GREAT WESTERN DIAMONDS CORP.
TSX VENTURE : GWD

GREAT WESTERN DIAMONDS CORP.

January 21, 2007 22:35 ET

Great Western Diamonds Expands Exploration Into Brazil

SASKATOON, SASKATCHEWAN--(CCNMatthews - Jan. 21, 2007) - Great Western Diamonds Corp. (TSX VENTURE:GWD) ("GWD") is pleased to announce that it has entered into a Memorandum of Understanding ("MOU") with Santa Elina Mines Corporation ("Santa Elina") of Road Town, Tortola, British Virgin Islands, acting through its Cyprus Branch, and Peter Marrone of Toronto, Ontario, to acquire, for shares and warrants, a 100% interest in 80 Exploration Permits (totaling approximately 690,000 hectares) and 17 Applications for Exploration (totaling approximately 140,000 hectares) known as the Rondonia Diamond Project, located near the city of Ariquemes in the state of Rondonia, Brazil. Rondonia is a state in the west central region of Brazil. GWD will purchase all of the shares of a subsidiary of Santa Elina which holds the property indirectly.

Under the MOU, the purchase price of $13,335,000 will be satisfied by the issuance, to Santa Elina (or a subsidiary) and Mr. Marrone, of 29,633,333 common shares ("Shares") of GWD and 14,111,111 common share purchase warrants ("Warrants"); each Warrant will be exercisable for the purchase of one share at a price of $0.60 for 24 months following closing. All transactions will be subject to TSXV and other regulatory approval.

GWD is being advised in this transaction by Wellington West Capital Markets Inc. ("WWCM"). WWCM's advisory fee will include 2.0 million warrants to acquire common shares exercisable at $0.45 per share for 24 months following closing, subject to TSXV and other regulatory approval.

GWD's largest shareholder, Great Western Minerals Group Ltd., which owns 25.3% of GWD, has stated that it is in favour of the transaction, subject to satisfaction of the conditions.

Completion of the transaction is subject to a number of conditions, including a concurrent private placement to Mr. Marrone, Santa Elina and others for proceeds of not less than CDN$2.5 million, the negotiation of definitive agreements and related documents, completion of due diligence satisfactory to all parties and their counsel, TSXV and all other applicable regulatory approvals, and board and shareholder approval. The private placement will involve units of GWD; each unit will be priced at $0.45 and consist of one common share and one-half share purchase warrant, each whole warrant being exercisable for one common share at $0.60 for two years from the date of closing.

Brent Jellicoe, President & CEO of GWD was quoted as saying: "This property was brought to our attention by Mr. Marrone through Wellington West because he recognized the suitability for development of this property by GWD. GWD is developing a proactive corporate identity strong on technical ability, yet counter-balanced by solid upper management experience, both of which support an aggressive strategy of building a diverse portfolio of projects at various stages, from reconnaissance through evaluation. The benefits of this corporate culture are seen in the recent acquisitions of properties in, and around, the known kimberlite fields of Alberta. As it is doing in Alberta, GWD will apply its extensive diamond exploration expertise to highly-prospective diamond projects in other geographic areas such as Brazil."

GWD welcomes the support and involvement of Peter Marrone and Santa Elina in expanding our exploration opportunities. Notably, Mr. Marrone is President and Chief Executive Officer and a Director of Yamana Gold Inc. (TSX: YRI), a Toronto based producer of gold with properties in Brazil, and Chairman of Vaaldiam Resources Limited (TSX: VAA), a Toronto based diamond exploration company with operations in Brazil. Mr. Marrone was instrumental in the creation of Yamana as a Latin American gold producer and Vaaldiam's expansion into Brazil.

Prior prospecting work on the Rondonia Diamond Project conducted by De Beers some 30 years ago revealed 12 kimberlites in three separate clusters. Additional exploration work recently completed by BHP Billiton under an earn-in agreement with Santa Elina included ground and airborne magnetic surveys as well as hand dug pits and auger drilling to acquire small samples for diamond recoveries. This work resulted in discovery of two more kimberlite bodies and a number of exploration leads to new kimberlites. BHP decided to withdraw from the project less than a year after commencing, and prior to review of diamond recovery, for a variety of reasons including internal competition for funds by other promising projects globally and that the size of the known kimberlites did not meet their initial threshold requirements.

Onsite due diligence and review of local and regional diamond exploration by GWD and Bill Roscoe of Scott Wilson Roscoe Postle Associates Inc. showed positive indicators of economic potential in terms of grade and value for the diamond-bearing kimberlite clusters on the Rondonia property, and that there exists significant potential for delineation of new kimberlites. Support for this assertion is found in similarities of initial emplacement history and favourable diamond indicator mineral chemistry that is evident between these clusters and those in the Pimento Bueno Field currently under investigation by Rio Tinto and Vaaldiam Resources Limited and located some 300 km to the southeast. Furthermore, the occurrence of several unsourced indicator mineral anomalies in stream sediment samples, along with prioritized airborne magnetic anomalies, indicates a need for a more detailed approach to finding new kimberlite bodies.

The project is at an early stage of exploration and work remains to be done in assessing the potential of previously identified kimberlites and in finding new kimberlites. Mr. Jellicoe asserts the suitability of the project for GWD by stating, "Large exploration companies may not pursue projects like this because their early work does not indicate a potential that meets their criteria, but the work that they do provides an opportunity for agile junior exploration companies with expertise, like GWD, to explore for economic diamond occurrences in an area that has already demonstrated potential. In addition, we will have created a strong exploration company with properties in two of the most promising countries for diamond exploration."

Great Western Diamonds Corp. is an exploration and mine development company currently focused on several diamond prospects including the 100%-owned Candle Lake Diamond Project in central Saskatchewan. GWD is committed to increasing shareholder value through aggressive, results-driven exploration. While Candle Lake is the core diamond project, the Company continues to build a balanced and geographically diverse project portfolio with both local and international diamond properties.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Great Western Diamonds Corp.
    Brent Jellicoe
    President & CEO
    (306) 668-0701
    or
    Great Western Diamonds Corp.
    Doug Patrick
    Manager of Investor Relations
    (306) 961-2785
    or
    Great Western Diamonds Corp.
    226 Cardinal Crescent
    Saskatoon, SK S7L 6H8
    Email: info@gwdc.ca
    Website: www.gwdc.ca