The company also released an updated mine plan for Ekati, including current estimates for anticipated annual production by pipe, with associated operating costs and capital costs. Dominion operates the Ekati mine through its 80 percent ownership interest in the Core zone, which includes the operating mine and other permitted kimberlite pipes, and 58.8 percent interest in the Buffer zone, an adjacent area hosting kimberlite pipes having both development and exploration potential.

On July 9, the company announced that, subject to the rights of first refusal set out in the applicable joint venture agreements, it has entered into an agreement with C. Fipke Holdings Ltd. to acquire all of Charles Fipke’s 10 percent participating interests in the Ekati Diamond Mine at a price equivalent to the price paid to BHP Billiton in calendar 2013 for its interests. It is anticipated that completion of the transactions will occur in September 2014.

The company had previously identified in its technical report in respect of the Ekati Diamond Mine, dated May 24, 2013, an exploration target for the Misery South and Misery Southwest Satellite Pipes (collectively, the “Misery Satellite Pipes”). Since the technical report, diamond grade and value estimates for the Misery Satellite Pipes have been validated by drilling, mining and processing activities. The company has now converted the exploration target to an inferred resource with the following tonnage and grade.

Following analysis of this winter’s drilling program, Dominion said it will be preparing an updated technical report on the mineral resources and mineral reserves at the Ekati Diamond Mine that will include further details on the Misery Satellite resources as well as updates to some other pipes. The company expects to file this updated technical report in the later part of calendar 2014.

Dominion said it is continuing to make improvements to the Ekati process plant that have, to date, increased the recovered grade by about 15 percent. The resulting additional small diamonds are not currently included in reserves and the mine plan, although the company expects to incorporate these higher recovery rates into an updated reserve statement later this year.

This current mine plan assumes production from Misery, Pigeon and Lynx open pits, and the Koala and Koala North underground operations. The mining of the Fox pit was completed this year. Koala North is currently in production as a sub level retreat underground operation and is scheduled to finish later this year. Koala is currently in production as a sublevel/inclined cave underground operation and is scheduled to finish in fiscal 2020. Stripping of waste material and satellite kimberlite is in progress at Misery open pit with expected full year production from the Misery Main Pipe in fiscal 2016 and completion of mining in fiscal 2018. Stripping of waste material from Pigeon open pit is scheduled to commence this year with mining of kimberlite commencing in fiscal 2016 and finishing in fiscal 2020.

In addition to probable reserves, this plan (the base case) includes the development and mining of the Lynx pipe that is currently an indicated resource. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

The Ekati processing plant has the capacity to process up to about 4.35 million metric tons a year. In addition, the company plans to process the inferred resources from the Misery South and Misery SW Extension kimberlite that are made available as the Misery reserves are accessed (the operating case).

Additional material

The reserves and resources that are planned to be processed, as detailed above, still do not fully utilize the Ekati processing plant’s capacity of roughly 4.35 million metric tons a year. The company plans to use the spare capacity to process additional material from Koala North, Misery Northeast, and coarse ore reject stockpiles, but has not included this additional material in the above mine plan.

It is estimated that there are 308,000 metric tons of material available from the Koala North kimberlite, the majority of which will be processed in fiscal 2015. In the first quarter of fiscal 2015 the company processed 82,000 metric tons of Koala North kimberlite that produced 71,000 carats at an average grade of 0.87 carats per metric ton.

The current pit design for Misery pipe includes the extraction of about 240,000 metric tons of Misery Northeast material to gain access to the Misery Main reserves. This material has, and will continue to be, processed along with other Misery material in fiscal 2015 and fiscal 2016. Coarse ore rejects have been stockpiled at Ekati since the start of production in 1998 to present. Several production periods have been identified during which high-grade feed sources were blended through the process plant using larger aperture de-grit screens (1.6 mm slot) compared to the current 1.2 mm configuration. In addition, the re-crush circuit was not utilized during these periods. The coarse ore rejects from the production periods of interest are estimated at 3.5 million metric tons to 4.5 million metric tons. Based on stone size distributions and recovered grade data, this material has an overall grade ranging from 0.2-0.6 carats per ton. While the historic recoveries and valuations may not necessarily be indicative of recoveries or valuations within the current coarse ore rejects stockpiles, treatment of this material represents an attractive opportunity to supplement mill feed. The company cautions that the potential quantity and grade remains conceptual in nature as there has been insufficient exploration and/or study to define this material as a mineral resource and it is uncertain if additional exploration will result in the exploration target being delineated as a mineral resource.

Recovery improvements

Since the company acquired the Ekati Diamond Mine, it has been taking active steps to improve the recovery of diamonds from processed ore. Greater discipline has been brought to the maintenance and operations of the high pressure grinding roll within the process plant. As a result, less coarse feed is being pushed through to the heavy media separator modules which has had a positive impact on the overall liberation of diamonds from the kimberlite plant feed.

The two HMS modules at the Ekati Diamond Mine have historically been run at high hourly feed rates leading to relatively high losses of diamonds. Lower and more consistent operating rates for the HMS modules have resulted in higher diamond recovery across all feed types. Additional cyclones have been ordered to expand the capacity of the HMS modules and will be available for installation by late summer. Improved operating procedures for monitoring screen panel wear have also contributed to the increase in the recovery of small diamonds.

Work is ongoing to re-establish the re-crush capability in the Ekati processing plant. Diamonds, trapped in larger pieces of kimberlite, are still going straight to tailings as coarse ore rejects. Once the re-crush circuit is re-commissioned in the fourth quarter, it will be possible to channel this oversized material back to the HPGR.

There are currently only two grease tables operating in the Ekati processing plant. The design of three additional grease tables has been completed, and these will be installed and operational by the end of this fiscal year.

Dominion estimates that process plant improvements to date have increased the recovered grade by about 15 percent. The resulting additional diamonds, although mostly small, are not currently included in reserves although once the process improvements have been substantially completed, the company will incorporate the higher recovery rate into an updated reserves statement due later this year.

Capital and operating costs

The capital and operating costs for this latest mine plan are based on the company’s estimates. The costs shown include estimated contingencies where applicable, but do not include any escalation or risk contingency amounts for unforeseen events. In addition to ongoing equipment replacements and general operational upgrades, sustaining capital will include certain categories of ongoing underground excavation to maintain mining advances to increasing depths.

Dominion continues to estimate that the Misery Satellite Pipes will commence commercial production effective Aug. 1, for accounting purposes, and consequently, about C$53 million of costs previously classified as capital costs are now included in operating costs. The current estimated cost for developing the Pigeon project is C$72 million, and the Lynx project C$33 million. Both of these estimates include the construction of access roads, and pre-stripping of waste material to prepare the pit for production and contingency.

The estimated operating costs assume that Ekati is running at full capacity and is based on the company’s operating experience, adjusted to present-day dollar terms. Given the remote location of the Ekati Diamond Mine, a large portion of the operating expenditure is fixed, with the major cost items being labor and fuel (for both power and equipment).