Vancouver, May 28, 2004 -- Diamonds North Resources Ltd. (DDN -- TSX Venture) reports the interim financial results for the three months ended on March 31, 2004. Diamonds North Resources Ltd. ("the Company") is an exploration stage company engaged in the acquisition and exploration of diamond mineral properties in Canada. The principal properties are located in northern Canada throughout Nunavut ("NU") and the Northwest Territories ("NWT"). The following is a summary of the interim consolidated financial statements and the management discussion and analysis for the three months ended March 31, 2004 both of which can be found on the Company's website at diamondsnorthresources.com.
As at March 31, 2004, the Company's mineral properties carrying value was $7,707,010, an increase of $1,932,021 from December 31, 2003. For the three months ended March 31, 2004, the Company's net mineral property expenditures include $1,712,221 in acquisition costs and $663,682 in exploration costs. Deductions from mineral properties expenditures include $373,213 in recoveries from project partners and $70,669 in write downs.
Blue Ice Project, Victoria Island NU/NWT
On March 24, 2004, Teck Cominco elected under the June 18, 2003 Participation Agreement to take up the initial option to earn a 30% interest in the Blue Ice property. In addition, the Company and Teck Cominco entered into an agreement (the "2004 Amending Agreement") to allow Teck Cominco to expand the Participation Agreement to include the Company's adjoining White Ice and Hadley Bay properties. In consideration, Teck Cominco paid the Company $55,000 on signing of the amending agreement and increased the 2004 expenditure requirement from $2,000,000 to $3,000,000. By December 31, 2004, Teck Cominco can elect to include any portions of the White Ice and Hadley Bay properties under the Participation Agreement by paying the Company an additional $55,000 and increasing the initial 30% interest aggregate expenditure requirements from $9,500,000 to $11,500,000.
Teck Cominco proposed a preliminary exploration budget for the Blue Ice, Hadley Bay and White Ice Projects totaling $3,000,000. The preliminary exploration budget includes $2,000,000 in drilling, $750,000 in airborne and ground geophysics and $250,000 in regional sampling.
Holman, Victoria Island, NWT
The Holman Project is located immediately west of the Blue Ice Project area on the NWT portion of Victoria Island. The Company holds a 100% interest in the Holman Project. An option had been granted to Serengeti Resources Inc. ("Serengeti"), whereby Serengeti could have earned a 50% interest in the property. On March 15, 2004, Serengeti elected not to fund the balance of the 2003 expenditure requirements and by mutual agreement, the companies elected to terminate the option agreement.
Kidme Project, NWT
The Company owns 40% of the 90,000 acre Kidme Project situated adjacent to the eastern border of the Misty Lake Property and to the south of the De Beers/Mountain Province Gahcho Kué property. In the spring, the Company and SouthernEra Resources Limited ("SouthernEra Resources") staked and an additional 83 acres around the Kidme Project on a 50/50 basis. During March 2004, a ground geophysics program was conducted by SouthernEra which identified five potential drill targets and a $500,000 drill program is planned to test these targets in June.
The Company holds a 100% interest in the Amaruk Project, which consists of 162 contiguous claims covering 418,365 acres located 45 kilometres south of Kugaaruk. On May 10th, 2004, the Company and BHP Billiton Diamonds Inc. ("BHP Billiton") entered into an agreement, see Subsequent Events.
Pelly Bay JV, NU
On February 16, 2004, the Company reported that the Company and BHP Billiton entered into an agreement on lands surrounding the Company's 100% owned Amaruk claims. The agreement covers 34 exploration permits totaling 2,142,745 acres and approximately 464 recently staked claims, totaling 1,198,280 acres. Although the total number of granted claims is not yet known, the total estimated land position under the joint venture is approximately 3,341,000 acres.
Under the terms of the agreement, the Company and BHP Billiton will each hold an initial 50% interest in the lands and each of the parties will contribute 50% of the staking and exploration costs. BHP Billiton has the following elections to earn up to an additional 15% interest in the property by:
1) Within 120 days of the management committee decision to collect a 200 tonne bulk sample, BHP Billiton can earn an additional 5% interest (for an aggregate 55% interest) by sole funding all exploration on the property, including the collection of the 200 tonne bulk sample from any one kimberlite located on the property;
2) Within 120 days of receiving results from 200 tonne sample, BHP Billiton will have a one-time election to earn an additional 5% interest (for an aggregate 60% interest) by sole funding all exploration on the property, including the collection of a 1,000 tonne bulk sample from any one kimberlite located on the property;
3) Within 120 days of receiving results of the 1,000 tonne sample, BHP Billiton will have a one-time election to earn an additional 5% interest (for an aggregate 65% interest) by sole funding all exploration on the property, including the collection of a 3,000 tonne bulk sample from any one kimberlite located on the property.
Subsequent to the period, the agreement with BHP Billiton was replaced with a new agreement, see Subsequent Events.
Selected Financial Information
The table below includes selected quarterly information from the interim consolidated financial statements for the three months ended March 31, 2004 and 2003. The interim consolidated financial statements were not reviewed by an Auditor. For more detailed information, please refer to the Company's interim consolidated financial statements and notes included therein.
For the Three Months Ended
March 31, March 31,
Total Revenues $ Nil $ Nil
General and administrative expense $ (326,945) $ (273,080)
Loss for the period $ (335,986) $ (261,672)
Basic and diluted loss per share $ (0.01) $ (0.02)
Weighted average number of
shares outstanding 23,912,695 13,614,307
Cash flow from (applied to)
operating activities $ (76,231) $ (68,150)
Cash flow applied to
investing activities $ (1,674,912) $ (514,439)
Cash flow from financing activities $ 969,835 $ 1,312,190
Cash and cash equivalents end of period $ 3,253,627 $ 953,473
General and administrative expenses of $326,945 (Q1 2003 - $273,080), represent a $53,865 increase over the comparative quarter with the increase largely due to a $53,337 increase in stock-based compensation expense. The Company's loss for the period before taxes was $381,358 (Q1 2003 - $261,672) and the loss for the period was $335,986 (Q1 2003 - $261,672). Some items of note which are discussed below:
- Investor relations and promotion expense was $62,812 (Q1 2003 - $55,436) which includes the attendance at three conferences and a trip in February to Toronto to update the financial community.
- Stock-based compensation expense of $120,020 (Q1 2003 - $66,683) relates to the granting of 200,000 stock options to the President of the Company.
- Wages and benefits expense of $57,908 (Q1 2003 - $48,590) increased due to additional staff.
- Write-down of mineral properties expense of $70,669 (Q1 2003 - $Nil) includes $1,314 for the Banning Lake, NU Project, $51,588 for the Blue Nose, NU Project and $17,767 for the Stefansson, NU Project. These grass roots projects did not warrant further exploration and accordingly the projects have been written off.
From December 31, 2003 to March 31, 2004 cash and cash equivalents decreased $781,308 to $3,253,627. Uses of cash include $76,231 for operating activities and $1,674,912 for investing activities while financing activities provided a source of cash totaling $969,835. Mineral property acquisition and exploration cost $2,002,690 resulted in outflow of cash under investing activities which was offset by a $329,710 increase in accounts payable and accrued liabilities. The $969,835 source of cash resulted from the issuance of common shares from the exercise warrants and stock option.
At March 31, 2004, the Company had $3,499,192 in working capital, which is sufficient to achieve the Company's planned business objectives for fiscal 2004. The Company's major exploration objectives for 2004 will be funded by project partners. As noted above under the Blue Ice Project, Teck Cominco will fund the 2004 Blue Ice, Hadley Bay and White Ice exploration programs. Also, the 2004 exploration programs on the Amaruk and Pelly Bay JV will be fund by BHP Billiton, see Subsequent Events.
a) On May 10, 2004, the Company and BHP Billiton Diamonds Inc. ("BHP Billiton") entered into an agreement to merge the Amaruk and Pelly Bay JV Projects along with approximately 3.5 million acres of land held by BHP Billiton. The new project covers approximately 7.0 million acres around the town of Kugaaruk Nunavut with each party holding a 50% interest in the project.
BHP Billiton has initiated the first option which will allow BHP Billiton to earn an additional 10% interest (for an aggregate 60% interest) by sole funding the project to feasibility within seven years. After completing the first option, BHP Billiton can elect to earn an additional 5% interest (for an aggregate 65% interest) by arranging the Company's portion of financing to production.
As part of the agreement, BHP Billiton will reimburse the Company for $500,000 in land acquisition costs incurred to date and for costs associated with a geophysical survey currently underway (approximately $500,000). In addition, the BHP Billiton will subscribe to a private placement of $500,000 consisting of 357,143 common shares at a price of $1.40 per share. Over the next three years at the election of the Company, BHP Billiton may subscribe to three separate private placements of $1,000,000 each. Each private placement would consist of common shares at a price with a 20% premium to the market price.
b) On May 28, 2004, the Company reported a non-brokered private placement of 392,857 common shares at $1.40 per share. BHP Billiton subscribed to 357,143 common shares as noted above and Teck Cominco subscribed to 35,714 common shares under it's financing right in the Blue Ice participation agreement.
c) Subsequent to March 31, 2004, the Company acquired 900,000 acres in northern Manitoba. The Manitoba Highlands project comprises eight mineral exploration licenses in total. Five licenses were granted to the Company through the license application process and a 100% interest in three additional licenses were acquired from a private company, Indicator Explorations Ltd. ("Indicator Explorations"). Upon signing the agreement, the Company made a cash payment of $10,000 and subject to regulatory approval, will issue Indicator Explorations 20,000 common shares. Staged over a four year period and assuming the Company continues with the project, Indicator Explorations will receive cash payments totaling $530,000. The annual payments are as follows: 2005 - $40,000, 2006 - $80,000, 2007 -- 160,000, and 2008 -- $250,000. A 1% royalty on any production from the property will be payable to Indicator Explorations.
d) On April 5, 2004, the Company granted stock options to employees for the acquisition of up to 200,000 common shares at a price of $1.19 per share until April 4, 2009.
Diamonds North is a dynamic successful exploration team focused on strategically advancing diamond opportunities and is determined to discover Canada's next diamond mine.
ON BEHALF OF THE BOARD OF DIRECTORS
For further information, please contact:
Diamonds North Resources Ltd.
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