Ever since the announcement of Trustco’s Meya acquisition in Sierra Leone, the market has been observing the announcement by the group with great interest. The group has kept the market appraised of its activities during the exploration phase, but for the average investor, the terms used can be somewhat convoluted, so let’s see what we can make of the November 2018 operational update of Meya.
The announcement mentions that Meya plans to extract 12 000 tonne of kimberlite from a second dyke within Dyke Zone B at the Meya River Sample during December 2018. Kimberlite, of course, refers to a form of igneous (i.e. from magma, or lava) rock which can contain diamonds. It’s named after the town of Kimberley in South Africa, where the discovery of diamonds resulted in a diamond rush in the late 19th century.
It is a quite rare form of igneous rock, which was formed deep within the Earth’s mantle (between 150km and 450km deep) that erupted violently and rapidly to the surface and contained considerable carbon dioxide and other components. Due the depth at which these eruptions form, the considerable pressure allows it to carry diamonds upwards inside the magma. As it erupts violently to the surface, these kimberlites are usually found in pipes… but also in dykes, as in the Meya mine.
Dykes, in essence, are fractures in pre-existing rocks that’s filled by magma as it erupts to the surface. Often, these dykes are formed with the eruption as it blasts to the surface. However, where kimberlite pipes burst to the surface and have the potential to scatter the top of the pipes, as well as reduce the pressure required for diamonds to reach the surface, the dykes not only maintain the pressure, but keep the magma contained within the rocks, enhancing diamond containment as well. Meya is thus exploring a specific dyke within a zone of identified dykes for diamonds. In total, the announcement notes that nine different dyke zones have been identified, while new dykes will be sampled during the next phase of core drilling.
Core drilling is the method by which ore bodies are delineated and tested for diamonds. A drill pipe with a diamond encrusted drill bit drills through the rock (in Meya’s case, about 250m of rock) to produce a long cylinder of rock. This is then extracted from the ground, and split longitudinally, with half being stored in case comparatives are needed, and half is assayed.
A bulk sample of the kimberlite is then extracted from the ground and processed by the plant, crushing the rock into smaller pieces to run through an assembly that sorts the crushed product into diamond and non-diamond pieces. This needs to be carefully calibrated and the correct equipment used, as crushing too small can break up larger diamonds, but crushing too large results in smaller diamonds not being released from the kimberlite. The announcement at Meya reveals that QTS Kristal Dinamika has analysed the diamond parcel and discovered that there is an 11.46% loss in value due to breakage by the plant. The group has an upgrade planned for Meya that will reduce these breakages.
In the meantime, the non-diamond output (called tailings) of the processing plant can be reprocessed and crushed and a smaller size to liberate smaller diamonds. This was the main meat of the announcement, as this allowed Meya to export 2571 carats recovered from those tailings to Antwerp at USD 272 per carat. Diamond carats are often confused with gold karats, but unlike the gold karat, which simply measures the purity of the gold, a diamond carat is a measure of weight – 0.2 grams, to be precise. To give you an idea of the size, a 1 carat diamond is about 6.5mm across. The announcement also revealed the output that can be achieved, and the relative scarcity of diamonds in the kimberlite, as the second pass yield was only 0.15 carats per tonne.
There is also mention of the downward pressure currently on small size stones, as reported by the Rapaport Research Report, which mentioned several reasons for this downward pressure. It includes, inter alia, the three new mines coming into operation globally in 2017, bringing rough production to its highest since 2008, while the prevalence of undisclosed synthetics has made more retailers wary of smaller stones, in addition to the new technology used by jewellers which allows them to be more selective.
Trustco’s Meya operation is thus ideally positioned to not only bypass that downward pressure with its plant upgrades, allowing for larger stones to be recovered from the kimberlite without breakages, but with the quality of diamonds that it produces, to be the premier supplier to the more selective jewellery industry.