Baffin baffles diamond hunters no more

Outcropping diamond-bearing kimberlites found near tidewater on Baffin Island

By Vivian Danielson November 1 2008 issue "Diamonds in Canada", a Northern Miner Publication

A new diamond discovery in the High Arctic has proven yet again that Canada still has excellent potential for the discovery of new diamond deposits.

Peregrine Diamonds (PGD-T) helped the diamond exploration scene regain some much-needed sparkle when it reported the recent discovery of outcropping diamond-bearing kimberlites at its Chidliak property on Baffin Island.

By Vivian Danielson The author is a freelance journalist based in Vancouver

A total of 190 diamonds were recovered from two representative surface samples from the CH-1 kimberlite, including 12 diamonds above the 0.60-mm sieve size in the cumulative sample of only 195 kg.

A second outcropping kimberlite, CH-2, was found 1.5 km from CH-1 and is estimated to be 3 hectares in size.

Within weeks of announcing these initial discoveries, Peregrine announced the discovery of a third kimberlite, situated about 12 km from CH-1. This kimberlite was found when field crews checking a geophysical anomaly discovered a collection of kimberlite cobbles and boulders over an area of about 500 sq. metres near the edge of the anomaly, which is estimated to be 2 hectares in size.

Peregrine Diamonds vice-president of exploration Peter Holmes (left) and Chidliak project manager Hugo Grenon at the Chidliak project on Baffin Island.

Peregrine CEO Eric Friedland describes the results as “phenomenal,” not just because the coarse diamond size distribution indicates potential for large commercial-size diamonds. Unlike most diamond-bearing kimberlites in northern Canada, which typically occur under lakes or are buried by overburden, the Chidliak kimberlites outcrop on surface.

“The geology of Baffin Island isn’t obscured by overburden and in this case the ice had melted and retreated just in time to expose the kimberlites sitting on surface,” Friedland says. “This is one of the only places sure to benefit from global warming.

“It’s still early days but we’re very excited by the potential as we’ve identified more than 65 geophysical anomalies within our land package,” Friedland adds. “More importantly, the geophysical anomalies associated with the best kimberlite indicator mineral chemistry on the property are yet to be tested.”

A helicopter at the Chidliak project where Peregrine Diamonds has found outcropping kimberlites.

Other favourable features include good tonnage potential as demonstrated by the sizes of the initial kimberlite discoveries and direct access to tidewater to the Atlantic Ocean. The project is situated just 150 km northeast of Iqaluit, the capital of Nunavut and an important supply centre for the eastern Arctic region.

But Friedland believes another major attribute is the pure Canadian status of the project.

“Diamonds from Canada’s Great White North sell for a premium because of their ‘conflict-free’ pedigree, but the attraction extends beyond that. With global diamond demand increasing and with supply diminishing as aging mines in South Africa, Russia and Australia face depletion, Canada has become the major source of new mines and new discoveries.”

Friedland speaks from experience, having searched for the precious stones in some of the world’s best known — and most notorious — diamond districts following his initial success in the late 1980s discovery and development of the Fort Knox gold mine in Alaska. In the 1990s, he made headlines for the involvement of mercenaries at various diamond projects in Sierra Leone and Angola that were previously controlled by armed rebels. One of the projects in Angola subsequently came under armed attack, resulting in several fatalities.

While the use of private security forces is standard practice throughout Africa, and these forces are largely drawn from former military personnel, Friedland and his famous and fearless older brother Robert were singled out as “blood diamond” poster-boys by anti-diamond-mining activists. The younger Friedland looks back on this stage of his career with remarkable candor.

“I was naïve then, as these places were far more dangerous than I was led to believe. But setting aside the potential for violence, there are still too many risks, including government uncertainty and interference. You just have to look at the (Democratic Republic of Congo), where so many good projects just can’t get off the ground.

"My brother Bob told me during a recent golf game that he’s a [Peregrine] shareholder, and that meant something because he rarely buys any stock except his own.’ "— Eric Friedland (pictured), CEO of Peregrine Diamonds

“I’d much rather be here in Canada,” Friedland adds emphatically. “I love this country. Ironically, it’s where my brother Bob had his greatest success — at Voisey’s Bay.”

Peregrine established a reputation as a Canadian-focused diamond exploration company in 2004, after acquiring rights to the WO diamond project hosting the diamond-bearing DO-27 kimberlite in the Lac de Gras region of the Northwest Territories. The company currently owns 71.74% of the project, along with 97.92% of the diamond marketing rights.

Peregrine has also assembled an exploration team with extraordinary diamond experience. President Brooke Clements is a former vice-president of exploration for Ashton Mining of Canada, and led the team that discovered the diamondiferous Renard kimberlite cluster in northern Quebec. Three of these kimberlites were advanced to the prefeasibility study stage by a subsequent operator, with results of this study expected in late 2008. From 1982 to 1987, Clements managed diamond exploration programs throughout the United States for Exmin Corp., the subsidiary of a Belgian diamond company.

Peter Holmes, vice-president of exploration, has more than 15 years’ experience with the De Beers group of companies, including important roles in Canadian, Russian and Finnish project management and evaluation. The team also includes diamond experts Jennifer Pell, chief geoscientist, and senior supervisor Duncan McBean.

For the past several years, Peregrine had focused and invested heavily in advancing the DO-27 kimberlite at the WO diamond project.

“It’s the largest undeveloped diamond resource in Canada at this time,” Friedland says. “It’s also one of the most challenging projects I’ve ever worked on, and I’ve been in some crazy places.”

Sunrise at Chidliak.

DO-27 is one of two kimberlites comprising the 16-hectare Tli Kwi Cho kimberlite complex discovered by Kennecott Canada Exploration, a unit of Rio Tinto (RTP-N), and several junior companies during the Lac de Gras diamond exploration boom of the early 1990s. The initial phase of exploration returned encouraging micro-diamond results, prompting Kennecott and its partners to by-pass a mini-bulk-sampling program and move directly to a larger scale, 5,000-tonne bulk-sampling program.

The results of the 1993 bulk-sampling program were below expectations, averaging just 36 carats per hundred tonnes from the area selected for the underground program, and the project was ultimately placed on hold.

Peregrine revived the project more than a decade later, convinced that the untested Main Vent of the DO-27 kimberlite had potential for higher grades, as indicated by the early 1990s exploration drilling results.

Peregrine tested the DO-27 Main Vent, starting with small sampling programs in 2005 and 2006, culminating with a larger sample of 1,616 tonnes from the main body of the pipe in 2007.

The modelled diamond values for the 2,075 diamonds recovered during the three years ranged from US$43 to US$70 per carat, with a base-case average of US$51 per carat.

DO-27 hosts an indicated resource of 18.2 million carats in 19.5 million tonnes kimberlite to a depth of 325 metres below surface, with an estimated grade of 94 carats per hundred tonnes. The kimberlite hosts additional inferred resources and remains open at depth.

The WO project lies just 11 km from the main ice road serving the Lac de Gras diamond camp and about 56 km southeast of the Ekati diamond mine. Despite the existing infrastructure, the challenges and costs associated with drilling through ice and overburden in bone-chilling cold year after year have forced Peregrine to ponder whether to continue bulk-sampling and collect the 5,000 carats the market typically requires to evaluate a potential diamond mine.

“Do we have enough carats — that’s the $50-million question, because the costs to get the additional 3,000 carats will be high,” Friedland says.

Under current market conditions, the WO project is viewed as a long-term asset that will ultimately be mined. Clements says that new technologies and proximity to existing diamond mines bode well for eventual production in the years ahead, particularly as the nearby Ekati and Diavik mines face depletion.

“It’s a nice asset to have in our back pocket,” Clements adds.

“It’s a soft pipe and easily upgraded [mechanically] to a significant grade,” Friedland says. “It’s the perfect blending stock.”

More recently Peregrine expanded its search for new diamond deposits to the Eastern Arctic region, where it has since discovered a new diamond district. The Eastern Arctic is one of Canada’s most active diamond exploration camps and hosts significant discoveries made by prominent diamond exploration companies, namely Diamonds North Resources (DDN-V), Indicator Minerals (IME-V) and Stornoway Diamond (SWY-T).

Peregrine’s Nanuq and Nanuq North projects are situated in the western Churchill district and encompass 3,140 sq. km and 330 sq. km, respectively. The company discovered three diamondiferous kimberlites by drilling three anomalies at the Nanuq joint venture property (with Indicator Minerals) in 2007, thereby establishing a new Canadian diamond district.

A total of 1,013 diamonds were recovered from 1,558 kg of kimberlite collected from the 2007 drill program. Of this total, 45 stones were greater than 0.425 mm, with the largest white fragment measuring 2.12 mm by 1.48 mm by 1 mm.

The first discovery at Nanuq North was a 4.5-hectare kimberlite that warrants additional exploration. Peregrine plans to further explore these projects in 2009, and also plans an aggressive program for its new kimberlite discoveries on Baffin Island.

Peregrine holds more than 2.7 million hectares of prospecting permits on Baffin Island, which cover areas prospective for diamonds, uranium, base metals and precious metals, including platinum and palladium. The company struck a deal in 2005 with BHP Billiton to acquire its database covering southern Baffin Island in exchange for certain back-in rights, and subsequently stood in line for two months to secure much of its current land position.

Prospecting on Chidliak in the summer of 2007.

“Baffin Island is a treasure trove, in my opinion,” Friedland says.

Peregrine’s 2007 diamond exploration program focused on areas with favour-able diamond indicator mineral chemistry, which was followed by airborne geophysical surveys in 2008. This work revealed more than 65 kimberlite-type geophysical anomalies that are priorities for follow-up programs. Many of these anomalies have signatures similar to the newly discovered, outcropping CH-1 and CH-2 kimberlites, as well as associated kimberlite indicator mineral trains. Some are situated as far as 50 km from the CH-1 kimberlite.

But the highlight of the 2008 exploration program was the recent discovery of three kimberlites in a new district situated approximately 700 km from the nearest known kimberlite occurrence.

Kimberlite float from Chidliak.

Representative surface samples from two different units or phases, IA and IB, of the CH-1 kimberlite were processed by the Saskatchewan Research Council, with results released in late August. Both samples are described as being magmatic kimberlite with abundant olivine and other kimberlite minerals, including garnet.

Sample IB weighed 94.6 kg and returned 146 diamonds larger than the 0.075 mm sieve size, including ten stones larger than the 0.60 mm sieve size, which indicates a very favorable coarse diamond size distribution. Sample IA weighed 100 kg and returned 44 diamonds larger than the 0.075 mm sieve size, including two stones larger than the 0.60 mm sieve size.

A total of 31 of the 34 diamonds from the combined samples larger than the 0.30 mm sieve size were classified as having a colorless/white color. The two largest diamonds (both from sample IB) are a colourless/white macle and a colourless/ white fragment measuring 2.2 by 2.06 by 0.66 mm and 3.28 by 2.42 by 0.56 mm, respectively.

Peregrine has collected another one-tonne sample from CH-1, with results expected later this fall. Also awaited are results of a 300-kg sample collected from the CH-2 kimberlite and about 200 kg collected from the CH-3 kimberlite.

In the meantime, the company plans an aggressive exploration season at Baffin Island for 2009. Percussion drills will be used as a low-cost “first-pass” tool to test priority anomalies, while surface sampling and core drilling will further test the newly discovered kimberlites. The lack of overburden will allow for low-cost bulk-sampling programs.

“The bottom line is that world needs new diamond discoveries,” Clements says. “We believe Canada has the best potential to deliver new discoveries. This country had no diamond production before 1998 and has gone from nothing to becoming a major player. By 2015, Canada will account for 15% of world production.”

For his part, Friedland believes Baffin Island has the best potential for new discoveries that he’s seen anywhere in the world. “Sometimes projects just feel right and this is one of them.

“My brother Bob told me during a recent golf game that he’s a [Peregrine} shareholder, and that meant something because he rarely buys any stock except his own.” — The author is a freelance journalist based in Vancouver.

“Do we have enough carats — that’s the $50-million question, because the costs to get the additional 3,000 carats will be high.”

— Eric Friedland

‘We believe Canada has the best potential to deliver new discoveries. This country had no diamond production before 1998 and has gone from nothing to becoming a major player. By 2015, Canada will account for 15% of world production.’

— Brooke Clements, president of Peregrine Diamonds

‘The geology of Baffin Island isn’t obscured by overburden and in this case the ice had melted and retreated just in time to expose the kimberlites sitting on surface.

This is one of the only places sure to benefit from global warming.’

— Eric Friedland, CEO of Peregrine Diamonds