Naujaat Diamond Project, Nunavut, Canada
On 2 June 2020, EHR announced that it has entered into a Phase One Option Agreement with North Arrow Minerals Inc. (TSXV: NAR; “North Arrow”) over the Naujaat diamond in the Nunavut territory of Canada.
The agreement provides EHR with the option to earn a 40% interest in the Project in return for funding of C$5.6 million for a preliminary bulk sample of 1,500 – 2,000 tonnes to be extracted in 2021.
The agreement has been structured to provide financial flexibility with an upfront payment of C$0.3 million, and the balance of funds to be provided by 1 April 2021.
The world class Naujaat project represents the largest undeveloped diamond property in Canada that is not under the control of a major mining company. First discovered by BHP in the early 2000’s, it was divested as part of BHP’s corporate refocus on iron ore, coal and petroleum operations later that decade. North Arrow acquired the project in 2013, and subsequent evaluation has focused on the potential value contribution from an exceptional population of uniquely coloured Fancy Vivid Orangey-Yellow stones. This is a specific and rare colour which has been certified by the Gemological Institute of America (GIA), and these diamonds today are expected to sell at high premiums to white diamond prices, upon which the historic project economics were mostly based.
The bulk sampling that has previously been completed at Naujaat has not recovered a large enough parcel of diamonds to establish conclusively the value of the coloured stones, particularly their continuity into larger size classes, and the Phase One bulk sample is expected to provide this information.
EHR has also made a preliminary proposal to earn an additional 20% undivided interest in the Property through a Phase Two Earn-in Option Agreement, the terms of which the two parties have agreed to use their best endeavours to finalise. The Phase Two agreement will include a larger bulk sample to establish diamond price to a prefeasibility study level of precision.
The Naujaat Project
The Naujaat project is located 9 km northeast of the hamlet of Naujaat (formerly Repulse Bay), Melville Peninsula, Nunavut. It comprises 10,742 ha of contiguous mineral leases and claims owned 100% by North Arrow.
A total of eight kimberlite pipes have been identified as well as a number of associated kimberlite dykes, with the Q1-4 kimberlite being the largest and most diamondiferous of these bodies.
Details of historic exploration, sampling and drilling programs are given on North Arrow’s website (www.northarrowminerals.com).
EHR is not relying on previous drilling and sampling results, with the sole purpose of the current option agreement being to complete a bulk sample to provide additional information on diamond size distribution, quality and price.
If a sufficiently valuable diamond price can be established, future estimates of mineral resources will be produced in accordance with the JORC 2012 Code.
The Phase One Earn-In Option Agreement
The agreement gives EHR the right to earn-in to a 40% undivided interest in the Property on completion of a minimum 1,500 dry tonne bulk sample on the Q1-4 kimberlite pipe, for an expenditure of C$5.6 million. The agreement is conditional on the Company being able to provide required funding by 1 April 2021, with a non-refundable up-front cash payment of C$0.3 million to be made immediately. These funds will be used by the project partners to purchase and ship helicopter fuel and other supplies to the project site in the latter part of 2020 in preparation for the commencement of the bulk sampling program in June 2021. The sample material will be shipped south for processing at an independent laboratory with results expected in the first quarter of 2022.
North Arrow will be the operator of the Phase 1 project under the guidance of a Technical Committee on which EHR and North Arrow will have equal representation. It is expected that EHR’s considerable expertise in diamond project evaluation will augment North Arrow’s extensive knowledge and experience at Naujaat to provide an industry-leading approach to this project.
The Company has proposed in a Letter of Intent to enter into a Phase Two Earn-in Option Agreement on receipt of the Phase 1 results. The Phase 2 program would include a nominal 10 thousand tonne bulk sample, and the Company would fund this sampling program to earn a further 20% interest in the Q1-4 kimberlite and immediately surrounding area.
If the parties do not proceed to Phase 2, they will enter into a Joint Venture with North Arrow holding a 60% interest and EHR a 40% interest. Terms for this Joint Venture have been agreed as part of the Phase 1 Earn-In Option Agreement.