Indicator gets gems, chomps at drill bit

2009-02-17 14:08 ET - Street Wire by Will Purcell

Indicator Minerals Inc. would like to spend over $1-million exploring Nanuq North this year, according to the company's head, Bruce Counts. The company's partner, Peregrine Diamonds Ltd. may not be in a rush, based on comments from its president, Brooke Clements.

The two companies got some encouraging diamond counts from the NQN-001 pipe recently, and three finds by Peregrine on the neighbouring Nanuq property in 2007 show the area contains a potentially large cluster of significantly diamondiferous pipes.

The two companies will settle their plans for Nanuq North over the next few months, but both would undoubtedly prefer a combined effort on both properties.

The plan

Mr. Counts said it was definitely premature to discuss firm plans, as Indicator will have to discuss the program with Peregrine. Nevertheless, he said that he would like to do some discovery drilling and get some core holes drilled into NQN-001. Core drilling on the existing pipe would allow the partners to get a better handle on the geology, geometry and grade of the kimberlite.

Nanuq North lies just southwest of Wager Bay in central Nunavut, a few hundred kilometres northwest of Hudson Bay.

That puts the property in one of the most remote regions of the North, and any work program carries the significant expenses of mobilizing men and equipment to the region, and sustaining a camp while they are there.

As a result, even small programs carry hefty budgets, and the best way to minimize unit costs is to plan a larger program, or share costs among rival programs.

A combined program would seem an easy task for Indicator and Peregrine, as the latter company owns a 100-per-cent interest in the adjoining Nanuq property and the two properties could share equipment and camp expenses.

Still, making arrangements for a joint program could be a problem as Peregrine clearly prefers to wait until 2010 to drill at Nanuq. The company is busy with its Chidliak property on Baffin Island and although it is not paying for that work, the company's management and geologists will be preoccupied with a big program on that sprawling project.

As well, Mr. Clements said that Peregrine would prefer not to be selling more shares to pay for a Nanuq program this year. Nevertheless, he did not slam the door on a 2009 drill program at Nanuq, suggesting Peregrine would be open to joint venture opportunities on the project.

Although Mr. Counts would prefer a combined program, he would be reluctant to defer drilling plans for Nanuq North by a year. "I would like to think we will get out to Nanuq North regardless," he said, although Peregrine will have an equal say in what transpires.

The encouragement

Indicator and Peregrine recovered 129 diamonds larger than a 0.106-millimetre sieve from 153 kilograms of NQN-001 kimberlite, or about 850 stones per tonne. The most tantalizing news was that the bottom one-sixth of the hole encountered a different phase of kimberlite and that material produced nearly one-half of the diamonds.

The hole ended in the richer rock, and that has Mr. Counts especially eager to go back with a core rig to test the big pipe, which appears to span 4.5 hectares. The discovery hole was drilled using a light reverse circulation drill, which might also grind up some of the larger diamonds, and that adds to the NQN-001 enigma.

Peregrine's three pipe finds on Nanuq also carried diamonds, although not quite to the same extent as NQN-001.

Peregrine used a core drill to recover nearly 1.6 tonnes of kimberlite from its three pipes, and the rock produced 689 stones larger than a 0.106-millimetre sieve, or about 450 stones per tonne. Those finds and NQN-001 now prove Wager Bay to be diamond country.

Indicator closed unchanged at nine cents Tuesday on 34,500 shares.

Hg