Anglo American kicks off major new diamond mine in Canada

By Barbara Lewis and Susan Taylor

LONDON/TORONTO (Reuters) - De Beers' Gahcho Kue diamond mine in Canada's Northwest Territories is expected to reach full commercial production early next year, Anglo American (AAL.L) said on Wednesday.

Output at the roughly $1 billion (£750.8 million) project, which Anglo describes as the world's largest new diamond mine, will be an average of 4.5 million carats per year over its anticipated 13-year life.

"Starting the ramp-up to production at Gahcho Kue - on time, on budget and in a challenging environment - is a remarkable achievement," De Beers Chief Executive Bruce Cleaver said in a statement.

De Beers, the world's largest diamond producer by value, has a 51 percent stake in Gahcho Kue, with the rest held by Mountain Province Diamonds (MPV.TO).

First diamond production at the Arctic mine began in late June, BMO Capital Markets analyst Edward Sterck said in a note to clients, two to three months ahead of schedule.

Output from the mine, which officially opens in September, will not result in a supply surge because it will replace production coming offline, De Beers said.

Anglo American, which has an 85 percent stake in De Beers, has set diamonds, precious metals and copper at the core of its restructured portfolio as it seeks to recover from a commodities rout.

De Beers has placed the emphasis on value rather than volume and in any case says large new finds are rare, predicting demand growth will "almost certainly" outstrip growth in carat production in the next 10 years.

The volume of carats recovered from first production has not been announced, but Mountain Province said two gem quality stones of 24.65 carats and 12.1 carats were recovered.

"Now that production has commenced, investor focus likely will turn to the first diamond tender and initial realised prices," Sterck wrote. "New mine production generally takes some time to establish itself in the market ... thus, there is some pricing risk around the first tender."

(Additional reporting by Esha Vaish in Bengaluru; Editing by Susan Thomas and Bill Trott)