(Photograph by Ekati Diamond Mine.)

The safest bet lies with managers who have found diamonds in the past. “Eighty percent of your decision should be based on this,” says Dave Kaiser of Canaccord Capital in Vancouver, B.C., a financial advisory specializing in the diamond market.

Stornoway Diamond, run by Eira Thomas, is a mine Kaiser thinks might do well. Shore Gold’s Star Diamond project is another one of two dozen explorations that Kaiser calls “serious.” His list of potentially hot investments also includes Diamond North Resources, the junior that discovered the Snap Lake deposit being developed by De Beers; Shear Minerals, with 51 percent interest in the promising Churchill project in Nunavut; Kensington Resources; and Ashton Mining.

Ed Schiller, a geologist who worked on the DiaMet project and invests in juniors himself, says the most promising companies are run by technical people. “If the management is lawyers and accountants, rather than geologists and geophysicists, I wouldn’t even consider it,” he says.

Kaiser says investors should avoid companies exploring Alberta. Though kimberlite was discovered there, the geology did not support further investigation because the rock formations were not old enough. More promising are the Northwest Territories, where two viable mines are in production; Saskatchewan, where explorers have found high grades of ore; and Nunavut, which has signs of rich kimberlite deposits.

Also, companies with small share floats provide better return potential. “If there’s a lot of stock out, it’s hard to see an increase in its value,” Schiller says. “If you’re trading at 50 cents and there are 600 million shares out there, if something good happens—you find a pipe and you’re going to start drilling for samples, say—the stock won’t go up very much. If you’re at $5 and you’ve only got 75 million shares outstanding, it’ll go up in dollar increments on the basis of good news.”

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