BHP tables report to develop more pipes

Vancouver — BHP Diamonds wants to add the Pigeon and Beartooth kimberlite pipes to the existing Ekati diamond mine plan in Canada’s Far North, increasing the projected lifespan of the operation to 18 years.

An Environmental Assessment Report on the development of these two pipes, plus the Sable pipe, was submitted to the Mackenzie Valley Environmental Impact Review Board in April. If approved, work on the pipes will begin in 2001.

In 1994, BHP Diamonds, a subsidiary of Australia’s Broken Hill Proprietary (bhp-n), applied for permits to build what became Ekati, Canada’s first diamond mine, 300 km northeast of Yellowknife in the Lac de Gras area of the Northwest Territories. After one of the most intensive environmental assessments ever conducted in Canada, BHP and its partners received the permits to begin construction in early 1997. The original mine plan included five kimberlite pipes: Panda, Misery, Koala, Leslie and Fox. Leslie was later dropped from the mine plan after feasibility work determined that the pipe was uneconomic. It was replaced with the Sable pipe.

Under the revised mine plan, the five pipes are to be mined by open-pit methods, followed, in the case of the Panda and Koala, by underground mining. The Panda, Koala and Fox pipes are near the site of the main processing plant, whereas Sable lies 17 km to the north and Misery, 29 km to the southeast. All five pipes occur under small shallow lakes that vary in depth from 12 to 29 metres. The original mine plan called for the de-watering of 10 small lakes and ponds. There are about 8,000 lakes and ponds on the BHP claim block.

A total of 78 million tonnes of ore and 508 million tonnes of waste rock is scheduled to be mined over the initial 17-year life of the project. Combined, the pipes contain proven and probable reserves of 65.9 million tonnes grading 1.09 carats per tonne at an average value of US$84 per carat, based on the 1997 feasibility study.

Ekati opened its doors in October 1998. It was built for a total cost of $750 million. The mine is a joint venture, owned 51% by BHP Diamonds and 29% by Dia Met Minerals (dmm-t). The remaining 20% is split between geologists Charles Fipke and Stewart Blusson.

To date, mining activities at Ekati have been in the Koala drainage, part of the Lac de Gras watershed. Regional baseline studies on fish population and water quality were carried out prior to development. BHP says ongoing monitoring shows that the mine is not having a significant effect on the waters in the claim block.

BHP has been collecting environmental baseline data for the Sable, Pigeon and Beartooth pipes since 1996. The proposed development will affect six small lakes. The baseline fisheries and water studies in lakes and streams associated with the three pipes were conducted between 1997 and 1999. The Sable and Pigeon pipes lie in the Exeter Lake watershed, northeast of the Koala watershed. The Sable pipe is 900 metres north of the Panda pit, whereas Pigeon is 4.5 km to the northwest. Snow surveys to measure the dust around Ekati were conducted in 1998.

Archeological baseline information has been collected along the proposed Sable Road since 1996. The road would link the three pit sites with the processing plant. Each proposed pit will need an area for waste rock storage. Pigeon and Sable will need parking areas for trucks. Sable will also require fuel and maintenance facilities and a building to store blasting material.

Based on all previous reviews and on the current assessment, BHP believes there will be few significant negative regional effects. Most of the effects of adding the three pipes will be limited locally. The proposed development may have a minor effect on grizzly bears regionally, and a modest effect at the local level. Studies at Ekati show that mining has a negligible effect on caribou, while birds continue to nest around the mine site.

Possible negative effects include: vehicle accidents with wildlife; loss of habitat; fuel oil spills; disturbance of archeological sites; and the release of sediments in water. BHP says its environmental policy and programs will responsibly predict, prevent and limit these negative effects.

BHP will use the existing facilities and workforce to develop the Sable, Pigeon and Beartooth kimberlites, as is stipulated in the mine’s current type-A water licence.

Small Lakes now cover the Sable and Beartooth pipes, whereas the Pigeon pipe is land-based and covered by boulders, gravel, sand and clay.

Beartooth is a small pipe with a surface area of 1 ha. A 189.3-tonne large-diameter reverse-circulation (RC) drill sample collected from the pipe in 1998 yielded 227.09 carats of diamonds for an implied grade of 1.2 carats per tonne. The average value of the diamonds was determined to be US$79 per carat.

The Pigeon kimberlite has a surface area of about 2 ha and is divided into an upper crater facie and a lower hypabyssal phase. The contact between the two zones occurs at an average depth of 120 metres.

BHP collected a 540-tonne sample of Pigeon in the summer of 1998 from 12 RC holes. The sample was divided into crater and hypabyssal zones for processing. A 213.6-tonne sample from the crater zone returned 113.89 carats of stones for a grade of 0.53 carat per tonne at US$71 per carat. In the lower hypabyssal zone, 137.42 carats valued at US$39 per carat were recovered from a 351.2-tonne sample, giving an implied grade of 0.39 carat per tonne.

To date, BHP has identified 121 kimberlite pipes on the Ekati mine property, including 36 pipes in the outlying Buffer zone claims. The Buffer zone block, which surrounds the central core group of claims, is owned 51% by BHP, 31.2% by Archon Minerals (acs-v), 10% by Fipke and 7.8% by Dia Met.

During this past winter, BHP bulk-sampled the Wolverine, Zach and Cougar pipes on the Core claims, as well as the Lynx pipe on the Buffer zone, by large-diameter RC drilling. The bulk samples will be processed on-site during the summer months.

Last year marked the first full year of operation at Ekati. The mine produced 2.6 million carats at an average of 217,000 carats per month in 1999. In the first three months of this year, Ekati produced 580,000 carats, versus 313,000 carats for the same period a year ago. All production is coming from the Panda pit.

Dia Met reported net earnings of $47.5 million (or $1.56 per share) for the fiscal year ended Jan. 31, 2000, on the sale of 2.24 million carats at an average price of US$168.05 per carat. The realized price was 29% higher than the US$130-per-carat-valuation placed on the Panda pipe by the 1997 feasibility study. Dia Met’s share of earnings from Ekati totalled $99.8 million.

At Jan. 31, Dia Met’s outstanding debt obligations stood at $204.8 million, down $71.5 million from a year earlier. Since the fiscal year-end, the company has paid down a further $24.1 million of debt.

Broken Hill Proprietary posted a record quarterly profit of $479 million (excluding abnormal items) for the third quarter ended March 31, 2000, representing the best quarter in the company’s 115-year history. The quarter was strengthened by higher prices in petroleum, steel and copper, as well as by the absence of the loss-making operations, such as the Hartley platinum mine and Southwestern Copper, which were closed. Chief Financial Officer Chip Goodyear says the new petroleum operations performed strongly during the quarter, as did the Ekati mine.

Unfortunately the quarter was marred by $681-million after-tax writedown of the entire book value of its hot briquetted iron (HBI) plant in Western Australia. Over the past two years, BHP has taken $780 million in after-tax writedowns on the plant. BHP intends to spend $39 million implementing changes to the plant but warns that if a decision is taken to shut down the plant by the end of the calendar year, it will be necessary to recognize liabilities amounting to $944 million before taxes.

As a result of the third-quarter writedowns, BHP lost $39 million for the 3-month period ended March 31.