BHP Billiton gains foothold in Nunavut diamond plays

Hunter Exploration Group, a private exploration and prospecting firm based in Vancouver, has agreed to sell its minority interest in a couple of promising diamond plays in Nunavut to BHP Billiton (BHP-N).

The diamond division of BHP Billiton will pay $7.1 million to acquire a 20% fully participating interest in the Aviat project, along with the diamond marketing rights to a 10% carried interest Hunter will retain. BHP Billiton will also pay $3 million for a stake in the early-stage Churchill project, just north of Rankin Inlet.

BHP Billiton Diamonds is the operator and 80% owner of the Ekati diamond mine and an active diamond explorer in Canada. The major already holds a sizable land position in the southern portion of Melville Peninsula.

Aviat was established in 2002 as a joint venture consisting of Stornoway Ventures (SWV-V), Northern Empire Minerals (NEM-V) and Hunter Exploration, and its mandate is to explore the Melville Peninsula region for diamonds. The partners hold interests in more than 7 million acres in that region. From Hunter Exploration, each of Stornoway and Northern Empire is earning a 35% interest in the Aviat properties by spending a total of $2 million on exploration before Oct. 1, 2005. Both Stornoway and Northern Empire hold a 30-day right of first refusal on the sale of Hunter’s interest. The two Northair Group companies say they are considering their options.

AV-1

Earlier this year, the joint venture unveiled strong microdiamond counts from a new kimberlite discovery, dubbed AV-1, that was found virtually on the last day of the 2002 summer field program. The discovery occurred during regional follow-up work on anomalous G10 kimberlite indicator mineral till samples. A 186-kg composite surface sample of AV-1 returned 228 microdiamonds. The Aviat joint venture recovered several stones larger than a 1-mm square mesh screen size and two stones exceeding 2 mm.

“All these stones fit nicely into a diamond distribution curve that suggests this kimberlite has potential for larger, commercial-size stones,” Stornoway CEO Eira Thomas told delegates attending the March 2003 convention of the Prospector & Developers Association of Canada, in Toronto.

Based on a petrographic analysis of the indicator minerals, the AV-1 kimberlite holds moderate to high diamond potential and is dominated by an impressive eclogitic garnet population.

“It’s interesting that the G10s took us in there, but in actual fact it’s the eclogitic garnets that look exciting,” said Thomas. “The diamond results, of coarse, are even more exciting.”

In addition to the AV-1 discovery, a field of diamond-bearing, angular kimberlite boulders, up to half a metre in size, was found 2 km southwest of the AV-1 outcrop. A 46-kg sample of the boulders yielded 92 micro, none of which exceed a 0.6-mm square mesh screen classification. Thomas said the diamond distribution curve from the boulders matches the AV-1 curve closely. However, he is confident the boulders are from a source other than AV-1, based on the direction of ice movement.

The exposed portion of the AV-1 discovery measures 76 by 13 metres and outcrops on the edge of a lake. Ground geophysics completed over the discovery area in early March shows a prominent magnetic signature that suggests the source body is larger than the outcrop. A second, equally prominent magnetic response lies under a small shallow lake immediately west of the outcrop. These two “obvious” magnetic signatures define a double-lobed anomaly at least 135 metres long and about 35 metres wide. During the geophysical program this past winter, the joint venture collected an additional 960 kg of material from AV-1 for microdiamond analysis.

Airborne survey

Under way is an airborne geophysical surveying program budgeted at $4.5-5 million. This year’s program on the Aviat properties will consist of prospecting, mapping, regional and till sampling, plus more than 1,500 metres of drilling.

Farther south of the Melville Peninsula, Shear Minerals (SRM-V) is the operator of the Churchill diamond project, with a 51% interest. Hunter holds the remaining 49%. Northern Empire has optioned a 35% stake from Hunter, which can be exercised by spending $750,000 on exploration. That will leave BHP Billiton with a 14% working interest in the project. Again, both Shear and Northern Empire have a right of first refusal and 30 days in which to respond.

The Churchill partners approved a $2.5-million exploration program this year; it will entail drill-testing at least 15 specific targets. The project area exceeds 1.1 million acres.