In an exclusive one-on-one interview, BRUCE CLEAVER, CEO of De Beers Group discusses the importance of the company’s African portfolio.
He also breaks down the ongoing necessity for exploration and how the evolution of technology and laboratory-grown diamonds is impacting the diamond major’s business. LAURA CORNISH reports.
While De Beers’ asset base extends across the globe, its African portfolio is and remains key to the Group’s diamond production contribution.
This article first appeared in Mining Review Africa Issue 3, 2019
“Mining in Africa is at the core of our business, just as it always has been, and just as it will be in future,” Cleaver starts.
“While Venetia is currently our only mine in South Africa, it is one of the world’s only Tier 1 assets. With our US$2 billion investment to transition Venetia from an open cast to an underground operation, we are extending the mine’s production life into the 2040s.
"This is the biggest single investment in South Africa’s diamond industry in decades and will ensure Venetia retains its status as the producer of about 70% of South Africa’s total diamond production.”
The company also continues to invest in both its Namibia and Botswana-based operations.
"According to Cleaver, the mining portfolio in Namibia continues to evolve with more production anticipated to come from the offshore operations as Namdeb’s land-based operations get nearer to the end of their lives.
“We see a great opportunity for mining offshore and will continue to work with our partners in government to develop this part of the business.
"We launched a new exploration and sampling vessel in 2017 – the world’s largest and most sophisticated vessel for this purpose – and we are looking at the potential for a new offshore mining vessel to complement the existing fleet,” Cleaver reveals.
In Botswana, Jwaneng and Orapa continue to pay the central role in Debswana’s diamond operations. Solid progress is being achieved with Cut-9 at Jwaneng and Cut-3 at Orapa.
“Cut-8 is now the main source of ore for Jwaneng and will run to 2030. While open-pit operations at Letlhakene ceased as planned in 2017, we have successfully established a tailing processing plant at the mine that will deliver around 800 000 carats a year.”
With well-established operations across these jurisdictions, Cleaver believes exploration is critical to secure the long-term future of the business.
“Exploration is very important to De Beers Group. The greatest long-term value-add potential for our rough diamond supply would be through exploration to add new production to our pipeline.
"However, the challenge, as ever, is that kimberlites with economic concentrations of diamonds are inherently rare and the probability of a major discovery is low.
"It is for this reason primarily that exploration remains an essential part of the Group’s activities, but the challenges inherent in this type of work must be recognised.”
Exploration activities in South Africa in particular have returned to De Beers’ radar after the Department of Mineral Resources approved 32 of its 54 prospecting rights applications in 2018.
The applications had been lodged with the department years back.
Following the company’s announcement to cut all exploration spend in 2017 because the applications remained on hold, the government expedited the process to reopen the exploration doorway.
Looking beyond production performance and objectives, Cleaver raises two themes that are influencing the way De Beers is moving forward as a business.
Laboratory-grown diamonds (LGDs) are gaining momentum from the consumer market as a more cost-effective alternative to natural diamonds but the CEO believes there is still demand for both products.
“LGDs have a different value proposition, and consumers see them as suited to different occasions. Just as has been the case with synthetic rubies, emeralds and sapphires, there is some limited consumer interest in them, but as lower-priced fashion jewellery items because they do not possess the ‘magical attributes’ that give natural diamonds inherent and enduring value.”
If properly disclosed, LGDs are a legitimate product that has a place in fashion jewellery Cleaver continues, and consumers must be fully informed so as to make clear and informed choices about what they are buying.
As such, De Beers Group has chosen to manufacture and sell a range of “sophisticated” equipment to ensure that LGDs can be readily detected.
“Natural diamonds and LGDs are different product categories with different values, and there is a risk that some unscrupulous companies may try sell undisclosed LGDs and pass them off as natural diamonds. The detection equipment is therefore important to protect against this risk.”
However, even when LGDs are disclosed, there can still be consumer misunderstanding and confusion that prevents them from making clear and informed choices about their purchase, “and this is also why we launched Lightbox – a range of De Beers LGDs.
Our consumer research has revealed that there is widespread confusion about what LGDs are, how they are manufactured and what their value proposition is. Lightbox will therefore play a key role by being very clear with consumers.
It does not pretend that its products are inherently rare or precious; it does not make any spurious claims about ethical superiority; and it does not seek to connect the value of an item mass-produced in a factory to the value of an inherently rare and finite product of nature born in the heart of the Earth billions of years ago.”
Overall, Lightbox is a very small component of De Beers Group’s business and will play a small part in the Group’s commercial future.
In 2018, De Beers Group spent almost double on consumer marketing of natural diamonds alone than it will spend over four years on building the entire new Lightbox facility.
“De Beers is and will remain a natural diamond business,” Cleaver highlights.
In closing the interview, Cleaver remarked on other technological innovations within the business.
“As with all industries around the world, technology plays a huge role in the diamond industry’s future, and this is true across the entire diamond pipeline,” he notes.
One of the biggest technological innovations for De Beers Group recently has been the development of Tracr, a comprehensive blockchain-enabled mine-to-customer traceability solution for the diamond industry.
This project is in pilot phase and has the potential to be transformational for the sector in providing reassurance to a range of stakeholders in a way that wasn’t previously possible, while also delivering major benefits in sector efficiency.
The company’s major shareholder Anglo American is also bringing leading technology approaches to the business, specifically through FutureSmart mining and De Beers Group is fully focused on exploring the benefits of new technology-based potential through this initiative-driven Group focus.
Exploration and mine safety provide two interesting examples Cleaver points out.
Diamond exploration requires fundamentally different technologies and expertise from targeting through to discovery.
“We have consequently developed and retained unique in-house competency in these fields that is supplemented by an extensive global network of researchers and institutions.
"Meanwhile, enhanced safety at mine sites is our key priority and we are exploring a wide variety of opportunities for seeing how technology can be applied in this area to keep our people safe.”