Eira Thomas is on the run.
The annual results for her company, Vancouver-based Lucara Diamond Corp., are coming out in 11 days, and as its co-founder and chief executive, she is prepping for a round of board meetings and earnings presentations, including dashes to both Florida and Toronto for mining conferences. Before that, she’s heading from her home in England to Morocco on a half-term school break with her two daughters. Plus, she’s experiencing such wretched technical glitches that she missed a Skype interview yesterday and had to rebook. Today, she apologetically comes on 24 minutes late, something so uncharacteristic that her personal assistant, who is in Zurich, has begun to worry. Life is a little frenetic, Thomas confesses.
Yet, when I ask her why diamonds hold such an allure, all of a sudden, the busy executive life seems to vanish. She savours her answer—and when it comes, it’s unexpected. Yes, there’s the thrill of the hunt. But she is a geologist, and so within the diamond she also reads the violent secrets of the inner Earth that created it billions of years ago, when the planet was much younger. She sees the torrid pressures under the planet’s crust that long ago bound carbon atom to carbon atom and the convulsions that later flung them upward in a volcanic rush of magma, carrying them near enough to the surface for a tenacious miner to find. Thomas sees, in effect, time and story and mystery.
“The fact that we even get a chance to experience a diamond because it’s been unearthed in these ancient volcanoes is pretty unusual in itself,” she says. “The world we know and understand is all these geological processes that have formed us. Yes, it’s science, but it’s also history.”
Thomas has surprising takes on other facets of the industry. For one thing, she’s not interested in diamond mining unless it brings widespread benefits to society. That’s a sharp knock to the reality of earlier eras, when the stones leeched wealth from local communities, sometimes to support bloody wars and corruption.
But she’s also revolutionizing the processing of raw ore and reimagining how rough diamonds are tracked and sold. Not only that, but Thomas is redrawing the face of the famously macho industry itself: To wit, the vast majority of her company’s senior leadership team is female. That includes the managing director of Lucara’s pride and joy, the Karowe mine in Botswana.
In short, Thomas has a genius for disruption. Not just for the sake of it but, as Lucara’s co-founder Catherine McLeod-Seltzer puts it, because Thomas views the world through a wider lens. “If you can use technology and your people to create more value,” says McLeod-Seltzer, “why wouldn’t you do it?”
Thomas’s knack for bringing a distinctive view to the job started three decades ago, when she was only 21.
She was on a post-undergrad travel jaunt, looking at doing a PhD in geology at the University of Cape Town with the godfather of diamond exploration, the late John Gurney. Her father, Grenville Thomas, an inductee to the Canadian Mining Hall of Fame, summoned her back home.
A diamond-staking rush was on in the Northwest Territories. Her dad had acquired a long shot under deep water and wanted her geology skills to figure out whether anything was there. “I thought he was a bit crazy,” she says. “Diamonds had never been discovered in Canada in an economic concentration.”
Fast-forward a couple of years. The staking rush has moved south. Thomas’s exploration budget is down to its final pennies. The project is days away from being shelved. But she is still sampling the remnants of old volcanic eruptions, called kimberlites, under that lake, reading the chemistry that tells her they must contain diamonds, determined not to give up.
Then, at the last possible moment, she finds something that looks like it could be a rough diamond. Her first reaction is skepticism. Diamonds big enough to be visible rarely show up in early excavations, even in the richest ores.
Her second reaction is to pull out a little diamond detector she’d picked up at a jewellery shop down south. She says her buddies at De Beers, the company that ruled the diamond world for much of the past century, would have laughed at such a gadget. But she plugs in the device and watches it glow green. Eureka. What she is holding really is a diamond, the first from what would become Diavik, one of the world’s richest diamond mines. It produces six to seven million carats a year and put Canada on the map as a major diamond source.
So not just a viable mine, but—far less common—a viable diamond mine. Found in a region not known for diamonds by a newbie geologist interpreting the numbers the way no one else was. “There’s a bit of relief, a little bit of vindication, and then just pure thrill, because you realize that the science worked,” Thomas says.
Had she been a more traditional miner, she might have given up. And, having bagged such a rare and lucrative find, she might have rested on her laurels.
“My father said, ‘You should just retire now, because you’re never going to achieve this ever again,’” she deadpans.
You could draw a straight line between Diavik and what’s going on now at Karowe in Botswana. There were, however, a few detours in between. Stornoway Diamond, which Thomas set up with McLeod-Seltzer, sought diamonds in the Arctic and helped develop Quebec’s first diamond mine, in Renard. (Stornoway fell on hard times last year, long after Thomas had exited; it sought bankruptcy protection and was eventually picked up by Osisko Gold Royalties and creditors.)
And then there was a heady stint in Yukon gold with Kaminak Gold Corp. Thomas took the helm in 2013, in the teeth of a bear market for the precious metal. Three years later, Goldcorp Inc. took it over for $520 million, making Thomas the toast of the investment community.
But she had a yearning for African diamonds. She’d tried to take Stornoway into Africa during her tenure as CEO, but shareholders had balked mightily. So, in parallel with her other ventures, she’d set up Lucara with Lukas Lundin (the Swedish-Canadian mining phenomenon) and McLeod-Seltzer to search for African kimberlites. The company has been trading under that name—a combination of Lukas, Catherine and Eira—since 2007. She became its CEO two years ago, after the Kaminak deal.
Lucara particularly wanted to focus on Botswana. Not only is it the world’s top diamond-producing region, along with Russia, but it has had a stable democracy whose leaders are determined to use diamond profits for the common good. One of the world’s poorest nations when it declared independence from the United Kingdom in 1966, Botswana has used those diamond profits to become an upper-middle-income country. To a mining company, that spells an enthusiastic, educated local workforce, plus good roads.
“I call it the Switzerland of Africa,” Thomas says.
Lucara’s big break arrived in 2010, when its management team came across the site that became Karowe. Then owned by De Beers, it features three intersecting lobes of kimberlites, with the potential for lots of diamonds. But De Beers’s long experience in southern Africa told it the site’s kimberlite pipes were too tiny to yield enough diamonds for them. So it said yes when Lucara wanted to buy the whole thing.
It turns out that tiny pipes can end up being 10 times as rich, per tonne, as bigger ones. And once the Lucara team started looking closely, they thought they saw something De Beers may have missed: fragments of not just big diamonds, but of vanishingly rare gigantic ones.
The problem with such huge diamonds—a wonderful problem to have, Thomas quips—is that you need them unbroken. But the traditional recovery system involves serial crushing and milling, a process unkind to big stones.
It was a gamble and an industry first, but Lucara invested in X-ray transmission (XRT) technology. Long used in recycling and food processes, XRT can also pick out unbroken diamonds of any size from lightly crushed ore by reading the signature of their atomic density, even if they’re wet or encased in other material. “It’s really paid off for us,” McLeod-Seltzer says.
Karowe has produced a stream of diamonds so large that several of them have their own names. They include last year’s find of the world’s second heaviest rock: the mighty black-coated Sewelô, weighing in at 1,758 carats. (The only bigger rough diamond ever discovered was the fabled Cullinan, in 1905—its two largest polished gems now grace the sceptre and crown of Queen Elizabeth II.)
Other Lucara prizes include the Lesedi La Rona at 1,109 carats, the Constellation at 813 carats and the most recent, an unnamed, ice-white 549-carat stone discovered in February.
Lucara has plans to find even more. Last year it finished a feasibility study that concluded digging underground in addition to the current open-pit operation would double the mine’s life to 2040 and potentially add billions in revenues. To build underground, the company is embarking on an engineering and design phase. That takes capital, so in November, it suspended dividends in order to redirect the money, as well as other cash flow. (It will also have to take on debt.)
The markets are waiting to see how that will play out. The uncertainty, plus an overall weak market for diamond equities, has pushed Lucara’s share price down to around $0.65 as of early March, down from a 52-week high of $1.76.
Geordie Mark, an analyst at Haywood Securities in Vancouver (which owns Lucara stock), says he thinks the share price is discounted right now. “Given what we’ve seen come out of the diamond deposits so far,” he says, “it’s quite unique in terms of its capacity to deliver unique, large-scale, large-quality diamonds of value.”
Size is a constant, easily measured. But what of price? In diamonds, as in great works of art, it comes down to desire. You wouldn’t look at a painting by Leonardo da Vinci and expect to pay by the square inch. Instead, you would assess its beauty, rarity, provenance, cachet, emotional resonance. All these also come into play in the ineffable cost of a diamond, whether it’s a rough stone waiting to be cut and polished or the rock flashing in an engagement ring.
And in Thomas’s view, diamonds are not fetching as much money as they should. That is partly the fallout from reports beginning a couple of decades ago that the trade in rough diamonds from conflict zones supported wars. A United Nations resolution improved the situation, leading to the Kimberley Process Certification Scheme, which took effect in 2003 and started to keep most of the so-called “blood diamonds” out of the markets. But the residue of uncertainty remains.
So while demand for luxury products of other sorts has risen, particularly among millennials and in China, desire for diamonds has limped along. Last year, for example, the market took a hit in the wake of the trade conflict between the United States and China, Thomas notes. This year, there’s the coronavirus outbreak. At the same time, supply has risen as polishers reduce their stockpiles. The combination has had an unpleasant effect on prices.
Selling practices within the hide-bound industry haven’t helped. The established way to get rough diamonds to the people who will transform them into shiny jewels is to hold a tender, which happens several times a year, depending on the producer. Stakeholders in the tender must buy a whole batch of diamonds, whether they want them all or not. And they usually don’t, so a secondary market emerges for unloading the surplus. A diamond can change hands as many as 10 times from mine to ring finger, destabilizing prices and siphoning off profits.
Enter two millennials (both of whom work in the industry) with a gasp-inducing idea: establishing a digital sales platform, now called Clara Diamond Solutions, that would allow buyers to purchase exactly what they want, stone by stone, rather than in batches.
Clara’s system cuts out the middleman and some of the secondary market, securing better prices for producers and higher margins for manufacturers, says Thomas. As well, the platform permanently tracks the stones’ path of ownership through blockchain, adding to the transparency around a diamond’s origins. “For the first time ever, we’re saying to our buyers, ‘Tell us what you want and we’ll find you the perfect rough stone you can polish into your perfect polished diamond for your business,’” Thomas says.
Lucara wholly owns Clara and says the platform may end up being as profitable over time as digging up diamonds. Lucara’s plan has been to start selling its own rocks and then invite in other suppliers. As of February, it was still a relatively small player, with a customer base of 32 and a total of 19 sales since December 2018, worth roughly $11 million. (By contrast, revenue from tenders of Karowe diamonds in the fourth quarter of 2019 alone were $56 million.)
But what of those freaks of nature, the massive rough stones? The risks in determining what they’re worth are greater, for both miner and manufacturer. How many polished diamonds will emerge? How special will they be?
Lucara is beginning to tackle that in an innovative way, too. Rather than auctioning off or tendering the rare black-coated Sewelô diamond and forgoing future profits from whatever exceptional gems emerge from it, the company sold a 25% stake in the stone to Louis Vuitton and another 25% to HB Co., which will cleave and polish it into gems. Lucara will keep a 50% interest in the polished stones that result. As well, 5% of all retail sales from the Sewelô collection will go back into community-building projects in Botswana. “We are trying to modernize this whole industry,” Thomas says. “One of my biggest criticisms over the past 20 years is that we have been too insular. It’s opaque.”
And self-consciously male-dominated. In Canada, just 15% of those employed in mining and quarrying in 2018 were women, according to the 2020 Canadian mining labour outlook from the Mining Industry Human Resources Council. Many of those women are in administrative positions and few in technical ones. The only Canadian sector with fewer women is construction.
McLeod-Seltzer’s experience is illustrative. In 2005, after years in the brokerage industry and as CEO of a junior gold miner, she was recruited (kicking and screaming, she says) to her first big board: Kinross Gold. “I was not only the only woman—talk about diversity!—I was one of only a few people not named John,” she says.
Now, she is Kinross’s independent chair (and co-chair of Bear Creek Mining Corp.). “I do think things are changing—maybe not at the pace people want to see, but they are changing,” McLeod-Seltzer says.
Again, Lucara has done things differently. Three of its seven board members are women. The majority of its senior leadership team is female. It wasn’t an explicit goal, Thomas says. Her goal was to hire talent. But she did want to create an environment that was welcoming to women: collaborative, respectful, passionate, fun.
“I think there are lots of high-potential women who turn down jobs because, quite frankly, they just don’t want to work in jerk environments,” she says.
Thomas points to Naseem Lahri, managing director of Lucara Botswana, the first woman to oversee a diamond mine in the country. Lahri had been the company’s CFO in Botswana for five years, but no one asked what else she wanted in her career. Until Thomas. “We realized, this woman’s a dynamo—she should be our managing director!” she says. “And that could have happened earlier. We had a vacancy in that role in Botswana for a number of years.”
As our interview winds down, again the unexpected. Thomas becomes reflective. Now in her early 50s, she’s matured, she says. Of course she’s eager to keep the flow of profits going at Karowe. But there’s more to it now.
“You do start to get a little more philosophical. What’s it all about? What’s the most important piece?” she says. “What started out as a treasure hunt is now much more about how we make a lasting contribution to the communities we are working with. And that becomes a much bigger priority.”