A rejuvenated
The company started out in 2003 as a veritable shell company, with a few dormant, mostly-written-off, diamond-exploration projects in Africa and a working-capital deficit of $59,000.
That changed in the spring of 2003 when, with Canadian brokerage-house Canaccord acting as matchmaker, Vaaldiam was introduced to Sao Paulo-based Santa Elina Mines, sole owner of Pimenta Bueno. The two hit it off and soon negotiated a reverse-takeover: Vaaldiam would buy a 100% stake in the property from Santa Elina in return for US$4 million in shares and warrants.
Vaaldiam finally closed the acquisition and a related, Canaccord- brokered, C$1.5-million financing in November 2003. As a result, Vaaldiam’s shareholder base was divided as follows: Santa Elina, with 74%; pre-existing Vaaldiam shareholders, 8%; and the new investors, who had just put up the C$1.5 million, 18%.
Coincident with the closing, Vaaldiam shares were consolidated on a 1-for-4 basis, resulting in 34.2 million outstanding shares.
Post-consolidation, the Vaaldiam management team has been headed by long-time President and CEO Ken Johnson, a geologist with 20 years’ experience who is also certified in the grading and evaluation of rough diamonds and who works closely with a diamantaire in Antwerp. Vaaldiam’s chief financial officer is Robert Yeoman, a former senior vice-president of
The newly expanded board of directors consists of: Chairman Peter Marrone, president and CEO of
Vaaldiam’s technical team is led by veteran Brazilian diamond explorers Luiz Bizzi and Jos Tonoli, both former
Rondonia state
The Pimenta Bueno property is in the remote, southeastern portion of Brazil’s Rondonia state, near Bolivia, and has the same latitude as Lima, Peru.
Ranchers have moved in and significantly opened up the land over the past half-dozen years. As a result, the property is easily accessible by dirt road.
The nearest town, Pimenta Bueno, has a population of 27,000, and Porto Velho, the major centre, is 500 km away by paved road.
Vaaldiam’s ground covers 1,760 sq. km, about 15 km southwest of the Roosevelt Indian Reserve (named after U.S. President Teddy Roosevelt, who once visited there), where two diamond-rich kimberlite pipes were discovered along the Lajes River during the past two years, sparking a diamond rush.
“These pipes are producing a significant amount of diamonds of high quality,” says Vaaldiam President Ken Johnson.
The mining is being carried out by garimpeiros, who use excavators to dig into both the kimberlite pipes and 45 km of downstream alluvial material, then wash it with high-pressure hoses to produce a slurry that is pumped through a jig.
“It’s pretty crude, and I think their recovery is probably fifty to sixty per cent,” says Johnson. “A lot of the diamonds, I’m sure, are being lost. You can see that when you look at a parcel, because the average stone size is quite large, in excess of one carat. It’s abnormal — I’ve never seen that anywhere else in the world.”
The details are murky, but Johnson estimates that these two kimberlite pipes are producing in the range of 100,000 carats of diamonds per month, with an average value of US$150-180 per carat.
Officially, garimpeiros of the Cinta Larga (“Big Belt”) tribe are carrying out diamond mining on the reserve, since, under the Brazilian constitution, only they can mine there (some are lobbying the national government to change the constitution to permit reserves to bring in non-Indian and even foreign partners).
Unofficially, however, thousands of non-Indian garimpeiros have repeatedly made their way on to the densely forested, sparsely populated reserve to mine illegally. The has created a tense situation, which, in April, resulted in the murder of 29 non-Indian garimpeiros. In the aftermath of the violence, the federal police, supported by the army and air force, set up checkpoints around the reserve, which covers 21,000 sq, km and is home to only about 200 families.
Pimenta Bueno
Over at the Pimenta Buena property, which is off the reserve, Vaaldiam has divided its holdings into three blocks: the northern block, where there’s been little exploration; and the southern and western blocks, explored by
About half the 32 pipes are diamond-bearing, and Vaaldiam believes 11 of these “exhibit economic potential,” based on results derived from Rio Tinto’s work. Adds Johnson: “The chemical analyses of the indicator minerals and the mineralogy of the kimberlites is very, very good.”
The pipes range from less than 1 ha to 25 ha in surface area, and most are diatreme facies, which suggests good tonnage potential.
Erosion is minimal at Pimenta Buena (compared with the reserve, where the Lajes River has cut into and exposed the two rich kimberlites), and kimberlites there are mostly covered by 5-20 metres of mildly weathered, carboniferous-age, Casa Branca siltstone.
“That’s why our property hasn’t had a lot of garimpeiro mining — so much of the kimberlite is below cover that they’re really blind targets,” says Johnson.
So far, the most promising pipe at Pimenta Bueno is Tumeleiro 3. The pipe exhibits low calcium and high chromium, a combination that indicates diamond-bearing kimberlite. Specifically, there is a high frequency of diamond-inclusion chromite with greater than 60% chromium oxide.
Rio Tinto took two small bulk samples, weighing of 238 and 163 kg apiece, from Tumeleiro 3, and these returned grades of 0.165 and 17.84 carats per tonne. Vaaldiam sampled more of the pipe this spring, and results are pending.
Another promising pipe at Pimenta Bueno is called Pepper 6. Rio Tinto poked two drill hoes into it after surface sampling returned a grade of 0.247 carat per tonne, which is approaching the economic range if the diamond value is in excess of US$150 per carat.
The exposed kimberlite at Pepper 6 is a little less than 1 ha, though right next door to it is a big, untested, magnetic anomaly which has a surface area in excess of 2 ha. Vaaldiam has run ground geophysics over that area and began drilling there in mid-year, after the rainy season.
The Pimenta Bueno property contains another 35 magnetic and three electromagnetic geophysical anomalies, which are untested but have signatures identical to the known kimberlites.
Johnson is enthusiastic about the high conversion ratio of these anomalies: “Based on the work Rio Tinto did before, in nine out of ten magnetic anomalies they drilled, they hit kimberlite. So our chances of finding new kimberlite pipes on this property are very, very good.”
Owing to the high magnesium level of the kimberlite, there is often a roundish, natural vegetation anomaly (no trees), which is coincident with both the magnetic anomaly and the pipe. It is the kind of vegetation anomaly seen only in tropical environments, such as the kimberlite regions of Gabon in Central Africa. Some of the 17 untested magnetic anomalies in Pimenta Bueno’s southern block have this exact same vegetation anomaly at surface.
“It’s funny,” says Johnson. “Through Rio Tinto’s exploration, all they did was drill two holes on each pipe or took surface samples, and that’s it.” He describes how, in its first year of work at Pimenta Bueno, Rio flew all the airbo
rne and did all the ground magnetics and how, in the second year, it started testing pipes with drill holes. But Rio Tinto slashed diamond-exploration budgets worldwide by 30-40% after acquiring Aussie diamond miner Ashton Mining.
“They never followed it up, never drilled it again, never did anything,” says Johnson. “They never even found out the sizes of the pipes because they’re buried or exposed only at one little corner.”
Johnson believes Rio Tinto geologists restricted themselves conceptually in that they chose not to investigate any magnetic anomaly less than 10 ha in surface area. As a result, 17 anomalies in the southern part of the Pimenta Bueno property were left undrilled. “They now realize that that was foolish,” he says. “There have since been pipes discovered in the Northwest Territories and Zimbabwe that are much less than ten hectares and are very rich.” The Pimenta Bueno project “kind of died a slow death in 1997-98,” he adds, because Rio kept cutting back exploration until it started losing the claims.
Jumping at the opportunity, from about 1999 onwards, Santa Elina slowly started acquiring the Pimenta Bueno claims as Rio Tinto dropped them, and eventually ended up with all its ground.
Rio Tinto returns
Last November, Vaaldiam signed a joint-venture agreement with Rio Tinto at Pimenta Bueno, signalling the major’s return to the area.
“The reason we did this was to fast-track our exploration,” says Johnson, who notes that his company was able to acquire all Rio Tinto’s exploration data at Pimenta Bueno, originally assembled at a cost of around C$4 million, for US$20,000 plus the option agreement. The data consist of 23,000 line km of airborne magnetic data, ground magnetics, mini-bulk-sample and drill results, and microdiamond analysis.
In return, Rio Tinto can acquire a 51% interest in the property by spending US$5 million over three years in the southern block and US$7.5 million in the northern block.
“The reason there is a bump-up in the northern block in exploration expenditures is that the area has never been explored,” says Johnson. “We’ve flown a new airborne survey over that, so we’ve added quite a bit of value to that part of the property.”
Rio Tinto can boost its interest in either block to 70% by advancing that portion of the project to the stage of bankable feasibility study. Vaaldiam, the operator of the exploration campaign, would be carried to 30% up to that point, after which it would have to pony up its share of any development and mining costs.
Vaaldiam retains an exclusive right to develop any smaller kimberlites that do not meet Rio Tinto’s development criteria. The deal also allows Vaaldiam to use Rio Tinto’s diamond laboratory in Brasilia, which includes two dense-media separation plants to handle bulk samples.
“Rio Tinto’s still high on Brazil,” says Johnson, noting that about 60% of the major’s exploration budget in the country is directed toward diamonds.
From this year forward, Vaaldiam has broadly divided its exploration efforts into two areas: the first is advanced exploration on the property’s southern and western blocks, where Rio Tinto has explored previously; the second is reconnaissance work on all the blocks — specifically, airborne and ground geophysical surveying, and follow-up sampling and drilling.
The junior will explore some untested anomalies close to the Carolina kimberlite pipe, which is a few kilometres west of Vaaldiam’s property and is the site of garimpeiro operations that are pulling around 800-1,000 carats per month. One 56.3-carat stone from Carolina fetched US$250,000.
Vaaldiam remains the largest claim-holder in the district. Others include De Beers, which first entered the area in 1974, and is now exploring ground in the middle of Vaaldiam’s northern block, and the new diamond division of Brazilian iron-ore giant
There are two other major diamond districts in Brazil: the often-low-value Juina diamond province in Matto Grosso state, where Mousseau Trembley’s
Brazil has produced 15 million carats of alluvial diamonds since the early 18th century, but no one has been able to find the source of all these stones.
Comments Johnson: “Brazil’s geology is similar to South Africa and West Africa: you’ve got the stable craton, and all the indications for economic kimberlites are there. But the country just hasn’t seen the level of exploration that other places have, and that’s why you haven’t seen a large-scale, kimberlite mine developed yet. However, I’m confident it’s just a matter of time.”
African diamonds
Although it is a secondary focus, Vaaldiam is still exploring for diamonds in Africa.
In South Africa’s Northern Province, about 15 km from the border with Botswana, Vaaldiam can earn a 70% interest from De Beers in a kimberlitic fissure named Makoppa K-4, which the major discovered in 2000.
While the fissure is too small by De Beers’ standards, it is part of the same cluster that comprises the small Martins Drift deposit, which De Beers and the government of Botswana are mining just across the border in Botswana.
Vaaldiam has two diamond projects in the Central African Republic, where Johnson has had past success discovering gold: he co-founded Asquith Resources in 1983 and ended up discovering the Roandji deposit in the CAR, which has become
“The CAR is a tough area to work in, but the potential there is just incredible,” says Johnson.
Vaaldiam’s first diamond project in the country is a hunt for the kimberlite source of all the alluvial diamonds that have been mined in the country for many years. Johnson says the CAR produces more than a million carats per year, half of which are reported to the government and half of which are mined illegally.
Johnson says the alluvials originate from the south — either in the southern portion of the CAR, or in the northern part of the Democratic Republic of the Congo.
Vaaldiam carried out a large, reconnaissance-scale stream-sediment survey in the CAR last year and is the first company to come up with indications of kimberlite: G-10 garnets, chrome diopsides, and some diamonds in streams.
“We have to go back there and follow up on that,” says Johnson.
Vaaldiam’s second interest in the CAR is a 1% gross sales royalty (capped at $200,000) on the Boungou River alluvial-diamond project, which is entering production this year.
Initially, it is expected to produce 35,000 carats of diamonds per year at a value of about US$200 per carat.
“Our goal is to be a producer of high-quality diamonds,” Johnson says. “We’re going to explore our projects in Brazil and in Central Africa, but we’ll also look at any alluvial opportunities that come along.”
Vaaldiam recently added a small Canadian project to its portfolio by entering into an option agreement with
Vaaldiam has 35.9 million Vaaldiam shares outstanding (45.7 million fully diluted). They recently traded at 42, for a market cap of C$15 million. The share price peaked in November at 72 and has spent this year bouncing between 40 and 60.
In mid-August, Vaaldiam priced a private placement of up to 12.5 million units at 40 apiece, with each unit comprising a
share and half a warrant. A full warrant is exercisable at 50 within a year. A portion of the proceeds is earmarked for Pimenta Bueno. Toronto-based brokers Westwind Partners and First Associates are the agents. (This latest financing replaces a tentative, C$5-million one announced in March, in which Canaccord would have been the agent.)
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