Aber Resources Ltd - Street Wire
Aber's production possibilities
Aber Resources Ltd ABZ
Shares issued 45,802,883 Jun 16 close $10.05
Thu 17 Jun 99 Street Wire
ABER AND DIAVIK WALK A TIGHT TIMELINE
by Will Purcell
This week, Aber Resources Ltd. released preliminary results of the 1999
exploration program conducted by its joint venture partner, Diavik Diamond
Mines Inc. Four exploration holes were drilled into the A-180 kimberlite
pipe, which is located 25 kilometres to the northeast of the main camp.
Caustic fusion results are expected later this summer. The A-180 kimberlite
has previously been proven to be diamondiferous. Two holes were drilled
into the body last spring, and 295 kilograms of kimberlite were sent for
caustic fusion analysis. A total of 192 diamonds were recovered, of which
29 were considered to be macrodiamonds. The results pale in comparison with
results from the joint venture's earlier discoveries, but apparently
warranted a closer look.
Of far more interest were the initial results from pipe A-841, which
largely lies on the Ekati (Dia Met-BHP) joint venture ground. This body is
called Piranha by the Ekati partners, and has also been referred to as the
border pipe. The kimberlite was jointly explored by both camps this past
winter. Diavik drilled seven delineation holes this past winter, in
addition to two holes completed in 1997. Caustic fusion results for four of
the nine holes were released this week. Kimberlite weighing 868 kilograms
contained a total of 1,416 diamonds, including 384 macrodiamonds. There was
no mention of any larger stones, and no breakdown of the larger macros by
maximum length was offered.
These results appear encouragingly similar to the caustic fusion results
for the A-154 twin pipes which are part of the Diavik mining plan. The
macro to micro ratio for A-841 stands at 0.37, compared to 0.54 for A-154
south and 0.41 for the north pipe. The A-841 body contains 0.44 macro
diamonds per kilogram, compared to 0.52 for A-154 south, and 0.40 for its
northern sister. These results are highly encouraging. The results reported
for the main Diavik pipes documented any larger stones recovered, and
provided a count of diamonds exceeding one and two millimetres in length.
The lack of similar data for A-841 makes a more detailed comparison
impossible.
Pipe A-841 would appear to reside in an upper class neighbourhood. Its
immediate neighbour to the southwest, A-154 north, has an estimated grade
near 2.5 carats per tonne, and its slightly more southern twin sister has a
grade well in excess of four carats per tonne. Pipe A-418 is roughly one
kilometre to the southwest, and also has a grade near four carats per
tonne. All of the pipes exist on a southwest to northeast line, terminating
with A-21, five kilometres to the southwest, which has a grade of three
carats per tonne. To the northeast, across Lac de Gras, lies the Misery
pipe. This body is part of the Ekati mine plan, and is also a high grade
kimberlite with an estimated diamond content in excess of four carats per
tonne.
Additional delineation drilling will be required to more accurately
determine the shape and position of the pipe, however current indications
are that approximately 30 per cent of the body lies on Diavik ground, and
the pipe is smaller than A-154 south, which contains approximately 12
million tonnes of kimberlite.
The Ekati joint venture has been busy as well. A minibulk sample weighing
approximately 75 tonnes was extracted from two holes in the pipe by reverse
circulation drilling. The sample is apparently being processed at the Koala
plant, with final diamond picking slated for the Dia Met facility in
Colorado. Results are expected in late summer, at which time the remaining
caustic fusion results from the five additional Diavik holes should also be
available.
The A-841 results are sufficient to generate some optimism that the body
might host an economic deposit of diamonds. If so, a number of important
issues would require resolution. The body lies largely on Ekati ground, but
it would be a logistical nightmare for that joint venture to mine the pipe
outside of the Diavik operation. Clearly, the ore would have to be
processed at Diavik as well, as trucking the kimberlite to the Ekati
processing facility does not appear to be feasible. It therefore appears
likely that any future mining of A-841 would take place under the direction
of the Diavik joint venture, and as part of their mining plan. It is indeed
possible that the Ekati group would consider selling their portion of the
pipe to Diavik, rather than become bogged down in a joint venture
arrangement in which they would not have control.
Meanwhile, the Diavik partners await the release of the final report of the
comprehensive study review, conducted by the Canadian government. The draft
report was made available to the public in late May. The government is
expected to release the final version this month for a 30 day public review
period. The government will then review the report and any additional
public input received during the review period, and render its decision as
to whether the project may proceed to the permitting phase.
Aber spokesman, Alan Bayless, said that the Diavik project feasibility
report would be released thereafter, if the government reached a positive
decision on the project. He said, "The important things we have to find out
are what the Minister's terms and conditions for permitting might be." Mr.
Bayless indicated that the project would be on schedule for startup in 2002
if the necessary permits were granted by November.
The draft report of the comprehensive study review is several hundred pages
long, and contains no executive summary. Mr. Bayless said that Aber had
summed the report up in one sentence, stating, "The draft, which remains
subject to revision, indicates that the project will not cause any
significant or unmitigable environmental or socio-economic effects." A
cursory read of the document would appear to bear out that opinion.
Every comprehensive study conducted must consider alternate methods of
carrying out the project. Diavik proposed three alternatives for mining the
pipes. One of the alternatives involved extracting the kimberlite entirely
by underground mining. This method would not have required the construction
of water retaining dikes, but would have necessitated leaving a substantial
crown pillar of kimberlite, approximately 100 metres thick, above the mined
area.
This alternative was determined to be uneconomic by Diavik, an assessment
that the draft report agreed with. Underground mining costs are estimated
to be two to three times higher than open pit mining, and only A-154 south
and A-418 would have ore value suitable for this method. The loss of A-154
north and A-21 would remove five million tonnes of kimberlite from the mine
plan, and the crown pillars would leave another seven million tonnes in
place. The latter loss would be particularly significant, as the top layers
of the pipes are considerably richer than the lower sections. The potential
loss of revenue was estimated at $2.3-billion (U.S.).
A second alternative proposed underground mining with the extraction of the
crown pillar by means of smaller open pit operations. Roughly half the ore
would be extracted by open pit, and the remainder removed by underground
operations.
The final proposal involves extracting a majority of the kimberlite by
larger open pit operations. This alternative requires longer dikes than the
second proposal. The increase in length and required material for the dikes
over the second alternative would only be about 30 per cent. The area
enclosed by the dikes would increase by almost 50 per cent. It is this
scheme that was advanced by Diavik, and the draft report suggests that this
alternative is indeed the preferred method.
The report does require Diavik to consider mine plan improvements into the
future. The responsible government authorities suggested Diavik evaluate
alternate mining technologies prior to dike construction, examine alternate
ways to maximize pit backfilling, and examine ways to recover the currently
uneconomic ore that Diavik proposed to leave in the ground.
In January, Diavik filed supplemental information to the project
description, proposing an alternate method of dike construction. The
revised method would leave the dikes with a smaller footprint, require
fewer resources, and take less time to construct. The most significant
impact of this change was the swapping of A-418 and the A-154 pipes in the
order of mining. The A-154 dike would now be constructed first, and these
pipes would be mined initially. The earlier plan called for A-418 to be
mined first, with A-154 to follow several years later. The revised mining
plan will allow access to the highest grade kimberlite in the earlier
years.
The revised plan also included a revised route for the A-154 dike. The
draft report noted that "The proposed alignment of the optimized dikes is
generally the same as the original proposal, except for a subtle revision
to the A-154 alignment to include the crescent shaped island at the
northeast corner." Apparently, a smaller amount of rock is required to take
this more northeasterly course.
One not so subtle impact of this change directly concerns pipe A-841. The
crescent-shaped island lies immediately to the east of the pipe, and the
more northeasterly course would ultimately take the dike westward across
the body. Should A-841 prove to have an economic grade, it appears quite
possible to include the pipe in a revised mining plan with a minimum of
additional effort.
In order to procure and ship the necessary construction material on the
next winter road, final approval will have to be in place by late fall.
Diavik appears to be operating on a rather tight timeline, although there
is still some room for slippage. If the final comprehensive study review is
released in late June, the public review period would end in late July, and
the government decision could be reached in August. A positive decision,
with few surprises, would allow Diavik to release their feasibility report
shortly thereafter.
The situation is quite similar to that faced by the Ekati group. The final
review panel report was released on June 21, 1996, and government approval
followed on August 9. Before the major licences would be issued, the
government indicated it would review the status of negotiations with the
affected aboriginal groups. Finally, on November 6, formal approval was
given. All of the required permits were issued by early January of 1997,
and the Ekati group was able to transport the required material over the
winter road that year. Ironically, the feasibility report for the project
was not released until early February of 1997.
If the Diavik project receives government approval, and permits are issued
in time for transporting supplies over the winter road, production is
forecast to begin by mid 2002. With predicted annual production of
approximately seven million carats, the project could see gross revenues in
excess of $400-million per year.
Aber shares recovered from a December low of $6.85 to over $12 as
Franco-Nevada Mining Corp. was actively purchasing a 9.6 per cent interest
in the company. The stock has since settled into the $10 range, and closed
Wednesday at $10.05.
(c) Copyright 1999 Canjex Publishing Ltd. canada-stockwatch.co |
