Dollars add glitter to diamond outlook

Prospects for Nunavut emerging as another major center of diamond production in Canada are rising right along with prices and worldwide demand for the sparkly stones, thanks to small group of dedicated explorers working across the northern territory.

Peregrine Diamonds Ltd. and BHP Billiton are reporting ongoing exploration success in eastern Nunavut, while Shear Diamonds Ltd. is mounting a new effort to rehabilitate the closed Jericho Diamond Mine in the west. They and other explorers, including Diamonds North Resources Ltd., Stornoway Diamond Corp. and North Arrow Minerals Inc., are also chipping away at various diamond prospects in between.

Some C$26.6 million was spent on 15 diamond exploration projects in the northern territory in 2010, and another C$28.1 million anticipated in 2011, which is nearly 12 percent of the C$322.8 million in total mineral exploration spending expected in Nunavut this year, according to the Mineral Resources Nunavut Regional Office of Indian and Northern Affairs Canada. The outlay represents

Promising Chidliak

Peregrine, one of the region's most active explorers, has five diamond exploration projects in Nunavut and another one in Northwest Territories, including three - Nanuq, Cumberland and Qilaq - in which it holds a 100 percent interest.

Since 2007, the junior has discovered two new Canadian diamond districts, Chidliak and Qilaq on southern Baffin Island and Nanuq in the eastern Arctic region.

In addition, Peregrine has established an independent NI 43-101-qualified, indicated mineral resource of 18.2 million carats in the DO-27 kimberlite located 27 kilometers, or 18 miles, from the Diavik Diamond Mine in Northwest Territories and controls early-stage exploration projects in the Northwest Territories, Nunavut and Manitoba.

Peregrine is currently focused on exploring the 8,589-square-kilometer, or 3,316-square-mile, Chidliak Project which it operates under a 49/51 percent joint venture with BHP Billiton, which has funded the venture in recent years. At Chidliak, which is located about 120 kilometers, or 74 miles, northeast of Iqaluit, Peregrine has discovered 50 kimberlites since 2008; seven of 35 tested so far have economic diamond potential.

Peter Holmes, Peregrine's vice president of exploration, told an audience at the Nunavut Mining Symposium in Iqaluit in April that the Chidliak project compares favorably at this point with the early days of Ekati and Diavik, Canada's oldest and largest diamond mines.

Peregrine started work March 15 at Chidliak on a C$17.7 million program for 2011 in which it plans to drill 11,000 meters; conduct a 12,000-line-kilometer airborne survey and 1,100 line kilometers of ground geophysics covering about 50 grids; collect 400 follow-up till samples and a 20-metric ton mini-bulk sample from the CH-28 kimberlite; and evaluate another 100 anomalies for prospecting potential.

It currently has three drill rigs on site.

The junior also intends to prepare for bulk sampling at CH-6, CH-7 and possibly other kimberlites in 2012 with a large reverse circulation rig.

Peregrine needs to determine bulk sampling requirements to begin the permitting process for the project.

The explorer began its 2011 drill program at Anomaly 440, which has a distinctive magnetic signature under a small lake close to CH-28.

Of the 50 known kimberlites at Chidliak, Holmes said 24 were discovered by prospecting and 26 by drilling. Of the seven kimberlites with economic potential, he said four cover at least 1 hectare, or about 2.5 acres, in surface area and high-quality diamonds have been recovered from them. CH-31 is larger than 5 hectares, or 12.4 acres, with a population of coarse diamonds. It also demonstrates bulk tonnage potential.

Holmes also predicted that more kimberlites will be discovered at Chidliak in 2011.

Jericho rebirth

Shear reported the start of its spring drilling program May 5 at the Jericho mine project located 420 kilometers, or 260 miles, northeast of Yellowknife. The junior also owns a portfolio of various diamond properties containing more than 120 kimberlites, including the advanced 242,817-hectare, or 600,000-acre, Churchill Project in eastern Nunavut and the 45,326-hectare, or 112,000-acre, Great Bear Project, which straddles the Northwest Territories-Nunavut border.

Shear purchased the defunct diamond mine in August for the bargain basement price of C$6.6 million. Jericho closed in 2008 after less than two years of production. The purchase included a C$200 million modern facility and 2,000-metric-ton-per-day processing plant at the mine site built by previous owner Tahera Diamond Corp.

Shear has earmarked C$4.6 million for phase 1 of a 2011 work plan at Jericho that began Feb. 28 and will continue through June.

The plan calls for about 5,000 meters of core drilling to test 10 new exploration targets, up to 12 angled exploration holes to test for additional tonnage and to firm up the volume model in the Jericho Kimberlite Complex and up to 11 vertical pilot holes (2,500 meters) for geological modeling. In addition, Shear planned to carry out till sampling, prospecting and structural interpretation on key targets.

The junior said the first drill hole it drilled this spring within the Jericho open pit into the Jericho Kimberlite Complex intersected more kimberlite than expected, an encouraging early sign.

Jericho has an existing resource of 1.88 million and 1.13 million carats of diamonds in the indicated and inferred categories, respectively.

In addition, Shear has other properties with 120 known kimberlites in various stages of development, many of them in Nunavut.

Shear Chairman Julie Lassonde and President and CEO Pamela Strand told a Nunavut Mining Symposium audience in April that the company's key priorities in 2011 are to prove up and expand the current diamond resource at Jericho, explore for new nearby diamondiferous kimberlites, rehabilitate the existing mill and assess potential stockpile processing, meet permitting and environment requirements, including renewal of the mine's Type A water license in 2012 and contemplate an updated NI 43-101 resource estimate and preliminary economic assessment for the first quarter of 2012.

Encouraging early drilling

The first drill hole (11JER-01) was drilled from the 450-meter bench into the southern lobe, reaching a final depth of 244.5 meters at a -65-degree inclination. The kimberlite contact was intercepted 27 meters before expected (according to the existing geological model), effectively increasing the outer contact by 10 meters in the horizontal plane.

Shear said drilling is underway on a second hole from the ice surface at the bottom of the open pit to test a contact in the Central Lobe on the west side of the kimberlite.

"The goal for 2011 is to refine and augment the existing geological model for the Jericho Kimberlite Complex as well as discover new kimberlites nearby," Strand said in a statement. "The results from our first hole are extremely encouraging. Obtaining this new information from the delineation program will increase Shear's confidence in the ongoing evaluation work on the Jericho Kimberlite Complex."

In addition to developing a better geological model, Shear said it will focus on achieving higher diamond recovery by improving the mine's milling process. During its brief stint of production between 2006 and 2008, the Jericho mine was plagued with an extraordinarily low diamond recovery rate, averaging 0.62 carats per metric ton during the two-year period. That was about half the expected recovery rate of 1.2-1.3 cpt.

Once the delineation drilling is complete and a final water license is issued for the project, Shear said the drill will be moved to claims surrounding the mine known as the Carat Property to test priority exploration targets identified in ground magnetic and horizontal loop electromagnetic surveys currently underway.

To date, a total of 296 line-kilometers of magnetic surveys over 27 targets, and 60 line-kilometers of HLEM surveys over 11 targets have been completed. Drill target selection is ongoing, with lake-based targets a priority for the remainder of the spring season.

Shear also reported that crews worked throughout the first three months of 2011 to open the Jericho camp. The renovation included work on heating the site, getting the water treatment and sewage plant working, and ensuring that all facilities at the site were in good working condition. The camp is now fully functional with heat and potable running water throughout and the kitchen is in good working order, the junior said. To conserve fuel, and to maximize use of the facility, portions of it were segregated to accommodate Shear's small current crew, some 20 to 50 staff members. The junior also said four Hercules aircraft hauled in supplies, equipment and the core drill.

Additional activities at Jericho this year include sampling for the aquatics effects monitoring program, ground geophysical surveying, site surveying and community consultations.

Effective innovation

Diamonds North Resources Ltd. is another explorer reporting progress at its huge Amaruk Property located in the Pelly Bay Diamond District of eastern Nunavut.

Using a pipeline approach, the company is exploring more than 404,695 hectares, or 1 million acres, of ground in the region and has identified 29 kimberlites and more than 300 geophysical targets to test in the central block of Amaruk, which spans more than 80 kilometers, or 50 miles. The most striking characteristic of the area is the high proportion of Ekati-Diavik quality G10 garnets.

In order to reduce costs and accelerate the drilling schedule, Diamonds North uses reconnaissance percussion drilling as a "first-pass" discovery tool to verify the presence of kimberlites and determine if they contain diamonds.

This exploration approach has enabled Diamonds North to test targets rapidly and cost effectively.

The percussion drill works at about one-fifth the cost and one-third the time of a traditional core drill.

The diamond results from percussion drill samples of each new kimberlite are then used to prioritize discoveries for follow-up bulk sampling.

The method has enabled the junior to identify kimberlite bodies efficiently and advance the discoveries with the greatest potential as quickly as possible.

In March, the junior said it has identified several new kimberlite targets on the Amaruk property using electro-magnetic airborne data and plans for evaluating this new generation of prospective targets are underway.

Diamonds North said it is used the innovative EM geophysical method to penetrate the conductive overburden in the region. This targeting led to the identification of sizable kimberlite targets (greater than 400 meters in diameter) with kimberlite indicator mineral support.

The potential of the EM method also prompted Indicator Minerals Inc. to partner with Diamonds North on exploration of the adjacent Barrow Property and provides Diamonds North with the opportunity to expand the application of the targeting system over a larger prospective region.

Diamonds North entered into the option agreement in which it may earn a 60 percent interest in the diamond rights on the Barrow property by spending C$2 million over five years. The junior will serve as the operator on the property during the earn-in period and will remain the operator in the joint venture, provided it holds the largest single interest in the property.

"For the first time, we have identified priority EM targets on Amaruk. I believe this could be a significant breakthrough for discovering economic kimberlites in the region. It should be noted that the kimberlites mined at the Ekati and Diavik Diamond Mines are EM conductors, and we are eager to test this new range of targets on Amaruk and Barrow," said Diamonds North President and CEO Mark Kolebaba in a statement.

Previously, interpretation of airborne EM over many parts of the Amaruk and the Barrow property has been ineffective as a targeting tool for kimberlite due to the presence of conductive overburden.

Until recently, the only effective geophysical kimberlite targeting tool available in the area has been through the use of magnetic data. Targeting with magnetics has lead to the discovery of 25 kimberlites and drilling has confirmed that Amaruk is a diamondiferous kimberlite field.

Hundreds of untested anomalies and numerous kimberlite indicator mineral trains remain unresolved, offering high potential for additional kimberlite discoveries on the properties.

Diamonds North said it intends to apply this new innovative method of EM to other parts of the Amaruk and Barrow properties targeting crater facies kimberlites. Kimberlite indicator mineral trains with highly prospective chemistry remain unresolved across the property. Re-interpretation of the indicator mineral data is currently underway.

Sizing up Hammer

North Arrow May 25 reported plans for a $1.3 million exploration drill program at the Hammer Property located 500 kilometers, or 310 miles, north of Yellowknife within the Coronation Gulf/North Slave Diamond District of Nunavut.

The Hammer property hosts the Hammer kimberlite discovered by prospecting in July 2009. North Arrow and Stornoway, the operator, are exploring the property in a 25/75 joint venture. First identified as a topographic low anomaly at the head of a kimberlitic indicator mineral train with strong diamond inclusion chemistry, the Hammer kimberlite has not yet been drill tested.

In 2009 weathered kimberlite breccia bedrock associated with the topographic low was confirmed within hand-dug pits. In addition there are numerous scattered kimberlite occurrences of surface float and frost heaved kimberlite fragments, and a single micro-diamond was recovered from a 6-kilogram hand sample.

While the true nature and size of the body is not yet known, a ground geophysical survey completed in the fall of 2010 has confirmed a significant magnetic response associated with the topographic feature, which measures 225 meters long by between 15 meters and 100 meters wide and has a surface expression of about 1 hectare, or 2.47 acres.

North Arrow said the 2011 drill program will be designed to delineate its size and diamond content. The goal of the program will be to delineate the true size and shape of the body, test for multiple phases of kimberlite, and collect sufficient samples to permit an estimate of diamond content. All required permits are either in place, or expected shortly, and mobilization is planned for the first week of June.