Photographer: Chris Ratcliffe/Bloomberg

Diamond Hunters Scent Hidden Fountainhead of Huge Gems in Angola

  • Lucapa seeks origin of its recent finds, among world's biggest
  • Company may look to London investors to fund mining operation

The diamond explorers known for discovering some of the world’s most-valuable gems in recent years, including a 404-carat stone sold last month, say they’re closing in on the source of their finds.

Lucapa Diamond Co., the Perth, Australia-based company that’s unearthed a stream of discoveries sifting through Angola’s gem-rich soil, is using cash from such sales to seek the “kimberlite” diamond-bearing rock where the stones probably originated.

“We’re finding some of the very best diamonds in the world,” Chief Executive Officer Stephen Wetherall said in an interview in London. “It’s telling us there is something big close by.”

Lucapa are currently alluvial miners, combing for diamonds that have been washed out of the kimberlite core. However, about 85 percent of the world’s diamonds are found by directly mining the cores, carrot-shaped pipes formed when violent explosions forced molten rock from the Earth’s mantle up to the surface, carrying a diamond lode.

Tell-Tale Signs

This is what Lucapa is hoping for next. While alluvial gems are easier to mine, it’s hard to tell how long any deposit will last. Hitting kimberlite is where the big money is made.

The CEO and his team say they’re finding tell-tale signs of kimberlite beneath the area they’re currently mining. Using cash from their share of the $16.7 million raised from the 404-carat diamond, the biggest ever found in Angola, the company is bringing in drill rigs and hopes for a better idea of what they have by the end of the second quarter.

Lucapa has also discovered five more gems greater than 50 carats this year.

Discovering kimberlite is no guarantee of success. Of the more than 6,000 such pipes that have been tested in the past 140 years, only 60 have been worthwhile mining, according to De Beers, the former monopolist and still the biggest producer of diamonds. No more then 10 of those have been so-called super deposits, capable of shifting global supply.

Another obstacle is Angola, not always an easy place to operate. De Beers has cut back its operations there, while BHP Billiton Ltd., Petra Diamonds Ltd. and Trans Hex Group Ltd. also surrendered deposits in the past. Producers must sell their stones through Angola’s Sodiam state marketing unit, resulting in discount prices relative to global trading hubs.

Should Lucapa find the conditions it’s seeking, the Australian-listed miner will probably look to London and its mining-investor base to fund the expensive business of building a mine.

“London understands diamonds and London has the pockets,” Wetherall said.

Before it's here, it's on the Bloomberg Terminal.