Three New Diamond Mines
Hit the Market
Issue 178, February 2017
...the gemstone industry. De Beers has scrapped plans to expand its Victor mine in Ontario, emerald miner Gemfields has reshuffled its auction schedule, whilst Gem Diamonds has idled its Ghaghoo mine in Botswana, citing “the weak state of the diamond market”.
There is “definitely pressure on the small side of the sieve,” says Brown, who was previously finance director and joint CEO at De Beers. “Better sizes and qualities went exceptionally well for us.”
Trade data suggests that India is now bouncing back. India's diamond imports rose 28 per cent in January to $1.3bn, whilst sentiment was reportedly positive at International Diamond Week in Israel earlier this month. “Don't buy too many diamonds,” joked Andrey Zharkov, the outgoing president of Russia's diamond giant Alrosa.
Mountain Province will therefore be hoping for better results at its second sale, currently underway in Antwerp. Its figures may also be flattered by a sales agreement it has with De Beers, its joint-venture partner at Gahcho Kue. Small stones are divvied up between the two firms, but anything over 10.8 carats is put into parcels, which both companies bid for. The winner takes the lot, buying its partner out.
Mountain Province outbid De Beers for the mine's first batch of good-sized stones, paying De Beers C$1.4m, potentially pushing its own sizes (and prices) higher.
What telltale signs point to promise ahead? Firestone has designed its plant to catch stones up to 400 carats, without them getting crushed. A pilot plant run at the site by its previous owners frequently broke large diamonds, bigger than 400 carats. Stornoway is also expecting to haul out stones over 100 carats every two to three weeks, upscaling its plant during construction to catch diamonds up to 600 carats.
Mountain Province meanwhile recovered a 68-carat diamond at Gahcho Kue two weeks ago. The mine's tonnage however is far larger than its competitor's, so the recovery points to a scarcity of big diamonds overall. Karowe produced 300,000 carats before finding a mega-stone; Gahcho Kue has already processed over a million.
It is early days for the industry's newest diamond mines, which all boast production of a decade plus. It will take up to six months for goods to pass through the industry's cutting pipeline, revealing how each deposit ultimately polishes up. But based on results so far, Firestone is the company to beat.
“It's an impressive operation,” says Panmure Gordon analyst Kieron Hodgson, who has just been on a tour of diamond mines in southern Africa. Firestone's first tender outdid Hodgson's forecasts, “but they're not yet in the prime areas of the orebody by a long shot.” The company will begin to access the higher grade zones in the second half of this year, according to his figures.
If Firestone's shares shoot ahead, will Brown start looking at deals? “We are keeping our heads down,” he says. “It is not a priority for us at present.”
Why are shares in Lesotho-focused Firestone following Lucara higher?
Diamond owned by Lucara is easily the biggest ever to go under the hammer
The perception that Rio Tinto's Argyle mine is close to depletion looks evermore ridiculous
Lussier has been the brains and mild-mannered spin behind every De Beers marketing campaign for nearly 25 years