Gas and solar have brighter future than coal: broker

GOLDMAN Sachs has forecast the end of thermal coal’s reign at the top of the energy ladder, citing tax, production costs and environmental regulations as the reason.

News Ltd reports the broking house said the prospect of weaker demand growth would see seaborne trade in thermal coal peak in 2020.

The news will be a blow to the huge coal projects in Queensland, including the $6 billion Wandoan project, owned by Glencore-Xstrata, and the mega mines in the Galilee Basin owned by Indian companies GVK and Adani, as well as Clive Palmer’s Waratah Coal.

Goldman Sachs said companies were already moving their capital away from energy coal, and cited talks it held with equipment manufacturer Alstom to suggest the downside risk of future regulation could offset any cost advantage coal had to alternative sources.

Despite the poor outlook, Goldman Sachs is not suggesting the end of coal and pointed to the demand for the commodity in China and India.

But it said the energy sources with the most upside were gas and solar power.

 

Read more: Anglo American under fire for planned gold-copper mine in Alaska

The polemic Pebble Mine project in Alaska, a 50-50 partnership between Anglo American (LON: AAL) and Northern Dynasty Minerals (TSX: NDM) is one again the centre of attention, as BBC World News aired Monday an in-depth report on the proposed open-pit copper and gold mine.

The video comes barely a week after the US Environmental Protection Agency (EPA)admitted to have spent $2.4 million in reviewing the proposed project in southwest Alaska.

The deposit, which could be worth as much as half a trillion dollars, hosts 55 billion pounds of copper, 76 million ounces of gold, 3.3 billion pounds of molybdenum, and quantities of silver, palladium and rhenium.

RELATED: INFOGRAPHIC: Pebble Project economics and employment 

If approved, it would become the largest open pit copper and gold mine in the world, but it would also generate tons of potentially dangerous waste material, which would damage the area’s salmon population, one of the world’s most valuable habitats for the fish.

 

Mixed reactions to state government’s proposed new regulations for mining projects

An anti-mine campaigner has accused the Premier Barry O’Farrell of running a totalitarian regime after the announcement of proposed changes to the way mining projects are assessed.

The state government wants to amend the planning laws to increase the importance given to the economic benefits of mining projects.

Australian Coal Alliance Campaign Director Alan Hayes says the economic benefits of projects such as Wallarah 2 on the Central Coast pale into insignificance when considering the risk to natural assets and human health.

Mr Hayes says Mr O’Farrell has a lot to answer for.

“He’s pandering to the mining companies at the expense of communities and natural resources,” he said.

“He promised the community prior to being elected that the community would have a decision in the planning or decision making of planning approvals and things like that but of course he’s reneged on that.”

Mr Hayes says it’s actually bad economics to give the Planning Assessment Commission the ability to put more weight on the financial benefit of a such a development.

“If you look at what the alleged economics of the mine would be against the loss of water and other amenity and subsidence and dust to the local community would far outweigh any economic value that is perceived from the mine,” he said.

But Wallarah 2 spokesman Patrick Southam says the proposed changes would provide a far more balanced approached to the assessment process.

“We do agree with the government that the economic and social benefits of projects like Wallarah 2 certainly deserve the same consideration as any potential environmental issues,” he said.

Public submissions on the changes are open for a fortnight.

Anti-fracking protesters halt Sussex shale gas operation

Anti-fracking campaigners claimed a surprise victory on Thursday against attempts to extract oil in the home counties.

Dozens of protesters blockaded a drill site outside the West Sussex village of Balcombe. The drill was operated by Cuadrilla, the energy company headed by former BP chief Lord Browne.

Earlier in the day, the Department for Energy granted a drilling permit for the site to Cuadrilla, which also operates hydraulic fracturing rigs in Lancashire. It is looking for oil in the Sussex shale and says it may need to use controversial high pressure hydraulic fracturing techniques to extract it.

After a seven hour stand-off between Cuadrilla and a group of environmentalists and local opponents – including several groups of parents and children from the village – a lorry that was carrying a generator essential for the drilling on the site was forced to move away, bringing cheers from the protesters. Drilling 3,000ft into the rock had been due to start on Monday.

Officers from Sussex Police earlier warned protesters they would bring in forces to remove anyone who would not make way for the lorry but they later reversed their decision.

Police alleged that the truck had been sabotaged with its air brake cables cut by protesters. Some had wrapped yellow and black “climate crime scene” tape around the equipment and hung a banner on it that read “no more dirty energy”.

A spokesman for Cuadrilla who said it was “disappointed” not to get its equipment on site added “but we are hopeful that deliveries will soon be able to continue”. It said safety of the public, including protestors, was a priority.

The setback for one of the UK’s highest profile potential fracking sites in the government’s electoral heartlands comes as the coalition said it will encourage fracking by bringing in tax cuts. Last week, the chancellor George Osborne announced tax on profits from fracking in Britain would be 30% compared to a top rate of 62% for North Sea oil. The British Geological Survey has estimated there could be enough shale gas in Britain to supply the country for 25 years and the campaign victory could galvanise opposition to proposed new sites, protesters said.

“People see the fracking industry as a direct threat to their health and environment,” said Josie Wiltshire, an anti-fracking activist. “The size of this blockade goes to show people feel the need to protect themselves. We’ll definitely be back tomorrow”.

But the village of Balcombe is not united against Cuadrilla and some protesters complained the turnout of up to 100 people was disappointing.

“There is mass hysteria in the village and the fears are ungrounded,” said Katherine Gunning, a local resident. “Most of the village is not anti-fracking.”

That is disputed by campaign leaders who said surveys showed a large majority are opposed to Cuadrilla’s operations. Many cite fears about damage to water courses from toxic chemicals used to fracture the rocks to release fuel, the impact of trucks rolling through the village and the possibility of earth tremors.

“I am horrified to discover what is happening on our doorstep,” said Louisa Delpy, a mother of two from Balcombe. “The pollution to the air and soil is unacceptable. I have lost faith in the agencies that are meant to protect us. I am going to stand here and stop this happening.”

Others said they felt government decisions to allow the exploratory drilling had moved too fast. “The speed at which the Environment Agency has considered hundreds of responses begs the question as to whether they are properly considering the impacts or rushing ahead,” said Friends of the Earth South East Regional campaigner Brenda Pollack.

The protest had a festive atmosphere with parents bringing children on their school holidays, picnics, musicians and a community singalong with the words to Row Your Boat substituted with “Blow, blow, blow your gas/ up into the sky;/ kill the birds and kill the bats/ and watch the rivers die”.

“I don’t want it to happen,” said Jack, aged nine. “I haven’t been to a protest before. It’s sort of scary sometimes. But this is poisoning the water and I want clean water and I don’t want the air polluted either.”

UPDATE 1-Russia ups gold reserves again in June, Turkey cuts -IMF

 

* Russia adds 0.3 tonnes for 9th consecutive monthly gain

* Ukraine, Kazakhstan, Azerbaijan boost gold holdings

* Turkey decreases by 3.8 tonnes for first drop since June 2012

By Frank Tang

NEW YORK, July 26 (Reuters) – Russia, Ukraine and Azerbaijan are among eight countries that increased their gold holdings in June, data from the International Monetary Fund shows, reflecting strong interest on the part of emerging economies to own gold as part of their reserves.

Turkey, Germany and seven other countries, however, shed some of their bullion holdings that month, according to IMF’s monthly International Financial statistics report, released late Thursday.

Investors are closely monitoring any possible shift in central bank attitudes toward gold after bullion prices plummeted to as low as $1,180 an ounce in late June, down from around $1,700 at the start of this year. Spot gold dropped 1 percent to $1,320 on Friday.

Fears of an imminent scaling back of the U.S. Federal Reserve bond-buyback stimulus and an improving global economic outlook have severely undermined gold’s investment appeal.

Data showed Russia’s gold reserves climbed 0.3 tonnes to a total of 996.4 tonnes in June for its ninth consecutive monthly increase. Russia has the world’s seventh-largest bullion holdings excluding the IMF’s.

Ukraine raised its gold by 2.5 tonnes to 38.9 tonnes, and Azerbaijan added by two tonnes for a total of eight tonnes.

The Central Asian countries continued to accumulate the yellow metal, with Kazakhstan increasing its holdings by 1.4 tonnes to 130.9 tonnes and Kyrgyzstan raising its stocks by less than 0.1 tonne to 3.3 tonnes.

Greece, Belarus and Bulgaria also reported small increases to their gold reserves.

 

BUYERS OR SELLERS?

Central banks as a group became net buyers in 2010 after they had been net sellers the previous two decades. The 2008 global economic crisis triggered resurgent official-sector interest in gold.

However, news in April that Cyprus could be forced to sell some of its gold reserves in return for IMF and European Commission financial lifelines stirred fears of a new wave of central bank gold sales.

Turkey, which has the world’s 11th-largest gold reserve, reported a 3.8 tonne decrease to 441.5 tonnes in June, the first monthly drop since June 2012.

Turkey’s gold holdings rose in the 12 months prior to June, partly due to a decision by the country’s central bank to allow commercial banks to hold a portion of their lira reserves in gold.

Germany, the world’s second-largest gold owner, reported a 0.8 tonne decrease to 3,390.6 tonnes in June.

Other countries that also reduced their gold holdings include Suriname, Guatemala, Mexico, Zimbabwe, Costa Rica, Czech Republic and Denmark.

Year to date, gold was down 21 percent, at risk of an annual loss after 12 straight years of gains.

Alacer adds to Çöpler resource

Gold miner Alacer Gold has increased the resource base at its Çöpler gold/silver/copper project, in Turkey, to some 8.5-million ounces of gold.

The project’s measured and indicated resource now stood at 194.2-million tonnes, grading 1.4 g/t gold.

“I am pleased to report that the measured and indicated resource at Çöpler has increased for both oxide and sulphide mineralisation since our last resource statement in December 2012,” said Alacer president and CEO David Quinlivan.

He noted that the resource update more than replaced the mine production during the period.

“It is also significant that the new resource model has under-estimated the ounces in the area mined to June 2013 by some 11%, identifying potential upside to this new resource estimate.”

Quinlivan said that the new resource update would form the basis of the ongoing Çöpler oxide and sulphide mine studies, and added that the ASX- and TSX-listed company had recently increased its regional exploration activities in the Çöpler district.

Alacer was of the impression that the Çöpler mine would likely be the first of several significant gold deposits to be discovered and mined in the district, and has recently increased its license holding in the area, as well as its regional geological, geochemical and geophysical survey activities.

Drilling had also started on high priority oxide-gold targets within a 20 km radius of the Çöpler deposit.

Anti-fracking protesters halt Sussex shale gas operation

Anti-fracking campaigners claimed a surprise victory on Thursday against attempts to extract oil in the home counties.

Dozens of protesters blockaded a drill site outside the West Sussex village of Balcombe. The drill was operated by Cuadrilla, the energy company headed by former BP chief Lord Browne.

Earlier in the day, the Department for Energy granted a drilling permit for the site to Cuadrilla, which also operates hydraulic fracturing rigs in Lancashire. It is looking for oil in the Sussex shale and says it may need to use controversial high pressure hydraulic fracturing techniques to extract it.

After a seven hour stand-off between Cuadrilla and a group of environmentalists and local opponents – including several groups of parents and children from the village – a lorry that was carrying a generator essential for the drilling on the site was forced to move away, bringing cheers from the protesters. Drilling 3,000ft into the rock had been due to start on Monday.

Officers from Sussex Police earlier warned protesters they would bring in forces to remove anyone who would not make way for the lorry but they later reversed their decision.

Police alleged that the truck had been sabotaged with its air brake cables cut by protesters. Some had wrapped yellow and black “climate crime scene” tape around the equipment and hung a banner on it that read “no more dirty energy”.

A spokesman for Cuadrilla who said it was “disappointed” not to get its equipment on site added “but we are hopeful that deliveries will soon be able to continue”. It said safety of the public, including protestors, was a priority.

The setback for one of the UK’s highest profile potential fracking sites in the government’s electoral heartlands comes as the coalition said it will encourage fracking by bringing in tax cuts. Last week, the chancellor George Osborne announced tax on profits from fracking in Britain would be 30% compared to a top rate of 62% for North Sea oil. The British Geological Survey has estimated there could be enough shale gas in Britain to supply the country for 25 years and the campaign victory could galvanise opposition to proposed new sites, protesters said.

“People see the fracking industry as a direct threat to their health and environment,” said Josie Wiltshire, an anti-fracking activist. “The size of this blockade goes to show people feel the need to protect themselves. We’ll definitely be back tomorrow”.

But the village of Balcombe is not united against Cuadrilla and some protesters complained the turnout of up to 100 people was disappointing.

“There is mass hysteria in the village and the fears are ungrounded,” said Katherine Gunning, a local resident. “Most of the village is not anti-fracking.”

That is disputed by campaign leaders who said surveys showed a large majority are opposed to Cuadrilla’s operations. Many cite fears about damage to water courses from toxic chemicals used to fracture the rocks to release fuel, the impact of trucks rolling through the village and the possibility of earth tremors.

“I am horrified to discover what is happening on our doorstep,” said Louisa Delpy, a mother of two from Balcombe. “The pollution to the air and soil is unacceptable. I have lost faith in the agencies that are meant to protect us. I am going to stand here and stop this happening.”

Others said they felt government decisions to allow the exploratory drilling had moved too fast. “The speed at which the Environment Agency has considered hundreds of responses begs the question as to whether they are properly considering the impacts or rushing ahead,” said Friends of the Earth South East Regional campaigner Brenda Pollack.

The protest had a festive atmosphere with parents bringing children on their school holidays, picnics, musicians and a community singalong with the words to Row Your Boat substituted with “Blow, blow, blow your gas/ up into the sky;/ kill the birds and kill the bats/ and watch the rivers die”.

“I don’t want it to happen,” said Jack, aged nine. “I haven’t been to a protest before. It’s sort of scary sometimes. But this is poisoning the water and I want clean water and I don’t want the air polluted either.”

Gold Price Rises from “Bearish Reversal” as China Tries “Mini-Stimulus”, Miners Cut Hedge Book Again

The GOLD PRICE rallied from a drop to $1310 per ounce Thursday lunchtime in London, gaining as world stock markets cut earlier losses 
 
Trading back above $1322 – a two-year low when hit by this spring’s first gold crash in April – gold also rallied 1.0% for Euro and Sterling investors.
 
The Pound regained half-a-cent after dropping to $1.5260 on news the UK economy grew 0.6% in the second quarter, in line with analyst forecasts.
 
“The selling gained speed after support at $1321 broke once again,” Reuters quotes gold trader Alexander Zumpfe at German refinery group Heraeus.
 
“While the [gold price] remains above key support at $1301,” says technical analysis from bullion and investment bank Scotia Mocatta, “it has now descended back below the downtrend that it had broken out of [Tuesday].
 
Wednesday’s action – opening higher but ending the day down – “formed a bearish reversal pattern called Key Reversal,” says gold price analysis from fellow London market-maker Societe Generale.
 
“Gold is therefore poised to correct lower to the previous congestion at $1303/1295.”
 
Commodities also reduced earlier losses in London trade Thursday, as did major government bond prices.
 
Ten-year US Treasury yields eased back from 1-week highs near 2.60%.
 
Silver bullion tracked and extended the gold price moves, rallying 1.9% from a 4-session low to trade at $20.18 per ounce.
 
After new data on Wednesday showed China’s manufacturing activity falling to an 11-month low, the State Council in Beijing last night unveiled what one analyst calls “a mini-stimulus.”
 
Aiming to “arouse the energy of the market,” the cabinet cut taxes on small business, reduced paper-work for exporters, and invited new investment in railway expansion.
 
“China’s leaders turned to credit-fueled investment…after export demand faded in the wake of the 2008 financial crisis,” says a Wall Street Journal report, noting that investment’s share of Chinese GDP rose from 42% to 48% in the six years to 2012.
 
“China’s world-renowned 8 to 12% growth rate is a myth,” writes financial author James Gorrie in London freesheet City AM today, “even as it now slips down towards 7%.
 
“China’s hard landing will…unfortunately be our hard landing as well.”
 
A cross-asset report from Societe Generale sees strong gold price volatility on a China hard landing, perhaps with “a sharp bounce from the initial sell-off if global central banks respond with further QE.”
 
Looking at US policy, “Recent communication by Fed officials has emphasized that the overall level of monetary accommodation will not be reduced significantly,” says a note from commodities analysts at investment bank Goldman Sachs.
 
Now forecasting an average gold price of more than $1400 per ounce for 2013 as a whole, the metal will average $1165 next year, the note says – repeating Goldman Sachs’ previous outlook – with a possible drop to $1050 by end-2014.
 
Dollar gold prices have so far averaged $1491 per ounce in 2013.
 
Gold mining companies took advantage of Jan-June’s drop in prices to reduce their gold hedge book, analysis from Thomson-Reuters GFMS said Thursday.
 
Building a total forward sale of nearly 3,000 tonnes by 2001, the gold mining industry then “de-hedged” that position as the gold price rose.
 
On top of the 11 tonnes bought back in the first 3 months of the 2013, “During the second quarter miners took the opportunity to reduce hedge cover further as the gold price fell sharply,” says theGlobal Hedge Book report, identifying another 17 tonnes of de-hedging.
 
Contrary to recent talk of a return to gold miner hedging by other analysts, “We forecast that producer activity will remain on the side of net de-hedging for the year,” GFMS adds, “despite the sharp fall in price.”

Canada highlights tech contribution to move oil sands output to new markets

The Canadian government on Wednesday highlighted its plans for the responsible development of Canada’s oil sands and its commitment to move the strategic resource to new markets.

Minister of State (Western Economic Diversification) Michelle Rempel delivered a keynote speech on behalf of Natural Resources Minister Joe Oliver, at the Oil Sands and Heavy Oil Technologies 2013 conference in Alberta, saying the oil sands were one of the world’s biggest innovation projects and the Canadian government was working hard to make important scientific contributions to help reduce potential environmental impacts from the development of this critical resource.

“Canada’s Oil Sands Innovation Alliance (Cosia) is also a powerful demonstration of the collective will to develop the oil sands sustainably. To date, Cosia member companies have shared 446 distinct technologies and innovations that cost over C$700-million to develop,” she said.

Rempel pointed out that in 2012, Canada and Alberta had also established a joint oil sands monitoring programme that was intended to take unprecedented steps to enhance the monitoring of air, land, water and biodiversity at oil sands operations. The programme improves the ability to detect changes in the environment and manage cumulative impacts.

Last month, the federal government had also announced its intention to strengthen pipeline safety by enshrining the principle of ‘polluter pays’ in law and proposing regulations that would require companies operating significant crude oil pipelines to have a minimum of $1-billion in financial capacity.

Earlier this year, government announced a world-class marine safety package including eight new tanker safety measures, the Safeguarding Canada’s Seas and Skies Act and a tanker safety expert panel. “Taken together these initiatives strengthen and ensure the appropriate response in the unlikely event of a spill,” she said.

“By continuing to ensure responsible resource development and protection of the environment, we will help ensure Canadians across the country benefit from the economic contribution of the oil sands.

“The Government of Canada is committed to the continuous improvement of our regulatory and safety regimes to ensure protection of the environment and citizens come first,” she said.

However, environmental activist organisation Environmental Defence climate/energy programme manager Adam Scott recently told Mining Weekly Online that Canada’s ‘have to’ attitude toward pushing for oil sands development and pipelines to get the product to market is a missed opportunity to build a green economy by investing in a sustainable green economy.

“Canada is tying itself to future boom-and-bust commodity cycles, instead of investing in exporting green-technology alternatives,” Scott said.

Oil sands ramp-up boosts Cenovus second quarter

Cenovus Energy Inc., Calgary, said it has achieved first heavy oil production last week from Phase E at its Christina Lake thermal project in Alberta and that the company’s overall oil sands production climbed 17% in the second quarter.

Combined oil sands production at Foster Creek and Christina Lake averaged nearly 94,000 b/d net in the quarter, up 17% from a year ago, while total oil production averaged 171,000 b/d, a 10% increase.

Christina Lake output climbed 35% to more than 38,000 b/d, due mainly to ramp-up of Phase D and despite the first full planned turnaround at the facility, and the company expects to bring on a new phase of production there in each of the next several years.

Discovered bitumen initially in place has increased 66% since 2009 to 93 billion bbl, reflecting the success of the company’s stratigraphic drilling program in converting undiscovered resource inventory.

Natural gas production averaged 536 MMcfd, down 10%.

Cenovus’s conventional oil assets, including Pelican Lake, were steady at more than 77,000 b/d. This slight increase was partly due to successful well performance related to the company’s current drilling program to develop tight oil opportunities in Alberta.

Work to expand infill drilling and the polymer flood program at Pelican Lake is proceeding, resulting in average production of nearly 24,000 b/d in the quarter, 7% higher than the same period a year earlier.

Operating cash flow from refining was $316 million in the second quarter, an 8% decrease when compared with the same period a year earlier. The narrowing WTI to WCS differential that benefited the company’s upstream operations resulted in increased feedstock costs at its refineries. Lower refined product output due to an unplanned hydrocracker outage at Wood River, Ill., in June also contributed to the decline.

Rigorous efforts to identify new markets for oil included participation during the quarter in the open season for TransCanada’s Energy East pipeline project. Cenovus is awaiting the results of that process.

Cenovus plans to transport as much as 50% of its oil production through firm commitments over the long term. At this point, the company has made commitments to various pipeline projects to move up to 175,000 b/d to the West Coast and up to 150,000 b/d to the US Gulf Coast. This transportation plan includes growing rail capacity to move up to 10% of production over the long term.

In the second quarter, Cenovus used rail to transport about 7,900 b/d to the East Coast and to markets in the US. The company expects to move 10,000 b/d on rail by yearend and up to 30,000 b/d by yearend 2014.

Lucara Diamond bonanza spurs acquisitions hunt

Lucara Diamond Corp. is seeking acquisitions in Africa, bolstered by a bonanza of large stones from its Karowe mine in Botswana.

In the past year, Lucara has discovered big, rough diamonds including a 239.25-carat (1.69 ounces) stone, which is about the size of a 9-volt battery. The added resources and heightened profile give Lucara the power to buy or join with a company that’s developing a diamond mine with annual sales of at least $100 million, said Chief Executive Officer William Lamb.

“That’s really what we want to focus on,” Lamb, 42, said last week in an interview at Lucara’s Vancouver headquarters. “We’re still only a company of one asset. To de-risk you want at least two assets, two producing entities.”

Three big-stone finds announced March 18 prompted Lucara, with a market value of C$304.8 million ($295 million), to hold a special auction of rough diamonds in May that reaped $24.9 million. Lucara said today in a statement it will hold a second sale of 16 stones, including five diamonds larger than 100 carats.

“We all know it’s the basic diamonds that are going to pay the bills,” Lamb said. “But every time you recover a 100-carat stone or a 200-carat stone, it drops right to your bottom line. Everyone’s hoping for that. It’s why people stay in diamonds.”

Shares Soar

Lucara shares have soared 42 percent in Toronto since the company said it found the 239.25-carat rough diamond as well as stones weighing 124 and 71.1 carats. The share performance has outpaced U.K.-based competitor Petra Diamond Ltd., which declined 5 percent in that time, and Gem Diamonds Ltd., which fell 15 percent. Among publicly traded Canadian metal and mining companies with a market value of more than C$250 million, Lucara is the third-best performer this year.

The company, 17 percent owned by the Lundin Group and the Swedish Lundin family, raised its forecast for full-year diamond sales by 5 percent to 420,000 carats, up from a previous prediction of 400,000, according to a May 27 statement.

“The market always likes a nice big diamond,” Ed Sterck, a London-based analyst at BMO Capital Markets, said in a July 17 telephone interview. “They’ve proven that Karowe is capable of producing large diamonds.”

Lucara rose 3.7 percent to 84 cents at the close in Toronto and has gained 27 percent this year.

Great Star

The average size of stones sold by Lucara in its regular diamond auctions is about 0.5 carat, Lamb said. Petra said in 2009 it unearthed a 507.6-carat stone, which weighed more than 3.5 ounces and was about the size of a chicken egg, at the Cullinan mine in South Africa.

The world’s biggest certified diamond is the 3,106-carat Cullinan, found near Pretoria in 1905. It was cut to form the Great Star of Africa and the Lesser Star set in the Crown Jewels of Britain.

Lucara said it brought Karowe into production last year within its $120 million budget. Lamb’s greatest challenge in expanding Lucara will be finding attractive projects and convincing owners to sell or consider a joint venture, BMO’s Sterck said.

“There’s not a great deal of stuff around that’s easily available,” he said.

While consolidation is a topic “regularly discussed among the players in the diamond market,” merger and acquisition activity among smaller diamond miners is at a standstill because of disagreement over valuations, Lamb said.

 ‘Stumbling Block’

 “Everybody believes their asset is worth more than the market is valuing it at,” he said. “That’s the biggest stumbling block.”

Rio Tinto Group, the world’s second-largest mining company, said last month it would hold onto its diamond businesses after unsuccessfully trying to find a buyer and considering a sale of the assets in an initial public offering.

Lucara and Gem Diamonds, a company with assets in Lesotho and Botswana, held talks in 2011 about a possible merger, Gem said at the time. Lucara also controls the Mothae project in Lesotho that’s not far from Gem Diamond’s Letseng project.

Lamb said it may be worthwhile for some of its peers to consider the benefits of greater consolidation among African diamond companies.

“It’s a question of which companies would go best together to be able to advance their portfolio, not just the assets that they have now,” Lamb said.

 ‘Few Opportunities’

Gem Diamonds didn’t respond to a request for comment.

“We are always looking” at possibilities for M&A, Petra CEO Johan Dippenaar said in a July 19 interview in London. “If there’s an opportunity you should always consider it, because there are few opportunities.”

Dominion Diamond Corp., formerly Harry Winston Diamond Corp., agreed last year to purchase BHP Billiton Ltd.’s Ekati diamond mine in Canada and its marketing operations for $500 million.

Lucara has had a “particularly strong start” to operations at Karowe, Des Kilalea, a London-based analyst at RBC Capital Markets who rates Lucara a buy, said in a June 18 note to clients.

The latest large-diamond sale comes sooner than planned, Lucara said in today’s statement. The tender will close on Sept. 2, the company said.

Rising Prices

Rough diamond prices have risen 14 percent this year, according to the PolishedPrices.com Composite Rough Diamond Index. De Beers SA, the biggest diamond producer, increased prices at its uncut auctions by 4 percent in May and by 3 percent in April, according to a report by diamond trading network Rapaport.

Lamb’s search to expand operations may get some help if prices for rough diamonds fall in the second half, as he expects, he said.

“Some companies might put projects on hold or just delay things slightly, especially if they are going out to raise money,” Lamb said. “If some people begin to lose faith, that opens up opportunities for us.”