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

I think we'll kick it off now. Good morning, everybody. On behalf of Burgundy Diamond Mines and Bell Potter Securities, welcome to the Burgundy Diamond Mines Q1 2025 Conference Call. My name is Stuart Howe, Resources Analyst at Bell Potter, and I will host today's call. From Burgundy, we have CEO and Managing Director, Kim Truter; and Chief Financial Officer, Brad Baylis. Format for today's call is that management will take us through a presentation. This will be followed by a Q&A session, which I will chair. [Operator Instructions] After the presentation, I'll read out your name, affiliation and the question. Today's call is being recorded. And before we get started, I want to draw your attention to the important notice and disclaimer on Slides 2 and 3 of today's presentation. Kim, Brad, over to you.

Thank you, Stuart. Good morning, afternoon, evening, everyone, wherever you are. Thank you for joining us, and thanks, Brad, for being with me. We'll do our usual where Brad and I talk to different slides. And then obviously, at the end, we'll take as many questions as you've got. We have kept it quite simple this time around. And I guess before we launch into it, it's probably fair to say that this last quarter has been quite a tough quarter for us, and we'll walk you through some of the reasons why the quarter has been quite tough for us operationally and as a result, probably financially. So we'll just go straight through into the operational update, and then we'll follow up that with the financial update. You can see on the screen the key operating metrics, which we always normally take you through. Obviously, we're highlighting this last quarter. And so you can see generally every single production metric has been down for the quarter with the exception of the grade, and I'll explain why that's the case shortly. And this is really all to do with the transition from the Sable open pit to Point Lake, which I think, to be frank, hasn't gone quite as well as we would have liked. The main issue with that transition is that as we shifted the big mining gear across from Sable to Point Lake, and we got down into the bottom of the pit as we were trying to get into the kimberlite ore itself, we really struggled with the remnants of the lake that had been pumped out and the ore itself was very, very wet and muddy. And so just generally, the mining conditions were very, very tough as we had to work through very, very muddy conditions. And the big equipment didn't like that whatsoever, as you can imagine, so we struggled with equipment getting stuck and that kind of thing. The real breakthrough happened towards the end of the quarter where we managed to bring in some smaller contractor equipment on a sort of a wet hire basis, and that small equipment was the breakthrough. It helped us move some of that muddy material. And then once we could get good running conditions for the big gear, we started hitting our straps again. So the good news is that we took a lot of pain in the first quarter, but we've turned the corner, and we've set Q2 up quite nicely. So you should see a big recovery in production and carats into Q2. But you can see the metrics on the screen. So if you do a sort of a quarter-by-quarter comparison, well, you can see that obviously, the waste -- the difference in waste between this quarter and the prior quarter a year ago. Didn't move as much wasting in Q1 compared to Q4 last year. Some of that is because of those muddy conditions, but the thing that really suffered was the ore delivery. We did try to compensate by bringing more Misery underground ore into the mix, and that's why the grade jumped up because the Misery pipe is much richer and much higher grade than Point Lake. So you can see that's why the grade spiked to 1.4 carats per tonne as we were favoring Misery production during the quarter to try and compensate for Point Lake. Misery itself didn't fire on all cylinders. We did struggle a bit with the ore body freezing up, especially at the end of the last quarter. And so the ore in Misery wasn't playing quite as nicely as we'd like either. So we had a bit of a double whammy there. But as I said, just to reassure you, we worked through both of those issues. Misery is now firing on all cylinders and Point Lake also firing on all cylinders, so the carats will be flowing into Q2. So that's just a bit of an overview of how the operations fared in Q1. And you can see, as Brad takes you through these metrics, some of that plays straight into these metrics. So over to you, Brad.

Yes. Thanks, Kim. Yes, like Kim said, challenging quarter operationally, which really has carried itself over into the selling and financial results. So down on carats sold quarter-to-quarter and the revenue per carat down quite a bit. And the big driver for the revenue per carat being down is we had probably between 300,000 and 400,000 very low-value, low-quality carats that really carry over from 2024 that sold in the first quarter. And so that really brought down our revenue per carat. And then obviously, our total revenue is down just for the fact that because we sold the lower-quality carats, but we also had just overall less carats to sell, brought down our revenue, so $73 million versus $118 million a year ago. So we are seeing that. The good news, I guess, from a selling perspective is we did see -- we definitely saw, especially in the February and the March sales, we did see some good like-for-like price improvements anywhere from between 8% and 10% across the board. So that was very good to see. Obviously, now with -- as we move into April and into the second quarter, we still -- we do have some uncertainty given the tariffs and still trying to get our heads around what does that all mean and what's going to be the impact. And hopefully, it kind of sorts itself out here in the short term. But yes. And then obviously, that, with lower revenue translates into weaker financial results. And so for the quarter, just over $6 million adjusted EBITDA, so down quite a bit from a year ago. And if we take a look quickly at our balance sheet. So some of the big changes sort of -- PP&E is up quite a bit, and that's just due to the capitalization of the Point Lake pre-strip and a little bit of equipment, but mainly the Point Lake pre-strip. Diamond inventories, down again. And again, that's largely due to the fact that we just haven't been recovering the carats that we normally do. And so that's kind of dragging our inventory down. Our kind of normal level would be between $70 million and $90 million. So we're definitely below where we would -- our normal inventory would be. And so as Kim mentioned, as we -- as our production starts to stabilize and starts to improve, then we should start to build up that diamond inventory again. And hopefully, by late Q2, early Q3, we get back to where we need to be. On the cash side, we had the onetime cash benefit associated with the fuel offtake arrangement with Macquarie Bank. So this is a great deal for us, and we'll look to kind of replicate it because it allows us to -- essentially instead of prebuying all of our fuel, allows us to kind of purchase fuel as we use it. One of the big challenges of operating in the Arctic is the fact that you can only bring in materials one time a year. And so we have a huge amount of cash going out the door in Q1, Q2, though we don't actually use those supplies for quite some time. So to be able to spread that expenditure over the year is very helpful for us. And then yes, obviously, everything kind of translates down into the net debt. Not where we want it to be. When we take our net debt, including diamond inventories, yes, it's $1 million. As we start to rebuild our inventory and hopefully, that should translate into some -- into a better cash position, we should start to see that kind of reverse its trend as we move through the year. And on the cash side, so just a quick snapshot of where the cash went for the quarter. So again, we started -- we ended the year at $25 million, and we ended the quarter just under $39 million. Here are the big drivers for cash. So we brought in $37 million associated with the fuel offtake arrangement. We spent quite a bit on the Point Lake pre-stripping. Like Kim alluded to, yes, it took longer than what we were anticipating. And so a fairly large chunk of capital, $35 million just associated with the Point Lake pre-strip. And then the rest -- the other $8 million of capital was just our regular sustaining capital. And yes, so those are kind of the main changes in cash for the quarter.

Thanks, Brad. Let's move on to some of the more positive topics, which is what's happening over at Misery and Point Lake. And if I start with Misery, I think we just want to highlight a few really important points here. Misery grade is around about 3 carats per tonne, which in diamond parlance is very high grade. So the Misery production is basically the cornerstone of our production, and it provides around about 60% of our production comes from Misery in terms of carats. So it's such an important little operation. And we really focused some of the diamond drilling during Q1 to keep going deeper in Misery, which is aimed at obviously expanding the life of that Misery mine and resource base. I think we've told you previously that we're trying to extend the Misery mine all the way out to 2030. That's our target. Because of that, we shifted a lot of our focus during the quarter from the Southwest extension, which is the extension of Misery up at the higher levels. And we focused a bit more on what we call the Misery Main pipe, which extends at depth. And even though we still did a bit of drilling in the Southwest extension, we started doing some more drilling in the Main pipe as well. And we've also been doing some sampling of the draw points at what we call the 1950 level, which is one of our working levels. And you use micro diamond analysis to enhance your knowledge of the pipe. And so far, all of the work is showing that Misery extends at depth. It also seems to be showing that the pipe is not narrowing. It's actually extending in sort of, let's call it, a straight line as it goes down and the grades are looking pretty good as well. So our confidence in Misery is extremely high. And obviously, that will play into the Burgundy mine plan that we'll be releasing in a few months' time. And there's some of the other kind of reminders there just about some of the characteristics of Misery: extremely low capital intensity. We really don't have a lot of capital that we need to spend. We just basically extend the decline down and keep following the pipe as we go. So fantastic contributor, Misery pipe. Point Lake, there's quite a nice photograph for you all. So you can actually see quite clearly how we -- we're now sitting right on top of the kimberlite pipe. You can see clear as day on that photograph, those dark areas where you're seeing some of the excavators and the diggers located, that's kimberlite. So you can see the dark material. And for those of you that might have seen our previous photograph, we showed you all, you can see how much deeper that pit is moving and there's a real hive of activity. So very significant progress over the quarter, getting rid of that mud and what we call the till, which is the rock that sits over the top of the kimberlite pipe. Managed to crack that nut during the quarter. The other thing we will be doing in a few weeks' time is we're going to be taking a big bulk sample. So basically a dedicated sample from that Point Lake main pipe. and we'll be feeding that through the process plant for about a week to 10 days. And what that will do is it will give us a very, very good handle on the -- not only the grade of the Point Lake pipe, but more importantly, the value of the carats. At the moment, we have a relatively small sample. And so the bulk sample will give us a hell of a lot more confidence about the value of the carats. And the other benefit of doing that is if the value of those carats comes back higher than we've currently got in our model, then there's potential for that pipe or the actual pit size to be made a little bit bigger with very little change in strip ratio, and that could add about 50% to the mine life of Point Lake. So that bulk sample is a very important piece of work. And as I say, we'll be mining it and processing it in May, and then we'll have the numbers really in terms of the quality and the value per carat, we'll have those in June, and we'll probably be able to share it with you in the Q2 update. The other thing we've spoken about previously is as we shifted all the people and the equipment across to Point Lake, there's been a big focus on making sure we capture the productivity gains by having the workforce all co-located with Misery. We've definitely been achieving that. We've gained over an hour a day of shift -- effective shift time because we don't have to travel so far and the workforce is located right close to the pipe. We've also improved our payload quite significantly and a lot of our operating metrics have improved. And as a consequence, our cost per tonne has gone down. So all of those are very good things, and I think that you would have been expecting us to do as we've shifted across. And then just some of those reminders there about the size of the resource and how we're using the Misery camp just a couple of Ks away. So that's a bit of an overview of the Point Lake mine. If we shift our focus to talk about the rest of the year and how '25 will shape up, I'll just start at the top there, and Brad has mentioned some of this already, but we kind of cover 3 topics here. So if we look at the market, as Brad mentioned, we saw some quite nice green shoots emerging in February and March sales, as Brad mentioned. And we were seeing the price per carat for some of our sectors of diamonds up 8% to 10% from prior sales. So we've got off to a whopping start. Unfortunately, the U.S. tariffs brought uncertainty back into the diamond sector. And I think the diamond sector, like I think many other industries are still trying to wrap their heads around exactly what the tariffs will do. So it has created a bit of uncertainty. And any uncertainty is never good when you're obviously selling diamonds. So we'll have to see how that plays out during Q2. And just as a reminder, of course, the U.S. still is one of the biggest single markets for diamond jewelry, now well over 40%, in fact, approaching 50%. So the U.S. market is very, very important to us. Just a reminder, though, that we still firmly believe in the long-term thesis that strong diamond prices will be maintained. And we sometimes refer you all to the report that comes out monthly by Paul Zimnisky, and I see he's maintained his positive outlook for diamond prices over the next 5 years in his latest report, which is good to see. On the operations, I've already mentioned some of those efficiencies that we were realizing as we've co-located the workforce next to Misery. I've spoken about that bulk sample. The other thing is, and this is very important, I mentioned how Misery is the cornerstone of our production. We've started lifting the production rate out of Misery. In fact, in the last week, we've achieved 2 of the highest tonnages we've ever achieved out of Misery, well over 4,000 tonnes per day. And the way we've achieved that is we've introduced at the moment, 2 larger underground haul trucks. So these are 45-tonne haul trucks, whereas prior to that, we used to run 30-tonne haul trucks. So we've now got 2 more trucks and 50% more capacity in those trucks. We've got a third one that's coming online at the end of at the end of May. So then we'll have 3 of those bigger trucks. So that's immediately lifted our underground production capacity. We've also got another production drill rig that's already come up the winter road. It's sitting on site. We're just retrofitting that drill, changing the voltage of the drill to match our site voltage. And that will give us more production and drilling capacity so we can drill up into the old open pit and increase our throughput from the draw points. And then just a final point there is that we're heading towards our first mine plan release that's been in development for quite a while now, and that will come out at the end of Q2. So we're quite -- we'll be quite excited to share that with all of you. And then, of course, we'll follow that up with a longer-term mine plan later on in the year. And then finally, obviously, a big focus on making sure we've got financial flexibility in 2025. And we've shared with you previously the establishment of that environmental trust fund, which gives us tax rebate or tax offsetting capability. We've landed the fuel offtake agreement that Brad was talking about. And we're still focusing on refinancing our 2L Loan and making sure that we've got enough liquidity. So a lot's happening in that front. And I'll just move to some of those liquidity things we've been talking about. And the way we've configured the slide, you can see the things we've already achieved, we've ticked. So obviously, a huge focus on making sure that all of our leaders are very focused on cash management and working capital management. So I can reassure you all that we've got a very focused leadership team on both of those. We've managed to cement now doubling the royalty valuations and that plays into being able to export diamonds out of Canada twice the number of times, now moving from 10x to 20x, which in theory means that we could hold 20 sales a year if we wanted to. But the real point is it gives us lots of flexibility to sell more often and then shorten the diamond pipeline that Brad spoke about. There's the Macquarie fuel deal. You might recall, we actually communicated that we've landed a $45 million fuel deal. That reduced slightly because -- with some hedging that we put in place to make sure we had a hedging arrangement. So that's why the number came down slightly to $39 million. And then just those last 2 points. We are still in the process of making sure we've got nondilutive funding alternatives up our sleeve to ensure liquidity, and we've spoken about things like presales and various opportunities to make sure that our liquidity remains strong. And then as we progress through the year, we're still focused on establishing a refinancing arrangement so we can replace the existing 2L Loan in a nondilutive way. And then just a reminder that, that 2L Loan matures in June 2026. So that's why we're very focused on making sure we've got a refinancing option to replace that 2L loan. So that's a bit of a nutshell, everyone. And I'll stop there, Stuart, and then maybe hand back to you for Q&A.

Great. Thanks, Kim and Brad. I'll kick off the questions. Just around CY '25 guidance, and there's obviously been a delay in issuing that. I'm just wondering what the key moving factors are. I guess it's mostly to do with the bulk sample at Point Lake. Yes, perhaps just elaborate a little bit on what you're looking to see before you can put out some guidance.

Yes, that's correct, Stuart. I mean we've been -- we obviously, as we were moving through Q1 and we were aware of some of those difficulties, we didn't want to put out guidance when we weren't 100% sure how Q1 was going to play out. So now that we've moved through some of those issues in Point Lake and we've got Misery firing, obviously, our confidence has returned. And then secondly, that bulk sample, as you mentioned, is another piece of the puzzle. So by the middle of June, we should have all the pieces of the puzzle and then we'll provide guidance.

And I noticed that some of the feed this quarter has been -- or the last quarter has been from the Fox stockpile. What have you learned from blending that into the blend?

Yes. So thanks for asking that, Stuart. So we took the opportunity while we were struggling to keep the plants full, to feed some of the Fox, low-grade stockpile directly into the plant. I just want to just qualify there are actually 2 parts to that low-grade stockpile. There's a very low-grade portion and then a low-grade portion. So anyway, we fed the low-grade portion directly into the plant and actually recovered some quite nice stones, and they look very much like the Fox stones that had been recovered previously by BHP. Those Fox stones are very high-value stones. They are about 4x the value of any of our other pipes. And that -- so we did successfully recover those stones. It confirmed that the colors and the sizes and the quality look pretty good. So yes, so far, looking quite nice, Stuart. And as the year plays out, we'll more than likely progress the processing solution that allows us to upgrade that low grade in the field before we send it to the plant. So we'll progress it as we go through the year. And we'll probably provide more information on that low-grade processing arrangement when we do the mine plan update.

Great. A question from [ Mike Milligan ] online. And it was a question I was going to ask as well and related to, I guess, capital and Point Lake pre-stripping. And I noticed that in the call, you mentioned that the development of trenches and ramps is ongoing there, but obviously, $36 million spent in the first quarter on capital for Point Lake. Can you give us any guidance on how that moves into this quarter?

Look, I don't think -- I mean, obviously, the pre-strip activity will reduce. So in Q2, we won't be moving as much waste. So obviously, some of that waste movement was a bit front-end loaded in Point Lake. So we'll see an improvement there. We'll start getting in some of the benefits of those productivity and cost reduction things that I spoke about. And then obviously, as our volumes start picking up, our denominator gets bigger, so our dollar per carat will be going down. So in general terms, our dollar per carat cost in Q2 will be a hell of a lot better than Q1. And we're trying to -- even with Point Lake, we are trying to make sure that we -- as we drive the cost down in Point Lake, we try to make sure that even if the bulk sample comes back with a lower grade, that we can still make Point Lake work. So we're pretty confident that under any scenario, Point Lake would still be profitable, Stuart. And that's our plan. Then, of course, and with Misery being a cornerstone, as long as Point Lake is not detracting, as long as it's making money, we would keep doing it.

And so I guess to try and pin you a bit more on that, the Q2 CapEx there, it will be lower than in Q1.

Yes, more than likely. Most of it is the capitalized waste movement, so yes.

Yes, great. And just what's your understanding of those -- of the Point Lake grade at the moment? Another question from [ Mike ]. Can you tell us about anticipated value, any fancy yellows or high-quality larger stones anticipated there?

Yes, still a bit early to answer that question definitively, [ Mike ]. It's -- the grade looks okay. So the grade, it looks like it's consistent with the model. But I think it's a bit too early to talk about the value per carat because we haven't really been able to isolate the Point Lake stones separately. And that's the benefit of that bulk sample. So just as a reminder, the bulk sample, not only are you're doing it as a totally independent activity in the process plant, but they'll also be sorting those in India the way we normally sort them as a totally separate sorting arrangement. And then we can value them properly once they've been sorted. So I don't think we can fully answer the value -- the price per carat question until June.

Perhaps let's move on to Misery. And you noticed going deeper versus the Southwest extension and the deeper opportunity to take you out to 2030. Is the Southwest extension still an option to move the life of the project beyond this?

Look, I think the -- I mean, some of the drilling we did in the Southwest extension was a little bit disappointing. We were hoping that the value -- the grade was going to be similar to the Misery Main pipe. That was not the case. So I think it's probably fair to say we've deemphasized the Southwest extension a little bit, and we prioritized Misery deep. Now that doesn't mean that the South extension won't play a role. It's always going to play a role later on in Misery's life. We never ever intended a Misery Southwest extension in the -- to compete with the Misery deep. We're hoping it would prop up some of the production in the later years. So I think it's probably fair to say that the Southwest extension has been a little bit deprioritized. And we've shifted some of our focus to Misery deep, but we've also been focusing more closely on Fox and making sure that we start having a really close look at Fox. And just watch this space because we've got some -- we'll be talking about Fox when we do the Q2 update.

And I guess just looking at the quarters going forward, is it fair to say that Q2, one we're in at the moment, will be another sort of transition quarter, hopefully, a bit stronger than one we've just been through and then things will normalize in the third and fourth quarter?

Yes. Look, I mean, I think Q2 will -- is shaping up when you look at the run rate, especially as we head towards the end of May and June, Q2 will be a much stronger quarter, certainly much stronger than Q1. Probably won't be at full capacity because we'll be building up on inventory, as Brad said, during the quarter, but we'll set ourselves up for success in Q3 for sure.

Got it. There is a question from anonymous attendee. And you get this all the time, so I'll ask it now as well. But any feedback on trends from end users around, I guess, customers' preferences between natural and lab-grown diamonds?

Yes, I think I'll tag team on this answer. Brad will have a view and I have a view. I think what we've said before, and I'll just repeat what we've said before. If you're talking about high-end diamonds, very expensive diamonds, we are not in -- we're not even competing. So if someone is going to be buying a $1 million yellow stone, which Misery regularly produces, they are not in the market to buy lab-grown diamonds. Where lab-grown does compete with natural stones is in the lower price point diamonds. So it's -- and we have been talking about 1 carat engagement ring, we do sometimes go head-to-head with lab grown. But people are not spending big money on lab grown, as you can imagine. And just a reminder that lab grown has dropped significantly in value. So you can now buy a 5-carat lab-grown diamond for whatever you can buy it for $5,000, and people are doing that. So generally, what -- if people are buying lab grown, they're buying much bigger stones so they can show off a bigger stone on their finger. But in the high end, we're not competing at all. Anyway, but I'll let Brad also chip in.

Yes. Well, I think I guess it depends on what customers are looking for. But like Kim said, there is still a bit of head-to-head going on in the bridal space, but we are starting to see some more separation as time continues. The thing with -- I think customers are starting to get educated. If they want a manufactured product and they're fine with that, then they would buy lab grown. If they want something that's rare, they they'll go for the natural diamond, right? And I think it's -- unfortunately, for the last number of years, the natural business has not done a great job of kind of marketing itself and they've let the lab grown sell a narrative that actually isn't true. And really, the lab-grown business was selling a narrative that it's a sustainable, it's a green alternative, which is completely rubbish. It's actually the opposite. So as time goes on, I think that, that narrative and the proper marketing will happen and the separation between lab and natural will continue to extend. And prices for lab will continue to drop and prices for natural will continue to rise as the rarity is worth something. So yes, it's just going to take some time, but I do see that the trends are changing.

And do you think the recent drop in your realized sales price was, I guess, symptomatic of some of the lower-quality stones that were pulled out of inventory, sold into those markets, which are more competitive with lab-grown diamonds?

To be honest, Stuart, I think the lower-quality diamonds, I mean, we're talking about quite small stones. I'm not sure that was because of lab grown. That's just a market for those stones. And when you look at dollar per carat basis, they didn't perform badly. It's just that we had too many of them.

Yes, yes, right. And obviously, you noted as well that you're seeing, I guess, on a normalized basis, some price recovery in the last couple of months of the quarter.

Yes. I mean if you -- if any of you do look at that Paul Zimnisky report, one thing that's quite interesting is that in any report, he has a graphic which shows the price -- the index price of polished diamonds versus the index price of rough diamonds. And for the first time, the index price of polished diamonds has actually crossed over the rough diamond index price. So in other words, it would suggest that the retail side, at the retail price of polished diamonds, has started increasing. And that's a really good sign because as that increases, it starts pulling through the rough diamond price, which is very good.

Great. And just pointing to cash flows, obviously, in the absence of the diesel agreement, things would have been very tough indeed. I'm just -- how confident are you around the balance sheet in the absence of further, I guess, support from other loans or other nondilutive forms that you mentioned earlier? Do you feel -- do you have enough confidence in your balance sheet the way it is at the moment?

Look, I think it can be stronger, to be honest. So that's why we're very focused on making sure that it's strong enough. Just as a reminder, when we acquired Ekati, we deliberately loaded up the balance sheet with quite a lot of cash to make sure that we were always carrying $30 million to $40 million of cash on our balance sheet, and that's still what our target needs to be. So I think the fair answer is, Stuart, we will make sure that we've got enough liquidity to keep that sort of buffer. And this business does burn cash really quickly because of being in the Arctic Circle. So it's important that we do have a buffer. So I think there's a very high likelihood that we will have several financial solutions to ensure that we have that sort of cash buffer in place.

And I guess, historically, the June and September quarters are not high CapEx quarters, are not high cash outflow quarters with the winter road purchase has already been completed and obviously, hopefully, you got most of that Point Lake CapEx behind you, so...

That's right. Yes. And the summer months are your best -- always your best months. So as we now come out of -- slowly work our way out of winter, just as a reminder, it's plus 15 down where we are and it's minus 20 up in the Northwest Territory still. So it's still pretty cold. And -- but as we head into the summer months, that's typically our most productive months, and that's when we make the most money typically.

Great. Another question from [ Mike ] around how the search is going for a new CEO. I guess that's typically done at the Board level, but happy for you to provide some comments, Kim.

Look, I'm not directly involved in that. As you know, Jeremy King has kindly offered to play the role of interim CEO. Jeremy actually came across to Calgary about 10 days ago already. So he's already in Calgary and he is planning to be in Calgary for many months ahead. And him and I are working very closely together as he comes up to speed. I have to admit that Jeremy is a really, really real fast learner. So he's got the benefit of being a director. He's got a lot of knowledge of Burgundy already. As a reminder, Jeremy has been on the Board of Burgundy for a long time. And so he's very -- he's got a lot of background about Burgundy. The only thing he's just learning about, and he's learning really fast, is a little bit about how the Arctic operating environment works. So I think what I'm trying to tell you is at the moment, we're in a really good shape in terms of the handover between myself and Jeremy. And then as time marches on, the Board will keep looking at whether Jeremy continues to play that role or whether we have someone else. We're in a very, very strong position there.

Kim, you're a hard man to replace. So I wish you all the best in your next steps as well. So that's pretty much all. I know there's a couple of questions we might as well cover off on. There's one from [ John ] around tariffs. Perhaps just talk about that one, Kim, if you can see that.

So there's 2 there. Okay. So the tariff question, [ John ] asks, how do tariffs work if the diamond goes from Canada to India and then comes back out again? Look, as it currently stands, the tariff would be 10% on -- basically on India because India would be the country exporting it back into the U.S. And so that's as it currently stands. And that's what we're trying to work out is whether that 10% is going to hold true or not. And obviously, the big issue is -- the argument against that 10% tariff will be -- there is no alternative. I mean it's not like you can mine and produce diamonds in the U.S. because there are no diamond mines in the U.S. and there's no manufacturing in the U.S., and there's really no way around it. It's not like some of the other industries. So there is a strong case to be made that diamonds should be exempt. I think a lot of the retail stores that operate in the U.S. will put a lot of pressure on the political regime that it's actually a stupid idea to have tariffs on diamonds. So I'm still hopeful that it will win through as common sense prevails.

And then perhaps just on that marketing -- like the diamond industry marketing efforts. And I know you previously used the CanadaMark, I guess, trademark. Perhaps talk a little bit about that.

Well, I think this question is more about just generally, what is the industry doing? And I think it speaks a little bit to Brad's point about what is the natural diamond industry doing to promote natural diamonds versus lab-grown diamonds. Now some of you might recall that De Beers made a commitment to spend a lot more money on that topic. Al Cook from De Beers has spoken about that a lot. I see that the Natural Diamond Council has been putting a lot of media out into the U.S. in particular, talking about this. So I think the push has already started to promote natural diamonds differently. I still think there's an opportunity to do a little bit of what the lab-grown industry did by using social media and influencers and all that modern stuff and all of which I don't really understand. There's probably still a bigger opportunity there. But I think as the natural diamond industry gets behind that effort of De Beers in particular, I think you'll see a lot more marketing happening, especially in markets like the U.S.

And I'll jump in. I'll just add to that. As part of the De Beers campaign, they also had a campaign with a partner in China. And actually, for the first time in 3 years, China has actually seen some positive growth in diamond demand. And if China, the market can wake up, that's a major boost for the diamond industry. So we are starting to see some improvement there, and we just hope to see that continue. So I think that the Beers marketing is starting to have an effect. And hopefully we will -- others will also join the party, and it's not all of De Beer's show, but others will join. And as an industry, we kind of push forward and hopefully, things will improve.

Yes. And the other economy that's really worth keeping a watch on is obviously the Indian market. India consumes a lot of diamonds as well. And so if India keeps increases their diamond consumption, that's a good thing. And of course, the Indian economy is doing quite well. So yes, I think the way this is going to play out, it's a combination of the Indian economy, China and of course, the U.S. and that's really the magic formula.

Great. We might leave it there. On behalf of Bell Potter, Kim and Brad, thank you very much for your time today. And Kim, I'm hoping to see you again on one of these calls, but best wishes if we don't. Thanks, everyone, for joining the call. Thanks, [ Mike ], for asking questions as well. Appreciate that. So thank you, everyone. We'll catch you next time.

Thanks, Stuart. Thanks, everyone.

Thanks, Kim. Thank you.