Argyle Diamond Mine Closure: The End of a Sparkling Era

The unique geological chemistry of the Western Australia location birthed the rarest hues, including champagne, cognac, blue, violet and of course the coveted Argyle pink and red diamonds.

Click here to read part two of this article, which covers the future of the Australian diamond sector.

Pink and red diamonds are among the most special gems in the world. The value of these highly sought-after natural stones speaks for itself, but their rarity has arguably increased since the closure of Rio Tinto’s (ASX:RIO,LSE:RIO,NYSE:RIO) Argyle mine.

The asset, which ceased mining activity on November 3, 2020, had been in operation since 1983. In that time, 865 million carats of rough diamonds were produced.

The unique geological chemistry of the Western Australia location birthed the rarest hues, including champagne, cognac, blue, violet and of course, the coveted Argyle pink and red diamonds. Millions of carats of white diamonds were produced at the prolific property as well.


After 37 years of output, Argyle’s closure came at a time of flux for the diamond market. The sector has been dealing with reduced demand caused by the COVID-19 pandemic, as well as shifting demographics.

While mining activity has concluded at the source of 90 percent of the world’s pink gems, diamond analyst Paul Zimnisky noted that Rio Tinto is likely still processing ore from Argyle.

“So (Argyle) diamonds will probably still be ‘produced’ this year,” he said. “Also, Rio may have some rough inventory overhang following all of the supply chain disruptions last year. But by the end of this calendar year or early next year, I think most of the primary market Argyle rough goods will be off the market.”

Demand for pink diamonds steadily growing

Colored diamonds, especially pink and red, are among the most valued gems on Earth. Prices can range from US$10,000 per carat for less intensely colored stones up to US$70,000 per carat for vivid hues.

Ahead of the Argyle closure, pink diamond prices were on the rise. According to the Fancy Color Research Foundation (FCRF), the value of pink diamonds rose 116 percent between 2010 and 2020. That’s more than any other colored diamond segment, including the extremely rare blue diamonds.

Even 2020’s disruptions and closures didn’t dent the rosy outlook for colored stones.

“The prices of all pink diamonds overall remained without a change in Q4 2020, with fancy and fancy intense categories presenting a slight increase,” a FCRF report states. “Although 2020 was challenging in terms of logistics and travel, contrary to market expectations, fancy color diamond prices proved to be resilient, with minor price decreases across the board.”

With as much as 95 percent of global pink diamond supply now removed, there is some anticipation that prices for the gems will continue to increase, perhaps at a faster rate.

“I think there are speculators out there making that bet,” said Zimnisky. “I believe Rio will be hosting one final pink diamond tender this year; I would imagine that demand will be fairly strong.”

There is already a growing buzz around pink diamonds. Earlier this year, American rapper Lil Uzi Vert had a 10 carat pink diamond surgically implanted in his forehead. The gem, which reportedly cost US$24 million, took the singer five years to pay off.

The musician took to Twitter (NYSE:TWTR) in late January to explain the purchase. “I’ve been paying for a natural pink diamond from Elliot for years now. This one Stone cost so much I’ve been paying for it since 2017. That was the first time I saw a real natural pink diamond. A lot of M’s in my face,” he wrote.

The rapper isn’t the only person taken by the rare pink gems. Rio Tinto’s last 2020 tender saw the gems experience double-digit price growth as participants from eight countries submitted bids.

“We are delighted with the results of the 2020 Argyle Pink Diamonds Tender, a testament to the unique Argyle ore body and its place in the history of the world’s most famous diamonds,” said Patrick Coppens, general manager of sales and marketing for Rio Tinto’s diamond business.

The interest has continued into 2021 as auction house Christie’s prepares to sell the Sakura diamond in Hong Kong. The centerpiece of an upcoming late May auction, the 15.8 carat Sakura stone is the world’s largest internally flawless purple-pink diamond.

The gem is expected to draw a large crowd, and sell for $195 million to $300 million Hong Kong dollars.

a large pink diamond on a white background.The Sakura diamond will be auctioned in Hong Kong on May 23, 2021. Image courtesy of Christie’s.

The heightened attention, paired with Argyle’s closure, is expected to bolster interest in the pink gems in the years to come.

“The effects of the closure of the Argyle mine will take some time,” explained fancy colored diamond analyst Yaniv Marcus. “I estimate it will take at least a year, there is another tender next year.”

He continued, “Only after that tender will we see a slowing surge in demand and price increase. For now, there are still many Argyle diamonds available.”

Reduced supply a potential diamond price catalyst

Argyle’s end of life was well publicized, spurring heightened interest in Rio Tinto’s pink diamond tenders. But Zimnisky stopped short of saying the inherent value of the mine’s gems has increased.

“It’s tough to say given how nuanced the rough market is, but it seems as if the rarest, most-desired Argyle goods have fared well in recent years,” said the diamond analyst.

For Marcus, it will take time for the mined goods to reach their full value.

“The value of the Argyle diamonds will take some time to really appreciate,” he said, referring to Rio Tinto’s December 2020 tender, which has been described as “record breaking.”

6 diamonds mined from the Argyle mine.The Argyle Pink Diamonds Signature Tender 2020 “hero collection.” Image courtesy of Rio Tinto.

“Most of the buyers of the last tender really bid high prices, and therefore will have to wait for a real surge in demand before being able to sell their inventory for a profit,” he said.

Pink diamonds aren’t the only segment that has seen growth in the diamond sector. Challenges in the first half of 2020 saw demand dwindle, but there has been a steady uptick since July 2020.

“A strong recovery in diamond demand that was first seen in the second half of 2020 has continued into 2021,” said Zimnisky. “The Chinese New Year season, an important demand catalyst for the industry, was quite good, which has in part kept a bid in diamond prices in recent weeks.”

The sector’s bounceback is indicative of investment potential, according to Marcus.

“Although the Argyle mine produced some of the rarest pinks in the world, other investment opportunities exist,” he said. “Remember that even though pinks are rare, it is all about creating financial value over time, and there are opportunities right now that make more financial sense.”

Don’t forget to follow us @INN_Australia for real-time news updates!

Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network. All readers are encouraged to perform their own due diligence.

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WHAT'S IN STORE FOR THE RESOURCE SECTOR IN 2022?

The Investing News Network (INN) spoke with analysts, market watchers and insiders about which trends will impact this sector in the year ahead.
✓ Trends   ✓ Forecasts    ✓ Top Stocks



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Rio Tinto Iron Ore Chief Executive, Simon Trott and Rio Tinto Managing Director of Port, Rail and Core Services, Richard Cohen, joined community members, local businesses and representatives from local government to celebrate the official opening of its new community ‘Hub’ in Karratha. Located on Ngarluma country in the heart of Karratha’s CBD, the new Rio Tinto Karratha Hub will make it easier for local …

Rio Tinto Iron Ore Chief Executive, Simon Trott and Rio Tinto Managing Director of Port, Rail and Core Services, Richard Cohen, joined community members, local businesses and representatives from local government to celebrate the official opening of its new community ‘Hub’ in Karratha.

Located on Ngarluma country in the heart of Karratha’s CBD, the new Rio Tinto Karratha Hub will make it easier for local people to connect with our busines.

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Rio Tinto is progressing an innovative new technology to deliver low-carbon steel, using sustainable biomass in place of coking coal in the steelmaking process, in a potentially cost-effective option to cut industry carbon emissions. Over the past decade, Rio Tinto has developed a laboratory-proven process that combines the use of raw, sustainable biomass with microwave technology to convert iron ore to metallic …

Rio Tinto is progressing an innovative new technology to deliver low-carbon steel, using sustainable biomass in place of coking coal in the steelmaking process, in a potentially cost-effective option to cut industry carbon emissions.

Over the past decade, Rio Tinto has developed a laboratory-proven process that combines the use of raw, sustainable biomass with microwave technology to convert iron ore to metallic iron during the steelmaking process. The patent-pending process, one of a number of avenues the company is pursuing to try to lower emissions in the steel value chain, is now being further tested in a small-scale pilot plant.

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Housing the world’s largest deposits of lithium, Chile’s unique geological landscape and climate make it ideal for lithium brine extraction

As the world continues on the path towards a future dominated by clean energy, lithium’s importance only continues to grow. Demand for the battery metal has already reached an all-time high, increasing by 400 percent in 2021. What’s more, there is every indication that this growth will continue in 2022, with prices increasing by 126 percent in just the first quarter.

Currently, Australia and Chile are the two leading producers of lithium, respectively accounting for 46.3 percent and 23.9 percent of worldwide production. Both countries are jurisdictionally inclined to support the mining sector. However, Chile’s potential could one day see it outstrip even Australia where investment is concerned.

Housing the world’s largest deposits of lithium, Chile’s unique geological landscape and climate makes it ideal for lithium brine extraction. The country thus has a pivotal role to play in meeting demand and establishing a stable global supply chain.


A critical component of sustainability

Climate change is an undeniable problem, one which requires a collaborative effort to address. It is for this reason that governments around the world have all agreed to pursue full climate neutrality by 2050. Because combustion engines represent an inordinate percentage of greenhouse gas emissions, replacing them with electric vehicles (EV) is essential if any nation is to achieve their sustainability goals.

Lithium is used extensively in both consumer and professional electronics. It is also a staple metal in multiple other sectors, including mining, manufacturing and energy storage.

Given its cross-sector industrial importance, the battery metal was already in high demand.

The large-scale manufacturing of electric vehicles has caused this demand to increase exponentially. As multiple automotive manufacturers construct gigafactories to ramp up EV distribution, the need for lithium is growing well beyond our current production capacity.

Investors and mining companies can benefit by turning to jurisdictions like Chile to ramp up supply. The world’s migration towards a sustainable future simply cannot occur without lithium.

Lithium: Australia versus Chile

Although Australia houses impressive lithium reserves, the majority of the country’s stores occur in hard rock deposits. Mining these deposits is relatively inexpensive, but hard rock lithium operations also tend to have narrow margins compared to other methods. In particular, lithium brine extraction offers higher yields, greater efficiency and a lower overall environmental impact.

Currently, the largest lithium producer in Australia is Pilbara Minerals (ASX:PLS,OTC Pink:PILBF). Its flagship project, the Pilgangoora operation, is situated atop one of the world’s largest hard rock lithium deposits. It also jointly owns a pegmatite lithium project with Atlas Iron (ASX:AGO), the Mt Francisco project.

Geography represents Chile’s first major advantage over other jurisdictions. Alongside Bolivia and Argentina, Chile lays claim to a geographic region known as the Lithium Triangle. Located in the Andes in South America, it contains an estimated 68 percent of the world’s identified lithium resources.

The Lithium Triangle is home to a series of vast salt flats, beneath which sit incredibly lithium-rich brine pools. More promising still is the climate of the region, which is known for being incredibly hot and dry. This represents a considerable boon for extraction operations, which typically rely on evaporative processes.

A powerful investment opportunity

Chile’s mining sector has leveraged its arid geography to great effect. The country’s Salar de Atacama salt flat is the largest-producing brine deposit in the world. It is also home to several major lithium brine operations.

One of these is owned and operated by Albemarle (NYSE:ALB). Currently the largest business provider of lithium for electric vehicle batteries, Albemarle also operates a lithium carbonate plant at La Negra. According to an Albemarle spokesperson, the company has a long history in Chile backed by a unique contract.

SQM (NYSE:SQM) operates another major lithium brine operation in the salt flat. As the world’s largest lithium producer overall, the company recently announced plans to reduce brine extraction in the region by 50 percent by 2030. This announcement came in tandem with a commitment to reduce water usage across all its operations by 40 percent.

Finally, just south of Salar de Atacama is situated the highest-quality lithium pre-production project in Chile. Maricunga is jointly owned by Lithium Power International (ASX:LPI), Minera Salar Blanco and Li3 Energy. Situated just 250 kilometers from Chile’s coast, and 170 kilometers from the mining town of Copiapo, it’s said to possess characteristics directly comparable to Atacama. Maricunga is also adjacent to Highway 31, which connects Northern Chile to Argentina.

The most significant challenge to Chile’s growth, from an investment perspective, is sociopolitical. Although the country has a history of being relatively friendly towards the mining sector, its current government is exploring new legislation that could nationalize both copper and lithium. A new mining royalty bill is also in the works, which could increase tax rates by up to 80 percent.

It’s worth noting that not every investor considers the current political climate to be a risk. South32 (ASX:S32), a spinoff of BHP (ASX:BHP), recently invested US$1.55 billion to purchase a 45 percent stake in the Sierra Gorda copper mine, and a lithium auction held by Chile earlier this year saw Chinese manufacturing company BYD acquire extraction rights for 80,000 metric tons of lithium.

Takeaway

Chile is home to the largest, richest and most valuable lithium deposits in the world. For many investors, the high margins and low cost of lithium extraction in Chile more than make up for the potential of a few political speed bumps.

This INNSpired article is sponsored by Lithium Power International (ASX:LPI). This INNSpired article provides information that was sourced by the Investing News Network (INN) and approved by Lithium Power International in order to help investors learn more about the company. Lithium Power International is a client of INN. The company’s campaign fees pay for INN to create and update this INNSpired article.

This INNSpired article was written according to INN editorial standards to educate investors.

INN does not provide investment advice and the information on this profile should not be considered a recommendation to buy or sell any security. INN does not endorse or recommend the business, products, services or securities of any company profiled.

The information contained here is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Readers should conduct their own research for all information publicly available concerning the company. Prior to making any investment decision, it is recommended that readers consult directly with Lithium Power International and seek advice from a qualified investment advisor.

LPI:AU

Australia is rich in gold, and is home to many major mines. Here's a look at the top Australian gold mines flush with the yellow metal.

With Australia earning more accolades within the gold space and the price of gold hitting record highs in the last two years, investors may want to find out more about gold mines in the country.

Currently the second-largest gold-producing country in the world, Australia is home to top producers and gold mines.

Read on for a breakdown of the Australian gold market, as well as the largest gold mines that can be found throughout the area.


The region of Australia

As previously mentioned, Australia is currently the second-largest gold-producing country across the globe.

Global gold consumption is expected to rise annually at a rate of 5.7 percent until 2023, when it’s expected to reach 4,535 tonnes. Australia’s continued expansion projects and new developments in the gold sector will improve output and help the country maintain its position as a key player in the gold production market.

One of the more prolific gold mining areas in Australia is Western Australia.

Recent exploration activity in the Pilbara region of Western Australia has renewed interest and helped increase the country’s consistent gold output. While the Pilbara region is typically known as one of the world’s largest producers of iron ore, the region is currently in the midst of a small gold rush thanks to a major discovery in 2017 by Novo Resources (TSXV:NVO,OTCQX:NSRPF) and Artemis Resources (ASX:ARV,OTCQB:ARTTF).

In fact, gold was the second largest commodity in Western Australia by value in 2020 to 2021, behind iron ore, at a record of AU$17.3 billion in sales in 2020. In 2021, the metal saw sales of AU$16 million in the state.

The Fraser Institute also named Western Australia one of the best mining jurisdictions in the world, coming in first in 2021. The area has attracted major miners like Rio Tinto (ASX:RIO,LSE:RIO,NYSE:RIO) and BHP (ASX:BHP,NYSE:BHP,LSE:BLT) to the region. Covering more than half a million square kilometres (km), Western Australia’s Pilbara is one of the most resource-rich regions in the state.

Western Australia itself represents close to 60 percent of the country’s total gold output and some geologists have compared the geology of the Pilbara Craton with South Africa’s Kaapvaal Craton and Witwatersrand Basin. Witwatersrand is home to the Earth’s largest known gold reserves and is responsible for over 40 percent of worldwide gold production. Both the Pilbara and Witwatersrand are similar in age and composition, sitting on top of the Archean granite-greenstone basement. The Pilbara area hosts numerous small mesothermal gold deposits containing conglomerate gold — mineralization known to hold large, high-grade gold nuggets.

What are the top Australian gold mines?

Below is a guided tour of the top 10 largest gold mines in Australia in terms of gold output, according to the Aurum Analytics quarterly report on Australian and New Zealand gold operations.

1. Cadia Valley

Owned and operated by Newcrest (ASX:NCM,OTC Pink:NCMGF), Cadia is officially the biggest mine in Australia in terms of production. During the second quarter of 2021, the asset had an output of 194,757 ounces of gold.

The mine is made up of the Cadia East underground panel cave mine and the Ridgeway underground mine (currently in care and maintenance), which produce gold doré bars from a gravity circuit and gold-rich copper concentrates from a flotation circuit.

In October of 2019, the company announced approval of the Cadia expansion project, bringing it to the execution phase. This stage involves beginning development for the next cave (PC2-3). In December 2021, the company received approval to expand production to 35 million tonnes a year.

2. Boddington

Newmont (TSX:NGT,NYSE:NEM) became the sole owner of this open-pit mine in 2009.

The mine is located 16 kilometres from Boddington, Australia, and has an annual gold production of 709,000 attributable ounces. The mine is Western Australia’s biggest gold producer. In 2020, the asset produced 670,000 ounces of the yellow metal.

In addition to gold, the mine also produces copper, and at the end of 2020, it provided an output of 56 million attributable pounds of the base metal.

In 2021, the company announced that Boddington would have the industry’s first autonomous haulage fleet.

3. Fosterville

Fosterville is a high-grade, low-cost underground gold mine located in the state of Victoria, Australia. The Fosterville mine features growing gold production at increasingly high grades, as well as extensive in-mine and district scale exploration potential.

The mine has been operational since 1989, with a lifetime production of over 16 million ounces of gold. Additionally, in terms of scale, it is Australia’s largest mine and its pits encompass more than 5 square kilometres. It’s also one of the lowest cost gold mines in the world.

The asset, which is owned by Agnico Eagle Mines (TSX:AEM,NYSE:AEM), is the third-largest gold-producing mine in Australia, producing an impressive 157,993 ounces in Q2 2021.

4. KCGM

Northern Star (ASX:NST,OTC Pink:NESRF) owns Kalgoorlie Consolidated Gold Mines (KCGM), which includes the Fimiston open pit, Mt Charlotte underground mine and Fimiston and Gidji processing plants.

Northern Star refers to the Fimiston open pit as a super pit because it has produced more than 50 million ounces of gold in the last 30 years.

The asset is located in the legendary Golden Mile, which was once reputed to be the richest square mile on earth. When fully developed, Kalgoorlie will be 3.6 kilometres long, 1.6 kilometres wide and up to 650 metres deep.

KCGM Operations had previously been joint-owned by Barrick Gold (TSX:ABX) and Newmont until both companies sold their interests, and the operations were handed entirely to Northern Star in June 2021.

5. Telfer

Another mine owned by Newcrest, Telfer is located in the eastern Pilbara and is one of the oldest in Australia. Between the years 1975 and 2000, the asset produced approximately 6 million ounces of gold until operations were suspended due to high operating costs.

Fortunately, production was able to restart in 2004, and the mine has since produced over 5 million ounces, with 416,000 ounces of gold in the 2021 financial year alone. The mine also produces copper, with an output of 16 tonnes in 2019.

In 2015, the company signed a land use agreement with the Martu people, which enabled work at the mine to continue in exchange for the Martu receiving AU$18 million over the course of five years with the addition of a further revenue-sharing agreement.

6. Tanami

Tanami has been fully owned and operated by Newmont since 2002, and it is located in the remote Tanami Desert of Australia. Additionally, both the mine and the plant are located on Aboriginal freehold land that is owned by the Warlpiri people and managed on their behalf by the Central Desert Aboriginal Lands Trust.

Tanami is a fly-in, fly-out operation in one of Australia’s most remote locations. The asset is 270 kilometres away from its closest neighbours, the remote Aboriginal community of Yuendumu. In 2020, Tanami produced 495,000 ounces of gold and reported 5.9 million ounces of gold reserves.

The Tanami Expansion 2 is currently underway to secure its future, potentially extending the mine life to 2040 and increasing annual gold production by an approximate 150 to 200 thousand ounces.

7. St. Ives

Owned and operated by Gold Fields (NYSE:GFI,JSE:GFI), St. Ives is both an open pit and underground mine, with two main open pits, and three underground mines.

In one of Gold Fields’ latest quarterly reports, it was revealed that St. Ives produced 393 tonnes of the yellow metal in 2021, up 2 percent from 385 tonnes in 2020.

8. Tropicana

Tropicana is co-owned by AngloGold Ashanti (ASX:AGG,NYSE:AU,OTC Pink:AULGF), which owns 70 percent, and Regis Resources (ASX:RRL), which owns the remaining 30 percent.

The mine spans 3,600 square kilometres, stretching over close to 160 kilometres in strike length along the Yilgarn Craton and Fraser Range mobile belt collision zone. The regional geology is dominated by granitoid rocks; it is a rare example of a large gold deposit within high grade metamorphic rocks that have undergone widespread recrystallisation and melting.

In 2021, Tropicana produced 265,000 ounces of gold with an all-in sustaining cost of AU$1,326 per ounce.

9. Jundee

Jundee is located in the increasingly sought-after Western Australia region and is owned by Northern Star after the miner purchased it from Newmont in 2014 for AU$82.5 million.

The project is well-known due to the fact that it solely uses underground mining and not the often utilized open pit mining. Jundee produces around 1.8 million tonnes of ore per year.

Most recently, the asset produced 83,562 ounces of gold in Q2 2021.

10. South Kalgoorlie Operations

The South Kalgoorlie Operations were acquired by Northern Star (ASX:NST,OTC Pink:NESRF) in 2018.

In the second quarter of 2021, the South Kalgoorlie Oerations produced 76,175 ounces of the precious metal.

How can you invest in Australian gold stocks?

Like all publicly listed stocks, gold companies issue shares that are available for investors to trade. When you purchase shares of a gold stock, you are essentially purchasing a stake in the company, making an investment with financial returns or losses from its profits.

There are two main ways that an investor can invest in gold mining stocks. The first way is when market participants purchase through a major mining company; the other way of trading on the stock market is by investing in a gold mining stock through a junior miner (a small cap stock).

Although no gold stock investing is 100 percent foolproof, backing a successful mining company in the precious metals space can alleviate some of the stress of a down stock market when you keep in mind that if a company’s share price goes down, it becomes more affordable to purchase and investors can more than likely anticipate that it will rise again and turn a profit.

While gold stocks are affected by some of the same factors that shape and shift the price of precious metals, they keep some distance from a direct correlation because it is possible for a gold miner and its stocks to be in a sound financial situation, even in a down market.

This is an updated version of an article first published by the Investing News Network in 2019.

Don’t forget to follow us @INN_Australia for real-time updates!

Securities Disclosure: I, Matthew Flood, currently hold no direct investment interest in any company mentioned in this article.

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