WillP yellow GEM diamonds command prices in some cases as high as 3 times their white counterparts.
PGDs 13% yellow population blows away this biggest yellow diamond source in the world.If some of them on PGDs ground come into GEM quality status.Then this will be the greatest diamond discovery to date in Canada.For the record I already think it is.
James
Tiffany's Ellendale mine in the Kimberley strikes yellow diamond gold
Massive earth-moving diggers and trucks work Ellendale's main pit, which is 400m across, 1.5km long and 150m deep. Source: Supplied
The yellow diamonds from Ellendale have a silken, buttery sheen. Source: Supplied
FROM the air, a sight that evokes Tolkien's Middle Earth looms out of the scrub - a vast gouge in the earth, striated with yellow and grey rock.
This is Ellendale Diamond Mine in the remote reaches of the Kimberley in northwest Australia, and arriving there is a bit like landing on another planet - but one fit for giants rather than dwarfs.
On the ground, though, among the mud and muddle of a mine site, we find an atmosphere that seduces-a friendly and excited "family" that is building a life around bringing the sunshine back to the yellow diamond business.
Times have been rocky in the diamond industry since the global financial crisis, but a new executive team from South Africa has crossed the Indian Ocean to be part of a new vision for Ellendale, one that sees it as a unique platform to satisfy the quickening thirst for high-calibre yellow diamonds in China and India.
This relatively small Kimberley open-cut mine - a fraction of the size of Argyle to the east - has a special claim to fame. While Argyle produces the supremely rare pink diamonds, the vast bulk of its production is of low-grade industrial-quality diamonds. Ellendale, by contrast, is the world's leading producer of fancy yellow diamonds-accounting for 50 per cent of global supply - which explains why in 2010 the world's leading jeweller Tiffany & Co negotiated exclusive rights to them for the full economic life of the mine. This is the glamour end of Australia's mining boom.
Only one in 10,000 of all diamonds are yellow, and less than 1 per cent of these radiate the inner fire that makes them "fancy" - their rarity commanding prices two or three times that of a white diamond. The best diamonds that come out of Ellendale have a wonderful buttery sheen and are so beautiful as they come out of the ground - uncut and unpolished - that you can almost see the jewel in your hand. While only 12 per cent of Ellendale's stones are radiant and charismatic enough to meet Tiffany's exacting standards, they account for about 80 per cent of the mine's total revenue.
Always prized by connoisseurs, yellow diamonds have recently surged in popularity among the style-conscious, in keeping with the fashion for all brightly coloured gems; celebrities Heidi Klum and Jennifer Lopez have recently sported yellow diamond rings and Rihanna has sung of "Yellow diamonds in the light". Tiffany & Co has stoked this appetite for yellow diamonds in a variety of modern jewellery using a cushion cut its stonecutters have tailored to maximise their striking colour and inner fire, such as its popular Soleste collection, which uses a double halo of yellow and white diamonds.
The irony is that demand for Tiffany's most prestigious gem is growing apace at a time when its security of supply has been under a cloud. Ellendale's primary producing pit is almost mined out, and the secondary pit has been suspended since 2009. Substantial investment is needed to prolong the mine's productive life, something the previous owners, Britain's Gem Diamonds, considered uneconomic during the dramatic price slump on the rough diamond market during the GFC, which saw it bleed millions of dollars in losses in 2008.
While prices have since rebounded strongly, thanks partly to Tiffany's merchandising of yellow diamonds, Gem Diamonds had been making plans for closure before it sold the business to ASX-listed Goodrich Resources in February at a bargain basement price.
But under the new owner, which changed its name to Kimberley Diamond Limited in April, it's a new era of opportunity and commitment. A new strategy and depth of experience in mining techniques have been brought in to extend the life of the mine at a viable cost, and an aggressive exploration program is planned. This new mine plan is clearly a relief for Tiffany, which had drawn up contingency plans "to ensure the seamless acquisition of diamonds from Ellendale", says Glen Schlehuber, managing director of Tiffany & Co Australia.
In August, Tiffany & Co hosted a group of Chinese, Japanese and Australian journalists on a visit to Ellendale to see how these rare and sought-after symbols of enduring love begin their journey to the display cases of the top jeweller in the world.
Yellow diamonds have been the jewel closest to the Tiffany identity since 1878, when founder Charles Lewis Tiffany bought a 287.42-carat fancy yellow rough stone. "This stone's acquisition solidified Mr Tiffany's reputation as the 'King of Diamonds' and made Tiffany & Co the world's diamond authority," says Schlehuber.
"The rough stone was cut into a cushion-shape brilliant weighing 128.54 carats with an unprecedented 82 facets and was named the Tiffany Diamond." This colossal stone, which was cut for brilliance rather than size so that it sparkles as if lit by an internal flame, mesmerised the public at world fairs from the 1890s to the 1930s. Audrey Hepburn was one of only two women to wear the Jean Schlumberger setting of the Tiffany Diamond, donning it for publicity shots for Breakfast at Tiffany's in 1961. Last year, the stone was set into a new necklace for the jeweller's 175th anniversary and sent to showcases in Tokyo, Dubai and Beijing. Today this new setting is on permanent display at Tiffany & Co's flagship store on Fifth Avenue, where it continues to spur the growing appetite for canary-coloured diamonds packed up in robin's egg blue boxes.
Far from the glitter of Fifth Avenue, among the elemental forces of nature, Ellendale has its own beauty, close to spectacular landforms such as Windjana Gorge and Tunnel Creek, which cut through rugged limestone ranges that formed Western Australia's famous Devonian Reef.
But what brings a sparkle to the eye of exuberant Russian-born investor Alex Alexander are the potential riches beneath this red earth. Alexander, KDL's executive chairman and its largest shareholder, is a key member of the new team taking a shrewd gamble on Ellendale.
"We believe in the story of diamonds," says Alexander, explaining why he bucked negative sentiment towards the diamond sector among major resource companies.
BHP recently exited the diamond industry, selling its EKATI mine in Canada, to concentrate on its core business. Rio Tinto, which owns the massive Argyle mine, tried to divest its diamond interests to reduce debt but shelved those plans in June. Gem Diamonds, which paid $300 million for Ellendale in 2007, waited for a buyer for a year before it accepted a price of just $14.3 million.
"The price was low; the cashflow projections were good. We thought we would make our money back in six months and we did it in two," says Alexander. "If you buy low, the sky is the limit to where it can go ... I thought it was worth the risk. On a personal level, diamonds are cool.
They are shiny and everyone wants to have them. It is a squirrel mentality which I can relate to."
The risk looks set to pay off, with independent investment house MineLife backing KDL to "reap huge rewards" from its "confidence and courage in pursuing the Ellendale opportunity (against a backdrop of ignorance and misunderstanding with respect to diamonds and the diamond industry generally)".
Lee-Anne de Bruin, KDL's young and vibrant managing director, also believes in the story of diamonds.
As a chartered accountant, she is excited by the recovery in diamond prices and predictions that demand will outstrip supply over the next decade, making it viable to plan for the reopening of Ellendale's secondary pit. Figures from broker Bain & Co estimate demand to grow by 5.9 per cent a year until 2020, as the emerging middle classes in China and India adopt the Western practice of giving diamonds as celebratory gifts. Meanwhile, with no major diamond discovery since 1997, global supply is expected to inch up by a mere 2.7 per cent, forcing producers to look at alternative mining techniques and reprocessing of tailings stockpiles to extend the life of existing mines.
Last year, China leapt to become the world's second-largest market for diamonds, according to Bain & Co, with annual sales of almost $US9 billion (compared with $US27bn in the US); India was third with $US8.5bn. By 2020 China and India will have the lion's share of the market, at 57 per cent, while the traditional markets of US, Europe, Japan will shrink to 40 per cent.
There's nothing glamorous about visiting a dusty diamond mine, as we discover while donning steel-capped boots, hi-vis vests, hard hats and wraparound sunglasses to visit the gigantic main pit with its horizontal layers of sandstone and siltstone. Sadly, there is no drilling or blasting to see today as a landslide damaged part of the pit wall after a blast. Getting diamonds out of the earth is a hard slog, production manager Gideon Scheepers explains. "It's like looking for a needle in a haystack," says Scheepers, a vastly experienced South African metallurgist who is a key member of the team hand-picked over the past six months to improve operations at the mine.
He explains that 100 tonnes of lamproite ore have to be crushed to find just two or three carats of diamonds.
"The average stone is 0.3 carats so that's eight or nine stones on each 100-tonne truck," he says.
Senior mine geologist Dudley Corbett says he has never seen a diamond at the pit in his nine years at Ellendale, only in the recovery room. He explains that diamonds are freaks of nature - ancient remnants of volcanic explosions millions of years ago that brought them from the earth's upper mantle to the surface. The volcanic explosion threw the diamonds in the air and they came down with the lamproite to create volcanic ore in a wineglass shape that tapers as it goes deeper.
There are 49 such occurrences on the Ellendale lease area but so far only two have been commercially mined.
Two more targets are to be explored with a drilling program and underground mining is being considered for the main pit. Meantime, most excitement revolves around the reopening next year of the secondary pit, which has a higher grade (more carats per 100 tonnes) than the primary pit but fewer high-value yellow diamonds. De Bruin will not disclose how much KDL plans to invest, but underground mining is expensive; Rio has committed $2.2bn to take the Argyle diamond mine to a block cave underground operation to keep the mine going until at least 2020.
KDL has another way of extending its resource going through a stockpile of about 10 million tonnes of previously treated material. These green slag heaps line the roadside into the camp and would have to be rehabilitated if left untreated. Bulk sampling has recovered unexpectedly good-quality stones, including Tiffany-quality yellows, indicating possibly more than two years of production.
KDL is also looking to capitalise on the diamond expertise of its new team and is in the final stages of buying Mantle Diamonds, which has a diamond mine in Botswana and exploration projects in Finland and Canada.
Despite the suspension of drilling, it's full steam ahead at the mine's on-site treatment plant, a gargantuan series of conveyor belts high above the ground, evoking the machine halls from the silent film Metropolis. We watch muddy rocks hurtle and clank along, becoming smaller and smaller with the crushing process. It's organised chaos, noisy and smelly-from the ammonium explosive used in the mining process - and the scale of the machinery involved is awe-inspiring. "It's a massive earthmoving operation to find the tiny little things that you wear on your finger," de Bruin says with a laugh.
The process of liberating a diamond from the volcanic rock is not complex; it's all about washing, crushing and sizing, says Scheepers. After a first stage of crushing, the clay and fine particles are washed off in a scrubber. The rocks are then crushed again and put through a dense media separation process. The resulting concentrate is put through an X-ray machine to pick up any fluorescence that illuminates the diamond. The final super concentrate is dried and hand-sorted, after which diamonds are cleaned by boiling in a caustic solution, then sized and shipped off to Perth.
In Perth, we are ushered through five doors into the sorting room, an Aladdin's cave where millions of dollars of diamonds are displayed on a table. We are looking at three weeks' production from Ellendale, grouped according to size and price. The price per carat varies widely, from $30 to $30,000, depending on the colour saturation, the grade, size and shape. Small inclusions (pockmarks or piquets) that make cutting difficult and reduce the yield also affect the price. One large well-shaped stone is estimated to be worth $140,000. "The simpler the shape, the more straightforward it becomes to cut and polish the stone," says Nick Yiannopoulos, KDL's manager of valuation and sorting. "But as the resource diminishes, these others will become more attractive to Tiffany."
KDL's chief financial officer and head of sales and marketing, Stephen Wetherall, another recent immigrant from South Africa, explains that the consistency of colour from Ellendale is useful for making collections of jewellery.
"If you are sourcing from other mines around the world or the open market it's harder to make a 'suite' because they produce different or inconsistent shades of yellow-some would be greener, more orange or browner."
Two veteran sorters crowned with magnifying spectacles crouch over benches, sifting and assessing the stones; both feel privileged to spend their days with such beauty. "Every day is a new adventure," says Gavin Begbie, who has been sorting diamonds for 40 years.
"Every day is a surprise because you don't know what you are going to see. You could find a triangular-shaped stone that shines like a rainbow because it has a crack in it. You see everything from a beautiful, shining octahedron of the best quality down to a low-quality stone that is dead."
On the day of our visit, Begbie is excited because he has found a yellow gem of a hue deeper and richer than the deepest stone in the four samples used to assess Tiffany-quality yellow diamonds. "It has a rich orangey glow. Every day as you pour out your diamonds you find something new," he enthuses. "In King Solomon's Mines, Rider Haggard describes the adventurers' reaction when they see the diamonds for the first time. They are taken aback by the shine. That's what we see every day |
