EXPLORING FOR DIAMONDS AND THE NORTH — Kennecott makes plans

The diamond exploration team of Kennecott Canada is going ahead with a major bulk-sampling program this winter on the DO-27 kimberlite pipe discovered on claims held here by DHK Resources.

Kennecott operates the program on the WO claim block held equally by its joint-venture partners Dentonia Resources (VSE), Horseshoe Gold Mining (ASE) and Kettle River Resources (VSE).

The Northern Miner recently toured the project where Kennecott, which is owned by London-based RTZ (NYSE), plans to spend up to $10 million to extract a 5,000-tonne bulk sample. A ramp to a depth of about 115 metres will allow for underground extraction of the sample. Kennecott also plans to build a processing plant at the Con gold mine at Yellowknife; the extracted kimberlite will be trucked to the plant via Echo Bay’s winter road. “We recommended going directly to the large 5,000-tonne sample rather than the smaller 200-tonne sample because we want to advance this project as soon as possible,” said John Stephenson, president of Kennecott.

Another international major, BHP Minerals, recently awarded a contract for a bulk-sampling program to test diamondiferous pipes on its joint venture with Dia Met Minerals (TSE), near the DHK project. Monopros, part of the De Beers organization, is also busy in the region, albeit tight-lipped about its progress. And more recently, Ashton Mining of Australia became the fourth international major to join the diamond hunt.

The first company to prove up an economically feasible diamond deposit will likely be in the best position to negotiate marketing contracts and financing for one or more mines.

Both BHP and Kennecott appear encouraged by the grades of their main targets, which so far appear to fall comfortably within the range of producing pipes in South Africa. (Pipes in that country have an average grade of 38 carats per 100 tonnes.) But while a pipe’s average diamond content is significant, it is the quantity and quality of gemstones that usually transform a pipe into a mine. And that can only be determined by large bulk-sampling programs. The first information on the quality of diamonds from the Lac de Gras region will be released shortly by BHP and Dia Met — important news which is anxiously awaited.

Kennecott, meanwhile, is focusing on the DO-27 pipe, which DHK prefers to call Tli Kwi Cho. It is about 18 km east-southeast of the Echo Lake camp, which Kennecott leases from Echo Bay Mines.

“The bulk sample will give us a better idea of the distribution of diamonds,” said Michael Senn, Kennecott Canada’s manager of diamond exploration. He added that so far, the grade appears “amazingly consistent.” And he said the group has been particularly encouraged by results of its micro-diamond work, which will be an “important” factor in the bulk-sampling decision. This work, coupled with chemical analyses of indicator minerals, suggests good conditions for preservation of diamonds.

The roots of the Tli Kwi Cho discovery go back to Kennecott’s 1992 program, which involved both geophysical surveys and geochemical sampling on joint-ventured properties near Lac de Gras. “Several properties produced encouraging indicator minerals,” said Senn, “and the DHK ground was one.” By the end of 1992, after five months of negotiations, Kennecott made a deal to acquire 65% of three blocks of claims held by DHK. “It was still tough for a junior to raise money for diamond exploration back then,” said Kettle River President George Stewart. “We didn’t have much choice except to make a deal with a major.”

The agreement on the WO claims is a complicated one. Aber Resources (TSE), Commonwealth Gold (VSE) and SouthernEra Resources (TSE) have rights to earn various interests from Kennecott. Once all options are exercised, Kennecott would have 40%, the DHK partners would each retain 11.7%, SouthernEra and Aber would each hold 10% and Commonwealth would have the remaining 5%. “We weren’t being benevolent,” Stephenson said. “We had an area-of-influence agreement with these companies (Aber, SouthernEra and Commonwealth) which pre-dated our agreement with the DHK group.” (Since then, Kennecott has acquired about 20% of SouthernEra and minor equity interests in each of the DHK partners.)

In mid-March of this year, Kennecott began drilling the DO-27 target, then considered to be a promising geophysical and geochemical anomaly. The first two holes fell short of the body of the pipe but did intersect diamondiferous kimberlite. The first hole, 27-1, returned 15.9 kg of core which yielded a total of seven micro-diamonds and three macro-diamonds (greater than 0.5 mm). Seven micros and two macros were recovered from 10.5 kg of core from the second hole.

“It was the third hole that hit the body of the pipe,” Senn said. A total of 48 micros and 16 macros were recovered from 60 kg of kimberlite. A fourth hole yielded 79 micros and 20 macros from 70 kg of core.

The combined results of these holes — 41 macros and 141 micros from 156.4 kg of kimberlite core — were viewed as highly encouraging. Moreover, they compared well with a 122.4-kg sample yielding 55 macros and 132 micros from a core-drilled target on the BHP-Dia Met property.

Kennecott has drilled 42 holes to test DO-27, the deepest hole being 215 metres. Of this total, 38 holes encountered kimberlite, which represents about 2,270 metres of kimberlite NQ core.

The core is processed at Lakefield Research and, because of a backlog, Kennecott has received results from only eight holes. The latest results, from three more holes in DO-27, were released in early August. Hole 27-18 yielded 13 macros and 24 micros from 32 kg of core while Hole 27-7 yielded 42 macros and 134 micros from 125.3 kg. But a 160-kg sample of kimberlite core from Hole 27-22 returned only three macros and 14 micros. It was explained, however, that this hole represents a different phase of kimberlite which constitutes a small percentage of the total pipe.

Kennecott also tested the north lobe of Tli Kwi Cho, known as Target DO-18. The first hole yielded 16 macros and 62 micros from 265.2 kg of kimberlite core. A second hole has been drilled, and Kennecott was drilling a third angle hole on this target when The Northern Miner investigated the site. Back-of-the-envelope estimates of the size of these targets were made by several mining

analysts on the tour, the average “guesstimate” being that the elongated DO-27 pipe covered about 12 hectares while the circular DO-18 covered about eight hectares. The two targets are separated by about 200-400 metres of country rock.

“Some of our recent drilling was designed to delineate the size of the pipe,” Senn explained, adding that some of this work will have to be put off until winter because a portion of the pipe lies under a lake.

Drilling conditions have been difficult, he said, partly because of glacial overburden (ranging from 10 to 50 metres thick) which covers the targets. Rafts of country rock (gneiss) were also encountered within the body of the pipe.

Kennecott is busy age-dating the pipes, which are believed to be younger than originally thought. “We have the upper sequence (pyroclastic kimberlite) preserved, which is something of an anomaly as this is not usually the case in the (South African) mines,” Senn said.

He also clarified rumors that the North Lobe (DO-18) was eclogitic. “We see a mix of both perioditic and eclogitic,” he said, adding that there appears to be very little difference between DO-27 and its twin, DO-18. The former has more supergene alteration, however, while the latter is described as more competent.

“We see the same two phases (differences in mineralogy) of kimberlite,” Senn said, “and the core looks similar. They are probably related genetically at depth.”

The only comment made about the quality of diamonds was that those recovered to date include clear, translucent and industrial.

Kennecott tested three other targets on the WO claim-block, including Pipe DO-32, which yielded one micro from 86.6 kg of kimberlite, and Pipe DO-41 which returned one micro from 122.1 kg of kimberlite. Pipe DO-40 produced no diamonds from a 3.8-kg sample.

Better results were achieved from three holes drilled to test the DD-17 pipe on the DHK claim block. These holes totaled 182.1 kg of core, yielding 14 macros and 37 micros. Pipe DD-42 yielded nine macros and 31 micros from 146.4 kg of core, while a hole next to this yielded three micros from 89.1 kg. “We have reported eight kimberlite pipes on the DHK ground,” Senn said, adding that “blank targets” were drilled as well. “Initially, we chased geophysical targets, but we are now using a combination of all the disciplines because other things such as iron formation can have geophysical signatures similar to those of kimberlite.”

The Kennecott team is continuing to refine targets and outline new ones by performing more detailed geophysical work than in the past, as well as more regional and detailed geochemical sampling. The cluster of pipes on the DHK property are believed to be part of the same pipe-field encompassing the BHP-Dia Met kimberlite cluster.

At Echo Lake, Kennecott has a heavy mineral separation plant which processes between 15 and 20 samples (20 kg each in size) each day. A larger processing plant will be constructed at Yellowknife for the bulk-sampling program. “We look for the same thing everyone else looks for,” Stephenson said of the geochemical program: “low-calcium, high-chrome pyrope garnets; high-chrome chromites; ilmenites low in ferrous-iron; and other elements of lesser importance. We also look at the morphology of the grains.”

What Kennecott doesn’t do, however, is rely on indicator minerals to predict the grade of a kimberlite before drilling. “We think it is a science in its infancy and potentially dangerous,” Senn said.

This view is not shared by the competing BHP and Dia Met team which has enjoyed success because of in-house expertise in this area. The use of indicator minerals to differentiate between diamondiferous and barren diatremes and to predict grade has been routine for more than 20 years for the South Africans and the Russians.

This winter, the company plans to drill-test other targets. The strategy is to use the drill as an exploratory tool, with the objective of drilling at least 100 metres of kimberlite in each vertical hole.