The late January, 2003 announcement of the discovery of a statistically significant 0.72-carat diamond has certainly validated the company's exploration efforts in a relatively new diamond frontier. The diamond, known as the 'Big Goose,' is by far the largest stone to be recovered from a primary rock source in the Wawa region. Its weight is nearly triple the previous best. And it silences those critics who have argued that Wawa's complex, enigmatic geology will never yield anything other than worthless micro diamonds.

Certainly, investors and diamond experts, alike, are now sitting up and taking notice of the implications of Pele's latest news from its wholly owned 101-square-kilometer Festival property.

"Pele has discovered an important new source of commercial-size and gem-quality Canadian diamonds," says Dr. Edward Walker, an independent diamond geologist.

"Given the size of these deposits, their location within one to five kilometers of the Trans-Canada Highway and the available infrastructure in Wawa, there is a strong potential for an economic diamond deposit at Pele's Festival property."

In other words, the Wawa area is probably one of the most cost-effective areas in the world to develop and operate a diamond mine. Additionally, Pele's diamonds are encased in large chunks of volcanic complex outcroppings, meaning that they pop out of the soil, making it unnecessary to drill through hundreds of feet of rock. This presents an ideal scenario for a low cost, open-pit mine. Hence, it would not require the presence of particularly high-grade commercial diamonds to make an economic deposit feasible.

This fact is not lost on the global diamond giant that is most synonymous with diamonds, De Beers. The Johannesburg-based multinational recently announced that this year it would spend close to 50 per cent of its $120 million diamond exploration budget in Canada. This could benefit Pele. Already, the two companies are in non-exclusive discussions regarding a possible joint venture partnership. To illustrate De Beers' keen interest in the Festival property, it has even processed two of Pele's bulk samples free of charge.

These bulk sample results include the latest 13-tonne sample that yielded the headline-grabbing 'Big Goose,' as well at 38 other smaller commercial sized diamonds. To date, Pele has found over 2,000 diamonds from over 25 different outcroppings. These results are compelling, especially given the previously mentioned dynamics that make Pele's property so attractive.

This fact is certainly not lost on Pele's canny president, Al Shefsky, a former stockbroker who also holds a law degree and a degree in economics. His head for numbers obviously came in very handy when he first saw the potential for a low-cost diamond mine. So far, his calculations have been on the money.

"The total aggregate weight of the bulk sampled commercial diamonds was 1.142 carats. And the recovered grade of the commercial diamonds is in the range of currently producing diamond mines," says Shefsky.

"The mines that are coming on stream in Canada's tundra region are tremendously more expensive to build and run than would be the case in an area with great infrastructure such as Wawa, Ontario. We could probably mine our deposit for as low as under $20 Canadian per tonne."

Indeed, the odds against Pele have narrowed considerably since Shefsky took a contrarian gamble by acquiring the Festival Property two years ago. At that time, most of Canada's serious diamond exploration action was focused on the Northwest Territories, where Canada's first ever diamond mine, the Ekati Mine, had just opened for business. One other mine, the Diavik, began production in early 2003 and another, the Snap Lake deposit, is due to open within the next couple of years. And numerous diamond exploration companies have been swarming around these multi-billion dollar discoveries like bees on honey.

Wawa might have remained completely overlooked had not several prospectors discovered a tiny number of diamonds along a logging road. Soon after, another junior, Band Ore Resources, and a major diamond exploration company, Kennecott of Canada, teamed up to explore the immediate area. In turn, Shefsky saw a glittering opportunity in the making and acquired land directly adjacent to the claims held by this new partnership. This became the basis for Pele's first ever foray into the diamond hunting business.

And it's turned out to be a smart move. That certainly is the opinion of some leading market pundits. At the Vancouver Resource Investment Conference in late January, several renowned natural resources newsletter writers sang Pele's praises. They include John Kaiser, the Editor and Publisher of the Kaiser Bottom-Fishing Report. He told a packed audience that Pele's latest find is "very encouraging" and that "this is a very important play to watch." He also added that the company is extremely undervalued, relative to other diamond explorers such as Pele's neighbor, Band Ore (which has a market cap of around $76 million as of late January). By comparison, Pele's market cap is minuscule at around $12 million. This conclusion is based on Kaiser's theoretical project valuation of companies that have achieved similar results to Pele. Such companies typically warrant a market cap of $100 million to $200 million, according to his theory.

Ironically, Pele's market cap can be justified even without considering its diamond prospects! The company has two very solid 'stand-alone' gold projects that ar e gaining increasing luster as bullion prices continue to rally to six-year highs. Specifically, the Ardeen Gold Project in northwestern Ontario hosts an independently stated inferred gold resource of more than 450,000 ounces grading 14 g/t in five mineralized zones.

At the center of the property is the old Ardeen Mine, which produced both gold and silver in the 1930s before being closed in 1936. At that time, mining records reveal that wide, high-grade gold veins were being intersected at the 1,100-feet level. Thus far, Pele has spent Can. $4 million on drilling 12,000 meters to delineate the property's potential at shallower depths. However, deeper zones may be tested later this year for high-grade potential. Meanwhile, the winter drill program is planned to outline the scope of the more readily accessible gold resources. A very strong iron formation anomaly is a priority target with the purpose of potentially stepping out and increasing tonnage. The prospects for continued success are further encouraged by the fact that Pele's property is bordered by another company's two-million-ounce low-grade gold deposit.

Meanwhile, at the Wawa Gold Project, much progress has been made to date. A tot al of 1,706 ounces of gold grading 5.1 g/t have been recovered from a 10,000-tonne 1999 bulk sample. Any future production would also benefit from the close proximity of a modern mill. Located only five miles away, this mill would be a significant contributing factor towards the development of a relatively low-cost mining operation. With this goal in mind, Pele's steady advancement of this project has also included a $1 million drill program of over 6,000 meters. Notably, a total of eight former producing mines can be found in this gold-rich mining camp, which has historically seen 1.4 million ounces of production.

On a penultimate note, a key factor that should continue to add value to Pele's market cap in the coming months is the company's solid management team. Since the junior's inception in the mid 90s, Al Shefsky has advanced its properties with intelligent management and cost-effective spending. The company has a very low burn rate and has been able to raise funds when needed. On the exploration side, Pele's team is headed up by Peter Dimmell. He is a geologist with over a quarter of a century's experience, 17 years of which were spent with the mining powerhouse, Noranda Exploration Company. He has also consulted to a number of high-profile mining companies, including Royal Oak Mines and Homestake Canada. Moreover, he is Vice President of the Prospectors and Developers Association of Canada.

And finally, for those of us who believe in luck, Shefsky named his company after the Hawaiian volcano goddess who, according to Polynesian folklore, bestows good fortune on people who live in her shadow. In that diamonds are brought to the surface via underground volcanic activity, it's quite possible that there's also a Wawa volcano goddess looking out for Pele Mountain. To date, that seems to be the case.