DIAMONDS — Diavik poised to become Canada’s second diamond producer — Rio Tinto, Aber Resources advance project to permitting stage, public meetings to follow

The recent submission to the federal government of an environmental assessment for the proposed Diavik mine in the Northwest Territories sets in motion the permitting process for what will be, in all likelihood, Canada’s second diamond mine.

Situated 300 km northeast of Yellowknife and 35 km southeast of the producing Ekati diamond mine, the Diavik project is owned 60% by Yellowknife-based Diavik Diamond Mines, a wholly-owned subsidiary of Rio Tinto (RTP-N), and 40% by Aber Resources (ABZ-T).

The environmental assessment, which was prepared by Diavik Diamond Mines, consists of an executive summary, environmental assessment overview, environmental management system, integrated socio-economic and environmental baseline report, and six separate supporting documents that report the operation’s potential effect on air quality, vegetation and terrain, wildlife, aquatics, historical resources and socio-economic conditions.

The submission concludes that the overall environment effects would be minimal, and that the project can contribute positively to the social and economic conditions of the region.

Diavik Diamond Mines will continue to hold formal public meetings during the remainder of 1998 to provide people with an opportunity to understand and participate in the formal review of the project’s environmental assessment. Following the consultation, government officials will complete a comprehensive study report, taking advice from technical experts and a steering committee consisting of members of native communities and representatives of the territorial and federal governments.

After the report is submitted to the federal minister of the environment, it will be released for a period of formal public comment. If the potential environmental impacts can be mitigated and public concerns have been adequately addressed, the government will proceed with permitting the mine.

If the permits are granted by the fall of 1999 and the joint-venture partners make a production decision, mobilization would occur in the first quarter of 2000, leading to commercial production in the second quarter of 2002.

Two environmental groups, Canadian Arctic Resources Committee and Ecology North, recently pulled out of the environmental assessment of the Diavik project after expressing concerns that the review process was “seriously flawed.” The groups are calling for “an immediate panel review of the project, adequate resource levels for public participant funding, independent technical expertise and ample time for a full debate around the project.”

The proposed mine centres on the development of four kimberlite pipes — A-418, A-154 South, A-154 North and A-21 — that together constitute a diluted minable reserve of 26 million tonnes of kimberlite grading 3.9 carats per tonne, equivalent to 102 million carats of diamonds. The total resource is estimated at 37.4 million tonnes averaging 3.5 carats per tonne, equivalent to 133 million carats with an average estimated value of US$56 per carat. More than 90% of the value of the diamonds produced are expected to be gem quality.

The four pipes lie just offshore of a 20-sq.-km island in Lac de Gras, called East Island. Diavik proposes to dam off the pipes with water retention dykes and open-pit mine all four pipes to depths of between 250 and 300 metres, followed by underground mining of the A-418 and A-154 South pipes to a depth of 400 metres.

The project facilities would be confined entirely to the East Island and include a conventional processing and diamond recovery plant, accommodation quarters, mine maintenance shop, fuel storage, and mechanical and administration complex. Diesel-powered generators would supply up to 22 MW of electricity.

A 1,800-metre-long airstrip could handle a range of aircraft, from Hercules transports to Boeing 737 passenger jets.

Most construction and production freight would be transported along the existing winter ice road, which passes within 1.5 km of the project site. About 2,200 to 2,400 truck loads per year are anticipated during construction, dropping to 1,500-1,700 loads per year during operations.

In order to mine the kimberlites safely, Diavik proposes to build water retention dykes — one around the A-154 South and North kimberlite pipes, one around A-418, and one around A-21. Diavik states that a team of internationally recognized engineering consultants developed the dyke design, whereas an independent board of engineering experts reviewed the design work.

Similar water-retaining structures have been constructed and operated successfully for mining in northern Saskatchewan, hydropower generation in northern Manitoba and for construction of the Hibernia offshore drilling platform in Newfoundland.

Construction of the first dyke is to begin in the year 2000, around the A-148 pipe. The construction phase will use quarried granite rock from East Island. Once the water is pumped out and the lakebed sediments removed, prestripping would begin. The dyke around pipes A-154 South and North would be built with mined country waste rock from A-418, and is expected to be in place by 2004. The average water depth along the paths of the A-418 and A-154 dykes is 12 metres, with the deepest part of the proposed dyke at 26 metres.

Construction of the A-21 dyke would begin some 10-12 years after startup, with underground mining of A-418 and A-154 South beginning 12-14 years after startup.

The three open-pits would taper from about 750 metres wide at the top to 100 metres at the bottom. The A-154 pit would be the largest and deepest, at 285 metres.

About 250 million tonnes of waste rock would be mined and hauled to two sites on the island, which would cover a combined 3.5 sq. km and reach 50 metres above the current highest point of the island. A fleet of 10-12, 218-tonne-capacity haulage trucks would be used.

The kimberlite ore is to be hauled to the diamond recovery plant, where diamonds would be separated from the kimberlite using a combination of crushing, centrifuging, magnetic separation and X-ray sorting. Diamonds would be sized and cleaned prior to being transported to an off-site sorting and valuation facility, which would be located in a northern community.

Rio Tinto and Aber each retain the right to market separately their own share of the diamonds.

The processed kimberlite, after the diamonds have been removed, is to be stored in an engineered containment structure in the centre of the island. Fine-grained kimberlite would be transported by slurry pipeline, while the coarse material would be trucked.

Once mining is completed, areas within the dykes would be prepared as fish habitat. Water would be gradually reintroduced to the pits and the dykes would be breached to return the inner dyke area to natural lake habitat.

A final feasibility study is on schedule for completion in the fourth quarter of this year. The study is examining a production rate of 1.5-1.9 million tonnes of kimberlite per year, which would yield 6-8 million carats of diamonds annually during full open-pit mining phase. The project has a mine life of up to 22 years.

The feasibility study is being conducted by a joint venture consisting of Nishi-Khon, the aboriginal Dogrib Nation Group of Companies, and the engineering firm SNC-Lavalin Group.

The capital cost of constructing the mine is estimated in the prefeasibility study at $875 million, whereas operating costs over the life of the mine are pegged at $66 per tonne of kimberlite, and $59 per tonne for years three through nine.

Aber is responsible for funding its 40% share. Aber currently has approximately 45.8 million shares outstanding, or 48 million fully diluted, and $123 million in working capital.

The 2-year construction period could provide about 675 direct jobs, of which 275 would go to residents of the Northwest Territories. Rio Tinto estimates construction would increase labor income in the Territories by about $75 million and provide government with new personal tax revenues of more than $25 million per year.

The mine is expected to provide a total of 400 direct jobs during opera
tion, with annual wages totalling about $30 million. Northerners will fill about 250 of these jobs at mine opening, and, as more northerners are trained to work at the mine, that number is expected to rise beyond 300.

Personal tax payments to government are projected to exceed $8 million annually, while the project could generate roughly $70 million in corporate taxes and royalties yearly over the life of the mine.

About $90 million would be spent annually to buy goods and services, of which $30 million would be spent on businesses based in the Territories.

Diavik says it is committed to providing northern employment during the construction, operation and closure stages of the mine. Priority will be placed on the directly affected communities of Wekweti, Gameti, Wha Ti, Rae-Edzo, Dettah, N’dilo and Lutsel K’e, as well as the Metis of the North Slave.

Dene, Mtis and Inuit residents of the Northwest Territories will be given priority in the hiring process.