Diamond sector bolstered by triumphant startup at Ekati — Diavik project undergoes assessment; Snap Lake takes shape

A new era in Canadian mining dawned in October as the nation joined the ranks of the world’s diamond producers.

Situated 300 km northeast of Yellowknife, N.W.T., in the sub-Arctic barren lands, the Ekati mine is operated by 51%-owner by BHP Diamonds, a division of Broken Hill Proprietary (BHP-N), Australia’s largest industrial and natural resources company. Dia Met Minerals (DMM-T) owns a 29% share of the mine, while Dia Met founder Charles Fipke and his former prospecting partner, Stewart Blusson, each hold 10%.

At an expected capital cost of $699.4 million, construction was completed on time and $15 million below budget. Ekati will produce between 3.5 million and 4.5 million carats of diamonds annually, representing 4% of the world’s current production by weight and 6% by value.

In November, Ekati churned out 80,048 carats, whereas October’s production was 27,839 carats. Production rates are gradually ramping up as the process plant undergoes fine-tuning. For the first two week of December, production has averaged 5,000 carats per day. The mine is expected to reach full production from the Panda pit by March 1999, at the rate of about 250,000 carats per month.

“The quality and size distributions of the initial production are consistent with the results of the bulk-sampling program,” the partners report. Large diamonds are being recovered, including a 47-carat stone.

Current plans call for the mining of five kimberlite pipes — Panda, Misery, Koala, Sable and Fox — over a span of 17 years. The pipes will be mined separately by open-pit methods, followed by underground mining at Panda and Koala.

Three of the pipes — Panda, Koala and Fox — are near the site of the main processing plant, whereas Sable is 17 km north and Misery is 29 km southeast. The five pipes all occur in the Core zone of claims, which comprises about 450,000 acres.

Initially, the kimberlite ore will be processed at the rate of 9,000 tonnes per day. An expansion to 18,000 tonnes is planned for year 10 at an estimated cost of US$80 million. Dia Met reports that cash operating costs for the first nine years of the mine are forecast at between US$30 and $35 per tonne. From year 10 onwards, the costs are estimated to fall between US$20 and $25 per tonne.

Together the pipes contain a proven and probable minable reserve of 65.9 million tonnes averaging 1.09 carats per tonne. The diamonds range in value from US$26 per carat for the Misery pipe to US$130 per carat for Panda, with an average of US$84 per carat for the five pipes.

The mine plan is described by the partners as “somewhat dynamic,” based on exploration results. It has previously been altered to replace one pipe (Leslie) with a more economic one (Sable). With 107 kimberlite bodies discovered to date on the Ekati property, including the outlying Buffer zone claims, the owners are confident that ongoing exploration will extend the total life of the mine to upwards of 25 years.

During the 1998 winter exploration program, mini-bulk drill samples were collected from the Koala North and Beartooth pipes, which were discovered in 1996. In total, 126.58 carats of stones exceeding

1 mm in size were recovered from a 201.7-tonne sample of the Koala North pipe, for a grade of 0.63 carat per tonne. The diamonds were determined to be worth US$200 per carat. Three gem-quality stones, ranging in size from 3.26 to 5.41 carats, account for 77% of the value.

The Beartooth pipe yielded 227.09 carats from a 189.3-tonne sample, giving a grade of 1.2 carats per tonne. The average value of the diamonds is US$79 per carat.

Although both of the pipes are described as small, they are close to the mining area currently under development. Koala North, which lies beneath Koala Lake, has a surface area of 0.6 ha, whereas Beartooth, which lies 900 metres north of the Panda pipe, comprises 1 ha. Work continues on the feasibility of incorporating the two pipes into the mining plan.

During the summer field season, exploration core drilling intersected seven kimberlite pipes on the Ekati property. Three of these — 98-A, 98-B and 98-C — have produced microdiamond results which the partners describe as significant. Pipes 98-B and 98-C both occur in the Core zone of claims, while 98-A lies in the Buffer zone claims.

Kimberlite 98-C, dubbed the Phoenix pipe, yielded 95 macros and 158 micros from 239.5 kg of core. (A macro is defined as measuring more than 0.5 mm in at least one dimension.) The stones weigh a total of 0.338 carat.

A 73.3-kg sample of pipe 98-B produced 11 macros and 12 micros with a total weight of 0.057 carat. Kimberlite 98-A returned 8 macros and 11 micros, weighing 0.112 carat, from a 194.9-kg sample of core.

Also, a 540-tonne reverse-circulation bulk sample was collected from the Pigeon kimberlite this past summer. The Pigeon pipe is land-based and covers a surface area of about 2 ha. It lies 5 km north of the Ekati mine process plant. The pipe is divided into an upper crater zone and a lower hypabyssal zone. The contact between the two zones occurs at an average depth of 120 metres.

A 113.89-carat parcel of stones was recovered from the crater zone, giving an indicated grade of 0.53 carat per tonne. Based on valuations made in Antwerp, Belgium, the diamonds are worth an average of US$71 per carat In the lower hypabyssal zone of the Pigeon pipe, 137.42 carats were recovered, for an indicated grade of 0.39 carat per tonne. The stones are estimated to be of lower value, at US$39 per carat.

During the upcoming winter months, further bulk sampling will be carried out on the Phoenix and Gazelle pipes. The latter was discovered in 1995 in the Buffer zone.

The Buffer zone block, which surrounds the Core group of claims, comprises 2,040 sq. km. Ownership of the block is held 51% by BHP, 31.2% by Archon Minerals (ACS-V), 10% by Fipke, and 7.8% by Dia Met. The Diavik diamond project adjoins the southeastern boundary of the Buffer claims.

Archon acquired its interest in the Buffer zone from President Stewart Blusson in exchange for 40 million company shares. A fairness opinion of the Archon deal was prepared by Vancouver-based B.J. Price Geological Consultants, which provides previously unreleased details about the kimberlites.

The Buffer claims cover 26 known and partially explored kimberlite pipes, compared with 81 discovered in the adjacent Core claims. Only one of the Buffer zone pipes — the Jay pipe — has been bulk-sampled.

The Jay pipe lies northeast of the original Point Lake discovery in Lac du Sauvage, near the western shore. The pipe is 7.7 ha in size, with an estimated resource of 38.5 million tonnes. Jay is bigger than most kimberlites in the Lac de Gras region. A 238-tonne mini-bulk sample collected from the pipe in 1996 yielded 477 carats of diamonds, for an average grade of 2.01 carats per tonne. The stones were valued at US$22.50 per carat. (By comparison, the Misery pipe in the current mine plan contains a proven and probable ore reserve of 5.5 million tonnes grading 4.26 carats per tonne, at an average value of US$26 per carat.)

An additional five pipes in the Buffer claims — Piranha, Shark, Gazelle, Glory and Wallaby — have moderate to high potential, reports Price.

The Piranha, or A-841, kimberlite is a small pipe with a surface area of about half a hectare. It straddles the boundary between the Buffer claims and the Diavik project, and is believed to lie about 75% within the Buffer claims. The pipe was discovered by the Diavik joint-venture while drilling in the area of a proposed cofferdam.

A 57-kg drill sample yielded 77 stones indicating a preliminary “micro-grade” of 5.51 carats per tonne. (Micro-grades may not correlate with true resource grades for macrodiamonds. True grade determinations require much more sample material.) The color of the microdiamonds was judged to be “very good.”

The Shark pipe comprises 3 ha and occurs in a cluster of small pipes in Lac de Gras, southeast of the Point Lake discovery. Drilling intersected 155 metres of kimberlite and gave a preliminary mi
cro-grade of 1.32 carats per tonne. The microdiamonds recovered were described as being of “better than average quality.”

The Gazelle pipe, east of Ekati, covers 1.3 ha. Initial drilling cut 172.5 metres of kimberlite. A 483.4-kg sample yielded 189 stones and a preliminary micro-grade of 0.87 carat per tonne. The stones were judged to be of “good quality.”

The Glory pipe comprises 2 ha and lies beneath Lac de Gras. Drilling intersected 162 metres of kimberlite, yielding 197 diamonds from a 243.8-kg sample. A preliminary micro-grade is estimated at 1.32 carats per tonne. The quality of the stones was determined to be “not favorable.”

The Wallaby pipe is land-based and represents an area of 1.5 ha. Drilling intersected about 85 metres of kimberlite and produced 20 diamonds from a 120.8-kg sample of core, giving a preliminary micro-grade of 0.57 carat per tonne. The quality of the stones is unknown.

For the 19 other kimberlite pipes known to exist in the Buffer zone, BHP considers them to be of low priority. There are still 36 potential kimberlite targets that remain untested. The targets are defined on the basis of geochemistry and geophysics.

Diavik project

In what will likely become Canada’s second diamond producer, the Diavik project, 35 km southeast of Yellowknife, underwent an environmental assessment in September. Situated 35 km southeast of Yellowknife, the project is a joint venture, owned 60% by Diavik Diamond Mines, a division of London-based Rio Tinto (RTP-N), and 40% by Aber Resources (ABZ-T).

The partners are optimistic that permits will be in hand in the fall of 1999. Subject to a production decision, construction could start in early 2000 leading to the start of commercial production in the second quarter of 2002.

The proposed mine centres on the development of four kimberlite pipes — A-418, A-154 South, A-154 North and A-21 — that together contain a diluted minable reserve of 26 million tonnes averaging 3.9 carats per tonne, with an average estimated value of US$56 per carat.

The four pipes lie just offshore of 20-sq.-km East Island in Lac de Gras.

Diavik proposes to dam off the pipes with water retention dykes and mine, by open-pit methods, all four pipes to depths of between 250 and 300 metres, followed by underground mining of the A-418 and A-154 South pipes to a depth of 400 metres.

A final feasibility study, originally scheduled to be completed by year-end, has been delayed until the second quarter of 1999. The study is examining a production rate of 1.5-1.9 million tonnes of kimberlite per year, which would yield 6-8 million carats of diamonds annually during the full open-pit mining phase. The project is forecast to have a mine life of up to 22 years.

The prefeasibility study estimates the capital cost at $875 million.

This past year, regional exploration drilling on the Diavik area properties uncovered four new kimberlites, raising to 53 the number found there to date. Twenty-four of the kimberlites are known to be diamondiferous. Aber holds interests varying from 15% to 44.4% in 10 separate properties that cover 3,076 sq. km of ground in the Diavik area.

One of the kimberlites discovered this year is pipe A-180, which is on the main block, 25 km northeast of the Diavik camp near Lac de Sauvage. A 294.8-kg drill sample of the land-based pipe yielded 29 macros and 163 micros.

Another pipe, A-2, situated in the area of the feasibility study, returned partial results of 28 macros and 372 micros from 2,153.7 kg of drill core.

No further work is planned for this pipe.

A 29-tonne mini-bulk drill sample from the A-11 North kimberlite pipe yielded 7.6 carats of stones, for an indicated grade of 0.262 carat per tonne. The recovered diamonds included a 3.01-carat “gem quality” stone.

A-11 North, a land-based pipe, is 10 km east of the proposed mine site.

Elsewhere in the Diavik area, the final results of three holes drilled a year ago on the C-13 kimberlite zone at the Commonwealth claim block returned 86 macros and 184 micros from 958.2 kg of core. The Commonwealth block adjoins the southern boundary of the Diavik Diamonds project at the eastern end of Lac de Gras. The block is held 45.6% by Kennecott, 44.4% by Aber and 10% by SouthernEra Resources (SUF-T).

A budget of $3 million has been agreed to by Diavik Diamond Mines and Aber for property-wide exploration in 1999. The A-180 pipe is targeted for follow-up work.

Snap Lake

Aber also owns a 32.24% interest in the Haywood block of the Camsell Lake property, 110 km south of the Ekati mine. The property comprises the NW Snap Lake kimberlite dyke, where operator and 67.7%-owner Winspear Resources (WSP-V) is carrying out exploration work.

Earlier this year, a 199.7-tonne bulk sample of the NW dyke, collected from two surface pits set 235 metres apart, yielded a 228.9-carat parcel of diamonds with a preliminary grade 1.14 carats per tonne. The parcel included 21 diamonds weighing more than 1 carat, with the three largest stones weighing 10.87, 8.63 and 6.03 carats. The diamonds were determined to be worth an average of US$301 per carat, which translates into an implied value of US$343 per tonne.

The NW dyke sub-crops on a peninsula that juts into the northwestern corner of Snap Lake. This summer, Winspear completed a 65-hole grid drill program on the peninsula over an area measuring 850 metres along strike and between 200 and 400 metres wide. A scoping study prepared by Mineral Resource Development Inc. (MRDI), a division of H.A. Simons, estimated that the portion of NW dyke underlying the peninsula contains a resource of 1.3 million tonnes.

A 1,000-tonne-per-day open-pit scenario on the peninsula assumes a 667,000-tonne minable resource. A second scenario incorporates the open-pit with underground room-and-pillar mining by projecting a 500-metre downdip extension from the eastern edges of the open-pit model. MRDI estimates a potential 3.5-million-tonne resource.

The dyke has in fact been intersected in limited, widely spaced drilling beneath Snap Lake, 1,800 metres east of the subcrop on the peninsula. At the close of the summer drilling program, five additional widely spaced holes were drilled to determine if the NW dyke continues northward on the other side of a crosscutting fault and to test the downdip extent of the dyke.

These five holes succeeded in expanding the strike of the system to 1,350 metres and the downdip potential to 2,200 metres east of the subcrop.

Microdiamond results are awaited for a 500-kg sample of the NW dyke, representative of the bulk sample taken in the spring, as are the micro results from spring and summer drilling. The results will add to the geostatistical database on the dyke’s microdiamond distribution, which is being established for purposes of grade prediction.

An aggressive program of delineation drilling is planned for early 1999: the work will focus on the portion of the NW dyke that extends beneath Snap Lake. In addition, it is likely Winspear will take a further 5,000-to-10,000-tonne bulk sample of the NW dyke to verify diamond values.

Back Lake

SouthernEra continued to search for the source of diamond-bearing kimberlite boulders found near the shore of Munn Lake at the Back Lake project, 50 km northeast of Snap Lake.

The Back Lake project is held 70% by SouthernEra, 19.38% by Kalahari Resources (KLA-V) and 10.62% by Island-Arc Resources (IAR-V).

Kennecott holds a back-in right to a 30% interest from SouthernEra’s share.

The Yuryi kimberlite float material was discovered in the summer of 1997. A 581.3-kg sample of the boulder material yielded 62 macros and 164 micros.

The largest recovered diamond weighed 0.12 carat, with four others greater than 0.01 carat.

During the spring, SouthernEra drill-tested 10 high-priority ground geophysical targets at Munn Lake, up-ice of the kimberlite float area, only to find a single 0.75-metre-thick kimberlite dyke.

In the new year, the company plans to establish an up-ice cutoff for the indicator minerals by utilizi
ng a sonic drill to collect till samples from the bottom of Munn Lake. Additional work will also be carried out on three indicator mineral trains around Margaret Lake.

AK-CJ and Doyle Lake

Encouraged by preliminary valuations of four kimberlite pipes at the AK-CJ project, 100 km southeast of Lac de Gras, Monopros is set to begin a $14-million bulk-sampling program. The company, which is the exploration arm of De Beers Consolidated Mines (DBRSY-Q), can earn a 60% interest in the properties from owners Mountain Province Mining (MPV-V) and Camphor Ventures (CFV-V) by spending at least $18 million on bulk-sampling, completing a bankable feasibility study and advancing the project to commercial production.

If Monopros fully vests, Mountain Province will hold a 36% interest, while Camphor will be left with a 4% share.

Monopros plans to recover, through large-diameter drilling, about 1,000 carats each from the Hearne, Tuzo and 5034 pipes, plus 200 carats from the smaller Tesla pipe. A separate program of delineation drilling is under way.

Mountain Province estimates the Hearne pipe contains a resource of 8 million tonnes; the Tuzo pipe, 9 million tonnes; and the Tesla pipe, 4 million tonnes — all to a depth of 300 metres. These estimates are based on a limited number of delineation holes and the size of the geophysical anomalies.

The 5034 pipe is estimated by Monopros to contain a resource of 15 million tonnes at an average grade of 1.6 carats per tonne. The 5034 stones are valued at US$51 per carat, for an implied value of US$82 per tonne.

De Beers has determined preliminary estimates of grade and diamond values for three other pipes: the Hearne pipe grades 2.33 carats per tonne at US$44 per carat, equivalent to US$103 per tonne; Tuzo has an indicated grade of 2.2 carats per tonne at US$68 per carat, giving an implied value of US$150 per tonne; and Tesla grades 0.37 carat at US$96 per carat, equal to US$36 per tonne.

Immediately south of the AK property are the LA 1-25 claims, which comprise part of the Doyle Lake project, a 60-40 joint venture between Monopros and Gerle Gold (GGL-V). The border of the LA 7 claim is just 200 metres south of the Hearne pipe.

During the summer, two diamond drill holes were drilled from shore to test two separate geophysical lake-based targets. The holes did not encounter any kimberlite. In addition, a heavy mineral and soil-sampling program targeted the area south and southwest of AK kimberlites.


Meanwhile, with a new management team in place, Lytton Minerals (LTL-T) has resumed discussions with New Indigo Resources (NDR-A) regarding a possible merger.

The companies are 50-50 joint-venture partners in the 2,736-sq. km. Jericho project, 400 km northeast of Yellowknife and north of the Lupine gold mine.

The project centres on the JD-01 and 03 pipes, plus the newly discovered Contwoyto-1 kimberlite.

JD-01 is a land-based kimberlite pipe estimated to contain a resource of about 6.1 million tonnes grading 0.94 carat per tonne. A prefeasibility study by Steffen, Robertson & Kirsten (SRK) determined a minable, open-pit resource of 3.8 million tonnes grading 1.01 carats per tonne, with a projected stripping ratio of 4.2-to-1. The JD-01 diamonds are reported to be worth an average of US$60 per carat, giving an implied value of US$60.60 per tonne.

The JD-03 pipe lies under a lake 7 km west of JD-01 and is estimated by the partners to contain a preliminary resource of 10.5 million tonnes to a depth of 300 metres. Three test samples weighing a total of 47.3 tonnes have yielded 16.9 carats of diamonds, for an overall grade of 0.36 carat per tonne.

The Contwoyto-1 kimberlite was discovered this past fall, 30 km east of the Jericho pipes in the vicinity of an indicator mineral train where diamondiferous kimberlite float was found. Caustic fusion analysis of 48.7 kg of float material yielded 123 diamonds above a 100-mesh cutoff. Seven of the stones were larger than 0.5 mm in two directions.

A 90.2-kg sample of drill core produced 169 stones. Twenty-six of the diamonds exceed 0.5 mm in one dimension, 12 are greater than 0.5 mm in two dimensions, and one measures more than 1 mm in two dimensions.

Lytton and New Indigo have formed a strategic alliance with Kennecott Canada Exploration covering several properties in the Northwest Territories, including Lytton’s wholly owned Ice and Ranch Lake properties. Kennecott holds the right to earn a 51% interest in these joint venture properties.

Kennecott’s exploration efforts have identified 19 proposed drill targets on the Rockinghorse property and six targets on the Hood River property.

An additional 19 proposed drill targets have been defined on the Ice-Ranch Lake claims.

The DIA claims, a 50-50 joint venture between Lytton and Pyroil Resources (PYR-A), are subject to the same joint-venture agreement with Kennecott. In the spring of 1998, Kennecott completed 1,211 metres of drilling in four holes, resulting in the discovery of one diamondiferous kimberlite. Analysis of 174.1 kg of kimberlite returned 2 macros and 46 micros, with a combined weight of 0.0085 carat.

Ground follow-up of selected airborne surveys led to the identification of two high-priority drilling targets.

At the Victoria Island property in the High Arctic, Monopros discovered five kimberlite bodies this past June. The De Beers subsidiary can earn a 51% interest in the 2-million-acre property by spending $2 million on exploration, after which Ascot Resources (AOT-V) and Major General Resources (MGJ-V) will each hold a 24.5% share.

While final size distribution results are still pending for the Snowy Owl kimberlite, which yielded 75 diamonds from an 80-kg drill sample, microdiamond results for the other four kimberlites are as follows: Golden Plover produced 2 macros and 42 micros from 180 kg of sample; Longspur yielded 2 macros and 37 micros from a 90-kg sample; Phalarope returned 6 micros from 180 kg of kimberlite sample; and Whimbrel yielded a single micro from 180 kg.

A work program for 1999 is expected include geophysics, glacial sediment sampling and core drilling.


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