Confidence in Diamonds

January 30, 2024

BY: Avi Krawitz

“Money talks, goes the old saying. If so, the diamond industry can consider itself heard, as three major mines announced plans or funding for their respective life extension projects. Those include the Jwaneng and Karowe mines in Botswana, and Ekati in Canada.

Perhaps more encouraging, a new fund was set up to finance small-scale mining in southern Africa. In that arrangement, Bonas Group, a rough brokerage firm, partnered with Delgatto Diamond Fund to sell on behalf of junior and mid-sized miners.

Run-of-mine production delivered to DelGatto’s office in Johannesburg or that of Bonas in Dubai will be valued by Bonas and assorted into lots for sale. The miners will receive immediate payment by Delgatto for the production, based on Bonas’s valuation, before being shipped to Bonas tenders in Antwerp or Dubai.

"We fund the mines as they send production monthly. This gives them liquidity that they normally would not have, explains Chris Delgatto, CEO of Delgatto Diamond Fund. "Once the tender happens we simply get back what we've funded."

Small-scale miners came under immense pressure during the 2023 downturn as demand slumped and lenders grew cautious about the diamond market. Several operations were put on care and maintenance as a result, include one or two along the Orange River in South Africa, while others lost funding for specific programs. The highest profile operation to mothball in 2023 was the Renard mine in Canada as owner Stornoway Diamonds filed for credit protection.

While many junior miners prefer to market their own production, partnering with Bonas-Delgatto might give them a lifeline. At the very least, it’s a vote of confidence in the sector. Similarly, plans unveiled for Jwaneng, Karowe and Ekati mark a significant change in sentiment and outlook for the diamond market.

Debswana, the mining joint venture between De Beers and the Botswana government, approved a $1 billion investment for a key development phase of its Jwaneng underground project. This is the first of three stages of the $6 billion expansion, which will start producing ore in 2033 and extend the life of Jwaneng to 2050. 

Not far from Jwaneng, Lucara Diamond signed a new financing arrangement that will enable it to proceed with its underground expansion at Karowe, which is meant to extend the mine’s life to at least 2040.

Equally noteworthy was a communication about a plan by Burgundy Diamond Mines to extend the Ekati operation to 2040. The mine, which Burgundy bought last year, was previously slated for closure in 2028.

These announcements have set a positive tone at the start of 2024 as investors appear willing to put money on the table – or, in the ground. That’s a stark contrast to 2023 when funding was scarce, reflecting the prevailing weak industry sentiment.

Not that the market improved to such an extent a few months later. But at the very least, investors seem willing to listen, and consider that there still is value in diamonds – and the mines that produce them.”

Source: www.avikrawitz.com