Quentin Flannery, Chief Investment Officer of the Flannery family office, is expected to experience a major windfall through another one of his investments, Lucapa Diamond Company Limited (ASX: LOM).
Expansion of the Mothae Kimberlite Mine is almost complete, and promises an improved nameplate capacity, or intended full-load sustained output. This capacity will increase by 45% once construction is complete, from 1.1 million tons per annum to 1.6 million. The Mothae mine has already been a consistent supplier of large, high-quality diamonds since its opening in 2019 and the Mothae mine’s expansion would not have been possible without Flannery’s investment which cornerstoned their capital raise late last year.
The timing of the expansion is ideal, as demand for diamonds begins to rise from the sharp decline in demand brought on by the 2020 epidemic. As the steward of a diverse set of holdings, Quentin Flannery brings all of his marketing experience to bear when it comes to determining the future of certain resources and commodities.
Quentin Flannery’s Investment in Lucapa
The success of the expansion of the Mothae mine is undeniable. In 2021 so far, a newly expanded mine in the Kingdom of Lesotho has sold $1.5million in diamonds. The price per karat of diamonds extracted reached $420/karat. The Kingdom of Lesotho is a small country with a population of 2.2 million nestled in South Africa. It’s become fertile ground for diamond exploration, having only just opened to foreign investment in 2017. The kingdom is known for being the highest $/karat diamond producer in the world, with the vast majority of its mines in a cluster high up in the Maluti Mountains.
Lupaca is a joint owner of the Mothae Kimberlite Mine, with 70% of it belonging to the Australian niche-diamond producer and the remaining 30% belonging to the Kingdom of Lesotho. Flannery’s investment towards the expansion of the Mothae mine lead to major changes in the processing plant including the installation of a new scrubber bypass conveyor, a primary jaw crusher, and other associated upgrades.
Quentin Flannery and the Next Generation
Flannery’s quest to expand his family’s portfolio led him to resources that often serve as barometers for the market as a whole, such as silica sands and copper. In this case, the Australian CIO is hedging his bets on the social mores of new generations of consumers. Diamonds are rooted in specific traditions and aesthetics surrounding engagement and marriage as well as larger more desirable stones setting themselves apart as global wealth creation expands and more consumers in Asia move into the higher end categories of the consumer cycle. By investing in Lupaca’s Mothae mine in the most diamond-rich country in the world, Flannery is making a very specific bet on future generations, future engagements, and future diamonds.
Now more than ever, the language around diamonds is changing on a retail level. Assumptions about the stone as an engagement necessity are coming into question as more and more new couples choose alternate options. The notion that diamonds are a necessity is fading, especially as future generations lose interest in brick-and-mortar jewellery retailers in favour of online shopping. Through websites like Etsy, customers now have more options tailored to their specific interests and aesthetics, involving any stone they like from diamond to emerald to lapis lazuli. The good news is that the shift to online shopping allows for greater marketing flexibility. Through more personal, algorithmic-based advertising, diamonds can have a much broader reach. Beyond associations with engagement and marriage, the right marketing can change the story of diamonds or even connect them with new or existing traditions.
Another major change in consumer interest comes from a desire among younger generations to be more conscientious and mindful consumers. Younger generations want assurances that the products they buy are ethically sourced and that the working conditions involved in the acquisition and delivery of those products are ethical as well. Increased initiatives toward sustainability in mining practices will be a major factor for younger purchases. Luckily Quentin Flannery has a great deal of experience in improved sustainability through his other holdings such as the copper mining company, Cyprium, which is restarting the now closed Nifty copper mining operations in Western Australia. Similar initiatives with Lupaca could do much for ensuring the company’s continued viability and success with future generations of consumers.
The Future Looks Bright for Diamonds
Findings in Mothae lend credence to the notion that the Lothae Kingdom remains the premier destination for diamond mining. The quality of diamonds procured from the new areas of the mine speaks to Quentin Flannery’s foresight in funding the expansion. While kimberlite material was sourced predominantly from lower-margin zones of the 8.8-hectare kimberlite pipe in H1 2019, mining has since transitioned to the higher-margin southern pit following dewatering into the main water dam. Initial recoveries from the southern pit include two exceptional 101-carat and 64-carat D-colour Type IIa gems, the first two commercially produced diamonds from Mothae sold for a price exceeding US$1 million.
The world is reopening and consumer confidence is growing. With its increased capacity, the Mothae Kimberlight Mine’s recent renovations position it just right to benefit from diamond sales rising to and eventually moving alongside pre-COVID trends. Because the dynamics of diamond demand operate in tandem with GDP and disposable income, as the economy continues to recover, so too will diamond sales. While social mores may change from generation to generation, the natural beauty of diamonds and their continued appreciation will remain constant. Diamonds may not be forever, after all, who can confidently predict the future after the year and a half the world has been through, but they are here to stay. Quentin Flannery is the next generation in his family’s line, the steward of a diverse set of holdings and at least for now, his eye is on the horizon. On to the next big win.
