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Policy reliability made Botswana mine investment possible – Gem Diamonds

Botswana president Ian Khama

Gem CEO Clifford Elphick

Ghaghoo GM Modise Gaoetswe (right) and Martin Creamer (centre)

8th September 2014

By: Martin Creamer

Creamer Media Editor

  

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GHAGHOO, Botswana (miningweekly.com) – Botswana’s policy reliability and investment certainty made it possible for Gem Diamonds to commit a billion pula to the initial phase of the country’s first underground diamond mine despite institutional funding having dried up in the aftermath of the world’s worst financial crisis.

Learning from mining the 20-million-carat Ghaghoo deposit is now poised to help unlock other kimberlite deposits buried under thick sand cover, particular in the western part of Botswana and also Angola and the economic feasibility of commencing a second phase is being studied for the resource that Gem Diamonds acquired from Xstrata and De Beers in 2007.

“The government played an extremely supportive role,” Gem Diamonds CEO Clifford Elphick said at the opening of the mine, the decline of which descends under 80 m of Kalahari sand into an orebody containing diamonds that are already selling at prices in the $260/ct to $270/ct range.

Mining Weekly Online was part of a large media contingent that entered the underground through the sturdy six-metre diameter tunnel. (Also see picture).

Elphick drew attention to the importance of government officials being knowledgeable and efficient in enabling his London-listed company to establish its second diamond mine in addition to the lucrative Letšeng mine in Lesotho.

Three workers - Opelo Mmolai, Mokgakolodi Monthe and Segolame Mashumba -  were killed during the construction phase of Ghaghoo.

Botswana president Lieutenant General Seretse Khama Ian Khama said at Ghaghoo’s official opening that the country’s aspirations were to see more diamond activities.

“Our preferred end stage is to see the whole value chain taking place in Botswana,” said Khama in reference to the diamond-mining country now aspiring to enter the field of diamond jewellery manufacture and retail after successfully entering the diamond aggregation and diamond cutting and polishing arenas.

The opening of Ghaghoo will eventually increase the supply of rough diamonds available for trading in Botswana in addition to those from the 50% Botswana-owned Debswana, global De Beers operations and the new Karowe diamond mine.

The Botswana government has given Gem Diamonds a period of grace to market the Ghaghoo diamonds globally before being obliged to market them from Gaborone, and Antwerp has been selected as the best place to start.

“We have a stone size that lends itself to the Chinese, Japanese and smaller US markets,” Elphick said in response to Mining Weekly Online questions at a media conference to mark the official opening.

The mine is expected to be producing at a rate of 250 000 ct/y to 300 000 ct/y from 2015.

The success of Karowe, which was developed by the Toronto-listed Lucara, is kindling hopes of “lightning striking in the same place twice” for Ghaghoo, which made use of London Tube-type techniques to get under the sand cover.

In doing so, Ghaghoo dispensed with the tradition of first embarking on a feasibility study, which would have cost an additional $75-million, and then sand removal for an openpit mine, which would have cost another $250-million.

Instead, it went straight ahead with establishing the first phase of the mine on time and on budget for an outlay of $95-million.

Now the results of the first phase will define Ghaghoo’s further development plans.

Mining analysts at Investec Securities described the mine as an important step for Gem Diamonds: “We look toward the development and sales process of the diamonds recovered.”

UK House of Lords representative Nigel Jones, a former chairperson of the Botswana group in Britain’s House of Parliament, told Mining Weekly Online that environmental objections to the building of the Ghaghoo mine in the Central Kalahari Game Reserve (CKGR) were unfounded.

Jones said that if one took the size of the CKGR as the size of a sheet of A4 paper, a dot in the middle of the A4 sheet would be less than the size of the footprint of the mine.

The game reserve is the size of Denmark and the mine is far smaller than the originally envisaged openpit because of it now being underground, said Jones, in response to Mining Weekly Online’s request that he elaborate on President Khama’s closing comment that it would be remiss not to mention the mine’s controversies, which Khama said had been driven by “deliberate disinformation” by some elements bent on “tarnishing Botswana’s image, just because they differ with our approach to development”.

Jones said that he was attempting to get an article into the British media to counteract the “nonsense”.

Gem Diamonds reported that a comprehensive rehabilitation plan had already been put in place for the first phase of the mine, which was expected to have a life-of-mine of 30 years.

The company said that it had also allocated funds to a community trust for the commissioning of community projects and was helping to provide the local communities with access to water.

Payback of the capital cost of the mine, which only attracted bank funding late in its construction phase, is expected in three-and-a-half to four years.

Linking up to the national electricity grid proved too costly and the company is now looking at introducing renewable energy in tandem with current diesel generation.

Mineworkers, whose work cycles are 14 days on and seven days off, are currently accommodated in tents, with a target of accommodating one worker a tent from up to five a tent currently by year-end, Gem Diamonds Botswana MD Haile Mphusu told Mining Weekly Online.

Earlier this year, Lucara reported revenue of $40.12-million from its second exceptional-stone tender at which 16 diamonds were sold, four of them selling for more than $4-million each and 13 for more than $1-million each.

The highest value Lucara diamonds sold were a 109.4 ct diamond that sold for $6.19-million, or $56 615/ct, and a 118.4 ct diamond that sold for $5.36-million, or $45 225/ct.

Edited by Creamer Media Reporter

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