Diadem Resources Ltd. continues to focus its efforts on the Franklin diamond exploration project. The work currently is being conducted north of 69 degrees, 25 minutes North Latitude on the Parry Peninsula near Paulatuk in the Inuvialuit Settlement Region of the Northwest Territories (near the Mackenzie River delta). The company has identified 18 new high priority drill targets, in addition to the 10 known kimberlite pipes already identified and previously drilled. Of the known, previously-drilled, kimberlite pipes, six were diamondiferous.

The Inuvialuit Settlement Region is unique in the Canadian Arctic – it was the first aboriginal settlement in the Arctic and because of the sovereign nature of the region, where a cost and benefits agreement is a precursor to exploration and development, Diadem is already ahead of the game because it is a party to such an agreement under which its rights and obligations already are set forth clearly.

Diadem has formed a joint venture with Darnley Bay Resources Ltd. (DBR) for diamond exploration of the Franklin project. Diadem is the operator of the joint venture. Diadem has expended over $3.2 million on exploration to date, including on land south of where work currently is being carried out. It must yet spend another approximately $750,000 by June 30, 2008 to earn an undivided 50% participating interest in the selected lands, with DBR holding the other 50%. Once Diadem has earned its 50% interest, DBR is required to contribute its share of costs, except that Diadem has agreed to carry DBR for the first $1.0 million of its share, to be repaid without interest out of DBR’s share of revenue from a diamond mine. The Inuvialuit Development Corporation has the right to back into the project on a participating basis for a 10% working interest (with dilution to be shared proportionately by Diadem and DBR) when a decision is made to place a diamond mine into production. If a decision is made to carry out a feasibility study, Diadem will have the right to fund a feasibility study, and if the property is placed into commercial production Diadem’s interest will increase to 75% and the DBR interest will decrease to 25%.

Originally, DBR was attracted to the area by the discovery of the strongest isolated gravity anomaly in North America. Many of the major magmatic nickel-copper and platinum group element deposits in the world are hosted by mafic intrusives. In exploring the gravity anomaly, an aeromagnetic survey of the area revealed a number of anomalies with characteristic kimberlite signatures. These results prompted a diamond-exploration program in an area of 240 km by 300 km.

Diamonds have been found in till and drill-core samples, and the results to date confirm the presence of a diamond-bearing mantle. The Franklin diabase dike swarm, which has focused, and to some degree constrained, the kimberlite intrusions in the Paulatuk area, is analogous to the Mackenzie dike swarm in the Central Slave District (which is host to Canada's first producing diamond mines, Ekati and Diavik). A mini bulk sample of about 2.5 t was collected and analysed by De Beers and 157 micro diamonds were recovered. One of the kimberlite pipes has been dated at 270 million years (Permian), older than the majority of the Lac de Gras pipes (65 million years) and closer in age to the Jericho pipe (172 million years) of Tahera Corp in Nunavut and the Victor pipe in the Attawapiskat area (136 to 190 million years) in the Hudson's Bay lowlands of Ontario.

Exploration encouragement
Exploration results suggest that it is "highly likely" that many of the kimberlite indicator minerals analysed over the past year or so originated from diamond-bearing kimberlites. Based upon this information, Diadem's management has now identified 18 new, high-priority drill targets in addition to the 10 kimberlite pipes already identified.

A geochemical survey has been carried out, with three main goals. First, to provide additional detail in areas where anomalous kimberlite indicator mineral results had been obtained from previous regional surveys. Second, to test geophysical anomalies identified during previous airborne and ground geophysical surveys. Third, to identify the indicator mineral signature of the known kimberlite pipes. In total, 223 samples of glacial till were collected, 163 in the vicinity of airborne and ground magnetic anomalies, within the Parry Peninsula Kimberlite Field, which exhibited signatures similar to those recorded over known kimberlite pipes and the other 60 in the vicinity of existing till sample anomalies and previously unsampled areas within Diadem's central claim block.

Testing procedure
Heavy mineral concentrates generated from these samples were examined optically for the presence of kimberlite indicator minerals (KIMs), principally pyrope garnet, chrome diopside, picroilmenite and chromite. A total of 527 KIMs identified were then subjected to electron microprobe analyses to determine their mineral chemistry and kimberlite provenance. The results were plotted as metallic oxide ratios in chart form referenced to a diamond inclusion field (DIF) created from the chemistry of the various KIMs from known diamondiferous kimberlites. The results from the analyses of the pyrope garnets were plotted as metallic oxide ratios against established chemical domains for G10, G9, eclogitic and Iherzolitic garnets.

The chemical composition Cr2O3:CaO (wt%) of eleven of the pyrope garnet grains analysed fell within the G10 pyrope domain, and the bulk of the remainder fell within the G9 pyrope domain. A small number of the garnets were found to be eclogitic with chemical compositions TiO2:Na2O (wt%), FeO:MgO (wt%) and TiO2:CaO (wt%) that fell partly within, or immediately adjacent to, the diamond inclusion field. The chemical composition Cr2O3:CaO (wt%) of over 95% of the chrome diopside grains fell within the diamond inclusion field.

Sixty-six grains of ilmenite were analysed and, when plotted, were found to form a tight cluster with MgO compositions ranging between 10 and 14 (wt%), with Cr2O3 compositions up to 7 (wt%) exhibiting a reducing trend, and therefore a strong indication of diamond preservation. Of the 85 grains of chromite analysed, the chemical composition Cr2O3:MgO (wt%), one fell within the diamond inclusion field and, although the others plotted outside the diamond inclusion field, they exhibited a strong kimberlitic trend.

The management of Diadem is encouraged by the results of the electron microprobe analyses, which suggest that it is highly likely that many of the kimberlite indicator minerals analysed originated from diamond-bearing kimberlites.
In 2006, Taiga Consultants Ltd. was commissioned by Diadem to prepare an assessment report of the 2005 geochemical and geophysical exploration program. Among other things, Taiga: "In addition to the ten known kimberlite pipes in the Northern Block, there are eleven high-priority targets for further exploration and two new targets identified by the 2005 airborne survey". Since issuing the report, Taiga has identified an additional five potential targets, bringing the total to be drilled to 28. In the report, Taiga said "Till sample kimberlite indicator mineral counts and mineral chemistry will assist in prioritizing drill targets but ultimately geophysical signatures should be used to define drill targets within areas of anomalous indicator mineral counts". Taiga concluded: "the known kimberlite pipes at MT9, MT100, MT101, MT103, MT104, MT105, MT106, MT107, MT108 and MT109 should be further tested by diamond drilling. The objective of the drilling should be to outline the dimensions and size of the pipes and also to collect larger samples for micro-diamond analysis.”

In recognition of the strong results from exploration to date, Diadem is developing a detailed diamond drilling program, with an estimated budget in the range of C$1.5 million to C$2.5 million. This work will include a further ground magnatometer survey to accurately delineate the targets proposed to be diamond drilled to test the known diamondiferous kimberlite pipes and the highly prospective geophysical targets. The latter have magnetic signatures similar to known kimberlite pipes, and around which kimberlite indicator minerals have been found down ice. Contractors to carry out the ground magnetometer survey and the drilling have been contracted and it is expected that work will recommence in March, 2008.

In order to minimize mobilization costs, in July 2007 Diadem transported bulk supplies and consumables (including diesel and helicopter fuel, calcium chloride and propane) to Paulatuk. These supplies will be required in the proposed 2008 exploration program. Taking advantage of the Project’s good access to water transport, these supplies were delivered by barge from Hay River, NWT via the MacKenzie River and Arctic Ocean to Paulatuk. These supplies are now in place in Paulatuk awaiting commencement of the program.