Contact hunts for viable mine.

There is a bit of a staking rush in the Timiskaming-Cobalt area as juniors and larger mining houses scout for viable kimberlite pipes.

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The story of diamond exploration in Kirkland Lake and Timiskaming has been around since De Beers and others began prospecting in the 1980s. Until Contact Diamond Corp.'s recent discovery of Pipe 95-2, which hosts 15 carats per 100 tonnes, the diamond potential was thought to be quite low.

Kimberlites are expressions of deep-rooted volcanic activity that starts way down in the mantle of the Earth. They punch through the Earth's surface violently like shotgun blasts.

In the northeast, these kimberlites form in small clusters following an imaginary line from Attawapiskat on the James Bay Coast down through Kirkland Lake, Cobalt and extends down to southern Ontario, through to New York.

The Lake Timiskaming Structural zone, which includes the Cobalt area, is part of a larger, more recognizable northwest-southeast geological belt of faults called the Superior craton.

Contact Diamond has a diamond project near the Ontario-Quebec border near the community of Temiskaming Shores. Eight kimberlite pipes have been discovered since 1995, six of which have proven to be diamondiferous. In 2003 and 2004, the company undertook a mini-bulk sample program and came up with commercial diamonds at marginally sub-economic grades (Pipe 95-2).

"It is almost economical given the cost of mining," Mathew Manson president and CEO of Contact Diamond says.

He spent eight years with Aber Diamond Corp. examining Diavik diamonds in the Northwest Territories.

"They are as good as anything coming out of the Northwest Territories."

The company has approved a budget of $2 million for exploration in 2006. They have expanded their land position to over 113,000 hectares of staked claims. An estimated 49,000 hectares includes the Elk Lake area, along with optional claims and mining patents covering nine geophysical targets. The 2006 program entails till sampling, airborne geophysics, drill testing and more exploration around the Lundy and Klock properties, where studies indicate the potential presence of more kimberlites.

"We think there are about five or six to be found and that is based on data showing indicator minerals that are unexplained by any kimberlites discovered."

The job is to find more kimberlite through critical mass to make the low-grade diamonds economical or alternatively, find something slightly better than Pipe 95-2.

Diamond supply is limited since no new mines have opened for over a decade.

By mapping out the predicted growth of the world economies and marrying it with the stable diamond habits, there is an expected shortfall, Manson says.

"That shortfall will be met with diamond prices going up."

If experts are correct, the 95-2 pipe could become economical in the next 10 years, when the price of diamonds is expected to increase an average of two or three per cent annually.

www.contactdiamond.com

By KELLY LOUISEIZE

Northern Ontario Business