Brian Testo's Grizzly Diamonds Ltd. plans to drill its two new Alberta kimberlites next year, but the plan for larger samples will likely have to wait until fall. Mr. Testo is still a big believer in the Buffalo Hills diamond play, but he will divert his company's attention to a gold project this spring. Grizzly still has about $1-million in working capital, but the company still hopes to avoid the destructive dilution experienced by most of its rivals, which have had to sell shares for just a few pennies each.

The plan

Mr. Testo said a significant chunk of Grizzly's cash would go to drilling on a gold project in British Columbia, with lesser amounts budgeted for the company's potash play along the border of Alberta and Saskatchewan. Gold is one of the few commodities still holding its lustre, and potash remains a flavour of the day with investors, despite the gloomy market.

Nevertheless, Mr. Testo still thinks Grizzly is a diamond company, and the fall plan for the Buffalo Head Hills projects includes drilling of larger samples from the BE-02 and BE-03 pipes that yielded encouraging diamond counts this year. As well, there are several new targets still to be drilled on the company's land holdings in the area.

Mr. Testo said Grizzly will have to top up its treasury at some point next year, and he would prefer it be later, rather than sooner. As a result, the more promotable gold play will push the diamond program back about eight months from its original schedule.

There is a chance the diamond work could take place this spring, but the odds seem long. Mr. Testo said Grizzly would sell more shares for the Buffalo Hills program "once things improve," adding that the ability to complete a private placement over 50 cents would qualify as a sufficient improvement.

Fortunately, Grizzly is one of the few diamond companies not to experience a total collapse this year. The company's stock clung to the $1 mark through the first half of 2008, and traded as high as $1.67 in July on a brief run fuelled by potash. The second half of the year saw a steady slide, but Grizzly has been hard to claw off the 50-cent mark for good.

Mr.. Testo made well over $1-million investing in resource sector companies over the years. He has invested much of his own money into Grizzly and currently holds over four million of Grizzly's 21.2 million shares outstanding. He also has been effective at convincing others to share his optimism. Mr. Testo, a former pipefitter who founded Grizzly in the early 2000s, now estimates another 10 million shares are currently held by his closest backers, a group he says includes, "brothers, sisters and everyone I sat beside on a bus."

The encouragement

The gruff but persuasive Mr. Testo has long touted the merits of his Buffalo Hills play and he got some sparkle to back it up this year. Grizzly drilled into two new pipes, each potentially 200 metres in diameter, just south of the main Buffalo Hills pipe cluster. The diamond counts from Grizzly's finds were encouraging, with both the BE-02 and BE-03 pipes producing comparable counts.

In all, both bodies produced 534 diamonds from 884 kilograms of kimberlite. The hauls included 280 gems larger than a 0.106-millimetre cut-off and 14 of them sat on a 0.30-millimetre mesh. Mr. Testo said 12 stones were macros according to the now obsolete standard, which puts Grizzly's two pipes among the best found in the area so far.

The numbers point to a modest grade, but two big neighbouring pipes could be worth mining with grades of about 0..1 carat per tonne, if the diamonds have the size and quality to support a hefty value. Proving it will take larger samples beyond what Grizzly plans for next fall.

Grizzly closed up four cents to 38 cents Tuesday on 4,400 shares.