Saturday 18th November 2017

Resource Clips


Posts tagged ‘botswana’

Lucara Diamond scoops up $53 million for world’s largest uncut rough

September 25th, 2017

by Greg Klein | September 25, 2017

The second-largest gem-quality diamond ever found now advances to “its next stage of evolution,” as Graff Diamonds takes on the 1,109-carat Lesedi La Rona. A company that modestly credits itself with fashioning “the most fabulous jewels in the world” plunked down $53 million for the product of Lucara Diamond’s (TSX:LUC) Karowe mine in Botswana, an ongoing source of record-sized rocks.

Lucara Diamond scoops up $53 million for world’s largest uncut rough

The Lesedi La Rona “will dictate how it
wants to be cut,” said buyer Laurence Graff.
(Photo: Donald Bowers/Getty Images for Sotheby’s)

Curiously, Lucara president/CEO William Lamb called the price “an improvement on the highest bid received at the Sotheby’s auction in June 2016.” That was when his company rejected a reported $61-million bid, hoping to haul in $70 million or more. Presumably the discrepancy results from what would have been the gavel-swinger’s piece of the action. As is usually the case for rough sales, the Graff transaction took place sans auction. By press time Lamb hadn’t responded to a ResourceClips.com inquiry.

Graff had previously paid the miner $17.5 million for a 373.72-carat shard that broke off Lesedi during the recovery process. With improved technology, Lucara and other companies hope to avoid such damage, making super-sized stones less uncommon.

The Lesedi sale amounts to $47,777 per carat, but falls short of a record for rough. In May 2016 Lucara got $63.11 million, or $77,649 per carat, for the 812.77-carat Constellation, another Karowe monster.

“The stone will tell us its story,” Laurence Graff said of his latest purchase. “It will dictate how it wants to be cut and we will take the utmost care to respect its exceptional properties.”

They’ll have to. Given the unique qualities of each stone, cutting and polishing can present heart-stopping challenges. But, since the time South Africa’s 3,106.75-carat Cullinan diamond was subdivided into nine components of Britain’s Crown Jewels, technology has improved the ability to both understand a rock’s properties and reshape it into brilliant bling.

But “why would you want to polish it?” Lamb reportedly had asked previously. According to a July 2017 Reuters story, he argued, “The stone in the rough form contains untold potential…. As soon as you polish it into one solution, everything else is gone.”

Lesedi has not only raised Karowe’s profile but influenced proposed legislation that would allow Botswana to purchase exceptionally large or unusual diamonds from its mines. Earlier this month Lucara stated its support for the plan, emphasizing that prices would reflect market values.

Read about the recently published Koh-i-Noor: The History of the World’s Most Infamous Diamond.

Of diamonds and dynasties

August 4th, 2017

A new marketing approach accompanies Alrosa’s new emphasis on polished stones

by Greg Klein

A new marketing approach accompanies Alrosa’s new emphasis on polished stones

The Dynasty Collection celebrates Alrosa’s revival of Russian jewelry craftsmanship.
(Photo: Alrosa)

 

Legendary diamonds have long been associated with imperial dynasties. Now, just as a new book promises to revive interest in the multi-empire story of the fabled Koh-i-Noor gem, Alrosa has unveiled a suite of five stones commemorating great families of old Russia. In doing so, the mining giant marks a new emphasis not just on extracting exceptional stones, but cutting and polishing them too. The company says it will use state-of-the-art techniques to revive traditions dating back to Peter I.

A near-second to De Beers as the world’s largest diamond miner by value, Alrosa’s overall strategy might be to broaden diamonds’ appeal beyond the maybe one (or two, or sometimes profligately multiple) life events that call for an engagement ring.

A new marketing approach accompanies Alrosa’s new emphasis on polished stones

(Photo: Alrosa)

The company’s new quintet started as a single 179-carat rough with a name that evokes grandeur, but also tragic decline and a horrific ending: The Romanovs. One and a half years in the making, the polished collection’s centrepiece is The Dynasty, a 51.38-carat traditional round brilliant-cut stone “unprecedented in the history of Russia” as the most expensive and purest of all large diamonds cut in the country.

The set’s other four gems recall wealthy dynasties “that played a crucial role in the development of Russian jewelry”: The Sheremetevs (16.67 carats), The Orlovs (5.05 carats), The Vorontsovs (1.73 carats) and The Yusupovs (1.39 carats).

The collection goes on sale online—take that Christie’s, Sotheby’s and U.S. sanctions—in November.

But there’s no association stronger than actual ownership, and in that regard the Koh-i-Noor might be the most esteemed of all diamonds. In a soon-to-be published book of the same name, authors William Dalrymple and Anita Anand track “the history of the world’s most infamous diamond.”

Here’s a rock that gained prominence in northern India’s 17th century Mughal dynasty, was pillaged by 18th century Persians and retrieved from the corpse of their assassinated ruler by Ahmad Shah, who wore the jewel himself while building the Durrani Empire of Afghanistan. His successors lost the gem, along with considerable territory, to Sikh emperor Ranjit Singh. The authors credit this early 19th century ruler with boosting the diamond’s prestige to an unprecedented level. Following his death and the Sikhs’ defeat at British hands, the victors ordered that the Koh-i-Noor “shall be surrendered by the Maharajah of Lahore to the Queen of England.”

Along with Cullinan I and Cullinan II, the world’s largest top-quality polished stones, the Koh-i-Noor takes its place in the Crown Jewels. Both India and Pakistan want it back.

The book’s publicist promises a saga of “greed, murder, torture, colonialism and appropriation.” But extracting the stones can come at a terrible cost too, and one doesn’t have to delve into history to realize that. Just days after Alrosa unveiled The Dynasty collection, the company reported nine miners missing after a flood at the Mir diamond mine in the far eastern Republic of Sakha.

A steady source of plus-sized rough, Sakha mines gave up gems of nearly 110 carats and 75 carats just last month and, last year, a 207.29-carat stone. The Romanovs was found there in 2015.

A new marketing approach accompanies Alrosa’s new emphasis on polished stones

The Tenner, a £10 flea market
find, sold for $848,000.
(Photo: Sotheby’s)

Size and weight aren’t everything, however, as the 1,109-carat Lesedi La Rona continues to demonstrate. Lucara Diamond TSX:LUC has yet to find a buyer after rejecting a $61-million bid last year for the “tennis ball-sized” Botswana diamond, the largest ever found after South Africa’s 3,106-carat Cullinan that’s since been subdivided and relocated to the Crown Jewels with the Koh-i-Noor. Last May Lucara did sell a piece of its original stone, estimated to have been about 1,500 carats, when cutter Graff Diamonds paid $17.5 million for a 373.72-carat shard that broke off during the mine recovery process.

Another super-sized non-seller is the 709-carat rough found by an artisanal miner in Sierra Leone. He entrusted it to the government, which rejected a $7.8-million bid that failed to meet the stone’s valuation.

But sometimes there’s amazing value to be found among the dross. Thirty years or so after a Brit paid 10 quid for a piece of second-hand “costume jewelry,” the owner got around to asking Sotheby’s for an appraisal. The verdict? “A genuine cushion-shaped diamond weighing 26.29 carats with an attractive colour grade of I and impressive clarity grade of VVS2.”

In dollar terms, that meant a price estimated up to about $450,000. In June the hammer came down on $848,000.

See an infographic about legendary diamonds.

World’s largest rough diamond fails to meet Lucara’s price expectations

June 29th, 2016

by Greg Klein | June 29, 2016

Dissatisfied with a reported $61-million bid, Lucara Diamond TSX:LUC declined to sell its 1,109-carat Lesedi La Rona stone. The company had hoped Sotheby’s June 29 London event would pull in $70 million or more.

The stone’s currently the largest gem-quality diamond in captivity and history’s second largest after the 3,106.75-carat Cullinan diamond. Found in 1905, Cullinan was cut and polished into nine gems for the Crown jewels and royal sceptre. Lucara took the unusual step of delegating the Lesedi La Rona sales job to an auctioneer, not standard procedure for rough. But a heavy promotional campaign failed to find a sufficiently astronomical price.

World’s largest rough diamond fails to meet Lucara’s price expectations

Despite its record size, as well as exceptional quality and
transparency, the Lesedi La Rona drew disappointing bids.
(Photo: Donald Bowers/Getty Images for Sotheby’s)

Yet the miner’s expectations might have been understandable. In May Lucara sold its 812.77-carat Constellation for $63.11 million, or $77,649 per carat, “the highest price ever achieved for a rough diamond,” the company stated. Lucara kept a 10% interest in Constellation’s sale after being cut and polished.

Exceptional cut-and-polished prices in recent months included the Blue Moon of Josephine which went for $48.4 million last March, then considered “a new record price for any gemstone and per carat.” Just one day earlier the same buyer paid $28.5 million for the 16.08-carat Sweet Josephine.

In April, however, Sotheby’s rejected a top bid of $22 million for the 9.54-carat Shirley Temple Blue diamond, having hoped for $25 million to $35 million.

Lucara’s recent record finds came from its Karowe mine in Botswana, aided by an improved recovery circuit. The two Josephines came from South Africa’s Cullinan mine, now operated by Petra Diamonds. That company’s most recent large find weighs in at 121.26 carats. It’s currently on tender.

Earlier this month ALROSA announced one of Russia’s biggest finds, a 241.21-carat rough that followed the previous month’s 207.29-carat stone, each from a different pipe at Yakutia in Siberia.

See an infographic: Six of the world’s most famous diamonds.

Sotheby’s imagines the Lesedi La Rona diamond outshining the legendary gems cut from the Cullinan stone

May 25th, 2016

…Read more

$58.25-million Oppenheimer Blue diamond sets new record polished price

May 18th, 2016

by Greg Klein | May 18, 2016

The gemnomaniacal super-rich continue to smash sales records as Christie’s pulled in $58.25 million for “the largest vivid blue diamond ever to come to auction.” The 14.62-carat Oppenheimer Blue easily surpassed the $48.4-million Blue Moon of Josephine, declared by Sotheby’s in November to be “a new record price for any gemstone and per carat.” Christie’s also beat its own pre-sale expectations of $38.9 million to $46.1 million for the Oppie. With more than 280 lots on the block, the May 18 event totalled $150.11 million.

$58.25-million Oppenheimer Blue diamond sets new record polished price

Rarity, beauty and the provenance of a former De Beers
boss all contributed to the Oppenheimer Blue’s historic price. (Photo: Christie’s)

Although relieved of some bragging rights, Sotheby’s didn’t do too badly either. The previous day, and also in Geneva, Christie’s rival got $32 million for the 15.38-carat Unique Pink, setting a record for a stone of its type, which in turn helped set “a new world record for any jewelry sale” with total auction proceeds of $175.1 million.

But for all the extraordinary cut-and-polished prices of recent months, Lucara Diamond TSX:LUC surpassed everyone with a 812.77-carat rough that raised $63.11 million last week. The Botswana miner hopes to get something like $70 million for a 1,109-carat rough which Sotheby’s puts on the block next month.

Humungous prices don’t, however, reflect the diamond market in general. The industry faces “a fragile recovery” following last year’s price slump, De Beers chief executive Philippe Mellier told the Financial Times. He added that “the market is not going to bounce back” as it did following the 2008 financial crisis.

But “my view is we have seen the market bottoming,” the FT quoted him, as rough and polished inventory levels are now “very close to normal and polished prices stabilized around December.”

Lucara gets $63 million for record rough diamond, expects even more next month

May 9th, 2016

by Greg Klein | May 9, 2016

The 812.77-carat sale had Lucara Diamond TSX:LUC bragging about “the highest price ever achieved for a rough diamond, breaking all records”—and the company has an even bigger stone going to auction next month. Lucara got $63.11 million, or $77,649 per carat, for the newly named Constellation, one of last November’s big finds from the Karowe mine in Botswana. The company retains a 10% interest in Constellation’s cut-and-polished profits.

Lucara gets $63 million for record rough diamond, hopes for even more next month

Sorters scrutinize some of the smaller
stones from Lucara’s Botswana operation.

Lucara’s record-breaking recovery, just days before Constellation, was the 1,109-carat Lesedi La Rona, from which Sotheby’s hopes to raise more than $70 million in London next month. As a gem-quality rough it ranks second in size only to the 3,106.75-carat Cullinan stone found in South Africa in 1905.

Cullinan was cut into nine polished gems, eight of them set into Britain’s Crown jewels. The ninth, the 530.2-carat Great Star of Africa, now resides in Queen Elizabeth II’s sceptre. It’s considered the world’s largest top-quality polished diamond but, Sotheby’s says, might lose that distinction to Lesedi La Rona.

But for that to happen, “a full complement of truly diamantine nerves will be required,” the auctioneer points out. “For while the art and craft of diamond-cutting—a meditative skill often passed down through generations—has radically improved since the Cullinan was cut, it is still through man’s ingenuity that the full beauty and light of a gem is revealed.”

Constellation bagged considerably more than the extraordinary cut-and-polished sales of recent months, including the $48.4-million Blue Moon of Josephine.

At a special tender of Karowe rough last month, Lucara flogged 10 diamonds totalling 1,525 carats for $51.3 million.

Last year Lucara attributed its historic finds partly to Karowe’s new XRT recovery circuit. The company planned to spend $15 million to $18 million to integrate an additional recovery process for exceptionally large gems.

See an infographic: Six of the world’s most famous diamonds.

Peregrine Diamonds releases CH-7 maiden resource, plans June PEA for Chidliak

May 5th, 2016

by Greg Klein | May 5, 2016

An initial resource for the CH-7 kimberlite brings the Chidliak project’s inferred total to a near-surface 15.62 million carats, Peregrine Diamonds TSX:PGD announced May 5. CH-7 shows 4.99 million tonnes averaging 0.85 carats per tonne for 4.23 million carats of diamonds inferred. Last month the company reported a 33% carat increase for Chidliak’s CH-6 pipe, 15 kilometres northwest, for an inferred 4.64 million tonnes averaging 2.45 c/t for 11.39 million carats.

Peregrine Diamonds releases CH-7 maiden resource, plans June PEA for Chidliak

Baffin Island’s not without challenges of climate and isolation.

The 513,249-hectare Chidliak project sits on Nunavut’s Baffin Island, about 120 kilometres from the territorial capital of Iqaluit. A preliminary economic assessment for Phase I operations remains on track for late June.

Both resources used a bottom cutoff of 1.18 millimetres. CH-7’s resource reaches only 240 metres in depth, while that of CH-6 bottoms out at 260 metres. Both kimberlites remain open at depth.

Last March Peregrine announced an Antwerp valuation of a 735.75-carat parcel of CH-7 stones showed a current average of $100 per carat, ranging from $73 to $154 per carat. The parcel’s modelled average was $114, ranging from $94 to $155. Modelled prices forecast amounts potentially obtained from a future mining operation. The independent study recommended $114 as CH-7’s base case valuation in the PEA.

The parcel’s eight largest diamonds ranged from 1.35 to 5.33 carats, with current average prices between $713 to $3,106 per carat.

A 2014 valuation for CH-6 showed an average $213 per carat and a modelled base case of $188, ranging from $162 to $236. The 1,013.5-carat parcel’s four largest gems weighed in at 8.87, 5.83, 4.62 and 4.11 carats, with respective prices of $4,076, $3,455, $2,900 and $2,633.

Peregrine holds three other projects in Nunavut, along with interests in Botswana and the Northwest Territories. The company’s 72.1%-owned DO-27 kimberlite in the NWT’s Lac de Gras camp holds a 2008 resource of 18.2 million carats indicated.

In January Peregrine pulled in $5.64 million from a rights offering announced at up to $7 million last November.

Diamondiferous territories

March 11th, 2016

Peregrine and Dominion weigh their optimism carat by carat

by Greg Klein

Peregrine and Dominion weigh their optimism carat by carat

Chidliak’s fly-in, fly-out camp overcomes challenges of climate and isolation.

 

Maybe this time this Friedland will get it right. His older brother Robert’s first foray into diamond exploration was, from the gemstone perspective, a monumental flop. Sure, the company stumbled on enough nickel, cobalt and copper to get a nice little $4.3-billion consolation prize for Voisey’s Bay. But as for finding and building a diamond mine, that might be up to younger brother Eric. He evidently sees an optimistic, fast-paced scenario for Peregrine Diamonds’ (TSX:PGD) Chidliak project in Nunavut.

Ironically, given the outcome of Friedland the elder’s search for Labrador diamonds, mineral exploration in the Chidliak area seems to have started with another company’s 1996-to-1997 search for a Voisey’s Bay-type deposit. But little else happened until 2005, when Peregrine and BHP Billiton Canada began regional reconnaissance.

Now 100% owner Peregrine continues to advance, announcing on March 8 a diamond valuation for Chidliak’s CH-7 kimberlite, which has a maiden resource slated for later this month. The project’s more advanced CH-6 pipe has an update underway for a resource that currently shows an inferred 3.32 million tonnes averaging 2.58 carats per tonne for 8.57 million carats.

Peregrine and Dominion weigh their optimism carat by carat

The CH-7 pipe’s first evaluation precedes
a maiden resource expected this month.

By June Peregrine expects to release a PEA looking at Phase I mining.

The evaluation for CH-7’s 735.75-carat parcel came to a current average price of $100 per carat but a base modelled average of $114 per carat. The Antwerp firm takes into consideration diamonds lost by breakage, using proprietary techniques to forecast average prices that could be achieved through actual production.

The sample’s top eight diamonds ranged from 1.35 to 5.33 carats, with current average prices ranging from $713 to $3,106 per carat. Last month analyst Paul Zimnisky forecast a 2016 global average of $92 per carat.

Most of the parcel came from a bulk sample of four CH-7 geological units that returned 0.88 carats per tonne, along with a mini-bulk sample previously taken from a surface trench.

Meanwhile Peregrine expresses expansive optimism in its “targets for further exploration,” the potential size of the CH-6 resource update and the June PEA. Of course the climate- and infrastructure-challenged Baffin Island location presents challenges. A roughly 150-kilometre flight connects Chidliak with the Nunavut capital of Iqaluit.

Other companies have passed up Chidliak. BHP sold Peregrine its 51% interest in 2011 for $9 million. De Beers dropped a JV option in 2013 after buying $2.5 million in shares, paying another $2.5 million and conducting its own summer exploration program. Even so, Peregrine’s largest shareholders include Ned Goodman’s Goodman Merchant Capital as well as Eric and Robert Friedland.

Peregrine holds three other projects in Nunavut, another in the Northwest Territories’ Lac de Gras region and four more in Botswana.

The same day Peregrine announced the CH-7 valuation, the world’s third-largest diamond producer by value released updated reserve and resource numbers for the NWT’s Diavik mine.

Dominion Diamond TSX:DDC reported 2015 output of 6.41 million carats from Diavik. Yet as of December 31, proven and probable reserves dipped only 500,000 carats to 52.8 million from the previous year. Indicated resources stayed even at one million carats, while the inferred category dropped from 8.3 million to five million.

Ten million of the proven carats come from Diavik’s A-21 pipe, which remains on schedule for open pit production in late 2018. Dominion holds 40% of Diavik and operates the mine, with Rio Tinto NYE:RIO holding the remainder.

At Dominion’s majority-held Ekati operation, the Sable pipe reached pre-feas last month and could begin open pit production in 2019.

The two NWT mines totalled over a billion dollars in sales last year. As of January 31, Ekati’s sales came to 2.38 million carats for $464.8 million, while Diavik sales reached 4.35 million carats for $639.25 million.

Read Chris Berry’s analysis of long-term diamond supply and demand.

End of a year-long ‘eternity’?

February 4th, 2016

Early signs hint at diamond recovery; meanwhile Canada plans additional supply

by Greg Klein

Coming from the company that commissioned the slogan “a diamond is forever,” Philippe Mellier’s remark sounded ironic. “It’s often been said that a week is a long time in politics,” the De Beers chief executive told customers in Botswana last month. “Well if that’s the case, then I think a year must represent an eternity in the diamond industry.” To be sure, 2015 must have been an eternity he’d like to forget, marking as it did the year demand went south, taking with it the accuracy of some previously bullish near-term forecasts. And now De Beers faces challenges from competitors as it tries to right the wrongs it’s been accused of.

Critics like industry player and commentator Martin Rapaport said De Beers put too much rough on the market last year and priced it too high, creating a surplus that manufacturers couldn’t afford. The company responded by cutting production and lowering rough prices by an estimated 7% to 10%. Mellier says that’s stabilized polished prices and in some cases improved them.

Early signs hint at diamond recovery, meanwhile Canada plans additional supply

The Rio/Dominion Diavik mine gains a fourth pipe when
A21 begins production, scheduled for the end of 2018.

Having previously called for Mellier’s resignation, Rapaport now credits him with “moving forward in the right direction.” But Rapaport accused the company of “messing up the supply side with unsustainable manipulations of the price and quantity of rough diamonds sold.”

Once a one-company cartel, De Beers used to manipulate the market any way it pleased. Although it’s still formidable with over 30% of the industry, any efforts to limit global supply would face challenges by other producers. Those are among the conclusions drawn by analyst Paul Zimnisky in a report released February 1.

After De Beers’ late 2015 production cuts, its output dropped 7% to 29 million carats for the year, Zimnisky stated. This year’s target comes to 26 million to 28 million carats. But ALROSA, with a similar market share, boosted 2015 production by 6% to 38 million carats. The company stockpiled about 22% of that total. ALROSA sees its production averaging about 40 million carats a year for the next decade.

Obviously the company expects buyers. As Chris Berry has noted, ALROSA foresees demand reaching a 5% cumulative annual growth rate up to 2024 while supply lags behind with a 1% CAGR.

Other challenges to De Beers would include Canada’s Dominion Diamond TSX:DDC. Its share in two Northwest Territories mines makes Dominion the world’s third-largest rough producer by value.

Last year Diavik, a 40/60 joint venture with Rio Tinto NYE:RIO, turned out 6.4 million carats, down 11.5% from 2014 due to processing plant pauses and the absence of stockpiled ore, Zimnisky reported. But the 10-million-carat A21, the mine’s fourth pipe, has production scheduled for late 2018.

Dominion also holds 88.9% of Ekati, which produced an estimated three million carats last year, a 6.3% decrease from 2014, Zimnisky added. The Misery Main pipe, with a reserve of 14 million carats, has production expected in H1 and would produce about four million carats this year. That would raise Ekati’s production by 70% to about 5.1 million carats in 2016.

The company also holds a 65.3% stake in the adjacent Buffer zone, which includes the Jay pipe with its 84.6-million-carat reserve. On February 1 Dominion announced the Mackenzie Valley Environmental Impact Review Board recommended the NWT approve Jay, which the company says could potentially extend Ekati’s lifespan at least 10 years beyond 2020.

Although De Beers shut down the NWT’s technically challenging Snap Lake mine last December, construction has reached 85% completion at Gahcho Kué, also in the NWT’s Lac de Gras region. A 51%/49% De Beers/Mountain Province Diamonds TSX:MPV JV that’s slated for H2 production, “the world’s largest and richest new diamond mine” would average about 4.5 million carats annually for an initial 12 years.

In Ontario, De Beers’ Victor mine has about five years left of its 12-year life. But Tango, a proposed extension now undergoing environmental review, could provide another seven years of operation. Production could potentially begin in 2018, the company says. Zimnisky reported 550,000 carats estimated for Victor this year.

Now five months ahead of schedule and $35.6 million under budget, Stornoway Diamond TSX:SWY expects its Renard project in Quebec to begin ore delivery by the end of September and commercial production by year-end. Output had previously been estimated at 1.6 million carats annually for 11 years. But revised guidance, mine life, reserves and other data should be released in Q2, the company announced on February 3.

If 2015 seemed tough to De Beers’ Mellier, his company showed signs of bouncing back this year. January rough sales surprised analysts by hitting about $540 million, Bloomberg reported February 2. As for De Beers’ Russian rival, “ALROSA extended its January diamond offering and is set to sell about double the amount originally planned,” the news agency stated, citing unconfirmed sources. They told Bloomberg ALROSA’s first sale of the year will likely bring in $450 million to $500 million without lowering prices as De Beers did.

RoughPrices.com credits De Beers, ALROSA, Rio and Dominion with well over 75% of world rough supply. “Polished, in contrast, is an extremely fragmented market.”

Read Paul Zimnisky’s report on global diamond mining.

Read Chris Berry’s analysis of longer-term supply and demand.

Casualty in Lac de Gras

December 4th, 2015

The NWT looks to Gahcho Kué diamonds as Snap Lake goes on care and maintenance

by Greg Klein

Bad news can have a way of sounding sudden, even when it’s not surprising. De Beers had publicly discussed Snap Lake’s possible closure last March and again just one day before the December 4 official announcement. It comes as the global giant revamps operations in response to faltering rough diamond prices.

The company’s first mine outside Africa and this country’s only fully underground diamond mine, Snap Lake is unique in Canada. The kimberlite “is a dyke that averages about 2.5 metres thick and slopes down beneath Snap Lake at an average of 12 degrees, making it challenging and complex to mine,” according to the company. It’s a fly-in/fly-out operation for all but six to eight weeks a year, when heavy equipment and supplies arrive via ice road.

The NWT looks to Gahcho Kué as Snap Lake goes on care and maintenance

“Even the gains made this year are not enough to overcome
the market conditions and put us in a profitable position,”
lamented De Beers Canada chief executive Kim Truter.
Photo: De Beers

De Beers said it “will evaluate market conditions over the next year to determine the potential of the ore body as a viable mine.” Its capacity was 1.4 million carats annually.

The company, owned 85% by Anglo American and 15% by Botswana, recently announced a number of restructuring moves. The same day as the Snap Lake announcement, Bloomberg cited anonymous insiders who said Anglo might cut this year’s dividend. While the company has been selling assets to raise money, Anglo might get as much as $10 billion if it sold its stake in De Beers, according to an HSBC note quoted by Bloomberg last month.

Also last month Dominion Diamond TSX:DDC reported an approximately 8% drop in rough prices this year. RoughPrices.com pegs the year-on-year decline at 18%. Rapaport Group chairperson Martin Rapaport has called on De Beers to slash rough prices another 30% to 50% and replace CEO/diamond newbie Philippe Mellier with an experienced diamantaire.

Rapaport’s news service predicted De Beers’ revenue will fall approximately 44% this year. The company that once ran the global diamond industry has missed out on the sector’s more sensational recent news, such as Lucara Diamond’s (TSX:LUC) announcement of the world’s second-largest diamond find. President/CEO William Lamb has said it might fetch more than $60 million. The stone came from Botswana’s Karowe project, in which De Beers sold its 70% stake to Lucara in 2009 for US$49 million.

The NWT looks to Gahcho Kué as Snap Lake goes on care and maintenance

The NWT’s Lac de Gras region hosts Snap Lake,
two remaining mines and mine-to-be Gahcho Kué.
Map: De Beers

Putting 434 people out of work immediately, Snap Lake’s closure deals a heavy blow to the Northwest Territories, now down to two mines with the October shutdown of the Cantung mine as operator North American Tungsten TSXV:NTC sought creditor protection.

Last year the three diamond mines provided 3,234 jobs, 47% of them going to northerners, and spent $979 million in purchasing, with $653 million on northern companies, according to figures from the NWT and Nunavut Chamber of Mines. Direct and indirect benefits contribute nearly 40% of the territory’s GDP, making diamonds the largest private sector contributor to the economy, the chamber added.

But Snap Lake contributed less than the other mines, with a total of 747 jobs and $182 million in purchasing. By comparison the Rio Tinto NYE:RIO/Dominion Diavik JV created 948 jobs and spent $332 million, while Dominion’s majority-held Ekati operation created 1,539 jobs and spent $465 million.

Still, chamber of mines executive director Tom Hoefer said, “We’re hoping that this kind of devastating action on our economy is something that will make governments take notice.” That would depend on the response from people elected federally in October and territorially in November. Among the NWT’s specific problems are the lack of infrastructure and high cost of living.

“The new federal government has spoken about investing directly in infrastructure, but that was a Canada-wide statement, so we need to see how that affects the North,” Hoefer said. “On the territorial government side, it’s pretty early to tell.” Of 19 MLAs elected, 11 are new to the legislature. Not formally aligned by party, the MLAs have yet to choose a premier or form a cabinet.

An optimistic development for both De Beers and the NWT would be Gahcho Kué, a JV with Mountain Province Diamonds TSX:MPV that’s scheduled for H2 2016 production. Heralded as “the world’s largest and richest new diamond mine,” it would more than make up for Snap Lake’s loss.

“Certainly having Gahcho Kué in the wings is a positive thing for us,” Hoefer acknowledged. But he’s waiting to see if guidance will be adjusted. “The other two mines are more resilient operations than Snap Lake, but they’re still facing the challenges of declining revenues, so what do you do about costs?”

Yet Canada might be the jurisdiction most likely to withstand the diamond downturn, according to analyst Paul Zimnisky. Speaking to Mining Weekly Online last month, he said Ekati and Diavik “are still quite profitable projects, even in a weaker price environment.” He suggested Dominion might pull in “$250 million in free cash flow next year and almost double that the following year, using what I would consider a conservative diamond price.”

Zimnisky also pointed out that financing’s fully in place for Gahcho Kué and Stornoway Diamond’s (TSX:SWY) Renard project in Quebec, slated to begin production late next year. With its Kennady North project surrounding Gahcho Kué on three sides, Kennady Diamonds TSXV:KDI expects its successful $48-million infusion to carry the company through 2017.

De Beers also runs the Victor mine in Ontario’s James Bay region. In February 2013 the company warned the mine could close if natives continued to block the ice road during the approximately 45-day period that trucks can reach the site.