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Diamonds North Resources: Disappointing results but all is not over

Last updated: 04:00 25 Feb 2009 GMT, First published: 05:00 25 Feb 2009 GMT

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Weak markets test investor nerves. And they tend to overly punish stocks when results are below expectations. Canadian Venture listed Diamond North Resources (TSX.V: DDN) was down by a whopping 54% yesterday in response to diamond results for Tuktu & Qavvik Kimberlites in its 100% owned Amaruk property in the Pelly Bay Diamond District of Nunavut.

Results for 11 drill core samples from Tuktu-1, 2 & 3 and 6 drill core samples from Qavvik-4, 5 & 6 have yielded a total of 576 diamonds above the 0.5mm sieve. The largest stones recovered from the relatively small mini-bulk samples remain on the 1.18mm sieve with the largest weighing 0.04 carats. Based on these results, the grades of the Tuktu and Qavvik kimberlite samples are inferred to be less than 0.1 ct per tonne. Considering the diamond size distribution and grade of Tuktu-1, 2 & 3 and Qavvik-4, 5 & 6 the company plans no further work on these kimberlites with the exception of quality control testing.

Admittedly, results are disappointing and fall short of DDN’s preferred target of 0.5 carat to 1.0 carat per tonne diamond grade. They however do not suggest Amruk property to be devoid of kimberlites with economic diamond contents. For starters, Amaruk is a large property with hundreds of targets remaining to be tested, while DDN has tested only a small number of kimberlites. Diamond results for 7 kimberlites discovered in 2008 in any event are still pending. DDN of course is undeterred by these results and intends to continue its exploration efforts to locate richer kimberlites. Amaruk kimberlites are characterised by their generally high micro-diamond content and certainly warrants further exploration.
 
Unlike other mining endeavours, diamond mining presents both joys of potentially massive returns and agonies of potentially disappointing outcomes. Those that were fortunate enough to make it in diamond mining have endured extensive exploration efforts, most of them with numerous less than pleasing outcomes. For instance, of approximately 150 kimberlites discovered at the Ekati Diamond Mine only 8 were deemed economic!

So all is not lost at DDN and similar episodes of disappointment have transpired at other projects. The company has identified over 300 targets at Amaruk and is keen to continue its exploration efforts. Exploration has been focused on the north western part of the property and will now focus on the southern and eastern portions of the property where 100's of targets remain to be tested.  A busy 2009 is ahead at DDN as the Company is planning to test up to 100 targets on the property.

Following its $12.5 million bought deal financing in July 2008, DDN is well-financed and still has over $5 million in the treasury. The company is aware of the need to preserve cash and has adopted low cost exploration techniques that are highly effective for kimberlite discovery. Correction today in fact leaves DDN market cap very close to its cash value. We will be meeting the management at the PDAC in Toronto March 1-4 and will bring a more detailed update.



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