Dominion Diamond Corporation Issues Reserve and Resource statement for the Ekati Diamond Mine
TORONTO, April 24, 2013 /PRNewswire/ – Dominion Diamond Corporation (TSX:DDC),
(NYSE:DDC) (the “Company”) is pleased to release the reserves and
resource statement for the Ekati Mine that is expected to be included
in the upcoming 43-101 Technical Report.The Ekati Diamond Mine was
acquired from BHP Billiton Canada Inc. in April 2013 and consists of
two joint ventures, the Core Zone and the Buffer Zone Joint Ventures.
-- The Ekati Diamond Mine consists of 282 mining leases over 262,175 hectares, containing 150 known kimberlites, with Mineral Resources currently estimated for eight pipes, and Mineral Reserves for five. -- Indicated Mineral Resources (inclusive of Mineral Reserves) of 105.7 million tonnes containing an estimated 127.5 million carats. -- Inferred Mineral Resources of 24.9 million tonnes containing an estimated 19.1 million carats. -- Probable Mineral Reserves of 20.6 million tonnes containing an estimated 19.6 million carats. -- Koala is being mined using an incline caving method, and Koala North is using a sub-level retreat mining method. The Fox open pit is currently active. The Misery pit is undergoing a pushback. -- Production to 2019 is supported by the current Mineral Reserves. -- There is significant upside potential to extend the mine life if some or all of the mineralization is promoted to resource status. In addition the Jay, Lynx, Sable and Fox deep mineral resources, may be able to be incorporated in the life-of-mine plan once sufficient additional technical work has been undertaken. -- Additional potential for supplemental process plant feed is present in the form of coarse reject tails that have been stockpiled at Ekati since the start of production in 1998 to present. There is also potential to treat low-grade stockpiles, primarily derived from open pit mining at the Fox kimberlite, if the grades in the stockpiles can be demonstrated to be economic with additional testwork.
The classification of reserves is supported by an economic model,
relating only to the mining of reserves, and prepared solely to justify
the classification as reserves by demonstrating economic value. This
model is the basis for the basis for the 43-101 and includes the
Company’s current estimates of future rough diamond revenue from the
current reserves only, which will be included in the 43-101 technical
report to be published in the next month. The model also includes an
estimate of costs which can be reasonably attributed to the mining and
processing of reserves only.
This model does not constitute the operating plan for the project. The
mine plan implemented by the previous operator included the past and
future mining of substantial additional mineralization which is not
currently categorized as reserves or resources within the meaning of
National Instrument 43-101 but which the Company expects to continue to
mine as part of its current mine plan. The Company may elect to do
further technical work on this mineralization to determine whether such
mineralization can be promoted to Reserve status. The Company is
constrained by National Instrument 43-101 from including this
mineralization in a combined production mine plan.
The Core Zone Joint Venture, which contains the current producing
assets, is held 80% by the Company, and hosts the Koala, Koala North,
Misery, Pigeon, and Fox kimberlites.The Company also holds 58.8% of the
Buffer Zone Joint Venture, which hosts the Jay and Lynx
kimberlites: neither of these kimberlites is ascribed a value in the
current life-of-mine plan.
Conference Call and Webcast
Beginning at 8:30AM (ET) on Thursday, April 25th, the Company will host
a conference call for analysts, investors and other interested parties.
Listeners may access a live broadcast of the conference call on the
Company’s investor relations web site at www.ddcorp.ca or by dialing 888-771-4371 within North America or 847-585-4405 from
international locations and entering passcode 34744794.
An online archive of the broadcast will be available by accessing the
Company’s investor relations web site at www.ddcorp.ca. A telephone replay of the call will be available one hour after the
call through 11:00PM (ET), Thursday, May 9th, 2013 by dialing
888-843-7419 within North America or 630-652-3042 from international
locations and entering passcode 34744794.
About Dominion Diamond Corporation
Dominion Diamond Corporation is a Canadian diamond mining company with
ownership interests in two of the world’s most valuable diamond mines.
Both mines are located in the low political risk environment of the
Northwest Territories of Canada. The Company is the fourth largest
diamond producer by value globally and the largest diamond mining
company by market capitalization, listed on the Toronto and New York
The Company operates the Ekati Diamond Mine through its 80% ownership as
well as a 58.8% ownership in the surrounding areas containing
prospective resources. It also sells diamonds from its 40% ownership
in the Diavik Diamond Mine.
For more information, please visit www.ddcorp.ca
Information included herein that is not current or historical factual
information, including information about estimated mine life, and other plans regarding mining activities at the Ekati Diamond Mine,
estimated reserves and resources at, and production from, the Ekati
Diamond Mine, projected capital and operating costs, future diamond
prices, and the estimated value of the Ekati Diamond Mine, may
constitute forward-looking information or statements within the meaning
of applicable securities laws. Forward-looking information is based on
certain factors and assumptions regarding, among other things, mining,
production, construction and exploration activities at the Ekati
Diamond Mine, mining methods, currency exchange rates, required
operating and capital costs, labour and fuel costs, world and US
economic conditions, future diamond prices, and the level of worldwide
diamond production. Actual results may vary from the forward-looking
information. While the Company considers these assumptions to be
reasonable based on the information currently available to it, they may
prove to be incorrect. Forward-looking information is subject to
certain factors, including risks and uncertainties which could cause
actual results to differ materially from what we currently expect.
These factors include, among other things, the uncertain nature of
mining activities, including risks associated with underground
construction and mining operations, risks associated with the location
of and harsh climate at the Ekati Diamond Mine site, fluctuations in
diamond prices and changes in US and world economic conditions, risks
relating to the price of fuel and the availability and cost of labour
for the Ekati Diamond Mine, the risk of fluctuations in the Canadian/US
dollar exchange rate, as well as risks associated with regulatory
requirements. Readers are cautioned not to place undue importance on
forward-looking information, which speaks only as of the date of this
disclosure, and should not rely upon this information as of any other
date. While the Company may elect to, it is under no obligation and
does not undertake to, update or revise any forward-looking
information, whether as a result of new information, further events or
otherwise at any particular time, except as required by law. Additional
information concerning factors that may cause actual results to
materially differ from those in such forward-looking statements is
contained in the Company’s filings with Canadian and United States
securities regulatory authorities and can be found at www.sedar.com and www.sec.gov, respectively.
Dominion Diamond Corporation (the “Company”) is a Canadian diamond
mining company with ownership interests in two of the world’s most
valuable diamond mines. The Company supplies rough diamonds to the
global market from its controlling interest in the Ekati Diamond Mine,
and its 40% ownership interest in the Diavik Diamond Mine, both located
approximately 300 km northeast of Yellowknife in the Canada’s Northwest
Territories. Dominion Diamond Ekati Corporation, a wholly-owned
subsidiary of the Company, is the operator of the Ekati Diamond Mine.
Unless otherwise specified, all financial information is presented in
Canadian dollars, on a 100% basis.
The Ekati Diamond Mine was acquired by the Company from BHP Billiton on
April 10, 2013. The Ekati Diamond Mine consists of the Core Zone, which
includes the current operating mine and other permitted kimberlite
pipes, as well as the Buffer Zone, an adjacent area hosting kimberlite
pipes having both development and exploration potential. The Core Zone
Joint Venture is held 80% by the Company and 10% each by Dr. Charles
Fipke and Dr. Stewart Blusson. It encompasses 176 mining leases,
totalling 173,024 ha, and hosts 111 known kimberlite occurrences
including the Koala, Koala North, Fox, Misery, Pigeon, and Sable
kimberlite pipes. The Buffer Joint Venture is held 58.8% by the
Company, 10% by Dr. Charles Fipke, and 31.2% by Archon Minerals Ltd. It
contains 106 mining leases covering 89,151.6 ha, and hosts 39 known
kimberlite occurrences including the Jay and Lynx kimberlite pipes.
The Ekati Diamond Mine is located near Lac de Gras, approximately 300 km
northeast of Yellowknife and 200 km south of the Arctic Circle in the
Northwest Territories of Canada. This area is within the Canadian
sub-arctic; cold winter conditions predominate for the majority of the
year, with approximately five months of spring/summer/fall weather each
year when day-time temperatures are above freezing. Mining activities
are conducted year-round.
Road access to the Ekati Diamond Mine is by a winter ice road that is
typically open for 8-10 weeks out of the year, from mid-January to late
March. The ice road is built each year as a joint venture with the two
other operating diamond mines in the region, the Diavik and Snap Lake
mines. All heavy freight except emergencies is transported to the site
by truck over the ice road. The Ekati Diamond Mine has an all season
runway and airport facilities suitable to accommodate large aircraft.
Air transport is used year round for transport of all personnel to and
from the site as well as light or perishable supplies, and as required
for emergency freight.
The discovery of kimberlites in the Lac de Gras region was the result of
systematic heavy mineral sampling over a ten year period by prospectors
Dr. Charles E. Fipke and Dr. Stewart Blusson. By late 1989, Dia Met
Minerals Ltd. was funding the programs and began staking mineral claims
in the region. After making significant indicator mineral finds in the
area, Dia Met approached BHP as a potential partner. The Core Zone
Joint Venture agreement between BHP, Dia Met, Charles Fipke and Stewart
Blusson was subsequently signed in August 1990.
The first diamond-bearing kimberlite pipe on the property was discovered
by drilling in 1991. An Addendum to the Core Zone Joint Venture in
October 1991 gave BHP the right to acquire additional mineral claims
within 22,500 feet of the exterior boundaries of the then property
area. The claims acquired as a result became the Buffer Zone Joint
Venture claims. To date, exploration activities have included till
sampling, airborne and ground geophysical surveys, and drill programs.
Approximately 350 geophysical and/or indicator dispersion targets were
drilled, with a total of 150 kimberlites discovered on the Core Zone
and Buffer Zone properties. The kimberlites were prioritized using
microdiamond and indicator mineral chemistry. Forty kimberlite
occurrences were subsequently tested for diamond content using reverse
circulation drilling and/or surface bulk samples. Significant
macrodiamond results were obtained on seventeen pipes. There has been
no exploration of the Ekati Project area for new kimberlites since
2007. Baseline environmental data were collected throughout the NWT
Diamonds Project area from 1993 to 1996. In 1995, BHP submitted its
Environmental Impact Statement (EIS) for the NWT Diamonds Project to
the Federally-appointed Environmental Assessment Review Panel. After a
comprehensive review, the Government of Canada approved the development
of the NWT Diamonds Project in November 1996.
In 1998, the project was renamed Ekati Diamond Mine after the Tlicho
word meaning “fat lake”. Construction of the mine began in 1997, open
pit mining operations commenced in August 1998, and the Ekati Diamond
mine officially opened on October 14, 1998. In 2011, a major milestone
was reached when Ekati achieved production of 50 million carats of
diamonds. Open pit mining operations commenced in August 1998 at the
Panda pipe, and continued through June 2003. Underground production
from the Panda pipe began in June 2005 and completed in 2010. The
Panda kimberlite pipe is fully depleted.
The Koala open pit operation commenced in 2003 and completed in 2007.
Underground production from the Koala pipe began in June 2007 and the
operation is currently active. The Koala North underground trial mine
was operated from 2003 to 2004. Commercial underground mining at Koala
North began in 2010 and the operation is currently active.
The Misery open pit operation commenced in 2002 and completed in 2006.
Production from Misery stockpiles continued to 2007. Pre-stripping at
Misery for a pushback pit commenced in 2011 and the operation is
active. The Fox open pit operation commenced in 2005 and the operation
is currently active. The Beartooth open pit operation commenced in 2004
and completed in 2008. The Beartooth kimberlite pipe is depleted and
the open pit is being used for fine processed kimberlite tailings.
Table 1 summarizes the Ekati Diamond Mine’s production history.
Table 1: Production History of the Ekati Diamond Mine
000's 000's Grade Fiscal Year Metric Carats Carats per Tonnes Recovered tonne Processed 1999 1,565 1,230 0.79 2000 3,377 2,777 0.82 2001 3,199 2,800 0.88 2002 3,354 4,562 1.36 2003 4,310 5,424 1.26 2004 4,446 6,853 1.54 2005 4,595 4,522 0.98 2006 4,297 3,197 0.74 2007 4,539 4,030 0.89 2008 4,411 4,188 0.95 2009 4,762 4,026 0.85 2010 4,895 3,811 0.78 2011 4,692 3,133 0.67 2012 4,482 2,231 0.50 2013 H1 2, 024 760 0.38 TOTAL 58, 948 53, 543 0.91
Notes to Accompany Production History Table. 1. Fiscal year 1999 - 1 June, 1998 to 31 May, 1999. 2. Fiscal year 2000 - 1 June, 1999 to 30 June, 2000 (13 months). 3. Fiscal year 2001 onward from 1 July to 30 June to reflect BHP Billiton's fiscal year. 4. Fiscal year 2013 H1 reflects period from 1 July to 31 December 2012
The reserve and resource information set out herein, as well as all
other scientific and technical information set out herein, was prepared
by or under the supervision of Mats Heimersson, P. Eng., an employee of
the Company and a Qualified Person within the meaning of National
Instrument 43-101. The Company is currently in the process of preparing
a technical report on the mineral resources and mineral reserves at the
Ekati Diamond Mine, pursuant to National Instrument 43-101. The Company
expects to file this technical report shortly.
Environment and Social Licence
Compliance with environmental requirements and agreements is reported
publicly on an annual basis through various agencies such as the
Wek’eezhii Land and Water Board and the Independent Environmental
Monitoring Agency. Version 2.4 of the Ekati Mine Interim Closure and
Reclamation Plan (ICRP) was approved by the Wek’eezhii Land and Water
Board in November 2011. The amount of financial security currently
provided to government for closure and reclamation of the Ekati
operation is $126 million. Additional payments would be required to
cover development of the Sable open pit. The Company has also posted a
$20 million ‘Environmental Guarantee’ required under the Environmental
Agreement and a $0.9 million security deposit required under the
Fisheries Act Authorizations, which are not specifically related to
closure and reclamation.
Ekati provided an updated estimate of reclamation security to the
Wek’eezhii Land and Water Board in March 2013. The proposed security
estimate is $225 million for existing development areas and Pigeon,
plus an additional $10 million to be provided in future at least 60
days prior to construction at the Sable open pit. Regulatory review of
the updated security estimate by the Wek’eezhii Land and Water Board
and other governmental agencies was initiated in April 2013, and no
final determination as to the final monetary amounts for the security
payments has been made to date.
Drilling and Sampling
Core drilling using diamond-tipped tools is used to define the pipe
contacts, wall-rock conditions, and internal geology but is not used
for grade estimation. Core drilling is also used to obtain
geotechnical and hydrogeological data. In the kimberlite deposits with
declared mineral resources, a total of 786 diamond drill holes (139,540
m) were completed.
Diamonds for grade estimation and valuation are obtained by reverse
circulation (RC) drilling and/or by bulk sampling in underground or
open pit bulk sample mines. Samples are processed using an on-site
sample plant. For the kimberlite pipes with declared mineral
resources, a total of 289 RC holes (62,653 m) were completed.
Conventional concepts of sample preparation and analysis do not
generally apply to diamond-bearing kimberlite deposits. Diamonds from
large samples must be physically separated from their host rock and
described and evaluated. To accomplish that, bulk samples from RC
drilling and/or underground/surface operations, must be processed and
the diamonds liberated and collected using a sample plant facility.
Sample plants are essentially scaled down process plants designed to
handle a few tonnes to tens of tonnes per hour.
Bulk sampling and RC sampling provide information on the size
distribution and value of the diamonds in a pipe. The underground
exploration drift samples (used at Fox, Panda and Koala) yielded large
diamond parcels (more than 2,000 carats) for valuation purposes and,
due to the large individual sample sizes (ca. 40 to 70 tonnes each) and
close spacing of samples (typically 3 m), provided key data on the
effect of increased sample support on grade statistics and on spatial
continuity of diamond grades. During RC drilling, an initial 100 to
200 tonne sample (total of drill hole interval samples) is taken from
each prioritized kimberlite pipe and, if encouraging results are
obtained, more extensive sampling campaigns are undertaken to provide
sufficient grade and diamond value data to support classification of
resources. The density and spatial distribution of RC drill holes
between pipes varies considerably and depends on a number of factors
including pipe size, geologic complexity and grade characteristics
relative to economic cut-offs.
The diamond value is estimated for each size cut-off using exploration
or production sample parcels and process plant partition curves and is
validated using recent sales prices achieved by the prior operator BHP
Billiton. The average diamond value (diamond reference value) is
estimated for each pipe (and in some cases multiple geological domains
within a pipe) using exploration and/or production parcels ranging in
size from several hundred carats to tens of thousands of carats. These
diamond parcels have been valued on both Ekati’s price book (prior to
transaction) and on the Company’s price book and are adjusted for
current market conditions.
Using the diamond reference values from the exploration and production
parcels, the current diamond recovery profile of the Ekati processing
plant and prices from Ekati’s December 2012 rough diamond sale, the
Company has modeled the approximate rough diamond price per carat for
each of the Ekati kimberlite types, shown in Table 2. For the purposes
of this model it has been assumed that there is a 2% per annum real
price growth during the life of the mine excluding the current year in
which pricing is assumed to be flat.
Table 2: Diamond Reference Value Assumptions as at 31, Dec 2012
Joint Venture Kimberlite US$/carat Recovery % Agreement Area Type @1.2 mm @1.2 mm Core Zone Koala Ph5 $358 93% (RVK) Koala Ph6 $415 95% (VK) Koala Ph7 $422 97% (VK/MK) Koala N. $435 96% (RVK/VK) Fox TK $312 95% Misery RVK $112 88% Pigeon RVK $217 88% Pigeon MK $195 83% Sable $140 79% RVK/VK Buffer Zone Jay RVK/VK $74 85% Lynx $257 86% RVK/VK
Notes to Accompany Diamond Reference Value Table. 1. RVK means re-sedimented volcaniclastic kimberlite; VK means volcaniclastic kimberlite; MK means magmatic kimberlite and TK means transitional kimberlite. 2. Diamond price is based upon the diamonds that would be recovered by the current Ekati process plant that uses a 1.2 mm slot screen size cut-off. 3. The recovery factor is the adjustment that is applied to the resource grade that is based on a slot screen size cut-off of 1.0 mm to make it equivalent to the grade that would be recovered by the current Ekati process plant which uses a 1.2 mm slot screen size.
Mineral Resource Estimates
Mineral resources are estimated for the Koala, Koala North, Fox, Misery,
Pigeon, Sable, Jay and Lynx kimberlite pipes.
Mineral resource estimation consists of development of appropriate
geological and domain models, using drill data. Geophysical imaging is
used to aid in modelling shape and size of the deposits at and near
surface for pipes that are not in production; as-mined outlines or
contact points are used to guide the modelling process where production
is underway. Domain boundaries are assumed to be smooth planar
contacts and are adjusted based on geological data. In the case of
internal dilution (e.g. granitic xenoliths), automated modelling has
been used, assuming sub-rounded, horizontal shapes.
Statistical and geostatistical analyses of grade, density, and moisture
content are performed to ensure that the defined internal domains are
appropriate to these properties. Contact analysis is used to support
both hard and soft boundaries. If appropriate, capping can be used to
limit the influence of grade outlier and large stones. Block sizes
depend on the mining method and deposit, and range from 5 x 5 x 5 m to
20 x 20 x 30 m in size. The maximum extrapolation distances used in
interpolation vary for each deposit/domain, and are assessed through
All data are compiled in a Vulcan block model (.bmf). Typically, model
interpolation is performed using ordinary kriging or, alternatively,
the data are simulated. When simulated, 100 equally probable
realizations were created and the average of these realizations
(e-type) was used as the block model estimate. The models were
validated using histograms, a series of swath plots in all three
dimensions, cross validation, comparing pairs of estimated grades to
composite drill holes grades, and visual comparisons across the pipe.
Drill spacing studies were conducted to support mineral resource
classification confidence category assignments. Drill hole spacing
classification is as follows unless otherwise specified:
Measured – less than 30 m to nearest sample;
Indicated – less than 60 m to nearest sample;
Inferred – less than 90 m to nearest sample.
In certain deposits, such as Koala, kriging variance may also be used to
support classification categories. Ekati employs a scorecard rating
system to systematically evaluate kimberlite model parameters and
assign resource classification. The scorecard system extends the grade
point distance based classification based on a workshop rating of key
model data sets including volume, grade, internal geology and diamond
valuation. It also considers other criteria such as tenure status,
processing characteristics and geotechnical and hydrogeological
Kimberlite value (US$/tonne) is equal to average grade (carats per
tonne) multiplied by average diamond value (US$/carat) multiplied by a
recovery factor. For the Ekati mineral resources, a slot screen size
cut-off of 1.0 mm is used and a 100% recovery factor is assumed.
Conceptual pit designs for open cut Mineral Resources (Fox, Misery,
Pigeon, Sable, Jay and Lynx) were completed using Whittle shell
analysis. Parameters used in pit shell analysis varied by kimberlite,
and ranges included; pit slope angles 40-80 degrees, mining costs
$5-8/wet metric tonnes (wmt), processing costs $16-26/dry metric tonnes
(dmt) and G&A costs $17-29/dmt. Diamond valuations were those
indicated in Table 2.
Conceptual underground designs for Koala North were based on a sub level
retreat mining method utilising 20m sub levels and $38-63/dmt operating
cost. Conceptual underground designs for Koala were based on a sub
level cave mining method utilising 20 m sub levels and $38-63/dmt
operating cost. Conceptual underground designs for Fox were based on a
130m deep block cave mining method and $50-84/dmt operating cost.
Underground operating costs vary by elevation within the underground
mines. Diamond valuations used were those indicated in Table 2.
The classification of stockpiles is based on the resource classification
for each source. Active stockpiles were surveyed at the end of the
effective period, 31(st) December 2012. Fox crater domain kimberlite and Run of Mine stockpiles
are included in the 2012 stockpile estimates.
Mineral Resource Statement
Mineral resources take into account geologic, mining, processing and
economic constraints, and have been defined within a conceptual
underground mine design or a conceptual open pit shell. Depletion has
been included in the estimates. No Measured mineral resources are
Mineral resources are reported inclusive of mineral reserves. Mineral
resources that are not mineral reserves do not have demonstrated
economic viability. Mineral resources are reported effective 31
December 2012 on a 100% basis. Mineral resource estimates are
presented in Table 3.
Table 3: Mineral Resource Statement by Kimberlite Pipe – December 31,
Classification Joint Kimberlite Tonnes Grade Carats Venture Pipe (millions) (cpt) (millions) Agreement Area Indicated Core Zone Koala UG 7.4 0.6 4.5 Koala N UG 0.3 0.6 0.2 Fox OP 10.3 0.2 2.5 (+140 RL) Fox UG 20.2 0.3 6.1 (-140 RL) Misery 3.7 4.5 16.8 Pigeon 10.6 0.5 4.9 Sable 15.4 0.9 13.3 Stockpiles 0.1 0.6 0.05 Subtotal 68.2 0.7 48.4 Indicated (Core Zone only) Buffer Jay 36.2 2.2 78.1 Zone Lynx 1.3 0.8 1.0 Subtotal 37.5 2.1 79.1 Indicated (Buffer Zone only) Inferred Core Zone Koala UG 0.3 1.0 0.3 Koala N UG 0.2 0.6 0.1 Fox OP 1.1 0.3 0.3 (+140 RL) Fox UG 5.6 0.3 1.7 (-140 RL) Misery 0.8 2.9 2.3 Pigeon 0.8 0.5 0.4 Sable - - - Stockpiles 6.6 0.2 1.0 Subtotal 15.3 0.4 6.1 Inferred (Core Zone) Buffer Jay 9.5 1.4 12.9 Zone Lynx 0.1 0.8 0.1 Subtotal 9.6 1.3 13.0 Inferred (Buffer Zone)
Notes to Accompany Mineral Resource Table.
1. Mineral resources have an effective date of 31 December 2012. The resources estimate was prepared under the supervision of Mats Heimersson, P. Eng., an employee of the Company and a Qualified Person within the meaning of National Instrument 43-101. Mineral resources are reported on a 100% basis. The Company has an 2. 80% participating interest in the Core Zone Joint Venture and a 58.8% participating interest in the Buffer Zone Joint Venture. 3. Mineral resources are inclusive of mineral reserves. 4. Mineral resources that are not mineral reserves do not have demonstrated economic viability. 5. Mineral resources are reported at +1.0 mm (diamonds retained on a 1.0 mm slot screen). 6.. Mineral resources have been classified using a rating system that considers drill hole spacing, volume and moisture models, grade, internal geology and diamond valuation, mineral tenure, processing characteristics and geotechnical and hydrogeological factors, and, depending on the pipe, may also include kriging variance. 7. Mineral resources amenable to open pit mining methods include Fox OP, Misery, Pigeon, Sable, Jay and Lynx. Conceptual pit designs for open cut mineral resources (Fox, Misery, Pigeon, Sable, Jay and Lynx) were completed using Whittle shell analysis. Parameters used in pit shell analysis varied by kimberlite and ranges included; pit slope angles 40-80 degrees, mining costs $5-8/wmt, processing costs $16-26/dmt and G&A costs $17-29/dmt. 8. The Fox mineral resources are divided by elevation (RL, m above sea level) between open pit and underground mining methods. 9. Mineral resources amenable to underground mining methods include Koala, Koala North and Fox UG. Conceptual underground designs for Koala North were based on a sub level retreat mining method utilising 20m sub levels and $38-63/dmt operating cost. Conceptual underground designs for Koala were based on a sub level cave mining method utilising 20m sub levels and $38-63/dmt operating cost. Conceptual underground designs for Fox were based on a 130m deep block cave mining method and $50-84/dmt operating cost. Operating costs vary by elevation within the deposits. 10. Stockpiles are located near the Fox open pit and were mined from the uppermost portion of the Fox open pit operation (crater domain kimberlite). Minor run of mine stockpiles (underground and open pit) are maintained at or near the process plant and are available to maintain blending of kimberlite sources to the plant. 11. Tonnes are reported as millions of metric tonnes, diamond grades as carats per tonne (cpt), and contained diamond carats as millions of contained carats. 12. Tables may not sum as totals have been rounded in accordance with reporting guidelines.
Factors which may affect the Mineral resource estimates include: diamond
valuation assumptions, changes to the methodology used to estimate
diamond carat content, mining methods, geotechnical and geological
interpretation, and the effect of different sample-support sizes
between RC drilling and underground sampling.
Mineral Reserve Estimates
Mineral reserve declaration is based on Indicated mineral resources and
supported by either an internal pre-feasibility-level or a
feasibility-level study. Mineral reserves were estimated for the
Koala, Koala North, Fox, Misery and Pigeon pipes, and active stockpile
materials. Koala is mined as an incline cave, similar to a block cave,
while Koala North is extracted by sub level retreat. The Fox open pit
is currently active; the Misery open pit is undergoing a pushback.
Mining has not yet commenced at the Pigeon pit. The Panda, Koala, and
Beartooth open pits are mined out. The Panda underground is also fully
Geotechnical parameters used during open pit mine design include inter
ramp, and inter bench angles, structural domains determined from wall
mapping and geotechnical drilling. Underground geotechnical
considerations are more focused on ground support, and monitoring of
There are no grade control programs. However, grade verification of
block models is carried out periodically by collecting and processing
run-of-mine underground and open pit development samples (typically 50
tonnes each). Generally all kimberlitic material within the resource
models is considered to be economic, and is either processed directly
or stockpiled for possible future processing.
Koala underground assumed overall dilution of 4% and 87% of mining
recovery. Koala North underground assumed no dilution and full
recovery of kimberlite by physical sorting of any waste material..
Fox open cut assumed dilution of 7% waste and mining recovery of 96%
diluted material including internal dilution from entrained granite
xenoliths. Misery open cut design assumed dilution of 4% waste and
mining recovery of 98% diluted material. Pigeon open cut design
assumed dilution of 6% waste and mining recovery of 98% diluted
Recovery factors are applied based on parameters established during
evaluation of recovered diamonds collected from bulk samples, and are
specific to each kimberlite deposit and contained geologic domain. The
process plant currently uses 1.2 mm slotted de-grit screen sizes so
that diamonds smaller than the lower screen size cut-off are generally
not recovered. For the Ekati mineral reserves, a slot screen size
cut-off of 1.2 mm is applied (de-grit slot screen used in the current
Ekati process plant) using deposit specific diamond size data and
partition curves modelling actual recovery of the current circuit.
Mineral Reserve Statement
Mineral reserve estimates are based on material classed as indicated
mineral resources. Consideration of the environmental, permitting,
legal, title, taxation, socio-economic, marketing and political factors
support the declaration of mineral reserves. Mineral reserves have an
effective date of 31 December 2012. Mineral reserves are summarized in
Table 4 by kimberlite pipe. No Proven mineral reserves have been
Table 4: Mineral reserves Statement – December 31, 2012
Joint Classification Venture Kimberlite Tonnes Grade Carats Agreement Pipe (millions) (cpt) (millions) Area Probable Core Zone Koala UG 5.8 0.6 3.6 Koala N UG 0.3 0.6 0.2 Fox OP 4.7 0.2 1.1 Misery OP 3.0 4.0 12.2 Pigeon OP 6.7 0.4 2.6 Stockpiles 0.1 0.5 0.04 Total Probable 20.6 1.0 19.6
Notes to Accompany Mineral Reserve Table.
1. Mineral reserves have an effective date of 31 December 2012. The reserves were prepared under the supervision of Mats Heimersson, P. Eng., an employee of the Company and a Qualified Person within the meaning of National Instrument 43-101. 2. Mineral reserves are reported on a 100% basis 3. The mineral reserves are located entirely within the Core Zone Joint Venture area. (DDC is operator and has an 80% participating interest) 4. Mineral reserves are reported at +1.2 mm (diamonds retained on a 1.2 mm slot screen). 5. Mineral Reserves that will be, or are mined using open pit methods include Fox, Misery, and Pigeon. Mineral Reserves are declared using the following assumptions: Fox open cut assumed dilution of 7% waste and mining recovery of 96% diluted material including internal dilution from entrained granite xenoliths. Misery open cut design assumed dilution of 4% waste and mining recovery of 98% diluted material. Pigeon open cut design assumed dilution of 6% waste and mining recovery of 98% diluted material. 6. Mineral Reserves that are mined using underground mining methods include Koala and Koala North. Mineral Reserves are declared using the following assumptions: Koala underground assumed overall dilution of 4% and 87% mining recovery of diluted material. Koala North underground assumed full recovery of kimberlite by the physical sorting of any waste material. 7. Stockpiles are minor run of mine stockpiles (underground and open pit) that are maintained at or near the process plant and are available to maintain blending of kimberlite sources to the plant. 8. Tonnes are reported as metric tonnes, diamond grades as carats per tonne, and contained diamond carats as millions of contained carats. 9. Tables may not sum as totals have been rounded in accordance with reporting guidelines.
Factors which may affect the mineral reserve estimates include diamond
price assumptions; grade model assumptions, underground mine design,
open pit mine design, geotechnical, mining and process plant recovery
assumptions, practical control of dilution, changes to capital and
operating cost estimates and variations to the permitting, operating or
social license regime assumptions, in particular if permitting
parameters are modified by regulatory authorities during permit
Open Pit Mining
Open pit production at Ekati is currently from the Fox pit which has
been producing since 2005. Phase 1 of the Misery open pit was
completed in 2004, and currently waste stripping is underway for a
second phase of open pit mining at Misery pit. A feasibility study for
the Pigeon pipe open pit is in progress and mining by open pit methods
Dewatering of lake systems that have developed over the kimberlite pipes
is generally required prior to commencement of open pit mining
activities. The roughly circular open pits are mined using
conventional truck-shovel operations and are developed in benches that
are typically 10 or 15 m high. The open pits at Ekati are relatively
small. Overall pit wall slopes range between 45-52º( )in waste and 35-37º in kimberlite. Phased mining has been used at the
Fox pipe, but is not widely applied at Ekati due to the small pit
sizes. A single circular access ramp around the perimeter of a pit is
developed progressively as the benches are mined. Waste rock is hauled
to a designated waste rock storage area and dumped to an engineered
design. Ore is hauled directly to the process plant.
Mined kimberlite is hauled directly from the open pit benches at Fox
approximately 11 km to the Ekati process plant. In the case of the
Misery open pit, the kimberlite from the pit will be dumped on a
transfer pad, and then loaded into haulage trucks for transport 29 km
to the process plant.
The open pit mobile equipment fleet includes two rotary blast hole
drills, two diesel hydraulic DTH hammer drills, one diesel hydraulic
shovel and two diesel hydraulic excavators for truck loading, and a
haulage fleet of two 170 t, and twenty-three 100 t capacity rigid-body
trucks. A fleet of 80 t capacity haulage trucks will be used for the
29 km ore haul from the Misery pit. Four of these trucks are now on
site. In addition, the surface mobile fleet includes over 90 units of
The planned open pit for Pigeon will require additional mining equipment
including blast hole and hammer drills, diesel hydraulic excavator,
dozers and loaders. It is anticipated that the existing haulage fleet
will be deployed for ore and waste rock movement. The haulage distance
from Pigeon to the process plant is 5km.
The Koala mine was developed with sublevels spaced 20 m apart vertically
and 5 m x 5 m drawpoints on a 14.5 m spacing (centre to centre). The
highest elevation production sublevel is located at 2050L,
approximately 160 m below the base of the former Koala open pit. Ore
production from the drawpoints is a combination of the blasted
kimberlite and caved kimberlite that lies above the blasted zone
through to the pit. As production proceeds, the top of the cave zone
below the pit is constantly being drawn down, and the level and profile
of the surface expression of the cave zone is closely monitored. Below
sublevel 1970L the mine transitions to an incline cave with the lowest
production level located at 1810L.
The Koala North mine is a sub level retreat operation with 20 m sub
level spacing. Drawpoints are 4.6 m x 4.6 m on a 16 m centre to centre
spacing. Drawpoints are offset between levels to ensure ground
stability and maximum draw.
Kimberlite is transported from the mines via a 1.37 m (54 inch) wide
conveyor system hung via chain from the back of the conveyor ramp. The
system consists of four main underground conveyor sections plus a
surface “stacker” conveyor, with a transfer arrangement between each
conveyor. All production mucking is carried out using load haul dump
(LHD) vehicles, tramming to the remuck bays or loading 45 t capacity
diesel haulage trucks. Ore is dumped into an ore pass system, and fed
to a 500 tph primary mineral sizer before loading onto the 2.4 km long
conveyor system from Koala to the process plant. On surface, the
radial stacking conveyor discharges to an 8,000 t surface stockpile.
The metallurgical process is conventional for the diamond industry. The
current nominal production rate for Ekati main process plant is 13,300
dry tonnes per day. Heavy media separation (MS) and X-ray are the
primary methods of extracting diamonds from processed kimberlite.
Kimberlite processing and diamond recovery at Ekati involves:
-- Primary crushing - redundancy with primary, secondary and reclaim sizers -- Stockpile - used as a buffer between plant and crushing -- Secondary crushing (cone crusher) -- Washing (degritting) -- Heavy media separation -- Recovery o Wet high intensity magnetic separation o Wet X-ray sorting o Drying o Dry single particle X-ray sorting o Grease table -- Diamond concentrate sorting, sieving and preparation for transport to the sorting and valuation facility in Yellowknife
Ekati is an operating mine and key infrastructure on site includes the
open pits, underground mines, sample and process plants, waste rock
storage and tailings storage facilities, buildings (mobile and
permanent), pipelines, pump stations, electrical systems, quarry site,
camp pads and laydowns, ore storage pads, roads, culvert and bridges,
airstrip, helipad, and mobile equipment. There is minimal additional
infrastructure expected to be required for the Pigeon open pit due to
its close proximity to the central Ekati infrastructure.
Deposition of fine processed kimberlite into one of the four licensed
containment cells within the Long Lake Containment Facility will be
completed in 2013 rendering this area available for reclamation field
trials. Deposition will continue to 2018 into two cells that have been
utilized throughout operations. The fourth licenced deposition area is
not currently planned to be used except as contingency or for future
developments. In addition, the mined-out Beartooth pit has been used
since late 2012 for processed kimberlite containment. The containment
cell expansions and Beartooth pit will provide capacity to 2018 with
the mined-out Panda, Koala and Fox pits available to provide additional
capacity beyond that date if required.
Capital and Operating Cost Estimates
The prior operator of Ekati had a financial year ending June 30th. All
the financial information is shown on a financial year end of June 30th
with the six month period of January 2013 to June 2013 shown as 2H
Table 5 shows currently estimated sustaining and mine development
capital from 2013 onward. The costs shown include estimated
contingencies where applicable, but does not include any escalation or
risk contingency amounts for unforeseen events. In addition to ongoing
equipment replacements and general operational upgrades, sustaining
capital will include certain categories of ongoing underground
excavation to maintain mining advances to increasing depths.
Table 5 includes costs associated with the development of the Misery and
Pigeon pipes. The total current estimated capital cost of developing
the Misery pipe is $385 million consisting largely of mining costs to
achieve ore release, and of which $145 was spent by end of December
2012. The current estimated cost for developing the Pigeon project is
$78 million which includes the construction of access roads, and
pre-stripping of waste material to prepare the pit for production and
Table 5 also shows currently estimated operating costs based on the
Company’s operating experience, adjusted to present-day dollar terms.
Given the remote location of the Ekati Diamond Mine, a large portion of
the operating expenditure is fixed, with the major cost items being
labour and fuel (for both power and equipment).
Marketing costs, private royalties and estimated reclamation costs are
not shown in Table 5. These are included separately in the economic
analyses set out below. The reclamation costs are based on Ekati’s
closure cost model that includes all activities required by the
approved Interim Closure and Reclamation Plan.
Table 5 Capital and Operating Costs – Ekati Diamond Mine (100%
CAPITAL COSTS OPERATING COSTS Developing Sustaining Total Direct and Indirect $Millions $Millions $Millions $Millions 2013H2 33 20 53 187 2014 125 34 159 374 2015 129 8 137 210 2016 32 8 40 275 2017 - 8 8 450 2018 - 8 8 392 2019 - 5 5 257 Totals 319 91 410 2,145
Note: Total may not add up due to rounding.
Table 6 represents a cash flow model based only on Probable mineral
reserves, and is presented solely to indicate the economic viability of
the operation and it is not a forecast of expected future cash flows.
The Probable mineral reserves in this cash flow model are sourced from
the Fox, Koala, Koala North, Misery and Pigeon kimberlite pipes.
The production forecast in Table 6 is derived from the Company’s
estimates, based on the current reserves as of December 31, 2012. The
capital and operating costs that are shown in Table 5 are also based on
the prior operators estimates with the Company having applied its own
economic factors, such as exchange rates.
The Company sorts its rough diamonds in Antwerp, Toronto, Canada and
Mumbai, India and then distributes the resulting sales parcels to its
Belgium and Indian subsidiaries for sale. The model is based on
production sales revenue (assume that all diamonds are sold in the year
of production). Marketing cost of $17.7 million per annum is assumed
based on Ekati’s recent budget forecast.
Two royalties are payable. One is to the Federal Government, the second
is payable to a third-party on production from the Misery pipe. The
Federal Government royalty payable is equal to the lesser of 13% of the
output value or a sliding scale royalty payable on the actual
production value that can range from 5% for production between $10,000
and $5 million to 14% for production over $45 million. The Misery
royalty is payable on kimberlite production from the Misery pipe such
that C$18.76 per tonne mined and processed is payable on the first
428,390 tonnes, and C$23.42 per tonne mined and processed is payable on
the next 544,000 tonnes.
The model is shown on a financial year end of June 30(th) with the six month period of January 2013 to June 2013 shown as 2H
2013. These figures do not include rough diamond stocks at the mine
at the opening of the year. In addition, the model does not take into
account any rough diamond inventory available for sale that the Company
held at the end of its January 31, 2013 financial year.
As a further analysis, based on the cash flow model, the sensitivity of
the Ekati Diamond Mine to changes in various parameters can be
demonstrated. Net present value (“NPV”) at a 7% real discount rate is
used as the indicator to see the impact of varying the diamond prices,
the grade, the capital costs, the operating costs and the Canadian/US
dollar exchange rate. For the variables in the sensitivity analysis, a
+/-10% change is applied. The impact on NPV (for the expected life of
mine cash flow model) of this level of variance in selected variables
is shown in Table 7.
Table 6: Cash Flow Model for Ekati Diamond Mine (100% Basis).
Item H2 TOTALS FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 FY35 FY36 Waste mined Total 79.00 6.44 15.72 19.50 17.41 9.98 8.51 1.44 Ore mined UG Koala 5.84 0.14 0.80 1.07 1.19 1.09 0.92 0.62 Koala North 0.29 0.17 0.11 - - - - - OC Fox 4.66 1.79 2.67 0.19 Misery 3.03 - - - 0.32 1.87 0.84 Pigeon 6.73 - - - 0.23 0.84 2.68 2.98 Total 20.55 2.11 3.59 1.26 1.75 3.79 4.45 3.60 Grade UG Koala 0.61 0.78 0.62 0.59 0.51 0.55 0.69 0.76 Koala North 0.57 0.58 0.55 - - - - - OC Fox 0.23 0.29 0.19 0.13 - - - - Misery 4.03 - - - 3.67 4.11 3.98 - Pigeon 0.38 - - - 0.38 0.39 0.38 0.38 Processing Total Tonnes Processed 20.55 2.11 3.59 1.26 1.75 3.79 4.45 3.60 Total Carats Recovered 19.56 0.74 1.08 0.66 1.88 8.59 5.01 1.61 Revenue Average Price1 US$ / ct 332.74 367.25 401.81 216.98 146.42 186.73 304.29 - - - - - - - - - - - - - - - - - Exchange Rate2 US$ / C$ 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Cash Inflow C$ M 4,203 453 396 265 407 1,257 936 489 - - - - - - - - - - - - - - - - Costs Development Capital C$ M 319 33 124 129 32 - - - - - - - - - - - - - - - - - - - - Sustaining Capital C$ M 91 20 34 8 8 8 8 5 Total Operating Costs C$ M 2,145 187 374 210 275 450 392 257 - - - - - - - - - - - - - - - - - Reclamation Costs3 C$ M 435 - 1 - - - 0 25 148 133 54 10 5 4 7 6 5 6 6 6 6 4 2 2 7 Marketing Costs4 C$ M 93 10 17 8 8 17 17 17 - - - - - - - - - - - - - - - - - Increase (decrease) in Working Capital C$ M Cash Outflow 3,083 250 549 356 324 475 417 303 148 133 54 10 5 4 7 6 5 6 6 6 6 4 2 2 7 Net Cash Flow before Taxes 1,119 203 (153) (91) 83 782 519 186 (148) (133) (54) (10) (5) (4) (7) (6) (5) (6) (6) (6) (6) (4) (2) (2) (7) Tax5 Territorial Taxation (11.5% of pre tax FCF) C$ M 163 28 - - - 71 49 15 - - - - - - - - - - - - - - - - - NWT Mining Royalty (Average 5.9% over life of mine) C$ M 237 5 6 - - 13 108 74 31 - - - Federal Taxation (15% of post Royalty FCF) C$ M 205 36 - - - 86 64 20 - - - - - - - - - - - - - - - - - Cash Flow Revenue less Costs C$ M 514 134 (160) (91) 83 613 298 77 (179) (133) (54) (10) (5) (4) (7) (6) (5) (6) (6) (6) (6) (4) (2) (2) (7) Net Present Value C$ M at 7% discount rate 460 (1) Value by pipe weighted by production from each pipe. 2% real compound annual growth applied over time in the model. H2 FY13 comprises of first three months actuals plus three months forecast which includes all inventory on hand being sold prior to June 30, 2013. FY14 and thereafter, revenue is based on all carats produced sold in that period (2) Assumes a constant parity rate through life of mine (3) Detailed closure workplan prior to mine closure include exit packages for remaining mine employees (4) Marketing costs based on FY14 budgeted diamond sorting and sales costs. (5) Tax calcuation illustrative
Table 7: Sensitivity Analysis – Ekati Diamond Mine (100% Basis)
________________________________________________________ | |Financial Sensitivity NPV ($Million)| | |________________________________________| | |- 10% | Base Case| + 10% | |Parameter |Change| | Change | |_______________|______|__________|______________________| |Price | 268| 460| 656| |_______________|______|__________|______________________| |Grade | 268| 460| 656| |_______________|______|__________|______________________| |Capital Costs | 483| 460| 438| |_______________|______|__________|______________________| |Operating Costs| 595| 460| 329| |_______________|______|__________|______________________| |US$/C$ FX Rate | 272| 460| 652| |_______________|______|__________|______________________|
The current mine plan assumes production from Fox, Misery and Pigeon
open pits, and the Koala North and Koala underground operations.
Koala North is currently in production as a sub level retreat
underground operation and is scheduled to finish in 2014. Koala is
currently in production as a sublevel / inclined cave underground
operation and is scheduled to finish in 2019. Fox is currently in
operation as an open pit and is scheduled to finish in October 2014.
Stripping of waste material and satellite kimberlite is in progress at
Misery open pit with expected production from the Misery Main Pipe in
December 2015 and completion of mining in 2018. Stripping of waste
material from Pigeon open pit is scheduled to commence in 2014 with
mining of kimberlite commencing in 2015 and finishing in 2019.
The Misery satellite pipes which will be mined during the pre-stripping
operations for Misery Main Pipe have been assessed from bulk samples
collected during exploration programs. An exploration target has been
estimated for the Misery satellite pipes. The Company cautions that
the potential quantity and grade of the exploration target is
conceptual in nature. There has been insufficient exploration and/or
study to define the exploration target as Mineral Resources it is
uncertain if additional exploration will result in the exploration
target being delineated as Mineral Resources. Recovered diamonds
displayed similar characteristics to the Misery Main Pipe; however,
there is currently insufficient support for grade estimates to allow
for estimating Mineral Resources. As a consequence, the material is
currently planned to be stockpiled until confirmatory grade testing at
the sample plant can be conducted. The tonnage range is estimated to
be between 2.7 Mt and 4.5 Mt at a grade range of 1.0 cpt to 1.7 cpt.
Based on sample data from the satellite pipes, and using the Diamond
Reference Value Assumptions as at 31 Dec 2012, the diamond values could
range between US$90 per carat and US$140 per carat.
Coarse reject tails have been stockpiled at Ekati since the start of
production in 1998 to present. Several production periods have been
identified during which high grade feed sources were blended through
the process plant using coarser de-grit screens (1.6 mm slot) compared
to the current 1.2 mm configuration. In addition, the re-crush circuit
was not utilised during these periods. The tonnage range for the coarse
reject tails from the production periods of interest are estimated at
3.5 to 4.5 Mt. Based on stone size distributions and recovered grade
data, this material has an overall grade ranging from 0.2 to 0.6 carats
per tonne. Based on recent process plant audit parcel valuations and
diamond values as at 31 Dec 2012, the diamond values could range from
US$80 per carat to US$140 per carat. While the historic recoveries and
valuations may not necessarily be indicative of recoveries or
valuations within the current coarse reject tails stockpiles, treatment
of this material represents an attractive opportunity to supplement
mill feed. A production test for grade and diamond recovery is planned
to be processed through the main plant later this calendar year.
Mineral resources that are not included in the current mine plan include
Jay, Lynx, Sable and Fox deep. Jay is considered the most significant
prospect due its large size and high grade (36.2 M tonnes of Indicated
Mineral Resources at an average grade of 2.2 carats per tonne) and
represents upside potential for the operation. A pre-feasibility study
for Jay has not been initiated to date. The Jay pipe deposit is located
within the Buffer Zone Joint Venture property beneath Lac du Sauvage, a
moderate sized lake north of Lac de Gras, and is approximately 1.2 km
from the shoreline. The area and shoreline close to the Jay deposit is
undeveloped except for the Misery pit and related infrastructure
(approximately 7 km to the southeast) and the main Ekati mine
infrastructure located approximately 30 km to the northwest.
The Misery satellite pipes and the coarse tailings, along with the Jay,
Lynx, Sable and Fox deep mineral resources represent future plant feed
upside potential, and some or all of this mineralization may be able to
be incorporated in the life-of-mine plan once sufficient additional
work has been undertaken to support estimation of higher-confidence
mineral resources and eventual conversion to mineral reserves. There
is also potential to treat low-grade stockpiles, primarily derived from
open pit mining at the Fox kimberlite if the grades in the stockpiles
can be demonstrated to be economic.
SOURCE Dominion Diamond Corporation