Tli Kwi Cho partners pin hopes on pipe dream

Convinced Rio Tinto (RTP-N) walked away too soon without properly testing the Tli Kwi Cho kimberlite complex in the Northwest Territories, a consortium of partners led by Eric Friedland’s Peregrine Diamonds are having another kick at the can.

Tli Ki Cho, which consists of diamondiferous kimberlites DO-27 and DO-18, is in the Lac de Gras camp, 23 km southeast of the Diavik diamond mine. The complex covers a surface area of 16 hectares (40 acres) and consists of multiple vents or kimberlite phases and intervening hypabyssal sills. It was discovered by Kennecott Canada, a division of Rio Tinto, while drilling a twin magnetic anomaly in March 1993 on ground optioned from Dentonia Resources (DTA-V), Horseshoe Gold Mining (HSX-V) and Kettle River Resources (KRR-V).

DO-27 is the main southern lobe of Tli Kwi Cho, which covers a surface expression of 9 hectares, whereas DO-18 is a northwestern lobe, between 200 and 400 metres distant. Kennecott intersected up to 12 metres of diamond-bearing “pyroclastic” kimberlite in the first two holes on DO-27 before hitting the main body of the pipe with the third hole. That hole cut 52 metres of pyroclastic kimberlite, which delivered 64 microdiamonds, including 16 stones exceeding 0.5 mm in at least one dimension, from a 60-kg sample. A 91-kg sample from the fourth hole, which intersected 105 metres of kimberlite, held 133 microdiamonds, including 33 stones larger than 0.5 mm.

In the fall of 1993, in a rush to advance the project, Kennecott elected to bypass a crucial mini-bulk sampling stage and proceeded directly to an underground, 5,000-tonne bulk-sampling program on the DO-27. When Kennecott made the decision to go underground, only 38 holes had been completed on the Tli Kwi Cho complex, with micro results released from only nine holes. Kennecott would later drill a total of 43 core holes to test DO-27.

During a site visit to the project in September 1993 by The Northern Miner, Kennecott personnel said that based on drilling up to that time, the grade appeared “amazingly consistent” and that they were especially encouraged by the results from its microdiamond work. That being said, there were clear indications Tli Kwi Cho was a complex beast, exhibiting multiple kimberlite phases of diamond content. Hole DO27-22, returned only 17 micros from a 160-kg sample taken from a 93-metre-long intercept of “diatreme” facies kimberlite. At the time, Kennecott said this hole represented a different phase of kimberlite, which constituted but a small percentage of the total pipe.

The $10-million underground gamble proved costly for Kennecott and its partners. When disappointing bulk-sample results were released to an unsuspecting market in August 1994, hundreds of millions of dollars were wiped off the stocks of the Lac de Gras diamond players.

Dentonia Resources, which holds a 6.7% stake in the project through its one-third ownership of DHK Diamonds, has long argued that Kennecott failed to properly test the potential of the large multi-phase DO-27 pipe. A re-interpretation of the geology suggests that the DO-27 southern lobe consists of two pulses or vents: a smaller, lower-grade northeastern vent and a main vent. Kennecott’s drilling shows a higher-grade core in the main vent, with lower grades along the periphery.

Dentonia contends that the underground bulk-sample was limited in scope and restricted almost entirely to the northeastern subsidiary vent. The bulk sample, collected from a Y-shaped drift starting from the eastern outer edge of the lower-grade lobe at 100 metres below surface, failed to sample the main vent of DO-27. The main vent alone measures an estimated 400 by 200 metres, or roughly 6 hectares.

A 3,003-tonne sample of pyroclastic kimberlite from the drifts returned 1,079 carats of rough diamonds, giving a grade of just 0.36 carat per tonne. What proved worse than the lower-than-expected grade was that the diamonds were valued at only US$22 per carat. The largest gem-quality diamond recovered weighed 3.6 carats and was valued at US$450-800 per carat. The largest industrial-grade diamond weighed in at 9.8 carats.

The diatreme facies, represented by some 1,258 tonnes of material, yielded just 16.4 carats, for an implied grade of 0.01 carat per tonne.

Discouraged by the results, Kennecott abandoned the DO-27 pipe. Plans to extract a 10-tonne mini-bulk sample from the land-based northwestern lobe of Tli Kwi Cho (that is, DO-18) were aborted in 1996, when a large-diameter reverse-circulation (RC) rig failed to cut through overlying boulders. The discovery hole into DO-18 had yielded 78 micros from 265 kg of kimberlite core. Sixteen of the diamonds exceeded 0.5 mm in at least one dimension. At Kettle River’s 1993 annual meeting, President George Stewart described the largest diamond recovered as a clear 0.35-carat, indicating the pipe’s potential for commercial-size stones.

There appears to be little difference between DO-27 and its twin, DO-18, said Michael Senn, who was manager of Kennecott’s diamond exploration at the time of The Miner’s visit in 1993. “We see the same two phases of kimberlite, and the core looks similar,” he was quoted as saying. “They are probably related genetically at depth.” Kennecott tested the DO-18 portion with six holes, recovering 677 micros, including 102 stones exceeding 0.5 mm in at least one dimension, from 1,349 kg of sampled kimberlite core.

Kennecott would later relinquish its interest in the WO claim block that held the Tli Kwi Cho complex in exchange for a 1% gross overriding royalty on any future diamond production.

In 2004, Peregrine Diamonds acquired BHP Billiton‘s (BHP-N) 38.47% interest in the WO claims, with a view to further bulk-sample the DO-27 kimberlite pipe. Peregrine has since increased its interest to 54.47% by spending $4 million to take a mini-bulk drill sample from the main core area of DO-27. This past winter, Peregrine extracted a 151-tonne, mini-bulk sample by completing six large-diameter RC holes to varying depths of up to 209 metres. In total, 135.96 carats of rough diamonds were recovered, for an overall grade of 0.9 carat per tonne based on a cutoff of 1 mm. The grade of each hole ranged from 0.7 to 1 carat per tonne.

The four largest stones included: a light brown 2.93-carat, flattened octahedron; an off-white 2.66-carat tetrahexahedron; a clean white 1.85-carat octahedron; and a clean white 1.62-carat complex tetrahexahedron. Twenty-one diamonds weighed greater than half a carat. The diamond parcel has been sent to several internationally recognized valuators.

Peregrine’s results contrast sharply with, and are much better than, those obtained from Kennecott’s previous bulk sampling, suggesting that the heart of DO-27 was never properly tested in 1994. Two different primary pyroclastic kimberlite phases were intersected in the portion of the DO-27 pipe tested by the RC drilling. Five of the holes sampled a layered sequence of primary pyroclastic tuffs in the central portion of the pipe; these were rich in chrome diopsides and pyrope garnets, with lesser amounts of fresh olivine. The southernmost hole of the program, RC-3, intersected a different volcaniclastic facies, containing high concentrations of fresh olivine. This hole showed the lowest grade: 0.7 carat per tonne.

Peregrine also completed three core holes at DO-27, which were designed to test the depth of the kimberlite and obtain further geological information on the lithological variations. The deepest hole, drilled to a depth of 465 metres, ended in kimberlite, and a second, drilled to 230 metres, ended likewise.

Peregrine plans to resume drilling in July, targeting both DO-27 and DO-18 for resource delineation. The Tli Kwi Cho project is currently held 54.47% by Peregrine, 20% by DHK Diamonds, 13.27% by Archon Minerals (ACS-V), 7.35% by Aber Diamond (ABZ-T), and 4.9% by SouthernEra Diamonds (SDM-T). DHK Diamonds, in turn, is owned equally by Dentonia, Horseshoe Gold, and Kettle River.