Naujaatt

North Arrow Minerals positioned for sustained diamond market recovery as it processes coloured samples from project in Nunavut, northern Canada
2021-11-17 07:00:00
Processing of a 2,000-tonne bulk sample from the company’s Naujaat diamond project started in October after the 2,500-bag sample was collected from the Q1-4 kimberlite, the largest and most diamondiferous of the eight kimberlites discovered so far at the project in Nunavut in northern Canada
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“It’s rare for a diamond project to get to this stage, with the collection of a bulk sample of this size,” North Arrow president and CEO Ken Armstrong said

The diamond market has bounced back from the doldrums experienced at the height of the coronavirus (COVID-19) pandemic in 2020 when producers cut back output due to a frozen diamond pipeline which included a total slump in jewelry demand.

That is good news for North Arrow Minerals Inc (TSX-V:NAR), a Vancouver-based exploration company focused on the identification and evaluation of diamond exploration opportunities in Canada.

Processing of a 2,000-tonne bulk sample from the company’s Naujaat diamond project started in October 2021 after a 2,500-bag sample was collected from the Q1-4 kimberlite, the largest and most diamondiferous of the eight kimberlites discovered so far at the project in Nunavut in northern Canada.

“It’s rare for a diamond project to get to this stage, with the collection of a bulk sample of this size,” North Arrow president and CEO Ken Armstrong said in an interview with Proactive. “It underscores just how far along the evaluation path the Q1-4 deposit is as a potential development.”

At over 20 million carats of diamonds with lots of potential for growth, the Q1-4 deposit is big by Canadian standards, Armstrong added.

Population of fancy coloured diamonds
North Arrow has also confirmed that the deposit includes a population of even more potentially lucrative orange-yellow diamonds that, when cut and polished, have been certified at the Gemological Institute of America (GIA) in New York as being ‘fancy’ in colour and ‘vivid’ in terms of colour intensity. This last descriptor is the best result one can hope for, the company said.

“They are of high value, and they would be of interest in the very high-end luxury jewellery market,” Armstrong noted.

“We know enough about the white diamonds that it would be pretty tough for them to make this deposit work economically on their own,” he said.

“The purpose of the new sample is to give us enough of these coloured diamonds to verify with certainty, earlier observations that the orangey-yellow and yellow diamonds get bigger than the white diamonds – what we call a coarse distribution”.

“The risk for this deposit now isn’t about its size or its location or whether it exists or not, it’s on these coloured diamonds,” Armstrong added. “A 2,000-tonne sample is a big sample, and the results are going to be meaningful. If we can confirm the consistent presence of those bigger coloured diamonds in the deposit, that will have a positive impact on the potential of the deposit.”

The four biggest diamonds recovered from previous samples at Q1-4 have been all part of that coloured population, from about 3.5 carats up to about 5.25 carats, Armstrong said. Now, North Arrow needs to see more such stones come from the current sample to better estimate their size and quality potential.

A strong partner in Burgundy Diamond Mines
The presence of coloured diamonds in the Q1-4 deposit and their tendency to be found in the larger sizes is what caught the attention of Burgundy Diamond Mines, which is putting its money behind North Arrow’s exploration endeavours by bankrolling the $5.6 million, 2,000-tonne bulk sample currently being processing, in return for a 40% interest in the Naujaat project.

Once the sample result is in, with a clear indication of the diamond recoveries including the colour and size profile, Burgundy will decide whether to continue in a joint venture with North Arrow. The companies also have in place a non-binding Letter of Intent for Burgundy to earn an additional 20% of the project by funding a subsequent 10,000-tonne bulk sample.

“Burgundy is a very strong partner; they’re based in Australia but are very familiar with evaluating diamond deposits and operating in Canada,” Armstrong noted. “We’re very like-minded in terms of how we should be going about evaluating the Q1-4 deposit and they’ve taken a very keen interest in coloured diamonds as well and this deposit really fits with that profile.”

While the coloured diamonds may have caught the attention of companies like Burgundy as well as strategic North Arrow investors such as Lukis Lundin, Ross Beaty and Thomas Kaplan, Armstrong said another reason for investors to pay attention is the current dynamic in the diamond market, highlighted by Paul Zimnisky Diamond Analytics, an independent data analysis and consulting proprietorship specializing in the global diamond industry.

In his recent November report, Zimnisky reported on a continued improvement in the diamond market, stating global mining giant De Beers had raised rough prices at almost every sale in 2021; Signet Jewelers, the largest jeweler in the US, also raised sales guidance again for the fiscal year ending January 2022 – marking the fourth hike since April; LVMH, the world’s largest luxury conglomerate, saw jewelry sales increase 18% year-over-year for 3Q; and China’s largest jeweler, Chow Tai Fook, had announced plans to continue their rapid rate of adding new locations, foreseeing 7,000 total points of sale by 2025, from 4,850 as of June 30, 2021.

Global diamond production curtailed
“It has been a bit of a struggle over the last number of years and one of the things that COVID-19 has done is that through the downtime the diamond pipeline cleared itself out,” Armstrong said.

While Rio Tinto’s decision to close its Argyle mine in Western Australia wasn’t because of the coronavirus (COVID-19) pandemic, it still removed 5-10% of global production. And several mines have curtailed production or gone out of production as a result of COVID-19, reducing supply to below the peaks reached in 2016/2017.

Russian miner Alrosa, the largest producer of rough diamond worldwide, warned this past October that global stocks of rough diamonds are nearing multi-year lows, as demand continues to increase with no meaningful supply response from miners.

“We’re seeing rough prices up about 20% this year,” Armstrong continued, “Prices are robust and that should start trickling down to the junior explorer side”.

While much hinges on the Q1-4 sample, North Arrow hasn’t placed all its stones in one basket. It is also evaluating diamond-bearing kimberlites at other projects, including a planned drill program at its Pikoo discovery in Saskatchewan, Mel at Nunavut, and Loki and its LDG joint-venture projects in Canada’s Northwest Territories.

“There’s going to be ongoing exploration and evaluation of our earlier-stage projects, but our focus is really in the short term, particularly over the next few months, on this sample, getting it processed and the results that come from it,” Armstrong said.

The company is also preparing for a larger 10,000-tonne sample, probably in 2023, that may include on-site processing facilities to produce faster results.

Not a short-term spike
Armstrong said he believes that the diamond market will remain buoyant, well beyond the time it takes for exploration of the Naujaat project to progress into the potential development of a mine.

“This isn’t a short-term spike; when we look at where future supply could come from there are not many projects that are on the drawing board to go into production,” he said.

There’s only one project - in Angola - that’s widely acknowledged to be in the position to produce in excess of a million or two million carats per year, he said. While large, with current global annual rough production of about 117 million carats, that only equates to between 1% and 2% of global production, he added.

“Naujaat is an inventory right now of more than 20 million carats so it’s sizable and if it works it’s capable of that sort of production profile,” Armstrong said. “It is a significant deposit and it’s the only project in Canada that has that kind of diamond inventory that’s not already under the control of a mining company."

In terms of the overall diamond market, he doesn’t believe the current recovery is a short-term blip as a result of a supply bottleneck or unusual demand that could be short-lived, but rather a longer-term trend.

“The timing of our results coming out towards the end of this calendar year and into the first quarter of 2022 dovetails really well with the supply/demand dynamic,” Armstrong