Just over a year after price stagnation led Rio Tinto to shut down the massive Argyle diamond mine in Western Australia, prices for the precious commodity are booming-giving confidence to the likes of ASX-listed explorer Odessa Minerals.
Odessa used to trade as Fargo Enterprises, a provider of cognitive virtual assistance artificial intelligence platform. Sensing an opportunity of a different kind, it recently agreed to acquire a 90% interest in a number of diamond exploration assets in the remote Kimberley region of northern WA-and situated about 200km from Argyle. It relisted and commenced trading on the ASX under its new name on January 18.
"The reason the company chose diamonds is that there's been a strong price increase based on strong supply and demand fundamentals," said Alistair Stephens, who assumed the role of chief executive in the week before the ASX relisting.
Stephens, a geologist with 30 years of industry experience including stints as CEO of rare earths project developers Arafura Resources and Globe Metals and Mining, said the increase in diamond prices was largely brought about by the Argyle closure.
"Just before Argyle closed, it was producing about 6 to 8 million carats a year, which was around 10 to 15 percent of global production. Its closure has created a gap. Demand is still increasing modestly, but the market is now undersupplied and stocks of diamonds are low."
The Ziminsky Global Rough Diamond Price Index, which tracks the like-for-like price change of natural rough diamonds, rose around 28% in 2021 and was still trending up at the start of 2022, with a 1% increase in the first three weeks of the year. Moreover, supply is expected to be almost flat over the next 10 tears, with very few new projects coming online, according to Bain & Company's Global Diamond Report 2020-21.
Stephens said the price increases had been especially pronounced in the coloured diamonds category for which Argyle was famous-and which he is confident will also be found in Odessa's tenements.
"The thing that's very different about the diamond market compared to the turn of the [twenty-first] century is that just about every diamond back then was white. There were different degrees of quality, size and clarity, but it was still white diamonds," Stephens explained.
"The Argyle and Ellendale fields in the Kimberley region really introduced the world to different colours of diamonds such as pinks, champagnes and cognacs. Once upon a time, if you wanted a brooch in different colours, you had to go for emeralds or sapphires or rubies with diamonds. Now you can have an entire brooch of diamonds with all these different unique and special colours.
"There's a big market. I was in a shop the other day, and a 0.4 carat Argyle pink was A$45,000 ($32,000). A 0.8 carat Ellendale fancy yellow was A$45,000. And a 2.4 carat VVS2 white diamond was A$45,000. And then I looked online-because you can't find a blue diamond in a store-and a 2.4 carat was A$1 million. That gives you a relative sense of the value that coloured diamonds have compared to whites."
Stephens believes the environmental, social and governance (ESG) agenda will lend further support to natural diamond prices in the coming years.
"Although there are synthetic diamonds on the market, these are hard to get to gem quality. It is possible, [but then] they have a higher carbon footprint because they have to replicate the intense pressures of where diamonds are formed, somewhere between 100 to 150 kilometres below the earth's surface."
He continued, "There is a place in the diamond market for ethically-sourced diamonds. Our ESG policies are very strong, and we have a great place in the world-the Kimberley of Western Australia- to produce ethically sourced diamonds. The vast majority of the current customer market, mostly the young people, are very focused on having ethically sourced diamonds with the right environmental and social footprint. Ethically sourced demand is only going to increase, and we are seeing premium prices for ethically sourced diamonds."
Odessa's assets cover an area of more than 2,400km2 and boasting at least three kimberlite pipes and 12 lamproite pipes with "impressive footprints", but where previous work has been insufficient to determine resources. It has already been granted titles for two tenements and has applications pending for an additional 16 tenements.
The highest hopes are reserved for Aries, a 0.35km x 0.25km kimberlite pipe. Bulk sampling at Aries in 1991 recovered 4,973 diamonds totalling 1,074 carats. Further exploration sampling in 2005 recovered 181 diamonds at 4.9 carats per hundred tonnes with 95% gem quality. Recently remodeled geophysical data indicates the Aries system could be a 3km feeder dyke of comparable scale to Argyle.
Odessa raised A$6 million in January 2022 through an offer of 300 million new shares at an issue price of A$0.02 per share. The proceeds will be used to fund diamond exploration activities across the company's portfolio of projects in the Kimberley region, and Stephens said he hoped work could commence by mid-2022.
"We're currently developing an exploration plan for our Program of Works approval with the [Western Australian] Government. We're also working on heritage access agreements with the traditional owners in the area. We'll probably have to allow three months to obtain full approval before we can start doing ground work. At the moment it's the wet season in the Kimberley, so we can't get in there before the end of March anyway. If we can get in there late in the first half of this year I'd be very happy."
Much of the exploration activity will focus on core drilling of the main pipes at Aries and at what Odessa believes are extensions to the south-potential dykes or fissures-where there may be other diamond pipe occurrences.
There are also a handful of unexplored pipes where Odessa will use aircore drilling or "simple, cheap augering" to drill down into the hard rock and take samples.
Finally, Odessa will test potential alluvial deposits-clusters of diamonds found outside of the main diamond-bearing pipes-using a non-invasive technique known as passive seismic exploration. Passive seismic is the detection of natural low-frequency earth movements, and helps to discern geological structure underground. Stephens said the technology would help to target areas which it thinks will be "traps for alluvial diamond occurrences."
Odessa has enough funds for two years of exploration, according to an announcement it made to the ASX upon its relisting. The company's market value at time of writing was just over A$4 million, but Stephens said its position in the diamonds sector would put it in a good position to raise more funds when needed.
"There are only four companies on the ASX that are purely diamond-focused. The pool of attention is pretty small. You're not fighting great mobs of companies for the same investment money," he said.
A lot of investor attention is currently going to other mined commodities, most notably battery metals such as lithium and nickel, he acknowledged.
But, he said, "There's a great deal of wealth creation to come out of diamonds. It's a different market. Diamonds are in everyone's hearts."
