Dianor Resources Inc.

A sparkling new realityDianor Resources Inc. has been focusing exclusively on diamond exploration for several years now to help meet the worldwide demand for diamonds. Keith Regan gets the details from the companyÔÇÖs CEO. For decades the diamond market was dominated and controlled by the DeBeers cartel, which was able to set prices and help determine which types of diamonds were most sought after by consumers.  While DeBeers remains a dominant player in diamonds, its grip on the market has been loosened, creating enormous new opportunities to supply emerging markets such as China and India and to help address a supply crunch caused by the fact that relatively few new diamond mines have been discovered and brought into production in recent years.The coming supply crunchÔÇö25 percent of the total annual current output needs to be replaced by 2010 to keep pace with demandÔÇöexplains why some $900 million is invested in worldwide diamond exploration annually, says John Ryder, president and chief executive officer of Val-dÔÇÖOr, QuebecÔÇôbased Dianor Resources Inc. About $200 million of that total is invested in Canada each year, and since Ryder and his fellow executives took the helm at Dianor several years ago, the company has focused exclusively on diamond exploration. Ryder, a native of Ireland who has been in mineral exploration for 35 years and involved in diamond exploration since the early 1990s, says DianorÔÇÖs approach to exploration reflects its junior exploration firm status. ÔÇ£We realized it would be difficult for us to raise the $10 million to $20 million annually weÔÇÖd need to just conduct grassroots exploration in areas like the Northwest Territories,ÔÇØ where most of the Canadian diamond exploration activity has been centered. That activity has focused largely on remote areas, which significantly escalates startup costs. Instead, Dianor concentrated its efforts on areas accessible by road and close to good infrastructure ÔÇömany of them the focus of earlier ore-mining activitiesÔÇöin more accessible parts of the country, including Quebec and Ontario. In the companyÔÇÖs sights is a 2.5-billion-year-old formation of rock known as the Superior Craton, the largest such formation of its type in the world. The formation was explored for diamonds in the 1960s and 1970s but was fairly quickly passed over for other opportunities. ÔÇ£It had a first pass and showed promise, but everyone went looking in the Northwest Territories,ÔÇØ Ryder states. ÔÇ£So youÔÇÖve got this huge mass of rock thatÔÇÖs only had a first pass of diamond exploration.ÔÇØ Staying in Quebec and Ontario fit with the firmÔÇÖs ÔÇ£Tim HortonÔÇÖs strategyÔÇØÔÇönamed after a ubiquitous chain of coffee and doughnut shopsÔÇöto focus on properties accessible via existing infrastructure. Dianor also forged a triple venture with Wemindji Exploration Inc., which is owned by the Cree Nation of Wemindji, and Metalex Venture Ltd., whose chairman, Dr. Charles Fipke, is considered the countryÔÇÖs foremost authority on diamond exploration. ÔÇ£ThatÔÇÖs something that no one else has been able to do, and it allows us to do the work of a multinational without having to expend the same type of funds and allowed us to draw on the expertise of CanadaÔÇÖs foremost diamond mine finder, Dr. Fipke,ÔÇØ Ryder says. ┬áThe main diamond property now being explored is known as the Leadbetter Diamond Project, named after the prospector who found diamonds while panning in a river in the Wawa area of Northern Ontario. Dianor secured the rights to his claims and has actively been exploring on the property since the spring of 2005. It recently filed for a permit to do larger-scale testing, with plans to enable the removal and processing of 34,000 metric tons of rock, enough to obtain a significant parcel of diamonds for appraisal and valuation. ÔÇ£ItÔÇÖs a huge project, and in three years weÔÇÖve succeeded in getting to the bulk sampling stage. When you look at comparable timelines in the Territories, thereÔÇÖs no comparison,ÔÇØ says Ryder. Preliminary testing has shown that the deposit also contains gold, rubies and sapphires, which are contained along with the diamonds in three distinct layers. Together they could yield as much as 566ÔÇô583 million metric tons of diamond-bearing rock, with the central layer believed to have the potential to produce 35 carats of diamonds for every 100 metric tons of rock mined. Dianor recently announced that testing on a nearby property also yielded significant numbers of colored diamonds. That property, where Dianor is a 30 percent owner of a joint venture that includes Mori Diamonds and Metalex Ventures, has yielded orange, purple, brown, green, yellow and gray diamonds in early testing from 10 test drill holes. Several of the diamonds were of or close to commercial size, Ryder notes. ThatÔÇÖs significant because the grip of the DeBeers cartel was loosened thanks to Canadian and Russian diamond discoveries in addition to the discovery and marketing of high-end champagne-colored diamonds by Rio Tinto. As a result, new markets for colored diamonds have been opening up that didnÔÇÖt exist just a few years ago, especially in the Middle East and Asia. Rio Tinto also helped open up new diamond polishing and cutting centers in India, where the appetite for non-white diamonds is strong and growing. Rio TintoÔÇÖs main non-white diamond mine in Australia has been seeing declining production in recent years, opening up that market to new suppliers. While the Leadbetter property is DianorÔÇÖs main focus, it also has early exploration work under way on nine other properties across Quebec. Half of a small number of 70-pound samples taken from those sites last year showed diamonds, including colored diamonds. ÔÇ£ThatÔÇÖs more blue sky and early stage, but we are extremely encouraged by the results so far,ÔÇØ Ryder says. Another property in Northern Ontario yielded 64 diamonds on early surface testing, including six stones of commercial size. ÔÇ£ThatÔÇÖs back burner at this point. ItÔÇÖs a brand new type of rock for us, so we need to take some time and scratch our heads about that one.ÔÇØ Funding the exploration work has proven feasible as Dianor has recently been able to raise additional capital for its efforts, raising more than $4 million in April and another $3 million in June/JulyÔÇödespite a miserable market for corporate fundraising, a fact that Ryder attributes to the companyÔÇÖs unique story. ÔÇ£The diamond exploration and mining sector has not been on the marketÔÇÖs mind for the past three or four years because people are making too much money on gold and base metals,ÔÇØ Ryder says. ÔÇ£Most people donÔÇÖt realize the major changes that are under way in the whole diamond industry and the opportunities that are being created.ÔÇØ