Monday 24th October 2016

Resource Clips

Posts tagged ‘Mountain Province Diamonds Inc (MPV)’

Renard ceremony marks official opening of Quebec’s first diamond mine

October 19th, 2016

by Greg Klein | October 19, 2016

The event marked the “culmination of approximately 20 years of work to bring the Renard project from a greenfield exploration concept to a fully operating new diamond mine,” pointed out Stornoway Diamond TSX:SWY president/CEO Matt Manson. Quebec’s first diamond mine, and Canada’s second to celebrate a grand opening in less than two months, Renard remains on schedule for commercial production by year-end.

Among staff, stakeholders and community reps in attendance were Pierre Arcand, Quebec’s Minister of Energy and Natural Resources, and Chief Richard Shecapio of the Cree Nation of Mistissini.

Renard ceremony marks official opening of Quebec’s first diamond mine

The 20-year project opened well ahead of schedule, having beat its target dates several times. Plant commissioning began in June, eight weeks ahead of a revised schedule that was already five months ahead of a previously projected timeline. Ore processing began in July and went through 91,010 tonnes by September 30, producing 111,556 carats, averaging 123 carats per hundred tonnes. Twenty-one stones surpassed 10.8 carats.

The first sale of Renard diamonds begins in Antwerp on November 14, two months earlier than anticipated.

Renard’s expected to average 1.6 million carats annually for an initial 14 years. The first decade should do even better, with an annual average of 1.8 million carats selling at an average $155 per carat.

Stornoway sees a potentially longer mine life. In addition to a probable reserve of 22.3 million carats, Renard has another 7.9 million carats of indicated resources and 13.35 million carats inferred, with all kimberlites open at depth. The company expects to move from open pit to underground in 2018.

Canada’s only diamond mine accessible by all-season road, the James Bay region operation is fuelled by LNG.

The company has also been drilling kimberlites at its Adamantin project about 100 kilometres south, but so far without success.

Another grand opening last month celebrated the world’s largest new diamond mine in 13 years, the Northwest Territories’ Gahcho Kué. A 51%/49% JV of De Beers and Mountain Province Diamonds TSX:MPV, the fly-in/fly-out operation’s expected to produce 54 million carats over a 12-year life, with average prices estimated at $150 per carat.

Why stop there?

September 20th, 2016

The world’s biggest new diamond mine hardly satisfies NWT appetites

by Greg Klein

Self-congratulation might have been irresistible as 150 visitors from across Canada and the world flocked to a spot 280 kilometres northeast of Yellowknife to attend Gahcho Kué’s official opening on September 20. But there’s no evidence the mining and exploration crowd will waste much time resting on their laurels. JV partners De Beers and Mountain Province Diamonds TSX:MPV continue their pursuit of additional resources. And within sight of the Northwest Territories’ new mine, Mountain Province spinout Kennady Diamonds TSXV:KDI hopes success will repeat itself right next door.

Twenty-one years in the making and the world’s largest new diamond mine in 13 years, Gahcho Kué’s expected to give up 54 million carats over a 12-year lifespan. Average price estimates for the three pipes come to $150 per carat. That would provide Canada with gross value added benefits of $6.7 billion, $5.7 billion of that going to the NWT, which would gain nearly 1,200 jobs annually, according to an EY study released earlier this month.

The world’s biggest new diamond mine hardly satisfies NWT appetites

Gahcho Kué partners hope to extend the
mine well past its 12-year projection.

That’s a strong rebound for the territory’s biggest private sector industry, following last year’s shutdown of the Cantung Tungsten mine and De Beers’ Snap Lake. The closures left the NWT with just two mines, both diamond operations in the Lac de Gras region that also hosts the newcomer.

But those two mines, the Rio Tinto NYSE:RIO/Dominion Diamond TSX:DDC 60/40 JV at Diavik and Dominion’s majority-held Ekati, maintained Canada’s place as the world’s third-largest producer by value.

Holding 51% and 49% respectively of Gahcho Kué, De Beers and Mountain Province hope to prolong its duration. Rather expansively maybe, the slightly junior partner outlines a multi-phase program.

Should all go to plan, Phase II would upgrade resources into reserves, maybe adding as much as five years to the operation. Phase III would deepen the Tuzo pipe, bringing another three years. Phase IV would do the same to the 5034 and Hearne kimberlites, as well as bring on the new Tesla pipe. If plans, projections and prayers come to fruition, Gahcho Kué might end up with more than 20 years of operation. With optimism drowning out any puns regarding pipe dreams, Phase V calls for “new targets.”

At least that’s the tale told by Mountain Province. De Beers acts as project operator.

Another company also holds high hopes, as well as about 71,000 hectares to the north, west and south of Gahcho Kué. Mountain Province spun out the Kennady North project into Kennady Diamonds, which has been advancing its own ambitious timeline.

The project’s Kelvin kimberlite has a maiden resource slated for this quarter and a PEA for Q4. Subject to those results, the company hopes to take Kelvin to feasibility next year, and to complete resource estimates for the Faraday 1, 2 and 3 kimberlites less than three kilometres northeast.

On the eve of the Gahcho Kué grand opening, Kennady pronounced itself pleased with this year’s 612-tonne bulk sample recovery, averaging 2.09 carats of commercial-sized stones per tonne from Kelvin’s north limb. With last year’s south limb grade coming to 2.02 carats per tonne, the results show “remarkable consistency in overall diamond grade across the full extent of the body,” said president/CEO Rory Moore. “This is a positive attribute from both an evaluation and a mining perspective.”

In a crucial step, a parcel goes to Antwerp next month for a price evaluation, with results expected about three weeks later.

The world’s biggest new diamond mine hardly satisfies NWT appetites

Kennady Diamonds hopes for a
glittering future just north of Gahcho Kué.

Two rigs currently have the Faraday kimberlites subject to an 8,000-metre summer program of both exploration and delineation drilling. Out of 15 holes reported so far, 14 revealed kimberlite.

The summer program follows a 10,712-metre winter campaign that discovered Faraday 3 as well as four diamonds in drill core, two each from Faradays 1 and 3.

Two mini-bulk samples released this year for Faraday 1 averaged 4.65 carats per tonne and three carats per tonne respectively. Faraday 2 minis averaged 2.69 carats, 3.04 carats and 4.48 carats per tonne.

Last month Kennady expanded its property by another 4,233 hectares directly south of Gahcho Kué. But the company’s focus remains on the Kelvin-Faraday corridor north of the new mine.

As for De Beers, its other Canadian focus since Snap Lake’s demise has been the Victor mine in Ontario’s James Bay region. With less than five years of operation left, it too faces doom. Another seven years could potentially come from the Tango kimberlite, seven kilometres away and now undergoing a federal environmental review.

Local relations, however, have taken an unexpected turn. Last week De Beers Canada chief executive Kim Truter told CBC the company would go beyond the duty to consult and seek the Attawapiskat community’s outright consent for Tango. “It’s pointless us actually operating in these first nations areas if we don’t have local support,” he said.

The network added, “Support has been shaky in the first nation since the signing of the original agreement with De Beers in 2005. Band officials boycotted and picketed the grand opening of the mine in 2008 and the road into the mine has been blockaded several times, including in 2013.”

But Truter’s remarks drew an angry response from newly elected chief Ignace Gull, the Timmins Press reported September 19. The paper quoted a social media post in which he stated, “Attawapiskat is in a midst of suicide crisis and we need to deal with this first and they have to back off instead of threatening us.”

In Quebec’s James Bay region, Stornoway Diamond TSX:SWY began ore processing at its Renard project in July, expecting to achieve commercial operation by year-end. The province’s first diamond mine expects to average 1.6 million carats annually for an initial 14 years.

Back at Gahcho Kué, visitors celebrated the grand opening as a possible strike loomed. Last week CBC reported that mediation had broken down between a contractor and a Teamsters local representing around 60 camp kitchen and cleaning staff.

Canada’s new diamond mines: Gahcho Kué ramping up, Renard catching up

August 3rd, 2016

by Greg Klein | August 3, 2016

“On time, on budget and in a challenging environment,” as De Beers CEO Bruce Cleaver proudly noted, the world’s largest new diamond mine has begun full commissioning. The Northwest Territories open pit should reach full production in Q1 next year with average output of 4.5 million carats annually over its 13-year lifespan, according to an August 3 statement from Anglo American. Or a 12-year life, according to a same-day statement from Mountain Province Diamonds TSX:MPV.

Canada’s new diamond mines: Gahcho Kué ramping up, Renard catching up

Sub-arctic conditions hardly deter De Beers,
which has opened three diamond mines in Canada’s north.

The company owns a 49% stake in the JV, with operator De Beers holding the rest. De Beers, in turn, is held 85% by Anglo and 15% by Botswana.

Mountain Province reported two large gem-quality stones recovered over the past few days, weighing in at 12.1 carats and 24.65 carats. The company expects its first diamond sale by year-end.

Located about 280 kilometres northeast of Yellowknife, Gahcho Kué sits in the diamondiferous Lac de Gras region that also hosts Dominion Diamond’s (TSX:DDC) majority-held Ekati mine, the Rio Tinto NYSE:RIO/Dominion 60/40 JV at Diavik, and Snap Lake, De Beers’ first mine outside Africa. De Beers also operates the Victor mine in northern Ontario.

Snap Lake, a money-loser since opening in 2008, shut down last December. The company plans to flood the mine unless a buyer can be found. Output from Ekati and Diavik, however, sustained the NWT’s rank as the world’s third-largest diamond producer by value.

The two operations also sustained mining as the NWT’s largest private sector employer, despite the closures of Snap Lake and North American Tungsten’s Cantung mine in October 2015.

In Quebec’s James Bay region, meanwhile, Stornoway Diamond TSX:SWY began processing ore at its Renard project last month, slated to achieve full nameplate capacity within nine months. The company will declare commercial production after 30 days of processing ore at 60% of nameplate capacity, expected to happen by year-end. The combined open pit/underground operation would average 1.8 million carats annually for the first 10 years of its 14-year life. Average prices have been estimated at $155 per carat.

Read more about Canadian diamond projects.

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

Diamonds for future demand

July 8th, 2016

Dominion gives Jay the go-ahead while Peregrine brings Chidliak to PEA

by Greg Klein

Spurned by the forces driving gold and silver, diamonds’ sparkle may have sputtered. But looking further ahead Canadian companies remain optimistic, and demonstrably so. This week Dominion Diamond TSX:DDC announced plans to move forward with the previously postponed Jay pipe addition to the Northwest Territories’ Ekati mine. One day later Peregrine Diamonds TSX:PGD outlined an ambitious scenario for Chidliak, suggesting a possible Nunavut gem operation by 2021. Meanwhile progress continues on two very near-term producers in the NWT and Quebec.

Baffin Island remoteness be damned, Chidliak could come online for well under a half billion dollars, according to a July 7 preliminary economic assessment. The study foresees Phase I open pit mining beginning with the property’s CH-6 pipe, followed by CH-7, 15 kilometres away. Output would average 1.2 million carats per year for a decade, peaking at 1.8 million carats.

Dominion gives Jay the go-ahead while Peregrine brings Chidliak to PEA

Peregrine Diamonds sees potential to expand existing
resources and find new deposits on its Nunavut kimberlites.

Using a 7.5% discount rate, the PEA calculates an after-tax NPV of $471.2 million and a 29.8% IRR. Initial capex would come to $434.9 million with payback in two years. Costs include 160 kilometres of all-weather road to the territorial capital of Iqaluit.

Not mentioned in the announcement, however, is the town’s lack of port facilities. The island’s only operating mine is Mary River, 935 kilometres north of Iqaluit. Operator Baffinland Iron Mines runs its own port at Milne Inlet, another 100 kilometres north. The company has proposed replacing the road with a railway.

A March diamond evaluation gave CH-6 an average $149 per carat and CH-7 $114. But assuming 2.5% annual price increases, life-of-mine averages would come to $178 and $153 respectively, Peregrine stated.

CH-6 holds by far the largest resource, with an inferred 11.39 million carats compared with CH-7’s inferred 4.23 million. Both resources remain open at depth.

Anticipating the direction that pre-feas studies could take, company president/CEO Tom Peregoodoff spoke of “optimization studies of the Phase I mine, including the expansion of the CH-6 resource to depth and through the development of a potential Phase II resource expansion from the numerous other kimberlites on the property, of which six currently show economic potential.” Chidliak’s 564,396 hectares host 74 known kimberlites.

A few thousand sub-arctic kilometres away, the world’s third-largest diamond miner by value has put its on-again, off-again Jay pipe back on again. The Ekati mine’s most significant undeveloped deposit, the kimberlite holds a probable reserve of 78.6 million carats.

With two joint ventures in play, Ekati’s ownership gets a bit complicated. Dominion holds 88.9% of the Core zone, which hosts the current operation. Jay is located in the Buffer zone, 65.3%-held by Dominion. The new open pit would rely on Ekati’s existing infrastructure about 30 kilometres away, resulting in a total capex of US$647 million funded through existing loot and internal cash flow.

The project’s new feasibility reported Jay’s total post-tax NPV at US$398 million with a 15.6% IRR. Dominion’s share shows a post-tax NPV of US$278 million and a 16.7% IRR. Jay’s operations would run from 2022 to 2033, two years longer than envisioned by last year’s pre-feas, with ore processing continuing into 2034.

Jay would operate concurrently with the 10.1-million-carat-reserve Sable pipe, already under development, from 2021 to 2023. The current plan has Jay operating solo from 2024 to 2032. But the company intends to “pursue other incremental growth opportunities near our existing operations,” said CEO Brendan Bell.

Last month’s Ekati plant fire, however, forced Dominion to suspend operations on the Pigeon deposit. Mining and stockpiling continues at Ekati’s Misery open pit and Koala underground operations. Preliminary estimates call for about $25 million in plant repairs. Ekati’s 2017 guidance dropped from 5.6 million to 4.7 million carats.

Dominion also has a 40% stake in Diavik, the NWT’s other diamond producer, with Rio Tinto NYSE:RIO holding the rest. The mine’s fourth pipe, the 10-million-carat A-21, has production scheduled for H2 2018. Saying the company’s stock price doesn’t reflect the value of its assets, Dominion this week also announced a proposal to buy back around 7.2% of its issued and outstanding shares.

Meanwhile Canada’s next diamond mine—and the world’s biggest new diamond development—has production slated to begin this quarter. A 51%/49% JV of De Beers and Mountain Province Diamonds TSX:MPV, Gahcho Kué’s expected to average 4.5 million carats a year for 12 years.

Along with those three mines in the NWT’s Lac de Gras region and De Beers’ Victor mine in Ontario, Canada will gain a fifth operation with Stornoway Diamond’s (TSX:SWY) Renard project in Quebec. This one has production scheduled by year-end, bringing an average 1.8 million carats annually for the first 10 years of a 14-year lifespan.

Diavik diamond production surpasses 100 million carats

May 19th, 2016

by Greg Klein | May 19, 2016

Canada’s largest diamond mine reached a production milestone this week as Diavik passed the 100-million-carat mark. In operation since 2003, the project’s now a 60/40 joint venture of Rio Tinto NYSE:RIO and Dominion Diamond TSX:DDC, with Rio acting as operator. The company lauded “the teams who have helped make this happen safely and responsibly in some of the harshest operating conditions in the world.” The mine sits about 220 kilometres south of the Arctic Circle in the Northwest Territories’ Lac de Gras region.

Diavik diamond production surpasses 100 million carats

Despite “some of the harshest operating conditions in
the world,” Diavik continues to produce valuable gems.

Rio expects to bring a fourth pipe called A-21 online in H2 2018, spending US$350 million over a four-year period that began in 2014. A-21 would add a proven reserve of 10 million carats, helping extend Diavik’s lifespan to 2023.

The mine employs approximately 1,100 people, half of them living in the north and one-quarter aboriginal. Since 2003, operators have spent C$6.8 billion on goods and services, over 70% with local firms, many of them native-owned.

“Strong and respectful partnerships are at the heart of the way we work at Diavik and I would like to thank all of our investors, our community, business and government partners, and our workforce for their support over the past 13 years,” said Diavik president/COO Marc Cameron.

After De Beers suspended Snap Lake operations last December, the NWT was reduced to just two mines, Diavik and Dominion’s majority-held Ekati. Those two, however, produce enough diamonds to place Canada third in world production by value. Lac de Gras gains “the world’s largest new diamond mine” in H2 this year as Gahcho Kué begins production on a probable reserve totalling 55.5 million carats. A 51%/49% JV of De Beers and Mountain Province Diamonds TSX:MPV, the mine was 94% complete as of last week.

Creating nearly 40% of the territory’s GDP in 2014, diamond mining provides the NWT economy’s largest private sector contribution.

The Diavik discovery followed Chuck Fipke’s 1991 Ekati find, which set off the country’s biggest staking stampede since the Klondike. Matthew Hart’s Diamond: The History of a Cold-Blooded Love Affair recounts Diavik’s dramatic 1994 discovery by Eira Thomas, then a 24-year-old project manager for Dominion-predecessor Aber Resources.

Thomas now serves as president/CEO of Kaminak Gold TSXV:KAM, which last week announced a takeover bid by Goldcorp TSX:G valued at C$520 million.

Stornoway Diamond increases Renard’s reserve, life and guidance; advances start date

March 31st, 2016

by Greg Klein | March 31, 2016

Not for the first time, Stornoway Diamond TSX:SWY has exceeded its own expectations for Quebec’s first diamond mine. Late March 30 the company announced increases to Renard’s reserve, lifespan and anticipated output, as well as an earlier start date for commercial production. The company now expects to start processing ore by the end of September, with commercial production (60% of nameplate capacity) beginning by year-end. That marks a five-month improvement over the previously announced start date.

Among other felicitous news, Stornoway announced a 25% increase in probable reserves, from 17.9 million to 22.3 million carats. Grade, however, fell from 75 to 67 carats per hundred tonnes. That “reflects the addition of new lower-grade material within the open pit and underground mining envelopes,” explained president/CEO Matt Manson.

Stornoway Diamond increases reserve, life and guidance; advances Renard start date

Renard’s earlier start date will put a second new
Canadian diamond mine into production this year.

Those 4.4 million extra carats extend Renard’s life expectancy from 11 to 14 years.

But average price estimates dropped to $155 per carat from $190 estimated in March 2014. The company noted a 19% decrease in world average rough prices during those two years. In early February, diamond analyst Paul Zimnisky forecast a 2016 global average of $92 per carat.

Renard’s annual production forecasts for the first decade now come to 1.8 million carats, compared to 1.6 million previously predicted. Beginning in 2018 Stornoway expects to process 2.5 million tonnes per year (7,000 tpd), boosting the earlier forecast of 2.2 million tonnes per year or 6,000 tpd.

An updated mine plan calls for a modified design for the Renard 2-Renard 3 open pit and a deepening of the Renard 2 underground mine.

Initial capex drops to $775 million, down from $811 million estimated in April 2014. The life-of-mine capex increases, however, from $1.013 billion to $1.045 billion.

A dramatic change puts the after-tax NPV at $974 million, previously $391 million, using a 7% discount rate.

The project now boasts “a cash operating margin of 59% after all taxes, royalties and the Renard diamond stream, despite the substantial recent reduction in rough diamond prices,” stated Manson. “We look forward to building on our track record to date of solid project execution as we bring Renard into production later this year.”

As for Canada’s other diamond mine-in-progress, Gahcho Kué reached 87% completion as of March 14 and remains on schedule for H2 production, Mountain Province Diamonds TSX:MPV reported. With a probable reserve totalling 55.5 million carats, it’s the “world’s largest new diamond mine and projected to be amongst the highest margin diamond mines due to the high grade and open-pit nature of the operation,” according to the company.

Mountain Province holds a 49% stake in the Northwest Territories JV with 51% owner De Beers.

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.

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. 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. 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.

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.