In our last issue, I asked whether there had been a shift in sentiment toward the diamond sector, which survived 2013 in much better shape than the rest of the mining industry.
The answers I received from industry sources were mixed. While interest in diamonds was reportedly picking up, it may have been so only because of the comparatively dismal performance of so many other commodities last year.
Since then, however, the positive trend has only gathered strength.
First, diamond prices are firming up nicely. After a flat 2013 overall, rough diamond prices were up 7.4% in the first quarter, with polished prices rising 3.5%, Dominion Diamond reported in April.
While there is always a seasonal lift to prices at the beginning of the calendar year, the strength of the rise could bode well for 2014.
Second, companies such as Lucara Diamond are reminding investors that diamond mining can be immensely profitable. Lucara’s Karowe mine in Botswana is now bringing in so much revenue (US$400 per carat against operating costs of US$100 per carat) that it’s set to declare its first semi-annual dividend in June, just two years after reaching commercial production. (Compare this to Lucara’s first sale from Karowe in 2012, when the company only received US$215 per carat and failed to sell all the diamonds on offer.)
Third, turning to Canada’s diamond mines, after several years of minimal spending, we’re witnessing the start of an enormous new wave of investment.
The $858.5-million Gahcho Kué mine (De Beers and Mountain Province Diamonds) is already under construction and potential expansions of up three existing mines are being studied (Dominion’s Ekati, Rio Tinto and Dominion’s Diavik, and De Beers’ Victor). It’s worth noting that the last mine built in Canada was De Beers’ Victor mine, which began commercial production in 2008.
Lastly, it’s not just projects owned by big producers that are finding money.
Junior Stornoway Diamond landed a financing agreement for its Renard project in April. Renard will be the first diamond mine in Canada built and operated by a junior, and the fact that Stornoway has come to an agreement with its lenders for nearly $1 billion (see Page 20) is a vote of confidence in the company, its project, and in diamonds. The mine will be Quebec’s first diamond mine and the first diamond mine in Canada with year-round road access.
It all adds up to a long-awaited revitalization of Canada’s diamond sector.
As ever, we welcome your feedback at ahiyate@northernminer.com.
–This editorial originally appeared in the May 2014 issue of Diamonds in Canada.
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