A series of restructuring moves is enabling
In the latest development, the junior optioned its wholly owned Jericho diamond project in Nunavut to Kennecott Canada Exploration. Kennecott’s parent company,
Kennecott will have a year in which it can elect to incorporate the Jericho project into an existing joint venture between Tahera and itself. During the 12-month option term, Kennecott must spend at least $1 million to drill a minimum of 20 kimberlite targets on the Jericho claims. Early this year, Tahera submitted a revised project proposal and a draft environmental impact study (EIS) for a combined open-pit and underground mine on the land-based Jericho pipe (JD/OD-1), along with a 1,200-tonne-per-day processing plant.
Tahera will continue to seek regulatory approval and intends to submit a final EIS as part of the permitting process.
Tahera and Kennecott originally entered into a joint-venture agreement in 1997. Under that deal, Kennecott could earn a half-interest in three diamond exploration properties (ICE, Rockinghorse and Hood River properties) by spending $50 million before May 2008. At the end of 2000, Kennecott had spent $18 million on exploration and found a total of nine kimberlite bodies. The joint venture was restructured in April 2001 to cover only the Rockinghorse and Hood River properties in Nunavut.
Kennecott can now earn an initial 25% interest in the two properties by spending a total of $25 million before the end of 2008. During this period, $2 million must be spent in 2001, and $1.5 million in each year thereafter. By funding all costs up to, and including, a bankable feasibility study by 2008, Kennecott can earn a 62.5% interest in the joint venture.
If Kennecott elects to add the Jericho project to the existing joint venture, it will be required to spend $1 million annually on these claims in addition to the $1.5-million-per-year commitment to the joint venture. Kennecott would also make a series of yearly $1-million private placements in Tahera over a period of four years at escalated premiums on the original premium price of 10% above market.
Kennecott will have the exclusive right to market all diamonds produced from the Jericho kimberlites for the first five years of production.
In addition, Tahera retains a 2% gross royalty on Kennecott’s share of production from the known kimberlites on the Jericho property.
If Kennecott does not commit to a mine plan on the Jericho kimberlite within 24 months of incorporation, Tahera can elect to develop the Jericho project on its own. Kennecott would then lose all rights and interests in the Jericho claims.
The Jericho properties lie along the northwestern and northeastern shores of Contwoyto Lake, 26 km north of the Lupin gold mine and 430 km northeast of Yellowknife. The Ekati diamond mine is 150 km south-southeast of Jericho. The Jericho properties are subdivided into three main parcels — the Jericho, Contwoyto and Burnside groups — which together total 2,000 sq. km.
Five kimberlites have been found on the Jericho properties, including the Jericho (JD/OD-1), JD/OD-3, Contwoyto-1 and JD/OD-2 pipes, along with a new kimberlite discovered in April of this year. The kimberlites are estimated to be 172 million years old.
The focus of the proposed Jericho mine project is the Jericho pipe, lying 400 metres south of Carat Lake. Discovered in 1995, the Jericho pipe is a multi-phase complex measuring 280 metres long and up to 120 metres wide. It has been tested to a depth of 350 metres by 86 NQ-size holes (4.5 cm in diameter) and 47 PQ holes (8.3 cm in diameter) for a total of 28,000 metres. The pipe intrudes Archean granodiorite rock and is covered by 10-50 metres of unconsolidated overburden. It has a surface expression of 1.2 ha.
Three phases
Underground bulk-sampling was carried out in 1996. A 257-metre-long decline, driven to a depth of 75 metres below surface, was used to collect 14,550 tonnes of kimberlite, representing three phases of the Jericho pipe. A total of 10,539 carats of diamonds at a cutoff grade of 1 mm were recovered from 9,402 tonnes of processed kimberlite. An unusual number of large stones were recovered, including 44 diamonds in the 5-to-10-carat range and 23 stones larger than 10 carats. The largest stone weighed 40 carats, and the largest gem-quality diamond was 23.89 carats.
The parcel of diamonds, excluding stones greater than 10.8 carats, were valued by De Beers Consolidated Mines in 1997 at US$59.61 per carat. A re-evaluation of the diamonds by WWW International Diamond Consultants in early 2000 indicated a value of US$74-88 per carat.
A June 2000 feasibility study by SRK Consulting concluded that the Jericho pipe could produce an estimated 3 million carats over an 8-year mine life. The study is based on a probable minable reserve of 2.5 million tonnes grading 1.19 carats per tonne.
The current mine plan entails the open-pit mining of 1.9 million tonnes of reserves averaging a grade of 1.26 carats per tonne (equivalent to 2.4 million carats) during the first four years at a stripping ratio of 8.4-to-1. This would be followed by underground mining of 614,000 tonnes grading 0.99 carat per tonne, equivalent to 610,000 carats, from the central lobe. The underground reserves would be accessible by a decline from the open pit. A combination of sub-level caving and open-bench mining methods are planned.
About 80% of the minable reserve is derived from the higher-grade, central lobe, which contains probable reserves of 2 million tonnes grading 1.29 carats per tonne. A further 500,000 tonnes grading 0.77 carat per tonne will be mined from the northern lobe and processed at the end of the mine life.
In addition, 780,000 tonnes of inferred resource in the southern lobe and 870,000 tonnes of inferred resource in the northern lobe will be mined by open-pit methods and then stockpiled. The Jericho pipe contains a total resource of 7.1 million tonnes grading 0.84 carat per tonne, equivalent to 5.9 million carats.
Recovery plant
The proposed 50-tonne-per-year diamond recovery plant will be constructed 1 km from the Jericho pipe and operate year-round. Open-pit mining will be carried out for nine months of the year. The operation is expected to employ just under 150 people at its peak.
Capital costs for the open-pit operation are estimated at $44.5 million, plus a further $10.4 million for underground and sustaining costs. Operating costs over the life of the mine are projected at $52.17 per carat.
SRK assumed a diamond value of US$75 per carat, which translates into a pretax internal rate of return (IRR) of 34.3% and a payback period of 2.7 years. Using a carat value of US$88 modelled by WWW International Diamond, the pretax IRR improves to 50.7%, with a payback of 2.1 years.
Tahera has not yet exhausted the potential for new discoveries at Jericho, nor has it fully ruled out the potential of some of the other Jericho pipes that could serve to increase the scale of the proposed mine. The JD/OD-2 pipe was discovered close to the Jericho pipe in early 1995, but, at 0.03 ha in size and with a diameter of 20 metres, it was considered too small to be of commercial interest.
The JD/OD-3 pipe lies under a small lake 8 km southwest of the Jericho pipe and is host to a kimberlite resource of 10.5 million tonnes to a depth of 300 metres. Delineation drilling indicates that the body is semi-circular and measures 160 by 140 metres. An initial mini-bulk drill sample of 10.5 tonnes collected in 1997 yielded 7.34 carats implying a grade of 0.7 carat per tonne. The largest stone, at 3.63 carats, represented half the weight of the recovered diamonds and is an order of magnitude larger than the second-biggest stone at 0.27 carat. The implied grade of the sample falls to 0.35 carat per tonne if the large stone is excluded.
A second mini-bulk drill-sampling program on the JD/OD-3 pipe was carried out in 1998. A 35.9-tonne sample yielded 10.41 carats of diamonds, for an implied grade of 0.29 carat per tonne. Thirteen of the diamonds weighed 0.1 carat or better, with the two largest diamonds coming in at 1.18 carats and 0.75 carat, respectively.
Supplementary feed
Tahera says results to date indicate JD/OD-3 is not economic as a stand-alone operation but that it could represent supplementary feed for the proposed Jericho project. JD/OD-3 sits 7 km northeast of De Beers’ Muskox kimberlite pipe, on an adjacent property.
Contwoyto-1, discovered in the fall of 1998, occurs near the centre of the Contwoyto group of claims, 38 km southeast of the Jericho pipe. The land-based pipe has a surface expression of 0.48 ha, measures 80 by 60 metres and extends to a depth of at least 222 metres. The discovery hole yielded 26 macrodiamonds and 143 micros from 90.2 kg of core. Twelve of the macros exceeded 0.5 mm in two dimensions, and one stone measured greater than 1 mm in two dimensions.
A follow-up, 50.1-tonne drill sample returned just 13.6 carats, for an implied grade of 0.27 carat per tonne.
Tahera discovered a new kimberlite under a small lake, 6 km west of the Jericho pipe, during the spring 2001 exploration drilling campaign. The discovery hole was angled at minus 50 and intersected 94 metres of kimberlite from 9 metres of depth to 103 metres down-hole. A second hole was drilled at a right angle to the first.
About 50 kg of kimberlite were selected from each hole for initial microdiamond testing. Only two diamonds were recovered, including a macro measuring greater than 1 mm in two directions.
Rockinghorse
In the meantime, Kennecott has made a significant find on the joint venture’s Rockinghorse property, 120 km northwest of the Jericho project, with the discovery of the Anuri kimberlite and the more recent Anuri East satellite.
Anuri was discovered in July and is significantly diamondiferous. In total, 337 macros and 600 micros were recovered from 656 kg of kimberlite core. Sixty-one of the macros were larger than a 0.5-mm square mesh screen size, and nine of the stones exceeded a 1-mm square mesh size. The largest stone recovered weighed three-quarters of a carat.
Anuri was found at the head of the prominent Tak Lake indicator mineral train. Angled at 45, the discovery hole intersected 134 metres (true width) of kimberlite from 71.4 to 260.7 metres down-hole. A second hole was drilled at a right angle to the first, cutting 90 metres (true width) of kimberlite from 204 to 331 metres down-hole, starting at a vertical depth of 150 metres. Preliminary estimates put the pipe-like body in the range of 100-120 metres in diameter.
The discovery prompted Kennecott to stake more ground in the area and focus on a 20-km radius around Anuri with geophysical surveys and infill till sampling. The company followed up with the discovery of a second kimberlite body, immediately east of Anuri on the opposite side of a Mackenzie dyke.
Kennecott tested a distinct geophysical target near the Anuri kimberlite in a small bay near the shore of Tak Lake. The discovery hole was collared 100 metres back from the target and drilled at a 45 angle. The hole intercepted 36 metres of kimberlite at a down-ole depth of 294-330 metres. Microdiamond analysis will be performed at Kennecott’s laboratory in Thunder Bay, Ont.
Additional drilling on the Anuri East kimberlite will be postponed until the upcoming winter exploration season so that the rig can be better positioned once the lake has frozen. Kennecott is continuing to test other targets through to the end of September.
When the Rockinghorse and Hood River joint venture was restructured earlier this year, Kennecott relinquished its interest in the ICE claims in return for a 1% gross royalty on future production from any kimberlites discovered on ICE up to April 23, 2001.
ICE claims
Tahera has subsequently been advised that BHP Diamonds, a wholly owned division of
Separately, BHP will have the right to earn an initial 51% interest in any new discoveries on the surrounding 1,230-sq.-km ICE claims by completing a 200-tonne bulk sample. BHP can boost its interest to 65% by funding a feasibility study. By arranging project financing for Tahera, BHP will have the right to an additional 5% equity interest. BHP will retain 100% exclusive diamond marketing rights for the first five years.
The ICE claims are 350 km north-northeast of Yellowknife and 60 km south-southwest of the Lupin mine. The Ranch Lake kimberlite was discovered in 1993. An initial six macros and 38 micros were recovered from samples weighing a total of 208.1 kg. Based on 35 drill holes, the pipe has an estimated surface area of 12.4 ha and contains a kimberlite resource upwards of 40 million tonnes to a depth of 350 metres. A 28.45-tonne mini-bulk drill sample in 1994 yielded 112 diamonds weighing 5.384 carats, for an implied grade of 0.189 carat per tonne.
The pipe exhibits three main geological units, with apparent distinct diamond grades and stone frequency distribution. The limited amount of work done to date on Ranch Lake may not be representative of the grade of the entire multi-phase body.
In addition to Ranch Lake, four other kimberlites have been found on the ICE claims, including T-27, T-31, Ll-201 and Vega.
The restructuring of Tahera’s assets have coincided with the recent appointment of Joseph Gutnick as president and chief executive officer, and the addition to the board of several key members, including Hugo Dummett, who served as senior vice-president of exploration for Broken Hill Proprietary from 1994 to 2000. Dummett played an instrumental role in the discovery and development of the Ekati diamond mine.
Tahera is trading at 14.5 in 52-week range of 20-10.5. The company has about 301 million shares outstanding, or 401 million fully diluted.
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