It was a contest in the early 1990s, but no more. The Ekati mine in the Northwest Territories has emerged as a solid winner in the race to bring Canadian diamonds to the international marketplace. The advanced Diavik and Snap Lake projects are now competing for the No. 2 spot, and several nearby competitors are pushing hard to become diamond producers early in the 21st century.
Officially opened in the fall of 1998, the US$700-million Ekati mine is operating at full capacity of 250,000 carats per month, even surpassing 300,000 carats in some months. By April 29 of this year,
it had produced well over 1 million carats.
Canada’s first diamond mine is operated and owned 51% by BHP Diamonds, a unit of Australia’s
“Diamonds and Ekati have been quite a success story for us,” stated Ron McNeilly, president of BHP Minerals, during an August briefing. “We have reached capacity quickly. We now see that there are opportunities for fine-tuning the plant and bringing on high-return, incremental expansions, should there be a market opportunity to justify that.”
Despite some weakness in diamond prices brought about by the Asian crisis and other global economic woes, BHP is grateful to have secured market share and recognition ahead of the Canadian competitors snapping at its heels. Ekati is expected to produce between 3 and 5 million carats of diamonds each year.
The first four parcels of diamonds, which totalled 526,000 carats, sold for US$76 million, equivalent to an average value of US$144 per carat — US$14 higher than suggested by a valuation carried out during the bulk-sampling stage. Specials (large stones of 10.8 carats and up) were not included; they will be marketed separately and, once sold, will boost the average price per carat of the parcels.
BHP and Dia Met say a large percentage of their gem-quality stones are commercial white goods. Some are in the D and E colour ranges (rarest white), but most are in the F to I ranges (white to slightly tinted white). Large diamonds are also being recovered, including a 69-carat diamond this year, and a 47-carat diamond in December 1998.
“We have got ourselves an excellent foothold in the diamond market, based particularly on quality,” McNeilly stated. “There has been excellent customer acceptance, and this year the project will deliver significant profit and cash flow to the bottom line.”
The first cut diamonds from Ekati were seen by the Canadian public in late 1998, when some rough stones were purchased, and then cut and polished, by B.C.-based Sirius Diamonds. They were displayed at Brinkhaus jewelry stores in Vancouver and Calgary.
Earlier this summer, BHP and Dia Met unveiled an internationally recognized Canadian symbol to represent their mined diamonds in the global marketplace. The logo consists of a crystal maple leaf superimposed with the Ekati trademark. The partners hope this marketing strategy will promote Ekati as a reliable and dependable source of high-quality diamonds.
Five separate kimberlites will be mined at Ekati, three of which — Panda, Koala and Fox — are near the main processing plant. Sable is 17 km to the north, whereas Misery lies 29 km to the south. All five will be mined by open-pit methods, followed by underground mining at Panda and Koala (because of their high-value ore). All of the pipes are under small shallow lakes, which vary in depth from 12 to 29 metres. A total of 78 million tonnes of
ore (and 508 million tonnes of waste rock) will be mined over the initial 17-year mine life. However, mining is expected to continue for 25 years or more as additional pipes are developed.
In addition to the core claims hosting the Ekati mine and numerous other kimberlite discoveries, BHP is exploring the adjoining buffer claims. It holds a 51% interest in these claims. However, the remaining interests are held 31.2% by Archon Minerals (acs-v), 7.8% by Dia Met and 10% by Charles Fipke. Five kimberlite pipes were recently discovered on the core claims, bringing to 112 the total number of confirmed kimberlite occurrences on BHP’s combined Lac de Gras holdings. This past summer, BHP bulk-sampled the Gazelle (buffer claims), Phoenix (core claims) and Piranha (straddling the boundary of the core and buffer claims) kimberlite pipes. Processing of samples from these pipes is under way.
BHP sells parcels of Ekati diamonds every five weeks, or 10 times a year, to core clients through a sales office in Antwerp, Belgium. Offerings of smaller parcels for test-marketing purposes are ongoing. As part of an agreement with the territorial government, BHP also plans to sell some production to qualified northern manufacturers for cutting and polishing. Two local firms have already secured preliminary agreements to cut and polish Ekati rough.
Earlier this year, after a lengthy period of intense lobbying to secure a share of Canadian production,
McNeilly said this relationship gives BHP “a lot of flexibility” for the future. “Strategically, however, our success with this diamond project raises a question: Where to from here?”
So far, BHP has refrained from taking on new diamond ventures in Canada’s North. But other international majors, including De Beers, are barking at its heels.
Until recently, the Diavik project, owned 40% by
Like Ekati, Diavik is in the Lac de Gras region of the Northwest Territories, some 300 km northeast of Yellowknife. Project facilities for the proposed mine would be on East Island in Lac de Gras, with open pits behind water-retention dykes built immediately offshore. The 1-year delay is partly due to the longer-than-expected permitting and construction period for the dykes, which are also adding to the overall cost of the project.
The proposed dykes are temporary structures designed to allow safe open-pit and underground mining over the life of the operation. Natural water conduits and the porous, weak nature of the kimberlite mean that underground mining without a dyke for water control would pose unacceptable risks to both life and property. One dyke will surround A154N/S, another will surround A418, and a third will be built around A21. Additionally, one small dyke would be placed across the end of the North Inlet, so the area can be used as part of the water containment system. Aber notes that the proposed design satisfies the most stringent criteria of the Canadian Dam Safety Committee.
The feasibility study also found that capital costs will total $1.2 billion, or $408 million more than expected. The price tag swells to $1.6 billion after factoring in additional funds to be spent on construction of the water-retention dykes and underground development. Operating costs are expected to rise to $85 per tonne from $72 over the first decade of operation.
The delay at Diavik has some analysts speculating that the Snap Lake project may become Canada’s second diamond mine, ahead of Diavik by one year. Aber holds a 32.26% interest in Snap Lake, which is part of the Camsell Lake property, with the remainder held by operator
an early start. Operators intend to carry out an underground program (including more bulk sampling) to obtain information for the final feasibility study.
Aber and partner Rio Tinto are pushing hard to permit the Diavik project, which, like Ekati, is based on the mining and processing of more than one kimberlite. After the initial ramp-up period of two years, the mine is expected to produce 6.3-7 million carats annually at full open-pit production.
The project hosts a minable reserve of 101.5 million carats contained within 25.6 million tonnes grading 3.96 carats per tonne. This estimate includes only measured and indicated resources to a depth of 420 metres. Additional inferred resources of 12.5 million tonnes grading 2.38 carats (or 29.8 million carats) are not included in the mine plans.
These resources are within four pipes: A154S and A154N, found 150 metres apart; A418, about 1 km to the southwest; and A21, 4 km farther to the southwest. The two highest-grade pipes, A154S and A418, have estimated grades of 4-5 carats per tonne. However, the overall value of Diavik diamonds is lower than at Ekati, with an average value of US$53 per carat.
Earlier this summer, Diavik passed a significant milestone with the completion of a comprehensive study review (CSR) by the Canadian government. The CSR states that “with the implementation of appropriate mitigation measures, the Diavik diamond project is not likely to cause significant adverse effects.” Detailed information has been provided to the Northwest Territories Water Board and three Canadian government agencies in support of various permits and authorizations required for the project.
Aber is awaiting a positive decision by the minister of the environment, which will enable it to proceed to the permitting phase. The company says the receipt of permits and a positive production decision before the end of this year “is vital for the mobilization of the winter road and the commencement of construction in January 2000, and commencement of diamond production in the first half of 2003.”
On the marketing front, Aber has reached an agreement with Tiffany & Co., a world leader in retail sales of high-end diamond jewelry. The company acquired a 14.9% stake in Aber by investing $104 million and agreed to buy at least U$50 million worth of diamonds from Diavik for at least a decade.
As Snap Lake and Diavik battle for second place in the Canadian diamond industry, several other juniors and their senior partners are advancing projects in Canada’s North. Monopros, a unit of De Beers, can earn up to a 60% interest in the AK/CJ diamond property, which some analysts believe will become Canada’s third diamond mine. The land package is south of the Ekati diamond mine and adjacent to Winspear’s Snap Lake project.
The four main kimberlites identified on this project are reported to host a combined resource of 36 million tonnes grading an average of 1.6 carats per tonne. The average carat value is estimated at US$55. Monopros is expected to begin a feasibility study for the project this fall.
Monopros is earning its interest from
Earlier this summer, the partners recovered 846 carats by processing 469 tonnes of kimberlite from the Hearne pipe, for a grade of 1.8 carats per tonne. While valuations from this mini-bulk sample are not yet available, diamonds recovered from last year’s test sample averaged US$44 per carat.
Results from the 5034 pipe were released in mid-July, when the partners reported the recovery of 980 carats from the processing of 573 tonnes of kimberlite, for a grade of 1.71 carats per tonne. The three largest diamonds recovered weighed 10 carats, 4.9 carats and 4.85 carats, respectively. In total, there were seven diamonds greater than 3 carats, 42 diamonds greater than 1 carat, 113 diamonds between half a carat and 1 carat, and 606 carats between one-fifth and half a carat. While valuations of these diamonds are still awaited, previous valuations of stones recovered in last year’s test samples averaged US$51 per carat.
More recently, Monopros released results from the Tuzo pipe. In total, 533 carats were recovered from the processing of 523 tonnes of kimberlite. The largest diamond recovered was 3.38 carats. The grades per drill hole at Tuzo ranged from 0.34 to 3.07 carats per tonne, owing to lateral and vertical grade variations observed within the kimberlite. The vertical variations were attributed to changes in the abundance of country rock (granite) inclusions, which are most abundant at a depth of 100-220 metres. Above this zone, the inclusions are less abundant and the grades are higher. Several holes showed an increase in grade with depth below 220 metres. The kimberlite below 300 metres appears to contain hardly any country rock inclusions.
The possible resource at Tuzo to a depth of 260 metres increased to 15 million tonnes from an earlier estimate of 9 million tonnes to a depth of 300 metres. However, more drilling is required to firm up this possible resource estimate.
In addition to the bodies at Kennady Lake, Monopros has discovered a kimberlite body 12 km northeast of Kennady Lake, on the AK claims. A 40-kg sample from core drilling yielded 88 microdiamonds, resulting in the discovery of the first diamondiferous body outside Kennady Lake. Exploration in this region is continuing.
Encouraged by results to date from the AK/CJ claims, Monopros recently elected to buy a 51% interest in a 3% gross overriding royalty against production from the property for $2.5 million. The royalty was held 90% by Mountain Province and 10% by Camphor. After the sale is completed later this fall, Mountain Province will hold a 44.1% interest in the royalty while Camphor will hold a 4.9% interest.
Farther north, midway between the Ekati mine and Coronation Gulf,
A feasibility study for the Jericho project, launched in May, will examine the economics of a modest-sized mine focused initially on the land-based Jericho kimberlite pipe. A formal project proposal was filed this past spring, marking the start of the permitting and environmental assessment process.
At last report, the most advanced kimberlite (JD/OD-1) hosted a total resource of 6.1 million tonnes grading 0.94 carat per tonne. A bulk sample of 10,539 tonnes taken from this pipe recovered diamonds valued at US$59 per carat. This pipe, combined with several smaller pipes, boosts the Jericho project’s overall resource to 16.6 million tonnes. Tahera has other targets yet to be fully tested, including ground optioned to a unit of Rio Tinto.
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