THE DIAMOND PAGE — DHK merger back on track as three juniors

The three junior companies that jointly own DHK Resources have agreed to begin negotiations for a merger. The wheels were set in motion by way of a letter-of-intent agreement signed by Horseshoe Gold Mining (ASE), Dentonia Resources (VSE) and Kettle River Resources (VSE).

The combined company would have a 35% interest in the Tli Kwi Cho (DO-27) kimberlite pipe being bulk-sampled by Kennecott Canada in the Lac de Gras region of the Northwest Territories. This interest would be carried through to production, should Kennecott decide to start mining diamonds from the pipe. A definitive agreement is expected within weeks. The proposed merger will involve an exchange of shares, with the new company to be named DHK Diamonds. The proposed ratio is one share of the new company for each outstanding share of Dentonia and Horseshoe, and two shares for each outstanding share of Kettle River.

The board of DHK diamonds will include directors currently involved in each of the three companies. But the parties intend to seek a top-ranking executive to head the new company, along with a new chief financial officer. The merger is expected to reduce overall costs and improve financing opportunities.

Elsewhere in the Northwest Territories

* Kennecott Canada is busy on a summer work program on claims in the Lac de Gras region; these are held by another group of juniors, collectively known as ATW Resources. ATW is owned 40% by Almaden Resources (VSE), 20% by Troymin Resources (ASE) and 40% by Williams Creek Explorations (VSE). Kennecott is in the second year of an option to earn a 65% interest in the ATW property, with ATW carried through to development of a first diamond mine. A kimberlite has already been discovered on the property, but a 67-kg sample of core from this pipe did not contain any diamonds.

Till sampling is currently focusing on ground between this kimberlite occurrence and those discovered on Aber Resources’ (TSE) ground about 13 km north of the ATW block’s northern boundary.

* Layfield Resources (VSE) is hopeful that its summer program will generate some excitement. The property lies on the west side of McKay Lake near Lac de Gras, fewer than 32 km southwest of the most recently announced kimberlites by Aber.

A preliminary geophysical and geochemical program resulted in the identification of 41 anomalies. A followup program of geophysical and geochemical work will be carried out in the next several weeks. This program is aimed at selecting targets to be drill-tested by late summer or early fall. Overseas

Diamonds are being recovered from a 5,000-sq.-metre bulk sample being collected by partners Solomon Resources (VSE) and Yellowjack Resources (VSE) on their MIGS II concession in Venezuela.

The juniors have reportedly recovered 364 diamonds totaling 159.09 carats from 1,658 sq. meters of material processed. About 77% are reported to be of gem quality, with evaluations showing an average price of US$187.31 per carat. The partners said recovery values averaged US$18.20 per sq. metre. Processing of the sample is continuing and more results are expected shortly. The partners are exploring several concessions in Venezuela where previous hand-mining of diamonds has taken place.