Diamond Hunt Gets Deeper
The demand for diamonds and diamond jewellery is on the rise. But since few of the famous diamond mines across the globe will reportedly run out of diamond deposits in the next decade, the hunt for the new mines are therefore going on in full steam. So, what’s the progress on that front? Here’s the full report by Praveer Sinha.
It is a known fact that the diamond mines have a life depending on its geographical location and the type of mining methods applied to extract rough diamonds. Moreover, these natural constraints represent a long-term problem in the form of depleting rough output.
Rough diamond production is expected to continue falling as new projects and expansions fail to replace lost output from closing mines. By 2030, several large mines will reach the end of their life, while only a few new projects are in the pipeline.
In its diamond-industry report, Bain & Co. said that some of the world’s biggest mines are expected to run dry by 2030. De Beers too have estimated that the global rough diamond output will fall by 1 per cent to 2 per cent a year until 2030. In fact, the scenario will further aggravate by 2050 when only 14 million carats of global rough diamond production is predicted by Frost & Sullivan.
“Rough diamond production is expected to continue falling as new projects and expansions fail to replace lost output from closing mines. By 2030, several large mines will reach the end of their life, while only a few new projects are in the pipeline.”
Dwindling rough supply
Diamonds are formed hundreds of kilometres beneath the Earth’s crust in carrot-shaped pipes known as kimberlites. However, finding a kimberlite is no guarantee of finding the diamonds. According to De Beers, of the more than 6,000 kimberlite pipes that have been tested over the last 140 years, only 60 have been worthwhile mining. Out of those 60, mere seven have been super deposits, capable of moving the supply needle.
In the past two decades, the world has produced more diamonds that it had in all of history. In 1872, the global rough diamond production was just one million carats, which peaked to a whopping 176.7 million carats in 2006. Since then, the global annual diamond output has dropped by 20-30 per cent off this peak. In 2016, the global rough diamond production from mines was 127 million carats. Lately, in 2017 the total production surged by 19 per cent to 150.9 million carats and as per estimates, the production will decline by 2.5 per cent to 149 million carats in 2018.
“Of the more than 6,000 kimberlite pipes that have been tested over the last 140 years, only 60 have been worthwhile mining. Out of those 60, mere seven have been super deposits, capable of moving the supply needle.”
Rising global consumer demand
On the contrary, the demand for rough diamond globally has seen a steady rise. The US, which represents the largest share of global jewellery sales, continues to grow consistently in terms of demand. The growing middle class in China and India has given a significant boost to the demand of diamond jewellery in the recent years.
De Beers last month reported that the global consumer demand for diamond jewellery increased by two per cent in 2017 to US$ 82 billion, due to sustained robust growth in the US and a return to growth in US dollar terms in China. Moreover, as per estimates, this steady increase in demand for rough diamonds globally will lead to shortage of an estimated 248 million carats by 2050. A 41 million carats gap by 2022 is forecasted by Frost & Sullivan itself.
Mines approaching end of life
Nearly all of the world’s annual output (99 per cent) of diamonds from mines, alluvial diamond fields and marine operations can be attributed to top nine producer countries – Russia, Botswana, DRC, Australia, Canada, Zimbabwe, Angola, South Africa and Namibia.
Several mines that currently supply 29 million carats a year are expected to be fully depleted by 2030. De Beers’ Victor mine in Ontario is currently in its last year of production. Alrosa’s Komsomolskaya mine will run out of diamond deposit by 2021. De Beers’ Voorspoed mine and Petra Diamonds’ Koffiefontein mine, which has a total diamond resource of 5.7 million carats, have reserves for only five years till 2023.
Dominion Diamond’s Ekati mine in Canada with Koala, Lynx, Misery, Pigeon and Sable active mined pipes, have a mining life till 2024. Dominion’s other mine, Diavik – situated 300 kilometres north of Yellowknife, in the Northwest Territories of Canada, is slated to be depleted by 2025 after years of open-pit excavations. Diavik mine, which is 60 per cent owned by Rio Tinto, was discovered in the late 1990s.
Moreover, Rio Tinto’s Argyle mine in Australia is expected to stop producing diamonds after 2020, immediately reducing annual global supply of diamonds by 15 per cent. This mine, which accounts for over 90 per cent of the global supply of pink diamonds, will be largely depleted within the next decade.
New projects to come to rescue
In pursuit of new diamond output to tap the rising demand, miners are now exploring diamond projects in Canada, Siberia and Central Africa as the mines in Botswana, South Africa and Namibia are depleting.
Three large new mines, Gahcho Kué – owned jointly by Mountain Province Diamonds and De Beers; Renard – operated by Stornoway in Canada and Liqhobong – run by Firestone Diamonds in Lesotho, started production in 2016. At their peak, their combined production is expected to exceed eight million carats per year and offset declining production in depleting mines. Moreover, Dominion’s newly discovered kimberlite pipe – Jay, has the capacity to extend Ekati mine production from 2024 to 2034.
“The newly discovered mines, which have started production in 2016, have added seven million carats a year to the total diamond production. As per estimates, new explorations projects could add 26 million carats to the declining supply from the existing mine.”
In May 2018, Alrosa, jointly with Endiama, invested about US$ 500-700 millon at Luaxe mining project in Angola. Discovered in 2013, the project has diamond reserves evaluated at 350 million carats and a mining lifespan of 30 years, with the potential to produce over 10 million carats annually.
A handful of other pre-development stage diamond projects globally with large commercial-scale potential are Shore Gold’s Star-Orion South diamond project, De Beers Canada’s Chidliak project; North Arrow Mineral’s Naujaat diamond exploration project in Canada and Bunder diamond mine in Madhya Pradesh, India.
While, Star-Orion South diamond project has a project life of 38-year with 66 million carats of diamonds, Chidliak project has a mine life of 13-year with its two kimberlites, out of the 74 kimberlites, could generate output of 16.7 million carats. North Arrow’s Q1-4 kimberlite at Naujaat hosts an inferred resource of 26.1 million carats from 48.8 million tonnes of material included in the estimate.
Similarly, Gem Diamonds’ Ghaghoo mines, the first underground mine in Botswana, has two kimberlite pipes, GO25 and GO136, of which GO25 is expected to host more than 100 million tonnes of diamonds. Other new diamond projects include: Alrosa’s Karpinsky’s 1; Diamond Corp’s Lace; Otkritie’s Grib diamond mine, Koidu Holdings’ Koidu project and Namakwa Diamonds’ Kao project.
The newly discovered mines, which have started production in 2016, have added seven million carats a year to the total diamond production. As per estimates, new explorations projects could add 26 million carats to the declining supply from the existing mine.
Quite obviously, with the easier diamond sources have probably been found, miners hope to extend well into the future with these new explorations. As the hunt for diamonds becomes deeper, mining companies are going to greater lengths to secure uninterrupted supply of diamonds.