Who will find the first Canadian diamond mine?

Several months have passed since 81 small diamonds were discovered in a kimberlite pipe 200 miles northeast of Yellowknife, N.W.T. In the meantime, more than 5,000 square miles have been staked in the Lac de Gras area, BHP-Utah Mines has launched a bulk-sampling program on the discovery pipe, and Christopher Jennings — a leader in diamond exploration — has circled the globe touting what he believes is North America’s most promising diamond prospect.

But the question on everybody’s mind is: who will find Canada’s first diamond mine?

Because kimberlite pipes occur in clusters of 10-40 spread over an area of 40 square miles or more, there’s a chance that the bonanza, if it exists at all, could lie outside the 850,000 acres carefully selected by partners Dia Met Minerals (VSE) and BHP.

Aeromagnetic surveys scheduled for this spring are designed to find all of the pipes in the cluster.

“In a diamondiferous field, many pipes have diamonds, but there is usually only one with economic grade,” says Jennings, who is consulting for area player Aber Resources (TSE). In Siberia, for example, 650 pipes host only eight mines. Worldwide, only 50-60 of the 3,000-plus known kimberlites have been economic.

Those odds are good enough for Monopros, the Canadian arm of diamond giant De Beers. Shortly after the Dia Met discovery, Monopros staked an estimated 2.7 million acres in the area. Others have followed suit, making Lac de Gras one of the biggest exploration plays ever recorded in North American history. Certainly Dia Met is leading the pack. Its land package on the lake’s north shore was chosen only after years of diamond exploration and analysis at the company’s laboratory in Kelowna, B.C. With the backing of mining giant BHP-Utah, it has the finances needed to carry out expensive, but critical, bulk-sampling programs. And, most importantly, it has diamonds on its property. Although those discovered to date are less than 0.8 inches (two millimetres) in diameter, some are of gem quality.

Newcomers to the area include a host of juniors: Almaden Resources (VSE), Argus Resources (ASE), Calco Resources (VSE), Dentonia Resources (VSE), Horseshoe Gold (VSE), Kettle River Resources (VSE), Troymin Resources (ASE) and Williams Creek Explorations (VSE).

Others, including Commonwealth Gold (VSE), Pure Gold Resources (TSE), Venturex Resources (VSE) and Westfort Petroleums (TSE), have signed agreements with Aber to complete a collective airborne survey. In return for doing the work, Aber will increase its interest in their claim blocks from 25% to 51%.

But only Monopros, through its parent De Beers, has access to the complete range of evaluation technology needed to distinguish an uneconomic pipe from a minable one at relatively little expense.

Refusal to share this knowledge has allowed De Beers to dominate the world’s diamond market, and shut out other senior companies that might otherwise have been active diamond explorers.

“You can always spot the Monopros geologists at a conference,” notes one observer. “They’re the ones without the name tags.”

But despite De Beers’ best efforts, diamond exploration techniques are slowly leaking out to the mining community. In 1991, four major diamond seminars were held in North and South America. For reference, the Geological Survey of Canada recently published an open file report specifically related to advanced evaluation technology.

Evaluation depends on several factors, particularly the presence of macrodiamonds and the mineral chemistry of the kimberlite. Having established a favorable mineral chemistry at Lac de Gras, the BHP-Dia Met joint venture is currently testing for larger stones with a 200-ton bulk sample. Expected to be completed this spring, the sample will also indicate the ratio of industrial to gem quality diamonds. Industrial diamonds, which can be made synthetically, sell for $1-3 per carat. Gem quality diamonds fetch at least 100 times that. Color is also an important factor — white, pink and blue stones are the most sought after.

To be considered economic, the pipe would need a grade of 0.5-0.9 carats per ton with a diamond quality of $50 per carat, estimates Andrew Muir of Pacific International Securities.

Jennings has worked all over the world as a diamond geologist, and at one time for De Beers. He is building his own data base for evaluation and is the main reason why, of all the junior players at Lac de Gras, analysts have given Aber the highest credibility rating.

Aber has been trading at about $1.30 per share, more than five times its 52-week low of 25 cents. The company has recently launched an airborne geophysical survey in preparation for ground follow-up this summer. The Gold Mining Stock Report also places Almaden and Horseshoe at the top of the list in terms of exposure to the play. The report points out that Almaden staked its 100,000 acres next to several diabase dyke swarms. The swarms suggest zones of crustal weakness which could also host kimberlite intrusions. As for Horseshoe, its land position was acquired by a geologist who has worked in the area since the early 1980s. The company also has a promising gold propsect on which it can fall back.

Lac de Gras is by no means Canada’s first diamond exploration play. In Saskatchewan, 4-5 companies are working in the Prince Albert area. At Fort-La-Corne, Sask., partners Uranerz Mining and Smelting and Cameco (TSE) report that 160 microdiamonds have been recovered from 15 separate kimberlite pipes. But at an average of two carats per 100 tons, the grade is uneconomic. The partners say they will investigate new magnetic targets this year. Northern Alberta is also a hot spot, but because Monopros and other players remain secretive about their findings, the potential of the area is unknown. In Ontario, the Attawapiskat River area west of James Bay has been investigated recently. Again, results have not been disclosed. Many experts agree the Lac de Gras area has the best chance of hosting Canada’s first diamond mine. The estimated area of the diamond-bearing kimberlite, 50 acres, is close to the average for economic pipes. Its location, on the edge of the Slave Craton, is favorable. And the mineral chemistry — illmenite, chromite and a certain type of garnet — is particularly encouraging.