DIAMONDS — From incredulity to reality: the birth of a diamond mine

The press release of Nov. 5, 1991, set off alarm bells in London, Sydney and Johannesburg, where headlines heralded a “major discovery” and a “coup” for Australia’s BHP Minerals. Foreign investors scrambled to buy a piece of the Canadian junior that, in partnership with BHP, had recovered 81 small diamonds from a kimberlite in the Northwest Territories.

Canadians, on the other hand, greeted the news with indifference and, later, as Dia Met Minerals (DMM-T) soared to $6 from pennies per share, with skepticism.

Diamonds, after all, were exotic minerals found in faraway lands like Siberia and South Africa. Few geologists knew that top secret diamond exploration had been taking place across Canada for several decades and that, more recently, De Beers had been sniffing around in the Territories. And who had ever heard of Chuck Fipke?

It wasn’t until some weeks after the announcement, when the remote area around the discovery was abuzz with helicopters and claim-stakers, that the domestic mining industry reluctantly conceded that Canadian diamonds might be a reality.

And as North America’s largest staking rush gathered momentum, Canadian geologists, financiers and members of the media began the steep climb up the diamond learning curve.

At first, it was next to impossible to get an objective opinion. Diamond exploration was, and to some extent still is, a secretive business. Most of the geologists who had worked for De Beers and other diamond seekers in the 1970s and 1980s were bound by confidentiality agreements. Christopher Jennings, a consultant for Dia Met competitor Aber Resources (ABZ-T), became the main source of information about the find and about diamond exploration in general.

But the demand for knowledge from the juniors, many of which had staked large tracts of land around Lac de Gras and now needed to know how to explore them, soon unleashed a flood of information.

Diamond explorers such as South Africa’s John Gurney, Australia’s Bram Janse and Russia’s Galina Kudrjavtseva flew in to offer their services as educators and advisors. Workshops and lectures featuring these experts, who seemed as rare and exotic as the mineral they pursued, attracted hundreds of promoters, geologists and media representatives eager to know more about the mysterious world of diamonds.

In San Francisco, financial newsletter writer Bob Bishop picked up on the significance of the discovery and did some sleuthing of his own. In the summer of 1992, he published Diamonds in North America: Point Lake and Beyond, which quickly became a bestseller in exploration and investment circles.

“I believe we are witnessing a discovery process that will lead to the establishment of the world’s newest diamond mining province,” he predicted in the report.

It wasn’t long before Canadian juniors were comfortable explaining to their shareholders the significance of G10 garnets as diamond indicator minerals, or the differ-ence between microdiamonds and macrodiamonds

Armed with this new knowledge, the juniors branched out from Lac de Gras, igniting rushes from Labrador to southern British Columbia. Having a diamond property became not only de rigueur for junior companies; it became practically a prerequisite for financing.

Although Canadian majors shied away from the frenzy, foreign majors familiar with diamond exploration, including RTZ, De Beers and Ashton Mining, became eager participants, mainly through financing agreements with the juniors.

Once acquainted with the geochemistry of diamond exploration, the area players began to look for structural controls on the kimberlite pipes at Lac de Gras. They discovered that the pipes were indeed concentrated in a corridor between two dyke swarms that produced distinctive aeromagnetic highs. The “Corridor of Hope” became yet another guide to finding Canadian diamonds.

By the end of 1994, 213,000 sq. km had been staked around Lac de Gras by more than 250 companies, the Dia Met-BHP joint venture was hatching mining plans, and the Fipke curse had been broken by a significant discovery on the Diavik property held by the Aber-Kennecott joint venture.

The possibility of diamond mining in Canada had gone from pipe dream to reality in three short years.

But there were some setbacks along the way.

The torrent of samples sent from the Territories in the first summer of the rush created serious bottlenecks at the few heavy mineral labs and microprobe facilities in Canada.

Later that year, some rare “canary yellow” diamonds found in a sample from Aber’s Tenby claims turned out to be synthetic diamonds that had fallen off the drill bit.

Aber and all the area players were dealt an even bigger blow when Kennecott gambled on a 5,000-tonne sample from the Tli Kwi Cho kimberlite pipe in early 1994, only to discover that the gem content was too limited to be economic.

And most of the rushes generated in other parts of the country came up empty, despite millions of dollars in exploration expenditures.

Still, the discoveries at Lac de Gras are a tremendous accomplishment. The Ekati mine is expected to produce between 3 and 4 million carats per year, or about 3% of world production. The Diavik project is forecast to be even larger, producing about 8 million carats by 2002. Early in the next century, Canada should rank as the world’s sixth-largest diamond producer and one of the leading gem producers.

Not bad for a beginner.