Naturally fluorescing rough diamond parcel from the Gahcho Kué mine. Credit: Mountain Province Diamonds
De Beers Group and Mountain Province Diamonds announced that their joint venture Gahcho Kué diamond mine has surpassed the C$2 billion spending threshold with Northwest Territories and Indigenous business.
The milestone represents 61% of the total C$3.2 billion spent on the project since 2015 when construction began. Local businesses supply welding, transportation logistics, trucking, passenger and cargo flights, labour, and camp catering. The venture has a stated goal of sourcing at least 60% of its requirements for the project from local businesses.
According to the NWT Bureau of Statistics, diamond mining is the largest contributor to the territory’s gross domestic product – C$588 million out of C$4.25 billion in 2023.
Key elements of the economic contribution of the Gahcho Kué mine include:
Gahcho Kué has a tiered contracting structure that gives preference to Indigenous and NWT businesses. Since 2006, C$5.3 billion has been spent with local and Indigenous business in the Northwest Territories and northern Ontario by Gahcho Kué and De Beers Group’s wholly owned Snap Lake (NWT) and Victor (Ontario) mines. (Snap Lake and Victor are now in active closure). In 2023, 69% of the Gahcho Kué mine spend was with NWT and Indigenous companies, totalling C$228 million, the highest amount spent with NWT businesses since construction. In 2023, C$90 million was spent with companies operated by the mine’s impact benefit agreement (IBA) communities. From 2006 to 2023, Gahcho Kué and Snap Lake mines have contributed a combined C$26.5 million in social investment within the NWT. Gahcho Kué has also made significant payments to Indigenous communities in terms of six IBAs and has paid resource royalties to the government of the NWT. Gahcho Kué was officially opened in 2016 and now provides 663 full-time equivalent jobs, including 245 jobs held by NWT residents.
The mine is located about 280 km northeast of Yellowknife, NWT, on the traditional territories of Tlicho, Dene and Metis peoples. De Beers is the 51% owner and operator. Mountain Province retains the remaining 49%.
In 2023 the project mined 3.3 million tonnes of kimberlite and recovered nearly 5.6 million carats (on a 100% basis). Guidance for 2024 is 4.2 million to 4.7 million carats.
Lucapa today (25 June) announced the sale of its 70 per cent stake in the Mothae mine, in Lesotho, to a local contractor for a nominal sum.
The Australian miner said it wanted to to focus on its core assets in Africa, where it has a 40 per cent stake in the Lulo alluvial mine, in Angola, and in Australia.
Mothae has produced over 150,000 carats since it started commercial production in 2019, bringing in more than $100m in revenue.
Lucapa says it will sell its stake in stake in Mothae Diamonds (Pty) Ltd to Lephema Executive Transport (Pty) Ltd, which has provided it with long-term contract mining services, for A$10,000 (US$6,660).
Mothae Diamonds, which owns the site, will pay Lucapa A$1m (US$666,000) in outstanding technical services payments.
“This agreement is the result of a period of offer and negotiation involving Lucapa and several interested parties,” said Lucapa managing director and CEO Nick Selby.
“(Lephema) Executive has a successful history with the Mothae Diamond Mine, having provided long-term contract mining services. Lucapa wanted to, as far as possible, see
this mine continue to operate and Executive are best placed to achieve this.
“The signing of this agreement is a key step towards Lucapa streamlining its portfolio and executing the new strategy which will focus on assets in Australia and Angola”.
Mothae has indicated resources of 180,000 carats and inferred resources of 960,000 carats, according to December 2023 figures provided by Lucapa, with a modelled per carat value of $606.
Lucapa said in its sales material that Mothae has recovered 13 +100ct diamonds (largest Type IIa gem 213cts), and 10 diamonds valued at over $1m.
Michael Moszynski, founder and chief executive of LONDON Advertising and an experienced investor, was introduced to Mr Dominguez by a fellow investor in a separate business.
He explained Mr Dominguez’s reputation – being an Entrepreneur of the Year finalist, tipped by Forbes magazine, with the backing of high-profile investors – made Vashi an attractive proposition.
The senior management team also included figures with strong track records in retail, which gave him confidence. Audited accounts suggested it had healthy assets and revenue.
“I went to see their store and they were just about to open this amazing shop in Covent Garden. It all looked really strong,” Mr Moszynski said.
“The quality of the investors was reassuring and everyone thought everyone else had done their due diligence. Some of the investors who lost their money were top names in British entrepreneurship.”
A Middle East investor, who has a background in the retail business and spoke anonymously, told The National he was attracted by Vashi’s approach which “had a lot of merit to it”.
He was impressed by the “brazenness” of stores in high-profile locations in central London.
“I was invited to the opening of the Covent Garden one and they walked us around, and it was busy and buzzing,” he said.
He put together a consortium, which included friends, family and his employers, spread across the Gulf and Saudi Arabia, to invest in Vashi.
The consensus was that if investment went wrong “at least we had the diamonds”, he said. “That was the insurance policy.”
He feels “taken in” by Vashi’s story.
“I’m involved in many companies that haven’t made it. They fail, but they fail on their merits,” said one frustrated investor from the Middle East, who wished to remain anonymous. “This feels different.”
Mr Moszynski said the fact the company was raising capital on the back of its diamonds, confirmed by auditors, convinced him to invest.
“That was a major, major reason why investors put in money. They felt even if the business wasn’t successful, the liquidation of the assets would offset the investment,” he said.
“But we investors discovered that there was no stock when we heard that the liquidators had opened the safe and it was bare.”
Vashi’s vision Mr Dominguez was born to a Spanish mother and Indian father on the island of Tenerife.
His insurance broker parents sent their only child to a private school and he went on to study law.
He dropped out, becoming a salesman at an electronics store and in the process finding his passion for business.
Mr Dominguez opened his own shop in 1998, then set himself up as a wholesale supplier of electronics to the Canary Islands, travelling to Hong Kong to deal directly with manufacturers.
Tiring of electronics, he decided to turn a childhood fascination with diamonds into a moneymaking venture.
Meteoric rise It’s a difficult business to break into, but after 100 meetings over nine months he managed to find a gems supplier in Mumbai and he was on his way.
After first selling them wholesale in his native Spain, he decided it would be more beneficial to market them online directly to customers.
Mr Dominguez moved his business to London in 2007, setting up its headquarters in the Hatton Garden diamond district. His company Diamond Manufacturers Ltd rebranded to begin trading in his own name, Vashi, and in 2009 his website was up and running.
He opened his first bricks and mortar store in the upmarket Mayfair district of the UK capital.
This led to media coverage and the regular slot on This Morning giving tips about buying precious gems.
Buoyed by his initial success and enhanced profile, he set out his vision for conquering the jewellery world, aimed at luring millennial and Gen Z customers to “iconic destination stores”, stocked with ethically-sourced diamonds.
He expanded to three more stores, with the flagship a dazzling 4,476-square-foot presence in Covent Garden. Each of them dovetailed with a bespoke online service.
Rather than intimidating destinations only for the super-rich, these would be “friendly and accessible”, with in-house workshops visible from the street that would tailor-make jewellery to embrace “the fundamental emotions of the wearer”.
Material for investors showed young photogenic customers, smiling as they engage in the diamond ring-buying “experience”.
John Ames joined Vashi as chief technology officer in July 2021 and his first impressions of Mr Dominguez were positive.
“He was a big man – imposing and tall. He was impressive,” Mr Ames told The National.
“He turned up to the meeting with a £60,000 gold watch on his wrist and he spoke eloquently about his vision.”
Meanwhile, Mr Dominguez was a finalist in the Ernst and Young Entrepreneur of the Year award, while Forbes magazine predicted Vashi would be among the UK’s next “unicorns” – a privately owned start-up company valued at over $1 billion.
The company recorded apparently dramatic increases in sales. A trading update issued in May 2021 stated that sales were up 385 per cent from the year before, when the UK was in lockdown due to the Covid-19 pandemic.
Mr Dominguez laid out plans for expansion into the US, saying the $300 billion jewellery industry was “ready to be disrupted”.
“Within five years, we expect to join one of the world’s biggest luxury conglomerates, and we will begin our global roll-out thereafter,” the company boasted.
A 2021 pitch seeking £75 million from investors set out a bold plan to use the capital to fit out New York stores and also to buy £50 million worth of stock.
The New York stores were to be on Fifth Avenue and in SoHo, where its premises were to be opposite Tiffany & Co and adjacent to Cartier, Louis Vuitton and Apple.
Vashi’s chief financial officer, Charles Leach, emailed potential investors to say the company was valued at £250 million with fixed assets in the form of loose polished diamonds and metal worth up to £200 million.
The unravelling Mr Ames, the chief technology officer, suspected all was not right when suppliers began seeking overdue payments.
By December 2021, he had reason to believe that the company was raising investment on the basis of sales figures he felt did not match reality.
Mr Ames was given an internal sales report, which showed the figures were around £5.4 million for 2020 and £5.09 million for 2021.
That contrasts with the last available public accounts filed with Companies House, which show that the company’s stated sales for the year ending 2020 were £53.63 million and 2021 £105.42 million.
The company made a pre-tax profit of £14.1 million in 2021, according to the filing for that year, up from £4.9 million the year before.
The accounts were signed off by Inger & Co, which operates out of a small office among shops in the East London suburb of Redbridge.
Mr Ames says when he challenged a fellow senior manager about the discrepancy, he was told the rest of the sales were made up of Mr Dominguez’s private sales to celebrities and other wealthy clients.
However, a presentation to investors states that revenue were split 62 per cent online and 38 per cent in stores. There was no mention of private sales.
It just “didn’t make any sense”, said Mr Ames.
From his conversations with Vashi employees involved in the purchase of precious metals and diamonds, Mr Ames understood those suppliers continued to chase the company for unpaid bills and were unwilling to allow the business to purchase on credit.
Other conversations, including with employees who worked in the stores, where diamonds were kept in safes, revealed that the necessary stock was not being bought.
He said he was “uncomfortable” with what was taking place.
Mr Ames began to raise concerns about a lack of internal governance and internal reporting but in January 2022 he was dismissed.
Former chief financial officer Mr Leach had by this stage put his own money into the company.
He told The National: “As an investor myself who lost a substantial sum, I relied like other investors on audited accounts, audited stock certificates and independent professional stock valuations.
“I was retained by the company as an external consultant, preparing investor forecasts from management accounts provided by the accountant, and communicating their vision to their investors.
“I never saw a bank statement or any internal sales or customer information. The business appeared to be a great British success story with an inspiring leader, and I put my heart into helping them tell their story.
“The sudden liquidation and the picture that emerged following it were a huge shock.”
Creditors, including diamond suppliers, had gradually lost patience, and court records show they were petitioning to have the company wound up from May 2022.
A former employee revealed on the Glassdoor employment website, which reviews companies, that staff were made to pretend to be customers in November 2022.
Other employees wrote on Glassdoor of unpaid salaries, pension contributions taken out of wages but not paid into pension funds, and having to lie to customers about their orders.
Meanwhile, furious customers complained about the shambolic service, with one saying Vashi had taken more than a year to replace a faulty ring.
The company was finally wound up in April 2023 after the Canary Wharf shopping centre, the landlords of one of its premises, and 19 other creditors, obtained a court order.
The liquidators say there are claims totalling £162 million from creditors, while staff are owed £2.5 million and the tax authorities £4.6 million.
Reflecting on his time at the company, Mr Ames said: “I hated the fact I was deceived. It made me very angry that other people were being recruited into it and deceived as well.
“They were young and very talented and they all believed in the concept and wanted to deliver on it.”
The person most able to answer questions about the company is of course Vashi Dominguez himself.
Efforts to contact him to seek a response to the allegations made have so far been unsuccessful. It is understood investors have also been trying to track him down.
At his last registered residential address in central London, a woman who answered the door when The National visited denied knowing who he was.
Mr Moszynski said he has now made a complaint to the UK’s Serious Fraud Office with a detailed dossier of evidence.
The SFO told The National its policy was to “neither confirm nor deny” whether it was looking at a case until it was officially announced but said criteria for investigating included “cases that involve millions of pounds”.
Russia is seeking to strengthen ties with Brazil, India, China, and South Africa and other BRICS countries in response to tighter sanctions on diamonds from the G7 and EU.
Setting an agenda for “equal and fair interaction between the parties involved in all segments of the global diamond trade” was the focus of a roundtable discussion at the St. Petersburg International Economic Forum earlier this month.
Russia currently chairs BRICS (the initial letters of Brazil, Russia, India, China, and South Africa. Later additions are Iran, Egypt, Ethiopia, and the United Arab Emirates).
“The only universal mechanism for regulating the global diamond trade, the Kimberley Process Certification Scheme (KPCS), is being undermined by the attempts of numerous countries to introduce unilateral trade barriers,” said BRICS in a statement. Alrosa CEO Pavel Marinychev said: “New cooperation mechanisms will ensure the stability of the global diamond market and preserve the system of the free global trade of diamond products based on the core principles of the Kimberley Process.”
Russia warned back in November 2023 that sanctions on it diamonds would have a “boomerang” effect – harming the countries that imposed them more than Russia itself.
Nikolayev Aysen, head of Russia’s Yakutia republic, where state-controlled diamond miner Alrosa is based, told the BRICS audience: “Given the illegal unilateral restrictions that certain Western countries have imposed on Russian diamonds, it is crucial for us to support the efforts of ALROSA, which aim to diversify international supply markets. For example, this will make it possible to maintain the sustainable socioeconomic development of Yakutia.”
India’s exports of polished diamonds suffered a further drop in May, down by almost 15 per cent to $1.47bn.
But the year-on-year rate of decline shows some signs of slowing, according to new figures from the GJEPC (Gem and Jewellery Export Promotion Council).
It fell 20 per cent in January, 28 per cent in February, 27 per cent in March and 17 per cent in April.
Diamonds are faring significantly less well than India’s overall gems and jewelry sector, which saw revenue for April slip by 6 per cent to $2.48bn.
Manufacturers bought more diamonds year-on-year in April and May (up almost 2 per cent by volume) but the price slump means imports are down almost 10 per cent by value are down by almost 10 per cent to $2.39bn.
US Capitol building at sunset, Washington DC, USA.
US jewelers have warned Congress of the harm that new sanctions on Russian diamonds will cause for the entire retail sector.
The trade association Jewelers of America (JA) met with with a dozen Democratic and Republican lawmakers in both the House and Senate to voice concerns over the 1 September restrictions that will require all goods of 0.50-scts and above to enter G7 countries via Antwerp for verification.
They say a single import channel will “cause maximum damage to the global diamond and jewelry supply chain, while having minimal effect on Russia’s diamond revenues”.
JA is urging all its members to lobby Congress and explain that the way the restrictions are being implemented will hurt jewelry businesses.
“JA has been working tirelessly behind the scenes and this visit to Washington, D.C. was a critical step to ensure we minimize unnecessary disruptions to the U.S. diamond industry,” said JA president & CEO David J. Bonaparte.
He and fellow JA representatives also called for a “grandfathering” clause to cover goods imported before 1 March (when the 1.0-cts and above restriction was imposed) and for clearer guidance on whether the current size limit applied only to individual, loose diamonds or to the total weight of all diamonds in finished jewelry.
Declining profits for lab grown diamonds could push retailers into a natural diamond pivot, said Paul Zimnisky, an independent diamond industry analyst.
Last week Zimnisky spoke to Kitco Mining.
The diamond market has been in a tough spot due to declining sales. In September Petra Diamonds reported full-year revenue declined 44%. In February Lucara Diamond announced full year revenue was down 16%, adding that the diamond market is a “volatile environment with market challenges coming from multiple areas.” Storied diamond company De Beers is being sold off by parent Anglo American, which is restructuring after rebuffing a takeover by BHP.
Demographics and growing market share by lab grown diamonds are part of the challenge, said Zimnisky, but exclusivity and rarity of natural diamonds could end up helping. Innovations in production have led jewelers to cut the costs of lab grown diamonds. That may lead jewelers to pivot and prioritize selling natural diamonds over lab grown, said Zimnisky.
“The catalyst could be declining profitability of selling lab grown diamonds, ” said Z. “[That] could incentivize retailers to really push natural diamonds again. That has the potential to be a very positive development for natural diamond industry.”
