There are tantalizing clues as to the possible whereabouts of billions of dollars worth of buried diamonds in the rough.
Since their discovery a few years ago, these geological clues have become known as the Black Wolf and the White Wolf.
Located in northern Finland, they consist of twin diamond-embedded rock formations — scientifically referred to as kimberlite pipes. And they have kept their secret for many millions of years.
Now the wait is finally over. For the first time ever, their geological DNA is being closely scrutinized in the hopes that it will point the way to a considerably more richly endowed nearby diamond deposit.
Initially discovered in 2005 by a small mineral exploration start-up called European Diamonds plc, the White Wolf and Black Wolf pipes are the first to emerge in a region that no doubt hosts more diamond-laced discoveries.
More on this in a moment.
A decade ago, the economic potential of these twin pipes was probed by way of some small-scale drilling. But the distribution of the micro diamonds among the rock samples taken proved to be too inconsistent to justify additional drill testing. So the project was abandoned and has since languished — until now.
Veteran diamond exploration company
Arctic Star Exploration Corp. (TSX.V: ADD) has come to Finland to test a scintillating theory: the two Wolf kimberlites can point the way to a glittering treasure trove at the heart of one of the world’s last under-explored diamond fields.
To this end, the company has acquired the White Wolf and Black Wolf diamond pipes and the geologically-prospective exploration grounds that surround them. This sizeable property can be found in the under-explored region of Kuusamo.
Known as the Foriet Property, Arctic Star’s exploration permits will now be the hunting grounds for a whole cluster of kimberlite pipes — any one of which could be the mother lode.
By studying all the geological characteristics of the initial White Wolf and Black Wolf discoveries, Arctic Star’s geologists believe they can zero-in on a swarm of proximal pipes. After all, this is the methodology that has proven phenomenally successful in Canada’s Northwest Territories (NWT).
It’s an exploration approach that also helped unearth several large, prolifically-mineralized Russian diamond mines that are located less than 500 kilometres to the east of the Foriet Property. Interestingly, these mines were only found relatively recently.
Can History Repeat Itself?
When another small diamond exploration company called Dia Met Minerals discovered the Point Lake diamond pipe in the NWT in 1991, there was considerable fanfare.
The stock rallied from mere pennies to over $67 the following year. By then, a small handful of far richer diamond pipes had been located nearby. They later became the multi-billion-dollar Ekati diamond mine — the first of its kind in Canada.
In fact, it turned out that Point Lake was worthless because it contains too few diamonds to be mined. But that didn’t matter.
What did matter is that the Point Lake discovery was a technical success that led geologists to eight proximal kimberlite pipes — all of which proved to be rich with diamonds.
Since the commercialization of Canada’s inaugural diamond mine, another nearby mine called Diavik has also come into existence. Together, they have yielded over $25 billion worth of diamonds so far.
Fortunately for Arctic Star, its Vice President of Exploration is Buddy Doyle, who was integral to turning Diavik into a world-class mine in the 90s. This is when he was exploration manager for Kennecott Canada Exploration Inc. — a subsidiary of the world’s biggest mining company, Rio Tinto plc.
Now he hopes to do it again. Only this time around, he also has the benefit of vastly improved diamond-hunting technology and a wealth of geological savoir faire. In recent years, he has traversed much of the frigid vastness of the NWT looking to replicate his earlier success at Diavik.
His search has now brought him and Arctic Star to Finland where he is applying the same diamond sleuthing expertise to one of the world’s last diamond-hunting frontiers.
Why the Wolf Pipes are Key to Revealing New Diamond Fields
Fortunately, there’s plenty of scientific encouragement for Arctic Star’s quest. For instance, the Foriet Property is close to the Russian border and is part of the same tectonic plate that already hosts several Russian diamond mines.
Known as the Karelian Craton, this crustal feature is geologically comparable to the Slave Craton in Canada’s Arctic, which is home to the Ekati and Diavik diamond mines. In other words, it’s proven to be geologically fertile for economic diamond discoveries.
Here’s how kimberlite pipes are found in both the Karelian and the Slave cratons: They are tracked down by following trails of indicator minerals. Many millennia ago, these tiny, colourful stones were eroded from kimberlites by glaciers and then deposited down ice.
The thicker the dispersion train, the closer the indicator minerals are to their diamondiferous bedrock source. In other words, finding diamondiferous pipes this way is analogous to following a trail of crumbs to a loaf of bread.
The Black Wolf and White Wolf pipes were discovered by this very same process.
Again, it’s worth mentioning that this is how the kimberlite pipes that constitute the Ekati and Diavik diamond mines were found.
Indicator mineral trails that are comparable to the one that leads to the White Wolf and Black Wolf pipes can also be found elsewhere on Arctic Star’s property. This supports the theory that other proximal kimberlite pipes are still waiting to be discovered.
In fact, diamond fields usually involve 10-30 kimberlites but can in some cases include as many as 100 or more. A cluster of pipes usually resembles a shotgun blast spread out over an area in diameter of up to 100 kilometres in diameter.
To this point, Finnish federal government geological data shows the presence of an 80-kilometre-wide “cloud” of indicator minerals dispersed across a wide area that is roughly centred on the Wolf pipes. This suggests that Arctic Star property encompasses a whole new cluster of kimberlites.
Additionally, the company’s till sampling program utilizes the same sampling and mineral ranking techniques that were used to find the Ekati and Diavik mines. This means that Arctic Star can predict the potential of certain kimberlite targets to host diamonds with a high degree of confidence.
Along with till sampling, Arctic Star’s accomplished diamond-finding geologists also intend to use aerial geophysical surveys and follow-up ground-based geophysics to identify new kimberlite prospects on its new property.
In the near term, Arctic Star is revisiting the economic potential of the Wolf pipes.
To this end, the company is beginning by sampling 14 core holes with a total length of 530 metres of kimberlite at Black Wolf that was drilled over a decade ago and was never assayed for diamonds.
Truth be told, the size potential of the Wolf kimberlites has still to be determined. A ground-based geophysics program will go a long way to solving this mystery. And more drilling still needs to be done to better understand the overall grade of the deposit.
This re-evaluation of the Wolf pipes is made easier due to the fact that these deposits are located near paved roads and in relative close proximity to a power grid, as well as logistical supplies.
Also, there is a skilled labour force nearby in the economically-underdeveloped town of Kuusamo. This pro-mining community also benefits from its own airport and is only an eight-hour drive from Helsinki.
It would therefore be far less expensive to commercialize one or more diamond mines in this region than in a remote, inhospitable location like the NWT.
Arctic Star’s President Patrick Power comments, “We plan to evaluate the economic potential of the Wolf pipes as an immediate priority.
“However, the greatest potential for success at the Foriet Property is the likelihood of finding more diamondiferous kimberlites, any one of which could be richly endowed enough to be economic, and to eventually become a mine.”
In terms of geopolitical risk, the Fraser Institute recently ranked Finland as the most attractive jurisdiction for mining investment anywhere in the world. So this too represents a major de-risking project booster.
Investment Summary
The company is also still active in the NWT, where it is involved in a joint venture to explore and develop the T Rex Project for diamondiferous kimberlite pipes.
So the company’s overall risk profile is mitigated by the fact that it has two separate exploration projects underway in two different jurisdictions.
On a technical note, Arctic Star has only about 54.7 million shares outstanding, representing a relatively tight share structure. In the eventuality of positive news flow, such a situation typically acts as a potent catalyst to higher share price valuations.
All told, Arctic Star is gearing-up for a busy exploration season that could yet take investors on the ride of a lifetime.
About the Author: Marc Davis has a deep background in the capital markets spanning 25 years. He is also a longstanding financial journalist, having worked for leading digital financial news agencies in North America and in London’s financial centre. He is also a former business reporter for CBC Television.
Over the years, his articles have also appeared in dozens of digital publications worldwide. They include USA Today, CBS Money Watch, Investors’ Business Daily, the Financial Post, Reuters, National Post, Google News, Barron’s, China Daily, Huffington Post and AOL.