Explorers' hunt for diamonds heats up

Diamonds exploration heated up in the Northwest Territories in 2014 as more and more companies mounted campaigns aimed at identifying the next big discovery in a region that has already produced three operating diamond mines and one well-advanced mine project.

"It's been an exciting season for us because on April 1, we took over management of mineral and oil and gas resources in the territory. Overall, we're seeing a consistent trend for exploration as well as a bit of a resurgence of interest in diamonds," Pam Strand, director of Mineral Resources for the Government of Northwest Territories, told Mining News in a recent interview.

Operators of the territory's three producing diamond mines, Ekati, Diavik and Snap Lake diamond mines, invested substantial funds in ongoing development in 2014.

Dominion Diamonds Corp., which owns and operates the territory's two largest producing diamond mines, Ekati and Diavik, reported exploration expenses of C$6.8 million incurred during the second quarter of 2014, compared with C$3.1 million in the comparable quarter of the prior year. Most of this spending went to work on the Jay kimberlite pipe within the Buffer Zone at the Ekati Diamond Mine located 310 kilometers (192 miles) northeast of Yellowknife, NT.

The proposed Jay Pipe Project is expected to enable the continued operation of the Ekati diamond mine, past its current projected mine life of five years. There is significant upside potential to extend Ekati's mine life, if some, or all, of the mineralization in the Buffer zone is promoted to resource status. The Ekati mine's current annual production is estimated to exceed 7.5 million carats (1,500 kilograms, or 3,307 pounds) of diamonds.

Though DeBeers Canada owns and operates the nearby Snap Lake diamond mine, the global producer's 51 percent interest in the Gahcho Kué diamond project has captured most of its attention and exploration spending in the NWT recently. On Sept. 25, regulators granted De Beers and its 49-percent co-owner, Mountain Province Diamonds Inc, a Type A water license for the project. It and two other key permits obtained in August, pave the way for operator De Beers to begin construction in hopes of meeting a projected start-up date for Gahcho Kué's operations in the third quarter of 2016.

The project has probable reserves totaling 31.3 million metric tons grading 1.57 carats per metric ton for 49 million carats in the Tuzo, 5034 and Hearne kimberlites. A 2010 feasibility study demonstrated that an open-pit operation could produce an average of 4.5 million carats per year over an 11-year period, while employing nearly 700 workers during the peak of construction and roughly 400 mine workers once operational.

"As the world's largest and richest new diamond mine, Gahcho Kué will maintain Canada's position as a leading diamond producer," said Mountain Province CEO Patrick Evans. "Employment created by Gahcho Kué and revenues generated by the mine will contribute to growth and prosperity in the NWT."

Significant quantities, grades of diamonds

Next door to Gahcho Kué, Kennady Diamonds Inc., a spin-off from Mountain Province Inc., is exploring the Kennady North Diamond Project located 280 kilometers (174 miles) northeast of Yellowknife. The property host four diamond-bearing kimberlites and more than 40 geophysical targets adjacent to Gahcho Kué.

Management envisions defining a 7 million- to 10 million-metric-ton resource at two carats per metric ton, or more than 14 million carats.

In 2013 Kennady North conducted an extensive exploration program, including lots of surveying and three-dimensional modeling, along with 49 diamond drill holes. In a 2014 winter campaign, the explorer also conducted ground geophysics, including 1,718 line-kilometers of OhmMapper, 262 line-kilometers of ground penetrating radar and 10,172 meters of drilling at Kelvin, Faraday and G6 exploration targets, using three drill rigs.

The junior recovered 25.103 metric tons of kimberlite from Kelvin and 1.07 metric tons from Faraday. After processing, Kennady North reported recovery of 1,014 diamonds from Faraday with a sample grade of 11.22 carats per metric ton and a commercial size grade of 4.32 cpt and recovery of 11,824 diamonds from Kelvin with a sample grade of 5.38 cpt and a commercial size grade of 9.86 cpt.

Kennady North also recovered substantial quantities of diamonds at good sample and commercial-size grades from both Faraday and Kelvin in the spring of 2014.

The company conducted 2014 exploration, including 12,000 meters of drilling, high-resolution surface (LIDAR) mapping, delineation and infrastructure upgrades to support an expanded 2015 exploration program. A vertical delineation hole (KDI-14HQ-031a) drilled at the north end of the Kelvin pipe intersected over 161 meters of kimberlite from a downhole depth of about 127 meters.

"This is shallower than previously modeled and indicates the potential for additional tonnage at the high-grade Kelvin pipe," said Kennady Diamonds CEO Patrick Evans.

The junior also reported the recovery of a high-quality 0.94 carat diamond found during logging of core from the Kelvin kimberlite.

Kennady North expects summer drill results by December and its first NI 43-101 resource estimate for the project by year's end.

Activity at earlier-stage projects

Margaret Lake Diamonds Inc. is another junior exploring for diamonds in Northwest Territories. Its efforts are focused on the 23,199-hectare (57,325 acres) Margaret Lake property located10 kilometers (six miles) from the Gahcho Kué diamond project and within a 90-kilometer by 40-kilometer (56 miles by 25 miles) diamond field that also contains the Snap Lake mine operated by De Beers.

The Margaret Lake property contains several indicator anomalies based on previous work done in the 1990s, and a number of untested kimberlite-like EM and magnetic anomalies. Margaret Lake Diamonds is proceeding with a similar gravity survey and strategy.

Margaret Lake Diamonds also entered into an option agreement recently with Canterra Minerals Corp. whereby Margaret Lake has been granted, subject to the acceptance of the TSX Venture Exchange, the right to acquire up to an aggregate 49 percent right, title and interest in and to Canterra's 26,000-hectare (64,246-acres) Marlin Property in the Northwest Territories.

The property comprises 23 mineral claims covering an area of about 26,000 hectares and lies contiguous to the north and west of the Kennady Diamonds project and west of the Margaret Lake Property.

To earn its interest in the Marlin Property, Margaret Lake must make staged cash payments totaling $100,000, issue an aggregate of 600,000 common shares and incur $1.75 million in exploration expenditures over a three-year period.

Canterra is the operator, and the initial exploration program, which consists of basal till sampling, is expected to commence immediately.

Canterra President and CEO Randy Turner, commented, "This option agreement with Margaret Lake Diamonds creates an opportunity between two companies that hold contiguous properties to the Gahcho Kué and Kennady North Diamond projects and share a similar geological environment. With the proximal nature of our land packages, the synergies of data collection and, plus the additional capital to advance the Marlin Property expeditiously, we are delighted with this partnership and look forward to a mutually successful outcome."

Paul Brockington, president and CEO of Margaret Lake, said, "We are pleased to enter into this option agreement with Canterra, as we now have ground under option that surrounds all the northern and western boundaries of the Kennady Diamonds property. We look forward to combining the knowledge base of our two management teams."

Under the terms of the option agreement, Margaret Lake has the right earn an initial 30 percent interest in the Marlin Property over a two-year period and an additional 19 percent interest in the Marlin property by the end of the third year.

Capitalizing on exploration advances

Canterra also conducted a diamond exploration program on other properties in its NWT portfolio this summer. These properties are located in the Southern Slave region, about 220 kilometers (137 miles) northwest of Yellowknife between the Snap Lake mine and the Gahcho Kué project.

The company also recently staked 13 additional claims at the Marlin property (contiguous to the Kennady North Diamond Project) increasing the size of Marlin to roughly 25,838 hectares (63,845 acres) and three additional claims at the Hilltop Property for a total of about 11,064 hectares (27,339 acres). Canterra's aggregate claim and lease holdings in the Southern Slave now total 74,673 hectares (184,517 acres).

Exploration crews have been mobilized to undertake a detailed basal till sampling program on the Hilltop, King, Marlin, Prism and Gwen properties - each of which hosts indicator mineral trains that comprise chromites, ilmenites and numerous G10 garnets, sourced from within the diamond stability field and which are potentially associated with diamond-bearing kimberlite sources.

Till samples will target areas of interest within these known kimberlite indicator mineral trains as well as geophysical anomalies. It is anticipated that the compilation of this data will identify and prioritize potential drill targets for future programs. This exploration strategy has been designed using a systematic study of the company's proprietary kimberlite indicator mineral database, as well as detailed geophysical data sets which were compiled over a 15-year time period.

"This exploration season will give the company an opportunity to combine results from previous exploration with the more recently advanced techniques that improve interpretative accuracy and precision," said Randy Turner, Canterra's president and CEO.

In describing the renewed interest in diamond exploration, Strand pointed out that Canterra's Randy Turner is a well-known diamond explorer, who, as the former head of Diamondex, discovered the nearby Snap Lake Diamond Mine, now owned by De Beers.

"As one of only a few explorers with a proven track record of mine discovery and development, we are dedicated to continuing our long history of diamond exploration success and with a recently closed private placement of C$2 million, we are well-positioned to achieve our objectives," Turner said in a recent statement.

Searching for kimberlite source

North Arrow Minerals Inc. is another junior that completed an exploration drilling program this year in the Northwest Territories. North Arrow's Redemption Diamond Project is located in the Lac de Gras region, about 32 kilometers (19 miles) southwest of the Ekati mine.

The junior is concentrating its efforts in western Lac de Gras, which is the opposite end of the region from where the operating mines and Gahcho Kué are located.

"Despite many well-defined kimberlite trains in the area, the west end of Lac de Gras has not seen as many kimberlite discoveries," said North Arrow President Ken Armstrong.

"In particular, we've been focusing our work on continuing what Arctic Star had been doing, trying to find the bedrock source for the indicator minerals and kimberlite train at South Coppermine," he told investors in June.

"We think we've identified eight or nine top priority targets that sit right at the end of the South Coppermine kimberlite train. It is one of the last well-defined kimberlite trains that does not have a bedrock source," he added.

A total of 799.8 meters of drilling tested seven targets located in the central part of North Arrow's property near the up-ice termination of the South Coppermine kimberlite train.

None of the drill holes definitively encountered a bedrock kimberlite source for the South Coppermine KIM train. Drill hole 14-RED23-08 (Az. 180 degrees; dip -60 degrees) tested a linear gravity low and encountered predominantly fresh to weakly altered granite that included a moderately to strongly fractured fault zone from 89.9 meters to 99.7 meters downhole. This fault zone contained intervals of dull green clay gouge, which have been collected for kimberlite indicator mineral analyses.

North Arrow is exploring the Redemption property under an option agreement with Arctic Star Exploration Corp., in which the company can earn a 55 percent interest by incurring C$5 million in exploration expenditures prior to July 1, 2017.

Added Strand: "It will be interesting to see what comes out of these projects."