DO-27 bulk-sample results disappointing

The junior partners of Kennecott Canada saw their DO-27 (Tli Kwi Cho) kimberlite project downgraded in early August from a development project to one of many exploration-stage projects in the Lac de Gras region of the Northwest Territories.

After processing a bulk sample totalling 4,261 tonnes, Kennecott informed its partners that results were not sufficiently encouraging to justify further bulk sampling of DO-27.

A total of 226 macrodiamonds weighing 16.4 carats were recovered from the 1,258 tonnes of diatreme material processed, for an average grade of 0.013 carats per tonne. For the lower pyroclastic phase (the other principal kimberlite phase present in DO-27), 13,888 macrodiamonds weighing 1,079 carats were recovered from 3,003 tonnes processed, for an average grade of 0.359 carats per tonne.

The announcement was met by a massive market selloff, with the share prices of Dentonia Resources (VSE), Horseshoe Gold Mining (ASE) and Kettle River Resources (VSE) particularly hard hit. The three juniors (referred to collectively as DHK) own a combined 35% of Tli Kwi Cho.

Dentonia lost $5.23 to $1.27, Kettle River plunged $9.20 to $2.55 and Horseshoe was off $5.60 at $1.15. Two other companies (both TSE-listed) with interests in the project, Aber Resources (15%) and SouthernEra Resources (10%), also lost ground.

Particularly disappointing for the junior partners was news that less than 30% of the diamonds above 2 mm in size were likely to be classed in the gem category in the commercial valuation planned to be carried out shortly. This development, combined with the relatively low grades, put the Kennecott-DHK venture out of the running to become Canada’s first diamond mine. When Kennecott launched its estimated $13-million underground program, it was vying with large bulk-sampling programs being undertaken by partners BHP Minerals Canada and Dia Met Minerals (TSE) on a nearby property. (The BHP-Dia Met project involves four diamondiferous pipes, and is now at the feasibility stage with a production decision expected later this year or early next year.)

What Kennecott did differently than BHP-Dia Met was to bypass an intermediate or “mini-bulk-sample” in the range of 100-200 tonnes. This smaller sample is usually collected to get a better idea on the grade, gem content and size distribution of the diamonds before committing to a major sampling program. Kennecott will continue to work on the DHK joint venture; it plans to carry out a mini-bulk-sample using large-diameter drill core on the nearby DO-18 kimberlite early next year. Delineation drilling on this target will begin shortly. The pipe is estimated to contain 30 million tonnes of pyroclastic material to a depth of 300 metres. Other targets will be drill-tested later this year.

Kennecott also has rights to earn a 60% interest in two recently discovered diamondiferous kimberlites on ground held by Aber Resources. Exploration drilling has returned an encouraging number of macrodiamonds; however, these targets have not yet been tested by a mini-bulk sample. Aber plans to collect 30 tonnes from each pipe, with the sampling program expected to start as soon as permits are in hand.