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Diamonds Galore in Brazil

Bob Moriarty
June 2, 2006

I just got back from one of those monster three week trips all over the world. I first visited a fascinating diamond project in Brazil and almost managed to get caught up in a civil war between the criminals and the cops in Sao Paulo. (There, like here, it's hard to tell the difference except in the color of the uniform) I went on to a short vacation in Uruguay and on to Argentina where I visited a giant uranium basin covering thousands of square miles. For an added fillip, I came back through Miami just long enough to wash some clothes and then immediately zoomed up to Red Lake to visit the next Goldcorp. I will be writing up all three companies in the near future. But first, onto the diamonds.

Randsburg International Gold Corporation (RGZ-V:TSX) has a whole slew of unrelated projects and I would expect them to do some restructuring and perhaps a spin-off of one or more of the projects. They have a 100% owned mid-size iron, vanadium, titanium property called the Titan deposit located 120 KM northeast of Sudbury, Ontario. Randsburg recently released an updated 43-101 resource calling for a 40 million ton indicated resource of 11.4% TIO2 (Titanium Dioxide), 41.7% iron oxide and .19% vanadium, plus an 18 million ton inferred resource of 6.9% TIO2, 25.9% iron oxide and .092% vanadium.

In addition, Randsburg announced on May 23rd progress on their 50% owned Elephant gold and silver project located in the Battle Mountain-Eureka Trend next to Newmont's new Phoenix open pit mine. Their 50% Joint Venture party in the project, Duncan Park, has announced a 3500 meter diamond core drill program for this season with drilling to begin immediately. Investors interested in RGZ can expect the first drill results to be announced in about 60 days. Duncan Park is the operator on the project as Randsburg is concentrating their focus on the Victory Strike diamond property in Brazil.

Also Randsburg has an additional very early stage diamond exploration project located west of Kirkland Lake in Northern Ontario.

But the big prize package has to be the Victory Strike diamond project located just outside of the tiny Brazilian town of Ipameri between Uberlandia and Brasilia, the capital of Brazil. I flew down to Sao Paulo a couple of weeks ago on the overnight express from Miami. Most major cities in South America can be flown to overnight and it makes flying to South America a treat from my home of Miami. At least the first part of the journey is a treat. Usually, with mining projects, it's all downhill from there. Brazil was no different.

I flew into Sao Paulo, Brazil and cleared customs quickly. Randsburg's chief Geo, Dr Ken Germundson was coming in from Toronto and he arrived an hour or so after my flight. We gathered our bags and took a bus over to the domestic terminal for our internal flight to Uberlandia. Once in Uberlandia, the company driver picked us up and we took off on a three hour drive to the property. My journey which began at 11:30 the night before finally ended about 7:00 PM In Ipameri. We had sufficient daylight for the drive for us to see the pastoral setting in the terrain between Uberlandia and Ipameri. It was a beautiful and scenic area of Brazil producing both cattle and soybeans.

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What Randsburg calls the Victory Strike was first discovered by the famous WW II Canadian Ace Donald MacFadyen who also pioneered in the use of geomagnetic equipment for finding mineral deposits and discovered the Araxa niobium mine in Brazil, one of the most valuable mines ever discovered. His partner in the Victory discovery was Ron Turner, a South African with 43 years in the mining business with extensive experience in diamond mining. The project is 100% owned by Randsburg's Brazilian subsidiary, DIADEM MINERAÇÃO LTDA which in turn is 85% owned by Randsburg and 15% owned by MacFadyen and Turner who also acts as the project manager.

The MacFadyen/Turner team knew about the famous diamond producing area located on the Verissimo River and its tributaries which has a 100 year history of diamond production by local garimpeiro miners including a world class 600 carat diamond in 1906, one of the largest diamonds ever discovered. They wanted to locate the kimberlite pipes which originally fed the paleo-channel gravels containing the diamonds being mined by the garimpeiros.

Turner/MacFadyen entered into a joint venture with Randsburg in 2003 and last year Randsburg flew a detailed aeromagnetic survey which defined over 70 targets. The airborne survey led Randsburg to increase the size of their land position to about 525 square kilometers.

15 of 30 magnetic targets have been sampled by trenching or auger drilling and have returned microdiamonds. Randsburg has diamonds, thousands of diamonds. But they are tiny. Now they are in the process of trying to identify just which kimberlite pipes have produced the larger macrodiamonds in eons past.

In 2005, seven macrodiamonds were recovered by auger drilling. These seven macrodiamonds with carat weights of 2.08, 1.79, 1.28, 0.95, 0.85, 0.47, and 0.05 totaling 7.46 carats were recovered from 936 kilos of material taken from 39 auger holes drilled between and adjacent to two airborne targets numbered A44 and A45.

As of May, 2006 Randsburg has completed 27 diamond core drill holes at Victory Strike with a total program of about 3875 meters. Eight kimberlites have been identified to date of which three are diamond-bearing at depth. Target A44 is one of the diamond-bearing kimberlites. Further sampling is planned in the next month to count macrodiamonds and determine which additional kimberlites are diamond-bearing.

A 3.5 tonne per hour diamond plant has been constructed and is to be located near or on one of the diamond targets in the next few months.

This was my first visit to any diamond property. Certainly, in Dr Ken Germundson and Ron Turner, Randsburg has two of the leading industry experts on diamonds. The airborne survey maps I saw showed a number of clearly defined kimberlite pipes and the drilling to date seems to show substantial progress in finding the diamond "motherlode." Randsburg has found the elusive macrodiamonds in auger drilling before. They know there are large, indeed, giant diamonds in the gravel beds worked by the garimpeiros historically. They are getting the indications of diamond bearing kimberlites and the next thing to do would be to conduct a much larger bulk sample once they have determined the source of the macrodiamonds.

And if I don't know much about diamond properties, I know even less about how diamond companies should be valued. But the shares shot up to $4.35 last August when Randsburg announced the discovery of the macrodiamonds and it has backed off more than 50%. The old adage of buy low and sell high has always worked for me. At current prices, RGZ is a whole lot closer to its low for the year than the high so it seems like a good bet to me.

Randsburg is an advertiser and paid my expenses to travel to Brazil. They have not in any way paid for this article but since I have a relationship with the company, of course I am biased and that should be kept in mind before buying or selling any shares. I do not own any shares of Randsburg, yet.

Randsburg International Gold Corp
RGZ-V $2.08 Canadian (June 1, 2006)
18 million shares outstanding
Randsburg Intl

Bob Moriarty
President: 321gold

321gold Inc