Resource World Magazine

O C T O B E R / N O V E M B E R 2 0 1 7 www.resourceworld.com 31 MINING T he Shore Gold Inc. [SGF-TSX] recent joint venture agreement with Rio Tinto Exploration Canada will enable the company to benefit from the financial and technical capabili- ties of a global mining giant to develop its Star-Orion South diamond project in cen- tral Saskatchewan. First staked in 1995, the project in the Fort à la Corne area has seen millions spent on multiple phases of surface and underground drilling, bulk sampling, pilot plant construction, shaft sinking and pre-feasibility work. Long time joint venture partner, Newmont Canada, recently agreed to give up its 31% interest for a share and war- rant consideration that will give it low risk leverage to the project's future success. Rio Tinto will have the right to earn a 60% interest in the project after fulfilling conditions specified in the option agree- ment. Rio Tinto will also subscribe to a $1 million private placement at $0.18 per unit which includes a warrant exercisable at $0.205 for 24 months. "We are extremely pleased to part- ner with Rio Tinto to further develop the potential of the project," said Ken MacNeill, CEO of Shore. "Rio Tinto is one of the few companies in the world with the resources and expertise to move forward with a project of the magnitude of the Star- Orion South diamond project. We are also very pleased to acquire the remaining por- tion of the project from Newmont and look forward to working with Newmont as a significant shareholder." The Star-Orion South diamond project is about 60 km east of Prince Albert with infrastructure including paved highways and power. The project has indicated resources of 393 million tonnes containing 55.4 million carats at a weighted average price of US $210/carat along with inferred resources containing 11.5 million carats. Based on surface and underground drilling and underground mapping, the Star and Orion South kimberlite deposits contain two distinct and complex types of kimberlite: eruptive kimberlite phases and kimberlitic sedimentary rocks. On a global basis, the former is the most common and are created by small but powerful volca- nic eruptions caused by the rapid ascent of kimberlites – an intrusive igneous rock that typically rises through fissures in the rock, forming vertical pipe-like structures. At least two kimberlites at Fort à la Corne are known to be inter-sedimentary kim- berlites deposited from pyroclastic flows. Unlike precious and base metals, dia- mond prices are not fixed and are variable which complicates the evaluation process for a diamond deposit. Prices are based on the four C's: clarity, colour, cut and carats. To accurately evaluate a diamond deposit, a sampling program is designed to obtain a reliable estimate of the aver- age grade of the deposit, expressed as carats/tonne or cubic metre, and of the average value of the diamonds, tradition- ally expressed as US dollars/carat. An analysis of the statistical distribution of the stone sizes, occurrences and values is essential for calculating the confidence limits on the estimated averages. Large diamonds, which command a higher price because of their scarcity, can play a major role in the economic evaluation process as evidenced by the fact that several large dia- monds including one weighing 49.5 carats have been discovered on the property. According to Bain and Company, an international management consulting firm, the long-term outlook for the diamond market remains positive. For the next three years, the supply of rough diamonds is expected to maintain a tight balance with demand. Demand for rough diamonds is expected to recover from the recent down- turn and return to a long-term growth trajectory of about 2% to 5% per year on average, relying on strong fundamentals in the US and the continued growth of the middle class in China and India. The supply of rough diamonds is expected to decline annually by 1% to 2% in value terms through 2030. Over the longer term, consumption may continue to slow in China, and there is a risk of a cyclical recession in the US. Synthetic diamonds as an emerging com- peting category to diamonds remain a risk, but diamond industry participants are determined to reduce the threat from synthetics by marketing the emotional attributes of natural stones. The recently formed Diamond Producers Association (DPA) is reviving industry-wide generic marketing efforts. Shore's recent focus on an updated feasibility study for the project includes investigating the use of new technology for the efficient excavation of the open pit and improvements to the flow-sheet of the diamond processing plant, while reducing pre-production capital costs and the time to initial diamond production. n Shore Gold partners with Rio Tinto to develop diamond project by David Duval A selection of high value rough diamonds recovered during the evaluation of the Star and Orion South Kimberlites at Shore Gold's diamond project at Fort à la Corne, Saskatchewan. Photo courtesy Shore Gold Inc.

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