For today's call, Michael, Kim, and Brad will take us through a presentation. This will be followed by a Q&A session, which I will chair. So please enter your questions on the Zoom platform. After the presentation, I'll read out your name, affiliation, and the question for Kim and Brad and Michael 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. Michael, I will hand over to you to provide some introductory comments. Thank you, Michael.
Thanks, Stuart. And hi, everyone. It's well, we've entered 2025, and I was just reflecting back and looking at the LVMH results over Christmas, and their sales haven't increased significantly. In fact, I think they're pretty flat, and that's a good indicator of where the luxury market is. And we look over at China and see what's happening in China with electric vehicles and what may happen with tariffs and also the sectors that's very heavily affected, and that's housing. So, look, I was hoping by this Christmas we'd see some green shoots appearing. It didn't seem to happen over Christmas, but you know, we're very keen on seeing what happens during this year.
You know, we're sitting in a background of when we, when we acquired the asset, we were forecasting, looking at the diamond prices, I think going to around about 140 a carat at the time. At the time though, about 119, 120. In fact, it's been a slow decline along the way, and it's quite painful. You know, that's our belief is there because the team's working heavily on the cost structure to make sure that we, you know, we're not overrunning our cost structure. I think everyone knows it was a mine that needed a lot of love and a lot of hard work to turn this asset around. As I can, you know, talk today, we've got a very good team together, and we are delivering on reducing the costs.
You know, there's a good consolidation and how we move forward, which Kim can run you through all of those issues. You know, I'm confident in the asset. I'm confident in the people running it. You know, our biggest issue is the diamond prices. So, you know, when will that market turn? Let's hope that it's going to be soon. You know, we're entering a period that, whereby at this time of year, always for us, we're building the ice roads, and we have, you know, two or three months of moving inventory to site, and we also have to pay for that. So, you know, it's typical of this time of year when that's happened. We're also spending quite a bit of capital moving into from the Sable mine to the Point Lake.
So again, that requires capital and the development that we're doing on the Misery underground, 400 foot deeper and also laterally. You know, patience is required. I know it's an easy thing for me to say, but did I forecast us picking the bottom? Yes, I thought I had. Did I get it wrong? Yes, we did. Where is the bottom? I'm not sure, but the main focus for us is to make sure that we can maintain, you know, a steady head and go forward. You know, we'll talk to you also about looking at. Brad and Kim are looking at taking on some more debt, which is going to be handy for us going forward. And they have, you know, certain ways of being able to raise that finance.
So I'll let Kim run through the operations and let give you an update on where we are with the various things I've mentioned, plus more. But again, you know, I thank everyone for their patience and, you know, we're working very, very hard to make sure that this, this asset is, is going to be in good shape when the turnaround happens. So over to you, Kim.
Yeah, thanks, Michael. And, and good day, everyone. Always good to catch up with everyone. So we'll do the usual format. I'll take you through some of the operational numbers and the mine growth, and then Brad Baylis, CFO, will take you through some of the financial numbers. So let's just kick off with the operational highlights, please, Brad. So if you actually, if you look at the shape of that top graph, what you can really see that really shows you the transition as we move, as Michael said, from Sable to Point Lake. So you can see the waste winding down as we slowly got to the bottom of the open pit in Sable, and then it starts winding up, as you can see in Q4 2024, as we start getting into the meat of Point Lake.
So that transition is now nearly finished. We've got a few more carats left in Sable that we're teaspooning out, but essentially now we have nearly fully shifted across to Point Lake. And I'll talk about that a little bit later. You can see down the bottom there how the carats recovered moved up and down. Q4 was a slightly lower quarter for us, primarily because of that transition from Sable to Point Lake. And we had to supplement the process plant with a little bit of what we call coarse rejects. So that's dragged the grade down slightly and dragged the carats down slightly. But you can see still a pretty good run rate and obviously setting us up as we go into Q1 2025. So that's just a bit of an explanation there. Brad will speak to the financial highlights.
So if you could just run through those, please, for us, Brad.
Yeah. So for the quarter, you know, carats sold slightly below our average run rate. We did have a bit of a disappointing December sale with some announcements by De Beers and Alrosa, with some price cuts that actually still had their prices higher than ours, but created a bit of negative sentiment in the marketplace. And those announcements happened just prior to our auction. So we ended up not selling all the goods. Typically, December is usually a really good sale for us. And so we did have some lower quality goods, a couple hundred thousand carats worth that we did carry forward to 2025. You know, we did see, you know, a big drop in carats sold, compared to 2024.
Now, this is largely due to the fact, you know, that we did carry some carats into 2025, but also, if you recall, in 2024 or 2023, sorry, there was a large overhang of carats that moved from September '24 into the Q4 2023 that resulted in higher than normal carat sales during that quarter. And so, you know, comparing year over year does get tricky. You know, on the good news side, you know, I think that, you know, given the very difficult market conditions we're in, we actually only missed. Our revenue was only down 6% year over year. And actually we were quite happy with our average dollar per carat, just over $90 for the year, compared to a budget that was just under, just around $95-$96 a carat.
For a market where the rough prices are down, you know, anywhere from 15%-20%, I think we fared fairly well during that market. Obviously, like Michael said, we're all hoping that the bottom happens soon and we haven't quite seen the end of it yet. We do hope to see some improvements as we move into the second half of 2025. And then on the EBITDA front, you know, our results were hurt a little bit due to the really inefficient mining we're doing as we're at the bottom of the Sable pit. You know, our mining costs on a per unit basis higher than what we would normally expect. And that's just because we're trying to scrape everything we can out of that pit.
So it definitely hurt our profitability in the latter half of the year.
Yeah, it's probably just adding one more comment to what Brad said there. As people probably know, De Beers sells differently. So that's why when Brad talks about their price coming down, typically they dictate the price to their customers. And so the prices that they dictate may not be market related, whereas because we run an auction process, our prices are market related. So when De Beers announces a price reduction, it's really to come more in line with the market as opposed to getting below where we are. I thought I'd just clarify that, but Brad, just keep going with the slide, mate.
Yeah. And so on the balance sheet side, you know, we see some, you know, small uptick in our plant equipment. That's due to the pre-strip for Point Lake. Cash and cash equivalents, you know, down just under $50 million compared to Q3. And that's largely driven by two factors. One being the pre-strip for Point Lake and the second being the contribution into the environmental trust related to our surety payments. Diamond inventories, nice trend downward on diamond inventories. We have put a big focus on shortening the pipeline and we'll continue to do that into 2025, but you can see a nice trend there where we're reducing the amount of inventory we're carrying on the balance sheet, so obviously, you know, at the end of the day, net cash position not where we want to see it.
You know, and this is largely impacted by the reduction in cash at the end of the year. Yeah, a bit more detail on the cash change. Like I mentioned, you know, just under 50 million reduction. And the largest components related to that are the two surety payments. So the Q1 and Q2 surety payments that were put into an environmental trust at the end of the year. You know, and then the well 30 million of pre-strip related to the Point Lake. Once we get through all of that pre-strip, then we should start generating some cash from that asset versus the other way around. You know, and the reason we put the money into an environmental trust is there are some tax benefits associated with that.
So, we really wanted to take advantage of that, which is why we kind of waited till the end of the year, to deposit those surety payments.
Thanks, Brad. Good overview. Thank you, Matt. So if I just switch to growth and the operations. So just this was the update on the Misery Mine. This was the underground mine that keeps on giving. And so you can see that the what we call the Misery drilling is now finished. We're just waiting for the results to be analyzed and then we'll. That'll feed into the updated JORC Mineral Resource and Reserve statement. Michael mentioned the lateral extension of Misery. So that's what we call the southwest extension. That drilling is now 40% complete. So we'll keep doing that drilling and then that'll also go away to get analyzed. And we're also doing a bulk sample in that southwest extension, just tunneling directly into the kimberlite pipe and taking a bulk sample.
We get a handy size sample there and we'll do a second bulk sample in Q2 to make sure we've got the most information possible on Misery. And that's really making sure we pin down the price per carat. And so we understand the quality. And then just a bit of as a reminder about Misery, as I said, this is the underground mine that keeps on giving. There's very little capital spend. Effectively, all you're gonna spend money on is ongoing, decline development as you keep going deeper. And it's a very profitable operation. Misery on its own generates, you know, $250 million a year in revenue. And we've got some big efficiencies planned for the underground mine.
This year we plan to try and introduce some bigger trucks that the actual excavations can handle bigger, bigger trucks. And so if we bring those bigger trucks in, we could probably get the underground output to increase by 10%-15%. So that's our plan for 2025. If I just shift to Point Lake. So as I mentioned early on, this has been the transition as we, as Brad said, teaspoon every carat out of Sable and now transitioning into Point Lake. So that's a very wintry picture of Point Lake. You can see, what you're basically seeing there is the upper benches as they got formed, you know, where those trucks are on the right hand side, that's the waste area. And then down there on the left hand side where that truck is sort of standing, that's as we intersect the Kimberlite pipe.
So the good news is we've now intersected the pipe. In fact, the first ore found its way towards the process plant over the weekend. And so we'll now get a really good feel for how the Point Lake ore moves through that process plant. And we'll also get a good feel for the diamond recovery. So you can see all the bullet points there. The other thing is, we're gonna take a bulk sample once we get into the meat of the ore body. That's that third bullet down at the top there. That'll also give us a great feel for how well the model's performing. And we've really reduced the strip ratio to a sort of adjusting time model, which has pulled quite a lot of cost out of 25.
We're only gonna move the waste that's required to expose the ore during 2025. And then we'll move whatever's required in 2026 to expose the rest of the ore. Just as a reminder, this is the 10th Kimberlite pipe that's being mined at Ekati, out of the 125 on the property. So there's still quite a long queue to go. There's 24 million tons in the Indicated Resource. And it does, on the face of it, contain a yellow diamond population. So we're quite excited to see what goes through the process plant, what sort of colors emerge as we start processing the Point Lake ore. The big benefit, of course, is that Point Lake is very close to Misery. So the camp infrastructure's only a couple of kilometers away.
So for the workforce that now gets housed over at Misery, it's very quick and easy to get to work, day and night as they get to work. And of course, it also gives us long haul efficiency because both Misery and Sable are now on the same side of the property. And so all our long haul is in one direction. If we just reflect briefly, I'll just go back on back to 2024 a little bit. So, first of all, we reflect on our guidance results. So you can see which ones we exceeded, achieved, or missed. So the miss was on the carats recovered. I have to say it was only a miss by about 40,000 carats, but it's a miss.
And a lot of that miss was because of, as we mentioned earlier, it was that transition from Sable to Point Lake didn't quite go smoothly as we would've liked. We just didn't get the ramp up fast enough in Point Lake. So, because we weren't, we just weren't quite on track, we didn't recover all of the carats. So that's why we missed that carat result. And then some of that flowed into the revenue and EBITDA, and also some of the pricing and the sales result that Brad mentioned, which is why we achieved the revenue, but missed the EBITDA.
If I go into 2024, just like looking at sort of some of the, I guess some of the big gains in 2024. So the top one there, as I've mentioned, you know, is the transition from Sable to Point Lake.
I think in the case of Ekati, it's a much bigger deal than normal because these two open pits are 50 km apart. So you've got the Sable pit 25 km in one direction from the process plant and Point Lake in 25 km in the opposite direction. So it's 50 km apart. So the transition why it was difficult was because you're really splitting your workforce between those two pipes. And so it took a little bit longer than we thought to go from one to the other. But that's done now and we're into the ore. The convertible notes was paid out of cash.
You know, in hindsight, given what Michael was talking about with the market, we might have revisited that decision, but at the time it was the right decision given what we thought, the cash we had on hand and our view of the market at the time. Then the two big ones were renegotiating that environmental bond payment so that we could amortize it over the life of the mine. As we've said before, you know, if we extend the life of mine, we'll amortize it over a longer period. Then just as a reminder to everyone in the contract, we basically have a safety net where we don't need to pay that bond payment, if we haven't got $70 million, sorry, $30 million on the balance sheet.
So we work very closely with the surety providers to decide whether we're putting payment forward or not. And then as Brad mentioned, that qualifying environmental trust is a big deal because it really gives us the benefit of the tax in 2025. And then you can see some of the other benefits there. Lots of progress made on the mine extension opportunities. Brad, who looks after our sales, has done a great job in getting multiple sales channels going. And as Brad mentioned, that 6% revenue decline year on year is probably really a result of the innovative sales channels we've now got in place. So that's probably some of the highlights for 2024. Let's shift the focus to 2025, please, Brad. Let's take a bit of a few seconds to catch up.
If you look at the head, at 25 so far, just break it down into sort of three areas. Starting with the market, rough diamond supply is tightening up considerably. On the supply side of the equation, global supply has now dipped below 105 million carats for the first time since 1995. We still think that underpins the thesis for strong diamond prices being maintained or growing. We still believe that the indications are that the industry has hit bottom. We are seeing some green shoots, here and there. Michael mentioned some of the sales in the luxury brand Richemont. Richemont recorded a very, very good quarter. We are seeing some good, good results coming in some areas.
On the operational side, as we mentioned, big production hauling and cost efficiencies will now occur as we have both Misery and Point Lake co-located within a couple of kilometers of each other, so we'll have less travel time and all that long haul in one direction. That'll simplify the asset quite significantly and that'll reduce our costs. We get a big step change in costs at the end of Q1 that we can look forward to, and then the big highlight in this quarter will be we'll be releasing our first official Burgundy plan at the end of Q1. This is a reminder that'll be followed by a second iteration, or a second longer term mine plan that we're hoping will push the life of the asset out into the mid to late 2030s.
And then on the financial side, we've got a pretty solid plan for 2025, built off the back of the fact that it's a much simpler operation to run. And then, as Michael hinted at, we've got a big focus at the moment just to make sure our balance sheet is strong, including some non-dilutive working capital opportunities, which I'll talk about next. So just hop onto the next slide there, Brad. So I know for some investors, they'd be worried about our liquidity. And I just wanted to reassure everyone that we are making sure that our cash position improves. So we've got quite a few initiatives both focused on cash management and working capital management. That first one is not an insignificant change.
We've successfully negotiated with the government of the Northwest Territories to increase the number of royalty valuations from 10 a year to 20 a year, which means that we can now export from the Northwest Territories and from Canada 20 times a year. And in theory, that means we could have 20 sales if we chose to do that. We probably won't have 20, but we can certainly increase the number of sales and that'll smooth the revenue stream and it'll also shorten the diamond inventory pipeline even more. We've also got quite a few very credible diamond purchase options. And I'm talking about things like repurchasing diamonds from us. So for example, if we feel our cash is getting tight, some of our customers are prepared to actually buy diamonds in advance of our auction.
I'm talking about sort of $5 million, maybe $10 million sales, those kind of numbers. We've got a few of those up our sleeve. The probably most exciting thing on this page is work that we are doing on a fuel consignment opportunity, which will reduce our sort of one-off cash flows and improve our working capital management. Effectively, the way that would work is Michael mentioned how we are buying all of our supplies for the year ahead. If we successfully achieve this consignment opportunity, which we believe is a few days away from concluding, then effectively we'd get paid back for the fuel we've already paid. So we'd all of the money we've outlaid on fuel, we'd get it back. Then as we consume fuel, we would pay for the fuel again.
So it's a huge inflow of cash, once that is in place. So fingers crossed on that opportunity. And then the bottom one there, you know, on top of that, we're also working with both our existing lenders and new providers to see if we can get an additional working capital facility just to give us even more flexibility. So what you can see there is we're really doubling down. We're making sure we've got multiple liquidity options at our disposal. And all of those will be real options that we can draw on either simultaneously or individually. So that's probably the end of our presentation. I think I'll hand back to you, Stuart, for the Q and A.
Great, thanks very much. Michael, I'm not sure if you wanna make any closing remarks. Yeah, and thanks to the team.
Look, the message we're trying to get across is here is that everything's very tight. The market's tight. We do see green shoots appearing. But remembering this is that, you know, we're quite unique as opposed to a mine in Western Australia or in warmer climates where we don't have to be making ice roads. We don't have to be bringing, you know, one big lot of product, over two months of the year to keep us going all year. That's when the pressure comes on. And when the pressure comes on, you know, you can be assured of one thing, that we're working very hard to make sure that working capital's there so we get through this period and we can take advantage of what's in the ground.
What is in the ground is what really attracted myself and Kim there, to look at this opportunity. That is one of the biggest diamond resources in the world that's untapped still. And it's this place has been operating for 20 plus years. And it's, you know, as Kim said, you know, without even mentioning the Jay pipe, which we always talk about, which is doable when, obviously, the diamond price is there, people have more confidence in us. People are prepared to put more equity and, you know, at the right times, people are prepared to put more debt in. But also the cash flow is totally different because the revenue we're generating makes a huge difference.
Now, put all that in perspective and just say in this time we are going through a lot of hardship, but we are making the cost structure totally different. So that sets us up to take advantage of this opportunity. I think the only thing I totally got wrong was the timing, timing on when we saw the floor. You know, a bit like Champion events. Oh, you know, it's the same. We said, well, it's different to Champion because, you know, the day we got the phone call to say we had the asset, I know it was $38 a ton. That was that day. And it's, you know, it's never been down there since and, and it's continued to go up. Here we bought the asset. We're forecasting, you know, $130-$140 a carat and we're sitting at, you know, $90-something a carat.
So it's different, but you know, our heart's in this, our money's in it. You know, we spend a lot of time thinking, working out these things. The working capital facility will make a big difference to us to carry us through. I think the indicators you look for is when we announce those sorts of things and hopefully that's imminent. I hate using that word, but you know, but we will keep you posted on where we sit on this whole thing. You know, it's hopefully we'll see that improvement in the diamond prices. We'll pass over, Kim, unless you wanna add anything to that to Stuart to open the Q and A.
Yeah, no, thanks. Maybe just two more points, Michael. I think that's a great summary.
I mean, probably just with reminding people that even in a tough market, BDM still achieved, you know, in Australian dollars, AUD 600 million in revenue, and 150 million Australian dollars in EBITDA in a multi-decade low diamond price environment. So despite the low market, we still achieved pretty good results. And probably it's worth reminding people that for every 10% the price increases, the diamond price increase, that translates to about a $50 million EBITDA improvement or AUD 80 million or AUD 70 million or AUD 80 million, which is about what our market cap is now. And it's probably not a single other listed ASX company where 10% price can basically give you an EBITDA about the same number as your market cap. So we enormously leveraged on the upside from diamond price.
So there's no doubt that as that price starts taking off, we are gonna benefit enormously. And the other advantage is our debt structure. So we've got our debt paid down to a, you know, very low number, you know, and that positions us very, very well from a, from a flexibility point of view. So I just wanted to highlight those two points, Michael. Thank you. But over to you, Stuart.
Great. Thanks, Kim and Michael. I'll kick off the questions and I guess it's more around the outlook, and guidance for 2025. There's the first Burgundy Mine Plan and then the longer term plan, down the track or in the second half of the year. Can you perhaps talk a bit about the timing of when you expect that news flow to come out?
And I guess just firstly with the 2025 guidance, am I, and I understand that, you know, you're probably limited with what you can say, but we've now seen the transition from Sable to Point Lake. You're not dealing with the bottom of pit. You're dealing with, you know, broader all sources at the top of the pit, sort of co-located with the Misery underground. So that has some improvements there. Perhaps just talk a bit about some of those factors again.
Yeah, thanks, Stuart. I mean, let's just link this all back to the guidance. We contemplated putting out the guidance in this call, but we decided not to.
The reason we decided not to was because we really wanna just work through the first couple of benches on Point Lake to give us the confidence that the carats are there as per the model. As soon as we get confidence in that, in the performance of Point Lake, that'll put us in a position to give out the guidance. Typically with these Kimberlite pipes, I've always created the analogy that the Kimberlite pipe looks like a carat, like a, the carat that you eat, not the carat that you put in your finger. Normally the top of the Kimberlite pipe is always a little bit unreliable. You've always gotta just work through the first 10 or so meters of the pipe and then you get into what I'll call the meat of the sandwich.
So what we'll see in the next couple of weeks and months is a little bit of variability. But once we actually get, you know, get into our stride, that'll firm up and then the carats will start flowing again. We are pretty confident, but just linking it back to guidance, Stuart, that's why we didn't put our guidance out. Once we've got a bit more confidence in Point Lake, we'll put that out. So probably towards the end of the quarter we'll issue that.
And in terms of the first mine plan that you plan to put out, how far into the future do you expect that to be able to take you?
You mentioned that in the second half you hope to have a runway that looks out to the mid 2030s, but that first, that initial plan, what's the views on that?
Yeah, so the plan, and we've been consistent in saying this all along, Stuart, is that the plan, the initial plan will probably be a five year plan. It'll just make sure that we've got a very robust five year period ahead of us. And then the second, the longer term plan, we'll run it out as far as we can get it. It probably won't include Jay, as Michael said, but it'll, we'll have everything in it, including Fox and Sable Underground, Misery, the low grade stockpiles and Point Lake, of course.
That's enough to get us out to certainly until the mid-2030s. Then there'll be the third version will be the one that probably includes Jay. So if you think of it like that, it'll be a five-year plan, kind of a 10-year plan, and then the next one might be a 15- or 20-year plan.
Great. I'll cut to some questions from the audience. And Mike Millikan, my contemporary, has asked a couple, so I'll sort of wrap them up. In terms of surety payments, you know, is there catch-up in 2025?
Yeah, so just to remind, Mike, there is no catch-up.
Remember the way it works is you pay every quarter you need to pay a payment subject to that $30 million. But we've had very open discussions with our surety providers. If we're not in a position to pay it, we won't pay it. So they've got low expectations of payment in 2025. If prices improve, then we may be in a position to pay. But at this stage, there's very low expectation on paying those.
Another one, I guess just talking around working capital initiatives. You mentioned, I think you mentioned repayments on diamond sales could, you know, could bring in another $5 million or $10 million just to assist with working capital of it. But the other big one, and that you mentioned, which you're pretty excited about, is the fuel consignment option.
Can you roughly,
I guess, put some numbers around that? Perhaps not even if not in dollar terms, but how much fuel would you burn each year at Ekati? What's the opportunity there?
Oh, look, it's a huge opportunity, Stuart. I mean, if you talk about the fuel, the fuel consignment, so we pre-purchased all of our fuel and then we've gotta transport it from Edmonton all the way up to Yellowknife, which is 1,600 km by rail and truck. It then goes into storage tanks in Yellowknife. Then when the winter road opens, we transport it from Yellowknife to the mine site. In total, you know, we spend, Brad, just help me. I think we spend around about $80-$90 million getting fuel up to the mine. It's a huge cash outflow.
So the way the working capital facility would work is we'd be prepaid for the fuel portion landed in Yellowknife. And so that could be circa $50-$60 million. So that we'd be basically repaid that amount. And then as we consume the fuel at the mine site, we'd be paying that amount back each month. So basically on a consumption basis, we'd be paying for the fuel as we use it. So the big benefit you get is that big cash outflow hump that Michael spoke about. This fuel consignment arrangement effectively would eliminate that. And the discussions we've had with the provider is something on a going forward basis as well. So we are working hard to get it in place for this year.
And then if we can get it in place this year, chances are it could be in place every year. So in future years, instead of spending the money upfront, we even have a scenario where we could actually, that they would purchase the fuel for us. So that's the kind of thinking, but early to count our chickens before they actually hatch. But I am pretty confident we'll have that in place. Just the diamond presale, Stuart, so that effectively, it's one or two of our customers saying, look, you know, we like some of your colors, let's say your yellows, like the ones on the screen. They specify the sort of diamonds they want and then they would basically pre-purchase them and then they'd pay the auction price.
So they, so basically we get the advantage of cash, cash earlier and they get the advantage of certainty in terms of access to diamonds. So that's loosely speaking, but we are not talking, these are not $10 million or $20 million dollar deals. These are sort of $5 million dollar deals that you would do.
Right. There's a handful of questions on, I'll switch over to the diamond market now. And there's a handful of questions on synthetic diamonds and perhaps how that's impacting the market. Do you wanna just talk a bit about how you see that at the moment and the future of those, those diamonds?
Yeah, look, I mean, it's probably the most common question we get asked is the role that lab grown or artificial, whatever you, whatever you wanna call them, what, you know, what role they're playing.
And I'll give the same, and I'll get Brad to chip in here as well. But I mean, when we look at the lab-grown problem, what we say is 10 years ago, lab-grown was a real threat. We 'cause we weren't quite sure how it was gonna play out. 10 years later, we now understand that there are two different products. You so lab-grown diamonds have lost a lot of their value. And so they, they're now selling largely as fashion jewelry. So remember, fashion jewelry is cheaper and natural diamonds are selling more in the luxury segment. So there are two different retail segments. They do cannibalize some of the natural diamonds in the bridal segment. So in certain size categories, they do make inroads.
So if you, for example, if you were to go and buy yourself a one carat white diamond, you could either buy a natural one for, you know, $6,000-$10,000, or you could buy a lab-grown one for $800. The problem with the $800 lab-grown diamond is, you know, it's only $800. And if that's what you wanna give your bride, well then good luck to you. So.
Yeah. Kim, you know, adding to that, that's true. And what we're seeing now is there's a lot of people that, you know, when they were buying her house, they wanted to get engaged and have mortgages at the same time. So it was obviously a stop-gap method. And what we're seeing is a lot of replacement of that, of those diamonds now.
But also if you look at De Beers, De Beers started up the synthetic diamond business. And it's interesting because with the breakup at De Beers, now potential breakup with De Beers, people are looking to acquire that the synthetic manufacturing and not really for the jewelry market, but more for the industrial market. And that's becoming more and more prevalent, you know, with lenses, high grade lenses, that sort of thing. So it's a perfect fit for that business. So the future of synthetic diamonds is more in the industrial uses. And there'll be, you know, obviously I think the impact is probably about 10% on the jewelry market, 10%-15%. And that's flattened out pretty, pretty well. Wouldn't you agree, Kim?
Yeah. No, it's a great clarification.
I think it's a very important point that you make about the industrial users.
Yeah. Just sticking with the market there then, obviously, you know, Russian supply has been a theme and, with sanctions coming onto that market, have you seen any impact of that in the market from your end?
Yeah. Look, I mean, I've always said the problem with the Russian conflict is that the Russian diamonds are still getting outta Russia despite the G7 sanctions. And they're probably getting out through China and then going back into India. And they have been dumping a lot of their diamonds on the market. So there's no doubt in our minds that Russia has been funding their war by selling off their diamonds and probably cheaply as well.
It has had an effect on our bottom line. I think if we look at the causes of diamond price decline over the last 18 months, that is one factor. Brad would point out that another big factor in the price decline has been China and the fact that China is not consuming diamonds and the economy hasn't been strong. So China is a big factor. And then Michael mentioned the other factor, which is the lack of disposable income as people had to pay, you know, high interest rates on their mortgages. And so they didn't have money. But, generally speaking, all of those effects are easing. And so that'll play into more disposable income and tighter supply and slowly the prices are gonna creep up.
We need to see the shift in inventory because, you know, Alrosa and supposedly Alrosa and De Beers were holding quite large inventory. So that was that announcement that Kim was talking about with, when they just came out and said, okay, we're just selling and these are the prices the way we go. So it was more like dumping. And, you know, it was, that had a serious effect over the, you know, the last few months.
Right. I might just cut back to a question on cash flows. And obviously there was a fairly large capital item pre-strip for Point Lake in the quarter just gone. As we move into 2025, I mean, is that something that a lot of those costs now transition across into OPEX?
I guess just trying to get an idea for capital requirements for the year ahead.
Yeah. I'll let Brad pick up on that one, Stuart. But obviously your waste stripping is capitalized. It is, but I'll let Brad answer that one.
And probably just to add to that question, I think Brad mentioned around the stripping ongoing. I'm just wondering how much of that pre-strip at the Point Lake is left.
I'd say the majority of the pre-strip was spent in 2024. There'd probably be a little bit of an overhang into the first month of 2025. But you know, as we get into the ore, then yeah, you'll start to expense that pre-stripped capitalized waste kind of over the production period, right?
So over the next four or five years, the life of the asset, right? So yeah, the big heavy spend for Point Lake is kind of behind us, you know, and we should start to now, as we start to process the ore, now start to generate some revenue from that investment. So obviously a bit of a lag there and kind of normal with any transition from one pit to another. As far as the rest of the capital program, yeah, we don't have any major capital investments in 2025 planned other than our regular kind of sustaining capital, which we, you know, we've kind of looked at it and making sure that we're as efficient as possible and only spending the dollars from a capital perspective that we need to.
So I guess, and I'm sorry to hop on this, but I think it's pretty important for the audience. But if you look at 2025, you know, we're now in Point Lake, the majority of the pre-strip's behind you. It's much shallower ore, Misery is the underground mine that keeps on giving. So essentially you continue mining at depth, no major capital requirements there. You're also blending in some of the high value Fox stockpile again, not high capital, in fact very low OpEx because you're basically picking it off the ground and blending it in with the feed. Yeah, that should have a material impact on cash flows this year. Am I correct?
100%. You described it perfectly, Stuart.
So that's the simplification we talk about, which flows through into lower costs and more cash. 100%.
Right. And then I guess in terms of the guidance, you expect this quarter to provide not only the guidance for 2025, but that initial sort of five-year outlook, say, and the second half of the year will have a longer-term outlook provided.
Yeah. And I mean, we actually getting very excited about that longer-term outlook. I mean, in fact, I was having a discussion earlier today about some of the long-term projects we can put in place, including things like upgrading the Fox ore so that it actually, you're not having to haul as much ore.
You can upgrade it at the mine itself and then you haul back a sort of a concentrate, so to speak. So that'll be one of the features, one of the things we focus on is which technology can we deploy to actually further lower our cost and upgrade some of these pipes. So I think people will be quite excited when they see some of the innovation we have in those plans.
And I guess with Kim, it's worth mentioning the people that you're bringing in to do that work too, because, you know, when we inherited this place, it didn't have the technical people that could evaluate this.
I mean, everyone's focus was on the underwater mining rather than what was sitting right in front of them, which was the opportunity to be able to mine the resources that existed there and how to extend them. So that's been a, that's been a quantum change for us. And, you know, bringing the right people on to do the evaluation work, I think is important to mention too. So, you know, I as Chairman have noticed that significant change in, in the, in the breed of people that you're, that you're bringing in to do that work.
No, I think that's a fantastic point, Michael. We've, we've, I think our technical team is, is a, probably some of the best brains on the planet. They're very, very sharp people.
As you say, I mean, some of the, some of the things we are discovering about the things sitting right under our feet is extraordinary. I mean, I, I think the Fox pipe will be the next big surprise for us. It's a wonderful pipe, very, very high value per carat, quite low grade, but very, very high value per carat. It's got lots of long life potential outside of Jay pipe. Fox is the biggest, the biggest pipe from a reserve point of view. I think I'll forget the exact number, but there's close to 20 million carats sitting in reserve at Fox alone. So Fox could easily be a 10 to 15 year mine if we can put that together.
So, and as you say, Mike, a lot of that is coming from the new technical thinking that's going into the operation.
And so a final question from me, which also I think pulls in another question on the platform is obviously 2025 looks like it'll be a fairly low capital year, with the benefits we just spoke of. But moving into 2026, and I guess with the information we see in 2025 results from feasibility studies, et cetera, will that be more a year? Will 2026 be a year where we start investing again in these new sources of supply? Or does that sort of depend on how Misery goes and Point Lake goes? Just any sort of, I guess, longer term color on that.
Yeah. No, good question. So it's all about timing, Stuart.
I don't think 2026 will be a big capital year. I think we need to start spending money in 2027 to basically mobilize Fox and some of the other pipes. So, I mean, we do need to spend the capital. You can't keep postponing it. You've gotta eventually spend the capital to bring the next pipes into the portfolio and into the pipeline. But it probably 2027 will be the year we start spending a bit more capital. We've had a very close look at the capital, Stuart, and we think we can be quite aggressive in dropping the capital spend. I had previously mentioned numbers of $200 million over the five-year period. We think we can actually do a lot better than that. So we think we can squeeze it down to much lower numbers.
Every year that Misery extends is another year we can push that capital out. So we'll take every opportunity we can to push it out as far as we can.
Great. Just considering time, I don't know if Michael, if you've got any final remarks you'd like to make.
Look, it's not easy. But I thank all the people that stayed in there for their patience. We've had people depart, lose patience and leave. That's their choice. You know, and people have said to me, why don't you start buying? Well, I'm not about to put money in to pay out people, ex-directors, ex-chairmen, and, sorry, CEOs and that that have lost faith in this thing. I'm prepared to put my money into where it counts. That's into the operations.
You know, I'm always prepared to do that as we go forward. So, you know, if there's any doubters out there about, you know, my dedication to it, let me tell you that, you know, we're fully committed to this asset and making it work. I mean, it's not easy, but that's only a reflection of what's happening in the market with the diamond prices. You know, if you look across the market, we saw Lucapa raise money at a cent or something the other day, you know, or a couple of weeks ago, and they raised four, you know, $3-$4 million. That's just to keep the lights on. You know, we are certainly in a, you know, in a much stronger position than that.
But if this industry is gonna take, there's gonna be a lot of casualties through the process. And, you know, we're working to make sure that we're survivors and we can take advantage of the upside. So look, thank you all very much, you know, for your support. Those that have stayed, and you wouldn't be on the call if you weren't a shareholder. And, you know, I thank you very much for that. And, we'll work our butts off to make sure that we try and get this thing right for you, which I hope that message comes through loud and clear from Kim, Brad, myself. -
Great. Michael, Kim and Brad, thanks very much for your time. We'll leave it there. Thanks everyone for joining the call. - Okay. Thank you.