Good morning, everybody. On behalf of Burgundy Diamond Mines and Bell Potter Securities, welcome to the Burgundy Diamond Mines June 2024 Quarterly Conference C all. My name is Stuart Howe, resources analyst at Bell Potter, and I will host today's call. From Burgundy, we have Kim Truter, Managing Director and CEO, and Brad Baylis, Chief Financial Officer. The format for today's call is that Kim and Brad will take us through a presentation. This will be followed by a Q&A session, which I will chair. Please enter your questions on the Zoom platform. After the presentation, I'll read out your name, affiliation, and the questions for Kim and Brad to respond to. Today's call is being recorded. Before we get started, I want to draw your attention to the important notice and disclaimer on slides two and three of today's presentation.
Kim, I will hand over to you to kick off the call. Thank you, Kim.
Thank you, Stuart, and good morning, good evening, everyone, and yeah, as Stuart mentioned, I've got Brad with me today. Look, we'll kick off the presentation today with probably one of the more important slides, which is why diamonds and why Ekati? Now, some of you have seen this slide before, but it's always worth just repeating the rationale for why we're doing this. But the key point here is that the play we are making is a countercyclical play. And as you know, this is a specialty of Michael O'Keeffe in particular, and he's most recently done that with his Champion Iron. And so going into diamonds is yet again a countercyclical play, and lets us, you know, pick up cheap, unloved assets.
And the hard part was obviously finding the right asset, and as you know, we've looked hard to find an asset that ticked all the boxes. And as you can see on the screen, Ekati ticked 5 key boxes, including the location, the infrastructure, the fact that it was a top 10 producer, owner disinterest, and a long life mine extension potential, which we'll talk about shortly. So we we're very happy with that acquisition, and Ekati has proven to be a fantastic asset. If I just a little bit of an update on the board and people on this call, obviously, myself and Brad from the executive, and then you've got the board, which is now quite a full board.
Our most recent addition is our strategic investor, Anshul Gandhi, from the Choron Group. So Anshul is officially on the board from the second of August, and he brings to bear a lot of midstream diamond experience, and he's already added a lot of value in our relationship with Anshul, so very pleased to have Anshul on board. You can see on the right-hand side, our capital structure, and which we're very pleased about in terms of our market cap and our cash position. And you can also see our listing there of our major shareholders. You can see the Choron Group, number two, through their investment arm, Karma Capital, and then Schroder Investment Management is the third largest investor, obviously, from Australia, and Michael O'Keeffe, number four.
The ex-owners invest through their respective capital vehicles, that's Brigade Capital, who were the previous owners of the asset. We'll take you through 5 different themes. Won't read them out to you, but you can see our progress and a few of the other topics there. I think the thing we're most proud of is the 12-month progress. So we put a bit of a summary up to compare what the asset looked like prior to the acquisition and then what it's looking like today. So the key thing, as you can see, we've taken production from around 4.1 billion carats, which is sort of the historical number. We're now sitting at 5.1 million carats.
We're very pleased with our net debt position, and Brad will unpack that again a bit later and take you through our cash situation and our use of cash. So very, very healthy net debt at $63 million. All, all of the currencies, by the way, we'll quote, will be in US dollars, unless we quote otherwise. As you all know, a big focus of ours has been on adding the life extension to this asset. When we acquired the asset, it had a mine life of four years, arguably slightly shorter, and we've been working tirelessly to extend the mine life, and we are looking at a 2036 or greater objective. And there's 140 million carats on this property that we are aiming to deplete over through our efforts.
Probably the other key, key, achievement has been the restructuring of the surety payment arrangement. When we acquired the asset, we would have had to pay out $177 million in this calendar year, 2024. Under the deal that we are now very, very close to finalizing, we have- we- our net payment this year is $44 million, so a net saving of around about $130 million, which we can now pour into the asset. I'm sure some of you will be wondering why that surety arrangement is taking so long to finalize. I, I will say it's a very, very slow-moving process. The sureties themselves are a consortium.
It takes quite a lot of toing and froing, but we are literally down to the last few details. And we're talking about minor things, about just making sure the wording around how many days it takes to pay them within a quarter, and things like that, are just putting into the agreement. So generally, all the terms have been agreed, and we should be able to sign that in the next few weeks. So I'm very pleased with our first 12 months of ownership. If we just have a look at our operational and financial performance, and I'll start off with the operational highlights, and then Brad will go through some of the financial performance. But you can see, generally, if you look at the top graph, very steady performance.
One of our key objectives with this asset was to make it a reliable, consistent producer. So you can see, pretty much ever since we acquired the asset, you know, every quarter is pretty solid, very repeatable on a quarter-by-quarter basis, which is something that everyone wants, including our customers that we sell our diamonds to. And then you can see the bottom chart takes you through the tons processed and the carats recovered, and also the grade. The blue little boxes are actually the grade recovered, so you can see it's relatively consistent on a quarter by quarter basis. And the carats recovered this quarter are a function of the tons that we processed.
Just worth mentioning that this, this last quarter, we had quite a big shutdown, doing a lot of work on our, on our diamond recovery technology, that's called the XRT recovery technology. It was quite a long shutdown, a bit longer than the prior quarter, and so that's why we recovered less carats this quarter. But generally speaking, the asset is very reliable, as you can see on a quarter by quarter basis. So I'll hand it to Brad now, and Brad will take us through how all that plays into the financial results and some of our sales. So over to you, Brad.
Yeah. So for the quarter, thanks, Kim, you know, you could see, you know, so the lower than the previous quarter on both carats and dollars. Part of this is reflective of kind of the marketplace we're in right now, part of it's seasonality. So technically, in kind of Q2, Q3, sales are a bit more... A bit slower than they are in Q4 and Q1. So we sold for the quarter $103 million in total rough carats. Revenue per carat slightly down from a year prior, and that's mainly due to the fact that, you know, the diamond prices come off significantly.
You know, so if you look at it, it's actually a pretty good result, about 20% since Q2 of last year. So it's been a significant decline, but we have been able to kind of have our sales market. During the quarter, we had two regular sales and one special sale. During the special sale, we sold approximately $12 million worth of goods, and then the remainder of the sales occurring during the two regular sales. Dollar per carat for the quarter is $103 per carat, so up quite a bit from Q1.
You know, there's always a lot of noise when you talk about dollar per carat, but largely driven by the special sale that we held during the quarter, that will always drive up your dollar per carat for the quarter. Yeah, and the other thing I guess I'll point out is the revenue forecast for the year. So we're forecasting to be in the range of $460 million-$500 million for the quarter. On the balance sheet front-
Sorry, Brad, I'd want to quickly-
This is going back to that slide. Sorry. There you go.
On the balance sheet slide, I'll just point out kind of our priorities going forward. On creating as long a mine life as we can. So a lot of the funding for all the mine extension work, you know, our plan is at this stage to self-fund all that, all the mine life extensions. And so that's kind of our number one priority when it comes to cash. Second will be meeting and reducing our debt obligations. So, you know, a good example of this is we have some upcoming convertible debts that's coming due in September. Our plan right now is to pay down that, to pay out that debt, and move forward without those notes.
And so that'll again be another cleanup of our balance sheet to you know get us in a better position going forward. And then you know we always need to ensure we have the cash reserves to kind of fund our working capital. We're operating up in the Arctic of Canada. You know it takes you know when we bring up our supplies on an annual basis it does take a healthy cash reserve in order to to build up the inventory required for the upcoming year. And then obviously our last priority you know will be to start returning surplus cash to the shareholders as dividends. So this won't happen immediately but definitely a priority for us to to start giving back to the shareholders. You know from a...
If I look at across the metrics here, you know, pretty good, pretty good performance, all around, you know, and, and the biggest change, from, from our net cash debt position, you know, we've gone from $44 million last quarter to, to $63 million. The biggest reason for that is, is a tax payment, and we'll get into that on the next slide. So just a quick snapshot on, on the change in cash from the end of, of March to the, to the end of June. So cash, cash from operations, just over $21 million. We have a regular kind of interest and, and financing charges, just under $9 million for, for the quarter. Kind of the one unusual item here for the quarter is, is, taxes and royalties. So we, we always have our royalty- payments, but this quarter we had our annual tax bill, so this is a federal and provincial tax bill that was in the order of $ 25 million. This is the one-off related to 2023 taxable income. Unfortunately, when the previous owners purchased the asset, they were not able to purchase the entire company, and so what happened was they lost a lot of the tax efficiencies they would have had if they would have been able to purchase the whole company. And so, we didn't have as many tax offsets as we would like.
We are in the process of setting up an environmental trust that will allow us to use that as a tax deduction, so I would estimate that next year's tax would be a fraction of this, if not zero, if we're able to get the trust up and running and working the way we need it to. On the capital side, we spent $21 million for the quarter. About 10 of that is related to development capital associated with the Point Lake pit that will start production in early 2025. The remainder is just our regular sustaining capital.
And then that's a change in working capital, and so we ended the quarter at just under $57 million. Pass that back to you, Kim.
Thank you, Brad. Yeah, that connection's a little bit shaky, but I think we got the gist of it. So just to reaffirm our guidance for the year, as you can see, we just put in our sort of lows and our highs as a sort of a range for each of the key operational metrics. And you can see across the board, we're pretty much on track. So we're quite confident in the second half of the year and how we'll do. It's always the second half of the year, generally you do better, mainly because it's warmer in Canada, so we do well in Q3, in particular, and then heading into the colder period towards the end of year.
So very much on track across a range of those metrics, and so our guidance remains the same. Just moving on to sort of our growth projects, which is a, which is a key focus of ours, as I mentioned early on. And this slide in particular shows our mine life objectives. And just to remind everyone, in order to publish an extended JORC compliant plan, we have to complete all the necessary work, so drilling and technical and economic studies, before we can publish any new mineral resources and reserves, and that's what we are busy doing as we speak. And I'll take you through that with each of the opportunities shortly. So the, as a reminder, there are five things we currently focused on.
That being Misery Underground extension, the Sable Underground, the Point Lake open pit that Brad mentioned, the Fox high-value stockpiles, which we're doing a study on, and then the Fox Underground. Also a reminder that we aim to use the same mining method that we use currently at Misery, which is the sublevel retreat underground mining method. It's a proven, low-cost capital development method, and a sort of a pay-as-you-go capital development method, where you just have to spend some capital on the initial decline, but then once you hit the kimberlite pipe, thereafter, it's self-funding. We'll do a phased mine life update over the next six to 12 months, as we complete the work for each of those five opportunities that I mentioned on the left-hand side there.
We will be talking more about the Jay pipe or Jay deposit, which has not been mined, and we have not included it in the graphic that you see on the screen there. But just as a reminder, the Jay pipe is the largest undeveloped pipe in North America. There's about 90 million carats in the pipe itself, and about 18 million carats of indicated mineral resources, using the mining method that was previously looked at in a previous pre-feasibility study. And Jay pipe on its own could be a 13-year mine life, depending on what mining method we use. So it's a very, very big pipe, and it's something we'll look at in the future. But the graph on the bottom there shows the pathway to get there.
So we've got the existing mine plan that was developed by the previous owners. We've got the five-year plan that we are currently following, which is our sort of optimized plan. And then as we start publishing the new JORC, JORC compliant mine plan, we'll be getting into the green box, which is all the mine extension opportunities to take the mine life out to 2040 or thereabouts. So we thought that would be a useful diagram to show the pathway towards the future. We still believe that Ekati has a wealth of options. This is the thing that Brad and I love about this asset, and of course, our board also love about this asset.
It's got lots of options, and I've talked you through many of these previously, but just as a reminder, you can see the layout on the screen there, the main camp right in the middle with the airport next to it, some of the old pipes that were mined by BHP, and some of the subsequent owners. And then you can see all the things that we are focused on. If I start in the right-hand corner there, you've got the Misery, the Misery camp, and the Misery underground, which we're currently mining. And then the Misery extension, which I'll talk to you shortly about. Point Lake, which, as Brad mentioned, will start in 2025. Then you've got the Sable pit up at the top there, which we're currently mining and looking at the Sable underground, which again, I'll talk about.
And then the two on the left-hand side there, the Fox high-value stockpiles, which are, you know, probably arguably worth about $300 million of diamonds in the ground, or on the ground, not in the ground, on the ground, at those stockpiles, and then the Fox Underground, which is a 16.5 million carat reserve. So if I just take you through some of the more detail on each of those, with the Misery Underground mine, we are looking at two extension opportunities. The first is going deeper, so you can see on that third bullet point there, the vertical extension, which is looking at the ore body, which appears to be going both wider and deeper.
As a reminder, these kimberlite pipes are shaped like carrots, but they're not always straight or go down vertically. Some of them do widen at depth, and this one does look like it's widening, so we're having a look at that. And then we're also looking sideways as an extension or an offshoot from the main ore body, which we wanna test as well. BHP previously identified that extension, but there wasn't much drilling done on it. So we are gonna be doing some drilling on that southeast extension, and also take a bulk sample from our existing development ends, which are quite close to that extension. And we'll have a look in the fourth quarter at what the grade and pricing information for that extension looks like.
Both of those two programs will be released in the form of an updated mineral resource and ore reserve, as I mentioned, probably towards the end of the year. We believe that the positive results, you know, will be a value-accretive option to extend that mine life. And Misery, as a reminder, could extend out towards 2030, and you can see the sort of annual production value of the Misery pipe. So a very valuable resource in Misery. The second one to just talk about is the Sable Underground. That on the right-hand side, you can see the picture of the open pit. We do now have the permit in our hands for the commencement of the underground construction, both the portal and the first production level.
So that is a new development since we last spoke to you. We, the permits for the full development and the mining are anticipated in Q1 2025, so that'll be for the balance of the underground mine. We've also completed the high wall rock scaling, to make way for the underground portal developments in terms of where the portal will commence the underground mine. And the delineation drilling of that kimberlite pipe is now nearly 50% complete. The aim of that program will be to include the Sable Underground in the new mine plan, backed by a pre-feasibility study. So that's the Sable progress. And if I switch to Point Lake, this is quite a nice aerial photograph of Point Lake.
Where that water in that picture lies is pretty much right over the kimberlite pipe itself, so that shows you the outline of the pipe. Everything around that water is the waste that needs to be moved as we progress that pipe downward. It'll be the tenth project or tenth kimberlite pipe to be, to enter production at Ekati, which is an amazing story, success story in itself. And you can see the ongoing work there to develop that pipe. So, finish off that dewatering. There's not a lot of water there, but just get that water out. We've already got the open pit mining approval, and then just prepare the waste rock area, both the construction and the blasting.
There's 24 million carats in the indicated resource, and there are some yellow diamonds in this pipe as well, which we're quite excited about. As we progress this pipe, we'll optimize the pit, more and more, either go wider or deeper. So we'll, we'll see how we go. And then just as a reminder, that the Misery Camp infrastructure is only 2 kilometers away. When we talk about a camp, it's a satellite camp which actually houses the workforce for the Misery Underground, and that camp can house extra people to support the Point Lake operation as well.
If I switch topics onto ESG, which is obviously very topical and very important for all mining and resource companies, what we decided to show this quarter was the impact that diamond mining has on the north of Canada. Over the last 30 years, diamond mining has contributed billions of dollars to the Northwest Territories' economy. You can see on that graph on the left-hand side how the population of Yellowknife, which is the capital of the Northwest Territories, has grown over time. And you can see how each of the diamond mines kicked into production in various times. Ekati kicked it off, and then later on some of the other diamond mines followed.
On the right-hand side, these are the numbers published by the government of the Northwest Territories, showing diamond mine's contribution to the Northwest Territories. So a very, very sizable contribution. The other way we support the indigenous communities is in the form of socioeconomic agreements, and these are agreements which should spell out economic payments as well as jobs and business creation, and many, many other ways we support the local communities. And you can see, on this slide, we show 25 years of contribution. So over the last 25 years, we have typically made a payment of $5 million per year in community contributions. That's under each of the socioeconomic agreements that I mentioned.
We've also, in 2023 alone, contributed another $5 million across those five or so topics. You know, the impact benefit agreement, payments, community donations. We donated some money during the wildfire response, sponsoring various community programs, and they have, of course, scholarships at the schools and so on. So a very, very meaningful contribution, and on the right-hand side, you can see our employment numbers and how many people we employ in the North as well. So very important and great contribution, and we are very proud of that effort. Just to switch topics and to end off today's presentation, before we do questions, this is just a look at the market. There's no doubt that supply is tightening.
The global annual rough diamond production is heading towards 113 million carats. You can see it on the graphs on the screen. It's probably just worth reminding people that that's rough production, and if you actually do the calculation of how many polished diamonds emerge out of that rough production, it's about 30 million carats or a little bit under 30 million carats of polished diamonds that emerge from that rough production. So that's what needs to be sold every year to the consumer. Burgundy contributes 4% of that global supply. That's out of the 113 million carats. If you actually separate out the G7 annual production, it's 77 million carats, and we are just under 7% of that 77 million carats. So a very sizable contribution if you just hone in on the G7 producers.
In a few years' time, we'll probably be the only G7 producer with some of those mines due to close. Natural diamonds are a very finite resource, and of course, with what's going on in Russia, it's made even more important. There is a large inventory buildup in the middle market or the, as we call it, the middle market. A lot of that came over the COVID period, and it has definitely suppressed diamond prices in the short term, and China's economy is yet to recover as well. So there's a combination of factors that have led to that buildup of inventory in the middle. But as that inventory gets reduced by consumers buying diamonds, that inventory will draw down, and prices will only go up.
And just to remind people that a 10% increase in diamond prices equates to $50 million of annual EBITDA for Burgundy. So we believe we are very, very well poised for a for a diamond price turnaround, which is, which is due to come. It's just a question of when. The other thing that's quite significant, there's been quite a lot of talk from De Beers recently, and we're very pleased to see that they have announced quite a big marketing campaign. I think some of you might have seen some media talking about their engagement with Signet Jewelers in the U.S. and a few others. There is a perfect correlation between money spent on marketing diamond jewelry and, in particular, engagement jewelry and wedding jewelry, and the sales that then occur.
You can see the various campaigns that we sort of singled out over the last nearly hundred years and what's happened every single time that money's been spent on marketing, there's been a corresponding consumption increase by consumers. So very pleased that that De Beers has started that new campaign, and we're also seeing a lot of our jewelers, even some that are actually supporting Burgundy, also running their own adverts. So fantastic to see some of that marketing happening, and all of that will lead to increased consumer demand and of course, prices.
So, this one just a reminder of the demand, and in particular, just highlighting the luxury goods markets, which is a huge industry, around a $400 billion industry at the moment, forecast to increase to $600 billion by 2030. Luxury brands are looking for natural and ethical and conflict-free supply. And with Russia providing 32% of global production, as the G7 sanctions come to bear, that will almost certainly tighten the supply side from the G7 countries. And then just a reminder that the laboratory diamonds have no place in the luxury diamond market, and the various leaders of the luxury groups have actually come out very vocally and said so.
So you can see a quote there on the screen. So that's just... I think that's our last slide, and just to remind people that we are very, very bullish about, about demand as well. So Stuart, back to you.
Great. Thanks very much, Kim, and Brad, for the presentation. Just a reminder to everybody to ask any questions through the Zoom platform. I will read your name, affiliation, and the question out for the gents to answer. I'll kick off the session with some questions that I have, while everyone's collecting their thoughts. Just starting with the quarterly, obviously, production and sales were a bit down on the previous quarters. I think there was a maintenance activity on the plant during the quarter. Could you just talk about now how that's ramped up post that maintenance and expectations for the quarters ahead?
Yes. Thanks, Stuart. I, I think I did mention that we, we've got a real head of steam at the moment. In fact, if you look at our, our day-to-day carat production coming out of that shutdown, we are actually producing some amazing daily results. So some of the work we did in that, in that, shutdown and, and some of the increased focus on production just generally as we get our teams working effectively, we're getting very good production. So very much on track, Stuart, for a great second half.
Great. We've got some questions on the online here. The first one from J.H. Tan, and I believe this was mentioned as well, but perhaps it's worth reiterating: What are the plans for the maturing convertible notes?
Yeah, Brad mentioned that during his section. I'll also let Brad go into more detail if need be. But our plan, and this has been agreed to by the board, is at the moment, our plan will be to pay out those convertible notes on the expiration date, which is in September. So, we'll just keep looking at it, but at the moment, that's our current intention, Stuart.
Great. Fantastic. Perhaps, perhaps moving on to diamond markets, and, another question from J.H. Tan, which is around Russian sanctions and the effects that that has had on, on diamond pricing in the market. Obviously, prices have been relatively weak. You, you got a boost in, in realized prices in the last quarter because of that special diamond sale. Perhaps just worth talking about, you know, how you see those, those sanctions impacting the market, and, and then, probably also overlaying, you know, the remaining quarters you have left this year. You've got that revenue target for $60 million-$500 million. What does that assume in terms of, in terms of pricing going forward?
Well, let me start off with your last question first. So generally, from an operational point of view, Stuart, we assume fair pricing. So we don't actually assume any price benefits in terms of how we run the organization. So we're very conservative in our pricing assumptions in terms of how we run the business on a day-to-day basis. We do think those sanctions are slowly starting to come to bear. They mainly, as I've repeatedly said, they mainly affect the G7 countries, and of the G7 countries, you know, the U.S. consumes 50% of all the world's diamonds. So they remain the biggest consumer of diamonds, and under the G7 sanctions, Russian diamonds are banned from entering the U.S.
So there are lots of efforts around traceability that are going on, and ultimately, what will happen is that diamonds above a certain size, probably one carat in size, will be tracked and traced in terms of their country of origin, and things using things like, you know, blockchain, so that the identity of the diamond can be tracked all the way through the system. So that's currently being worked on, and that should come into effect early next year. That will almost certainly make it harder for the Russian diamonds to get out. And then there are also other ways of tracing the diamonds, including scanning them in using some sort of software that's available, and you've probably seen some of the other producers that have made announcements around traceability.
So traceability is very important, Stuart, in terms of making sure we know where diamonds come from. Brad, I don't know if you want to add to that answer in any way?
Yeah, like, I think the one thing that that's happened since our last call is that the sanctions for half carats and up were moved from September to March of next year, so slight delay, and you know and I think the industry is still grappling with what that technology solution is gonna look like, and they needed some additional time just to make sure that it's robust. And like Kim said, it'll help to really minimize the amount of Russian stones getting into the G7 countries.
Great. Thanks, guys. We've another question on the line from Sam Walters. Good morning, evening, guys. Would you consider doing a small, targeted market, marketing ad to promote the Ekati asset and the, and the, and the good that comes from it? Thanks, Sam.
I think that's a great question, Sam. I mean, we always do struggle to get the good news out about what we do, and there's some tremendous work that's going on. So if you've got any ideas about where you think we should be advertising and promoting more, we'd be very interested to know. We are rejuvenating our communications team as we speak, and we'll we're putting a lot of effort into making sure we have more of an outward-looking communication team and process, and so, but we'll certainly take it on board, Sam, and see what we can do.
Great. Thanks, Kim. And another question online from Larry Lee: Thanks for the presentation, Kim and Brad. May I know more details about the delay of surety payments? Can you explain more? Is there any deadline on this?
Again, I'll answer it backwards, Larry Lee. There's no deadline. But, you know, we literally are focused on it every single day. The first part of the delay was just getting a draft agreement. So once we agreed in principle and to a term sheet in terms of what we were trying to achieve, we basically announced that one back in at the end of March, and then it took quite a few months before we actually got a typed up document from the surety providers, which we got about a month ago. And then, of course, we've just been arguing about one or two minor points, but I must stress, Larry Lee, they're mostly just little details.
As I mentioned early on, the key change, which is the actual payment arrangement, shifting from the deadline date of May 2024 to spreading it over four years, that's definitely no longer being debated. So it's just minor details like payment terms, as I said, is it 60 days or 90 days, and little things like that, but we literally are a few days away. I do apologize that it's taken so long. It has been a source of frustration for Brad and I, but it has been a very slow-moving process, so I have to confess.
Great, thanks, Kim. Question now on expansions, opportunities or expansion opportunities from Cam Stuart: We have five mine extension options. When do you think we'll fire up the J opportunity?
Cam, it's a great question. I'll, again, I'll start with something. At our last board meeting, our board generally said we should be trying to accelerate Jay. And so, Michael O'Keeffe in particular, was quite keen that we make sure we got things moving so that, you know, when the time was right, that Jay was sort of ready to go. Now, part of that is, part of when Jay will be developed will be diamond prices. So we obviously do need the market to recover so that the economics of Jay pipe improve, and then, and also making sure that we keep doing the five mine extension opportunities, and to keep the cash moving, to buy the time so we can get Jay done.
The permitting process will take quite a few years, as will things like the pre-feasibility study and finding the right mining method. So it is not a quick process. I think Jay pipe, even with the best will in the world, is a sort of a three- to four-year process. But as I've said, that the board wants us to start it as soon as possible so that when everything's ready to go, we are ready to go.
Great. Thanks, Kim. I might ask a few more questions on those mine life extensions, but in the meantime, that's all the questions on the platform. So if anyone has any further questions, please, please jump on and type them in. Point Lake, you mentioned about Point Lake going through the dewatering phase and kicking off, I guess, next year. The timing around that, though, is, from my understanding, all around when the Sable mining completes. Can you talk a bit more specifically about when that transition is expected to happen from Sable across to Point Lake open pit mining?
Yeah, thanks, Stuart. So as you rightly picked, the transition is to go from one open pit to the other. So basically, when Sable is finished, then Point Lake needs to take over. Now, what we want - one bit of optimization we did in our own five-year plan, which is the one I showed on that one slide, was to question why Sable needed to go as deep as what the previous owners had planned. So we've actually taken Sable a few more benches deeper. So what that does is it means we could push Point Lake out slightly. And once those benches in Sable are depleted, then Sable will immediately come into play. So that should happen round about Q1 2025, when we shift all production from Sable to Point Lake.
Then the ramp up of the Sable Underground, and you spoke to the permits to commence the portal and first production level. Is that a pretty quick ramp up of getting tons from that underground operation?
Yeah, it is pretty quick, Stuart. Those tons would be complementary tons, remember? Because by then you'd have Misery Underground going, you'd have Point Lake going, and then Sable Underground basically complements those two sources. So you're not under any pressure to ramp up, but it complements the ore coming from both Misery and Point Lake. To bring it into production typically takes about a year, because you've got to develop the portal and the decline down to the kimberlite pipe. You've got to install the ventilation system, and then once you intersect the kimberlite pipe and establish your first mining level, then production starts. And that takes about a year, a year to 18 months. So once we get the green light for Sable, roughly 18 months, and then we can go into production.
And as I said, it'll complement both Misery and Point Lake. And then the other thing that'll complement Misery and Point Lake, and potentially Sable, will be that Fox high-value stockpile we mentioned. And this is a key part of our strategy, is to have multiple mining sources. So we don't just wanna rely on two mining locations. Ideally, we want multiple mining locations, partly because that also lets us mix and match the quality of diamonds and get the best value out of the out of the diamonds. And that's also how we spread our risk around a number of kimberlite pipes, and eventually there'll be five of them. So it's actually a very important question you asked, Stuart, because it, it unravels part of our operating strategy going forward.
My next question was gonna be on the Fox stockpiles. So perhaps just remind us how that could potentially work, and from my understanding, is that a blending opportunity? And you know, what proportion of the mill feed do you think that could take?
Yeah, exactly right, Stuart. It's a wonderful opportunity because the ore is just lying there ready to pick up and go. The only thing you'd have to. It's already broken down and quite small, so you don't even have to put it into the front end of the plant. You can introduce it into the plant, sort of halfway through the plant. We do need to spend a bit of money on capital to actually pick up and upgrade the diamonds in that, or upgrade the ore in that stockpile. Because if you feed it as it is, it's probably too low value, so we wanna upgrade it about four or five times. So we need to spend a bit of money on that equipment.
That'll then come up the winter road and be ready, hopefully sometime next year, to go into production. So that'll, that'll also be part of our new published plan. In terms of volume, Stuart, it's quite low volume. We probably spread it out over the next four to five years as we blend it into the plant. It's not more valuable than other ores, so you would only feed it into the plant opportunistically, on top of what you're feeding in from Misery, Sable, Point Lake, or elsewhere. So it's complementary ore, but it must not supplement other ore.
Great. Thanks, Kim. I have a couple of questions relating to the, I guess, more to the marketing and to the financial side. One from James Unger: Are there any opportunities to accelerate the monetization of diamond inventory? What is the current inventory cycle time from mine site to sale, and where could that go to?
Fantastic question, and Brad's all over that one, so I'll let Brad answer that one.
Yeah, like our current inventory cycle is, it's about three months, depending, you know, on when the sales are scheduled. But yeah, three, three and a half months. Number of trials where we can actually start to unlock some of this. And really, we haven't really taken kind of firm action yet, just because the market's a bit soft right now, and there's no point in really forcing more goods into the market. But I think in Q4, we plan to probably look at a three-week acceleration, and sell those goods into the market in Q4. So we're still working through the details, but, you know, there's a few bottlenecks along the way.
One is our royalty valuation process, so we're not allowed to export any diamonds from Canada until they've been valued. And so we may actually just pay for some extra valuations in order to get our goods out quicker. So that's one lever we can pull. We are looking at some options related to our sorting process in India. So we have a great partner in India, and they're willing to kind of work with us to look at some optimization of our sorting cycles, and that'll get the goods to the market quicker. You know, and then as well, so whether that's sorting locations, sales locations, viewing locations, there's a number of different balls in the air.
And then we're also looking at some technology solutions, so selling diamonds differently. So today, we sell everything via tenders out there that allow us to actually scan our diamonds and sell them individually. And so that could be a game changer, where we could actually scan our diamonds either at the site or in Yellowknife before they even leave the country, and they could actually be sold before they even get off mine site or before they are exported out of Canada. And so that would cut out a huge amount of the inventory cycle. Now, that would only be on a certain subset of goods.
You wouldn't be able to do that with all the small goods, but those are some of the things that we're looking at to try to accelerate the pipeline.
Great. Can I press you for any financial, I guess, benefit from shortening that inventory cycle and the working capital release, or is it too early to ask?
Yeah, you know, it's, I estimate it's somewhere between $10 million and $15 million per week that you can shorten it. But yeah, it's probably like, at this stage, I would say we're kind of aiming for one additional sale in Q4. It could, that could be about a 3-week shortening. But again, it'll, we haven't built that into our forecast yet, until we get a better sense of the market. We need to make sure that we're selling our goods at the right time and not just pushing goods for the sake of it.
Thanks, Brad. Question now from Matthew Smithman. "Thanks, Kim and Brad. Any comments you can make on the Diamond Standard ETF, and how Burgundy can play a role, and what this could do for the overall trading in diamonds?
Yeah, Matthew, that's a very insightful question. So I think as a key point here, we think the Diamond Standard is a very interesting initiative, and we would be very supportive of it. I can say we have been in dialogue with the people over at Diamond Standard, and we are discussing a range of opportunities between the two of us. But we're very supportive of the concept. We think that anything like that, that can actually consume diamonds out of the midstream, which would actually makes the supply-demand fundamentals even better, is something that should be supported.
And if the Diamond Standard actually gets up and running, and it, and it achieves some of the potential, and it does what it's done in other commodities, it could be a real game changer in diamonds. So we think it's a fantastic initiative, and it's something we're very supportive of. So thanks, Matthew, for asking that question.
I guess again, on supply chain, another one from Sam Walters: "Hey, guys, what's the productivity and opportunity from the cutting facility in Perth?
Yeah, Sam, another insightful question. The cutting facility is working well. They are steadily pouring out some pretty good diamonds, starting to generate some revenues. We also took an opportunity, Sam, to do an internal staff sale recently, where we actually sold some of those diamonds to our own staff, and I can tell you now, we couldn't keep up with demand. In fact, that's still going on. And we are potentially expanding that staff sale to include Champion Iron in the future. So that's been a real benefit of the Perth facility.
We're also using our key strategic partner, as I mentioned, in collaboration with the Choron Group, to help improve our cutting and polishing processes in the Perth facility, and also helping us with sales. So lots of initiatives on underway with that Perth facility, and so far it's going pretty well. So thanks, Sam.
Great. Thanks, Kim. Just a question on balance sheet now. This is from Richard Germaine. "Given your forecast of capital expenditure for various works and investigations, is there any risk of a required capital raising in the near future?
Yeah, Richard, I think Brad answered that question early on. You could see when he went through the use of capital slide. You know, we've put a lot of our efforts into making sure we're generating enough cash to cover our capital. So I can tell you now, we have absolutely no intention of doing any capital raise. It's not even in discussion, and it's not even on the radar. So our intention is to self-fund all of our capital.
Thanks, Kim. And another one from James Unger. How are you seeing the peer group currently? It feels like the sector is under pressure, which may open up some opportunities for Burgundy.
Yeah, thanks, James. Also a good question. It's always a bit of a compliment when your competitors wanna talk to you. And I can tell you now that all of the Canadian competitors are talking to us, and we're collaborating on a few opportunities together, including how we can sell jointly and a few other things. So yeah, but I think generally, as you know, James, our balance sheet is 10 times stronger than any of our competitors, and it was something we did on purpose when we acquired the Ekati asset. And it's a key way we're running the Burgundy business, is to focus on our debt and to make sure our balance sheet is very, very strong.
In fact, if you have a look at the latest report that was issued by Paul Zimnisky, that came out a few days ago, he actually singles out Burgundy and actually talks about how strong our balance sheet is and that we are the best-capitalized diamond company. So we're very, very proud of how we're setting up the business and how it's running. And that goes across the board, in for both the listed and unlisted diamond companies. We are in a very, very strong position. So thanks for raising that question, James.
Great. Thanks, Kim. And just a reminder, if there are any more questions, please, please type them in. We're running short of time. I'll just go on with one more. I guess, in the 12 months that you've had the asset, aside from the extension opportunities you're looking at, you know, what are some of the, I guess, enhancement opportunities you've been able to pull through? I understand you had a program where employees could put forward suggestions. Perhaps just talk around some of the value you think you've unlocked in that 12 months.
Yeah, we obviously, cost and efficiency focus is something that if you're a miner, you're always gonna go after, Stewart. And so we've been very focused on cost and efficiency. We launched a sort of business improvement process about six months ago, which has been very, very successful. We've got hundreds and hundreds of ideas that have emerged from the shop floor and middle management and so on. And all of those ideas are being tracked through the system and are leading to improvements in efficiency and reducing our costs. So that's sort of a bottom-up process. And then on top of that, we've also did a process where we engage Partners in Performance to do a diagnostic on opportunities.
Those are bigger ideas that we are focused on, and we're continually looking at it. That'll be things like reducing our granite attrition and a few other opportunities. We've focused on both the little things and the big things. We're hoping that between the two, we improve our efficiency, and ultimately, we lower our dollar per carat. That's something that Brad will keep reporting on as we go forward, is what our dollar per carat performance looks like.
Thanks, Kim. Just one more question online around the Fox high-value stockpile, and we sort of mentioned this earlier, I think, but what capital is required for unlocking that? I think you mentioned obviously the stockpile is on the ground, so that's fairly cost-effective, but in terms of changes to the plant that might be required.
Yeah, James, good question. So I think the short answer is we don't, we don't know yet, because we still need to do a bit of design work on exactly what equipment is required. But if I had to give you a range, I'd say between CAD 10 million and CAD 20 million. And that's pretty Canadian, so in the US, probably $10 million-$15 million.
Great. Thanks, Kim. Look, I think we're getting towards the end of the hour. I think it's probably worth just running through the sort of newsflow that you're expecting over the remainder of 2024. Obviously, we've got the surety payment extension, definitive agreement coming imminently, but the studies you're expecting to put out on the Sable Underground and Misery extension. Let's just talk about some of those key catalysts that we should see in the next six or so months.
Yeah, I think, I think you just... I'll highlight the one you mentioned there. I think the surety one is a, is a big deal, Stewart, so we should be able to announce that has been completely finalized in a, you know, in a week or two. So that'll be the first cab off the rank. As we do some of that work on each of the ore bodies, both Misery and Sable, and possibly the Fox stockpile, we'll announce some of those results, whether they are drilling results or feasibility study type results, so we'll certainly be announcing that. I think the more exciting thing is actually some of the things that Brad mentioned. So we have a long list of things that are very market sensitive, so we can't always talk about them publicly while we're working on them.
But you will see, due course as we start announcing some of those initiatives that are either focused on, reducing our inventory and releasing some of that much-needed cash, or increasing price, or different ways of selling. So you'll start hearing some of those initiatives come out over, over the probably the course of this year, Stuart. I think... So those will be quite a few announce-worthy things. And then, of course, we'll culminate in, announcing the new mine plan, hopefully by the end of the, end of 2024.
Great. And from my understanding, the Misery Underground lateral extension, that will hopefully come in in early 2025 in terms of the additional tons that could bring in?
That's correct. So I think the Misery deep extension will probably get done first, and the Misery, the lateral extension, will probably get done second. So I think we'll be able to announce in the first mine plan, the Misery, the Misery deep extension, possibly the low-grade stockpile and something about Sable Underground, and then possibly in the second iteration, it'll be around the Misery lateral extension and possibly the Fox Underground and anything else we can add. So I think there'll be a few, there'll be a few mine plan releases as we get more and more information, Stewart, over the course of the next six to 12 months.
Fantastic. Kim and Brad, and there's no more questions online. Today's been fantastic. You've, you've done a really clear run-through of the company, where you're at, and what some of the opportunities are, and also an overview of where the market is, and obviously the outlook that looks, looks like it could be improving. So thank you very much, and to everyone on the call and to everyone who asked questions, thank you very much on behalf of Burgundy Diamond Mines and Bell Potter Securities.
Thank you, Stuart, and thank you, everyone, for the fantastic questions this time around. Thank you.
Wonderful. Thanks. We'll end it there. Have a good day. Cheers