LETTERS TO THE EDITOR — Ignore Sarnoff’s diamond warning,

I feel that The Northern Miner is the logical spot to comment on the article in the Gold Stock Advisory by Paul Sarnoff, dated July 7.

For those who did not read “Canadian Diamond Stocks Can Be Dangerous to Your Wealth,” suffice it to say it was an unknowledgeable, poorly researched article inspired by some agenda unknown to me.

Sarnoff was one of the original silver bulls and many years ago, when the Earth was young, I attended one of his lectures on silver in Spokane, Wash. This guru of silver was calling for high silver prices and increased demand. He closed the session with the comment: “Wait till the millions of Chinese start snapping photos.” Much impressed, I travelled back to my camp in the mountains and moiled for silver.

The next year I travelled back to the Sarnoff temple and heard the same thing. Well, it all takes time, says I. But even decades later, I hear, again from Sarnoff: “Wait till the masses in Communist China start using Kodak film.” Well, this is the decade of high-resolution electronic images. I began to suspect that my path was being directed by an armchair expert. Now I find Mr. Sarnoff is a diamond expert. So I read this report that goes out to what must be an unusual audience.

Agreed, the diamond rush is generating a speculative fever and the time is coming when only a few companies with diamond-bearing pipes will be working. That is the future.

But to compare kimberlite prospects to lamproites, as Sarnoff does, is akin to comparing apples to oranges. The diamond trade classifies the production from the Argyle AK 1 Pipe (in Australia) as “colored stones,” not diamonds. A true diamond mine, producing colorless, flawless, well-shaped diamonds of good size, is a miracle of nature and one of the most valuable of the Earth’s treasures.

It should be pointed out that RTZ, BHP and De Beers are the biggest players in the Lac de Gras diamond camp and the amount of resources being poured into the play by these huge corporations is truly amazing. Some of us have been there and have seen these things.

The diamond field is serviced by a good road from January to April and the area is well serviced by landing areas for planes. Nobody flies parts in with a helicopter. It is a simple matter to scrape off a frozen lake for an airstrip or make winter roads to mine sites. The governments of the Northwest Territories bend over backwards to clear the way for development. Dia Met, DHK and others began drilling in the winter and are drilling now. “The harshest climate on Earth,” as Sarnoff puts it in his newsletter, allows 24 hours, seven days per week drilling all year. Try doing that in the jungles and swamps elsewhere in the world or in areas with weird people running around with AK-47 assault rifles.

On the consumption side, diamond demand is up, diamond prices are up and the Las Vegas Jewelry Show this spring was the busiest ever.

On the supply side, many diamond mines are near exhaustion. The AK 1 Pipe will be closed in a decade. To date, the massive exploration for additional lamproite reserves has not produced a replacement, and I wonder if the market would accept a further cascade of small yellow-brown stones. The large, beautiful champagnes and cognacs of the Argyle mine sell well but are a small percentage of production.

It is confusing for the investor not to be able to see the commodity being sought. The reason for this is that a good diamond grade is one part diamond to millions of parts of rock. Because of this extreme nugget effect, even a large test does not give forth sacks of diamonds.

Luckily, the minerals associated with diamonds are common in the Lac de Gras camp and these tell the miner a story. In the Lac de Gras diamond camp, certain pipes contain minerals indicating extremely rich diamond pipes. Do these minerals tell the true story? Do you ever wonder why the three largest resource companies in the world are there? Whom should the investor believe? George Stewart

Manager, DHK Resources Greenwood, B.C.