UK-listed Ireland-based diamond, exploration and project development company Botswana Diamonds is expanding its growth in Botswana, with one project in progress and two new potential projects for the future.

Executive chairperson John Teeling tells Mining Weekly that the company started drilling in mid-February on a highly prospective 249 km2 exploration licence in Orapa, Botswana.

“We identified three high-potential targets on good ground, which are part of the Orapa kimberlite cluster on the Kaapvaal craton. High-resolution geophysics have been completed and soil samples found concentrations of diamond-indicator minerals, namely garnets, ilmenites and a few spinels and chromites.

“The results of the drilling will about take eight weeks. We have applied for adjacent ground which has become available,” he says.

The company has entered into a 50:50 joint venture (JV) project with a Russian diamond mining company that will introduce a new technology to Botswana to help identify large diamondiferous kimberlites.

“The Russian company has been able to find ten mines up to 80 m below surface using computer technologies. As mines in Botswana have, for the most part, been found at the surface or near the surface, this is a completely new technology for the country.

“The company believes it can identify kimberlitic structures up to 100 m below the sand and basalt and, by using (mathematical) algorithms, they believe they can even identify diamondiferous kimberlites using soil sample data,” says Teeling.

He notes that final negotiations of the JV are still being completed.

“We have analysed the data and identified 13 target areas north-east of the Orapa region. We have applied for 12 licences and are waiting for these to be confirmed – which does take time in Botswana,” Teeling says.

Recently, the company also entered into an agreement with a private South African company, which holds an 85% interest in 13 prospecting licences about 700 km south-west of the area where the 12 licences applied for are located.

This region contains the Ghaghoo diamond mine, which is being developed by diamond mining company Gem Diamonds, and the X-36 diamond dis- covery that was made by diamond mining company Petra Diamonds, as well as 21 known kimberlites.

Teeling notes that the licence area covers 6 518 km2.

“The agreement stipulates a three- month exclusivity period, during which Botswana Diamonds will review the available data on the licences. Should the analysis prove positive, we will negotiate an equity interest in the licences.

“This agreement represents another step forward in the development of our interests and gives us access to a prospective area of Botswana, which is new to our company. This agreement is in addition to the JV to the north-east of Orapa,” he says.

Industry Restructure

Teeling points out that 2012 was a year of significant structural change for the diamond industry.

“The Oppenheimer family completed the sale of their 40% share of diamond company De Beers to mining major Anglo American, ending a legacy of four generations of family ownership of the world’s most promi- nent diamond company. Anglo American cemented its ownership of De Beers with an 85% share, while leadership changes at Anglo American have also been announced.

“Diamond miner Alrosa reinforced its position as a global leader in production terms and the De Beers sales and marketing division continued its move from London to Gaborone, in Botswana, as local beneficiation gathered further momentum,” states Teeling.

He adds that independent State-owned diamond trading company Okovango Diamond Trading’s marketing arm in Botswana began to prepare to auction of 10% to 15% of mining company Debswana’s production.

“Further, the Marange deposit, in Chiadzwa, Zim- babwe, produced an estimated 12-million carats of rough diamonds in 2012. Mining major BHP Billiton agreed to sell its Ekati mine to American jeweller Harry Winston for $500-million and mining major Rio Tinto attempted to sell its diamond division, together accounting for 15% of global rough diamond supply.

“Diamond miner Gem Diamonds sold its Ellendale mine, in Australia, to mineral resources exploration com- pany Goodrich Resources and, finally, strategic upstream investments by downstream players have increased, as long-term supply concerns drive new approaches to mine development financing,” states Teeling.

He says that, although dia- mond prices remained at relatively (historically) high levels, 2012 was a difficult trading period for diamond players.

Outlook for 2013

Going forward, Teeling says there are mixed reviews among industry commentators regarding this year’s price growth, but all views are robust and positive for the longer term.

“Botswana Diamonds expects more positive senti- ment in the rough diamond market in early 2013, followed by a relatively steady price performance for the rest of the year, with a further lift before the key season in the second half of the fiscal year,” he says.

According to the company’s diamond market report for the second half of 2012, this forecast is based on relatively stable distribution behaviour by the two key producers – De Beers, which is number one by value, and Alrosa, which is number one by volume.

“In the longer term, the fundamentals of the diamond market remain healthily robust. The price trend is expected to be driven upwards by limited supply, fewer new mines coming on stream and continued growing demand from the emerging markets.

“A report published by global management consulting firm Bain & Co in December esti- mated that rough diamond demand would increase by 6% a year until 2020, doubling the size of the industry. Last year did not play out this way, but the anticipated price growth will come as the economy recovers,” states Teeling.

He adds that financial management and advisory company Merrill Lynch recently stated its positive view on the long- term fundamentals of the industry, citing diamonds as a “secular, late-development commodity” with significant growth potential, owing to the current low per capita consumption in emerging markets and the expected supply-demand deficit in the medium to long term. Teeling believes there are not enough mines to supply the expected demand.

“This will offer opportuni- ties for juniors to re-evaluate existing ground and new blue- sky territory,” he concludes.