Looking to extend the mine life at its Ekati operation beyond 2020, when it’s now slated for closure, Dominion Diamond (TSX: DDC; NYSE: DDC) has been busy this year proving up the Jay and Sable pipes at the property.
After releasing a positive prefeasibility study for its much larger Jay pipe at Ekati in January, it has now also released a preliminary economic assessment (PEA) for its Sable pipe at the project.
The study looked at developing Sable, which is 17 km north-northwest of the existing infrastructure at Ekati in conjunction with Jay, which lies 25 km southeast of the main camp.
According to the PEA, released in September, Sable can be developed with US$147.4 million in initial capex and US$20 million in sustaining capital.
The study projected Sable’s internal rate of return at 17.3% and an incremental after-tax net present value of US$233 million. The study used a discount rate of 7%.
The PEA is based on production of 9 million carats at a grade of 0.8 carat per tonne and a diamond value of US$190 per carat.
Although it’s small, Sable lies in the project’s Core zone, meaning Dominion owns 88.9% of the pipe. Moreover, Sable is already fully permitted, as opposed to Jay, where permitting is expected to be completed in 2016.
As part of the Buffer zone at the mine, Dominion owns only 65.3% of the Jay pipe.
The company sees the project sharing infrastructure and equipment with Jay. Together, the two pipes should keep the processing plant at capacity until 2033, with mining at Sable ending in 2027.
Dominion foresees development at Sable beginning in the first half of 2016, with construction of rock dams and infrastructure in 2017, dewatering and prestripping in 2018, and production from Sable starting in 2019.
A prefeasibility on Sable is under way.
Indicated resources stand at 15.4 million tonnes grading 0.8 carat per tonne for 11.7 million carats, on a 100% basis.
The Jay pipe prefeasibility pegged initial development costs at US$657 million, with an after-tax, internal rate of return of 16% and a net present value of US$610 million. By itself, Jay is projected to add 11 years of mine life to Ekati, which is now slated for closure in 2020. The pipe holds probable reserves of 84.6 million carats contained in 45.6 million tonnes grading 1.9 carats per tonne.
— This article originally appeared in the November 2015 issue of Diamonds in Canada.