To illustrate that all that glitters is not gold, Diagem International Resource (DGM-V) recently invited the The Northern Miner to view an 80-carat diamond being polished in Vancouver, B.C.
The diamond is believed to be the largest ever polished in Canada and represents the largest of four gems cut from an original 312-carat stone found by a garimpeiro in Brazil’s Mato Grosso state. The other three diamonds weigh in at 15 carats, 3 carats and 2 carats; the remaining 212 carats were lost in the polishing process.
Diagem President David Cohen said that it is not uncommon to lose 50 to 60% of the diamond, by weight, during the polishing process.
The garimpeiro found the alluvial diamond not far from Diagem’s 11,000-ha Chapada property. He sold it to Diagem for an undisclosed amount and Diagem has since resold it. The finished value of the 80-carat stone is estimated at $3 million. The cutting and polishing process started in mid-January and is expected to be completed shortly.
Diamonds were first discovered in Brazil in 1725 on the Rio dos Marinlios in Minas Gerais state.
At that time, all diamonds had to
be sold directly to the Portuguese Crown. This policy was ruthlessly enforced, under penalty of death, until the end of the eighteenth century, but was eased when the Napoleonic wars drained Portugal’s resources.
Until the twentieth century, the country saw only limited diamond exploitation in the form of small-scale artisanal mining. These garimpeiros were either self-financed or were funded by local merchants or land owners.
Modern exploration and exploitation began with the appearance of mechanized mining methods early this century. Production fell off considerably during the war years and did not recover until the 1970s.
Two spurts of development, from 1900 to 1930 and from 1970 to 1986, revealed the widespread nature of diamond occurrences in Brazil. It is estimated that more than 47 million carats have been recovered from alluvial sources in the country. There has been no production from kimberlite pipes to date, however, DeBeers Consolidated Mines, Rio Tinto and, more recently, Teck have actively searched for economic pipes, as have a host of juniors.
All known kimberlite pipes in the country and most of the alluvial deposits occur within a belt that stretches over 2,500 km in length and up to 300 km in width.
The three dominant diamond deposit types found in Brazil include: eluvial deposits, formed by the in-situ erosion of diamond-bearing kimberlite pipes; terrace alluvial deposits, formed by the ancient stream erosion of diamondiferous pipes, eluvial deposits or older terrace deposits; and fluvial deposits, which are composed of alluvium in present-day stream channels
Over several million years of erosional history, rivers in Brazil and elsewhere have changed course numerous times, eroding or re-eroding eluvial or ancient alluvial deposits. As a result, the search for kimberlite sources of diamonds found in gravels is an arduous one.
Diagem and its equal partner, Brazil-based Mineracao e Comercio de Diamantes Juina-MT, have focused their search on the state of Mato Grosso.
The partners’ crown jewel is the Juina diamond project, situated about 30 km northwest of the town of Juina. The project comprises five properties totalling 6,723 ha that Diagem acquired from the Brazilian government in December 1995.
The company is currently mining alluvial gravel on the Juina project’s Sorisso property. The diamond processing plant began operation in July 1996, and produced 122,854 carats over the following 18 months. Current production ranges between 4,000 and 9,000 carats per month.
Diagem reports that all of the diamonds recovered are greater than 1.5 mm in diameter. The reserves are heterogeneous in terms of diamond quality, diamond size and ilmenite and pisolite content. Numerous diamonds weighing in excess of 10 carats have been recovered, including one 100-carat stone.
In addition to production from its own washing plant, Diagem purchases diamonds from local garimpeiros.
No formal reserve estimates have been calculated, but past production data indicates a reserve of about 35 million carats grading about 4 carats per cubic metre on the Sorisso property. About 15% of the diamonds recovered from the plant are of gem quality, 20% are classified as industrial and the remainder are described as near-gem quality. So far, the diamonds have fetched an average of $49 per carat; that average drops to $24 when the 312 and 100-carat stones are excluded.
To date, the realized cash flow from the company’s Juina project amounts to over $6 million from the sale of 123,849 carats of diamonds.
The company plans to boost annual production to 20,000 carats by the end of 1998. To accomplish this, Diagem has hired Kilborn Engineering to help upgrade and expand its processing equipment.
Diagem also has a 50% interest in the 11,000-ha Chapada project, situated 30 km west of Juina. Mineracao e Comercio de Diamantes Juina-MT holds the remaining interest. Diagem is attempting to identify the kimberlite source of the alluvial diamonds found in the area. About 15 kimberlite pipes have been reported to the south and west of the property, however, they are not diamond bearing.
An airborne magnetic survey was flown over the entire property last year, and stream-sediment sampling has identified abundant ilmenites, which can indicate the presence of kimberlite, in streams draining a large plateau on the property. These results, combined with data from mapping and ground geophysics, will aid in the definition and prioritization of drill targets.
Diagem has focused on five targets and has identified 15 magnetic anomalies on the property to date. The company has budgeted about $500,000 for reverse circulation drill holes that will test prime targets on the Chapada property.
The Diamantino project is situated 420 km southeast of Juina and covers an area of about 172,000 ha. Diagem plans to initiate a grassroots exploration program at Diamantino to identify diamondiferous gravels and kimberlite pipes.
Diagem has 35 million shares fully diluted and a working capital of about $1.5 million.
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