MINING MARKETS & INVESTMENT NEWS — QUERY — Alberta diamond play was triggered by Ashton

I would like to know more about the few diamond exploration companies active in Alberta, including Ashton, Montello and the others, as I am considering investing in the province’s diamond play. Could you provide me with a background summary of the play?

John Ruberto

St-Leonard, Que.

Despite the drilling success of Ashton Mining of Canada (ACA-T) on the Buffalo Hills joint venture project and Kennecott Canada Exploration on the Legend joint venture, the highly touted Alberta diamond play has been less than successful.

It was Ashton’s discovery of a diamond-bearing kimberlite field in the north-central part of the province that sparked a province-wide staking rush in 1997. At its height in early 1998, more than 50 junior exploration companies held some sort of position there, but the speculative play was marred by disappointment in 1998. Initial drilling programs by Lucero Resource (LCR-V), Meteor Minerals (MMI-A), Primero Industries (PMI-V) and Montello Resources (MEO-A) were all unsuccessful at locating new kimberlites.

Montello and partner Redwood Resources (RDW-A) later teamed up with Kennecott on the 1.5-million-acre Legend property in northeastern Alberta and had some success. The partners have discovered seven confirmed kimberlite bodies to date in a new field about 100 km northeast of Ashton’s kimberlites. A recent hole into an eighth body also intersected what is believed to be kimberlite.

More recently, Monopros, the Canadian exploration arm of De Beers Consolidated Mines (DBRS-Q) pulled out of a joint venture with Troymin Resources (TYR-A) following an unsuccessful drilling program on three targets in the Buffalo Hills region.

Clearly the biggest disappointment for the Alberta play came from mini-bulk sampling results from Ashton’s most promising pipes: K-14, K-91 and K-11. While the results show that the kimberlite pipes contain diamonds of commercial size, Ashton reported that the results were uneconomic.

The K-14 kimberlite yielded a 56.45-carat parcel of stones from a 479-tonne reverse-circulation (RC) drill sample, for an indicated grade of 11.78 carats per 100 tonnes. The two largest stones recovered weighed 0.9 and 0.88 carat. A 35.87-tonne drill sample of K-91, situated 2.3 km northwest of K-14, returned 4.56 carats of diamonds, indicating a preliminary grade of 12.72 carats per 100 tonnes. The two largest stones weighed 0.45 and 0.41 carat.

Kimberlite K-11 is one of a cluster of four kimberlites discovered in early 1998, about 30 km east of K-14. A 21.85-tonne drill sample of K-11 yielded 0.96 carat of stones, giving an indicated grade of 4.39 carats per 100 tonnes. The two largest diamonds recovered weighed 0.095 and 0.094 carat, with maximum dimensions of 2.7 and 3.6 mm.

Ashton has discovered 31 kimberlite bodies to date in the Buffalo Hills region of north-central Alberta, of which 16 are known to be diamondiferous. Microdiamond results are currently awaited for five of the most recent finds. The Buffalo Hills project is a joint venture between Ashton, Alberta Energy (AEC-T) and Pure Gold Minerals (PUG-T). On completion of the 1999 program, Ashton and Alberta Energy will each hold a 45% interest in the central 5.6-million-acre package of ground, with the remainder held by Pure Gold. On the much broader, 21.3-million-acre Cayo lands, Ashton and Alberta Energy will each have a 35% stake, leaving Pure Gold with 30%.

The discovery of kimberlites across a distance of 60 km provides an encouraging indication of widespread kimberlite occurrences, and Ashton is ever hopeful of the possibility of finding an economic diamond deposit. Working from a budgeted $7.4-million program in 1999, Ashton will continue with follow-up geophysical surveys and reconnaissance drilling to explore the potential of this new kimberlite province.

In the meantime, Kennecott has completed a winter drilling program on the Legend property. The company, a division of London-based Rio Tinto (RTP-N), says it will use the next few months to review the results to date and plan the next campaign. Of the eight kimberlites discovered on the Legend property, only the Phoenix kimberlite has been fully processed for microdiamonds; it yielded a previously reported 5 microdiamonds from 380 kg of drill core.

However, caustic fusion analysis of check samples representing about 10% of the core recovered from six of the other bodies proved to be barren, as did an initial 80 kg of core from the Roc kimberlite and 30 kg of sample from Dragon. Further results are pending.

Kennecott can earn a 60% interest in the Legend property block by spending $30 million on exploration over seven years, leaving Montello with a 28% interest and partner Redwood with 12%. So Far, Kennecott has spent about $1.8 million on the property.

Kennecott’s strategy has been to obtain a large inventory of separate kimberlite intercepts by drilling as many targets as possible. Buddy Doyle, exploration manager of the North American diamonds division of Kennecott, was previously quoted as saying: “The more kimberlite we intercept, the more we will increase our chances of an economic discovery and increase our understanding of this kimberlite field.”