THE BRAZILIAN REALITY OF THE DIAMOND SMALL-SCALE MINING

THE BRAZILIAN REALITY OF THE DIAMOND SMALL-SCALE MINING JOSÉ RICARDO THIBES PISANI Workshop on Rough Diamond Artisanal Alluvial Production– 2008 – Pisani/ Vaaldiam

How big is the global diamond industry? ü Total Production: 160 milion carats per year ü Value of production: + $ 13 bilion per year ü Global Diamond Exploration Expenditures in 2006 US$ 1 billion. ü DIAMOND INDUSTRY IS RELATIVELLY SMALL INDUSTRY, BUT. . ü IT IS ONE OF THE MOST PROFITABLE MINING SECTOR The Major Minind Players in 2006/2007 • De Beers • Rio Tinto • Alrosa • BHP Bilinton • Gem Diamonds 51 M carats valued at $6 B 35 M carats valued at $1. 3 B 31 M carts valued at $2. 3 B 2. 5 M carats valued at $440 M 0. 9 M carats valued at $355 M Source: RBC Capital Markets Workshop on Rough Diamond Artisanal Alluvial Production– 2008 – Pisani/ Vaaldiam

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. Source: Trends in Cdn Mineral Exploration & Pers. Communication with Operating Companies in Brazil; Ontario Ministry of Northern Development and Mines Workshop on Rough Diamond Artisanal Alluvial Production– 2008 – Pisani/ Vaaldiam

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

Use the excellent work done by De Beers, Rio Tinto, CPRM, etc. > 1. 000 kimberlites discovered since 1966 (Redondão Kimberlite); Workshop on Rough Diamond Artisanal Alluvial Production– 2008 – Pisani/ Vaaldiam

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

Who were the diamond producers in Brazil? Workshop on Rough Diamond Artisanal Alluvial Production– 2008 – Pisani/ Vaaldiam

Diamond Mining Companies Just for comparason: more than 100 diamond companies are listed and exploring in Canada. . . . Workshop on Rough Diamond Artisanal Alluvial Production– 2008 – Pisani/ Vaaldiam

Producing Mines Chapada Mine Workshop on Rough Diamond Artisanal Alluvial Production– 2008 – Pisani/ Vaaldiam Duas Barras Mine

Producing Mines Duas Barras Chapada Annual Production 30, 000 cts Annual Production 20, 000 cts Diamond Value US$ 165 / ct Diamond Value US$498 /ct Cash Cost of Production US$ 93/ ct Cash Cost of Production US$ 465 / ct Mine Life 5 Years Mine Life 4 Years Workshop on Rough Diamond Artisanal Alluvial Production– 2008 – Pisani/ Vaaldiam

Duas Barras Mine Minas Gerais State Workshop on Rough Diamond Artisanal Alluvial Production– 2008 – Pisani/ Vaaldiam

Duas Barras Mine Minas 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. 2 M from 31, 640. 82 carats & average sales value of US$164 per carat. NI 43 -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 Workshop on Rough Diamond Artisanal Alluvial Production– 2008 – Pisani/ Vaaldiam

Chapada Mine Mato Grosso State Workshop on Rough Diamond Artisanal Alluvial Production– 2008 – Pisani/ Vaaldiam

Chapada Mine Mato 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 20 m), 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 Workshop on Rough Diamond Artisanal Alluvial Production– 2008 – Pisani/ Vaaldiam

The Finance Crisis How the finance crisis will impact the diamond business in Brazil? ü The diamond prices are already trading at discounts; ü the smaller companies which do not have sustained production and positive cash flow will suffer due to the lack of raising capital opportunities. ü A rush to sell projects, claims, equipments already start; ü Downsizing is now the strategy for all junior diamond companies in Brazil. Workshop on Rough Diamond Artisanal Alluvial Production– 2008 – Pisani/ Vaaldiam

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

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

We need more Players – As soon as possible Workshop on Rough Diamond Artisanal Alluvial Production– 2008 – Pisani/ Vaaldiam

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