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Harry Winston's Life-of-Mine Plan Values Diavik at Nearly $3B

Aug 21, 2012 9:11 AM   By Jeff Miller
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RAPAPORT... Harry Winston Diamond Corporation updated its life-of-mine plan for the Diavik diamond mine for the period extending through 2023. Development of the underground mine the past two years has provided better understanding of future production levels, the best mining methodology and clarity on cost structures, according to the firm. Harry Winston holds a 40 percent stake in Diavik and Rio Tinto owns a 60 percent share.

Using a real discount rate of 7 percent and a rough diamond price increase of 2 percent per annum, the updated assessment provides a net present value (NPV) of approximately $2.6 billion for the Diavik diamond mine for all reserves and resources, or approximately $2.1 billion for  only proven and probable reserves. The plan estimated that rough diamonds recovered  would total approximately 78 million carats, cash inflow from the sales of diamonds totaled $13.5 billion and revenue less costs was $4.3 billion.

At present, Harry Winston and Rio Tinto expect that 2023 will be the final year of mining and processing  based upon the present understanding of the A-154 south, A-154 north, A-418 and A-21 kimberlite pipes.  These pipes do, however, extend below the current inferred resource horizons although additional economic ore may be limited in volume and might not add longevity to the mine life, according to the company.

Regional exploration efforts on these current property holdings are ongoing and several dozen kimberlites have been found and many of them are diamondiferous. Their future development will involve weighing factors such as proximity to the Diavik mine site, accessing the island on which the Diavik facilities are located, and/or project economics if a stand-alone operation is necessary. None of those exploration activities have any impact on this updated plan. 

Based upon prices from a rough diamond sale in December 2011 and the current diamond recovery profile at the Diavik processing plant, the report modeled the approximate rough diamond price per carat for each of the Diavik ore types.  The quality of the diamonds in the A-21 pipe is estimated to be similar to those from A-154 south, which were priced at an average of $165 per carat, but A-154 north held an estimate of $215 per carat, while A-418 was $115 per carat.

The Diavik diamond mine has been in production since 2003 and as of December 2011 it had produced approximately 69 million carats of diamonds.

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Tags: davik, Harry Winston, Jeff Miller, reserves, Rio Tinto
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