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Chantilly, champagne and clear-cut
Paul Loudon
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Nelendhre Moodley
With diamond demand forecast to exceed supply in the near future, diamond miners are well positioned to profit from a robust market driven largely by the growing appetite from the Indian and Chinese jewellery sectors. AIM-listed diamond miner, DiamondCorp, expects to tap into this market by developing its recently acquired Lace Diamond mine located in Kroonstad in the Free State.
CE, Paul Loudon (below), anticipates that the value of world diamond shortfall between supply and demand will be about $3bn by 2015.
In addition, WWW International Diamond Consultants has forecast (July 2007 values), that diamond demand will outstrip supply to the tune of $26bn by 2020.
After a recent mine visit to the Lace Diamond project, located 9km from De Beers Vergenoeg mine, Loudon reports that phase one of the operation, which includes developing a tailings treatment facility, was commissioned in October last year.
The company is also stepping up plans to delve underground, a mission which it anticipates will be in full production in two years time.
Established primarily to purchase the Lace Diamond mine - DiamondCorp's initial estimates were to recover about 370 000cts from the tailings.
While diamond recoveries from phase one exceeded expectations, phase two has the potential of recovering up to 13.7mct over a potential 20-year life of mine from underground mining.
80% of the project's first phase is recovering gem quality diamonds, including 14ct and 18ct stones.
"5% of the diamonds are fancy colours, such as intense purple, pink and yellow stones," Loudon says.
Of the two dense medium separation (DMS) plants on-site, the 100tph plant treats -6mm materials, which is the predominant diamond size recovered in the area.
"We are finding a lot of small diamonds," Loudon reports, adding that diamonds of this size are destined for the Indian and Israeli markets, where demand for smaller diamonds is high.
A parcel of 10 000ct per tender is sold every six weeks.
With more than 500 000ctpa in peak production, Loudon is adamant that the underground operation will be a significant cash generator over the next 20 years.
As with phase one, DiamondCorp will spend a further R100m in developing the phase two operation.
The underground operation's depth will go down to 180m, and be accessed through a 4m x 4m decline with a capacity of 4000tpd, which will be used for equipment, maintenance and vehicles, with the shaft being used to hoist ore.
Cyril Ramaphosa's Shanduka Group and Sphere Investments are the company's black economic empowerment (BEE) partners, each holding a 13% stake in DiamondCorp.
Once the underground operation feasibility study has been completed, each BEE partner will kick R13m into the project, Loudon reports.
The company currently employs 104 people, but will employ an additional 120 people in phase two.
Meanwhile, Loudon says that, while the company has been doing well, having recovered more diamonds than initially anticipated, it is besieged by heavy rainfall and severe power outages, which last year adversely affected production.
"We lost 12 days in one month last year through load shedding," says Lace Diamond's GM, Paul Sharples.
Diamond Corp expects to supplement its 1.6MW from Eskom with 5MW from an additional line that is expected to come on board before the end of January.
The company is building a R10m power station to solve its power disruption issues.
"We will get two separate power sources - particularly good for the two shafts," says Loudon.
DiamondCorp is scheduled for a secondary listing on the JSE in February, and expects to recover some 140 000ct of diamonds from the tailings, and 40 000ct from its underground operations, which will come into full production in 27 months.
It also anticipates posting a maiden profit in the year ahead.
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