NI 43-101 Technical Report - Gem International Resources

Transcription

NI 43-101 Technical Report
The Dala Diamond Project, Lunda Sul
Province, Angola.
Prepared For:
GEM INTERNATIONAL RESOURCES INC.
3467 Commercial Street
Vancouver, BC, V5N 4E8
Prepared By:
RORY O. MOORE, Ph.D., P.Geo.
Diamond Bay Enterprises Ltd.
2782 Ottawa Ave,
West Vancouver, B.C.,
V7V 4R2
BRUCE A. COUNTS, B.A.SC., P.Geoph.
Lithoquest Capital Inc.
199 Norton Road,
Salt Spring Island, B.C.,
V8K 2P5
Effective Date: October 28, 2015
Technical Report: The Dala Diamond Project, Lunda Sul Province, Angola
Table of Contents
1.
Summary ............................................................................................................................ 1
2.
Introduction ......................................................................................................................... 4
3.
Reliance on Other Experts .................................................................................................. 5
4.
Property Description and Location ...................................................................................... 5
4.1
Introduction to Angola .................................................................................................. 5
4.2
Dala Property Location ................................................................................................ 6
4.3
Property Agreement ..................................................................................................... 7
4.4
Government Agencies, Permits and Obligations .........................................................11
4.4.1
5.
6.
Accessibility, Climate Local Resources, Infrastructure and Physiography ..........................14
5.1
Access, Infrastructure and Local Resources ...............................................................14
5.2
Climate .......................................................................................................................15
5.3
Physiography ..............................................................................................................17
History ...............................................................................................................................17
6.1
7.
The Angolan Mining Code....................................................................................11
Previous Work on the Dala Concession ......................................................................17
Geological Setting and Mineralization ................................................................................18
7.1
Introduction .................................................................................................................18
7.2
Regional Geology .......................................................................................................18
7.2.1
Archean ...............................................................................................................19
7.2.2
Proterozoic ..........................................................................................................19
7.2.3
Palaeozoic ...........................................................................................................22
7.2.4
Mesozoic .............................................................................................................22
7.2.5
Cenozoic ..............................................................................................................23
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7.3
Structural Geology of the Lunda Region .....................................................................24
7.4
Property Geology ........................................................................................................24
8.
Deposit Types ....................................................................................................................27
8.1
Kimberlite Deposits .....................................................................................................27
8.1.1
Introduction ..........................................................................................................27
8.1.2
Kimberlites in Angola ...........................................................................................28
8.1.3
The Catoca Mine .................................................................................................31
8.2
Alluvial Deposits .........................................................................................................34
8.2.1
8.3
9.
Angolan Alluvial Deposits ....................................................................................35
Other Mineral Potential ...............................................................................................38
Exploration .........................................................................................................................38
9.1
Target Area Selection .................................................................................................38
10.
Drilling ............................................................................................................................46
11.
Sample Preparation, Analysis and Security ....................................................................46
12.
Data Verification .............................................................................................................46
13.
Mineral Processing and Metallurgical Testing .................................................................46
14.
Mineral Resource Estimates ...........................................................................................46
15.
Mineral Reserve Estimates .............................................................................................46
16.
Mining Methods ..............................................................................................................46
17.
Recovery Methods .........................................................................................................46
18.
Project Infrastructure ......................................................................................................46
19.
Market Studies and Contracts ........................................................................................46
20.
Environmental Studies, Permitting and Social or Community Impact ..............................47
21.
Capital and Operating Costs...........................................................................................47
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iii
22.
Economic Analysis .........................................................................................................47
23.
Adjacent Properties ........................................................................................................47
24.
Other Relevant Data and Information .............................................................................47
24.1
Overview of the Angolan Diamond Industry ................................................................47
24.2
Additional Information .................................................................................................52
25.
Interpretation and Conclusions .......................................................................................53
26.
Recommendations .........................................................................................................54
27.
References .....................................................................................................................59
28.
Certificate of Author ........................................................................................................60
29.
List of Abbreviations .......................................................................................................62
October 28, 2015
iv
List of Figures
Figure 1: Location of the Dala Project.
Figure 2: Dala Property Map.
Figure 3: Average temperature statistics for Saurimo as recorded over the past 23 years.
Figure 4: Average rainfall statistics for Saurimo as recorded over the past 27 years.
Figure 5: Simplified geology of Angola.
Figure 6: Tectonic Terrains of southern Africa.
Figure 7: Geological map of the Dala Concession.
Figure 8: Angolan kimberlite provinces and alluvial diamond mining activity.
Figure 9: Alluvial environments in the Lunda region.
Figure 10: East-west cross sections over the Tchicapa River.
Figure 11: East-west cross sections over the Luachimo River.
Figure 12: A north-south profile over the length of the Tchicapa River in the Dala Concession.
Figure 13: A north-south profile over the length of the Luachimo River in the Dala Concession.
Figure 14: Relative depth of incision of the three main rivers on the Dala Concession.
Figure 15: Potential alluvial target areas on the Dala Concession.
Figure 16: Target Area #T3-1.
Figure 17: Target Area #T5-1.
Figure 18: Target Area #L3-2.
Figure 19: Angolan diamond production over the period 2004 to 2012.
Figure 20: Angolan diamond production by total value.
Figure 21: Average diamond values for Angolan diamond production.
List of Tables
Table 1: Schedule B to the Letter Agreement between GEM and Global Gems
Table 2: Simplified Stratigraphy of Angola.
Table 3: Budget for Recommended Work on the Dala Project.
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v
List of Plates
Plate 1: Regional paved road that passes through the Dala concession area.
Plate 2: Archean granitic gneiss in the Luachimo river valley.
Plate 3: Quaternary flood plain sediments in the Luachimo river valley.
Plate 4: Quaternary gravel deposits exposed in garimpo pits.
Plate 5: A satellite view of the Catoca Mine Site.
Plate 6: An aerial view of the Catoca open pit.
Plate 7: Processing plant at the Catoca Mine.
October 28, 2015
vi
1.
Summary
Diamond Bay Enterprises Ltd. (“Diamond Bay”) was retained in April 2015 by Gem International
Resources Inc. (“GEM”), to conduct a site visit to the Dala property in Angola and to prepare an
independent National Instrument 43-101 (“NI 43-101”) compliant Technical Report on the Dala
Diamond Project. GEM is a Vancouver-based public company listed on the TSX-V and trading
under the symbol “GI”. Dr. Rory Moore, a geological consultant with over thirty years of
international diamond exploration experience and a Qualified Person (“QP”) under the regulations
of NI 43-101, conducted a site visit to the property on April 17, 2015 with a representative of GEM,
Mr. Denis Hayes. Mr. Bruce Counts, also a Qualified Person (“QP”) under the regulations of NI
43-101, assisted by co-authoring the report.
The Dala Project is located immediately south of Saurimo, the capital of the Lunda Sul Province
and the concession covers an area of 3,000 km2 between the Luachimo and Luangue rivers. The
proximity of the project to Saurimo provides convenient access to general supplies and services.
GEM has an option to acquire a 91.5% ownership of Global Gems International Ltd. (“Global
Gems”), and thereby attain 91.5% of a 45% interest in the Dala Diamond Project. In exchange for
the Option, GEM has agreed to:a) Pay an aggregate cash option fee of USD$800,000 and issue 5 million common shares of
the company to the vendors, and,
b) Contribute an aggregate USD$5 million towards exploration expenditures over a two-year
period.
The Dala Concession was officially awarded to Global Gems under the “Contract of Mining
Investment to Explore the Secondary Deposits of Diamonds Among Endiama Mining Limited,
Global Gems International Limited, Cimader Limited and Gemston Limited” dated 30th June 2015.
The breakdown of ownership is as follows: Endiama Mining – 30%; Global Gems – 45%; Cimader
– 9%; Gemston - 8%; Lumege - 8%.
Angola is the third largest country in Sub-Saharan Africa and is well endowed with natural
resources including oil, diamonds and other minerals. The capital city is Luanda, located on the
Atlantic coastline in the northern part of the country.
Angola represents one of the most compelling diamond exploration areas of the world. Not only
does it have excellent geological credentials for hosting world-class deposits, but the fact that it
was essentially closed to exploration while Africa’s longest civil war raged for nearly thirty years
from the early seventies until 2002 means that it is underexplored. Despite the significant increase
in exploration activities for diamonds since the civil war ended, only about 40% of the diamondprospective territories have been systematically explored using modern techniques. The full
extent of the country’s diamond potential therefore remains unknown and this makes it an
attractive venue for international exploration companies to attempt to discover a major diamond
mine.
October 28, 2015
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Diamond production in Angola showed a rapid increase in the first five years of peace, with
production nearly doubling from 5 million carats in 2002 to close to 9.5 million carats in 2006.
Since then, production has remained relatively stable at around 8 million carats per year with 84%
coming from the Catoca Mine (60% by value). In 2012, Catoca produced 6.7 million carats worth
US$ 579 million from 10.5 million tonnes of kimberlite ore. In 2013, Angola produced 9.36 million
carats for a total value of US$1.28 billion which ranks it as the world’s fifth largest diamond
producer by value and sixth largest by volume.
The overall quality of Angolan diamonds is particularly good, with approximately 70% classified
as gem quality, 20% as near-gem quality and only 10% as industrial. The average value of the
Angolan diamond production in 2012 was US$ 133/ct., which represents a mix of US$ 86/ct for
the Catoca diamonds and US$ 327/ct for the production from other, mostly alluvial, sources. The
diamonds found in alluvial deposits have undergone a natural sorting process during
transportation and deposition that favours the survival and concentration of only the best quality
gem stones.
In the past, Angola has had difficulty in attracting foreign investment because of security concerns,
corruption, human rights violations and illicit diamond trade. However, the situation has improved
quite substantially over the past decade with the security now under control, major improvements
to infrastructure achieved and steady progress being made by the authorities in clamping down
on the illicit diamond trade.
Angola implemented a new Mining Code in 2011 with the aim of providing a modern set of rules
regarding the exploration and development of its mineral resources that would be attractive to
foreign investors in the face of increasing competition from other African countries. One of the
main positive features of the new code is that exploration, mining and marketing rights are granted
under the same instrument, thus ensuring a seamless transition from exploration to mining.
The Dala Concession is located in the heart of the highly prospective and productive diamond
region of Angola, only 25 km south of Catoca. The Dala Project represents an early stage project
with excellent potential for the discovery of both alluvial and kimberlite deposits. The concession
has two of the most prominent diamond mineralised rivers in Angola flowing through it, namely
the Tchicapa and Luachimo Rivers and exposure to over 100 km of prospective river length to
explore and evaluate. Both of these rivers have incised through the diamond-bearing Cretaceous
stratigraphy and the present day river beds have penetrated into Archaean basement rocks.
Evidence for the presence of alluvial diamond mineralization in both rivers is provided by the
presence of garimpeiro activity.
It is anticipated that the main source of the diamonds in the project area will be from the
Cretaceous Calonda Formation, with possible supplemental contributions from the early Kalahari
gravels. Because the Tchicapa river valley is so mature (deeply incised and wide), it offers wide
bands of exposure of Calonda Formation on both sides of the river along the length of its course
through most of the project area. Not only has this provided a widespread source for diamonds to
be concentrated into localised Quaternary alluvial deposits; but, it also means that in-situ Calonda
gravels can be targeted for evaluation and possible exploitation. It is less likely that in-situ Calonda
October 28, 2015
2
gravels will represent direct alluvial targets along the Luachimo River as the exposure of
Cretaceous lithologies is much more limited in the Luachimo valley. However, the potential for the
presence of Quaternary alluvial deposits on the Luachimo remains high.
The methodology used to select high potential target areas involves a number of considerations
including a study of the river channel profile, elevation changes along the course of the river and
river channel geometry. These factors are important as they influence the sampling, transportation
and deposition of diamonds. A preliminary evaluation of the Tchicapa and Luachimo River
systems based on the above considerations has identified a total of thirty-eight promising alluvial
target areas on the Dala Concession that justify follow-up evaluation.
Despite the fact that the potential for the discovery of primary kimberlite deposits on the Dala
Project is considered to be good, the initial focus will be exclusively on evaluating the alluvial
potential of the project. This is because the alluvial potential can be evaluated relatively quickly
and cheaply and the timeline to revenue generation can be relatively short. In addition, the
evaluation and development cost associated with alluvial deposits is orders of magnitude lower
than it is for kimberlite deposits. After the initial phase of exploration and evaluation of the alluvial
deposits has been completed and/or at the time when a revenue stream is achieved from the
alluvials, a systematic approach to kimberlite exploration will be developed and implemented.
The authors believe that the implementation of a focused and staged exploration program
following the methodology outlined in this report has a very good chance of success.
October 28, 2015
3
2.
Introduction
The following report has been prepared to provide an independent National Instrument 43-101
(“NI 43-101”) compliant Technical Report of the Dala Diamond Project located immediately south
of the town of Saurimo in north-eastern Angola. It has been prepared for Gem International
Resources Inc. (“GEM”), a Vancouver-based public company listed on the TSX-V and trading
under the symbol “GI”. The report was written Diamond Bay Enterprises Ltd. (“Diamond Bay”) in
collaboration with Lithoquest Capital Inc. (“Lithoquest”) at the request of Mr. Denis Hayes, a senior
representative of GEM.
On September 23, 2015, GEM signed a binding agreement with Global Gems International for an
option to acquire a 50% ownership of Global Gems, and thereby attain 50% of a 45% interest in
the Dala Diamond Project. In exchange for the Option, GEM has agreed to:a) Pay an aggregate cash option fee of USD$500,000 and issue 2.75 million shares to the
vendors, and,
period.
On March 24, 2016, GEM and Global Gems International terminated the above agreement and
concurrently entered a new agreement whereby GEM secured an option to acquire 91.5 per cent
of the issued and outstanding shares of Global Gems and thereby attain 91.5 per cent of a 45per-cent interest in the Dala project. In exchange for the Option, GEM has agreed to:a) Pay an aggregate cash option fee of USD$800,000 and issue 5 million shares of the
company to the vendors, and,
period.
Diamond Bay was retained by GEM in April 2015 to conduct a site visit to the Dala property in
Angola and to prepare an independent National Instrument 43-101 (“NI 43-101”) compliant
Technical Report on the Dala Diamond Project.
Dr. Rory Moore, a geologist with over thirty years of international diamond exploration experience
and a Qualified Person (“QP”) under the regulations of NI 43-101, conducted a site visit to the
Dala Property with Mr. Denis Hayes on April 17, 2015. Mr. Bruce Counts, a Qualified Person
(“QP”) under the regulations of NI 43-101, assisted by co-authoring the report.
This Technical Report is prepared in accordance with the requirements of NI 43-101 of the British
Columbia Securities Commission (“BCSC”) and the Canadian Securities Administration (“CSA”)
and has an effective date of October 28, 2015. The authors understand that the report will be
used for internal decision making purposes and may be filed as required under TSX-V regulations.
This report may also be used to support public equity financings.
October 28, 2015
4
3.
Reliance on Other Experts
Apart from viewing the Agreement between GEM and Global Gems that outlines the Option for
GEM to acquire a 91.5% ownership of Global Gems, the authors have made no attempt to verify
the legal status and ownership of the Property, nor are they qualified to do so. The authors have
also not verified the legality of any underlying agreement(s) that may exist concerning the Dala
Concession License but have relied on, and believe they have a reasonable basis to rely upon
documents provided by GEM and its partners. GEM has conducted independent legal due
diligence on Global Gems International and its ownership rights to the Dala Concession and has
made available to the authors an official title opinion dated September 29, 2015 completed by the
Angolan legal firm “CNS & Associados Advogados”. The opinion provides comfort as to the legal
ownership by Global Gems International of a 45% interest in the Dala Concession under the
“Contract of Mining Investment to Explore the Secondary Deposits of Diamonds Among Endiama
Mining Limited, Global Gems International Limited, Cimader Limited and Gemston Limited” dated
30th June 2015.
All statements and opinions expressed in this document are given in good faith and in the belief
that such statements and opinions are not false and misleading at the date of this report. The
authors’ reserve the right, but will not be obligated to revise this report and conclusions if additional
information becomes available subsequent to the effective date of this report.
4.
Property Description and Location
4.1
Introduction to Angola
Angola is the third largest country in Sub-Saharan Africa, encompassing approximately 1.3 million
square kilometers, a population of approximately 11.2 million and an annual population growth
rate of about 2.7%. The country is well endowed with natural resources including oil and minerals,
as well as fertile soils and a productive ocean. The capital city is Luanda, located on the Atlantic
coastline in the northern part of the country. The country is divided into 18 Provinces, each
administered by a Governor appointed by the President.
Plagued by more than thirty years of war, first with its Portuguese colonial rulers and later because
of internal ideological differences, Angola has been rebuilding its economy since the onset of
peace in 2002. The Angolan economy is driven by oil and diamonds, with revenues from oil
production being much more significant (US$ 50-60 bn/annum versus US$ 1 bn/annum
respectively). For the past decade, Angola has been one of the fastest growing economies in the
world, with its real GDP expanding at an average annual rate of 11% (Chambel et.al., 2013). With
the stability that followed the prolonged civil war, Angola has taken advantage of the oil boom in
the mid-2000’s to rebuild its infrastructure and enhance its democratic institutions. The
government is committed to diversification away from its dependence on oil and gas. In pursuit of
this goal, it introduced a new mining code in 2011 aimed at attracting foreign investment to pursue
the exploitation of largely untapped reserves of minerals such as iron ore, copper, gold and
uranium.
October 28, 2015
5
Angola is one of the most compelling diamond exploration areas of the world. After the civil war
ended, huge swathes of the diamond-rich country became available in the north-eastern region
of the country that was formerly under the control of the National Union for the Total Independence
of Angola (“UNITA”). This resulted in a rush of foreign companies to Angola to invest in diamond
exploration and mining and a dramatic increase in the formal diamond production figures. Angola
is now the world’s fifth largest diamond producer by value.
Despite the significant increase in exploration for diamonds, only about half of Angola’s diamond
fields are currently being explored. Estimates of Angola’s diamond reserves vary significantly and
the full extent of the country’s diamond potential remains unknown.
4.2
Dala Property Location
The Dala diamond concession is located immediately south of Saurimo, the capital of the Lunda
Sul Province (Figure 1). The concession covers an area of 3,000 km2 between the Lueli River in
the east and the Luele River in the west. The village of Mona Quimbundo is situated close to the
southwestern boundary (Figure 2). Saurimo is located at Latitude 09o 39’ S and Longitude 020o
24’ E and an altitude of 1,080 m above sea level. The proximity of the project to Saurimo provides
convenient access to general supplies and services.
The concession area is defined by the following geographic coordinates:09o 40' 14” S
020o 00’ 00’ E
09o 40' 14” S
020o 40’ 00’ E
10o 02' 09” S
020o 40’ 00’ E
10o 02' 09” S
020o 00’ 00’ E
Figure 1: Location of the Dala Project, Lunda Sul Province.
October 28, 2015
6
Figure 2: Project location in relation to Saurimo.
The Property represents an early stage exploration area, and the authors are not aware of any
environmental liabilities that may have accrued from previous exploration and/or development
activities within the Dala Concession. The authors are also unaware of any other significant factors
and risks that may affect access, title, or the right or ability to perform work on the Property. The
Company and its partners are bound by the laws of Angola concerning environmental compliance.
4.3
Property Agreement
On September 23, 2015, GEM entered into a binding letter agreement with Global Gems for an
option to acquire 50 per cent of the issued and outstanding shares of Global Gems and thereby
attain 50 per cent of a 45-per-cent interest in the Dala Project. In exchange for the Option, the
Company has agreed to pay an aggregate cash option fee of US$500,000 and issue an aggregate
2,750,000 common shares of the Company to the vendors and contribute an aggregate
US$5,000,000 towards the exploration expenditures over a two-year period.
On March 24, 2016, GEM and Global Gems International terminated the September 23, 2015
agreement and concurrently entered a new agreement (“the Agreement”) whereby GEM secured
an option to acquire 91.5 per cent of the issued and outstanding shares of Global Gems and
October 28, 2015
7
thereby attain 91.5 per cent of a 45-per-cent interest in the Dala project. In exchange for the
Option, GEM has agreed to:c) Pay an aggregate cash option fee of USD$800,000 and issue 5 million shares of the
company to the vendors, and,
d) Contribute an aggregate USD$5 million towards exploration expenditures over a two-year
period.
Specific details of the agreement are summarised as follows:
An amount of US$300,000 is due and payable to Global Gems within 21 business days
after the execution of the Agreement. This amount constitutes an unconditional nonrefundable obligation of GEM and the funds will be allocated as initial working capital for
Global Gems to establish project infrastructure in Angola.

Upon receipt of TSX Venture Exchange approval of the Agreement, a further amount of
US$250,000 together with the issuance of 2,500,000 common shares at a deemed price
of CDN$0.05 per common share, for an aggregate deemed value of CDN$125,000 is to
be paid by GEM to Global Gems. Completion of this payment shall signify that GEM
exercises the Option and that the Agreement has become final and unconditional. The
Option is an option only and nothing in the Agreement obligates GEM to to proceed
beyond the initial US$300,000 payment if it so elects.

After GEM has completed a private share placement of not less than US$1,950,000 and
within one year of the date of execution of the Agreement, GEM to provide a cash payment
of US$175,000 to Global Gems together with cash calls on an as needed basis that
collectively total an amount of US$1,775,000 with such funds to be used to explore and
evaluate the diamond potential of the Dala Concession according to the approximate
expenditure schedule outlined in Table 1.

On or before the 2nd anniversary of the execution of the Agreement, a further amount of
US$250,000 together with the issuance of 2,500,000 common shares at a deemed price
of CDN$0.05 per common share, for an aggregate deemed value of CDN$125,000 to be
paid by GEM to Global Gems.

On or before the 2nd anniversary of the execution of the share purchase agreement and
provided that GEM has successfully completed a Private Placement of not less than
US$2,750,000, GEM to make a cash payment of US$200,000 and provide a further
US$2,550,000 to Global Gems on an as needed basis to be used to explore and evaluate
the diamond potential of the Dala Concession according to the approximate expenditure
schedule outlined in Table 1.
The Dala Concession was officially awarded to Global Gems under the “Contract of Mining
Investment to Explore the Secondary Deposits of Diamonds Among Endiama Mining Limited,
Global Gems International Limited, Cimader Limited and Gemston Limited” dated 30th June 2015
October 28, 2015
8
(“the Contract”). The breakdown of ownership is as follows: Endiama Mining – 30%; Global Gems
– 45%; Cimader – 9%; Gemston - 8%; Lumege - 8%. The duration of the Contract is five years
and it may be extended for successive one year periods up to a maximum of seven years.
Under the Contract, Global Gems and partners are granted the following rights:





Exclusive exploration rights to the secondary diamond deposits found within the area of the
Concession. Secondary deposits mean deposits in alluvial settings rather than primary
kimberlite sources.
Full and free access to the concession area at all times to conduct exploration and
evaluation work.
Upon the granting of specific permits, authority to build infrastructure, access roads and
conduct drilling and bulk sampling operations within the concession area.
Upon filing the appropriate applications, granting the necessary visas and work
authorizations for skilled foreign workers, collaborators and consultants to work on the
project.
Rights to import and export equipment, samples and goods.
Rights to import capital investment from foreign entities.
Under the Contract, Global Gems and partners accept the following commitments:




Pay a guarantee equivalent to 1% of the minimum value of the proposed work plan (in this
case 1% of US$5 million = US$50,000). The guarantee is refunded upon completion of the
proposed program.
Complete the minimal work programs as outlined in the proposed work plan (in this case
US$5 million over the 5-year term of the Contract).
Global is committed to funding the initial US$5 million of expenditure, which responsibility
reverts to GEM under the terms of the Agreement.
Abide by the environmental laws of Angola in all exploration and operational activities.
The authors are not aware of any back-in rights or other encumbrances relevant to the Dala
Concession under the Contract.
October 28, 2015
9
Table 1: Schedule of Indicative Expenditure as Outlined in the Letter Agreement between GEM
and Global Gems
ITEM
Geophysics
Drilling
Suction Pump (6") and Auxiliary
Bulldozer D6 - H/R
Excavator - Volvo
Tipper Truck
Articulated Truck
Fuel Tank
Grader
Loader
X-Ray Diamond Recovery Unit (MB70)
Dense Media Separation Plant (30 tph)
Workshop Equipment
Generators
Tents
Residential Containers
Water Treatment Unit
Equipment Mobilization
Toyota Land Cruiser
Unimog
Land Rover
Toyota Hi-Lux (D/Cab)
Local Staff Wages
Food
Fuel
Maintenance
Security
Environmental Impact Study
Study of Techical & Economic Viability
Miscellaneous
October 28, 2015
QTY
1
1
1
2
2
2
4
1
2
1
1
2
10
1
2
1
2
4
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
AMOUNT
100,000
54,000
250,000
520,000
380,000
172,000
420,000
69,800
260,000
300,600
450,000
600,000
150,000
265,400
60,000
5,000
75,000
100,000
49,000
50,000
59,000
39,000
86,000
30,000
20,000
10,000
26,000
50,000
100,000
249,200
5,000,000
10
4.4
Government Agencies, Permits and Obligations
4.4.1 The Angolan Mining Code
The legal framework governing a mineral resource project is key to the potential success of the
project should it be successful in advancing from the exploration stage through evaluation and
development. It is therefore important to carefully consider these matters even before proceeding
with an early stage exploration program. The Mining Code of the host country is obviously the
most important critical piece of legislation relevant to exploration and mining companies, but other
laws concerning foreign investment, fiscal policies as well as environmental protection are also
critical.
In September 2011, Angola implemented a new Mining Code (termed Código Mineiro) by way of
Law 31/11. The aim of the new Mining Code was to provide the Angolan mining sector with a
modern set of rules regarding the exploration and development of its vast mining resources, as
well as to unify, in a single document, a framework that was previously fragmented in various
different, cumbersome and outdated laws (i.e. the “Mining Law” of 1992 and the “Diamond Law”
of 1994). A further major goal of the modernization, simplification and clarification of the mining
framework was to attract foreign investment to the sector in the face of increasing competition
from other African countries. One of the main concerns of foreign investors that have been
addressed is that the former “double contract” model was replaced by a system whereby
exploration, mining and marketing rights are granted from the onset under the same instrument,
thus ensuring a seamless transition from exploration to mining (Fialho, 2012).
The main features of the Mining Code are as follows (summarized and adapted from Fialho, 2012
and Mayer Brown, 2012):
Sustainability - this is an important principle. The holders of mining rights are required to
conduct exploration and mining in a sustainable way for the benefit of national economy,
in strict observance of the rules of safety, the rights of local communities and
environmental protection.

Local communities - have the right to be actively engaged in the process leading up to
the development of mining activities in their territory and it is mandatory to establish
communication/consultancy channels with these communities. If mining activities are likely
to cause habitation damage, the holders of mining rights have the obligation to resettle
local communities with due consideration given to local traditions and culture.

Environmental protection - the holder of mining rights is required to comply with all
general and specific mining-oriented environmental legislation and to conduct exploration
and mining activities with a focus on preserving nature and the environment. Key aspects
include the mandatory filing of an environmental impact study (“EIS”) with the mining
authorities and the requirement to grant the local population access to the EIS if the study
identifies any potential detrimental effects that may arise for their communities.

State Participation – the State participates in mining activities by collecting part of the
production whether by (i) a direct participation of a State Company in a given concession
October 28, 2015
11
(with a minimum 10% participating interest); or (ii) by sharing the production with the
entities engaged in the mining operation.

Local Content - preference must be given to the hiring of national employees living in the
surroundings of the concession areas and to ensure that they receive appropriate training.
Also, within the bounds of certain practical guidelines aimed at avoiding exploitation,
preference must be given to acquiring goods and services from local suppliers.

Geological Information - belongs to the State and entities that collect geological
information are only permitted to use it for the purposes contractually established with the
State.

Mineral Resources - Mineral resources belong to the State and mineral production
belongs to the holders of mining rights.

Mining Rights - Mining rights are provided through one of the following titles:
(a) Prospection Title – granted for a period of 7 years to facilitate exploration and
evaluation of mineral resources. The holder is required to release 50% of the concession
area by the end of the initial 5-year period. The Prospection Title can be extended beyond
7 years, but upon each extension the holder is required to release an area as determined
by the Mines and Geology Ministry. If the holder does not wish to drop any ground, then a
surface tax of US$ 105/km2 is payable.
(b) Production Title – covers the production of mineral products and is automatically
granted subsequent to a successful exploration and evaluation process except if there is
a breach of law and/or contract, or when there are legitimate public interest concerns. The
granting of these rights requires the filing of a business/technical plan, environmental
impact study and a production plan. Rules applicable to mining activities under this title
are outlined in the Mining Contract. Mining rights are granted for a 35 year period (including
the period covered by the Prospection Title) and are subject to 10 year extensions that are
subject to Ministerial approval.
(c) Mining License – covers the production of mineral products that are used in the
construction industries (e.g. quarries for gravels etc.).
(d) Mining Pass – covers artisanal (garimpeiro) mining activities.

Acquisition of Mining Rights - Mining rights are issued either by application or through
a public tender process. Mineral rights over areas with high geological potential or relating
to strategic minerals (diamonds, gold and radioactive minerals) are always granted
through public tender.

Land Ownership - when mining rights are granted over land owned by individuals,
authorization from the land owner is required before work can proceed. The land owner is
also entitled to a land rental fee and a security deposit to cover potential damages.

Concession Area – covers up to a maximum of 10,000 km2. If a larger area is required,
special authorization is required from the Mines and Geology Ministry.
October 28, 2015
12

Assignment of Mining Rights – Mining rights are transferable to a third party subject to
restrictions set by the Mines and Geology Ministry. Mining rights can be used as collateral
to secure credit facilities to finance mining activities. Mining rights cannot be seized.

Guarantee - private holders of mining rights are obliged to provide a guarantee to cover
their contractual investment obligations. During the reconnaissance, exploration and
evaluation stage, the guarantee is set at 2% of the investment obligations. During the
production stage, the guarantee is 4% of the investment obligations. Mining companies
are required to have a legal reserve corresponding to 5% of the invested capital in the
project to cover environmental restoration costs if the project is abandoned or comes to
its natural end.

Taxes and Royalties - Investments in mineral activities by Angolan or foreign entities are
subject to a specific authorization, in the form of the approval of the relevant mineral
investment contract, to be approved by the Minister of Geology, Mines and Industry or the
President of the Republic, as the case may be. Investors in the Angolan mining sector
may be given tax and other incentives, are subject to a more favourable industry-specific
customs regime and are guaranteed the reimbursement of their investments from the
proceeds of the sale of the minerals produced. A summary of taxes and royalties
applicable to the mining industry is as follows:o
o
o
o
o
Corporate Income Tax – 25%
Royalty on Production – 5%
Surface Tax – US$ 7/km2 in Year 1 up to US$ 35/km2 in Year 5.
Investment Income Tax – 10% on dividend distributions, 15% on interest payments.
Customs Duties – exemption on the importation of certain equipment to be used
exclusively for mining operations.
The diamond industry in Angola falls under the management of the state-owned company
“Emprêsa Nacional de Diamantes” (“ENDIAMA”), which represents the fifth largest diamond
producer in the world. Foreign companies are obliged to work in partnership with ENDIAMA. All
exploration and production contracts must be approved by the Council of Ministers and the
Ministry of Geology and Mines.
Since 2000, the size of diamond concessions has been limited to a maximum of 3,000 km2.
Previous to this, concessions could be larger (and most were). However, security issues and the
effective control of illegal mining over large areas were cited as the reasons behind implementing
the current limit. Companies may be allowed to own more than one concession. The minimum
required investment on an alluvial concession is US$ 5 million, with a mandatory security deposit
of US$ 500,000 required as a guarantee. In the case of a kimberlite concession, the minimum
required investment is US$ 10 million, with a mandatory security deposit of US$ 1.2 million
required as a guarantee.
Angola is an official signatory of the Kimberley Process Certification Scheme (KPCS). The KPSC,
enacted in 2003 in response to a global campaign against the proliferation of “conflict diamonds”
or “blood diamonds”, requires all participating countries to issue a certificate to accompany all
October 28, 2015
13
exported rough diamonds. Angola’s civil war was sustained partly due to UNITA’s control of the
illicit diamond trade.
5.
Accessibility, Climate Local Resources, Infrastructure and Physiography
5.1
Access, Infrastructure and Local Resources
The capital city of Angola, Luanda, is readily assessable via international flights from various
African and European cities. There is a regular commercial jet service between Luanda and
Saurimo operated by the Angolan national airline, TAAG. Flying time is one hour and thirty
minutes and the service operates several times per week using modern Boeing 737-800 aircraft.
In the past, road access to Saurimo (a distance of 950 kilometres) was slow due to the poor
condition of the road resulting from poor maintenance and excessive use by heavy vehicles.
However, significant investment has been made to improving the major road networks in Angola
over the past decade and much of the route is now paved and in good condition.
Saurimo boasts the second longest all-weather landing strip in Angola, capable of handling large
cargo aircraft. While equipment and general supplies are commonly transported into the region
by road, movement of personnel and perishable goods from Luanda and abroad is normally done
by air.
The principal roads within the concession area are in excellent condition and three regional paved
roads pass through the concession area (Figure 2, Plate 1).
Outside of Saurimo, there is no electrical grid in the region and so the project will need to make
use of diesel-generated power. Drinking water is readily available from natural springs throughout
the region, while larger volume water requirements (for irrigation, diamond recovery plants etc.)
can easily and freely be sourced from the local rivers.
In terms of telecommunications, Saurimo boasts a modern well-functioning mobile network, but
communications outside of the city limits is via satellite.
Primary and secondary schooling is provided by the State in Saurimo, but there are limited
education facilities available outside of the provincial capital.
Tropical diseases such as malaria and typhoid are endemic in the region. While reasonable
medical services are available in Saurimo, any serious health problems would require evacuation
by air for treatment in Luanda.
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Plate 1: Regional paved road passing through the Dala Concession.
5.2
Climate
The climate in the Dala Project area is tropical savanna (Subtype "Aw" on the Köppen Climate
Classification Scheme) which, by definition this implies that it has a monthly mean temperature
above 18°C in every month of the year and a pronounced dry season, with the driest month having
precipitation of less than 60mm. In essence, a tropical savanna climate tends to either see less
rainfall than a tropical monsoon climate or have more pronounced dry seasons than a tropical
monsoon climate.
The average monthly temperatures for Saurimo as recorded over the past 27 years are illustrated
in Figure 3. This plot illustrates that the warmest month, on average, is September with an average
temperature of 22.8°C, while the coolest month is June with an average temperature of 20°C.
Daily maximum temperatures are in the high twenties to early thirties throughout the year and
daily lows average 17.6°C on an annual basis with minimum temperatures dropping to as low as
14°C in the winter months. The overall average temperature on an annual basis in Saurimo is
21.8°C.
As mentioned above, the region around Saurimo experiences two pronounced seasons in terms
of rainfall. Figure 4 illustrates that the wet season runs from September to April, with the heaviest
rainfall occurring in March (221 mm). The dry season runs from May to September with June and
July being the driest months with typically no precipitation at all. The average annual precipitation
for Saurimo is 1,291 mm.
October 28, 2015
15
Field conditions are good during the dry season (May to September), but deteriorate with the
onset of the rains. It is, however, generally possible to conduct fieldwork throughout the year,
accepting seasonal fluctuations in productivity.
Saurimo Temperature (oC)
Average Temperature (oC)
50
40
Max, 28.6
30
Average, 21.8
20
Min, 17.6
10
0
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Figure 3: Average temperature statistics for Saurimo as recorded over the past 23 years.
Source: Weatherbase.com
Saurimo Precipitation (mm)
250
Precipitation (mm)
200
150
100
50
0
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Month
Figure 4: Average rainfall statistics for Saurimo as recorded over the past 27 years.
Source: Weatherbase.com
October 28, 2015
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5.3
Physiography
There are two distinct geomorphological regimes regionally in the project area: the Tertiary land
surface and the Quaternary land surface. The former comprises a flat, smooth plateau that is
very gently inclined towards the south, with a regional slope of approximately 0.1 degrees from
the horizontal. This plateau covers most of the inter-fluvial areas between the larger rivers
(Tchicapa, Luele and Luachimo), with elevations in the range 1,150 m above sea level (“asl”) in
the south to 1,100 m asl in the north of the concession.
The Quaternary surface is restricted to the active river valleys, and is consequently narrow and
sinuous in form. Elevations range between 1,020 m asl in the south, and 1,000 m asl in the north.
Hydrographically, the concession area is dominated by the perennial Tchicapa, Luachimo and
Lueli rivers, which flow from south to north. Tributary drainage patterns are poorly developed
dendritic, with headwater areas exhibiting the form of steep-sided amphitheatres. Because of
cover of Kalahari sands, rivers are mainly fed by ground water. The influence of bedrock structure
is evident in the regional drainage pattern.
6.
History
6.1
Previous Work on the Dala Concession
Moydow Mines International Inc., a public company listed on the TSX Exchange in Toronto and
AIM Exchange in London, England explored the Dala Concession between 2004 and 2008. Very
little technical detail of Moydow’s activities is available on public record and the authors
recommend that a formal request be made to the Angolan authorities to facilitate access to the
official records held by Endiama in Luanda prior to work commencing on the concession.
Moydow initially obtained the rights to exploit alluvial diamonds on the Dala Concession in 2004,
and subsequently secured the rights to explore for kimberlite diamond sources in early 2006.
During the course of alluvial exploration, Moydow encountered extensive evidence pointing to the
existence of kimberlitic bodies within the licence area. In September 2005, they flew a 15,000line kilometre airborne geophysical survey over the entire concession. The survey included
magnetics and radiometrics and was flown at a line spacing of 150 metres and a height of 80
metres above ground. Numerous magnetic anomalies were identified from this survey and in
follow-up work completed in 2006 and 2007, a total of 102 grids each approximately one square
kilometre in size, were covered by ground magnetic surveys. The results were interpreted by
international diamond exploration specialists, Scott Hogg & Associates Ltd. of Toronto, Canada,
who outlined 19 high priority targets and 15 medium priority targets.
In June 2008, Moydow initiated a 5,000 metre drill program to test a selection of the high priority
targets. The first hole of the campaign was a vertical hole located near the centre of a magnetic
anomaly (DAL 58) and it hit kimberlite at a depth of 126 metres. Three further kimberlites
discoveries were announced in September 2008, the so called G34, G35 and G84 targets. A
total of eleven anomalies were drilled during the program of which six were considered to be high
October 28, 2015
17
priority targets. Of the six high priority targets, four intersected kimberlites, one drillhole was
abandoned due to ground conditions before reaching target depth and one returned a negative
result. No official results for these kimberlites were available to the authors at the time of
publishing this report, but unconfirmed verbal communication with representatives from
ENDIAMA indicate that at least two of these pipes are diamondiferous.
Moydow was forced to abandon the Dala Project in 2009 when it was unable to continue financing
exploration work due to the significant negative impacts on junior exploration companies
stemming from the Global Financial Crisis. In January 2010, Moydow was acquired by FrancoNevada for its gold assets in West Africa and its public listings on the TSX and AIM were
cancelled.
7.
Geological Setting and Mineralization
7.1
Introduction
The regional geology of Angola is poorly documented and detailed geological map coverage is
sporadic and incomplete. Systematic mapping of the country by the Geological Survey of Angola
essentially stopped when Angola achieved independence in 1975 and the country plunged into a
period of prolonged instability and civil war. Some focused studies by international corporations
exploring for oil and diamonds have been undertaken, but these are isolated and access to this
information is often not available. Fortunately, the Ministry of Geology and Mines has recently
taken positive steps to address this situation. In 2009, the President of Angola approved a
proposal for an ambitious geological initiative and the government put out an international tender
for the program that included airborne geophysical coverage over the entire country, as well as
regional geological and geochemical mapping for the whole of Angola at a scale of 1:250,000.
A five-year time-line for the so called National Geology Plan (“Planageo”) was initiated in 2013
and is scheduled to be completed in 2017. Four international companies (one each from China,
Brazil, Portugal and Spain) were selected to complete the work at an estimated cost of US $413
million. In addition to the regional geological work detailed above, a new headquarters for the
Angolan Geological Institute is being built in the south of Luanda, together with two regional offices
equipped with laboratories located in Saurimo in Lunda Sul and in Huíla Province. For the
execution of Planageo, Angola’s territory has been divided into three areas (northwest, southeast
and south, and east and northeast) and then further sub-divided into 22 blocks in order to facilitate
efficient data collection.
7.2
Regional Geology
The geology of Angola is relatively complex, with the geological formations being distributed
essentially parallel to the coast, in a NNW direction in the northern part of the country and in a
NNE direction in the south. A brief summary arranged according to geologic age is provided below
and it should be read with reference to the simplified geological map of Angola presented as
Figure 5 and the summary stratigraphy presented in Table2.
October 28, 2015
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7.2.1 Archean
The occurrence of diamondiferous kimberlites on Archean cratons has long been
recognised as a critical guideline when exploring for primary diamond deposits (Clifford,
1966). This empirical observation (the so called “Clifford’s Rule”) has subsequently been
explained by the fact that the geological conditions that are required to grow and preserve
diamonds occur under Archean cratons (Helmstaedt & Gurney, 1995). Diamonds are
preserved in the craton root zones until they are sampled by kimberlite volcanic events that
bring them to surface (see Section8.1.1). It is therefore not surprising that the diamond
producing region in the northeastern Lunda provinces of Angola is underlain by the Congo
Craton (Figure 6), which comprises an Archean mafic charnockitic complex. Outcrop
exposure is very limited in this region as the Archean is mostly buried beneath younger
cover rocks.
The oldest rocks in the Lunda region are mafic and intermediate products of high grade
metamorphism of older granitoid rocks. The age of the precursor granitoids is thought to be
3.1 to 3.4 Ga and the charnockitization event occurred during the Musefu episode at 2.8 Ga
(Delhal & Ledent, 1971). Suites of gneisses, migmatites and granitoids occur along the
valleys of the Tchicapa and Luachimo Rivers. These units are usually intensely weathered
and outcrop is generally very poor, usually confined to small areas within the most deeply
incised sections of the rivers.
Besides underlying the north-eastern part of the country, the Archean is widely represented
in the rest of Angola with major outcrops occurring in the large shield areas that occur in an
almost continuous north-south belt along the western half of the country. Small windows of
lower Archean rocks occur in the valleys of the Luanguinga and Ninda Rivers in eastern
Moxico. The Archean rocks consist predominantly of gneisses, but other lithologies such as
schists, amphibolites and quartzites are also represented. Large areas of granite and
gabbro-norite intrusions occur, especially on the Angola Shield.
7.2.2 Proterozoic
Proterozoic aged lithologies occur mostly over the large shield areas in Angola. They are
predominantly comprised of sediments that were deposited in basins and low-lying tectonic
settings on the Archean basement and subsequently metamorphosed by the Eburnian,
Kibaran and Pan-African events. The lower Proterozoic sediments have only been affected
by the Eburnian and Kibaran orogenic events, while the upper Proterozoic (Riphean to
Vendian) lithologies have been affected by the Pan-African event. The extensive upper
Proterozoic sediments on the eastern portion of the Maiombe Shield are generally flat-lying
and the youngest formation (the Xisto-Gresoso Group) in the Cuango River valley is
intruded by kimberlites.
October 28, 2015
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Figure 5: Simplified geology of Angola. Source: Spilpunt.blogspot.ca.
Figure 6: Tectonic Terrains of southern Africa illustrating that the
northeast region of Angola is underlain by the Archean Congo Craton.
Source: jgs.lyellcollection.org
October 28, 2015
20
Table 2: Simplified Stratigraphy of Angola.
Era
Period
Ma.
-
Cretaceous Palaeogene Neogene Quaternary
0
Carboniferous- Triassic Permian
Jurassic
135
Riphean
PROTEROZOIC
RipheanVendian
PALAEOZOIC
MESOZOIC
CENOZOIC
Eon
Occurrence
Recent Sediments
(aeolian deposits, alluvial terraces,
floodplains, channel and slope deposits)
Sand, gravel
Eastern and Southern Angola
Kalahari Group: “Ochre Sand Formation”
Sst, arg
Eastern half of Angola
Kalahari Group: Undifferentiated
Sst, cgl
Kalahari Group: “Gres Polimorph Formation”
Sst, cgl
23
23
65
65
135
Calonda Formation
Kwango Formation
Intrusives
Continental Intercalar Formation
Sst, cgl, arg
Sst, cgl, arg
Kimberlites
Sst, arg
Lunda N, Malanje, Uíge
Malanje, Uíge
SW-NE belt across Angola
Bié, Moxico
Karoo Supergroup: Upper Stormberg
Karoo Supergroup: Stormberg ?
Karoo Supergroup: Lower Stormberg
Karoo Supergroup: Cassanje Group
Dol, bslt
Bslt, sst
Cgl, sst, arg
Sst, arg
Moxico (Upper Zambezi area)
Cuito R (at Namibian border)
Lunda N, Malanje
Karoo Supergroup: Ecca Group
Karoo Supergroup: Lutoe Group
Cgl, sst, arg
Tllt, cgl, sst, arg
Namibe
Lunda N
570
Xisto-Gresoso
Group (Inkisi Group) (PA)
Xisto-Gresoso Group (M’Pioka Group) (PA)
Xisto-Gresoso Group Undifferentiated (PA)
Ark,
grv, cgl
Ark, sst, scht, cgl
Scht, ark, grv, sst, cgl
Uíge
Uíge
Malanje, Cuanza S, Cuanza N
680
M’Bridge Formation
Cgl, grv, cgl
Uíge
680
Xisto-Calcario Group (PA)
Chela Group (Leba Formation) (K)
Chela Group (Humpata Formation) (K)
Intrusives
Macondo Group
Alto-Chiloango Group (PA)
Terreiro Group (E ?, PA)
Dlm, scht, ark, sst
Lmst, chrt
Qzt, cgl, sst, arg
Grnt
Cgl, lmst, sst, qzt,
scht
Lmst, scht, grv, ark,
sst
Scht, arg, sst, grv,
lmst
Grnt, dol, gbr, kimb?
Tuf, ark, cgl, scht
Cgl, qzt, sst, grv, scht
Scht, cgl, qzt, sst
Cgl, sst, qzt, scht, tuf
m-cgl, qzt, m-grv,
scht
m-grv, bslt, scht, qzt
Gnss, grnt, gbr, qzt,
m-cgl
Malanje
Namibe, Huíla
Namibe, Huíla
Gnss, amph, scht
N-S belt across western
Angola, Lunda N and Moxico
(Upper Zambezi area)
230
230
300
1650?
Lower
Proterozoic
2600
2600
Archean
Lithology*
1.8
1.8
?
ARCHEAN
Group / Formation
Metamorphic event: Eburnian (E),
Kibaran (K), Pan-African (PA)
Intrusives
Lulumba and Uerda Groups (E)
Oendolongo Group (K)
Lunda and Luana Groups (E)
Malombe Group (E)
Bale Group
Jamba and Cuandja Groups (E)
Upper Archean
Lower Archean
3500
Cuanza N, Uíge
Cuanza N, Uíge
Bengo, Zaïre
Huambo
Lunda N, Lunda S
Jamba area
Jamba area and Cuito River
N-S belt across western
Angola & Lunda N
* sst : sandstone, arg: argillite, cgl: conglomerate, ark: arkose, tllt: tillite, grv: greywacke, lmst: limestone, dol: dolerite, bslt: basalt,
grnt: granite, gbr: gabbro, kimb: kimberlite, gnss: gniess, scht: schist, qzt: quartzite, amph: amphibolite
October 28, 2015
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7.2.3 Palaeozoic
The Karoo Supergroup is widespread in Angola, and since no Cambrian to Carboniferous
age units are present in the stratigraphy, the Karoo unconformably overlies either Archean
or Proterozoic basement lithologies. The Karoo rocks in Angola can be subdivided into the
Lutoe Group, the Cassange Group and the Stormberg Group.
The Lutoe Group consists of tillites, conglomerates, sandstones and shales and is
considered to be upper Carboniferous to Permian in age. The tillites closely resemble those
of the Dwyka Group in South Africa, but are only 5 to 12 m thick in Angola. In Lunda Norte
and Lunda Sul, Lutoe Group sediments are exposed in the valleys of the Tchicapa,
Luachimo and Luembe Rivers and consist of friable, arenaceous to argillaceous red beds.
The Cassange Group sediments occur mainly in the Cassange Graben, a north-central to
north-western geographical depression. They are well exposed over a large portion of the
drainage of the Cuango River in Lunda Norte and Malanje provinces, where they are
commonly intruded by kimberlites. The Cassange Group rocks include fine-grained thinly
bedded sandstones that contain fossil fish and plant remains. The thickest formation is the
Phyllopode Beds, a succession of shales and sandstones that attain a thickness of 500 m.
This group is generally regarded as an equivalent to the Beaufort Group in South Africa,
and is considered to be upper-Permian to lower-Jurassic in age.
Younger formations in the Karoo sequence that are related to the Stormberg Group in South
Africa are represented as arenaceous sediments, basalts and dolerites. The Stormberg
Group outcrops as sandstones and basalts in the Cuito River valley near to the Namibian
border, and as arenaceous sediments in the upper Zambezi area in eastern Moxico
Province.
7.2.4 Mesozoic
An upper Jurassic to lower Cretaceous continental sedimentary unit of sandstones and
argillites called the Continental Intercalar Formation is exposed in river valleys in the
provinces of Bié and Moxico. This formation is well represented in the river valleys of the
upper Cuanza River and its tributaries, as well as in the river valleys of the south-east
flowing rivers of the southern part of Moxico Province. The Continental Intercalar Formation
has been argued to belong to the Karoo system as it is reported to be conformable with the
Cassange Group.
Cretaceous rocks of marine origin, including limestones, marls and sandstones,
predominantly occur in a narrow belt along the Angolan coast. These rocks are a very
important source of hydrocarbons for the Angolan economy.
The continentally deposited Cretaceous sediments are represented by the Calonda and
Kwango Formations. The arenaceous sediments of the Calonda Formation are the same
age as the basal conglomerates of the Kwango Formation in the Democratic Republic of
the Congo. The age of the formation is considered to be between 80 and 100 Ma. No fossils
October 28, 2015
22
have been found in the Calonda Formation, which makes precise dating difficult. The
Kwango Formation is widely represented in the provinces of Uíge and Malanje, whereas
the Calonda Formation is mainly represented in Lunda Norte and Lunda Sul. Apart from the
fact that the Kwango Formation is reported to contain fossils, the reason for distinguishing
between the two formations on the geological map of Angola is unclear.
All presently known kimberlites in Angola were emplaced during the Cretaceous. The
kimberlites are older than the Calonda Formation, and younger than the Continental
Intercalar Formation (Upper Jurassic to Lower Cretaceous). The basal units of the Calonda
Formation are well mineralised with diamonds sourced by the erosion of the kimberlites,
and as such, represent a very important source for the alluvial diamond deposits in Lunda
Provinces.
The Calonda Formation is late Cretaceous in age and consists of a continental red bed
sequence of feldspathic sandstone (arkose) and basal conglomerates, with argillites
appearing in the upper part of the sequence. The sediments vary in colour from brown-red
to light purple due to the presence of iron and manganese oxides. The thickness of the
formation varies considerably, ranging from 30 m in the Luaco mine to small pockets of
sediment preserved in basement depressions in areas such as Chitotolo. The sediments
accumulated as fan deposits and braided stream washes in SW-NE trending graben-like
valleys. The basal conglomerate unit ranges in thickness from 0.3 to 4.0 m and is typically
poorly sorted. Clasts range up to cobble size and include quartzite, agate, chalcedony, vein
quartz, granite gneiss and schist. The prevailing climatic regime at the time of deposition
was arid. At a number of localities in the Lunda region, the basal gravels of the Calonda are
being mined for diamonds.
7.2.5 Cenozoic
Tertiary aged Kalahari sediments blanket most of eastern Angola. These sediments strongly
resemble related deposits in the adjoining countries and consist predominantly of piedmont
colluvial deposits, fluvio, fluvio-deltaic deposits, aeolian sands, alluvial gravels and laterite
horizons. The Kalahari in the Lunda region is divided into an Upper and a Lower unit, with
a maximum combined thickness reported from drilling records being of the order of 180
metres. The oldest unit is termed the Gres Polymorph Formation and is believed to be of
Eocene age. The Gres Polymorph consists of sands, silicified sediments and
conglomerates and can be diamond-bearing in areas of diamondiferous kimberlite
occurrences and in areas of reworked Calonda Formation sediments. The youngest
Kalahari sediments in the Lunda region are unconsolidated sands and clays that belong to
the Pliocene-aged Ocre Sand Formation. This unit defines the Tertiary peneplain in the
region.
The most recent sediments in Angola range in age from Pleistocene to Holocene and
include piedmont deposits, aeolian deposits, alluvial terraces, floodplains, river channel
deposits and slope deposits on valley sides. These occur predominantly in the eastern and
southern portions of the country.
October 28, 2015
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7.3
Structural Geology of the Lunda Region
Due to the paucity of outcrop, little is known of the geological structure of the basement rocks in
the Lunda region. A regional structural analysis performed by De Beers in the 1960s led to the
conclusion that the Lunda province was subjected to tectonic tension during the late Cretaceous
period, in sympathy with the Atlantic rifting. This tensional regime resulted in a series of SW-NE
trending grabens and half-grabens. The distribution of kimberlite occurrences across the Angolan
craton reflects this structural trend. The same trend is also believed to control the principal zones
of accumulation and preservation of the Calonda sediments.
A system of N-S trending faults beneath the Kalahari cover is thought to govern the orientation of
many of the major rivers in the region.
7.4
Property Geology
Property scale mapping has not yet been undertaken on the Dala Concession and the map
presented as Figure 7 is a representation adapted from the published 1:1,000,000 scale geologic
map. Despite the inaccuracies and lack of detail inherent in such an adaption, a few important
observations that were corroborated by field observations can be made from the map.

The majority of the concession area is covered by unconsolidated Tertiary sand cover of
the Kalahari Supergroup.

The two main rivers that traverse the concession, the Tchicapa and Luachimo are
sufficiently incised to expose Archean basement lithologies over considerable lengths
within the concession (Plate 2). The Lueli and Tamba Rivers are not as deeply incised,
but a small amount of Archean is exposed in the Tamba river valley as it exits the
concession in the north. This has positive implications for alluvial diamond potential in that
the main rivers have cut completely through the Cretaceous lithologies, thereby providing
opportunity to sample the diamond-bearing horizons.

No exposure of Proterozoic rocks are evident on the concession.

Cretaceous Calonda Formation rocks are exposed over a wide zone along the full length
of the Tchicapa River within the concession. This is a very positive factor for the alluvial
diamond potential of the project.

The Gres Polymorph Formation of the Kalahari Group is exposed over a considerable
length of the Luachimo and Lueli river valleys in the southern-eastern area of the
concession.

It is anticipated that detailed mapping will reveal a more complete representation of the
full stratigraphy within the concession area.

While not represented on the map (Figure 7), field observations reveal the presence of
extensive Quaternary sediments in the base of the river valleys (Plate 3).
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Figure 7: Geological map of the Dala Concession.
Plate 2: Outcrop of Archean granitic gneiss at the base of the Luachimo river valley.
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Plate 3: View from the base of the Luachimo river valley looking northeast, showing garimpo diggings within
Quaternary flood plain sediments.
Plate 4: Quaternary gravel deposits exposed in garimpeiro pits on the flood
plain of the Luachimo River. The basal gravel unit has rounded clasts and may
represent a terrace deposit, while the clasts in the overlying gravel unit are more
angular and likely represent a hillslope deposit (see Section 9.2.1 for further
explanation of Quaternary alluvial deposits).
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
While further study is required in order to make firm conclusions, field observations within
the garimpeiro workings reveal the presence of hillslope gravel deposits as well as
possible terrace deposits within the Quaternary flood plain sediments (Plate 4). The
nature of these deposits is discussed in more detail in Section 8.2.1.
A high priority for a future exploration program will be to compile a detailed geological map over
the concession area.
8.
Deposit Types
The areas with the highest diamond concentration in Angola are in Lunda Norte and Lunda Sul
provinces located in the northeast of the country. Diamond reserves in Angola can be classified
into two types; primary and secondary. Kimberlite diamond deposits represent the primary source
of diamonds in that the volcanic rock called kimberlite has sampled diamonds from their source
area in the upper mantle and transported them to surface. When the diamonds from kimberlite
are released into the secondary environment during the weathering process, they become
available to be transported, concentrated and deposited into secondary “alluvial” diamond
deposits in the river systems.
8.1
Kimberlite Deposits
8.1.1 Introduction
As previously mentioned, diamondiferous kimberlites are typically correlated with Archean
cratonic terrains, and in Angola the kimberlites of economic interest are underlain by the
Congo Craton (Figure 6). Kimberlites characteristically occur in localised clusters which
collectively define kimberlite districts or provinces. Individual kimberlites within a cluster
often exhibit dramatically different diamond potential, and it is not unusual for an economic
kimberlite to have a neighbouring pipe that is either sub-economic or even barren. Even
within individual pipes, multiple phases of kimberlite may be present, and diamond grade
between these phases can vary quite dramatically. The physical characteristics of diamond
populations (e.g. size distribution, colour and degree of resorption) may also vary between
different kimberlite phases within a pipe. Another variable that can have a significant impact
on the economics of a kimberlite is the abundance and size of country rock material (known
as xenoliths) that are included during the intrusion process. High xenolith content can
significantly dilute the diamond grade and even result in localised areas of a pipe becoming
uneconomic to mine.
The eruption process for kimberlites is rapid and violent, with a mixture of kimberlite magma
and CO2 gas along with a range of xenolithic material that is sampled during the intrusion
process being explosively extruded at the earth’s surface. Xenolithic material typically
includes rocks and minerals that have been sampled from the upper mantle (depths of >150
km), as well as rocks from the stratigraphic column through which the kimberlite is
emplaced. The upper mantle sample may or may not include diamond bearing lithologies
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depending on whether the kimberlite sampled the area within the upper mantle where
diamonds are stable (>180 km depth). If diamond bearing rocks are sampled by a kimberlite,
they are typically disaggregated during the intrusion process resulting in discrete diamond
crystals being randomly distributed throughout the host kimberlite.
After kimberlite eruption, the extruded volcanic debris forms a large crater on surface, with
the main body of the kimberlite occurring as a carrot-shaped diatreme below. Because the
mantle derived minerals that constitute a large component of kimberlite are formed at high
temperatures and pressures, they are chemically unstable at the earth’s surface and rapidly
decompose when exposed to atmospheric agents such as air and water. Streams and rivers
readily erode the clays and oxides that represent the decomposition products of these
mantle minerals. However, since diamond is chemically inert and resistant to weathering
processes, it survives unscathed and remains available for transportation and concentration
in the secondary environment.
8.1.2 Kimberlites in Angola
This section is adapted and summarised from Chambel et.al. (2013), supplemented by
publically available records and reports sourced on the internet.
Angola is very well endowed with kimberlites, including a number of world-class deposits
such as the Catoca and Camatchia‐Camagico kimberlites. Historical reports indicate that
over 700 individual kimberlites were discovered between 1952 and 1974, and this number
has greatly increased since the application of modern exploration techniques after the
cessation of the civil war in 2002.
Apart from a few minor exceptions, Angolan kimberlites occur along a SW-NE trending
tectonic corridor that extends from the SW of the country and continues into the DRC. This
corridor is known as the Lucapa Trend and it is defined by thousands of individual kimberlite
intrusions (Figure 8). The diamond potential of the kimberlites decreases as one moves
away from the centre of the Congo Craton towards the margins and beyond, i.e. in a SW
direction along the Lucapa Trend. The nature of the volcanism also changes in this direction,
with carbonatites replacing kimberlites as the dominant volcanic rock type in the SW coastal
region.
The majority of kimberlites in Angola are Middle Cretaceous in age, but a subordinate
population of younger (Middle Tertiary) kimberlites is also present. The Cretaceous
kimberlites have been deeply eroded and since they pre-date the Calonda, the diamonds
eroded from these kimberlites provided the source for the significant mineralization
observed in the basal conglomerates of the Calonda. The Tertiary kimberlites have been
exposed to very little erosion which has enabled good preservation of the crater zones of
these pipes.
As is typical of kimberlites around the world, Angolan kimberlites occur in spatially restricted
clusters that collectively define specific kimberlite districts. Monteiro (1993) has defined the
following major kimberlite districts and constituent clusters (Figure 8):
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Lunda Northeast Kimberlite District: contains a large number of kimberlites, including all of
the known economic and/or most important deposits. Includes the following clusters: Calonda cluster – consists of 19 known kimberlites, the most well-known being the
Camafuca-Camazambo complex which was the first kimberlite discovered in Angola. It
is located 20 km SE of Lucapa and represents one of the largest undeveloped diamondbearing kimberlites in the world. The Camafuca complex consists of five individual
kimberlite pipes that coalesce at surface to cover an area of 160 Ha. The body is
approximately 3.3 kilometres in length by 500 metres in width and it is transected by the
Tchicapa River. SouthernEra Resources completed a pre-feasibility study on Camafuca
in 2000, which defined an inferred mineral resource of 23.25 million carats to a depth of
145 m, at an average grade of 0.111 ct/m3. An independent valuation at the time pegged
the average diamond value at US$109 per carat. The authors have been unable to verify
this estimate and this information is not necessarily indicative of potential mineralization
on the Dala Property. A mining licence was issued for the Camafuca Project in 2005, but
for a variety of reasons SouthernEra did not proceed with the project.
 Camatchia cluster – consists of 8 known kimberlites. The main Camatchia kimberlite is
oval shaped and has a surface area close to 30 Ha. The top one hundred meters of the
pipe is composed of crater facies kimberlites before reducing down to 17.5 Ha in the
main body of the pipe. The Tchicapa River used to flow directly over the pipe, but has
since been diverted to allow for exploration and evaluation activities.
 Camútuè cluster – consists of 12 known kimberlites. The Camútuè W kimberlite (also
known as Camútuè 1) is the most important pipe in this cluster. It is located 10 km from
Lucapa and immediately adjacent to the Camútuè E pipe (which is essentially barren).
Camútuè W is well preserved, with much of its crater zone still intact. During the initial
stages of exploration, a thin cover of mineralised elluvial gravel was discovered over the
pipe which flagged the economic importance of the discovery. Detailed evaluation has
revealed the presence of multiple kimberlite phases, each with a different diamond
grade. The crater facies rocks are substantially lower grade than the kimberlites from the
main body of the pipe and there appears to be a trend of decreasing grade and diamond
size with increasing depth. The Camútuè diamonds are well known for their quality and
value, with well-formed octahedra representing the dominant crystal form.
 Lôva cluster – consists of 14 kimberlites, including Catoca, which is described in more
detail in Section 9.1.3.
 Alto Cuílo – Luangue cluster – these kimberlites are located approximately 100
kilometres west of Saurimo within the Lucapa trend. The Luangue cluster is contiguous
and to the north of the Alto Cuílo kimberlites. Both clusters were extensively explored by
BHP and Petra Diamonds over a period of 10 years during the 2000’s. The kimberlite
geology is similar in both clusters, with a Cretaceous age of emplacement and minimal
erosion resulting in the almost complete preservation of the kimberlite craters. In much
of the area the kimberlites are buried beneath a thick layer of Kalahari sands (up to 60
metres), but kimberlite pipes outcrop on surface in the major river valleys where the
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present day river systems have eroded through the sediment horizons. In 2008, Petra
reported that a total of 81 kimberlites had been confirmed at Alto Cuílo, along with 9
pipes on the Luangue Concession. The presence of positive diamond indicator mineral
chemistry and microdiamond results on 8 high priority targets led to a bulk sampling
program using a large diameter drill and 10 tonne per hour mobile DMS plant. Diamond
quality was reported to be high, with an average value of US$295/carat reported from an
initial 310 carat sample. Petra withdrew from the Angola in early 2009 in response to the
global economic crisis.
Figure 8: Map of Angola showing the location of the major kimberlite provinces as well as the
areas where alluvial diamond activity. Adapted after: Chambel et.al. (2013).
Cuango/Cacumbi/Cacuílo Kimberlite District: This area was extensively explored by
DIAMANG during the colonial times and over 450 kimberlites have been discovered to date.
Very little evaluation work has been undertaken on most of these kimberlites, but some
have been noted to be diamond bearing, with a few having interesting diamond grades.
CONDIAMA subdivided the district in two clusters with one group occurring northeast from
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the Cuango River up to the Cacumbi River and the second occurring in the Luangue River
tributaries.
Cuanza Kimberlite District: About fifty kimberlites have been documented in this area with
most of them occurring in the headwaters of the Cuanza River. Little work has been
undertaken on these pipes as most are believed to barren or extremely low grade. A few
small alluvial deposits in the region have been worked.
Huambo/Cunene Queve Headwaters District: DIAMANG and CONDIAMA discovered
numerous kimberlites in this region, but none were of economic interest. Isolated cases of
diamond-bearing gravels have been documented in river basins in this region.
Longa Headwaters District: Kimberlites are known to occur in this region but they are of no
economic interest.
Chibemba/Colui District. Thirteen kimberlites occur within three distinct clusters in this
district and they are either low grade or barren. Isolated occurrences of small diamonds
have been reported from alluvial environments within the region but they are of no economic
interest.
Quando/Cuchigi - Lungué Bungo/Luia District: At least ten kimberlites have been
discovered in this district and indications are that they may be diamondiferous. However,
the large thickness of the Kalahari sands in the area significantly downgrades economic
potential.
Cunene District: Three kimberlites have been documented, but they are believed to be
barren.
Kuito District: Two kimberlites are known from this district and it is assumed that they are
diamond-bearing as diamonds have been found in the area.
Lomba/Quando District. Diamondiferous kimberlites may be present under the Kalahari
sand cover, as several diamonds and indicator minerals have been found in the area.
8.1.3 The Catoca Mine
The Catoca diamond mine is located near Saurimo (Figures 7 & 8), approximately 25 km
north of the Dala Project. It is the fifth largest diamond mine in the world by reserve and has
an expected mining life of 30 years. The pipe has a diameter of almost one kilometre (990
x 915 m) and a surface area of 64 hectares and is one of the biggest kimberlites in the
Lucapa trend. The mine is owned and operated by Sociedade Mineira de Catoca, a joint
venture of the state-run mining company ENDIAMA (32.8%), Russia-based diamond
producer Alrosa (32.8%), China Sonagol (18%), and Odebrecht Mining (16.4%).
Catoca is an open pit mine (Plates 5 & 6) that is currently operating at a depth of just over
200 m, with a planned ultimate pit depth of 600 m to be reached by 2034. In 2013, Catoca
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produced 6.6 million carats (“Mct”) of rough diamonds that generated revenues of US$ 594
million. This equates to about 6% of the world diamond production and about 70% of
Angola's total diamond output. In 2002, Catoca was estimated to have reserves of 271 Mt
of kimberlite at a grade of 70 carats per hundred tonnes for a total of 189 million carats of
diamonds (Chambel et.al. (2013). The authors have been unable to verify this estimate and
this information is not necessarily indicative of potential mineralization on the Dala Property.
Catoca was discovered by DIAMANG in 1965. Initially the pipe was exploited by way of
artisanal mining until ENDIAMA conducted a feasibility study for the commercial exploitation
of the kimberlite during 1980s. The Sociedade Mineira de Catoca joint venture was formed
in 1994 to build and operate the mine. The first formal production was achieved in 1997 at
an initial level of 4 million tonnes per annum (“Mtpa”). A major expansion was completed in
2005 with the addition of a second processing plant that raised the combined processing
capacity of the mine to 10 Mtpa (Plate 7).
The Catoca kimberlite is only slightly eroded with the majority of the crater zone preserved.
Several phases of kimberlite are present including volcano-sedimentary kimberlite from the
crater zone together with various tuffisitic and brecciated kimberlites within the diatreme
zone. Structure within the pipe is complex as a result of various tectonic processes related
to subsidence (Pervov et. al., 2011), and this has an impact on mine planning and
operations. These technical challenges are further compounded by uneven grade
distribution within the deposit. The kimberlite has been demonstrated to extend to depths of
at least 600 m.
Plate 5: A satellite view of the Catoca Mine Site. Source: Google Earth
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Plate 6: An aerial view of the Catoca open pit. Source: Mining-Technology.com
Plate 7: Catoca has two processing plants with a combined capacity of 10 Mtpa. Source:
Mining-Technology.com
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8.2
Alluvial Deposits
The following section is summarised and adapted from Chambel et.al. (2013) and Pereira et. al.
(2003).
Alluvial diamond deposits form in a variety of settings including active river beds, terraces and
flood plains, with flowing water playing the leading role in the creation, development and evolution
of the deposits. Diamonds released from their primary source rock during the erosion process are
washed into the river systems and are transported by water mixed with gravel, sand and clay.
The energy of the transporting medium changes in response to weather conditions (e.g. a rapid
influx of water immediately following a heavy downpour) and the morphology of the river (e.g. a
narrowing of the river channel will result in an increase in flow rate). A high energy river system
is capable of transporting a huge sediment load that will range from large boulders through
cobbles, pebbles, sand to clay sized particles. When the water loses velocity, it deposits its
suspended load, with the heavier and denser particles (gravel and heavy minerals, such as
diamond, gold and other metallic minerals) being the first to be deposited. Sandy materials are
the next to drop out, finally followed by the clay particles as the energy of the water dissipates.
The initial heterogeneous mix of deposited material is then sorted by the running water, with the
sediments being classified according to size, density and shape.
The other important factor involved in the concentration of alluvial diamonds is the morphology of
rivers and riverbeds. Factors that change the flow dynamics of the water such as the presence of
a barrier, a bend in the river or the sudden widening of the river channel will result in sediment
deposition. The local characteristics of the bedrock are also very important. The presence of
bedrock depressions such as fissures, ruts and pot holes serve as trap sites for the preferential
concentration of diamonds. Because of their high specific gravity (3.52 kg/m3), diamonds exhibit
similar hydraulic behaviour too much coarser quartz gravels in natural river systems. This means
that diamonds are concentrated and naturally sorted within gravel deposits and there is a
correlation between diamond size and the coarseness of the host gravel. Natural pulsation in the
water system serves to classify the gravel according to clast size, with the smaller, denser
diamonds working their way through the interstitial spaces into the bottom of the gravel layer
where they are typically concentrated within bedrock trap sites.
The transport of diamonds by water has important economic consequences as it provides a
natural mechanism for sorting the diamonds according to quality. While diamonds are ten times
harder than any other natural substance, they are brittle and subject to breakage during
transportation in high energy river systems where they may be impacted by bouncing boulders
and cobbles. Lower quality diamonds with inclusions and internal fractures are much more
susceptible to breakage than flawless gem quality stones, which results in a natural increase in
diamond quality with distance from source. Furthermore, the general decrease in the energy of
river systems as they travel away from the source results in a natural sorting by diamond size.
Alluvial deposits are therefore typically characterised by an increase in quality and decrease in
average diamond size with increasing distance from source.
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In nature, there are many factors that may combine to add complexity to the nature of alluvial
deposits and the characteristics of diamonds occurring in the various deposits within a river basin.
Firstly, river systems are complex and dynamic and they evolve through time. Rivers erode the
formations they cross, change their course in response to local geological factors and in some
cases even capture other rivers. Major global variables such as climate change and plate
tectonics also have an impact on water regimes and river patterns over geologic time. These
factors all contribute to the evolution of alluvial diamond deposits, with several cycles of transport,
deposition and remobilization likely involved in the formation of each individual deposit.
Secondly, as described in the previous section, kimberlites typically occur in clusters and districts
which implies that the diamond population in a river system will be sourced from multiple pipes.
Each pipe will have a characteristic diamond signature that will be mixed during transportation
and deposition to create a more complex population. Under certain circumstances, diamonds may
be transported for hundreds of kilometres and may ultimately reach the mouth of rivers and be
deposited in the marine environment (e.g. along the west coast of South Africa and Namibia).
Once in the marine environment the diamonds will be further transported, sorted and deposited
by wave, current and tidal action.
8.2.1 Angolan Alluvial Deposits
The majority of diamonds mined in Angola to date have been sourced from alluvial deposits,
and this style of deposit also hosts a major fraction of the still existing diamond reserves of
the country. The most important river basins in terms of alluvial diamond deposits include
the Cuango, Tchicapa, Luachimo, Chiumbe, Luana and Luembe. These rivers all flow
northwards and contain a very high proportion of gem quality diamonds.
The Angolan alluvial deposits have been formed in several cycles, starting in the
Cretaceous when the majority of kimberlites were emplaced. As discussed in Section 7.2.4,
the Calonda Formation sediments were deposited over an extensive area of northeastern
Angola. The basal conglomerates in this unit represent the most extensive diamondiferous
horizon in Angola, being the repository for diamonds released from kimberlites immediately
after emplacement. The erosion of this unit provides an important source of the diamonds
found in the more recent alluvial deposits. In fact, it is widely thought that the Calonda
represents a more important source of diamonds for the recent alluvial deposits in the Lunda
Provinces than the local kimberlites themselves.
The Calonda conglomerates either rest on Archean basement or on Karoo Formation rocks,
and range in thickness from 1 to 3 metres. They are generally buried under a variable
thickness of Kalahari sands and represent an attractive exploration target in many areas.
The conglomerates typically contain an abundance of kimberlitic indicator minerals and a
diamond grade of up to 0.7 carats/m3. The economic limit for commercial exploitation of the
Calonda conglomerates is obviously dependent on diamond quality and the thickness of
overburden, but is generally in the region of 0.2 carats/m3. On rare occasions diamonds
have also been deposited in the gravel units of the Kalahari Group, but these are generally
at sub-economic grades.
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The recent (Quaternary) alluvial diamond deposits in the Lunda provinces have been
extensively studied by DIAMANG geologists as well as others involved in the exploration
and mining of these deposits. Economic concentrations of diamonds are found in a number
of environments within Quaternary sediments and active river channels as illustrated in
Figure 9. The salient features of the most important deposit types are as follows:Hillslope deposits - these gravel deposits are located on the flanks of the valleys of the
major rivers. The gravels may outcrop or may be covered by several metres of overburden.
The gravels typically consist of well-rounded quartz pebbles and locally derived angular
fragments of vein quartz and quartzites in a dark brown clay/sand matrix. Blocks of Gres
Polymorph, agates and nodules of laterite are commonly present. The diamonds in these
gravels are derived from the erosion of primary (kimberlite) or secondary (Calonda and/or
Tertiary) sources in the vicinity of the deposit.
Terrace deposits - terrace deposits are found along the outer margins of the floodplains of
the major rivers. Several terrace levels are known to exist in the valleys of the large rivers
in the Lunda region and they represent former floodplains corresponding to the successive
stages of deepening of the valley. The gravels consist of rounded quartz pebbles and
angular granite-derived quartz grit together with blocks of Gres Polymorph, agates and
laterite nodules in a silt or sand matrix. Due to their similar origin, they resemble current
floodplain gravels in many respects, but the overburden and gravel are often partially
consolidated and laterised in the terrace deposits.
Terrace gravels either outcrop or they may be covered by up to 6 metres of silt and/or sand
overburden. The higher and older terraces of the major rivers are often heavily laterised.
This, in conjunction with their similar composition, can make them difficult to distinguish
from hillslope gravels. In some areas, the terrace deposits are so heavily laterised that they
form duricrusts, and crushing is needed to release the diamonds. Where sampled (e.g. at
Luo), these indurated gravels have often been found to be well mineralized.
Alluvial flat gravels - occur at the base of the present floodplains of the major and minor
rivers. The floodplains of the major rivers in the Lunda region are not usually very broad.
The riverbanks are periodically flooded during the wet season and are typically underlain
by gravel. The gravels are unconsolidated and consist of medium to coarse, rounded quartz
pebbles in a loose sandy matrix. Overburden may reach 4 to 5 metres of loose sand and
clay with a high organic component. Diamond grades in these gravels are frequently good
which resulted in them being some of the first diamond deposits to be exploited in the Lunda
region.
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Figure 9: Schematic cross section of a typical river valley in the Lunda region illustrating the various
environments in which alluvial diamonds may be deposited. Source: Pereira et. al. (2003).
River channel gravels - occur on the beds of the present day rivers. The distribution of
these deposits is controlled by structural and compositional variations in the bedrock, which
results in extreme variations in gravel thickness and diamond content. For example, in the
Cuango River where greater compositional and structural variations occur, many deep
pools and scour channels are formed in which high concentrations of diamonds may occur.
However, since the north flowing rivers in the Lunda region (e.g. the Tchicapa, Luembe and
Luachimo rivers) mostly flow over fairly uniform granite and schist bedrock, the gravels are
more evenly spread over the riverbeds, with only sporadic localised diamond-enriched trap
sites.
River channel gravels are "free wash" gravels with resistant, rounded quartz pebbles
dominating over a matrix that is deficient in clays. The gravels may reach a thickness of
several metres in localised pools and scour channels, with the potential for high diamond
concentrations occurring at the gravel/bedrock contact. The upper part of these gravels is
also usually mineralized, but grades are typically lower grade than at the bedrock contact.
Detailed evaluation of river channel gravels prior to mining is difficult. The major rivers are
often more than four metres deep and are often fast flowing
Penetration deposits - these occur when significant quantities of alluvial diamonds have
penetrated into decomposed bedrock that is not genetically related to the diamonds at all.
Penetration depth is typically a few tens of centimetres, but diamonds have been observed
at depths of up to 60 cm. In terrace and hillslope deposits, diamonds are often recovered
from the lateratised and broken material below the gravel layer that represents the former
bedrock of the deposit. In standard evaluation and mining procedures, 20 to 30 cm of
decomposed bedrock is included in the mining depth to ensure that these diamonds are
recovered.
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8.3
Other Mineral Potential
In terms of the mineral potential of the rest of Angola, the immense importance of the oil and gas
industry to the country’s economy has already been highlighted. These deposits are hosted in the
marine coastal basins of Lower Cretaceous to Quaternary age. Diamonds are the second most
important contributor to the resource industry and the kimberlite and alluvial diamond deposits of
Angola have been discussed in some detail in this report. Closely related in time and space with
the Angolan kimberlites are carbonatites, which offer exploration opportunities for carbonatiteassociated minerals such as nepheline, niobium, tantalum, fluorite, barite and the rare earth
elements. The greenstone belts of Archean and Lower Proterozoic age offer excellent exploration
potential for base metals and gold. The Pan-African age fold belts that occur adjacent to
Precambrian shield areas offer good potential to host stratabound polymetallic copper ores similar
to the deposits in the Zambian copper belt. In addition to hosting Angola’s oil and gas reserves,
the coastal sedimentary basins host low-grade stratabound copper deposits together with a
number of industrial and chemical minerals, including salt, potash, phosphate, sulphur, gypsum
and limestone. Not much is known about the extensive areas in the south-east of Angola that are
covered by Kalahari sands, but lignite seams have been reported from this region.
9.
Exploration
While the potential for the discovery of new kimberlites is very real on the Dala Concession, the
initial focus will be exclusively on evaluating the alluvial potential of the project. The reasoning
behind this approach is that the alluvial potential is considered to be good and if exploration efforts
are successful in locating potentially economic alluvial deposits on the property, the timeline to
revenue generation is relatively short. In addition, the evaluation and development cost
associated with alluvial deposits is orders of magnitude lower than it is for kimberlite deposits.
After the initial phase of exploration and evaluation of the alluvial deposits has been completed
and/or at the time when a revenue stream is achieved from the alluvials, a systematic approach
to kimberlite exploration will be developed and implemented.
9.1
Target Area Selection
The Dala Concession is traversed by two of the most important diamond-bearing rivers in Angola,
namely the Tchicapa and Luachimo Rivers. This provides excellent potential for the presence of
economic alluvial deposits on the project. More than 100 km of river length is available to explore
and evaluate, 53 km for the Tchicapa and 51 km for the Luachimo.
The methodology used to select high potential target areas involves a number of considerations
including a study of the river channel profile, elevation changes along the course of the river and
river channel geometry. These factors are important as they influence the sampling, transportation
and deposition of diamonds. The maturity of a river system is also important as it determines how
deeply the river has incised through the local stratigraphy. In the Lunda region, it is essential that
a river has cut through and sampled the diamond-bearing Cretaceous lithologies in order for it to
be mineralised.
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As described in Section 8.2, alluvial diamond deposits form in a variety of settings including active
river beds, terraces and flood plains, with flowing water playing the leading role in the creation,
development and evolution of the deposits. Diamonds released from their primary source rock
during the erosion process are washed into the river systems and are transported by water mixed
with gravel, sand and clay. The energy of the transporting medium changes in response to
weather conditions (e.g. flash flooding after a tropical downpour) and the morphology of the river
(e.g. a narrowing of the river channel will result in an increase in flow rate). A high energy river
system is capable of transporting a huge sediment load that will range from large boulders through
cobbles, pebbles, sand to clay sized particles. When the water loses velocity, it deposits its
suspended load, with heavier and denser particles (gravel and heavy minerals, such as diamond
and gold) being the first to be deposited. Sandy materials are the next to drop out, finally followed
by the clay particles as the energy of the water dissipates. The initial heterogeneous mix of
deposited material is then sorted by the running water, with the sediments being classified
according to size, density and shape.
The other important factor involved in the concentration of alluvial diamonds is the morphology of
rivers and riverbeds. Factors that change the flow dynamics of the water such as the presence of
a barrier, a bend in the river or the sudden widening of the river channel will result in sediment
deposition. The local characteristics of the bedrock are also very important. The presence of
bedrock depressions such as fissures, ruts and pot holes serve as trap sites for the preferential
concentration of diamonds. Because of their high specific gravity (3.52 kg/m 3), diamonds exhibit
similar hydraulic behaviour to much coarser quartz gravels in natural river systems. This means
that diamonds are concentrated and naturally sorted within gravel deposits and there is a
correlation between diamond size and the coarseness of the host gravel. Natural pulsation in the
water system serves to classify the gravel according to clast size, with the smaller, denser
diamonds working their way through the interstitial spaces into the bottom of the gravel layer
where they are typically concentrated within bedrock trap sites.
A series of east-west cross sections over the Tchicapa and Luachimo Rivers is presented in
Figures 10 & 11 respectively, and north-south profiles over the length of Tchicapa and Luachimo
Rivers within the Dala Concession are presented in Figures 12 and 13. The relative depth of
incision of the three main rivers in the project area is presented in Figure 14.
The cross section profiles in Figures 10 & 11 show that there is significant incision into the
peneplain by the Tchicapa and Luachimo Rivers, and this is also well illustrated in the DTM
images included in Figures 12 & 13. Incision into the bedrock lithologies is more pronounced in
the northern portions of the Project area than in the south. It is evident from Figure 14 that the
Tchicapa river system is more mature than the Luachimo and Tamba rivers, with deeper
penetration into the bedrock lithologies and a much wider river valley. Since all of the rivers in the
Lunda region flow to the north and the major known diamondiferous kimberlite clusters fall slightly
to the north of the project area (see Figure 8), it is expected that the main source for alluvials
diamonds in the project area will be from the Cretaceous Calonda Formation, with possible
supplemental contributions from the early Kalahari gravels. When reviewing the potential of the
three rivers, the Tchicapa and Luachimo offer the best opportunity for the development of alluvial
diamond deposits in that they have both eroded completely through the Kalahari and Calonda
October 28, 2015
39
horizons into the Archean basement. The Tamba River has not incised to the same levels as the
two main rivers and therefore has potentially not eroded deep enough to gain access to the
diamond-bearing lithologies. As such, the Tamba River represents a low exploration priority.
The gradient of the river along its course is also an important factor in the development of alluvial
deposits. Valley shape is to some extent defined by the gradient of the river and the relative
energy changes that occur along its course in response to changes in gradient. Indicative changes
in slope along a river profile are defined by what are termed “nick points”. These represent
locations where changes in energy within the river environment manifest in zones of deposition
in relation to incision. Zones of deposition will result in broader flatter river valley profiles whilst
zones of incision result in steeper and narrower valley profiles. The gradient on the Tchicapa
River is very gentle and smooth over the full extent of its course through the Dala concession and
then experiences a sharp drop-off in elevation about 20 km to the north of the concession
boundary (Figure 12). It is not clear what geological factors have caused this, and it will be worth
following up with a field visit to this area to investigate further. The profile of the Luachimo River
shows that a series of subtle nick points occur along its course through the Dala concession
(Figure 13) and these correspond to deposition and incision segments along the course of the
river. The depositional segments will be more conducive to accumulating alluvial diamonds and
this should be one of the factors to consider when prioritising target areas.
It is difficult to rate the relative potential of the Tchicapa and Luachimo Rivers without conducting
a detailed remote sensing study in conjunction with field investigations that include river
morphology, structure and sedimentological observations to allow for a relative ranking per target
or portion of each river. Both rivers show evidence of diamond mineralization by the presence of
garimpo workings in numerous places along their passage through the Dala
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Figure 10: East-west cross sections across the Tchicapa River that are representative of the
valley profile in the southern and northern parts of the Dala Concession.
Figure 11: A series of east-west cross sections across the Luachimo River illustrating the
variation in the valley profile as the river flows northwards across the Dala Concession.
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Figure 12: DTM (digital terrain model) illustrating the incision of the of the river drainages
into the bedrock lithologies on the Dala Concession. Also shown is a south to north profile
over the length of the Tchicapa River from Point “a” through “b” to “c”.
Figure 13: DTM (digital terrain model) illustrating the incision of the river drainages into the
bedrock lithologies on the Dala Concession. Also shown is a south to north profile over the
length of the Luachimo River from Point “a” through “b”, “c”, “d”, to “e”.
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Figure 14: Cross section showing the relative depth of incision of the Tchicapa, Luachimo,
Tamba and Mombo Rivers along the indicated section line.
Figure 15: Distribution of target areas within the Dala Concession. A series of evaluation
blocks (Labelled T#1-6 and L#1-6) have been established along the lengths of the Tchicapa
and Luachimo rivers to provide a reference system to facilitate the systematic evaluation of
the targets. The red shaded areas represent target areas illustrated in Figures 16 through
18 below.
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concession, and both rivers have an abundance of river features that offer excellent potential for
the development of alluvial diamond deposits.
Figure 16: Target Area T3-1 on the Tchicapa River. Extensive garimpeiro workings are
evident on what would appear to be a terrace deposit on the outer edge of the flood plain.
Traces of previous meander paths of the river are clearly evident in the flood plain. These
represent good targets for locating mineralised paleo-channel gravel deposits.
Based on all of the above considerations and a preliminary study of public-domain satellite
imagery, a total of thirty eight of the most promising alluvial target areas have been identified on
the Dala Concession (Figure 15). This selection is by no means complete and many more high
potential areas are available for consideration. A selection of three of these target areas is
presented in Figures 16 through 18 below to illustrate some of the features that offer attractive
targets for further evaluation. The location of these specific target areas is referenced with red
shading in Figure 15.
In Target Area #T3-1 on the Tchicapa River (Figure 16), evidence of diamond mineralization is
provided by the presence of extensive garimpeiro workings on what is likely to be a terrace deposit
on the outer edge of the flood plain. Traces of previous meander paths of the river are clearly
evident in the flood plain in this area and these represent good targets for locating mineralised
paleo-channel gravel deposits. Figure 17 illustrates Target Area #T5-1 on the Tchicapa River
where excellent potential for good gravel accumulation on the inside of the meander bend is
evident from the well-defined meander scars. Target Area #L3-2 on the Luachimo River (Figure
18) shows very clear evidence of extensive migration of the river channel on the flood plain over
time. The meander bends and captured meander features represent good target areas for locating
mineralised gravel deposits.
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Figure 17: Target Area #T5-1 on the Tchicapa River. Favourable river geometry and
excellent potential for good gravel accumulation on the inside of the meander bend as
evidenced by the well-defined meander scars.
Figure 18: Target Area #L3-2 on the Luachimo River. Evidence of extensive migration of
the river channel on the flood plain over time. Meander bends and captured meanders
represent good target areas for locating mineralised gravel deposits.
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10. Drilling
This section is not relevant to this submission as no drilling has been completed on the property
to date.
11. Sample Preparation, Analysis and Security
This section is not relevant to this submission as no sampling has been completed on the property
to date.
12. Data Verification
This section is not relevant to this submission.
13. Mineral Processing and Metallurgical Testing
14. Mineral Resource Estimates
15. Mineral Reserve Estimates
16. Mining Methods
17. Recovery Methods
18. Project Infrastructure
19. Market Studies and Contracts
October 28, 2015
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20. Environmental Studies, Permitting and Social or Community Impact
21. Capital and Operating Costs
22. Economic Analysis
23. Adjacent Properties
The Catoca Concession is located immediately north of the Dala Concession. The Catoca Mine
has been discussed in some detail in Section8.1.3, and the reader is referred to this section for
further details. Other diamond projects in the region have also been discussed in Section8.
24. Other Relevant Data and Information
24.1 Overview of the Angolan Diamond Industry
The first discovery of diamonds in Angola dates back to 1912 when a group of Belgian prospectors
discovered diamonds in a stream in the northeast of Lunda Norte Province after investigating
upstream of diamond occurrences in the present day Democratic Republic of Congo. In 1917, a
Portuguese company Companhia de Diamantes de Angola (“DIAMANG”) was granted a one
million square kilometre diamond concession that essentially covered the entire Angolan territory
with the exception of a stretch of land in the SW coastal region. This established a monopoly for
DIAMANG over the entire Angolan diamond industry that lasted for over fifty years. In 1971, the
size of the DIAMANG concession was reduced to 50,000 km2, and the Angolan diamond fields
were opened to other companies. One of the most successful new entries was CONDIAMA, a
joint venture between DIAMANG and De Beers. However, this venture only lasted until 1975 when
it was forced to close down operations due to the decline in the security situation. In the four year
period that CONDIAMA was active; it explored huge areas of Angola and discovered many
kimberlites and areas with alluvial potential. Unfortunately, because of the premature shut down
of its operations, many of the new discoveries were only partially evaluated and most remained
completed untested.
Angola secured its independence from Portugal in 1975, which resulted in turmoil in the diamond
industry as the new political and economic order was implemented. The Angolan Government
took control of DIAMANG in 1977, and in April 1979, a general law on mining activities (Law 5/79)
was enacted that gave the State the exclusive right to prospect for and exploit minerals.
Accordingly, a state diamond-mining enterprise, the National Diamond Company (Emprêsa
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Nacional de Diamantes or “ENDIAMA”) was founded in 1981 and acquired the government's 77%
share in DIAMANG.
The Angolan civil war began even before independence in 1975. However, after independence,
the war intensified as the Movement for the Popular Liberation of Angola (“MPLA”) and UNITA
attempted to gain the upper hand and rule the country. The formal Angolan diamond industry
came to a virtual standstill, paralysed at first by the departure of technical personnel during the
Portuguese exodus, and later as UNITA guerrillas drove off foreign companies and took control
of Angola’s diamond-rich provinces. The conflict was exacerbated by the political agendas of the
two super powers USA and Russia, which were at the time engaged in the height of the cold war.
The USA viewed Angola as a venue to fight the threat of a global spread of communism and so
it spent large sums of money on covert operations and arms shipments in support of UNITA. On
the other hand, the Soviet Union did the same for the Marxist leaning MPLA. Both warring Angolan
factions also received direct support from foreign troops, with South Africa fighting alongside
UNITA and the Cuban military bolstering the MPLA forces. The cost of the conflict in terms of loss
of human life and destruction of infrastructure was massive.
In late 1986, Roan Selection Trust began mining in the Cafunfo area on the Cuango River, the
site of Angola's most valuable alluvial diamond deposits. Mining had been halted there for more
than two years after UNITA attacked the mining camp in February 1984, kidnapping seventyseven expatriate workers and severely damaging the mining equipment. After the subsequent
kidnapping of a British expatriate in November 1986, defense forces in the area were
strengthened, allowing the resumption of mining operations. While recognising that official
statistics covering this period in Angolan diamond mining history are unreliable, figures reported
by Hodges (1987), indicated that diamond production rose from less than 400,000 carats in 1986
to 750,000 carats in 1987. However, this represented only a little over half of the output of 1.5
million carats reported for 1980.
The resumption of mining in the area along the Cuango River and a decline in theft of stones of
higher value in the Andrada and Lucapa regions resulted in an overall increase in the quality of
Angolan diamonds entering the official market. In addition, ENDIAMA, which was responsible for
overseeing the industry and for holding monthly sales, managed to persuade dealers to pay
higher prices in the hope of securing favored treatment in the future. As a result, the average
carat value established by the monthly sales in 1987 exceeded US$110, more than twice as much
as in 1985 (US$45) and at its highest level since 1981 (US$119) (Hodges, 1987).
In 1987 Endiama signed a two-year mining contract with “Sociedade Portuguesa de
Empreendimentos” (SPE), a Portuguese company that retained a large number of Portuguese
technicians previously employed by DIAMANG. Former shareholders of DIAMANG founded SPE
in 1979 after DIAMANG was nationalized. The mandate given to SPE was to undertake new
exploration in Angola and to assist ENDIAMA with diamond valuation. In December 1987, Angola
also signed an agreement with the Soviet Union that facilitated its participation in diamond mining
enterprises in exchange for compiling a detailed geological map of Angola (Hodges, 1987). At
around this time the government also began to revise the 1979 mining law to encourage new
companies to invest in the diamond-mining industry, and in particular to resume exploration
October 28, 2015
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activities. Two of the more important players attracted to Angola by this initiative were the British
conglomerate Lonrho and the South African diamond-mining giant De Beers. De Beers was
particularly interested in evaluating the diamond potential of the numerous kimberlite pipes
previously discovered by CONDIAMA.
As the cold war dissipated so did the super power’s attraction to Angola, but even with the
withdrawal of external assistance, the war continued. Instead of relying upon the USA and Russia,
the two warring sides funded their armies by exploiting the natural resources under their control.
In the case of the MPLA, this was via Angola’s vast oil reserves and for UNITA through the mining
and selling of diamonds. It is estimated that during the height of the civil war, UNITA smuggled
more than $200 million per year in diamond production onto the world market in order to fund its
war effort.
A brief interlude to the war occurred between 1991 and 1992 following the signing of the Bicesse
accord, which was brokered by a joint effort between the U.S.A, Portugal and Russia. The period
saw a return to normal relations between the two sides and an internationally recognized free and
fair presidential election. However, following a narrow victory by the MPLA the leader of UNITA,
Dr. Jonas Savimbi, claimed that the election was rigged and the country was thrown back into
civil war.
In response to pressure from the International Monetary Fund and the World Bank, the Angolan
government began to liberalize its economic policies and move to a more market orientated
economy in the early 1990’s. This led to the passing of law 2/91, which allowed foreign mining
companies to apply for and be granted mining concessions. This law also permitted individual
Angolans to do the same and so thousands flocked to the diamond region to establish “garimpo”
operations. These uncontrolled mining practices led to significant environmental damage as well
as widespread illegal smuggling of large quantities of diamonds out of the country through
neighboring Zaire from where they would be dispersed throughout the world. Subsequent efforts
to control the garimpo operations, including the compulsory sale of diamonds to a single official
channel have only met with limited success.
After Jonas Savimbi was killed and his UNITA headquarters destroyed in a well-planned military
operation by the MPLA forces in February 2002, the prospect of lasting peace and stability finally
became a reality. The ceasefire that finally ended one of Africa's bloodiest and longest-lasting
civil wars was signed on April 4, 2002 opening the door for international mining companies to
participate in the development of Angola’s very attractive diamond potential. The ensuing rush to
secure high potential diamond concessions was not restricted to the major players such as De
Beers, Alrosa and BHP Billiton, but a large number of mid-tier and junior companies (e.g.
Odebrecht, TransHex, Petra, Gem Diamonds, SouthernEra, DiamondWorks, Metalex and
Lucapa) also participated. Focus quickly moved to developing and evaluating kimberlites, with
the ramp up in production at the Catoca Mine leading the way (Catoca is described in Section
8.1.3).
The progress achieved in the Angolan diamond industry during the first five years of peace was
extraordinary, with production nearly doubling from 5 million carats in 2002 to close to 9.5 million
October 28, 2015
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carats in 2006. Gross revenue from diamond sales also effectively doubled, from US$638 million
in 2002 to US$1.2 billion in 2006. Government participation in this revenue more than tripled from
US$45 million to US$165 million over that same five-year period.
Angolan diamond production figures covering the period 2004 to 2013 are plotted in Figure 19.
From this graph it is evident that the volume of production has remained relatively stable at around
8 Mct/year since 2006. It is also evident from this figure that the country’s output is dominated by
Catoca production which has been relatively steady since the ramp-up in production was achieved
in 2008. Production from other projects has been variable, but with an overall declining trend of
3.4 million carats in 2006 to 1.6 million carats in 2012 and then increasing to 2.8 million carats in
2013. In 2012, Catoca produced 6.7 million carats from 10.5 million tonnes of kimberlite ore worth
US$ 579 million with a reported operating margin of 36%. This is equivalent to 84% by volume
and just below 60% by value of the Angolan production (Chambel et. al., 2013). In 2013 Catoca
produced 6.6 million carats worth $594 million, with an average diamond price of $89.68/carat
(Rapaport, Diamond.net).
Figure 19: Angolan diamond production over the period 2004 to 2013,
illustrating the importance of the Catoca production relative to all
remaining projects. Source: Chambel et. al. (2013).
The average value and price statistics for the Angolan diamond production over the period 2004
through 2013 are presented in Figures 20 & 21. The first very obvious point of note from these
graphs is the substantially lower value of the Catoca production relative to the diamonds from the
general Angolan production. This is because the non-Catoca production is dominated by
diamonds mined from alluvial deposits, which by definition are of a significantly higher quality than
diamonds recovered directly from kimberlite. As explained in a subsequent section, the diamonds
found in alluvial deposits have undergone a natural sorting process during transportation and
deposition that favours the survival and concentration of only the best quality gem stones. Figure
21 shows that the highest value over the period under discussion was
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Figure 20: Angolan diamond production by total value (in US$ millions) Source: Chambel et. al. (2013).
Figure 21: Average diamond values for Angolan diamond production illustrating the lower value
production from Catoca relative to other projects. Source: Chambel et. al. (2013).
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achieved in 2005, with an average price of US$154 per carat. The minor value decrease since
then represents the relative increase of the lower value Catoca diamonds in the overall
production. The other fluctuations evident in these graphs are related to global market variations,
with the sharp decrease in 2009 corresponding to the Global Financial Crisis. Prices are noted to
recover back to pre-2009 values in 2010 and 2011. The average value of the Angolan production
in 2013 was US$ 137/ct, which represents a mix of US$ 90/ct for the Catoca diamonds and US$
247/ct for the production from other sources.
Angola is now the third largest producer of diamonds by value in Africa (behind Botswana and
Namibia, but ahead of South Africa). Historically, the country has had difficulty in attracting foreign
investment because of security concerns, corruption, human rights violations and diamond
smuggling. However, the situation has improved quite substantially over the past decade with the
security situation now under control, major improvements to infrastructure achieved and steady
progress being made by the authorities on clamping down on the illicit diamond trade. The
country’s diamond potential is considered to be extensive by industry experts, with only about
40% of the diamond-prospective territories explored to date. Moreover, the overall quality of
Angolan diamonds is particularly good, with approximately 70% classified as gem quality, 20%
as near-gem quality and only 10% as industrial. This makes Angola an attractive venue for
international exploration companies to attempt to discover the world’s next major diamond mine.
24.2 Additional Information
The authors are not aware of any other data or information with respect to the subject matter of
this Technical Report that is not reflected in this document. The omission to disclose such
information would make the Technical Report misleading.
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25. Interpretation and Conclusions
Angola represents one of the most compelling diamond exploration areas of the world. Not only
does it have excellent geological credentials for hosting world-class deposits, but the fact that it
was essentially closed to exploration while Africa’s longest civil war raged for nearly thirty years
from the early seventies until 2002 means that it is underexplored. Despite the significant increase
in exploration activities for diamonds since the civil war ended, only about 40% of the diamondprospective territories have been systematically explored using modern techniques. The full
extent of the country’s diamond potential therefore remains unknown. This makes Angola an
attractive venue for international exploration companies to attempt to discover the world’s next
major diamond mine.
The overall quality of Angolan diamonds is particularly good, with approximately 70% classified
as gem quality, 20% as near-gem quality and only 10% as industrial. The average value of the
Angolan diamond production in 2012 was US$ 133/ct., which represents a mix of US$ 86/ct for
the Catoca diamonds and US$ 327/ct for the production from other sources (mostly alluvial). The
diamonds found in alluvial deposits have undergone a natural sorting process during
transportation and deposition that favours the survival and concentration of only the best quality
gem stones.
In the past, Angola has had difficulty in attracting foreign investment because of security concerns,
corruption, human rights violations and diamond smuggling. However, the situation has improved
quite substantially over the past decade with the security now under control, major improvements
to infrastructure achieved and steady progress being made by the authorities on clamping down
on the illicit diamond trade.
Angola implemented a new Mining Code in 2011 with the aim of providing a modern set of rules
regarding the exploration and development of its mineral resources that would be attractive to
foreign investors in the face of increasing competition from other African countries. One of the
main positive features of the new code is that exploration, mining and marketing rights are granted
under the same instrument, thus ensuring a seamless transition from exploration to mining.
The Dala Concession is located in the heart of the highly prospective and productive diamond
region of Angola, only 25 km south of the world-class Catoca diamond mine. The Dala Project
represents an early stage project with excellent potential for the discovery of both alluvial and
kimberlite deposits. The concession has two of the most prominent diamond mineralised rivers in
Angola flowing through it, namely the Tchicapa and Luachimo Rivers and exposure to over 100
km of prospective river length to explore and evaluate (53 km for the Tchicapa and 51 km for the
Luachimo). Both of these rivers have incised through the diamond-bearing Cretaceous
stratigraphy and the present day river beds have penetrated into Archaean basement rocks.
Evidence for the presence of alluvial diamond mineralization in both rivers is provided by the
presence of garimpeiro activity. While not necessarily reliable, verbal communications with
several garimpeiros claim the recovery of numerous high-value large diamonds from hillslope and
terrace deposits as well as from barges operating in the active river channel at a number of
locations within the project area.
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It is anticipated that the main source of the diamonds in the project area will be from the
Cretaceous Calonda Formation, with possible supplemental contributions from the early Kalahari
gravels. Because the Tchicapa river valley is so mature (deeply incised and wide), it offers wide
bands of exposure of Calonda Formation on both sides of the river along the length of its course
through most of the project area (Figure 7). Not only has this provided a widespread source for
diamonds to be concentrated into localised Quaternary alluvial deposits, but it also means that insitu Calonda gravels can be targeted for evaluation and possible exploitation. It is less likely that
in-situ Calonda gravels will represent direct alluvial targets along the Luachimo River as the
exposure of Cretaceous lithologies is much more limited in the Luachimo valley.
The potential for the discovery of primary kimberlite deposits on the Dala Project is also
considered to be good. However, as discussed in Section 9 of this report, the initial focus will be
exclusively on evaluating the alluvial potential of the project. The reasoning behind this approach
is that the alluvial potential is considered to be good and if exploration efforts are successful in
locating potentially economic alluvial deposits on the property, the timeline to revenue generation
is relatively short. In addition, the evaluation and development cost associated with alluvial
deposits is orders of magnitude lower than it is for kimberlite deposits. After the initial phase of
exploration and evaluation of the alluvial deposits has been completed and/or at the time when a
revenue stream is achieved from the alluvials, a systematic approach to kimberlite exploration will
be developed and implemented.
The authors believe that the implementation of a focused and staged exploration program
following the methodology outlined in the recommendations section below (Section26), has a
good chance of success. While highlighting that the project represents an early stage exploration
opportunity that is by definition high risk, the authors of this report are not aware of any specific
environmental, permitting, legal, title, taxation, socio-economic, marketing, political or other
relevant factors that might materially affect the outcome of this project.
26. Recommendations
The recommended approach to an alluvial exploration program on the Dala Concession includes
the following steps:
Acquire an ultra-high resolution satellite image dataset from a commercial vendor. Such
vendors typically offer a number of supplemental channels in addition to the visible
wavelengths (e.g. infra-red). These wavelengths can be very useful mapping tools as they
are capable of detecting relatively subtle differences in substrate composition below layers
of overburden cover. It is also critically important to acquire a high resolution digital terrain
model (“DTM”) with the dataset to facilitate an accurate assessment of relative elevation
differences within and along the river systems.

Compile a property scale geological map of the Dala Concession using the satellite image.
The preliminary map should be fine-tuned by ground truthing in the field.
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
Use the DTM to compile a series of river valley cross sections over the length of the two
major rivers at one kilometre intervals (i.e. as illustrated in Figures 10 & 11). This exercise
will provide a detailed picture of the valley profiles over the course of each river.

Compile a north-south profile for each river along the lines of those illustrated in Figures
12 & 13 and fine tune the location of segments of the rivers conducive to deposition.

Complete a more detailed assessment of the thirty eight target areas already identified in
Figure 15 and add any additional targets that may emerge. Prioritize the best ten targets
based on the criteria discussed above.

Ground truth each of the ten high priority target areas and establish a local grid over the
best target to facilitate ground geophysical and drilling operations.

Conduct an orientation ground geophysical survey over the best target area in to order
identify the most appropriate technique for mapping subsurface gravel horizons such as
paleo-river channels, terraces and hillslope deposits. It is recommended that groundpenetrating radar and electro-magnetic techniques be tested, with ground penetrating
radar being the first choice if it is not possible to test both techniques.

Spot drillhole collars on lines positioned perpendicular to the river flow initially spaced 400
m apart with holes located at 40 metre intervals, and if promising alluvial targets are
located, infill drilling should be completed on a 200 x 20 m grid.

A detailed map of the drilling results should be compiled for the purpose of designing a
bulk sampling campaign by trenching.

The shape and dimensions of the bulk sampling trenches will be designed according to
the specific nature of the target gravel horizon to be sampled, but it is important that at
least a half a metre of the basement horizon is included in the sample to ensure a complete
sampling of the diamond bearing horizon.

Repeat the ground geophysical and drilling procedures on the remaining high-priority
targets in order to establish the best possible area to initiate large scale bulk sampling
and/or trial mining operations.
An indicative budget covering the first two years of exploration and evaluation of the alluvial
potential of the project is presented in Table 3. It is recommended that the program be divided
into two stages (Phase #1 and Phase 2) with the progression to Phase 2 contingent on sufficiently
encouraging results emerging from the Phase #1 work. The budget for the Phase #1 program is
US$ 2,250,000 and includes the establishment of a field camp and the completion of
environmental base line studies together with geological investigations and the initial bulk
sampling of the highest priority alluvial targets. The geological program includes the completion
of a remote sensing study and compilation of a project scale geological map, completion of an
orientation study on ground geophysical techniques and a detailed investigation of target areas
to arrive at the best ten targets for further evaluation.
Contingent on positive results emerging from this work, equipment will need to be purchased (or
leased) to facilitate the initial bulk sampling of high potential targets. A backhoe and dump truck
October 28, 2015
55
will be required to dig the trenches and transport the gravels to a small scale processing plant.
The processing plant should be modular in design and consist of an initial washing and sizing
circuit, followed by a diamond recovery unit. The detailed design of the plant will need to take into
consideration the characteristics of the gravel deposits to be treated (e.g. the size range of the
cobbles, the clay content in the matrix, the degree of lithification etc.). If the plant is not located
immediately adjacent to the bulk sampling site, it will be prudent to pass the gravels through a
coarse grizzly screen at the bulk sampling site in order to remove the large boulders and cobbles
prior to transportation. This step should reduce the volume of material to be transported by at
least half. The washing circuit will typically include a wet trommel screen (rotating circular screen)
which serves to breakdown the gravels and wash out the fine grained matrix material. The
remaining washed material between the top and bottom cut-off size range is then screened into
appropriate size fractions for further processing in a dense media separation plant (DMS) and
final diamond recovery unit.
There are two basic techniques available for recovering diamonds from the sized material, units
based on x-ray technology or the old fashioned grease tables. The commonly used word in the
industry to describe the x-ray units is “sortex” and there are a few different design options available
that make use of this technology. Sortex is by far the most efficient and secure of the two methods
and the higher cost of purchase of the unit is well worth the expense. The basic principle of the
technology relies on the fact that most diamonds fluoresce when irradiated with X-rays. As
material is fed into a sortex unit on a conveyor belt it is irradiated with x-rays. When a diamond
passes through the x-ray beam it will fluoresce, which prompts a series of detectors to trigger a
blast of compressed air that ejects the diamond from the conveyer. Another similar x-ray recovery
unit known as a “flowsort” allows wet material to be processed and instead of compressed air to
eject the diamond, a flapper gate is manipulated to divert the diamond to concentrate. Appropriate
research will need to be conducted to identify the best diamond recovery unit for the specific
materials to be processed at Dala.
Security is obviously a key issue to be addressed with any diamond project. It cannot be
emphasised enough that strict security protocols need to be established and enforced prior to the
commencement of a bulk sampling program. The nature of individual diamonds recovered during
a bulk sampling program will vary quite dramatically in terms of size and quality. Having a single
large high value stone go missing could mean the difference between making a positive
development decision and abandoning the project.
If positive results are achieved on the initial bulk sampling tests then the project should advance
to Phase #2, which would involve larger scale bulk sampling and potentially even trial mining of
the most promising alluvial targets. This work will require the purchase (or lease) of additional
earth moving equipment as well as upgrading the capacity of the gravel processing and diamond
recovery circuits. Geological investigations of additional alluvial targets would be ongoing in order
to create new areas for evaluation by trenching. The estimated cost of implementing Phase #2 is
US$2,750,000 which would bring GEM’s total expenditure to US$5,000,000 and thereby vesting
its 50% ownership interest in Global Gems.
October 28, 2015
56
It is recommended that the initial focus on the project should be on exploring and evaluating the
alluvial potential. As soon as Phase 2 of the recommended program is underway and/or at the
time when a revenue stream is achieved from the alluvials, a systematic approach to kimberlite
exploration should be developed and implemented.
October 28, 2015
57
Table 3: Budget for recommended work on the Dala Project.
ITEM
UNITS
UNIT COST
AMOUNT
PHASE #1 - INFRASTRUCTURE, GEOLOGY & INITIAL BULK SAMPLING
Infrastructure & Logistics
Camp trailers and tents
Generators
Water Treatment Unit
Workshop Equipment
Mobilization
$
$
$
$
$
$
50,000
100,000
50,000
50,000
50,000
300,000
$
$
$
$
50,000
200,000
50,000
300,000
$
$
$
$
$
$
80,000
450,000
140,000
300,000
200,000
1,170,000
15,000 $
25,000 $
$
YEAR #1 SUB-TOTAL $
180,000
300,000
480,000
2,250,000
$
300,000
$
$
$
$
$
100,000
600,000
300,000
250,000
1,250,000
25,000 $
75,000 $
$
YEAR #2 SUB-TOTAL $
300,000
900,000
1,200,000
2,750,000
Total
5,000,000
2
$
Geological and Environmental Program
Geophysical Surveys
Geological Mapping, Target Evaluation and Prioritization
Environmental Studies
Initial Bulk Sampling of Alluvial Targets
Vehicles (Landcruisers and Pickup Trucks)
Bulk sampling equipment (Backhoe, Loader & Dumptruck)
Suction Pump and Auxilliary for Diver Operation
Modular DMS Processing Plant
Modular diamond recovery plant
Operating Costs
Camp
Field Operations
12
12
50,000
$
$
PHASE #2 - LARGE SCALE BULK SAMPLING & TRAIL MINING
Technical Program
Exploration Target Evaluation and Prioritization
Expansion of Bulk Sampling to Trial Mining Operations
Vehicles (Landcruisers and Pickup Trucks)
Earth Moving Equipment (Grader, Backhoe, Loader & Dumptruck)
Expansion of Modular DMS Processing Plant
Upgrade and Expansion of Diamond Recovery Unit
Operating Costs
Camp
Field Operations
October 28, 2015
12
12
$
$
$
58
27. References
Chambel, L.; Caetano, L & Reis, M. (2013) - One Century of Angolan Diamonds. Research Report
published by Sinese & Eaglestone Securities, 104 pp.
Clifford, T.N. (1966) - Tectono-metallogenic provinces of Africa. Earth and Planet Sci. Lett., 1, pp.
421-434.
Delhal, J. & Ledent, D. (1971) – Ages U/Pb et Rb/Sr et report initiaux du strontium du Complexe
gabbro-noritique et charnockitique du Souclier du Kassai (Republique Democratique du
Congo et Angola). Ann. Soc. Geol. Belg., 94, pp. 211-221.
Fialho, J.A. (2012) – Mining in Angola – Focus Shifts to Base Metals Angola Today Website:
http://www.angola-today.com/tag/mining-code/.
Helmstaedt, H.H. & Gurney, J.J. (1995) – Geotectonic controls of primary diamond deposits:
implications for area selection. Journal of Geochemical Exploration, 53, pp. 125-144.
Hodges, Tony Angola to the 1990s, London, 1987, 75; and Economist Intelligence Unit, Country
Report: Angola, S#ao Tomé and Príncipe [London], No. 4, 1987, 17.
Mayer Brown (2012) – Mayer Brown – The Mining Codes of Angola. Mayer Brown Website:
http://www.mayerbrown.com/The-mining-codes-of-Angola-10-01-20121/.
Monteiro, J. A. (1993) - O diamante, riqueza de Angola: notas sobre a indústria do diamante em
Angola desde a sua descoberta até 1975. In J.D. Gouveia, P.C. Moncada, J.A. Monteiro, &
M.N. Neto, Riquezass Mineraiss des Angola (p. 257). Instituto para a Cooperação
Económica.
Pereira, E. (1995) - Posição dos trabalhos de prospecção. Relat. Inédit. Endiama, Angola.
Pereira, E.; Rodrigues, J. & Reis, B. (2003) – Synopsis of Lunda geology, NE Angola: Implications
for diamond exploration. Comun. Inst. Geol. E Mineiro, 90, pp. 189-212.
Pervov, V. A., Somov, S.V., Korshunov, A.V., Dulapchii, E.V., & Félix, J.T. (2011) - The Catoca
kimberlite pipe, Republic of Angola: A paleovolcanological model. Geology of Ore Deposits,
53 (4), pp.295-308.
October 28, 2015
59
29. List of Abbreviations
$ – Canadian Dollar
º – Degrees
ºC – Degrees Celsius
% – Percent
> – Greater than
< – Less than
~ – Approximately
the Agreement – the Dala Option Agreement
asl – Above Sea Level
BCSC - British Columbia Securities Commission
bn – billion
the Company – Gem International Resources Inc.
CONDIAMA – a joint venture between Diamang and De Beers Consolidated formed in 1970.
CSA – Canadian Securities Administration
Ct – carat, the unit by which diamond weight is measured. 1 carat = 0.2 grams (200 milligrams).
DIAMANG – Companhia de Diamantes de Angola, a colonial company formed in 1917 to explore
for and exploit Angola’s diamond resources.
Diamond Bay - Diamond Bay Enterprises Ltd.
EM – Electromagnetic
ENDIAMA - Emprêsa Nacional de Diamantes, Angola’s national diamond company.
ESE – East-Southeast
ft – foot or feet (Imperial measurement)
g – Grams
garimpeiro – local artisanal miner
October 28, 2015
62
GDP – Gross Domestic Product
GEM - Gem International Resources Inc.
GIS – Geographical Information System
GPS – Global Positioning System
Global Gems - Global Gems International Ltd.
g/t – Grams Per Tonne
IPO – Initial Public Offering
Lithoquest - Lithoquest Capital Inc.
kg/m3 – kilograms per cubic metre
km – Kilometres
km2 – Square Kilometres
KPCS - Kimberley Process Certification Scheme
m – Metres
Ma – million years ago
Mcts - million carats
Mcts/year – million carats per year
mm – millimetres
MPLA - Movement for the Popular Liberation of Angola
Mt – Million tonnes
Mtpa - million tonnes per annum
N – North
NE – Northeast
NI – National Instrument
NNE – North northeast
October 28, 2015
63
NNW – North northwest
NW – Northwest
ppm – Parts Per Million
the Property – the Dala Concession
Planageo - A five-year National Geology Plan initiated in 2013 that is scheduled to be completed
in 2017. The program includes completing airborne geophysical coverage over the entire country,
as well as regional geological and geochemical mapping for the whole of Angola at a scale of
1:250,000.
QP - Qualified Person
Report – Technical Report
S – South
SE - Southeast
SG – Specific Gravity
SPE - “Sociedade Portuguesa de Empreendimentos”, a Portuguese company that retained a
large number of Portuguese technicians previously employed by DIAMANG.
SW – Southwest
TAAG - the Angolan national airline “Linhas Aéreas de Angola”
TSX-V – The Toronto Venture Exchange
t – tonnes
UNITA - National Union for the Total Independence of Angola
US$ – American Dollar
UTM – Universal Transverse Mercator
WGS – World Geodetic System
October 28, 2015
64

NI 43-101 Technical Report - Gem International Resources

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