By John Helmer, Moscow
Russian oil company LUKoil plans to launch commercial production of diamonds at its Grib diamond mine in September, the company confirms. It is the first diamond mine to be opened in Russia since Alrosa, the state diamond miner, commissioned the Nyurba mine in Sakha in 2003. Alrosa’s Lomonosov diamond mine, less than 50 kilometres from the Grib site, has been in development since 2005, and the first stripping for the Botyubinskaya mine in Yakutia commenced last month.
On LUKoil’s and Alrosa’s current estimates, the Grib mine with 98 million carats holds roughly twice the volume of mineable diamonds compared to Lomonosov next door. Grib ranks fourth in size of reserves on the table of Russia’s diamond mines, after Udachny, Jubilee, and Mir, all being worked by Alrosa in Sakha.
The announcement came from LUKoil chief executive and control shareholder, Vagit Alekperov, at a presentation he gave on January 23 at the Davos World Economic Forum. The Grib pipe is at Verkhotina, in Russia’s northwestern Arkhangelsk region. It was first prospected by a joint venture between Arkhangelskgeoldobycha (AGD) and Archangel Diamond Corporation (ADC), a Toronto-listed junior miner. The former was taken over by LUKoil, the latter by De Beers, and together they formed a joint mining and marketing venture in April 2008. DeBeers was to design and operate the mine; but in 2009 it abandoned the project for reasons neither DeBeers nor LUKoil ever explained in public. Jonathan Oppenheimer, who was attempting to control DeBeers at the time, ordered ADC into bankruptcy later the same year. The minority shareholders of ADC are still suing LUKoil in the US courts.
A spokesman for LUKoil in Moscow confirmed that Alekperov said the mine may be put up for sale after commissioning production and commencing diamond sales. “We are launching the project in September. We are constantly receiving offers [to buy], but we believe that we need to start the project, and then make this assessment.”
A resource estimate prepared for Grib by ADC counted 98 million tonnes of kimberlite to a depth of 500 metres, containing an estimated 67 million recoverable carats. The grade has been estimated by De Beers from 69 to 82 carats per 100 tonnes. In 1999 ADC estimated that the Grib stones would average $79 per carat. In 2008 the valuation had jumped to $119 per carat. Depending on valuations which have moved with oscillating prices for rough, the asset value of the diamonds to be mined is between $5 billion and $10 billion. But environmental and technical mining problems and costs led De Beers to calculate that the mine had a net present value in 2008 of no more than $400 million. The joint venture terms then agreed between DeBeers and LUKoil obliged DeBeers to pay $225 million in three instalments for its 49.99% stake in the mine.
LUKoil was asked this week to clarify its mining and marketing plan for the Grib stones. Vladimir Semakov, LUKoil’s spokesman, told PolishedPrices.com: “The reserves are more than 98 million carats. How many we will produce in a year, it is very difficult to say, because there will be several stages. Initially an open pit. This will be up to 350 meters in depth. It’s possible continue to dig up to 900 meters. This question is still open.”
“We plan to launch the field this year. That is, roughly speaking, we get the first diamond [for commercial sale] this year. But for the time being there are no specific figures. Of course, all the products will be sold. The issue is where, on what market. I cannot say exactly right now, because, frankly, we understand the oil market and the oil products market – part [of the crude] is processed in the country, part is exported, then the petroleum products go for export. Certainly we ourselves are not going to engage in cutting [the Grib diamonds]. And to whom we will sell, whether wholly within Russia or a part to be exported — there is also no final decision.
“I do not deny that for us [the Grib mine] is not a core asset. We are still an energy company, not an ore-mining company. But [the diamond mine] was inherited.”
“With De Beers we could not reach an agreement. There were problems — the government has not given permission for the entry of a foreign partner. Therefore, first of all — look at the statement of Mr Alekperov — once we got into the project, we need to fully prepare it for work to start, to begin commercial production, and then we will assess: how much we have invested there, how much to invest, how much revenue we will get. Then perhaps we will make a decision – to sell, to change or to keep in our property. Now there is no clarity.”
LUKoil is working with the London-based WWW International Diamond Consultants to develop sorting, valuing and marketing plans for the Grib stones.