More Mines on the Block

Once again, our attention turns to the diamond mining segment, which has arguably been hardest hit by the decline in demand. This past week, two mid-tier miners effectively announced their intention to exit their operations.

Petra Diamonds, owner of the legendary Cullinan and Finsch mines in South Africa, launched a strategic review to address its liquidity concerns, including a possible sale of its assets. The company has already unsuccessfully sought to sell Finsch and now, it seems, is putting a giant For Sale sign in front of Cullinan as well.

Keep in mind that Petra still has a major expansion underway at Cullinan, while it shelved plans to extend the life of Finsch. These are South Africa’s last remaining major diamond mines after De Beers put Venetia on hold in September, although alluvial operations remain active.

Not long ago, a portfolio comprising Venetia, Cullinan and Finsch might have been a relatively easy pitch to the right investor. With production potential of more than 5 million carats a year, extending into the 2040s, there was a compelling scale story to tell.

Today, it is a much harder sell. All three mines achieve average prices well below $100 per carat and are dominated by lower-value goods, where demand has dropped sharply. Cullinan, of course, has a habit of yielding rare blue diamonds, which adds some upside.

Still, it would take a substantial recovery in the market to make such a portfolio marketable again.

Meanwhile, in Canada, Mountain Province sold its 49% stake in the Gahcho Kué mine to its senior partner, De Beers.

There is a question as to why De Beers would double-down on the operation, given that De Beers Canada has recorded losses in the past two years. But, for context, De Beers did not pay for the stake. Instead, it released Mountain Province from its liabilities and obligations related to the mine.

Again, it highlights the difficulty of building a sustainable business around a single mining asset producing lower-value diamonds, as was the case for Mountain Province at Gahcho Kué.

Now fully under De Beers ownership, Gahcho Kué is scheduled to end operations in 2028. I would expect that deadline to be brought forward unless the market improves substantially in the coming year.

Increasingly, rough supply is consolidating among larger, multi-asset portfolios and companies with high-value mines that can better withstand current market conditions.

Read the full October 5 edition of the Pressing Matters Executive Memo here.