DIAMOND SPECIAL — BHP progressing quickly at NWT Diamonds

The “NWT Diamonds” project has come a long way since Charles Fipke and Stewart Blusson began looking for diamonds in North America in the early 1980s.

At the outset, many regarded the initiative as downright flaky, yet the notion that diamonds could be found in the Northwest Territories eventually evolved into one of the biggest staking rushes in Canadian mining history. BHP Minerals’ confidence in the prospect of developing an economic diamond mine was evident during a recent visit to the property by The Northern Miner. The company has pulled out all the stops in its evaluation of the project that is now known as NWT Diamonds.

BHP entered the scene in 1990, signing an agreement to earn a 51% interest in the property by funding up to US$500 million in development costs for the first diamond mine. Dia Met Minerals (TSE) holds a 29% interest in the joint venture while Fipke (Dia Met’s chairman) and Blusson each retain 10%. Bruce Turner, BHP’s project manager, would not divulge how much has been spent to date, saying only that the company has pumped about $20 million into the Territorial economy during the past year.

A portion of that money has taken the form of a first-rate 180-man camp, 10 tonne-per-hour process facility and 700-metre airstrip (currently being expanded to 2,000 metres in order to accommodate Hercules aircraft), as well as the bulk-sample declines in the Fox and Panda pipes. Add to that, untold feet of exploratory drilling, bulk-sample drilling, road work (including a 40-km spur from the winter road used by Echo Bay Mines’ Lupin mine), permitting and other costs . . . and the total expenditure is anyone’s guess. Whatever the figure, BHP is obviously high on the project.

Perhaps prompted by recent disappointments at other diamond projects in the Territories, Turner pointed out that a decision to proceed with development of a diamond mine is not necessarily a foregone conclusion.

Development of the NWT Diamonds project will depend on the results of ongoing bulk sampling, as well as expedient permitting.

“We are, however, very optimistic that results will be positive, leading to Canada’s first diamond mine,” Turner said.

According to its current timetable, BHP expects to submit a new plan of operations in September and complete an internal economic feasibility study by year-end. Assuming the feasibility is positive and the company receives production permits next summer, the mine will be up and running in early 1997. Certainly, results received to date from the property have been encouraging. BHP released figures from large-diameter drilling on several pipes in July, including a primary bulk sample on the Koala pipe.

The Koala drilling recovered a 1,193-tonne sample from several stacked sub-horizontal phases. BHP had planned to sample 3,000 tonnes of kimberlite, but boulders, encountered during the drilling, hampered the operation. Nevertheless, Turner is confident that the sample is large enough to be taken as representative of the Koala pipe, noting that results to date are consistent.

The 1,193-tonne sample returned 6,600 stones yielding 893 carats. The stacked phases were split into four zones (upper, middle, lower and deep), with each evaluated by three separate diamond dealers from Antwerp. The dealers gave the stones an average value of US$110 per carat, which is roughly equivalent to US$82 per tonne.

“We think we’ve got an economic pipe with Koala,” Turner said. However, one economic pipe might not be enough to make a mine, and the project manager concedes that Koala alone is probably not sufficient to support a $500-million investment. The results from bulk sampling on the other pipes will need to be positive, as well, to support a production decision. BHP is mining underground bulk samples from both the Panda and Fox pipes. Initial results from the Fox pipe (on the first 1,572 tonnes of a 7,000 tonne bulk sample) returned an average of 0.23 carats per tonne. A per-carat dollar value has not been released for Fox.

Mining on Fox is now complete and the company is completing underground drilling to define the pipe more accurately.

The decline to the Panda zone is now in such a position that a second attempt to enter the kimberlite pipe can be made. BHP has already tried to gain access to the pipe at another location, 30 metres up the decline, but severe water problems were encountered at the Contact zone.

Based on test-drilling in the area, as well as geological interpretation of previous drill results, Jaap Zwaan, chief mine engineer, does not expect the same water inflow problems at the second location.

Little ground support is needed in the surrounding granite, but the same cannot be said about the kimberlite.

Upon entering the kimberlite, Zwaan said considerably more ground support is needed, particularly at the Contact zone. Openings are shotcreted, screened and bolted. The shotcrete is specially formulated to be used in low temperatures and contains 2-inch steel fibers for added strength. Drilling from surface on Panda recovered a 230-tonne sample yielding a total of 270 carats for an average grade of 1.18 carats per tonne. The diamond dealers estimated the value of the stones at US$127 per carat, equivalent to US$150 per tonne.

BHP is now arranging permits to construct a 44-km road to the Misery pipe, as well as permits for a bulk sample.

“I didn’t name it, but now I have to ask for a permit to build a road to Misery,” joked Turner.

Surface drilling on the main Misery pipe yielded 437 carats from 132 tonnes for an average grade of 3.3 carats per tonne. The dealer evaluation of the diamonds returned an average value of US$43 per carat, or about US$142 per tonne.

BHP envisions a 30-year mine life fed by five kimberlite pipes: Panda, operating by open pit from 1997 to 2001, followed by underground mining from 2002 to 2007; Misery, from 2000 to 2006 by open pit; Koala, from 2002 to 2006 by open pit, followed by underground mining from 2007 to 2014; Fox, from 2006 to 2020 by open pit; and Leslie, from 2007 to 2025 by open pit. Current plans call for an initial production rate of 9,000 tonnes per day in the first four years of operation, increasing to 18,000 tonnes per day thereafter.

No exploration results or diamond values have been released under the name of Leslie. Karen Azinger, BHP’s manager of external affairs, said some exploration results have been released under the old nomenclature based on numbered pipes. She would not, however, say which pipe relates to Leslie under the old numbered system.

On the regulatory side, Clem Pelletier, president of Rescan Environmental, does not believe the company will experience any problems in obtaining permits for a diamond mining operation. He admitted, however, that he expects to see some intervention by various environmental groups during the permitting process.

Pelletier is quick to point out that a future mining operation at the site would be “totally innocuous.” No chemicals would be used, he said, and the waste rock is benign. The only deleterious substance is the suspended solids in the waste water produced by washing during the crushing operations, but this problem has been solved by the addition of a clarifier which brings suspended solids down to 6-7 mg per litre (compared with the discharge permit maximum of 25 mg per litre).

BHP expects to recycle all its process water when a mine is up and running, using outside water only for potable purposes.

The company appears to have the locals on side; it is already holding talks with the Dogrib Nation, the native group whose land claim covers the property. The Dogrib Nation’s openness to economic development was recently highlighted by the signing of an agreement with Northwest Territories Power for the development of a hydroelectric power project about 160 km north of Yellowknife.

The Dogrib Nation will own that project and lease it back to the power company.

Turner stresses that BHP’s opportunity at Lac de Gras is the Dogrib’s opportunity as well. One of those opportunities is employment. Turner said the company has about 40 employees from the Dogrib Nation, or about 20-25% of the employees at the site. He expects that figure to increase substantially if the company proceeds with production.

The Lac de Gras property is on Crown-granted claims, and since the Dogrib have not concluded their treaty negotiations with the government, the company is technically not obligated to deal with them at the present time. But BHP, which operates mines on aboriginal lands in other parts of the world, prefers to take an assertive stance on native issues.

It is important to note that previous treaty agreements in the Territories have all recognized third-party interests, such as mineral claims. A tour of BHP’s treatment plant at Koala reveals a simple operation consisting of three stages of crushing and gravity.

Bulk-sample material runs through a primary and secondary crusher before being washed and screened. Material exceeding 16 mm in size reports to a tertiary crusher and then back to the screen, while the 1-16-mm fraction reports to a heavy media cyclone.

Heavies, at a specific gravity of greater than 3, make up the final concentrate. (Diamonds have a specific gravity of about 3.5, while granite and kimberlite rate at about 2.7 and 2.4, respectively.) Lights, with a specific gravity of less than 3, are screened and the material greater than 6 mm reports back to the tertiary crusher to be run through the circuit again. “That ensures that we don’t lose any of the small stones that could be encapsulated in a larger piece of material,” explained Michael Rylatt, senior project engineer for process development.

Rylatt said only about 0.25% of the original feed reports to the final concentrate product.

That product is then sent down to BHP’s lab in Reno, Nev., where it is concentrated further using an X-ray sorter.

Rylatt provided an abridged version of the operation of an X-ray sorter, explaining that an X-ray is fired at a falling stream of concentrate. Diamonds fluoress under X-rays and, in so doing, trigger a photo-electric cell which, in turn, triggers an air blast that pushes the diamond into a separate stream. The final diamond concentrate is then sorted by hand. No decision has been made on how production from a future mine at Lac de Gras would be marketed. Turner said the company is gathering intelligence on marketing possibilities but noted that it would be premature to begin negotiations without the “goods.”

In any case, BHP is rapidly approaching the point where it will be able to back up its optimism with numbers and eventually produce those goods.