Eira Thomas: A Great Time for Exploration

By Ronit Scheyer

Eira Thomas

For those who have heard the name Eira Thomas, and there are very few in upstream diamonds who haven’t, the facts are well known – a 30-something CEO of Stornoway Diamond Corporation (a publicly traded Canadian exploration company), a geologist and one of the key personalities in the discovery of the Diavik diamond mine in Canada’s Northwest Territories.

Stornoway is still in the development stage, striving to get the attention of investors who will put their money – as Thomas does – on the belief that Canada should be taken seriously as a viable source of rough diamonds and that Stornoway will succeed in profitably unearthing this wealth. Thomas believes that there is at least one more world-class diamond mine to be discovered in Canada, if not more. “We are actually the largest landowner in Canada,” she reveals.

As part of an overall plan to aggressively explore vast tracts of frozen Canadian wilderness and create value for shareholders, she says that Stornoway’s focus is to continue “particularly targeting small- to medium-sized assets that some of the larger diamond companies have really overlooked.” This includes Renard, Stornoway’s most developed project, which could turn out to be Quebec’s irst diamond mine.

The company is also searching outside of Canada and has begun drilling at a site in Botswana, as part of a 50/50 joint venture with Motapa Diamonds, a Vancouver-based African exploration company.

Despite the firm’ s recent announcements detailing positive outcomes from explorations in Canada, Stornoway’s stock still has a long way to go before it recovers from the downward slope it has been on since March 2007.

Thomas says that this has been a tough period for all Canadian diamond miners, her company included. “We’ve actually started to react finally,” she says.

At the end of January, Stornoway’s stock reached a one-year low of around 47 cents per share. As of late-February, they had gained some ground and hovered around the $0.69-$0.72 per share range.

Thomas admits that this is not the performance that the company would have hoped for. However, don’t expect Stornoway to end up on a road like Tahera Diamond Corporation, which suspended mining operations at its Jericho mine in February after running out of funds. “We have cash in the bank and we continue to move forward with all of our plans,” Thomas says. “We’ve been meeting our milestones, and technical results have either met or exceeded our expectations.”

Although she cautions that it’s too early to say whether the situation will improve, Thomas says that the Canadian diamond mining sector has finally begun to receive some attention from the investment community. She hopes that publicly traded exploration companies in Canada can generate enough in the way of positive results to cause the investment sector as a whole to sit up and pay attention, while at the same time explaining her opinion on why Canadian diamond companies – such as Stornoway – have traded so poorly in the recent past.

“My view is that we’ve gone through a major commodities boom, with an appreciation in all commodities…there’s been so many short term gains to be had in those markets, that it’s been difficult for the diamond sector to attract the interest of the high-risk investment community. Diamonds require a huge amount of patience. They’re difficult to find, they’re expensive to explore for, so you need to raise a significant amount of capital, and you’ve got to apply that capital over a reasonable amount of time to expect to get any kind of return.”

And as Thomas points out , diamonds differ from other commodities. This, she says, is one of the most attractive features for an investor. “Diamonds have traditionally not had the same volatility that we see in other commodities such as gold. While we do see some cyclicity and some volatility in the diamond markets, more so today than we have in years past or traditionally, what is accepted is that diamond prices have continued to appreciate, and it’s a relatively steady market, one that’s really tied to global economic factors related to population factors.” It’s a very stable market, in other words.

Despite Moti Ganz’s dissenting opinion at the recent rough diamond conference that the looming rough diamond shortage is actually a myth, the general industry consensus is that the amount of rough is decreasing, against an increase in consumer demand. The diamond industry, according to Thomas, is entering its ‘perfect storm.’ “This is really based on looking at consumer trends around the globe,” she says, citing work carried out by consulting firms, mainly WWW International. “What we’ve determined in that analysis is that diamond supply is not increasing, despite the discoveries in Canada – world-class discoveries in the 1990s – they haven’t significantly impacted world supply, and we are anticipating a shortfall particularly in some of the larger, higher quality goods.”

Maybe i t ’s the years spent exploring in the Canadian arctic, but she is not fazed by the looming industry crisis. “We know there’s nothing coming over the horizon that can significantly impact that supply curve, but this is why we think it’s a great time to be exploring for diamonds, finding them and actually getting them into production.”

Nunavut, Canada

Where is the Benefit?

As a well-known figure in the Canadian mining industry, Thomas offers a unique perspective on the drive to launch local wealth creation through diamond cutting and polishing, otherwise referred to as beneficiation. That beneficiation in northern Canada did not prove to be feasible is a generous assessment. Thomas attributes its failure to financial issues. “We support the idea of creating business opportunities and maximizing business opportunities for local people, but we also think that it has to be a viable business.”

One of the main reasons that polishing in northern Canada is not picking up is that aboriginal workers can ind much higher paying jobs in other aspects of the diamond pipeline, Thomas asserts. These sectors include business development initiatives such as catering for the mines, supplying fuel and construction – “viable businesses that have the potential to make a lot of money, to grow and to integrate meaningful jobs,” she says.

She also argues that Canada is leading edge when it comes to corporate responsibility, and she wants to look at the beneficiation issue as a broader picture of creating sustainable economic development that will outlast the life of any particular mining site. “There are so many different types of benefits that have come out of diamond mining in these communities. Everyone talks about beneficiation as being about cutting and polishing. But I would argue that beneficiation is actually much broader than that. To me, beneficiation is about creating new businesses that have the opportunity to grow and develop and actually survive beyond the end of the mining era.”

Thomas explains that the overall impact of diamond mining on Canada, specifically in the mining areas, has been positive. She sees mining as giving Canada’s northernmost reaches, which she describes as an area “close to [her] heart,” the potential for real economic growth. These communities are extremely isolated, some with 100 percent unemployment, and little or no development.

“The diamond mines that have been developed in the Northwest Territories have gone a long way to changing the approach that some Canadian companies have had when it comes to development projects. In Canada’s diamond mines, you have record aboriginal employment; there’s a huge number of new businesses that have been developed as a result of these diamond mines going into production. There’s been a lot of good work done between the governments, local communities and the diamond companies, and this is something, in my opinion, that is very important.”