Diamond Market Shines Bright as Prices Continue to Climb
The diamond market, like most commodities, has been hit hard by falling prices and rising costs. The volatile sector has caused companies like Rio Tinto and Anglo American to rethink strategies surrounding the precious gem, even making them question whether the industry was worth staying in.
But that’s all changing now.
Diamonds are now delivering some of their healthiest returns. Rio’s precious stones division doubled its aluminum sector, while Anglo American’s diamond unit boasted a higher rate of return than its core businesses.
"We expect the demand requirements to grow around 6% per annum for the course of the decade," said Alan Davies, head of the diamond unit for Rio Tinto. "And when you look at the supply response there hasn't been a major find brought on for a long time."
Rio Tinto, which is the world's third-largest diamond producer, had previously mulled the idea of selling its diamond unit just 18 months ago. Anglo American actually went through with it, selling its Ekati mine in Canada to jewelry maker Harry Winston Co. for $500 million.
And the world’s hunger for diamonds is only getting stronger.
Last year, demand for precious gem grew 18 percent in China, while the demand in the U.S. grew eight percent. In the first half of 2014, rough diamond prices charged by major mining companies rose seven percent on average.
"If you look at prices across the mining industry, diamonds stand apart with prices continuing to rise," said René Medori, Anglo American's Chief Financial Officer.
Alrosa, the world’s largest diamond producer anticipates a big jump in gem prices as the demand continues to skyrocket.
De Beers is investing $3 billion over 15 years to develop one of the largest open cast mines in the world in Botswana. The site will include an automated diamond recovery plant to filter the gems from other rocks. Earlier this year, South African producer Petra Diamonds sold a rare blue diamond for $25.6 million, or $862,780 a carat. With those type of prices miners are now investing heavily into automated technology to help recover more harder-to-reach diamonds.
As the demand for diamonds continues to rise, don’t be surprised if more mining companies begin entering the market.
Vale invests $150mn to extend life of Manitoba operations
Vale has announced a $150mn CAD investment to extend current mining activities in Thompson, Manitoba by 10 years while aggressive exploration drilling of known orebodies holds the promise of mining well past 2040.
Global energy transition is boosting the market for nickel
The Thompson Mine Expansion is a two-phase project. The announcement represents Phase 1 and includes critical infrastructure such as new ventilation raises and fans, increased backfill capacity and additional power distribution. The changes are forecast to improve current production by 30%.
“This is the largest single investment we have made in our Thompson operations in the past two decades,” said Mark Travers, Executive Vice-President for Base Metals with Vale. “It is significant news for our employees, for the Thompson community and for the Province of Manitoba.
“The global movement to electric vehicles, renewable energies and carbon reduction has shone a welcome spotlight on nickel – positioning the metal we mine as a key contributor to a greener future and boosting world demand. We are proud that Thompson can be part of that future and part of the low carbon solution.”
Vale continues drilling program at Manitoba
Coupled with today’s announcement, Vale is continuing an extensive drilling program to further define known orebodies and search for new mineralization.
“This $150mn investment is just one part of our ambitious Thompson turnaround story. It is an indicator of our confidence in a long future for the Thompson operations,” added Dino Otranto, Chief Operating Officer for Vale’s North Atlantic Base Metals operations.
“Active collaboration between our design team, technical services, USW Local 6166, and our entire Thompson workforce has delivered a safe, efficient and fit-for-purpose plan that will enable us to extract the Thompson nickel resources for many years to come.”
The Thompson orebody was first discovered in 1956 by Vale (then known as Inco) following the adoption of new exploration technology and the largest exploration program to-date in the company’s history. Mining of the Thompson orebody began in 1961.
“We see the lighting of a path forward to a sustainable and prosperous future for Vale Base Metals in Manitoba,” said Gary Annett, General Manager of Vale’s Manitoba Operations.