EXPLORATION 1997 — SouthernEra Resources aims to become major diamond producer

Given this country’s recent political transformation, it seems appropriate that its next major diamond mine boasts virtually colorless diamonds.

SouthernEra Resources (SUF-T) is a year away from commercial production at the Klipspringer project, which is nestled in the high rolling hills of the Northern Transvaal province. When it was initiated in early 1995, the project was essentially a single exposure of kimberlite in a small pit. But by the time of The Northern Miner’s recent visit, it had become a major mining development centred on two fissures with a possible resource exceeding 10 million tonnes of kimberlite.

More than 4,600 carats of diamonds have been recovered. The average size is about one-third of a carat, while 15 gem diamonds greater than 4 carats have been discovered, including a 17-carat stone valued at US$550 per carat.

Unlike other high-value diamonds from Botswana and the Northwest Territories, the diamonds at Klipspringer are extracted from kimberlite fissures, not pipes.

Kimberlite fissures are generally less than 1 metre wide but can run for many kilometres and extend to depths of well over 1,000 metres, whereas pipes are carrot-shaped intrusions of kimberlite averaging a few hundred metres in diameter, which extend to minable depths of less than 1,000 metres. A fissure, measuring 10 km by 0.8 metre and extending to a depth of 500 metres, generates about the same tonnage as a pipe with a 2-ha surface expression, and, unlike pipes, fissures generally maintain consistent width and grade at depth. Considerable tonnage may be added to the ore reserves in fissures by pipe-like enlargements or “blows,” which occasionally occur along strike where the fissure meets an area of structural weakness.

The initial discovery of the Leopard fissure at Klipspringer was made by De Beers Consolidated Mines in 1985, but it was not followed up. The fissure was rediscovered in early 1995 by a firm working for SouthernEra and M.J. Scott & Associates. An initial, 11-tonne sample from the Klipspringer fissure kimberlite yielded encouraging results. Shortly thereafter, a 130-tonne bulk sample from a small open pit yielded 470 carats of diamonds.

Two independent firms in London, England, evaluated the first 269 carats recovered at US$85 per carat. The stones were found to have unusually good colors, and a relatively high number measured greater than one carat in size.

Virutally all the 432 carats of diamonds were classified as cuttable.

Encouraged by these results, SouthernEra initiated a program of systematic soil sampling, trenching and diamond drilling, which enabled it to delineate an initial, 2.1-km strike length for the fissure. The company also secured mining rights to dozens of farms, to the extent that it ended up with one of the largest contiguous mineral packages in South Africa, comprising 1,200 sq.

km. Most of the mineral options are wholly owned by SouthernEra; on a few farms far from the known fissures, those rights are shared with Randgold or (in one case) De Beers.

That SouthernEra was able to secure such an extensive ground position in South Africa is a major achievement, considering that country’s laws have tended to make it easy for large mining houses, such as Gencor and Anglo American, to tie up enormous tracts of land without having to work them.

“It’s just that it wasn’t in a traditional diamond area, gold area or platinum area,” SouthernEra President Christopher Jennings told The Northern Miner. “We were really lucky.”

The company has entered into agreements to buy both surface and mineral rights covering the central development area of the Klipspringer landholdings, where the Leopard and Sugarbird fissures are situated.

In the first agreement, the company has agreed to buy surface rights to property covering 1,600 ha, including the known extent of the Leopard fissure and half of the known strike length of the Sugarbird fissure.

In the second agreement, the company has agreed to exercise its right to acquire all mineral rights in the area.

Exploration program

An accelerated program of regional exploration is currently focused on several targets, including: the known 62 km of strike length (which includes the Leopard fissure) along which kimberlite indicator minerals have been found; the parallel Sugarbird fissure; other linear anomalies; and at least one large circular mineral anomaly on the property.

Exploration now consists of follow-up prospecting with both core and percussion drills.

SouthernEra recently discovered three new kimberlite occurrences.

A kimberlite fissure with an estimated width of 1.5 metres was encountered in several reverse-circulation drill holes testing coincident indicator mineral and magnetic anomalies. This occurrence is 14 km from the previously identified Leopard and Sugarbird fissures, which are undergoing advanced development, including bulk sampling.

The second discovery was made 4 km from the first new occurrence. Drilling in this area intersected a kimberlite body with a true width of at least 7 metres. The body is associated with an extensive, indicator-mineral soil anomaly where, in earlier work, four small diamonds were found.

SouthernEra found the third occurrence, 17 km from the previously known kimberlites, while prospecting a 3-ha target area with abundant kimberlite indicator minerals. The kimberlite here was found in discontinuous outcrops and float.

All three areas are now undergoing additional sampling, geophysics and diamond content testing.

With these new discoveries, kimberlite is now known to occur in four areas.

These areas are more than 30 km apart, making the Klipspringer property a sizable kimberlite field.

Processing plant

Kimberlite from bulk samples is processed at a small outdoor plant at Klipspringer. Just steps away from the Leopard fissure, mined kimberlite is fed into a primary jaw crusher, where particle size is reduced to 25 mm. A series of conveyors takes it through to an ore bin and a scrubber (trommel screen), which rejects material exceeding 25 mm and removes fine particles.

The coarse kimberlite material rejected by the scrubber is returned to the primary crusher, while the remainder is conveyed to two rotary diamonds pans in which a mixture of ground-up kimberlite and water is spun. The heaviest material (including diamonds) is pushed to the perimeter by the action of several arms within the pan. One of the rotating arms is equipped with a “tapping tooth” at its end, with which concentrate is pushed out a sliding door at regular intervals.

This first rotary pan produces concentrate which contains 96% of the diamonds eventually recovered. Tailings from the first rotary diamond pan go into a second such device, and concentrate from this pan accounts for 4% of the eventual diamond recovery.

Fine tailings from the pans are piped to a nearby pond; the coarse tailings are sent to vibrating screens, after which all material greater than 4 mm is fed into a secondary crusher and back through the full plant cycle.

“Nothing larger than 4 mm is ever discharged to the tailings,” Project Geologist George Albino noted. “So, logically, no diamond larger than 1 mm should be released to the tailings.”

Diamonds smaller than 1 mm are considered uncuttable, and thus uneconomic to recover. Theoretically, at the other extreme, diamonds larger than 25 mm (one inch) would be destroyed by the plant. However, SouthernEra does not expect such enormous gems to exist at Klipspringer. So far, the largest stone recovered is 17 carats.

“If we start to think we have extremely large stones, we could reconsider [the plant design],” Albino said.

Concentrates produced at the plant are trucked down the hillside to SouthernEra’s well-guarded compound, which comprises a house, office and a small diamond recovery shack. In this small building, a roll screen sizes the concentrate and eliminates clay material. The diamond-bearing material is then loaded into a vertical post jig known as a “digger’s dream”. The concentrates are jigged for 20-30 minutes, during which time the most dense material (including the diamonds) forms an “eye” in the centre of each circular pan.

The full pans are thrown down onto a table where the diamonds are picked out by hand. The remaining concentrates are trucked to Johannesburg, where they are double-checked for diamonds.

In the digger’s dream, some of the concentrate overflows the screens and ends up as jig tailings. This material is collected and poured onto a terraced grease table, where any stray diamonds will stick in the grease, while the less dense material is washed down the terraces.

SouthernEra plans to continue bulk-sampling until it obtains 5,000 carats for continuing diamond grade and valuation. Meanwhile, two consulting engineering groups in South Africa have been commissioned to begin a full feasibility study.

Low mining costs

It is estimated that mining and treatment costs will be about US$25 per tonne, leaving a large operating margin per tonne mined. The low mining costs are possible partly because of the project’s competent host rock and its proximity to established infrastructure. Other reasons include a climate that is mild throughout the year and the ability to mine from adits instead of shafts.

Early results indicate that the kimberlite from Klipspringer has the highest value per tonne of any diamond fissure in the world.

Six months after the feasibility study is completed, Jennings expects the project to enter small-scale commercial production, in the order of 750 tonnes per day. “We’ll start small, but we’ll be building the plant in modules, expanding it up to around 3,000 tonnes per day,” he said.

Most of the production will come from the Leopard fissure, which is augmented by a small pit on the North fissure’s blow. The blow is 55 by 45 metres — large enough to represent several hundred thousand tonnes of kimberlite ore amenable to open-pit mining — and reflects the intersection of the kimberlite fissure and a fracture related to a diabase dyke.

“What we’ve seen from the 100-plus tonnes we’ve taken from the blow is that the diamonds appear to be unusually large, even compared to the Leopard fissure,” Jennings noted.

The 1997 budget for Klipspringer is $12 million, which includes part of the mine’s construction costs.

SouthernEra has roughly 20 million shares outstanding, no debt, and cash reserves of $13 million. The company’s share price has nearly tripled since late 1995 and currently is in the rage of $8. Jennings said the effect of all of these strong numbers is to give SouthernEra more control and flexibility over its exploration work and over further acquisitions in South Africa and elsewhere.

Jennings has no interest in bringing in a joint-venture partner to run Klipspringer. “We’ll be able to do it, and do it very well indeed,” he said.

“This, for us, couldn’t have been a better deposit. It’s low-capital-cost, it’s high-return, it’s long-life — it suits us down to the ground.” SouthernEra plans to market Klipspringer diamonds independently, not with De Beers’ Central Selling Organization.

Sole management

M.J. Scott & Associates is relinquishing management of the project to SouthernEra but will be left with a 2% royalty on production.

“It’s been a good association.” Jennings said. “M.J. Scott has supplied the people and the vehicles; all we’ve had to do is supervise.”

While exploration has, for the most part, proceeded smoothly, Jennings did express some frustration over what he termed “bureaucratic inefficiency.” “We had a few minor problems in the early days with getting our temporary mining permits. Nine different government departments had to sign off on our permit.”

Notwithstanding these hurdles, he says the South African government has indicated that it welcomes mineral development by Canadians. “Canada stood up for the African National Congress (ANC) party in the apartheid days, and they haven’t forgotten that.”

President Nelson Mandela’s ANC-led government has reduced the corporate tax by 5% and done away with the 15% withholding tax on the export of dividends.

“The message is loud and clear from the current government that they want to encourage foreign investment,” Jennings said.