Tenby property find — Colored microdiamonds spur investor

The discovery of tiny colored stones in the Lac de Gras area of the Northwest Territories has spawned a new surge of investor interest in the diamond exploration game.

After joint venture partners Aber Resources (TSE), Commonwealth Gold (VSE) and SouthernEra Resources (TSE) released drill results from one of seven kimberlites on their Tenby ground, shares of many of the area players raced to new highs on big volumes.

SouthernEra almost doubled to $4.25 before slipping back to $3.40 by presstime.

“The long and short of it is that we are finding diamondiferous kimberlites outside the Dia Met ground,” says Andrew Muir of Pacific International. “The game is on and everyone has a chance.”

Of seven core samples taken from the 400-ft. hole, two 8-kg samples returned a total of five microdiamonds (diamonds with a diameter of less than 0.5 mm). Three of the diamonds, including at least one crystal, are yellow. Because they are relatively rare, colored stones or “fancies” — including pinks, blues and yellows — can sell for up to hundreds of thousands of dollars per carat. For example, the Argyle mine in Australia would be a marginal industrial diamond operation but for the odd pink stone it produces and sells at a premium.

“Colored stones can make marginal deposits profitable, and they can make profitable mines wildly so,” says Robert Bishop in a recent report titled Diamonds in North America: Point Lake and Beyond.

Slight impurities and chemical inclusions give the stones their color. Yellow stones, for instance, may contain uranium and iron oxide. Pink stones are tinted by manganese.

“This probably solves the mystery of Point Lake’s rumored colored fancy stones,” says SouthernEra President Christopher Jennings. “They (the Dia Met-BHP joint venture) will probably also have canary yellow diamonds.” The discovery of octahedral crystals is also encouraging, Jennings says, because it suggests that the kimberlite host rock provided a favorable environment for diamond preservation. Often, diamonds are resorbed (their original crystal structure destroyed) as kimberlite ascends to surface. But Aber’s release warns that the samples “are far too small to interpret any reliable statistical or economic information.” Results from the remainder of the pipes are pending.

Drilling and sampling of this kimberlite and two adjacent targets will resume in early spring. Kennecott Canada has the right to earn 60% of the interest held by Aber (25%) and SouthernEra (50%) in the property.

Elsewhere, First Marathon Securities has agreed to purchase, on behalf of a group of European investors, four million units of Lytton Minerals (TSE) at $1.25 per unit and two million common shares of Aber at $2.35 per share. Each Lytton unit consists of one share and one half a warrant to purchase an additional share at $2.15 before June 1, 1993.

“First Marathon has tremendous power,” remarked one analyst. “This play is building.”