Canadians search in secret for first diamond producer

It has been likened to buying a billion dollar lottery ticket — the odds are sky high but the rewards could be just as rich.

Even though the history of diamond exploration in this country doesn’t support the theory, a number of Canadian geologists are convinced they will reap the commercial returns that Canada’s first diamond mine would bring.

“The thing that keeps people excited is that they know they are there, it is just a question of when they are going to be found,” said Ed Godin, president of Continental Precious Minerals (ME). This company plans to spend $3.5 million by 1990 in a joint venture with BP Resources Canada in a bid to be the first commercial diamond producer north of the 49th parallel.

A number of other Canadian firms including Lac Minerals (TSE), Aur Resources (TSE) and De Beers’ subsidiary Monopros Canada are among other Canadian companies spending significant amounts of money to hunt for diamonds. Several have been working at it steadily for a number of years.

Although their efforts remain a closely held secret, most are believed to be concentrating their efforts in the James Bay Lowland area north of Timmins, Ont., where the kimberlitic host rocks are already known to exist. University students

Monopros Canada, for example, employed a number of University of Toronto students during the summer to look for gems near Pickle Lake, Ont. Toronto-based Aur Resources, which has tentatively agreed to finance the development of Glencairn Explorations’ (ASE) Brazilian diamond deposit, is looking for diamonds in the Canadian Shield. But Aur Chairman Jim Gill refused to say exactly where.

Lac’s vice-president exploration, Bob Valliant said his company is also looking for diamonds in Ontario but he too declined to be specific on location. “It’s a very competitive business,” he said.

Similar geologically to regions in South Africa and Russia which support the world’s largest diamond mines, James Bay is thought to be at the apex of a fan formed by glacial transport paths along which diamonds were carried by continental ice sheets million of years ago. Surveys conducted by Selco Exploration in the 1960s, the Canadian Rock Company and the Ontario Division of Mines suggest that kimberlite source rocks (which are the primary source of diamonds) are likely to occur in an anomaly that extends across the James Bay Lowland area from Chapleau to Moosonee.

But if any of the companies currently looking for a diamond “mother lode” are going to be successful, the price is likely to be high and the odds long. Economic quantities

Only 1% of all known kimberlites contain diamonds in economic quantities, wrote Lac Minerals consultant Joe Brummer in an article titled “Diamonds in Canada.”

While diamond discoveries have been reported this century in Peterborough, Ont. and South Porcupine, a number of companies, including De Beers, BP and Dow Chemical Co., have undertaken diamond exploration in various parts of the United States but with no commercial success to date. Not one of the companies currently looking for diamonds in Canada have been able to announce a significant find.

Even if they are successful, the technical and marketing expertise needed to refine and sell diamonds profitably means that successful exploration companies must be associated in some way with diamond giants like De Beers, said Godin.

The recovery process is complicated by the fact that no two diamonds have the same value, he said. “The value placed on a diamond can range from $500 to $500,000 depending on clarity, color and shape,” he said.

Nevertheless, the reward to the discoverer of a commercial deposit could be very high, said Godin. The October stock market crash had little or no effect on the demand for diamonds which are currently trading at about $110(US) per carat. Top quality

On the contrary, the market recently reported a shortage of large, top quality diamonds for the first time in many years.

The supply-demand equation suggests that the recent upward momentum of prices will be maintained, barring any major recessionary tends in the world economy, according to a special report on diamonds published by The Economist Magazine.

That may explain why revenues of $400 million from the huge Orapa diamond mine in Botswana were almost double the $201 million in revenues reported by Hemlo Gold Mines (TSE), operator of one of Canada’s largest gold producers.

Diamond explorers tend to be secretive about their activities because of the nature of diamond exploration. “Companies looking for diamonds usually take large areas and sample them without necessarily acquiring any ground, said Godin who is prospecting an area which encompasses 100,000 acres.

The basic exploration approach is to look for minerals associated with the two basic host rocks — kimberlites and lamporites — and trace them back to source. Exploration companies attempt to pinpoint the location of the kimberlites with large scale aeromagnetics before acquiring any ground. Preliminary work “You don’t want to acquire any ground until you have done the preliminary work because you may end up with land that isn’t associ ated with areas that you are interested in,” said Gill.

As a result, diamond exploration companies are expected to remain tight lipped about their activities until a major discovery is announced.