EXHIBIT 4.09


                          CONSULTANT RETAINER AGREEMENT

THIS AGREEMENT dated as of and effective on the 31st day of December, 2002;


BETWEEN:
               ARCHANGEL DIAMOND CORPORATION,  a Corporation continued under the
               laws of the Yukon Territories, Canada;

                                                             (the "Corporation")


AND:

               GERALD  E.  DAVIS,  of the  City of  Littleton  in the  State  of
               Colorado, U.S.A.;

                                                              (the "Consultant")


WITNESSES THAT WHEREAS:

A. The  Corporation is an  international  diamond  exploration  company  holding
certain joint exploration and participation rights with respect to the mining of
diamonds  from  the  400  square  kilometer  Verkhotina  Area in the  Oblast  of
Arkhangel'sk in northwestern Russia;

B. The  Consultant is willing and capable of providing on a "best efforts" basis
various  management  consulting  services with respect to Corporation's  diamond
interests;

C. The Corporation desires to retain the Consultant as an independent consultant
and the  Consultant  desires to be retained in that  capacity upon the terms and
conditions hereinafter set forth;

NOW THEREFORE in consideration of the mutual covenants and agreements  contained
herein and for good and valuable  consideration  (the receipt and sufficiency of
which is hereby acknowledged by each of the parties) the parties hereto covenant
and agree each with the others as follows:

1. DUTIES OF THE CONSULTANT

1. 1. Subject to the terms and conditions hereof, the Corporation hereby retains
the  Consultant as an independent  consultant and the Consultant  hereby accepts
and agrees to such retainer.  The Consultant  shall render  consulting  services
outside  of  the  United  States  of  America  with  respect  to  the  strategic
management,  planning and budgeting  with respect to the  Corporation's  diamond
exploration  interests to the Corporation,  together with such other services as
may,  from  time to  time,  be  mutually  agreed  to by the  Consultant  and the
Corporation during the term of this Agreement (the "Services").

1.2.  The  Consultant  agrees  that he shall,  during  the  continuance  of this
Agreement,  provide  the  Services  personally  and in that  respect  apply  his
reasonable  time and  attention to the business of the  Corporation,  and to any
subsidiary of the Corporation,  for the performance of the Services  faithfully,
diligently,  to the  best of his  abilities  and in the  best  interests  of the
Corporation.  The time of service to be  provided  hereunder  by the  Consultant
shall be as agreed to from time to time by the Corporation and the Consultant.



<PAGE>

1.3. The Corporation  acknowledges that the Consultant currently serves and may,
from time to time,  serve as a  director  or officer  of  entities  which do not
conflict with duties under this Agreement.

1.4.  The term  "subsidiary"  as used herein  means any company or  companies of
which more than fifty per cent of the  outstanding  shares carrying votes at all
times (provided that the ownership of such shares confers the right at all times
to elect at least a  majority  of the  Board of  Directors  of such  company  or
companies)  are  beneficially  owned by or held for the  Corporation  and/or any
other  company in like  relation to the  Corporation  and include any company in
like relation to the subsidiary.

2.          TERM

2.1. The  appointment  shall  commence  with effect from  December 31, 2002 (the
"Effective Date") and shall continue for an initial period of Two (2) years from
the Effective Date unless earlier  terminated in accordance  with the provisions
of  this  Agreement  (the  "Initial  Term").  If  agreed  by  the  parties,  the
appointment  will  continue,  starting  January 1, 2005 on a one (1) year annual
basis  until  terminated  prior to the end of such year in  accordance  with the
provisions of this Agreement.

3.          COMPENSATION

3.1. The  Corporation  agrees to pay a fee for Services to the Consultant at the
rate of  US$134,322  per  annum,  payable  to the  Consultant  in equal  monthly
installments  within Thirty (30) days following the submission by the Consultant
of monthly invoices for Services rendered by the Consultant.

3.2. The Corporation agrees to pay to the Consultant if applicable,  at the same
times and in the same manner as provided  for in the Excise Tax Act (Canada) all
Goods and  Services  Tax  ("GST")  payable in respect of the  Services  provided
hereunder,  including without limitation, such taxes calculated on or in respect
of amounts  payable by the Corporation  under this Agreement.  It is anticipated
that the  majority of the  consulting  will be  performed  outside of the United
States of America.

3.3.  It is  understood  and agreed  that the  Consultant  may incur  reasonable
expenses in connection  with his duties under this  Agreement.  The  Corporation
will reimburse the Consultant  for any such expenses,  including  business class
travel  expenses,  provided that the Consultant  provides to the  Corporation an
itemized written account and receipts acceptable to the Corporation within sixty
days after they have been incurred.  The  Consultant  will not be reimbursed for
any item in excess of  US$5,000  unless  approved  in  advance in writing by the
President,  Chief Executive Officer or Chief Financial Officer,  as the case may
be, of the Corporation.

3.4.  Subject to the  policies of the TSX Venture  Exchange  and any  applicable
securities  laws,  the  Consultant  may in the sole  discretion  of the board of
directors be granted  incentive  stock  options to acquire  common shares in the
capital of the Corporation  pursuant to the Corporation's  then applicable stock
or equity compensation plan provided,  however,  that the Consultant shall enter
into an agreement with respect to the granting of the above stock options in the
form provided by the Corporation  which complies with the terms of such plan and
the policies of the TSX Venture Exchange. 3.5. The parties hereto understand and
agree that any and all deductions,  assessments  and  remittances  required as a
result of the compensation payable to the Consultant pursuant to this Consulting
Agreement shall be and remain the sole responsibility of the Consultant.


                                       2
<PAGE>

4.          COVENANTS OF THE CONSULTANT

4.1. The Consultant  shall be responsible  for obtaining all necessary  licenses
and permits and for complying with any applicable federal, state, provincial and
municipal  laws,  codes and  regulations in connection with the provision of the
Services   hereunder  and  the  Consultant  shall  when  requested  provide  the
Corporation with adequate evidence of his compliance with this Section 4. 1.

4.2. The Consultant shall comply, while on the premises used by the Corporation,
with all the rules and regulations of the Corporation from time to time in force
which are brought to his notice or of which he could reasonably be aware.

4.3.  The  Consultant  acknowledges  that as the  result of  entering  into this
Agreement he will be a "person in a special relationships, as that expression is
defined  in the  securities  laws of  various  provinces  of  Canada,  with  the
Corporation,  and that as such he may receive  information  concerning  material
changes  in or  material  facts  concerning  the  business  and  affairs  of the
Corporation that has not been generally  disclosed,  and it covenants and agrees
that he will not purchase or sell any securities of the  Corporation  until such
information has been generally disclosed.

5.          AUTHORITY

5.1. It is understood  and  acknowledged  by the parties that the Consultant is,
being  retained by the  Corporation  as an  independent  contractor and that the
Consultant  shall have no  authority  to enter into any  agreement  or incur any
obligation on behalf of the  Corporation,  except with the prior written consent
of the President,  Chief Executive  Officer or Chief Financial  Officer,  as the
case may be, of the Corporation.

6.          CONFIDENTIAL INFORMATION

6.1.  The  Consultant  acknowledges  that he will,  in providing  the  Services,
acquire  information  about certain matters and things which are confidential to
the  Corporation,  and  which  information  is  the  exclusive  property  of the
Corporation, including, without limitation, the following:

     (a)  exploration and/or development plans;

     (b)  assay results, geological data and/or feasibility reports;

     (e)  financing arrangements and/or joint venture agreements; and

     (d)  other confidential  information  concerning the business operations or
          financing of the Corporation.


<PAGE>


6.2. The Consultant acknowledges the information as referred to in paragraph 6.1
could be used to the detriment of the Corporation.  Accordingly,  the Consultant
undertakes not to disclose same to any third party either during the term of the
Consultant's  retainer except as may be necessary in the proper discharge of his
retainer  under  this  Agreement,  or after  the term of his  retainer,  however
caused,  except with the written  permission of the President,  Chief  Executive
Officer or Chief Financial Officer, as the case may be, of the Corporation.  The
Consultant also agrees that the unauthorized  disclosure of any such information
during the life of this Agreement shall constitute a failure to comply with this
Agreement for the purposes of Section 7 of this Agreement.

6.3. The Consultant  acknowledges  that in addition to any and all rights of the
Corporation,  the Corporation shall be entitled to injunctive relief in order to
protect the Corporation's rights and property as set out in Sections 6.1 and 6.2
of this Section.

6.4. The Consultant  understands  and agrees that the Corporation has a material
interest in preserving the  relationship it has developed with its joint venture
partners  against  impairment by  competitive  activities of a former  employee.
Accordingly, the Consultant agrees that the restrictions and covenants contained
in this Section 6 and the  Consultant's  agreement  to them by his  execution of
this  Agreement,  are of the essence to this Agreement and constitute a material
inducement  to the  Corporation  to enter into this  Agreement and to employ the
Consultant,  and that the Corporation would not enter into this Agreement absent
such an inducement.  Furthermore,  the existence of any claim or cause of action
by the Consultant  against the Corporation  whether predicated on this Agreement
or  otherwise,  shall  not  constitute  a  defence  to  the  enforcement  by the
Corporation  of the  covenants  or  restrictions  provided  in this  Section  6,
provided, however, that if any provision shall be held to be illegal, invalid or
unenforceable  in any  jurisdiction,  the  decision  shall not  affect any other
covenant or provision of this Agreement or the application of any other covenant
or provision.

7.         TERMINATION

7.1. The  Corporation or the Consultant may terminate this Agreement at any time
in the  event  of the  failure  of the  other  party to  comply  with any of the
material provisions hereunder upon such other party being notified in writing by
the party alleging such failure and failing to remedy such failure within thirty
(30) days of receiving  such notice in which case the  Consultant  shall only be
paid fees for Services up to the end of such thirty (30) days.

7.2. The Consultant  may, at any time,  terminate this Agreement upon the giving
of  sixty  (60)  days  written  notice  to the  Corporation  in  which  case the
Consultant shall only be paid fees for Services up to the end of such sixty (60)
days. The  Corporation may terminate this Agreement  immediately  upon paying to
the Consultant a lump sum payment  representing  that aggregate fees for Service
payable for the balance of the Initial Term or the 1 year renewal  term,  as the
case may be, of this  Agreement,  plus GST or similar taxes  related  thereto as
applicable.

7.3.     This Agreement shall be terminated upon the death of the Consultant.

7.4. Notwithstanding any termination of this Agreement for any reason whatsoever
and with or without cause,  the provisions of Sections 4.3, 6, 8 and 9 any other
provisions of this Agreement  necessary to give efficacy  thereto shall continue
in full force and effect following any such termination.

                                       4

<PAGE>


8.         CORPORATION'S PROPERTY

8.1. The Consultant  acknowledges that all items of any and every nature or kind
created or used by the Consultant  pursuant to the  Consultant's  retainer under
this  Agreement,  or furnished by the  Corporation to the Consultant  including,
without limitation,  all equipment,  automobiles credit cards,  books,  records,
reports,  files, diskettes,  manuals,  literature,  confidential  information or
other  materials  shall remain and be considered  the exclusive  property of the
Corporation at all times and shall be surrendered  to the  Corporation,  in good
condition,  promptly at the request of the  Corporation,  or in the absence of a
request, on the termination of the Consultant's retainer with the Corporation.

9.         NOTICES

9.1. Any notice, waiver, direction or other instrument or communication required
or permitted to be given to any of the parties hereunder shall be in writing and
may be given by facsimile transmission or by delivering the same:

         (a)     In the case of the Corporation, to:

                 Archangel Diamond Corporation
                 C/O 204 Lambert Street
                 Whitehorse, Yukon Territory
                 YIA 3T2

                 Fax: (867) 667-7600
                 Attention:     President and CEO

         (b)     In the case of the Consultant, to:

                 34 Lark Bunting LN
                 Littleton, Colorado
                 80127

                 Fax:           (303) 297-0538
                 Attention:     Mr. Gary E. Davis
                                         -

9.2. Any notice,  waiver,  direction or other  instrument  or  communication  if
delivered shall be deemed to have been validly and effectively given on the date
on which it was  delivered  and,  if sent by  facsimile  transmission,  shall be
deemed to have been  validly  and  effectively  given on the next  Business  Day
following the day on which it was sent; provided that, if the day of delivery is
not a Business  Day,  such  notice,  waiver,  direction or other  instrument  or
communication  shall be  deemed  to have been  given  and  received  on the next
Business Day following such date.  For the purposes of this Agreement  "Business
Day" means any day other than a day which is a Saturday, a Sunday or a statutory
holiday in Toronto, Ontario, Canada.

9.3. The  Corporation  and the  Consultant may change its address for notices or
service from time to time by notice given in accordance with the foregoing.



<PAGE>

10.          INTERPRETATION AND GENERAL PROVISIONS

10.1.  Sections and Headings.  The division of this  Agreement into Articles and
Sections and the insertion of headings are for the convenience of reference only
and shall not affect the construction or interpretation  of this Agreement.  The
terms "this Agreement",  "hereof",  "hereunder" and similar expressions refer to
this  Agreement  and not to any  particular  Article,  Section or other  portion
hereof and include any agreement or instrument supplemental or ancillary hereto.
Unless  something in the subject  matter or context is  inconsistent  therewith,
references  herein to sections and  paragraphs are to sections and paragraphs of
this Agreement.

10.2.  Number.  In this Agreement words importing the singular number only shall
include the plural and vice versa and words importing the masculine gender shall
include  the  feminine  and neuter  genders  and vice versa and words  importing
persons  shall  include   individuals,   partnerships,   associations,   trusts,
unincorporated organizations and Corporations and vice versa.

10.3. Entire Agreement.  This Agreement constitutes the entire agreement between
the parties with respect to the  retainer of the  Consultant  from and after the
Effective Date and any and all previous agreements,  written or oral, express or
implied,  between the parties or on their behalf,  relating to any employment or
retainer of the Consultant by the  Corporation  are terminated and cancelled and
each of the parties  releases and forever  discharges  the other of and from all
manner of actions, causes of action, claims and demands whatsoever,  under or in
respect of any such agreement.

10.4.  Remedies  Cumulative.  The rights and remedies of the parties  under this
Agreement  are  cumulative  and in addition to and not in  substitution  for any
rights or remedies  provided by law. Any single or partial exercise by any party
hereto of any right or remedy  for  default or breach of any term,  covenant  or
condition of this Agreement does not waive, alter, affect or prejudice any other
right or  remedy  to which  such  party may be  lawfully  entitled  for the same
default or breach.

10.5. Waiver. The failure of a party in any one or more instances to insist upon
strict  performance  of any of the terms of this  Agreement  or to exercise  any
right or  privilege  arising  under it shall not  preclude it from  requiring by
reasonable  notice that any other party duly perform its obligations or preclude
it from exercising such a right or privilege under reasonable circumstances, nor
shall  waiver in any one  instance of a breach be  construed  as an amendment of
this Agreement or waiver of any later breach.

10.6.  Assignment.  The  rights  which  accrue  to the  Corporation  under  this
Agreement shall pass to its successors or assigns.  The rights of the Consultant
under this Agreement are not assignable or transferable in any manner.

10.7. Further Assurances.  The Consultant shall from time to time at the request
of the Corporation and without  further  consideration,  execute and deliver all
such other additional assignments, transfers, instruments, notices, releases and
other  documents and shall do all such other acts and things as may be necessary
or  desirable  to assure more fully the effect of the  retainer for the Services
contemplated hereby.

10.8.    Time. Time shall be of the essence of this Agreement.

10.9.  Amendment.  This  Agreement may be amended or varied only by agreement in
writing signed by each of the parties. Unless the context otherwise so requires,
a reference to this  Agreement  shall  include a reference to this  Agreement as
amended or varied from time to time.


                                       6
<PAGE>

10.10.  Severability.  If any  provision of this  Agreement is  determined to be
invalid   or   unenforceable   in  whole  or  in  part,   such   invalidity   or
unenforceability  shall  attach only to such  provision  or part thereof and the
remaining part of such provision and all other provisions  hereof shall continue
in full force and effect.

10.11.  Governing  Law. This Agreement  shall be governed by and  interpreted in
accordance  with the laws from time to time in force in the  Province of Ontario
and the laws of Canada applicable herein, and each of the parties hereby attorns
to the non-exclusive jurisdiction of the courts of Ontario.

10.12. Benefit of Agreement. This Agreement shall enure to the benefit of and be
binding upon the parties  hereto and their  respective  successors and permitted
assigns.

10.13.  Counterparts.  This Agreement may be executed in as many counterparts as
are  necessary  and shall be binding  on each  party when each party  hereto has
signed and delivered one such counterpart.  When a counterpart of this Agreement
has been executed by each party, all counterparts  together shall constitute one
agreement.

10.14. Copy of Agreement.  The Consultant hereby acknowledges  receipt of a copy
of this Agreement duly signed by the Corporation.

IN WITNESS  WHEREOF  this  Agreement  has been duly  executed by the  respective
parties hereto effective as of the date first above written.

ARCHANGEL DIAMOND CORPORATION
By:


 /s/ Michael J.M. Farmiloe                                    c/s
-----------------------------------
(Authorized Signatory)



(Authorized Signatory)




  /s/ Gerald E. Davis                   Witnessed By:
-----------------------------------
GERALD E. DAVIS
                                        /s/ Robert Shirriff
                                        ----------------------------------------
                                        (Signature)

                                        135 Roxborough Drive
                                        ----------------------------------------
                                        (Print Name & Address)

                                        Toronto, Ontario
                                        -----------------------------------

                                       7