Dieter Haage

De Beers Consolidated
Mines head of operations
Dieter Haage

With 12 major mines in four countries, the De Beers Group is responsible for more than 40% of global diamond production. DBCM produces nine per cent of global production in terms of both value and weight, and almost one-third of the 51 million carats mined by De Beers in the last year.

“We are positioning ourselves for future growth by focusing our human resources and capital investment on those operations which are right for De Beers,” says company head of operations Dieter Haage in an exclusive interview with Mining Review Africa.

“We are in a state of flux right now, primarily through a strategic re-think by the group on our portfolio process – what assets we should and should not hold,” he explains. “We regard a review like this as an eminently sensible thing to do to move us strategically from a ‘mine everything to the last drop’ operation to a portfolio of high-volume-high-return assets.

This DBCM strategy is being built on two pillars of action – on the one hand identifying and selling off assets which do not match the company’s future plans and aspirations, and on the other proceeding with the exploration and development of projects which do.

In line with the first aspect of this strategy – selling off of certain properties – the company has been looking at opportunities which have arisen around the disposal of such assets as the Kimberley underground operation, Cullinan, and the Koffiefontein mine, as well as negotiations around the Alexkor-Namaqualand Mines merger.

“This will really ensure that our eventual portfolio will be much closer to the high-volume-high-return quadrant” Haage predicts. “It has made for a very exciting period during the last eight to twelve months – and it will remain so for some time to come,” he adds.

DBCM1-6:2007

General view of the plant at Finsch
from the top of the headgear –
the open pit can be seen
in the background

DBCM SELLS KIMBERLEY UNDERGROUND
In the latest development, DBCM has agreed to sell its Kimberley underground mines to Petra Diamonds. In terms of the agreement the total consideration is R78.5 million, which includes a cash payment and provision of a guarantee for the full environmental rehabilitation liability. Petra will also assume responsibility for full care and maintenance of the underground mines from the signature date.

“Petra, its BEE joint venture partner Sedibeng Mining, and DBCM will now seek the necessary approvals from the Department of Minerals and Energy that will allow the joint venture to operate the mines at optimal levels after the transaction has been concluded,” Haage explains.

DBCM2-6:2007

An underground jumbo drill rig
in operation at the Finsch mine

Petra will operate the mines with Sedibeng, aiming an annual output of 100 000 carats. De Beers’ surface operations are continuing as before, and are forecast to produce more than 1.5 million carats a year. The operation has been turned around, and is now profitable. The two companies also operate the Dancarl Mine in the Barkley West District, which Petra previously purchased from DBCM. Petra also bought DBCM’s Koffiefontein Mine in November 2006.

The Kimberley Mines agreement follows the announcement in February 2007 that De Beers intended to seek offers for its underground mines, as well as selected tailing mineral resources in and around Kimberley, and for Cullinan Diamond Mine. “The proposed sales form a significant part of DBCM’s drive to position itself for future growth by focusing its resources on those mines that fit the company’s strategy to ensure sustainable growth beyond 2014, while creating opportunities for new entrants to the industry to further the transformation goals the company shares with government,” Haage emphasises.

The surface resource that exists in Kimberley was earmarked for treatment through the company’s combined treatment plant, and is a project which DBCM believes will contribute profitably to the operation.

“There are, however, some resources outside of these for which the company has been employing the contract services of some empowerment companies which would ultimately become medium-sized players and competitors in the mining industry in South Africa,” he points out. “These four companies are being given the opportunity to purchase the resource,” says Haage, “the process is underway, and they are forming a consortium to make a combined bid.”

The Kimberley surface operation is expected to produce some 1.5 million carats a year.

DBCM3-6:2007

The Venetia open pit, which
measures 2.1 km in length

CULLINAN AND NAMAQUALAND ON OFFER
In a similar process at Cullinan, a decision was made to sell the operation as a going concern. The tender process was opened, bidders placed non-binding offers, and then a short-list of bidders was selected. “Currently we are in the process of reviewing those offers, and I would hope that in the not too distant future we will be able to name the successful bidder,” states Haage.

Meanwhile De Beers and the South African Department of Minerals and Energy have reached an agreement in terms of which the west coast operations of Alexkor and DBCM’s Namaqualand Mines will be amalgamated into a new, stand-alone diamond mining company. As a first step in this process, De Beers will be issuing, through a special purpose vehicle, a 20% stake in its Namaqualand Mines to the DME.

The process of consolidating these assets is due to be concluded by the end of 2008, after which the option of a listing may be examined by the operator of the new company. De Beers does not intend to be the operator, and will dilute its stake over time.

“We are currently on track to finalise all these transactions (Kimberley, Cullinan and Namaqualand) during the course of 2008,” Haage predicts. “We also have to make sure that these developments support the aspirations of government – and government wants to see a growing and transformed industry – so the way we go about these various transactions must, as far as is practical, measure up to that,” he adds.

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Ore extraction activities in the
open pit are run 24 hours a
day at Venetia mine

“We believe we are achieving this with assets which will continue to operate under new owners, assuring that the jobs are there, and that there will be a strong empowerment component,” Haage contends. “This is a philosophy of getting fit as a company, but doing it in a way which supports the aspirations of government, and indeed supports the very product we mine.”

During 2006 DBCM treated a total of 32.6 million tonnes of diamond-bearing kimberlite ore and recovered close to 15 million carats of diamonds.

BILLIONS COULD BE SPENT ON NEW PROJECTS
The second pillar of the company’s future strategy – exploration and development of projects which will improve those production figures on an ongoing basis – involves at least six initiatives which could lead to capital investment of close to R25 billion over the next five to ten years.

Revealing these facts, Haage was quick to emphasise that while three of projects are well underway, the other three – which would require the bulk of required spending at more than R20 billion – are merely in the concept stage.

DBCM remains focused on building new mines in South Africa. Its SASA (South African Sea Areas) Project and Voorspoed Mine in the Free State were scheduled to be operational in 2007 and 2008 respectively. Other capital investments in growth projects include significant investment in its world class assets – the Finsch and Venetia mines – as well as funding of new exploration activities to find the diamond mines of the future in South Africa.

First of three confirmed projects is the R1.2 billion Voorspoed mine, 35 km north of Kroonstad in the Free State. The project is on schedule and within budget, and is scheduled for commissioning towards the end of 2008. It will ramp up to full production, treating 4 Mtpa and producing 900 000 carats pa by mid-2009. Life of mine has been calculated at 11 years.

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“Peace in Africa” – the first deep-sea
marine diamond vessel mining
in South African waters, being
fitted in Cape Town harbour

Looking to the future, it is far too early at this stage to speculate about future expansion or an eventual move into underground mining. “Our track record shows that we go in with a plan and – over a period of time and through a process of continuous improvement – we usually increase the rate at which we are able to put kimberlite through our plants,” Haage reveals. “Inevitably this leads to a ramp-up at a later stage, but one has to trade that off against the resource. There’s no point ramping up and not making money because the resource is limited,” he reasons.

FIRST MARINE DIAMOND OPERATION IN SA
“Our deep sea mining operation is the part of our business that really excites me,” Haage enthuses.

The R1.1 billion South Africa Sea Areas (SASA) initiative began production earlier this year with the launching of the mining vessel “Peace in Africa” – the first deep-sea marine diamond vessel mining in South African waters. Operating off the Atlantic coastline of South Africa, the vessel is equipped with a large undersea tracked mining tool (crawler), and has a specialised diamond recovery treatment plant on board. It is expected to yield an average annual production of 240 000 carats of diamonds over an estimated operating life of 30 years.

“The vessel is capable of operating down to a depth of 200m,” says Haage. “We only operate in the region of 120m – between 90 and 140m – and we are unlikely to need to go further down,” he adds.

“Peace in Africa was designed around a 19 year operation, but inevitably with marine resources, one continually proves up resources as one mines,” Haage explains. “I have no doubt that we should be around for a lot longer than that, given the track record that we’ve established in Namibian waters,” he estimates.

“We are also confident that we will increase production on this project through ongoing technical improvement,” he adds. “This is where the biggest opportunity lies – in improved rate of production, as opposed to new finds in the area.”

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Open pit operations at the
new Voorspoed mine

THREE SIGNIFICANT CONCEPT STUDIES
At Finsch mine, 165 km north-west Kimberley in the northern Cape, the R630 million upgrade of the treatment plant is well underway. Construction is currently scheduled for completion, with commissioning in Q1 of 2008 and the ramp-up completed during the course of the second quarter.

“The rationale behind this initiative was really to be able to ramp up the pre-1979 tailings mineral resource to full account, and at the same time to upgrade the technology and recovery,” Haage explains. “The upgraded plant will boost the mine’s throughput by 1.3 million tonnes to 7.3 Mtpa, and the operation is forecast to recover an additional 500 000 carats pa,” he claims.

This brings us to the three concept studies which – if they materialise – could involve a combined investment of between R15 billion and R21 billion.

“DBCM has shown the vision to examine these possibilities, and is spending a considerable amount of time and money to establish their potential,” Haage points out. “But it is still very early days, and all these initiatives will have to clear the various hurdles along the way before any of them are given an official go-ahead,” he emphasises.

First of these is at Finsch, where life of mine for the current Block Four is scheduled to end in 2014. “We are currently in the process of the concept phase for the next drop-down to Block Five,” says Haage. “If Block Five does come to fruition and the go-ahead is given, it will involve a capital investment of somewhere between R5 billion and R8 billion, and should take us to 2023,” he reveals. “Then of course there is the potential of a Block Six – but we are a long way from there.”

VENETIA MAY GO UNDERGROUND
Finally at Venetia – 80 km west of Musina in Limpopo – concept studies are underway into the Venetia Cut Five project and the mine’s underground concept.

“Currently the surface operation takes us to Cut Four, and the opportunity to do a Cut Five is there,” Haage explains. “Indications are that we would be able to make Cut Five work, which would take us to between 2018 and 2020. We would deal with this as a project, although it really is an extension of the open pit, and would cost in the vicinity of R5 billion,” he calculates. “We are also busy with concept studies to define the resource at depth, and to obtain an understanding of what is down there – not just in terms of value, but also as regards technical parameters,” says Haage.

“Bearing in mind that the probable intention would be to move underground between 2018 and about 2020, we do have some time to go through the various phases of the process,” he observes. “Once again, we believe the conservative approach is the right way to go. It’s a not insignificant investment – also some where between R5 billion and R8 billion – and we must ensure that we would be getting the returns we need from such an investment,” he insists.

“With all of the above projects we have a specific approach which takes us from concept through the pre-feasibility and feasibility process, determination of mining methods and costs, the decision to mine, and finally the move toward eventual implementation,” Haage explains.

“We strongly believe that South Africa is a highly prospective country,” he says. “Although it is true that the best deposits may well have been found, we really believe that the potential to find more in this country is excellent, and that with our full range of advanced technology, we will succeed,” Haage enthuses.

“The fact that we are selling off certain operations does not mean we are getting smaller; it means we are getting fit to grow.” he concludes.