Diamonds in Canada November 2018 by The Northern Miner Group

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—IN CANADA—

NOVEMBER | 2018

DE BEERS’

FUTURESMART PLANS FOR CHIDLIAK

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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%.

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Contents 6

NOVEMBER 2018

EDITORIAL Younger consumers shaping industry trends

. . . . . . . . 4

DE BEERS LOOKS TO PUSH THE INNOVATION BAR AT CHIDLIAK By Alisha Hiyate

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

De Beers’ Chidliak project in Nunavut. Credit: De Beers

NEW MOUNTAIN PROVINCE CEO’S DEEP DIAMOND ROOTS By Janice Leuschen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

LITHOQUEST HEADS DOWN UNDER . . . . . . . . . . 18

DE BEERS LAUNCHES LIGHTBOX

ON THE COVER:

STORNOWAY LOOKS TO CASH-FLOW POSITIVE 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

By Alisha Hiyate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

FINE CUTS FIVE TAKEAWAYS FROM OUR FIRST DIAMONDS SYMPOSIUM . . . . . . . . . . . . . . . . . . . . . . 12

Lucara brings Clara online; North Arrow at Mel; Star Diamond approval; Dunnedin discovery . . . . . . 20

Digital copy available to subscribers at www.northernminer.com

225 Duncan Mill Rd, Ste. 320, Toronto, Ontario, M3B 3K9 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: Barbara Burrows

PRODUCTION MANAGER: Jessica Jubb CONTRIBUTING WRITERS: Janice Leuschen

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Younger consumers shaping industry trends ALISHA HIYATE EDITOR

‘

It seems

the one thing the industry does not need to prove to young consumers is that diamonds are the perfect symbol of

’

love,

— De Beers CEO Bruce Cleaver

uddenly, the diamond sector is an exciting place to be. Personally, I feel a renewed sense of optimism about the industry after being a part of the first ever Diamonds Symposium, organized by DiC’s publisher The Northern Miner in June. It was gratifying to see a great turnout at the event, proving that there is still a vibrant diamond community in Canada (see Page 12). But it’s not just that we had a successful and positive event. Recent developments point to an industry that is rising to the many challenges before it. For starters, the industry is taking steps to be more transparent in order to shore up confidence in its product and to modernize its tracking and sales processes for the benefit of all participants. De Beers’ blockchain initiative (which we reported on in our June 2018 issue) and Lucara Diamond’s new digital sales platform, Clara (see Page 20), are two examples. And then there’s De Beers’ Lightbox Jewelry initiative. While synthetics have been a concern for a number of years, Lightbox, which in September began selling lab-created diamond jewelry at a fraction of the price of synthetics produced by others — seems a strong and decisive effort to distinguish synthetics from natural diamonds in consumers’ minds (Page 9). There’s always been some sort of challenge to the natural diamond proposition Stornoway Diamond president and CEO Matt Manson pointed out in a recent interview — whether it’s been moissanite, conflict diamonds, or highpressure, high-temperature heat treatments. “I remember going to the Antwerp diamond conference in 2002 or 2003… and speaker after speaker was predicting the imminent demise and destruction of the diamond business because of the conflict diamond issue. Every speaker was certain that the business was finished,” he said.

“Ultimately, the diamond proposition has proven to be very secure in our culture; I think the business itself has responded well to the challenges that have popped up from time to time and I see the same thing here.” Demographics are also exerting their own pressures on the sector and shaping its evolution. In its 2018 Insight Report, released in September, De Beers noted that the Millennial and Gen Z cohorts represent nearly two-thirds (64%) of the world’s population. It turns out Millennials, aged 21-39, are already the largest consumers of diamond jewelry in the key U.S. (59%) and Chinese (78%) markets. But to retain and grow demand from socially conscious Millennials and Gen Z consumers, who are the future of the market, companies will have to show how they are making a positive difference in the world. In a foreward to the report, De Beers CEO Bruce Cleaver noted that both of these generations have high expectations of corporations. “For younger consumers, what you do and how you do it is becoming just as important as what you sell and how you sell it, and paying lip service to ‘doing good’ simply isn’t good enough,” Cleaver said. This will be a big challenge to the industry (as it is to the mining industry and all businesses). Fortunately, however, Millennials and Gen Z still associate diamonds with love. “It seems one thing the industry does not need to prove to young consumers is that diamonds are the perfect symbol of love,” Cleaver said. “Those in the diamond sector must recognize that love may now be expressed in many ways, and diamonds may also be used differently to symbolize it, but the connection remains as strong as ever.” As ever, we welcome your feedback at ahiyate@northernminer.com.

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DE BEERS LOOKS TO PUSH THE INNOVATION BAR AT

CHIDLIAK BY ALISHA HIYATE

n 2013, De Beers Canada turned down a chance to own a majority stake in Peregrine Diamonds’ Chidliak project in Nunavut. Five years later, it now owns the project outright. What changed in that time period? De Beers Canada CEO Kim Truter says that the timing just wasn’t quite right the first time around. “I always say to people that to develop a mining business, you need a few stars to line up and of course the number one star is what’s happening with the global economy and what’s happening with the diamond business in general, then you get down to the local environment and the quality of the asset. At that time, those various stars just didn’t line up,” Truter told Diamonds in Canada magazine in an October interview. Now, the situation on all those fronts is different. “First of all, the project had actually advanced, so credit to the Peregrine team that have done a tremendous job advancing the understanding of the orebodies and the kimberlite pipes up there,” Truter explains. “That, coupled with our portfolio needs and where the economy was sitting meant the stars did line up. So it’s fantastic to have made that acquisition.” With its Snap Lake mine on care and maintenance since the end of 2015 and its Victor mine to close next year, it was vital for De Beers — which has been in Canada for 50 years — to get new projects in its pipeline to complement production from its 51%-owned Gahcho Kué mine. And whereas its past joint venture option on Chidliak would have given it 50.1% of the asset for a total investment of $58.5 million, it acquired Peregrine and all its Canadian projects in

ARCTIC PROJECT COULD BE DE BEERS’ FIRST “FUTURESMART” OPERATION GLOBALLY a friendly deal in September for 24¢ a share or $107 million. But most importantly, perhaps, is that Chidliak — if proven economic — presents the perfect opportunity for De Beers to put into action the “FutureSmart” approach to mining innovation being developed by Anglo American (LSE: AAL), De Beers’ parent company. (Anglo owns 85% of De Beers with the government of Botswana owning 15%.) “From an Anglo American point of view, we would like to improve our mining image. The world is moving on and the ex-

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Left: A selection of diamonds from the CH-7 kimberlite at Chidliak. Credit: De Beers

Large-diameter drilling at Chidliak, in Nunavut. Credit: De Beers

pectations about what a mining project looks like and the impact on the environment and communities is evolving,” Truter said. “It’s very important to us that we now start setting ourselves apart by building mines that have a much smaller footprint and embrace some of the technologies that either currently exist or are emerging so we can change how we operate, we can change our footprint on the environment, we can offer a different value proposition for communities and government, and we can offer a different value proposition for employees, including things like working remotely.” The company will also be working to reduce its energy footprint at its projects, and will look to work with government and local communities on joint infrastructure needs — whether energy or data transmission requirements, Truter said. Peregrine released an updated positive PEA looking at development of the CH-6 and CH-7 kimberlites — two of the 74 kimberlites at Chidliak — in May. The study showed current resources at the two kimberlites could support a mine producing 16.7 million carats over a 13-year mine life. But using innovative technologies and approaches, De Beers is hoping to develop more of the kimberlites while leaving a much smaller footprint. While De Beers has employed innovative technologies at many of its mines, including Gahcho Kué, Chidliak

would be the first of its mines globally to incorporate FutureSmart innovations. “For us to have sole ownership of those 74 kimberlite pipes gives us a very good opportunity to find the model where we can try to develop as many of those pipes as possible,” Truter says. “That will take some different thinking as we think about things like a mining method that is scalable and reproducible and something we can potentially move from one pipe to the next.” A lean, precision approach would be completely different from a traditional mine like Gahcho Kué, which is a sprawling mining complex with lots of physical infrastructure on the ground. “We want to avoid that up on Baffin Island — somehow find a way of mining pipes with a very, very small footprint and something that allows us to move from one pipe to the next without leaving much infrastructure behind.” But first, De Beers needs to prove the economics of the project, and get through the permitting process. Over the next two to three years, the company will be advancing permitting, as well as environmental, traditional knowledge, and technical studies at Chidliak. Chidliak isn’t De Beers Canada’s only new holding. The company is also providing services and support to Adia

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Resources in return for a 15.4% stake. A private company majority owned by Altius Minerals (TSX: ALS), Adia has an option to earn a 100% interest in the Lynx diamond project in northeast Manitoba, where a 15.8-km sample taken in 2016 returned 144 microdiamonds. Truter also says the company is looking in Ontario, near Victor — which has been a “very consistent” mine, and where about 30% of land reclamation for closure has already been completed — as well as elsewhere in the province and across the country.

Gahcho Kué Since starting commercial production in March 2017, Truter says that Gahcho Kué, in the Northwest Territories, has performed well. “First of all, the ramp-up went exceptionally well. To go from

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Far left: The Northern Lights over the open-pit Gahcho Kué mine in the Northwest Territories. Centre: Stockpile at Gahcho Kué. Right: Supervisor Cindy Lazarus at the Victor mine in Ontario. Credit: De Beers

standing position to full production within a year — and actually better than full production as we’re exceeding the design capacity of the process plant and we’re recovering a lot more diamonds than we anticipated — it’s been a success story to date.” Truter says De Beers, which operates the mine, has tested some new and innovative concepts at the open-pit mine, including alternative energy and running a lean operation with a compact workforce. Another example is pit sequencing. As a new open pit is mined, the waste material will go into the first pit, and so on. “In other words, we’re filling the first hole with the second hole — so that’s quite innovative and hasn’t been tried elsewhere.” Prices for Gahcho Kué diamonds have been lower than expected (JV partner Mountain Province Diamonds [TSX: MPVD; NASDAQ: MPVD] has reported recent sales at between US$60 and US$99 per carat, as opposed to revenue of US$149.66 per carat projected in its 2014 feasibility study). However, Truter says the higher than expected grades and volume have balanced out any price weakness. “Whenever you conduct a feasibility study, there are always going to be pluses and minuses. We’ve experienced both — we’re getting better grades and more volume from the pipes, but some of the prices are a little bit lower.” One recent plus for the property has been the discovery of new kimberlite between the Tesla and Tuzo kimberlites, and between the 5034 and Tuzo kimberlites. With its partner, Mountain Province Diamonds, De Beers will be working into mid-2019 to bring the new kimberlite into the mine plan with additional drilling and technical studies. “There is some potential that this might extend the life of the asset, and we’re obviously hopeful of that,” Truter says. “And it won’t be the end of the story because we’ll keep drilling. We have some theories about the size and extent of the kimberlite orebodies and if they continue to grow, that again might lengthen the life of the asset — so that’s all positive upside.”

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De Beers launches

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World’s foremost diamond miner delves into synthetic jewelry

Lightbox

Lab-created diamond jewelry available from the Lightbox website.

BY ALISHA HIYATE

crolling through the website of Lightbox Jewelry soon after its launch in late September, three things jump out at you. First, the website declares its product is lab-grown diamonds. Second, the pricing is consistent, regardless of the colour of the synthetic diamonds on offer (white, pink or blue) and surprisingly low. It also increases proportionally with size. And third, there are no rings for sale – only earrings and necklaces. Owned by diamond miner De Beers, Lightbox is clearly putting into action De Beers’ strategy for differentiating synthetic and natural diamonds in the minds of consumers. When De Beers announced its new business in late May, some, like independent analyst Paul Zimnisky, called the move “genius,” while others, like JCK news director Rob Bates, called it a “huge gamble.”

Credit: Lightbox Jewelry

In a release, the company said that it aimed to provide affordable, high-quality fashion jewelry to consumers. “Lightbox will transform the lab-grown diamond sector by offering consumers a lab-grown product they have told us they want but aren’t getting: affordable fashion jewelry that may not be forever, but is perfect for right now,” De Beers Group CEO Bruce Cleaver said. “Our extensive research tells us this is how consumers regard lab-grown diamonds — as a fun, pretty product that shouldn’t cost that much — so we see an opportunity here that’s been missed by lab-grown diamond producers.” But De Beers is also entering the space to educate customers and differentiate lab-created diamonds from its main product — mined diamonds. “We’ve learned from our research that there is a lot of confusion about lab-grown diamonds – what they are, how they differ from diamonds and how they are valued,” said Steve Coe, general man-

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extremely competitive prices. In fact, the price of Lightbox stones — US$800 for a onecarat polished — is up to 80% less than its competitors’ prices, Zimnisky says. “We’re talking substantial price undercutting,” he says. Through its Element Six subsidiary, De Beers has been creating synthetic diamonds for industrial use for over 50 years. The company says that after decades of R&D investment, it’s able to offer affordable prices for its lab-created stones while still making a profit. Although De Beers is intentionally not selling diamond rings — which it would argue should be made with natural, mined diamonds — Zimnisky says this doesn’t mean individual consumers can’t buy a piece from the website and have it reset. (Only finished jewelry is available from the website.) “That’s possible and it seems like there’s enough incentive to do that because the price is so much lower.” As for Lightbox’s possible effect on mined diamond prices, most miners applaud De Beers’ strategy. “We fully support what De Beers has done here,” said Stornoway Diamond (TSX: SWY) president and CEO Matt Manson. “The whole idea of differentiating natural diamonds from synthetic diamonds by forcing the price of synthetics down, which is Pricing As part of establishing a clear difference between lab-created what Lightbox is, is a very clever idea. The diamond business has and mined diamonds, De Beers is offering Lightbox jewelry for absolutely no problem with the Swarovski crystal business, for example, because even though we’re selling jewelry that’s white and sparkles, it’s a different market.” That said, the price of lower-quality and smaller mined diamonds may be vulnerable to competition from synthetics. “There is cause for concern there,” said Zimnisky. “The sub-US$1,000 diamond jewelry pieces are probably the pieces that are going to be most likely at risk of losing share to lab-created.” However, most agree that a response to labcreated diamond jewelry was likely necessary to safeguard the natural industry. In that light, De Beers’ move to control the narrative will benefit all miners. “I don’t think De Beers ever wanted to get involved in the lab-created diamond jewelry space,” Zimnisky says. “I think this was a result of necessity, given how far and how quickly the lab-created diamond jewelry industry is progressing. So I think this was more of a proactive – maybe offensive move on their part.” TSXV:NAR Zimnisky says he believes there will be inherent support in the value of natural diamonds because the cost to produce is increasing while production costs for lab-created diamonds drop.

ager of Lightbox Jewelry. “Lightbox will be clear with consumers about what lab-grown diamonds are and will offer straightforward pricing that is consistent with the true cost of production.” In an interview, De Beers Canada CEO Kim Truter said that the rise of labs making and selling synthetic diamonds has created confusion both in the mid-stream of the business (cutters and polishers) and among customers. At ﬁrst, De Beers’ response was to focus on developing technology that could detect synthetics. But as labs proliferated, the company realized an additional response was required. “What we decided to do as De Beers is to make sure that it was crystal clear in peoples’ minds the difference between a labgrown stone, which is a very reproducible stone and we would argue is more of a commodity than a diamond, because as we all know, every single diamond is different,” Truter says. “So the Lightbox announcement and the commercial go-live process is to clearly distinguish between the two and to make sure that the pricing differentiation between a natural mined stone and a synthetic stone is very clear, and that consumers can be well educated about the difference when they’re making a purchase.”

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“

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Our extensive research tells us this is how consumers regard lab-grown diamonds — as a fun, pretty product that shouldn’t cost that much — so we see an opportunity here that’s been missed by lab-grown diamond producers.

”

US$94 million to build a facility in Oregon to support its Element Six facilities in the U.K. in producing Lightbox diamonds via chemical vapour deposition (CVD). The plant will be capable of making 500,000 carats of rough synthetic diamonds per year. Until its Oregon facility is ready, Zimnisky says the company is essentially selling rejects from Element Six. Compared to De Beers’ rough mined production of 30-35 million carats for 2018, Lightbox will be a small component of De Beers’ overall business – too small for parent company Anglo American (LSE: AAL) to detail in its ﬁnancial reporting. But that could change. The “endgame” for the labs that have entered the synthetic diamond business is not jewelry, but the high-tech industry, Zimnisky says. Diamond’s thermal conductivity and ability to cool quickly make it ideal for many industrial applications. But to use

diamonds in this way, industry would need access to perfectly flawless and consistent diamonds on a large scale. De Beers’ technology could give it a head start in this market, which will be much larger than the jewelry market. “For a company like Anglo, 10 or 20 years from now, what might be the most exciting outcome from this is that Element Six is the ﬁrst player to really be able to produce very high-quality, lab-created diamonds on a large scale and start selling it to industry,” Zimnisky says. That possibility could completely remake De Beers and Anglo. “Can you imagine?” Zimnisky said. “In 2035, 2040, maybe it will actually make more sense for a multinational mining company to be generating a signiﬁcant portion of their products from a synthetic material.”

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5 symposium

THEMES FROM DIC’S FIRST DIAMONDS

The ﬁrst annual Diamonds Symposium, organized by The Northern Miner and Diamonds in Canada, spanned the earliest days of Canada’s diamond rush in the early 1990s to present trends and predictions for the future. Held in Toronto in June, the event featured keynote speakers Grenville Thomas, Eira Thomas and independent analyst Paul Zimnisky, as well as corporate presentations and more. Here are a few of our takeaways from the day.

Canada’s enduring diamond exploration potential With intense diamond exploration only starting in Canada during the early 1990s, and an exploration scene that has been quiet since the ﬁnancial crisis, Canada still has immense diamond potential. “Canada has vast cratonic areas — many are underexplored or unexplored,” said George Read, senior vice-president exploration and development for Star Diamond (TSX: DIAM). “De Beers is still following up targets to my knowledge that came out as highlights in the 1960s.” Discoveries are still being made, even in areas that have seen previous exploration. Stornoway Diamond (TSX: SWY), for example, recently found a kimberlite about 70 km north of Elliott Lake, Ont. “It wasn’t found with conventional methods and I can’t tell you how we found it, but it was an area that’s been explored before,” said Stornoway president and CEO Matt Manson. Peter Ravenscroft, managing director of Burgundy Diamonds, had a slightly different take on the theme. “Someone asked me the other day where do I think the next new mine in Canada’s going to be discovered, and I said it’s already been discovered. We’ve found so many diamondiferous kimberlites that there is a new mine in there somewhere,” he said. Gren Thomas — chairman of North Arrow Minerals (TSXV: John Cumming, editor-in-chief of The Northern Miner (at podium) moderated a panel on Canada’s diamond sector, including Matt Manson, Peter Ravenscroft and George Read. Credit: The Northern Miner

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NAR) and an admitted optimist — said all the elements are in place for Canada to retain its place as a top diamond producer. “Canada has a depth of talent and people that do exploration, the best in the world — as long as the government doesn’t screw it up,” said Thomas, who was the founder of Aber Diamond (now Dominion Diamond). “We’ve got it made — we’ve got the geology, we’ve got the geologists, and I suppose because the government’s been so slow to develop the north that’s why it’s still wide open.”

Optimism about De Beers’ Lightbox initiative De Beers’ announcement that it was starting Lightbox Jewelry — a company selling lab-created diamonds — was made two weeks before the Diamond Symposium (see Page 9). The initiative received a supportive response. “I think it’s genius from a strategy standpoint,” Zimnisky said. “If this strategy works, you’re going to see it in case studies in textbooks.” Miners, including Lucara Diamond (TSX: LUC) president and CEO Eira Thomas, also saw the move positively. “There’ve been mixed views on the whole Lightbox initiative, but I think the reality is that synthetics are here to stay, but they don’t need to be a competitive market and I think that’s what De Beers is saying with Lightbox,” she said. “Setting up Lightbox for one speciﬁc part of the market is a smart thing to do — I think it really differentiates natural stones now from synthetic stones.”

The diamond sector is innovating Aside from De Beers’ move into synthetics, other aspects of

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The 2018 Diamonds Symposium was held at the Fairmont Royal York. Centre: Northern Miner publisher Anthony Vaccaro (left) and independent analyst Paul Zimnisky (right). Top right: The event was well attended by many with a deep interest in and knowledge of diamonds, including Chris Jennings (far left) and Pat Sheahan (centre). Credit: The Northern Miner

innovation in the diamond sector were highlighted. Stornoway Diamond’s new ore waste sorter, for example, has helped to reduce diamond breakage — a problem that is “endemic” in the sector — at its Renard plant, Manson said. Renard is also the ﬁrst mine of any in Canada to use the technology, which uses spectral analysis to remove waste from the head feed. In Renard’s case it removes about 20% of the feed, which is almost entirely hard waste rock. “It’s actually reduced the power consumption of our plant because the power we were using to crush that waste is more than the power to run the sorters,” Manson said. Lucara’s Clara platform — a technology aimed at modernizing the diamond-selling process — was another notable example of innovation. Although Lucara’s Thomas said the move had yet to be recognized by the market, the company is conﬁdent Clara will unlock value for all participants and be a money maker when it’s fully up and running in 18-24 months. “Our view is that Clara will generate revenues that will match or exceed the revenues we’re generating from our mine,” Thomas said. continued on page 22

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STORNOWAY LOOKS TO CASH-FLOW POSITIVE 2019

n ore shortage in the first half of the year and a challenging underground ramp-up at its Renard mine led Stornoway Diamond (TSX: SWY) to close a $129-million financing in October. But Stornoway president and CEO Matt Manson says that all the pieces are now in place, and the company is set to be cash-flow positive in 2019. Stornoway achieved commercial production at Renard, in north-central Quebec, in early 2017. The initial open-pit development was five months ahead of schedule, but underground at the Renard 2 kimberlite, where the majority of the Renard ore lies, Stornoway has been slightly behind plan. Full production of 6,000 tonnes per day was achieved at the end of August, two months behind schedule. Part of the slower than expected ramp-up had to do with a change in the mining method underground from blast-hole shrinkage stopage to assisted block caving. “In mid-stride, we had to make an adjustment to the mining method because all of our data was telling us in the mine design process that the kimberlite was quite competent and wouldn’t cave,” Manson said. “But when we opened up the production stopes, we were getting a natural cave.” In the end, the change in method is a net positive, as it means less dilution and lower costs. Fortunately, the company had pre-

pared for a potential block-cave scenario in its planning, and the infrastructure required for both methods — the drawCredit: Stornoway Diamond points, overall panel designs and equipment specifications — is the same. Less blasting is needed for assisted block-caving and the company is transitioning to horizontal from vertical panels. In addition, in the first half of the year, the company wasn’t able to supply enough ore to the mill. While the open-pit development was five months ahead of schedule, underground development wasn’t – opening up a potential production gap. Recognizing the risk, the company’s mitigation strategy was to extend the life of the open pit, which was a relatively shallow pit with a short life. “That proved to be unfeasible during the winter because of bad winter conditions, ice, restricted access, and health and safety issues in the pit,” Manson said. “So we were caught short in the first half of the year during the ramp-up in what ore was available to supply the mill,” Manson said. Meanwhile, the ore coming from underground development from the edges of the Renard 2 orebody was lower grade. Grades are now improving as the company advances toward the centre of the orebody. Stornoway Diamond’s Renard mine in Quebec.

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in the second quarter and US$103 per carat in the third quarter.) But with several diamond mines slated to close starting next year with Credit: Stornoway Diamond the closure of De Beers’ Victor mine in Ontario, Manson believes natural diamond prices will have to rise in the future. “I think 2017 will prove to have been the top of the supply curve for diamonds,” he said, noting the new production coming on-stream from Renard, Gahcho Kué and Firestone Diamonds’ Liqhobong last year. “I think 2018 will be down and then it’s down every year for the next ﬁve years. The diamond business has never gone through a genuine supply decay before and it will be very interesting to see what happens.” The company’s ore sorting plant, which was commissioned in May 2018 to reduce diamond breakage, has been working well. The circuit eliminates about 20% of the head feed — most of that consisting of very hard waste rock. As a result, it has cut overall power consumption in the plant. Left: Underground at Renard. Below: A 36.84carat Renard diamond.

Between the ore supply crunch and the ramp-up issues underground, Stornoway had to lower its production guidance in May (to 1.35-1.4 million carats from 1.6 million carats). And at that point, with lower than expected sales revenues affecting liquidity and cash flow, the company recognized the need for an additional financing. “When we had to change our guidance in terms of carats because of the ore supply issue and the ramp-up, it became clear that we needed to address the balance sheet,” Manson said. In early October, the company announced a ﬁnancing of $129 million, consisting of loan principal payment deferrals (up to $54 million); and adjustments to streaming agreements that give Stornoway $45 million. A private placement with institutional investors added $20 million, with an additional • Proven diamond potential, existing $10 million available to existing shareholders. high grade resource Manson noted that the company was able to • Exploration led by Dr. Chuck Fipke, avoid adding any new debt, or doing a diluEkati diamond discoverer and largest tive rights offering, as many of Stornoway’s DVI shareholder peers have done recently. • Good infrastructure, not remote “We should be cash flow positive in 2019,” • Hosts high-quality, large diamonds Manson said. “The big capex is now behind • Kimberlite pipes successfully drilled in 2018 us and we’re looking forward to getting cash flow in 2019, and then enjoying that for a • Numerous targets to be drilled in 2019 long time.” • See us in the “Discovery Group” booth #2813 at PDAC A relatively weak diamond market has not helped revenues. “Every diamond company that started production in the last couple of years has had a miss on price compared to feasibility planning, and we’re no exception,” he said. While sales prices for Renard diamonds are much higher this year — by the end of June they were up 27% from the very ﬁrst www.dunnedinventures.com sale, Manson notes — they are still below the ventures inc. levels projected in the feasibility study. (The info@dunnedinventures.com average achieved price was US$109 per carat

ADVANCE STAGE DIAMOND EXPLORATION IN NUNAVUT, CANADA

DUNNEDIN

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NEW MOUNTAIN PROVINCE CEO HAS

DEEP DIAMOND ROOTS BY JANICE LEUSCHEN

ith more than 25 years experience in the diamond industry — including 19 with De Beers – Stuart Brown was looking for a new opportunity. He found it as the president and CEO of Mountain Province Diamonds (TSX: MPVD; NASDAQ: MPVD). “I was quite excited by this,” he said. “I think the mine has good potential, because it’s just starting off. I thought I could add a lot of value with my prior relationship with De Beers.” Brown, whose last role at De Beers Group was as CFO and joint acting CEO, joined Mountain Province in May. Mountain Province owns 49% of the Gahcho Kué mine, which is 280 km northeast of Yellowknife. De Beers owns 51% and is the operator. For Brown, it’s not a matter making changes to the company, but rather moving its production forward and extending the life of the mine. “We are in our second year of commercial production, so we are still finding our feet as producers,” he said. “When I say producers, I’m talking about the Gahcho Kué mine. So, whether it’s De Beers operating it or us, we do this together.” In the coming year, Brown wants to ensure that De Beers and Mountain Province are working towards the same goal. “Our primary objective is to add the additional resources that we are currently discovering on the joint venture property,” he said. Additional kimberlites have been found between 5034 and Hearne, and 5034 and Tuzo. These finds will be added to the draft mine plans, which will be published shortly. “In the coming twelve months we want to do a lot more work on that,” Brown said. “And clearly that’s a preference for De Beers, because it’s right on our doorstep.” Earlier this year, Mountain Province brought the Kelvin and

Faraday kimberlites back into the company by acquiring Kennady Diamonds — which had been spun out of the company in 2012. It owns 100% of the kimberlites, which lie 8 km away from Gahcho Kué. “We need to do a little bit more work on those to upgrade them and get a better understanding on the value of the diamonds in the ground,” Brown said. “We would like to bring them into the joint venture. In order to do that, we need De Beers to agree.” Right now, the preference is to continue evaluation of new near-mine discoveries at Gahcho Kué.

Our ambition at Mountain “ Province is to extend the life of this project beyond 2030. ” — Stuart Brown, Mountain Province CEO

“Our current mine plan with De Beers is that we would go until 2028, with what we know is in our plan,” he said. “Then we have all of this additional (near-mine) material that we are discovering now. Over the next twelve months we will be trying to incorporate that in our design.” Beyond the Gahcho Kué property itself and Kelvin and Faraday, Brown says there is a huge amount of grassroots greenfield exploration potential on the property. Mountain Province will be investing a limited amount of money into identifying new targets.

Diamond market However well the mining process goes, there is still the issue of selling them.

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The Gahcho Kué mine site, in the Northwest Territories.

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Open pit mining at Gahcho Kué Credit: Mountain Province Diamonds

Credit: Mountain Province Diamonds

Inside the processing plant. Credit: Mountain Province Diamonds

A 67.87 carat stone from the mine. Credit: Mountain Province Diamonds

is increasing. The retail side of the business has grown, especially in “For 2017, the market was quite good,” he said. “It recovered 2017, and we see 2018 will be a good solid year for retail.” well towards the end. In 2018, we saw good solid growth for the Several diamond mines will be closing in the next couple of first seven months of the year.” years, having come to the end of their natural life. This situation He added that the market has become a little bit nervous will work in Mountain Province’s favour. recently, resulting in price reductions. “Our ambition at Mountain Province is to extend the life of “It’s not a question of oversupply that is causing prices to this project beyond 2030.” fall,” Brown said. “It’s a few external factors around the midstream financing chain where we’ve seen a lack of funding in this area causing buyers not being able to participate, hence prices have dropped.” However, the retail demand for diamonds is strong. “We are seeing such good results coming out of retail performance and predictions of uuu good retail going into the holiday season in North American and Asia,” he said. C/W diopside indicator mineral. 6.3 acres on old volcano. Brown describes the situation as anomalous. Lava pillows, fissures with crystallized quartz and “In the large goods and the better qualities, other possibilities. Prospected Early 1900’s. we’ve seen strong growth this year, so we beC/W cottage $2.7 million OBO. lieve the supply and demand fundamentals are still in the favour of the miners where there is EM: wiland@mymts.net | PH: (204) 391-6003 going to be limited supply growth and demand

DIAMOND PROPERTY FOR SALE

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down under LITHOQUEST HEADS

ny new diamond exploration venture that gets off the ground these days is a notable one. Indeed, Bruce Counts, the CEO of Lithoquest Diamonds (TSXV: LDI), was involved with private company Proxima Diamonds, an explorer focused on the Slave Craton in the Northwest Territories that was planning to launch publicly in 2014. “Unfortunately, the timing wasn’t great,” Counts says, and the public listing didn’t happen. Although he’s not sure the timing is any better now, Counts notes that Lithoquest was able to go public through a reverse takeover in November 2017, based on promising results from its North Kimberley project, in Western Australia. Counts, who ran junior explorer Indicator Minerals from 2004 to 2010, was also part of team that made the Ekati discovery, working for BHP Billiton (NYSE: BHP; LSE: BLT) as a project geophysicist and later, for Dia Met Minerals. Counts became interested in Lithoquest’s North Kimberley project in 2015, when his friend and president of Apex Geophysics, Mike Dufresne, showed him results of a rock sample he’d taken on the property in 2007, shortly before the market crash. “As explorers, we chase chemistry, and the mineral chemistry of the kimberlite indicator minerals that were recovered from rocks on this property are amongst the best I’ve seen in twentyfive years,” he said.

Lithoquest Diamonds conducted its first drilling campaign at its North Kimberley project, in Western Australia, this year. Credit: Lithoquest Diamonds

The rock was chosen to be sampled because it looked kimberlitic, Counts said. “This part of Australia, you haven’t had glaciation for several hundred million years, so the rocks are deeply weathered. So it was really more textural than anything else,” he explains. “The fact that Mike had been prospecting and found these indicator minerals, to me, was very compelling. I thought that you can’t be too far from the sources given that they’re rocks.” Following up on those results, the company took four samples from two locations that also turned up indicator minerals. Since going public and raising $5 million for its first exploration program, Lithoquest has collected rock samples, loam samples

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The exploration program at North Kimberley included rock, loam and stream-sediment sampling, drilling and prospecting. Credit: Lithoquest Diamonds

and stream sediment samples, as well as completing a 1,200-metre drill program to test five targets. In April, Lithoquest announced that three microdiamonds (two yellow and one grey) had been recovered from a 10.06-kg sample collected from a weathered outcrop at North Kimberley. The company’s first drill hole was targeted to drill directly underneath that outcrop, but only hit basalt — “a bit of a headscratcher,” Counts says. One drill hole at Kimberley North did hit kimberlite. In September Lithoquest reported that one of two holes drilled at target 1804 hit kimberlite breccia from 100.5 metres depth to 124.3 metres, in between intervals of clay-altered and then carbonatized and fresh basalt. The core has been sent to Canada for a detailed

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review and then diamond testing at the Saskatchewan Research Council. Results are expected before year-end. “It’s very early and we have not done all the required work to be definitive on this, but it appears to be volcaniclastic in nature, so it means you’re looking at something that’s more like a pipe than a dyke, which is always good. The mineral chemistry is very compelling and the rocks look very good.” For next year, Lithoquest will focus on developing new targets and refining its exploration program in the hopes of finding more diamond-bearing kimberlite. “Now that we’ve drilled a kimberlite, we’ve got an indication of the geophysical properties that show up on geophysics, so we can use that as a sort of a fingerprint to look for other targets in the area.” Counts says. The company may also fly new surveys to update and tighten up the line spacing on the airborne data it has for North Kimberley, given the last EM and gravity surveys were conducted in the early 2000s, and magnetic and radiometric in 2008. It currently has a treasury of $2 million. The 1,500-sq.-km project is located on tidewater in northwestern Australia, and accessible by a seasonal road for eight months of the year (excluding the rainy season). Western Australia also hosts the Argyle and Ellendale diamond mines, although they are located several hundred kilometres from North Kimberley and are lamproite deposits rather than kimberlite. While most Canadian diamond explorers prefer to explore nearby, Counts sees several advantages to going so far from home. “Diamond exploration in Australia has been very quiet for ten years,” Counts says. “One of the great things is we’re blending the Australian expertise with the Canadian expertise, and I think that’s really gone a long way to giving us success.”

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FINE CUTS LUCARA BRINGS CLARA DIGITAL SALES PLATFORM ONLINE

ucara Diamond (TSX: LUC) announced in October that its new sales platform Clara Diamond Solutions, is ready for its first sale of diamonds in November. The platform is meant to modernize the diamond selling process and improve margins for both buyers and sellers. Sales through Clara will be stone by stone rather than by assortments, which the company says will achieve the best possible price for producers and allowing manufactures to buy only what they want. Through proprietary analytics, the technology matches the characteristics of rough diamonds with the buyers’ requirements for the final polished stone. The digital technology uses blockchain technology for secure transactions and proof of the origin of the stones, improving consumer confidence. Sorting diamonds from Lucara Diamond’s Karowe mine, in Botswana. The initial sale will include rough dia- Credit: Lucara Diamond monds from Lucara’s Karowe mine in Botswana, as well as third-pary rough diamonds $29-million deal that resulted in less than 3.7% dilution, would between 1 carat and 15 carats in better colours and qualities. soon prove its value. Lucara says a select group of large jewelry houses and diamond “It’s very inexpensive to get this platform up and running — manufacturers are participating. our total budget for the year is $3 million and our view is that At The Northern Miner’s Diamonds Symposium in Toronto in Clara will generate revenues that will match or exceed the revJune, Lucara president and CEO Eira Thomas predicted that the platform, which the company acquired in February in an all-share, enues we’re generating from our mine,” she said.

NORTH ARROW TESTS NEW KIMBERLITE FIELD

ollowing up on last year’s discovery of the diamond-bearing ML8 kimberlite at its Mel project in Nunavut, North Arrow Minerals (TSXV: NAR) completed the ﬁrst ever exploration drilling campaign at the project. Six holes totalling 787.5 metres were completed, with ﬁve intersecting kimberlite. Drilling at ML8 extended its strike length to more than 170 metres. Three holes tested the kimberlite, intersecting up to 11.2 metres of coherent kimberlite mixed with cracked country rock. Lab results are pending. Last fall, a 62.1-kg sample from ML8 yielded 23 diamonds larger than 0.106 mm, including one colourless diamond of 0.85 mm.

This year’s program also unearthed a second kimberlite — ML345, about 1.5 km south of ML8. Both holes testing ML345 cut short, near-surface intercepts of kimberlite. Further drilling is needed to test the target, which is located at the head of a kimberlite indicator mineral train with the highest indicator mineral counts at Mel to date. “The drilling of kimberlites ML8 and ML345 has confirmed that the Mel Project represents a new diamondiferous kimberlite field in Canada,” said North Arrow president and CEO Ken Armstrong. The company also completed ground geophysical surveys and till sampling to generate new targets and define existing ones at the project, which is located 20 km from tidewater.

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STAR DIAMOND GETS PROVINCIAL GO-AHEAD

tar Diamond (TSX: DIAM), formerly Shore Gold, has received approval for its Star-Orion South diamond project from Saskatchewan’s environment minister. The project is located near Fort à la Corne, in the central part of the province. The federal environment assessment agency announced its positive decision in December 2014. Additional permit approvals from the provincial and certain municipalities are required. Star’s updated preliminary economic assessment on the project from earlier this year estimates that 66 million carats of diamonds could be recovered over a 38-year project life. After taxes, the net present value at a 7% discount rate is $2 billion and the internal rate of return is 19%. Star Diamond recently granted an option to earn up to a 60% interest to Rio Tinto. The ﬁrst stage of the agreement requires Rio Tinto to complete a 10-hole bulk sampling program or $18.5 million. The major began drilling its ﬁrst bulk-sample hole in October. The option agreement covers all of Star’s Fort à la Corne properties include Star-Orion South, which Rio refers to as project FalCon.

Diamonds from the Star-Orion project in Saskatchewan. Credit: Star Diamond

– With ﬁles from www.canadianminingjournal.com.

DUNNEDIN FINDS NEW PIPE AT KAHUNA

n July, Dunnedin Ventures (TSXV: DVI) announced the discovery of a new kimberlite pipe on its Kahuna project in Nunavut. The KH10-11 pipe was tested with a rotary air-blast drill hole to 112 metres depth, ending in kimberlite. Diamond results from KH10-11, which the company notes contained garnets and possible mantle xenoliths in about 100 metres of continuous kimberlite, were pending at presstime. Dunnedin’s fall program also drilled two historic pipes (KD900 and KD230) to review diamond content and for po-

tential expansion. The ﬁrst results from the drilling were released in October. From 133.3 kg of material collected from KD900, 18 diamonds larger than 0.106 mm were recovered. However, the company says that indicator mineral results suggest KD900 isn’t the only source of high-quality KIMs (kimberlite indicator minerals) in the Josephine target area. Along with till sampling in the area, the drill results will help Dunnedin deﬁne and prioritize targets for its next drill program in early 2019.

Sunset at Dunnedin Ventures’ Kahuna project in Nunavut this summer. Credit: Dunnedin Ventures

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If we want to get more momentum back into the business we need “an investable-sized company that the market can get behind. ” — Lucara Diamond president and CEO Eira Thomas

Bright future for mined diamonds The supply/demand fundamentals of diamonds are solid, said Zimnisky, who noted that there has been a real rise in rough diamond prices from US$91 per carat per in 2008 to US$106 this spring. He noted that in 2015, all ﬁve publicly listed diamond stocks were proﬁtable and paying dividends based on 2014 diamond prices, which weren’t far below current price levels. “I see that as the key level for rough prices, where a lot of these companies really start to generate some cash again,” Zimnisky said. That level was about 5-10% higher than current prices, he added. “But I think we’re pretty close to this, and I think the fundamental backdrop is pointing towards a picture where this is quite possible in the next few years.”

The need for a diamond champion Canada’s diamond sector has suffered from not having a multiasset, publicly listed diamond miner that could act as a consoli-

Father and daughter Grenville Thomas and Eira Thomas with Diamonds in Canada editor Alisha Hiyate. In a live interview, Eira recounted her early exposure to mining exploration, accompanying Gren to remote camps as young as age seven. Credit: The Northern Miner

dator of assets and companies, Manson noted. When Dominion Diamond was acquired by private, U.S.-based Washington Cos. last year, hopes that it would become a consolidating champion in the diamond sector vanished. But Lucara, a single-mine company that is looking for growth through M&A in addition to other avenues, could step into this role: “I think if we want to get more momentum back into the business, we need an investable-sized company that the market can get behind and I think that, in turn will help junior explorers and the whole pipeline,” Lucara’s Thomas said. “We think that Lucara is well positioned to be that company.”

ADVERTISER’S INDEX Dunnedin Ventures Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Saskatchewan Research Council

Lithoquest Diamond Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Star Diamond Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IFC

Lucara Diamond Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IBC

Stornoway Diamond Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Talmora Diamond Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

North Arrow Minerals Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Willard Anderson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Mountain Province Diamonds Inc.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . OBC

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