Karelian Diamond Resources - Re: KDR Stream Log - IMMINENT Karelian’s diamond exploration program,...

IMMINENT Karelian’s diamond exploration program, which has already delineated the largest known diamondiferous kimberlite in Finland, at Seitaperä in the Kuhmo region. Karelian Diamond Resources plc reports that the Finnish Mining Authority has granted the Finland-focused diamond exploration company three exploration Claim Reservations in the Lapland region of the country. In all three areas where Claim Reservations were granted, kimberlitic indicator minerals have been recovered, says Karelian. The company applied for the Claim Reservations, which grant exclusive rights to apply for exploration claims within the reservation area, after analyzing the region’s airborne geophysics as well as till sampling and data that were made available under an agreement with Rio Tinto Mining and Exploration Limited. The new Claim Reservations are a further addition to Karelian’s diamond exploration program, which has already delineated the largest known diamondiferous kimberlite in Finland, at Seitaperä in the Kuhmo region. “I am delighted that these additional Claim Reservations were granted, all of which are considered to have potential for diamonds. The Company’s exploration programme is designed to find diamond deposits similar to the world class ones found in similar geology across the border in Russia,” says Karelian Chairman Professor Richard Conroy. Professor Richard Conroy, the company’s chairman, sounds distinctly upbeat as he sets the scene for the next stage of Karelian’s development. The reasons for his optimism are twofold: confidence in the underlying asset portfolio, and an awareness that he has plenty of support in the market. A fundraising announced in early December brought £750,000 into the company’s coffers in early January, but was swiftly followed by a further £550,000 raise which was rapidly organised to soak up additional demand. During the course of that money raising month, Karelian’s share price rose to a two-and-a-half year high of 3.975p, before falling away subsequently to the current 1.25p. What’s behind this resurgence in the market? First off, there’s the improved sentiment towards diamonds. Over at SBG Securities analyst Tim Clark is forecasting Chinese demand for rough diamonds to increase at a compound annual growth rate of 8.5 per cent over the next four years. Global demand he pegs somewhat lower, but even so, and even allowing for some increase in supply from the majors the market will remain in deficit throughout for several years. So far, so good. China, he notes, had a market share of nearly 70 per cent in iron ore in 2012, of over 40 per cent in copper, of nearly 30 per cent in platinum and gold, but less than 10 per cent in diamonds. Karelian drill rig in Finland Karelian drill rig in Finland Will that change? You betcha. But for now, the US remains the largest consumer of diamonds, accounting for nearly 40 per cent of global jewellery demand as against China’s 13 per cent. Note, though, that the US economy is improving, albeit at an uneven rate, and that Chinese growth rates remain largely steady at 7.7 per cent. According to SBG’s own calculations, for every 10 per cent increase in US incomes, diamond demand increases by 1.4 per cent. Nice to have such an exact correlation to work with, but even if a margin of error is required, the trend is clear. Which is why the big three – De Beers, Alrosa, and Rio Tinto – are all increasing production. This all bodes well for any one further down the pecking order in the diamond space, even a company as far down as Karelian. But of course it helps if your major shareholder – Professor Conroy himself, with 29.1 per cent – is independently wealthy and able to dip into his own pockets when need be. In this case, though, there has been additional interest, and that’s heartening, although allowing (ahem) for rational markets not altogether surprising. The company has been searching for diamonds on the Finnish side of the Karelian craton for some years now, and is one of the few juniors to have stayed the course throughout the boom and into the subsequent bust. Partly that’s been thanks to Professor Conroy’s largesse, but’s also related to the company’s ability to run a tight ship and burn minimal cash and to the extensive potential of the data it has made available to its geologists. “We have an agreement with Rio whereby they have provided us with a vast mass of data”, says the Professor. “We expected a lot, but never this much. They have provided over 53,000 samples that they and Ashton have taken.” Ashton was the former leader in Finnish diamond exploration before it was gobbled up by Rio back in the 1990s. Other companies have come and gone, but between them it’s Ashton and Rio who have been writing the definitive book on Finnish diamonds. Until now. Rio retains a back-in right, but it’s Karelian that will now make all the running, casting envious glances across the Russian border to the famous Grib pipe and others already well-established as economic. Indeed, as the Professor points out, Alrosa has recently raised a couple of hundred million dollars, talking about proving up more projects in the White Sea area, which also includes the Karelian Craton. All of which only goes to spur on the team at Karelian Diamonds. “Our chaps have been working steadily through the Rio data”, says the Professor, “and relating it to our own more modest but more specifically-focussed exploration in which every penny had to count. And now we have begun to start taking up and making various claims.”