EuroZinc

Amidst all the hype of the internet and high-tech stocks, Dia Met Minerals (DMM-T) is showing just how profitable diamond mining can be.

With the global diamond market bolstered by De Beers “Millennium” marketing campaign, strong U.S. demand and improving Asian markets, Dia Met reported net earnings of $30.5 million (or $1.01 per share) on revenue of $78.2 million for the 9-month period ended Oct. 31. Dia Met continued to show strong growth, earning 56 per share in the third quarter — almost double the 30 per share earned in the second quarter and nearly four times the 15 earned in the first quarter. Operations generated a cash flow of $1.04 for the third quarter.

Dia Met’s year-end of Jan. 31, 2000, will represent the first full year of production from the Ekati diamond mine in the Northwest Territories. The mine was brought into production in October 1998 at a cost of $900 million.

BHP Diamonds, a subsidiary of Broken Hill Proprietary (BHP-N), is the operator and 51% owner of Canada’s first diamond mine. Dia Met owns a 29% stake, with the remaining 20% split between geologists Charles Fipke and Stewart Blusson.

During the first nine months of the fiscal year, Ekati sold just under 1.8 million carats for US$289 million — an average of US$165 per carat. This is well above the US$130-per-carat valuation predicted for the Panda pipe based on bulk sampling. Dia Met’s share of the diamond sales was $124 million for the nine months. Analysts John Lydall and Kerry Smith of National Bank Financial recently reported that mine operating costs averaged US$69 per carat over the first six months.

Sales of Ekati diamonds are conducted every five weeks, or 10 times a year, to clients through an office in Antwerp, Belgium. De Beers Consolidated Mines (DBRSY-Q) has a 3-year agreement to buy 35% of Ekati’s run-of-mine production. These diamonds are sold into international markets by the Central Selling Organization, De Beers’ sales arm.