Canadian Diamonds

In October 1998, when the Ekati mine began to produce Canada’s first diamonds commercially, the industry was still a fledgling. There was a flurry of exploration activity, particularly in the Northwest Territories and Nunavut (which would not become a separate territory until April 1999). The strongest contender as the country’s second diamond mine, Diavik, had ran into permitting slowdowns, and there was uncertainty if the price of diamonds would hold up.

Three years have passed, and the picture has become clearer. There will be more diamond mines in Canada; in fact, three more are to open in the next five years, all of them in the Northwest Territories or Nunavut. Concerted exploration over the last decade has uncovered kimberlite pipes and dikes in every Canadian province between Alberta and Quebec, and bulk samples from some of them are yielding very promising results.

Ekati has turned out to be one of the world’s best diamond mines, dishing up 6% of the world diamond production by value. The Diavik project is no slouch; it is predicted to produce 5% of the value of world diamond production after it opens in 2003. Snap Lake will be another major producer when it achieves full production, probably in 2006. Jericho is a different matter, being a fairly small deposit. Although not yet approved, studies have recommended that it will be a short-lived producer built at small capital cost with mainly contract employees. Jericho may point to way toward the exploitation of individual rich pipes rather than clusters.

De Beers’ underground mine

The Snap Lake project will likely be Canada’s fourth diamond mine into production, but will be a first on several counts: the first underground diamond mine in Canada, the first De Beers mine outside southern Africa, and the first time a kimberlite dike will be mined on such a large scale.

The deposit is on the Camsell Lake property, 220 km northeast of Yellowknife, 35 km from the Lupin winter road.

In 1997 Winspear Resources Ltd. of Vancouver discovered two areas of complex but highly diamondiferous kimberlite dike on opposite sides of Snap Lake. The dike averages 2.5 m thick and dips shallowly at 5* to 20* northeast under the lake. The deposit has been delineated over a confirmed distance of 3.4 km north-south and 3.7 km east-west, to a vertical distance of 1 km from the surface near the northern property boundary. The age of the kimberlite is about 523 million years.

A court decision in April 2000 confirmed Aber Resources Ltd.’s claim to 32.24% interest in the property. (Winspear owned the rest.) De Beers Canada Mining Inc. is now the sole owner and operator of the Camsell property, as a result of its successful hostile purchase of Winspear in November 2000 for Cdn$305 million, followed by its February 2001 purchase of Aber’s interest for Cdn$171 million.

The August 2000 update to the prefeasibility study by MRDI gave the Snap Lake diluted, indicated resource as 21.6 million tonnes grading 1.65 carats/tonne at a minimum thickness of 1 m and assuming approximately 15% dilution. The deepest drill intersection within the indicated resource is 515 m from surface. The report concluded that a production rate of 3,000 tonnes/day would be sustainable over a 22-year life, yielding 1.6 million carats per year on average. The company estimates the baseline on construction capital costs for the mine to be Cdn$260 million.

Diamonds extracted from an underground bulk sample were valued at US$100 per carat in early 2000. This figure might drop slightly if the valuation were done today, according to Jocelyn Fraser, senior advisor in public affairs for De Beers Canada.

The current plan is to build an underground mine with access through the existing portal, and use room and pillar mining, followed by paste backfill and pillar removal. The plant will process 3,000 tonnes of ore per day, using a series of crushing, washing, screening, concentrating and sorting steps. Mine rock and kimberlite not used for paste fill will be placed on the North pile, contained by a berm. Mine rock with acid-generating potential will be covered with paste, processed kimberlite and granite.

Water from the plant will be reclaimed and reused in the plant, and potable and make-up water taken from Snap Lake. Water from the mine, camp, paste fill plant and runoff will be collected and stored in the mine water clarification pond and treated, if necessary, before discharge to Snap Lake.

The average manpower during construction will be 450, and on-site personnel during operation are expected to exceed 350. Most of the facilities now at the site will be incorporated for use during mining. The existing 914-m airstrip will be expanded to 2,000 m to accommodate larger craft. The total project footprint for the mine will be less than 250 hectares.

By February 2001, when De Beers filed applications for land and water use licences from the Mackenzie Valley Land and Water Board (MVLWB), “We were convinced that we were going forward with the mine development,” says Fraser. Therefore, instead of launching a feasibility study, De Beers began an optimization study, through an alliance agreement with the engineering firm AMEC. That study will carry on during the permitting process.

In May, the project passed its first permitting hurdle when the MVLWB referred the Snap Lake applications to the Mackenzie Valley Environmental Impact Review Board for assessment. In August, De Beers Canada president, Richard Molyneux stated that the anticipated date of full production would be delayed “to allow a little more time for the permitting process, and for our team to further delineate the resource within a technically challenging kimberlite.” The company now anticipates receiving the required approvals in early 2003, and transporting the construction equipment and supplies over the winter road in 2004. Production will be phased in, with test mining beginning in 2004, and full production slated for 2006.

One of the priorities is to resolve boundary issues, as the property lies in an area claimed by both the Dogrib Treaty 11 communities and the Yellowknives and Chipewyan Treaty 8 communities in North Slave. Community consultation is continuing.

The persistence of De Beers in searching for Canadian diamonds has born fruit in several of the best projects. Besides Snap Lake, De Beers is exploring at its wholly-owned Victor project 90 km west of Attawapiskat in the James Bay Lowlands of northern Ontario. It has several joint ventures including Gahcho Ku with Mountain Province Diamonds Inc. and Camphor Ventures Inc. at Kennady Lake, N.W.T.

Modest project with big stones

Toronto-based Tahera Corp. has several significant diamond projects and joint ventures in Nunavut and the Northwest Territories. Its flagship operation, the Jericho project, could become Canada’s third and Nunavut’s first diamond mine.

The Jericho project is 420 km northeast of Yellowknife, 28 km north of Echo Bay Mines Ltd.’s operating Lupin gold mine. The project is exploring a cluster of diamondiferous, 172-million-year-old kimberlite pipes, much older than the kimber- lites at Ekati and Diavik, but younger than at Snap Lake.

A decline was driven to 75 m depth to facilitate bulk sampling from the JD-1 pipe at Jericho in 1996. A 9,401-tonne representative sample yielded 10,539 carats of diamonds, at a cut-off of 1 mm. An appraiser valued the complete parcel of diamonds at US$59.61/carat. A re-evaluation early in 2000 resulted in a modeled value of US$74 to US$88/carat for the same diamonds.

The company has noted an unusual number of large stones present in the bulk samples, which could make average values higher in run-of-mine conditions. Of the stones extracted from JD-1, there were 67 weighing five carats or more–the largest one more than 40 carats, and the largest gem-quality stone weighing 23.89 carats. A 10.53-tonne mini-bulk sample from the JD-3 pipe, 7 km west of JD-1, yielded 7.34 carats, including one stone weighing 3.6 carats.

A June 2000 feasibility study by SRK Consulting concluded that a combination of open pit and undergr
ound mining could exploit the land-based JD-1 pipe at Jericho to recover about 3 million carats of diamonds over a life of at least eight years, or 375,000 carats/year. The study used a probable reserve of JD-1 as 2.53 million tonnes grading 1.19 carats/tonne, within a total geological resource of 7.068 million tonnes grading 0.84 carats/tonne to a depth of 300 m. It suggested a 1,200-tonne/day plant. The estimated capital costs are Cdn$55 million, including Cdn$10 million to buy a diamond processing plant, and Cdn$8 million for underground development in 2006. The study concluded that the modest project showed excellent economics with a base case pretax internal rate of return of 34.3%.

Early this year, Tahera began the formal permitting process by filing a revised project proposal with the relevant authorities, and submitting a draft Environmental Impact Statement. This is one of the first mining projects to navigate the untested waters of Nunavut’s permitting process. The company anticipates receiving permits by the second quarter of 2002, leading to commercial diamond production as early as 2004.

Exploration last winter came up with a new kimberlite under a small lake, 6 km west of the JD-1 pipe. Two 50-kg samples from drill core were processed at Tahera’s laboratory in Vancouver, and yielded just two diamonds. A summer exploration program began in August and will include regional and follow-up till sampling, geophysical surveys to further define priority kimberlite target areas, and drill-testing.

In early September, Tahera signed a letter of understanding with Kennecott Canada Exploration, to incorporate the Jericho claims into an existing joint venture between the two companies.

Tahera and Kennecott have two other joint venture projects–Hood River and Rockinghorse–that look very promising. Kennecott is operator and can earn up to 62.5% interest in the projects. Preliminary results of exploration on the Rockinghorse property, 120 km northwest of Jericho, indicate that the Anuri kimberlite, discovered in July, is significantly diamondiferous. Analysis on 656 kg of drill core (to the end of August) yielded 937 diamonds measuring more than 0.15 mm, including nine diamonds caught in a 1-mm square mesh. The prominent kimberlite indicator mineral train emanating from the Anuri area suggests the presence of more diamondiferous kimberlites.

As well, Tahera has a joint venture with BHP Billiton on its Ranch Lake kimberlite in the 120,000-hectare ICE claims, 75 km northwest of the Ekati mine and 85 km south of the Jericho diamond project.

Lac de Gras jewel

The most advanced diamond development in Canada today is the Diavik project about 300 km northeast of Yellowknife, 30 km southeast of the Ekati mine.

The four kimberlite pipes to be mined at Diavik were discovered in 1994 and 1995 in shallow water in Lac de Gras by a joint venture of Rio Tinto subsidiary Kennecott Canada Exploration and Aber Resources, on claims staked in 1991-92 by Aber. The project is operated by 60%-owner Diavik Diamond Mines Inc. (a wholly-owned subsidiary of Rio Tinto plc of London, U.K.); the other 40% is held by Aber Diamond Mines Inc. (a wholly-owned subsidiary of Toronto-based Aber Diamond Corp.).

The project is centred on a 20-km2 island immediately west of the four pipes. The plan is to close off the areas of the kimberlites by constructing a succession of watertight concrete dikes, and then to dewater the kimberlites for open pit mining to 200-300-m depth. Mining would move underground at two pipes toward the end of the 20-year mine life.

Much of the planning has centred around causing as little environmental and wildlife disruption as possible during this process, and returning most of the affected parts of Lac de Gras to fish habitat after mine closure. The formal environmental assessment review was initiated in March 1998, and federal government approval for permitting and licensing was received November 1999.

The infrastructure construction began at the start of 2000. Project development began the end of that year, with materials that were hauled in before the winter road closed in early April 2001.

Construction was on schedule and within budget at the end of the first half of 2001; Cdn$515 million had been spent of the total budgeted Cdn$1.3-billion capital cost. The two temporary construction camps (one at the plant site and the other by the first dike, the A154) can accommodate up to 1,150 personnel, handling peak demands that are expected in the third quarter of 2001.

A project description in August said that concrete work was being done on the 11-storey-tall process plant and diesel power plant as well as the maintenance complex, boiler plant and 264-person permanent accommodations complex. Steel erection was well underway at the process plant, boiler house and power plant. (Two steelworkers died in mid-July when a manlift accidentally overturned.) Construction of the arctic corridors from the power plant had begun. The third 18-million-litre permanent fuel tank was nearing completion. The permanent sewage treatment plant was being commissioned. All physical structures will be completed in 2002.

The on-land portions of the A154 containment dike were started, including installing an impermeable 1-m-thick “plastic” concrete cut-off wall in the core of the dam. Dewatering and overburden removal will take place at the A154 pit once the dike is completed, in the summer of 2002.

Conventional processing will be practised with crushing, washing and screening, and then separation of the diamond-bearing fraction using dense media. The fraction will be passed to the recovery plant for wet and dry x-ray sorting to remove the diamonds. They will be chemically cleaned, sized and packaged before transfer to an off-site facility.

The plant is expected to start up in the first half of 2003, followed by a two-year ramp-up period to full capacity of 4,100 tonnes of kimberlite per day. Diavik’s planned production rate is about 6 million carats of diamonds annually at a value of US$63/carat (2000 valuation) over the mine life. Aber president and CEO Bob Gannicott said in an April presentation that, compared with other world mines, the Diavik diamonds have better colour and clarity and have a higher proportion of stones larger than 2 carats.

The two owners have the right to independently market their share of the diamonds produced from the mine. As part of its marketing strategy, Aber intends to establish a Canadian identity marque with a certificate of Canadian origin for all of its Diavik diamonds. To service these arrangements, Aber is establishing a diamond-sorting office in Toronto. This will permit the sale of sorted diamonds directly to its main markets. Aber has signed a 10-year diamond sale agreement with Tiffany & Co., a prestigious jeweler than sells only top colour and clarity diamonds.

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