Karowe Resource (AK06 kimberlite) Update

During Q2 2018, an updated mineral resource was announced for the AK06 kimberlite. The updated Mineral Resource Estimate was completed by Mineral Services Canada Inc. The estimate is based on historical evaluation data combined with new sampling results (microdiamond, bulk density and petrography) from recent deep core drilling and from historical drill cores. New delineation drill coverage and review of historical drill cores supported an update of the internal geological model. Production data (including a controlled production run from the Eastern magmatic/pyroclastic kimberlite ((“EM/PK(S)”) unit) and recent sales and valuation results have been incorporated into the grade and value estimates, which have been made based on an updated model of process plant recovery efficiency. The updated Mineral Resource is reported based on the Canadian Institute of Mining Definition Standards for Mineral Resources and Reserves as incorporated by National Instrument 43-101 Standards of Disclosure for Mineral Projects.  

In 2018, following the release of a positive Preliminary Economic Assessment (“PEA”) in November 2017, the Company embarked on a US$29 million technical program to support a Feasibility Level study (“FS”) for a potential underground operation at the Karowe Diamond Mine. This program included the completion of the above noted mineral resource update, geotechnical drilling of the country rock and AK06 kimberlite, hydrogeological drilling and modelling, and mining trade off studies to address risks and issues identified during the PEA.  A total of US$21.0 million was spent out of a 2018 budget of US$29 million in support of this work, which resulted in significant de-risking of the key technical components associated with the potential underground development.

During 2018, 33 core holes totaling 20,283 metres were drilled representing approximately 83% of the originally planned drilling.  Drilling will continue into late Q1 2019 and will focus on deep granite/kimberlite intersections with the final receipt of all data by mid to late Q2 2019. Data collection is underway consisting of detailed geotechnical and geological logging, density measurements, point load and other geotechnical rock strength testing.   As data is received results will be incorporated into the rock mass model and used as part of the mining method selection.  Data collection within the country rock has accounted for approximately 38% of the completed drilling and will provide detailed information with respect to the rock mass qualities of the host Karoo sequence at Karowe. Approximately 35% of the drilling has targeted the AK06 kimberlite at various elevations to achieve increased data on the nature of the kimberlite /country rock contacts in various rock types and to provide additional data within the deeper portions of the South Lobe.  No major risks have been identified during drilling or with data collected from geotechnical rock testing.

The main objective of the hydrogeological program was to quantify the mine dewatering and depressurization requirements to continue the successful de-watering of the open pit and to identify the immediate and ongoing de-watering requirements for the potential underground mining operations.  A total of four deep bore holes were drilled to assess the deep hydrogeological conditions at Karowe.  Regionally and as documented at other diamond mines in the area, the contact between the Tlapana Formation (carbonaceous shales) and the basement granites was separated by the Mea Arkose Formation.  The Mea Formation, at other locations where examined, has formed a basal aquifer containing hot, pressurized saline water.  Three of the 4 deep hydrogeological evaluation boreholes were designed to target and test the potential existence of a deep basal aquifer at 400 m depth below surface.  Drilling encountered limited water strikes, providing no evidence for such an aquifer. This positively addressed one of the key risks identified during the PEA study.

Botswana Prospecting Licenses:

In Q3 2018, the AK11/24 license (PL371/2014) was reduced by 50% in area and extended for two periods until the third quarter of 2019.  At AK24, four holes were sampled for microdiamonds and samples were shipped to the Saskatchewan Research Council.  Microdiamond results were received in Q4 2018, although diamondiferous, microdiamond counts were low and no further work is planned for AK24. 

Sunbird Exploration Generative Project:

During Q2 2018, an agreement was signed with a Botswana company, Sunbird, to focus on the discovery of new kimberlites within the country using a proprietary UAV magnetometer platform to identify targets.  Data acquisition commenced during Q2 2018 and continued through Q4 2018 incorporating over 50,000 line kilometres of high resolution magnetics. Drilling of selected targets commenced in late Q3 2018 and continued into Q4 2018.  Though no kimberlites have been discovered to date, work will continue in 2019 on other significant targets identified.  This work is being funded from the original exploration budget of $6.0 million for fiscal 2018. Thirty-seven prospecting licenses covering 14,862 hectares in highly prospective regions in Botswana are held by Sunbird, pursuant to this exploration agreement.