With a name like Vaaldiam Mining one’s mind immediatelyzeroes in on diamonds in South Africa, but that would be a mistake.Vaaldiam Resources, as it was known in 2004 when Minews first wroteabout it, has been chasing diamonds in Brazil for several years. KenJohnson, who was the chief executive at the time, explained back thenthat although ‘Vaal’ comes from the Vaal River, which is the birthplaceof diamonds in Africa, the focus was on the State of Rondonia in Brazil,where a diamond rush had resulted, following the discovery of twokimberlite pipes by garimpeiros on the Rooseveld Indian Reserve in 2002.These pipes, 15 kilometres along the Lajes river from the Pimenta Buenoproperty owned by Vaaldiam, and the associated downstream alluvialdeposits, were producing at a rate of 100,000 carats per month only twoyears later. In a very short time Rio Tinto, which had relinquished thePimenta Bueno property in late 1900s changed its mind and agreed tore-acquire a controlling interest in the property by spending a total ofUS$12.5 million over three years.
This is all old history but itdemonstrates that Ken was quick on his feet and usually in the rightplace at the right time. Now the focus is on Vaaldiam’s 51 per centinterest in the Brauna diamond project in the State of Bahia and RobertJackson, a mining engineer, has taken over as chief executive, thoughKen is still in charge of operations in Brazil. This project covers 50square kilometres and consists of three exploration concessions whichencompass four diamondiferous kimberlite pipes or blows that areassociated with a system of 22 kimberlite occurrences over a distance of15 kilometres. At the beginning of this year an initial resourceestimate was announced for the B3 kimberlite with 630,000 tonnesgrading 24.58 carats per hundred tonnes (cpht) to a depth of around 40metres in the South Lobe and 670,000 tonnes at just 4.72 cpht in theNorth Lobe, all in the indicated category. In addition there were alsoinferred resources to a depth of approximately 200 metres containing3.75 million tonnes at a grade of 24.6 cpht in the South Lobe and 1.04million tonnes at a grade of 4.7 cpht in the North Lobe.
So the South Lobe has many more diamonds, with 155,000 carats in theindicated category and another 922,000 carats inferred, while the NorthLobe offers only 31,000 carats indicated and 49,000 carats inferred.Even more important, the average value per carat in the South Lobe is aheady US$339 per carat, while that in the North Lobe is only US$98 percarat. Small wonder then that the South Lobe was effectively the focusfor a preliminary economic assessment, which proved positive. Based onan earlier resource grade of only 16.8 cpht this study showed a netpresent value of US$33.6 million and an internal rate of return 42 percent using a 10 per cent discount rate and a diamond value of US$338 percarat. But subsequent to that a recent resource estimate from ACA Howeusing a grade of 24.58 cpht whacked these figures up to US$101 millionand 107 per cent respectively which leaves little doubt as the project’spotential.
The studies have envisaged an open pit operation producing 720,000tonnes per year for five years. Based on the earlier Coffey resourcethat would mean production of 530,000 carats per year, but this wouldrise to 839,000 carats per year on the Howe figures. The capital cost islikely to be a modest US$25 million, including a 15 per centcontingency, and average open pit life of mine operating costs shouldcome in at around US$31 per tonne, on the basis of a conceptual mineplan down to 200 metres. Small wonder that Robert Jackson has decided tospend US$3.9 million on the Brauna property this year. His strategy nowis to focus on the kimberlite potential at Brauna, to increase theinitial B3 diamond resource and to bring that kimberlite into productionas quickly as possible. Fortunately, Vaaldiam has a portfolio ofinvestments which can be sold so it’s under no particular financialpressure.
A significant part of this portfolio is the holding in Flemish GoldCorporation, a company with mining assets in Africa which has recentlyraised C$10 million by a placing and which will seek a listing in Canadalater this year. Vaaldiam has 10.6 million shares in the company whichis equivalent to 18.5 per cent and the recent fund raising at C$1.00 perunit through BMO Capital Markets should ensure a price better thanC$1.00 at listing. That might be an opportunity for Vaaldiam to sell itsshares and raise nearly half of the capex required for Brauna 3.However, such a move would be a bit of a volte face for Robert Jacksonwho said last month that Flemish was a key part of Vaaldiam’s growthstrategy. Even so, management is all about making difficult decisionsand it is a fair bet that North American shareholders in Vaaldiam preferdiamonds in Brazil to exploration in Burundi, Rwanda and Uganda.
Unfortunately it proved impossible to track down Robert or KenJohnson at the company’s offices in Vancouver or Belo Horizonte, somaybe they were at one of the innumerable mining conventions that takeplace in North America at this time of year. What we know, however, isthat good results were received from a bulk sample taken last year interms of high grades and quality diamonds, and the best way forward witha kimberlite is to repeat such an exercise on a larger scale. The planis to sink a shaft in the centre of B3 to a depth of at least 80 metresand take another bulk sample which can be used in the feasibility study.The nice thing about such projects is that bulk sampling may merge intoa commercial operation if everything goes right. In this case therewill be more delineation drilling to understand more about thekimberlite dyke system between Brauna 8 and Brauna 21, but the messageis that the big bet is now on the Brauna project.