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Canada undeterred by diamond downturn: Paul Zimnisky

by Greg Klein | November 24, 2015

The world’s third-largest diamond producer by value, Canada has two new mines under development and a busy exploration scene despite the gems’ price slump. Speaking to Mining Weekly Online, diamond authority Paul Zimnisky said this country appears to be the jurisdiction best-positioned to navigate the turbulence.

Canada undeterred by diamond downturn: Paul Zimnisky

Dominion Diamond’s majority-held Ekati mine endured
lower value per carat this year but is anticipated to increase
volume as the Misery main pipe comes online.

“Looking at the Northwest Territories’ Ekati and Diavik mines, for instance, they are still quite profitable projects, even in a weaker price environment,” he told deputy editor Henry Lazenby. “I think Dominion Diamond [TSX:DDC], which owns 89% of Ekati and 40% of Diavik, could generate almost $250 million in free cash flow next year and almost double that the following year, using what I would consider a conservative diamond price. The company’s market cap is only $750 million.”

On November 19, Dominion reported fiscal Q3 2016 sales of $145 million, down from $222.3 million the same period last year. The company attributed the drop to a “cautious market,” lower-value production from Ekati and an approximately 8% decline in rough prices this year. Still, Ekati’s Misery main pipe remains on schedule for fiscal Q1 2017 production.

Zimnisky also noted Canada’s two mines-to-be, the De Beers/Mountain Province Diamonds TSX:MPV Gahcho Kué joint venture in the NWT and Stornoway Diamond’s (TSX:SWY) Renard project in Quebec, stand fully financed despite the investment climate. Additionally, Kennady Diamonds TSXV:KDI closed a $48.12-million private placement last month, funding its Kennady North project to the end of 2017—“which, Zimnisky noted, was impressive relative to the company’s $130-million market capitalization.”

He added that Canada’s share of global output by value could increase from about 15% now to 25% by 2018, thanks to new mines in development and exploration activity on a number of fronts.

Despite the slump, diamonds continue to out-perform other minerals, Zimnisky pointed out. “If they aren’t already, I would expect the Rios and BHPs of the world to start actively looking at diamonds again as a way to diversify their portfolios,” he told Mining Weekly.

See an overview of Canadian diamond mines in operation or under development.

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