With a mine life that ends in 2018, the ore is running out at Ontario’s only diamond mine — De Beers’ Victor mine, 90 km west of Attawapiskat.
The open-pit mine, which began production in 2008, yields 600,000 carats of high-value diamonds a year from a single 15-hectare kimberlite.
But with 15 other diamond-bearing kimberlite pipes at the project, there is potential for an extended mine life at Victor.
De Beers has already started an environmental assessment on the Tango Extension kimberlite, the most promising of the other pipes in the Victor cluster. Situated 6.5 km northwest of the Victor mine, the company believes it could extend Victor’s mine life by seven years.
The company is studying the potential to mine Tango Extension as an open-pit operation at a rate of 3 million tonnes per year.
However, the project is not yet shown to be economic.
The Tango Extension kimberlite is smaller, lower-grade, and contains less valuable diamonds than Victor.
While Victor is a low-grade mine at 0.23 carat per tonne, its diamond values are among the highest in the world at more than US$400 per carat.
So far, samples from the Tango Extension indicate the quality is good, but they won’t fetch the same price per carat as Victor diamonds, De Beers Canada’s director of external and corporate affairs Tom Ormsby says.
“We do know at this point the diamonds are not going to be at the same level as Victor — few in the world are,” Ormsby said.
“By the standard that Victor set and the costs that are associated with remote mining where we are, right now the mine is marginal at best.”
Two key programs that are planned for early 2015 should give the company a clearer picture of the Tango Extension’s economics.
One is a bulk sample that will give De Beers a better handle on diamond values and allow it to draw up a reliable revenue model.
“The trench sample will give us a much larger parcel of diamonds, and then we’ll have a better idea of what the revenue will look like,” Ormsby says.
The bulk sample will be the first for the Tango Extension kimberlite.
The other program is a hydrogeological survey that will provide data on the potential cost of dewatering the kimberlite. The project lies in the James Bay lowlands — one of the world’s biggest wetlands.
“We have to carry out a more detailed hydrogeological survey on water flow underground, then we have to do the math on what that would cost to keep it dry,” Ormsby says.
“Dewatering wells and the related power costs to keep them running are quite substantial, so an excessive amount of wells will impact the economics.”
According to De Beers’ project description, more than 200,000 cubic metres of groundwater per year would need to be extracted to mine the kimberlite.
While it investigates Tango Extension’s economic potential, De Beers is on a tight timeline. If its studies prove the Tango Extension is economic, De Beers will have to make a production decision in early 2016 to begin construction that year in time for 2018 production, when Victor will run dry.
Cognizant that the clock is ticking, the company, which is 85% owned by Anglo American (LSE: AAL), began the environmental assessment (EA) process for the Tango Extension development last year.
“The key to potential extension work will be having the next kimberlite permitted and ready to go immediately off the back of the Victor pit closure, as any delay will negatively impact the potential of extending the mine,” Ormsby says.
The EA process is expected to take two years. Ormsby says the company promised the community years ago that it would go through the whole comprehensive EA process again in case an extension was considered.
“Because this was going to be the first mine for the community and for that general area, we said we would definitely go through it again the next time,” he says. “It would give everyone a second chance to look at everything, and it helps increase everyone’s understanding of mining.”
The Tango Extension project is one of the first to be subjected to an environmental assessment under the revised Canadian Environmental Assessment Act. The federal government made changes to the act in 2012 that were meant to streamline the process and avoid federal–provincial duplication.
The impact benefit agreements (IBAs) in place with local First Nation communities have provisions to renegotiate terms for any development, such as Tango, but new IBAs could also be drawn up.
Until the project is closer to looking economic, Ormsby says it would be too early for such talks, although communication with local communities is ongoing.
“We’ve been having general high-level discussions with the community just to say this is where we are, and if this proves to be economic, we’ll need to sit down and talk in more detail about what to do going forward,” Ormsby says.
In Canada, De Beers owns the Snap Lake diamond mine and is advancing its 51%-owned Gahcho Kué mine in the Northwest Territories toward production in 2016.