A $40-million program of advanced exploration now under way at the NW Snap Lake project in the Northwest Territories will provide operator
A recently completed prefeasibility report on the NW kimberlite dyke, prepared by consultant MRDI Canada, confirmed the potential for a robust operation that could come into full production as early as the first quarter of 2003.
Situated 220 km northeast of Yellowknife, the Snap Lake project is controlled by the Camsell Lake joint venture, in which Winspear holds a 67.76% interest. The remainder is held by
The prefeasibility study makes reference to a 12-year mine life based on a sustained daily mining rate of 3,000 tonnes. Projected capital costs for the combined open-pit/underground mine have risen to $269.4 million from the 1999 scoping-study estimate of $241 million; operating costs are pegged at $93.62 per tonne, up 31% from an earlier estimate of $71.52.
The study projects an after-tax cash flow of $1.2 billion, for a 37.6% discounted internal rate-of-return and a payback period of 2.1 years, reduced from 3.6 years under the original scoping study.
During a recent site visit, The Northern Miner was informed by President Randy Turner that Winspear was pleased with the study. “The capital costs are pretty well in line with what we saw in the scoping study; the discounted cash rate-of-return after tax is very high. Most major projects are anywhere between 15% and 20% — so, at 38%, it’s extremely high. The payback is very quick; the capital costs, in comparison with other major developments in the Northwest Territories, are very small.”
MRDI’s mine plan entails the mining, by open-pit methods, of 185,000 tonnes of kimberlite from the northwestern peninsula of Snap Lake, with the remainder recovered from underground using room-and-pillar methods to a limited depth of 350 metres below the lake. The underground mining plan envisions the recovery of all the kimberlite in most areas by replacing 10% of the mined kimberlite with high-strength concrete pillars, with the remaining 90% to be replaced by cemented paste backfill.
The diamonds will be recovered at an on-site processing plant designed with a gravity feed to minimize damage during separation. Proposed site facilities include a 300-man camp, a 1,820-metre landing strip sized for 737 and Hercules aircraft, a processed kimberlite containment facility, waste rock storage areas, a paste plant, various storage buildings, diesel fuel storage capacity for 28 million litres, and a 6-million-litre storage facility for propane to heat the mine air.
Turner said the 31% increase in operating costs over what was projected in last year’s scoping study is related to additional operating supplies required for the high-strength concrete pillars and mine air heating.
The mine plan is based on an indicated and inferred kimberlite resource of 12.6 million tonnes grading 1.75 carats per tonne and exceeding 2 metres in thickness, after allowing for mining dilution of 13% and partial recovery of pillars upon cessation of mining. This is equivalent to more than 22 million recoverable carats at a revised value of US$118 per carat, equivalent to US$206.50 per tonne.
Owing to the recent jump in diamond prices in world markets, a 10,708-carat parcel of diamonds recovered last year from a 5,986-tonne surface bulk sample of the sub-cropping NW dyke was re-valued 12% higher by London-based WWW International Diamonds.
An additional 4.2-million-tonne kimberlite body ranges between 1 and 2 metres in thickness. While the prefeasibility study used a minimum thickness criterion of 2 metres, Winspear says this does not necessarily represent the lower cutoff limit for economic mining, given the margin between the projected operating cost of $93.62 per tonne and the kimberlite value of $299 per tonne.
The indicated and inferred resource represents about 60% of the dyke’s much larger global resource, which stands at 21.3 million tonnes grading 1.97 carats per tonne (equivalent to 42 million carats), based on 189 drill intersections completed to the summer of 1999. At that time, a total of 339 holes had been drilled in the Snap Lake area since the dyke was discovered in 1996.
While MRDI’s present mine plan is limited to a depth of 350 metres below surface. Kimberlite has been intersected at a 500-metre depth in the northeastern area, on the edge of the global resource outline, while the deepest intersection was recorded last fall at 700 metres. Winspear says additional work is needed to determine the most economic way to mine this deeper material. Art Ettlinger, a Calgary-based analyst with Yorkton Securities, suggests that a second means of gaining access to kimberlite on the northern shore at an early stage of the project could significantly increase the proposed daily mining rate beyond 3,000 tonnes.
The minable and global resource estimates do not include the two dozen or so holes drilled so far this year, nor the results of a fall 1999, widely spaced 8-hole program that demonstrated that the NW dyke continues with a thickness of more than 3 metres at least 600 metres to the northeast, beyond the global resource boundary. The dyke, however, appears to become thinner to the northwest and east, based on a couple of “skinny intersections” encountered in the fall program. “We figure we’re feeling the edge of this thing,” said John McDonald, executive vice-president.
Results to date suggest that the sub-cropping NW dyke is a gently east-dipping (10-12) single phase of macrocrystic hypabyssal kimberlite, relatively uniform in both thickness (averaging 2.4 metres) and grade. The global resource boundary extends roughly 2.6 km to the east beneath Snap Lake from the subcrop on the northwestern peninsula and up to 2.2 km north to south. “It’s a funny shaped [triangular] block, but those would be the maximum dimensions,” said McDonald.
On the north shore, the strike of the body changes slightly to the northwest, while the dip is approximately 18-20.
The Camsell Lake property is underlain by granites and gneisses typical of the Slave Structural Province. The NW Snap Lake dyke intrudes into metasedimentary gneisses of the Yellowknife Supergroup. The gneisses are fine-to-coarse-grained biotitic units. Disseminated sulphide mineralization occurs at less than 1%.
The microdiamond counts in the 189 drill intersections are said to be consistent and typical of results obtained from the two 1999 bulk-sample pits, which supports the inference by Winspear of a single kimberlite pulse. Comparisons of the kimberlite’s appearance and morphology between the drill holes and surface pits supports this conclusion. Winspear has reported a slight but progressive increase in microdiamond content towards the northeast, which suggests a corresponding increase in macrodiamond grade.
Micro-macro ratios
In preparing the overall production grade calculations, MRDI has extrapolated the microdiamond results using ratios developed in the bulk-sample pit areas, where both values are known and size distribution curves have been developed. MRDI uses a detailed and carefully considered statistical process to develop the micro-macro ratios. Winspear has confirmed these results using in-house consultants. This process would not be valid if there were more than one pulse or phase of kimberlite present, each with a differing diamond population.
Much of this year’s exploration and development program will involve driving a 1,200-metre-long decline at a slope of 15 from the northwestern peninsula, some 120 metres beneath Snap Lake, in order to collect up to 20,000 tonnes of kimberlite from 600 metres of development drift along the downdip extent of the dyke. Of that total, three widely spaced, 2,000-tonne samples will be processed on-site in a 10-tonne-per-hour dense media separation plant that was purchased late last year from Tahera for $2.3 million.
Not only will the underground program provide further information pertaining to the grade and value of the diamonds downdip; geological, geotechnical and hydrogeological data will be obtained and used to establish underground mining conditions.
Since the beginning of the new year, Winspear, through the efforts of seven contractors, has completed the following work: installation of an 85-man Atco-style camp, with water and sewage facilities in place; a 750-kW generator set, plus a back-up; a 3.3-million-litre storage tank fuel farm; and a 920-metre-long airstrip capable of handling twin otters and 748s. The initial lifts for the dams forming the processed kimberlite containment facility are partially in place.
The underground contractor Procon Mining & Tunneling has constructed a shop, dry and office area. The portal was collared in February and, at the time of The Miner’s visit, the 5-by-5-metre decline had been advanced more than 200 metres, with its first turn completed, along with one re-muck and one sump bay. “In general, ground conditions have been good,” said Brad Corrigan of AGRA Simons, which is managing the underground program. The decline is not yet under the lake. Winspear expects to begin bulk-sampling kimberlite by late August or early September. About 20 days will be required to process each 2,000-tonne bulk sample.
Extension
Winspear currently has three drill rigs working at Snap Lake and, at last report, had completed 6,700 metres of a planned 10,000-metre spring program. The main objective of the program is to extend the indicated resource out to the east and north. A total of 6,300 metres had been drilled from the ice on Snap Lake before the rigs were moved on land. Results from the first eight holes included an 8.82-metre-thick intercept of dominantly hypabyssal kimberlite with associated kimberlite breccia. This intercept was drilled within the eastern boundary of the global resource and represents the thickest interval on the NW dyke to date. Four other holes had intercepts ranging from 2.59 to 3.36 metres, while three of the holes yielded intervals of less than 2 metres along the dyke’s southeastern margin.
Winspear is also addressing the idea that northwesterly-dipping kimberlite dykes found in the southeast part of Snap Lake may represent the southeastern limb of the NW dyke. A gap of 800 metres now exists between these two areas. “We have confirmed and extended the dyke in the southeast area, but we’re still not confident that it joins across,” said geologist Duncan McBean. Further drilling is required.
So far, Winspear has been unsuccessful in finding the source of the NW dyke, though McBean said the company is keeping an eye on the Snap fault, a major structural feature that parallels the north shore in an east-west direction. One incline hole was put into the fault this spring; it encountered brittle deformation in a fairly constrained area, with not a lot of shearing. There is also no evidence that the fault has produced any significant off-setting of the NW dyke.
Winspear has set out a time frame that could see mine construction begin as early as mid-2001, followed by the start of open-pit mining in the third quarter of 2002, commissioning in late 2002 and full production in the first quarter of 2003.
Project financing
Critical to this agenda is project financing. With approximately 52.3 million shares outstanding, or 60.9 million fully diluted, Winspear currently has about $16 million in cash. Aber has $196 million, most of which is probably earmarked for its Diavik mine project, a joint venture with
In light of the current permitting difficulties that Aber and Rio Tinto have run into at their Diavik project, permitting remains a cause for concern at Snap Lake. “Operationally, the Snap Lake project should result in far less surface disturbance and less permanent deposition of processed waste materials,” writes Graeme Currie of Canaccord Capital in a Feb. 17, 2000, research report. “The surface footprint of the facilities and the proposed starter pit should work in its favour, as should the underground mining and the return to underground of the bulk of all tailings as stope backfill. As planned, the project does not disturb or drain Snap Lake; nor are there any plans to construct a dam to hold back any portion of the lake.”
He added: “It is premature to suggest that Snap Lake will have a less onerous path than BHP/Dia Met or Diavik, though our perception is that, due to its small footprint and underground mining procedures, Snap Lake could receive far less scrutiny.”
The relationship between Winspear and Aber is also open for scrutiny. What was once a cordial relationship appears to have been tarnished by a lawsuit launched by Aber over a funding dispute related to the 1999 work program. The court ruled that Aber can retain its 32.24% stake in the Camsell Lake joint venture and has the right to pursue its pending lawsuit for damage claims against Winspear.
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