Diagem Inc.

Diagem Inc.

November 14, 2006 13:54 ET

Diagem Discovers a New Type of Primary Diamond Deposit on its Brazil Juina District Exploration Licenses

MONTREAL, QUEBEC--(CCNMatthews - Nov. 14, 2006) - Diagem (TSX VENTURE:DGM) is encouraged by the discovery of a new diamondiferous layer with high-grade diamond content and larger size diamonds than is usually seen in Juina. The discovery, unique in that it appears to have formed in situ as air fall material from and during a kimberlite explosive eruption, has the potential to form a large deposit. It suggests the presence of a nearby kimberlite pipe which could be of equal grade. The Company is currently investigating the size of the discovery and plans to bulk sample the new layer or unit to confirm the grade reported by artisanal miners. The Company has also initiated a program of ground geophysics to define both new and previously known kimberlite targets.

The new diamondiferous layer has been exposed on Diagem's 7,646 hectare Property 370/98, as the result of the work of artisanal miners to whom were granted a 30 hectare artisanal mining licence by Diagem as allowed by the Brazilian mining regulations.

The artisanal miners are reportedly extracting 10,000 carats of diamonds per month from the layer. The structure that is being mined is one to two metres thick, extends over a width of 300 metres and has an exposed length of one kilometre. The grade has been estimated by the miners to be 2.0 carats per cubic metre, which is considered to be very rich since it is not compacted and can be extracted and processed just like gravels.

Diagem had the opportunity to examine 6,000 carats extracted from the new discovery. Twenty-five (25) percent of the parcel were diamonds greater than 4.5 mm (0.30 carat) in size, 50% were in the range between 4.5 mm and 2.7 mm in size (i.e. between 0.30 carat and 0.13 carat), with the remaining 25% consisting of diamonds smaller than 2.7 mm (0.13 carat). Paulo Andreazza, Diagem's chief geologist in Brazil, indicated that this size distribution represents coarser than average stone size normally encountered within the Juina area. The largest stone recovered from the deposit weighed 67 carats.

Andreazza, further suggested that the associated abundant diamond indicator minerals such as the picro-ilmenites, which are coated with leucoxene, and the absence of pebbles of secondary origin in the host rock, are evidence of close proximity to a primary kimberlitic source and are also an indication that the deposit is itself primary and kimberlitic.

Dr. Mousseau Tremblay, Diagem's diamond expert, visited the new diamond occurrence and offered the following comments:

"I believe that this is a unique occurrence which has not yet been seen anywhere else in the district or at least identified as similar to any other occurrences. Based on the available geological evidence, the layer was deposited from an airborne ash "fall" as altered lapili tuffs. This came as the result of an explosion of one or more erupting kimberlite pipes. My experience at Mwadui, in Tanzania, suggests that kimberlite material blown up in the air by the explosive eruption of the kimberlite falls back within a radius of 2.0 to 4.0 kilometres around the centre of the intrusion and its crater. Of significance, at Mwadui, the diamond grade of lapili tuffs that fell back on surface is equal to that of the grade of the erupting kimberlite and of the kimberlite pipe below the crater. Assuming that the artisanal miners' grade of the layer is indeed 2.0 carats per cubic metre, it is expected that the kimberlite body from which the layer is issued could have a grade of 2.0 carats per cubic metre or roughly 1.0 carat per ton".

Clues as to the significant surface area of the new unit can be inferred from the distribution of the material away from the crater of the kimberlite pipe using the above radius of 2.0 to 4.0 kilometres. This assessment, while still under verification, underlines the excellent economic potential for the target area.

A program of soil sampling, auger drilling, and trenching is being conducted to delineate the full extent of the favourable unit. Diagem has so far traced the favourable unit well beyond the limits of the artisanal miners' operations onto Diagem's concessions for a distance exceeding 3.0 kilometres. The majority of the prospective ground lies on Diagem's exploration licenses. Diagem has applied for additional mining rights in the area where warranted.

Pending the granting of a license of operation (LO), which is under application, Diagem's immediate objective will be to bulk sample the unit, where feasible, for delineation and grade determination and the calculation of a resource amenable to surface mining methods. Bulk samples will be processed at the site using a newly constructed 10 cubic metre per hour moveable concentration plant. The concentrates will be transported to Diagem's Sortex facility in Juina for diamond recovery.

The technical content of this news release has been approved by Dr. Mousseau Tremblay, of Williamstown, Ontario, a Qualified Person and Chairman of the Board of Directors of Diagem Inc.


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