Diamonds Snapshot: Eight Canadian companies ready for discovery

After a difficult 2020 that saw a near shutdown of the diamond market for half the year as a result of pandemic-related travel restrictions, diamond prices have bounced back in 2021. Here’s a look at eight active Canadian-listed diamond explorers and miners who’ve made it through the trough and are preparing for the upturn.

Arctic Star Exploration

Arctic Star Exploration (TSXV: ADD) has unearthed four new kimberlites this year at the Diagras joint-venture project, 22 km north of the Diavik diamond mine in the Northwest Territories.

The junior’s $2.1 million spring drilling program concluded in May, and resulted in the discovery of the Birch, Sequoia, Alder and Cedar kimberlites. The company also intersected a 50-cm-wide kimberlite dyke 55 metres east of Birch. Coarse-grained olivine and abundant mantle derived indicator minerals have been observed in the volcanoclastic kimberlites.

Diagras also contains 23 kimberlites previously discovered by De Beers.

Planning for a summer drill program at the 226-sq.-km project will focus on the most promising kimberlites discovered, after the company receives caustic fusion results from the spring program.

In June, Arctic Star released detailed geological logging results from the Birch kimberlite. One vertical hole drilled at Birch cut a total of 43.7 metres of kimberlite (in shorter intervals of 4 to 15 metres) starting at 28 metres. A second angled hole drilled from the same location cut 38 metres of kimberlite in total. Both holes intersected two different kimberlite types, one of which contained abundant mantle-derived fragments and indicator minerals. Core samples totalling 150.5 kg from the two holes have been sent for caustic fusion analysis.

Diagras is a joint venture with Margaret Lake Resources, but the company has opted since 2019 not to participate. Arctic has taken over as operator, and it now holds 77% of the project, up from 40% originally.

Arctic Star also holds the Timantii diamond project in Finland and the Stein joint venture project in Nunavut.

Burgundy Diamond Mines

Since 2019, diamond exploration incubator Burgundy Diamond Mines (ASX: BDM) has been busy securing option agreements for diamond exploration projects around the world.

The latest addition to Burgundy’s portfolio came in March, when it signed an option to acquire the Ellendale project in Western Australia from Gibb River Diamonds (ASX: GIB). The project consists of the Ellendale mine – which was known for its yellow diamonds and closed in 2015 – and the Blina project.

The two-year, staged option deal would see Burgundy pay a total of A$6.7 million and issue 17 million shares to Gibb River, in addition to a 1.5% gross revenue royalty on any diamonds and other minerals produced at the project.

Burgundy has already completed the first payment of A$1.7 million and issued 5 million shares to Gibb River.

Last June, Burgundy (then known as EHR Resources) announced two deals, the first with North Arrow Minerals (see entry below).

The other agreement was with Diamond Exploration Strategies (DES), a private company that holds more than 2,000 sq. km of prospective ground in Botwana.

Under the deal, Burgundy will provide funding of US$1.5 million over three years, including US$300,000 in the first 12 months, to earn a 50% stake in any discoveries made. It can also earn up to 70% of a designated project by funding a scoping study, and up to 90% if it funds a feasibility study.

This February, DES signed an agreement to earn into Botswana Diamonds’ (LSE: BOD) prospecting licences in Botswana. The arrangement will form part of the existing agreement with Burgundy, which will allow Burgundy to earn majority control over successful projects.

Burgundy also holds a 100% interest in the Nanuk diamond project in northern Quebec and 18% of the La Victoria gold-silver project in Peru.

Lucara Diamond

Lucara Diamond‘s (TSX: LUC) Karowe diamond mine in Botswana has been producing exceptional large and high-value stones since it first opened in 2012.

This year has been no different: The open pit mine has produced three diamonds over 300 carats so far, and 10 diamonds weighing more than 100 carats.

With large diamonds accounting for around 70% of its revenue. Lucara has managed to maintain revenue from those stones throughout the pandemic by turning to an alternative sales arrangement with Antwerp-based HB Group.

Last July, the two companies struck a supply agreement for HB to buy all special stones (10.8 carats and above) from Karowe at a price based on the estimated final polished outcome. Any difference between the initial price and the final sales price are accounted for post-sale, less a fee and the cost of manufacturing.

This year, Lucara and HB extended the agreement for 24 months.

In its first quarter of the year, Lucara reported a recovering diamond market.

The company posted revenue of US$53.1 million or US$579 per carat sold for the period — 56% higher than the comparable quarter of 2020. Net income improved to US$3.4 million compared to a net loss of US$3.2 million last year. In addition to sales through HB, Lucara sold diamonds through regular tenders and its digital sales platform, Clara.

Lucara has also started on a US$514-million underground expansion of Karowe that will extend the mine life to 2040.

Site construction work began in early 2021 after the company received a 25-year extension to the Karowe mine licence to 2046. The expansion is expected to take five years.

Lucara’s production guidance for Karowe this year is 340,000 to 370,000 carats.

The company forecasts sales of between 350,000 and 390,000 carats, and revenue of US$180 to US$210 million.

Mountain Province Diamonds

Despite an improving diamond market in 2021, Mountain Province Diamond (TSX: MPVD) had a rough first quarter, with a Covid-19 outbreak forcing a 22-day shutdown of its 49%-owned Gahcho Kué mine in the Northwest Territories.

Mountain Province had to cancel its May diamond sale in Antwerp, and with the resulting cash crunch, it turned to its largest shareholder – Dunebridge Worldwide – for a US$33-million short-term loan.

The company already has a US$25 million revolving credit facility with Dunebridge, which is controlled by Dermot Desmond, a 32% shareholder in Mountain Province.

Mountain Province CEO Stuart Brown says the short-term loan will address the company’s short-term liquidity needs, and give it time to execute on a revised mine plan that will see the process plant make up most of the lost production by raising throughput and changing 0.8-mm cutoff screens to 1.1-mm screens.

“This plan shows us largely making up the lost production, revenue and cash generation during 2021 and should allow us to repay this loan by the end of 2021,” he said in May.

During the shutdown of the diamond market last year, Dunebridge provided additional support to Mountain Province with a US$100-million sales agreement for diamonds under 10.8 carats. Under the agreement, Dunebridge buys Mountain Province’s diamond production at market prices, with Mountain Province participating in 50% of future upside when the stones are sold.

Gahcho Kué, operated by majority owners De Beers, is expected to produce 6.3 to 6.5 million carats this year (on a 100% basis) at production costs of $125-135 per tonne or $58-$63 per tonne treated.

Mountain Province reported net income of $7.3 million for the quarter (compared to a net loss of $41 million in last year’s first quarter) on revenue of $54.2 million ($65.4 million last year). For the period, it sold 602,773 carats sold at an average price of $90 per carat (US$71).

North Arrow Minerals

North Arrow Minerals (TSXV: NAR) is planning a 1,500 to 2,000 tonne sampling program at the Q1-4 kimberlite at its Naujaat project in Nunavut’s Melville Peninsula. The aim is to gather a larger sample of coloured diamonds found in previous sampling for valuation.

The program is fully funded through Burgundy Diamond Mines (ASX: BDM), which  has an option to earn up a 40% interest in the project by funding the program to the tune of $5.6 million.

Depending on the results of this summer’s work, expected to take place in July, Burgundy can fund a larger 10,000-tonne bulk sample in return for another 20% interest in the project. The preliminary bulk sample is expected to be collected in July with processing following later in the year and diamond results following in the first quarter of 2022.

Q1-4 has an inferred resource of 48.8 million tonnes grading 53.6 carats per hundred tonnes for 26.1 million carats and is known to host a population of rare orangey-yellow diamonds.

At its Loki project in the Lac de Gras region of the Northwest Territories, North Arrow is also conducting a reverse-circulation drill program to test recently defined gravity targets.

The program, which will take place during a two-week period in June, will target potential bedrock kimberlite sources for a regional kimberlite indicator mineral anomaly that terminates on the Loki property and forms part of what has historically been known as the South Coppermine Train.

Located near North Arrow’s LDG joint venture with Arctic Canadian Diamond Company, Loki hosts five diamond-bearing kimberlites.

RJK Exploration

RJK Exploration (TSXV: RJX.A) has discovered eight kimberlites at its claims near Cobalt, Ontario, since last February.

The company has two land packages in the area — the Bishop Nipissing project optioned from prospector Tony Bishop in early 2019, and the smaller Kon claims to the southwest.

The latest discovery, dubbed Gravel Pit, was found at Bishop Nipissing in February via reverse-circulation drilling. The kimberlite was intersected in nine holes with a thickness of up to 24 metres and averaging 15.6 metres.

The company’s RC drill program, which began in December, is aimed at identifying areas for bulk sampling that will maximize the potential for discovery of large and/or coloured diamonds in the Cobalt mining camp.

At the Kon project, RJK reported at the end of May that it was halfway through a 10-hole drill program to follow up on its Kon kimberlite sill discovery from last February.

The goal of this spring’s drill program is to find the source feeder location, create a 3-D model, and correlate the different kimberlite layers to optimize microdiamond sampling by discrete phases.

Kon is one of two kimberlites RJK has found (the other is the Paradis kimberlite at the Bishop Nipissing project) that have proven to be diamond-bearing.

In March, RJK released results of a kimberlite indicator mineral analysis by C.F. Mineral Research shows a strong G9 and G10 component in garnets from both kimberlites. The results indicate that Paradis in particular is unique in its chemistry and is derived from the “optimum” mantle region to produce diamonds.

RJK is searching for the source of the famous Nipissing yellow diamond, estimated at 700-800 carats, which was found in the early 1900s. It holds 170 sq. km of ground in the Cobalt area, in a well-established kimberlite field within the Lake Temiskaming Structural zone.

Star Diamond

A legal dispute regarding the ownership of the Star-Orion South project in Saskatchewan between Star Diamond (TSX: DIAM) and Rio Tinto (NYSE: RIO; LSE: RIO; ASX: RIO) is unlikely to be heard in court this year.

In a February news release, Star Diamond said the parties still had to agree on a timetable for pre-trial steps, including oral questioning and the exchange of expert reports.

Rio Tinto signed an agreement with Star in 2017 to earn up to a 60% interest in Star-Orion by spending up to $75 million over 7.5 years. Rio says it has completed the work required under the four-stage agreement and opted to exercise its rights for a majority stake in the project early in November 2019. However, Star Diamond says the company has not satisfied its obligations under the agreement and started legal proceedings against its partner last March.

At issue in Star’s claim is whether Rio Tinto has completed all processing, recovery and test work on a 10-hole bulk sample it conducted at Star-Orion in 2019, allowing it to form a 60/40 joint venture. When that happens, Star will be required to fund 40% share of project spending or its interest will be diluted.

Rio says the work is complete, and that the results have improved confidence in grades at the project. Star, however, believes the work is not complete without a comprehensive breakage study. The junior says the method Rio used to take the sample – trenching technology adopted from civil engineering applications – resulted in diamond breakage, and claims it caused “unnecessary cost overruns” and “materially damaged” Star’s interest in the project.

Despite the dispute, Rio Tinto has completed some work at the project, which it refers to as FalCon, this year. The major completed an eight-hole geotechnical drilling program at the Orion North kimberlite to collect data about the physical properties of the overburden and kimberlite.

A 2018 prefeasibility study of the large, low grade Star-Orion project outlined an open-pit operation with a mine life of 34 years that would cost $1.4 billion to build and produce 66 million carats. The project, located 60 km east of Prince Albert, is known to host larger stones, including high-value Type IIa diamonds.

Tres-Or Resources

After receiving promising microdiamond results from its Guigues kimberlite pipe in southwestern Quebec, Tres-Or Resources (TSXV: TRS; US-OTC: TRSFF) is planning to process the remaining drill core from its 2019/2020 five-hole drill program at the project.

In January, the company reported that 48 more microdiamonds were recovered from 305 kg of previously unsampled kimberlite core from Guigues. Two were larger than 0.425 mm square mesh screen and all but three were white/colourless or transparent with no or minor inclusions.

Testing of microdiamonds over 0.150 mm by the Saskatchewan Research Council has shown low-nitrogen, Type II microdiamonds dominate the sample.

Type II diamonds are rare and high-value. Tres-Or has not recovered any Type II macrodiamonds from Guigues yet. However, a 2-mm by 1-mm by 0.5-mm macrodiamond was recovered from the pipe in 1989 through reverse-circulation drilling.

In addition to processing the remaining core from its 1,432-metre drill program to test for diamonds larger than 0.425, Tres-Or also plans to drill another two to five holes to further define Guigues’ shape and better understand the distribution of macro and microdiamonds. The pipe is estimated to be 4.5 to 6 hectares.

The Guigues kimberlite, located 10 km from Notre-Dame-du-Nord, was discovered by De Beers in 1983.

— With files from the Canadian Mining Journal.