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De Beers inviting bids for life-extending takeover of Kimberley Mines

Phillip Barton

Photo by Duane Daws

One of De Beers' Kimberley Mines operations.

21st May 2015

By: Martin Creamer

Creamer Media Editor

  

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JOHANNESBURG (miningweekly.com) – South Africa’s De Beers Consolidated Mines (DBCM) on Thursday announced its intention to dispose of its Kimberley Mines as a going concern by competitive tender to a new owner able to extend the life of the historic operations beyond 2018 and preserve 650 jobs in the process.

The current life-of-mine to 2018, which requires no further capital investment in DBCM hands other than stay-in-business capital, is seen as being extendable to 2030 through lower cost processing methods.

Retreatment has been a growing source of diamond production in Kimberley since 1978, with Kimberley Mines currently recovering 800 000 ct a year from 6.4-million tonnes of ore treated.

“The reason why we’ve put this in the market is to try and extend the life of the operations under new ownership,” DBCM CEO Phillip Barton told Creamer Media’s Mining Weekly Online in a telephone interview.

From 2018, the operation will no longer meet DBCM’s strategy of holding only large, long-life, low-cost assets.

“We felt it would be irresponsible of us, come 2018, to say that it’s all over, the jobs are gone and that we have to rehab and, therefore, sterilise the assets.

“The most responsible thing to do is to give somebody an opportunity to see if there’s a chance of extending mine life under new ownership,” Barton added.

Kimberley Mines employs 353 people directly as employees and another 300 indirectly as contractors.

DBCM’s new-order mining right expires in 2040 for the low-cost operations, which have a compliant resource base of 26.2-million tonnes of ore at an average grade of 10.8 carats per hundred tonnes (cpht), translating into a mineral resource of 2.8-million carats.

The mines also have 93.2-million tonnes of ore deposits at a grade of 4.4 cpht on a total diamond resource that is spread over 3 981 ha.

DBCM wants to dispose of 100% of the assets and liabilities in a single transaction and expressions of interest must be in by next Friday, May 29.

The successful bidder will require operational capability, financial capacity and the mandatory black economic empowerment credentials.

Fast deal closure is being targeted to give the new owner maximum benefit.

Every month that DBCM continues to mine takes away value, which is why the company is working closely with government to ensure that the regulatory component of the transaction is speeded up.

Sale as a going concern will require rehabilitation guarantees to be factored into the transaction.

“We’re hoping, if we find successful bidders out there, to go to the regulator in October, and we’re hoping it will go through soon after that,” said Barton, who added that De Beers' other Kimberley interests, including its diamond sorting hub, Big Hole responsibilities and Stockdale Street as the registered head office, would remain unchanged.

In the past year, DBCM has been mulling the options of mining until 2018 and then implementing a closure plan; developing an affordable way of extending mine life; or offering the mines to a third party with empowerment credentials or an empowerment consortium.

Both De Beers and adviser Standard Bank arrived at the conclusion that disposal to an experienced life-extending operator was the best option.

Since its establishment in Kimberley in 1888, the company has been mining the area's primary kimberlite pipes of the Bultfontein, De Beers, Dutoitspan, Kimberley and Wesselton mines, which resulted in the accumulation of the tailings now on offer.

In the last four years, Kimberley Mines has produced three-million carats from these tailings and another 2.4-million carats can be recovered to the end of 2018.

Diamond mines sold previously by De Beers include the Kimberley Underground, Cullinan, Finsch and Williamson mines to the London-listed Petra Diamonds; Jagersfontein to Superkolong-Reinet; Rooipoort to a Reinet-led consortium; and Namaqualand Mines to Trans Hex.

Simultaneously, DBCM has increased its own capacity by 30% in the past four years to 6.4-million tons a year through the lucrative Venetia diamond mine in Limpopo and the Voorspoed mine in the Free State.

Diamonds were first discovered in South Africa in 1866 along the banks of the Orange river between Hopetown and Douglas. The search continued into the hinterland and dry diggings began at what became known as New Rush in 1870 and 1871.

The mining camp was renamed Kimberley.

Diamond mining initiated further exploration and great interest in South Africa’s mineral potential was ignited.

In 1886 gold was discovered on the Witwatersrand and minerals-based economic development ensued followed by what became, in 1910, the Union of South Africa and later the Republic of South Africa.

De Beers has a strong legacy in Kimberley, where Kimberley mine became the Big Hole.

After extensive studies in the 1990s, De Beers commissioned the R780-million Combined Treatment Plant (CTP) in 2003 and has continued to contribute to extending the life of the now-for-sale Kimberley Mines. 

Interested parties have until 17h00 on Friday, May 29, to email expressions of interest to acquire Kimberley Mines to Sandra du Toit and Yogan Appalsamy of Standard Bank.

Edited by Creamer Media Reporter

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