Kennady plans mini-bulk sample

Spun off from Mountain Province Diamonds (TSX: MPV; MDM: NYSE-MKT) in 2012, Kennady Diamonds (TSXV: KDI) has delivered well above expectations at its Kennady North project, adjacent to Gahcho Kué.

In August, a 1.1-tonne sample collected through a 5,000-metre drill program last winter returned outstanding grades of 8.13 carats per tonne from the Kelvin kimberlite and 11.23 carats per tonne from the Faraday kimberlite.

While the company had been expecting a very healthy grade of around 2 carats per tonne, Kennady president and CEO Patrick Evans says he was “astonished” by the actual results, as well as the size of the three largest diamonds found.

Those diamonds, a 2.48 carat off-white, transparent octahedral, a 0.9-carat off-white transparent irregular, and a 0.75-carat off-white transparent octahedral, were recovered from different drill holes at Kelvin.

“Particularly to find the 2.48-carat diamond in NQ-core in a one-tonne sample is extraordinary,” Evans says.

In total, a 987-kg sample taken from the Kelvin kimberlite returning 393 macrodiamonds (including 110 commercial-size diamonds) weighing 8.02 carats, while a 115.86-kg sample taken from the Faraday kimberlite returned 67 macrodiamonds (including 26 commercial-size stones) weighing 1.29 carats.

In a press release, the company pointed out that commercial size stones (larger than 0.85 mm) were recovered from different holes across the length, breadth and depth of both kimberlites, rather than being concentrated in a small area.

Another positive: the company says 64% of the diamonds recovered are white and transparent, with almost all of these having no or only minor inclusions.

The next results from Kennady North, due out in late November, will be from the caustic fusion results of 3.4 tonnes of kimberlite recovered from this year’s 3,850-metre drill program.

In the meantime, Kennady is fast-tracking plans to collect a mini-bulk sample of 25-30 tonnes at Kelvin next year using a large-diameter drill.

Evans admitted that the decision to do a mini-bulk sample at Kelvin rather than the higher-grade Faraday has caused some confusion among shareholders.

“The key that’s driving our decision on this is we believe we have more tonnage at Kelvin than we do at Faraday, so even though the indicated grade is lower, the potential for us to have a mineable resource at Kelvin, based on what we know at present, is very good.”

The company is not ignoring Faraday, however: it will also complete delineation drilling this winter at both kimberlites. Between the mini-bulk sample, delineation drilling and some exploration drilling, Kennady is planning a 10,000 metres of drilling.

While a 25-30 tonne mini-bulk sample would not normally yield a large enough parcel of diamonds to able to calculate a resource and conduct a valuation for the diamonds, Evans hopes to get a large enough sample of macrodiamonds to do scoping or prefeasibility-level revenue modelling.

“The delineation drilling that we’ll be doing will enable us to declare our first resource statement for Kelvin and probably for Faraday, so that’s the primary objective of the drill program, to declare an inferred resource,” Evans said. “The secondary objective is we hope to have sufficient macrodiamonds to be able to do at least some preliminary revenue modelling.”

Both the Kelvin and Faraday kimberlites are dykes of variable width, with Kelvin ranging from a couple of metres wide to 20 metres wide along a strike length of 1 km.

“The kimberlites are principally dyke structures, but based on the drilling that we’ve done this last summer, it appears that there’s a small pipe at the north end of the Kelvin kimberlite with a dyke trending along the structural zone to the southwest of this whole pipe.”

Faraday appears to be similar, with multiple blows on the structure that the company hopes drilling will reveal to be small pipes.

Kennady has plenty of cash to find out. In late October, the company closed a $9-million non-brokered private placement, followed by a $5-million bought-deal financing.

At presstime, Kennady Diamonds stock traded at $5.73 in a 52-week range of $1-$6.32. The company has 21.2 million shares outstanding.