86 posts categorized "Diamond Mining"

Diamonds Could Soon Be An Investor's Best Friend As Demand Rises And Supply Falls - Forbes

Diamonds-round brilliantDiamonds might be a girl’s best friend but from next year they could also be an investor’s best friend thanks to a global decline in the production of quality gems from mines in Russia and Canada, and rising demand, particularly in China.

Not a recommended investment for everyone because of the difficulty in valuing individual stones there is evidence that the top end of the diamond business is starting to stabilize after a sharp fall in gem prices in 2011.

Like some other luxury goods, diamond prices were pushed higher in the wake of the 2008 Lehmann Brothers collapse as rich investors diverted a portion of their capital into non-monetary, and highly-portable, assets.

Between mid-2009 and early 2011 industry indices which track the value of the highest quality diamonds rose by 70%, but crashed by around 30% last year as fear faded.

Declining Production

The latest assessment of the diamond market, according to an analysis by Citigroup C Markets, is that improving economic conditions, structural social trends in China and a decline in the rate of newly-mined gem quality diamonds is setting the stage for a sustained price recovery.

Because diamonds are tricky to value, and the same stone can generate widely different opinions, they are a commodity best left to professionals, and even then only after receiving expert advice.

But, what analysts at Citigroup have detected is a change in the outlook for diamond demand, a significant decline in the rate at which kimberlites (the host rock for most diamonds) are being discovered, and the drying up of a diamond stockpile once kept by the industry leader, De Beers.

“Diamond prices are weaker than they were two years ago and demand does not yet appear to be strong enough for the limited mine supply to create a significant shortage,” Citigroup said in report titled Diamond Price Outlook which was circulated to clients this week.

Shortage Emerging

“It is therefore likely that prices will stabilize at the lower levels through 2013 and 2014, but that the mine supply trend, the structural shift in China, and a slowly recovering global economy should see diamond shortages making their mark on prices in 2015-to-2010.”

Of the major factors in the diamond market the three most important are the melting of the De Beers stockpile, the development of a diamond-ring buying habit by engaged couples in China, and the failure of the mining industry to discover big new deposits of gem-quality stones.

The De Beers stockpile was a critical factor in controlling prices for much of the 20th century when the London-based company drip-fed diamonds into the market via an arcane process that caused it to be viewed as a monopoly engaged in unacceptable trade practices.

A changed marketing policy by De Beers has seen it behave more as a conventional business, but the sell-down of its stockpile has reduced the buffer-effect so that when the next shortfall in mined diamond supply occurs there could be significant upward price pressure.

Catching The Engagement Ring Habit

In China, a growing middle-class has seen the development of a diamond-buying habit with Citigroup reporting that 62% of engaged coupled in Shanghai now buy a diamond ring, roughly double the 33% rate in the 1990s. In Beijing the gift of a diamond ring currently extends to only 40% of couples.

In the mining world, despite a worldwide search, there has been a very low rate of kimberlite discovery with mine production of diamonds peaking in 2006 at an annual rate of 175 million carats, and currently down to 130 million carats a year.

“New discoveries could see industry production reaching 160 million carats in 2018 but if economic growth has normalized by then, diamond demand should be far greater than that level at that time.”

via www.forbes.com

Stornoway: Quebec’s first diamond mine, ready to go - Proactiveinvestors (NA)

Rough diamond photo“It’s Canada’s next diamond mine, and it’s basically ready to build now.” The burgeoning mine in question belongs to Stornoway Diamond Corp (TSE:SWY), whose chief executive, Matt Manson, is rather forthright on the subject of the company’s 100 per cent owned flagship asset, known as the Renard diamond project

Proactive Investors spoke to Manson a matter of days after the road to Stornoway’s production site had broken through; that is, right after the four segments composing the 240km long road – 97 km of which Stornoway was responsible for, the rest coming care of the ministry of transport of Quebec -- were all linked up.

It is an auspicious event, because “that’s the last thing to achieve before final project financing and starting construction of the mine”, Manson points out. The road is to allow year-round access to the site, and the schedule on which it was constructed bodes well too: the plan was to get the road open by the fourth quarter of this year, and the company managed that by the end of August.

Stornoway’s plans, as established in the January 2013 optimization study, include plant commissioning before the end of December 2015, with commercial production to be achieved by mid-2016.

From there, the numbers are dizzying, with the mine set to average about 1.7 million carats a year at about US$190/carat, yielding revenues between $300 and $450 million.

According to the NI 43-101 compliant report for the site released in July of this calendar year, total indicated resources stand at 27.09 million of contained carats, with a further 16.85 million carats classified as inferred and 25.7 million to 47.8 million carats of total exploration upside.

The resource estimate for the project, which is located approximately 350 km north of Chibougamau in the James Bay region of north-central Québec, showed a 14 per cent increase in indicated resources as compared to the previous report, by converting 2.3 million carats of near-surface inferred mineral resources to the indicated category.

Unlike almost every other commodity, Manson points out diamonds have gone up in value and “the supply and demand story for diamonds is very strong.”

And the case to be made for the calibre of the project itself is strong indeed.

“It has an 11-year life based on the reserve; it has a 20-year life based upon the resource, and it has a 30- to 40-year life based on how much we can reasonably see is there.”

Clearly, the Renard project is a development in which the government of Quebec sees some significant potential, as clearly demonstrated by the act of pledging $77 million to Stornoway for the completion of the company’s segment of the road. “They see this as an anchor project in the region that will employ multiple generations of local people,” says Manson, “so it’s a big deal.”

It is also set to be Quebec’s first diamond mine ever. And, as Manson says, only two other new diamond projects of any scale exist anywhere in the world: Gahcho Kue in the Northwest Territories and the Grib project in Russia, set to be in production by the end of this calendar year.

Certainly, the project is high profile in La Belle Province.

“We get a lot of media coverage in Quebec,” says Manson. “Everybody knows the project.”

And while media relations have had their role to play, Manson emphasizes the importance of Stornoway’s relationship with the local community.

The road itself is a case study in community engagement. As director of investor relations for the company, Orin Baranowsky, says, all the contractors

via ProactiveInvestors.com

A new perfection found in diamonds created by an asteroid in Siberian crater 35 million years ago

Popigai Crater mapNew research indicates special qualities which makes these diamonds unique in the world, according to a new announcement by scientists in Novosibirsk. 

'We and Japanese colleagues have arrived at very interesting conclusions,' said Nikolai Pokhilenko, director of the Sobolev Geology and Mineralogy Institute of the Siberian Branch of the Russian Academy of Sciences, reported Interfax.

Their 'high abrasiveness' is 50% to 60% superior to natural or synthetic diamonds, he said. 

The impact diamonds from the crater also have exclusive polishing characteristics. 'It is possible to make ideally smooth surfaces. Even nano-size crystals of a regular diamond scratch surfaces, but these diamonds polish so well that you won't see any scratches even with an electronic microscope,' he revealed. 

This bodes well for potential applications in high-precision optical systems in satellites, jewellery and other industries, new composite materials, borers and cutting tools, Pokhilenko said. Further studies of the impact diamonds from the vast site - with reserves 10 times bigger than the world's known diamonds - will continue in cooperation with the Kyiv Institute of Super-Solid Materials, Alrosa's subsidiary Almazy Anabara and De Beers' synthetic diamond subsidiary Element Six, and Baker Hughes.

'The precious stones were created by the impact of a space projectile crashed into the Earth 35million years ago, leaving the 100km wide crater'. Pictures: Republic of Sakha information portal 

An expedition to the Popigai crater has been planned for 2014. 

'We will collect samples of impact rock from the discharge area: large pieces, up to 1.5 centimetres, spewed from the crater after the impact,' Pokhilenko told Interfax. He estimated the world market capacity for the new type of diamond raw materials at approximately 3 billion carats.

'The scope of diamond use in industries is growing rapidly in contrast to rare earths, the consumption of which is growing 10-15% per annum,' he said.

'The output of synthetic diamonds has reached 14 billion carats and the new materials (impact diamonds) have their own niche and will eventually force out synthetic diamonds because they are more efficient.'

The precious stones were created by the impact of a space projectile crashed into the Earth 35million years ago, leaving the 100km wide crater.

'The first results of research were sufficient to talk about a possible overturn of the entire world market of diamonds', said the scientist a year ago. 

The crater is located above the Arctic Circle northeast of the most northern Russian city of Norilsk. The nearest stepping off point is the outpost of Khatanga from where it is accessible by helicopter. The Popigai crater is an icon to paleontologists and geologists. But for decades the region was 'off limits' due to diamond mines constructed by Stalin's gulag prisoners. Designated a Geopark by UNESCO, it was created by either an 8 km (5.0 mile) diameter chondrite asteroid, or a 5 km (3.1 mile) diameter stony asteroid, say experts. 

Graphite in the ground was instantly transformed into diamonds over a vast territory. Several scientific expeditions to the crater in the 1990s furthered understanding of its origins and potent

via siberiantimes.com

Argyle mine set to meet changing Chinese demand for diamonds: Rio | MINING.com

Argyle-pink-diamonds 300x250Rio Tinto’s (ASX, LON: RIO) Argyle mine in Western Australia will play a key role in meeting China’s growing and changing demand for diamonds, thanks to the mine’s new underground section and its unique gems collection, said the firm Monday.

As the miner’s multi-million-dollar Argyle rare red, blue and pink gems debuted in Hong Kong, the chief executive of the company's diamonds and minerals division, Alan Davies, said demand for diamond jewellery in China is expected to grow strongly into the next decade.

Currently, China is the world’s second-largest diamond market, according to consulting firm Bain & Co., but Rio says Chinese tastes in diamond jewellery are shifting from an emphasis on large white gems to more coloured rocks for everyday wear.

And to ensure the new demands are met, Rio has opened its doors to about 100 carefully selected gem enthusiasts in Hong Kong, who will be able to see —for the first time in the 30-year history of the Argyle diamonds exhibit— three “fancy red” rocks, including the famous 1.56-carat Argyle Phoenix.

Jewellery makers, connoisseurs, collectors and investors – by invitation only – will view the 64 diamonds of this year's tender, which have a combined weight of 54.99 carats.

The company is hoping they will sell for more than $1 million per carat.

Due to their shortage, red diamonds are extremely hard to estimate in price. Earlier this year, a 1.92-carat red diamond sold for over $3.2 million, or $1.6 million per carat, at a Christie’s auction in Geneva. The sale set a record for a red diamond on a per-carat basis.

Other highlights at the tender include a 3.02 pink diamond named the Argyle Imperial. According to Rio Tinto, pink gems fetch on average 20 times the price of white diamonds of equivalent size.

Rio Tinto’s Argyle mine is home to 90% of the world’s new pink diamond production, said the company, even though pink diamonds account for less than 0.01% of its total production at the mine.

Image from Argyle Pink Diamonds

via www.mining.com

The state of 2013 global rough diamond supply | Resource Investor

Rough diamondRough diamonds achieved record prices in the summer of 2011, but prices have since slipped back to 2010 levels on global macroeconomic worries.  However, current prices are still higher than historic levels reached in the summer of 2008, and new supply is estimated to fall short of new demand over the next two decades, which could take prices back to new highs. According to a December Bain and Co. report, “The Global Diamond Industry: Portrait of Growth,” global diamond demand is expected to grow at 5.9% annually through 2020, while supply is only expected to grow at 2.7% over the same period of time.  (I think it is worth noting that when discussing diamond supply/demand, the demand is typically end user or purchaser demand of polished diamonds, while supply is typically rough diamond supply from mines.  There are sometimes divergences between rough and polished diamond prices, but generally speaking they are symbiotic.)

Modest-at-best new supply growth over the next 17 years can be attributed to mature mines approaching non-economic depths, and a lack of new projects to offset the diminishing production of the aging mines. Even with annual supply growth of 2.7% through 2020, the supply in 2020, estimated to be 157 million carats, will still not equal pre-financial crisis supply of 177 million carats produced in 2005.

Two of the largest diamond mines in the world, Canada’s Ekati and Diavik mines, have exhausted open pit resources and now are both underground mines. The need to convert a mine from an open pit operation to an underground operation typically results in curtailed production given the geology of kimberlite pipes (the geologic formation of the resource is shaped like a carrot, and gets narrower at depth). Ekati’s production declined 28% year-over-year (YOY) in 2012, and Davik’s production is estimated to decline 17% YOY in 2013.  Three more of the world’s largest mines are set to go underground over the next few years, as Russia’s Udachny mine is expected to be converted to an underground operation in the next two to four years, and Botswana’s Jwaneng and Orapa mines are expected to go underground shortly thereafter. 

Given that it can take more than a decade and $1billion to take a diamond project from discovery to production, there have been a very limited number of significant new projects in development since the mid-1990s.  Projects expected to come online in the next five years, with estimated annual production of 1 million carats or more are Canada’s Renard and Gahcho Kue projects, Botwana’s Ghagoo project, and Russia’s Grib, Lomonosov, Botuobinskaya, and Lomonosovsky projects.  Two other projects worth noting are Canada’s Chidliak and Star-Orion projects, which have the potential to be large mines, but are not likely to commence production any time soon.

The intention of this study is to focus solely on the new supply of gem-quality rough diamonds through mine production.  The mining of industrial grade (non-gem-quality) diamonds exclusively is not economic, thus, an estimated 98% of industrial grade diamond demand is supplied with synthetic (lab grown) diamonds.  However, mines do produce industrial grade diamonds, but only as a by-product.  On average, gem-quality diamonds only represent approximately 25% of a mines production, but account for 95% of the value of diamonds produced. It is important to understand that diamond mining is not just about the quantity of carats produced, but also the quality of diamonds produced. That said, for purposes of simplicity, this study is based on the assumption that the supply of rough diamonds is based on the quantity of carats produced, not the value of carats produced.

Global 2012 rough diamond production is estimated to have been 127 million carats, 2013 production is estimated to be 130 million carats.  The below chart details the production of the most significant diamond mines in the world, estimated to produce a combined 113 million carats in 2013 (or 87% of estimated 2013 supply). The balance of 2013 global rough diamond production (or 13% of estimated 2013 supply) not included below is composed of small-scale or informal mining operations, where production data is opaque or not available.  For example, the Democratic Republic of the Congo (DRC) is the third largest diamond producer in the world by volume, but there is only one commercial producer in the country, so the majority of DRC production data on a project basis is unreliable or not available at all. 

 via www.resourceinvestor.com

Denny's Comments

Like most industries, the price of diamonds is product of the balance between supply and demand.  This is especially true now that there are many diamond producers and no De Beers monopoly.  The lead time to bring on new diamond production is long and requires great investment so we can expect to see prices increase until this investment in new mines is justified.

Diamond Mining in Africa - Resource Investing News

Africa, the world’s largest producer of diamonds, has produced half of all diamonds. With 1.9 billion carats produced, the continent has mined about $158 billion worth of the gems.

African DiamondDiamond mining in Africa dates back to 1866, when the child of a Dutch farmer found a 22-carat diamond in what is now South Africa — that was the first known diamond discovered on the continent. When an 83-carat diamond was found three years later, it drew a rush of miners into South Africa.

The first four mines in Africa were dug in 1871 in areas around the Vaal River. The largest was Colesberg Kopje, nicknamed “the Big Hole,” in Kimberly. The wealth produced by these mines triggered industrial development, with modern shipping ports, along with travel and communication networks springing up throughout the subcontinent. That ultimately lead to two wars between the Dutch settlers (known as the Boers) and the British from 1880 to 1881 and 1899 to 1901. Over the next century, Africa continued to lead the world in diamond production.

The majority of Africa’s diamond empire is controlled by De Beers. The company controlled the flow and pricing of the diamond market for a large part of the 20th century after forming Anglo American Corporation in 1917 and establishing a central selling organization to stabilize sales.

Major diamond mining companies

De Beers is a holding company for various companies that explore for, trade in and produce diamonds; it is the world’s biggest diamond producer. Total sales decreased in 2012 by 16 percent, to $6.1 billion, though rough diamond sales increased 15 percent, to $5.5 billion. De Beers is predicting moderate growth in 2013 and the company expects strengthened fundamentals as diamond production plateaus and demand increases.

Anglo American (LSE: ALL) is an 85-percent shareholder in De Beers. Last year, the company saw an underlying operating profit of $496 million in diamonds alone, with a total underlying profit of $6.2 billion and $2.8 billion underlying earnings. The company predicts that robust demand for industrial commodities will boost growth for 2013.

Rio Tinto (LSE:RIO,ASX:RIO,NYSE:RIO) is another leading diamond producer that is active in mining, sales and marketing. The company reported $9.3 billion in underlying earnings for 2012. However, it recorded a net loss of $3 billion. New incoming CEO, Sam Walsh, who will officially take control of the company in July, said Rio will reduce its capital expenditure to $13 billion this year.

While Africa remains the center of global diamond production, Russia recently revealed a massive diamond mine of its own that may loosen the continent’s tight grip on the industry. Alrosa (MCX:ALNU) is a Russia-based company that explores, mines, manufactures and sells rough diamonds. The company accounts for 25 percent of global diamond production and 94 percent of Russia’s overall diamond output.

A popular way to invest in diamonds is by physically holding them. Returns for diamonds beat those of equity for much of the last 15 years, according to the Financial Times. Three-carat diamonds increased by 145 percent and 5-carat diamonds increased by 171 percent between 1999 and 2011. However, it’s worth bearing in mind that diamond trading is an unregulated market. With De Beers retaining much of the trade, it can be difficult for private investors to break into the market. With the still relatively new diamond discovery in Russia, it is hard to say if the diamond market of today will be recognizable in years to come.

Source: http://resourceinvestingnews.com/55144-diamond-mining-in-africa.html

==DENNY'S COMMENTS========================

This is a nice overview of Diamond Mining in Africa and how it has evolved to its current status.

Petra Diamonds finds rare 25.5 carat blue stone - Telegraph

TPetra_Diamond_blue_25.5 carathe diamond is a rare blue colour and Petra says the stone is considered to be a “high quality gem diamond of top colour”.

The Cullinan mine is renowned for its large diamonds, with many stones discovered there now set within the Crown Jewels. These include the Great Star of Africa which was discovered at the mine in 1905.

“Blue diamonds are the rarest of all diamond and Cullinan is one of the largest producers of the stones,” Jeremy Dibb, an analyst at broker Canaccord said. “Cullinan produced an important blue stone following the acquisition by Petra Diamonds.”

This previously discovered 26.6 carat fancy vivid blue stone was cut into an internally flawless 7.03 carat polished stone.

This blue diamond was sold at auction at Southeby’s in May 2009 and achieving a record price per carat for any gemstone sold at auction, hitting $9.49m or $1.35m per carat.

Petra Diamonds, a member of the FTSE 250 index, saw its shares rise 0.6p to 108p following the discovery.

via www.telegraph.co.uk

The most famous blue diamond is the Hope Diamond housed in the Hall of Geology, Gems and Minerals at the National Museum of Natural History.

'Largest' Diamond Mining Ship In The World Launched

Marine diamond shipDiamond company De Beers announced the launch of what they are claiming is the largest sea-going vehicle in the world for mining diamonds, Rough and Polished reports. Otto Shikongo, chief executive of De Beers Marine Namibia, said that the latest addition to their fleet will harvest more ore and generate more revenue than any of their other ships. The boat, dubbed the MV Mafuta, will be the fifth in DebMarine's arsenal, but will soon be single-handedly responsible for a full 30% of the firm's annual diamond production.

The vessel is capable of mining for rough diamonds underwater for over four days without taking a break. Within a year, it is able to recover approximately 350,000 carats of precious gems, according to Rough and Polished.

Source: The Israeli Diamond Industry

Dominion Diamond Sees Diamond Price Increase, Has Eyes on Diavik - JCK

Diavik-mineDominion Diamond Corp., formerly known as Harry Winston, has seen diamond prices rise over the last few months, and predicts they will continue to increase over the next year. 

While the company saw overall diamond prices decrease this year, it also found that prices rose 9 percent since August, and 6 percent in the current quarter, according to James R. W. Pounds, the company’s executive vice president, in a conference call following the release of its financial results.

He said he expects prices to plateau over the next couple of months, and then possibly increase again by the end of the year.

He noted that diamond demand remains uneven in India and China, but said the company is seeing “upbeat trends” in the United States, with strong indications that the American distribution channels were consolidating.

“Larger players now dominate what was once a fragmented market,” he said.

Company executives also dropped numerous hints they have their eyes on buying the rest of the Diavik mine, after purchasing nearby Ekati. The company currently owns 40 percent of Diavik, and the remainder is currently being offered for sale by owner Rio Tinto.

CEO Bob Gannicott talked at one point about possible benefits that could occur if Ekati and Diavik “were to come under common ownership.” Later, he added that it “was not clear at this time" whether Dominion would acquire Diavik.

The company completed the sale of its Harry Winston luxury brand division to Swatch this month. “That sales transaction brought us closer to the Swatch Group,” Gannicott said. “We contemplate a diamond supply relationship going forward.” 

Dominion said it expects to close its purchase of the Ekati diamond mine by April 10.

The company also reported mixed financial results.

Results from the fourth quarter of fiscal 2012 (ended Jan. 31):

  • Consolidated sales from continuing operations: Up 8 percent, to $110.1 million
  • Operating profit from continuing operations: Down 12 percent to $21.0 million Consolidated EBITDA from continuing operations: Down 6 percent to $45.3 million 
  • Rough diamond production: Up 19 percent to 1.9 million carats

Results from the 2012 fiscal year:

  • Consolidated sales from continuing operations: Up 19 percent to $345.4 million
  • Rough diamond production: Up 8 percent to 7.2 million carats  
  • Operating profit: Up 27 percent to $47.7 million   
  • Consolidated EBITDA from continuing operations: Up 10 percent to $127.9 million  

via www.jckonline.com

Harry Winston Finalizes $1 Billion to Swatch Group

Harry Winston logoThe sale of Harry Winston to watchmaking Swatch Group was rumored in October of last year, announced in earlier this year, and finalized March 26, 2013.  The price of the acquisition was $1 billion, Swatch assuming $250 million in debt and Winston netting $750 million.

The Harry Winston Diamond Corp was created in 2006 when Aber Corp, a Canadian diamond mining group, purchased the U.S. based Harry Winston luxury retail business.

Harry Winston Diamond Corp has now sold off the Harry Winston luxury retail division, which is the Harry Winston brand, and will change its name to Dominion Diamond Corp.  Dominion will continue as a diamond mining company that already owns 40 percent of the Diavik mine in Canada and is seeking to acquire the Ekati diamond mine, also in Canada.