BHP joins Tahera in the Northwest Territories

Having wrapped up its due-diligence study, BHP (BHP-N) has decided to enter into a joint-venture agreement on Tahera‘s (TAH-T) Ranch Lake kimberlite and Ice claims, 75 km northwest of the BHP-run Ekati diamond mine.

BHP can earn a 55% interest in the project by funding to completion a feasibility study on the Ranch Lake kimberlite. The company must also collect a 200-tonne bulk sample from the kimberlite within two years. If BHP withdraws from the deal, it will not retain any interest in the Ranch Lake kimberlite.

Also under the deal, BHP can earn a 51% interest in any new kimberlite discovery on the joint-venture land by completing a 200-tonne bulk sample. Completing a feasibility study of the new discovery would boost BHP’s interest by 14%. If a decision to develop the discovery is made, BHP can earn an additional 5% interest by providing or arranging project financing for Tahera. Tahera must use 90% of its share of project cash flow to repay the BHP loan. Tahera has the option of requesting such financing under the same terms.

BHP also gets the marketing rights for any diamonds produced from the Ranch Lake kimberlite/Ice claims joint venture for the first five years. The two companies will then decide marketing rights, or share them based on equity interest levels.

BHP will also contribute to the joint venture several claims staked during the review period.

Formal documentation of the deal is expected in a few weeks.

The large-tonnage Ranch Lake kimberlite pipe was discovered in 1993. Kennecott, a subsidiary of Rio Tinto (RTP-N), has estimated that the pipe contains about 40 million tonnes of kimberlite to a depth of 350 metres. A 28-tonne, mini-test sample returned 5.3 carats, but the grade, distribution and quality of diamonds was weakly defined.

Kennecott recently relinquished its interest in the Ice claims to Tahera, but retains a 1% gross royalty based on future diamond production from kimberlites discovered on the claims before April 23.

In addition to the Ranch Lake kimberlite, four other kimberlites have been discovered on the 1,200-sq.-km Ice claims.

BHP plans to use its proprietary airborne gravity gradiometer system over the joint-venture land.

The company also plans to fly a test survey over Tahera’s nearby Jericho property during this summer — at Tahera’s election and cost. Under that deal, BHP would receive a 2% gross revenue royalty on any new kimberlite discovered and developed as a result of the survey.