Author: WillP -- Date:1999-03-02 07:27:47
Subject: The Empire Strikes Back
THIS POST IS A WHIMSICAL VIEW OF WHAT MIGHT HAPPEN IF
THE MOST ARDENT WINSPEAR SUPPORTERS DREAMS CAME
TRUE. (FOR JSPEC: THE PROBABILITY OF THIS UNFOLDING AS
STATED BELOW IS LESS THAN 3.27x10-232.) :-)
DeBeers Consolidated Diamond Mines announced today their decision to delay
the opening of their nearly finished Kennady Lake mine for up to three years.
The mine was slated to open in September of this year and reach a full
production rate of 7,000 tonnes per day by April 2004. The mine would have
produced four million carats valued at $53 US per carat for the next ten years.
Today's decision leaves much in doubt. Officials with deBeer's joint venture
partner, Mountain Province Mining, could not be reached for comment.
Analysts suggest the primary reason for the decision is a last ditch effort by de
Beers to control the supply side of the diamond market. Recent mine
development in Canada has seen supply increase significantly since the year
1999. Ekati now produces 3.5 million carats annually, and Diavik began full
production last year with an estimated 7.2 million carats produced annually. This
increase in production, almost a 10% increase over 1998 levels, has had serious
repercussions throughout the industry.
The announcement by Winspear Resources last week of plans to exponentially
increase their production appears to have been the final straw. By late 2004,
production rates approaching 10,000 tonnes per day will be achieved, as the
5,500 tonne per day 'Pokhilenko Pit' located on the north shore of Snap Lake,
and the 3,000 tonne per day 'John A. McDonald' open pit/underground
operation on the southeastern side of the lake comes on stream. This is
estimated to add an additional 5 million carats worth 1.25 billion to the annual
production figures. This would rank the 'Randy Turner Mine' as the world's most
prolific diamond producer, and simultaneously rank Canada as the premier
producing nation.
For an organization such as the CSO and de Beers, this is an intolerable
situation.
In an attempt to control the supply in recent months, deBeers had announced the
planned closure of the Premier and Finch mines, slated for November of this
year. Previously the company had closed the money losing Koffiefontein
operation in 2002. Industry analysts suggest that these moves had been in the
works since the opening of Diavik, and there will likely be further shakedowns in
the industry. The mothballing of the remaining operation at Argyle two years ago
actually forced a mild increase in the price of industrial grade diamonds, but had
little if any impact on the pricing structure for near gems and gem quality
diamonds. De Beers hopes the closure of three of its mines, and the decision to
mothball Kennady Lake for at least the immediate future will cause the price of
raw gems to firm over the next year.
In spite of the woes of its parent company, Monopros remains more active than
ever in staking new ground around the world. The company now holds 55% of
the staked claims in the NWT, and its land holdings in other countries is rising
similarly.
Sources close to the US government suggest that deBeer's active exploration
program and simultaneous decision to mothball production at heretofore
profitable mines will likely instigate another investigation by anti-trust officials.
- 30 -
Cheers,
WillP |
