The mine life of the Diavik Diamond Mine has been extended to 2025 from 2023, there is an increase in carat production, growth in future revenues and cash flows, and maintenance of operating costs and capital expenditures at levels that are consistent with earlier forecasts, according to a new report published by the Dominion Diamond Corporation.
Dominion has recently been the target of a takeover bid and last week created a committee to look at potential strategic moves. The firm owns 40 percent of the Diavik mine and fully owns the Ekati mine, both of which are located in Canada's North West Territories.
The report, entitled "Diavik Diamond Mine, Northwest Territories, Canada, NI 43-101 Technical Report", was prepared by the operator of the Diavik mine, Diavik Diamond Mines (2012) Inc. (DDMI), a subsidiary of Rio Tinto plc.
The report includes an updated mineral reserves and mineral resources statement and an updated "reserves-only" life of mine plan. Dominion has a 40 percent interest in the Diavik mine with Rio Tinto plc owning the rest and operating the mine through DDMI. The report also says the mine has an after-tax net present value of approximately $2.6 billion at a 7 percent discount rate, based on the assumptions and analysis in the Technical Report.
The report adds that 46.0 million carats were recovered between 2017 and 2025, an increase of 6.3 million carats or 16 percent, from the previous estimate for the comparable period.
There is forecast total revenue of approximately $9.0 billion, and total operating cash flow of approximately $3.7 billion between 2017 and 2025, an increase of 22 percent and 32 percent, respectively, from the previous estimates for the comparable period.
Total operating costs between 2017 and 2025 are consistent with the previous estimate for the comparable period, as the impact of cost escalation and the increase in mine life and reclamation are offset by efficiency improvements, the report says.
Total capital expenditures between 2017 and 2025 are consistent with the previous estimate for the comparable period, as lower expected capital expenditures at the A-21 pipe are offset by higher sustaining capital expenditures related to cost escalation and the increase in mine life.
"The updated life of mine plan for Diavik extends the mine life, increases carat production, and grows future revenues and cash flows, while maintaining operating costs and capital expenditures at levels that are consistent with earlier forecasts," said Jim Gowans, Chairman of the Board of Directors. "The focus on cost efficiency improvements and development of the A-21 pipe, which underpins the mine life extension, is consistent with our goal of increasing net asset value per share."
As of December 31, 2016, the Diavik mine had 16.3 million tonnes of proven and probable mineral reserves containing 46.0 million carats of diamonds, compared to 18.7 million tonnes of proven and probable mineral reserves containing 52.8 million carats as of December 31, 2015. The updated mineral reserves and mineral resources statement reflects a decrease of 2.4 million tonnes containing approximately 6.8 million carats, attributable almost entirely to depletion.
During 2016, the mineral resource and reserve models were updated based on surveying in active mining areas, confirmation of orebody contacts located by underground drilling, and the results of new samples taken. In addition, model grades were adjusted from the results of production batches sole-sourced from A-154 South and A-418 that were processed separately through the plant. In anticipation of future production from the A-21 pipe, additional drilling provided updated orebody geometry, internal geology and grade estimation.
Between 2017 and 2025, 46.0 million carats are forecast to be recovered from the processing of 16.3 million tonnes of ore. Production will be sourced from three existing pipes at A-154 South, A-154 North and A-418, with production from the A-21 pipe, which is currently in development, commencing in 2018. Production will cease from the A-154 South pipe in 2019, followed by the A-418 pipe in 2021 and the A-21 pipe in 2023, with production from the A-154 North pipe continuing until the end of the mine life in 2025.