Acquiring a dominant kimberlite position in Brazil
Five Star Diamonds is putting Brazilian gems in the spotlight
By Don Hauka
Five Star Diamonds Ltd. (TSX.V: STAR), is a Toronto Venture Exchange listed company that has some 80 licences to explore and mine for diamonds on 24 projects over 185,000 hectares, spread across Brazil. Within this extensive portfolio there are already identified 15 known diamond bearing kimberlite pipes, with an additional 75 known kimberlite pipes yet to be tested as diamond bearing.
Unlike kimberlite discoveries in Canada, where kimberlite pipes are primarily very deep, the projects in Brazil are close to surface, meaning the company can undertake its work in a modest and quick manner. These identified pipes represent exploration success across a fraction of the acreage investigated. They are expected to be proportionate to the quantity of pipes that may exist, once the portfolio of licenses has been reviewed. Many of these properties had originally been identified by Rio Tinto and De Beers. Focus was lost on Brazil, not because of diamonds, but because of parent company concerns due to reasons of global financial considerations.
Matthew Wood is Chairman of the Board, President and CEO. Luis Azevedo, Executive Director and COO. Both have already successfully built mining companies in Brazil, including a large copper/gold operation in the north of the country. In addition to this, and separately, Matthew Wood has built from inception and listed several mining companies across the globe with aggregate capitalisations in excess of billions of dollars.
A cornerstone investor in the company is R & R Ventures LLC. R & R is owned by Ronald Lauder and Richard Parsons. Mr. Lauder is a scion of cosmetics giant Estee Lauder, Chairman of Clinique, President of the World Jewish Congress, and a well-known philanthropist. Mr Parsons is the former Chairman and CEO of Time Warner and Citigroup, and current Chairman of the Rockefeller Foundation. R & R Ventures currently hold approximately 26 per cent of the company’s shares. Company management own a similar percentage.
Five Star Diamonds is in a unique position. It has a fundamental understanding of global geology, specifically in Africa and Brazil. Also, it has the financial and geographical benefits to take advantage of the re-emerging Brazilian diamond mining sector.
Diamonds found in riverbeds typically have been removed from the primary kimberlite source and motivated downstream by natural erosive action over millions of years. This is alluvial mining. Kimberlite is an igneous rock which sometimes contains diamonds. Kimberlite occurs in the crust of the Earth between 100 and 300 miles down, in vertical structures known as kimberlite pipes.
Evidence of the Continental Drift provides a body of thought to suggest that 130 million years ago, geologically parts of Africa and the Brazilian coastline were once connected as a supercontinent called Pangaea. Both parts of Africa and Brazil were subject to much geological violence, and borne from this were hundreds of diamondiferous kimberlite structures. These are the kimberlite pipes we refer to, that reside in significant quantities across parts of Africa and Brazil, where both geologies were originally attached.
In 1725, alluvial miners along the banks of the Rio Jequitinhonha, in the State of Minas Gerais, Brazil, inadvertently discovered diamonds whilst panning for gold. The significance of this find truly manifested when, for over the next 150 years, Brazil was the World’s primary source of diamonds. Over 3,000,000 carats were extracted from Minas Gerais during this century of prolific mining. Brazil became famous for the aptly named Star of the South, a 254 carat single stone, and the colossal 600 carat Verissimo single stone diamond; both happened upon by alluvial miners.
The entire Brazilian diamond mining industry at this stage was based predominantly on alluvial extraction. Then, as focus shifted to Africa in the late 1800’s, when the 83.5 carat Star of South Africa was found, Brazil was all but forgotten as a diamond geological centre, and the kimberlite pipes were left untouched until material focus turned back to Brazil in the late 20th Century. The return of the major explorers coincided with a commodity price collapse and their wholesale country and geographic regional exit, gave Five Star Diamonds Ltd the opportunity to step in and purchase or relicense the significant holdings it controls today.
Brazil as a diamond producing country was almost forgotten as Africa emerged as the leading provider of diamonds globally. Ironically, both geologies are almost identical. Where Africa has experienced major development, Brazil has remained relatively untouched, and this is one of Five Star Diamonds key advantages.
Five Star Diamonds, on a comparative scale, has one of the largest diamond exploration and producing portfolios of any enterprise globally.
The Jaibaras project in the North of Brazil contains eight individual kimberlites, with three already proven to be diamondiferous. The company is focusing on the economic viability of these pipes. If the company can establish this, then there is potential for Five Star Diamonds to become overnight a billion dollar company. The company strongly feels it will be in a position to produce diamonds from Jaibaras within six to nine months.
The company’s Catalao project has historically produced high quality diamonds, including two diamonds over 100cts in size from a small alluvial operation about 500 metres away from the current operation. Since its acquisition, Five Star has consistently produced diamonds under its pilot plant programme. The company has recently invested in a much larger 100t/h commercial plant, with first diamond production expected in the first quarter of 2018. The initial mine maintains a target production of 100,000cts per annum, with the upgrade to fresh rock production providing an expectation to double that number.
As previously noted, Verissimo is probably the source of one of the largest diamonds ever discovered in Brazil at 600 carats. Five Star has highlighted about 10 kimberlites on its Verissmo project so far, with one pipe already proving to be diamondiferous, and approximately four to five hectares in size.
The company is now targeting what Mr. Wood considers two of the most exciting of its projects identified to date; the Caiapo and Riachao projects. Large numbers of high quality diamonds have been rumoured to have been discovered on the Caiapo project by past explorers, and initial work by Five Star should be released soon. The Riachao project has highlighted the largest pipe the company has discovered in Brazil to date, an enormous 25ha kimberlite pipe, which is large on a global scale and is the largest kimberlite identified amongst its 24 diamond projects in Brazil.
A lot of diamonds have previously been discovered within this region around the project, and recent micro-diamond analysis work undertaken by the company has yielded a discovery of natural diamonds from two separate bulk samples 100m apart. These are early but exceptional encouraging results at Riachao, and additional assessment will need to be undertaken on this very large kimberlite pipe.
Five Star Diamonds has also recently signed an agreement with Hennig & Co. Ltd, the world’s leading international diamond broking and consulting group, which will help develop the company’s development and growth efforts in the industry. Hennig has been aiding clients procure rough diamonds for over 125 years, and has worked with the major players at all levels of the value chain. This strategic cooperation will provide Five Star Diamonds the ability to enhance its customer relationships and marketing in the broader diamond sector.
Except for a couple of projects, the company controls nearly all the Brazilian projects previously owned by the big diamond companies De Beers and Rio Tinto. “Five Star Diamonds will retain this remarkable and enviable position for many years to come, as Brazil diamonds become a global brand of its own,” said Mr. Wood. “The combination of our in house mining and exploration expertise with Hennig’s exceptional knowledge, expertise and relationships in the diamond sector is truly a unique and compelling opportunity.”