Pure Gold and De Beers ink “High Arctic” diamond deal

Vancouver – With a new president at the helm and a financing in the works, Pure Gold Minerals (PUG-T) has signed an agreement with De Beers Canada to earn up to an 85% working interest in a portfolio of six diamond projects in the High Arctic region of Nunavut.

The Baffin Island, Eden Point, Muskox Hill, Chartrand Lake, Byron Bay and Mount Pelly properties collectively comprise 10.8 million hectares. The core projects cover parts of Baffin Island, all of Prince of Wales Island, and all the open areas of Devon Island.

The option agreement calls for Pure Gold to spend $5 million on exploration each year, starting in 2006 through 2008. The junior must also issue De Beers 7.5 million of its shares upon formal approval of the agreement, and a further 5 million shares on each of the first and second anniversaries, assuming it elects to continue the option.

De Beers has agreed to acquire, through a private placement, 6 million units of Pure Gold at $0.10 per unit to fund the initial year’s exploration at the properties. De Beers can extend the option for several more years under similar terms (based on the market price at the time), and also has back-in rights to acquire up to a 70% interest.

Baffin Island is the most advanced property. De Beers has spent more than $16 million on exploration and considers it one of its most prospective projects in northern Canada. Pure Gold plans to spend at least half its $5-million commitment to fund ongoing exploration, with programs operated by De Beers. Past work has revealed numerous well-defined kimberlite-boulder trains, while till sampling has returned “highly prospective” mineral chemistry results. A total of 940 micro-diamonds were recovered from analyses of 11 separate pieces (348.8 kg) of kimberlite float. Results are awaited from a further 480 kg collected from four other boulder trains.

The 2006 program at Baffin Island will include follow-up geophysics and drilling of a kimberlite dyke discovered late in 2005. The dyke is reported to have “highly prospective” mineral chemistry. Prospecting and mapping of the kimberlite-boulder trains are also planned, along with geophysical and geochemical programs to locate the source of the kimberlite-boulder glacial dispersion trains.

Other priority projects are Muskox Hill on Prince of Wales Island, and Eden Point on Devon Island, both acquired by De Beers based on kimberlite indicator mineral results from stream-sediment samples collected more than 20 years ago. More recently, De Beers identified positive kimberlite indicator mineral results and targets that will be further tested in ongoing exploration programs.

Gordon Keevil has replaced Donald Sheldon as president of Pure Gold, though Sheldon will remain a director. The company has also arranged a “best efforts” private placement for up to $8.4 million, subject to shareholder and other approvals expected by early July of this year.