‘Material, newsworthy’ diamond finds on the rise – analyst

3rd October 2017 By: Henry Lazenby - Creamer Media Deputy Editor: North America

‘Material, newsworthy’ diamond finds on the rise – analyst

Lucara Diamond Corp recovered the 1 111-ct ‘Lesedi La Rona’ in November 2015
Photo by: Lucara Diamond Corp

VANCOUVER (miningweekly.com) – There has been a marked increase in the number of publicly reported special diamond finds in recent years, with 61 of 66 press-released diamond finds in the last nine years taking place in the last five years, noted independent diamond industry analyst and consultant Paul Zimnisky in a new report published Monday.

The New York-based analyst dissected available press releases over the last nine years, looking for diamond producers reporting finds considered “special enough” that the company that discovered them subsequently issued a press release to announce the occasion.

For publicly traded companies, securities laws generally require notifying the public when a ‘material’ event occurs. “In this case ‘material’ typically means information that will have an impact on the company's stock price, or the announcement will likely change the perceived value of the company’s stock. Given the unusual asymmetric valuation of diamonds compared to other commodities, for a diamond miner, a material event could include the discovery of a single, very valuable diamond.

“The greater the value of the diamond recovered and the smaller the size of the company, the more material a diamond discovery is to a particular company,” Zimnisky stated in a report sent to Mining Weekly Online.

A good example was when TSX-listed Lucara Diamond Corp recovered the 1 111-ct ‘Lesedi La Rona’ in November 2015. At the time of the discovery, the market capitalisation of Lucara was just more than $500-million and the perceived value of the diamond was upwards of $75-million, or 15% of the value of the whole company. When ASX-listed Lucapa Diamond discovered a pure 404-ct stone in February 2016, the situation was similar. The market cap of the company was under $100-million, but the diamond was worth more than $15-million.

Over just the last two years multiple historic gems have been found. In addition to the ‘Lesedi’, Lucara also found an 813-ct stone the same weekend, which later sold for $63-million, making it the most expensive rough diamond ever sold. The Lesedi recently sold for $53-million, the analyst pointed out.

Lucapa’s 404-ct diamond was the largest ever found in Angola. In December 2015, Rio Tinto recovered a 187-ct diamond at its Diavik mine, in Canada, the largest gem-diamond ever found in North America. And just last month Russion miner Alrosa produced a 28 ct fancy-pink diamond, the largest of its kind ever found in Russia.

Zimnisky said that Lucara’s Karowe mine, in Botswana, is relatively new, having commenced production in 2012. The company has continually worked to enhance the successful recovery of large diamonds. Just this summer the mine’s processing plant was fitted with industry-leading technology aimed at identifying and recovering mega-stones without breakage.

“However, current large-diamond recovery technology still has its limits. Breakage during processing has been an ongoing challenge for LSE-listed Gem Diamonds, owner of the Letšeng mine, in Lesotho, another primary source of the world’s large diamonds. During the company’s most recent analyst call in August, management gave average-price-per-carat guidance that included a breakage rate of 80%, saying that while ameliorating breakage has been a priority, the results have been disappointing due to the limitations of current technology,” Zimnisky pointed out.

Lucapa started commercial production at its alluvial Lulo mine in January 2015. Last year, Lulo diamonds averaged $2 983/ct, the highest average-price-per-carat figure in the world for a commercial operation, but the mine only produced 19 800 ct. According to Zimnisky’s analysis, over the last three years Lucapa press released 15 diamond recoveries, more than any other company, despite being one of the smallest publicly-traded diamond miners by market capitalisation.

Gem Diamonds' Letšeng mine produced 108 000 ct last year, at an average-price-per-carat of $1 695, giving it the highest figure for a non-alluvial mine. The company has already produced six press-released diamonds in 2017, including four colourless diamonds in excess of 100 ct.

Lucara’s Karowe mine had an average-price-per-carat of $824 last year, producing 354 000 ct. Over the last year Lucara has been mostly processing Karowe tailings and has not produced any press-release-worthy diamonds, as torrential rain, a new contract miner, and increased waste-rock removal limited mining. However, with a processing plant upgrade now complete the company is well positioned to resume mining Karowe’s South Lobe, the portion of the orebody that produced the Lesedi and Constellation diamonds.

Meanwhile, LSE-listed Petra Diamonds' storied Cullinan mine, in South Africa, remains perhaps the most prolific source of special diamonds in history.

The mine has been in production since 1903 and is the source of the ‘Cullinan Diamond’, the largest rough diamond ever recovered at 3 106 ct, parts of which reside in the British Crown Jewels. In January 2014, a 29.6 ct vivid blue diamond with “extraordinary saturation, tone and clarity” was recovered from the mine, and as recently as last year, the mine produced two "newsworthy" white diamonds, both over 100 ct, Zimnisky said.

It is important to note that, while serving as a proxy for spectacular diamonds recoveries, press releases are not a conclusive database. Some companies are more aggressive than others with regards to publicising specific recoveries and some producers do not announce individual recoveries at all. 

The second-largest diversified miner in the world, LSE-listed Rio Tinto, has only press released one rough diamond recovery in recent years, despite being the sole-owner of the Argyle mine, the world's primary source for ultra-valuable pink, purple and red diamonds. Instead, Rio has press released the dates and offerings of its special Pink Diamond Tenders in two of the last three years, in essence debuting more than a year of production at once. In 2015 the special tender included 65 diamonds, this year the tender includes 58 diamonds, but the company has specifically highlighted a 2.11 ct (polished) fancy-red, the largest high-quality red diamond ever recovered.

Russia’s Alrosa did not press release special diamond recoveries until they publicly offered a minority stake of the company in the fall of 2013, and subsequently increased financial reporting transparency. The largest diamond producer in the world by value, De Beers, does not announce the recovery of special diamonds, nor does its parent Anglo American. Privately held diamond mining companies and governments rarely publicise the recovery of individual diamonds, the analyst noted.