Canada’s diamond age (1990-2005)

Dec. 9, 1991

Diamond fever has hit the residents of Yellowknife, N.W.T., since Dia Met Minerals announced results from its Point Lake kimberlite prospect, 300 km north of the capital city (T.N.M., Nov. 11/91).

Sources say that four or five crews are actively staking around the junior’s 850,000-acre property and that “millions” of acres have already been claimed. Every helicopter and plane is booked solid.

The announcement stated that 81 small diamonds, all measuring less than two millimetres in diameter, had been recovered from a 59-kg sample made up of fresh kimberlite core. The core length, sampled from 140 metres to the end of the hole at 180 metres, is the richest-ever intersected in Canada. But because the sample is statistically so small, the joint venture has chosen not to release carat weights and gem quality figures at this stage. “It’s unheard of to have so many diamonds in such a small sample,” said DiaMet Chairman Charles Fipke. “But a 200-tonne sample should be done before weight and gem quality are mentioned.”

March 16, 1992

A brief ceremony March 11 in Elliot Lake, Ont., marked the end of 35 years of uranium mining by Denison Mines in the northern Ontario community.

President Bill James presided at the mainly symbolic ceremony, capping “the lid on the last barrel of U3O8” to be produced at what the company described as the largest underground uranium mine in Canada.

March 23, 1992

As the bigger companies downsize their exploration efforts in North America, the emphasis on Mexico has mushroomed to the point where there are now at least 74 Canadian and a handful of U.S. firms conducting activity there.

That list does not include the majors that have recently opened exploration offices in response to new foreign investment rules that allow them to control local projects for up to 12 years from the date of initial production. When The Northern Miner toured Mexico recently, officials from Colorado gold mining giant Newmont Mining were preparing to join Amax and Noranda by setting up base in Mexico.

“As North American governments raise taxes and introduce tougher regulations, what we are seeing is a natural migration to real good geology,” said Russ Babcock, chief geologist at Utah-based Kennecott.

May 18, 1992

Although Curragh Resources will likely survive the Westray coal-mine disaster in Nova Scotia, it will emerge from the wreckage with a severely damaged reputation in the eyes of investors and creditors alike, some analysts say.

Even if the lead-zinc producer’s name is cleared after what is expected to be a lengthy inquiry into the accident, Curragh officials will have a hard time explaining why they got involved in a project that was thought to be both hazardous and politically motivated.

May 25, 1992

Gem-quality diamonds recovered from a kimberlite pipe in the Lac de Gras region of the Northwest Territories indicate that Dia Met Minerals and BHP-Utah Mines may be sitting on Canada’s first diamond mine.

Diamonds in a 160-ton bulk sample from the Dia Met property collectively weigh at least 90 carats, according to BHP-Utah, which is doing the processing at its diamond recovery plant near Ft. Collins, Colo. Investors who have been waiting eagerly for that news rushed into the market and sent Dia Met shares rocketing to $13.50 from $8.13 after 249,822 shares had changed hands May 20, the date of the announcement. Results from Colorado also sparked heavy trading in other Lac de Gras area property holders including Aber Resources, which gained 55 cents on a volume of 1.1 million. Argus Resources moved up 9 cents to 47 cents on 587,600 shares. BHP said a preliminary examination reveals that about one-quarter of the diamonds found in the sample are likely to be of gem quality and a few of the stones are in the 1-3-carat range. The sample was shipped out two months ago after Dia Met reported finding 81 small diamonds, some of gem quality and all less than two millimetres in diameter from a 465-ft. core sample of kimberlite.

Oct. 19, 1992

Recent drilling on ground held by partners Aber Resources, Commonwealth Gold and SouthernEra Resources has blown holes in the theory that the BHP-Dia Met claim block holds the only potential for economic diamond discoveries in the Northwest Territories.

Testing its first target, the joint venture intersected a kimberlite intrusion on the south side of Lac de Gras, about 16 km south southwest of Dia Met’s diamond-bearing Point Lake pipe. Kennecott Canada is financing the program.

“It looks like the Fipke curse that all the ground outside of the Dia Met block is worthless may have been broken,” says John Kaiser, an analyst with Vancouver-based Pacific International.

Amid frenetic staking by a number of diamond seekers earlier this year, Dia Met Chairman Charles Fipke said results from his years of sampling in the Territories had ruled out the possibility of economic kimberlite finds outside the Dia Met-BHP landholdings. His brother, Wayne Fipke, added fuel to the fire by labelling all rival claims “moose pasture.”

Their proximity suggests the likelihood that the Aber find and the Point Lake pipe are members of the same cluster, says Grenville Thomas, president of Aber. Worldwide, kimberlite pipes tend to occur in clusters averaging 50 km in diameter.

Dec.14, 1992

Is flow-through funding the magic formula that led to the discovery of billions of dollars worth of ore or another government scheme plundered for the benefit of the few?

Once again the pros and cons are being debated. This time the “pros” are given fresh ammunition in a report produced by Fenton Scott, president of the Prospectors and Developers Association of Canada (PDAC). The report provides an invigorating analysis of how the mining industry and government have reaped a rich harvest.

The bottom line of Scott’s analysis shows a net cost to governments during the 7-year flow-through period of 1984-90 of $460 million. It also shows a net estimated return to governments from the 29 flow-through mines started up, or announced prior to 1991, of $4.5 billion. These figures give a 10-to-1 return on government investment.

June 28, 1993

The owners of the Windy Craggy deposit in northwestern British Columbia will be demanding compensation of several hundred million dollars from the provincial government. Last week, the government expropriated the project to make it part of a provincial park encompassing the entire Haines Triangle.

Waving placards and wearing black arm bands, a noisy group of Vancouver mining representatives turned out in force to protest the decision announced last week by Premier Michael Harcourt. The New Democratic Party (NDP) premier was booed and heckled by a visibly angry delegation of mining executives, geologists, engineers, mine suppliers and Howe Street investment brokers. The protest was reminiscent of the controversy that erupted when, in 1974, the previous NDP government introduced onerous legislation that drove mining companies out of the province. Many of the placards read: “Super-Royalty 1974, Windy Craggy 1993 — We will never forget.”

Sept. 12, 1994

The takeover battle for gold-producer Lac Minerals has come to a satisfactory conclusion for American Barrick Resources.

Barrick acquired more than 80% of Lac’s common shares on a fully diluted basis in a vote by Lac shareholders. The offer was conditional on the acceptance of at least 66.6% of Lac’s shares being tendered. Barrick’s main rival for Lac was Royal Oak Mines, which was the first to take a run at Lac earlier this summer. Barrick quickly followed suit. Other suitors made noises but made no formal offers. The turning point came when Lac management endorsed a revised offer by Barrick.

With the acquisition of Lac, Toronto-based Barrick becomes the third-largest gold producer in the world. The total output of the combined operations of both companies in 1993 was about 2.7 million oz. gold.

Nov. 28, 1994

A staking rush is t
aking place on the east coast of Labrador, triggered by drill results that have confirmed a significant nickel-copper-cobalt discovery on Diamond Fields Resources’ Voisey’s Bay project, 35 km southwest of Nain.

The most impressive results were from hole 2, which intercepted 71 metres (232 ft.) of base metal mineralization grading 2.23% nickel, 1.47% copper and 0.123% cobalt. This includes a 33.2-metre (108-ft.) massive sulphide (95%) zone.

“This is a significant discovery, just 10 km from deep tidewater, with open-pit potential,” says Diamond Fields President Jean-Raymond Boulle. The company is already gearing up for an expanded stepout drill program in conjunction with additional ground geophysics.

The discovery was big news in St. John’s, Nfld., where companies and individuals must register their claims. “We are in the middle of a staking rush,” asserts Noel Gover, mineral claims recorder. “Over 5,000 claims were staked by the 21st, and we’ve handled another 1,000 this morning. Labrador will never be the same.”

Feb. 27, 1995

The Eskay Creek gold mine in northwestern British Columbia is up and running. The initial shipment of crushed and blended ore, destined for smelters in Japan and eastern Canada, was made earlier this year.

Owner Prime Resources Group estimates that total capital cost will be about $73 million, which is 3% below the feasibility study estimate of $75 million.

Of this total, $55.6 million was spent in 1994. This year, the remaining $17.2 million will be used to buy underground mining equipment, upgrade the access road and provide additional working capital.

April 1, 1996

A rival suitor has crashed the Falconbridge-Diamond Fields Resources wedding. Whether Falconbridge will rise to the challenge or be left alone at the altar remains to be seen.

Inco has calculated the value of its recent offer to be $43.50 per Diamond Fields share, or approximately $4.5 billion, making it half a billion dollars richer than the offer made by Falconbridge in February. Inco is offering 0.557 of an Inco common share per Diamond Fields share, valuing Diamond Fields at $26.39 per share and Inco at $47.375 per share. Inco would also issue to Diamond Fields shareholders a new series of convertible preferred shares, which would allow them to retain a 25% interest in the Voisey’s Bay nickel-copper-cobalt deposit in Labrador. Finally, each Diamond Fields share would entitle the bearer to one share in Diamondco (Diamond Fields’ diamond business).

Inco has set a cash limit of $350 million for its bid, and plans to issue about 51 million Inco common shares if that number is reached. The deal would increase Inco’s effective interest in the Voisey’s Bay nickel-copper-cobalt deposit to 75%, and would allow it to cancel, without additional cost, the US$387 million of Series D convertible preferred shares it issued in June 1995 to acquire its initial interest in the deposit.

April 7, 1997

A month ago, it was reputed to be sitting on the largest gold find of the century, but the ground is now shaking beneath Bre-X Minerals, operator of the Busang gold project in eastern Kalimantan, Indonesia.

Due diligence investigations by Freeport McMoRan Copper & Gold and a technical audit by respected consulting firm Strathcona Mineral Services have uncovered evidence that the drill program at the Busang deposit may be invalid and that the deposit may have substantially less gold than had been estimated — that, in the worst case, it may have no economic mineralization at all.

Freeport, which had started its field work by drilling four twin holes — holes collared about 1.5 metres from earlier Bre-X holes, and aimed in the same orientation — found that core samples carried “insignificant” concentrations of gold; over lengths comparable to mineralized intersections in the Bre-X holes, assays never exceeded 0.06 gram per tonne. When the results were made public on March 27, Bre-X shares fell a drastic $13 on the Toronto Stock Exchange and speculation that Bre-X was not an elephant but, rather, a giant pillar of salt, began to take over the market. Bre-X disclosed on March 26 that it had been advised by Strathcona Mineral Services, which it had retained in the previous week, that “there appears to be a strong possibility that the potential gold resources have been overstated, because of invalid samples and assaying of those samples” (T.N.M., March 31/97). Freeport added its own release, saying analyses of cores from its confirmatory holes had, up to that time, indicated “insignificant amounts of gold.”

Bre-X’s mineral resource consultants, Kilborn SNC-Lavalin, issued a statement clarifying that it had been retained only to perform resource calculations based on data supplied by Bre-X, and that the calculations depended “on the validity of samples and assaying.” That an established mining consultancy such as Kilborn felt obliged to issue such a clarification underscored the unease that many were beginning to feel about Busang.

The news shocked the market, but with trading in Bre-X halted the funds could do little but sell other speculative junior exploration stocks and break open a box of red pens.

March 16, 1998

Aber Resources and Diavik Diamond Mines, a division of Rio Tinto, unveiled a $875-million plan to build Canada’s second diamond mine. The mine site is situated 300 km northwest of Yellowknife, N.W.T., and 35 km southeast of the Ekati project of BHP and Dia Met Minerals.

The mining plan calls for a 2-million-tonne-per-year processing plant that will handle production from four kimberlite pipes: A-418, A-154S, A-154N and A-21. The plant will utilize heavy medium separation with x-ray diamond recovery.

The operation is expected to yield 6 to 8 million carats of diamonds per year, with a total projected mine life of 16 to 22 years. After year 15, the rate of production would drop to between 3 and 4 million carats per year. A preliminary reserve estimate, calculated by Diavik, weighs in at 37 million tonnes grading 3.3 carats per tonne (or 123 million carats). To date, 83% of the resource, (104 million carats), falls into the total minable reserves category. The average diamond price is estimated to be US$56 per carat. The companies expect that more than 90%, by value, of the diamonds produced will be gem quality.

A prefeasibility estimate pegs the project’s capital cost at $875 million, plus or minus 25%. The final feasibility study is expected to be completed in the fourth quarter of 1998. Current estimates suggest that production could commence as early as 2001.

May 4, 1998

Falconbridge reports that its Raglan nickel mine on northern Quebec’s Ungava Peninsula is expected to reach its rated capacity of 21,000 tonnes of contained nickel by mid-1998.

The $570-million operation produced its first nickel-copper concentrates late last year, three months ahead of schedule. The concentrates will be shipped this summer to Deception Bay and then Quebec City, where they will be transported by rail to Falco’s smelter at Sudbury for conversion into matte. The matte will then be sent by rail back to Quebec City, for shipment to Falco’s refinery in Norway.

At last report, proven and probable reserves stood at 14.4 million tonnes averaging 3.17% nickel and 0.88% copper, plus possible reserves of 6.1 million tonnes averaging 2.97% nickel and 0.88% copper.

Falco describes Raglan as having “great expansion potential.” Based on recent exploration successes, the company figures it can expand production to 30,000 tonnes of contained nickel annually.

Oct. 26, 1998

The recent submission to the federal government of an environmental assessment for the proposed Diavik mine in the Northwest Territories sets in motion the permitting process for what will be, in all likelihood, Canada’s second diamond mine.

Situated 300 km northeast of Yellowknife and 35 km southeast of the producing Ekati diamond mine, the Diavik project is owned 60% by Yellowknife-based Diavik Diamond Mines, a wholly-owned subsidiary of Rio
Tinto, and 40% by Aber Resources.

Dec. 7, 1998

Placer Dome has reached an agreement with Johannesburg-based Western Areas to acquire a 50% operating interest in a property in the Witwatersrand district of South Africa.

The property contains a proven and probable reserve of 235 million tonnes grading 7.8 grams gold per tonne, equivalent to 59.3 million contained ounces gold. Of this, a deposit known as South Deep accounts for 52 million oz. The calculations are based on a gold price of US$260 per oz. and a cutoff grade of 4.2 grams. The total mine life is estimated at 79 years. Placer Dome must pay Western Areas US$235 million upfront and make additional payments over the life of the mine.

Jan. 4, 1999

A new era in Canadian mining dawned in October as the nation joined the ranks of the world’s diamond producers.

Situated 300 km northeast of Yellowknife, N.W.T., in the sub-Arctic barren lands, the Ekati mine is operated by 51%-owner by BHP Diamonds, a division of Broken Hill Proprietary, Australia’s largest industrial and natural resources company. Dia Met Minerals owns a 29% share of the mine, while Dia Met founder Charles Fipke and his former prospecting partner, Stewart Blusson, each hold 10%.

At an expected capital cost of $699.4 million, construction was completed on time and $15 million below budget. Ekati will produce between 3.5 million and 4.5 million carats of diamonds annually, representing 4% of the world’s current production by weight and 6% by value.

April 17, 2000

Economically interesting deposits of platinum group metals (PGMs) are few and far between on planet earth, with more than 90% of the world’s supply coming from only three mining camps: Bushveld in South Africa, Noril’sk in Russia and Stillwater in the U.S. What’s more, the deposits tend to be lean and metallurgically complex, further reducing their appeal as exploration targets.

Notwithstanding these real and considerable challenges, Ontario is increasingly viewed as prime hunting ground for PGM deposits. It has the right geology — as evidenced by the Lac des les palladium-platinum mine, north of Thunder Bay (Canada’s only primary PGM producer) and new PGM discoveries within the River Valley Intrusive near Sudbury — and access to nearby metallurgical complexes that potentially could handle downstream processing of concentrates. To top it all off, two of South Africa’s largest PGM producers have made deals with juniors actively exploring for the noble metals in the province.

Indeed, PGM exploration in Ontario is one of the few bright spots on the Canadian exploration scene. The sustained rally in platinum and palladium prices has allowed juniors handily to raise funds for their exploration efforts, and prompted others to cut their traditional ties to gold and jump on the PGM bandwagon.

Oct. 30, 2000

It began life in 1948 as Dickenson Mines’ Arthur White gold mine and went on to produce more than 3.1 million oz. without interruption until a strike forced a shutdown in 1996. Recently, under the ownership of Goldcorp, the mine was reborn as one of the highest-grade underground gold producers in the world.

The re-christened Red Lake operation, situated in the Kenora district of northern Ontario, started up in August, since which time more than 35,000 oz. gold have been poured. In October, the mine was officially re-opened in a ribbon-cutting ceremony attended by The Northern Miner and various other guests.

Goldcorp acquired the mine when it amalgamated with Dickenson Mines in 1994. In April 1998, Bruce Humphrey, Goldcorp’s vice-president of operations, visited the site for the first time. “I had been warned that the property was a little run-down and needed some work,” he says. “That was an understatement: this truly was a 50-year-old facility that had been undercapitalized for many years. But it’s not the same mine anymore. It not only looks different; in may ways, it really is different.”

The new mine is wired for fibre-optic communications and video, and all areas, including the head office in Toronto, are linked via computer networks.

These and other modifications are key to Goldcorp’s full-production target of 240,000 oz. per year, which was to have been achieved by presstime. Cash costs are estimated at US$88 per oz., with the total after-tax cost pegged at US$213 per oz.

Jan. 1, 2001

Aber Diamond has agreed to sell its 32.24% interest in the promising Snap Lake project to South Africa’s De Beers Consolidated Mines for $173 million.

The move came just days after London-based Rio Tinto approved an accelerated construction schedule for the $1.3-billion Diavik mine project in the Northwest Territories. Diavik Diamond Mines, a wholly owned subsidiary of Rio, is the operator and 60%-owner of the joint-venture project. Aber holds the remaining 40%.

The Diavik project lies 300 km northeast of Yellowknife and 30 km southeast of the producing Ekati diamond mine.

Dec. 24, 2001

Convinced that its Turquoise Hill copper-gold porphyry discovery in southern Mongolia has the tonnage potential to rival that of the huge Grasberg deposit in Indonesia, Robert Friedland’s Ivanhoe Mines has raised some US$16.7 million in recent months and embarked on an aggressive winter drilling campaign.

During a recent site visit to Turquoise Hill (or Oyu Tolgoi, as it is known in Mongolia), The Northern Miner learned that another two drill rigs are being added to the four that are currently positioned over the Southwest Oyu discovery zone. Southwest Oyu is one of four distinct targets occurring in an area measuring 3 by 2 km. This past summer, Ivanhoe discovered a gold-enriched zone of hypogene copper mineralization after testing the depth potential of an earlier hole drilled by BHP Billiton near the northeastern edge of the Southwest Oyu zone. BHP had intersected a 74-metre-thick zone of sheeted quartz stockwork rich in bornite, chalcopyrite and magnetite grading 1.6% copper and 0.18 gram gold per tonne from 54 to 126 metres of depth, followed by 80 metres of 0.52% copper.

BHP had drilled three other holes, spaced 400 metres apart into Southwest Oyu, as well as a large, northeasterly trending induced-polarization (IP) chargeability anomaly and a coinciding magnetic anomaly. These holes returned intervals of 140 metres grading 0.56% copper and 0.46 gram gold from 82 to 224 metres of depth, 218 metres of 0.5% copper and 0.4 gram gold from 24 to 242 metres, and 36 metres of 0.69% copper and 1.16 grams gold, starting at 113 metres of depth in the footwall of a dipping syenitic intrusion.

Ivanhoe’s discovery hole, OTD-150, was collared at minus 55 and directed toward the northeast. The hole reached a down-hole depth of 591 metres and averaged 0.81% copper and 1.17 grams gold over 508 metres, from 70 to 578 metres of depth. The 508-metre-long intercept included an upper 54 metres grading 0.51% copper and 0.45 gram gold, followed further down-hole by a 278-metre zone grading 1.02% copper and 1.6 grams gold between 188 and 466 metres.

“We knew instantly we had a significant deposit,” Douglas Kirwin, Ivanhoe’s senior vice-president of exploration, told The Northern Miner. “It was tremendously satisfying. Every field geologist spends his entire career trying to find something like this.” Kirwin gives full credit for the discovery to BHP’s geologists in Mongolia, who were opposed to BHP’s dropping this project.

Dec. 24, 2001

In mid-December, shareholders of Homestake Mining gathered in Walnut Creek, Calif., for the final meeting in the company’s 124-year history and overwhelmingly approved merging with Barrick Gold.

Under the terms first offered by Barrick in June, each Homestake share was converted into 0.53 of a Barrick share, so that former Homestake shareholders now own about 26% of Barrick’s 536 million outstanding shares.

With holders of Homestake stock, Homestake Canada exchangeable shares and Homestake CHESS depository interests eligible to vote at the meeting, the company reports that 95.7% of votes cast were in
favour of the merger, representing 64.7% of all Homestake’s outstanding shares. (Barrick shareholders were not required to vote on the merger.)

Based on Barrick’s closing share price of US$15.67 on Dec. 13, the deal valued each Homestake share at US$8.31, giving the acquisition a value of US$2.2 billion and boosting Barrick’s market capitalization to US$9 billion.

The acquisition of Homestake brings Barrick 12 major mines in four countries, hosting combined reserves of 20.8 million oz. Last year, these mines produced 2.2 million oz. for Homestake at a total cash cost of US$174 per oz.

Jan. 7, 2002

Confirmation that two “kimberlitic” discoveries in the Otish Mountains region of north-central Quebec are diamondiferous has focused attention on the area.

Prior to the Christmas holidays, Ashton Mining of Canada reported the microdiamond counts from two kimberlitic bodies discovered during a first pass of drilling last fall.

March 22, 2004

With two diamond mines already established and three projects at the permitting stages, Canada will surpass South Africa this year in terms of diamond production value and move into third place, behind Botswana and Russia.

The Ekati and Diavik diamond mines in the Northwest Territories accounted for 11% of the world’s diamond production by value in 2003. What’s more, Canada’s share is expected to increase to more than 15% in the next five years as De Beers’ Snap Lake and Victor projects come on-stream, along with Tahera’s Jericho project. Owing to their high gem quality, coupled with a clean and pristine image, Canadian diamonds are commanding a premium in the rough and retail markets, and have among the highest average value per carat in the world.

May 31, 2004

IMA Exploration’s Galena Hill discovery in southern Argentina has a resource equivalent to more than 200 million oz. silver, according to an independent estimate.

Assay results from 37 holes drilled on roughly 80-to-100-metre centres point to an indicated resource of 63.6 million tonnes grading 101 grams silver per tonne (2.9 oz. per ton) and 1.76% lead, equivalent to 207 million oz. silver and 1.1 million tonnes lead. The estimate, provided by Snowdon Mining Industry Consultants, is based on a cutoff grade of 50 grams silver-equivalent.

Oct. 18, 2004

The Manitoba-based operations of Hudson Bay Mining & Smelting could be sold to tiny Venture-listed OntZinc if a new deal with Hudson Bay’s parent goes through.

South African mining house Anglo American has agreed to a deal to sell the assets to OntZinc for $325 million, following a quiet auction for the assets.