Diamonds

Madagascar, the world's fourth largest island, is emerging as a target for diamond exploration. This highly mineralized country previously received little attention from the mining world due to an unfavorable investment climate. Recent changes in the mining act and the discovery of large gemstone quality diamonds in Madagascar have led to a rush by international mining companies to acquire claims in the most prospective areas. PAMM has acquired permits covering in excess of 3000 sq. kilometers of areas it deems prospective for diamond exploration.

Independent interpretation of geophysics data generated in the Company’s recent high resolution magnetic and radiometric survey in Madagascar has confirmed strong diamond targets previously identified in our geochemical sampling programs. Further follow-up sampling and ground work is now underway on a dozen high priority targets with a view toward generating drill targets for potential kimberlites.

A high resolution, helicopter-borne, magnetic and radiometric survey covering two key regional heavy mineral anomalies in Madagascar was completed by Fugro Airborne Surveys (Pty) Ltd. in late 2006 under contract from the Company. This survey indicated a number of magnetic bulls-eye targets with signatures typically characteristic of kimberlite pipes. In view of the magnetically active character of the terrain, a Toronto-based geophysical contractor, Scott Hogg & Associates Ltd., was commissioned to filter the geophysics data, provide an independent interpretation and recommend magnetic targets for ground follow-up. This analysis was carried out without reference to the Company’s stream sampling results. Eleven specific follow-up targets were identified by the contractor “that justify investigation on the basis of their magnetic characteristics alone.” A further target with a kimberlite-like magnetic bulls-eye was also identified in a nearby magnetically active area.

Five of the high-priority follow-up magnetic targets selected by the contractor are located in an area where our geochemical sampling results had indicated the potential presence of kimberlite pipes. Four of these targets are in close proximity to discrete ilmenite anomalies that were outlined by our sampling, while the fifth is in an area where sampling results are still awaited. The ilmenites recovered closely match compositions reported in mantle-derived eclogitic xenoliths from the diamond-bearing Orapa kimberlite in Botswana, and also rare eclogitic ilmenite inclusions in diamonds.

The geophysical survey also covered an area immediately adjacent to these discrete pathfinder anomalies, where drainage traps are poorly developed, and sampling would be anticipated to be a less reliable prospecting tool. A further five of the targets recommended for follow-up are located in this area. These five isolated magnetic circular features collectively define a lineament that is discordant with the magnetic fabric in the area.

Geological Overview
Two hundred million years ago, Madagascar formed part of the super-continent Gondwana. The western margin of Madagascar was attached to Africa (adjacent to Tanzania) and the eastern margin to India). This is of significance to diamond exploration, because both Tanzania and India contain numerous kimberlites, the intrusive rocks that can host diamonds. Kimberlites are volcanic rocks which are intruded into the earth's crust. During times of instability, such as during the break-up of Gondwana, magma from the earth's mantle is forced upward forming volcanoes. Some of these volcanoes are kimberlites which contain diamonds. During the break-up of Gondwana, many kimberlites were intruded into Tanzania and India, and it is therefore probable that kimberlites were also intruded into Madagascar.

Research has revealed that diamond-bearing kimberlites are only located on very old parts of the earth's crust. These old cores are called cratons and were formed more than two and a half billion years ago. Only small portions of the earth's continents are composed of cratons, limiting the areas which are likely to contain diamondiferous kimberlite. Approximately two-thirds of Madagascar's landmass is underlain by craton, thus providing the right conditions for the intrusion of diamond bearing magmas. Figure Dia-1 shows Madagascar's position in Gondwana, its large area of craton, and its past proximity to the cratonic regions of Tanzania and India.

Madagascar has had very little systematic exploration for kimberlites. To date, no discoveries have been announced. There is strong evidence to suggest that diamondiferous kimberlites or related rocks may be present on the island. Two very large, gemstone quality diamonds were recently purchased by Diamond Fields International from alluvial sapphire miners in the Sud-Est region of Madagascar. These diamonds weigh 23.82 and 8.39 carats respectively. This is a significant discovery since no kimberlites are known to have been found on the island and the primary source of these diamonds still awaits discovery. According to government data, a number of other diamonds have been recovered in Madagascar over the past century. There have also been findings of indicator minerals typically associated with kimberlites or other potentially diamond-bearing rocks. These minerals are ilmenite, chromite, pyrope garnet and chrome diopside.