Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Canada’s Diamcor Mining (TSX-V:DMI) announced this week not so positive results from the tender and sale of rough diamonds recovered from its 5,888-hectares Krone-Endora project in South Africa, located next to De Beers’ Venetia mine, the world’s third largest.
“The Company sold 4,353.91 carats of rough diamonds for gross proceeds of USD $864,546.09, resulting in an average price of USD $198.57 per carat. The lower number of carats tendered and sold is attributable to a reduction in the volume of material being processed due to the previously announced water recovery issues associated with excessively suspensive properties of the very fine kimberlitic clay materials,” Diamcor said in a media statement.
The Kelowna-based junior has not been able to operate the Krone-Endora plants at full capacity due to insufficient recoveries of water from the project’s settling dams. The company said that corrective measures, such as the installation of a paste thickening plant, are being implemented and should eventually fix the issue. “Processing of material at limited volumes will continue in the short-term, however considerable focus is being placed on finalizing the procurement, installation, and commissioning of this item, and once installed, the Company remains confident that processing volumes can be significantly increased,” the communiqué reads.
Besides the technical water problems, Diamcor stated that a shorter time frame between tender dates also affected its proceeds for this quarter.
Nevertheless, the company highlighted that during this period it recovered higher-value gems, which allowed it to receive a better average price per carat. In detail, Diamcor tendered and sold three individual rough diamonds that were over 10.8 carats, with the largest being 25.02 carats, and 19 individual rough diamonds being over 5 carats in size. “The average dollar per carat of $198.57 for the rough diamonds tendered and sold in the current period increased compared to the previous quarter ended September 30, 2017, in which the average dollar per carat of rough diamonds sold and tendered was reported as $171.70,” the firm revealed.
Tiffany & Co Canada has the first right of refusal for Diamcor’s stones, based on a deal that the British Columbia miner signed with the retailer in 2011 following its acquisition of Krone-Endora.
2 Comments
Robert_S_Stewart
Frik: It might be interesting for your readers if you showed a pictograph chart of the costs that go into a diamond from exploration, through extraction, cutting, and polishing with some examples of what it costs at the retail level in settings. From $198.57 per carrot (rough), back that into the cost of exploration and extraction, then carry it forward to the commercial sales price.
Then everyone can see the effort that goes into the cost of “Diamonds are Forever”. When we discovered the giant reserves in Botswana (Jwaneng and Orapa) there followed the Northern Canadian discoveries in the NWT. In between, there was Tanzania (Williamson) and the DR Congo (Mbuji Mayi) were the costs of exploration and mining were wildly different. But simple graphs on one area (say South Africa or Northern Canada) may be interesting to your audience.
Altaf
@ Robert, Interesting stats that you preferred to be written.
What I feel is, while the extraction costs are structured on the lines explained by you, the auction prices have nothing to do with them. They are forward priced. I mean to say between buying roughs and selling them as jewelry in outlets, the stones change hands multiple times. From buyers of rough to retailers to wholesalers to cutters, polishers to jewellers to wholesalers to retailers to shops. The buyers of the roughs make their bid calculations based on the estimated net carats sold in the shops and net final price of each carat and make backward calculation of margins of each “hand change”.
As a rough guess, the 4,353.91 carats of rough will get converted to 1,000 carats at a wastage rate of 80% as the stones are neither outstanding nor big. That means after cutting, the cost of rough jumps to 1000 dollars (@ 80% you need 5 carats rough to get 1 carats cut stone) At 4,000 per carat final selling price as jewelry (average diamonds) margins between 10000 and 4000 dollars are split between the number of hand changes or I would rather say parcel changes 🙂