Three New Diamond Mines
Hit the Market
Issue 178, February 2017
Firestone leads the pack, Mountain Province “very fluorescent”
In 2009, a young diamond executive co-authored a paper on the “huge degree of uncertainty” involved in opening a new diamond mine. Rock samples at surface give a good indication of what a mine will produce in its “first few years”, but deeper down, decisions have to be based on tiny quantities of drill core that “often equate to 0.0000025% of the ore body to be treated.” Yet plant design is completed “in minute detail” and a mine's value is calculated “to two decimal places.”
The executive, a researcher who had grown up inside diamond giant De Beers, was called William Lamb. Two years later he became chief executive of Vancouver-based Lucara Diamond, which built-out the Karowe mine in Botswana, beautifully proving the paper's point.
Karowe's diamond resource was thought to be worth $138 per carat; eleven months after it opened, the plant started spewing out some of the biggest diamonds the industry has ever seen. In the last year, Karowe's prices have averaged well over $800 per carat, six times higher than originally forecast.
Opening a diamond mine, it turns out, is like drilling into a jeweller's vault: he might have left it overflowing with pricey pieces, or he might have taken everything to Hong Kong for the weekend.
Three new companies now find themselves in the same nail-biting position. Stornoway, Firestone and Mountain Province have all opened their first mines in recent months, crushing untouched kimberlite and hitting the market with new goods for the first time. “The suspense is killing me,” Firestone's chief executive Stuart Brown told Global Mining Observer earlier this month, as he waited for results from the company's first tender.
Deceptively, all three companies delivered similar results at their inaugural sales. They each sold 40,000 to 75,000 carats, raising $6m to $8m. Stornoway's Renard mine in Quebec hit the highest average prices, whilst Firestone's Lighobong mine in Lesotho shifted the greatest volume.
Parcel-by-parcel, however, there was huge variation. Firestone sold all its carats, plus a clean white 37-carat stone for over $1m, but Stornoway and Mountain Province, which co-owns the Gahcho Kue mine in Canada, both propped up their prices by withdrawing parcels that would have skewed their figures far lower.
In total, a quarter of Mountain Province's parcels were withdrawn. Their lower quality stones were “very fluorescent”, according to diamond specialists, a defect found in around a third of all diamonds. By carat it was even worse, with half the company's goods on the table going unsold.
New diamond mines begin by processing their lowest quality ore, to avoid taking-out any teething problems on their better tonnage. The results were “disappointing”, Mountain Province's chief executive Patrick Evans said, but a company's first diamond tender “is a price discovery exercise with buyers naturally cautious.”
The market backdrop has also been far from ideal. India, where most small diamonds are sent to be cut and polished, banned large denomination bank notes at the end of last year, clipping liquidity in the diamond market. The impact has been felt across...
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