DIAMOND PAGE — Ekati partners evaluate pipes near mine

The bulk sampling of two diamond-bearing kimberlite pipes in the vicinity of the Ekati mine site development area has returned preliminary grades and valuations comparable to the five pipes slated to be mined.

The Ekati mine project, construction of which is more than 85% complete, is situated in the Lac de Gras region of the Northwest Territories, 300 km northeast of Yellowknife. The core block of claims, containing the Panda, Misery, Koala, Sable and Fox pipes, are owned 51% by BHP Diamonds, a subsidiary of Broken Hill Proprietary (BHP-N), 29% by Dia Met Minerals (DMM-T), 10% by Dia Met founder Charles Fipke and 10% by Fipke’s former prospecting partner, Stewart Blusson.

Three of the five kimberlite pipes — Panda, Koala and Fox — are near the site of the main processing plant, whereas Sable is 17 km to the north and Misery is 29 km to the southeast. Proven and probable reserves of the five pipes total 65.9 million tonnes at an average grade of 1.09 carats per tonne, with a diamond value averaging US$84 per carat.

The Buffer claims, which lie outside the core block, are held 51% by BHP, 31.2% by Blusson, 10% by Fipke and 7.8% by Dia Met. Shareholders of Archon Minerals (ACS-V) recently approved the transfer of Blusson’s 31.2% interest in the Buffer claims to Archon in exchange for 40 million company shares. The deal remains subject to approval by the Vancouver Stock Exchange.

Of the 100 kimberlite pipes discovered on the Ekati mine property to date, 75 are in the core block of claims.

During the 1998 winter exploration program, mini-bulk drill samples were collected from the Koala North and Beartooth pipes. A total of 126.58 carats of diamonds exceeding 1 mm in size were recovered from a 201.7-tonne sample of the Koala North pipe, for a grade of 0.63 carat per tonne. A commercial valuation of the stones in Antwerp, Belgium, pegged them at US$200 per carat.

Three gem-quality stones ranging in size from 3.26 to 5.41 carats account for 77% of the value.

The Beartooth pipe yielded 227.09 carats from a 189.3-tonne sample, giving a grade of 1.2 carats per tonne. The average value of the stones is US$79 per carat.

Both of the pipes are described as relatively small. Koala North, which lies beneath Koala Lake, has a surface area of approximately 0.6 ha, whereas Beartooth, which lies 900 metres north of the Panda pipe, covers a surface area of 1 ha. Reserve modelling on both pipes is proceeding.

The joint-venture partners are committed to continued exploration on the Ekati mine project, with the objective of improving near-term cash flow by substituting more economic pipes in the mine development plan and expanding the 78-million-tonne reserve base.

This summer’s exploration program will involve further drill testing of geophysical targets and the extraction of a 500-tonne bulk sample from the Pigeon kimberlite. Previous sampling on the Pigeon pipe returned 60 carats from a 154-tonne sample, for a grade of 0.39 carat per tonne. Those stones were valued, in 1995, at US$51 per carat.

Capital costs for the Ekati mine project to the start of production are estimated at US$700 million, including contingencies. The project remains on schedule and within budget for commercial production to begin in October of this year. Rough diamonds from the mine are expected to be available for sale by the end of the year.

BHP was responsible for arranging the first US$500 million in financing. With the recent signing by the joint-venture partners of a 5-year marketing agreement that appoints BHP Diamonds as the sales representative of the Ekati mine, BHP will guarantee the balance of funds required to advance the project to commercial production.

Dia Met is required to repay its share of the mine financing at CDOR plus 3% per year from 90% of its share of the net after-tax cash flow from the mine until fully repaid.

While a diamond marketing plan has yet to be announced, Dia Met states in its 1997-98 report that the joint-venture continues to develop a marketing program through multiple channels and expects it to be in place prior to the mine opening.

BHP Diamonds has opened an office in Antwerp and has entered into a 4-year consulting agreement with IDH Diamonds, an established diamond dealer. IDH offers a range of services pertaining to the establishment of the office, the gathering of market information and the sale of a portion of the mine’s production.

Dia Met further states that: “Negotiations are continuing with [South African-based diamond producer] De Beers, although the proportion of production which could be sold to De Beers is somewhat limited by legal considerations.”