Based on the positive results of an updated scoping study,
Situated 220 km northeast of Yellowknife, Snap Lake is held 67.76% by Winspear and 32.24% by joint-venture partner
Winspear intends to go underground next year to extract a large bulk sample, establish mining conditions and costs, and collect other technical information for the full-scale feasibility study. Environmental work will continue so that a project description covering both the proposed open-pit and underground operations can be submitted to regulatory authorities later this year.
Winspear President Randy Turner says the company has come a long way since it reported the discovery of 16 micro- and macro-sized diamonds at Snap Lake in the fall of 1996.
“In approximately three years, we’ve taken this project from 16 diamonds to where now we have presented a scoping study and a project that is moving forward into full feasibility. Since that time, we have spent approximately $20 million. We’ve carried out 52,000 metres of diamond drilling in 507 holes, 15,000 line km of airborne and about 900 line km of ground geophysics.”
Winspear has collected considerably more than the 5,000 carats of diamonds deemed necessary to judge a diamond project’s economic potential. Earlier this summer, the company reported the recovery of 10,708 carats of diamonds from 5,995.7 tonnes of kimberlite, for a grade of 1.789 carats per tonne, with an average value of US$104.96 per carat. The large bulk sample was extracted from two surface pits on the northwestern peninsula of Snap Lake.
“With that, and information gathered since last year as a result of drilling and earlier mini-bulk samples, we’ve proceeded to a full scoping study under the direction of MRDI Canada [a division of H.A. Simons],” Turner says.
The scoping study, which examined several different operating scenarios, found that Snap Lake’s NW dyke has economic potential for an open-pit and undergound mining operation, with a minimum mine life of 10 years. The dyke subcrops on the northwestern peninsula and dips 11-15 to the east beneath Snap Lake. It extends 2 km in a northerly trending direction, 2.5 km downdip, and has an an average thickness of 2.5 metres.
Once permits are in hand, initial production will begin from an open pit on the northwestern peninsula at the rate of 1,000 tonnes per day for about two years. Underground mine development would begin after open-pit mining gets under way and increase as the open pits are depleted.
The updated scoping study assumed that production from underground would reach 3,000 tonnes per day in the fourth year, rather than the originally envisioned 1,000 tonnes per day. Preliminary capital costs for the combined open-pit/underground mining plan are estimated at $241 million, while operating costs are pegged at $71.52 per tonne. The payback period is envisioned to be 3.6 years, based on before-tax cash flow of $1.2 billion (or $737.3 million after taxes and government royalties).
Robert Klassen, mining analyst with Goepel McDermid, suggests that Snap Lake could become “Canada’s second diamond mine, as production is conceivable by 2002.” The first is the Ekati diamond mine, owned by BHP Minerals and Dia Met Minerals in the Lac de Gras region of the Northwest Territories. It was officially opened in the fall of 1998.
“The economics of Snap Lake are robust, with project payback in 3.6 years and an internal rate-of-return that approaches 30%,” Klassen adds. “However, Winspear must first obtain permits for a proposed underground sample to be taken this winter and raise an additional $15-20 million to fund the winter program if the project is to stay on the fast track.”
Although it was based on the mining of 8.2 million tonnes of kimberlite over 10 years, the study
suggests the mine life could be extended well beyond a decade if additional tonnages of kimberlite are confirmed. Under this scenario, a second mine, possibly feeding a central processing complex, would be considered.
“The potential for expanding the mine life beyond 10 years is excellent, given the abundance of kimberlite in the area,” Klassen states.
Snap Lake is reported to host a global resource of 23.4 million tonnes. An updated resource estimate is expected shortly, based on exploration results not yet incorporated into existing estimates. Because this work is still in progress, it was not included in the scoping study, whichfocused on a minable resource of 8.2 million tonnes.
The next stage of work at Snap Lake will begin once a Class B water licence is obtained to support the advanced exploration program. This work will involve construction of a 1,200-metre-long access drive some 20 metres below the NW dyke, driven out under Snap Lake. A ramp would then be driven into the kimberlite, and about 600 metres of development undertaken — work that will give the company a better idea of the technical challenges of developing an underground mine beneath a lake.
Plans call for the extraction of about 20,000 tonnes of kimberlite. Of this total, 6,000 tonnes would represent three 2,000-tonne bulk samples separated by about 300 metres. Geological, geotechnical and hydrogeological data would be obtained and used to establish underground mining conditions and costs. Since the dyke is narrow, this work will allow for a better handle on dilution, which the scoping study pegged at 10.3% (combined internal and mining dilution) for the open pit, and 10.7% for the underground.
The engineering firm has recommended that Winspear proceed with a full feasibility study based on an underground mining rate of 3,000 tonnes per day, with decline access from the northwestern peninsula.
Toward that end, the underground program will extract bulk samples from the deeper portions of the kimberlite (previous bulk samples were collected from surface pits). Valuations will be obtained to determine how these diamonds compare with those previously extracted from the upper portions of the kimberlite dyke.
By mid-2000, Winspear hopes to have constructed a dense media separation plant on site, which will then process the three underground bulk samples at the daily rate of 100 tonnes. Results of this work are expected to be in hand by year-end. The plant is being designed so that, with minimal improvements, it can handle up to 1,000 tonnes per day. This will allow for a rapid start to open-pit mining once the bulk sample is completed and necessary operating permits are obtained.
A 900-metre airstrip and camp facilities will be constructed to support the advanced exploration program. Winspear estimates it will cost about $20 million to complete the underground program and surface work, increasing to $50 million to bring the project to full feasibility.
Meanwhile, Golder Associates continues to carry out environmental work, including a geotechnical, hydrological and geochemical program aimed at augmenting baseline work initiated in early 1998. Winspear hopes to file an environmental impact assessment report early next year.
Yet to be resolved is ligitation between Winspear and Aber involving a dispute over participating interests in this year’s work program. If Winspear is successful, Aber’s existing interest would be reduced to 16%. However, Aber is disputing Winspear’s claims and has filed suit to protect its current 32.24% interest.
Turner hints that the recent departure of Kenneth Hanna as president of Aber could signal improved relations between the companies. Robert Gannicott, a well-known mining executive, was recently appointed president, whereas John Lamacraft has replaced John Parker as chairman.
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