RBC Report Details Challenges and Hope in Diamond Industry
October 07, 09
Dwindling output from existing mines is pushing development into new areas in Canada, Botswana and South Africa, but these mines are still several years away from moving into full production. Some of these mining areas are relatively new, such as areas around Canada's Arctic Circle.
Most of these mines are in the aforementioned countries and are expected to become fully operational within three to five years, producing between 0.5-3 million carats annually.
The Gahcho Kue mine in Canada is 51 percent owned by De Beers and 49 percent Mountain Province. After 10 years of exploration, production is expected to start at the end of 2012, producing 3 million carats for 15 years.
Renard, owned by Stornoway Soquem, each holding 50 percent, saw exploration start in 1999, but there is no expectation of mining to start before 2013. Annual output could reach 1 million carats per year, but the mine needs infrastructure.
Star Project has seen its owner, Shore Gold, spend over $300 million. Production is only expected to start between 2012-2013, with production reaching 1-2 million carats per year.
Botswana's AK6 Mine is 66 percent owned by De Beers and 28 percent by Africa Diamonds. It is expected to produce 0.5 million carats per year, for 12 years, starting in mid 2011.
Lace Mine in South Africa is 74 percent owned by DiamondCorp. By 2012 it could produce up to 0.5 million carats per year.
The details are listed in a new report by the Royal Bank of Canada (RBC) Capital Markets Division.
According to the report by analyst Des Kilalea, titled "Diamonds – Where Will All the Rough Come From? Recovery in global demand could create another price bubble," cutting centers are constrained by the lack of available capital and their inability to create bank debt.
The report highlight the increasing involvement governments are taking with the diamond business. Different examples of this increased activity can be seen in Botswana, Russia and Zimbabwe.