Upcoming Diamond Projects - Promising Exploration Projects

Thus far in our current series, we have looked at some of the recent diamond mining projects to come online. These projects will be important for the continuation of supply of rough diamonds to the market, as older mines reach the end of their productive life in the coming decade.

Upcoming Diamond Projects - Promising Exploration Projects

Thus far in our current series, we have looked at some of the recent diamond mining projects to come online. These projects will be important for the continuation of supply of rough diamonds to the market, as older mines reach the end of their productive life in the coming decade. 

Perhaps not since the Diavik mine opened in 2002 has the world seen the discovery of a ‘super-pit’ diamond resource. However, the cumulative impact of many smaller projects will aid in keeping supply at a reasonable level to satisfy demand. Yet, the probable end of the Argyle mine in Australia will send shockwaves through the market, with nothing in sight on a similar scale to replace it.

There are still numerous prospective mines around the world that have the potential to contribute to the supply of rough diamonds, as long as those mines can find a willing operator and the needed financing to get them started. In the final article of this series, I will look at some of the better prospective diamond mining projects around the world that may begin to produce in the years to come.

Chidliak - Peregrine Diamonds - Canada

The Chidliak project is one of the world’s largest prospective projects in the feasibility stage. It is located in northern Canada, on the remote Baffin Island in the territory of Nunavut. The property has great potential, with 74 kimberlites discovered to date, and eight of them being investigated for their economic diamond potential.

The property is 100 percent owned by Peregrine Diamonds Ltd. The flagship deposit, known as CH-6, has been shown to have a high grade of 2.58 carats per tonne, and a modelled average price of $149 per carat. The property boasts another high-value kimberlite, CH-7, which also shows economic potential. The company released a preliminary economic assessment in July of 2016, which showed a potential to produce an average of 1.2 million carats per year over a 10-year mine life. This includes just the CH-6 and CH-7 deposits to a relatively shallow depth, so there is more potential to expand the known resource of the project.

Like many projects in the remote Canadian north, Chidliak would be expensive to build and to mine, and would be contingent on significant infrastructure projects, including a 160 km all-weather road to be built to connect the mine to Nunavut’s capital city Iqaluit. The Canadian government has announced plans to build a modern port on the island as part of the country’s efforts to better control its Arctic shipping lanes. This port will be critical to the project’s success, by simplifying and lowering the cost of delivering supplies to the remote island. The port is scheduled for completion by 2020. The company estimates a capital requirement of about $330 million to build the mine, and is currently seeking a financing deal for the development. Peregrine trades on the Toronto Stock Exchange under the trading symbol T.PGD.

Bunder - India

In August 2016, Rio Tinto announced that it was walking away from its Bunder diamond asset in the Indian state of Madhya Pradesh, after years of struggle to obtain appropriate permits and licenses for the project. The fate of the mine remains unknown, and Rio Tinto is said to be working with local and regional governments to look for an investor to take it over.

Discovered in 2004, the mine was expected to be a significant producer of up to 3 million carats per year, and more than 34 million carats over its lifetime, according to the company’s website. Rio Tinto reportedly invested as much as $120 million to develop the project, but struggled to obtain the necessary permits from India’s environment ministry, due to the mine's perceived impact on forestry and on tiger habitats.

If another operator could be found and the required licensing obtained, Bunder would be an important producer, and possibly one that supplied only to the Indian diamond market. Throughout history, diamonds mined in India have been amongst the highest quality in the world, and India has produced some of the most storied diamonds in history.

 Mothae – Lesotho

Until late 2015, the Mothae mine in Lesotho had been 75 percent owned by Lucara Diamond Corp., and 25 percent owned by the government of Lesotho. Lucara undertook a trial mining operation between 2011 and 2013, and held four sales of Mothae diamonds in Antwerp. In 2015, the company decided to divest of the asset. After one proposed buyer failed to secure the required financing, the government of Lesotho temporarily took ownership of the mine, and has been reviewing options to sell it.

According to the country’s Minister of Mining, at least ten different companies submitted applications, and the review process is at an advanced stage. One of the major challenges of diamond mining in Lesotho is acquiring sufficient power in the remote mountainous location. Since there are other diamond mines in the area, it is possible that the preferred buyer will be another operator who can supply Mothae’s power needs with a much smaller infrastructure investment. According to the government, the resource at Mothae contains over a million carats. However, diamonds in this region can often be very large, with a very high average value per carat.

Star-Orion – Shore Gold – Canada

The Star-Orion South Diamond Project is located in the Canadian province of Saskatchewan, within the Fort à la Corne provincial forest. It is a massive deposit covering 352 hectares, clustered with numerous diamondiferous kimberlites with a combined indicated and inferred resource of 67 million carats. It is a complex operation that has so far not been developed, more than 20 years after its initial discovery.

Although it is located within a mining friendly area with access to year round roads and all the necessary power and infrastructure, the deposit itself is difficult and costly to mine because of the geology. The kimberlites in the area are much flatter than the typical carrot-shaped ore bodies that are well suited to open-pit mining. This means that the open pit must be truly enormous to capture all the ore. In addition, there is a significant layer of overburden that sits on top of the pipes, ranging in depth from 90 meters to over 300 meters. That means a lengthy stripping period before any revenue can be achieved.

Shore Gold, the majority owner in the project, has estimated a capital cost of $1.6 billion to build the mine. The deposit has yielded some very interesting diamonds in bulk sampling, including large diamonds weighing 46 carats, 33 carats, and others with average prices in excess of $15,000 per carat. The mine is currently in the process of obtaining all the necessary permits and environmental licenses, although a financing deal has not yet been announced. Shore Gold trades on the Toronto Stock Exchange under the trading symbol T.SGF.

Looking beyond

There are a few other small projects around the world that could be interesting to a small company or group of private investors. However, there has not been a major new diamond discovery in many years, and these projects can take up to 20 years to develop after they are discovered. For years now, major producers have been supplying more rough stones than the polished market can absorb, and new technologies have improved production. Natural diamonds are a finite resource and although numerous mines have managed to extend their lifespans, they will eventually run out, and the supply gap in rough will be real. As to when this becomes reality, only time will tell.

 The views expressed here are solely those of the author in his private capacity. No one should act upon any opinion or information in this website without consulting a professional qualified adviser.