Exploration activities at the Chidliak diamond project on Baffin Island, Nunavut, in Northern Canada, will con- tinue at a steady pace during 2011.
Peregrine Diamonds owns 49% of Chidliak and is the operator of the project, while global mining giant BHP Billiton, which is the discoverer, operator and majority owner of the Ekati diamond mine, owns 51%.
Peregrine investor relations and corporate vice-president Mike Westerlund tells Mining Weekly that, similar to 2010, the company expects to have a steady stream of results throughout 2011.
“We will have additional microdiamond results from our 2010 discoveries and from drilling conducted on existing kimberlites to announce in the first quarter of 2011. We will conduct exploration drilling to discover new kimberlites from March to September, beginning with the winter drilling of kimberlites and targets that are lake-based,” says Westerlund. “We are still finalising our plans for the year with BHP Billiton, but expect that this year’s programme will be of similar size and scale as the $15,3 million 2010 programme.”
The company expects to undertake more drilling and to collect several minibulk samples from the kimberlites with economic potential this year. Further, it will undertake an aggressive exploration programme to discover new kimberlites.
Thereafter, the drill core and samples that are collected will be submitted for diamond testing, and the results will come in during autumn and winter.
“We are looking at a full year of comprehensive news flow again. We will also be advancing the logistical planning that would facilitate the extraction of larger samples from key kimberlites in 2012,” says Westerlund.
He explains that, in 2008, it discovered three kimberlite pipes at Chidliak; in 2009, an addi- tional 13 were discovered, and, in 2010 an additional 34 kimberlites were found, bringing the total on the project to 50 to date.
Of the 27 that have had diamond results reported so far, 26 have diamonds and seven kimberlites, namely the CH-1, CH-6, CH-7, CH-28, CH-31, CH-44 and CH-45, have coarse diamond-size distributions and are considered to have economic potential in Arctic settings.
“Minibulk samples from the CH-6 returned grades of 6,8 ct/t to 2 ct/t , which, if confirmed by future work, would make this one of the highest-grade kimberlites in the world. “Clearly, the CH-6 is a very important pipe for the project,” says Westerlund.
“We have six kimberlites with economic potential clustered together in what we are calling the Southern Focus Area, an area with an 8 km radius. One of these kimberlites, the CH-31, has a surface expression of 5 ha, making it the largest on the property to date. An 840 kg sample from the CH-31 returned 1,39 ct of commercial-sized diamonds, and, if this result is repeated in future samples, this pipe could play a major part in our future plans.”
He explains that, as a general rule of thumb, a kimberlite pipe with a 1 ha surface area has five-million tons of kimberlite to a depth of 200 m.
“Having a dense cluster of kimberlites with economic potential is important, because one can envision them serviced by one central processing facility in a potential future mining scenario,” says Westerlund. “Also very promising is the fact that the majority of our kimberlites either come to the surface or are covered by shallow overburden, making potential future mining a much simpler exercise than if, say, they were covered by a deep lake such as the Diavik kimberlites are.
“It is the presence of large, good-looking diamonds in the relatively small samples from the Chidliak kimberlites, and the sheer number of kimberlites that we are discovering, that make us believe that the project will host a significant diamond mine in the future,” says Westerlund.
He comments that the discovery of this prolific diamond field in the Arctic offers both blessings and challenges.
“We are fortunate that our project is located about 100 km from Iqaliut, the capital of Nunavut, which has a large marine port, making the transportation of bulk supplies a relatively simple exercise. “The topography from Iqaliut to our Chidliak project is relatively flat and should not pose any significant issues for year-round road access. “This puts us in a much better situation than the big diamond mines in the Northwest Ter- ritories which rely heavily on an unpredictable seasonal ice road to bring in their bulk supplies,” says Westerlund.
“Being so far north does restrict our exploration activities outside of the March to Septem-ber timeframe, owing to the darkness and weather, but if and when we are an operating mine, we expect we will operate 12 months a year.”
He adds that the government in Nunavut is pleased with the company’s progress to date in the mining of one of the few oppor- tunities to achieve economic sustainability in the North.
“The federal government’s focus on northern sovereignty should lead to more investment into local infrastructure, including, possibly, power-generation plants and deep-water ports.”
He comments that the fundamentals for diamond supply and demand are very bullish for diamond prices right now.
“We are pleased to note that demand for diamonds in emerging economies is growing, as diamonds make their way into the hands of the expanding middle class. In 2010, China overtook Japan as the second-largest consumer of diamonds in the world, behind the US. This has very positive implications for demand because of the sheer size of this growing market,” says Westerlund.
“On the supply front, Ekati, Diavik and Argyle are all large producing diamond mines that are moving to underground operations as the openpit mines are exhausted. “This will lead to fewer carats produced at higher cost. There are no new diamond mine devel- opment projects of the size of Ekati or Diavik on the horizon currently, suggesting that there will be supply constraints for rough diamonds in the near future.
“Chidliak is one of the most exciting diamond projects in the world right now, and we look forward to advancing the project and demonstrating its true potential in the coming months and years,” says Westerlund.
“When we look at the shareholder value that Aber was able to realise with its 40% ownership of Diavik through the creation of the vertically integrated Harry Winston, we start to see the potential of what our 49% ownership in Chidliak could deliver.
“We are in the value creation phase of growth right now, and want to keep as large a percentage ownership as we can. Chidliak compares favourably to the early days at Ekati and Diavik, and we have no intention of parting with this asset at this time,” explains Westerlund.
He says that, as the operator at Chidliak, the most important task for the company is ensuring that the exploration programme is undertaken in a safe and efficient manner despite what can be challenging seasonality and weather conditions.
Peregrine will participate in this year’s Prospectors and Devel-opers Association of Canada (PDAC) event and can be found at booth 2304.