Site visit: Kennady causes a commotion
Diamond junior expands unique Kelvin kimberlite
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By: Lesley Stokes 2015-11-01
YELLOWKNIFE — There’s a frosty glow across the rugged northern tundra at the Kennady North diamond project, 280 km east of Yellowknife, but the icy shimmer still doesn’t compare to the sparkle of diamonds trapped in the rocks beneath.
For the past three years, owner and operator Kennady Diamonds(TSXV: KDI) has been on the hunt for these precious stones at its flagship Kelvin kimberlite pipe, and the high-grade results has everyone in the diamond business intrigued.
Diamonds in Canada travelled to Yellowknife to meet with president and CEO Patrick Evans before venturing out on a site visit to see the project and find out why it’s creating such a stir.
“Kennady North is one of the highest-grade diamond discoveries in the world,” he says while waiting for a table at the eccentricBullocks fish restaurant located at the heart of the city. “We believe we have Canada’s next diamond mine and that’s why we’re committing a huge amount of money towards it.”
The company recently closed the first tranche of a $48-million private placement, which is enough cash, Evans says, to advance the project to full feasibility by the end of 2017.
But first, the company is scheduled to deliver the maiden resource for the Kelvin kimberlite pipe before the New Year — building on bulk-sample results released in August. The 443-tonne bulk sample returned 16,247 diamonds weighing 892.9 carats for a sample grade of 2.02 carats per tonne.
“We’re calculating the resource based on a conceptual open-pit design that extends to 350 metres depth,” Evans says.
The company is expecting a resource estimate to fall between 13 and 16 million tonnes at grades of between 2 and 2.5 carats per tonne. Evans notes that the Kelvin bulk sample was taken from the upper reaches of the deposit, where the grades are usually lower.
Leading up to its initial resource later this year, at presstime, Kennady had just released results from a valuation study by WWW International Diamond Consultants on a 989-carat diamond parcel from Kelvin. The diamonds were separated into four parcels representing three zones of the kimberlite. The Zone A parcel of 442.82 carats was modelled at US$56 per carat and the Zone B parcel of 447.05 carats at US$70 per carat. A Zone 3 parcel of 80.44 carats was too small to create a modelled price, but the parcel’s average price was reported at US$123 per carat. Values for a small (16.79 carat) fourth parcel of mixed diamonds weren’t released.
While there were only 88 diamonds greater than 0.66 carat per stone in the overall parcel, WWW noted that it was “encouraging to see so many good colour white gem stones, especially in the C sample.”
The three highest-value diamonds in the parcel were: a 4.22-carat Zone B stone valued at US$1,603 per carat; a 2.58-carat Zone C stone valued at US$1,366 per carat; and a 2.38-carat Zone C stone valued at US$1,196 per carat.
In a release, Evans said he was pleased that the results confirm Kelvin hosts a population of high-value, gem-quality white diamonds. “These good results were achieved despite the valuation being done at a challenging time with the rough diamond price index at multi-year lows,” he noted.
The company will follow up with a 500-tonne bulk sample from the Kelvin North Lobe in early 2016, which is expected to more than double the Kelvin diamond parcel to over 2,000 carats, the size recommended by the CIM for accurate revenue modelling for a feasibility level study.
Geological model
At the site, Evans uses a 3-D-printed geological model to demonstrate the unique shape and grade distribution of the kimberlite — a special type of igneous rock that originates from deep within the earth’s mantle.
He explains that around 150 km below the surface, high temperatures and pressures condense any carbon stored in the rocks into a diamond.
If one of these mantle plumes intercepts a diamond-enriched layer during its ascent, he says, it’ll assimilate the diamondiferous fragments before venting to surface in the form of a vertical, cylindrical pipe.
But the geology at the Kennady North property doesn’t quite fit with the conventional model explorers use to zero in on the pipes, which is likely why previous explorers missed its potential.
“In the world of kimberlite geology, people look for a round lake and indicator trains to point them towards vertical, carrot-shaped bodies that host the diamonds,” Evans says during a one-hour float-plane journey to the property. “But if you’re looking for something like that, then you’re certainly not going to find this. Kelvin is the first of its kind: It’s unique and it has everyone excited.”
Peering outside the plane window, it’s easy to see how the lakes can be an easy distraction for explorers at these northern latitudes.
Scattered across the rolling and rugged landscape are a countless number of irregularly shaped bodies of water, partially frozen by the falling temperatures of an approaching winter and sparkling like diamonds under the mid-day sun.
In the distance looms the Gahcho Ku diamond mine, which is in development under the world’s leading diamond miner, De Beers, with 49% joint-venture partner Mountain Province Diamonds(TSX: MPV).
The mine is scheduled to start producing from three kimberlite pipes by late 2016, which boasts reserves of 55.5 million carats within 35.4 million tonnes at 1.57 carats per tonne.
Almost 20 years ago, De Beers ventured onto the Kennady North property, 5 km northeast of Gahcho Ku, and identified a sheet-like kimberlite that outcrops at surface and plunges gently undercover, where it mysteriously vanishes at depth.
“They didn’t think the kimberlite went anywhere so they returned the property back to Mountain Province and focused on developing Gahcho Ku because it’s a big job,” says Evans, who is also president and CEO of Mountain Province.
Mountain Province decided to pick up where De Beers left off by funnelling the project into Kennady, and brought on a contract geology crew from Aurora Geosciences to manage the operation.
Shortly thereafter, the technical team discovered that the pipe unexpectedly shifted direction to the north, where it ballooned to over 200 metres vertical length and 50 to 70 metres wide horizontally.
“There’s a lot of ideas around how this pipe was formed, but the one we consider the most probable is that the kimberlite squeezed its way into preexisting structural grain within the rock,” he says. “It’s almost like a branch off a tree, and the big dollar question for us now, is, where’s the trunk?”
At the core shack on site, contract geologists point to fragments of granite that are entrained within the kimberlites, which suggests that the pipe could become a lot bigger than anyone thought previously.
“We think the kimberlite is coming in from the west because we’re seeing a lot of granite fragments in the drill core, and the only place where we see that granite at surface is 700 metres west of current drilling,” he adds.
Exploration drilling is currently under way to test the downplunge extensions of the Kelvin North kimberlite outside the resource model, and so far, the results are showing that the pipe has shifted back towards the northwest.
In a recent press release, Evans noted that drilling has expanded Kelvin’s strike length 120 metres beyond the current model, for a total of 720 metres, and it is still open at depth.
“It looks like the kimberlite is bending back to the northwest, but we don’t know if it’ll continue dipping shallowly or turn down more steeply,” he said during the site visit.
Drilling at Kelvin is suspended for the balance of the year but will resume again in early 2016.
Bulk samples taken from the Kelvin North extensions returned 2.6 carats per tonne from a 2.4-tonne sample for diamonds of commercial size, reported in October.
Meanwhile, two diamond-drill rigs are punching holes just outside camp testing the extensions of similarly shaped kimberlites at the Faraday 1 and Faraday 2 prospects, along with another rig testing the MZ kimberlite, 25 km to the north.
Evans expects that the prospects could add significant tonnage to the project.
“I would be surprised if De Beers isn’t looking in this direction and curious about what’s happening,” he says, predicting that Kennady North may become a neighbouring mine site in the shadow of the world-class miner.
The only obstacle he predicts Kennady may encounter on the road to development is obtaining the class A water license from the Mackenzie Valley Land and Water board — a permit that took De Beers nearly a decade to obtain.
“There are two paths with the review board: either an assessment or a full environmental review, which could take two years, or even longer,” he says. “But we think the risk that Kennady will be pushed to full review is very low because all of the issues have already been identified and studied in extraordinary detail when De Beers went through their permitting.”
Inside the heavily insulated office tent, the crew speak about what it’s like working in the remote reaches of Canada’s North — watching the Northern Lights during a late-night visit to the drill-rig, to the dangers of frostbite working in -40°C conditions.
Winter also brings about a 280-km stretch of ice road from Yellowknife that will service the nearby Gahcho Ku mine, which will help ease logistics for the exploration crew and boost the outlook on future mine planning.
“For us, it’s fantastic knowing that for the next 20 years there will be an ice road that goes right past us,” Evans says. “We’re all very excited about the project, and pleased by how it’s coming together.”
Kennady has traded within a 52-week range of $2.80-6.50 and closed at $3 at press time. It has 29.8 million shares outstanding.
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