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Dominion increases its Ekati stake, Canada to more than double diamond production

by Greg Klein | October 15, 2014

The world’s third-largest diamond producer by value just got bigger and a world-renown diamond explorer just got richer. Dominion Diamond TSX:DDC announced October 15 it had completed its acquisition of Chuck Fipke’s remaining interest in Ekati, the mine he discovered. In July Dominion stated Fipke’s entire stake would fetch US$67 million. But with co-discoverer Stewart Blusson and Archon Minerals TSXV:ACS exercising their right to pick up a proportionate share, Dominion now pays Fipke a total of $55.4 million.

Dominion increases its Ekati stake, Canada to more than double diamond production

After sorting and pricing its rough diamonds, Dominion
sells them in Antwerp, Belgium and Mumbai, India.

In return the company increases its previous 80% interest in Ekati’s Core zone, which includes the mine and other permitted kimberlite pipes, to 88.889%. Dominion also gets an additional 6.53% of the Buffer zone, which hosts pipes with development and exploration potential, for a total of 65.3%. Blusson now holds the remainder of Core, while Archon holds the rest of Buffer.

Fipke got $27.55 million from Dominion on closing, with the rest to come through instalments. The company may issue him shares to cover one or more instalments.

Dominion also holds a 40% interest in the nearby Diavik mine, which is operated by 60% owner Rio Tinto NYE:RIO.

For production by value, Dominion is the world’s third-largest company and Canada the third-largest country. Even if De Beers’ Victor mine in Ontario were excluded, the three mines of the Northwest Territories’ Lac de Gras region would retain the global third-place standing.

One day before Dominion’s announcement, diamond authority Paul Zimnisky stated Canada’s production would more than double within four years. While this country currently extracts about 14.2% of the planet’s supply by value, two new mines “are estimated to boost Canada’s global market share to 25.2% in value and 15.1% in volume by 2018,” he wrote. That would “give Canada the highest compound annual growth rate of production (20.2% in value and 17.4% in volume) among the world’s eight largest diamond-producing nations over the next four years.”

Only three large-scale mines are projected to open outside Canada during that period, Zimnisky added. None of them are expected to match production from either of the upcoming Canadian mines, De Beers’/Mountain Province Diamonds’ (TSX:MPV) Gahcho Kué in Lac de Gras and Stornoway Diamond’s (TSX:SWY) Renard project in Quebec. Meanwhile “some of the largest mines in the world are reaching exhaustion,” Zimnisky pointed out.

Apart from the new mines, Canadian diamond exploration has seen considerable new activity, especially in Lac de Gras.

Read more about Dominion Diamond.

Read more about Canadian diamond exploration.

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