It’s never been easy to find a diamond mine and the issues encountered during the discovery and establishment of Australia’s three diamond production centres at Argyle, Ellendale and Merlin prove just that.
After 20 years working in mining exploration in Africa and Europe, I was asked to return to Australia to search for diamonds for Tanganyika Holdings.
Diamond was known to exist in every Australian state but only the Wellington Alluvials in NSW had any significant production.
I had studied geology at the University of Western Australia under Rex Prider.
From his researches, Prider postulated that strange rocks in the Fitzroy Valley, known as leucite lamproites, were very similar magmatically to the diamond-bearing pipes in South Africa.
In 1969, because of Prider’s research, I asked my Perth office to design and cost a search program in the Kimberley for kimberlite. As my funds were limited and joint ventures were becoming fashionable, I invited AO (an Australian subsidiary of London Tin Corporation), Belgian diamond company Sibeka, Jennings Mining (a company with previous Kimberley experience) and Northern Mining, of which I was a director, to come on board. Each would contribute $20,000 to meet the $100,000 budget, and so began the Kalumburu Joint Venture.
The search begins
Kimberlites are diamond-bearing ultramafic rocks that source in the earth’s mantle from depths greater than 150 km; they are effectively diamond-bearing volcanoes. Because of the low abundance of diamond even in a kimberlite, an economic deposit content may be as low as 1:100,000,000. The explorer does not expect to find a diamond sticking out of a volcano as one might see a gold nugget in a quartz vein. Instead he looks for ‘indicator minerals’ that form at a similar depth to diamond but are more abundant. Usual indicators are pyrope garnet, picroilmenite, chrome diopside and chromite.
To find these heavy minerals, the search requires the collection of gravel samples from all the creeks and streams in the search area. A heavy mineral concentrate is prepared and examined on a grain-by-grain basis under a binocular microscope. The recovery of one grain of an indicator in a sample is seen as a triumph and pickers had to be trained to such a skill level that they didn’t miss that one grain. Are there any people with these skills left today?
The Kimberley plateau is well-drained and, in 1972, we reconnaissance sampled 200,000 sq km, three times the size of Tasmania. Over three months we collected 1,600 samples of carefully-screened gravel from trap sites in the creeks. The sample density was low – one sample for each 15 km of stream length – but the quality of the samples was high. This was not just a job of collecting a bag of sand from a creek; it required skill and real commitment.
There was no diamond laboratory in 1972 so the samples were all sent to Sampey’s Laboratory in Perth where each sample was separated in a heavy toxic liquid called tetrabromoethane. Any ‘lights’ that floated were strained off with tea strainers and ‘heavies’ washed in acetone. The heavy concentrates were then sent to Tanganyika’s office in Perth for binocular examination.
In Africa I had worked on a gold mine near the Mwadui diamond mine and knew one of the prospectors. I learned about pyrope and picroilmenite as indicators but had no first-hand experience. Fortunately, we had engaged Chris Smith who had worked with De Beers in Africa – he had designed our exploration program and could recognise indicator minerals and diamonds.
Maureen Muggeridge had been engaged for the sampling program and Rob Mosig joined from Northern Mining. Both were geologists to be trained by Smith in indicator recognition.
It’s important here to discuss the issue of land tenure. In 1947, you could purchase a Miner’s Right for five shillings that enabled you to peg a claim and begin mining but restrictions existed over certain land. The 1972 campaign required access to an A-class Aboriginal reserve during a time when aboriginal land-rights legislation in the Northern Territory was up for review – a popular cry was ‘Land rights, not mining’.
Late in 1972, the WA Government created the Aboriginal Planning Authority as well as legislation to create Aboriginal Lands Trusts. Could this be a problem?
On August 23, 1972, Smith called me to say a diamond with indicators had been discovered in a sample picked by Mosig. I was sceptical – was this a plant or contamination from one of Sampey’s dust bins?
I went to Perth to witness the sample picking to find that the site, and supporting sites around it, did indeed show an indicator population. Clearly we were in a catchment with a kimberlite source within it!
The sample in question, sample M109, was taken in a tributary of the Berkeley River that we named Pteropus Creek. The mouth of the Berkeley River was 150 km from Wyndham and the site was 50 km upstream. By August 1974, we had found four diamonds in three different north drainages but we didn’t know if there were commercial-sized stones.
We bought a Heavy Media Separation (HMS) plant and established it after some considerable difficulty on the Drysdale River. We had no real targets except the Pteropus drainage and no mineral title. What we wanted was something like the iron ore companies had – Temporary Reserves on a grand scale – and we would try to get a Temporary Reserve for diamonds over the whole of the Kimberley.
I calculated a rental figure of $19,300 per year, a fraction of the iron finders’ rent, and went with cheque to the Premier’s office. He didn’t laugh in my face but directed me to Andrew Mensarus, the Minister for Mines in the next office.
Mensarus wouldn’t accept it either but both men knew we would shortly need comfort if we were to continue our search.
While we were battling to get the HMS plant to the Drysdale River, Bruno Morelli of Sibeka was visiting and panning in the gravels of the King George River produced a diamond. Morelli was so excited he exclaimed in French, “We’ve got the fox by the tail!” To this day the site is known as Morelli’s Fox.
This success proved to be a diversion. Morelli advocated an alluvial search for diamonds; he had bad experiences in Africa searching for kimberlites and the idea of revenue from alluvial mining appealed to the joint venturers. In my view this was taking the eye off the ball. I doubted if any of these northern-draining rivers had alluvial spreads on a scale to make economic mining but we had spent about a million dollars and we hadn’t found a kimberlite. I was instructed by London and Brussels to find an additional source of funding – we required local money.
I approached Arvi Parbo of Western Mining but he was not interested. I had adventured with Sir John Proud of Peko Wallsend elsewhere in Australia and he sent John Elliston to visit our laboratory in Axon Street, West Perth. Elliston was impressed with what he saw and we drafted the Plateau Joint Venture to admit Peko.
There was very nearly money in the bank until Rees Towie of Northern Mining refused to sign. I was furious and resigned from his board. It emerged that Towie had been holding private discussions with other parties to seek funding. One was John Collier of CRA, now Rio Tinto. I hadn’t approached CRA because they were not Australian at that time but the CRA deal was better than my Peko deal – CRA would match the joint venture’s expenditure of $1.6 million and obtain a 25 per cent interest, diluting the other five shareholders to 15 per cent. Tanganyika would remain manager until CRA had contributed $1.6 million in exploration expenditure and would then employ all Tanganyika staff and maintain the high standard of exploration. The now-named Ashton Joint Venture Policy Committee would include Warren Atkinson, CRA’s exploration manager in Western Australia, and Frank Hughes would join the Tanganyika personnel in the field.
CRA could hardly believe its luck when the first kimberlite was discovered in Pteropus Creek in January 1976. In London, Rio Tinto had asked CRA to get a South African diamond geologist to view the data. Baxter Brown was impressed but wanted to see a commercial, quarter-carat diamond. The HMS plant had found nothing in the Drysdale and the plant was moved to the King George River to search for stones at Morelli’s Fox for alluvial valuation.
In July 1976, in the presence of all the top brass of CRA, the Pleitz Jig produced a 0.4-carat stone.
Testing Ellendale feasibility
The year 1976 was a vintage year for kimberlite. After Pteropus came Big Spring in the west, Skerring in the north, kimberlite dykes in the east and the Ellendale Diamond Field in November.
After Pteropus, we were aware of chromite’s significance in our searching. Chromites were not so important in Africa and we kept this fact very secret.
Following up one of Smith’s 1974 chromite and pyrope-bearing samples from Mt North Creek, Hughes found a diamond and stood on what became Ellendale’s ‘No. 4’ pipe. The pipe was covered in part by a Mt Isa Mineral Claim and it was not until Easter Day 1977 that it could be pegged.
We now certainly had the ‘fox by the tail’. In and around Prider’s leucite lamproites, we found geophysics could spot pipes that did not rise up out of the valley like volcanic plugs. These pipes contained olivine and olivine lamproites, which were similar to kimberlite in that they were diamond bearing.
Prider had been right!
The success of the 1976 discoveries meant there was pressure to speed things up. Testing of 48 lamproite pipes identified Ellendale 4 and Ellendale 9 as possible diamond mines. The stones were beautiful but were there enough in a tonne of rock to justify mining?
From 1977 to 1980 feasibility studies were made. With success and the prospect of ever-increasing budgets, some of the parties were looking to sell at a profit. Jennings was the first to leave while Alan Jones of AO alerted his Malaysian colleagues and they, along with CRA, became buyers.
By the middle of 1978, Jones had accumulated a 24.2 per cent interest in a company called Ashton Mining. A parcel with 60 per cent of the Ashton Mining shares was put into the Australian Stock Market and the 50 cent shares first traded on November 9, 1978. They opened at 85 cents, valuing Ashton’s joint venture interest at $119 million and therefore the total joint venture at $491 million – now that’s some markup for a $100,000 pledge!
By mid-1979, the feasibility studies weren’t looking too promising. Could we ever develop Ellendale? Diamond quantity is not too difficult to estimate but diamond quality is something else.
Argyle is born
It was in August 1979 that a sample taken in Smoke Creek by Muggeridge showed two diamonds. The next day, a sample from the same creek showed four and another showed five. Atkinson said they might be sourced from the Devonian Conglomerate further up the creek where access was not immediately available as there was an all-minerals Temporary Reserve held by Uranertz, a uranium explorer, which blocked us.
In 1974, after my presumption to pay $19,300 as a year’s rent for the Kimberley diamond rights, the Court Government sought to accommodate us. They could not refuse applications under a Miner’s Right for claims but if we indicated on a map where our diamond searching was focusing then they offered not to grant Temporary Reserves for diamonds. This map was to be kept in the government geologist’s safe.
The discovery of the kimberlite dykes in the east, trending along the Halls Creek mobile zone, led to extend the search area to the Northern Territory border but the map in the safe did not extend this far.
Sampling up Smoke Creek continued. The Uranertz tenement expired and on October 2, 1979, Hughes and Atkinson found the Argyle pipe nestling between two ridges past the Devonian Conglomerate. Hughes sent a piece of the rock to Smith at Ellendale after seeing a diamond sticking out of an ant heap!
As soon as the title was clear, Hughes moved to secure it, firstly by a Temporary Reserve and then pegging claims under a Miner’s Right. Truckloads of pegs were assembled and all available hire cars and maps were procured and stored in CRA’s premises in Kununurra to block others. The pegging was completed quickly like a military operation.
By some strange delving, being aware that the CRA Miner’s Right had lapsed, a ‘junior’ company, Afrowest, over-pegged all the joint venture’s claims. It was real Wild West and stopped us in our tracks. Was our title secure? We had a Temporary Reserve and surely we were morally entitled to our prize – if there was one. Our legal advice was that we should continue but we could be, and were, challenged in the courts.
This challenge could have gone to the Privy Council in London – which would have taken many years – however, WA Premier Sir Charles Court, sensing blackmail and wanting progress, agreed to special legislation to secure the title for the joint venture.
Drilling, sampling and engineering occupied 1980 and 1981. We found a large, 46-hectare, olivine lamproite pipe rich in diamonds – six to seven carats per tonne – but the stones were low quality. Fortunately, Smoke Creek had extensive alluvial spreads and we could produce quantities of diamonds for valuation.
Northern Mining got Australian diamond buff Albert Joris to look at the stones. His value was much higher than what we had been led to believe and Towie was certain we were undervaluing the goods. He ran a campaign in the media, which was widely believed, stating that we were deliberately concealing a bonanza.
The first ore reserve, calculated in 1980, was 74 million tonnes with a grade of 6.7 carats per tonne and an average value of US$6.5 (AU$8.4) per carat – perhaps US$3.25 billion (AU$4.2 b) in contained diamonds!
From those samples, William Leslie, one of the directors of Ashton Mining, purchased a large rough pink diamond, which he had cut and polished in London under the supervision of renowned Australian jeweller Stuart Devlin. That diamond was worn by Leslie’s wife for three decades and is now for sale by Garry Holloway of Holloway Diamonds in Melbourne.
At Argyle we had aboriginal neighbours – sacred site Debil Debil Spring sat on Glen Hill pastoral lease, part of which was on the pipe, and the gap in the east wall of the pipe was a women’s sacred site. Argyle offered to commit to capital works on each property as part of a ‘good neighbour’ policy and the traditional owners visited Perth to get independent legal advice, following which a policy document was signed.
The plan was to produce 25 million carats per year for 20 years. This would increase world natural-diamond production by 25 per cent. Could the market absorb such an increase? We commissioned the Boston
Consulting Group (BCG) to study it. One of the first capital estimates in 1980 was $310 million for this size production, consisting of 5 per cent gem-quality diamond, 45 per cent cheap gem and 50 per cent industrial goods.
Because of the public perception of a bonanza, the Diamond (Ashton Joint Venture) Agreement Act 1981 contained some pretty tough conditions – we had to build a town, which could be delayed until 1987; we had to pay a 22.5 per cent net profit royalty; we had to pay an ad valorem royalty of 7.5 per cent.
Still, the state agreement was completed in six weeks and ratified December 1981 – a record that couldn’t possibly be done today! We were relieved to have indisputable title and planning could proceed.
It took from December 1981 to November 1983 to tweak the pre-feasibility study into final form and arrange the financing. Ashton Mining, now responsible for 38.4 per cent of the project, had to raise US$175 million (AU$227.5 m) in debt finance. The banks required some comfort that we could sell our product but the only assurance would be a contract with De Beers – even the mention of De Beers in Canberra caused trauma.
The Federal Government had the power to stop the export of diamonds but Deputy Prime Minister Doug Anthony knew such a project was in the national interest and a five-year contract was negotiated with Harry Oppenheimer for De Beers to buy all the gem-quality diamonds, half the cheap stone and half the industrial goods.
The banks were satisfied and Argyle Diamond Sales was created by CRA and Ashton to sell their production together. Northern Mining required its 5 per cent to be extracted from each diamond sale and sold separately. I doubt they ever got a better price.
In November 1983, the Ashton Joint Venture took its ‘decision to mine’ and the Argyle Diamond Mines Joint Venture was born. Despite some union troubles over who should man the project, and one threat of strike, the $325 million project was completed on time and budget in November 1985.
Merlin diamond mine
With the discovery of kimberlite dykes in the east Kimberley, the Halls Creek mobile zone became of interest. CRA started to explore in the Northern Territory and Ashton followed suit.
Ashton’s first tenement application was in 1978 in and around the Daly River and it took more than 25 years to secure title, due to a native title embargo. Ground conditions were very different and Ashton used micro diamonds as an indicator to find Coanjula, which Dr Peter Gregory described as “the world’s first micro-diamond mine”. We had drilled seventeen kimberlitic pipes without a diamond but there was a two billion-year-old sandstone deposit full of micro-diamonds nearby Coanjula Anomaly.
CRA found the Emu Pipes in the McArthur basin but walked away after long and thorough exploration. Australian geologist Tom Reddicliffe negotiated access to the lapsed CRA titles with Bob Biddlecombe, a local property developer and prospector. There he found two unexplained chromite anomalies and identified a fine, north-trending fracture that had chromite and micro-diamonds.
Reddicliffe, following the fracture, found two breccia pipes and an amphitheatre. Loaming showed clusters of chromite and diamonds but trenching and shallow drilling showed no source rocks. Following another CRA indicator trail on Abner Range, Reddicliffe recognised another breccia pipe. Its peripheral breccias, concentric fracturing and huge sandstone blocks prompted him to re-examine the amphitheatre, which he drilled to 20 m in 1991 without sign of kimberlite.
Redrilling to 26 m in 1993, Reddicliffe found kimberlite rich in diamonds. This became Excalibur, the first of twelve pipes of the Merlin diamond mine. Merlin was on a pastoral lease and we bought half the lease, believing Native Title to be extinguished in 1996; however, the High Court found that Native Title was not extinguished on a pastoral lease and therefore the Mines Department could not issue us a mining lease. Negotiations were completed with the traditional owners in June and a mining lease granted on June 15, 1998. Trial mining began in late 1998 and diamonds were sold by Argyle Diamond Sales.
After Rio Tinto bought Ashton in 2000, mining continued until 2003 when all easily-mined ore had been extracted. The grade was around 23 carats per hundred tonnes and the value better than US$110 (AU$143) per carat. The site also produced Australia’s largest diamond, a 105-carat stone that resides in the museum in Darwin.
The future of diamond mines
Australia has had three diamond producing mines, and I believe there are more mines to be discovered, so why is it more difficult today to find one?
Finding mines requires money and investment enthusiasm is low. Diamond mining is also a long-term business and it needs men in power, like Court with his vision for Western Australia and Oppenheimer with his vision for the world of diamonds. Without those two, Argyle would not have flown. It also needs trained people with a keen interest in diamond-bearing rocks to search in the field and man the laboratories.
Legislation remains an issue. Even if we are able to wade through the bureaucratic porridge, we must realise it took Lang Hancock’s daughter Gina Rinehart 4,000 permits to get the Roy Hill iron ore mine off the ground. Who has the patience and can bear the cost of delay?
I am unashamedly an explorer. To me, everything is either grown or mined. How is it possible that a majority of our nation would prefer, on environmental grounds, that there be no mining? At some point the industry needs to get out of the trenches and fight governments for that which is essential for our nation.
It can’t be too soon.
This article is based on a presentation Ewen Tyler delivered to a mining conference in Australia in May 2015.