Scoping study points to Camsell Lake’s potential

Preliminary results of a scoping study of the NW Snap Lake kimberlite dyke at the Camsell Lake property in the Northwest Territories suggest that the potential economics of the project are strong.

Winspear Resources (WSP-V) is the operator of the project, in which it holds an approximate 67% interest. The remainder is held by Aber Resources (ABZ-T).

The NW dyke subcrops on a peninsula that juts into the northwestern corner of Snap Lake. The north-striking body dips gently eastward under the peninsula and extends beneath Snap Lake, where it has been intersected in limited, widely spaced drilling 1.8 km east of the subcrop on one section only.

Earlier this year, a 199.7-tonne bulk sample of the NW dyke, collected from two surface pits 235 metres apart, yielded a 228.9-carat parcel of diamonds for a preliminary grade of 1.14 carats per tonne. Included were 21 diamonds weighing more than 1 carat, with the three largest stones coming in at 10.87, 8.63 and 6.03 carats. The stones were determined to be worth an average of US$301 per carat, which translates into an implied value of US$343 per tonne (or about $500 per tonne in Canadian dollars).

MRDI estimates that the portion of the NW dyke that underlies the peninsula contains a resource of 1.3 million tonnes. The estimate is based on a 65-hole grid drill program completed in the summer and fall of this year, and on 13 holes drilled in 1997. The area drilled measures 850 metres along strike and between 200 and 400 metres wide.

Winspear says drilling indicates that the kimberlite dyke has a relatively constant thickness over significant areas and, as currently interpreted, shows only broad warps in overall attitude. The main dyke averages a true thickness of 2.6 metres but splits locally into two dykes separated by up to 2 metres of country rock.

While the bulk of the kimberlite encountered in the drill core is hypabyssal phase, kimberlite breccia has also been encountered in restricted areas. The breccia components comprise material similar in composition to the immediately adjacent host rocks. The kimberlite breccia tends to be thicker than the hypabyssal and ranges in thickness from 1.3 to 9.4 metres.

In an area where 19 closely spaced holes were drilled on 20-metre centres (close to the subcrop, in preparation for the next stage of bulk sampling), four of the holes intersected breccia. Two other widely spaced holes also intersected this material.

The scoping study, performed by MRDI Canada (a division of H.A. Simons), proposes that NW Snap Lake dyke, as currently understood, can be mined economically. MRDI examined two economic models: an open pit and a combined open-pit and underground operation. Both models assumed an ore value of $400 per tonne, compared with the current implied value of more than $500 per tonne.

The first model examines a 1,000-tonne-per-day open-pit mine on the peninsula; the model conforms to existing Territorial mining regulations by staying within 50 metres of the lake shore. MRDI projects a mine life of 25 months based on an assumed 667,000-tonne minable resource. Capital costs are estimated at $61 million, while operating costs are pegged at $73.80 per tonne. The after-tax discounted cash flow rate of return is estimated at 54.3%, with payback coming in the first 12 months of operation. The total cash flow after-tax is forecast at $99.5 million.

The second model incorporates the open pit with an underground room-and-pillar mining operation on the portion of the NW dyke that extends under Snap Lake. By projecting a 500-metre downdip extension from the eastern edges of the open-pit model, MRDI estimates a potential 3.5-million-tonne resource, which would warrant a mine life of 10 years based on a 1,000-tonne-per-day rate.

Capital costs are estimated at $103.8 million; operating costs, at $87 per tonne; and the after-tax discounted cash flow rate-of-return, at 55.6%. Payback would occur within the first 12 months. The total after-tax cash flow is projected at $572.4 million.

Winspear President Randy Turner says the quick payback that is projected in both models is comparable to some of the best in the world.

The company notes that considerable work must still be done on the NW dyke to verify diamond values and establish minable reserves. Plans call for the taking of a 5,000-to-10,000-tonne bulk sample in the new year. The valuation of this bulk sample will play an important part in advancing the project. As well, further delineation drilling is planned in 1999 on that portion of the NW dyke that extends under Snap Lake.

At the moment, two drill rigs are in place to test additional features on the northeastern side of Snap Lake for evidence of a phantom pipe. A few holes on the northern side of the lake will determine if the NW dyke extends on the other side of a crosscutting fault.