Positive Mention Here - Will PurcellMost investors now consider Aber Diamond Corp. a diamond producer and
retailer, but the company still has an interest in diamond exploration.
The
company and Rio Tinto PLC continue to examine their large block of
Diavik
ground for new kimberlites worthy of inclusion into the mine plan. Aber
also
has a small interest in an old project that Peregrine Diamond Corp.
brought
back to life last year. Further, the company remains on the prowl for
any
new projects that could help supply its retail arm in the coming years.
The Diavik search
Aber's chief executive officer, Bob Gannicott, said the continuing
exploration program at Diavik went through about $5-million last year.
That
effort failed to turn up anything economic. The Diavik partners planned
mini-bulk tests of two kimberlites on the old Commonwealth portion of
the
property, about 20 kilometres east-southeast of the mine.
The partners remained mum about the program, but the diamond results
from
C-13 and C-12 were modest at best. That is mildly disappointing, as the
bodies produced encouraging diamond counts and some larger
macrodiamonds.
Still, there was never any reason to expect Diavik-sized results.
Aber and its partner completed more geophysics, as well as till sampling
across the 260,000-hectare property. Drilling of new targets turned up
at
least three new Diavik kimberlites last year, but the diamond content of
the
new discoveries failed to merit mention. More than half of all the
Diavik
kimberlites are diamondiferous, but just four are worth mining and just
a
few others managed to produce intriguing grades.
The last big find on Diavik came a decade ago, with the discovery of
A-418.
The last potentially economic find was A-841, or Piranha, which turned
up
straddling the border with the Ekati property. Both rivals shared the
exploration effort on the pipe, but they lost interest because of the
small
size of the body and the mediocre quality of the diamonds.
The four rich Diavik kimberlites lie along a line running southeastward
across the western fringe of the property. Just five kilometres separate
A-154 North from A-21, at the southern end of the line. Still, there
were
some hints of sparkle found beyond that cluster. The area surrounding
C-12
and C-13 is just 10 kilometres northwest of the old Tli Kwi Cho pipe,
which
Peregrine now calls DO-27.
Aber and its partner also drilled up some brief encouragement at A-11
North,
about 10 kilometres east of Diavik. The pipe delivered promotable
diamond
counts in the mid-1990s, warranting a mini-bulk test in 1998. A 29-tonne
test delivered a grade of 0.26 carat per tonne, with a single
three-carat
gem accounting for nearly half the parcel.
Mr. Gannicott said the partners would be busy with exploration in the
coming
months, working on the second year of a $10-million program. The amount
seems modest in comparison with companies working on mini-bulk tests,
but
Aber's head since 1999 said the current exploration budget was "about as
much as you could spend" on the property.
Diavik put much of its recent exploration effort into the existing
kimberlites, looking to expand the contained resource through a more
detailed delineation drilling program. That work did add new blocks of
kimberlite to the resource, but the focus for this year will be somewhat
farther afield.
Tli Kwi Cho revived
Diavik is reluctant to deliver big new finds, but an old discovery on a
neighbouring property is making a comeback. Peregrine is now working on
a
bulk sample of the core of Tli Kwi Cho, now dubbed DO-27. A group led by
Rio
Tinto's Kennecott Canada Exploration Inc. once touted the project as
possibly Canada's first diamond mine, but an underground bulk test in
1994
proved disastrous.
Kennecott recovered just over 1,000 carats from over 4,200 tonnes of
kimberlite. The test managed an average grade of just 0.36 carat per
tonne
from about 3,000 tonnes of a rock unit then called pyroclastic
kimberlite.
The grade was well below expectations and the diamond value was worse,
coming in at less than $22 (U.S.) per carat.
The result was a shock, as the earlier diamond counts pointed to a rich
core
zone. Kennecott gave up on the play, but a few of its junior partners
kept
the faith, finally selling Eric Friedland and Peregrine on the play.
That
led to a new mini-bulk test of the core kimberlite.
The Peregrine program produced 136 carats from about 151 tonnes of
kimberlite, pointing to an average grade of 0.90 carat per tonne. A
valuation suggested the diamonds had an average value of about $60
(U.S.)
per carat, with room for added optimism.
Aber held a 15-per-cent share of Tli Kwi Cho in its glory days, but the
company's interest shrank over the past decade, as others agreed to give
the
play a shot. The company now has a 7.35-per-cent interest in DO-27, with
a
gross overriding royalty of 0.3 per cent.
There was some speculation earlier that Aber might elect not to
contribute
its share of the budget for the new bulk test of DO-27, but Mr.
Gannicott
confirmed that Aber was putting up its portion of the costs. The full
exploration budget for the property comes to $12.5-million, leaving Aber
with an expected bill of just under $1-million.
Mr. Gannicott was not brimming with enthusiasm with the project, mainly
because of Aber's modest share. He said that Peregrine's new tests
"pretty
much corroborate the results of Rio Tinto. "Of course, the diamond
market
has changed, so this is worth a second look."
That seems a conservative assessment. The Peregrine test delivered a
grade
potentially more than double than Rio found in the pyroclastic phase.
With
the latest appraisals suggesting a diamond value about three times
greater
than the 1994 result, Aber's DO-27 partners are optimistic.
That optimism grew recently, when diamond counts from several hundred
kilograms of kimberlite core delivered some larger macrodiamonds that
continue to show the core zone of the pipe has a good grade. The latest
haul
included diamonds weighing 0.59 carat, 0.18 carat and 0.08 carat, with a
parcel that offered a coarse size distribution curve. Still, Aber and
its
partners will have to show there is a significant amount of kimberlite
available with an economic rock value.
New plays
With Diavik running beyond its original specifications and Harry
Winston
delivering retail profits ahead of schedule, Aber is looking for new
opportunities. Mr. Gannicott said there was no reason to add another
retail
name to Aber's business. That leaves new mining opportunities as the
likely
focus.
"We are certainly interested in acquiring new sources of supply, of any
characteristic," Mr. Gannicott said, adding that anything that would be
able
to supply the quality of goods needed by Harry Winston would be
especially
desirable. That would put the emphasis on larger stones, and diamonds of
top
quality.
Aber shed itself of most of its geological field expertise over the past
several years, as it moved from grassroots exploration to production and
retail. As a result, the company is not likely to be banging stakes of
its
own into the ground any time soon. The hefty Diavik profits leave the
company with brimming coffers, and Aber would likely make any new mining
forays by buying into an existing project.
Several advanced diamond projects lie scattered across Canada. Some
could
benefit from a timely investment by a well-heeled veteran, but Aber
plans to
be choosy. "We have not seen anything yet that causes us to write a
cheque,"
Mr. Gannicott said.
If so, that would rule out an investment in the current crop of advanced
projects, at least for now. As well, Aber's need for raw diamonds would
appear to preclude an investment in any project that did not control the
marketing rights to the diamonds.
In fact, Aber may have greater interest in getting into a new project at
an
earlier stage. Thanks to the many finds at Diavik and several of Aber's
other old properties, the company has an excellent library of diamond
size
and value distribution data, and that gives the company an advantage in
assessing early results. Mr. Gannicott said Aber's bounty of data gave
it a
better idea than most people about what good and bad finds would look
like.
As a result, he said Aber would be "more than happy to take a run at an
early stage program."
Aber added 13 cents Thursday, closing at $47.99.
C 2006 Canjex Publishing Ltd.