Part 1: KPCSC gives insight into illegal diamond mining, trading in Africa

Although the diamond watchdog Kimberley Process (KP) prides itself for significantly reducing the flow of conflict goods since its establishment in 2003, the Kimberley Process Civil Society Coalition (KPCSC) alleged that illegal diamond...


The jewelry industry in Russia needs to be upgraded in a serious way

Dina Nasyrova is a vice-president of the International Jewelry Exhibition-Congress J-1 recently hosted by the Atrium of Gostiny Dvor in Moscow. As a partner and the Muse of the famous jeweler Ilgiz Fazulzyanov, she actively participated in the preparation...

11 october 2021

Smiling Rocks, a philanthropic business model, inspires companies to work for betterment of the world

Zulu Ghevriya, the CEO and Co-Founder of Smiling Rocks, Founder of Vedantti Jewellery and Managing Director of Prism Group has been in the diamond and jewellery industry for over 20 years. Zulu started his business, Prism Group, as a natural diamond...

04 october 2021

Work hard and you will find success

Eduard Utkin, Director General of the “Jewellers’ Guild of Russia” Association, expert of the RF Chamber of Commerce and Industry’s Committee on Precious Metals and Precious Stones, told R&P about implementing the SIIS PMPS (State Integrated Information...

27 september 2021

GOLDNET.MARKET - “We want and are working to provide business with the opportunity to develop a lot of activity areas”

Today, almost all jewellery companies have their own wholesale websites, online stores, and social media pages. But a year ago, GOLDNET.MARKET, the first jewellery wholesale marketplace appeared in Russia, a new effective tool for the jewellery market...

20 september 2021

Junior companies in the diamond industry in Canada and Russia

14 september 2020
anlt_14092020_mntprovince .png

Image credit: Mountain province Diamonds

Junior companies in the mining industry are understood as small and medium-sized enterprises, the purpose of which is the prospecting and exploration of new mineral deposits. At the same time, upon the discovery of a deposit, a junior company can either sell a licence to a mining company or start developing it on its own. The juniors can develop into large mining companies or specialize exclusively in geological exploration.

The diamond industry has begun to engage junior companies relatively recently - after the discovery of commercial diamond-bearing kimberlite pipes in Canada in the 1990s; before that, the exploration companies preferred to search for gold. We can now see the results of the keen interest in the Canadian diamonds - thanks to the juniors’ active work, the country has become one of the world's largest diamond producers ranking second in terms of diamond production by volume in 2017, and third in 2018.

Among all diamond-mining countries, Canada is closest to Russia in terms of climate and, in part, the infrastructure development. Let's consider some junior companies in Canada and Russia.

Canada’s Mountain Province Diamonds (MPD) acquired a licence for the Kennady Lake area in the Northwest Territories where the Gahcho Kué deposit was discovered in 1992. In 1995, the company discovered the first kimberlite pipe - 5034; in 1997, three more pipes were opened; that same year, De Beers Canada (called Monopros Limited at that time) showed its interest in the deposit. In 2002, a JV was established between De Beers Canada (51%), Mountain Province Diamonds (44.1%), and Camphor Ventures (4.9%) to implement the Gahcho Kué project. Later on, MPD increased its stake to 49% by acquiring Camphor Ventures. De Beers became the operator of the project, the development of the project progressed steadily even during the global financial and economic crisis of 2008-2009. In 2016, the deposit was put into operation and in 2017, the mine was brought to full design capacity. At present, Gahcho Kué is the largest diamond mine in the world launched over the past decade, it produced 6.85 mn carats in 2019. De Beers and MPD share the operating costs and independently sell their quantities of the rough diamonds mined. Following the closure of the diamond exchanges in March 2020 due to the COVID-19 pandemic, the mine continued its normal operation. In early June 2020, MPD announced about its $50 mn diamond sale to Dunebridge Worldwide Ltd. to provide financing of the operating costs.

Another Canadian junior company, Stornoway Diamonds, was able to implement a project independently to develop the Renard diamond deposit by launching the first diamond mine in the Canadian province of Quebec. The regional diamond exploration in Quebec began in 1996 by Ashton and SOQUEM companies. In 2001, the first kimberlite bodies were discovered, drilling and small-volume sampling began in the area. In 2006, Stornoway acquired Ashton, in 2011 it acquired SOQUEM to become a 100% owner of the Renard project. By this time, the geological exploration for the Feasibility Study stage had been completed at the project, and the reserves were estimated. Within a short time, the company obtained all the necessary permits, built a road to the project area. The mine was started up in mid-2016, and a year later, it was brought to full production capacity. 1.3 mn carats of diamonds were mined at the deposit in 2018 and about 1.8 mn carats in 2019, according to estimates. At the end of March 2020, Stornoway decided to suspend the Renard operations and placed it under care and maintenance until the situation in the global diamond market would improve. 

Star Diamond Corporation (named Shore Gold Inc. until February 2018) began the operations on its Star-Orion South project also in the 1990s, but the mine has not been put into operation yet. The project is located within the Fort à la Corne kimberlite field in the well-developed area of ​​Saskatchewan. The company successfully carried out the geological exploration, including bulk sampling; for this purpose, a beneficiation plant with a capacity of 10 t/h was built at the deposit in 2003. However, at the end of 2008, the work had to be shut down due to a lack of funding caused by the global financial and economic crisis. Until 2014, the company was engaged in analytical studies without any field work and it resumed its drilling programme in 2014. In the summer of 2017, Star Diamond entered into an option agreement with Rio Tinto Exploration Canada Inc., under which the latter was granted an option to receive up to 60% of the shares in the Fort à la Corne project (including the Star-Orion South deposit). In 2018, Star Diamond announced the results of an independent Preliminary Economic Assessment, according to which the deposit could produce 66 mn carats of diamonds by open-pit mining within 38 years. The average value of diamonds from the Star-Orion South kimberlites was estimated at $190/ct (for comparison, it was $78/ct at the Gahcho Kué deposit, and $104/ct at Renard). In 2019, bulk sampling continued at the Star-Orion South, and exploration began within the Fort à la Corne kimberlite field where about 60 kimberlite bodies were identified. In 2020, the project faced the problems not related to the COVID-19 pandemic. In March, Star Diamond filed a suit against Rio Tinto Exploration Canada Inc. due to non-fulfillment of the terms of the option agreement; the suit was to be considered on June 29-30, 2020. Due to the legal proceedings and current situation on the diamond market, the project may be postponed indefinitely, but in general, the chances of success are quite high, mainly due to the high value of the diamond in the deposit.

However, the commissioning of a mine is not always synonymous with a successful project. A striking example of such an exception is the development of the Jericho kimberlite pipe in the Nunavut province. The deposit was discovered in 1995 and explored by the junior Tahera Diamond Corp. that brought it into operation in 2006. The company expected to produce about 500,000 carats of diamonds annually for eight years, but the mine operated until 2008 only; in three years, about 700,000 carats were mined totally. Of course, the reason for stopping its production was the global crisis, which the junior could not overcome despite a number of measures taken. In 2010, Tahera sold its mine to another junior company, Shear Diamonds Ltd. Shear commenced operations to recover the mine, simultaneously extracting diamonds from the tailings. The company raised funding and obtained the necessary permits to start mining, but in 2012, it announced the suspension of the mine's operations due to a drop in the demand for diamonds in the global market. As a result, Shear simply left the mine without undertaking any rehabilitation of the environment and it owed $2 mn to the Canadian government.

It is worth noting that it was not only the juniors who had to shut down an existing diamond mine in Canada - in 2016, De Beers shut down its Snap Lake mine waiting for some improvements in the diamond market.

Nevertheless, in general, the junior companies in Canada are considered as very active and effective, both with the support of the giants like De Beers and Rio Tinto, and without any support. It should also be borne in mind that the Canadian companies are successfully operating around the world, in particular in Africa and Latin America. In Russia, the junior movement is not so much developed, there are only a few such companies in the country's diamond mining industry.

AGD DIAMONDS (until September 2018, it was named Arkhangelskgeoldobycha) is among the most successful Russian junior companies. It was established in 1995 on the basis of Arkhangelskgeologiya, the Arkhangelsk state enterprise for prospecting, exploration, mining and processing of minerals, and in 1996, the V. Grib diamond-bearing kimberlite pipe was discovered - at about the same time as the above Canadian deposits. In less than ten years, in June 2014, a mining and processing plant with an annual capacity of 4.5 mn tonnes of ore was put into operation at the deposit. Today, AGD DIAMONDS is the only diamond mining company in Russia that operates independently of the ALROSA Group. During the COVID-19 pandemic, the company continues its normal operation. AGD DIAMONDS also conducts its diamond exploration at several sites in the Arkhangelsk Region.

In addition, there are several companies operating in Russia aimed at finding new diamond deposits, and Proex Service is the most active one among them. The company was established not so long ago, in 2008, and today, it owns six licences for geological exploration of subsoil in the Arkhangelsk Region issued on a ‘declarative’ basis. Within two years (2016-2017), the company discovered seven new kimberlite pipes using up-to-date geophysical methods. However, to carry out further research that could lead directly to the discovery of new deposits, it is necessary to raise funding, which is very difficult in the Russian reality.

The activities of other juniors engaged in diamond exploration in Russia - Arkhalm, Batolit - have not yet been very successful.

In 2018, Adagran was registered having outcompeted ALROSA and Severalmaz in January 2019 and it received a licence on a competitive basis for the geological exploration of the Chernoozersky-3 Block with inferred diamond resources of the P3 category, 10 mn carats. The founder of the ‘dark horse’ is AGD DIAMONDS. The information on the results of the new company is not yet freely available.

What are the reasons for the low interest in the juniors in Russia? First of all, the lack of the state support in the taxation of the geological exploration. In particular, while AGD DIAMONDS was included in the list of the Russia’s systemic companies that can count on the government support during the COVID-19 pandemic as a large diamond mining enterprise, such privileges were not granted to the companies engaged exclusively in geological exploration (for example, Proex Service). The second reason is the lengthy and complicated procedure for obtaining licences for the use of subsurface resources. There is already certain progress in solving this problem such as the emergence and improvement of the ‘declarative’ principle thanks to which junior companies can obtain licences for the areas of interest. The solution to the third problem - that is the difficulties in attracting venture capital investments required for the implementation of high-risk projects (especially at the exploration stage) - may take much longer since there are practically no such venture capital investments in Russia. Nevertheless, the very presence of the junior companies in the Russian diamond industry inspires the hope that in the future, they will play a significant role in the development of the country's industry and economy.

Anastasia Smolnikova for Rough&Polished