Vaaldiam starting diamond production in Brazil in New Year

Vaaldiam Resources‘ (VAA-T) new diamond recovery plant at the Duas Barras deposit in Minas Gerais, Brazil should be finished in December, with production slated to begin in the New Year.

The plant should be at a full production rate of 120 tonnes per hour by mid-March, 2007.

Within a year, the company will decide whether to increase production to 180 tonnes per hour, which would cut the mine life of Duas Barras, currently at eight to 10 years, down to six.

That decision will depend on cash flow during the first year because it will mean taking on extra costs such as bringing in more machinery and workers, said Janet Reid, investor relations manager at Vaaldiam.

Vaaldiam, based in Toronto, has a 75% interest in Duas Barras with Minerao Marly, an engineering company based in Sao Paulo, holding the remaining 25%.

Vaaldiam expects to recover about 38,000 carats of diamonds and 43 kg. of gold per year. It will generate US$7.7 million in gross revenue with net after tax revenues of US$3.1 million per year.

In September, fine gold in the alluvial deposit was discovered, which could add US$3.50 per cubic metre to the value of the diamond-bearing gravel at the mine.

Bulk sampling showed that Duas Barras has an average fine gold grade of 0.18 gram gold per cubic metre, or 0.006 oz. per tonne.

With these results it was determined that Duas Barras contains an indicated resource of about 1.7 million bank cubic metres at an estimated grade of 0.16 carat of diamonds per cubic metre and 0.18 gram gold per cubic metre.

The sample represents a resource of about 270,000 carats of diamonds and 300 kilograms, or 9,800 oz., of gold.

There is also an inferred resource of about 1 million bank cubic metres at an estimated grade of 0.16 carat of diamonds per cubic metre and 0.18 gram gold per cubic metre, representing a resource of 160,000 carats of diamonds and 180 kg., or 5,800 oz., of gold.

An independent valuation in September of about 170 carats of diamonds showed an average value of US$197 per carat. The largest stone was a white dodecahedral weighing 4.66 carats, valued at US$1,395 per carat. Another 24 stones totalling 33.23 carats fell within the 1-to-4-carats range and were valued at US$354 per carat.

Vaaldiam’s Pimenta Bueno property in western Brazil’s Rondonia state is half way through a 3-year exploration project with partner Rio Tinto Mineral Exploration. Rio Tinto can earn up to 51% and has committed US$5 million the first year, US$5 million this year and US$2.5 million in the third.

Drilling has stopped for now at Pimenta Bueno after some diamond breakage occurred while drilling in the Cosmos 1 pipe. The drill, which is less than 6 inches in diameter, is too small.

Reconnaissance sampling has continued while the companies determine whether they should buy a Bauer rig drill with a 1.5-metre diameter. The cost of the drill is about US$1 million and bringing it into Brazil would cost another US$500,000.

Two more kimberlite pipes were found at Pimenta Bueno during the testing of two magnetic anomalies, bringing the total to 36.

For the pipe Tumeleiro 9, an angled drill hole intersected kimberlite at a down-hole depth of 72 metres (about 62 metres vertical depth), sampling 88 metres of kimberlite before intersecting with what was thought to be the southern boundary of the pipe. Tumeleiro 9 has a surface area of about 2 hectares, overlain by a 62-metre-thick sequence of sandstone and conglomerates.

Tumeleiro 10 has is about 3 hectares. The drill hole intersected kimberlite at a vertical depth of about 68 metres and about 99 metres of kimberlite were sampled to a depth of around 167 metres.

Vaaldiam also has a 60% interest in the Brauna property in the state of Bahia. The company is currently having the diamond grades analyzed of two 50-tonne mini samples to find out whether it’s worth doing a full 1,000-tonne sample. The samples need to have grades of 11 to 12 carats per 100 tonnes before further testing.

During the early 1990s, DeBeers did some reconnaissance sampling in the area that showed 11 to 60 carats per 100 tonnes.