Monday 26th September 2016

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Beautiful, brilliant, bloodless

Exploration gains momentum as the world’s affluent covet Canadian diamonds

by Greg Klein

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The old saying aside, diamonds are not forever—not when existing supplies are depleting. So the search continues for new deposits. And it’s in Canada, the country that transformed the international market with its high-quality, ethically produced stones, that much of the exploration takes place. Now the market might be facing another transformation, not from new supply in Canada but new demand in China and India.

“Historically that’s not where most of the diamonds have been sold,” says Patrick Power, president of Arctic Star Exploration TSXV:ADD. “But they’re opening up right now largely due to the efforts of De Beers. China and India have never been incorporated into any [forecast] number before.”

As luxury items—industrial diamonds play a negligible role in the market, Power says—the gems’ value depends on the alliterative vagaries of colour, clarity, cut and carats. Esthetic values can be subjective, but a complete lack of colour generally gives a diamond the highest value. Clarity concerns the absence of imperfections. Cut involves the technical precision in faceting a stone’s shape to enhance its colour and brilliance or “fire.” Of course greater weight, measured in carats, also increases value.

Exploration gains momentum as the world’s affluent covet Canadian diamonds

But the value of Canadian diamonds goes beyond the four Cs. Power puts it bluntly: “They’re not blood diamonds. They’re ethically mined. All parties participate in the wealth. So there’s a premium paid for that,” he explains.

“Plus they’re fantastic diamonds. De Beers’ Victor mine in northern Ontario is producing stones that are $400-plus a carat. That’s an amazing diamond. So we have quality plus branding. Canada was the first country ever to brand diamonds, with the polar bear diamond and the maple leaf diamond. Ekati and Diavik put micro-signatures on each diamond’s girdle. That’s Canadian. No one ever did that before.”

Supply/demand predictions can be troublesome. But the supply of diamonds above one carat (0.2 grams) marks the point “where they start to get scarce,” Power says. “And if you want two, three, four carats of better-quality diamonds, you can tell your supply is dropping.”

Of course growing affluence in emerging markets, where De Beers has been peddling its opulence, would seem to enhance demand. As for the ultra-wealthy, they’re paying record-breaking prices. In early November Christie’s sold “the largest fancy vivid orange diamond ever offered at auction (14.82 carats)” for $35.5 million. The company had hoped for about $20 million.

Just one day earlier, Sotheby’s sold the 59.6-carat Pink Star for $83.2 million.

But the excitement’s not limited to the über rich. The people who search for the stones have a passion of their own. “What’s really exciting for those of us exploring in the Northwest Territories is that the technology is changing for the first time in a long time. We can look again at ground that was previously explored and find new stuff,” Power says.

In particular, a helicopter-borne gravity gradiometry survey over Arctic Star’s Redemption project in the Lac de Gras diamond fields found 32 anomalies, including some at the head of a glacial mineral train. The results, announced in October, could indicate the presence of kimberlite pipes among the more dense granitic rock.

Developed by Lockheed Martin and BHP Billiton NYE:BHP at least 15 years ago, the technology’s been available to other companies for less than three years, Power explains. “It’s now the third generation of that system. We’re amazed at the high-quality data, as compared to the first generation when BHP flew Ekati way back when. Gravity is a very difficult, time-consuming and expensive thing to do on the ground. Surveys are traditionally small. But you can fly the entire area with this system. We’re seeing things that we haven’t seen before.”

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