Global diamond output by value expected to shrink 10%
Despite efforts by diamond majors De Beers and Rio Tinto to curb global diamond sup- plies, lower output is forecast to be offset by stable Russian production, new mines and production increases by Dominion Diamond Corp and Petra Diamonds, according to independent industry analyst and consultant Paul Zimnisky.
In a report published lat week, Zimnisky stated that he expected 2016 global diamond produc- tion by volume to grow by 1.3% year-on-year to 137-million carats, despite De Beers’ and Rio’s efforts.
However, the impact of strategic production cuts was more apparent on a value-produced basis, as curtailments at De Beers’ high-value mines in particular and lower diamond price offerings across the industry reduced global diamond production-by-value forecasts by 10%, over 2015 estimates, to $12.6-billion in 2016.
The average price per carat was estimated to be $92 in 2016.
Zimnisky noted that industry leader De Beers, representing more than 30% of global market share, strategically reduced output at multiple mines in 2015 and completely suspended produc-tion at others, cutting total output by about 7% in 2015 to 29-million carats.
As tailings operations offer the greatest opera-ting flexibility, De Beers strategically reduced tailings production at Orapa, in Botswana, last year before reducing production at Venetia, in South Africa, and offshore operations in Namibia. It also put Snap Lake, in Canada, and Damtshaa, in Botswana, on care and maintenance in an effort to balance global diamond supply and demand.
De Beers also sold its South African Kimberley tailings mine and related operations in December for $7.2-million to a joint venture between Petra Diamonds and private firm Ekapa Mining.
De Beers was targeting 26-million to 28-million carats in 2016, compared with 29-million in 2015 and 33-million in 2014, less 6.9% and 18.2%, respectively.
Production While De Beers cut production, Russian miner Alrosa, which had a similar market share, increased output in 2015 by 6% year-on-year to 38-million carats. Instead of reducing production, Alrosa held back supply by only selling 78% of 2015 production.
Production at the company’s largest mine, Jubilee, which represents about 25% of the company’s output, increased 3.1%, as higher grade was achieved at the orebody’s central lobe. Production decreased at the company’s second-largest mine, Nyurbinskaya, as the mine’s processing plant was shared with ore from the Botuobinskaya mine and the Nyurbinskaya placer operations.
Zimnisky said that Alrosa had indicated that it did not plan to reduce production unless market conditions became substantially worse. The company was targeting production growth going forward, with an average output of about 40-million carats a year being the norm over the next decade.
Rio Tinto’s ’s Argyle mine, in Australia – the world’s largest diamond mine by production volume – realised a bigger-than-45% year-on-year production increase in 2015, after completing a multiyear underground mine development project despite strategically halting processing in December in an effort to “manage inventory levels” in a softer global diamond market. Argyle produced 13.5-million carats in 2015, compared with 9.2-million carats in 2014.
In June 2015, Rio sold its 78% stake in Murowa mine, in Zimbabwe, to partner with RioZim (private), which now owns 100% of the mine. A new diamond mining tax structure in Zimbabwe and concerns of forced government consolidation of the country’s diamond miners most likely influenced the company’s decision to leave the country, Zimnisky said.
Rio now only held two operating diamond mines, 100% of Argyle and 60% of Diavik, in Canada. The company was targeting 21-million carats in 2016.
Dominion Diamond is Rio’s 40:60 partner in the Diavik mine, which has four kimberlite pipes, three of which are in operation. The fourth pipe, A-21, has a ten-million-carat reserve and is being developed for $400-million, with first production slated for late 2018. In 2015, Diavik produced 6.4-million carats, which was down 11.5% year-on-year, owing to processing plant pauses in the fourth quarter and the absence of stockpiled ore, relative to 2014.
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