Seeking success where others have failed, Toronto-based junior
Comprising 39 sq. km, the property is serviced by a sealed road and grid power. It lies 45 km from the coastal city of Banjarmasin in southeastern Kalimantan, where the Apukan rivers empty into a flat, grass-covered swamp.
Gem-quality diamonds have been found in the gravels of an ancient, westward-flowing drainage system named the Cempaka channel, the upper reaches of which occupy the full, 16-km, east-west extent of BM’s property.
As well, BM is examining a second, smaller diamond-bearing paleotributary. Known as the Danau Seran channel, it joins the Cempaka paleosystem from the northeast.
Extensive drilling and bulk testing at Cempaka by previous operators have delineated an inferred resource of 33 million cubic metres of near-surface, 1-to-3-metre-thick gravels grading 0.1 carat per cubic metre. BM notes that this estimate conforms neither to Australian nor Canadian reserve standards.
The source of Cempaka’s alluvial diamonds is believed to be the Meratus Mountains, which lie west of the property and form part of an Upper Cretaceous orogenic belt. Diamonds have been mined there on a small scale from Upper Cretaceous conglomerates, within the basal layer of the Manunggul Formation, which consists of sedimentary rocks grading into volcanics.
The ongoing uplift and erosion of the Meratus Mountains have generated a continual supply of diamond-bearing detritus, carried via the drainages of the Riam Kanan, Riam Kiwa and Apukan rivers, to Tertiary and Quaternary sediments in the Banjarmasin district, which includes the Cempaka property.
While diamond mining in the Cempaka area dates back to Dutch colonial times, various operators carried out modern exploration and trial mining at the property during the 1970s, ’80s and ’90s.
Today, the Cempaka project is covered by a seventh-generation contract of work that was granted in 1998 to PT Galuh Cempaka, which was owned at the time by three partners: Australia’s
As operator of that joint venture, Ashton carried out an 18-month trial dredging operation at Cempaka beginning in 1999. While the largest diamond recovered weighed more than 20 carats, diamond grades were disappointingly low at 0.008 carat per cubic metre.
In August of the following year,
Meanwhile, BM’s officers, who had been active over many years at the property in various drilling and sampling roles, still believed in Cempaka’s potential and moved to take over as project operator.
In September 2001, BM Diamondcorp, under its former name Battlefield Minerals, struck a deal to acquire an 80% interest in the Cempaka project whereby, in return for Rio Tinto’s and Malaysia’s respective stakes, BM must pay a combined gross-production royalty of 2%.
The remaining 20% interest in Cempaka is still owned by Aneka Tambang.
As part of the deal, BM acquired the project’s bucket-line production dredge, which has a handling capacity of 2.3 million tonnes per year and includes an onboard, modular, 120-tonne-per-hour, dense-media-separation (DMS) treatment plant and an X-ray recovery unit.
BM has already modified the existing diamond plant in order to ovecome bottlenecks in the X-ray recovery section.
In return for 1.1 million shares, BM directors sold the company processing equipment, including a gravel-screening plant, gravel pumps and a second X-ray diamond sorter. (BM notes that, earlier, this same equipment had been sold by the company to the directors for US$80,000, with the roughly US$20,000 gain allowing for two years of carrying costs.)
BM reckons that the expenditures made on the property prior to the 2001 acquisition totalled US$9 million, with a further US$15 million spent on capital, including US$12 million for the dredge.
During the acquisition, BM hired diamond consultant Richard Garnett to review the project. In his report, Garnett attributes Ashton’s disappointing results to at least three factors: a poorly selected dredge course; gross mining dilution; and a poor performance from the plant ahead of the DMS section.
In early 2002, BM mobilized two drill rigs to the site and started infill drilling on a 25-metre spacing, with the goal of providing data for a final pit design at Danau Seran.
A prefeasibility study by BM in the first quarter concluded that the Danau Seran south channel could be dry-mined economically and that dredging is the preferred method for the remainder of the Danau Seran area, as well as for the much larger, adjoining Cempaka resource.
BM is now studying the feasibility of starting commercial production in the first half of 2003 at the annual rate of 35,000-45,000 carats.
Overall, the company wants to prove up a recoverable grade sufficient to support a minimum 10-year operation capable of producing 250,000 carats per year at a total operating cost of US$100 per carat, before royalties.
As part of the study, BM will begin trial mining at Cempaka in August 2002. In preparation, the company is defining the initial 12-month mining blocks, which will comprise about 600,000 bank cubic metres of diamond-bearing gravels.
BM notes that no further permits are required to begin mining, because the existing CoW is all-embracing.
If a commercial project is given the go-ahead, mining would likely target Danau Seran for three years and then proceed to the Cempaka area for the longer term.
Preliminary studies suggest that, to begin mining, it will be necessary to invest US$1 million in the plant and US$1 million in working capital.
As part of its Cempaka purchase, BM acquired an inventory of diamonds from the property totalling 4,460 carats. These were shipped to Antwerp, Belgium, for evaluation by WWW International Diamond Consultants, which also serves as a diamond evaluator for Canada’s federal government.
From the first two tenders of these diamonds in the second quarter, BM received about US$193 per carat. Diamond sales so far this year — from both inventory and bulk testing — have totalled 4,061 carats for proceeds of US$758,000.
These tenders were the first-ever official sale of Indonesian diamonds on which a 5% royalty was paid to the Indonesian government. Under economic reforms introduced by President Megawati Sukarnoputri, 80% of Indonesian mineral royalties are now paid to the regional and local governments in the locality of the mining project.
Although BM describes rough prices as having weakened slightly, owing to a large De Beers sight in early May, the junior says it “continues to experience strong interest in its product, particularly from members of the Antwerp diamond trade looking for new long-term supply sources.”
BM Diamondcorp has had a restless life. It was incorporated in 1987 as Golden Marlin Resources and in 1995 changed its name to Indomin Resources, and in 1998 to Battlefield Minerals.
In 1998-99, under the Battlefield banner, the company commissioned and then closed an ill-fated gold mine in Zimbabwe.
As part of a major corporate makeover related to the sale, BM consolidated its shares on a 1-for-7 basis in November 2001, and succeeded in getting its shares relisted for trading.
In December, BM raised $500,000 by privately placing 3.6 million units at 14 apiece. Each unit comprised a share and half a warrant, with each whole warrant exercisable at 25 into one share.
In the first quarter of 2002, BM completed an additional private placement, of 1.5 million shares, netting $237,000.
The company ended the first quarter with 13.4 million outstanding shares, which now trade in the 20 range.
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