TORONTO (miningweekly.com) - Vancouver-based Stornoway Diamonds wants to become a two-million-carat-a-year producer, CEO Matt Manson said this week.

The company still plans to decide whether or not to build its flagship Renard mine in Quebec by the end of 2011, with first production then following two years later.

Should Renard reach the two-million carat mark, it would the third biggest diamond mine in Canada.

BHP Billiton’s Ekati mine produces some three-million ct/y, while Rio Tinto and Harry Winston’s Diavik mine produces around nine-million carats yearly.

Stornoway said in a statement on Tuesday that recent evidence suggests diamond size and content at one of the kimblites at Renard, dubbed Renard 65, may have been understated.

Renard 65 is the largest kimberlite pipe in the Renard cluster, and a 4 ct stone was found in a drill core sample of the pipe in 2003, which created much excitement in the market. Further exploration, however, dampened enthusiasm for the Renard 65 kimberlite, causing Stornoway to leave it out of the greater mine plan.

The new information hasn’t changed the mine plan, but Manson said it could provide potential in the future. Renard 65’s grade is lower at surface, but increases with depth. “We’ve got lots of smoke to suggest we’ve got better stuff lower down.”

“Our long-term goal for Renard is to be a two-million ct/year producer . This project’s open, we’ve got a lot of upside tonnage and diamonds,” he said in an interview.

Under current planning, Stornaway, which is 15,8%-owned by gold miner Agnico-Eagle and 8,9%-owned by Rio Tinto, would produce an average 1,2-million carats a year at Renard, with production peaking in 2019/20 at 1,6-million carats.

Construction should begin in early 2012, once the necessary permits and financing are ready.

DIAMOND MARKET

Asked for diamond price prediction, Manson said “we’re not forecasters”, but he tended to go along with the bullish views of market watchers that expected demand would outstrip supply over the longer term.

Manson believed Chinese consumer demand would have a “huge” impact on the diamond business.

“They are rapidly increasing as a diamond consuming nation,” he said.

Last month, De Beers MD Gareth Penny said Chinese diamond demand could reach the same level as the US, the biggest consumer, in the next decade.

Manson said Chinese sovereign wealth funds and companies might start looking to invest in diamond production, even though up to now the focus has been on investing in commodities to feed the nation’s rapid industrial growth.

“The Chinese are showing a propensity to get fully involved in the entire supply chain in the modern world,” he said.

“It’s now branching out into general investment in the capitalist economy. When the jewellery and diamond business gets to its peak in China it will be an enormous business.”

It wouldn’t surprise Manson to see Chinese companies investing capital in diamond production.

“That would be very interesting to watch,” he said.

Stornoway owns the Renard project in joint venture with the Quebec government’s Société générale de financement du Québec.

CUTTING AND POLISHING

While the Quebec government has a diamond policy that 10% of gems produced there should get cut and polished in the province, Stornoway doesn’t intend on entering the beneficiation business.

“We want to stay a mining company. We don’t want to go downstream,” Manson said. He said the 10% target was an aspiration not the law.

He did not completely rule it out though: “We will work cooperatively if that’s their desire.”