De Beers puts its money into Baffin Island gem hunt

by Gregory Reynolds

The quest for another diamond mine in Eastern Canada has led De Beers Canada to Baffin Island in the Far North.

It has entered into an option agreement with a junior diamond hunter, Peregine Diamonds Ltd. that could give it 51.1 per cent of the Chidliak kimberlite project 120 km from Iqaluit, the capital of the Territory of Nunavut.

A bulk sample of about 200 tonnes was collected by surface trenching. As reported on Dec. 6, 2010, a 14.11 tonne mini-bulk sample collected from the CH-6 kimberlite returned a grade of 2.84 carats per tonne (cpt).

The company, headed by CEO Eric Friedland, says “if that grade is confirmed with further testing, CH-6 would be one of the highest grade kimberlite pipes in the world.

Sample processing for the recovery of commercial-sized diamonds, with subsequent independent diamond valuations, is expected to commence in the fourth quarter of 2012 or earlier in the event De Beers has entered into the Chidliak JV Agreement.

The diamond grade and value information acquired from the 200 tonne sample will allow for the development of a preliminary revenue model for CH-6 and serve as the foundation for future resource calculations.”

De Beers already has two diamond mines in Canada, the Victor in the James Bay Lowlands of Northern Ontario and the Snap Lake, 220 km northeast of Yellowknife.

The work plan for Chidliak is estimated at $5 million.

The bulk sampling program, currently being funded by Peregrine, is budgeted at $3 million.

Ongoing work being funded by De Beers, budgeted at $2 million, includes a comprehensive desktop mining study, kimberlite pipe characterization studies, ground geophysics, and new target generation work.

De Beers’ expenditures will be applied to its earn-in obligation of $58.5 million should it enter into the JV Agreement. In the event De Beers does not elect to enter into the joint venture, Peregrine will not be required to refund these expenditures.

De Beers says the Chidliak contains 61 diamondiferous kimberlites, and the agreement enables De Beers to start mineral exploration and development work in 2013 to assess the project’s techno-economic viability.

De Beers is a member of the Anglo American plc group. In 2012, Anglo American plc completed its acquisition of a further 40 per cent interest in De Beers, bringing total shareholding to 85 percent.

In light of prevailing diamond market trends as well as operational challenges, the company’s stated strategy of producing to demand was maintained in 2012, with 27.9 million carats recovered in 2012 (2011: 31.3 million carats) while operations continued to focus on maintenance and waste stripping backlogs.

In Canada, production remained relatively steady at 1.6 million carats (2011: 1.7 million carats). Of total carat recovery, Victor Mine delivered 0.7 million carats (2011: 0.8 million carats) and Snap Lake Mine produced 0.9 million carats (2011: 0.9 million carats). Established in 1888, De Beers is the world’s leading diamond company with unrivalled expertise in the exploration, mining and marketing of diamonds. Together with its joint venture partners, De Beers employs more than 23,000 people across the diamond pipeline, and is the world’s largest diamond producer, by value, with mining operations in Botswana, Canada, Namibia and South Africa.

This jointly funded Chidliak program has been designed by Peregrine and De Beers to meet two objectives. Firstly, information from the bulk sample at CH-6 together with the desktop mining study, scheduled for completion this quarter, will be instrumental in the advancement of the project towards development.

Secondly, the results of the kimberlite characterization studies, ground geophysics and target generation work will optimize future programs that will include the evaluation of known kimberlites with economic potential and exploration for new kimberlite pipes.

Nunavut is the largest, northernmost and newest territory of Canada. It was separated officially from the Northwest Territories on April 1, 1999.