Aber shares hit high on expansion plans

Under a revised mine plan, partners Rio Tinto (RTP-N) and Aber Diamond (ABZ-T) envision boosting throughput to 1.7 million tonnes of ore to produce around 8 million carats of diamonds from the Diavik mine in the Northwest Territories in 2004.

Originally, the mine was expected to process about 1.5 million tonnes of kimberlite ore to produce around 6 million carats annually.

The new plan also calls for definition drilling to convert known resources to reserves, and an aggressive exploration program on the 2,400-sq.-km property. An updated reserve figure is expected during 2004.

At last count, proven and probable reserves contained in Diavik’s four kimberlite pipes — A-154 South, A-154 North, A-418 and A-21 — were pegged at 27.1 million tonnes grading 3.9 carats per tonne, equivalent to 107 million carats valued in 2000 at US$62 per carat.

In detail, the pair plan to mine a total of 2.1 million tonnes of ore from the existing A-154 open pit area during 2004. Of the total, 1.6 million tonnes will be derived from the A-154 South kimberlite pipe, another 470,000 tonnes will come from the A-154 North kimberlite pipe. Based on 76% plant utilization, all of the ore from A-154 South, and about 60,000 tonnes from A-154 North will be processed during the year. The balance of the tonnes will be stockpiled for processing when capacity allows.

The partners expect to produce around 8 million carats by the end of 2004; Aber plans to sell its 40% share by Jan. 31, 2005. Production is expected to peak at 2 million tonnes of processed ore in 2005.

Under the plan, $38 million is budgeted in 2004 for the purchase of haulage trucks and an expansion of the processed kimberlite containment structure and other associated capital expenditures.

The production increase from the A-154 pit necessitates accelerated development of the A-418 pit and its water containment dyke, and the development of an underground mine plan capable of bringing the underground resources in A-154 North to reserve status.

To that end, $140 million in capital expenditures are planned for 2006 and 2007 for the construction of the A-418 dyke. Another $25 million is budgeted for the construction of a production-sized decline to provide access to assess the feasibility of various underground mining methods in the A-154 South and A-418 pipes.

Additional manpower and production improvements to optimize capacity and development planning will increase annual operating cash costs to $193 million, or $24 per carat, based on a throughput rate of 1.7 million tonne, compared with actual cash costs of $60 per carat during the first half of 2003.

Also, the exploration budget for 2004 has been more than doubled to $9 million. Efforts will focus on 27 kimberlite pipes in the central core of the Diavik claim, but will also target the entire property.

During the third quarter, processing at the operation improved to 74% of design capacity, with 1.47 million carats pulled from 368,000 tonnes of kimberlite. Since beginning operations in early 2003, the mine has recovered more than 2.7 million carats from 874,000 tonnes. Year-end production is expected to hit 3.7 million carats of gem-quality rough diamonds.

Shares in Aber were $1.06 higher at a new 52-week high of $46.48 in late afternoon trading in Toronto following the news on Nov. 19. For their part, Rio Tinto shares were off US$1.64 at US$94.35 in New York.