Diamond Prices Blina Alluvials

Key Points

  • An independent appraisal on the value of a 1,497.57 carat parcel of diamonds previously mined from the 100% owned Blina Diamond Prospect at Ellendale, reports the Fancy Yellow component has gone up by 131% to US$3,391 per carat (A$4,403 per carat). The previous valuation of the Fancy Yellows in 2006 was US$1,466 per carat.
  • The Fancy Yellow component (7% by weight) now constitutes 62% of the value of the whole diamond parcel (up from 50% in 2006).
  • The overall parcel valuation is US$389 per carat (A$505 per carat). This is a 63% increase on the previous price of US$238 per carat made in 2006.
  • The largest diamond in the valuation parcel is a Fancy Yellow stone weighing 43 carats. This diamond has an estimated value of US$44,482 (A$57,769) which is the equivalent of US$5,277 per carat (A$6,853 per carat).
  • The 100% owned Blina Diamond Prospect is a part of the Ellendale Project in the West Kimberley region of WA and covers a 40 km long diamond bearing palaeo-channel named Terrace 5. The channel drains the central section of the previously mined Ellendale diamond field. The GIB Terrace 5 ground has previously produced significant quantities of diamonds, including Fancy Yellows.
  • Blina Project Mining licenses M04/467 is granted and fully permitted for bulk sampling, trial mining and full scale mining.

Some of the Terrace 5 diamonds included in this valuation parcel. All stones are greater than 2 carats. The Stone on RHS is an 8.43 carat Fancy Yellow valued at US$44,482

1.0 Introduction

The Blina Diamond Prospect in the Ellendale Diamond Province of WA's Kimberley Region is 100% owned by Gibb River Diamonds Limited (‘GIB’ or the ‘Company’). The project consists of various exploration and mining leases situated 100km east of Derby.

A diamond bearing alluvial palaeochannel named Terrace 5 extends over some 40km of the GIB project area, with channel widths from 200m to 500m. Diamonds recovered from the Terrace 5 gravels are considered large, with an average stone size of around 0.4 carats. Most stones are of gem or near-gem quality. The largest diamond recovered to date from Terrace 5 weighed 8.43 carats (from Pit 82)1, with stones larger than two carats common.

An independent appraisal on the data from a 1,497.57 carat parcel of diamonds previously mined from Terrace 5 gives a price of US$389 per carat (A$505 per carat). This is a 63% increase on the previous valuation of US$238 per carat made in April 2006.

This substantial price increase is mainly due to the greatly increased pricing of the fancy yellow component of the parcel which has gone up by 131% to US$3,391 per carat (A$4,403 per carat). The previous valuation of the Fancy Yellows in 2006 was US$1,466 per carat. The Fancy Yellow component now constitutes 62% of the value of the whole parcel (up from 50% in 2006).

Figure 2: Diamond Valuation Parcel Mined Areas - Cuts 1&2 and Pit 82

2.0       Diamond Valuation Background

GIB recently commissioned Independent Diamond Valuers International (‘IDVI’) to provide diamond valuation services to the Company. IDVI was responsible for sorting, grading, valuing and selling diamonds from the Ellendale Diamond Mine (now closed) and the Blina Project, including Terrace 5 goods, from 2002 to 2016. IDVI’s pricing system was used throughout this period and is utilised to provide this valuation. GIB considers IDVI to be a reputable, experienced, independent and qualified expert for the purposes of this valuation.

In 2006 IDVI performed a valuation on a 1,497.57 carat parcel of diamonds recovered from the mining of the Blina Terrace 5 Cuts 1 and 2 (in 2005 and 2006) and Pit 82 (in 2004), ground that is a part of GIB tenure today. This parcel was subsequently sold and this updated appraisal is based on the size and grading data from the original valuation. The 2006 valuation has been re-appraised using both IDVI’s price book from 2016 and current 2017 market conditions to ascertain an estimated market price for the 1,497.57 carat parcel as of 1 November 2017. The full diamond valuation report by IDVI is available in the ASX Release dated 6 November 2017.

3.0       Diamond Valuation Results

The IDVI market valuation dated 1 November 2017 is based on the data from a 1,497.57 carat parcel of diamonds previously mined from Terrace 5 is priced at US$389 per carat.

The original market valuation in April 2006 on the same parcel was priced at US$238 per carat.

This is a highly significant increase of 63% in the valuation of this diamond parcel from 2006 to 2017, which is a very important factor in assessing the mining economics of Terrace 5.

In terms of variability, the current market upper/lower estimate range on the parcel is priced at US$350 to US$430 per carat.

3.1       Fancy Yellow Component of the Valuation

Of particular interest is the increase in the value of the Fancy Yellow component of the parcel valuation which has gone up by 131% to US$3,391 per carat (A$4,403 per carat). The previous valuation of the Fancy Yellows in 2006 was US$1,466 per carat. The Fancy Yellows now constitute 62% of the value of the whole parcel (up from 50% in 2006).

Table 1  Blina Terrace 5 Market Valuation by Diamond Type: Year Comparison

Diamond Type

US$ per carat

US$ per carat

% Increase

-

November 2017

April 2006

To 2017

Fancy Yellow

US$3,391

US$1,466

131

Commercial Goods

US$158

US$126

25

Weighted Average Total

US$389

US238

63

The largest stone in the valuation parcel was a Fancy Yellow stone weighing 8.43cts. This diamond has an estimated value of US$44,482 (A$57,769) which is the equivalent of US$5,277 per carat (A$6,853 per carat).

This 8.43 carat Fancy Yellow diamond was the largest recovered from the Terrace 5 sampling (Pit 821) and is a part of the valuation parcel which is the basis of this report. This stone has an estimated value of US$44,482

 

Within the valuation parcel, 7% of the stones were classified as Fancy Yellow. The Ellendale E9 pipe (believed to be the main source of the Terrace 5 diamonds) contained between 9% and 16% Fancy Yellows. Given the strong evidence that E9 is the main source for the Terrace 5 diamonds, there is potential for this particular Terrace 5 parcel to be statistically under-represented in terms of Fancy Yellow stones. Should the actual Run of Mine production from Terrace 5 prove to have a greater proportion of Fancy Yellows than the 7% in this valuation parcel, that would have a positive effect on the project economics, see Table 2.

Table 2   Fancy Yellow % Recoveries: Effect Upon Overall Pricing

The true Fancy Yellow component of Terrace 5 will only be known as mining proceeds, but Table 2 indicates the considerable economic effect of even small changes in the percentage of Fancy Yellows that are recovered in any parcel.

Prior to the mine closure in 2015, Kimberley Diamond Company (KDC) had a contract to sell the Fancy Yellow component of their Ellendale mine production to Laurelton Diamonds (the jeweller Tiffany & Co), at a premium to the IDVI price book.

Although this agreement is no longer in place, it does indicate the potential for GIB to sell the Fancy Yellow component of company production at a premium above the current valuation. These premium sales could be to tier one jewellery brands like Tiffanys, other buyers or a retailer seeking to build upon or create a unique diamond brand.

3.2       Market Valuation by Size

A summary of the parcel diamond values by size is shown in Table 3. A total of 89% of the total value of the Terrace 5 valuation parcel sits within the 0.90 to 8.79 carat size range, which could be considered large by world standards.

Table 3   Blina Terrace 5 Market Valuation by Size, November 2017

Sizes

Size range

Price per carat

Weight (carats)

Value US$

% Value

8 carats

7.80 - 8.79ct

$5,277

8.43

$44,482

8%

7 carats

6.80 - 7.79ct

$611

6.86

$4,190

1%

6 carats

5.80 - 6.79ct

$5,874

5.90

$34,656

6%

5 carats

4.80 - 7.79ct

Nil

0.00

Nil

0%

4 carats

3.80 - 4.79ct

$4,762

20.90

$99,516

17%

3 carats

2.80 - 3.79ct

$1,291

78.12

$100,842

17%

8-10 grainer

1.80 - 2.79ct

$693

156.93

$108,805

19%

6 grainer

1.30 - 1.79ct

$536

111.45

$59,738

10%

4 grainer

0.90 - 1.29ct

$288

225.82

$65,033

11%

3 grainer

0.66 - 0.89ct

$98

174.42

$17,023

3%

+11 Sieve size

~ 0.40cts

$81

348.34

$28,135

5%

+9 Sieve size

~ 0.25ct

$69

195.83

$13,446

2%

+7 Sieve size

~0.10ct

$50

88.1

$4,428

1%

+5 Sieve size

~0.05ct

$39

68.03

$2,658

0%

-5 Sieve sizes

~0.02ct

$25

8.43

$210

0%

Total

 

$389

1,497.56

$583,164

100%

Diamonds in the 1.5-16mm range recovered from Cuts 1&2; 1.2 to 14mm from Pit 82
These valuations are based upon the 1,497.57 carat parcel data from the Blina Diamonds Terrace 5 Project originally sized and graded by IDVI in 2006. All sieve sizes in this report supplied by IDVI.
The average stone size from the mining of Cuts 1 and 2 was reported by the original operator as 0.42 carats1.

3.2.1   Significance of the Valuation by Size Data

This valuation by size data is extremely useful in terms of evaluating the project economics. Tables 4 and 5 shows how the value curve skews to the left of the stone size curve (the x-axis of both graphs is the same). This indicates how 97% of the value of the Terrace 5 diamonds sits within the larger stone sizes of plus 11 sieve size (2.86mm or ~0.4 carats).

GIB’s aim is to achieve the best commercial balance between plant throughput, screen sizes and diamond recoveries: the bigger the minimum screen size, the higher the throughput (but with diamonds smaller than that minimum screen size being lost). This valuation by size data will enable the configuration of more efficient plant throughput levels. (For reference, the +9 sieve size equates to a 2.35mm sieve size).

Table 4   Stone Size Distribution: Terrace 5 versus Ellendale 9 Diamonds

Table 5   Value (%) versus Size Distribution of Terrace 5 Diamonds

3.3       Size Distribution Comparison: Terrace 5 versus Ellendale 9 Diamonds

The size distribution of the Terrace 5 goods shows a remarkable similarity to the Ellendale E9 production (Table 4), albeit with a smaller percentage of diamonds in the fine (smaller) size fractions. This provides further empirical evidence that Terrace 5 (as sampled) is largely derived from the erosion of the Ellendale 9 pipe. This in turn could have positive ramifications for the proportion of Fancy Yellows which are found when Terrace 5 is mined (para 3.1).

3.4       Valuation Composition by Quality

The valuation parcel had a Gem content of 38%, Near-gem of 55% and Industrial of 7%. The combined Gem and Near-gem content of 93% could be considered high by world standards.

3.5       Valuation Composition by Colour

The valuation graded the diamonds by colour as follows:

 7%     Fancy Yellow
18%    White
46%    Off-white
29%    Brown

The Fancy Yellow component at Blina has already been covered in para 3.1, however a significant number of the Terrace 5 Off-white stones have a yellow hue which grades from just below Fancy Yellow down to a very pale yellow. The stones in this colour range with a stronger yellow component are very attractive and have potential for premium branding in their own right.

Data from the original valuation was used to collate the information above; this information should be used as a guide only as to the actual composition of the Terrace 5 diamonds.

4.0       Blina Project Diamond Valuation Summary

The Board is very pleased with this new major increase in the valuation of the Terrace 5 diamonds. We believe it is an extremely significant development for the Company which will also have a positive effect on the economics of the Blina Diamond project.

The increase of 131% in the valuation of the parcel’s Fancy Yellow component to US$3,391 per carat shows that Blina could produce some of the worlds most desirable diamonds and thus be in an excellent position to brand and market this unique and conflict-free product to leading buyers and jewelry houses.

The Company considers the Blina Diamond Project to have the potential to deliver a relatively simple, low capital cost and low operating cost alluvial mining project. Much of the exploration risk has already been accounted for given the positive results of previous work and the successful recovery of significant quantities of very high quality diamonds from the alluvial channels1.

The increased diamond values in this report together with the highly successful GPR geophysics survey conducted by GIB earlier in the year (which targeted high grade/bonanza alluvial trap sites within the diamond bearing channels), provides excellent momentum going forward into the sampling and trial-mining program in 2018.

References:

1Further detailed information including the Table 1 (JORC Code, 2012 Edition) and references are available on the GIB ASX Release dated 9 October 2015: click here

2GIB ASX Release 18 October 2017 includes further exploration & Table 1 data: click here

3Blina Diamond Project Fancy Yellows Value Increases by 131% to US$3,391 per carat dated 6 November 2017

4Blina Diamond Project, Gamechanger GPR Survey; POZ ASX Release dated 18 October 2017 click here

5Trenching Discovers New Gravel Targets at Blina; POZ ASX Release dated 6 August 2018 click here

6Record 2018/8 Geology, Resources and Exploration Potential of the Ellendale Diamond Project, West Kimberley, Western Australia (Geological Survey of Western Australia); by G. Boxer and G. Rocket. 2018 click here

Exchange Rate used in this report is US$1 = A$0.77

The information in this report that relates to previously reported exploration results is based on information compiled by Mr. Jim Richards who is a Member of The Australasian Institute of Mining and Metallurgy and a Member of the Australian Institute of Geoscientists.  Mr. Richards is a Director of GIB River Diamonds Limited. Mr. Richards has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.  Mr. Richards consents to the inclusion in the report of the matters based on the information in the form and context in which it appears.

The information in this report that relates to diamond valuations was compiled by Mr Rod Criddle, a Director of Independent Diamond Valuers International (‘IDVI’). IDVI has been responsible for sorting, grading, valuing and selling diamonds from the Ellendale Diamond Mine (now closed) and the Blina Project, including Terrace 5 goods, from 2002 to 2016. IDVI’s pricing system was used throughout this period and is utilised to provide this valuation. GIB considers IDVI to be a reputable, independent, experienced and qualified expert for the purposes of this valuation. The valuation is an independent valuation. Mr Criddle consents to the diamond valuation information contained in his report in Appendix A of ASX Release dated 6 November 2017 being included in this report.