Vaaldiam still digging at Pimenta Bueno

2008-01-15 16:25 ET - Street Wire

by Will Purcell

Ken Johnson's Vaaldiam Resources Ltd. has wrapped up one dig on its Pimenta Bueno property in Rondonia, Brazil, and it is well into a second mini-bulk test. Vaaldiam is collecting samples from two of its Cosmos kimberlite pipes that it thinks could have modest grades, but quality diamonds. This is the first test for one of the pipes, and although the other yielded a disappointing result in 2006, Vaaldiam thinks its sampling method will produce a far better result.

The tests

Mr. Johnson said the excavation of about 200 tonnes of kimberlite at Cosmos-1 was now complete. The company dug four vertical shafts into the pipe, reaching depths of up to 30 metres. The shafts are roughly two metres square and Vaaldiam thinks its sampling method is far more efficient than using reverse circulation drills to acquire the rock.

Vaaldiam is also testing Cosmos-2, a kimberlite pipe about 500 metres from Cosmos-1. De Beers never tested the body when it was running the project and Rio Tinto PLC also bypassed the pipe when it was a partner with Vaaldiam on the Pimenta Bueno project. Mr. Johnson said the company was sinking shafts into Cosmos-2 and planned to collect up to 100 tonnes of kimberlite for testing.

The Cosmos kimberlites do not lie under thick layers of overburden and that makes sampling from the surface an easier task. Rio Tinto managed to spend several million dollars on the property in a little over a year, but it quit the play midway last summer. The mining major kept a 60-per-cent back-in right, in case Vaaldiam discovers something big.

Rio Tinto spent much of the money on drilling, including the costly mini-bulk testing on several of the Pimenta Bueno pipes. The next stage would have been far costlier, had it pursued plans for significantly larger tests. Mr. Johnson said that Vaaldiam's shafts are far less costly, running about $600 (U.S.) per tonne.

The encouragement

Rio Tinto's mini-bulk test of Cosmos-1 resulted in the recovery of 62.2 tonnes of kimberlite chips from 13 reverse circulation drill holes. As is always the case with such tests, a significant amount of material turned to dust and the partners estimated that the excavated weight of kimberlite was nearly 100 tonnes. Rio Tinto pulled just 2.45 carats of diamonds from the remaining rock, suggesting a grade of about 0.025 carat per tonne based on the theoretically excavated amount of kimberlite.

Two other mini-bulk tests held greater disappointment. Rio Tinto excavated just over 90 tonnes of kimberlite from 12 holes into Cosmos-3 and the larger chips yielded just 0.28 carat. Ten holes into Pepper-4 yielded about 50 tonnes of kimberlite and the larger chips yielded diamonds weighing 0.42 carat. Both grades were below 0.01 carat per tonne.

Vaaldiam had been hoping for values between 0.1 and 0.2 carat per tonne and Mr. Johnson thinks the drills are at least partly to blame for the much poorer results. Diamond loss with reverse circulation drilling is a common complaint and the company thinks the absence of any large diamonds in Rio Tinto's mini-bulk tests confirms significant losses occurred. Diamonds as large as 3.5 carats apparently have come from the top of Cosmos-1. As well, Rio Tinto's diamonds showed signs of significant damage.

Still, Vaaldiam will need to boost its diamond recoveries considerably if it is to make a mine out of its Pimenta Bueno kimberlite cluster. The company touted the play as being comparable with the Fort a la Corne project in Saskatchewan and it will need grades that come close to its earlier expectations. Fortunately, Vaaldiam will face cheaper costs in Brazil, leaving it some wiggle room.

Vaaldiam closed up seven cents to 60 cents Monday on 994,000 shares.