Diamonds in Canada June 2018 by The Northern Miner Group

—IN CANADA—

JUNE | 2018

EIRA THOMAS

TAKES THE REINS AT LUCARA

GREN THOMAS’S ENDURING PASSION

DE BEERS TAPS

BLOCKCHAIN TECH

Complimentary PM no. 40069240 JUNE 2018 v 1

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The recent Preliminary Economic Assessment of the Company’s Star — Orion South Diamond Project, situated in central Saskatchewan, Canada, estimates 66 million minable carats of diamonds over a 34-year production life with an average diamond price of $190 per carat and an after-taxes and royalties NPV (7%) of $2.0 billion with an IRR of 19%.

TSX: DIAM

EXPLORING AND DEVELOPING CANADA’S DIAMOND RESOURCES

WWW.STARDIAMONDCORP.COM @STARDIAMONDCORP

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—IN CANADA—

Contents 6

JUNE 2018

—IN CANADA—

JUNE | 2018

EIRA THOMAS

TAKES THE REINS AT LUCARA

GREN THOMAS’S ENDURING PASSION

DE BEERS TAPS BLOCKCHAIN TECH

Complimentary PM no. 40069240 JUNE 2018 v 1

ON THE COVER: Lucara Diamond CEO Eira Thomas . Credit: Lucara Diamond

EDITORIAL The next diamond boom . . . . . . . . . . . . . . . . . . . . . . 5 DIAMONDS AN ENDURING PASSION FOR GREN THOMAS By Virginia Heffernan . . . . . . . . . . . . . . . . . . . . . . . . . 6

ALL THAT GLITTERS: THE LATEST NEWS FROM ACTIVE DIAMOND COMPANIES IN CANADA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 DE BEERS TURNS TO BLOCKCHAIN TECH . . . . . . . 26 STAR DIAMOND’S NEW PEA . . . . . . . . . . . . . . . . . . 28

EIRA THOMAS TAKES THE REINS AT LUCARA By Alisha Hiyate . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

PAT SHEAHAN’S NEWSLETTER, 2.0 . . . . . . . . . . . . 30

DISCOUNT FOR LAB-MADE DIAMONDS GROWS By Paul Zimnisky . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Digital copy available to subscribers at www .northernminer .com

38 Lesmill Rd., Unit 2, Toronto, ON M3B 2T5 Phone: (416) 510-6768 Fax: (416) 510-5138 E-mail: ahiyate@northernminer.com

PUBLISHER: Anthony Vaccaro

EDITOR: Alisha Hiyate

ADVERTISING SALES: Joe Crofts Michael Winter

ART DIRECTOR: Melissa Crook

PRODUCTION MANAGER: Jessica Jubb CONTRIBUTING WRITERS: Virginia Heffernan, Paul Zimnisky, Janice Leuschen, Richard Quarisa

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2018

S Y M P O S I U M JUNE 11TH, 2018, FAIRMONT ROYAL YORK HOTEL

The Northern Miner and Diamonds in Canada would like to thank our 2018 Diamonds in Canada Symposium Sponsors:

DIAMOND SPONSOR

GOLD SPONSORS

Talmora Diamond

Inc.

S I LV E R S P O N S O R S

38 Lesmill Rd., Unit 2, Toronto ON, M3B 2T5

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info@northernminer.com

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ALISHA HIYATE EDITOR

Geotech_Earlug_2015_VTEM_Colour3.pdf 1 2015-09-25 9:59:47 AM

VTEM™ ZTEM™ Gravity Magnetics Radiometrics Data Processing Interpretation 905 841 5004 | geotech.ca

EBEC / 7–10

One of The Largest Silver Discoveries of 2014 TSX.V: GRG www.goldenarrowresources.com

Editorial

Canadian Mining Hall of Fame

Discipline pays off / 4

Five new inductees / 5

VOL. 101 ISSUE 34 / GLOBAL MINING NEWS · SINCE 1915 / $3.99 / WWW.NORTHERNMINER.COM

Mining sector forced to innovate

ECH CONFERENCE

| New technology stokes productivity gains, but ‘no silver bullet’

haulage trucks on the move at Rio Tinto’s West Angelas iron ore mine in Australia’s Pilbara region.

BY ALISHA HIYATE ahiyate@northernminer.com

he mining sector is facing a Darwinian moment, delegates at the first annual Technology and Innovation in Mining conference in Toronto heard in September. Just as species deal with changes in their climate, food sources or other circumstances, miners dealing with mounting cost, social and technical pressures must innovate if they want to survive, research group AMIRA International managing director Joe Cucuzza said. “If you look at Darwinian evolution, there are more species that go extinct than actually quickly adapt,” Cucuzza told the conference. “The point is that in our industry, we need to adapt quickly. Those that are slow to adapt, unfortunately, are going to go extinct.” The conference, organized by DubaiSee TECHNOLOGY / pg. 2

RIO TINTO PM40069240

WOOD MACKENZIE SEES RAY OF HOPE / 4

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“

There aren’t any large deposits that have been discovered in the past ten years that can feed even average demand.

”

— Gren Thomas

The next diamond boom

e’ve timed the release of this issue to coincide with Diamonds in Canada’s first-ever event. The inaugural Diamonds in Canada Symposium, hosted by The Northern Miner, will take place on June 11 at the Royal York in Toronto. The event will look at the diamond market and industry trends, and involve some of the biggest players in the sector — including Grenville and Eira Thomas. Each had a central role in the founding and building of Canada’s diamond sector: Gren Thomas was the founder of Aber Diamond (now Dominion Diamond) and is still deeply involved in diamond exploration through North Arrow Minerals. His daughter Eira Thomas was part of the exploration team at Aber that found the Diavik mine, as well as a founder of Stornoway Diamond and Lucara Diamond. A passion for diamonds clearly runs deep in the Thomas family. It also runs deep throughout the diamond exploration and mining sector— a tiny fraternity in mining that may finally be on the verge of expanding in a significant way for the first time in 25 years. Some of the world’s biggest diamond mines are slated for closure in the next decade. Rio Tinto’s Argyle mine in Australia is in its last years of production, while the mine life at its 60%-owned Diavik mine ends in 2025. At Ekati, recent reports that owner Dominion Diamond is delaying the development of the Jay project cast some uncertainty over its expected production, as well.

Smaller mines are also closing — De Beers’ Snap Lake ceased production in 2016 to be followed by its rich Victor mine in Ontario next year. New mines Gahcho Kué and Renard won’t make up the shortfall. And with a more than decade-long slump in funding for diamond exploration, new discoveries have been few. At the same time, demand for diamonds is expected to rise with the expanding middle class across China, India, and other developing nations. “There aren’t any large deposits that have been discovered in the past ten years that can feed even average demand,” notes Gren Thomas. This all creates an opportunity for those who recognize it. Lucara Diamond, for example, is adding an executive to its team with responsibility for corporate development, to look for opportunities in Canada, Botswana and elsewhere. Meanwhile, looking to feed the project pipelines of diamond miners that will need to replace production within the next decade, Burgundy Mining Advisors is launching a fund that will home in on high-potential diamond exploration projects at the crucial discovery stage (see Page 23). We believe the timing of our symposium could be just right to catch the next updraft for the diamond sector. More than 25 years after the first diamond staking and exploration frenzy in Canada’s north, we may be ready for a second boom. As ever, we welcome your feedback at ahiyate@northernminer.com.

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DIAMONDS AN ENDURING PASSION FOR

GREN THOMAS IINDUSTRY LEGENDI ISEES LOOMINGI ISUPPLY CRUNCHI

Gren Thomas and project geologist Regan Chernish at North Arrowâ&#x20AC;&#x2122;s Loki project. Credit: Credit North Arrow Minerals

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“

There was a foreignness and romance to diamonds in Canada when the industry first started 25 years ago. Now they are part of the Canadian fabric.

”

— Grenville Thomas, chairman of North Arrow Minerals

Moving the drill rig at North Arrow’s Loki project, in the Northwest Territories Credit: North Arrow Minerals

VIRGINIA HEFFERNAN

E At North Arrow’s Loki project, in the Northwest Territories. Credit: North Arrow Minerals

ven though prospecting for diamonds in Canada no longer elicits the electrifying buzz of the 1990s when juniors were uncovering the country’s first diamond mines, the rationale for exploration is just as strong today, according to veteran explorer Grenville (“Gren”) Thomas. “There’s hardly anyone out there exploring for diamonds and there aren’t any large deposits that have been discovered in the past 10 years that can feed even average demand,” said the chairman of North Arrow Minerals (TSXV-NAR) from his hotel room in London, where he was attending The Northern Miner’s Canadian Mining Symposium in April. “We’ve discovered a few things that under normal circumstances would have generated a lot of ink. But investors’ minds are elsewhere.” The 77-year old Thomas is referring to North Arrow’s discoveries of kimberlite on the Loki project in the Lac de Gras mining camp of the Northwest Territories, rare and valuable yellow diamonds at the Naujaat project in Nunavut where a preliminary economic assessment (PEA) is ongoing, a new diamondiferous kimberlite field at the Mel project, also in

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Grenville Thomas at the Loki project, in the Northwest Territories. Credit: North Arrow Minerals

“

Dominion (Diamond) is the third largest diamond company in the world and the largest in Canada, so it didn’t make me very happy when it became an American private company.

”

— Grenville Thomas, chairman of North Arrow Minerals

Sampling the ML-8 kimberlite at North Arrow’s Mel project. Credit: North Arrow Minerals

First piece of kimberlite found at Mel, in Nunavut. Credit: North Arrow Minerals

Nunavut, and 10 discrete kimberlite bodies at the Pikoo project in Saskatchewan. Thomas became a legend practically overnight when his company, Aber Resources, discovered the Diavik diamond mine under Lac de Gras in 1994. His daughter Eira — now a rock star in her own right but a newly minted geologist at the time — was supervising the last drill hole on the frozen lake before spring break-up when the drillers pulled a kimberlite core with a 2-carat diamond embedded in it, an extraordinary exploration outcome. Thomas is pleased with his daughter’s career trajectory since then, including her founding of Stornoway Diamond — now in production with the Renard mine in Quebec — and her recent appointment as CEO of Lucara Diamond (TSX-LUC). “There was a foreignness and romance to diamonds in Canada when the industry first started 25 years ago. Now they are part of the Canadian fabric. She was there at the beginning and has grown along with (the industry),” said Thomas, who expects his daughter’s leadership role at Lucara, owner of the Karowe diamond mine in Botswana, will present interesting new challenges as the producer adopts cloud and blockchain technologies to modernize the diamond supply chain. The Diavik mine opened in 2003 and continues to produce 6-7 million carats of predominantly large, white gem-quality diamonds for Rio Tinto (NYSE-RIO) (60%) and Aber descendent Dominion Diamond (40%). In a surprise move, private conglomerate Washington Companies purchased Dominion — which also owns 90% of the Ekati diamond mine — last year when the company was rudderless and vulnerable, having lost its CEO Bob Gannicott to leukemia.

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Thomas did not mask his disappointment about the takeover of the company he founded with Gannicott so many years ago. “Dominion is the third largest diamond company in the world and the largest in Canada, so it didn’t make me very happy when it became an American private company,” said the PDAC’s 1999 Prospector of the Year, who began his career as a 16-year old coal miner is his native Wales, but has been exploring in the Canadian tundra for decades since landing here in the 1960s. Thomas believes the diamond industry has changed fundamentally over the past 15 years because of a combination of factors, including the creation of lab-grown diamonds that are difficult to distinguish from natural ones, the dismantling of the De Beers cartel that maintained both mystique and market price, and changes in fashion as some millennials shun material possessions. A cash crunch caused by currency reforms in India, where 90% of the world’s rough diamonds are cut, polished or traded, has also disrupted the market. Still, De Beers and Alrosa — the two largest producers of

North Arrow CEO Ken Armstrong with Investor Relations manager Nick Thomas. Credit: North Arrow Minerals

natural diamonds — collectively sold almost $10 billion worth of the stones in 2017, according to diamond analyst Paul Zimnisky. “People are still buying diamonds and the market is starting to firm so we view the industry quite optimistically,” said Thomas. “We’ve got some brand new areas to explore. Who knows what we’ll find there.”

ADVANCE STAGE DIAMOND EXPLORATION IN NUNAVUT, CANADA •

Proven diamond potential, existing high grade resource

•

Exploration led by Dr. Chuck Fipke, Ekati diamond discoverer and significant DVI shareholder

•

Good infrastructure, not remote

•

Hosts high-quality, large diamonds

•

Numerous kimberlite pipe targets to be drilled in 2018

•

Drill program ongoing, first results in June/July

DUNNEDIN ventures inc.

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EIRA THOMAS

TAKES THE REINS AT

LUCARA Miner to pursue growth through Clara acquisition, Karowe expansion and traditional M&A BY ALISHA HIYATE

Lucara Diamond CEO Eira Thomas. Image source: Lucara Diamond

ightning has struck more than once so far in Eira Thomas’s career of more than 25 years. The geologist famously spotted a nearly 2-carat diamond in drill core — an incredibly rare occurrence — during exploration at Lac de Gras in 1994, at what would become the Diavik mine in the Northwest Territories. And as a founder and director of Lucara Diamond (TSX: LUC), she was part of the leadership when the company unearthed a 1,109-carat stone — the secondlargest diamond in history — at its Karowe mine in Botswana in November 2015. “I’ve been very fortunate,” said Thomas in an interview in May. “Those were obviously two exciting milestones for me in my career, but I think with each and every project that I’ve worked on there’ve been those moments.” While those moments have not always been so dramatic, they have been extremely satisfying and meaningful, she adds. “A lot of it has to do with being involved in a good project with good people,” says Thomas, whose father Grenville Thomas is one of the pioneers of Canadian diamonds as a founder of Aber Diamond. Other “good projects” that Thomas has been involved with: As a cofounder and CEO of Stornoway Diamond (TSX: SWY), she led the junior through the first phases

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The plant at Lucara Diamond’s Karowe mine, in Botswana. Credit: Lucara Diamond

of acquiring Renard in 2007 — now Quebec’s first diamond mine — and then through an extremely successful advanced exploration program. And as CEO of Yukon junior Kaminak Gold, she spent three years advancing the Coffee gold deposit before negotiating the company’s $520-million acquisition by Goldcorp in 2016. Now Thomas is taking on a new full-time role at Lucara — and bringing her own stamp to the company.

Digital platform Last year, the Lucara board approached Thomas about joining the company as CEO to replace William Lamb, who was stepping down. While it was clearly a natural fit for Thomas, who had cofounded the company with Lukas Lundin and Catherine McLeod-Seltzer in 2007, there was one thing in the way. She was deeply involved in Clara Diamond Solutions, a fledging technology company that was working to bring its proprietary secure digital sales platform for diamonds to market. “When I was approached by the board, I had already been moving down a path towards an IPO establishing a new public company for Clara,” she says. “I told them: ‘Look, I’m not in a position to abandon Clara, so we need to figure out whether or not there’s any synergy here and whether this could make sense to combine the two.” She had previously approached Lundin, Lucara’s chairman, about finding a place for Clara within Lucara, but the solution wasn’t far enough along to make sense for Lucara at the time. This time, outgoing CEO William Lamb spearheaded the due diligence work. “He invested a great deal of time looking at it and he came back to the Clara board with a recommendation that they acquire it.” In February, Lucara named Thomas as CEO, and at the same time, announced the acquisition of Clara for an initial 13.1 million Lucara shares, worth around $29 million. Another 13.4 million shares will follow in staged payments as certain milestones related to revenue generated by Clara are achieved. Like De Beers’ recent announcement about a blockchain initiative that will track diamonds from source to retail (See

Page 26), Clara uses secure blockchain technology that will assure customers of the provenance of all diamonds sold through it. But Thomas says that’s just a side benefit of the technology. “Clara fundamentally is a business solution,” Thomas says. “It transforms how diamonds are actually sold, so it’s quite a different concept.” The platform uses computing algorithms to match rough diamond production to buyers who want stones with the same characteristics. Management believes that the technology can improve margins for both buyers and sellers, and testing has indicated the potential to unlock more than 20% of value throughout the diamond pipeline to the benefit of all parties, the company says. For Lucara, the potential of Clara is twofold — both to increase the prices it receives for Karowe production, and to generate revenue independently of Karowe. Clara’s revenue model is based on capturing a portion of the incremental value that the technology unlocks. “Clara’s exciting because for the first time in the history of the company, it provides us with an avenue for growth outside of Karowe,” Thomas says. “And though it’s not a mining opportunity, it’s a diamond opportunity that’s very compatible with our core diamond mining business.”

A 327-carat gem diamond recovered from Karowe in April 2018. Credit: Lucara Diamond

The company will soon be able to prove the benefits of its new acquisition. Lucara plans to start selling Karowe’s production through Clara in the third quarter. After that, the company will allow other diamond producers to try the platform. “We’re offering an opportunity to sell a portion of their diamonds through Clara and they can compare against their existing sales processes to determine if there’s a benefit,” Thomas explains. “We think of course we’ll be able to demonstrate that there is. We believe that they will realize higher diamond prices for their rough. They will also be selling diamonds in real time, no longer tethered to a five-week sales process.” While a departure for any diamond company, adoption of the digital technology is in some ways in keeping with Lucara’s reputation. The company has used innovative technology in its processing plant to improve recoveries and reduce breakage.

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An exceptional asset As Lucara’s CEO, Thomas is for the first time in her career, responsible for an operating asset. While her experience has been heavy in exploration, including two years as vice-president exploration at Aber Diamond in the late 1990s, Thomas says her experience with projects ranging from exploration to feasibility to operations, including her 14 years as a director on the board of major oilsands player Suncor Energy (TSX: SU), means she’s well prepared for the job. “I think so much of what we do as senior leaders really relies and depends on the team that you’re able to build to support your strategy. At Lucara, I’m lucky to be inheriting a very strong core leadership team that I can add to.” Thomas has already made some changes to senior leadership in Botswana, including the promotion to managing director of former in-country CFO Naseem Lahri, the first Motswana woman to become managing director of a diamond company. Karowe, which began production in 2012 and has delivered many exceptional large, Type II a stones (including the 1,109-carat Lesedi La Rona and the 813-carat Constellation diamond,

which sold for US$63.1 million), is an exceptional asset. So much so that it’s supported a regular dividend since 2014. But a great asset on its own isn’t enough. “It’s important when you’re looking at leadership, especially with leadership renewal, that you don’t lose sight of the fact that with high-margin assets like Karowe, it’s easy to become complacent because you almost can’t help but make money,” Thomas said. “We have an opportunity to refocus our efforts and look hard at where we can drive operational efficiencies and improve overall performance to impact the bottom line.” The open-pit operation, which is expected to produce 270,000 to 290,000 carats of diamonds this year, has enough ore to support mining to 2026, but Lucara is looking at the potential for underground mining at the AK6 kimberlite. Following a pos-

CORPORATE PROFILE

SRK builds deep diamond expertise SRK Consulting’s diamond experts have developed an in-depth understanding of the unique difficulties associated with diamond deposit geology, evaluation, and mining, having worked on dozens Jarek Jakubec of diamond projects globally. Heading up SRK Canada’s diamond team is Corporate Consultant Jarek Jakubec, who also leads the Vancouver Mining and Geology group and has more than 30 years of experience focused on diamond mining and mass mining methods. Jarek joined SRK in 1997, developing consulting services for the diamond industry and building SRK’s team of diamond experts. Jarek has also worked on diamond projects in Siberia, southern Africa, South America, Australia, and Canada and has published dozens of papers, including several on diamond mining. Jarek’s most memorable experience in the diamond industry came after he joined De Beers in Botswana in 1992. While he understood the economic value of diamonds, he found it incredible to see, first-hand, the benefits and prospects for

sustainability that diamonds were providing to Botswana and its people. Also a member of SRK’s diamond team, Corporate Consultant Casey Hetman has over 20 years of experience focused on diamond Casey Hetman deposit exploration and evaluation. Casey has dedicated much of his career to the macroscopic and petrographic investigation of drill cores and mining exposures for purposes of identifying and characterizing geological domains defined by different grades. He combines this information with other data sets and modern volcanological principles to generate 3D models that guide exploration, resource classification, and mine planning activities. He has worked on diamond projects in Canada, Greenland, Botswana, Lesotho, Angola, Zimbabwe, and Sierra Leone. Casey’s most memorable experience, as part of the Meya Mining team, was recovering the 476-carat Type IIa “Prosperity” diamond in Sierra Leone in 2017. Although the kimberlite’s existence had been known for decades, until then its potential to carry massive, high-value gems had been largely unrecognized.

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The processing plant at Lucara’s Karowe mine in Botswana. Credit: Lucara Diamond

itive preliminary economic assessment released in November 2017, the company expects to complete a prefeasibility study on underground development before the end of the year. The PEA showed the potential for a 10-year mine life extension and another 2.72 million carats of production with a preproduction capital cost of US$195 million.

Future plans Since acquiring a majority stake in Karowe (then known as AK6) in 2009 and then consolidating ownership in 2010, the project has been Lucara’s main focus. But with the company soon to name an executive in charge of corporate development, Thomas says it will be looking at M&A opportunities. “We’ve got an economic engine at Karowe that will

continue to support and sustain our current business plan and the dividend and I think that affords us an opportunity now to look a little bit beyond.” Canada and Botswana are at the top of the list in terms of low-risk jurisdictions with diamond potential, but Thomas says Lucara will keep an open mind. “The diamond universe is pretty small — there’s very few players and very few producing diamond mines. And it’s a difficult commodity to explore for, it’s expensive and it’s high risk,” she says. “So I think as a leading mid-tier diamond producer, we will necessarily have to look broadly and not restrict ourselves too much. But certainly, we’ll start with the safer jurisdictions like Botswana and Canada.” As for the diamond market itself, Thomas says that it is recovering nicely from 2017, and that some stability — along with margins in the downstream — has started to return after a volatile period. Longer-term, the supply and demand fundamentals look very good. “We just haven’t made any new, world-class discoveries that can replace the declines we’re seeing from all major diamond producers,” she says, adding that Rio Tinto’s (NYSE: RIO)

A Canadian Leader in Diamond Discovery @narminerals northarrowminerals northarrowminerals.com info@northarrowminerals.com Suite 960, 789 West Pender Street Vancouver, BC V6C 1H2 604.668.8355

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closure of the Argyle mine in Australia will take a significant amount of production off the market. While diamond exploration no longer has the sheen of excitement around it that it did during the 1990s, Thomas is a strong believer that that excitement could return. “It’s going to take an important discovery, something new and exciting, but I think it’s absolutely possible,” she says, adding that there’s a good chance it could happen in relatively underexplored Canada a second time.

Lessons learned Having worked with Grenville Thomas at Aber and now being involved with his current venture North Arrow Minerals (TSXV: NAR) as an advisor, her father has undoubtedly been an important mentor for Thomas. “He’s just so driven when it comes to exploration — his enthusiasm has never waned,” Thomas says, noting that he still calls her up when he wants to show her drill core he’s excited about. But the most enduring lessons Thomas learned from her dad

were around leadership, she says. “My dad was a mining engineer that had a passion for exploration but he wasn’t a geologist. What he did is he surrounded himself with a lot of smart people that had the expertise that he didn’t and I would argue that he’s become probably as much of an expert in geology as I am as a trained geologist.” That respect for expertise extended to hiring First Nations local people as part of exploration teams in the bush — long before it became part of many companies’ mandates. “He wanted to work with people that know and understand how to explore in remote places like northern Canada, so of course you’d hire local First Nations because those are the guys that had the most experience.” It’s clear that her father’s strength in building a team and showing respect has resonated with Thomas. “I think that’s been a big lesson for me, watching him put together the right mix of skills and experience with people that can work within our northern communities of interest and actually be successful,” she says. “It’s never a one-man band, it’s always about the team.”

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The price of lab-created diamonds

C A N A D A

credit: Abscent84/IStock photo

CONTINUE

TO FALL Synthetics manufacturers eye high-tech market BY PAUL ZIMNISKY

he discount of gem-quality lab-created diamonds, manufactured for use in jewelry, relative to natural diamonds has doubled from around 10-20% a year ago to 30-40% today, according to a survey of prices. For example, a white, 1-carat round diamond that is VS (very slightly included) in clarity, F-H (near-colourless to colourless) in color, VG-ideal cut, with no-to-low florescence was selling for around US$4,850 at the end of the first quarter of 2017 but is now US$4,350 â&#x20AC;&#x201D; a 10% decline.Â However, over the same period of time, the price of an equivalent natural diamond went from US$5,850 to US$6,150, representing an increase of about 5%. Thus, the discount of the lab-created diamond relative to the natural equivalent was roughly 17% at the end of the first quarter of 2017, but is now about 29%, a 71% year-over-year increase.Â See table on page 17 for more examples. Lab-created diamonds are becoming less expensive relative to natural equivalents as investment in lab-diamond production technology has rapidly improved production economics in just the last few years. This has led to rapid relative supply growth and

an environment that is more price competitive for lab-diamond manufacturers. However, actually gauging lab-diamond supply growth is difficult. The global proliferation of lab-diamond production facilities in recent years, from China to Russia to the U.S., has made tracking production figures challenging, especially given that the companies involved are private and proprietary in nature. Further complicating the process is the range in quality and scale at which lab diamonds are being produced. Natural diamond production quality can be segmented as roughly 40% gem-quality, 20% near gem-quality, and 40% industrial-grade. Gem diamonds are used in jewelry, industrialgrade diamonds are used for abrasive and other industrial a pplication, and near-gem diamonds are used for both jewelry and more-specialized industrial application, with the split of use dependent on market prices and demand. It is important to note that natural industrial-grade diamonds are simply seen as a byproduct, as the presence of gem-quality diamonds in a deposit are what drive the economics behind natural diamond production decisions.

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Small parcels of near-gem-quality lab-created diamonds manufactured in China. Credit: Paul Zimnisky

In the case of lab diamonds, the ability to create higherquality gem diamond product economically is a relatively recent development — within the last decade. Even with the recent developments in technology, current lab-created production of true gem diamonds represents less than 10% of global output, estimated at less than 5 million carats. That

compares to natural gem-quality output of around 60 million carats (based on 40% of an estimated total natural production of 149 million carats in 2018). The business of manufacturing lab-created diamonds for industrial application (typically referred to as synthetic diamond) has been around for decades, and the industry currently supplies more than 99% of global industrial diamond supply for use as abrasives (production is in the billions of carats, for context). Lab production of near gem-quality diamonds is where supply analysis gets especially challenging. Producers of synthetic industrial-quality diamonds have been advancing their production capability through improved technology which has enabled them to increase the quality of their product from industrial to near-gem quality. Given that billions of carats of industrial-quality diamonds are produced each year, it becomes apparent that lab-created near-gem production could be in the hundreds of millions of carats; and some of this product is being passed off for use in jewelry — which is continued on page 18...

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SYNTHETIC DIAMONDS TABLE End-Q1 2018

YoY Change

End-Q1 2017

Carat Weight1

Lab-created

Natural

LC Discount2

in Discount3

Lab-created

Natural

LC Discount

0.5

$1,090

$1,505

28%

147%

$1,315

$1,480

11%

1.0

$4,350

$6,150

29%

71%

$4,850

$5,850

17%

1.5

$7,275

$12,125

40%

100%

$9,500

$11,875

20%

32%

106%

Average

16%

**Diamond price figures based on average survey of prices by category sampled from prominent online diamond retailers. 1All

diamonds sampled were round in shape, VS in clarity, F-H in color, VG-ideal cut, with no-to-low fluorescence. 2“LC Discount” is discount of lab-created diamond relative to equivalent natural diamond. 3 “YoY Change in Discount” is the year-over-year percent increase in discount of lab-created diamond relative to equivalent natural (Analysis by Paul Zimnisky diamond.)

Talmora Diamond

Abstract:

Horton Project

Inc.

SEARCH FOR LARGE “SUPER-DEEP” DIAMONDS Chromite

PY ILM MnILM CPX ECL CR CR >48% Olivine

Fipke et al DIF Argyle Field Creighton et al DIF

Cr2O3 (wt%)

Pie Chart (Max 40 Grains) 40 20 4

Talmora Diamond Inc. is exploring for diamonds in the NWT. The company has identified over 40 high resolution airborne magnetic anomalies averaging ~ 200m diameter with associated KIM anomalies ready for drilling. “New” magnetic anomaly found on a 400m line spaced airborne survey with associated KIM and ICP train anomalies is larger diameter and is also ready for drilling! “New” anomaly KIMs include Chromites and Mn-Ilmenites with chemistry and texture as those KIMs found elsewhere as inclusions in Super-Deep Diamonds. The largest diamonds in the world are from Super-Deep mantle sources. www.talmoradiamond.com

MgO (wt%)

58615.0

0.35

58630.2

58 6 4 0

Low Chrome Primary Mn-ilmenite

58635.6

58639.1

58641.7

58645.7

58650.8

58656.1

58660.9

58669.1

0.3

Cr2O3 wt%

0.25 0.2

0.15

0.1

20km

40km

0.05

10 MgO+MnO wt%

“New” KIM Train field samples Inclusions in Super-Deep diamonds; Juina, Brazil; Kaminsky et al (2001, 2009)

2km

4km

L. Devonian-dolomite/shale

“New” Anomaly

Ordovician-dolomite Ordovician/Cambrian-dolomite with local clastics 5 0

Interpreted Super-Deep Diamond Inclusion Field (DIF)

Cretaceous - clastic sediments

58 64 0

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Parcels of natural diamonds produced in Russia and Canada. Credit: Paul Zimnisky

primarily used to embellish larger stones and for use in pavé settings. The natural diamond industry has been proactively developing affordable screening technology so that lab-created diamonds of all quality and sizes used in jewelry can be properly disclosed and sold as such. As lab-diamond production continues to accelerate, it seems

inevitable that the price spread between lab created and natural diamonds across all sizes and qualities will continue to widen, especially in the case of generic lab diamonds, those that are not supported by a manufacturer or retailer’s brand. Medium- to longer-term, expect the dialog surrounding lab-created diamonds to shift from jewelry to application in high-tech developments such as processing chips, optics, laser devices, and thermal conductivity equipment. The unique properties of diamond make the application potential exciting and wide, and the scientific and tech community has just begun to scratch the surface of its potential. The high-tech industry enthusiastically awaits economically available mass-produced high-quality diamond, the lab-diamond manufacturers know this and most are just using jewelry as a stepping stone. — Paul Zimnisky is an independent diamond industry analyst, author of the Zimnisky Global Rough Diamond Price Index and publisher of the subscription-based State of The Diamond Market monthly industry report. More information can be found at www.paulzimnisky.com.

CORPORATE PROFILE

Dunnedin tests new targets selected with Chuck Fipke’s help When your diamond exploration project catches the attention of diamond legend Chuck Fipke, you know you’ve got something big. That’s the case for Dunnedin Ventures (TSXV: DVI) and its 100%-owned Kahuna project in Nunavut. Fipke got involved with the project in 2015 when Kahuna till samples sent to his lab (CF Mineral Research) showed startling similarities in indicator mineral geochemistry to the Ekati mine, which Fipke co-discovered. Fipke has a 12% stake in the company and is also an advisor helping to guide Dunnedin’s work program. Dunnedin first optioned the project in mid-2014. Over the next six months, it made quick progress at Kahuna thanks to the extensive work done by previous owners, who spent $30 million advancing the project. In early 2015, Dunnedin released an initial inferred resource of 4 million carats in 4 million tonnes grading 1.01 carats per tonne.

The current resource is contained in two kimberlite dykes: Kahuna and Notch, which have only been drilled to 80 metres depth and over a couple hundred metres of their 5.5-km and 3-km respective strike lengths. The project also contains other high-grade, diamond-bearing dykes, including PST and O7KD-24, which are open for expansion. While probing the extension of these structures, Dunnedin’s 2018 program — its first drill program ever at Kahuna — will focus on its potential for larger, diamond-bearing kimberlite pipes. Of 40 kimberlite targets so far identified, five were drilled in April, with more drilling slated for June when ground conditions improve. Finally, infrastructure and ease of access to Kahuna are unusually good for an Arctic project. The 1,664-sq.-km project is located only 25 km from the community of Rankin Inlet and right next door to Agnico Eagle’s Meliadine gold mine. Setting up the Kahuna exploration camp. Credit: Dunnedin Ventures

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CORPORATE PROFILE

Star Diamond and Rio Tinto plan bulk sample for Star-Orion South

Star-Orion South diamonds. Credit: Star Diamond

Two things stand out about a new preliminary economic

$18.5-million advancing the project, or complete a 10-hole-

assessment Star Diamond (TSX: DIAM) released for its

bulk sampling program within three years. After that, Rio can

Star-Orion South project in April.

conduct another $18.5 million in work or complete a 10-hole

Compared to a feasibility study on the project in

bulk sampling program within 18 months to earn 51% of the

Saskatchewan was released in 2011, the study outlines

project. The last 9% interest would be earned in a final

a scenario where a much larger number of carats are

two stages.

recovered at a considerably lower cost. “The principal difference is the elevated number of carats recovered, which goes from 34 million carats to 66 million carats and the pre-production cost, which has lowered

The total timeline for the earn-in is 7.5 years. But Read says Rio appears to be intent on completing the first phase of work as quickly as possible. In fact, Rio Tinto has already ordered both a 30-tonne-

substantially,” says George Read, senior vice-president of

per-hour bulk-sample plant and equipment to be used for

exploration and development. “We’re very pleased with the

the sampling program, which should begin before the end

outcome of the PEA.”

of the year.

With a preproduction capital cost projected at $1.4 billion

For the bulk sample, which will be taken from the Star

— $500 million lower than the $1.9 billion outlined in the 2011

kimberlite, Rio will use a Bauer trench cutting tool that has

feasibility — the project would generate strong return over a

until now been principally been used in civil construction to

mine life of 34 years.

sink deep holes for ventilation and for other uses.

The PEA projects Star-Orion’s after-tax internal rate of return at 19% and its net present value of $2 billion. The study was based on a 2015 resource estimate of 393

“This is the first case where it will be used to sample a kimberlite at depth,” Read says. The equipment will use less pressure to cut the kimberlite

million indicated tonnes containing 55.4 million carats plus a

and remove the samples than large-diameter drilling, which

further 11.5 million carats in inferred resources.

in the past has resulted in diamond breakage. It’s also

The main reason for the lower capital cost is the incorpo-

suspected to be the reason for lower sample grades in

ration of bucket wheel excavators to remove overburden at

LDD drilling than bulk samples that were extracted from

the project, rather than conventional truck and shovel.

underground workings.

Star-Orion, which is known to host a population of rare,

“Rio appears to have great confidence that this method

high-value Type IIa diamonds, has attracted positive

will result in considerably lower diamond breakage, if any,

attention for another reason of late.

and that they will get grades that confirm the underground

Star Diamond (formerly Shore Gold) announced last June that Rio Tinto had signed an option to become a joint-venture partner at Star-Orion South. The agreement could see the major earn up to 60%

grades in these bulk sample drill holes” The bulk sample plant is being specifically designed by Consulmet to minimize breakage and maximize recovery of specials (diamonds larger than 10.8 carats)

of Star-Orion in several phases. But before it can begin

that could be present at both the Star and Orion South

earning a stake in the project, Rio will have to spend

kimberlites.

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All that glitters –in the–

TRUE NORTH

AN OVERVIEW OF THE LATEST NEWS FROM ACTIVE DIAMOND EXPLORERS, DEVELOPERS AND MINERS IN CANADA. Altius Minerals Altius Minerals (TSX: ALS) is planning to spin off its Lynx project, located near Oxford House in Manitoba, into a new public company. As part of those plans, Altius is planning to release a technical report on the project, which it acquired in early 2017, in the second quarter. Fifteen samples taken from the project’s Eastern Bay zone last year returned 1,693 microdiamonds from 240 kg of ultramafic host units collected over a 3-km strike length. Eight of the stones were macrodiamonds (at least 0.5 mm). The diamonds show positive characteristics: 24% of the stones larger than 0.3 mm were white/colourless, 45% off-white and 17% octahedral.

De Beers

At Dunnedin Ventures’ Kahuna project, in Nunavut. Credit: Dunnedin Ventures

TOP LEFT: Taking a sample at Altius Minerals’ Lynx project, in Manitoba. Credit: Altius Minerals

De Beers announced last November that production at its Victor mine, in Ontario, will end in the first quarter of 2019. While it had previously been advancing its Tango extension at Victor, spokesman Tom Ormsby said the project is not economic once Victor has been mined out. “The potential of any other kimberlites on the property are not foreseeably economic with the current infrastructure and footprint, so Victor will enter the closure phase once operations cease.” Ormsby added that the mine set a production record in 2017 and has the potential to set another production record in its last year of operation. Victor had originally been forecast to produce 6

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Dominion Diamond Mines

Reclamation at De Beers’ Victor mine, in Ontario. Credit: De Beers

million carats of diamonds over its mine life, but has already produced 7 million carats. There had been tensions with the local Attawapiskat First Nation regarding De Beers’ plans to explore Tango, but Ormsby told Northern Ontario Business in November that the decision was purely based on economics. The company has budgeted $7.4 million this year for progressive reclamation, which has been ongoing for several years. Victor is Ontario’s only diamond mine.

Now privately owned by Washington Companies, Dominion Diamond Mines is reportedly delaying further work at its Jay development at its Ekati mine in the Northwest Territories. CBC News reported in May that the company was examining ways to increase the project’s profitability. Construction at Jay had been slated to begin in 2018. A 2016 feasibility study had pegged the project’s cost at US$647 million, its post-tax internal rate of return (IRR) at 15.6% and its (net present value) NPV at US$398 million. The study used a 2015 base case value of US$53 per carat for Jay diamonds.

Dunnedin Ventures In April, Dunnedin Ventures (TSXV: DVI) began its first drill campaign at its Kahuna project in Nunavut. The junior has been advancing the project for three years through till sampling and geophysical exploration programs, building on work completed by previous operators. It also released a first resource for the Kahuna and Notch dykes based on previous

CORPORATE PROFILE

North Arrow hits the mark with new discoveries With several discoveries under its belt, than 0.106 mm, including one colourless Drilling at Loki. a portfolio of promising projects, and a diamond that was larger than 0.85 mm. To Credit: North Arrow brain trust that includes Aber Resources follow up, North Arrow plans to drill-test founder Grenville Thomas, North Arrow six to eight targets at Mel this summer. Minerals (TSXV: NAR) certainly stands Drill programs are also planned for two out from the crowd. other North Arrow projects this summer North Arrow is the only junior explorer in the Lac de Gras area of the Northwest that can lay claim to discovering a brand Territories: Loki and LDG, a joint venture new kimberlite field in Canada in the past with Dominion Diamond that will see a five years. In fact, it has discovered two. $2.8 million drill campaign. After making the Pikoo discovery in North Arrow’s most advanced project, Saskatchewan in 2013, the company Naujaat in Nunavut, may also see some made a discovery at the Mel project drilling to update the resource model and in Nunavut last fall. Both fields are resource estimate at the Q1-4 kimberlite. diamondiferous. The 12-hectare kimberlite currently hosts While Mel is early stage and hasn’t seen any drilling yet an inferred resource of 26.1 million carats contained in 48.8 (the junior has so far discovered 10 kimberlites million tonnes grading 53.6 carats per hundred tonnes. at Pikoo), North Arrow already knows that it has at least one The project hosts a population of yellow diamonds with diamond-bearing kimberlite. The ML-8 kimberlite was found high-value potential. by prospecting last year, and North Arrow took a 62.1-kg Planning and permitting for the next big step at Naujaat — sample soon after. The sample returned 23 diamonds larger a bulk sample of 5,000 to 10,000 tonnes — is under way.

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drilling and sampling in 2015. The two kimberlites host 4 million carats of diamonds contained in 4 million tonnes grading 1.01 carats per tonne. The company had planned to drill 17 kimberlite targets during the spring program, but weather delays meant it only had time to test five targets with rotary air blast drill holes. Kimberlite has so far been intercepted at two of the targets — both extensions of existing, diamond-bearing kimberlite dykes. Drilling has extended the known diamond-bearing PST kimberlite to 350 metres in strike length and the 07KD-24 kimberlite to 225 metres in strike length. Drilling will continue in June, including at high-priority targets thought to be kimberlite pipes. In November, the company brought Claudia Tornquist on as president. Tornquist spent nine years with Rio Tinto in multiple roles, including working on the underground expansion of the Argyle diamond mine in Australia, and at Diavik in the Northwest Territories.

GGL Resources In April, GGL Resources (TSXV: GGL) announced the acquisition of three new land packages in the Lac de Gras area of the Northwest Territories: Bishop, Zeus and Rhombus. All three were acquired by staking and are strategically located based on historic discoveries of diamond-bearing kimberlites, previous positive exploration results, and the company’s proprietary database.

Margaret Lake Diamonds In May, Margaret Lake Diamonds (TSXV: DIA) began a core drilling campaign to test six kimberlite targets at its Margaret Lake property, just 9 km north of Gahcho Kué in the Northwest Territories. Each of the targets displays a gravity low, bedrock conductor or combination of both, as well as geophysical characteristics associated with kimberlite bodies. The company is using methods similar to those that Kennady Diamonds used successfully to delineate kimberlite targets at its nearby Kennady North project. Margaret Lake also holds 60% of the Diagras property in Lac de Gras with Arctic Star Exploration.

Mountain Province Diamonds Mountain Province Diamonds (TSX: MPVD; NASDAQ:

Crusher at the Gahcho Kué mine. Credit: Mountain Province Diamonds

MPVD) closed the acquisition of Kennady Diamonds in April. The company announced the all-share merger with the junior, which was originally spun out of Mountain Province in 2012 to advance the Kennady North project adjacent to Gahcho Kué, in January. The company also appointed former De Beers executive Stuart Brown as CEO in May, following the departure of Patrick Evans to join Dominion Diamond Mines last summer. Gahcho Kué, a 49/51% joint venture between Mountain Province and De Beers, began commercial production in March 2017. In the first quarter of 2018, Mountain Province reported net earnings of $67,000 on revenues of $67 million. The company sold 527,000 carats at an average price of $126 per carat for the quarter. (In 2017, Mountain Province reported total diamond sales worth $238 million with an average achieved price of $89 per carat.) The mine is expected to produce a total of 6.3-6.6 million carats in 2018.

North Arrow Minerals North Arrow Minerals (TSXV: NAR) discovered a new kimberlite field at Mel in Nunavut late last year — its second such find after the diamondiferous Pikoo project in Saskatchewan. Mel will see its first-ever drill program, testing several kimberlite targets, in July. A 62.1-kg sample taken from the ML-8 kimberlite, discovered by prospecting last year, returned 23 diamonds larger than 0.106 mm, including one macrodiamond (over 0.85 mm).

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GGL Resources retains a royalty at Mountain Province Diamonds’ Doyle project, in the Northwest Territories. Credit: GGL Resources

RIGHT: North Arrow Minerals’ Naujaat project, in Nunavut. Credit: North Arrow Minerals

Mel is located 210 km northeast of Naujaat — North Arrow’s most advanced project. The company is making preparations for a 5,000-10,000 tonne bulk sample at the Q1-4 kimberlite at Naujaat to collect enough diamonds for an accurate valuation and to inform a PEA. Q1-4 contains an inferred resource of 26.1 million carats in 48.8 million tonnes grading 53.6 carats per hundred tonnes (cpht) to a depth of 205 metres. To faciliate a bulk sample at Q1-4, North Arrow is looking at options to build a road. The project is 9 km northeast

of the community of Naujaat (Repulse Bay), and only 7 km from tidewater. In April, North Arrow reported the discovery of a new kimberlite at Target 465 at its Loki project, adjacent to its 45%-owned LDG joint-venture project with Dominion Diamond Mines. The discovery is the first in the Lac de Gras kimberlite field in the past five years.

Olivut Resources In December, Olivut Resources (TSXV: OLV) closed a $300,000 flow-through financing for exploration at its HOAM project in the Northwest Territories.

CORPORATE PROFILE

Burgundy Diamonds: Incubating diamond exploration projects — and investor returns For years, diamond juniors have struggled to raise funds for exploration that is typically more expensive, more complex and involves longer evaluation times than other commodities. This is where innovative new player Burgundy Diamonds sees a big opportunity for both project owners and investors. The private company is raising US$30 million to invest in a portfolio of diamond projects in the early exploration phase — the “sweet spot” when project valuations can increase by 5-10x in a short amount of time. However, it won’t usually take an equity stake in junior companies, which typically suffer high dilution. Instead, it will invest directly in exploration projects, normally through earn-in. A typical deal might involve progressive investment of $3-10 million for a 51% or greater stake. The company will manage risk through nurturing a portfolio of 6-10 projects at a time, balancing project locations, stage of development and complexity of evaluation. Burgundy would exit the asset on successful results, when the value of the project is much higher than the original investment. Aside from cash to advance their projects, Burgundy will offer its junior partners technical and strategic expertise.

Burgundy’s founder, Peter Ravenscroft, is one of the world’s foremost experts in diamond project evaluation, particularly in grade, size and price estimation. When the company is up and running — Ravenscroft expects it will be fully funded later this year — he will bring in other leading experts in diamond exploration and in the commercial and legal arenas to help grow and manage the portfolio. A good portion of the $30 million Ravenscroft is seeking has already been committed, but there is still opportunity for new investors to join. Burgundy will provide unique exposure to a hand-picked selection of the world’s most promising diamond projects, managed by an industry-leading team. The company plans to spend about $5-10 million in the first year, with its first deal coming before the end of 2018. Over three years, it would spend a total of $20-30 million, and after that, it is expected to be self-sustaining and generating substantial returns. Ravenscroft has already met with diamond juniors to gauge interest in the venture. With a short list of likely projects already in the works, he says that Burgundy Diamonds will consider projects worldwide, but Canada, Botswana and Australia are at the top of the list.

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Peregrine Diamonds In May, Peregrine Diamonds (TSX: PGD) released an updated preliminary economic assessment for its Chidliak project, in Nunavut, that incorporates expanded resources at the CH-6 and CH-7 kimberlites. The study increases total carats recovered at Chidliak by 44%, its mine life by 30% and the project’s after-tax NPV by 44% compared to a 2016 PEA. For an initial capital cost of $455 million, Chidliak is projected to produce 16.7 million carats over a mine life of 13 years. The project’s after-tax NPV is estimated at $679 million, with an after-tax IRR of 31.1%. CH-6 contains an inferred resource of 17.96 million carats in 7.5 million tonnes grading 2.41 carats per tonne to a depth of 525 metres. CH-7 contains 4.23 million carats in 5 million tonnes grading 0.85 carat per tonne. CH-6 diamonds are valued at US$151 per carat and CH-7 diamonds at US$114 per carat. There is potential to expand resources at both CH-6 and CH-7. The study looks at open-pit mining of CH-6 to a depth of 300 metres.

Surveying at Peregrine Diamond’s Chidliak project, in Nunavut. Credit: Peregrine Diamonds

Last November, Peregrine reported finding a rare green diamond in a sample at CH-6.

Rio Tinto Rio Tinto (NYSE: RIO) reported in February that development of the A21 pipe at its 60% owned Diavik mine, in the Northwest Territories, remains on schedule and within budget. Dyke construction and dewatering were complete early this year and first production from A21 is expected in mid-2018.

T SX .V L D I.V

ON THE ROAD TO DISCOVERY Exploring the Kimberley Diamond Project, Western Australia

L I T H O Q U E S T.C O M

778 -373 -1485

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The Diavik mine, in the Northwest Territories. Credit: Rio Tinto

RIGHT: A 36.84-carat diamond recovered from the Renard mine. Credit: Stornoway Diamond

The pipe is the fourth to be developed and is expected to support mining until 2025. Rio Tinto’s 40% partner at the mine is Dominion Diamond. Rio Tinto is also completing work at Star Diamond’s StarOrion South project in Saskatchewan (see Page 28).

Stornoway Diamond Stornoway Diamond’s ( TSX: SW Y ) Renard mine in Quebec achieved commercial production at the start of 2017,

but experienced high levels of breakage that negatively affected the sales price of its production. As a result, it introduced an ore-waste sorting circuit, which was commissioned at the end of the first quarter of 2018. The company reported a net loss of $11 million for its first quarter of 2018, as it transitions from open-pit mining to underground mining and relies on lowergrade material from stockpiles and initial stope development. The company reduced its guidance for the year to 1.35-1.4 million carats from 1.6 million carats. During the first quarter, Stornoway sold 399,135 million carats for a total of $56.6 million at an average price of US$112 per carat. By the end of the second quarter, the company expected its transition to underground mining to be complete, with the ore-sorting circuit expected to improve diamond recoveries and quality.

You, your diamond project, the financier, and the sale on different continents... we’re your common ground Our global diamond experience gives you expert, integrated solutions at every phase of your mining project.

SRK Canada:

+1 604 681 4196

•

info@srk.com

>1,400 professionals >45 offices • 20 countries • 6 continents

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DE BEERS TAPS BLOCKCHAIN TECH TO BOLSTER CONSUMER CONFIDENCE

BY JANICE LEUSCHEN

e Beers’ new blockchain technology, Tracr, will transform the diamond industry when fully implemented. “We believe that the blockchain technology has the potential to be transformative for the diamond industry by addressing some of its main concerns,” said Tom Montgomery, senior vice-president, Strategic Initiatives, De Beers Group. “Crucially, it can support confidence in the diamond ecosystem by creating a tamper-proof, immutable record of a diamond’s journey throughout the value chain and ensuring that its provenance.” In April 2017, De Beers started brainstorming ways that digital models could change the system. “We distilled hundreds of ideas to arrive at the concept of a blockchain traceability platform which is now Tracr,” Montgomery said.

“

For this blockchain to work, it has to be embraced by the industry, and provide benefits for all.

”

— Tom Montgomery, Sr. VP Strategic Initiatives, De Beers

Assorted rough diamonds. Credit: De Beers

“Tracr currently uses Ethereum, one of the most secure, versatile and widely-adopted blockchain protocols, to build the platform. Being industry-focused, we have also developed a unique cutting-edge privacy technology piece to address specific industry concerns around privacy and data security.” In early May, the company announced that it had successfully tracked 100 high-value diamonds through the blockchain platform. “Initially, the focus of the pilot has been on recording a diamond’s journey as it passes through the value chain, so we have started with newly mined production,” Montgomery said. “The information is uploaded onto the Tracr platform at the point of allocation of rough diamonds to the manufacturers that are participating in the pilot. De Beers worked with five diamond manufacturers during the pilot phase: Diacore, Diarough, KGK Group, Rosy Blue NV and Venus Jewel. Each company provided input into the development of a mechanism for integrating current recordkeeping with blockchain. During talks with industry stakeholders, the De Beers team found a genuine demand for an inclusive digital system to trace and, therefore, track the value of diamonds.

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“For this blockchain to work, it has to be embraced by the industry and provide benefits for all,” Montgomery said. “If people do not engage with the platform, it will be a wasted investment for De Beers. The more users that participate in the blockchain platform, the more effective it will be and the more value it will create for each and all its members.” Tracr allows users to own their data and share it selectively, while ensuring immutable traceability on the blockchain. “Neither De Beers nor other platform participants are or will be able to access data unless the data owner chooses to share it,” Montgomery said. Montgomery added that Tracr has other benefits, which include “improved transparency and trust between sometimes untrusting parties,” efficiencies in the supply chain and potentially faster access to financing. The pilot project for Tracr is ongoing and the company plans to expand the number of participants in the pilot project to get their input.

“We look forward to expanding the pool of participants soon in order to develop a truly comprehensive and workable solution for the industry,” Montgomery said. Signet Jewelers is the latest company to join the project. A project team from Signet will work with the Tracr team members to ensure the platform works for jewellery manufacturers and retail. “We have also been engaged in close discussions about Tracr with many key industry players, including other producers, manufacturers, retailers, industry associations, grading bodies, banks and logistics providers.” The launch of Tracr is expected later this year. It’s too soon to predict when this technology will reach Canadian mines. “The vision is to create the first comprehensive, end-to-end, independently governed blockchain — by the industry for the industry – that will ensure cast-iron provenance and immutable traceability for diamonds as they travel from the mine along the full value chain through to the end consumer.”

CORPORATE PROFILE

Talmora Diamond follows encouraging clues at Horton River Talmora Diamond (CSE: TAI) picked up its Horton River project in the Northwest Territories in 2003. The acquisition followed Darnley Bay’s discovery of a “Diamond Corridor” similar to the Slave “Corridor of Hope,” and by 2004, the whole region was covered by claims and juniors conducting surveys and till sampling. Sampling in the region, which became known as the Lena West district, turned up 18 diamonds as well as multiple kimberlite indicator minerals (KIMs), but their source was never found. There is evidence that Talmora could hold the source area. In 2008, a major explorer in the region, Diamondex, determined that most of the KIMs found on its property originated from a source to the east – where Horton River is located. Horton River has not seen any core drilling, but Talmora has identified many prospective targets for testing. Sampling by the company has shown a strong correlation between KIMs in till samples and over 40 magnetic anomalies at the project with characteristics of kimberlite pipes. Horton River has been challenging to explore because the

Horton River Canyon cutting through the Melville Hills plateau. Credit: Talmora Diamond

area had been exposed to Eocene (55 Ma) tropical weathering that destroyed garnets, and unlike most parts of northern Canada, the weathering was not removed by erosion. However, recent research has shown that rare Type IIa, low-nitrogen diamonds that formed at super depths are associated with manganese-ilmenite and low-chromium chromites. These KIMs are resistant to weathering and have given Talmora another clue to exploration at Horton River. The largest high-value diamonds are also Type IIa and have recently been shown to form at super depths. As a result, Talmora has a prime target that’s ready to drill. The junior has found a KIM train that shows indications of both peridotitic diamonds and high-value super-deep diamonds and is associated with a large magnetic anomaly.

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NEW PEA SLASHESI PREPRODUCTIONI COSTS FORI

STAR-ORION SOUTH Pre-production capex shrinks by $500M

An 11.96-carat Type IIa diamond from Star-Orion South valued at US$135,543. Credit: Star Diamond

BY RICHARD QUARISA

tar Diamond (TSX: DIAM) has tabled a new preliminary econoic assessment (PEA) on its StarOrionSouth diamond project in the Forte à la Corne diamond district in central Saskatchewan, 60 km east of Prince Albert. According to the study, the project could produce 470 million tonnes grading 14 carats per hundred tonnes (cpht) for 66 million carats over 34 years. The project has an after-tax net present value of $2 billion at a 7% discount rate and a 19% internal rate of return. Based on a December 2015 resource estimate, the Star kimberlite contains 193 million indicated tonnes grading 15 cpht for 28.3 million carats as well as 57 million inferred tonnes grading 11 cpht for 6.4 million carats. Orion South contains 200 million indicated tonnes grading 14 cpht for 27.2 million carats plus 72 million inferred tonnes at 7 carats for 5.2 million carats. The company says a significant portion of its diamonds are rare, high-value Type IIa stones. Notably, Star Diamond now pegs pre-production capital at $1.4 billion, a $500-million drop from its 2011 feasibility study (FS) estimate. “Most people found that number unpalatable at the time,” Star Diamond’s vice-president of exploration George Read says in an interview with Diamonds in Canada. Read attributes the cost reduction largely to the company’s plan to use bucket wheel excavators to clear the “vast quantity

of overburden” covering the kimberlites. In the FS, the company had decided to remove the overburden, which consists of sand, clay and till, using a truck and shovel system that Read says was very expensive. The company visited coal mines in East Germany that Read says have to remove a similar type of overburden. “They’ve been using bucket wheel excavators for over 50 years, and very successfully,” Read says. Star Diamond can use three excavators at Forte à la Corne to remove overburden for as little as 55¢ per tonne. Read adds that although bucket wheel excavators were used unsuccessfully in Canada in the past, malfunctioning in cold weather, he believes that thanks to the use of optic oils those issues have largely been resolved. Star Diamond has plans to operate two open pits, one at Orion South and one at Star. It would start with Orion South. “At Star we have sand and clay, till, then some low-grade kimberlite, before better ore at around 135 metres,” Read says. “At Orion South, from till you go directly into the kimberlite at 90 metres. In economic terms, you can access the payable ore quicker.” The company is also touting what it calls “state of the art” processes to recover larger diamonds from its project without breaking them. It says standard processing plants can easily break large stones, making them far less valuable. Its solution is to use X-ray transmission sorters supplied by

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Tomra Sorting. Tomra has used its technology in recycling and food sorting, and according to Read, the cost of running its machines is “much more manageable” than the standard process for diamond recovery. During its evaluation process, the company found a 49.5-carat stone at Star and a 45.9-carat stone at Orion South — which it says is unusual for that stage of exploration. “Diamond populations are naturally log-normal distributions, meaning that there are exponentially more little ones than big ones,” Read says. “However, in our case we have the opportunity to recover some significantly large stones, not dissimilar to what’s seen in the famous kimberlites in southern Africa.” Star Diamond acquired a 100% interest in Forte a la Corne in June 2017 from Newmont Mining (NYSE: NEM). It currently has a staged option agreement with Rio Tinto (ASX: RIO) to joint-venture the project. The first stage requires Rio Tinto to complete a 10-hole bulk sampling program or spend $18.5 million on the project. Rio Tinto has three years to complete the first stage, which will not earn it any interest. In January 2018, Rio Tinto completed overburden drilling

“

We have the opportunity to recover some large stones, not dissimilar to what’s seen in the famous kimerlites in southern Africa.

”

— George Read, VP Exploration for 10 holes. It announced in April it had finalized contractual arrangements for Bauer BC 50 cutter rigs from Nuna Logistics. The company will drill up to 250 metres below surface and extract 100 tonnes of kimberlite for every 10 metres. Star Diamond, formerly Shore Gold, began trading under its new name in February 2018. Its shares are valued at 19¢ with a 52-week range of 17¢ to 24¢. The company has a market capitalization of $72 million. —Richard Quarisa is a staff writer with The Northern Miner.

CORPORATE PROFILE

Lithoquest Diamonds: Driving discovery in the North Kimberley Lithoquest Diamonds (TSXV: LDI) only began trading in November, but the junior has already found diamonds at its early-stage North Kimberley project in northwestern Australia. In April, Lithoquest announced that a 10.06-kg sample from a weathered outcrop returned three microdiamonds (two yellow and one gray). The sample was collected at target 702, one of several kimberlite targets the company has identified at its 100% owned project. With a fully funded drill program planned for July, and other surveying and prospecting work that will be conducted as part of its $2 million spring/summer exploration program, Lithoquest will be releasing a steady flow of news this year. A fall program following up on microdiamond results, and testing and developing new targets is also planned. Guided by leadership with a history of success in diamond exploration and development, Lithoquest has a large land position in the prospective Kimberley Region (1,000 sq. km, plus another 478 sq. km under application). Known for producing coloured diamonds (pink and yellow), the region hosts the Argyle diamond mine and 70% of the kimberlites so far discovered in Australia.

Land positions of this size are rarely available in the area, but the junior’s timing was just right to pick up licences that expired following the prolonged market downturn. Lithoquest’s timing also looks good in terms of diamond demand and supply – with producing companies looking to replace depleted assets over the next five to ten years. The company has a low share count of 46 million and has strong institutional support from its largest shareholders Rosseau Asset Management and Eric Sprott.

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N A

D A

Pat Sheahan and John Kaiser

team up

s one of the only mining newsletter writers with a lasting interest in diamonds, John Kaiser has been receiving Pat Sheahan’s diamond literature service — a monthly PDF listing of technical papers that have been published on diamonds, plus notable diamondrelated corporate press releases and media coverage — for years. But Kaiser found the PDF format of limited use and in 2015, he approached Sheahan with a way to modernize the service, which Sheahan had first started in 1970. “Pat puts all this effort into it, but because of the format, the way she was delivering it, I don’t think the audience was able to extract the value out of it to justify the effort she was putting in,” Kaiser says. If the letter was in digital form, instead of being emailed out as a PDF it could be posted online with links to the technical articles, and could even be searched by topic or author, so Kaiser approached Sheahan with the idea. Sheahan says she jumped at the chance. “After Bob Bishop retired, John was always the one that I went to listen to

because he believed in diamonds and he also was working extremely hard to be very good at what he does — and he is.” Not only that, but Kaiser was willing to take on a lot of the technical details over from Sheahan, who doesn’t claim to be tech-savvy. However, it still required Sheahan retrieving older references from archaic technology — including floppy disks, and adding proper keywords. “He struggled and he pushed and he shoved and I finally got from 2004 to the present cleaned up to his requirements and I laugh because I’m supposed to be retired!” Sheahan says. By early 2016, Kaiser had posted the references back to 2004 on his website. The two have since been working on getting the rest up in batches — including references back to 1849, Kaiser says. Earlier this year, Kaiser asked Brooke Clements (a Hugo Dummett Diamond discovery award winner) to provide commentary on some of the technical articles. “I persuaded him since he’s actually a geologist in this field to go through the abstracts and pick out ones that catch his attention, and to say, this is

Pat Sheahan

interesting for this reason,” Kaiser says. Kaiser, meanwhile is flagging and commenting on media articles and wider diamond trends. The information is easily accessible, searchable and available for free on Kaiser’s website. “I’m hoping for a revival in the diamond space,” Kaiser says. “And having all this stuff available in one place would also be a gateway if people ever wanted to care about diamonds again and start getting up to speed with what’s going on in the space.” To access the archive, go to Kaiser’s homepage (www.kaiserresearch.com) and then follow the link to the Diamond Resource Centre.

ADVERTISER’S INDEX Burgundy Diamonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

SRK Consulting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Dunnedin Ventures Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Star Diamond Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .IFC

Lithoquest Diamonds Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Stornoway Diamond Corp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .OBC

Mountain Province Diamonds Inc . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Talmora Diamonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

North Arrow Minerals Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

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Liberals, Greens Q&A on mining in BY ALISHA HIYATE Canada ahiyate@northernminer.com

Mining sector forced to innovate TECH CONFERENCE

| New technology stokes productivity gains, but ‘no silver bullet’

ELECTION 2015 | Credibility and accountability are top concerns

BY ALISHA HIYATE ahiyate@northernminer.com

BY JOHN CUMMING jcumming@northernminer.com

he mining sector is facing a DarW delegates at the winian moment, first annual Technology and Innovation in Mining conference in Toronto heard in September. Just as species deal with changes in their climate, food sources or other circumstances, miners dealing with mounting cost, social and technical pressures must innovate if they want to survive, research group AMIRA International managing director Joe Cucuzza said. “If you look at Darwinian evolution, there are more species that go extinct than actually quickly adapt,” Cucuzza told the conference. “The point is that in our industry, we need to adapt quickly. COAL OUTLOOK: WOOD MACKENZIE SEES RAY OF HOPE / 4 Those that are slow to adapt, unfortunately, are going to go extinct.” The conference, organized by Dubai-

BY JOHN CUMMING jcumming@northernminer.com

Mining sector W forced to innovate

ith Canadians looking ahead to a federal election on Oct. 19, The Northern Miner submitted mining-related questions to the leaders of the four major political parties running across CanTECH CONFERENCE | New technology stokes productivity gains, but ‘no silver bullet’ ada. The following are the answers from the Liberal Party of Canada ELECTION 2015 | BY ALISHA HIYATE leader Justin Trudeau and Green Party Credibility and ahiyate@northernminer.com accountability are of Canada leader Elizabeth May and top concerns their parties: he mining sector is facing a DarThe Northern Miner: In recent years winian moment, delegates at the BY JOHN CUMMING first annual Technology and Injcumming@northernminer.com the federal has streamlined novation in Mining conferencegovernment in Toronto heard in September. environmental permitting for miners ith Canadians looking Just as species deal with changes in byfood trying tooravoid ahead to a federal election their climate, sources other duplicating provinon Oct. 19, The Northern circumstances, miners dealing with efforts. Do you support this apMiner submitted mining-related quesmounting cial cost, social and technical tions to the leaders of the four major pressures must innovate ifDoes they want to federal government proach? the political parties running across Cansurvive, research group AMIRA Interhave adirector unique role to play in avoiding ada. The following are the answers national managing Joe Cufrom the Liberal Party of Canada cuzza said. catastrophic tailings dam failures, such leader Justin Trudeau and Green Party “If you look at Darwinian evolution, of Canada leader Elizabeth May and there are more that go extinct as species the Mount Polley spill in B.C. in their parties: than actually quickly adapt,” Cucuzza 2014?“The point is that The Northern Miner: In recent years told the conference. the federal government has streamlined in our industry, we need to adapt quickly. Justin Trudeau/Liberal Party: The environmental permitting for miners Those that are slow to adapt, unfortuby trying to avoid duplicating provinnately, are going to go extinct.” Harper government has eroded the cial efforts. Do you support this apThe conference, organized by Dubaicredibility of Canada’s environmental proach? Does the federal government See TECHNOLOGY / pg. 2 have a unique role to play in avoiding reviews by narrowing their application, catastrophic tailings dam failures, such Autonomous haulage trucks on the move at Rio Tinto’s West Angelas iron ore mine in Australia’s Pilbara region. as the Mount Polley spill in B.C. in limiting public participation and slash2014? ing the capacity of the federal governJustin Trudeau/Liberal Party: The Harper government has eroded the ment to protect the environment. credibility of Canada’s environmental reviews by narrowing their application, They have ended over 50 years of limiting public participation and slashing the capacity of the federal governenvironmental oversight in Canada ment to protect the environment. by repealing the Canadian EnvironThey have ended over 50 years of environmental oversight in Canada mental Assessment Act so that the by repealing the Canadian Environmental Assessment Act so that the federal government can sidestep enfederal government can sidestep environmental reviews of potentially vironmental reviews of potentially harmful projects. harmful projects. Without public trust, Canada’s environmental assessment processes are Without public trust, Canada’s enincreasingly paralyzed. Not only are vironmental assessment processes are we not doing a good enough job at protecting our environment, we are increasingly paralyzed. Not only are not getting our resources to market. We need clear and efficient processes we not doing a good enough job at that have reasonable, evenhanded protecting our environment, we are rules, clear beginning and end points and decisions that can be relied on. not getting our resources to market. We will launch an immediate, public review of Canada’s environmental We need clear and efficient processes assessment processes. Based on this that have reasonable, evenhanded review, a Liberal government will rules, clear beginning and end points See ELECTION / pg. 3 and decisions that can be relied on. We will launch an immediate, pubCOAL OUTLOOK: WOOD MACKENZIE SEES RAY OF HOPE / 4 lic review of Canada’s environmental assessment processes. Based on this review, a Liberal government will

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TECH CONFERENCE

ith Canadians looking ahead to a federal election on Oct. 19, The Northern Miner submitted mining-related questions to the leaders of the four major political parties running across Canada. The following are the answers from the Liberal Party of Canada leader Justin Trudeau and Green Party of Canada leader Elizabeth May and their parties: The Northern Miner: In recent years the federal government has streamlined environmental permitting for miners by trying to avoid duplicating provincial efforts. Do you support this approach? Does the federal government have a unique role to play in avoiding catastrophic tailings dam failures, such as the Mount Polley spill in B.C. in 2014? Justin Trudeau/Liberal Party: The Harper government has eroded the credibility of Canada’s environmental reviews by narrowing their application, limiting public participation and slashing the capacity of the federal government to protect the environment. They have ended over 50 years of environmental oversight in Canada by repealing the Canadian Environmental Assessment Act so that the federal government can sidestep environmental reviews of potentially harmful projects. Without public trust, Canada’s environmental assessment processes are increasingly paralyzed. Not only are we not doing a good enough job at protecting our environment, we are not getting our resources to market. We need clear and efficient processes that have reasonable, evenhanded rules, clear beginning and end points and decisions that can be relied on. We will launch an immediate, public review of Canada’s environmental assessment processes. Based on this review, a Liberal government will

Autonomous haulage trucks on the move at Rio Tinto’s West Angelas iron ore mine in Australia’s Pilbara region.

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See TECHNOLOGY / pg. 2

Canadian Mining Hall of Fame

Discipline pays off / 4

Five new inductees / 5

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Liberals, Greens Q&A on mining in Canada

Mining sector forced to innovate TECH CONFERENCE

| New technology stokes productivity gains, but ‘no silver bullet’

ELECTION 2015 | Credibility and accountability are top concerns

BY ALISHA HIYATE ahiyate@northernminer.com

BY JOHN CUMMING jcumming@northernminer.com

See ELECTION / pg. 3

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ith Canadians looking ahead to a federal election on Oct. 19, The Northern Miner submitted mining-related questions to the leaders of the four major political parties running across Canada. The following are the answers from the Liberal Party of Canada leader Justin Trudeau and Green Party of Canada leader Elizabeth May and their parties: The Northern Miner: In recent years the federal government has streamlined environmental permitting for miners by trying to avoid duplicating provincial efforts. Do you support this approach? Does the federal government have a unique role to play in avoiding catastrophic tailings dam failures, such as the Mount Polley spill in B.C. in 2014? Justin Trudeau/Liberal Party: The Harper government has eroded the credibility of Canada’s environmental reviews by narrowing their application, limiting public participation and slashing the capacity of the federal government to protect the environment. They have ended over 50 years of environmental oversight in Canada by repealing the Canadian Environmental Assessment Act so that the federal government can sidestep environmental reviews of potentially harmful projects. Without public trust, Canada’s environmental assessment processes are increasingly paralyzed. Not only are we not doing a good enough job at protecting our environment, we are not getting our resources to market. We need clear and efficient processes that have reasonable, evenhanded rules, clear beginning and end points and decisions that can be relied on. We will launch an immediate, public review of Canada’s environmental assessment processes. Based on this review, a Liberal government will

See TECHNOLOGY / pg. 2 Autonomous haulage trucks on the move at Rio Tinto’s West Angelas iron ore mine in Australia’s Pilbara region.

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