Argyle sells disputed site

Ellendale, a diamond field discovered a quarter of a century ago, is finally to be mined following its sale by the Rio Tinto company Argyle Diamonds to Kimberley Diamond Co.

It will be only the third diamond mine in WA, and the first commissioned for more than 20 years.

Bow River and Argyle were launched then, but the first of these closed many years ago.

The $23.2 million acquisition brings to an end litigation over part of the Ellendale leases between Argyle and Kimberley, which has made highly promising discoveries in adjacent tenements.

Work will begin soon on a “shoestring” operation at two of the richest Ellendale pipes, which will be brought into production for between $6 million and $8 million. The first diamonds should be produced within 12 months of regulatory approvals.

Kimberley has estimated, with the help of independent consultants, that this investment, and operating costs, will be recouped in the first year of operation.

A heavy media separation plant will treat 750,000 tonnes of diamondiferous material, rising to 2.5 million tonnes a year, with a mine life of 10 years.

Alluvial diamonds from the Blina prospects discovered by Kimberley will also be treated at Allendale, although the diamond grades in Pipes Four and Nine (as they were designated in the original Argyle discoveries) are believed to be sufficient to justify a stand-alone project.

Kimberley will have about 1000sqkm of ground and over 35 known diamondiferous pipes in the Ellendale Diamond Field.

It was estimated in 1990 that these contained 29.4 million tonnes of diamondiferous material at a grade of 6.4 carats per 100 tonnes.

Recent studies suggest that this figure is valid and there is potential for more.

Argyle will retain a right to “buy back” an interest in any new pipe discovered by Kimberley in the Ellendale field under a pre-determined formula. Kimberley has been exploring its own Blina tenements for more than seven years and has, to date, identified a significant, alluvial diamond prospect along an ancient river system.

It recently announced that it was concentrating its exploration on an area that could be the source of the hundreds of alluvial diamonds found along this system.

The company has commissioned initial scoping studies, independently conducted by Snowden Mining Associates, which have indicated that the Ellendale project will produce over 200,000 carats of diamonds in the first year of mining with average values exceeding $175 per carat.

Kimberley chairman Miles Kennedy said the Ellendale diamonds, particularly the brilliant yellows, were unique and there was strong demand to secure a portion of the marketing rights. The company was likely to insist on diamond sales taking place in Perth.

The sale ends legal actions involving the two companies and the WA Government over tenements held by Argyle and claimed by Kimberley.

Ellendale launched a classic Australian share market boom in the 1970s, with scores of companies rushing to peg ground in the Kimberley region and the usual cloak-and-dagger attempts to gather information.