Monday 26th September 2016

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The drama of discovery

Not without excitement, the quest continues for Canadian diamonds

by Greg Klein

Calling it an “exceptionally rare” occurrence, Kennady Diamonds TSXV:KDI geologists spotted a macro diamond while logging drill core from the Faraday 2 kimberlite on July 15. It was the second such find in a year for the Kennady North project and probably rendered less than momentous by foreknowledge that the pipe did in fact contain diamonds. Even so, the event brings to mind a dramatic moment in Canadian diamond history.

The scene also took place in the Northwest Territories’ Lac de Gras region, but during late winter 1994. As recounted in Matthew Hart’s Diamond: The History of a Cold-Blooded Love Affair, 24-year-old Eira Thomas ran the project for Aber Resources while her father, Gren Thomas, conducted merger negotiations down south. Eira feared the deal would close at a disadvantage to Aber despite lab recovery of micro diamonds from the property’s A-21 kimberlite.

Not without excitement, the quest continues for Canadian diamonds

Standing up to disagreement from a partner as big as Rio Tinto NYE:RIO, the young geo thought she was on the brink of a more substantial discovery with the A-154 target. Even as lake ice began thawing, Thomas not only persuaded the crew to continue barge-based drilling but cajoled them into working a heavier, larger-diameter rig. Just as weakening ice finally forced the drillers to quit, Aber geologist Robin Hopkins found kimberlite studded with indicator minerals. Summoned by phone calls, Aber and Rio staff descended on the camp.

As they gathered in the core tent, Hopkins spotted something protruding from a piece of core. Hart writes:

Hopkins tried to scratch the crystal with his thumbnail, and couldn’t. When he looked up, he saw that Thomas was raptly watching him. “No way,” he breathed. He passed the core with the crystal embedded in it to Buddy Doyle of Rio Tinto. Doyle stared at it. “No fucking way,” he said, and handed it on to Thomas. She took the core in her hands and gazed at it, a two-carat diamond bouncing light from its crystal face.

That dramatic moment presaged Diavik, Canada’s second diamond mine and successor to Ekati, itself the result of Chuck Fipke’s adventurous spirit as well as geological acumen. Now, with three Lac de Gras mines in operation, the NWT ranks third globally for diamond production by value.

Yet the lifespan of Ekati, majority-owned by Dominion Diamond TSX:DDC, ends in 2020. The mine’s Jay deposit could potentially extend the expiry date to 2031, according to the company. Diavik, held 60/40 by Rio and Dominion, would last to 2023, even with the addition of a fourth pipe, the A-21 that Thomas discovered before A-154.

Snap Lake, De Beers’ first mine outside Africa, could continue operating until 2028, albeit with declining output. Earlier this year the company warned a much earlier shutdown might occur if an amended water licence wasn’t approved. Last month the Mackenzie Valley Land and Water Board recommended the territorial government grant approval for a plan to flush a higher proportion of dissolved solids into water that’s discharged into the lake.

De Beers also produces Canadian diamonds at its Victor mine in Ontario’s James Bay lowlands. The discovery actually dates back to 1987, about five years before Fipke’s historic find. But the Ontario mine didn’t open until 2008.

As those four mines mature, Stornoway Diamond TSX:SWY plans to pick up some of the slack with its Renard project in Quebec’s James Bay region. With commercial production slated for Q2 2017, Renard would give up 1.6 million carats annually for 11 years, about 2% of global supply, the company estimates.

Back at Lac de Gras, the world’s richest diamond development project continues to progress. Last week Mountain Province Diamonds TSX:MPV announced construction at Gahcho Kué was 62% complete and on schedule for H2 2016 operation. Also headed by Kennady president/CEO Patrick Evans, Mountain Province holds a 49% stake in the project, which is operated by JV partner De Beers. It’s expected to produce an average 4.5 million carats a year over a 12-year life.

Not surprisingly, Lac de Gras hosts a busy exploration play. Gahcho Kué’s next-door neighbour Kennady North remains the most advanced. On July 15, the same day the Faraday 2 stone lit up Kennady’s core shack, the company reported lab recovery results from Faraday 2’s spring drill program. About 930 kilograms of kimberlite returned a sample grade of 1.93 carats per tonne for diamonds of commercial size.

Of 247 individual diamonds described by the lab, 37% were transparent and white/colourless, while 56% were off-white. With 97% of the sample showing transparent white or off-white gems, the results could “have a positive impact on diamond values,” Evans stated.

The company expects recovery results from Kelvin’s 436-tonne bulk sample by the end of Q3. Results from a 2.6-tonne sample of Kelvin South Lobe kimberlite should arrive in early September.

Saskatchewan, meanwhile, hosts a more advanced diamond project in Shore Gold’s (TSX:SGF) majority-held Star-Orion South. Although it passed a federal environmental review in December, the company now seeks to cut pre-production capex through a revised mine plan and feasibility study.


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