Saskatchewan diamonds slow to surface

Vancouver — Fifteen years have passed since the first kimberlite discoveries were made in Saskatchewan’s Fort la Corne district. At the current rate of activity (and barring a geological miracle), five more years could pass before the operators of the most advanced projects are able to determine if it is feasible to build the province’s first diamond mine.

The pace of exploration and development in Saskatchewan has been slow relative to Canada’s northern territories, where two diamond mines are operating and several others are being constructed, and yet the cautious approach masks the many discoveries that occurred since the first kimberlite was drilled in 1989. Most notably, various companies have identified at least 71 kimberlite bodies with a combined tonnage exceeding 10 billion tonnes, making Fort la Corne the largest diamond-bearing kimberlite field in the world.

In contrast to the Northwest Territories and Nunavut, where kimberlite pipes are small and where typically two, three, or more are required to feed a central processing plant, the Saskatchewan bodies are enormous by world standards. Furthermore, about 70% are diamond-bearing — an unusually high number, again, by international standards. More significantly, half the bodies have produced macrodiamonds (stones greater than 0.85 mm) and roughly 70% of those macros are considered gem-quality, with 22% described as near-gem quality.

Other favourable factors are good road access and mining-related infrastructure, including hydroelectric power. Fort la Corne is 65 km east of Prince Albert in central Saskatchewan. The province, local communities, and aboriginal groups are generally supportive of mine development, and a skilled workforce is available.

On the other hand, Saskatchewan bodies are geologically complex and low-grade relative to the best pipes found in Canada’s north. Potential mine developers also face challenges imposed by the unique nature of the kimberlites, which typically lie under 100 metres of glacial overburden and have no surface expression. This makes them more difficult to delineate and potentially mine than pipes in Canada’s north, which often outcrop on surface or under shallow lakes, making them amenable to open-pit mining.

The prairie bodies are different from most known kimberlites in that they’re dominantly composed of “crater facies” volcaniclastic material. The crater facies are generally completely preserved, whereas in Canada’s north, the tops of kimberlites have been scraped and scoured away by several periods of glaciation, leaving behind the diatreme facies and root zones.

Although the Saskatchewan bodies come in various shapes and sizes, a typical cross-section would show a “champagne-glass” profile, as opposed to the characteristic pipe or carrot shape observed in Canada’s north. The roots of the prairie bodies are rarely found, though limited drilling has shown that they tend to be deep, steep and small.

Furthermore, the internal geology of prairie kimberlites varies considerably. The larger bodies are made up of distinct, multiple eruptive phases of mainly pyroclastic crater facies material. The multiple eruptions can come from a number of eruptive centres, which may coalesce or separate during the time the kimberlite is forming, so there can be many discrete intrusive phases and volcanic layers to the kimberlite complex. The end result is a high degree of variability in the grade and diamond content of the kimberlite bodies, making them a challenge to evaluate, at least quickly.

For most of the 1990s, and until early 2004, most companies active in Saskatchewan focused on assessing the average grade of the most promising targets. This strategy produced encouraging results for Shore Gold (SGF-T), which is pushing hard to advance its Star kimberlite to the prefeasibility stage. It has been less successful for others, owing to the complexity and sheer number of large bodies to be tested.

A case in point is the Fort la Corne joint venture, which hosts almost all of the kimberlites found to date in Saskatchewan. Project operator De Beers holds a 42.25% interest in the joint venture, while partner Kensington Resources (KRT-V) holds a similar stake. Cameco (CCO-T) has a 5.51% stake, while UEM has a 10% carried interest.

The partners spent more than $37 million on exploration over the past 15 years, most of which was applied to drill-testing and, later, mini-bulk-sampling to determine the overall diamond potential of various targets.

While sample grades for various bodies were reported from earlier drilling campaigns, these are generally viewed with low confidence, owing to the geological complexity of the bodies and their highly variable diamond content.

In some cases, the mini-bulk-sampling produced mixed or even disappointing results, such as with kimberlite 150. At the same time, however, it became apparent that certain bodies had higher-grade zones, notably the prospective 140/141, 148 and 122 kimberlites.

In early 2004, microdiamond recoveries were reported from samples taken from these kimberlites. In many cases, they returned stone counts higher than similar historic samples. By this point, it was firmly established that certain phases or geological units of the kimberlite bodies had richer diamond content than others.

High-grade units

As a result, the joint venture shifted its strategy from assessing the average grades of individual bodies to defining higher-grade units in multiple, closely situated kimberlite bodies.

In late 2004 and early 2005, the partners completed a major $7.6-million program, which included core drilling and mini-bulk-sampling of the 140/141 and 122 kimberlites, along with core drilling of higher-grade zones in other prospective bodies.

Partner Kensington subsequently reported that three of the best kimberlites showed “good potential, with a combined total of 33 million carats in-ground” defined in the higher-grade zones. The company added that as an interim goal, the joint venture is looking for a potential resource of 70 million carats.

Geological modelling and grade forecasts were released for several targets, though these are also viewed as preliminary in nature. The joint venture points out that not enough work has been done to define resources on the property.

Based on work to date, the “units of interest” on the 140/141, 148 and 122 bodies are estimated to contain 369 million tonnes with an average grade of 10 carats per 100 tonnes. Grade forecasts ranging from 5 and up to 20 carats per 100 tonnes were made for four other bodies, namely 120, 121, 221 and 147, but these are based on limited data.

The average value of diamonds from kimberlite 140/141 ranges from US$67 to US$97 per carat, whereas smaller samples from other bodies have ranged from US$148 to US$179 per carat. A large sample of up to 5,000 carats is required before diamond valuations can be used to determine the economics of a potential mine.

Early this year, the partners announced a budget of up to $25.6 million for a multi-phase, systematic work program — the largest commitment to date for the joint-venture property. The program is aimed at bringing the project to the prefeasibility stage by 2008, based on the development of high-grade zones in several kimberlites.

Richard Molyneux, president and chief executive of De Beers Canada, says the increased expenditures will allow the joint venture to assess a larger portion of the kimberlite field than in previous years. “This will compress the exploration timeline and provide targets for subsequent evaluation work,” he says.

At least 14 kimberlite bodies will be tested during the ongoing program, with at least 10 holes used to assess each body. The initial phase will include geological drilling and microdiamond analysis to determine the internal geology and grades of the targeted kimberlites.

If results are positive, the selected u
nits will be further tested by delineation drilling and mini-bulk-sampling to confirm the potential of the higher-grade units.

Delineation drilling of at least three kimberlites is planned, including sampling of up 10,000 kg of core. Mini-bulk-sampling of targets will obtain about 580 tonnes for any given body. Throughout the process, emphasis will be placed on evaluating the enriched zones of the most promising bodies.

Other work will include collection of environmental data and ongoing consultations with local stakeholders, along with geotechnical drilling and other engineering work. Although engineering and environmental work are not normally carried out during the exploration stage, De Beers notes that such activities in this instance “reflect the joint venture’s commitment to advance the project.” Adds Molyneux: “Accelerating the project reflects De Beers’ broader strategy of fast-tracking exploration projects in order to meet the growing global demand for diamonds.”

The methodical, step-by-step exploration and evaluation plan adopted by the joint venture is expected to take almost four years to complete. The partners say it will lead to a decision by mid-2008 on whether or not to advance the project to prefeasibility. Assuming sufficient higher-grade resources in proximal bodies are outlined, the next stage would involve deposit modelling and engineering studies to determine the most economic way of mining the zones of interest while still achieving the economies-of-scale possible in bulk-mining operations.

Shore finds a ‘star’

Saskatoon-based Shore Gold has quietly emerged as a major player in Saskatchewan’s fledgling diamond industry by virtue of having already defined a kimberlite body that appears to have economic potential.

The company recently launched a $43-million program aimed at bringing its Star diamond project to the prefeasibility stage in less than three years. It is the largest and most aggressive work program ever outlined for any diamond project in the Fort la Corne region. Moreover, Shore’s work commitment combined with the De Beers joint-venture program represents the largest-yet infusion of investment capital in Saskatchewan’s emerging diamond industry.

The junior company decided to forge ahead with a massive program at Star after years of systematic work, including a previous bulk-sampling program that produced a total of 27,837 tonnes of kimberlite, resulting in a diamond parcel totalling 4,048.81 carats.

Diamond valuations were encouraging. Four separate companies evaluated a 3,050-carat parcel of diamonds from the Star kimberlite. The valuations averaged US$110 per carat, based on the price a producer would receive in Antwerp.

A “modelled value” of US$135 per carat was also determined, using statistical methods to estimate the average value of diamonds that would be recovered from a future mine on the Star kimberlite.

Shore was pleased with the results and notes that the diamond parcel included a significant portion of white goods, including top-value whites, many large diamonds (up to 19.67 carats), rare coated diamonds, and a low proportion of brown stones and boart.

Shore Gold says its ongoing program, which will include additional underground bulk sampling, is aimed at defining a mineral reserve compliant with the reporting standards outlined in National Instrument 43-101. Plans call for the extraction of at least 10,000 additional tonnes of kimberlite from the underground workings on the 125-metre level, surface core and large-diameter drilling, and engineering studies.

The prefeasibility study will also include an airborne laser survey for topographic mapping of the site, kimberlite and country-rock test work, three-dimensional modelling, grade estimation, block-model construction, mine and plant design, and environmental impact studies. The program is expected to take 30 months to complete. Assuming positive results, it will be followed by a feasibility study to determine the economics of a potential diamond mine.

The Star deposit covers more than 4 sq. km, averages 88 metres in thickness, and is covered by 90 metres of overburden.

Shore Gold says it was the first company in the Fort la Corne district to locate a root zone beneath the kimberlite crater, when hole 20 intersected 539 metres of kimberlite. This is believed to be the longest intersection of continuous kimberlite from a vertical drill hole ever reported in North America.

Earlier this year, Shore announced that Newmont Mining (NEM-N) had participated in the company’s $116.6-million equity financing to advance the Star kimberlite.

Newmont invested $50.9 million and bought 9.2 million shares, ending up with an approximate 9.9% interest in Shore Gold.

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