Six Canadian-listed diamond companies poised to prosper as market recovers

Whether they’re producers, developers or explorers, Canadian-listed diamond companies are a tough lot. Those that have survived the disruptions of the pandemic — and the soft diamond market that preceded it — may be in an excellent position to capitalize on the diamond recovery and lower supply and recent closure of Rio Tinto’s Argyle mine in Australia. Here are six companies that are actively exploring or mining diamonds – at home and elsewhere.

Arctic Star Exploration

Arctic Star Exploration (TSXV: ADD) has enjoyed exploration success in the Northwest Territories’ prolific Lac de Gras kimberlite field this year, discovering five kimberlites at the Diagras project.

The project also hosts 23 kimberlites discovered by De Beers in the 1990s.

Four of the five new kimberlites are diamond-bearing (the company did not sample the fifth, small dyke-like intercept). The Sequoia kimberlite complex has been identified as the most promising in terms of diamond counts and dimensions. It has a geophysical signature up to 1,000 metres long and 300 metres wide. Caustic fusion results from the spring drilling program returned 499 diamonds from a 505.3-kg sample from Sequoia — or 99.8 stones per 100 kg. That compares with 20 or fewer stones per 100 kg in samples recovered from the other kimberlites. Arctic star says the results, along with Sequoia’s diamond indicator chemistry, suggest the presence of large diamonds.

Arctic Star is conducting a fall airborne EM survey of the 483.5-sq.-km property, which it recently doubled in size through staking, and plans to conduct further diamond studies. Based on the results of the survey, it’s also planning a spring 2022 program that will include definition drilling at Sequoia to get an initial idea of its grade and tonnage potential.

Diagras is a joint venture with Margaret Lake Resources (TSXV: DIA), which previously held 60% of the project. As part of a shift in focus away from diamonds, the junior has not contributed its share of funding for this year’s $2.1-million program and has been diluted to a holding of 18.5%. Once its stake is diluted below 10%, it will be converted to a gross overriding royalty (GOR) of 1%.

Arctic Star holds several projects, including a 100% interest in the Timantti diamond project in Finland.

Diamcor Mining

Diamcor Mining (TSXV: DMI) completed phase one upgrades to its Krone Endora project in South Africa in September. The work, including upgrades to the operation’s material handling and diamond concentration systems plus a new electronic diamond X-ray recovery unit, is aimed at doubling processing volumes at the project to provide revenue for a second, larger phase of upgrades.

The upgrades had been delayed by the onset of the Covid-19 pandemic and restarted in May this year. Now that it is complete, Diamcor plans to start its second phase shortly and finish up in mid-2022.

The upcoming work will see Diamcor consolidate its facilities to further increase throughput, reduce the project’s overall processing footprint and unit costs, and reduce environmental disturbance. The company also plans to conduct drilling and bulk sampling at prospective areas, starting late this year.

In October, Diamcor completed its first sale of the quarter, with 2,516.91 carats sold for a total of US$483,422 or US$192 per carat. Two more tenders are planned for the fourth quarter.

Krone-Endora is an eluvial deposit that was formed from a direct shift of material from De Beers’ neighbouring Venetia mine. As such, it contains high-quality diamonds, but in variable, low-grade gravel material. Diamcor acquired the project in 2011 from De Beers.

Lucara Diamond

In September, Lucara Diamond (TSX: LUC) officially approved the US$534-million underground expansion of its Karowe diamond mine in Botswana. The approval came as Lucara closed the last piece of financing needed for the development — a US$170-million loan facility and a US$50-million working capital facility. The remainder of the development cost will be paid for by a combination of a previously closed $41.4-million equity financing and cash flow. The expansion, which will take about five years to complete, will extend Karowe’s mine life out to 2040.

Work began on the underground expansion earlier this year with US$64.6 million already spent by the end of September.

Lucara has benefited from a stronger diamond market in 2021. The diamond miner reported a 57% increase in revenue to US$72.7 million in its third quarter over the previous quarter. The average price per carat sold was US$619 from 117,459 carats.

A supply agreement the company struck with HB last year for the purchase of all special diamonds (10.8 carats and larger) from Karowe has also helped maintain revenue. The HB agreement, which helped secure revenue for Lucara during the pandemic, has been extended for two years.

In addition, Lucara’s Clara online sales platform continues to attract new buyers with 87 clients now using it. Lucara CEO Eira Thomas told Canadian Mining Journal last month that demand has now outstripped supply on the platform. The company is in talks with other diamond producers to add supply.

Karowe is expected to produce between 350,000 and 390,000 carats this year, generating revenue of US$195-210 million. Lucara is projecting 2022 production at 300,000 to 340,000 carats for revenue of US$185-215 million (not including revenue from exceptional large diamonds).

Mountain Province Diamond

Mountain Province Diamond (TSX: MPVD) reported its second-best quarterly revenue ever in the third quarter, with diamond sales of 1 million carats bringing in $94.2 million (US$74.1 million). Value per carat was $92 (US$72), up from $50 per carat (US$37 per carat) in last year’s third quarter. On a like-for-like basis, Mountain Province says its sales prices are now about 47% higher than its pre-Covid benchmark of February 2020. The company owns a 49% interest in the Gahcho Kué mine in the Northwest Territories, operated by 51% owner De Beers.

The mine, which produced 4.7 million carats for the first three quarters of the year, is on track to meet its full-year production guidance of between 6.3 and 6.5 million carats. The operation was shut down for 22 days in the first quarter in response to a Covid-19 outbreak.

Mountain Province appointed Mark Wall as its new president and CEO in November after Stuart Brown left the post by “mutual decision” in October. Brown had been at the helm for three years. Wall was most recently CEO of Streamers Gold Mining, a subsidiary of Shandong Gold Mining, and previously also held senior positions with Nevada Copper and Barrick Gold.

Mountain Province also recently added “strategic claims” to its 100%-owned Kennady North project, adjacent to Gahcho Kué. The project will see 2,000 metres of drilling starting early next year.

North Arrow Minerals

North Arrow Minerals (TSXV: NAR) reported that processing of a 2,000-tonne bulk sample taken from its Naujaat project in Nunavut began in October. The sample is aimed at confirming the size distribution and character of a population of fancy yellow to orange yellow diamonds hosted in the Q1-4 kimberlite at Naujaat, located near the community of the same name and near tidewater.

Results from dense media separation (DMS) processing of the sample at the Saskatchewan Research Council lab in Saskatoon will be reported in stages as processing of each of five subsamples is completed.

The kimberlite hosts an inferred resource of 26.1 million carats in 48.8 million tonnes grading 53.6 carats per hundred tonnes down to a depth of 205 metres depth.

Perth-based Burgundy Diamond Mines (ASX: BDM) is funding the $5.6-million bulk-sample program in return for a 40% interest in the project. Under an agreement signed last year, Burgundy can earn another 20% in Naujaat by funding a 10,000-tonne bulk sample.

This fall, North Arrow also completed a till sample of its Pikoo project, 140 km east of La Ronge, Saskatchewan, where the company has discovered 10 kimberlites, including the diamond-bearing PK150 kimberlite. Results of the program will inform a 2022 exploration program and better define drill targets.

Star Diamond

Star Diamond (TSX: DIAM) is awaiting its day in court regarding the ownership of its Star-Orion South diamond project in Saskatchewan, 60 km east of Prince Albert. The junior is battling major Rio Tinto (NYSE: RIO; LSE: RIO; ASX: RIO), which in 2017 signed a four-stage option agreement to earn up to 60% of Star-Orion by spending up to $75 million over 7.5 years. Rio believes it has met the conditions under the agreement and announced in 2019 that it would exercise all four options at once and ahead of schedule. Star has argued that the option was not “validly exercised” and that Rio engaged in “predatory” practices and overspent on the project. It also argued that the work Rio has done at Star-Orion South is not complete without diamond breakage studies.

However, in June, the Court of Queen’s Bench for Saskatchewan ruled that the diamond breakage report was not required for Rio to complete the earn-in. In July, Rio called a management committee meeting of the joint venture where it approved a budget of $17.8 million for the period of June 2021 to March 2022. It also outlined $64.4 million spent between 2019-May 2021 that is attributable to the JV, meaning it expects Star to pay 40% of the cost.

Star’s interest in Star-Orion (or FalCon as Rio Tinto calls it) may be diluted if it does not contribute funding to the joint venture. At the end of September, Star had working capital of $1.1 million. The lawsuit settling the issue is expected to be heard by a court next year.

According to a 2018 preliminary economic assessment, Star-Orion would cost $1.4 billion to build and would produce 66 million carats over a mine life of 34 years. The large, low-grade project contains high-value large diamonds and rare Type IIa stones. A 10-hole bulk sample program conducted by Rio Tinto at the Star kimberlite has improved confidence in the grade of the project.

A spokesperson for Rio Tinto said that activity into the first half of 2022 will focus on technical studies to investigate options for optimal mining methods and maintaining the site.