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De Beers plans to keep South African diamond exploration spend at R30m a year

De Beers Consolidated Mines CEO Phillip Barton updates Mining Weekly Online’s Martin Creamer on the company’s exploration programme. Video: Nicholas Boyd. Video Editing: Lionel da Silva.

21st October 2014

By: Martin Creamer

Creamer Media Editor

  

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JOHANNESBURG (miningweekly.com) – Diamond company De Beers plans to maintain its diamond exploration spend in South Africa at R30-million to R35-million a year.

De Beers Consolidation Mines (DBCM) CEO Phillip Barton, who spoke to Mining Weekly Online in a video interview (see attached) on the sidelines of the Diamond Route conference, said on Tuesday that the South African arm of the historic diamond company had the team, the geological data and the infrastructure to support ongoing exploration projects.

“We’ve got to find the next mine for De Beers,” Barton commented.

DBCM, which currently mines at Venetia in Limpopo province and at Voorspoed in the Free State, has built up a large volume of geological data in South Africa over the years, including in areas were it mined in the past.

Barton said the country remained one of the top three world destinations for diamond exploration, which was being enhanced by the introduction of new technologies.

The economic crisis of 2008 was the only reason the company pulled back from exploration spend, but exploration in close liaison with South Africa’s Department of Mineral Resources (DMR) is now gaining momentum.

“We’re starting to get the turnover on ground that we require and we’re finding kimberlites,” he said.

Barton rebutted reports that DBCM was planning to dispose of its Voorspoed mine.

“Voorspoed is not in the market,” he told Mining Weekly Online, adding that the mine was attaining its production targets and generating good cash.

“Why would you want to dispose of a mine that is putting profit on the table?” he queried.

Voorspoed’s current life-of-mine extends to 2021 and its orebody reaches well below the current mining level.

At the end of September, DBCM had completed 11.8% of its underground expansion project at Venetia, where it is investing R20-billion.

The expansion project is on track to deliver its first diamonds in 2021, building up to 4.5-million carats a year for 20 years.

The underground mine under development will have an automated driverless horizontal truck-haulage system in its workings and is receiving strong support from the Anglo American technical division, which has brought on board a number of world experts.

“The golden rule being followed is that only proven technology will be used. But what is an idea today may be proven technology by 2018 when some of the key technology decisions have to be made and we’re keeping an open mind,” Barton added

Massive mining techniques will be used to mine 5.9-million tons of ore a year, give employment to 1 800 people to well into the 2040s and treat 130-million tons of ore.

The project itself is supporting 8 000 jobs directly and a further 5 000 through the supply chain.

It is expected to contribute $19.9-billion towards the South African economy between 2012 and 2043, $7.8-billion of which will be a direct contribution.

Last week DBCM signed a three-year wage agreement extending to 2016 with the National Union of Mineworkers, involving an increase of 9% backdated to May 1 and the same percentage in 2015 and 2016.

A subsidy towards homes owned by employees in areas where they are employed will also be paid.

“We’ll subsidise the acquiring of the property and also then further assist with a small subsidy so that employees who are at a level where they don’t quality for bank finance are put in a position to afford their own home,” Barton explained, adding that demand for diamonds was currently strong, with the long term continuing to hold interesting dynamics.

The ability of smaller diamond-mining companies to raise equity capital was also boding well for the entire diamond-mining industry.

Investec Securities said in a note on Tuesday that the $6-billion that Anglo American paid for the Oppenheimer family’s 40% stake in De Beers in 2011/12 could be easily justified against De Beers current valuation of close to $20-billion.

“We have also revisited our peer analysis to show that a 15 times price-earnings (PE) multiple for De Beers looks supportable, even without making comparisons with luxury goods companies.

“In our view, Anglo American acquired the Oppenheimer 40% stake in De Beers at a good price in 2011 and at a PE (11.4 x 2011A) that would be considered low given current peer multiples,” Investec added.

Edited by Creamer Media Reporter

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