Burgundy Diamond Mines Limited (BDM) Earnings Call Transcript & Summary

Good day. My name is Kim Truter. I'm the Chief Executive and Managing Director of Burgundy Diamond Mines. Burgundy Diamond Mines is a vertically integrated pure-play ASX-listed global diamond company. We've got a cornerstone asset called Ekati up in the Northwest Territories in Canada. And we've got our corporate headquarters in Calgary, Alberta. And then we've got offices in Antwerp, where our rough sales occur; and in Perth, Western Australia, where we do our polished sales and manufacturing.

Okay. Fantastic. Lovely to meet you, Kim. Look, we've not met or spoken before. Can you give us a little bit of background on yourself? Where have you been that's relevant to what you're doing there?

I'm a long-term mining executive. I spent many, many years with Rio Tinto. I've worked in quite a few continents around the world, Australia, Africa, many, many years in Canada. In the last 20 years, I've specialized in diamonds. And I guess I've got the claim to frame in Canada at least for having either built or run every diamond asset in Canada. I also ran the iconic Argyle mine in Western Australia, and I was the Chief Operating Officer for Rio Tinto Diamonds for many, many years as well. So quite a long background in mining and diamond mining.

Right. And talk to us about the team. And again, if we can focus on the people who sort of affect the business operational rather than just sort of nameplate so we could understand their experience and what they're adding to the team.

Yes. Look, I'm a great believer that you are who you surround yourself with. And so one of the first things we did when we built the business was make sure we established an A team, both at the Board level and at the management level. So we've got a very, very experienced Board made up of both Australian and global executives, including a strategic investor. And then our management team are very seasoned people, predominantly here in Canada. Our CFO and our Head of Organizational Development and I have worked together for many years. VP Operations and I worked together at Rio Tinto many, many years ago. And so that's always the first thing you do, is just make sure you've got the A team in place. And we are very, very comfortable with our team.

Okay. Okay. And this Michael O'Keefe guy, who's he?

So Michael is -- in Australia, he's a bit of a legend. Michael cut his teeth as an operational person at Mount Isa Mines, which has produced many great mining executives, as people in Australia would know. He went on to work for Glencore, and he did a lot more work outside the mine gate in the sort of the entrepreneurial side of the business. And he's done some amazing transactions in his private capacity after leaving Glencore, including Riversdale Resources, which was an amazing process of growing up a coal company and then selling it for $4 billion. A few years ago, he acquired the Bloom Lake iron ore asset in Quebec in Canada. And he's grown that business into nearly a $4 billion iron ore business. And now we're doing the same thing with diamonds. And part of Michael's real skill set is he's picking a countercyclical sector. And that's probably a question you will ask me, is why diamonds, and I'll explain that maybe next.

Yes. Well, I guess let's go there. Let's just try and understand the thematic of the background of the drivers in the marketplace. I think in recent years, diamonds come up against synthetic diamonds. It's come up against, I guess, lack of interest, and I guess more recently, lack of disposable income. So can you kind of describe the size of the market? And where -- what -- when you say diamond market, can you encapsulate what that actually means?

Yes. Look, it's a very interesting sector. I'll use the word -- that descriptor as a sector. So when you look at it from a resource point of view, what separates diamonds from the other commodities or sectors that you could mine in is, first of all, the diamond market is very -- on the producer side is very, very concentrated. It's probably best described as an oligarchy these days. You've got 2 major producers being the Russian producer, which is called Alrosa. And then you've got the remnants of De Beers, who previously were the monopoly of the market, but they're no longer the monopoly. So those are the 2 big producers. And then you've got a few smaller producers like ourselves. So that's the first interesting thing about the diamond sector, is there's very, very few players. And it's very, very concentrated in a few sets of hands. The other piece to the sector, you've then got what's called the midstream, which is where the diamonds are traded and polished or manufactured, predominantly in India. Around 90% of the world's diamonds pass through India. And then the final piece of the puzzle is the retail sector, which most of the public would understand where they actually buy the diamonds. So it's very, very different. And part of the attraction as a mining company is that in diamonds, there's a real opportunity to take a leadership role. De Beers' power has been declining over years. And as we know, Anglo American have now got De Beers up for sale. So that will probably change hands in the course of the next year. So from a Burgundy perspective, we saw a real opportunity to take a take a leadership position in a sector that's sort of ripe for change and then also to do things differently, especially appealing to the younger generation who are now seeking greater transparency of where the things that they buy come from. And in diamonds, that's particularly important, being able to prove to the consumer the origin of the product and so on. So we see a real opportunity to take a dominant role in a sector that's concentrated and to really get the vertical integration and sourcing and traceability correct.

Right. Okay. But just -- I want to understand the size of the opportunity, okay, in terms of -- in dollar terms because when I look at the diamond market as a natural resource investor and a broader investor, there's very few players, as you say. There's a couple of big players, and then there's lots of wannabes, right? And they've had varying degrees of success in terms of sustained revenue, sustained margin. And quite frankly, a lot of change of people, personnel in there as well. It's uncertain times. So what is it that people are chasing? What is the size of the price for, say, a company like you? When you say we want to take advantage of the situation and we want to be countercyclical, what does that actually mean in terms of how you go about doing that?

Yes. So if you remember, I described 3 different segments: the upstream, the midstream and the downstream. So the upstream, which is the production side of the equation, the total annual production is between 100 million and 110 million carats, which equates to about -- it depends on what price you use, but between $10 billion and $15 billion of rough diamonds are being produced and sold. And of course, then that goes down into the midstream and the retail. Now remember, we're a vertically integrated company. So we're not only a producer, but we also manufacture and sell. So we actually go all the way down. If you go all the way to the end of the chain, it's an $80 billion industry. So if you go -- if you add it all up from a production, the midstream and the retail part, it's about an $80 billion industry.

Okay. So big number, not so many players. Being vertically integrated, you're suggesting, offers you a better chance of success in terms of capturing more of the value downstream. That's what you're going with, yes?

That's correct. And part of that is it's not just about capturing the value. It's about actually being able to guarantee a chain of custody. We're one of the only companies that actually can claim to a consumer that the diamonds have never left our hands. From the time we mined it, recovered it, had it graded, sorted, sold, cut and polished, we hold it in our hand all the way through. And that's got huge appeal not just to the end consumer but to the luxury brands, in particular, who these days are really looking for a guaranteed ethical sourcing. And I'll just give you an anecdote there. A typical watch these days takes about 10 different elements to actually construct a watch, whether it's iron ore or stainless steel or platinum and so on. Ironically, diamonds are one of the very few things that these days you can guarantee the traceability of a diamond that could potentially go into a luxury watch. And that's the kind of thing that luxury brands are looking for. It's an absolute unequivocal traceability of the product they're going to be using and what they're selling as a luxury product.

Right. But if everyone does the same thing, that doesn't necessarily lend you a premium. It's just that demand and expectation of your customer. So I guess what I'm trying to -- here's what we should do. Let's start with the business plan. You said -- we talked about this vertical integration, but is there more to the business plan than that in terms of moving from where you are today to where you -- what percentage of the market or what parts of the market you think you can capture to deliver that growth?

Yes. So the business plan is quite simple. We -- the first thing -- part of that is to acquire an asset in the right jurisdiction. And so when you look around the world from a diamond point of view, there really are only 3 jurisdictions. There's Russia, there's Africa and there's Canada. Of those 3 jurisdictions, we chose Canada being what we call a Tier 1 jurisdiction, where you can be absolutely guaranteed all the background -- the operating environment is exactly what consumers are after. The Ekati asset that we acquired is a top 10 producing asset. So that was the second piece of the puzzle, is acquire an asset of scale. And the third piece is you want to buy a brownfield asset which has got an established infrastructure. BHP built the Ekati mine 25 years ago. And in today's money, to replace that infrastructure would probably cost $2 billion. So that's the other piece of the puzzle, is getting something with established high-quality infrastructure. The third part of the puzzle is having an asset that's got potential for growth and extension. Now one of the amazing things about the region where the Ekati mine is operating, there are 2 other scale diamond mines in the region, one owned by Rio Tinto and the other one is a JV between De Beers and Mountain Province. Ekati is the largest of those 3, and it's got the most significant growth prospects ahead of it because there's still around about 140 million carats left in the ground on the Ekati property. And in the surrounding areas, there's also -- it's very prospective as well. So there's many, many carats or diamonds still left in the ground. And just to educate people there, diamonds occur in what is called a kimberlite pipe, which is a rock that is a remnant of a volcano. And that area millions of years ago was very, very active. And so there are multiple opportunities to extend the life of the asset.

So just a bit of an aside, these kimberlite pipes, do they tend to be vertical? Or do they come in all sections and sizes?

Yes. So I normally describe to people to get a picture in their heads, it looks like a carrot really, the carrot that you actually eat, not the diamond carat. And so they shaped exactly like a carrot. They're a little bit bigger at the top, and they narrow as they go down vertically. If you think of the pipe, the pipe is a remnant of a volcano. So it's really the feeder that came from somewhere below the earth's mantle. And so those pipes are quite uniformly shaped. Up in the Northwest Territories, they're relatively small. And by that, I mean the diameter of that carrot-shaped pipe would be several hundred meters in diameter, which is a bit different to places like Africa, where sometimes the pipes, they are kilometers wide. But the big difference here in Canada is the pipes are very, very high grade. So the diamonds are very concentrated in a much smaller pipe. At Ekati, we have identified 125 kimberlite pipes, of which we've mined 10. So there's arguably another 115 to go that we could sequence through over the next few years.

And do these kimberlite pipes vary in terms of quality? Because I noticed that word that you use on the front page of your PowerPoint. It's reliable. Now you've explained reliable can mean a whole bunch of different things to you, but reliability of continuity with the ore. And obviously, the rough -- access to these rough diamonds is important to you. So do all kimberlites look and operate the same way? Do they give up the same stuff each time?

It's interesting. That's a great question. One of the appeals about diamonds -- well, it's both an appeal and it's a mystique, I guess, is that all diamonds are different. There's no one diamond that's the same. In fact, there's 20,000 different categories of diamonds. And one of the reasons why they're so different is because they come from different pipes. So every pipe would have a slightly different grade and a slightly different composition of diamonds. Within the pipe, there's not as much variability. There is some variability, but there's not that much. So typically, a pipe -- each individual pipe would be fairly uniform. Just to give you a feel for what I'm talking about, so right now, we are busy mining 2 pipes up at Ekati. One is an underground or one is an open pit. And the grade of the one pipe is 5x more than the grade of the other pipe. The quality of the diamonds in the one pipe is different. It produces lots of yellow diamonds and beautiful yellow diamonds. And the other one produces nice white diamonds. We've got a pipe that we're about to start mining that looks like it's got great orange and pink diamonds in it. So you do try and target pipes that appeal to consumers as well. That's important that we do that. And [ Graeme ], that's one of the wonderful things about the Ekati property. We've got great variation of pipes and flexibility to produce different kinds of diamonds.

Right. And so how do you go about with the target? Okay. You've identified these kimberlite pipes. How do you identify and prioritize those? Because obviously, drilling and -- yes, it's expensive. It's expensive. Again, you want to kind of get after some good stuff, get the revenue, et cetera. So when you say there's this variability to a degree, what's the priority process look like?

Yes. So I'll just try and dumb it down so just everyone understand what we're talking about. When you sample a kimberlite pipe, as you already mentioned, you either drill it with large diameter holes or core drill it or you take a bulk sample. You go in there, either tunnel into it or you dig a big trench or something like that. You get a bulk sample. And what you're trying to do is get -- recover enough diamonds so that you can have a look at the size-frequency distribution that's sitting in front of you. So if you could just picture a little pile of diamonds sitting on the desk in front of you, if you were so lucky to actually have that pile in front of you, there'd be a whole variation in size and color and quality and so on. And you can plot it on a graph. You can actually plot it graphically to say, well, how many small ones have I got? How many big ones have I got? And that -- we call that graph a size-frequency distribution. Every pipe has got a different size-frequency distribution. And then, of course, you can look at the diamond and say sort of what's the quality. Everyone knows the 4Cs, what's the clarity, are there any inclusions, what's the color, et cetera, et cetera. And all of that will produce a different price per carat for that size-frequency distribution. So the price per carat of a pipe is actually an average price across that whole distribution of diamonds. And so every pipe will be different. And what you're looking for to answer your question is you're obviously looking for a price -- an average price per carat that is the best, and you'll go after the best pipes and the ones with the highest quality and price.

Right. Okay. I have actually been lucky enough to sit in the free trade zone in Zurich with a bagful of this stuff worth $90 million apparently. So that's for another day. The -- with regards to strike and late stage, not to say dumbing down -- I don't want to use that phrase. Making it simple for people to understand, in conventional mining, people understand the terminology around things like life of mine. You're talking about a district which has over 100 of these kimberlites. How do you define the need to expand the life of mine of your project in layman's terms? Is that just the case of just targeting each one of these kimberlites? Or is there more sort of infrastructure work that's done and that's a kind of collect the [ fuss ] away?

Yes. Well, that -- as I mentioned earlier on, one of the key advantages of the asset we bought is where the primary infrastructure has already been built. So we're talking about things like airports and camp to house the workers, power generation facilities, the process plant, all of your mining equipment, all of that's been purchased. When you then mine each of the pipes, typically with kimberlite pipes, we only mine the 2 ways. You -- either an open pit where you mine the top piece of the pipe, and you can typically shave off the top 250 to 300 meters of the pipe using a conventional open pit. And then what you'll do is you'll switch to an underground mining method to take the rest of the pipe. So effectively, what we're doing is we're leveraging off all that infrastructure that's already been built. So you don't have to spend $1 more on infrastructure. The only thing you've got to spend money on as you keep going from pipe to pipe to pipe is either pre-stripping the waste at the top of the pipe so that you can establish an open pit or sinking a decline so you can get down into the underground mining method. So that's -- you've put your finger on a really, really important point. The other key attraction of this asset is our capital-to-carat ratio is probably one of the lowest in the world. We have to spend very little money to keep replicating the formula as we go from pipe to pipe to pipe. And all you're doing is you're just identifying the next pipe in the queue. And as long as it's got the right sort of price per carat profile and the market is after that type of quality, then that should make sure it's economic, and then we just go from there.

So let's look at that arbitrage, right? There's a point where it becomes sub-economic. If you're saying this carat shape gets thinner as it goes down, deeper down, I mean, how do -- are we talking about this kimberlite?

So the pipe itself could go down kilometers. Typically, today in Canada, most of the mines mine the top 700 to 800 meters. Maybe it's -- of the pipe. So you take the top 200 to 300 meters with an open pit and the next 600 or 700 meters with an underground mine.

So how do you view this? Like okay, you come in here, countercyclical model and saying, right, it's not worth a lot now, but we think we can get after each of the revenue streams and make this something bigger, right? Michael O'Keeffe with Champion and I would say, yes, we can do this. Do you say, I'm going to get after the most valuable part of this kimberlite and then move to the next one, and we'll come back for this stuff? We know there's value here. But right now, in terms of the return on capital investments, yes, we get after this up 300, 400 meters first, and we'll come back for the rest later, move on, move on because you got to kind of build up a kind of capital reserve for sites.

What you described is not always true. I mean there are cases where an underground mine could beat an open pit mine. And that comes back to -- I think people are familiar with the term strip ratio. So if it's an open pit mine, how many waste tonnes do I have to move to get at the ore? Obviously, the advantage of doing the underground mining is you move very little waste. 90% of what you actually mine underground is ore. The only waste that you're having to mine underground will be the tunneling around the pipe as you access the pipe. So actually, in some cases, an underground mine can actually be more economically feasible than an open pit mine. So it's just based on economics. The pipes or the mining method that wins, wins the price. And one thing I do want to say though is part of the formula, we're speaking about one part of the equation, which is the mining side and the portfolio development of how you sequence from pipe to pipe. I just want to make one point before I go to what I was going to say. The huge advantage of this property that we own is, as I said, how many kimberlite pipes are on the property and how many we can develop. When you look at our competitors, they don't have that queue of pipes. They have -- so if you look at -- some of the competitors are a single pipe owner. They only own one pipe or maybe they own 2. Even De Beers is only actively mining 5 or 6 pipes. They don't have a long queue of pipes after that in their portfolio. So we've specifically -- which is really what the Champion Iron ore formula is, which is really try and get an asset where you've got a long queue of development opportunities with very low capital intensity. Now that's only half the story. The other part of the story is what happens outside the mine gate, and I'm sure we're going to talk about that shortly because that's a very, very important part of...

We will, for sure. I just want to -- again, can I get the terminology, get the understanding for everyone listening or watching or reading about this part, okay? So with regards to, again, conventional mining, people understand the kind of study phases, PEA, PFS, DFS, et cetera, right? And that kind of defines the cost and margins, therefore, the economics of these things and the way that these -- the mines work. With diamonds, again, it's going to be quite unique. I know we've spoken to gold companies with [ Barrick ] and so forth, and they've kind of got their own way of explaining that. For you guys with kimberlite, how do you go about the economic assessment? Because you look it's 25 years of history. There's probably a bunch of data that came with that, and there's probably a bunch of data to be had. How do you bring all that together in some kind of economic study that people can understand?

So I mean first of all, the -- I mean, we've purposely chosen mining methods that are pretty simple. I think one of the mistakes people sometimes make in diamonds especially is they bring a sort of a big company approach to how they mine things. I'll give you a practical example of what I'm talking about. I mean I think it's well known that probably one of the most expensive upfront capital mining method is the block caves. Ironically, diamond pipes or kimberlite pipes lend themselves to block caves, especially if they're big pipes. But of course, the problem with the block cave is you're spending a lot of money upfront on infrastructure. Yes, you get the benefit of lower operating costs later on, but it's huge capital expenditure upfront. We've been very careful in choosing very low capital-intensive mining methods. So the underground mining method that we use at Ekati, for example, is what's called a sublevel retreat. And without getting too complicated, all it involves basically was you have a decline that runs around the outside of the pipe. And then every 25 meters or so, you tunnel back into the pipe. You drill upwards and you're just basically dropping it level for level for level. Now the beauty of that method is you spend very little capital upfront. It's what I would call a just-in-time capital expenditure method. So for the shareholders, you don't -- you're not asking them for billions of dollars upfront to build block caves and those kind of things. You actually can fund all of your capital out of your operating cash flow. And so you don't have this problem where you're going back to investors again and again asking for capital raises to progress the assets. So that's -- by design, that's something we've done. And when we acquired the company, we made sure our balance sheet was in a fantastic position with very little debt and lots of working capital cash flow so that we could fund the development of these mines as we sequence through them.

But it -- how much of that do you -- I know you've got this vertically integrated model, but how much of that do you monetize? Because I'm thinking that's a very long time to monetization if you go down the full chain downstream. So you've got to be extremely well capitalized, not just in terms of the infrastructure type, but the operational costs, et cetera. So how do you try to monetize some of the rough diamonds? How do you -- how do you monetize rough -- or how do you do it? Along the way? Or can you sort of stomach the pain as it were of waiting for revenue way down stream?

Well, you don't have to wait for very long. I mean obviously, we're a producing mine already. We produce 5 million carats of diamonds as we speak right now, which makes us the seventh biggest single producer in the world. So that's giving us cash flow as we speak. And then when it comes to -- I think to answer your question, when you're developing the next pipe, because as I said, you don't have a lot of work to do, all you're doing is you're just taking a decline down a couple of hundred feet or a couple of hundred meters, you often get a very short payback. So you can -- from the time you start developing the next pipe, within 6 months, you can be generating cash out of that pipe. You don't have this -- it's a great question because that's another issue with something like a block cave. Sometimes you're waiting 5 years before you get your money back, whereas in our case, typically, we're getting a way less than a 1-year payback on every bit of capital we're doing. We're shifting at the moment -- let me give you another practical example. We're shifting from one open pit to the next currently. We've gone from a pipe called Sable, and the next pipe we're busy establishing is called Point Lake. We turned over the first dirt, the first waste at Point Lake about 6 months ago. And by the end of the year, we'll be producing the first ore. So it's basically a 9-month payback for the revenue. So very quick.

Okay. Okay. So that's a really interesting point. That's a really interesting point. I'm glad you covered that. Okay. So in terms of the -- we move downstream -- I might bounce around a bit here because I'm trying to understand how all the pieces fit together. So as we move downstream, let's look at some of the revenue streams that you have got the opportunity to take advantage of. So can you run through where the money comes from and who are the clients, who are the buyers?

Yes. So again, I'm just going to -- so people understand how it works. Remember, I described that there's 3 sectors to the whole diamond market. There's what we call the rough side of the equation, which we predominantly play in. So that's that 100 million to 110 million carats global thing. As I said, we currently do just over 5 million carats from Ekati. Those diamonds -- I'll just give you a feel for the flow. So the diamonds start at the mine. They get recovered at the mine. Here in Canada, they have to go through the capital of the Northwest Territories, which is called Yellowknife. They get valued by the government, and then they get exported out of Canada. We then send them off to India to get sorted. And that sorting is where you're putting them into like size, color, clarity, et cetera, et cetera. So if you can just imagine, you've taken your 5 million carats, and you put them in a whole lot of different packets of diamonds. That's that 20,000 categories I was referring to earlier on. You can sort them into a whole bunch of categories. And then...

But can you just give me some broad example? Like are you kind of industrial diamonds size? Or are we talking large colored?

We take -- we don't call it industrial. We call it non-gem. So we take all the non-gem diamonds, kind of put them to one side. So the first part of the sorting is just to get all the gem diamonds together. And then what you're doing is you're putting more light -- so let's take for example you put all 1-carat stones that have got a similar color and shape, and you put them in a packet. And then you do the same thing for your half carat. So all the different sizes, there'd be literally thousands of different packets of light.

Broadly, I'm trying to understand the kind of revenue or the margin. Are you 80% non-gem or 10%? Or how does that work all the way through the broad categories?

Great question. So again, the way I always answer this question is every producer -- and remember, I said you've got a size-frequency distribution. So you generally are producing a lot more small diamonds and a lot less big diamonds. And if you put all those diamonds on a pile on your table, you've got a little pyramid of diamonds. Right at the top of the pyramid will be the most valuable, biggest stones, which you produce very few of. And down the bottom of the pyramid are all your smaller stones. So absolutely, most of your revenue comes from the top of the pyramid. So your high-value stones or the bigger, rarer stones is where you get most of your money. What's also interesting, if you look at some of the mines in Africa, for example, they don't even bother to recover the smaller stones. They focus only on the bigger stones. So that's another thing that makes comparing different companies quite difficult because you might have a mine down in Africa that's selling on average for, say, $2,000 a carat, but those are -- that's because they're not focusing on the smaller diamonds. We focus on kind of everything. So we're a volume producer, a bit like what De Beers does in all of the assets where -- in other words, we produce everything. We produce everything from small to big stones. So our dollar per carat on average is lower because we're selling everything. But our spectrum of dollar per carat varies from $50 a carat to $30,000 a carat. It just -- it depends on what we're trying to sell.

How do you help us understand it better? Because obviously, you could look at how many carats per tonne or you could look at how many dollars per tonne depending on whatever the market is doing at that time. Where do you kind of stack up then? Because I understand you don't want to leave any money in the ground. What does that actually convert to on your bottom line? Where do you sit compared to others?

Yes. Well, I mean, ultimately, we compete on margin per carat. I always say this. That's a little bit different to, let's say, an iron ore miner or a coal miner. Obviously, they're very focused on their dollar per tonne. But we -- in diamonds, generally, what's the most important financial metric is actually what is the margin per carat. In other words, what is the delta between your selling price per carat and your operating -- your business operating cost per carat. And so most diamond mines are anything from -- well, I suppose at the bottom of the spectrum will be 10% or 20% margin and the top of the spectrum will be 50%, 60% margin. So as a business, you'd want to try and operate somewhere in that range so that you've got the best, the biggest -- and obviously, you try to increase that margin all the time. You want the biggest possible margin between your price per carat and your cost per carat.

Okay. So look, it's been a tough year either for all juniors and tough 3, 4 years for juniors, quite frankly, after the excitement of 2021. You're a $140 million, $150 million market cap company. You've got growth ambitions, vertically integrated, good pedigree on the Board, your relevant experience, et cetera. And you've got an asset which has multiple targets that you can get after the market not understanding diamonds at the moment. Is it? Or is it too early in your strategy to be able to see that kind of reflection of the things that you're doing on the ground? How are people reading it? And how should people be reading it?

Yes, that's a great question. I think that the way people are reading it is they're generally reading the newspaper headlines about what gets published often about lab-grown diamonds or some of the negativity coming out around De Beers, for example. And so I think the most layperson is reading the media, kind of believing everything they read in the newspaper. And I think that actually paints quite a negative picture of the industry. And I think that has definitely affected people's willingness to participate in the diamond industry. I think the reality is far different. The reality is that, first of all, we don't all compete in the same selling space. So for example, I mean, I've already mentioned how every pipe is different and prices are different. So the interesting thing is high-quality diamonds have actually gone up in price. They haven't gone down in price. So if you've got -- if you're a company that can produce lots of high-quality diamonds, you can actually fare well in nearly any cycle. The other reality is that the lab-grown industry has not taken our market share. The interesting thing is that at a consumer level, the market has actually bifurcated. So what you've now got is you've got people that are choicefully and purposely buying natural diamonds because they understand that the inherent value of a natural diamond continues to exist and continues to grow. And a lab-grown diamond is now seen as a fashion item that doesn't hold its value. So consumers are getting quite smart about that piece of the puzzle. But I think there's still a perception being created by some of the newspapers that the lab-grown market is actually destroying the natural market. That's not true. The other thing that -- the other reality is that natural diamonds are getting scarcer. And I think we all know that price is driven by scarcity. I mentioned a figure of between 100 million and 110 million rough diamonds a year. You mentioned that some of those are -- you called it industrial. I call it non-gem. Around about half of that 110 million carats are non-gem diamonds. So you could actually divide that number by 2. So you're now down to sort of 50 million, 60 million gem diamonds. And when you cut and polish diamonds, you could divide that by 2 again. So you're down to about 30 million polished diamonds a year in a global population of 8 billion people. So you're talking about quite a rare commodity that's getting rarer because you've got no new mines coming on board. And so natural diamonds are getting increasingly rare, and human beings like rare, nonreplaceable items. And so our belief is that ultimately, the diamond market is going to recover and recover strongly as we work through some of the macroeconomic issues.

Right. Right. Okay. Here's one to you. I came across it. It made me smile. Misery underground mine. Your marketing team made some work on that.

Yes. Unfortunately, I mentioned that we acquired the asset as a legacy BHP asset. It's so funny. Just as an anecdote, when you look at the naming conventions that they've used over the years, and we inherited it, unfortunately, so Misery would have been named by someone back in BHP's days. We're trying to pin it down, by the way. We think it was actually a geologist that named it. And apparently, the...

Scottish.

But the drilling conditions were atrocious. It was minus 45. And I presume the driller that was standing out on the [ drillery ] and discovered the pipe was in abject misery, and that's why they called it Misery.

Right. Right. Not [ a dura ] Scotsman.

Unfortunate name, but it's a wonderful pipe.

It's a wonderful pipe. That's really good news. And I'm just conscious of time here. I've really enjoyed this conversation. Not only have I learned a lot, but I've actually enjoyed the conversation. I would love to learn more about the business and the kind of these -- not more about the business plan but more about these kind of sales strategies into these different markets and the way that you go about driving margin, increasing sales and obviously, operationally with engineers, working out how do we get after the good stuff as well. So Kim, I'm going to have to -- I'm reluctantly going to cut it short there and let you get on. But I appreciate your time today. Really fascinating. Love to hear about the team as well. But stay in touch, please. And let's know how you get on. We'd love to hear more.

Yes. And I'd love to tell you more because we've only spoken about half the story. The other half of the story is outside the mine gate, and we're doing a lot of very innovative things out there which I'd love tell you about.

Absolutely. Absolutely. I look forward to it, sir. Okay. Kim, thanks for your time today.

No worries. Thank you.