DIAMOND PAGE — Diavik pipe yields lower grade for Rio Tinto and Aber

Mini-bulk sampling at the Diavik Diamond project in the Northwest Territories has yielded mixed results.

The 29-tonne, large-diameter, mini-bulk drill sample, which was collected from the A-11 North kimberlite pipe, yielded 7.6 carats of diamonds.

Included in that figure is a 3.01-carat “gem quality” stone. The preliminary grade of the overall sample is 0.262 carat per tonne.

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

Situated 300 km northeast of Yellowknife, the project is owned 60% by Diavik Diamond Mines, a division of London-based Rio Tinto (RTP-N), and 40% by Aber Resources (ABZ-T).

In a recent commentary, David James, an analyst with Canaccord Capital, called the mini-bulk samples results “disappointing” in light of the encouraging caustic fusion results. Previous drilling on the A-11 North pipe returned 421 macrodiamonds and 745 micros from a 1,436-kg aggregate sample.

(A macro is defined here as exceeding 0.5 mm in at least one dimension.) The A-11 North had been ranked in the top five of the 24 diamondiferous pipes on the Diavik property. Aber says any decision to proceed with further work will be based on a review of the recently received data.

Further delineation drilling was carried out on known diamondiferous pipes A-2 and A-5, which are close to the development area, and on pipes A-21 and A-154 South, which are part of the reserve base.

Samples from A-2 and A-5 are undergoing microdiamond analysis, and results from drilling on the A-21 and A-154 South pipes will be used to update resource estimates.

The proposed mine development plan centres on the mining of four kimberlite pipes — A-154 South, A-418, A-154 North and A-21 — and on the construction of a 2-million-tonne-per-year diamond recovery plant.

Based on a 2-year, $80-million prefeasibility study, the four pipes together contain an undiluted minable resource of 26.7 million tonnes averaging 3.88 carats, equivalent to 104 million carats with an average estimated value of US$56 per carat. The total resource is estimated at 37 million tonnes grading 3.3 carats.

The operation is expected to produce 6-8 million carats per year (5% of world supply at current levels) during full open-pit production, with a total mine life estimated at 16-22 years. Capital cost projections are in the range of $875 million, including a $75-million allowance, while mine site operating costs are pegged at $59 per tonne of kimberlite for years three to nine, and $66 per tonne of kimberlite for the entire mine life.

Aber is responsible for its 40% share of the costs and will market its 40% share of the diamonds.

March saw the beginning of the environmental review process. A $30-million bankable feasibility study is being conducted jointly by Nishi-Khon, the aboriginal Dogrib Nation Group of Companies, and the engineering firm SNC-Lavalin. If all goes as planned, diamond production could begin in late 2001 or 2002.

During the winter, regional exploration drilling discovered four additional kimberlite bodies, raising to 53 the number of kimberlites found on the Diavik property. Caustic fusion results from that work are pending, as are results from drilling of untested phases of five kimberlite pipes.

Meanwhile, a condemnation drilling program in the proposed mine development area has failed to encounter any new kimberlites.

Exploration work on Diavik is budgeted at $10 million in 1998. Follow-up ground geophysics will be carried out on eight additional anomalies that lie within 15 km of the proposed mine site.

In the meantime, Aber is engaged in a $1-million exploration program farther north at the Victoria Island Kuujjua nickel project. The initiative, which entails drilling six airborne geophysical anomalies, is being fully funded by QNI, in which London-based Billiton is a majority shareholder. QNI can earn half of Aber’s 100% interest in the project. Separately, Aber expects to spend about $300,000 this summer on diamond exploration at Kuujjua. Aber retains 100% of the diamond rights.

Elsewhere, Aber has set aside $1 million to explore for diamonds in West Greenland. This program involves additional ground geophysics, till sampling and drilling on a 12,140-sq.-km project covering three blocks.

Under a joint venture with Platinova (PAS-T), Aber can earn half of 98% of this property, as well as a 25% share on the remaining portion. To do so, the junior must either complete 10,000 metres of drilling or extract a 1,000-tonne bulk sample from a kimberlite body. Since 1996, Aber has spent a total of $2.9 million on exploration, completing 1,500 metres of drilling.

This summer, the company plans to collect an additional 500 samples and consider more than 100 geophysical anomalies for possible drilling in late 1998 or early 1999.

At Aber’s annual meeting, a shareholder rights plan was withdrawn after several institutional shareholders indicated they would not support it.