JOHANNESBURG (miningweekly.com) – The Department of Public Enterprises (DPE) on Friday revealed a “game-changing” plan to diversify State-owned diamond miner Alexkor into a strategic coal and limestone player, as well as a land-mining company, as marine-produced diamond resources waned.

The group aimed, over the next few years, to enter into several joint ventures (JVs) with emerging black-, women- and youth-owned mining start-ups to develop operations delivering high-grade limestone and coal to State-owned power utility Eskom.

Percy Khoza, who stepped in as Alexkor CEO in April, told Mining Weekly Online on the sidelines of a media briefing in Pretoria, that the implementation of the strategy would see the State-owned company (SOC) supply part of Eskom’s required 60-million tons a year of coal.

The entity also planned to deliver yet-to-be-defined volumes of limestone for the power utility’s Kusile power station’s flue gas desulphurisation plant within the next eight to nine months, and Medupi’s flue plant within the next three years.

While no JV agreements had been entered into as yet to kick off the strategy, Alexkor had identified several possible emerging miners to partner with or incubate until the start-ups reached a “bankable stage”, said Khoza.

The group would offer the necessary technical and business expertise to transition the JV miners from ‘emerging’ to ‘established’.

The State miner was targeting coal output of one-million tons a year in the short term, with a medium-term target of between four-million- and five-million tons of coal a year, culminating in about ten-millions tons of coal a year within the next ten years.

Alexkor was currently syndicating an undisclosed amount of State funding to pursue the strategy, but Khoza noted that a four-million to five-million-ton-a-year coal mine cost about R3-billion to develop.

“In its current form, Alexkor is not sustainable in the medium- to long-term” and, along with industry, needed to “adapt or die” as the diamond industry lagged, Public Enterprises Deputy Minister Bulelani Magwanishe said on Friday.

The South African diamond industry was in structural decline, with yearly diamond output decreasing steadily, after a peak of just over 15-million carats in 2005, to about 7-million carats in 2012.

The struggling diamond manufacturing sector had also resulted in a decline in the number of polishers, from 3 000 to about 300, during the same period, on the back of insufficient diamond production.

However, with Eskom expected to start experiencing coal supply shortages by 2018, the State’s need to “move fast” to avert an energy crisis opened an opportunity for Alexkor to complement future coal output from the State-owned African Exploration Mining and Finance Company, which was housed under State-owned entity the Central Energy Fund, and to move to satisfy the push for SOC-to-SOC collaboration.

Leveraging SOC infrastructure for the transportation of coal and limestone resources, for example, would provide Alexkor with a cost advantage, Magwanishe pointed out.

This was in line with comments made by Public Enterprises Minister Malusi Gigaba in the DPE’s May Budget Vote, where he said that initiatives adding momentum to a “comprehensive industrialisation and transformation programme”, linked to the multibillion-rand investment programmes of SOCs such as Eskom and Transnet, would be unveiled.

He noted that there was an “unyielding political will” to ensure that black industrialists, miners and professionals were developed and nurtured through the procurement policies and programmes of the various SOCs falling under his authority.

The strategy was a “well-crafted compelling value proposition” that would position Alexkor as a world-class mining company with aspirations to respond to the immediate needs of the country, Magwanishe said.

While there may be some resistance and opposition by those that might feel the strategy was “a threat to their long-entrenched positions”, Magwanishe noted that the company’s will “was bigger than those forces” and that its main focus was to become sustainable and act as vanguard for transformation in the sector, aiding black emerging miners who were struggling to gain a foothold in the sector.

“Ours [strategy] is not to reinforce Alexkor’s commercial bottom-line, but to secure the future of this country and to ensure that the sector is finally transformed,” he explained, adding that, while people believed that the State “was crowding them out” every time it intervened, there was “space for everyone”.

The strategy also focused on diamond exploration activities on land and developing land-based operations, to boost output from the dwindling ocean resources, while securing a deep-sea mining agreement with deep-sea exploration company IMDSA to explore resources in deep waters and fully exploiting the deep-sea concessions currently held by Alexkor, said Khoza.

“We are not abandoning diamonds,” he assured.

The diamond miner’s pooling-and-sharing JV with the community-owned Richtersveld Mining Company was planning to commission the revamped R50-million metallurgical processing plant, in the Muisvlak region, in the Northern Cape, by December or January, Magwanishe said.

The plant, located 10 km north of Port Nolloth, would enable Alexkor to re-establish a production node on the higher terrace of the Muisvlak mine and would create 200 direct jobs.

The 1.36-million-ton-a-year, or 200 t/h, facility would effectively wash, screen and efficiently and securely concentrate the diamonds for transfer to the main sort house facility in Alexander Bay.

In addition, the group was currently in talks with several potential partners to set up beneficiation plants in the Richtersveld region, enabling communities to viably process diamonds smaller than 1 ct. The discussions were expected to be concluded in the 2014/15 financial year.