As Dominion Diamond leads the way, others vie for a share of Lac de Gras riches
by Greg Klein
Better than expected production volumes, grades, sales and prices mark another strong quarter for Dominion Diamond’s (TSX:DDC) two Lac de Gras-region mines in the Northwest Territories. Announced September 3, the fiscal Q2 2015 financials show strong performance and optimistic forecasts for a company that refrains from modesty—it boasts a reputation as “the world’s third-largest producer of rough diamonds by value.”
Those bragging rights result from the company’s 40% interest in the Diavik mine, which is operated by majority owner Rio Tinto NYE:RIO, and Dominion’s 80% stake in Ekati, which the company operates itself. Dominion also holds a 58.8% ownership in resources surrounding Ekati.
Quoting all dollar amounts in U.S. currency, Dominion recorded a Q2 net income of $26.6 million or $0.31 per share. The treasury ended the quarter with cash and cash equivalents totalling $384 million. Three months of sales brought in $277.3 million, with $107 million coming from Diavik and $170.3 million from Ekati. Dominion’s operating profit came to $46.5 million, nearly three times the $15.7-million profit for the same period last year.
Not included in the figures was $10.6 million in sales from Ekati’s Misery satellite pipes, still classified as pre-production in Q2. They began commercial production on September 1.
Production numbers were reported differently for the two mines. Dominion reported 40% production figures for its 40%-held Diavik but 100% production for its 80%-held Ekati. Diavik’s numbers came from three months ending June 30 while Ekati’s came from the quarter ending July 31. On that basis, Ekati produced 802,000 carats, compared to 483,000 for the same period last year. Diavik gave up 860,000 carats compared to 624,000. Overall production for the last two quarters exceeded company expectations by 30%.
The stones find willing buyers. That six-month period “saw continuing growth in diamond jewellery sales in the United States and the mass market in China, which together account for over half of the world’s diamond jewelry sales, resulting in rough diamond prices rising approximately 8%,” Dominion stated. A seasonal slowdown “failed to materialize this year due to the strength in the polished diamond markets.”
The quarter’s exploration expenses came to $6.8 million, compared to $3.1 million for Q2 2013. All of it went to the Jay pipe, part of Ekati’s Buffer zone and considered to be the mine’s future. Hoping to extend Ekati’s life by another decade beyond 2019, Dominion has budgeted $15.5 million on Jay, to develop North America’s “largest diamondiferous resource.”
But Ekati’s not the only Lac de Gras project bursting with superlatives. “The world’s largest and richest new diamond development project,” as owners Mountain Province Diamonds TSX:MPV and De Beers call Gahcho Kué, is planned for full commercial production by January 2017.
That will be Canada’s fifth operating diamond mine, including De Beers’ Snap Lake, also in Lac de Gras, and its Victor mine in Ontario.
[The six-month period] saw continuing growth in diamond jewellery sales in the United States and the mass market in China, which together account for over half of the world’s diamond jewelry sales, resulting in rough diamond prices rising approximately 8%.
And, as Kennady Diamonds TSXV:KDI shows at its Kennady North project, there are yet more Lac de Gras diamonds to be found. Located north, west and south of Gahcho Kué, the project’s focus is the Kelvin kimberlite which undergoes delineation, exploration and mini-bulk sample drilling. The current program also has drills scheduled to turn at three other kimberlites and around four new exploration targets. Results from a previous Kelvin bulk sample, along with an initial resource, are expected in Q4.
North of Kennady North, Margaret Lake Diamonds TSXV:DIA nears completion of an airborne gravity survey over its Margaret Lake property, recently expanded to 23,199 hectares. Late last month the company optioned 49% of Canterra Minerals’ (TSXV:CTM) Marlin property contiguous to the north and west of Kennady North, and west of Margaret Lake.
Canterra crews have spent the summer on till sampling at the company’s Hilltop, King, Marlin, Prism and Gwen properties, all located between Snap Lake and Gahcho Kué.
In July Prima Diamond TSXV:PMD moved immediately south of Gahcho Kué and east of Kennady North to pick up the 42,000-hectare Godspeed Lake project. Prima followed that acquisition with another in August, the 14,000-hectare Munn Lake, from where a 581-kilogram sample from one kimberlite yielded 226 diamonds while a 42-kilogram sample from another revealed 14 diamonds.
Even Dominion, unsated by success at Ekati and Diavik, wants more of the region’s gems. The company’s currently earning 55% from North Arrow Minerals TSXV:NAR of the Lac de Gras joint venture, which has so far undergone till sampling and geophysics. In the same vicinity, meanwhile, North Arrow is earning 55% of the Redemption project, a JV with Arctic Star Exploration TSXV:ADD. After summer drilling wrapped up last month, intervals from a fault zone are being analyzed for kimberlite indicator minerals.
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