The Canadian arm of Utah-based Kennecott is emerging as one of the biggest players in the Lac de Gras area of the Northwest Territories as the major agrees to shell out millions to get its foot in the door of Canada’s most celebrated exploration play.
Recent agreements with SouthernEra Resources (TSE), Geomaque Explorations (CDN) and Stall Lake Mines (VSE) mark the latest in a string of deals Kennecott Canada has signed with junior companies holding ground around the Point Lake kimberlite pipe since several diamonds were discovered there by Dia Met Minerals (VSE) and BHP-Utah Mines last fall.
Kennecott’s increasing involvement in the diamond play is a show of faith in the potential of the area. The copper producer’s parent company, RTZ of London, is the world’s second largest mining company with international interests in base metals, gold, uranium, coal, potash and not insignificantly, diamonds. Through its 49% interest in CRA, RTZ owns a piece of the Argyle mine in Australia, the world’s largest diamond producer.
The SouthernEra option, one of the most valuable, calls for the major to make cash payments and work commitments of $6 million over five years to earn a 60% interest in 530,000 acres. To earn a 100% interest in six properties owned by a syndicate consisting of Geomaque, Stall Lake, SouthernEra and private investors, Kennecott must make payments totalling $400,000 and spend $450,000 on exploration.
Kennecott’s interest in the Lac de Gras play now extends to at least two million acres through options on ground held by Aber Resources (TSE), Thermal Exploration (ASE), Bre-X Minerals (ASE) and the aforementioned juniors.
Other major landholders in the area include Monopros, the Canadian representative of De Beers and the BHP-Utah-Dia Met joint venture.
Kennecott appears to be favoring ground to the east of the discovery. Christopher Jennings, president of SouthernEra and a diamond exploration expert, postulates that kimberlites on SouthernEra and Aber ground, scoured by westward-bound glaciers during the last Ice Age, are the source of indicator minerals found in eskers near Lac de Gras.
John Stephenson, president of Kennecott Canada, was unavailable for comment.
The major has also agreed to purchase 1.14 million units of SouthernEra at $1.75 per unit. Each unit will consist of one common share plus a warrant to purchase an additional common share at $2 at any time during the next 12 months. If all the warrants are exercised, Kennecott would end up holding at least 20% of SouthernEra.
Jennings says he will use the financing to investigate other diamond prospects around the world, but mainly in North America.
In the Crater of Diamonds state park in Arkansas, Kennecott is part of a consortium of companies, including a subsidiary of CRA, Continental Precious Minerals (ME), and Arkansas Development spending $500,000 to explore the Prairie Creek lamproite pipe, a former producer.
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