DIAMONDS — Trans Hex renews quest for Brazilian diamonds

Trans Hex International (THI-T) is once again searching Brazil’s river systems for alluvial diamonds.

The Toronto-based company’s latest venture centres on a 49,000-ha property stretching along 50 km of the Rio Grande River. Trans Hex can earn a half-interest in the property from owner Verena Minerals (VMCO-C) by spending US$2 million on exploration over the next three years, with funding thereafter to be expended on a pro rata basis. The company will also act as project manager.

Situated in the eastern state of Minas Gerais, the Rio Grande property extends up to 6 km inland from either bank of the river after which it is named. The property’s gems are found in gravel horizons representing paleochannels and terraces directly overlying bedrock. Where exposed by garimpeiro workings, the gravels average between 2 and 4 metres in thickness, contain well-rounded boulders and can occur up to 2 km from the river’s present course.

Previous exploration at Rio Grande has been limited to local mining activities, with two such operations ongoing and a third now dormant. This lack of modern exploration, however, has not altered the company’s perception of the property’s potential.

“Rio Grande certainly appears to contain the thickest gravel we’ve ever seen in Brazil,” says Trans Hex President Neil Hoogenhout. “And from what we’ve seen of the garimpeiro’s sales records, they are extracting some good-looking stones… though the smaller ones are left behind.”

Trans Hex’s first endeavor in Brazil began in late 1995, immediately following its incorporation in Ontario as the international arm of Trans Hex Group of South Africa, which retains a 65% interest in the company. The agreement, which was with a private company, involved a property in the northern state of Tocantins, but results proved discouraging and the property was eventually dropped late last year.

In the ensuing months, Trans Hex turned its attention to the more prospective Minas Gerais, including a brief pass over the Canabrava diamond property, which was then being explored by Teck (TEK-T) and Canabrava Diamond (CNB-V). Concurrently, the company signed a letter-of-intent with Verena for Rio Grande, which has since become its property of choice.

While modern exploration at Rio Grande is wanting, garimpeiros mined more than 5,333 stones from 1985 to 1997 in the Bandeira area. The present value of those diamonds, adjusting for historical inflation, is estimated to be US$1.8 million or US$401 per carat. The mineralized gravels grade between 0.02 and more than 10 carats per cubic metre. The grades were substantiated somewhat by a bulk-sampling program carried out by the local miners and Verena a few months prior to Trans Hex’s involvement.

The samples, consisting of 40 and 420 cubic metres, were taken within 10 metres of each other. From the smaller sample were recovered eight stones weighing 6.1 carats, which were subsequently sold for US$218 per carat. Sixty carats were liberated from the larger sample, with six-tenths of that total contained in 11 stones ranging in weight from 1.6 to 5.85 carats. That package fetched an impressive US$625 per carat on the market.

A Verena press release on the program’s results states that there are still 250 ha of unmined continuous gravels at Bandeira. At an average thickness of 2 metres, these gravels are believed to contain 5 million cubic metres of mineralized material.

Since signing the letter-of-intent last May, Trans Hex has mapped the ground surrounding all three areas. This, along with results from ground-penetrating radar and aerial photography studies, has resulted in the identification of several additional areas prospective for mineralized gravels.

However, before any advanced exploration can begin, the partners must first acquire surface rights for those portions of the property that are farmland. If land is privately owned by local farmers, a company is required to satisfy their demands without governmental assistance.

“The mineral title only excludes someone else from that area,” explains Hoogenhout. “Our main goal for the immediate future is to tie up all the land positions we’ve looked at so far, particularly the surface rights.”

Despite this uncertainty, Hoogenhout remains confident in his company’s ability to reach agreements, especially with farmers owning heavily vegetated areas. “Because full rehabilitation is now required, the farmers know they can force you to replace the topsoil once you’ve finished and thus make it ready for farming.”

Once a sufficient number of agreements have been reached, the company will begin a program of widely spaced drilling to determine the lateral extent and thickness of gravels in selected areas. This will be followed by tightly spaced drilling to pinpoint areas for trenching and bulk sampling.

Of potentially longer-term significance at Rio Grande is its thin veneer of overburden, which has so far averaged 2 metres in thickness and not more than 5 metres. This is quite different from the company’s properties (and those of its parent company) along southern Africa’s famous Orange River, where overburden can reach up to five times the thickness of the diamond-bearing gravels.

“The negative to Rio Grande is all the farming, and that’s why we are concentrating on the surface [rights] situation,” says Hoogenhout.

At North Bank, which is on the Namibian side of the river, Trans Hex hopes to begin excavating two trenches early next year. The program, which depends on a positive outcome to surface rights hearings, set to renew in November, will involve the extraction of more than 460,000 cubic metres of overburden to reach 149,000 cubic metres of gravels deposited in a meso-aged (3-to-5-million-year) paleochannel.

Each trench will test an area selected from results of 122 of the 770 holes drilled into the channel. Results from the trenches are expected to provide an upper limit estimation of the grade of the channel’s estimated 30-million-cubic-metre resource.

Trans Hex funds 75% of the exploration costs on the property as part of its requirement to maintain a half-interest. The rest is being covered by Lazare Kaplan International (LKI-A) and a private Namibian company, each of which owns a 25% interest in the property.

Meanwhile, a similar program is continuing at Trans Hex Group’s Baken mine on the South African side of the river. The program is testing the arc of the 7-km-long-by-1-km-wide paleochannel currently being mined and, if successful, could triple the mine life, currently estimated at six years.

Hoogenhout, who is an executive director for Trans Hex Group, says a recent miner’s strike has delayed results but that work is now back on schedule. This may turn into somewhat of a blessing as the company’s recent diamond sales were affected by Asia’s financial woes and doubt in North America’s ability to sustain economic growth.

“It’s unfortunate, but it does put us at a better base to ride the turnaround,” Hoogenhout says. “The problem is predicting when that is going to happen — probably earlier next year.”