Aber unveils bankable study

Canada’s fledgling diamond industry took another step forward with the release of a bankable feasibility study for the Diavik project in the Lac de Gras region of the Northwest Territories.

The study shows the project to be “extraordinarily robust,” with 40%-owner Aber Resources (ABZ-T) expecting to recover its share of capital costs within 32 months of commercial production. The project will be managed by a unit of London-based Rio Tinto, which holds a 60% interest.

The study, commissioned by Aber and prepared by SNC-Lavalin, incorporates a reserve report prepared independently by Agra-Simons MRDI, which, in turn, incorporates a valuation study by WWW Diamond Consultants, the official diamond valuers of the Canadian government.

The project manager has retained SNC-Lavalin to perform engineering and procurement for the Diavik project, while Agra-Simons has been retained as construction managers.

The bankable study concludes that the Diavik project hosts 25.7 million tonnes of proven and probable reserves (open pit and underground) averaging 4.2 carats per tonne. Of this total, 11.7 million tonnes are contained in the A-154 South deposit, which will be the first to be mined. This pipe has a grade of 5.2 carats per tonne and a diamond value of US$79 per carat.

The project’s total mineral resource stands at 37.4 million tonnes containing 138.1 million carats.

The estimated capital cost remain unchanged at $1.29 billion. The operation would produce an estimated 107 million carats over a 20-year mine life. Over the first 10 years, annual production would average 7.1 million carats at US$74 per carat. Average cash operating costs are pegged at US$13 per carat.

The internal rate of return is estimated at 22.6%, after tax. The construction timeline and economic models are the same as those presented in a July 1999 feasibility study (T.N.M., Aug. 30/99). However, engineering work is attempting to speed up the schedule so that production can begin sooner than the previously planned mid-2003 start date.

Despite a widely publicized delay earlier this year, supplies and equipment have been transported to the site by winter road, and work is under way. A water licence is expected this summer, followed by other permits. Once these are in hand, the partners will make a formal production decision.

Aber retains the right to market its 40% share of diamonds independently and has agreed to sell a portion to Tiffany’s of New York.