DIAMONDS — Archon gains piece of Buffer Zone claims in NWT

Archon Minerals (ACS-V) has been given the green light by the Vancouver Stock Exchange to acquire a 31.2% participating interest in the Buffer Zone diamond claims, near the Ekati mine in the Northwest Territories

Archon shareholders unanimously approved the issue of 40 million treasury shares to President Stewart Blusson in return for his interest in the Buffer Zone claims.

The agreement gives Archon a 29.5% participating interest in the first kimberlite pipe to be developed on the property, as well as a 31.2% interest in all subsequent kimberlite developments.

The deal does not cover any of Blusson’s interest in the Ekati mine or the core claims on which it is situated. The transaction gives Blusson a total of 44.8 million shares, or 95% of Achon’s issued shares.

Blusson recently donated 10 million shares of Archon, worth about $27 million at current market prices, to the University of British Columbia to fund geological research.

The gift guarantees a sum of at least $50 million regardless of the market value of the shares. The Canada Foundation for Innovation and the provincial government will match every dollar spent on research. As a result of the donation, UBC now owns 21% of Archon.

The 191 claims cover 162,610 ha and form an 8-to-10-km-long border around the main Ekati claims. Archon’s partners there include BHP Diamonds, with a 51% interest; Dia Met Minerals (DMM-T), with 7.8%; and Chalrles Fipke, that company’s founder, with 10%.

The Diavik project, held 60% by Rio Tinto (RTP-N) subsidiary Diavik and 40% by Aber Resources (ABZ-T), lies immediately south of the southeastern boundary of the Buffer claims.

An ongoing feasibility study is based on a resource of 37.4 million tonnes grading 3.5 carats per tonne, with an average value of US$56 per carat. At least 50 kimberlites have been identified on the 1,300-sq.-km property, of which 20 are diamondiferous and four have defined resources.

By comparison, the Ekati mine has a reserve of 65.9 million tonnes with a diluted grade of 1.09 carats and an average value of US$84 per carat. The main claim block covers 181,465 ha and hosts 75 known kimberlites, of which 21 have been bulk-sampled. Only five of those pipes are included in the current mine plan.

The Buffer claims were staked in 1991 and 1992, since which time BHP Diamonds, the operator, has spent about $15 million on exploration. In the process, it has identified 25 kimberlites. Of these, only the Jay pipe has been bulk-sampled. BHP considers five other pipes to have high or moderate potential: Gazelle, Glory, Shark, Piranha and Wallaby.

The Jay pipe is northeast of the Point Lake discovery in Lac du Sauvage, near the western shore. The pipe has an area of 7.7 ha and is bigger than most kimberlites in the Lac de Gras area. It lies under 30 metres of water and about 9-15 metres of glacial sediments. Results from bulk sampling in 1996 indicated that 477 carats of diamonds were processed from 238 tonnes of kimberlite at an average grade of 2.01 carats per tonne. The stones were valued at US$22 per carat. The Jay pipe is estimated to contain 38.5 million tonnes of ore. Even though the grade of the pipe is respectable, the quality of the diamonds is lower than the pipes that are part of the current mining plan at Ekati.

The Gazelle pipe comprises 1.3 ha east of the Ekati mine. Initial drilling cut 172.5 metres of kimberlite. A 483.4-kg sample yielded 189 stones, and preliminary “micro-grade” analysis of all stones weighed in at 0.87 carat per tonne. The stones were judged as good quality. It should be noted that micro-grades may not correlate with true resource grades for macro diamonds. True grade determinations require much more sample material.

The Glory pipe measures 2 ha in size and is situated in Lac de Gras. Drilling intersected 162 metres of kimberlite and produced a 243.8-kg sample from which 197 diamonds were recovered. Preliminary micro-grade analysis returned 1.32 carats per tonne for stones larger than 100 mesh. The microdiamond quality was judged as “not favorable,” though additional sampling is planned.

The Shark pipe comprises a 3-ha area and is one of a cluster of small pipes in Lac de Gras. It exists under 30 metres of water and is about 1 km from the shore. Drilling intersected about 155 metres of kimberlite and gave a preliminary micro-grade of 1.12 carats per tonne. The microdiamonds recovered were described as being of “better-than-average quality.”

One small pipe (only 0.5 ha), known as the Piranha, straddles the Buffer claims and the Diavik/Aber joint-venture boundary. The pipe is thought to lie about 75% within the Buffer claims, and was discovered by Diavik while drilling in the area of a proposed cofferdam. Drilling encountered about 136 metres of kimberlite, and micro-grade analysis yielded 5.51 carats per tonne from a 57-kg sample. Seventy-seven stones were recovered, and their quality was judged as “very good.”

The Wallaby pipe comprises 1.5 ha and is on land near the junction of two eskers. Drilling intersected about 85 metres of Kimberlite and produced a 120.8-kg sample of core that returned 20 diamonds. Preliminary micro-grade analysis returned 0.57 carat per tonne.

For the 19 other kimberlite pipes known to exist on the property, little or no information is available, and BHP considers them to be of low priority.

There still are 36 untested kimberlite targets on the Buffer claims. These were outlined by geochemical and geophysical methods, though none of this data has been made public.