LATIN AMERICA — Trans Hex digs in at Barra Grande project in Brazil — Black Swan forgoes option on Jequitinhonha River diamond property

Brazilian rivers have long-been known for their diamond potential, and partners Trans Hex International (THI-T) and Verena Minerals (VMCO-C) are showing their Barra Grande property, on the banks of the Rio Grande River, is no exception.

The 57,948-ha property stretches 85 km along the river, which separates Minas Gerais and Sao Paulo states, and extends up to 6 km inland on either side.

Small-scale mining has been ongoing on the northern, Minas Gerais side of the river since the 1940s. Historical records indicate that, between 1985 and 1997, the largest operation, Bandeira, produced 5,333 diamonds weighing 4,407 carats and that (adjusting for inflation) those stones were sold for US$401 per carat. Also, local dredging on the river channel over the past year reportedly has recovered two stones weighing greater than 20 carats each, a purple fancy and multi-carat yellow and pink stones.

Trans Hex, as operator, has so far completed a first phase of drilling totalling 4,901 metres. In total, 144 reconnaissance holes were sunk on the Minas Gerais side, along a peninsula defined by the river flowing tens of kilometres southwards and then swinging back northwards the same distance, before redirecting itself eastwards.

The regional program outlined four gravel horizons over widths of 3-5 km, each of which was intersected by 3-11 holes. Gravels varied from 2 to 16 metres in thickness, covered by overburden measuring less than 7 metres to greater than 17.6 metres in thickness.

Geologically, alluvial diamonds at Barra Grande are deposited no differently than those found elsewhere, being held in paleochannels and terrace deposits. Here, the gravels rest on uneven red argillic bedrock, which in turn covers uneven basaltic volcanics.

Generally, the gravels are matrix-supported, though clast-supported bands occur. The matrix is composed predominantly of red clay fragments and minor sand, with clasts consisting primarily of well-rounded quartzites up to 25 cm in diameter and lesser arkose and basalt.

Trans Hex believes the results point to several hundred million cubic metres of gravels sitting in the peninsula and is now attempting to define the form and continuity of the most extensive prospect, which lies between two of the garimpeiro workings. Holes will be drilled on 500-to-500-metre centres, in a rectangular area extending 8.5 km north-south and 4.5 km east-west. If warranted, follow-up holes would tighten that spacing in half to determine the most promising features. (Typically, fluvial diamonds collect in depressions, such as plunge pools.)

Concurrent with drilling, separate studies will be carried out for metallurgical purposes, as will small-scale box-hole sampling to determine if selected features of the alluvial system can be correlated with diamond occurrences.

Trans Hex expects to take the first bulk sample in mid-2000, after obtaining a licence from state officials. To that end, baseline studies and a full environmental impact report will be carried out.

In the meantime, the company has entered into agreements with the local landowners to prevent the sort of delays it has experienced at its separate Northbank alluvial diamond property in Namibia. Both countries require that local landowners be compensated for their losses, which, in Brazil, amounts to a minimum 0.1% royalty on gross revenues from commercial production.

Trans Hex can earn a half-interest in Barra Grande by spending US$2 million on exploration, of which $400,000 was covered in its 1999 fiscal year ended March 31. Another $600,000 is earmarked for the current year.

Elsewhere in Brazil, Black Swan Gold Mines (BSW-T) has allowed to lapse its option to acquire a Brazilian company that has mined diamonds from the Jequitinhonha River in northeastern Minas Gerais state. The company, which also explores other rivers in the state, decided it would be unable to resume production quickly, as detailed drilling is required to prove up existing resources.

Before operations ceased in 1996, Mineracao Tejucana was recovering up to 65,000 carats of diamonds and 4,800 oz. gold annually from 6.5 million cubic metres of dredged gravels. The material was extracted from a 20-km stretch of the river. Another 335 million cubic metres of prospective gravels (grading 0.008 carat per cubic metre) apparently remain.

Black Swan would have had to pay US$1.7 million in cash to the owners of Mineracao, as well as issue 2 million shares and an equal amount of options that have a strike price of 50 cents each. The company remains hopeful it can hammer out a new deal and, toward that end, is continuing negotiations with the vendors.

In all, the property covers 105 km of the river channel and totals 10,000 ha in extent. Included among the equipment located on-site are four large-scale bucket-wheel dredges.

Black Swan holds some 50,000 ha of alluvial diamond properties in Minas Gerais, and, of these, Gamela is among the most advanced. Situated on the Paranaiba River in the western part of the state, it is estimated to contain 6.6 million cubic metres of gravels in two paleochannels with a combined length of 800 metres and a width of 150 metres.

A pilot plant at the site is being expanded to treat 2,000 cubic metres per day, following the sale earlier this year of a 32.38-carat parcel of diamonds that fetched US$1,241 per carat. The high evaluation is skewed by a 6.85-carat greenish yellow stone that sold for an impressive US$5,000 per carat.

Black Swan can earn a 51% interest in Gamela and is seeking a permit to undertake a 6-month program of bulk-sampling.

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