Lac de Gras diamond venture no pipe dream

The pace of exploration may seem deliberate, yet every day, slowly but surely, BHP Minerals Canada and Dia Met Minerals (TSE) are one step closer to a production decision. The goal, Canada’s first diamond mine, is unquestionably worth the wait.

The partners’ rigorous and systematic approach may not be fast enough for some investors, but it appears to satisfy BHP management, which has committed at least $3 million of its $60-million worldwide exploration budget for the year. About $4 million has already been spent since the joint venture with Dia Met was signed.

“Everyone at BHP Minerals regards this project highly,” Hugo Dummett told The Northern Miner during a recent site visit. Dummett, BHP’s manager of North American exploration, has been involved in diamond exploration on this continent and in his native South Africa since 1978.

BHP has opened an office in Kelowna, B.C., where Dia Met is based. The manager of diamond exploration is Rory Moore, a former director of a South African consulting firm owned by diamond expert John Gurney. Moore will be working closely with the project’s chief engineer, Jaap Zwaan, previously with BHP-managed Ok Tedi copper mine in Papua New Guinea. The field program (excepting geophysics) is carried out on a contract basis by Dia Met Chairman Charles Fipke, whose tenacity led to the original diamond discovery. This winter’s bulk sampling of at least two diamondiferous kimberlite pipes is similar to that completed at Point Lake in 1992. At Point Lake, a 160-tonne sample from 37 vertical holes yielded 101 carats of diamonds (25% of which were of gem quality), with some in the 1-to-3-carat range. Targeted are two of the nine pipes found last summer. Core drilling was done on seven of these pipes, all of which are at least as large as the Point Lake pipe. Results varied, but a 122.4-kg core sample from one target yielded an impressive 55 macrodiamonds (greater than 0.5 mm) and 132 microdiamonds. All pipes returned gem-quality diamonds in variable proportions, and all core drilling excludes diamonds from drill bits (including a number of “canary yellows”).

The goal is to obtain at least 200 tonnes of kimberlite from each site, by the end of April, for processing at Dia Met’s 75-ton-per-day plant in Colorado. If ice conditions permit, smaller samples of about 20 tonnes may be taken from other pipes this spring. Plans for summer include mapping, sampling, geophysics and core drilling to identify more diamondiferous pipes. A 40-km road has been extended from Echo Bay’s winter road. Drilling began several weeks late, on Feb. 21, because unseasonably mild weather prevented ice from building up on the lake. Reverse circulation drilling, under Specialized Drilling Services, employs a 1058-inch diameter drill and tungsten carbide bits.

Drills are turning 24 hours a day, seven days a week. At the time of the site visit, one rig had intersected kimberlite on an unnamed target some 30 km from the Point Lake pipe. (Eleven more vertical holes are planned on this target, to a maximum of 240 metres).

Nut-sized pieces of kimberlite pass over shaker tables before being bagged for shipment in sealed trucks to Colorado. A geologist is assigned to each rig to log and sample cuttings, as well as watch for changes in horizontal zoning. Since these changes in kimberlite lithology have implications for diamond content, core from the different phases are bagged separately. While we weren’t shown any diamonds, The Northern Miner did view a typical assemblage of diamond-indicator minerals, including green chrome diopsides, a selection of pyrope garnets (including the highly-prized purple G-10s), and some blackish chromites and illmenites.

Geochemistry is a key exploration tool in the Northwest horizontal zoning. Since these changes in kimberlite lithology have implications for diamond content, core from the different phases are bagged separately. While we weren’t shown any diamonds, The Northern Miner did view a typical assemblage of diamond-indicator minerals, including green chrome diopsides, a selection of pyrope garnets (including the highly-prized purple G-10s), and some blackish chromites and illmenites.

Geochemistry is a key exploration tool in the Northwest Territories, where heavy minerals usually remain well-preserved. The BHP/Dia Met program uses criteria established by John Gurney for recognizing kimberlitic minerals in diamond-bearing kimberlite. Gurney’s criteria, in turn, are based on the microprobe composition of minerals derived from kimberlite.

The roots of the discovery stretch back to the early 1980s, when Dummett (then with Superior Oil) and Fipke (then with C.F. Minerals) explored for diamonds together in the North. Hearing that Monopros was staking near Norman Wells, they began tracing the indicator mineral train to the east, but this was abandoned when Superior pulled out. (Included in this early venture was Stewart Blusson, who, like Fipke, is a minority shareholder in the current project.)

Fipke formed Dia Met in 1984 and, on a bare-bones budget, continued exploration until 1989 when the first claims were staked in the Lac de Gras region. During those lean years, he doggedly tracked the indicator mineral train for several hundred kilometres from the Mackenzie Valley to Lac de Gras. Glaciers, bulldozing east to west, had smeared kimberlitic indicator minerals. These minerals later served as a pathway back to the source pipe, where they became larger and more plentiful.

“We knew we hit the pipe field when the indicator minerals dropped off,” Fipke said, adding that he continued taking till and esker samples for another 350 km east of Point Lake. “We found some indicator minerals but nothing to indicate economic pipes.” He added that recent work on targets in the Dubawnt Lake area is raising questions as to whether they are lamproites, kimberlites or minettes.

The initial samples from Exeter Lake were significant. One 10-kg sample of minus 85 mesh-sized esker material yielded 6,000 pyrope garnets and 1,500 chrome diopsides. The early sampling even yielded a few diamonds. All samples were processed at Fipke’s lab in Kelowna, owned by C.F. Minerals and reputed to be the best in North America.

In early 1990, Fipke sent geochemical data from six samples to Gurney and Moore. Without disclosing that the samples were taken down-ice from Point Lake, he requested they predict a grade for the pipe.

“They predicted greater than 60 carats per 100 tonnes,” Fipke said. “And they were right.”

Fipke had failed to find a Canadian major as a senior partner, but his luck turned when Dummett joined BHP in September, 1989. Dummett understood the significance of Fipke’s findings and brought the project to BHP. A year later, BHP was allowed to earn a 51% interest.

The original claims were re-staked twice to secure all known prospective ground, and the land package now covers almost one million acres in two blocks. So far, nothing significant has been discovered on any adjoining properties, most of which are largely unexplored.

Only one of every 100 or 200 pipes has diamonds, and only one of 20 pipes with diamonds is economic. Before the joint venture, in their respective careers, Fipke and Dummett found about 10 diamondiferous kimberlites — all uneconomic — in Arkansas, Colorado and Canada.

For both explorers, that thrill is now clearly gone.

“We are not interested in finding pipes with a few diamonds,” Fipke said. “And we won’t drill anything unless we know we have a good grade.” Dummett said that while the joint venture is able to predict grades from indicator minerals, “we can’t predict the percentage of gem-quality diamonds, and that is one of most important factors in determining whether a pipe is economic.”

Bulk-sampling is therefore aimed at confirming the grade of the kimberlites, as well as determining the size distribution and quality (whether gem, near-gem or industrial) of the macrodiamonds. Only material coarser than 0.5 mm is processed.

Next, a 2,000-to-5,000-carat sample would have to be provided for feasibility studies. (A sample
of this size is required to determine, with accuracy, grade and an average price for the diamonds.) Mine-financing and sales contracts would follow.

Only when the partners are convinced they have identified the best target will a production decision be made, Dummett said. No wildcat drilling occurs on this property, and new targets being tested will probably prove higher in grade than the Point Lake pipe.

Numerous kimberlites, emplaced into Archean rocks of the Slave tectonic province, are known to exist on the property. The rocks consist of diabase dykes, felsic intrusions (granite and granodiorite), greywackes and shales, and volcanics. The relationship between the dykes and kimberlites is unclear. Fipke said five sets of dykes are evident on different trending breaks in the Archean craton, “and we don’t understand the basement structure.” In winter, trailers can be moved on skids to locations near rigs (the summer camp at Exeter Lake is permanent). The geophysical camp, made of cozy Weatherhaven units, is also mobile. This camp is headed by BHP’s Ray Ashley, whose team usually covers 10 km each day of ground traverses, with heavy instruments on their backs. Airborne and ground geophysical work enables the joint venture to pinpoint pipes and refine drill targets.

“You can find lots of targets with geophysics, but they can be barren pipes or other things,” Dummett cautioned. “We don’t drill any holes without integrating geochemical results with geology and geophysics, simply because we do not want to drill holes that are not justified.”

Ongoing work will determine if a diamond mine will be built at Lac de Gras. Such a mine would be a first for Canada. To earn its 51%, BHP must spend at least $2 million per year on exploration until a feasibility study is delivered. The Australian resource company must also finance up to US$500 million of the first mine in which Dia Met will have a 29% interest.