Friday 19th April 2019

Resource Clips


Posts tagged ‘Dominion Diamond Corp (DDC)’

Arctic Star and North Arrow announce drilling at Redemption diamond project

March 22nd, 2016

by Greg Klein | March 22, 2016

Located in the Northwest Territories’ diamondiferous Lac de Gras region, the Redemption project now has ground geophysics and drilling underway. Announced March 22 by Arctic Star Exploration TSXV:ADD and North Arrow Minerals TSXV:NAR, the program calls for a week of geophysics, while the rig’s expected to be busy until late April. The companies hope to find the source of the South Coppermine indicator mineral train.

Arctic Star and North Arrow announce drilling at Redemption diamond project

Angular and coated grains among the indicator
minerals suggest a shorter distance to their source.

Previous work has included electromagnetics, gravity and sonar surveys, as well as 350 till samples. Diamonds have been found among the indicator minerals. Other encouraging signs include pyropes with high chrome, ilmenite, chromite and eclogitic garnet. Angular stones, as opposed to smoother shapes, suggest shorter transport from the source.

Redemption lies about 32 kilometres southwest and 47 kilometres west of the NWT’s two currently operating diamond mines, Dominion Diamond’s (TSX:DDC) majority-held Ekati and the Dominion/Rio Tinto NYSE:RIO 40%/60% JV at Diavik. North Arrow funds the Redemption program and acts as operator under a 55% earn-in which would require $5 million of work by July 1, 2017.

North Arrow’s portfolio includes a majority stake in the Pikoo diamond project in Saskatchewan, where drilling began last month. Arctic Star also holds the T-Rex and Triceratops kimberlite clusters northwest of Ekati, and the Stein property in Nunavut.

See Chris Berry’s research report on long-term diamond demand.

Mining’s intangibles

March 18th, 2016

The NWT tries to gauge social impacts of its largest industry

by Greg Klein

Does diamond mining affect rates of STDs? Tuberculosis, family violence, teen pregnancy or suicide? The Northwest Territories government actually tried to find answers to those questions and others. An exercise that arose out of socio-economic agreements with the territory’s diamond miners, many of its results were—not surprisingly—inconclusive. Even so, the report offers perspective on mining-related issues that are often overlooked.

Two diamond operations comprise the sum total of NWT mining now that a third, De Beers’ Snap Lake, went on care and maintenance last December. That shutdown followed North American Tungsten’s (TSXV:NTC) C&M decision for its Cantung mine. But during the last fiscal year, the three diamond mines paid taxes of $44 million to the territory, an 11% increase over the previous year. Miners also pay the territory royalties.

Up to 2013 the territory diverted $39 million in diamond royalties to three native governments with settled land claims, according to figures supplied by the NWT and Nunavut Chamber of Mines. In 2015, the NWT shared nearly $6.3 million with nine native groups that signed the devolution agreement. The territory says it collected $63 million in diamond royalties in 2014 to 2015, half of which went to the feds.

In 2014 diamond mines created over 3,200 person-years of employment and paid more than $653 million to northern businesses, about 33% of which were aboriginal-owned.

Those outcomes can be quantified. What’s harder to assess are changes for better or worse on individuals, communities and culture since diamond mining started in 1998. Nevertheless, the NWT tried, looking at a range of factors affecting Yellowknife and seven small communities, all roughly 250 kilometres southwest of the Lac de Gras diamond camp.

We read about the use of aboriginal languages (declining in the smaller communities but showing a slight increase in Yellowknife and elsewhere), suicide (especially difficult to track on numerical trends), teen births (declining), sexually transmitted infections (increasing in the smaller communities but not Yellowknife), TB (little change), family violence (a series of spikes and declines in the smaller communities, relatively flat in Yellowknife), school achievement (significant improvement) and so on. Again and again, the report concedes that it can’t link those issues with mining.

So what’s the point of the study? If anything, it demonstrates that communities expect mining to provide intangible benefits as well as material rewards. Those communities also show concern about how a large industrial operation might affect their society. Although mining’s by far the territorial economy’s largest private sector driver, companies can’t betray complacency about their importance.

That too was demonstrated by statements miners made during their environmental assessments. In addition to singing the praises of their proposals, companies acknowledged potential disadvantages, for example the possibility of “increasing stress and related alcohol abuse, by alienating people from traditional lifestyles and by increasing the pace of change in communities.”

That comment came from BHP Billiton, which later sold its share of Canada’s first diamond mine to Dominion Diamond TSX:DDC. Holding a majority stake in Ekati and 40% of a JV with Rio Tinto NYE:RIO in Diavik, the company looms large over NWT mining. With pre-feas complete on Ekati’s Sable kimberlite, the pipe’s scheduled to begin mine construction next year and possible production in 2019. Diavik’s fourth pipe, meanwhile, has production slated for 2018.

But the biggest diamond development story in the NWT, and indeed the world, is Gahcho Kué. The 51%/49% De Beers/Mountain Province Diamonds TSX:MPV JV has surpassed 87% completion, staying on schedule for production in H2 this year. Barring a drastic decline in demand, diamonds will likely remain the jewels of the NWT economy.

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.

Dominion Diamond completes Sable pre-feas, construction to begin next year

February 22nd, 2016

by Greg Klein | February 22, 2016

Now boasting a 10.1-million-carat reserve, Dominion Diamond’s (TSX:DDC) Sable pipe could begin production in 2019 and continue to 2027, helping keep the company’s Ekati plant at full capacity until 2033. Dominion released pre-feasibility highlights on February 22 for an open pit 17 kilometres north of Ekati’s existing infrastructure in the Northwest Territories’ Lac de Gras region.

Dominion Diamond completes Sable pre-feas, construction to begin next year

Dominion holds an 88.9% interest in Ekati’s Core zone, which includes Sable. The company has a 65.3% stake in the adjacent Buffer zone and its Jay pipe, with Archon Minerals TSXV:ACS holding the remaining 34.7%. Jay’s January 2015 pre-feas envisioned that pipe as a standalone operation. But in September Dominion decided to defer Jay production to give Sable higher priority.

Using a one-millimetre cutoff, Sable’s pre-feas shows a probable reserve of 12 million tonnes averaging 0.8 carats per tonne for 10.1 million carats.

The resource estimate used a 0.5-millimetre cutoff, with rounded numbers showing:

  • indicated: 15.4 million tonnes averaging 0.9 ct/t for 14 million carats

  • inferred: 300,000 tonnes averaging 0.9 ct/t for 300,000 carats

The study provides all dollar amounts in U.S. currency based on a 2015 exchange rate of C$1.33. With a 7% discount rate, Dominion’s share of the post-tax net present value comes to $137 million and the post-tax internal rate of return comes to 16.2%. The study assumed a base case diamond price of $140, $50 less than last September’s PEA. The lower price results from a re-evaluation of size frequency and price per size, weaker diamond prices and additional recovery of smaller stones, Dominion stated.

Total capital expenditures would reach $55 million in fiscal 2017, $72 million in 2018 and $15 million in 2019, with another $85 million for pre-stripping, which would mostly take place in 2019.

The company plans to begin building the fully permitted mine in fiscal 2017 without a full feasibility study. Production would begin in 2019. Dominion stated it “plans to re-evaluate and further optimize the Sable mining and processing schedule based on the results of the Jay feasibility study, which is currently underway.” Jay’s probable reserve contains 84.6 million carats.

The company has previously stated that Jay could potentially extend Ekati’s mining life by at least 10 years beyond 2020. Ekati’s Misery Main pipe, with a reserve of 14 million carats, has production scheduled to begin in H1.

The world’s third-largest rough producer by value, Dominion also holds the smaller portion of a 40/60 joint venture with Rio Tinto NYE:RIO in Diavik, another Lac de Gras operation. The mine’s fourth pipe, the 10-million-carat A21, has production scheduled for H2 2018.

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

Read Paul Zimnisky’s report on global diamond mining.

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.

Rio Tinto unveils a record rock from NWT’s Diavik diamond mine

December 2nd, 2015

by Greg Klein | December 2, 2015

 

Rio Tinto NYE:RIO calls it “one of the largest diamonds ever discovered in Canada.” But could it be the largest? Either way, the rock made its public debut at no less a venue than Kensington Palace, Rio announced December 2. Christened the Diavik Foxfire, and also going by the indigenous name Noi?eh Kwe, the 187.7-carat gem-quality rough surfaced at Diavik, the Northwest Territories joint venture of Rio and Dominion Diamond TSX:DDC.

At two billion years of age, “its ancient beginnings, together with the fortitude, finesse and innovative technology required to unearth a diamond in the challenging sub-arctic environment, make it a true miracle of nature,” enthused Jean-Marc Lieberherr, managing director of Rio’s diamonds division.

Referring to the indigenous name, Tlicho Grand Chief Edward Erasmus said, “I am very pleased that this has been named to honour the area of the caribou crossing, as this has been important to the Tlicho since time immemorial.”

Rio Tinto unveils a record rock from the Diavik diamond mine

The Diavik Foxfire, also known as Noi?eh Kwe.

Following its London presentation the stone returns to Antwerp for “careful assessment and planning for the next stage of its journey,” Rio stated. The rock will likely “yield at least one very large polished diamond with its ultimate destiny in an exclusive heirloom piece of jewelry.”

The stone surpasses a 182-carat rough from another NWT mine, Ekati, that didn’t meet gem quality. Dominion, now the mine’s majority owner, refers to the 78-carat Ekati Spirit as the project’s most significant find. The rough stone sold in 2011 for $6.1 million.

Perhaps with pride clouding accuracy, last September Birks claimed its 15.1-carat, $3.69-million North Star cut-and-polished jewel originated from the largest diamond found in Canada, a 55.07-carat rough from Diavik.

The past few months have seen outstanding numbers in rough sizes and cut-and-polished sales globally. In November the $48.4-million Blue Moon brought Sotheby’s “a new record price for any gemstone and per carat.” The previous day Christie’s auctioned a 16.08-carat diamond ring for $28.5 million.

Also last month, Lucara Diamond TSX:LUC announced the find of a century, a 1,111-carat stone from the Karowe mine in Botswana that’s surpassed only by the 3,106-carat Cullinan stone which now forms part of the British Crown jewels. Within days Lucara announced 813-carat and 374-carat discoveries, with weights subject to change when the stones are cleaned.

Canada undeterred by diamond downturn: Paul Zimnisky

November 24th, 2015

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.

Sotheby’s sets new records as the Blue Moon diamond gets $48.4 million

November 11th, 2015

by Greg Klein | November 11, 2015

The Blue Moon netted less than the seller’s highest hopes but still set “a new record price for any gemstone and per carat,” Sotheby’s Geneva showroom heard. And, one day after Christie’s auctioned a pink diamond for $28.5 million, the anonymous buyer sparked speculation. In each case the purchaser was described only as being from Hong Kong, Reuters reported. He, she or they promptly named the first Sweet Josephine and the second Blue Moon of Josephine.

Blue Moon diamond sets new records with $48.4-million price

The Blue Moon before and after: A master cutter hacked
away more than half the size to nearly double the value.

The blue’s price fell in the mid-range of an anticipated $35 million to $55 million. Christie’s pink got over half a million more than its highest anticipated price and nearly tripled the auctioneer’s past pink record of $10.77 million set in 2009. But in 2010, Sotheby’s sold a 24.78-carat pink for $46 million.

The 12.03-carat, internally flawless Blue Moon, described as one of the world’s rarest gems, features a fancy vivid hue that the Gemological Institute of America said “might be so unique as to be indescribable.”

Dug up in January 2014 at South Africa’s fabled Cullinan mine, the Blue Moon’s 29.6-carat rough original sold the following month for $25.6 million. The stone underwent five months of scrutiny by a team of experts before a design was chosen, then three months of artistry by a master cutter.

Cullinan was a 1902 discovery so rich that it threatened De Beers’ hegemony until the giant took over the mine in 1914. Petra Diamonds has operated it since 2008. Cullinan boasts of being the only reliably conflict-free source of blue diamonds.

Sotheby’s sets new records as Blue Moon diamond gets $48.4 million

Ultraviolet light exposes the Blue Moon of
Josephine’s red phosphorescence, “another
extremely rare and fascinating feature of
this diamond,” Sotheby’s noted.

It’s also known for its progeny of other stones of exceptional quality and size. At 3,106 carats, the mine’s namesake Cullinan diamond was the largest rough gem ever recovered. Cut into two magnificent pieces, the Great Star of Africa and the Second Star of Africa, the stone provided the two largest diamonds in the British crown jewels.

Since 1904 the mine has produced nearly 800 stones greater than 100 carats and over a quarter of the world’s diamonds above 400 carats.

Although Canadian rough generally fetches sums well above the global average, the prices and sizes are dwarfed by the most ostentatious bling. Last September Birks offered for sale a $3.69-million, 15.1-carat stone that it called the “largest diamond ever mined in Canada.” That gem originated as a 55.07-carat rough from the Rio Tinto NYE:RIO/Dominion Diamond TSX:DDC Diavik joint venture in the Northwest Territories. But in 2011 BHP Billiton NYE:BHP auctioned the Ekati mine’s 78-carat rough Ekati Spirit for $6.1 million. Dominion, now the mine’s majority owner, calls that stone Ekati’s most significant find. The mine has also coughed up a 182-carat rough that fell short of gem quality.

Diamonds haven’t been the only luxuries attracting the super rich in recent days. On November 9 Christie’s sold Modigliani’s Reclining Nude to a Chinese billionaire couple for $170.4 million, “the second-highest price ever achieved at auction for a work of art,” the Guardian reported. Another Christie’s art auction the following night brought an additional $331.8 million, according to the Wall Street Journal. Two days later Sotheby’s was to put more art under the hammer, including an Andy Warhol silkscreen and a Cy Twombly painting with pre-sale estimates of $40 million and over $60 million respectively.

Read about Christie’s Sweet Josephine auction.

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

Diamond prices down but 2016 could bring improvement, says Zimnisky

November 6th, 2015

by Greg Klein | November 6, 2015

While weak sales, high inventories and lagging prices hit the diamond industry this year, production cutbacks and the possibility of a strong holiday season might reverse the decline next year, according to Paul Zimnisky. The independent consultant and diamond authority’s latest report notes relatively healthy demand growth in the U.S., still the world’s largest diamond market. But growth in China and elsewhere fell short of anticipation.

Diamond prices down but 2016 could bring improvement, says Zimnisky

Despite this year’s price slump, ALROSA increased rough inventory
20% YTD as of September. (Photo: ALROSA website)

Miners responded in different ways, Zimnisky reported. While De Beers and Rio Tinto NYE:RIO cut production, ALROSA expects a 5% increase in carats over last year. Like De Beers, the Russian company lowered prices but ALROSA has been building inventory too.

Although Rio plans to suspend operations at its Argyle mine in Western Australia in Q4, its Diavik joint venture in the Northwest Territories has seen this year’s guidance increased from 6.7 million carats to 6.8 million.

In the same Lac de Gras region, Rio’s JV partner Dominion Diamond TSX:DDC also holds the Ekati mine, making Dominion the world’s fourth-largest diamond seller. De Beers, ALROSA, Rio and Dominion produce well over 75% of the world’s rough diamonds, according to RoughPrices.com.

As for the fifth-largest producer, Petra Diamonds continues ramping up output despite this year’s disappointing sales, Zimnisky pointed out. The company plans to produce three million carats in 2015, up from two million in 2012, and expects five million by 2019.

Badly battered as the major miners’ stocks have been, Quebec producer-to-be Stornoway Diamond TSX:SWY stood out with a 26% YTD improvement.

In the short term, the industry looks hopefully to Diwali in November, then Christmas and, in February, the Chinese New Year. “A stronger than expected holiday season could clear out lighter than usual inventories, making for more aggressive buying in spring/summer of 2016 which, coinciding with less rough coming to market via De Beers, ALROSA and Rio, could mark a trajectory shift in prices,” Zimnisky stated.