ninety days while they attempt to resolve the outstanding issues on a “without prejudice” basis.
The two have been unable to come to terms over the signing of a joint-venture agreement on the project.
The pair has been operating under the terms of a letter of understanding dated April 2000 that outlined the basic terms by which De Beers could earn a 70% interest in the property by spending $10 million over six years. Rhonda’s argued that a formal agreement was never signed.
The main sticking point at Knife Lake appears to be the inclusion of an agreement pertaining to the sale and marketing of diamonds, an agreement Rhonda said was never mentioned in the letter of understanding
De Beers discovered a diamond-bearing kimberlite pipe on the 10-sq.-km Knife property, in the Coronation Gulf district, in May 2000 while drill-testing a coinciding geophysical and indicator mineral anomaly. De Beers eventually recovered 208 microdiamonds and nine macros from 397 kg of tested kimberlite material (a macro is here defined as exceeding 0.5 mm in one dimension). The 217 stones weighed a total of 0.128 carat.
De Beers returned to the Knife property in the spring of 2001 and collected a 9-tonne mini-bulk sample from a further six delineation holes. Based on the kimberlite intercepts, the pipe is estimated to measure 390 by 230 metres at surface.
De Beers delivered the results of the 9-tonne sample, part of which was analyzed for commercial-size diamonds, to Rhonda in November 2001. On the advice of its lawyers, Rhonda neither opened nor reviewed those results while it continued to negotiate a definitive joint-venture agreement. Rhonda says it has since returned the information to De Beers.
Dismayed by Rhonda’s actions, De Beers launched legal proceedings in the Ontario Superior Court of Justice seeking declarations as to the existence of the joint-venture agreement, and that it has earned a 51% stake in the Knife Lake property. Alston is uncertain about the exact amount De Beers has spent on the Knife project to date but believed it to be around $2 million.
Shares in Rhonda were off 2 or more than 6% in afternoon trade in Vancouver on Mar. 4.
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