In the current model of the mining industry, junior exploration companies are usually looking to discover new deposits. After the initial discovery, they will develop the deposit, determining its size and volume. They evaluate the mineral resources of the deposit and then conduct a pre-feasibility study (PFS) to determine the economic potential of the project and the expected life of the mine.
Primary exploration involves the risk of discovering and adding value to a project. If a project has strong mining potential, the larger mining company will typically purchase the deposit at a premium reflecting the above value added. This provides a lucrative windfall for the shareholders of the junior company.
Few exploration companies have the experience or desire to become producers. However, producers have the financial and technical resources to build mines. Therefore, they are willing to pay for the acquisition of a risk-free project with high economic viability, creating a win-win situation for both parties.
When a new deposit is discovered, the challenge for young companies is to turn it into a potential mine as efficiently and cost-effectively as possible. Technological advances in exploration tools and techniques have allowed researchers to get a pretty good idea of the chances of an asset being successful before a drill bit penetrates the earth’s crust. Drilling is the most expensive part of exploration. Therefore, in order to develop the most effective drilling strategy, special attention must be paid to a detailed study of this property.
Modern airborne and surface geophysical instruments allow geologists to detect anomalies and model underground geological structures at significant depths, providing accurate drilling targets. Diamond exploration is the main beneficiary of some of these technological advances.
Diamonds are most commonly found in geological formations called kimberlites, which contain material from ancient volcanic activity. This material usually contains diamonds and often looks like cylindrical tubes. Through these “pipes” during volcanic activity, magma erupts, bringing various minerals to the surface of the Earth. These minerals are cooled and subsequently dispersed by glaciers. It is worth noting that although kimberlites are often associated with diamonds, not all kimberlites contain diamonds.
A widely used method for diamond exploration is VTEM (Versatile Time Domain Electromagnetics), a helicopter geophysical method developed in 2002 by Geotech Ltd in Markham, Ontario. This allows geologists to react by generating “seeing” currents 300 meters below the surface, which propagate to the ground and bounce back. Any conductive material will absorb current, creating a secondary field that is measured with VTEM.
VTEM delivers electromagnetic pulses of variable length and short duration using an optimized power-to-noise ratio, providing a realistic assessment of subsurface conductive materials and the ability to detect and distinguish between average and excellent conductors. The data is recorded in real time, uploaded to a computer server, and then analyzed in detail by geophysicists to obtain an accurate geophysical model of the target.
A key benefit for diamond prospectors is that once VTEM data is modeled, VTEM can clearly pinpoint the exact location and definition of kimberlite pipes. This eliminates any guesswork as to where they are drilling.
When kimberlites are found, diamond geologists conduct a sampling program. They drill into the kimberlite to extract any diamonds contained in the kimberlite ore. The sample is then sent to a laboratory for analysis. The lab uses a chemical process called “alkali dissolution” to dissolve the kimberlite ore, thereby extracting the diamonds from the sample. This process, commonly referred to as “alkaline melting”, is particularly suitable for the recovery of microdiamonds, providing the ability to recover 100% of the diamonds in any sample.
A sampling plan is an important first step in determining whether a kimberlite discovery has economic potential in the future. All diamonds recovered from the sampling procedure are examined under a microscope, sorted and registered by size, color, shape and weight. The laboratory uses strict supply chain protocols for maximum quality control and confidentiality.
The recovered diamonds are recorded and plotted on a spreadsheet to create a “diamond distribution curve” showing each diamond, from largest to smallest, and how much of each diamond was recovered. As the exploration program continued, more diamonds were mined and more results were added to the database.
This more accurately predicts the potential number of diamonds for the project, as well as the type and size of diamonds that the site may contain. Conducting a larger sampling plan can improve the accuracy and reliability of the database, which is critical to conducting a pre-feasibility study on the potential economic viability of a project.
The image above is an example of a small sample diamond distribution curve for the 2021 exploration program by Polaris Exploration (TSXV: ADD). The curve will expand as exploration continues, including the following results from the planned 3,000 ton mass sampling program in 2022-2023.
Another example of a diamond distribution curve is a 2005 analysis of a small alkali alloy sample from Peregrine Diamonds’ DO-27 well. 5 carats.
It is important for junior exploration investors to understand where a company’s project is when making an investment decision. Mass sampling of sequoia kimberlite as well as bayberry kimberlite at the Polaris Diagras project is expected in the near future, which will provide additional data on the potential viability of the deposit and allow the company to continue along the path of potential further development of the project.
Many factors can affect the economic viability of any given exploration project. For diamond exploration companies, a well-defined diamond distribution curve allows geologists to make a more accurate analysis of the viability of a project. The larger the kimberlite field and the associated diamond production, the greater the likelihood of a project being economically viable.
The company will then consider cost variables such as infrastructure, labor, and transportation when creating a pre-feasibility study. Potential fans such as manufacturers will rely on this research when considering a possible acquisition.
Full disclosure: Arctic Star Exploration is a client of Canacom Group, the parent company of The Deep Dive. The author was paid to cover the North Star quest in Deep Dive, which has full editorial control. Not recommended for buying or selling. Be sure to do additional research and consult with a specialist before buying securities.
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Post time: Sep-24-2022