The Gahcho Kué diamond mine in Canada’s Northwest Territories is the largest diamond project initiated in many years. The project is a joint venture, owned 51% by De Beers, and 49% by Mountain Province Diamonds of Canada. Following the decision to close Snap Lake diamond mine, Gahcho Kué is one of only two De Beers projects located outside of southern Africa. The other one is the Victor diamond mine, also in Canada.
The mine’s name, Gahcho Kué (pronounced Gow-Cho-Kway) is something of an accidental transliteration to English from the local indigenous language of Chipewyan. Gahcho Tué was the intended name of the site, meaning ‘Place of the Big Rabbit’. However, English speakers adopted the erroneous pronunciation more than 20 years ago, and over time it stuck. The name comes from the proliferation of wild rabbits in the area, which is a favorite spot for indigenous hunters and trappers.
The mine is located about 85 km southeast of the now-defunct Snap Lake diamond mine, and 280 km east-northeast of Yellowknife, the capital city of the Northwest Territories, with a population of about 20,000 people. This broader diamond region features five diamond mines, two of which are now closed, including the Ekati and Diavik mines less than 300 km away. The mine consists of four individual kimberlite pipes that will be mined as open pits in sequence. The mine has an estimated 11-year mine life.
The property was first sampled in 1993, as part of the diamond rush when diamonds were first discovered in Northern Canada. It was first discovered by Mountain Province, and like many of the other projects in the area, the small exploration company had to rely on an experienced diamond producer to assume operation of the project. Mountain Province maintains the marketing rights to its 49% stake in the project, and the first sale of their diamonds is expected in Q1 2017.
Early sampling of the mine begun in 1998, but a preliminary economic assessment was not ready until 2006. The report, along with numerous new sample results, assessed the project positively. The project was initially mired in lengthy delays, mostly due to environmental assessments and water and land use permits. The mine sits within a cluster of environmentally sensitive lakes and river systems, and local review boards initially refused to issue the required permits without a complete, and costly, environmental impact review.
By 2011, De Beers supplied the government with the appropriate environmental assessment, and would later make certain amendments. These amendments were approved in July 2011, giving the green light to a full feasibility study and mine development proposal, which was completed in May 2014. The company was eventually granted a 21-year mining lease on the property.
Like many other mine projects in this very remote region of Northern Canada, known locally as the “Barrenlands,” the mine does not have permanent roads or year-round power supplies. All mining supplies must be transported, either by air or by winter roads. The mine is located within 80 km of the famous Tibbett to Contwoyto ice road, which is a joint venture owned and operated by numerous companies in the region that require the road for annual re-supply. The road has even been featured on a syndicated television show called Ice Road Truckers. The road is typically open for 8-10 weeks of the year, during the coldest winter temperatures when lakes have between 100 to 120 centimeters of ice cover.
However, given Gahcho Kué’s distance from this road, an additional 120 km of road must be constructed every year. This smaller road cannot support the same volume of traffic or weight as the primary highway, and therefore is suitable only for light traffic. The mine is referred to as a fly-in/fly-out mine, because the vast majority of supplies and personnel arrive by air. More recently, an airstrip was built at the mine, which provides a gravel runway in the summer months, and an ice runway in the winter.
The mine was officially opened on September 20, 2016, and is billed as the largest new diamond project since 2003. Diamond processing has begun, and the mine is expected to reach full commercial production in the first quarter of 2017. Over the life of the mine, Gahcho Kué is expected to produce 54 million carats from 35 million tonnes of kimberlite ore, for a grade of 1.57 carats per tonne. The mine also has inferred resources and the property has some potential exploration upside. With annual production of approximately five million carats per year, the mine will rank in the top ten of producing diamond assets in the world by volume.
Interestingly, the joint venture has not publically released its estimates of the project’s expected diamond valuation. However, the actual (un-modelled) valuations from February 2014 yielded an average price per carat of $175. De Beers’ share of the production (51% by value) will be aggregated and sold along with its production from other mines. Mountain Province is expected to market its 49% share via tenders.
The views expressed here are solely those of the author in his private capacity. No one should act upon any opinion or information in this website without consulting a professional qualified adviser.