Canadian Diamond Production Estimated to More than Double in Next 4 Years
With Gahcho Kué and Renard now officially in construction phase, I think it's fair to say that in 4 years time Canadian diamond production will look significantly different than it does today.
In July, Stornoway Diamonds (TSX: SWY) completed a C$964 million financing package to fund construction of Renard. In September, Mountain Province Diamonds (TSX: MPV) closed a C$100 million equity financing and is in the final stages of arranging US$370 million in debt to fund its portion of Gahcho Kué’s capital expenditure.
Canada currently represents an estimated 14.2% of the world diamond production in value, and 8.7% in carat volume. The two new mines, set to commence production in 2016/2017, are estimated to boost Canada's global market share to 25.2% in value, and 15.1% in volume by 2018, which would give Canada the highest compound annual growth rate of production (20.2% in value and 17.4% in volume) among the worlds 8 largest diamond producing nations over the next 4 years.
Outside of Canada, there are only 3 other large-scale commercial mines scheduled to commence operations within the next 4 years: Lace, Botuobinskaya, and Bunder, all of which have annual production profiles that are below that of both Gahcho Kué and Renard.
DiamondCorp’s (LSE: DCP) fully financed Lace project in South Africa is estimated to produce up to 500,000 carats annually, with first ROM production slated for late next year. Laurelton Diamonds, a wholly owned subsidiary of Tiffany & Co, has an offtake agreement in place for the projects proposed 30 years of production. Lace has a history of producing approximately 750,000 carats from 1901 to 1931 until the Great Depression rendered the mine uneconomic.
ALROSA’s (RTS: ALRS) Botuobinskaya mine is nearing construction completion, and first mining is planned for the middle of next year. Botuobinskaya is estimated to produce 1.5 million carats annually in Russia’s Sakha region of Northeastern Siberia, and has a resource of over 70 million contained carats.
Rio Tinto’s (LSE: RIO) Bunder project represents the first diamond discovery in India in 40 years. Bunder could be in production by 2017, with a production profile of 700,000 carats annually, and a resource of 27 million carats.
LUKoil’s (RTS: LKOH) Grib mine, which commenced production this summer, and ALROSA’s Karpinskogo, mine which commenced production in October, are the first two non-alluvial diamond mines with annual production of greater than 1 million carats to be put into production since Canada’s Diavik mine went online back in 2003. Both mines are located in Russia, and have annual production profiles of 4.0 million and 2.2 million carats, respectively.
As Gahcho Kué and Renard are being constructed, some of the largest mines in the world are reaching exhaustion. In Botswana, Orapa and Jwaneng, arguably the world’s two most important diamond mines (mines with 50+ year lives), have less than 15 years of production left at current economics.
In Australia, the Ellendale mine, which is the largest producer of fancy yellow diamonds in the world, is set to go on care-and-maintenance by year-end as the mine’s economic ore has been exhausted.
At the alluvial Marange fields in Zimbabwe, a site estimated to produce 8 million carats of diamonds this year, most of the easily accessible loose surface gravel has been mined leaving hard conglomerate rock requiring additional capital expenditure to continue operations, an investment that most of the miners there have indicated that they will not make.
Its worth noting that in addition to Gahcho Kué and Renard commencing production in the next 4 years, an additional boost to Canadian production will come from Ekati where a new mine plan is estimated to take production from 2.2 million carats annually worth US$630 million, to 5.9 million carats worth US$1.2 billion, by 2018. The primary source of additional production will come from Ekati’s Misery pipe. Ekati is majority owned by Dominion Diamond Corp (TSX: DDC), which upped its stake in the mine to 90% in July.
At the time of writing, the author held a long position in Stornoway Diamond Corp, the owner of the Renard project.