Rio Tinto's Argyle Goes Underground

	Good news for India: Nirupa Bhatt

Rio Tinto announced plans to develop a $760 million underground project at its wholly owned Argyle diamond mine, located in the Kimberley region of Western Australia. "The decision to proceed with an underground mine at Argyle - the world's largest diamond mine - is a significant decision for the Indian diamond industry and for Rio Tinto," Nirupa Bhatt, Rio Tinto Diamonds marketing manager told Solitaire.

"It is estimated that over 90 per cent of the Argyle production is processed in India and the strategic alliance between Argyle and the Indian diamond industry has been a major source of competitive advantage over the last 20 years," she noted. Bakul Mehta, chairman, Gem & Jewellery Export Promotion Council (GJEPC), said the news of the expansion had put the Indian industry in a buoyant mood, as it would fuel further growth and investment in the diamond industry.
"An underground mine will ensure continuity of supply until at least 2018, which is good news for Argyle's Indian customer base.

Diamonds are an important product group for Rio Tinto and together the Argyle, Diavik and Murowa diamond productions have ensured the Rio Tinto Group has an important presence in the international diamond trade," Bhatt added.
The mine life of Argyle's AK1 open pit is through to 2008, Bhatt further stated. The optimal open pit mining rate for 2005 to 2008 is likely to be in the order of 25 to 30 million carats per annum (+/- 10 per cent). The average annual production of the underground mine through to 2018 is expected to be around 60 per cent of Argyle's historical annual average of 34 million carats.

Argyle will be Rio Tinto's first underground diamond mine. At Diavik, Rio Tinto's Canadian diamond mine, underground mining is part of the original mine plan. Feasibility studies, expected to be completed in 2007, will determine the best underground mining methods for the richest kimberlite pipes at Diavik.

Bhatt also pointed that a project is underway to look at the practicability of centralising RTD's diamond sorting facilities. A number of locations, including Mumbai, are being considered, but it will be some time before this analysis is complete.

Foreign Ownership of Diamond Mines Approved

The Group of Ministers (GoM) constituted by the Indian government in early December, has put forward its recommendations to allow 100 per cent Foreign Direct Investment (FDI) in mining and exploration of diamonds and precious stones through the automatic route. Previously, the FDI cap for the sector stood at 74 per cent. The move is expected to facilitate the induction of modern mining technologies and may eventually reduce the dependence on imported rough.
The Indian government has also decided to ease FDI regulations in retail outlets meant exclusively for 'single brands'. According to union commerce and industry minister Kamal Nath, the move will allow foreign multinational giants like Chanel, Louis Vuitton and Gucci to invest up to 51 per cent in joint ventures to set up such outlets.

BHP Diamond Output Down 21 Per Cent

In 2005, BHP Billiton registered a 21 per cent drop in diamond production at 3.22 mn cts, compared to 4.08 mn cts recovered in 2004. For the half year and second quarter ended December 31 2005, output decreased by 21 per cent to 1.466 mn cts, and by 30 per cent to 614,000 cts respectively.
The company attributed the dip in production, in the half year, to the processing of lower grade ore at the Ekati mine in Canada, where it holds an 80 per cent interest. BHP stated that the 28 per cent drop in quarterly production, compared to the previous September 2005 quarter, was due to the reduced throughput and lower grade ore following changed ore sources within the mine.

Alrosa Net Profits Up

The Russian state-owned diamond company Alrosa posted a net profit of $368 million for the period January to September 2005, up 12.5 per cent over the same period last year. The company's revenues for the same period stood at $1.93 bn. Alrosa increased its diamond production by 3.9 per cent to $1.3 bn during the same nine-month period, in comparison to last year. The company's total sales increased by 18.2 per cent to reach $1.75 bn.

… To Head Overseas
Reports from Russian news agencies have suggested that Alrosa is on the brink of launching an extensive programme involving geological exploration at home and abroad. Alrosa president Alexander Nichiporuk told reporters that Russia, Angola and Canada were on his shortlist. He hinted at a potential partnership "with one of the world's biggest diamond companies" in order to develop them.
In Angola, the company is in negotiations to acquire rights to five viable properties, where a study of 10 to 15 kimberlite pipes has been conducted. Alrosa has ascertained the existence of kimberlite pipes and is set to begin exploration in Canada on a property covering 26,000 sq km, Nichiporuk added. A delegation from Alrosa visited Canada in early December last year.

… 2006 Production Targets
Chaired by president Alexander Nichiporuk, Alrosa's executive board convened in late December to discuss the economic and production targets for 2006. The board announced that its primary objective is the systematic reduction of all expenses relating to every division and subsidiary, with special attention on increasing exploration efficiency and active efforts aimed at discovery of new deposits.
The target objectives approved for this year include lower diamond breakage during ore treatment, effective solutions for underground mining at Udachnaya and the organisation of diamond exploration in Angola. The board set a consolidated diamond production target of $2,087.1 mn for OAO Alrosa-Nyurba, and $1,597.1 mn for Alrosa Co Ltd. Rough diamond sales are estimated to reach $2,734.4 mn, while polished diamonds are expected to bring in $ 159.2 mn.

De Beers Canada Plans Third Diamond Mine

De Beers Canada Inc, an operating partner of the Gahcho Kué joint venture, has filed an application with the Mackenzie Valley Land and Water Board for permits required to construct and operate a diamond mine at Gahcho Kué, located in the Northwest Territories (NWT). The project is a joint venture between De Beers Canada (51 per cent), Mountain Province Diamonds Inc (44.1 per cent) and Camphor Ventures (4.9 per cent).

"Advancing this project is consistent with our strategy of maintaining a pipeline of projects to meet increasing global demand as well as contributing to the sustainability of the Canadian diamond industry," said Richard Molyneux, president and CEO of De Beers Canada Inc. "Gahcho Kué is evidence of the importance we attach to partnerships with Canadian exploration companies as a winning formula for growing the diamond industry in this country," he noted.

The Gahcho Kué project will be an open pit mine, with an estimated resource of 31 million tonnes. Capital costs to construct the mine are estimated at C$ 825 million. The project is expected to have a life of twenty years from start of construction to closure. It will produce an average of 3 million carats annually over 15 years of operations.

De Beers Eyes Karnataka

De Beers India Private Limited, the Indian arm of the South African diamond miner, plans to start prospecting in Central Karnataka and has made an application to the state government. The two reconnaissance permits (RPs) will authorise the company to prospect in the regions of Tumkur, Chitradurga, Raichur, Gulbarga and Dharwad. "The department has sent its recommendations in this regard to the centre, which has cleared the proposal," said mines and geology joint director T N Venugopal. The RPs will be issued subject to their compliance with the Mines and Mineral Development Regulatory Act (MMDRA), 1957 and Mineral Concession (MC) rules, 1960, he added.