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Rio Tinto sets Diavik’s fourth pipe for 2018 production, Dominion Diamond reports

by Greg Klein | November 26, 2014

Rio Tinto NYE:RIO boss Sam Walsh hinted the announcement would be made next year. But the news came out in a November 26 announcement from Dominion Diamond TSX:DDC: The Diavik mine’s fourth kimberlite pipe should start production in late 2018.

Rio Tinto sets Diavik’s fourth pipe for 2018 production, Dominion Diamond reports

A fourth pipe will help the NWT’s Diavik
mine maintain diamond production.

One of four pipes discovered in the mid-1990s, A-21 got the go-ahead from project operator and 60% owner Rio. Dominion holds a 40% stake in the mine. The latter company will pay US$140 million of an estimated US$350-million capex.

The first equipment should arrive onsite via ice road early in the new year. Four years of dike construction and pre-stripping for the lake-covered deposit are expected to be followed by about five years of open pit mining.

A-21 will ensure “continuation of existing production levels,” Dominion stated. The company has said Diavik’s reserves can last at least until 2022.

The pipe has a December 2013 resource showing:

  • measured: 3.6 million tonnes averaging 2.8 carats per tonne

  • indicated: 400,000 tonnes averaging 2.6 carats per tonne

Rio estimates the pipe will average $145 per carat. Different sources estimate world average prices for rough diamonds between about $100 and $120 per carat. Diavik’s updated resource and reserve estimates are scheduled for Q1 next year.

A fiscal Q3 production and sales report issued November 20 showed the company’s 40% share of Diavik production came to 589,000 carats, down from 727,000 for the same three-month period last year. Blame was pinned on a lower proportion of high-grade ore being mined.

At the company’s 88.9%-held Ekati mine, however, higher-than-expected grades increased total production to 975,000 carats, from 609,000 in last year’s Q3.

Dominion’s 40% share of Diavik sales came to $80.4 million, at an average of $115.50 per carat. Ekati’s total sales came to $141.9 million, averaging $309.80 per carat. Combined, the loot came to $222.3 million, over 50% more than last Q3’s $148.1 million.

Both mines are in the Northwest Territories’ Lac de Gras region, also home to De Beers’ Snap Lake mine and the De Beers/Mountain Province Diamonds TSX:MPV Gahcho Kué joint venture, scheduled to open in 2016. The NWT region ranks third in global diamond production by value.

Read about diamond supply and demand.

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