Global mined diamond production to increase, or will it?

Diamond Production
[Image Courtesy: Ruslan Akhmetsaphin, ALROSA, Mining.com]

While it is known that majority of diamond mines are depleting fast and nearing their end of life with a dwindling rough supply in past few years, recent news stories may give an impression that enough traction is happening that may lead to increase in global mined diamond production. However, a look at the comprehensive scenario may form a differing interpretation. Let’s first consider the various events happening with mined diamond production.

 

 

De Beers’ Debswana to increase life of Jwaneng mine in Botswana

 

De Beers is saving the world’s eighth largest and richest mine – Jwaneng diamond mine in Botswana from going into slumber. Jwaneng mine, a 50-50 JV between Botswana government and De Beers’ Debswana Diamond Company, and which also contributes almost 70% of partnership’s revenue, is being revived to extend the life of mine till 2035. The venture called the Cut-9 project, is expected to produce additional 53 million carats of diamonds till end of life. To enable the same, Debswana has already awarded a $ 1.2 Bn contract to Majwe Mining to provide diamond mining services, and at its peak is expected to create more than 1,000 jobs. Debswana will invest around $ 2 Bn over the life of project, for extension of the Jwaneng mine. In November 2018, the company already completed Cut-8 project – a $3 Bn 10 year long expansion plan extending the life of mine to 2024.

 

 

Debswana is targeting 24 Mn carats diamond output in 2019

 

In 2018, Botswana’s Debswana Diamond Mining increased diamond outputs by 6% to 24.1 million carats – a four year high. In 2019 also, the company is aiming to keep the diamond production level constant at around 24 million carats.

 

 

Chinese companies set to return to Zimbabwe’s diamond fields

 

Almost three years after former president Robert Mugabe expelled Chinese company Anjin along with Mbada diamonds on looting allegations and grounds of special grant licenses expiring, Zimbabwe government under the new President – Emmerson Mnangagwa, is bringing Chinese companies back along with Russia’s Alrosa to Chiadzwa diamond fields. They will be entering into partnerships with Zimbabwe Consolidated Diamond Company (ZCDC) to help in achieving government’s target of $ 400 Mn revenue by 2019. This development came after neighboring Botswana passed on an offer to do the same.

 

 

Lucapa Diamond Company increases resource at Lulo diamond mine by 90%

 

Cape Town, South Africa-based Z Star Mineral Resource Consultants has updated the 31st May 2017 diamond resource of Lulo Diamond mine in Angola, owned by Lucapa Diamond Company, on depletion and addition basis as at 31st December 2018. The new estimate increases the Lulo mine’s diamond resources by 90% to in-situ 80,400 carats. This total resource is more than four times Lulo’s 2018 production of 19,196 carats. Z Star has also increased Lulo’s diamond resource value from $ 1,215 per carat to $ 1,420 per carat.

 

 

Alrosa is contemplating restoration option of Mir underground diamond mine, and looking for controlling stake to mine in Zimbabwe

 

Russia’s Alrosa is contemplating a restoration option of the currently suspended Mir underground mine. To confirm the mine’s reserves, deep level exploration will be required down to -1,300 m. Costing around $ 31 mn, the activities are scheduled to be completed by 2022. Based on exploration results, Alrosa will drill pilot holes to start preparing deposit opening design documents, which may be completed by 2024. In case this fails, Alrosa may also choose full closure of Mir underground mine.

 

Besides, the company will also be assessing diamond reserves quality in Zimbabwe, which is trying to attract investments by scrapping restrictive legislations of foreign companies, over the next six months and will start mining if it is able to take a majority stake in such projects.

 

 

Alrosa estimates its diamond resources at over 1 billion carats

 

Micon’s independent experts estimated Alrosa’s diamond resources at 1,064 million carats and reserves at 628 million carats as of July 1, 2018. Published in an updated estimate in JORC (Joint Ore Reserves Committee) Code-compliant report, Micon excluded operations of Catoca Ltd. Mining Co. in Angola where Alrosa has a 32.8% stake and also the reserves of Mir underground mine in eastern Siberia where operations are suspended since August 2017 after water flooding incident trapped 151 people.

 

In a separate report, Alrosa reported 8% YoY dip in sales volume but increase in sales value by 6% to $ 4.4 billion driven by stronger pricing and better sales mix. The company’s 2018 financial results also reported a 15% increase in net profits to $ 1.38 Bn.

 

 

 

Anyone going through these stories may form an impression that global diamond mining production is rebounding. However, there is more than meets the eye. After its peak in 2006 at 176 million carats, the global diamond production has fallen significantly till last year.

 

Diamond Production
[Image Courtesy: Kimberley Process, Panmure Gordon, Bloomberg]

 

2 separate reports forecast that diamond supply will fall into a deficit by around 2021. Panmure’s Kieron Hodgson mentioned a 15 million carat deficit, or around 10% of global supply, by 2021. However, despite this, according to Berenberg an Industry analyst, miners will still have to wait for recovery of diamond prices, which will remain flat for another two years, followed by meagre 1% gain in 2021.

 

A closer look at the above stories about mined diamond production reveals that even if all the plan materializes, it will have a limited impact. While other factors like exhausting diamond mines and many reaching their end of life soon, no new mines coming up because of economic unviability, mines going underground that yields fewer diamonds and associated with high operating costs, declining production etc. indicating that diamonds will run out sooner than you think, still holds true.

 

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