Mountain Province, De Beers make progress on Canada diamond project study

May 31, 2010

TORONTO (miningweekly.com) – Canadian junior Mountain Province Diamonds expects a completed definitive feasibility study in August, or thereabouts, for its Gahcho Ku diamond project in Canada's Northwest Territories, CEO Patrick Evans said on Monday.

Mountain Province owns 49% and De Beers Canada holds the balance of the project, which is located about 300 km north-east of Yellowknife.

The companies are also working on an environmental-impact statement, which should be filed in the second half of 2010, kicking off the environmental review for which the project has been referred.

"We've told the regulators we will submit it either during the third quarter or the fourth quarter of this year," Evans told Mining Weekly Online.

Once the feasibility study is completed, and while the companies await permitting approval, the next milestone will be securing finance to build the diamond mine.

Mountain Province and De Beers have agreed to arrange the debt component of the project capital jointly, and each will then need to come up with their share of the equity finance.

The last publicly stated capital estimate for the project was about C$700-million, and the final figure, including working capital, will probably end up in the same vicinity, Evans said.

"And our sense is we would probably be able to debt fund somewhere around 60% of that, with the remaining 40% coming from equity."

PERMITTING

Once the EIS has been submitted later this year, the environmental review will be conducted by the Mackenzie Valley Environmental Impact Review Board, which will make a recommendation to the Minister of Indian and Northern Affairs, followed – hopefully – by Ministerial approval.

The timing of the process is difficult to predict though, because the review process involves a 'to and fro' of requests for information from the regulator and other parties to the developer, and then responses from the developer to the respective parties.

"And we obviously try and anticipate most of the questions that are likely to be asked in the EIS itself, but invariably there are requests for elaboration or clarification," Evans said.

"Our best sense is, that we will complete the review process by the end of next year."

The companies have also been working hard in the last few months to optimise the project plan, he added.

Gacho Ku could be the sixth diamond mine to be built in Canada, after BHP Billiton's Ekati mine, the Diavik mine owned by Rio Tinto and Harry Winston, the now-closed Jericho mine, owned by Tahera Diamonds, and of course De Beers' own two operations – Snap Lake and Victor.

Evans said the project will benefit from a lot of experience in building Canadian diamond mines - from the De Beers team, as well as JDS Energy and Mining, which is conducting the feasibility study and was involved in the development of Jerico and Ekati.

The Gahcho Ku project consists of a cluster of kimberlites, three of which have an indicated resource of about 30,2-million tons grading at 1,67 ct/t, or about 50,5-million carats, plus an inferred resource of about six-million tons grading at 1,73 ct/t, for around 10,3-million carats.

The hefty resource makes it one of the bigger advanced diamond projects in the world, and it could support an average yearly production rate of about three-million tons of ore, producing around 4,5-million carats a year, Mountain Province said in January.

Gahcho Ku's main competition for the title of 'Canada's next diamond mine' will likely be Stornoway Diamonds' Renard project, for which the junior published an attractive new preliminary economic assessment in March. Stornoway CEO Matt Manson said at the time that production could start as early as 2013.

In July 2009, De Beers Canada and Mountain Province agreed to revise their joint venture – De Beers had been sole funding work on the project, as part of an earn-in agreement, but the ownership split will now stay at current levels, and the partners will fund their respective share of spending.

Part of the new deal was also that Mountain Province would repay its share of historic spending in stages, including by paying De Beers' part of the cost for the feasibility study.

The company raised $11,5-million in a private placement earlier this month, and those funds should take the company through the feasibility study and permitting for the project, Evans said.

for the original click here: http://www.miningweekly.com/article/mountain-province-de-beers-makng-progress-on-diamond-project-study-2010-05-31