Stornoway readies Qilalugaq hunt

2008-06-24 17:12 ET - Street Wire

by Will Purcell

Eira Thomas's Stornoway Diamond Corp. is getting set to start hunting new kimberlites on its Qilalugaq project in central Nunavut. The company is busy on another play a few hundred kilometres to the northeast and in Quebec, but the former BHP Billiton Diamonds Inc. gem hunt at the base of Melville Peninsula remains intriguing. Drilling of new targets and larger tests of some existing finds are on Stornoway's to-do list, but mini-bulk samples will likely wait until 2009.

The plan

Stornoway will start work in a few weeks, assuming the weather co-operates. The company's weather requirements are modest, as warm sunny days in the Arctic do little more than breed bugs. At the height of the warm season, clouds of mosquitoes on the west coast of Hudson Bay become dense enough to restrict visibility and annoy prospectors and drillers to the point of distraction.

Stornoway's main weather concern will be the low cloud, drizzle and fog that can linger for days and ground anything larger than a gull. The company ideally has at least three months to work, but in the worst of summers, the snow threatens to return before the old crop melts away and weather delays can extend a week's work into a month-long effort. As a result, explorers in the region usually fall short of the optimistic plans of spring.

The Qilalugaq project already yielded some intriguing kimberlites, but Stornoway will put its main effort on finding new bodies this year. The company has several unexplained mineral trains that produced indicators with encouraging chemistry. Preliminary sampling will undoubtedly produce more than enough targets for a worthwhile drill program and ideally, there would be enough time to test the best anomalies before the fall. Unfortunately, things are rarely ideal in deepest Nunavut, an area that makes Edmonton or Winnipeg seem like a destination resort.

The company will also poke at the ground along two of its Naujaat dikes, seeking sites to collect small mini-bulk tests. If it finds enough rock at the surface, it will gather a tonne or two for diamond recovery. The company managed to gather similar tests of four other Naujaat bodies last year, but the diamond grades were disappointing.

A larger test of the Q1 pipe yielded a more promising outcome and Stornoway is considering a still larger test of that body, also known as A-28. Q1 covers about 5.4 hectares. It is part of a 14-hectare complex kimberlite comprising the Q1, Q2, Q3 and Q4 pipes, which coalesce at the surface. The planning needed to complete the larger test suggests Stornoway will not be in a position to collect a mini-bulk test until 2009.

The encouragement

The results from Q1 are enough to sustain Stornoway's interest and keep Qilalugaq on its priority list. About 34 tonnes of kimberlite from the body yielded 9.96 carats of diamonds, for a grade of 0.29 carat per tonne. The average diamond weight was just 0.032 carat, but that is still a function of the small sample size and a low minimum cut-off of 0.85 millimetre.

The size of the complex intrigues Stornoway, as does its location. The big kimberlite could contain over 30 million tonnes of kimberlite, and that has the company thinking it could contain over 10 million carats, based on the results so far. A typical diamond value could imply the diamonds in the Q1-4 complex carry a gross value of $1-billion (U.S.), enough to warrant more work.

The weather woes aside, Qilalugaq's location does have its good points. The pipe is barely 10 kilometres from Repulse Bay, which receives annual resupplies by barge from Churchill. That would result in substantially lower capital and operating costs, if the company can make a mine out of the project.

Stornoway closed down a penny to 34.5 cents Monday on 75,900 shares.