All That Glitters May Be Diamonds : Broad Area in Rockies Could Yield Fortune in Gems

In this vast terrain of craggy granite peaks straddling the border of Colorado and Wyoming, where old mines are as common as antelope, a new breed of miner is quickening the hearts of investors hoping to strike it rich with something more rare and valuable than gold, silver or copper.

By luck of the geological draw, this 1,000 square-mile district along the state line is peppered with globules of the same blue-green volcanic rock that has yielded the world’s greatest caches of diamonds in the fabled mines of South Africa.

Preliminary samplings of the rock known as kimberlite, which resembles fruit cake, have turned up thousands of the precious gems. Now, at least six firms are staking claims and gobbling up land in a race to open the first commercial diamond mine in the United States.

With jobs threatened as precious metal mines lose battle after battle against environmentalists and foreign competitors, state geologists are encouraging the diamond hunt in a place they say is glittering with potential.

A diamond mine, they point out, involves a rock-crushing process that is more benign than, for example, that used at a typi-cal gold mine, which saturates heaps of ground up ore with cyanide solution to tease out the metal.

“There are diamonds out there,” said Colorado Geological Survey geologist Jim Cappa, “and the first to mine will be first to market the romantic blush of diamonds produced in Colorado and Wyoming.”

Farthest along in the race are Diamond Co. N.L., an Australian firm operating out of Ft. Collins, Colo., and Vancouver-based Royalstar Resources Ltd., both of which hope to create a niche market for home-grown U.S. diamonds within a few years.

“Americans are very patriotic, and I think they would go crazy buying American diamonds before any other,” said John Young, president of Royalstar, which this year secured 320 acres of a deposit a few miles south of the Wyoming border.

Howard Coopersmith, a slim, ponytailed geologist who is president of Diamond Co., figures diamonds mined from his 6-year-old stake at a remote Rocky Mountain trout pond called Kelsey Lake could fetch a premium price on the world market.

The proof, Coopersmith said, is in the 600 gem-quality specimens he has culled from test samples of ore scraped out of his deposit, nestled in a mountain saddle 8,000 feet above sea level.

“Diamonds come out of the ground looking like this,” he said, carefully unwrapping a blue-paper envelope containing a sparkling rough stone the size of a pea with the clarity of ice.

“It’s one of my favorites,” he said, rolling the apparently flawless diamond around in his palm. “Isn’t it a pretty color?”

But even Coopersmith, who has traipsed across every inch of the stateline district over the past 18 years, concedes that it will be a year or more before he can determine whether there are enough of these stones to turn a profit. His firm has sunk $1 million so far into finding out; Royalstar has invested about $210,000, company officials say.

You wouldn’t know that by the Canadian investors trying to get a piece of the action. The diamond rush here is hot stuff on the notoriously speculative Vancouver Stock Exchange, according to Vivian Danielson, western editor of Vancouver’s Northern Miner Magazine.

These risky ventures are financed largely by Canadian investors who first got excited about the discovery last year of diamonds in Canada’s inhospitable Northwest Territories and now are gambling on new targets in America, Danielson said.

“Diamonds, more than gold, have a tremendous appeal, and people tend to get carried away,” acknowledged Bernard Free, a geologist working as a consultant to Royalstar. “But our intention is not to promote stock. We believe our mine will be a producer.”

The South African company De Beers currently controls about 80% of the world market in uncut diamonds through its London-based cartel.

Hope of loosening De Beers’ lock on the market with an American diamond mine has been raised before, in places such as Michigan, Kentucky and Arkansas. But the kimberlite deposits in those states were not considered rich enough to warrant full-scale exploration.

Here too the race is littered with obstacles to be overcome--not the least of which is finding out whether the diamonds are of the size and quantity to make mining worthwhile.

Even then, it could take years to sort, sell, cut, mount and market them for sale to the public. Indeed, skeptics warn that digging for gems can be far easier than selling them at a profit.

“Let me tell how much you can do and still fail in one of these ventures,” said Denver diamond broker Steve Droullard, past president of a joint venture that operated the world’s largest sapphire mine in central Montana’s Yogo Gulch until it closed in 1986.

“We pushed that rascal in thousands of news articles, a book, and full-page ads . . . promoting a home-grown product,” he said. “We found that was valuable in Montana and possibly a few miles over the border in any direction.”

Worse, he added, “When our mine opened, it was taxed by two regulatory agencies. Within three years, there were 21, because everybody who could legislate a tax on us did so.”

The lesson?

“An explorer for gem property is like an inventor--they think that by opening a mine they’ve completed 95% of the task of turning it into a profit-making venture,” Droullard said. “In truth, getting machinery up on a mountain to tear up dirt and get crystals in a jig is nothing compared to the job of financing and marketing.”

But Dan Hausel, senior economic geologist for the Wyoming Geological Survey, is optimistic--in part because diamonds have more cachet than other gemstones.

“Take a look at this,” Hausel said, unfurling a large survey map of the stateline district covered with hundreds of black dots. “Each one of those dots represents a place where diamond-indicator minerals have been found. That’s a lot of area to explore, and a lot of potential.”

The indicator minerals--garnet, ilmenite and chromite, strewn over the region by eons of weather and geological tumult--have come from at least 30 kimberlite deposits discovered in the stateline district, he said.

Those deposits--large, carrot-shaped formations--were created 390 million years ago when molten rock from the Earth’s mantle punched upward through fissures to the surface. Diamonds, crystallized from carbon a billion years ago in the tremendous heat and pressure of the mantle, were thrust 120 miles to the surface by the eruptions.

Even in kimberlite, diamonds are exceedingly rare. For a mine to be economically viable, 50,000 tons of ore must yield 5,000 to 10,000 carats.

However, because more than 100,000 mostly low-grade, small diamonds already have been recovered throughout the stateline district over the past decade, Coopersmith is confident.

Standing beside a large rock crusher he built on a forested hill near his prime digs, Coopersmith said, “I’ve dreamed about and lived on kimberlites for 18 years, and these are by far the most interesting in the United States.

“Nobody’s making a buck yet; we’re just prospecting,” he acknowledged, scooping up a handful of crushed ore and letting it slip through his fingers. “But this sand is filthy with diamonds.”