Kennecott Canada Exploration unsuccessfully tested 20 exploration targets during spring drilling at
A number of kimberlite indicator mineral trains remain unexplained, including several within a 10-km radius of the Jericho kimberlite. In addition, the source of diamondiferous float uncovered by Kennecott’s field crews last fall has not been discovered. A 7-kg piece of kimberlite found at the end of a mineral train terminating 900 metres west of the Jericho pipe returned one microdiamond and six macros. (A macro is here defined as exceeding 0.5 mm in one dimension.)
A program of prospecting, till sampling and geophysics will be carried out to define targets for future drilling. The major has until September to decide whether or not to incorporate the Jericho project into the pair’s existing joint venture covering the Rockinghorse properties in the emerging Coronation diamond district, a further 120 km to the northwest. If Kennecott elects to add Jericho, it will be required to spend 1 million annually on these claims in addition to an existing $1.5-million annual commitment to the Rockinghorse joint venture. Kennecott would also make a series of yearly $1-million private placements in Tahera over four years at escalating premiums to market value.
Kennecott will have the exclusive right to market all diamonds produced from the Jericho kimberlites for the first five years of production. If Kennecott fails to commit to a mine plan on the Jericho pipe within 24 months of incorporating the property into the joint venture, Tahera can elect to develop Jericho on its own. Kennecott would then lose all rights and interests in the joint venture.
Under the Rockinghorse joint venture, Kennecott can earn an initial 25% interest by spending $25 million before May 1, 2008. At the end of 2001, Kennecott had spent about $21.3 million on the joint-venture claims. In return for funding all costs up to, and including, a bankable feasibility study, Kennecott can earn a 62.5% stake in the joint venture upon making a production decision by May 2008.
Kennecott is a division of London-based
The Jericho properties lie along the northwestern and northeastern shores of Contwoyto Lake, 26 km north of the Lupin gold mine and 420 km northeast of Yellowknife. The Ekati diamond mine is in the Lac de Gras area of the Northwest Territories, 150 km south-southeast of Jericho. The Jericho project covers about 2,500 sq. km.
Six kimberlites have been found on the Jericho properties to date, including the Jericho (JD-1), JD-3, Contwoyto-1 and JD-2 pipes, plus the TAH-1 kimberlite, discovered in April 2001, and the OD dyke, discovered several years ago in the Bird Lake area.
The focus of the proposed Jericho project mine project is the land-based Jericho pipe, 400 metres south of Carat Lake. Discovered in 1995, the multi-phase pipe is 280 metres long, varies from 1 to 120 metres wide, and contains a total resource of 7.1 million tonnes grading 0.84 carat per tonne, equivalent to 5.9 million carats. A June 2000 feasibility study by SRK Consulting concluded that a combined open-pit and underground mining operation on the Jericho pipe could produce an estimated 3 million carats over a mine life of eight years, based on a probable minable reserve of 2.5 million tonnes grading 1.19 carats per tonne. A re-evaluation of the diamonds by WWW International Diamond Consultants in early 2000 indicated a value range of US$75-88 per carat.
Capital costs for the open-pit operation are estimated at $44.5 million, plus a further $10.4 million for underground and sustaining costs. Operating costs over the life of the mine are projected at $52 per carat.
SRK assumed a diamond value of US$75 per carat, which translates into a pretax internal rate of return (IRR) of 34.3% and a payback period of 2.7 years. Using an upper carat value of US$88 modelled by WWW International Diamond, the pretax IRR improves to 50.7%, with a payback of 2.1 years.
The JD-02 pipe was discovered close to the Jericho pipe in early 1995, but, with a diameter of just 20 metres, it is considered too small to be of commercial interest. The JD-3 pipe, discovered in 1996, lies under a small lake 8 km southwest of the Jericho pipe and contains a kimberlite resource of 8.9 million tonnes to a depth of 250 metres. The body measures 160 by 140 metres. An initial mini-bulk drill sample of 10.5 tonnes collected in 1997 yielded 7.34 carats of diamonds, for an implied grade of 0.7 carat per tonne. The largest stone weighed in at 3.63 carats and represented half the weight of the recovered diamonds. The implied grade falls to 0.35 carat per tonne if the large stone is excluded.
A second mini-bulk drill-sampling program on the JD-3 pipe was carried out in spring 1998. A 35.9-tonne sample yielded 10.41 carats for an implied grade of 0.29 carat per tonne. The two largest diamonds weighed 1.18 and 0.75 carats, respectively. The JD-3 kimberlite is not considered economic as a stand-alone operation but could represent supplementary feed for the proposed Jericho project. Further assessment of JD-3 will be carried out this summer.
Discovered 38 km southeast of the Jericho pipe in 1999, Contwoyto-1 initially returned strong microdiamond counts. A 90.2-kg sample from the discovery hole yielded 143 micros and 26 macros, including 12 stones exceeding 0.5 mm in two dimensions and one stone greater than 1 mm in two dimensions. However, a follow-up, 50.1-tonne drill sample returned just 13.6 carats, giving an implied grade of 0.27 carat per tonne. Owing to its relatively low grade, no further evaluation of Contwoyto-1 is planned. Contwoyto-1 has a surface expression measuring 60 by 80 metres.
Last year’s discovery of TAH-1, 6 km west of Jericho, returned only two stones from 100.4 kg of sample taken from two holes.
In the meantime, the diamond division of
BHP has the right to earn up to a 60% interest in any of the previous kimberlite discoveries and up to 70% in any new discoveries.
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