COAL, URANIUM & OIL SANDS — SouthernEra explores ground in NWT, eyes Brazilian gems

Diamond drilling by SouthernEra Resources (SUF-T) is testing the probable source of diamond-bearing boulders found near the shoreline of Munn Lake at the Back Lake project in Canada’s Northwest Territories.

The Toronto-based company narrowed down the source area of the Yuryi kimberlite float using a sonic drill to complete 231 holes in Munn Lake. In total, 199 till samples were submitted for indicator mineral and kimberlite fragment recovery, and an additional 48 lake sediment clay samples were collected for geochemistry analysis.

Two of the vertically drilled sonic holes bottomed in kimberlite bedrock. SouthernEra says a visual examination of the kimberlite material confirms the presence of “pyrope and other indicator minerals.” The southernmost hole lies within 100 metres of shore and is in 20 metres of water.

The kimberlite material was intersected in a north-northwesterly trending lake-bottom depression. Kimberlite fragments were found in 22 other till samples from inside the depression. Indicator minerals and kimberlitic fragments were also found in a few other samples outside of the lake-bottom depression.

SouthernEra says the results of the sonic drilling program suggest the Yuryi kimberlite boulder material is derived from an inferred steeply dipping kimberlite body that has a strike length of at least 105 metres.

The Yuryi boulders were discovered in the summer of 1997 on the western shores of Munn Lake. The float material contains boulders ranging up to 25 metres in diameter. A 581-kg sample of the boulder material yielded 62 macrodiamonds and 164 micros. (A macro is defined as measuring more than 0.5 mm in at least one dimension.) The largest recovered diamond weighed 0.12 carat, with four others greater than 0.01 carat.

Meanwhile, 21 sonic holes were recently drilled in two fences at Margaret Lake, 2 km northeast of Munn Lake, in a bid to establish up-ice cutoffs for two indicator mineral trains. Results from this work are expected to be available shortly.

SouthernEra operates and holds a 70% interest in the Back Lake project, which is 100 km south of the Lac de Gras region. The remainder is held on a carried basis by Kalahari Resources (KLA-V), with 19.38%, and Island-Arc Resources (IAR-V), with 10.62%. Kennecott Canada Exploration, a division of London-based Rio Tinto (RTP-N), holds a back-in right for 30% of SouthernEra’s interest.

Meanwhile, SouthernEra has completed more than two-thirds of an 8,000-line-km high-resolution airborne geophysical survey which is targeting the entire Yamba Lake property, situated 46 km north of the Ekati diamond mine.

Follow-up ground geophysics are already under way on more than 30 airborne targets. The diamond drilling of the first of these targets will begin during the first week of April. To date, six kimberlite pipes have been discovered on the property, including the Ptarmigan and T-10 pipes, which will be re-tested by SouthernEra during the current phase of drilling.

SouthernEra can earn a 51% interest in the property from partners Tanqueray Resources (TQY-A) and Mill City International (MIY-V) by spending $10 million on exploration over four years. Tanqueray and Mill City each hold a 44.5% interest in Yamba Lake, while Cypango Ventures (CAV-V) holds 11%.

In South Africa, the company has begun treating diamondiferous gravels overlying the M3 target at its producing Marsfontein farm. The company holds a 40% interest in that project, with De Beers Consolidated Mines (DBRS-Q) holding a 30.6% stake and a consortium of South-African black-economic-empowerment groups sharing the remainder (T.N.M., March 15/99).

Roughly 40,000 tonnes of gravel will be treated in a newly erected, 50-tonne-per-day processing plant, which connects to the plant that is used to process ore from the M1 kimberlite pipe. Near-term plans call for the exposure of the underlying 100-by-10-metre kimberlite body and subsequent extraction of a 2,000-tonne bulk sample for grade estimations.

Also targeted for assessment are gravels extending southwards from M1. Similarly, a mini-bulk sample of the M8 fissure, which extends east and west of the pit, is being extracted for analysis. This fissure is one of several discovered on the property so far, and a previously treated sample yielded 0.32 carat per tonne.

Elsewhere on the property, soil anomalies containing indicator minerals have been outlined in several areas, one of which is coincident with a 40-by-50-metre gravity anomaly similar to those associated with the M1 and M3 kimberlites. Another soil anomaly extends 3 km southwest of M1, along which occur three areas exhibiting unusually high amounts of indicator minerals, possibility indicating blows and pipes nearby.

Since last September, more than 2,000 soil samples have been taken from the entire property. Exploration continues.

In related news, SouthernEra has inked a deal with Canabrava Diamond (CNB-V) to earn a half-interest in that company’s namesake diamond project in southeastern Brazil. To do so, SouthernEra must spend US$20 million on exploration over seven years, or spend US$15 million over that period plus subscribe for $1 million worth of Canabrava shares in a private placement by Dec. 10 of this year.

The Canabrava property comprises 480,000 of exploration concessions sitting on the southwestern margin of the Sao Francisco craton in the Cretaceous-aged Alto-Paranaiba Igneous province. It is considered prospective for both primary and alluival diamond deposits, with more than 50 stones weighing between 100 and 762 carats having reportedly been found in the region.

Previous exploration by Canabrava included airborne and surface geophysical surveying, geochemical sampling and drilling. These efforts paid off with the discovery of more than 100 kimberlite and lamproite pipes, of which only eight were tested for diamond-content (three returned microdiamonds), and more than 500 untested geophysical and geochemical targets.

Several targets have been targeted for follow-up exploration.

In 1998, SouthernEra’s net earnings topped $14 million (or 54 cents per share) on revenue of $52.4 million, compared with losses of $7.7 million (or 33 cents per share) in 1997, when the company was still developing its projects in southern Africa. The current year’s results include $4.5 million in exploration writeoffs and $5.3 million in losses tied to the shutdown of the Lou and Cassanguidi alluvial operations in Angola.

Cash flow from operations skyrocketed to $35.1 million from minus $1.8 million. Exploration expenditures remainded relatively unchanged at $11.7 million.

The company began the year debt-free and with $10.9 million in working capital.