Chance of Alaska diamonds not so remote?

Where has never been a diamond mine in Alaska, but that may change if Golconda Resources has anything to do with it. The Calgary-based junior, in partnership with Shear Minerals and Shulin Lake Mining, is exploring for diamonds at the Shulin Lake property in central Alaska.

Diamonds have been found across the border in Nunavut and Northwest Territories. But in Canada, diamonds are brought to the surface in kimberlite pipes, igneous structures that rise due to their high temperature and the extremely high pressures that exist deep in the Earth. Kimberlite mainly occurs in the stable cores of the continent, not in mountain chains.

Explorers looking for diamonds in Alaska, Washington and California are not expecting to find kimberlite, but the source of the diamonds they have been finding may be lamproite, another type of igneous rock.

Golconda recently recovered a white, transparent diamond fragment (0.46 by 0.26 by 0.14 millimeters) from a Shulin Lake drill hole.

The company sent nine samples from the drilling of three different magnetic anomalies to Ontario-based SGS Lakefield Research for analysis. Golconda hopes that one of the three magnetic anomalies will be the center of volcanic activity, company President Guenter Liedtke told Mining News.

The first holes that Golconda drilled on the south side of Peters Creek produced a mixture of volcanic material, sand and debris washing down from the Alaska Range, Liedtke said.

"Last year we finally found that the material consisted nearly exclusively of angular little grains that had not been transported far, so we knew we were very close. My guess is we're within one or two miles of the source. The question is, which direction to go in, so we went back to the magnetic survey. We're figuring out where to drill at the moment."

Placer mining previously in area

Indicator minerals that have turned up in the Shulin Lake area include chromite and purple garnet. Shear leased the property in 1999, but decided to focus on its big kimberlite discoveries in Canada. Golconda now has a 51 percent interest in Shulin Lake, with Shear owning 9.2 percent and Shulin Lake Mining 39.8 percent.

"This is an out-of-the-box type target, and Golconda has the right kind of experience for it," Pamela Strand, president and CEO of Shear, told Mining News.

Liedtke formed Golconda in 1986, having previously worked in uranium mining in South Africa and his native Germany. The company, which mainly explores for gold, has also been exploring for diamonds in California and Idaho.

Canada third in world for diamonds

Liedtke was not involved with diamond mining in South Africa. "In South Africa everything was controlled by De Beers, exploration was compartmentalized," he said. "You never found out the results from your samples, because someone else would take over. It was very boring work, it did not interest me."

In the last decade Canada has cut into De Beers' share of the market. The company now controls less than 50 percent of the world's known diamond reserves. In third place after Russia and Botswana, Canada has surpassed South Africa in terms of diamond production by value.

"Canadian diamonds are extremely high quality," Strand said. "They're beautiful when they're cut, internally flawless and completely colorless."

At Shulin Lake the grade and size of the diamonds is impossible to predict without locating their source, because Golconda is finding splinters from larger diamonds, rather than micro-diamonds. "The splinters are all from clear, white diamonds, which is what you want to find," Liedtke said. "These have the highest value."

These kinds of diamonds have also been found in Australia and Borneo, where they are placer mined in significant quantities, but their source has not been located.

Golconda has spent approximately C$1 million so far on the Shulin Lake project. "The amount of indicator minerals that I ran across since 1998 or so would indicate that the system seems to be very large," Liedtke said. "The reward compensates for the risk." (One diamond sample costs about $1,000 and takes six to 12 months to analyze, compared with $10-$20 and two days for a gold sample.)

Strand agrees that exploring in Alaska could pay off. "Fifteen years ago they were laughing at people looking for diamonds in Canada," she said. "If you can find an economic diamond mine, the rewards are huge. Two mines in Canada will have a revenue of C$25 billion over a 25-year mine life; they cost $1 billion to build, and their capital costs are paid back after three years. They are money-making machines."