Monday 24th October 2016

Resource Clips

Posts tagged ‘angola’

Diamonds not forever

March 13th, 2015

The gems failed to enrich Zimbabwe and now its resources are running out

by Greg Klein

Zimbabwe’s vow to merge all the country’s diamond miners into one state-led entity follows reports that the country’s largest diamond-producing region has largely played out. The Marange fields, once considered the world’s biggest diamond-producing area by volume, has left Zimbabwe little if anything to show. Much blame has been directed at the government. Now that same government rationalizes its planned merger on the basis of transparency.

The mining minister’s announcement, reported by Reuters on March 12, gives companies until March 16 to respond. The idea had been discussed previously but was originally directed at six companies working in the Marange, where the government already holds a slightly better than 50% stake. The plan now encompasses every diamond miner in the country, including Rio Tinto’s NYE:RIO 78%-held Murowa mine.

The gems failed to enrich Zimbabwe and now its resources are running out

Earlier this month Zimbabwean finance minister Patrick Chinamasa told parliament he’s not expecting diamond revenue this year because, as stated, Marange’s resources are depleted and miners have no capacity to dig deeper. The journal added, “When the Marange diamonds were ‘discovered’ around 2005, then-mines minister Obert Mpofu claimed that Zimbabwe would earn $2 billion annually from the gems. Mpofu famously boasted that the country would never again need to beg for financial help.”

Yet Zimbabwe still depends on handouts from the West and China, which has invested widely in the country. Meanwhile accusations of corruption persist. In one example, president Robert Mugabe’s inner circle stands accused of “perhaps the biggest single plunder of diamonds the world has seen since Cecil Rhodes,” stated human rights watchdog Partnership Africa Canada in November 2012. “Conservative estimates place the losses due to illicit activity at over $2 billion since 2008.”

PAC noted Mpofu’s “unexplained wealth,” exhibited by a conservative estimate of $20 million in personal spending, mostly in cash, over the previous three years.

Accusations hardly stop there. Last July Mpofu tried to deflect charges of demanding a $10-million bribe from diamond miners by pointing out his accusers also faced charges—of defrauding the government of $2 billion, the Zimbabwe Herald reported.

After Chinamasa announced Marange’s depletion earlier this month, opposition critics again raised accusations of government corruption. Chinamasa didn’t deny the allegations, but offered a strange rationale. “Sanctions have caused corruption and other vices you are talking about,” quoted him. “Business is no longer done directly due to sanctions and for your own information these illegal measures were put on us not because of human rights violations but because we had taken back our land.”

The sanctions followed concerns from organizations like PAC, which called Zimbabwe and Angola “the main perpetrators of diamonds-related human rights abuses, as their governments have waged violent campaigns to control lucrative diamond fields.”

Nor did Zimbabwe do well after the EU lifted its embargo in 2013. Last September Belgian authorities confiscated Zimbabwean diamonds up for auction in Antwerp, following a $500-million suit by Amari Platinum Holdings over a cancelled mining concession. The following month diamond miners warned they would face “collapse” if Zimbabwe adds a new 15% dividend to their government payments.

Analyst Paul Zimnisky estimates 2013 Marange output at nearly 17 million carats. Pointing out that neither the government nor miners release production figures, he stated anecdotal evidence suggests this year’s production will fall to between six million and 10 million carats averaging a low $45 per carat. Continued U.S. sanctions, he stated, “has resulted in Marange diamonds trading at a discount to global market prices.”

As for the planned miners’ merger, it would come under a Zimbabwean government affiliate, Zimbabwe Mining Development Corp, “which has mining partnership agreements with quasi-private entities, most of which are thought to have ties with Zimbabwe ex-military and political officials,” Zimnisky added.

A diamond-rich neighbour has fared considerably better. Botswana took advantage of its resources to face up to the once-indomitable De Beers, taking a 15% share of the global giant. Through 50/50 joint ventures with De Beers, the country holds a bigger stake in its Botswana mines. The country won another historic victory when it persuaded De Beers to transfer its sorting and sales operations to the capital city of Gaborone. The move was part of a government goal to make the country a global “mines-to-market hub.”

De Beers credited diamonds with 25% of Botswana’s GDP in 2013 and 75% of exports that year. But in last November’s state of the nation address, President Seretse Khama Ian Khama called for greater diversification, warning that diamonds alone can’t sustain the economy, reported. Even so, “We will remain a leading global producer over the next three decades until at least 2050.”

Blood diamonds prominent as multi-billion-dollar Swiss Leaks scandal hits HSBC

February 9th, 2015

by Greg Klein | February 9, 2015

HSBC’s secret Swiss bank accounts facilitated billions of dollars in money laundering, tax evasion, fraud, arms trafficking and possibly terrorism, a team of investigative journalists reported February 8. Almost 2,000 of the account-holders are associated with the diamond industry.

The probe began in 2008 when a former HSBC employee handed files over to French tax authorities. After Le Monde got ahold of the info the paper turned to the International Consortium of Investigative Journalists, which assembled a team of over 140 reporters from 45 countries to “sift through the data from all angles.” Excerpts from their Swiss Leaks report were released February 8 and 9.

Their revelations have rich and famous—from celebrity athletes to politicians, and from rock stars to royalty—running for their spin doctors. Diamonds were central to several enormous crimes.

Diamonds have a long history of being linked to conflict and violence. The ease with which diamonds can be converted into tools of war, when not sourced responsibly, is astonishing.—Michael Gibb
of Global Witness

The report noted that the HSBC files “document huge sums of money controlled by dealers in diamonds who are known to have operated in war zones and sold gemstones to finance insurgencies that caused untold deaths.”

A co-founder of the Kimberley Process, Ian Smillie, told the ICIJ that “diamonds are a great way to launder money, to hide money, to evade taxes and all the rest.” Referring to wars financed by conflict diamonds, he added, “Half a million died in the Angolan civil war. Tens of thousands died in Sierra Leone, Congo and elsewhere. It was a huge humanitarian crisis that destabilized huge regions.”

One HSBC client, Emmanuel Shallop, got a six-year prison sentence and lost $59 million in diamonds and real estate to Belgian authorities in 2010 after being convicted of crimes related to blood diamonds from Sierra Leone.

“Diamonds have a long history of being linked to conflict and violence,” the report quoted Michael Gibb of the human rights group Global Witness. “The ease with which diamonds can be converted into tools of war, when not sourced responsibly, is astonishing.”

HSBC replied that it has “taken significant steps over the past several years to implement reforms and exit clients who did not meet strict new HSBC standards.” Its Swiss unit has shed about 70% of account-holders, the bank added.

Read more about the ICIJ Swiss Leaks report here and here.

Canadian mines increasingly important to world diamond supply

February 6th, 2015

by Greg Klein | February 6, 2015

As some of the world’s largest sources of diamonds become depleted, Canadian operations—both new and expanded—help prevent a decline in supply. This year’s global rough diamond output will increase about 3.3% over 2014 to produce approximately 135.5 million carats, according to estimates released by Paul Zimnisky on February 6. The independent consultant and diamond authority stated that the world’s 10 largest mines produce about 61% of global production. The top 54 mines produce 85%. The rest comes from small artisanal operations, mostly in Africa.

Canadian mines increasingly important to world diamond supply

With the 2016 opening of “the world’s largest and richest new diamond mine” on schedule, Gahcho Kué has helped spur an exploration
rush in the NWT’s Lac de Gras region.

Four recently opened mines will see their first full year of production in 2015, two in Russia and one each in Botswana and Angola. Three new mines have production planned this year, in Russia, South Africa and Botswana. The latter mine, operated by ASX-listed Kimberly Diamonds, will replace the company’s Ellendale mine in Australia, due to close in May.

Zimnisky sees Canadian production more than doubling over the next four years “driven by two new world-class mines coming online in 2016 and a new mine plan at [Dominion Diamond’s TSX:DDC] Ekati mine, which is estimated to increase production almost three-fold to six million carats annually by 2018.”

Located in the Northwest Territories’ Lac de Gras region, Ekati had been facing a 2020 shutdown. But late last month Dominion released a prefeasibility study for the project’s Jay pipe, which would add 11 years to the mine’s lifespan.

Two upcoming Canadian operations make Zimnisky’s list of the “most anticipated” mines-to-be. Gahcho Kué, also in Lac de Gras, remains on track for H2 2016 production, Zimnisky stated. Production estimates for the De Beers/Mountain Province Diamonds TSX:MPV joint venture total 53.4 million carats over a 12-year life. At an estimated $150 per carat, that “would make it one of the world’s top-10 largest diamond mines by value produced.” Zimnisky estimates global prices to average $103 per carat in 2015, down about 2% from last year.

In north-central Quebec, Stornoway Diamond’s (TSX:SWY) Renard project has production slated for H2 2017, Zimnisky stated, “with annual production estimated to reach 1.7 million carats annually at an estimated $180 per carat.”

Other major projects coming into operation would be Firestone Diamonds’ Liqhobong mine in Lesotho, planned for Q2 2016 production and estimated to produce up to a million carats annually at $125 per carat. “At the moment, Liqhobong is the only new mine in development outside of Canada and Russia estimated to produce at least one million carats annually.”

Rio Tinto’s (NYSE:RIO) Bunder project in India might begin operation by 2018. “Initial production profiles show Bunder producing 700,000 carats annually, from a resource of 27 million carats.”

In Russia’s far east republic of Sakha, ALROSA’s Verkhne-Munskoe project holds an estimated 40 million carats and could turn out a million carats annually by the end of the decade.

Back in the NWT’s Lac de Gras region, forecasts see the Rio/Dominion Diavik mine becoming the world’s fourth-largest by value this year, producing 6.1 million carats at $115 per carat. Another Lac de Gras current producer, De Beers’ Snap Lake has 1.2 million carats estimated for this year at $105 per carat.

Now the focus of renewed exploration activity, the Lac de Gras region alone ranks third for global diamond production by value.

De Beers, meanwhile, stands out as a top performer in the diversified holdings of Anglo American, which owns 85% of the vertically integrated diamond company. This week The Australian stated Anglo “risks a downgrade to ‘junk’ status as it faces billions of dollars of write-downs and plunging profits as commodity prices tumble.”

Zimnisky sees diamond prices rising steadily from this year’s forecast of $103 per carat to $120 in 2019, then dipping slightly the following year.

A report issued last December by Bain & Company and the Antwerp World Diamond Centre forecast rough diamond demand growing between 4% and 5% up to 2024. Supply projections, on the other hand, see only 3.5% to 4% growth up to 2019, then 1.5% to 2% for the next five years.

Read more about diamond supply and demand.

Diamonds in demand

September 17th, 2014

Supply can’t keep up so the quest continues for new deposits, says De Beers

by Greg Klein

Growing diamond demand “will almost certainly outstrip growth in carat production, given the lack of major new discoveries in the last decade and the projected slowdown in several existing mines.” That’s among the findings of the first annual Diamond Insight Report released September 17 by De Beers, the global giant of the gem’s mining and vertical integration. A moderate increase in supply will fail to match demand up to 2020. Then, “unless major new discoveries are made in the coming years, supply can be expected to decline gradually.”

Between 2008 and 2013, consumer demand for polished diamonds rose nearly 5% in compound annual growth, driven largely by China, India and the U.S., according to De Beers. The company estimates last year’s rough diamond production at 146 million carats globally, representing a 7% increase in volume over 2012 and a 3% rise in value to US$18 billion. Even so, volume fell far below the 2005 peak, which surpassed 176 million carats.

Supply can’t keep up so the quest continues for new deposits, says De Beers

Not surprisingly, exploration spending “is expected to remain high as the chase to find the next major source of diamonds intensifies,” the report states. Most diamond exploration now takes place “in historically underexplored African countries such as Angola, the Democratic Republic of Congo and Zimbabwe, as well as the vast swaths of arctic Siberia and Canada.”

Yet exploration for diamonds hasn’t kept pace with that of other natural resources, De Beers maintains. Although last year’s global spending hit 250% above the 2001 figures, that amount fell to “practically half the record levels seen in 2007, when the industry was spending almost US$1 billion per year on diamond exploration.”

“The trend here differs from the mining sector in general, where 2013 expenditure, although lower than in 2012, remains well above 2007/2008 levels.”

If there are more of the really big Tier 1 deposits to be found, they remain elusive. The world has only seven such mines currently. The largest of eight projects coming onstream has a relatively modest peak production estimate of five million carats a year. That’s the De Beers/Mountain Province Diamonds TSX:MPV Gahcho Kué joint venture in the Northwest Territories’ Lac de Gras region. Just one other projected operation, the Grib mine in Russia, comes close with an estimated four million carats annually. The other six, in Canada, Russia, India and Botswana, have estimates ranging from two million carats per year down to 400,000 carats.

But the report cautions that “no amount of investment in exploration guarantees the discovery of deposits on which sustainable mining operations can be built.” Furthermore new discoveries take considerable time to move into production. “From 1950 to today, it took an average of 14 years between the discovery of a diamond deposit and the start of production.” More recently, that timeline has been expanding. Gahcho Kué, slated to begin operations in 2016, was discovered in 1995.

Exploration will likely focus on “those areas where the prospectivity potential is highest and where the least exploration has been conducted to date, such as central Africa, Russia and Canada.” Additional carats might still be found in South Africa and Zimbabwe, despite their long histories of diamond mining, thanks to advances in geophysical technology.

The challenges of discovery and development “in some of the world’s most inhospitable places are astonishing feats of engineering and human ingenuity.” De Beers, active in both the NWT’s Gahcho Kué development project and Snap Lake mine, ranks the Canadian sub-Arctic among the world’s “more hostile natural environments.” But it’s also “home to some of the largest recent developments of diamond mines.”

[Diamond exploration will likely focus on] those areas where the prospectivity potential is highest and where the least exploration has been conducted to date, such as central Africa, Russia and Canada.—De Beers’ Diamond Insight Report 2014

“Such operations are inherently more complex to run and involve greater infrastructure investments,” the report continues. “Miners go to extraordinary lengths to bring diamonds to market. This has always been the case and supply will continue to increase as demand grows. However, this cannot happen without substantial effort and investment. The cost and complexity of mining diamonds will continue to increase, and diamonds will remain one of the most coveted of earth’s products.”

Apart from Snap Lake, Canada’s sub-Arctic hosts the Ekati mine (majority-held by Dominion Diamond TSX:DDC) and Diavik (Rio Tinto NYE:RIO/Dominion). All three mines, as well as Gahcho Kué, lie within the NWT’s Lac de Gras region, the site of substantial junior exploration activity.

De Beers also runs the Victor mine in northern Ontario as well as operations in Botswana, Namibia and South Africa. Last year the company, once a cartel that controlled most of the global diamond industry, handled 33% of the world’s rough diamond sales by value.

De Beers’ supply/demand forecasts generally echo Bain & Company’s Global Diamond Report 2013, which estimated supply growth of 2% annually for 10 years contrasting with demand growth of 5.1% as “existing mines get depleted and no major new deposits come online.”

Download the Diamond Insight Report 2014.

Alberta most attractive mining destination in Canada, third worldwide

March 3rd, 2014

by Cecilia Jamasmie | March 3, 2014 | Reprinted by permission of

Alberta most attractive mining destination in Canada, third worldwide

Oilsands development in northern Alberta.


For the second consecutive year, Alberta—home to the booming and controversial oilsands industry—ranked first in the country and third worldwide as the most attractive jurisdiction for mining investors in the Fraser Institute’s annual global survey of mining executives.

The study, released March 3 as the Prospectors and Developers Association of Canada convention kicked off in Toronto, is based on input from 690 mineral exploration and development company executives.

Sweden and Finland scored the top places in this year’s survey, which spotlighted 112 jurisdictions worldwide. Kyrgyzstan and Venezuela were named the worst two countries to venture.

“Miners praise Alberta for its transparent and productive approach to mining policy. The province offers competitive taxation regimes, sound legal systems and relatively low uncertainty around land claims. That’s what miners look for,” said Kenneth Green, Fraser Institute senior director of energy and natural resources.

Two other Canadian jurisdictions—New Brunswick (7), and Newfoundland and Labrador (9)—ranked in the top 10 worldwide, followed by Saskatchewan (12), Yukon (19), Quebec (21), Manitoba (26), Ontario (28), Nova Scotia (29), British Columbia (32), Nunavut (44) and the Northwest Territories (47).

Quebec, once the darling of mining investors, continued to fall down the rabbit hole. From 2007 to 2009, the French-speaking district topped the survey, then dropped to fifth in 2011, 11th in 2012 and finally 21st worldwide in 2013, due in part to amendments to Quebec’s mining act and recent tax policy changes.

“If Quebec wants to renew confidence in the global mining sector, it should reduce red tape, minimize the risk associated with policy changes and tax increases, and respect negotiated contracts,” Green said.

B.C. dropped to 32nd from 31st in 2012, though the survey recorded improved perceptions regarding the western province’s political stability and availability of labour and skills.

The Canadian public policy think tank also identified the 10 places mining enthusiasts should avoid. From the bottom, they are Kyrgyzstan, Venezuela, Philippines, Argentina (La Rioja and Mendoza), Angola, Zimbabwe, Ivory Coast, Indonesia and Madagascar.

Reprinted by permission of