Redaurum starts production at Kelsey Lake diamond mine

Production is in full swing at the first commercial diamond mine in North America.

Nestled high in the the foothills of the Rocky Mountains of northern Colorado, the Kelsey Lake operation started up in early May, enabling Redaurum (RRK-T) to jump ahead of its Canadian competitors in the Northwest Territories, who are still in the development stage.

Compared with the proposed mines in the Lac de Gras region of the Territories, which will produce $500-million worth of diamonds annually, Kelsey Lake is small in scale.

Even so, the start of production is gratifying for Redaurum’s geologist Howard Coopersmith, a lifelong diamond enthusiast credited with the discovery of Kelsey Lake.

During a recent site visit, The Northern Miner learned that Redaurum has crafted a marketing strategy to maximize the value of its diamonds, which will be sold, cut and marketed in the U.S. under the trademarks “Colorado Diamonds” and “Kelsey Lake Diamonds.”

The first marketable parcel of diamonds from Kelsey Lake will be sold in the third quarter of this year, adding revenue to Redaurum’s bottom line.

A previous parcel obtained from test-mining fetched US$206 per carat earlier this year, although the size of the parcel was not released. Redaurum has estimated, however, that reserves at Kelsey Lake contain about US$153 million in diamonds, excluding stones larger than 10 carats.

No grade for the deposit has been published, but the concentration of diamonds is reportedly less than one part per million. What makes the project potentially profitable is that 25% of the diamonds exceed 1 carat in size, and 65% of the stones are of gem-quality.

The largest stone found to date measured 14.2 carats, the largest ever recorded in Colorado and the eighth-largest diamond found in North America.

Reserves are expected to last 12 years, and Redaurum expects the mine to crank out 25,000 carats in 1996, rising to 100,000 carats in 1997 and as much as 150,000 carats in later years.

Earth-moving at the open-pit operation is undertaken seasonally, mining about 5,000 tons per day using only a dozer and a scraper.

The ore is stockpiled and then transported in a front-end loader to the processing plant.

“The rock is so weathered that we don’t need blasting or crushing,” said Coopersmith. He acknowledged, however, that a crushing circuit might have to be installed in the future.

The plant processes about 200 tons per hour continuously over a 4-day work week and is fully insulated and heated year-round.

The kimberlite material is separated according to size (between 2 and 19 mm), and further separations are made through four 14-ft. rotary diamond pans and two grease tables.

Redaurum built the plant without the aid of contractors, at a cost of less than US$2 million. “This way we know every nut and bolt in the place,” said Mine Manager Michael Hobbs.

The cost was considerably less than a dense-media separation (DMS) plant of similar capacity. In contrast, Canadian diamond projects will feature DMS plants and one is already in use at the BHP-Dia Met project near Lac de Gras.

Redaurum has 16.9 million tons of kimberlite material contained in two pipes, tested to a depth of 100 metres. Mining is currently focused on the southern part of the 10-acre KL2 pipe. Prestripping at the KL1, which spans 12 acres, has already begun, and mining and processing will follow.

Mining and processing costs for the project are low, at about US$5 per ton.

The mine employs 14 persons.

The kimberlites at Kelsey Lake were intruded into the billion-year-old granites about 390 million years ago.

Eight pipes are known to exist on the 1,200-acre property, and Coopersmith said there is good potential for future discoveries in the area.

Kelsey Lake is the second-largest of four diamond mines owned by Redaurum. In Zimbabwe, the company holds a half interest in the River Ranch mine, which produces 450,000 carats per year. And in South Africa, it owns the Quaggas Kop and Avontuur alluvial mines.

Redaurum expects to begin trading on the American Stock Exchange in September, and is also seeking to list on the London Stock Exchange.