Kelsey diamond mine sold

The United States’ only diamond mine changed hands early this month as the owners decided to ditch diamonds for a precious metal: vanadium.

McKenzie Bay International Ltd. sold the Kelsey Lake Diamond Mine for an undisclosed sum to Wyoming-based Roberts Construction Co. and diamond seller BJ&J Ltd. of Boulder. The mine, which produced the famous 28.3-carat Colorado Diamond in 1996, sits west of US Highway 287, at the Colorado-Wyoming border.

Roberts and BJ&J will acquire the mine for the net value of equipment minus the outstanding debt. The agreement further provides that the new owners will pay McKenzie Bay a 50 percent royalty over the next five years for any diamonds recovered over 10 carats per hundred tons of mined kimberlite — an ore that can contain diamonds.

McKenzie Bay purchased the mine in early 2000 for $1.4 million. At the time, company officials expressed high hopes for diamond production there. New equipment was brought in and a reported $2 million was to be spent on bringing the mine to full operating capacity. But a surge in the market for vanadium — a metal that can be used to store energy for extremely long periods of time — caused McKenzie Bay to focus on what company officials call a “whole new energy sector.”

McKenzie Bay is seeking to develop the largest vanadium deposit in North America to provide the metal for vanadium storage technologies.

“If we didn’t have such an incredible opportunity in energy, we would have kept the diamond mine,´ said Gary Westerholm, president of McKenzie Bay.

Westerholm said the company decided to look for a buyer last fall.

BJ&J Ltd. already secured the exclusive marketing rights to the diamonds from an earlier agreement, said company spokesman James Wahler. “Our company has diamond experience and their company (Roberts) has heavy construction and mining experience,” he said. The agreement calls for a due diligence period, and Wahler said that the companies would have a better idea of the mine’s capacity after that is completed.

Ron Leibel, president of Roberts Construction, said the company will begin testing the new equipment in October. The test will last about 60 days, he said.

Howard Coopersmith, vice president of operations and exploration at the mine, said

“The intention is to continue the facility upgrade and bring the mine to increased production.” Coopersmith, who has worked at the mine since it first opened in 1987, said there has been no significant production under McKenzie Bay. “We’ve primarily been in a development upgrade stage,” he said. “Mainly to upgrade and increase production.”