Karelian Diamond Resources Share Discussion Threads

[johnnygrainger] 15/8/2018 12:51

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While it’s true that value comes from rarity, no natural resource lasts forever, and the rare is becoming even rarer. Diamond production is set to peak in 2019, after which it will begin a steady decline. De Beers estimates global output will fall by 1% to 2% a year until 2030, while some analysts predict as much as a 5% annual drop.

Regions that have heavily dominated the trade over the last five decades are now reaching the end of the line, and new exploration projects may not be able to compensate fully for their loss.

Rio Tinto’s Australian asset, Argyle (pictured), is expected to close in 2020, while its Diavik deposit in Canada’s Northwest Territories (NWT) has a mine life through 2034. These resources are a drop in the bucket in terms of their contribution to Rio Tinto’s finances, but the same can’t be said for their impact on the industry. Argyle’s 14 million-carat yearly production makes up around 10% of the world’s total annual diamond output, and the mine is a dominant player in the colored-diamond market.

Other NWT assets, including Dominion’s Ekati mine and the joint Mountain Province-De Beers venture Gahcho Kué, are also expected to run out around 2034. And while extensions have been discussed, they have yet to come to fruition. A case in point is the Jay pipe expansion of Ekati, which has been suspended several times while Dominion conducts viability testing.

New horizons to explore

As these old and loyal fields dry up, newer pastures are taking their place. But newer doesn’t always mean greener. Angola, a diamond-rich country, has long been a questionable prospect due to stringent rules that make it difficult for potential miners to invest in projects. The Central African Republic (CAR) only recently came into line with the Kimberley Process, and in any case, its diamond reserves are not as great as other countries’.

Dmitry Amelkin, head of strategic projects and analytics for Alrosa, nonetheless thinks Angola and other, less-explored parts of Africa will help compensate for the decline in “great measure.”

“I think Angola is a standout…given the geological endowment that’s in the country,” says Kieron Hodgson, executive director of commodities and mining research for investment bank Panmure Gordon. “That will definitely be attracting new capital, given the size of deposits…and the economic viability of those deposits.”

Hodgson also thinks the African nation of Lesotho could help counterbalance the deficit in other countries, as well as relatively unexplored regions of Russia.

However, the shift won’t happen immediately, nor will it be a simple endeavor. While almost all economically viable deposits can be mined, says Hodgson, the investment required to establish them can often exceed the return.

“Mining in alluvial areas like Angola, Democratic Republic of Congo and CAR is a completely different game,” says Peter Meeus, chairman of the World Diamond Mark and special government adviser to the CAR diamond industry. “The sector stands for the largest changes to come in the next decade. At the same time, these procedures cost money and are not too easy to apply.”

Jean-Marc Lieberherr, CEO of the Diamond Producers Association (DPA), agrees. “I think there is likely to be a shift toward new locations,” he says, but notes that “diamond exploration is very difficult, and the ‘easiest’; locations have already been extensively explored. Now explorers are moving to places that are either physically more difficult — deeper or more remote — or to places which have previously been inaccessible for political reasons but which are now opening up.”

Ripples through the pipeline

Beyond the impact on miners, what does the potential shortage mean for the industry as a whole — for diamond manufacturers and jewelers? What about for the average consumer? Will sourcing become more difficult, and will prices inevitably rise? Experts seem to have mixed feelings.

While Hodgson doesn’t fully believe in an imminent shortage, he concedes that “it’s sort of an economics 101. There’s a shortage potentially at certain price points, but in a different pricing arena, there may not be a shortage, so it’s...in the eye of the beholder.”

Amelkin says the drop in production will lead to a shortage, one that will mean an increase in prices for rough, while Boris Sinitsyn — a metals and mining analyst with VTB Capital — says its biggest effect will be on the end consumer, as the scarcity will surely push the price of diamond jewelry up.

The real consequences won’t be felt until retailers have to tell consumers something isn’t available, adds Meeus. At that moment, he says, “scarcity will become a reality, not a mere expectation,” and that “should support price increases.”

Lieberherr thinks any price changes will be gradual as the diamond supply decreases, and therefore won’t be as noticeable down the line. That said, he believes price inflation is good — not only for the industry, but for the diamond-buying public.

“An environment in which prices are rising modestly is beneficial for the industry and for consumers alike,” he says. “Slightly rising prices underscore the value proposition of diamonds.”

A boon to synthetics?

One particularly timely question is the effect a diamond shortage will have on the synthetics industry. Will lab-grown stones gain a stronger foothold in the wake of depleting natural supply and rising prices?

In that regard, most of the experts agree the natural-diamond trade has nothing to fear from its lab-created competitors. At best, they predict synthetics may take over the lower end of supply.

“I do think…that synthetic production would displace material volumes at the lower end of the value chain, just simply on an economic basis,” says Hodgson.

Lieberherr feels synthetics have a place in the fashion jewelry market, as does Michael Minister, owner of Canada’s Maple Leaf Diamonds — but “not for engagement or bridal,” Minster says. Sinitsyn and Meeus also see lab-grown as a lower-end substitution or “niche” product, but not as an actual competitor, regardless of the supply.

So what will actually happen as some of the world’s biggest mines turn their lights out and shut their doors?

Diamond resources might not be forever

“I think the sector is in a period of change,” says Hodgson, “but it doesn’t really know, in my view, what the change will be. I like to think positively.”

[kevjones2] 14/8/2018 16:39

Idris Elba has turned down the James Bond part. He's opted to work for KDR Covert Operations Unit instead.

[duplicate book] 14/8/2018 12:27

Yes. It would appear KDR have done so Goldeneye5!

[goldeneye5] 14/8/2018 11:19

Mr Grimmer was not rns'd. Was he brought back at someone else's request? Given his previous work on Seitapera, I wonder what he is doing. Apparently part of the reason Rio Tinto approached KDR in the first place was because they were impressed with what KDR had done at Seitapera. It's easy to forget Seitapera!

[ladybird1] 14/8/2018 11:06

Interesting post, Johnny. You are clearly sticking close to the action. I assume you to mean Dr Grimmer will be back from holiday?

[johnnygrainger] 14/8/2018 10:43

He will be back on the 17th

[goldeneye5] 14/8/2018 10:27

KS, if you are still about. Have you any thoughts on Mr Grimmer and what he might be working on?Regards

[goldeneye5] 14/8/2018 10:22

That's a nice buy at 4.4p.

[johnnygrainger] 13/8/2018 12:06

100% correct Ladybird. With a huge work program at Lahtojoki scheduled including Lahtojoki south exploration and Environmental study not to mention Kuhmo 1, 3 x blocks at Riihivaara, Liper2 ect ect. Serious money needed. What gives heart is a company prepared to pay $5 million for 70% of Finnish assets spending big money at Lahtojoki which KDR picked up for £50k and a further £100k payable if KDR mine. Plus of course within that $5 million investment for 70% at that time in 2005 all Kopane had was the Railway train pointing to Riihivaara and Kuhmo 1 (green diamond) which off course KDR discovered recently. So you can see why the company and Large shareholders value the assets much higher. As to finding the millions this program of works requires, one can only hope the board can deliver. I’ve brought a few recently on my research while the majority are running the company/board down and there’s no interest in buying. I expect good things from Riihivaara/Kuhmo 1 drilling.

[ladybird1] 13/8/2018 11:57

Thanks, Johnnyg. Interesting but I guess unless/until KDR can actually report realised as opposed to prospective results then, with their shoestring, last(?) resources they cannot be viewed positively.

[johnnygrainger] 13/8/2018 10:42

Think you missed my point DP. Remodelling the feasibility study to now include the eastern limb is progress. Riihivaara update please.

[duplicate book] 13/8/2018 10:23

Why is that strange Johnnygrainger.....like today's RNS, all previous are exactly the same. What possible value can be attributed to KDR from today's release? Lack of buying interest says it all. One good thing is the share price hasn't fallen on today's news! There might be 4 Private Investors holding nearly 20%, but until the Company release some tangible news that will put some 'meat on the bones', their holdings are as worthless as mine, and everybody else's!

[johnnygrainger] 13/8/2018 09:32

Kopane had much bigger fish in Lesotho and mantle ran out of cash. Mantle had to spend $5 million to gain 70%. Mantle also spent £700k on a feasibility study at Lahtojoki indicating 35Cpht as well as stripping all the overburden that has left the flooded pit which KDR are remodelling. The drill core is old not fresh. I would guess the pit will be drained and KDR will improve upon previous incumbents drilling results to mini bulk sample using the GTK latest pilot plant that can be transported to site with a feeding capacity of 10–50 kilograms per hour. Bare in mind Previous incumbents core samples were mostly country rock. As previously the KDR team will alter the drill angles to hit the sweet spot. I see on these boards the last 2 placings been bucket shops. I haven’t seen a 3% holdings from either and only £17k worth of warrants to BH. 4 x P/I built nearly 20% and share price down over 60% strange that. Does anyone check placings list?

[ladybird1] 13/8/2018 09:22

Johnny. I was wondering when I read the RNS why the previous incumbent did not follow up. Inevitable conclusion they didn't think it worthwhile & simply walked away. Can you throw any different light?

[duplicate book] 13/8/2018 08:22

Looks like people have finally caught on!

[useless23] 13/8/2018 07:45

Here comes a placing ...lol

[ladybird1] 13/8/2018 07:30

The usual.

[escapetohome] 10/8/2018 00:00

Well done Steve “”poops”” .

I thought youd go in for a wise top up!!

No choice really, but to.

You know best and you will be victorious, your gung-ho stance will be vindicated.

( just dont forget the toilet paper top up and book the counselling, it really must be hard , a paper loss of hundreds of thousand surely on your mega huge holding. I dont know how you do it my hat goes off to you. Well done.)

[stevepoops] 08/8/2018 17:01

All you small holders need to shut up and average down. I have just traded in me white van, ebayed me collection of vintage razzles and accepted a generous offer for me left kidney from some Russian bloke on t’interweb. Next stop equity release on my little semi. As poops always says in for a penny in for a pension. Poops xxx

[rbonnier] 07/8/2018 23:32

4p will look a pretty good price soon after this has collapsed sub 1p again doubt prof will be at this years AGM not feeling too well will be the excuse as he laughs out loud round a roof top pool in a 6* Penthouse suite in the Seychelles at how hes managed to fleece and Con Roy everyone leaving shane titley 1 dancing round a dustbin in his underpants minus £100k with only a smelly tramps sock for comfort .😨