Diamond sector enters 2000 on bullish note ( Part 2)

Kennady Lake

Last winter, Monopros, the Canadian exploration arm of De Beers, collected bulk drill samples from a cluster of four pipes at Kennady Lake in the Northwest Territories (5034, Hearne, Tuzo and Tesla). The effort was part of a $14-million program designed to recover enough diamonds to determine the grade and value of each pipe.

Situated 120 km southeast of Lac de Gras, Kennady Lake comprises a portion of the AK-CJ properties, in which Monopros can earn up to a 60% interest by advancing the project to production. Mountain Province Mining (mpv-t) is carried to a 36% interest, whereas partner Camphor Ventures (cfv-v) is carried to 4%.

A 609-tonne sample from the 5034 pipe yielded 1,044 carats of diamonds above a commercial-size, 1.5-mm square-mesh cutoff. The 1999 bulk sample included 42 stones weighing greater than 1 carat. The three largest diamonds recovered weighed 10, 4.9 and 4.85 carats. Based on these results, together with previous mini-bulk sample and micro results, De Beers has modeled a kimberlite resource of 12 million tonnes grading 1.64 carats per tonne to a depth of 300 metres. The 5034 diamonds are worth an average of US$63 per carat, which translates into an implied value of US$103.50 per tonne.

De Beers recovered 64 carats of diamonds from 184 tonnes of drill sample from the Tesla pipe for an indicated grade of 0.35 carat per tonne (compared with the previous estimate of 0.37 carat). The largest diamond recovered weighed 2.7 carats. Valuations were not available at presstime, though previous valuations made on the 1998 mini-bulk test sample averaged US$96 per carat. Tesla is the smallest of the four pipes sampled, with a revised resource estimate of 4.6 million tonnes.

The Hearne pipe hosts 6.9 million tonnes to a depth of 300 metres. A 469-tonne bulk sample yielded 846 carats for an implied grade of 1.8 carats per tonne. The largest diamonds recovered were 3.7 and 3.16 carats. In total, 40 stones weighed greater than 1 carat. Diamond valuations are pending. Based on the 1998 test samples, Hearne was modeled to grade 2.33 carats per tonne at US$44 per carat.

The resource in the Tuzo pipe increased to 15.3 million tonnes to a 360-metre depth from an earlier estimate of 9 million tonnes to 300 metres. In total, 533 carats were recovered from a 523-tonne bulk-sample, giving an indicated grade of 1.02 carats per tonne. Twenty diamonds weighed in excess of 1 carat, the largest being 3.38 carats. Tuzo was previously modeled to grade 2.2 carats per tonne at US$68 per carat. Revised valuations for the Hearne body are expected shortly, with those for the Tuzo pipe to follow.

Wallace pipe

Last spring, Monopros discovered a fifth pipe, called Wallace, between the Hearne and 5034 kimberlites. The discovery hole yielded 9 macros and 72 micros from 40 kg of kimberlite. Monopros believes the maximum dimension of the pipe is unlikely to exceed 60 metres. A second body of kimberlite was intersected by drilling 150 metres northeast of Wallace and 150 metres southwest of the 5034 pipe. An 80-kg sample returned 5 macros and 284 micros. Monopros is unsure whether this new kimberlite represents a new body, or if it is an elongated continuation of the Wallace pipe.

Monopros reopened the Kennady Lake camp in November 1999 and has resumed exploration drilling on the Faraday kimberlite body, discovered last spring 12 km northeast of the Kennady lake cluster. An angled hole intersected 34 metres of kimberlite between 38 and 72 metres of depth, giving a horizontal projection of 22 metres. A 40-kg sample yielded 6 macros and 82 micros. A second hole, collared nearby, intersected successive narrow intervals of kimberlite, varying from 2 to 7 metres in thickness.

Also in November, Monopros bought a 51% interest in a 3% gross overriding royalty against production from the AK-CJ properties held by Mountain Province and Camphor. In return, it paid $2.5 million.

Immediately south of Kennady Lake are LA1-25 claims, where Gerle Gold (ggl-v) drill-tested four targets in Blob Lake, plus one target on the southern shore of the lake and one at Fox Lake, 2 km to the northwest. The targets were a combination of geophysical and lake-sediment geochemical anomalies. No kimberlite was intersected.

The LA1-25 claims comprise part of the Doyle Lake project, a 60-40 joint venture between Monopros and Gerle.

Formed through the amalgamation of Lytton Minerals and New Indigo Resources, Tahera (tah-t) continues to advance its wholly owned Jericho project in Nunavut, 420 km northeast of Yellowknife and 170 km northeast of Ekati. A prefeasibility study by SRK Consulting indicates that a proposed open-pit operation on the land-based JD-1 pipe could produce 2.7 million carats annually over an 8-year mine life, based on a processing rate of 300,000 tonnes per year. Capital costs are estimated at $40.3 million.

The study examined two options for the location of the proposed diamond recovery plant, favouring the construction of a 50-tonne-per-hour plant at the site of the Lupin gold mine, subject to the implementation of the terms of a 1996 agreement with mine owner Echo Bay Mines (eco-t). Current plans call for seasonal open-pit mining of JD-1 using a contractor, and trucking the kimberlite ore during the winter months along an ice road to the Lupin site, 28 km to the southeast. The processing plant would treat the ore year-round.

The JD-1 pipe is estimated to contain a geological resource of 6.5 million tonnes averaging 0.82 carat per tonne. SRK estimates a minable, open-pit resource of 2.3 million tonnes grading 1.13 carats per tonne, worth an estimated US$65 per carat ($96 per carat), or US$73.45 per tonne ($108.48 per tonne). Operating costs are pegged at $63 per tonne. The prefeasibility study forecasts an internal rate-of-return of 33.2% and payback over two years.

A 9,400-tonne underground bulk-sample collected across three phases of the pipe in 1996 yielded 10,539 carats of diamonds. The recovered stones were all larger than 1 mm and included a 40-carat stone. The largest gem-quality diamond weighed 23.89 carats.

A second pipe, JD-3, lies under a small lake, 7 km west of JD-1, and carries an inferred resource of 10.5 million tonnes to a depth of 300 metres. A preliminary grade of 0.36 carat per tonne is based on the recovery of 16.6 carats of stones from 46.6 tonnes of drill samples. The largest recovered stone weighed 3.6 carats.

The once-promising Contwoyto-1 kimberlite, discovered in the fall of 1998 about 38 km southeast of JD-1, was put on the back burner after further sampling showed the pipe to be of low grade. A 50.1-tonne mini-bulk drill sample returned 13.6 carats for an implied grade of 0.27 carat per tonne.

In a separate exploration campaign, Kennecott is entering the fourth year of a joint venture with Tahera. Kennecott can earn a half-interest in the Ice, Rocking Horse and Hood River properties by spending $50 million by 2008. The company has spent $14 million to date.

During the spring 1999 drilling program, Kennecott discovered the Vega kimberlite on the Ice property and the Altair kimberlite on the Rocking Horse claims. Tahera says micro analysis suggests the kimberlites are not economic. Kennecott has budgeted $2.5 million for further exploration on the joint venture claims in 2000.

Ashton

Ashton Mining of Canada (aca-t) conducted heavy mineral sampling programs during the summer on the Star, Ric, Roc, Bel and Con properties in the Northwestern Territories and Nunavut. The company holds interests in some 2,200 sq. km of ground in the Slave Regional, Lupin and CR-LL joint ventures. On the 56%-held Star property, 180 km southwest of Ekati, sampling further defined a mineral indicator train originating from the junction of three lakes. A ground geophysical survey will be conducted this winter, with drilling to follow. Pure Gold Minerals (pug-t) holds a 24% stake in the property and Tenajon Resources (tjs-v) owns 20%.

Field investigations of anomalous 1998 sample results on the Ric property, 250 km northwest of Ekati in Nunavut, led to the discovery of a kimberlite named Hydra. The body outcrops on a lake shore and is believed to extend under the lake. If a recent airborne survey identifies magnetic targets, or the results of micro tests are favourable, a drilling program will be conducted this winter. Ashton holds a 81.8% interest in Ric, with the remainder held by Pure Gold.