Teck teams with junior in diamond rush

Indicator Minerals Inc. is that most fortunate of Canadian junior exploration companies, one with a prospect so enticing that a major has signed on to do some heavy lifting.

The three-year-old Vancouver, British Columbia-based venture is well into its third season of exploration, poring over more than 4 million acres of mineral claims in the Far North's Nunavut Territory in search of Canada's next big diamond discovery.

Indicator's most promising prospect to date is the Darby property, located on nearly 700,000 acres of claims about 72 miles southwest of Kugaaruk, Nunavut. In 2004, the junior acquired an 80 percent interest in Darby from well-known diamond seekers Hunter Exploration Group, which retained a 20 percent share.

Indicator Minerals President and CEO Bruce Counts said the Darby claims as well as another Nunavut prospect that the junior purchased called Barrow looked more compelling than most in Hunter Exploration's sizable inventory and had good mineral chemistry.

Airborne geophysical surveys of both properties revealed significant signs of kimberlite, the rock formations that sometimes contain diamonds.

Last year, Indicator identified a field of kimberlites in the Darby property and took samples from five kimberlites. The company also said it counted 95 kimberlite floats, or rock fragments that could contain diamonds, at Darby. One kimberlite, in fact, has a surface area of some 28 acres, Counts said in an interview Aug. 20.

"It's pretty clear to us that there are more kimberlites there. Where you find one, you're going to find more," Counts said.

But not all kimberlites contain diamonds and not all diamond-bearing kimberlites are economic - one in 25 contains diamonds and one in 250 is economic, according to Indicator Minerals.

Exploration a challenge

"The challenge," said Counts, "is to find the one kimberlite in the field that's economic."

And Counts' opinion should count. He and other senior managers at Indicators Minerals are veterans of Canada's recent diamond rush.

A geophysicist by training, Counts worked for BHP Minerals Canada Ltd. in the 1990s, and was an integral member of the team responsible for the discovery and development of the huge Ekati Diamond Mine in the Northwest Territories. Ekati is Canada's first producing diamond mine.

Geologist Dave Kelsch, Indicator's vice president of exploration, played an integral role in the discovery and development of kimberlites that were incorporated into the Diavik Diamond Mine, the other big producing mine in the Northwest Territories.

Grant D. Lockhart, the other technical member of Indicator's management team, also played a key role in the discovery and development of Ekati.

"We're part of the first generation of diamond explorers in Canada," said Counts. In all, Indicator has nine employees, and most of them worked on earlier diamond projects.

Today, Canada has three producing diamond mines, two more in construction, and a sixth in the permitting process.

At the Darby property, Teck Cominco Ltd. has agreed to spend $14 million over four years to earn a 51 percent ownership interest in the project. The major also agreed to carry to production the remaining 29 percent interest held by Indicator Minerals on a project-loan basis as well as other considerations.

This year, Teck Cominco has undertaken an $8.5 million exploration program at Darby that is already yielding results.

Indicator Minerals announced Aug. 1 that the first hole drilled as a result of Teck's ongoing airborne geophysical survey intercepted kimberlite.

To date, 15 new targets have been tested by drilling in 2007 resulting in three new kimberlites and one lamprophyre being discovered. This brings the total number of kimberlites discovered on the Darby Project to eight. The 16,000-line-kilometer airborne geophysical survey was 90 percent complete Aug. 1, and more than 750 of a possible 1,200 planned heavy mineral samples had been collected. The remaining six to eight weeks of Teck's efforts were to focus on extending the Darby field by prospecting and drilling targets identified in the new airborne area.

"These discoveries reinforce our early belief that the kimberlite field at Darby covers a very large area and that our current land position is strategically positioned within Canada's newest kimberlite field," Counts said in a statement.

Diamond find excites explorers

At Barrow, meanwhile, Indicator Minerals is focusing on collecting more samples to identify targets for a new airborne geophysical survey this fall. The company is also continuing to explore the region, and is quite willing to go elsewhere in the world if an opportunity presents itself, he said.

Last year, a member of the Indicator exploration team found a 40-kilo boulder in a single occurrence sticking out of the ground on the Barrow property that returned 176 diamonds, including five larger stones.

"From an explorer's perspective, you get excited if you find one stone for every kilo of kimberlite," Counts said.

So far, Indicator has identified 11 targets at Barrow, about half of them underwater, which means they will be explored this winter. Six of the targets have the right geophysical anomalies to be the source of that diamond-rich boulder.

Counts said his team will do some prospecting this fall until the drill arrives in December when they will begin taking samples.

Barrow is on 44 mineral claims less than 10 miles from Kugaaruk, formerly known as Pelly Bay, on the shore of the Gulf of Boothia in northeastern Canada. The 113,630-acre property has easy access to a deepwater port, airstrip and other important infrastructure, Counts said.

Barrow's accessibility should greatly improve its economics if a mine is developed on the property.

Counts said he is excited about both Darby and Barrow's prospects for yielding commercial discoveries of diamonds, but he has learned that every exploration venture is different.

"At Ekati, the discovery was as much good luck as it was good science," he said. "You have to keep an open mind, be flexible and use a multidisciplined approach."