Colorado's Diamonds Cap Geologist's Quest

For 12 years, Howard Coopersmith had been tracking diamonds in the high Rockies around the Colorado-Wyoming border. Chipping away at an area in the midst of a mountain pine and Douglas fir forest, he found his quarry.

"There it was -- a beautiful gem diamond," he recalls. The find led to the discovery of the first American diamond mine. The mine, located near Kelsey Lake, Colo., went into production in June, and the first parcel of 3,000 carats was scheduled to be sold by tender offer in late September.

In the beginning, that one diamond didn't make a mine, of course. But it did provide an excellent clue because diamonds are exceptionally hard to find. Even in known diamond-bearing kimberlite, a miner usually has to sort through a ton of rock to recover a single decent-sized stone.

Before going any further, Coopersmith visited nearly every rancher and farmer in that corner of the state seeking permission to prospect their properties. In 1987, he drilled test holes and took samples of the ore to determine whether mining would be possible. Of course it was done strictly on the QT.

"I must have walked every one of these hills prospecting for diamonds," says Coopersmith. "If a site looked promising, we'd drill some test holes. I think we must have dug 20,000 holes. All that time, people kept telling me there are no diamonds here or anywhere in the U.S."

Adding to the skepticism were the tales of a locally famous 80-year-old mining scam in which con artists convinced investors to buy shares in a barren diamond mine. In an ironic twist, the phony mine was only a few miles from the Kelsey Lake site -- which lies just below a promontory called Diamond Peak.

Curiosity aroused: Coopersmith began his quest while still a geology student at the University of Colorado. "A professor told me kimberlites had been discovered in this area in the 1960s and that the area was part of the original continental shelf, the only areas in which diamonds have ever been found," he remembers.

The first hard evidence that diamonds existed in Colorado came in 1975, when a graduate student was sawing through a nodule inside a piece of kimberlite. "The saw stopped because it hit a diamond," says Coopersmith. During the next decade, reports filtered out of scattered diamond finds in the area. In 1980, JCK reported on promising explorations in southern Wyoming, though the rosy predictions failed to pan out. "Most of those reports came from our exploration team," Coopersmith says.

Optimism rose with the discovery of the Kelsey Lake deposit. "As soon as we took the sample, I knew this deposit was different," he says. "It looked much better, and the geological formations around it made me think this could make a mine."

The preliminary samples looked good, but it took three years to round up enough backers to pay for a large sample (500 tons or more). The large sample was even more promising, turning up a number of high-quality gems. While searching for backers to underwrite more expensive bulk sampling and mine construction, he went ahead and obtained a mineral-rights lease from the landowner and continued explorations. Each sample showed he was on the right track.

Exploration revealed the deposit to be a cluster of eight kimberlite pipes. All of the exploration has been on the two largest: named KL1 and KL2. The kimberlites aren't round like most others but oblong, with a portion of KL2 extending into the Wyoming border. The remaining six are being tested now, though at least two are too small to mine economically.

Even with these encouraging test results, finding financial backers remained difficult. Many mining companies at that time looked at diamond mining as difficult and esoteric -- diamonds had to be sorted into sizes and qualities, then haggled over --while other minerals could be sold simply by the scale.

Then some good luck. The 1991 discovery of diamonds by DiaMet Minerals in the Northwest Territories of Canada touched off the biggest diamond rush since the boom in SouthAfrica in the 1870s. Diamonds were suddenly hot and nearly every mining company in the western world dispatched teams to the sub-Arctic to look for them.

That's when Coopersmith found backing through Redaurum, a small but adventuresome mining company based in London and Toronto. Redaurum, which went into Zimbabwe's River Ranch project after De Beers bailed out, specializes in low-budget development. Kelsey Lake, for example, cost only $2 million to bring on-line. The mine is relatively small and the output is low by De Beers' standards: 20,000 carats may be dug up and sold this year, 100,000 carats yearly at the peak. But the diamonds are white, clean and one-fourth of them are larger than a carat.

Operating costs are also low compared with typical De Beers' projects. Most of the equipment was bought second-hand or built on-site. Although the mine lies 8,000 feet into the Rockies, it's close enough to roads and power lines to keep down infrastructure costs. It's staffed by two crews of six workers operating around the clock.

The low costs and the mining potential of the other kimberlite pipes in the cluster will keep Kelsey Lake profitable through its projected 12-year life span, says Redaurum.

Though Redaurum has made no firm decision on marketing the Kelsey Lake diamonds, Coopersmith believes the tender offer system will suffice for the foreseeable future. Diamond manufacturers from the U.S. and elsewhere are invited to view the goods in a Denver locale and make bids. "We would like to keep as many of the diamonds as possible in the U.S.," he says. "But we also have to do what's best for our shareholders."

Coopersmith is convinced that Kelsey Lake is no fluke. He firmly believes there's a world-class deposit somewhere in the U.S. He says diamond-bearing kimberlites have been found all over the central U.S., from the Ohio valley to the Continental Divide. Thanks to modern exploration techniques, it's much easier to spot them. "In Colorado, most people thought it had all been explored," he says. "We've obviously proven them wrong."