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Diamond exploration junior obtained conclusive proof of diamond-bearing kimberlites in Russia’s North

11 september 2017

vladimir_shchukin_xx.jpgOOO Proex Service, which is searching for diamonds in the Arkhangelsk Region of Russia, discovered seven kimberlite pipes in the Kozolsky license area having spent 15 months for the find. One of the pipes is very similar to the highly diamondiferous Grib diamond pipe by its petrochemical characteristics and a set of indicator minerals pointing to kimberlites. Vladimir Shchukin, the head of Proex Service, is confident that diamondiferous kimberlites will be discovered in other licensed areas explored by this junior company, whose operations he described in an interview given to Rough & Polished.

Could you say a few words about your company’s business for the sake of our readers?

The main task of Proex Service is to search for diamond deposits. To solve this task, we have to make some prognostic plotting, that is to select areas for prospecting works and in fact to start geological exploration to identify projected deposits. The importance of choosing the right areas for prospecting is obvious, so we attach special importance to this kind of work. The employees of our company created an automated system for comprehensive analysis of geological and geophysical materials with a view to forecasting mineral deposits. This system is constantly being improved, new programs and subprograms are being created, its databases are being replenished. Therefore, the development of new software products for our system is one of the important aspects of our activity.

How difficult is it for you to obtain prospecting licenses and what are the operational terms within them?

Obtaining licenses in our environment is a long and difficult process. My personal experience: we sought our first licenses for more than two years and spent more than three years to get the currently valid licenses. The situation has improved slightly after the introduction of the application principle, but in this case the time from filing an application to obtaining a license is about 6 months. Another problem is connected with compiling an application package of documents.

The subsoil user is obliged to include a contract with a bank, fund or large company to finance the project in the package of application documents (this is about 100 pages of text). As a rule, banks do not give and do not promise money to finance an idea, while private funds are rarely able to agree, and not all juniors have the opportunity to even talk to them, so only large, often inaccessible companies remain. This makes potential juniors having good ideas stay idle, without work.

How successful is Proex Service’s business? What kimberlites have you discovered and what is their potential?

In the licensed areas, we have obtained conclusive evidence of diamondiferous kimberlites, so the probability of finding an economically important deposit is very high. We have discovered seven kimberlite pipes in the Kozolsky Block in the course of 15 months of our operations there. The KL1 pipe is currently the most explored area, while the rest are tapped by 1 or 2 wells. On the KL1 pipe spreading across almost 7 hectares, we intersected xeno-tuff breccias of kimberlites. By its petrochemical characteristics and a set of kimberlitic indicator minerals, this pipe is analogous to the highly diamond-bearing Grib Pipe. We plan to evaluate the identified kimberlites in the winter season of 2017-2018. This is a very good result. We are sure that diamondiferous kimberlites will be discovered in other licensed areas.

How do you manage to finance geological exploration for diamond deposits?

After obtaining licenses, we prepare exploration programs and present them to potential investors. We offer up to 50% of the company’s shares to investors for the full financing of the project's search and evaluation program. The investor is guaranteed to return the spent sums primarily from the company's profits when the discovered deposit will be developed or sold. Of course, the risk exists, but if a diamond deposit is discovered, the costs of geological exploration will be paid off many times over. It is this aspect that attracts investors. In the previous project, we managed to attract a foreign investor, but the financial crisis of 2008 destroyed the project. We have not yet found an investor to finance the entire program of work within the current project, so we are going to do it.

What are the prospects for your company in case you will discover a large primary diamond deposit?

It is the business of large mining companies to develop primary diamond deposits, as it is difficult for juniors to attract the necessary technology and funds. Therefore, we have either to sell an explored deposit or to assign a significant stake in the company. It is quite possible that there will be other opportunities.

How much are you interested in attracting investments in your project? In what way may it arouse interest on the part of investors?

Our project is one of the largest diamond exploration projects in Russia and therefore we are interested in attracting funds for its full implementation. We have carried out the major part of exploration work, which is the riskiest part. Now it is necessary to proceed with the planned discovery of new kimberlite pipes and their evaluation. The possibility of discovering a new diamond field is very high, and in our opinion, this should attract investors.

The Ministry of Economic Development, while offering its development concept for junior exploration companies in Russia, focused on attracting private capital to geological exploration. What is your take on this matter?

In my opinion, the development of junior exploration companies can be carried out only by attracting private capital. But this requires a new Law on Subsoil.

Do you think that state participation in junior exploration companies can bring more benefit or harm?

From my point of view, the state participation in junior companies will lead to complete elimination of this movement in Russia. As a rule, junior companies are established by high-level professionals, who are well acquainted with the area, in which they are going to work, and the type of mineral. The relative freedom in decision-making in terms of exploration direction, selection of contractors, acquisition of equipment, etc., will be lost in case of state participation, whereas mobility is the main advantage of junior companies. The state should legislatively provide an opportunity for juniors to access archival geological materials and the prospective plots allocated to them. For this, it is necessary to change the Law on Subsoil replacing it with a new one, and not just to make regular changes and amendments.

Tell us about the development of your software for geological exploration. How much does the market demand such products?

The employees of our company have developed the "Proex-geology" software package, which is a target-oriented automated system for comprehensive processing of geological and geophysical data needed to forecast and search for mineral deposits (Certificate No. 2004610060 issued by Russia’s Federal Agency for Intellectual Property, Rospatent).

The Proex-geology automated system includes a database and five blocks for processing geological and geophysical information. The architecture of the system is constructed in such a way that both additional blocks and individual programs can be included in it. Such a configuration allows us to continuously improve the system and, if necessary, align it to any type of mineral.

The search for mineral deposits is an elaborate and expensive process, especially in areas with a complex geological structure. In such areas, the geologist has to solve a multifaceted task with a huge amount of initial data, the qualitative processing of which is impossible without modern technologies. With the intensification of geological exploration in Russia, such software products will be in demand on the market.

What will be your contribution to the 11th International Kimberlite Conference in Botswana?

The International Kimberlite Conferences (IKC) are held every four years, and they are attended by geologists and diamond miners from all the world, who are bringing their news, ideas and reports. This is a great opportunity to talk with colleagues, exchange opinions and get first-hand information. In general, we are going for new knowledge. I am going to present a report at this conference (using a stand), which is "Diamond bearing capacity of the North European part of Russia and prospects for discovering new diamond deposits." I hope the report will be of interest to my colleagues.

Vladimir Malakhov, Rough&Polished

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