North American diamond hunt puts De Beers in spotlight

The increase in diamond exploration in North America and the advanced stage of several projects in Canada’s North have triggered interest in De Beers Consolidated Mines and its marketing arm, the Central Selling Organization (CSO).

Though it has been active intermittently in Canada for more than 30 years, De Beers has remained relatively secretive about its activities. This has added to the De Beers mystique, while, at the same time, perpetuating some of the myths that surround both the organization and the diamond industry. This year, however, De Beers took on a higher profile, particularly during the recent convention in Toronto of the Prospectors and Developers Association of Canada. “We are here to wave the flag and inform people about our business,” said George Burne, CSO secretary and a De Beers director. “We are also trying to debunk some myths, one being that we don’t like partners.” The organization is making no secret of its interest in marketing Canadian diamonds, assuming bulk test programs continue to be positive from several kimberlite pipes in the Lac de Gras region of the Northwest Territories. “We believe there is room in the market for new producers, particularly for good quality diamonds,” Burne said in Toronto. “But if Canadians were to produce at the cheaper end, it would be more difficult to find a market for those.”

Although the joint venture of BHP Minerals Canada and Dia Met Minerals (TSE) appears to be the front runner in the race to develop the first diamond mine in North America, De Beers is hoping to make economic discoveries of its own in Canada through its subsidiary, Monopros.

“We have started a drill program, and will be drilling five or six of our claim blocks in the Northwest Territories this year,” said Jerilynn Lamb, administrative manager for Monopros. The claim blocks are near Hardy Lake, Lake Providence, Upper Carp Lake, Salmita and Rocking Horse Lake. Lamb said this year’s drill programs are exploration-oriented, and will not involve bulk sampling, adding that Monopros has worked in every province in Canada.

“We don’t abandon our claims but stay in the various provinces because the work helps solve questions we may have. But we do shift priorities around and our priority now is the N.W.T.”

Lamb confirmed that Monopros has acquired considerable ground on Victoria Island, in the High Arctic. The company is also involved in a joint venture in Saskatchewan’s Fort a la Corne region, with partners Cameco (TSE) and Uranerz Exploration and Mining. Monopros will have acquired a one-third participating interest by the end of 1994.

Roland Loewer, communications manager for Uranerz, said the partners plan to resume drilling this May, as a large number of targets remain untested. “The work will be similar to what we’ve done in the past,” he said. “Although we’ve been drilling here for several years, we are still at an early exploration stage.”

Results from last year’s drilling were not as good as hoped. The program consisted of 34 holes in 18 kimberlite bodies, eight of which were previously untested. A total of 2.34 carats (63 macrodiamonds greater than 1 mm in size) were recovered from samples representing a total of 243 tonnes of kimberlite. Because the number of recovered stones was so small, estimates on the quality of the diamonds were not undertaken.

The projected macrodiamond grades for the 33 individual bodies, drill-tested between 1989 and 1993, range up to a maximum of 6.3 carats per hundred tons. Although based on limited sampling which is statistically unrepresentative, the projected grades are below world averages for economic deposits. The bodies range from 2 to 70 hectares in size. Some were tested with one hole; others with up to 20 holes.

Farther afield, De Beers is carrying out large-scale prospecting in southern and eastern Africa, Australia and South America. It also opened a new mine, Venetia, in August, 1992. The operation produced 2 million carats in 1992 and will become the largest diamond producer in South Africa when it attains full production in the mid-1990s. Venetia is of strategic importance in that De Beers believes its ability to stabilize the market during difficult times is tied to its status (together with its partners) as the world’s largest producer of gem diamonds by value.

At the turn of the century, De Beers was the sole diamond producer. But its share of production has declined steadily since then. Today the corporation is linked to about half of world production (by value), after taking into account its joint venture with the government of Botswana.

The Russian Federation represents the most important sales contract De Beers has among its non-group producers that market through CSO. That contract comes up for review in 1995 and it appears the Russians are still debating the pros and cons of trying to market more production independently. As for De Beers, its position is no secret.

“We like exclusive contracts,” said Roger van Eeghen, spokesman for De Beers-Centenary, adding that an office was recently opened in Moscow to explain to Russian politicians, press and the public the advantages of the CSO system of centralized marketing.

“The CSO is not the monopolistic company that people think,” van Eeghen said. “It is becoming more of a producers’ co-operative that lends itself to the goals and objectives (value-added) of the producing countries.” As an example, van Eeghen said Botswana went from being one of the poorest African nations to one of the richest, largely because of its diamond industry partnership with De Beers. Angola was cited as the less fortunate counterpoint.

So far, De Beers has not held formal negotiations with any potential Canadian producers, although some preliminary discussions are believed to have taken place. Some diamond experts speculate Russian and Canadian producers will have growing influence over the diamond industry in coming years. As a result, speculation is growing that the CSO may evolve from a De Beers-dominated organization to one where non-group producers are allowed more representation.

“We will have to see how our contractual arrangements go over the next few years,” van Eeghen said. “The CSO has worked well for over 60 years, and we believe it can continue to serve the diamond industry well into the future.”