Mine co-owner seeks diamonds next door

The quest for diamonds at the Kennady North project next door to the Gahcho Kué Mine in Northwest Territories got a boost on Feb. 27 when owner Mountain Province Diamonds Inc. reported plans to begin its 2019 winter exploration program on the 67,432-hectare property.

Kennady North covers a portion of the southeastern Slave Geological Province in Northwest Territories within the Kelvin-Faraday Corridor, a northeast-southwest structural feature that continues to the southwest and includes the Gahcho Kué kimberlites.

Mountain Province re-acquired control of the Kennady North project last April when it purchased Kennady Diamonds Inc., a junior it spun out six years earlier. Located 280 kilometers (170 miles) east-northeast of Yellowknife, the project encompasses 22 mineral leases and 58 mineral claims within a prolific kimberlite camp near two other operating diamond mines, Diavik and Ekati, both owned by Dominion Diamond Mines ULC.

Mountain Province (49 percent) shares ownership of the Gahcho Kué Mine in a joint venture with De Beers Canada (51 percent).

Nearly two decades of exploration work by several operators at Kennady North has led to the discovery of five kimberlite bodies, Kelvin, Faraday 1-3, Faraday 2, Doyle and MZ. Kennady Diamonds has reported resources estimates for the Kelvin and Faraday kimberlites.

Kelvin has an indicated resource of 13.62 million carats of diamonds contained in 8.5 million metric tons of material grading 1.6 carats per metric ton with an average value of US$63 per carat, and Faraday 2 has an inferred resource of 5.02 million carats contained in 3.27 million metric tons of material grading 1.54 ct/t and an average value of US$98/ct. Both resource estimates used a 1-millimeter bottom cutoff size.

Targets eyed near GK mine

In its 2019 winter program, Mountain Province plans to focus on testing several combined indicator and geophysical targets located west and southwest of Gahcho Kué's Hearne kimberlite. Some 2,000 meters of drilling are planned to test the exploration targets.

The company also said it compiled all the in-house data acquired since the start of the Kennady North project into a user-friendly GIS format in the last half of 2018, including proprietary data relevant to the project it acquired from GGL Resources Inc. through a lease and one-time cash payment. The combined database was then linked to a recently-completed glacial mapping and sampling program that incorporated a LIDAR survey of the project area.

Mountain Province said the exercise produced a glacial till ranking scheme that could be combined with geophysical data to generate target areas for follow-up sampling and drilling. Several of these target areas are the focus of the current exploration program.

"In addition to the successful advancement of the Kelvin and Faraday kimberlites, we are very pleased to have completed the compilation of all the regional exploration data into a consolidated database, which will provide the basis for all future work on our wholly owned properties near the GK Mine," Tom McCandless, Ph.D. and vice president for exploration at Mountain Province, said in a statement. "We also have augmented our database with new interpretations of the surficial geology in order to prioritize all historical, as well as newly acquired, data."

Mountain Province and DeBeers Canada have entered a memorandum of understanding that outlines framework for incorporating Kennady North into the Gahcho Kué joint venture and are working on a definitive agreement to bring the neighboring property into the JV.

Microdiamonds recovered

The company also completed caustic fusion recovery of microdiamonds from core extracted in drilling programs on Faraday 2 in 2017 and 2018. This drilling extended the Faraday 2 kimberlite by more than 150 meters to the northwest. Geologic modeling of this northwest extension has confirmed that lithologies identified in the upper portion of Faraday 2 also are present in the extension. The microdiamond results generated 10.4 carats of commercial-size diamonds.

"Our microdiamond results from the northwest extension of Faraday 2 are excellent but not unexpected, as kimberlites within the Kelvin-Faraday corridor exhibit a remarkable consistency of grade across internal lithologies," said Mountain Province President and CEO Stuart Brown. "Our early indications are that the inclusion of the northwest extension into Faraday 2 will contribute substantially to the value of this resource within our Kennady portfolio."

The company said the microdiamond results will be incorporated into an updated resource estimate for Faraday 2 that will be completed later this year.

In 2018, winter exploration at Kennady North, Mountain Province said 38 drill holes were completed totaling 6,826 meters.

Delineation drilling on the northwest extension of the Faraday 2 kimberlite also has been completed. The northwest extension, discovered in 2017, extends the Faraday 2 kimberlite by more than 150 meters, with geologic units in the inferred resource continuing into the northwest extension. Drilling completed since 2017 is expected to advance the Faraday 2 pipe shell model to an inferred level of confidence.

"The goal of the Faraday geotechnical program was to complete drilling that will advance the Faraday kimberlites from a scoping-level to a pre-feasibility level of confidence in terms of geotechnical analysis," McCandless said. "In this respect the program was very successful, with all of the planned drill holes and associated geotechnical surveys, ground water sampling and other required test work completed."

Mountain Province said in April 2018 a third drill rig tested geophysically-defined exploration targets located near the Faraday and Kelvin kimberlites. Eight targets were tested with 17 drill holes. Kimberlite was intersected in all of the holes, consisting of kimberlite sheet complexes with the longest intercept being 6.85 meters of coherent kimberlite. In every case the kimberlite sheets are intimately associated with greater zones of altered and brecciated country rock.

While only kimberlite sheets were intersected, McCandless said in each case the subtle geophysical anomalies the explorer targeted were explained by intervals of highly altered and fractured country rock immediately adjacent to the kimberlite sheets. "Similarly fractured and altered country rock is associated with both the Kelvin and the Faraday pipes, and we are confident that kimberlite pipes may be associated with some of the geophysical anomalies that remain to be tested," he added

Gahcho Kué output sets record

The Gahcho Kué mine ended 2018 with a record diamond production of 6.94 million carats at an average grade of 2.17 carats per metric ton, 17 percent higher than output in 2017. More than 41.4 million metric tons of kimberlite were mined at Gahcho Kué, up 25 percent from comparable volume in 2017.

"From a production perspective, 2018 was a good year for Mountain Province Diamonds where we achieved our expected (metric tons) mined and recovered a record (number) of carats," said Brown. "Operationally, the mine has settled down and our expectation is that it will continue to perform at these levels in the future. So far in 2019, production has been positive," he added.

Mountain Province also said the diamond mine reported sales of 3,252,491 carats for 2018 with an average value of US$74 per carat (C$96 per carat) that generated total proceeds of US$240 million (C$311 million).

The diamond sales reflected market conditions, with prices for better quality larger goods, where the majority of Gahcho Kué's value lies, remaining strong throughout the year, though lower qualities and smaller sizes late in 2018 generated price pressure, driven predominantly by a weakened Indian rupee against the U. S. dollar. Demand at retail in both the US and China for luxury goods were reported to be strong overall in 2018, and initial reports from the Chinese and US holiday retail season are generally positive, according to Mountain Province.

Despite the lower quality and smaller-size rough diamonds, Mountain Province's sales process attracted sufficient demand to sell 100 percent of its 2018 production.

"We expect to see more interest in the first-quarter rough sales where the market is traditionally stronger," added Reid Mackie, vice president of diamond marketing for Mountain Province.

CORRECTION: The name of Dominion Diamond Mines ULC was corrected on April 1.