“People haven’t spent money on diamond exploration and, therefore, there are no new discoveries. The only one of note is Alrosa’s Luaxe kimberlite, in Angola, but there aren’t any more,” he pointed out.
The development of the newest diamond mine, a joint venture between Alrosa and Angolan national diamond company Endiama, was announced in May, with the deposit expected to be worth more than $35-billion.
Meanwhile, Campbell pointed out that “even the large majors” were not spending too much money and have also not found recent new deposits. “The older mines are becoming deeper and more expensive, so supply is plateauing and, in the next five years or so, it will drop off,” he said.
With diamonds being an aspirational buy and with a growing middle-class emerging in Asia – including China and India – Campbell forecast a widening supply and demand gap, which would lead to a steady rebound in the diamond price.
He added that top-end producers, which deliver diamonds worth anything north of $100/ct, experienced much less volatility in diamond price growth.
Asked how juniors would find new diamond pipes, Campbell said brownfield projects were often the most obvious places to start. “However, there are many parts of the world where there hasn’t been exploration or, if there was, it was 30, 40 or more years ago.”
Campbell was referring to the AK6 kimberlite project in Botswana, where the “abundance” of Type IIa and larger diamonds were inadequately considered in initial evaluations. “The operating margins are significant, so it could have been a De Beers mine today,” he said.
“Modern technology allows you to go back and look at those previously explored areas. If you look at the central Kalahari, [there is a revival] in diamond exploration,” he noted, adding that Botswana Diamonds was also currently evaluating a kimberlite pipe in the region, which was discovered by another company.
Meanwhile, Major quipped that if there was a diamond mining company to invest in at the moment, it would be Botswana Diamonds, as “they are selling us an option on what could be reality, an option without an expiry date and that is the kind of option I like to invest in”.
Source: Mining Weekly