Editor & Publisher: Robert Bishop
Managing Editor: Brent E. Vogel

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One of the best-known ways for markets to go from bad to good is for a junior company to announce a major dis-covery. A discovery spawns an area play, reminds investors that extraordinary opportunities for profit still exist in the sec-tor, and reliquefies a market where a prolonged period of losses favors capital preservation over speculation. In the current climate, there's no one major discovery to point to, but this market does feel as if it's getting better on several fronts. Some are obvious, and some are much less so. Beginning with the obvious, positive factors in today's market include:

• Technically, tax loss season lasts into late December. The unnatural events of this year, however, left most investors in a losing position early in 1997, and as a result, investors have been afforded an unusually long period to rationalize their portfolios. The net effect, it seems to me, is that much of the market's rationalization is already behind us. While the price history of some stocks will make them "heavy" traders right up until the end of 1997, a number of stocks recently appear more capable of rising in price, and this can only help a market that's on the mend­as opposed to one that is more likely to get worse before it gets better.

• Gold and silver prices, led by silver, have much to do with this prospective change in market psychology. These barometers have cried "wolf" often enough that significant follow-through will be required to make believers of many who've been down this path before, but the market strikes me as having a perceptibly different "feel" to it than at any time in recent memory, even allowing for yesterday's $6.00 decline in gold. The action of the TSE and XAU indexes, in the face of a pullback in bullion, strikes me as sending this message: the market believes, and is now viewing market pullbacks as buying opportunities­not as new opportunities to get short or to indiscriminately sell stock. While new long positions have been the story in the silver market, short covering has been the story in gold. While modest short covering is not going to fuel a new bull market, it does reflect the beginning of a change in market psychology. The July washout, the September re-test (as old friend Ian McAvity says, "They re-opened the trap door and nobody jumped"), and the current "constructive" action are not the stuff of dramatic market reversals, but these events are one way a market gets better.

• The Alberta diamond play cleared a significant hurdle in mid-September, and while the area play hasn't yet kicked into high gear, the high diamond counts reported by Ashton Mining and the ease of exploration in Alberta suggest that this play will become very active over the next year. (Although I own a few of the Alberta area players, I would lean toward owning Ashton [ACA.T/$5.30] on pullbacks, rather than backing up the truck on the wannabes.) It's symptomatic of how far diamond stocks have come in the last few years that a person can pick and choose their diamond plays (more about which later), but as for the Alberta play, I have not been on the ground floor and couldn't do a better job than John Kaiser is doing here anyway (Kaiser Bottom Fishing Report, 510-631-9748, fax 631-9753). Area plays always evolve in stages, and if Ashton can report long intersections of diamondiferous kimberlite sporting diamond counts approaching those reported in mid-September, the Alberta diamond play is one variable that will go a long way toward helping the resource stock market get better.

• Three years ago, Diamond Fields did a lot to make a bad market better, and the area play that fed off that discovery produced some outlandish profits for investors in the second quarter of 1995. Since then we've had Cartaway I and II (the sequel just last week), but importantly, we've also seen Teck and partner Donner Resources (DRZ.V/$1.18) report thin lenses of massive sulphide mineralization that contains "...copper, nickel and cobalt values similar to Voisey's Bay...." This isn't the next Voisey's Bay just yet, but it is the first drill core from the region that has yielded massive sulphides with grades approaching those found by Diamond Fields. Another way to look at this news is that virtually all the drilling to date on this project has yielded wispy smoke. In contrast, the news reported on September 30th means that there's a fire down there somewhere. A third drill will be on site this week, and Donner and partners Major General (MGJ.V/$0.39), Northern Abitibi (NAI.A/$0.60) Cypress (CYP.V/$0.45), and NDT (NDE.V/$0.49) are among the potential beneficiaries of a discovery hole. Volume and volatility have accompanied this news­a plus by any measure­but a discovery hole on a Voisey's Bay look-alike would be a huge boost to the overall market.

• I know I sound like a broken record on this subject, but takeovers will also be of great assistance to the market. In search of a catalyst, the recent action in gold and silver is the kind of thing that may help to motivate the majors to acquire projects that they must if they are to continue to grow their reserves. The calendar (tax loss season) won't be working in favor of the majors much longer, and with the precious metals­and the share prices of senior companies­again showing signs of life, this is the kind of activity that can serve as a catalyst for movement on the takeover front. I continue to view Francisco as the most likely takeover on our list, with Crystallex (KRY.T/$6.70) likely to be a target upon re-affirmation that its wholly owned subsidiary is indeed the legal claimholder to Las Cristinas 4&6. While I have presented the downside as $2.50-$3 for KRY, I now have considerable difficulty in seeing how the company will not at least be a significant player in the future of the Kilometer 88 region. As such, I don't think that KRY's downside is meaningful; importantly, the upside remains intact, with resolution likely not far away. I'm hoping next week brings at least some measure of closure, as I'm going to South Africa the following week. Although not on our list, Mar-West (MSR.V/$2.60) is a stock that I've owned for some time, and is another name on the short list of acquisition candidates. I wouldn't be surprised to see a Mar-West takeout get underway before some of the others occur. Predicting the timing of acquisitions is much more problematic than predicting that they will occur, but with that said, one acquisition is likely to lead to more of them. With any help from bullion, we could actually see senior companies falling all over themselves to get some of these deals done.

Like a fisherman with many lines in the water, the current market offers many opportuni-ties to improve on itself, including several beyond those just cited. I regard the following story on the emerging Greenland diamond play as one more way for the market to build on exploration suc-cess, if not this fall, then probably in the first half of next year. This is an unusual area play for a number of reasons, not least of which because diamonds were found in advance of locating a po-tential source. The discovery of such a source is what will take this play to the next level, and in my view, provide numerous opportunities for in-vestors to profit. In much the manner of the Lac de Gras play over five years ago, Greenland seems likely to provide considerable excitement in the months, and hopefully, years ahead.

It will be six years ago next month that Dia Met announced the Point Lake diamond find in the Northwest Territories. This discovery was greeted with considerable skepticism, in large part because there was no precedent for diamond discoveries in North America. That a small Vancouver junior had announced this discovery, in what proved to be the late stages of a multi-year bear market, did not add to the credibility of this find. There are undoubtedly still skeptics on the Northwest Territories diamond discoveries, but after a tour of the Aber and Dia Met projects two weeks ago, I can't imagine how naysayers could explain away the 750-person Dia Met facility that's under construction, or the fact that the results from these two projects puts Canada indisputably on the threshold of becoming an important diamond producer.

Since the Dia Met discovery was announced in November of 1991, diamond exploration has become a legitimate sector of the resource market, with Canadian companies exploring for and developing diamond projects all over the globe. Among the many diamond companies spawned by Dia Met's discovery, Diamond Fields Resources acquired marine diamond concessions in Namibia, two producing mines in South Africa, and among other exploration projects, was searching the drainages of northern Labrador for indicator minerals, in hopes that such "pathfinders" might lead to diamond discoveries. That search for diamonds, of course, led to the discovery of the world's richest nickel deposit, at Voisey's Bay. In turn, this major discovery led to a predictable area play, and beyond the nearby ground, to the question "where else?" The answer, for a small handful of companies, was GREENLAND.

Beginning in the 1995 field season, Diamond Fields, Inco, Cominco, and junior explorer Major General were among the companies that mounted a search for nickel in Greenland. The rationale behind this was that, owing to plate tectonics, Greenland is the eastern extension of the Canadian Shield. Additionally, the area is underlain by an Archean craton similar to that of the Slave Geological Province, in the Northwest Territories. The search for nickel in Greenland was shortlived, but with a history of small diamonds recorded by the Geological Survey of Canada in the 70s, and with the geological conditions ripe for kimberlite emplacement there, the search for nickel quickly gave way to a focus on diamonds. The abundance of circular lakes in Greenland, and their proximity to major geological structures, led Major General consultant John Ferguson to make comparisons to the Northwest Territories, which in the latter part of the '95 field season led to indicator mineral sampling programs around 31 lakes. Eight of these samples "kicked" for diamond indicator minerals, and the search for diamonds was on.

Other than Diamond Fields, Major General was the first junior into Greenland looking for nickel. Platinova soon followed, and because company president Bob Gannicott is sometimes referred to as "Mr. Greenland," Platinova had a bit of an edge on many of its peers. Gannicott couldn't help but notice that Quadrant, a private company in partnership with Major General, had farmed out some of its ground to Monopros, the Canadian exploration arm of De Beers. The similarity of Greenland to the Northwest Territories also was not lost on Gannicott. He is an Aber director, and was in on the ground floor of the NWT play. For Gannicott, diamonds in Greenland did not require the great leap of faith it might have for others. As a result, Platinova had soon amassed the largest land position in the country, a figure that currently stands at 8.4 million acres (almost 34,000 sq. km.), all but 1.1 million acres of this total subject to joint-ventures with other companies. The next largest land position­4.6 million acres­is held by Fjordland, which was formed by Major General directors Dick Atkinson and Victor Tanaka, when it became apparent to them that funding Major General's existing programs precluded broad exposure to a major diamond exploration program in Greenland.

The Greenland diamond play is unusual for a number of reasons. Foremost among them is that an area play has emerged in advance of a major discovery, rather than the usual discovery that's soon followed by an area play. The history of diamond occurrences, and the similarities and recent example of the Northwest Territories help to account for this situation. As the Northwest Territories play developed, you'll recall that the early focus was on "indicator minerals," the garnet, ilmenite, chrome diopside, and other of minerals whose occurrence points to kimberlite discoveries to follow. In Greenland, these minerals were in abundant supply, but as reported in these pages in September of 1996, diamonds were also being found in kimberlite boulders and glacial till. Diamonds are, of course, the best of all indicator minerals, and their discovery at such an early stage is an exceedingly good sign of where the Greenland diamond play might be going.

As for the indicator minerals themselves, their abundance and size in Greenland has always been viewed as a good sign, but the message they convey has been even more emphatic: the G-10 garnets that confirm the diamondiferous nature of their kimberlite host rock have been of the highest quality, and the same can be said for the ilmenites, whose value is in determining the state of diamond preservation. Even more than finding diamonds at an early stage, the interpretation of indicator mineral chemistry is what has gained the attention of diamond explorers since the Greenland diamond play began to unfold. That's been the message I've been receiving for over a year now, and it was reiterated in August when Dia Met formally entered the Greenland diamond play. The DMM release said that its sampling had "detected kimberlite indicator minerals at least as favorable" as what it had found in the Northwest Territories. I saw DMM chairman Chuck Fipke on site at the Koala diamond project two weeks ago, where the mineral chemistry teaser of years gone by has given way to construction of a massive diamond mine; In discussing Greenland, Fipke emphasized the high quality of the G-10 garnet population, and said that sampling has produced a greater number of the highest quality G-10s at a much earlier stage than occurred in the NWT. The buzz on the subject of mineral chemistry is what first got my attention over a year ago, and according to Fipke, mineral chemistry­and what it says about the diamonds that will be found­is why I believe the Greenland diamond play is so deserving of investors' attention.

So far, Aber-Platinova is the only joint-venture that has done any drilling. Ten targets were explored earlier this year, with no kimberlite discovery to show for it, but it was established that geophysics would work in Greenland. Two ultra-mafic diatremes were located, as well as some biotite-rich mafic pods. Exploration may not be as simple as it proved to be in the early days of the NWT play, but it's also simply too early to be drawing many conclusions about how difficult it will be to locate the kimberlite pipes that almost certainly are there. The recessive nature of the kimberlite dykes that have been located, and the profusion of circular lakes that also suggest a recessive host rock, bodes well for the discovery of kimberlite pipes beneath some of those lakes. A kimberlite pipe discovery is the missing link at this stage, and most view it as only a matter of time before such a discovery will be made.

While the experts tell me that there is no place in the world where kimberlite dykes are not also accompanied by kimberlite pipes, diamond expert Dr. John Gurney points out that in China and Sierra Leone, strong linear features favor the emplacement of dykes over pipes, something that investors with exposure to the Camsell Lake region of the NWT are all too familiar with. In China, this is thought to be caused by the craton bumping up against the Himalayas, and in Sierra Leone, by an anticlinal arch that favors the emplacement of linear features (dykes) over pipe sources for diamonds. China's diamond mines aren't too exciting, but Sierra Leone does host some excellent pipes, so even this attempt at devil's advocacy comes up short. The lure of mineral chemistry, known diamond occurrences, and a map shot through with small circular lakes is what gives explorationists optimism that the sources of those diamonds will be located. I'm betting pipes will be found, but we can't be too presumptuous about where the Greenland diamond play is going until they are found.

Viking explorers with a flair for marketing, and who didn't let the truth stand in the way of a good story, first gave Greenland its name. The hope was that the name would attract settlers, and what few of them came located along the southwestern coast, the only place where anything green could be said to exist­and then only during the summer months. Greenland is a province of Denmark, the largest island in the world, and fully 85% of its land mass is covered by ice. The icecap averages over one mile in thickness, and precludes diamond exploration in all but the southwestern corner of the country. There are several base metals projects in Greenland, and as with the diamond projects, all occur on the country's coastal boundary. The Greenland diamond play occurs at the same latitude as the NWT, but Greenland's winters are milder, with freezeup also coming slightly later. There is a strong likelihood that at least one drill program will be underway over the next month, with ice-based programs starting as early as January. Diamonds in Greenland are already a reality, but this story awaits a pipe discovery before the market is likely to embrace it. When that happens, the market is likely to focus on several points, among them:

Serious diamond players are already on board; Monopros, Dia Met, Aber, and others rumored to follow demonstrate that Greenland has captured the attention of the companies most knowledgeable in this sector. Dia Met and Aber may not provide terribly leveraged exposure to diamonds in Greenland, but they are recent enough success stories that their presence here is not likely to be lost on the marketplace. When Aber and Dia Met began to talk about diamonds in 1992, the market had to scale a learning curve before it would understand and embrace a diamond stock. If there's an impediment to being involved with a diamond stock today, it is because there are so many to choose from, not because there is an aversion to diamonds due to lack of investor knowledge.

The ground is gone, which is something that usually doesn't occur until after a significant discovery is made. The recent experience in the NWT and the science of diamond exploration account for this, but as land reductions must be made by December 31, there are likely to be new additions to the play. At this stage, however, Greenland promises to be an extremely concentrated area play, one that lends itself to a "basket approach" to gain exposure to exploration success.

Management overlap is another way of saying that the Greenland diamond is cliquey, if not downright incestuous. There are numerous examples of multiple directorships, with Aber's Gren Thomas serving on the boards of Fjordland, Aber, and Platinova. These relationships will facilitate deals as the play evolves and ground must be dropped. The small number of companies in this play will also produce a concentrated area play (without dozens of companies diluting the flow of speculative funds), and overlapping management further reinforces an "own some of each" approach to the Greenland diamond play.

In 1997, the year of Bre-X, et. al., it should come as no surprise that the shares of most of the Greenland diamond explorers are trading near their lows. With the pace of news on the verge of accelerating (even if drilling does not occur until 1998), Greenland represents a ground-floor diamond play with all the correct technical ingredients in place, the right players on the board, and not incidentally, a closely held play that permits a more relaxed approach to this evolving story. I have owned Platinova and Fjordland Minerals for some time, the former at a loss, the latter at a modest profit, and when this has been distributed via the newsletter, I plan to add Lexam and Canadian Mountain Minerals to my portfolio. The liquidity in the following group of stocks is a mixed affair, but common sense should prevail and investors should try to acquire these stocks at only slight premiums to current prices. Most of the Greenland companies will not have exposure to a drill program until early 1998, so there should be a window of opportunity to pick away and acquire positions in these shares. As I'm bringing the following group of stocks to your attention at this time, I plan to follow this group and perhaps others as the play evolves. I urge you to gain at least some exposure to this play before a kimberlite pipe is located. That event will prove pivotal and will be accompanied by higher prices across the board. The following brief reviews of companies will aid you in the acquisition of a Greenland diamond stock portfolio.

Platinova (PAS.T/$1.60) ­ I view Platinova much as I did Aber five years ago: good people, huge land position, and a substantial fallback position in its other projects. Whereas Aber's fallback position in 1992 was a portfolio of speculative projects, Platinova holds a 100% interest in the Peary Land Zinc project, where the company's goal has been to expand the high-grade portion of an overall resource of 20 million tonnes of 7.0% zinc and 1% lead. In early September Platinova reported that "it is clear that the higher grade resource has been significantly expanded," and several majors have been in discussions with Platinova on this project. On the central west coast of Greenland, the Black Angel zinc-lead-silver mine produced from 1973 to 1990, and Platinova has determined that remaining ore reserves may lend themselves to shipping to a custom concentrator, and a detailed engineering study is underway on this project. Peary Land and Black Angel are substantive projects, but my focus is on the company's diamond projects. Platinova's early land acquisition program has resulted in the largest land position in Greenland, and exisiting joint-ventures with Fjordland and Lexam. On the project joint-ventured to Lexam, the partners have recovered diamonds and, with airborne data being interpreted daily, I think there is an excellent chance we'll see some drilling by these partners, most probably beginning within the next 30 days. That remains a prospective comment, but because I think it's likely, a near-term drill program also argues for a more aggressive posture toward the Greenland diamond play. As was true for Aber five years ago, Platinova's land position makes the company extremely well positioned to benefit from a discovery, on its own or with one or more partners. The Greenland diamond play aside, Platinova is the largest land holder in Greenland, and with the country making major taxation and mineral policy changes that favor development, it probably won't hurt that the country is also a significant Platinovae under two different symbols, PAS and PVA.S, both listed on the Toronto Stock Exchange. The PVA.S shares are special shares that are exchangeable for one common share of Platinova; in effect, these shares are the equivalent of a depository receipt share. Generally, the PAS shares enjoy greater liquidity and thus should be favored for purchase.

Lexam (LEX.M/$0.55) ­ Lexam is a company whose shares were dividended out to shareholders of Goldcorp, whose management is also responsible for Lexam. Goldcorp president Rob McEwen also serves on the Platinova board. Lexam holds an option to earn a 50% interest in a 3,390 sq. km. block of ground held by Platinova, which as noted above, recently yielded two microdiamonds from a dyke system that has been traced over 2.5 km. This is believed to be the first discovery of diamonds in place in Greenland, and together with earlier discoveries of diamonds, is beginning to represent a corridor of prospectivity, much like the so-called "corridor of hope" within which most of the diamond discoveries in the NWT were located. Because airborne surveys are near completion and are being interpreted daily, the chances of matching geochemical and geophysical targets­and drilling them yet this year­are considered excellent. As such, Lexam probably offers the greatest near-term leverage to diamond exploration in Greenland. Were Greenland not in the picture, Lexam also holds a 100% interest in the San Luis Basin oil play, in Colorado (they found oil while looking for gold), and interests in base metals and coal deposits. My expectation, however, is that diamonds will be what commands the attention of the market in the months ahead. (416) 865-0326, fax 361-5741.

Fjordland Minerals (FML.V/$0.55)­ Fjordland shares common management with Major General, and as mentioned earlier, was created when it became apparent that MGJ could not continue to fund a high-cost diamond exploration program. (Major General still holds 2,500 sq. km. of ground, but because this isn't broad exposure and because it is already widely owned, I'm not suggesting new buying in MGJ at this time. I do, however, expect the stock to benefit from its exposure here, and perhaps to the Voisey's Bay area as well.) With exposure to 4.6 million acres, Fjordland's ground represents the second largest land package in the Greenland diamond play. At $2.5 million, FML has the region's largest budget, with most of this total devoted to earning a 50% interest in a 3.6 million acre block held by Platinova. A steady stream of results from sampling can be expected to flow over the next couple of months. Combined with airborne geophysical surveys, drill targets will emerge and be followed up by drill programs during the winter season. Experienced mining professionals, the smallest market capitalization in the play, and a large land position in a highly prospective environment suggests to me that Fjordland will trade much higher over the next 12 months. (604) 893-8365, fax 669-8336.

Canadian Mountain Minerals (CYM.A/$2.70) ­ Canadian Mountain Minerals is headed up by Dia Met founder Chuck Fipke, and owing to this lineage, can fairly be described as a "cult stock." What I mean by that is that the Dia Met experience has produced a shareholder base focused on the long-term, which is another way of saying that CYM is extremely illiquid. It trades "by appointment only," and clearly must attain higher levels before any meaningful volume will be evident. A contemplated financing will help, but the reality is that most of the company's shares are owned by people who don't exactly need the money: Fipke himself owns approximately five million shares; Goldtex, another junior he's affiliated with, owns three million shares, and directors who did rather well the last time they believed in Chuck Fipke own an additional two million shares. That leaves a four million share float, and based on Fipke's comments on this play, I don't expect much of that stock to float too readily about the market.

Canadian Mountain was approached about getting involved last spring, and after confirming the sampling information provided by Monopros, Dia Met entered into a joint-venture with Monopros. In a separate agreement, Dia Met and Canadian Mountain joined forces with Quadrant, the private company that entered Greenland on the ground floor. CYM has acquired an option to earn a 20% interest in a 15,530 square kilometer area, approximately half of which surrounds a 100 square kilometer block held by Monopros (51%) Dia Met (49%). According to Fipke, the results from Monopros' indicator mineral analysis were so good he had difficulty believing the data, but having duplicated the Monopros results from his own sampling, both Dia Met and Canadian Mountain entered the play, their respective deals being announced in August. CYM shareholders also have exposure to gold and base metals exploration in Yemen, projects that are more likely to yield near-term news than CYM's Greenland diamond play. (250) 860-8582, fax 860-1362.