How to Find a Diamond Mine

Besides being one of the rarest and most valuable minerals in the world, diamonds are also the hardest natural substance known to man. This explains why diamonds have survived one to three billion years, having formed from crystallized carbon long before even the most primitive form of life existed on this planet. Hundreds of millions of years later, the continents began shifting. During this upheaval, diamonds were transported from the bowels of the earth to its surface in volcanic eruptions of molten rock that later hardened into vertical carrot-shaped rock structures known as kimberlite pipes.

In Canada's far north, these kimberlitic eruptions typically left fingerprints in the form of indicator minerals, such as garnet, that were dispersed like volcanic ash in the vicinity of the pipe's cratered surfaces. In some instances, these trails of indicator minerals were smeared down-ice by glacial action over distances up to hundreds of kilometers from the kimberlite pipe. However, no matter how far these colorful, glassy minerals have traveled, diamond prospectors can often trace their telltale trails back to the buried treasure troves from whence they came. Typically, the more plentiful these high-chrome and low-calcium garnets get, the closer the explorations are to their kimberlitic source. Moreover, the width of an indicator mineral dispersion fan tends to narrow to a head as it approaches a pipe. The right kinds of indicator minerals also have to be present, otherwise, a pipe can often prove to be barren.

Once the tracing of mineral trains back to the vicinity of their source has been successfully completed, geologists will determine drill targets by pinpointing the pipe's location. This is where the science of geophysics comes into play. Kimberlites sometimes present clues as to their whereabouts in the form of geophysical signatures. Airborne electromagnetic surveys and gravity surveys reveal different physical properties for kimberlites when compared to the surrounding country (host) rock. Simply stated, these intruding kimberlitic anomalies can stand out on a geophysical survey like circular knots on a sheet of plywood. Follow-up ground geophysics in conjunction with heavy indicator mineral sampling are then used to better define geophysical anomalies. Targets will only be drilled if the right diamond-indicating minerals exist in the target area.

If drilling reveals the presence of macro diamonds (greater than 0.5 mm) and micro diamonds (less than 0.5 mm) in sufficient quantities, then the next stage of exploration, a mini bulk sample, may be initiated. This is facilitated by using larger diameter drills to recover a minimum of approximately five tonnes or more of kimberlitic rock. Surface test pits can also be used if the pipe's apex is close to surface. Only when a mini-bulk sample is completed will the scientists have a preliminary idea of what the grade of the deposit might be.

One key difference between diamond exploration and the search for metals is that not all carats are equal in value whereas one ounce of gold is worth the same as any other ounce of gold. This is one of the reasons why the cycle from discovery to exploitation is usually considerably longer for diamonds than for gold.

If the results of the mini-bulk sample are favorable, the next step is to take a bulk sample in the range of 10,000 to 20,000 tonnes. This can be a costly undertaking, but it is necessary in order to accurately determine the grade of the deposit and to get a sample of diamonds large enough to allow mineralogists to ascertain the quality of the pipe's diamonds. The size of the bulk sample must be large enough to account for the uneven distribution of diamond within a given pipe.

The initial discovery of a kimberlite pipe is a significant event and will usually give a junior a short-term boost in share price. Unfortunately, the cycle from initial discovery to production is a long one and only one in five pipes tend to be diamondiferous while only about 1% of pipes worldwide are economic. Given the long odds and the long exploration cycle and the fact that pipes can range in value from nil to several billions of dollars, investors in junior diamond stocks should expect a roller-coaster ride with several peaks and valleys over several years.

The Ekati Mine has a valuation of about $2.5 billion. Its reserve base is approximately 60 million carats and it produces approximately three million carats per year.

Following closely behind the groundbreaking success of Ekati, is the Diavik Mine (discovered by another junior company, Aber Resources, and now operated by global mining heavyweight Rio Tinto Ltd.). A richer mine than Ekati, it is worth at least several billion dollars.

We are optimistic that future exploration could bring Canada one step closer to seeing history repeat itself in the form of another diamond dream come true.

Why might diamond exploration stocks have near-term upside potential? Here are several key reasons why:

• In the last ten years, Canada has proven to be a fertile and largely untapped frontier for diamond discoveries. Moreover, the advent of the multi-billion dollar Ekati and Diavik mines is indicative of Canada's burgeoning diamond potential.
  
• Canadian diamonds are untainted by political violence and are therefore more appealing to conscientious consumers. It is estimated that up to US $10-billion worth of "blood diamonds'" have been sold over the past decade. "Blood diamonds" are those that have been used to finance civil wars and brutal military regimes in Third World countries such as Angola and Sierra Leone. A growing movement, spearheaded by De Beers' Central Selling Organization, is trying to outlaw the sale of diamonds that are not certified as "legitimate." New techniques for mapping the unique internal "fingerprints" of each diamond that is sold in the Western World could form the basis of such a certification program.
  
• Although Canada has become the world's third largest diamond producer, Canada's diamond mining sector is still in its early development. Some analysts predict that Canada will supply up to 50% of the world's gem quality diamonds in the foreseeable future.