Kennecott ups diamond search at Rockinghorse

While Tahera (TAH-T) awaits details of next year’s budget for the Rockinghorse project in the Coronation Gulf diamond district of Nunavut, its joint-venture partner, Kennecott Canada Exploration, is committed to spending $1.5 million per year under the option agreement.

Kennecott, a division of Rio Tinto (RTP-N), will have earned a 25% interest in the Rockinghorse project once it incurs $25 million in accumulated expenditures. Kennecott can increase its interest to 62.5% by funding all costs leading to a production decision by May 2008. To the end of last year, Kennecott had spent a total of $21.3 million.

The Rockinghorse project covers 1,500 sq. km and lies about 450 km north of Yellowknife, N.W.T. Kennecott spent 2002 assessing the potential of the highly diamondiferous twin Anuri kimberlites, in addition to testing upwards of a dozen new targets without much success. A new kimberlite, Atani, was discovered 16 km north of the Anuri kimberlites. A 120-kg test sample returned just four microdiamonds.

Kennecott discovered the Anuri kimberlites in 2001 at the head of a prominent, 15-km-long indicator mineral train dominated by abundant chrome diopside and pyrope garnets. The twin Anuris were found under the northern bay of Napaktulik Lake, 50 metres from shore.

The indicator mineral train emanating from the Anuri pipes was defined by heavy-mineral sampling between 1995 and 2000. The geophysical anomaly over Anuri is subtle, and is defined by a gravity low and a coinciding weak magnetic signature. It took more than 40 holes to locate the source of the dispersion train.

The Anuri kimberlites have been tested by seven drill holes, and results suggest the pipes coalesce near surface. The main Anuri kimberlite measures 225 by 150 metres at surface, whereas Anuri East is 100 by 100 metres.

In total, 1,498 kg of tested drill core yielded 1,096 microdiamonds and 552 macrodiamonds, based on a lower cutoff of 0.15 mm. (A macrodiamond is here defined as exceeding 0.5 mm in one dimension.) Kennecott reports that 110 of the stones exceed a 0.5-mm square mesh screen size and 14 diamonds are larger than 1-mm square mesh. The largest diamond recovered weighs three-quarters of a carat. The micro results indicate that the main Anuri pipe has a much higher grade potential than the East pipe.

Grant Ewing, Tahera’s vice-president of corporate development, says the 2003 exploration program will initially focus on finding sisters to the Anuri pipes. Kennecott wants to find additional pipes before embarking on a bulk-sampling program at Anuri, says Ewing. “The best-case scenario would be a couple more discoveries, so that a series of kimberlites could be bulk-sampled together.”

There are several unresolved indicator mineral trains within a 20-km radius of the Anuri kimberlites. During the summer, Kennecott took 75 till samples to determine drill targets at the head of these trains.

“It’s challenging geophysically,” explains Ewing. “A lot of the stand-out geophysical anomalies have turned out not to be kimberlite. The surveys are not as clean as in the Lac de Gras area; there’s more noise. It takes more than having a roughly defined train and ground geophysics.”

Meanwhile, Tahera has resumed permitting at the wholly owned Jericho project, 120 km southeast of Rockinghorse. Kennecott elected not to take on Jericho after unsuccessfully drilling 20 exploration targets during a spring campaign.

Several kimberlite indicator mineral trains remain unexplained, including several within a 10-km radius of the Jericho kimberlite. In addition, the source of diamondiferous float uncovered by Kennecott’s field crews during the fall of 2001 has not been discovered. A 7-kg piece of kimberlite found at the end of a mineral train terminating 900 metres west of the Jericho pipe returned one micro and six macros.

The Jericho properties lie along the northwestern and northeastern shores of Contwoyto Lake, 26 km north of the Lupin gold mine and 150 km northwest of the Ekati diamond mine. The Jericho project covers 2,500 sq. km.

Six kimberlites have been found on the Jericho properties to date, including the Jericho (or JD-1), JD-3, Contwoyto-1 and JD-2 pipes, plus the TAH-1 kimberlite, discovered in April 2001, and the OD dyke, discovered several years ago in the Bird Lake area.

The focus of the proposed Jericho project mine project is the land-based Jericho pipe, 400 metres south of Carat Lake. Discovered in 1995, the multi-phase pipe is 280 metres long, varies from 1 to 120 metres wide, and contains a total resource of 7.1 million tonnes grading 0.84 carat per tonne, equivalent to 5.9 million carats.

A June 2000 feasibility study by SRK Consulting concluded that a combined small open-pit and underground mining operation on the Jericho pipe could produce an estimated 3 million carats over a mine life of eight years, based on a probable minable reserve of 2.5 million tonnes grading 1.19 carats per tonne. A re-evaluation of a 10,530-carat parcel of diamonds by WWW International Diamond Consultants in early 2000 indicated a value range of US$75-88 per carat.

The proposed mine plan entails the open-pit mining of 1.9 million tonnes of reserves averaging 1.26 carats per tonne (equivalent to 2.4 million carats) during the first four years at a stripping ratio of 8.4-to-1. This would be followed by underground mining of some 614,000 tonnes grading 0.99 carat per tonne, equivalent to 610,000 carats, from the central lobe. The underground reserves would be reached by a decline driven from the open pit. A combination of sub-level caving and open-bench mining methods is planned.

About 80% of the minable model is derived from the higher-grade, central lobe. A further 500,000 tonnes grading 0.77 carat per tonne will be mined from the northern lobe and processed at the end of the mine life. In addition, an inferred 780,000 tonnes in the southern lobe and 870,000 tonnes in the northern lobe will be mined by open-pit methods and stockpiled for processing.

Capital costs for the open-pit operation are estimated at $44.5 million, plus a further $10.4 million for underground and sustaining costs.

A 50-tonne-per-hour diamond recovery plant would be constructed 1 km from the Jericho pipe and operate year-round. Open-pit mining would be carried out for nine months of the year. Operating costs over the life of the mine are projected at $52 per carat.

SRK assumed a diamond value of US$75 per carat, which translates into a pretax internal rate of return (IRR) of 34.3% and a payback period of 2.7 years. Using an upper carat value of US$88 modelled by WWW International Diamond, the pretax IRR improves to 50.7%, with a payback of 2.1 years.

Tahera plans to submit a final environmental impact statement to regulators in early 2003. The company still has to negotiate a socio-economic impact benefit agreement with the Inuit.

Tahera is pursuing a strategic alliance with a partner to help finance the Jericho project.

The company has tentatively planned a $1-million exploration budget for Jericho next year.