Pisani The Brazilian Reality Of The Diamond Small Scale Mining

Workshop on Rough Diamond Artisanal Alluvial Production– 2008 – Pisani/ Vaaldiam

THE BRAZILIAN REALITY OF THE THE BRAZILIAN REALITY OF THE DIAMOND SMALL-SCALE MININGDIAMOND SMALL-SCALE MINING

JOSÉ RICARDO THIBES PISANI


How big is the global diamond industry?How big is the global diamond industry?

Total Production: 160 milion carats per year Value of production: + $ 13 bilion per year Global Diamond Exploration Expenditures in 2006 US$ 1 billion.

DIAMOND INDUSTRY IS RELATIVELLY SMALL INDUSTRY, BUT.... IT IS ONE OF THE MOST PROFITABLE MINING SECTOR

The Major Minind Players in 2006/2007

• De Beers 51M carats valued at $6B• Rio Tinto 35M carats valued at $1.3B• Alrosa 31M carts valued at $2.3B• BHP Bilinton 2.5M carats valued at $440M• Gem Diamonds 0.9M carats valued at $355M

Source: RBC Capital Markets


Source: Trends in Cdn Mineral Exploration & Pers. Communication with Operating Companies in Brazil; Ontario Ministry of Northern Development and Mines

Diamond Exploration Expenditures (US$ Millions)Diamond Exploration Expenditures (US$ Millions)

In 1991, the first economic

kimberlite pipe in

Canada was discovered at Pointe Lake

> US$ 2 billion was invested in diamond exploration since 1991 and this results in at least 4 new diamond mines = more than US$ 2 billion of diamond/ year.


Diamond Occurrences in BrazilDiamond Occurrences in Brazil


Use the excellent work done by De Beers, Rio Tinto, CPRM, etc.Use the excellent work done by De Beers, Rio Tinto, CPRM, etc.

> 1.000 kimberlites discovered since > 1.000 kimberlites discovered since 1966 (Redondão Kimberlite);1966 (Redondão Kimberlite);


Why the “Majors” walked away from Brazil

The “majors” diamond companies did a very good and successful exploration work in Brazil; however they were looking only for WORLD CLASS MINES.

Note: Just for reference most of the kimberlites which comprise Point Lake (Ekati Mine) area are smaller than 3 hectares in size. Ekati produces US$ 500 million/ year for at least 25 years.

Many small bodies can make a big mine.


Who were the diamond producers in Brazil?Who were the diamond producers in Brazil?


Diamond Mining CompaniesDiamond Mining Companies

Just for comparason: more than 100 diamond companies are listed and exploring in Canada........


Chapada MineDuas Barras Mine

Producing Mines


Duas Barras Chapada

Annual Production

30,000 cts

Diamond Value

US$ 165 / ct

Cash Cost of Production

US$ 93/ ct

Mine Life 5 Years

Annual Production

20,000 cts

Diamond Value

US$498 /ct

Cash Cost of Production

US$ 465 / ct

Mine Life 4 Years

Producing Mines


Duas Barras MineMinas Gerais State


Duas Barras MineMinas Gerais State

• located along the Jequitinhonha River in northern Minas Gerais State of Brazil• Commercial production commenced in September 2007 with total diamond sales of $5.2M from

31,640.82 carats & average sales value of US$164 per carat.• NI43-101 compliant indicated resources of 1.6 M bcm at 0.16 cts/bcm and 0.18 gr Au/bcm & inferred

resource of 0.8 M bcm at 0.16 cts/bcm and 0.18 gr Au/bcm

Deposit Characteristics:

Paleochannel / channel scour deposits with gravel thicknesses of up to 20 metres

Ore horizon comprised of upper “yellow gravels” (Fe-rich) grading 0.07 cts/bcm and lower “white gravels” grading in excess of 0.20 cts/bcm

Operating Performance:

ROM capacity of 80 to 100 tonnes per hour depending on ore type

Average recovered grade to date of 0.16 cts/bcm & 0.18 gr/bcm @ US$165 per carat and US$29 per gram Au

Gross value of ore = US$33 per bcm

Operating cost of US$14.86 per bcm or US$93 per carat


Chapada MineMato Grosso State


• Located in the Mato Grasso State of Brazil, 80 km north east of the state capital of Cuiaba

• Largest diamond mine operating in South America• Ni 43-101 compliant resource of 4.8 M bcm at 0.05 cts/bcm• Exploration concessions provide opportunity to expand production and resources

Deposit Characteristics:

The basal conglomerate of the Bauru Formation of varying thickness (up to 20m), which outcrops widely, is considered the most likely local source of diamonds found at Chapada

Operating Performance:

ROM capacity of 60 to 70 bcm per hour

Total sales to date of 32,516 carats @ $411 per carat

2007 ore processed of 565,776 bcm for total carats of 17,892

Chapada MineMato Grosso State


The Finance CrisisHow the finance crisis will impact the diamond business in Brazil?

The diamond prices are already trading at discounts;

the smaller companies which do not have sustained production and positive cash flow will suffer due to the lack of raising capital opportunities.

A rush to sell projects, claims, equipments already start;

Downsizing is now the strategy for all junior diamond companies in Brazil.


How we can Change this Scenario?How we can Change this Scenario?

Partnership small companies and “garimpeiros” by:

1 – Share the same mining concessions (PLG’s, JV, etc.);

2 – Improving the processing from “garimpeiros” by using the companies technology.

3 – Improving the environmental reclamation in order to minimize the impact of the areas explored by garimperios.

Partnership small companies and “garimpeiros” by:

1 – Share the same mining concessions (PLG’s, JV, etc.);

2 – Improving the processing from “garimpeiros” by using the companies technology.

3 – Improving the environmental reclamation in order to minimize the impact of the areas explored by garimperios.


How we can Change this Scenario?How we can Change this Scenario?

Brazilian Diamond Players 1 - Incentives in order to have diamond companies listed at BOVESPA;

2 - Finance and facilities to buy equipments and working capital;

3 -Training in order to have Brazilian diamond valuators with international recognition;

4 - Analysis the possibility to create a Brazilian Diamond Exchange Centre.

5 – Safe regulations and legal stability.

Brazilian Diamond Players 1 - Incentives in order to have diamond companies listed at BOVESPA;

2 - Finance and facilities to buy equipments and working capital;

3 -Training in order to have Brazilian diamond valuators with international recognition;

4 - Analysis the possibility to create a Brazilian Diamond Exchange Centre.

5 – Safe regulations and legal stability.


We need more Players – As soon as possibleWe need more Players – As soon as possible


Thank YouThank You

Pisani The Brazilian Reality Of The Diamond Small Scale Mining

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