"With world diamond prices currently 'very unexciting' and with stagnant growth forecast for jewellery sales, junior miners should think long and hard before investing in diamond exploration projects, as there is a risk of decreased investment from the market."
This is how Megan Van Wyngaardt of Mining Weekly Online summarized the presentation of Cadiz Securities economist Peter Major at the Junior Indaba held this week in Johannesburg, who warned that the diamond mining industry was currently “filled up”.
The CEO of junior miner Botswana Diamonds, James Campbell, disagrees, telling Mining Weekly on the sidelines of the indaba that there was still steady growth in diamond demand that, together with the forecast of a widening supply and demand gap, would lead to a steady rebound in diamond prices - which is of even greater importance to junior miners.
Concerning exploration, Campbell pointed out, “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.”
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.
Major miners have not been investing too heavily in exploration and there have been no recent major finds, but the topic of this Indaba was the juniors. Van Wyngaardt asked Campbell how juniors would find new diamond pipes: he 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."
He also pointed out that with the advent of new technology, a junior miner such as Botswana Diamonds was able to develop a mine that De Beers walked away from into "billion-dollar asset". 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.
He also told Van Wyngaardt, “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,” adding that Botswana Diamonds was also currently evaluating a kimberlite pipe in the region, which was discovered by another company. “Using different technology, we found very different and very encouraging results. You have to be in the right place and have the right technology,” said Campbell.
Meanwhile, Major said 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".
Curiously enough, as Miningmx reported, John Teeling, currently the executive chairman of Botswana Diamonds, spoke candidly at the Indaba about the pitfalls of investing in junior miners: “I’m a prospector, an early stage explorer. It’s extremely high risk and I hear people talking about ‘high risk’ expecting that it also means ‘high return’, but what it really means is that you are going to lose your money most of the time. I sell hope, not hard fact. I sell mystery, not history. That’s what exploration is. Nobody knows what lies two miles into the ground.”
Teeling said the two main risk factors were geological and political. He added: “The assumption we make is that if there’s political uncertainty that’s something that will change over time."
Source: The Diamond Loupe