Diamonds in Canada November 2017

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Discipline pays off / 4

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Mining sector forced to innovate TECH CONFERENCE

| New technology stokes productivity gains, but ‘no silver bullet’

ELECTION 2015 | Credibility and accountability are top concerns

T

BY ALISHA HIYATE ahiyate@northernminer.com

BY JOHN CUMMING jcumming@northernminer.com

he mining sector is facing a DarW delegates at the winian moment, first annual Technology and Innovation in Mining conference in Toronto heard in September.

Just as species deal with changes in their climate, food sources or other circumstances, miners dealing with mounting cost, social and technical pressures must innovate if they want to survive, research group AMIRA International managing director Joe Cucuzza said.

“If you look at Darwinian evolution, there are more species that go extinct than actually quickly adapt,” Cucuzza told the conference. “The point is that in our industry, we need to adapt quickly.

COAL OUTLOOK: WOOD MACKENZIE SEES RAY OF HOPE / 4 Those that are slow to adapt, unfortunately, are going to go extinct.”

The conference, organized by Dubai-

BY JOHN CUMMING jcumming@northernminer.com

Mining sector W forced to innovate

ith Canadians looking ahead to a federal election on Oct. 19, The Northern Miner submitted mining-related questions to the leaders of the four major political parties running across CanTECH CONFERENCE | New technology stokes productivity gains, but ‘no silver bullet’ ada. The following are the answers from the Liberal Party of Canada ELECTION 2015 |

BY ALISHA HIYATE leader Justin Trudeau and Green Party Credibility and ahiyate@northernminer.com accountability are of Canada leader Elizabeth May and top concerns their parties: he mining sector is facing a DarThe Northern Miner: In recent years winian moment, delegates at the

BY JOHN CUMMING first annual Technology and Injcumming@northernminer.com the federal has streamlined novation in Mining conferencegovernment in Toronto heard in September. environmental permitting for miners ith Canadians looking Just as species deal with changes in byfood trying tooravoid ahead to a federal election their climate, sources other duplicating provinon Oct. 19, The Northern circumstances, miners dealing with efforts.

Do you support this apMiner submitted mining-related quesmounting cial cost, social and technical tions to the leaders of the four major pressures must innovate ifDoes they want to federal government proach? the political parties running across Cansurvive, research group AMIRA Interhave adirector unique role to play in avoiding ada. The following are the answers national managing Joe Cufrom the Liberal Party of Canada cuzza said. catastrophic tailings dam failures, such leader Justin Trudeau and Green Party “If you look at Darwinian evolution, of Canada leader Elizabeth May and there are more that go extinct as species the Mount Polley spill in B.C. in their parties: than actually quickly adapt,” Cucuzza 2014?“The point is that The Northern Miner: In recent years told the conference. the federal government has streamlined in our industry, we need to adapt quickly.

Justin Trudeau/Liberal Party: The environmental permitting for miners Those that are slow to adapt, unfortuby trying to avoid duplicating provinnately, are going to go extinct.”

Harper government has eroded the cial efforts. Do you support this apThe conference, organized by Dubaicredibility of Canada’s environmental proach? Does the federal government See TECHNOLOGY / pg. 2 have a unique role to play in avoiding reviews by narrowing their application, catastrophic tailings dam failures, such Autonomous haulage trucks on the move at Rio Tinto’s West Angelas iron ore mine in Australia’s Pilbara region. as the Mount Polley spill in B.C. in limiting public participation and slash2014? ing the capacity of the federal governJustin Trudeau/Liberal Party: The Harper government has eroded the ment to protect the environment. credibility of Canada’s environmental reviews by narrowing their application, They have ended over 50 years of limiting public participation and slashing the capacity of the federal governenvironmental oversight in Canada ment to protect the environment. by repealing the Canadian EnvironThey have ended over 50 years of environmental oversight in Canada mental Assessment Act so that the by repealing the Canadian Environmental Assessment Act so that the federal government can sidestep enfederal government can sidestep environmental reviews of potentially vironmental reviews of potentially harmful projects. harmful projects.

Without public trust, Canada’s environmental assessment processes are Without public trust, Canada’s enincreasingly paralyzed. Not only are vironmental assessment processes are we not doing a good enough job at protecting our environment, we are increasingly paralyzed. Not only are not getting our resources to market.

We need clear and efficient processes we not doing a good enough job at that have reasonable, evenhanded protecting our environment, we are rules, clear beginning and end points and decisions that can be relied on. not getting our resources to market.

We will launch an immediate, public review of Canada’s environmental We need clear and efficient processes assessment processes. Based on this that have reasonable, evenhanded review, a Liberal government will rules, clear beginning and end points See ELECTION / pg. 3 and decisions that can be relied on.

We will launch an immediate, pubCOAL OUTLOOK: WOOD MACKENZIE SEES RAY OF HOPE / 4 lic review of Canada’s environmental assessment processes. Based on this review, a Liberal government will

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Editorial

OCTOBER 5–11, 2015 / VOL. 101 ISSUE 34 / GLOBAL MINING NEWS · SINCE 1915 / $3.99 / WWW.NORTHERNMINER.COM

| Credibility and accountability are top concerns OCTOBER 5–11, 2015 / VOL. 101 ISSUE 34 / GLOBAL MINING NEWS · SINCE 1915 / $3.99 / WWW.NORTHERNMINER.COM

VTEM™ ZTEM™ Gravity Magnetics Radiometrics Data Processing Interpretation

| New technology stokes productivity gains, but ‘no silver bullet’

ELECTION 2015

Liberals, Greens Q&A on mining in Canada

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TECH CONFERENCE

T

ith Canadians looking ahead to a federal election on Oct. 19, The Northern Miner submitted mining-related questions to the leaders of the four major political parties running across Canada. The following are the answers from the Liberal Party of Canada leader Justin Trudeau and Green Party of Canada leader Elizabeth May and their parties: The Northern Miner: In recent years the federal government has streamlined environmental permitting for miners by trying to avoid duplicating provincial efforts. Do you support this approach? Does the federal government have a unique role to play in avoiding catastrophic tailings dam failures, such as the Mount Polley spill in B.C. in 2014?

Justin Trudeau/Liberal Party: The Harper government has eroded the credibility of Canada’s environmental reviews by narrowing their application, limiting public participation and slashing the capacity of the federal government to protect the environment.

They have ended over 50 years of environmental oversight in Canada by repealing the Canadian Environmental Assessment Act so that the federal government can sidestep environmental reviews of potentially harmful projects.

Without public trust, Canada’s environmental assessment processes are increasingly paralyzed. Not only are we not doing a good enough job at protecting our environment, we are not getting our resources to market.

We need clear and efficient processes that have reasonable, evenhanded rules, clear beginning and end points and decisions that can be relied on.

We will launch an immediate, public review of Canada’s environmental assessment processes. Based on this review, a Liberal government will

Autonomous haulage trucks on the move at Rio Tinto’s West Angelas iron ore mine in Australia’s Pilbara region.

T

he mining sector is facing a Darwinian moment, delegates at the first annual Technology and Innovation in Mining conference in Toronto heard in September.

Just as species deal with changes in their climate, food sources or other circumstances, miners dealing with mounting cost, social and technical pressures must innovate if they want to survive, research group AMIRA International managing director Joe Cucuzza said.

“If you look at Darwinian evolution, there are more species that go extinct than actually quickly adapt,” Cucuzza told the conference. “The point is that in our industry, we need to adapt quickly.

Those that are slow to adapt, unfortunately, are going to go extinct.”

The conference, organized by Dubai-

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VTEM™ ZTEM™ Gravity Magnetics Radiometrics Data Processing Interpretation 905 841 5004 | geotech.ca

SPECIAL FOCUS: QUEBEC / 7–10

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See TECHNOLOGY / pg. 2

Canadian Mining Hall of Fame

Discipline pays off / 4

Five new inductees / 5

PM40069240

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Liberals, Greens Q&A on mining in Canada

Mining sector forced to innovate TECH CONFERENCE

| New technology stokes productivity gains, but ‘no silver bullet’

ELECTION 2015 | Credibility and accountability are top concerns

BY ALISHA HIYATE ahiyate@northernminer.com

T

he mining sector is facing a Darwinian moment, delegates at the first annual Technology and Innovation in Mining conference in Toronto heard in September.

Just as species deal with changes in their climate, food sources or other circumstances, miners dealing with mounting cost, social and technical pressures must innovate if they want to survive, research group AMIRA International managing director Joe Cucuzza said.

“If you look at Darwinian evolution, there are more species that go extinct than actually quickly adapt,” Cucuzza told the conference. “The point is that in our industry, we need to adapt quickly.

Those that are slow to adapt, unfortunately, are going to go extinct.”

The conference, organized by Dubai-

BY JOHN CUMMING jcumming@northernminer.com

W

See ELECTION / pg. 3

W

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Editorial

See TECHNOLOGY / pg. 2

RIO TINTO

15-09-29 8:10 PM

ith Canadians looking ahead to a federal election on Oct. 19, The Northern Miner submitted mining-related questions to the leaders of the four major political parties running across Canada. The following are the answers from the Liberal Party of Canada leader Justin Trudeau and Green Party of Canada leader Elizabeth May and their parties: The Northern Miner: In recent years the federal government has streamlined environmental permitting for miners by trying to avoid duplicating provincial efforts. Do you support this approach? Does the federal government have a unique role to play in avoiding catastrophic tailings dam failures, such as the Mount Polley spill in B.C. in 2014?

Justin Trudeau/Liberal Party: The Harper government has eroded the credibility of Canada’s environmental reviews by narrowing their application, limiting public participation and slashing the capacity of the federal government to protect the environment.

They have ended over 50 years of environmental oversight in Canada by repealing the Canadian Environmental Assessment Act so that the federal government can sidestep environmental reviews of potentially harmful projects.

Without public trust, Canada’s environmental assessment processes are increasingly paralyzed. Not only are we not doing a good enough job at protecting our environment, we are not getting our resources to market.

We need clear and efficient processes that have reasonable, evenhanded rules, clear beginning and end points and decisions that can be relied on.

We will launch an immediate, public review of Canada’s environmental assessment processes. Based on this review, a Liberal government will

See TECHNOLOGY / pg. 2 Autonomous haulage trucks on the move at Rio Tinto’s West Angelas iron ore mine in Australia’s Pilbara region.

RIO TINTO PM40069240

See ELECTION / pg. 3

Autonomous haulage trucks on the move at Rio Tinto’s West Angelas iron ore mine in Australia’s Pilbara region.

COAL OUTLOOK: WOOD MACKENZIE SEES RAY OF HOPE / 4

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bal n 5.

CONTENTS 5

18

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CIAL FOCUS: QUEBEC / 7–10

One of The Largest Silver Discoveries of 2014 TSX.V: GRG www.goldenarrowresources.com

Editorial

Canadian Mining Hall of Fame

Discipline pays off / 4

Five new inductees / 5

OCTOBER 5–11, 2015 / VOL. 101 ISSUE 34 / GLOBAL MINING NEWS · SINCE 1915 / $3.99 / WWW.NORTHERNMINER.COM

berals, Greens &A on ning in anada

Mining sector forced to innovate TECH CONFERENCE

| New technology stokes productivity gains, but ‘no silver bullet’

CTION 2015 | edibility and untability are p concerns

BY ALISHA HIYATE ahiyate@northernminer.com

T

he mining sector is facing a Darwinian moment, delegates at the first annual Technology and Innovation in Mining conference in Toronto heard in September.

Just as species deal with changes in their climate, food sources or other circumstances, miners dealing with mounting cost, social and technical pressures must innovate if they want to survive, research group AMIRA International managing director Joe Cucuzza said.

“If you look at Darwinian evolution, there are more species that go extinct than actually quickly adapt,” Cucuzza told the conference. “The point is that in our industry, we need to adapt quickly.

Those that are slow to adapt, unfortunately, are going to go extinct.”

The conference, organized by Dubai-

OHN CUMMING

ng@northernminer.com

th Canadians looking head to a federal election on Oct. 19, The Northern itted mining-related quesleaders of the four major ties running across Canllowing are the answers iberal Party of Canada Trudeau and Green Party eader Elizabeth May and s: rn Miner: In recent years overnment has streamlined tal permitting for miners avoid duplicating provinDo you support this apes the federal government ue role to play in avoiding tailings dam failures, such nt Polley spill in B.C. in

See TECHNOLOGY / pg. 2 Autonomous haulage trucks on the move at Rio Tinto’s West Angelas iron ore mine in Australia’s Pilbara region.

RIO TINTO PM40069240

8

deau/Liberal Party: The ernment has eroded the f Canada’s environmental arrowing their application, lic participation and slashcity of the federal governotect the environment. ended over 50 years of ntal oversight in Canada g the Canadian Environessment Act so that the rnment can sidestep enal reviews of potentially ojects. public trust, Canada’s enl assessment processes are paralyzed. Not only are ng a good enough job at our environment, we are our resources to market. ar and efficient processes easonable, evenhanded beginning and end points ns that can be relied on. unch an immediate, pubCanada’s environmental processes. Based on this iberal government will

ELECTION / pg. 3

AL OUTLOOK: WOOD MACKENZIE SEES RAY OF HOPE / 4

ndd 1

NOVEMBER 2017

15-09-29 8:10 PM

—IN CANADA—

NOVEMBER | 2017

Editorial Dominion’s latest transformation. . . . . . . . . . . . . . . . . 4

CANADA’S NEW MINES IN

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Complimentary PM no. 40069240

ON THE COVER: Mining at Gahcho Kué, in the Northwest Territories.

Credit: Mountain Province Diamonds

Dominion Diamond’s next chapter Washington Companies takeover is just the latest twist in company’s history | By Virginia Heffernan. . . . . . . . . . . 5 Shore finds potential partner in Rio Tinto Rio signs option to earn majority stake in Saskatchewan project | By Alisha Hiyate . . . . . . . . . . . . . . . . . . . . . . . 8 Stornoway crafts breakage plan for Renard plant $22M waste-sorting circuit to be commissioned in early 2018 | By Alisha Hiyate. . . . . . . . . . . . . . . . . . . . . . . . 11

Gahcho Kué makes the grade Partners raise 2017 production guidance for new NWT mine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Diamond market slows after strong recovery A market update for the second half of 2017

By Paul Zimnisky. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Kennady delivers Faraday resource

By Lesley Stokes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Fine Cuts Lucara sells Lesedi; North Arrow advances Naujaat; and Peregrine probes depths of CH-6 . . . . . . . . . . . . 20

Digital copy available to subscribers at www.northernminer.com

38 Lesmill Rd. Toronto, ON, M3B 2T5 Phone: (416) 510-6768 Fax: (416) 510-5138 E-mail: ahiyate@northernminer.com

PUBLISHER: Anthony Vaccaro

EDITOR: Alisha Hiyate

ADVERTISING SALES: Joe Crofts Michael Winter

ART DIRECTOR: Melissa Crook

PRODUCTION MANAGER: Jessica Jubb CONTRIBUTING WRITERS: Virginia Heffernan Lesley Stokes Paul Zimnisky

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Dominion’s latest transformation ALISHA HIYATE EDITOR

“

Washington has gone to some lengths to reassure regulators, shareholders and the public that nothing much will change under its ownership.

”

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n recent decades, Dominion Diamond has been one of the more interesting companies to watch — not just in the diamond space but in mining, period.

As Aber Diamond, it was there at the birth of Canada’s diamond industry in the early 1990s and in fact had a starring role in the discovery and development of the Diavik mine. Under the leadership of the late Bob Gannicott, the company followed an unorthodox path — becoming a retailer with the purchase of Harry Winston Diamond in the mid-2000s, when there were few other growth opportunities in diamonds.

Years later, when the health of the retail side was much improved, it shed the luxury retail division for a fat profit and invested the cash in a more attractive asset that had come up for sale — Canada’s first diamond mine, Ekati.

Since Gannicott stepped away from Dominion for a medical leave in late 2014 (he passed away last year after battling leukemia), the company has lacked a similarly passionate champion. Indeed, it had been searching for a new CEO when Washington Companies expressed its interest in acquiring the company earlier this year.

So it will be fascinating to see what new transformation the sale will bring to Dominion when the acquisition closes in late 2017.

The fact that Washington is interested in a diamond miner is probably a positive indicator for the diamond sector.

In an interview with Canadian Mining Journal last month, Stornoway Diamond CEO Matt Manson noted that with three new diamond mines having started up in the past year, “we’re at peak production right now.”

But while the diamond market is currently oversupplied, it will not remain that way forever.

Washington is a U.S.-based company, and that has caused the usual concerns about Canadian assets coming under foreign control. In this case, the angst is somewhat heightened by Ekati’s status as Canada’s first diamond mine.

But Washington has gone to some lengths to reassure regulators, shareholders and the public that nothing much will change under its ownership.

It has sought to reassure Canadians that it’s here for the long haul, stating: “Washington will be a responsible, long-term operator and builder of Dominion’s world-class assets, and plans to extend the mine life of Ekati for decades, consistent with the current development plan.”

It has indicated that the company’s headquarters will remain in Calgary after being moved there from Yellowknife earlier this year.

The company has also committed to deploy capital to develop the Jay and Fox Deep projects at Ekati, and make new investments in exploration. In addition, it has promised to “maintain a significantly Canadian management team,” hiring Patrick Evans, former head of Mountain Province Diamonds and a Canadian diamond mining insider, as CEO. It’s too early to evaluate Washington’s commitments: at presstime on Nov. 2, the acquisition had only just officially closed.

But we look forward to covering Dominion’s next chapter, and hope that as a private company, it will continue to be open about its plans at Ekati and elsewhere.

As ever, we welcome your feedback at ahiyate@northernminer.com

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Dominion Diamond’s

new chapter Takeover by Washington Cos. just the latest twist in Dominion saga

By Virginia Heffernan

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ne of the biggest deals to hit the diamond world recently is the sale and privatization of Dominion Diamond ( TSX: DDC; NYSE: DDC), Canada’s premier diamond miner and the world’s third largest producer of rough diamonds by value.

The sale gives Montana-based Washington Companies a 100% stake in the Ekati diamond mine and a 40% interest in the Diavik diamond mine operated by Rio Tinto (NYSE: RIO; LSE: RIO). Both mines are in the Northwest Territories.

Patrick Evans, former president and CEO of Mountain Province Diamonds (TSX: MPVD; NASDAQ: MPVD) and a respected industry veteran, will become the new CEO of Dominion Diamond once the US$1.2-billion transaction closes later this year. Mountain Province owns 49% of the Gahcho Kué mine in the Northwest Territories

Underground at Ekati.

Credit: Dominion Diamond

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Surface mining at Ekati, in the Northwest Territories.

Credit: Dominion Diamond

The Dominion saga 1980 Grenville Thomas founds Aber Resources

1991 Chuck Fipke/Stewart Blusson discover Ekati diamond mine

1991/92 Aber Resources and West Viking Resources (Bob Gannicott and Lee Barker) stake Lac de Gras claims

1994 Aber Diamond Corp. is formed by merger of Aber Resources and West Viking; Aber discovers Diavik mine

1998 BHP begins production at Ekati

2003 Rio Tinto & Aber begin production at Diavik

2004 Aber acquires 51% of Harry Winston Inc., a luxury jewelry brand

with 51% owner and operator De Beers, so Evans is well versed in the logistics of diamond mine development in the unique environment of northern Canada.

Everyone in the industry knows Evans, but who are the new owners? While Washington Companies is withholding comment until the deal is complete, the multinational is a private company owned by billionaire Dennis Washington. More than 50 years ago, he leased a bulldozer and started offering earth moving services for road construction and, later, for mines, according to the company’s website.

In 1986, he acquired ARCO’s mothballed copper and molybdenum deposit in Butte, Mont., and reopened the mine. Washington subsidiary Montana Resources has produced more than 1.2 billion lb. copper and 144 million lb. molybdenum from the deposit since.

Washington’s success at Butte allowed him to diversify into railroads, shipping, aviation and real estate. His other Canadian asset, acquired in the 1990s, is Seaspan, an association of companies involved in marine transportation, ship repair and shipbuilding in western North America.

Dominion Diamond first put itself up for sale in 2015 when one of its major shareholders, K2 & Associates Investment Management, questioned management’s leadership around issues of corporate governance, performance, and project priorities

amid a crumbling share price.

The company then experienced a string of misfortune in 2016, including a fire at Ekati that suspended processing and cost the miner about C$44.5 million in mine standby costs, the death of its founder Robert Gannicott, and weak global diamond prices.

Early in 2017, CEO Brendan Bell left Dominion citing personal reasons related to the company’s move from Yellowknife to Calgary. The combination of challenges weighed heavily on performance: Dominion lost US$40.7 million before income taxes in the year ended Jan 31, 2017, compared to a profit of US$170.3 million in fiscal 2015. Its share price crumbled from a peak of US$19.75 in May 2015 to less than US$9 in March 2017.

That’s when Washington came calling with a US$1.1-billion bid prompting Dominion — unimpressed with the implied value of its assets and pointing to Washington’s lack of experience in diamond mining and marketing — to search for alternative buyers.

But no alternative emerged and in July, Dominion agreed to a sweetened bid of US$14.25 per share or US$1.2 billion. The transaction represents a 44% premium to Dominion’s stock price at the time of the bid. In September, shareholders voted in favour of the sale.

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Crusher for the Jay project at Ekati.

Credit: Dominion Diamond

2006 Aber increases ownership of Harry Winston Inc. to 100%

2007 Aber changes name to Harry Winston Diamond Corp. and lists on NYSE

2012 Harry Winston agrees to buy Ekati mine

2013 As Dominion awaits the power shift, business is beginning to improve. For the three months ended July 31, Dominion racked up net income of US$31.1 million attributable to improved sales from higher value pipes at Ekati and a rebound in demand for lower value diamonds. Cash resources totalled US$199 million with no debt and US$157 million available under a revolving credit facility.

Washington intends to operate Dominion as a standalone business and keep the company headquarters in Calgary. The private company says it is committed to maintaining Dominion’s focus on training and employing Indigenous people, honouring existing commitments to nearby communities, and continuing scholarship programs, heritage finds and support for local contractors and suppliers.

Diavik is nearing the end of its life, but there is still development potential at Ekati, where the current mine plan focuses on production from six kimberlite pipes: the Misery Main, Pigeon, Sable, Lynx and Jay open pits, and the Koala underground operations. Jay was approved for construction last year, extending the mine life by approximately 10 years to 2033. A prefeasibility study on Fox Deep — an underground deposit below the mined out Fox open pit — is currently underway, and may further extend Ekati’s life to 2042.

But independent diamond analyst Paul Zimnisky, who called Washington a “relatively unlikely suitor” in his latest State of the Diamond Industry report said that after the Misery Main pipe is mined out around 2020, “planned expansion projects at Ekati are arguably marginal at best.” Effective exploration may be the key to longevity in that case: There are 150 known kimberlites on Ekati, including 110 that have never been bulk sampled, and Dominion intends to spend C$50 million over the next five years to test them and other kimberlites in the region.

During fiscal 2018, Dominion plans to produce 6.3-7 million carats by processing about 4 million tonnes of ore compared to 5.2 million carats from 3 million tonnes in fiscal 2017. High value ore from the Koala underground and Misery Main pipes is being mined first, followed by an increased proportion of ore from the Pigeon and Lynx pipes during the remainder of the year.

Dominion management appears to be satisfied with the sweetened deal. “The Washington offer delivers compelling and immediate value to Dominion shareholders at an attractive premium that recognizes the intrinsic value of Dominion and provides shareholders certainty through an all-cash offer,” said Jim Gowans, chair of Dominion’s board of directors.

The company divests Harry Winston & changes name to Dominion Diamond

2016 2016 Robert Gannicott dies

2014 Chuck Fipke sells 10% stake in Ekati to Dominion for US$67M

2017 Washington Companies agrees to buy Dominion for US$1.2B

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High-value stones from the Star and Orion South kimberlites.

Credit: Shore Gold

Shore finds potential partner in Rio Tinto

Winter ice-road to the ekati and diavik diamond mines

Rio can earn 60% of Star-Orion South through $71.5M option deal

Credit: Dominion Diamond

By Alisha Hiyate

A

s recently as 2012, mining giant Rio Tinto (NYSE: RIO; LSE: RIO) had been publicly considering exiting the diamond space.

But the company, which operates and owns 60% of the Diavik mine in the Northwest Territories, as well as the Argyle mine in Australia, was unable to find a buyer and announced in 2013 that it would retain its diamond business.

With Argyle slated to close in 2021 and Diavik in 2024, and the company deciding last August not to proceed with its Bunder project in India, Rio needs to replenish its diamond pipeline. New Rio Tinto CEO Jean-Sebastien Jacques, who was appointed last July, signalled soon after taking the reins that the company was ready and willing to invest.

“I would love to have more diamonds,” Jacques told the Sydney Morning Herald last December. “That’s a priority area.”

Now Rio has made its first move towards expanding its diamond pipeline by signing an agreement that could see it the majority owner at Shore Gold’s (TSX: SGF) Star-Orion South diamond project in central Saskatchewan.

The deal, which could see Rio earn up to 60% of the project for a total investment of $71.5 million, was announced in June.

But George Read, Shore’s senior vice-president of exploration

George Read, senior vice-president of exploration and development at Shore Gold.

Credit: Shore Gold

and development, says that Rio has had an eye on the project for a long time.

“In our initial large-diameter drilling sample, which took place in the early 2000s, it was noted that the diamond size frequency distribution was coarse,” Read said in an interview in early October. “That attracted Rio Tinto’s initial attention and there’s been a long dance, if we can call it that, between the companies that’s been on and off since then.”

Read adds that Rio participated openly in the initial valuation of Star-Orion South diamonds, which was published in early 2005, offering assistance in Antwerp.

At the same time as it announced the option with Rio, Shore reported that it had acquired Newmont Mining’s (NYSE: NEM) 31% stake in the project in return for 53.8 million

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A rough macle diamond from the Star kimberlite.

Credit: Shore Gold

common shares and 1.1 million warrants. Newmont now owns 19.9% of Shore`s undiluted stock.

Terms of the deal While Rio has officially declared its interest in Star-Orion South, it doesn’t appear to be in a hurry to earn its potential 60% stake: the term of the four-phase deal extends over 7.5 years.

As part of the first phase of the deal, Rio will conduct $18.5 million in work at the project, or a 10-hole bulk-sampling program, within three years. It has also invested $1 million in Shore.

It won’t earn an interest in the project, however, until it completes the second phase — another $18.5-million in spending, or 10-hole bulk-sampling program over 18 months. At that point, Rio will earn 51% of Star-Orion South.

It can then earn another 5% by conducting $18.5 million worth of work or a bulk-sampling program within an 18-month period.

The last 5% interest will be transferred to Rio once it spends

another $15 million or completes a feasibility study within 18 months.

Asked whether he was disappointed that the timeline for the deal was not more accelerated given the amount of work that has already been put into the project, Read admitted: “Yes, I think that is the simple answer! But I believe that Rio Tinto has every intention of achieving their goal as quickly as possible. I can’t speak for Rio Tinto, but certainly there is every intention to mobilize the (bulk-sampling) equipment and get the job done.”

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The Star-Orion South project in Saskatchewan.

Credit: Shore Gold

Feasibility update The main reason Star-Orion South has not yet been developed is its large price tag. According to a 2011 feasibility study, building an open-pit operation at the large but low-grade project, located 60 km east of Prince Albert, would cost $2.5 billion, with $1.9 billion of that cost coming before production.

Part of the high cost is due to the amount of overburden covering both kimberlites, averaging 92 metres deep at Star and 105 metres deep at Orion-South. But Read says the company is looking at different technology to reduce the cost of removing it.

Shore is considering the use of bucket wheel excavators to remove the layers of sand, clay and till. The 2011 feasibility had looked at removing the sand and clay by truck and shovel and the till layers with an in-pit crushing and conveying system.

Removing the 20-metre-deep layer of sand and clay at both kimberlites by truck and shovel was the most expensive part of the overburden removal. The company believes a bucket wheel excavator can remove all layers at a much lower cost (35-40¢ per tonne).

Shore is also looking at an improved processing plant design, with a revised flow sheet and the use of XRT recovery of diamonds to avoid breakage of the large stones Shore expects to recover.

Shore expects to see some large, high-value stones in future production — potentially stones above 100 carats.

“We recovered a 49-carat stone from Star and a 45-carat stone from Orion South in the evaluation that has already taken place,” Read says. “And the most valuable stone from Star is an 11.96-carat, Type IIa stone that is a real gin and tonic white.”

Type IIa stones are rare, nitrogen free, highly valued diamonds.

Work is under way on a feasibility update incorporating the changes to the plant and overburden removal.

“Previously with the 2011 feasibility study, we had a $1.9-billion preproduction capital cost that was considered somewhat unpalatable by a number of investors. That number

we believe can be brought down significantly through these two approaches with the overburden and with the plant.”

The study will use a 2015 resource update that increased indicated resources at Star by 38% and at Orion South by 134%.

(Indicated resources for both kimberlites total 55.4 million carats in 393 million tonnes grading 14 carats per hundred tonnes.)

While Read says he can’t say when the feasibility will be completed, he notes that the bulk of the work towards it has already been completed. “We have some detailed engineering work that remains to be done that can be completed quite quickly, and we are busy with that.”

Shore Diamond In the meantime, in September, Shore shareholders approved a proposed name change to Shore Diamond Corp. — a move that Read says is appropriate now that a potential path to diamond production has opened up with the Rio deal.

Also at the annual general meeting, a faction of dissident Shore shareholders representing about 10% of the company’s shares, failed to unseat some of the company’s directors. The shareholders, who want to see some of their own nominees appointed to the board, had also tried to unseat several directors at the 2016 AGM. On the permitting side, Shore is still waiting for provincial approval of its environmental impact statement (EIS), which was approved by the federal government in 2014. The province committed $137,000 to First Nations consultations early this year as part of its duty to consult after it identified issues that hadn’t previously been addressed in a public review process.

“There is no information that we’re required to provide them with at this stage,” Read says. “There was work that they were doing on duty to consult with local communities. We understand that if that work has not already been completed, it’s very close to being completed.”

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Stornoway Diamonds’ Renard mine site, in Quebec.

Credit: Stornoway Diamond

STORNOWAY looks to spectral sorting to reduce breakage at

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t didn’t take long for Stornoway Diamond (TSX: SWY) to realize that it had a problem with diamond breakage at its newly built Renard mine, 360 km north of Chibougamau, Que. While all diamond plants have some amount of breakage, the levels at Renard — which began commercial production on Jan. 1 and achieved nameplate production of 6,000 tonnes per day in June — were higher than expected.

“We’re breaking approximately 10% more than we expect, so we’re talking about a range of 20-25% breakage,” said Patrick Godin, Stornoway’s chief operating officer, in September.

The company had only predicted levels of 10-15%, so the higher breakage levels mean that smaller and lower-quality stones make up a larger share of production than anticipated — reducing overall revenues.

In the first half of the year, the company saw a modest improvement in breakage after it made a number of adjustments to the plant, such as adjusting crusher operating settings, material balancing, and minimizing ore and diamond recirculation.

But high levels of internal dilution in Renard ore — country rock gneiss which is much harder than kimberlite — meant that breakage levels were still unacceptably high in the secondary (cone) crusher and high-pressure grinding roll. The impact of the hard waste, which can vary up to 50-70% of mined material, against the diamonds and the steel linings in the crushers is a principal cause of breakage.

In response, the company announced a $22-million plan in August to install a 7,000-tonne-per-day TOMRA spectral sorting unit at the plant. The circuit, which is being installed after the primary jaw crusher and before the secondary cone crusher, will extract waste rock in the +30mm to -200 mm size range. It’s expected to be commissioned in the first quarter of 2018.

In an August conference call to discuss Stornoway’s second-quarter results, Godin said the company had done two series of tests that demonstrated the technology works very well to separate the waste from the ore, which are visually different.

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A truck driver at Renard.

Credit: Stornoway Diamond

Underground at Renard.

Credit: Stornoway Diamond

Renard diamonds on sale at Birks in Montreal.

Credit: Stornoway Diamond

Although the sorting technology has been used in industrial operations, Renard will be the first diamond mine to incorporate it. Asked about the risks of being the first diamond miner to use the technology, Godin noted that TOMRA spectral sorting equipment is widely used in mining.

“When we did our tests it was at high rates with equipment that was sized for the operation, not for a lab, so we are pretty confident we’ll be successful with this,” he said.

The new circuit, which will add about $1 per tonne in operating costs (currently running around $54 per tonne), can be expanded in the future. As it will remove about 35-40% of the waste, it also has the added benefit of opening up capacity in the back end of the plant.

Diamond market Other than the breakage issue, Stornoway has reported that operations are running smoothly — mining costs have been in line with expectations and the orebody has delivered higher grades than expected (in the third quarter, grades were 12% above plan).

And after being initially cautious, buyers have warmed to Renard goods, said Stornoway president and CEO Matt Manson.

“Since the first sale last November, we’ve increased in real terms — looking through the mix, normalizing the mix, normalizing the quality assortment and the size distribution — by 19%,” Manson told Canadian Mining Journal in September.

Only about 3-6% of the increase has been due to a rise in the overall market, he added.

“We’ve had very good reports on yield, the amount of polished you can get out of the rough,” Manson said. “There’s no skins or coats on our goods — they’re very easy to assess when you pick them up and look at them and they’re very predictable when you polish them.

“After about 1 million carats of sale, we’ve only had one report of a diamond breaking on a polishing wheel.”

To the end of September, Stornoway had completed seven diamond sales (for a total of nearly 1.2 million carats), averaging US$81 per carat in the first quarter, US$87 per carat in the second and US$94 in the third. Due to several factors, including the breakage issue in the plant and market conditions, the company said its pricing figures would likely fall below its 2017 pricing guidance of US$100-132 per carat given earlier in the year.

In the second quarter, Stornoway reported net income of $2.3 million on revenue of $42.6 million. Renard is expected to produce 1.8 million carats per year over a 14-year mine life.

Stornoway has also been active on the exploration side: it recently staked three new properties based on a review of proprietary databases, with work programs planned for this year, after access permits are received.

The company discovered two new kimberlites at its Adamantin property 100 km south of Renard after a drill program completed in April. Diamond results are pending.

—With files from Canadian Mining Journal, October 2017.

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Sub-arctic environment.

Aggressive deadline.

Successful delivery of engineering for the diamond processing plant at Quebec’s first diamond mine.

Impossible?

Not for DRA. The Renard Mine is located in the James Bay region of Quebec, an environment that poses logistical and climatic challenges. DRA’s smart engineering solutions and fit-for-purpose design addressed the climatic conditions by positioning the process plant inside a winterized building with an optimized footprint. This resulted in capital and operating cost savings. DRA’s global project team quickly adapted to the requirements and successfully delivered the full diamond processing plant at Quebec’s first diamond mine within very tight timelines.

DRAglobal.com

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2017-10-31 5:06 PM

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GAHCHO KUÉ makes the grade

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fter reaching commercial production on March 1, De Beers’ and Mountain Province Diamonds’ (TSX: MPVD; NASDAQ: MPVD) Gahcho Kué mine pushed into high gear with full production in mid-year.

On a conference call in August, interim president and CEO David Whittle noted that operating costs have been in line with expectations and the plant performance has been “outstanding.”

The 5034 orebody at Gahcho Kué, 280 km northeast of Yellowknife, in the Northwest Territories, has been outperforming in terms of grade.

For the first six months of the year, the mine processed 1.3 million tonnes of ore and recovered nearly 2.5 million carats.

The average grade of 1.97 carats per tonne was some 20% higher than expected.

As a result, the JV has raised production guidance for the year to 5.5 million carats from 4.4 million. For Mountain Province’s attributable production (49%), the increase is to 2.7 million carats from 2.2 million carats.

Gahcho Kué is forecast to produce an average of 4.5 million carats per year over a 12-year mine life.

On the pricing side, early Gahcho Kué diamonds have fallen within the US$70-90 per carat guidance the company issued in April for 2017 sales. However, that falls well short of a February 2014 modelled value of US$123 per carat.

On the conference call in August, Whittle said that “price discovery remains somewhat challenging.”

He noted that while prices have strengthened somewhat in recent months and the effects of India’s demonetization had largely dissipated as of July, prices are still about 20% below the levels of 2013/14. Prices for the second half of the year are expected to be stable but flat.

In addition, the diamond distribution in the upper layer of the 5034 kimberlite is highly variable, and the early sales are so far not reflective of bulk sample results — which were taken across the length, breadth and depth of 5034. The kimberlite has six lobes.

“We’re still seeing a lower quality distribution in mine production relative to what we’re expecting when we get further

Mining at Gahcho Kué, in the Northwest Territories.

Credit: Mountain Province Diamonds

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Scenes from Gahcho Kué.

Gahcho Kué is located 280 km northeast of Yellowknife, in the Northwest Territories.

Credit: Mountain Province Diamonds

Credit: Mountain Province Diamonds

into 5043 orebody,” Whittle said. Whittle was appointed interim president and CEO after Patrick Evans stepped down in June, after 11 years with the company. (Evans will be the new CEO of Dominion Diamonds after the takeover by Washington Companies is completed this fall.)

The company received an average of US$72 per carat in the first quarter (three sales totalling 522,000 carats) and US$91 per carat in the second quarter (two sales totalling 370,000).

In August, the company warned that the average per carat price for its next two sales would be lower because of a change to territorial government procedures regarding royalty valuation for smaller goods, allowing them to be fast-tracked into the sales cycle, and inflating their numbers relative to larger goods.

In its seventh sale, in September, the company sold 463,000 carats for US$27.1 million or US$59 per carat. Adjusting to include fancies and specials at the price paid

by De Beers, and to exclude smaller fasttracked goods, the average value was US$72 per carat, which the company said is consistent with the year-to-date adjusted realized sale value of US$75 per carat.

In the second quarter, the company reported net income of $7.6 million or 5¢ a share on revenues of $27.6 million from two diamond sales (215,000 carats in total).

The Gahcho Kué partners recently reported they will conduct a $2.3-million fall million exploration program in an area between the 5034 and Hearne pipes known as the Southwest Corridor. Stripping activities in the area, which was slated in the mine plan to be mined as waste rock, turned up diamond-bearing kimberlite. Geophysical surveys will be followed up by drilling later in the year.

funding requirements to reflect current market conditions,” it said this spring.

The creditors have extended the deadline several times in return for Mountain Province providing an updated financial model and life of mine plan, an independently prepared diamond pricing valuation comparison between production sold to date and historic samples, and other information.

In late August, the company reported that some terms had been agreed on: that it would fund a cash call reserve account with at least US$25 million by Sept. 15, that it would not use the full US$370 million available to it under the original agreement, and instead stop at the current outstanding balance of US$357 million, and that quarterly interest payments would be made from cash flow rather than drawing on the loan facility.

TSXV:NAR

Loan agreement Mountain Province is making progress on renegotiating some terms of a US$370 million loan it arranged in 2014 to fund its portion of mine construction. Under the original terms, Mountain Province was required to have a cash call reserve of US$27.9 million as of May 1.

But the company has been in discussions with its lenders to “realign the reserve account

Exploring Diamond Opportunities

in Canada

Tel: 604.668.8355 info@northarrowminerals.com

@narminerals northarrowminerals northarrowminerals.com

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Diamond market slows

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Miners overlooking the plant at the Jwaneng mine in Botswana.

Credit: Debswana

By Paul Zimnisky

A Assorted rough diamonds from De Beers mines.

Credit: De Beers

strong recovery followed an industry-wide diamond inventory buildup in 2014-2015 and another slide after India’s demonetization in late 2016. However, lately, the diamond industry’s momentum has begun to stall. While industry fundamentals are not necessarily negative, signals are mixed with a subdued tone.

In the diamond industry’s largest market, the U.S., retail diamond jewelry demand is somewhat underwhelming. Large national retailers have underperformed so far this year despite a resilient economy and a stock market that seems to make new highs daily. In China, the industry’s fastest growing large market, demand is improving but the market is not thriving.

Rough prices are higher this year, but polished is flat, if not down in some categories, and there are indications that excess polished inventory is building.

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Rough diamonds from Alrosa mines.

Credit: Alrosa

One of Alrosa’s prospecting teams.

Credit: Alrosa

being considered, however initial production of Luele ore may start as early as 2018 via trucking of ore to the Catoca plant for processing.

Paul Zimnisky is an independent diamond industry analyst, consultant and publisher of the State of The Diamond Market monthly industry newsletter. More information can be found at www.paulzimnisky.com.

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De Beers appears to be attempting to curtail excess supply to the market by maintaining relatively high rough prices while reducing allocations to clients. At the same time, Russian major Alrosa (RTS: ALRS) is increasing production and supply to clients (despite an accident and subsequent production halt at one of its mines) due to “strong demand.”

Through August, De Beers has made $4 billion in diamond sales, a 4.4% decrease year-over-year, but 42.2% more than 2015.

Alrosa has made $3 billion in sales, which is down 0.5% from last year but up 14.8% compared to 2015. De Beers and Alrosa currently represent an estimated 39% and 28% of global diamond production by value and 22% and 26% by volume, respectively.

For the producers, the first half of this year was marked by a notable return in demand for lower-quality rough that was severely impacted after the Indian government demonetized its highest denomination bank notes last November.

Consequently, miners have been unloading excess inventory consisting of primarily lower-quality goods and have thus seen average price per carat figures skewed lower despite raising prices on a like-for-like basis this year. For example, De Beers has seen over a 20% decrease in average price per carat sold in the first half of 2017 over the second half of 2016, but has alluded to a 2-4% increase in their “average price index” over the same period of time. The Zimnisky Global Rough Diamond Price Index, which aims to consolidate global rough diamond price data, is up 3.6% through mid-September.

Perhaps the most significant development in the supply side of the industry is the progression of the Luaxe project in Angola.

Earlier this year, a concession agreement was reached making Angola’s government-run mining entity, Endiama, and Alrosa the primary owners. According to Alrosa, the Luele kimberlite pipe on the Luaxe concession is the largest discovered in the past 60 years, with an assessed value of “over $35 billion.”

The Luele pipe is only 20 km away from the world-class Catoca mine, which is also owned by Endiama and Alrosa.

Luele diamonds are said to be of similar quality to those of Catoca, which are worth about US$100 per carat, but in a highergrade deposit. Construction of a standalone plant at Luaxe is still

9

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CSE : TAI Shares outstanding: 61, 998,801 68,841,801 Contact: Raymond Davies Phone: 416 491 6771 Email: rayal.davies@sympatico.ca Website: www.talmoradiamond.com

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maiden resource for Kennady Diamond’s (TSXV: KDI) Faraday kimberlites has added 5 million carats to the diamond resource at the company’s Kennady North project in the Northwest Territories.

The company reported on Oct. 3 that the Faraday 2 and 3 kimberlites contain 3.3 million inferred tonnes at 1.54 carats per tonne. Faraday 1 wasn’t included in the estimate because of insufficient drilling.

The Faraday cluster is located 2.5 km northeast of the project’s Kelvin kimberlite — which contains 13.6 million carats in 8.5 million indicated tonnes at 1.6 carats per tonne — and only 10 km northeast of De Beers’ and Mountain Province Diamonds’ (TSX: MPVD; NYSE: MPVD) new Gahcho Kué diamond mine.

Kennady’s president and CEO Rory Moore tells Diamonds in Canada during a phone interview that the company has seen an improvement in diamond quality at the Faraday kimberlites.

“The grade is very similar to the grade at Gahcho Kué and Kelvin, but what’s particularly nice about the Faraday kimberlites is the high value of the carats, which is considerably higher than Kelvin,” Moore says.

Diamond valuation results for Faraday 2 and 3 weigh in at US$98 per carat, whereas at Kelvin values average US$63 per carat.

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“

Kennady Diamonds’ Kelvin camp and bulk-sample drilling.

(Left): Bulk-sample drilling at Kennady North.

Credit: Kennady Diamonds

“And if you break it down even further, the Faraday 2 kimberlite is looking even more stellar, in that the grade is 2.24 carats per tonne with a value of US$112 a carat,” he adds. “That’s essentially US$250 rock to mine, which is pretty rich ore.”

And there’s lots of room for Faraday 2 to grow, he adds.

Recent drilling has extended the kimberlite beyond the current resource estimate by another 150 metres. The final hole of the 2,800-metre program intercepted 64.6 metres of kimberlite, one of the longest kimberlite intercepts ever drilled at Faraday 2.

“Faraday 2 certainly doesn’t look to be petering out anytime soon,” Moore says. “We see it as one of the many opportunities to build significant tonnes at the project.”

At Faraday 1, bulk samples returned modelled diamond values of US$108, US$164 and $267 per carat for the low, base case and high values, respectively. The work also confirmed that the kimberlite links up with Faraday 3 at its northwestern tip.

The company is finalizing details of an upcoming drill program, which will further expand the Faraday 2 kimberlite, and test additional targets across the 610-sq.-km property.

The kimberlites at Kennady North are angled and tabular in shape — unlike the carrot-shaped kimberlite pipes seen at Gahcho Kué — and fall within a distinct structural corridor, which the company has coined the “KFC.” “There’s a structural alignment between the kimberlites at Faraday, Kelvin and Gahcho Kué,” he says. “And we control the bulk of the KFC both north and south of the mine, so essentially,

We’ve outlined a number of very nice exploration targets to drill this winter, so we’re hoping that will lead to some new diamond discoveries.

”

—Rory Moore, president and CEO, Kennady Diamonds

we control the whole trend. We’ve outlined a number of very nice exploration targets to drill this winter, so we’re hoping that will lead to some new diamond discoveries.”

Moore is no stranger to diamond discoveries. Nearly three decades ago — before diamonds were discovered in Canada — Moore was hired as a consultant by Chuck Fipke, founder of Dia Met Minerals, to lead interpretations at the company’s Ekati project in the Northwest Territories.

Moore says he was attending a conference with Fipke and mentor John Gurney in Saskatoon in 1991 when a geologist on the rig at Ekati called Fipke and said “the eagle has landed.”

“Chuck was very paranoid about security back then and thought his phone was being tapped, so we set up a code phrase for the geologists to use if kimberlite was hit in the hole,” he says.

“When we got the call that day, we immediately jumped in a twin engine aircraft and flew out to site. John Gurney and I positively identified the kimberlite, and we knew we were well on the way to some serious excitement.”

So when Kennady approached Moore early last year, asking if he’d like to assume the role as president and CEO, Moore couldn’t resist.

“For me, going back to the Northwest Territories is just fantastic, I get to relive those early days of discovery and excitement,” he says.

Kennady has 50.9 million shares outstanding for a $147.7million market capitalization.

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Fine Cuts

Lucara sells Lesedi La Rona for US$53M

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ucara Diamond (TSX: LUC) has sold the 1,109-carat Lesedi La Rona stone recovered from its Karowe mine for US$53 million, or US$47,777 per carat.

The sale, made to British jeweller Graff in September, took place just over a year after Lucara withdrew the diamond from auction in mid-2016 because the bids it drew were not meeting expectations.

In a note to clients, BMO Capital Markets mining analyst Ed Sterck noted that the price was “some way short of our estimate of US$75 million.”

Sterck added that getting a price closer to the estimate was problematic because of a lack of buyers prepared to risk so much cash on one diamond.

Lucara received more — US$63 million — for the 813-carat Constellation diamond it sold last May, but Sterck noted that the Lesedi La Rona is believed to be more challenging to cut.

In a release, William Lamb, President and CEO of Lucara, said the discovery of the Lesedi La Rona was a company defining event that solidified the amazing potential of Karowe.

“We took our time to find a buyer who would take the diamond through its next stage of evolution,” he said.

“The price paid is also an improvement on the highest bid received at the Sotheby’s auction in June 2016. Graff Diamonds is now the owner of the Lesedi La Rona as well as the 373-carat diamond, purchased earlier this year, which formed part of the original stone. We are excited to follow these diamonds through the next stage of their journey.”

Lucara Diamond’s Karowe diamond mine, in Botswana.

(Below): The Lesedi La Rona stone.

Credit: Lucara Diamond

The company recently completed modifications to the plant at its Karowe diamond mine, in Botswana, aimed at maximizing the value recovered in two different size categories.

The Mega-Diamond recovery circuit processes material from 50 mm to 120 mm, while the Sub-middles XRT circuit processes material from 4 mm to 8 mm.

Also in September, Reuters reported that the Botswana government is proposing an amendment to its Precious and Semi-Precious Stones Act that would allow it the first right to buy any unusually large stones recovered. The proposal states the purchases would be made by agreement of both parties at the current market price. Lucara said in a release that it supports the policy “as a way for both the government and the company to

achieve sustainable revenue at market prices for the sale of its diamonds.”

In its second quarter, Lucara reported net income of US$32.2 million on US$79.6 million in revenues, down from US$46.1 million in net income on US$140.8 million in revenues in the same quarter a year earlier.

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North Arrow advances Naujaat Junior makes new discovery at Mel

North Arrow’s Naujaat project in Nunavut, where it completed a mini-bulk sample this summer.

Credit: North Arrow Minerals

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orth Arrow Minerals (TSXV: NAR) completed a $3.2-million exploration program this summer at its Naujaat project, in Nunavut, focused on advancing it towards a preliminary economic assessment.

The work at Naujaat (formerly named Qilalugaq) included the collection of a 234-tonne mini-bulk sample from the 12-hectare Q1-4 kimberlite. The kimberlite contains a population of rare, fancy orangeyyellow diamonds that North Arrow is anxious to assess.

This summer’s mini-bulk sample was collected from an “undertested” section of Q1-4 and will help the company characterize the diamond population in this section. The exposed kimberlite exposed a north-trending internal contact between distinct

kimberlite blue and green phases as well as a mixed blue and green area.

North Arrow also conducted an 11-hole, 3,469-metre drill program to better define Q1-4 for indicator and microdiamond analysis, and to feed into a new geological model for the kimberlite, which will be prepared next year. The drill program collected 2,440 kg of drill core.

Drilling focused on the kimberlite below the current resource, which extends to 205 metres depth. Q1-4 hosts an inferred resource of 26.1 million carats in 48.8 million tonnes grading 53.6 carats per hundred tonnes.

A larger bulk sample is planned for 2018.

In October, North Arrow also announced a discovery at its Mel project in Nunavut. A 62.1-kg sample from the ML-8 kimberlite returned

23 diamonds larger than 0.106 mm, including one stone larger than 0.6 mm and another colourless diamond larger than 0.85 mm.

“The presence of two diamonds greater than 0.6 mm in this small sample is highly encouraging,” said North Arrow president and CEO Ken Armstrong in a release. “These initial microdiamond counts compare favourably with results from the diamondiferous Aviat and Naujaat kimberlite fields, located 240 km to the north and 210 km to the southwest of Mel, respectively.”

North Arrow will drill ML-8 and other targets at Mel next year.

The company also holds the Pikoo project in Saskatchewan.

North Arrow closed a private placement for $5 million in May. NOVEMBER 2017 v 21

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Peregrine tests underground potential of CH-6

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eregrine Diamonds (TSX: PGD) completed an $8.5-million summer work program at its Chidliak project, 120 km northeast of Iqaluit, this year focused on expanding resources at the CH-6 kimberlite.

The work included a 5,288-metre core drilling program at CH-6 to expand resources below 260 metres depth, where the current resource ends, to 500 metres depth. The 15-hole program confirmed that the kimberlite extends beyond 500 metres depth.

An internal concept study completed earlier this year showed that the project’s economics could be improved by considering underground development at CH-6. A preliminary economic assessment (PEA) released last summer projected positive economics for open-pit development of the CH-6 and CH-7 kimberlites.

With a preproduction capex of $434.9 million, the project’s after-tax net present value was calculated at $471.2 million and its IRR at 29.8%.

Over a mine life of 10 years, the mine was projected to produce an average of 1.2 million carats per year.

This year’s program was also aimed at refining geotechnical design parameters of the CH-6 open pit (particularly

Diamonds larger than 0.11 carat from a 2013 bulk sample of CH-6.

Credit: Peregrine Diamonds

pit slope angles), and advancing permitting at the project in Nunavut.

An updated resource estimate for CH-6 is expected to be released in the fourth quarter. If it proves to be of sufficient size and grade, Peregrine will update the PEA to include an underground mining component at CH-6. The PEA could be completed in the first quarter.

CH-6 currently holds an open-pit inferred resource of 11.4 million carats in 4.7 million tonnes grading 2.45 carats per tonne. CH-7 contains 4.2 million carats in 5 million tonnes grading 0.85 carat per tonne. CH-6 diamonds have been valued at a base model price of US$149 per carat; CH-7 diamonds at US$114 per carat.

In order to focus on advancing Chidliak, Peregrine has transferred all

shares in its Botswana-based subsidiary, Diamextrat Botswana to U.K.-based private company Diamond Exploration Strategies (DES UK). In return, it will receive a 1% gross overriding royalty on any production. The deal allows DES UK to buy the licences for $2 million within 60 days of discovery of a diamond-bearing kimberlite; for $5 million within 60 days of delivery of a prefeasibility; or $7.5 million within 60 days of a construction decision.

Peregrine had obtained the licences in 2015 in return for a 1% gross overriding royalty and assuming $450,000 of the private company’s debt.

“We still believe strongly in the diamond discovery potential of Botswana,” said president and CEO Tom Peregoodoff in a release. “This transaction allows us to maintain our focus on our primary asset — Chidliak — while continuing to give us exposure to the 60 plus years of combined diamond exploration experience in Botswana that the principals of DES UK possess, and any exploration success that they have in the future.”

Peregrine raised $10.3 million in a rights offering in August, after starting its summer work program in July with a $1 million loan from chairman Eric Friedland.

Core drilling at the CH-6 kimberlite at Chidliak in August.

Credit: Peregrine Diamonds

22 v Diamonds in Canada

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