Answers: 2016 Diamond Industry Quiz

Here are the answers to the 2016 diamond industry quiz:

1. In what country was the world’s largest lab-created gem-quality blue diamond produced this year?

A. U.S.

B. China

C. Russia

St. Petersburg Russia’s New Diamond Technology (private) produced the 5-carat HPHT stone which debuted at Basel World 2016 in March.

2. What Canadian diamond mine was impacted by a processing plant fire in June that disrupted Q3 production?

A. Diavik

B. Ekati

C. Victor

Dominion Diamond’s (TSX: DDC) Ekati processing plant sustained a fire on June 23rd which damaged the plant’s de-gritting circuit and related components. The shutdown impacted almost 1 million carats of production in 2016. The plant was restarted on September 21st.

3. What was the high bid for the 1,109 carat Lesedi La Rona rough diamond at Sotheby’s June auction in London?

A. $53 million

B. $61 million

C. $75 million

The second largest gem-quality diamond ever discovered failed to sell as the >$70M reserve price was not met. The stone is expected to be sold by owner Lucara Diamond Corp (TSX: LUC) in 2017 via private sale.

4. What is the name of Quebec’s first diamond mine that commenced production in October?

A. Gahcho Kué

B. Renard

C. Snap Lake

Stornoway Diamond’s (TSX: SWY) Renard mine began initial production in October and achieved commercial production in December. Renard is one of two world-class Canadian mines to commence production in 2016, the other is De Beers'/Mountain Province Diamond's (TSX: MPV) Gahcho Kué mine in the Northwest Territories.

5. Lukoil sold its 4.5 million carat/year Grib diamond mine to which company?

A. ALROSA

B. Otkritie

C. Rosneft

Russian integrated oil major Lukoil sold its Grib diamond mine to Russian diversified financial service company Otkritie Holding Group for $1.45B on December 2nd.

6. What was the Diamond Producers Association’s approximate initial annual budget to fund its “Real is a Diamond” marketing campaign?

A. $6M

B. $28M

C. $72M

The recently formed DPA is financed by the world's largest diamond producers and aims to reinstate generic diamond marketing with its initial $6M budget. De Beers spent as much as $200M annually to fund its “A Diamond is Forever” campaign up until 2008.

7. In what month did Rio Tinto’s CEO Jean-Sebastien Jacques indicate that diamonds are a priority area of growth for the company on Bloomberg TV?

A. February

B. September

C. December

On December 6th, Rio’s chief executive acknowledged that they would like to have more diamond assets in their portfolio. Rio currently only has two diamond assets, the Argyle mine in Australia, and 60% of the Diavik mine in Canada.

8. What company postponed it’s December auction as a result of India’s cash shortage?

A. Gemfields

B. Gem Diamonds

C. Lucara

On December 1st, integrated precious gem company, Gemfields (LSE: GEM), rescheduled its December emerald auction for February because of demand concerns resulting from India’s demonetization.

9. Why did Diamond Corp have to halt production at its Lace mine in November?

A. Rain

B. Power shortage

C. Labor strike

On November 14th, DiamondCorp, operator of the Lace Mine in South Africa, announced suspension of mining operations following 90mm of rain in just over an hour, which equates to almost 1/3 of the mine's typical total annual rainfall. Production is expected to be halted for at least 3 months. Lace was estimated to produced over 200k carats of diamonds this year.

10. How much was De Beers’ parent Anglo American’s stock up in 2016 (through Dec 23rd)?

A. 12%

B. 113%

C. 305%

After making a multiyear low in January, Anglo stock is up 305% in 2016 as of December 23rd (from 277 GBp to 1,125 GBp). Last year the diversified miner restructured the company making diamonds a priority asset, while divesting iron ore, nickel, and coal assets.

11. What denomination notes were removed from circulation in India in November?

A. ₹100 and ₹500

B. ₹500 and ₹1,000

C. ₹1,000 and ₹2,000

The ₹500 and ₹1,000 notes were India’s highest denomination bank notes and were rendered invalid by the Indian government on November 8th in an effort to fight money laundering and black market dealings. The diamond manufacturing business in India is highly dependent on cash, and the move has already impacted diamond demand, especially for smaller lower quality goods.

12. What U.S. retailer stopped carrying lab-grown diamonds this year after an unsuccessful initial trial?

A. Jared the Galleria of Jewelry

B. Helzberg Diamonds

C. Zales

In October JCK’s Rob Bates reported that the Berkshire Hathaway (NYSE: BRK-A) owned retailer with over 200 locations decided to not move forward with a test program selling white lab-created diamonds.

13. In what city did ALROSA build a diamond trading center to target Asian customers?

A. Vladivostok

B. Krasnoyarsk

C. Novosibirsk

In September, ALROSA announced the opening of the Eurasian Diamond Centre in Vladivostok aimed at catering to the company’s Asia-Pacific clients. Vladivostok is a peninsula in South-east Russia not far from the county’s boarder with China and North Korea.

14. What world-class diamond development project did Rio Tinto walk away from in August?

A. Grasberg

B. Oyu Tolgoi

C. Bunder

In August Rio Tinto said it would shut operations at it’s Bunder project in India. Bunder was an estimated $500M capex project, with the potential to produce 27M carats over an estimated mine life of 30+ years. Rio had spend almost $100M on Bunder development over the last 14 years, but the difficult permitting process ultimately led to Rio giving up on the project.

15. In August, Tiffany & Co. said online revenue currently accounts for what percentage of the company’s sales?

A. <2%

B. 6%

C. 14%

Indicating the challenge of attracting younger customers who are more likely to shop online, the company said web sales still only represents about 6% of company revenue.

16. Marange diamond production in 2016 should be closest to?

A. <2M carats

B. 6-8M carats

C. 10-12M carats

Production at the alluvial diamond fields in eastern Zimbabwe with a soiled history of civil rights abuse, and illegal production and trade is likely to fall to less than 2 million carats this year as the government nationalized mining and the mines reach economic depletion. The mines produced as much as an estimated 17 million carats as recently as 3 years ago.

17. Chinese super-retailer Chow Tai Fook opened its first location in the U.S. in November by partnering with which U.S. department store?

A. Nordstrom

B. Macy’s

C. Neiman Marcus

On November 12th, Chow Tai Fook opened a 500-square foot store inside of a Macy’s (NYSE: M) in Queens, New York. The company has over 2,300 stores in Greater China.

18. In April, what country did ALROSA indicate has the most potential for new diamond discoveries?

A. Angola

B. Canada

C. Russia

ALROSA noted that it sees Angola as the nation with the most upside potential for new discoveries because it has been under-explored relative to other diamond rich locations in the world. The company is currently partnered with Endiama, Angola’s state-run diamond miner, on the Catoca mine, which is estimated to produce 6.5M carats of diamonds this year worth $550M.

19. In March Endiama, Angola’s state-run diamond miner, said that it’s Luachi project could host approximately how many carats?

A. 125 million

B. 200 million

C. 350 million

In March, Endiama said its Luachi, also referred to as Luaxe, discovery could host as much as 350M carats with the capacity to produce up to 12M carats annually, which would make it one of the most important diamond mines in the world. The company said it plans to spend up to $800M over six years to build the mine, with initial production to commence as early as 2018, although very few official details on the project have been formally released.

20. De Beers 2016 sales volume (in dollars) increased by how much compared to 2015?

A. 28%

B. 36%

C. 61%

De Beers produced $5.6B in diamond sales this year, which is up 61% year-over-year, but still down 13% vs. 2014.

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Disclosure: At the time of writing Paul Zimnisky held a long covered-call position in Dominion Diamond Corp.