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JOHN KOWALCHUK - DIAMOND DISCOVERIES INTERNATIONAL CORPORATION (DMDD)
CEO Interview - published 12/20/2004

DOCUMENT # ZAS612

JOHN KOWALCHUK is President and Chief Executive Officer of Diamond
Discoveries International Corp. He has more than 34 years of mineral
exploration experience with both senior and junior mining companies
working in Canada, US, Mexico and Chile. He was District Geologist for
Placer Dome for over six years and was instrumental in the discovery of
several world-class mineral deposits in Canada, including the Howard's
Pass lead-zinc deposit on the Yukon/Northwest Territories border and the
Kerr Copper Gold Deposit at Eskay Creek, British Columbia. Mr. Kowalchuk
has also served as Officer and Director for several junior mining
companies, including Admiral Bay and presently on Island Mountain Gold
Mining Ltd, Gold Star Resources Corp., and Castillian Resources Corp.

Sector: metals & mining

TWST: Would you give us a history and overview of the company?


Mr. Kowalchuk: The company was formed in 2000 and filed its SB-2 with
the U.S. Securities Commision in fall of 2000, and became fully trading
on the OTC bulletin board in 2002. It was formed specifically to explore
and exploit a diamond property in the Torngat Mountains of northeastern
Quebec where diamonds were found in a neighboring property by Twin
Mining in 1999 and 2000. A prospector who knew the area picked up ground
adjacent to and on strike with Twin Mining's ground. Twin Mining had two
lamprophyre dykes. These are ultramafic dykes and basically they did a
bunch of sampling on it and got fair amounts of macrodiamonds, which are
over 0.1 millimeter across and hundreds of microdiamonds in channel
samples from trenches across the dykes. The largest diamond that they
found was approximately 0.67 carats. These dykes were fairly small,
three feet to 10 feet across, and they were unable to find any
kimberlite pipes on their property. I'm not sure how hard they looked
for them though. It seems like they found these dykes with diamonds in
them, and they just focused on that. They took several bulk samples and
spent their money on that and then couldn't find a lot of interest other
than the interest that there were diamonds in the area. They weren't
able to take it to the next step themselves. Prospector, Peter
Ferderber, from Quebec acquired the ground to the south and to the east
of them right up to the Labrador border, and then optioned the property
to Diamond Discoveries. Diamond Discoveries was set up by Ted Pangia. He
took it right to a full OTC bulletin board listing and raised money to
start exploration on it.  It's quite a mountainous terrain, even though
it is up in eastern Canada, so the focus was on basically prospecting
streams and heavy mineral sampling of the stream sediments. They located
50 kimberlite and ultramafic dykes or lamprophyre dykes. The eastern
dykes are all kimberlites, and the western ones are all lamprophyres.
The property is about 180 square miles in size. So it is a huge
property, which is what you need. Just in grab samples from surface dyke
rock, they found 20 microdiamonds and at least five macrodiamonds. Many
of the other dykes they had in the area had diamond fragments, whether
the fragments were caused in preparation or whether they were smashed up
in coming to surface or what, we are not sure.  They also found at least
five kimberlite pipes, but the markets weren't that good so they weren't
able to do any drilling until this summer. Actually we did some more
analysis of the dyke materials from last year. The problem with diamond
exploration is that diamonds are the classic nugget effect. When you
have coarse gold, basically one small grain of gold in a sample will
give you a high assay. But you could take five samples of a rock, and
one grain will give a very high assay, the next two might give nothing
and the next two might give a low assay. So when you are taking a 10
pound or 20 pound sample, if you get a diamond in it at all, you are
very happy.  When you are evaluating these rocks for possible economic
diamond content, you are looking at half a ton to a ton minimum size of
sample. We haven't had the financing to do that yet, so we haven't done
it. But this summer we did find another dyke with diamonds in it, which
was encouraging, and finally we were able to raise enough money to put a
drill hole into one of our kimberlite dykes. We are still waiting for
the assays. In diamond exploration, the diamond assay is called a
caustic fusion where they dissolve all the rock in acid and end up with
just a little bit of residue, which is where the diamonds are.

TWST: You see what falls out.


Mr. Kowalchuk: That is basically it, and you can't do anything else. So
basically we spend about three years doing just surface exploration on
the property and taking small 10 pound to 50 pound samples of various
dyke materials, but as I said we have been successful in finding 50
kimberlite or ultramafic or lamprophyre dykes. We have found at least
five large diamonds or macrodiamonds in them and both 20 to 25
macrodiamonds in them, and we have located at least five kimberlite
pipes.

TWST: Has any diamond mining been done in this geography?


Mr. Kowalchuk: Basically this is part of the Canadian Shield and across
Hudson Bay on the other side in Nunavut there are about three operating
diamond mines now.

TWST: Is that where Aber is?


Mr. Kowalchuk: That's where Aber is and Ekati. The Canadian diamonds
have been very successful. So basically the whole of the Canadian Shield
is prospectable for diamonds. You look for large deep-seated structures,
which brought the rocks up from the mantel, and then you test them for
whether or not they come from a right part of the mantel. That is how
you do that and as you take what they call indicator minerals, you can
find out the pressure and the temperature of where these minerals were
formed. From the chemistry of them, virtually all of our kimberlites and
most of our lamprophyres come from the area in the mantel where diamonds
are stable when it formed. So this is why we are quite excited. All our
indicator minerals suggest we will get lots of diamonds. One advantage
to us is we are fairly close to the coast. Our property borders on the
coast of the ocean and actually Ungava Bay, so once, if we do locate
something of significance, it is certainly significantly cheaper to mine
than out in the middle of the barrens.

TWST: Going back to the original question, has any active mining taken
place where you are looking at this point?


Mr. Kowalchuk: Not in our area. There has been nothing in our area.
Other than Twin Mining, we have been the only company working in that
area. Twin Mining, since they were unable to find any pipes or
kimberlites, pulled out and moved out to Baffin Island. But we've kept a
very low profile and low scale operation because of financing. The
principals have done most of the financing. We are now looking to
institutional financing. Basically diamond exploration is unlike any
gold or silver exploration in that it takes very deep pockets and a lot
of patience. Before most companies find a diamond deposit, before they
even find a kimberlite, it often takes two years. Then with the major
cost of drilling and then each assay or each cost of fusion, you are
looking at $500 to $2,000 a sample or more just for analyzing each
sample. Recently a 660 kilo sample had a cost of $50,000 for caustic
fusion analysis. So, as I've told most junior companies when they are
interested in getting to diamond exploration, as long as you have deep
pockets and a lot of patience, you are looking at a five-year plan
minimum before you can get to the stage where you might have something
that's economic enough.

TWST: With the testing you have done, when will you get the results?


Mr. Kowalchuk: We are hoping to get them by early December. Basically we
drilled this kimberlite dyke. We have a true width of 17 feet, a little
over five meters, and it's just a classic kimberlite. Rubies were found
in the kimberlite residue. Corundum is a diamond indicator mineral. So
we are hopeful. We sent all the core from that intersection into
Saskatchewan Research Council for caustic fusion.

TWST: If you look out over the next two or three years, what's going to
be the strategy of the company?


Mr. Kowalchuk: We left the drill on the property. We have raised enough
money this year to do the drilling. We got squeezed out because of bad
weather in September, which is often the case at the end of September.
We left a drill on the property, and we have fuel for our drilling
program next year. We plan on drilling about 10,000 to 15,000 feet
starting probably in April, and we'll be drilling our suspected pipes.
What people should be looking for in the next year is reports on the
fact that we have hit, kimberlite pipes. Hopefully they are
diamondiferous. Since there are diamonds in the area, I would expect
we'll get diamondiferous pipes. Then later in the summer, we'll look to
see what the diamond counts are in those in kimberlite intersections. 
Next summer should be a real make or break year because next year is the
year we are going to do the significant testing of the pipes and
assaying of the pipes. We'll know whether it shows an interesting
diamond count or significant diamond count. If any of the pipes that we
have look like they have significant diamond counts, then the following
year we will be going into a large-scale bulk tonnage and bulk tonnage
sampling to get the actual grade of the whole pipe period and look at
the economics of it.

TWST: Assuming you do find something, when would production likely
start?


Mr. Kowalchuk: I would say three to four years from now.

TWST: What's the cost to get up and producing?


Mr. Kowalchuk: I would say probably $500 million to $1 billion. It's not
cheap, but if we get the grades that it's going to be an economic mine,
we are going to have all kinds of major diamond producers knocking on
our doors, either willing to finance us or willing to buy us out. That's
usually the case with most junior companies. The senior mining companies
hop in fairly quickly. They try and hop in before your stock goes too
high. Payback even at a cost of $500 million to $1 billion would be
relatively quick.

TWST: What is the capital budget for next year?


Mr. Kowalchuk: Next year's budget will be probably be about $2 million.

TWST: Do you have that in hand?


Mr. Kowalchuk: We have offers to provide it. We have offers of up to $5
million for the next two years from two groups. So our objective this
winter is to get our story told where we don't want to dilute ourselves
significantly in raising the $1 million to $2 million next year. So we
would like to see our stock at a higher price.

TWST: What are your plans to help that happen?


Mr. Kowalchuk: Basically we've been hit with sellers. I'm not sure
whether it's people just dumping on us or shorting the stock, but we've
been hit with a lot of stock being dumped on us and hitting the bid all
the time. Basically this winter through spring, long-term investors will
be just accumulating all available stock. We have been doing it all year
it seems, and they have to run out eventually. Good drilling results in
the spring will assist in the company's valuation.

TWST: Why the downward pressure in your stock?


Mr. Kowalchuk: I'm not sure. I just joined the group in January. We were
trading about $0.10 then, and it went up to about $0.20. Some groups
with free trading shares probably can't wait until spring. That's what I
suspect. I suspect there were probably a few million shares that have
sold on the bid. Actually most of the shares, probably about 30% or 40%,
are in a lot of original investors that are in for the long term and
have faith in the property. Some of these sellers just thought they
would play with it. I have no idea why they would be selling. To have a
property with known kimberlite pipes and with known kimberlite dykes
with diamonds, really the stock should be $0.50 to $1. Why is it down
there? I don't know.

TWST: Have you been involved with diamond mining before?


Mr. Kowalchuk: I was involved with some diamond exploration in northern
Ontario in the Temagami and Temiskaming area. In the Otish Mountains of
Quebec, 700 kilometers south of DMDD's property, Ashton got those
significant diamond results. So that is when all the neighboring
companies in Ashton went up to $3 or $4 at the time. Until there is a
major discovery in your area, it is hard to really push it. So we are
hoping we will be the major discovery this summer. We have managed to
raise the money and get the confidence from the technical people anyway
to do the work and to raise the money to do the major discovery
ourselves.

TWST: Do you have the in-house expertise to follow through on this?


Mr. Kowalchuk: Yes, we do. We have Robert Dillman, a diamond expert from
Ontario, who is our main consultant. Mark Connell from New Brunswick and
several people doing the work for us are all diamond experts. Also I am
a geologist with over 35 years of experience myself, and I am familiar
with diamond exploration as well, but I leave it to my experts.

TWST: Why should investors pay attention to what you are doing, and what
are the key factors here?


Mr. Kowalchuk: This a good company to add to a larger portfolio for
Canadian diamond plays. One thing I have noticed with the OTC bulletin
board as opposed to the Canadian exchanges is the Canadian investors are
familiar with the fact that Canada is now the third largest diamond
producer in the world behind Russia and Botswana. Botswana is first and
then Russia, then Canada. Canada will be passing Russia within a year
once our Victor Pipe and another pipe up in the Northwest Territories
opens up. Canada is going to be even more high profile in the fact of
the problems with conflict diamonds coming out of Africa. These diamonds
are being sold to rebels who are financing several rebellions in Angola
and a lot of the fighting in Africa. It has been financed by diamonds.
So this is why De Beers and all the major diamond marketers are trying
to put pedigrees on their diamonds. With all diamonds from Canada, there
is no problem doing that. We can automatically put a pedigree on, so
most Americans aren't even aware that Canada mines diamonds.  We need to
better educate the American investing public that Canada is probably one
of the premier places to look for diamonds. It has had a very high
success rate relative to other areas, and they are clean diamonds.
Because they can be proven to be clean diamonds, they will be sold at a
premium. Another reason is, we are prospecting on the Canadian Shield as
one of the premier areas to look for diamonds, so there is a great
upside there. If we are successful in finding significant diamond counts
in our property, there is no problem with getting into production. There
is no problem, especially in Quebec. It is one of the best areas in the
world to look for any mining commodity, and as far as government
legislation, there are no problems from the tenure. Once you have found
something, you don't have to worry about a government taking it away
from you, so there are a lot of pluses about exploring for diamonds in
Canada and in Quebec. That is one of the biggest things. But as I said
most Americans aren't aware that we even have diamonds, and that is the
first thing we have to inform them of. We not only have diamonds, we
have some of the best diamonds in the world, and we are now the third
largest diamond producer in the world. That is from the first discovery
of diamonds in 1991. So we have moved that quickly.

TWST: Is the government doing anything to foster that?


Mr. Kowalchuk: In Canada, in Quebec, basically for junior mining
companies they have these wonderful tax breaks at super flow through
taxes where basically you get virtually a 100% if your exploration costs
are taken off or actually over a 100% taken off of your taxes if you are
a Canadian citizen. For companies that have Americans or non-Canadians
investing, what happens is the company can take that tax break, and they
get it back as a grant from the government. We received about $600,000
from the Quebec government over the last three years. So there are major
financial incentives helping companies go through those first expensive
phases, which certainly helped us, especially with the way the market
has been. We haven't had to sell a lot of shares to raise money for
exploration this year. We were able to use a lot of the money we spent
from previous years, TWST: Is there anything else we should touch on?


Mr. Kowalchuk: I think we are worth watching, and I think once we start
drilling in the spring, you will see a steady growth of the stock.

TWST: Thank you. (TJM)


JOHN KOWALCHUK
 President & CEO
 Diamond Discoveries International Corp.
 750 West Pender Street
 Suite 804
 Vancouver, British Columbia V6C 2T7
 Canada
 (604) 683-1368
 (604) 685-6905 - FAX
 www.diamonddiscoveries.com
 e-mail: info@diamonddiscoveries.com

Copyright 2004 The Wall Street Transcript Corporation
All Rights Reserved


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