By John Helmer, Moscow
Arkhangelskgeoldobycha (AGD), the LUKoil diamond-mining subsidiary, has made its first detailed presentation of the new mine it is building in Arkhangelsk, with confirmation of the new mine’s diamond grades, volume of production, and financial value. The Grib mine, named after the Russian geologist who first found the deposit, is the first major diamond source to start production in Russia in several years, and the first to be developed independently of the state miner, Alrosa. As chief executive Maxim Mescheryakov, AGD’s chief executive, told a Toronto, Canada, audience, the presentation is designed “to show that we exist; that we are big; and that we commence production this year, fourth quarter. We are talking about 4 million carats delivered to the market annually.”
Mescheryakov estimates that more than $500 million have been spent to date on the new mine. At an average grade of 1 carat per tonne of ore, and at the three-year old price of $100 per carat, AGD and LUKoil expect to recover the cost of the mine in seven years. But given the rise in diamond prices to date, annual sale revenues by 2015 could be more than $650 million, and the payback period cut in half. The life of mine in the open-pit stage is about 15 years (60.5 million carats). Another 50 million carats may be mineable under the pit.
By volume of mine output, Grib trails behind the biggest of the Sakha region mines of Alrosa, which peaked at over 13 million carats per annum several years back. Today, the biggest of Alrosa’s open-pit mines, Nyurbinskaya and Jubilee, are producing, respectively, 7.3 and 6.3 million carats per annum (2012). Grib will produce 2 million carats in 2014, and reach capacity the year after of between 4 and 4.5 million. Thirty kilometres away from Grib, Alrosa subsidiary Severalmaz is building its Lomonosov mine which is planned to produce about 2 million carats next year. Alrosa reports spending Rb120 billion ($390 million) on building this mine since 2010.
Close as the two mines are as the bird flies, there is a world of difference underground, say Russian sources who have compared rough stones sampled from the two pipes. The sources say the Grib diamonds are of much higher quality and provide better shapes for cutting and polishing.
Mescheryakov announced that LUKoil and AGD have engaged WWW, the UK-based diamond consultancy led by Richard Wake-Walker and Charles Wyndham, to assess the market quality of the Grib diamonds and advise on a marketing plan. WWW is the Canadian Government’s diamond valuer for mines in northwestern Canada. A LUKoil marketing team has been despatched to Antwerp and to Mumbai to discuss the new diamonds with major industry buyers. Wake-Walker said in Toronto he believes the Grib diamonds should fetch on average between $130 and $160 per carat, assuming the market does not drop significantly in the coming months. Alrosa has reported that last year its average price per carat was $136.40.