in the world of diamonds, the big and beautiful size does ... - in the world of... · synthetic...

Mike de Wit2019 Junior Indaba

4th June 2019Johannesburg

In the world of diamonds, the Big and Beautiful –size does matter!

12 Apr 2019 MW

18 Jan 2019 MW

The industry is changing, but sunset?.…..take your pick.

Smoking gun and shrinking exploration funds.

Bain (2018) however remains positive over the long-term.

Million Cts

Marquise Capital

Middle class in China and India (millions of people)

Bain 2018

Pricing

PJGolds 2016

De Beers sales in US$ m

De Beers records lower sales amid macroeconomic uncertainty

Mining Weekly 21 May2019

De Beers May 2019

Polished Diamonds inventories - indexed

Edahn Golan 13 May 2019

Inventories rising – Golan/Rapnet

◊ The industry is supply and not demand driven (Rapaport 2019)

◊ Golan (2019): Diamond industry ‘out of balance’

Paul Zimnisky May 2019

0.75 – 1.25 cts

0.13 – 0.42 cts

Rough Diamond price performance by size

3 – 4 cts

◊ Most diamond mines produce a range of goods including very small low-quality stones to larger one.

◊ To make their operations worthwhile economically most miners need to sell the entire range.

◊ These mines will stop operating if they cannot sell low and mid-range goods.

◊ But only very few mines that also produce large high-value stunning.

Run of Mine production

◊ Synthetics, disclosed and undisclosed.

◊ New supply from Gahcho Kué, Renard, Liqhobong, Ekati Misery pipe.

◊ Higher recoveries of smalls due to XRT technology.

◊ Indian manufacturer troubles, especially those that deal in smaller goods.

Catalysts for price dislocation

Gahcho Kué - 4.5 mct/a

Rapaport 2019

Mountain province Diamonds

Synthetic diamond

Projected market share of Lab Grown Diamonds (LGD)FT Oct2017

• By 2030 LGD will have some 10% share of the market.

• “It all comes down to consumer choice - Uber did not hurt the taxi industry” (Amish Shah 2017).

• Producers of natural gems are unnerved by cheaper, cleaner synthetic jewels (FT 2017).

According to Chaim Even-Zohar (2017):

◊ Synthetics have become a real threat to the natural diamond producers.

◊ Exploration money will dry up because synthetics are increasingly considered a pure, more affordable economic substitute.

Science & Sparkle

◊ Lab-grown diamonds share the same physical, chemical and optical characteristics as rare, natural diamonds.

◊ But the process to create them is different from nature, so while they are neither as valuable or precious, they are just as sparkly.

Hello, we're Lightbox (Element six – part of De Beers Group)

Lightbox 2019

‘Our diamonds are laboratory-grown. In soft shades of pink and blue and white’

Lab Grown Diamond (LGD) prices

LGD wholesale transaction prices % change:

Q1 2019 vs Q4 2018

◊ Compared to wholesale transaction prices of natural diamonds, prices of LGD are on average 65–84% lower (Golan 2019).

◊ Rapaport (May 2019) shows that retailers can make higher profit margins selling synthetic diamonds.

88.2 ct stone (size of a pigeon egg) sold for

US$ 13.8 M

GIA

The value of the big stones

Lesedi La Rona:• Found 2015• Uncut: 1,109 cts• Sold 2017 for US$53m

Graff

Karowe Mine (Lucara Diamond)

Lucara 2019

Sold in 2017 for $53 M USD

◊ 7 ha kimberlite

◊ Orapa Kimberlite field, Botswana

◊ Discovered 1970: mine opened 2012

◊ 2nd (1,758 cts) and 3rd (1,109 cts) largest diamonds ever found in 2019 and 2015 respectively.

Apr 2019

Lesedi was cut into the largest square emerald cut diamond – 302.37 cts.

◊ +10.8 cts (Specials), contribute ~5% by volume and 70% by revenue.

◊ Since 2012 some 181 diamonds +100 cts, and 13 diamonds +300 cts have been found.

◊ 187 diamonds sold for more than US$1 M each and 10 single diamond for more than US$10 M since 2012.

Lucara 2019

Karowe Mine (Lucara Diamond)

121.3 ct2016

The Cullinan Diamond3,106.8 cts (0,62 Kg)

1905

424.9 and 209.2 cts2019

Cullinan Mine (Petra Diamonds)

Sold for US$15 M

Found: Cullinan in 1986599 cts

Cut to 273.85 ct

Centenary Diamond

Cullinan Mine (Petra Diamonds)

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+100 +200 Tonnes

404 cts2016

US$ 16 M

131 cts

129.6 ct

120.4 cts2018

Lulo mine (Lucapa Diamonds)

◊ An alluvial mining operation

◊ Exploring a large kimberlite field within its concession

◊ Cuango drainage basin in Angola

◊ Proximal to the Lulo mine are numerous kimberlites which are being tested for the source of the large Type ll stones.

◊ In addition, Lucapa Diamond operates a second large diamond producing mine Mothae in Lesotho. This is next to Letšeng-la-Terae of Gem Diamonds

173ct

2016

Lulo mine (cont.) ◊ +10.8cts (Specials): 30% by weight, >85% of revenue.

◊ +5 cts: 45% by weight, 92% of value.

◊ Recently some large stones were valued in excess of ~25,000 US$/ct.

Letšeng-la-Terae (Gem Diamonds)

603 cts2006

Sold for US$ 12.4 M

Cut in to 26 pieces76.4 cts largest

Valued US$ 60 M

Lesotho Promise

138 cts495 ctsSold for

US$10.4 M

Letšeng-la-Terae (Gem Diamonds)

◊ Main pipe 17 ha, satellite pipe 5.2 ha in the highlands of Lesotho.

◊ Highest average dollar per carat kimberlite diamond mine.

Hope Diamond (Type llb)◊ Found in the early 1600s, India◊ Cut: 45.5 ct◊ Insured for US$250m◊ At Smithsonian

Blue diamonds (Type llb)

Moon of Josephine (Type llb)◊ Found 2014 Cullinan as a 29.6 cts◊ Cut to 12.03 cts – sold for US$48.4 M

122.5 cts Blue diamond recovered in 2014 sold for US$ 27.6 m

The Cullinan Dream

Cut into 24.18 cts fancy intense blue sold for US$25.4 M in 2016

Diamond ‘Types’

◊ Type I Diamond

◊ Contain structurally bonded nitrogen

◊ Often yellow in colour

◊ Good crystal shapes

◊ Type lla/llb Diamond

◊ No or low Nitrogen content

◊ Usually colourless - Type lla

◊ Skewed to larger sizes

◊ High proportion of white stones (D colour)

◊ < 10% luminesce

◊ Type llb

◊ Blue (contain boron)

◊ No or low N content

◊ High value

Type llb

Type lla

Type l

Type ll producers include:

◊ Karowe◊ Letšeng◊ Mothae◊ Jagersfontein◊ Cullinan◊ Jwaneng◊ Luo (Alluvial)

◊ Larger diamonds are more likely to be D colour

◊ Type ll diamonds are more abundant in the larger sizes

◊ Type ll diamonds very slightly included to flawless (substantially fewer inclusions than Type l)

Smith et al. 2017

227ctType ll represent a high proportion of large D colour diamonds

A typical Kimberlite ProcessingPlant these days would include:

◊ Autogenous milling

◊ Hybrid Crusher

◊ XRT/BV recovery units

◊ Waste Sorting (if country rock rich)

Autogenous milling:

◊ Self grinding of the ore

◊ Not crushing

◊ Preservation of large diamonds

◊ Installed at Cullinan and Karowe

Autogenous Milling as Opposed to Conventional Crushing

X-Ray Transmission (XRT)

◊ XRT – Sensor identifies the atomic number (C)

◊ XRT can recover low fluorescence and non-fluorescence diamonds

◊ 200 tph machines on the horizon

◊ Replaces DMS for + 8 mm material, shortly +4 mm material

◊ Recovers diamonds before secondary or tertiary crushers

◊ Diamond breakage minimised

◊ Feed preparation is critical

Stachel and Harris, 2008

◊ Peridotitic: base of the thick Lithosphere

◊ Eclogitic: subduction related

The source of the Type ll diamonds

◊ Most of Type l diamonds form at the base of the lithosphere (150 200 km depth)

◊ The majority of the Type ll diamond form at 600 to 800 km depth and are also referred to as ‘deep’ diamonds

Diamond inclusions

Garnet inclusion (Richardson 2017)

Silicate inclusion (Davies 2017)

Internal growth structures

Viljoen 2012

◊ Lithospheric inclusions: olivine, Cr-rich pyrope, CPX

◊ Sub-lithospheric inclusions: Ca-perovskite, majorite garnet, ferropericlase and even Fe-Ni-C-S inclusions

Formation of CLIPPIR diamonds

Smith et al. 2016

CLIPPIR = Cullinan-Like, Inclusion-Poor, relatively Pure, Irregularly shaped, Resorbed.

200 km

650 km

◊ Metallic iron segregates aided by deformation of the subduction slab in transition zone.

◊ Liquid metal evolved to Fe-Ni-C-S.

◊ Diamond crystallization occurs within metallic liquid (P ~ 12 to 25 Gpa) under reducing conditions.

◊ CaSi-perovskite inclusions.

◊ C saturated by increase P, adding more C, or increasing S.

◊ After growth diamonds are physically separated and transported upwards.

Smith et al. 2018

1. Serpentinization of seafloor introduces Boron into oceanic lithosphere

2. Subduction and metamorphism of serpentine to DHMS

3. Breakdown of DHMS yields hydrous Boron-rich fluids.

4. Crystallisation of Boron-bearing diamonds triggered by Redox reactions

5. Vertical transport by upwelling mantle and kimberlites

Formation of Type IIb (Blue) diamonds

Asteria

Craton

Kimberlite intrusions

Diamond Bearing

Diamond Mines

Region

Point

Point

Point

0 1,000 2,000

kilometers

CLIPPIR diamonds are found:

◊ Near the edges of cratons: Lulo, Karowe, Jagersfontein, Letšeng, Mothae

◊ Close to major discontinuity within cratons: Cullinan, Jwaneng (?)

Where to explore for CLIPPIR diamonds

Exploring for sources of large stones

◊ Approx. 7000 known kimberlites

◊ Some 70 have been or are mined (1%)

◊ Only a maximum of 10 diamond mines are known to produce CLIPPIR diamonds (0.1% of total kimberlites)

◊ Mainly primary kimberlites but also secondary deposits

• Kimberlites with large stones are found on the margin (Letseng, Mothea, Jagersfontein, Karowe) or major tectonic boundaries within (Cullinan, Jwaneng) the Kaapvaal Craton: and the alluvials of Lulo along the Kasai Craton.

• Large diamonds form in subducted blocks pushed deep down into the lower mantle.

• Exploration will have to refocus to identify those kimberlites that contain ‘deep large diamonds’.

Mike de Witdewit@icon.co.za

079 502 8029

So coming from…..

…..towards a new reality.