John Kaiser, Renowned Diamond Stock Analyst & Newsletter Writer Announces Some of His Key 2003 Picks

By Marc Davis, Managing Editor
March/April, 2003

It's 2003 and we're on the threshold of a particularly exciting new chapter in the Great Canadian Diamond Rush. Indeed, this year we should see a great deal more action on the drilling front compared to last year's sporadic and largely disappointing drilling forays. And just one company, Ashton Mining of Canada (TSX.ACA), was the driving force behind most of 2002's drilling. Its only real glimmer of hope came in the Otish Mountain region of central Quebec.

This time around, however, most diamond juniors have done their homework. And now they are ready and eager to probe the hundreds of Canada-wide geological "sweet spots" where they hope to strike pay dirt. After all, it only takes one drill hole into a frigid patch of tundra or a mosquito infested piece of muskeg to locate a one to ten billion dollar glittering prize.

Last summer most juniors engaged in painstakingly sampling the soil or til all around their exploration camps. And over the winter, they had the opportunity to compare and corroborate their findings with the results from their airborne and ground geophysical surveys. On this basis, most juniors have now laid their bets on their best drill targets. And tens of million of dollars will be spent in 2003 on drilling these targets -- typically above the tree line in Canada's most inaccessible and inhospitable regions.

Within the next six months, we'll likely find out which of these juniors guessed right. And which ones guessed wrong. After all, diamond exploration may be driven by modern high tech geological sleuthing techniques but it still isn't an exact science. There's still plenty of guesswork involved in picking top priority drill picks. So, a little luck will be needed by all. And when the drills stop turning, there will be plenty of shattered dreams (as well as depleted treasuries). On the other hand, a small handful of remaining players will have a wicked glint in their eyes and heightened hopes for a ridiculously big payday.

So now that each company's day of reckoning is near, SmallCapMedia will look at the frontrunners over the next couple of months. Meanwhile, for the sake of brevity, we'll focus on several key players which garnered a great deal of attention at the recent 2003 Cambridge House Investment Conference in Vancouver.

This is where several thousand investors gathered to hear a number of widely-read and widely-respected investment newsletter writers hold court on how 2003 will unfold in the natural resources sector. But most of these pundits were preoccupied with gold bullion prices and gold stocks. Only John Kaiser, the renowned Editor and Publisher of The Kaiser Bottom-Fishing Report, held sway on Canada's diamond front. And rightly so. He has become quite a world authority on diamond stocks ever since Dia Met Minerals' fairy tale discovery of Canada's Ekati diamond deposit a little over a decade ago. Indeed, Kaiser embarks upon exhaustive research of all the diamond juniors and sometimes he's on the money and sometimes he's not. But he's always at least very thorough and insightful.

Among his diamond favorites is Mountain Province Diamonds (TSX-MPV), which he believes will easily "double…in the next few months." De Beers and Mountain Province are jointly developing a number of kimberlite pipes in the Northwest Territories. The Hearne, 5034, Faraday and Kelvin kimberlites all have high diamond grades in the 1.5 to 2.5 carat-per-tonne range. And that makes Mountain Province an obvious buyout candidate subject to bulk sample valuations for the Hearne and 5034 pipes. Regardless, Kaiser is a believer, adding that Mountain Province "could be a $5 to $10 stock."

He also likes the most high profile and experienced of diamond exploration juniors, Ashton Mining of Canada. Ashton is making steady headway with its cluster of nine kimberlites, named the Renard Pipes, in central Quebec's Otish Mountain region. Though these pipes appear to be quite small, bulk sampling is returning impressive grades of between 0.6 and 1.5 carats per tonne. Ashton is said to be spending a further $6 million in 2003 to better investigate these pipes' potential.

Elsewhere, Kaiser sees the greatest "blue sky" potential in Ontario's much-overlooked James Bay and Wawa diamond plays. He noted that Ontario sits right in the middle of the largest Archean-age craton in the world. Cratons, which are continental building blocks that are up to several billion years old, are ideally suited to the emplacement and preservation of diamond-hosting kimberlite pipes.

"This area should host world-class diamond deposits," Kaiser told a packed conference room of several hundred people.

He added that the most important stocks to watch are Metalex Ventures Ltd. (TSX.V-MTX) and its joint venture partner, Arctic Star Diamond Corp. (TSX.V-ADD) which are scheduled to embark upon a March drill program in the Attawapiskat area of James Bay in north central Ontario.

Already, the Attawapiskat region has won over the world's most venerable diamond company, De Beers. Its Canadian exploration and mining division is discreetly conducting a multi million dollar full feasibility study of its prized Victor pipe. Kaiser says he's confident a mine is in the offing. And he says it should contribute about three per cent of the world's gem-quality diamonds within a couple of years. That's on par with predictions for the output of the Northwest Territories' Snap Lake deposit, which is next in line to come on stream after the Ekati and Diavik diamond mines, both of which are now operational. Interestingly, De Beers is also the major partner in the Snap Lake deposit.

De Beers has found a total of 18 kimberlite pipes in total in the Attawapiskat area, 16 of which are diamond-bearing. This suggests that other pipes have yet to be discovered in the area.

That's why De Beers is expecting some stiff competition if it expects its future Victor Mine to be the new showcase of Ontario's mining industry. Dr. Chuck Fipke of Dia Met fame is committed to finding his own diamond mine just a few miles down the road from the Victor pipe. Back to Metalex. This is Fipke's company - one in which he personally owns nearly all of the shares. And he apparently hasn't parted with a single share in spite of the stock's 1,000-per cent-plus rally in within the last few months. Now's a good time to remember that Fipke found what has become Canada's world-class Ekati Diamond Mine a little over a decade ago. And he didn't sell a single share of Dia Met even then - that is until Dia Met was bought out by the world's largest mining company, BHP Billiton, which now runs the mine.

Kaiser thinks that Fipke has a trump card up his sleeve with his new diamond project - his first in a decade. Much of Metalex and Arctic Star's exploration work to date has been cloaked in virtual secrecy. But Kaiser is confident that Fipke has zeroed-in on some excellent kimberlite prospects.

"I have a lot of respect for the guy running the show. Fipke has been saying that this (his Attawakpiskat prospects) will be the next Ekati Mine."

Assuming that Fipke backs up his bold talk with some tantalizing drill results, Kaiser believes that a staking rush in the Attawapiskat region is almost certain to ensue.

"We're likely to see a major play in that area," Kaiser said.

About 500 kilometers to the south, the Wawa area is also beginning to heat up. For several years now, Band-Ore Resources (TSX-BAN) has produced plenty of micro diamonds from an enigmatic diamond-hosting rock that has failed to impress the investment community. Some critics have long argued that these rocks are structurally damaged kimberlites that will never yield sizeable diamonds. But that theory was recently blown out of the water when Band-Ore's next-door neighbor, Pele Mountain Resources (TSX-GEM) recently announced the recovery of a statistically relevant 0.72-carat diamond from a similar type of diamondiferous rock. Kaiser sees this as a turning point for Wawa's contenders.

"This news has very interesting implications. This is a very important play to watch," he said.

Elsewhere, Kaiser is expecting plenty of action in Nunavut and the Northwest Territories once the drills start turning. But with the exception of several players like one of his other favorites, Diamonds North Resources (TSX.V-DDN), the majority of diamond juniors won't break the ground until April or May.