Tiffany & Co’s yellow diamonds are prized by the rich and beautiful but the Kimberley mine that produces them seems set to become an example of the worst end of Western Australia’s mining industry. Only three years ago, Kimberley Diamonds' (then Goodrich Resources) $3.2 million acquisition of the Ellendale mine was being touted as the mining asset steal of the decade (Gem Diamonds put the mine on the market for A$300m). Now Ellendale is in mothballs, its workers and contractors unpaid, the State Government may have to clean up its environmental legacy and it is almost certain that a host of unpaid contractors will also go bust, putting more people out of work and further damaging the reputation of the State’s mining industry.
Interestingly, the closure announcement came just one day after the company announced that it had secured debt funding of $10m to re-commission the Lerala Diamond Mine in Botswana. One has to wonder if the company will actually get its Lerala mine into production, and if so, will the end result be like Ellendale – leaving a trail of destruction behind, while covering its own assets. Small cap resource investors are forewarned.