Preparatory work is underway at the world’s flagship diamond mine – Jwaneng in Botswana – for a major expansion project which will be the largest ever single capital commitment to the private sector in Botswana.

“Debswana Diamond Company Limited, a joint venture between the De Beers group and the government of Botswana, is investing an initial US$500 million in capital expenditure at Jwaneng, but that is the tip of the iceberg,” Jwaneng mine general manager Balisi Bonyongo says. “Taking into account all project stages, including feasibility, design, implementation and mining operations, as well as the cost of plant and equipment, the estimated project investment is likely to total well over US$3 billion over the next 15 years,” he tells Mining Review Africa deputy editor Lionel Williams in an exclusive interview.

“The actual total cost for the project, which is known as the Cut 8 project, is estimated at R25.2 billion. This is broken down as R3.8 billion for project capital, R3.4 billion for the mining fleet, with the remaining R18 billion going to working costs over the 16 year period,” Bonyongo explains.

“Last year our board approved the R3.8 billion to get the project started by mobilising and laying down the infrastructure. Then in March this year it approved a further R1.8 billion for us to start purchasing mining fleet,” he says.

“It is critical to life of mine that Cut 8 is producing ore by 2017, or Jwaneng would come to a standstill,” Bonyongo states. “But before we can get to that ore we will need to move 700 million tonnes of waste between 2010 and 2016.

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Night view of the Jwaneng mine
with the Aquarium building
in the right foreground.

“This project will extend the life of the asset base at Jwaneng significantly, and it will unlock substantial future option value for the mine. This is why Debswana is proceeding without delay to ensure that it is implemented,” Bonyongo continues. “This way the returns that our shareholders are receiving now will continue into the Cut 8 period, and Cut 8 will be playing a significant role in maintaining Jwaneng’s status as the richest diamond mine, by value, in the world.”

Through the years before the global financial crisis struck, Debswana described itself as a US$3 billion a year business, and Jwaneng mine consistently contributed about 70% of that amount. Even during the crisis period that proportion of 70% of Debswana’s earnings continued. And from a macroeconomic point of view, diamonds make up 33% of Botswana’s GDP; they provide about 50% of government revenue, and 70% to 80% of foreign exchange earnings.

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Trucks at work removing ore from the pit at Jwaneng. In 2010 they are due to move 63 million tonnes and produce 10.8 million tonnes of rough diamonds.

“The idea with Cut 8 is to ensure that these statistics continue,” says Bonyongo. “We are tackling the Cut 8 waste mining campaign in two phases. Phase one is the current one, running from 2010 to 2011, and it will move some 60 million tonnes of waste. The stockpiles we are moving are inside the Cut 8`s pit limit and have to be relocated. This process has started. It is the first phase of the project, and we are mining at a rate of about 70,000 tonnes a day,” he adds.

“We have also started work on preparations for stockpile relocation, and bays and workshops for the big trucks and earth-moving machinery will be maintained. Work on earthworks, civils, piling, structural steel and electrical installation has started, and we expect all of this to be completed by the third quarter of 2011,” Bonyongo continues.

“Phase two will ramp up to an eventual 120 million tonnes per annum (mtpa), commencing in 2011. This is three times the current rate of 40 mtpa. It will continue until the end of 2016 so that come 2017 the ore will be there,” he says.

“We are currently mining Cut 6 ore and stripping Cut 7 waste, and we should have completed this task and reached Cut 7 diamond-bearing ore at the end of 2012. That ore will be finished by 2017 – it is a time critical operation,” he emphasises.

“The ore extraction rate will be similar to our current rate of extraction. What is changing is the work profile – currently its 40 mtpa of waste and 10 mtpa of ore, but as we get to 2017 we will be peaking at 120 mtpa of waste, but still only extracting 10 mtpa of ore. We will not be looking to increase ore production any further – that rate matches plant capacity. Ten mtpa of ore will give Debswana actual diamond production of between 13 and 15 million carats a year.”

The new development, by removing over 700 million tonnes of waste between 2010 and 2024, will expose an additional 78 million tonnes of diamond-bearing ore, and will deepen the Jwaneng pit to a depth of 650 metres. “This will create access to a further 95 million carats, which could be worth in excess of US$15 billion over the life of the mine,” Bonyongo estimates.

“The project will extend the life of the operation by at least seven years to 2024/2025,” he adds.

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The 10 mtpa of ore treated in the
main treatment plant yields
about 15 million carats a year.

On the exploration front, about three years ago Debswana started an extensive drilling programme called the Jwaneng resource extension, which undertook deeper drilling to 85 metres. The idea with this project has been to understand the geology, to understand the rock type and the grade so that the volume of ore down there can be calculated. “When we have completed geological analysis through the Jwaneng resource extension project in 2012 we will be in a position to understand whether the mine will have to go into another cut – Cut 9 – or whether we would then have to develop an underground facility,” Bonyongo reveals.

“It will most likely be a Cut 9, but it will depend on what the information and the economics look like as they become available. There is little doubt that Jwaneng can be extended after Cut 8 – it’s simply a question of how it will need to be done,” he explains.

“By 2024/2025 we must have diamond-bearing ore that comes from either Cut 9 or the new underground mine. This means we need to make some significant decisions in the next two to three years.

“As far as the cost of Cut 9 is concerned, if one looks at the amount of fleet we are bringing in for Cut 8, we will probably not need to spend that much on Cut 9. It would therefore cost significantly less than R25 billion being devoted to Cut 8,” Bonyongo calculates. “If we have to go underground, however, it will be far more expensive than Cut 8.”

There are two considerations: first the economics, because the mining rates will be much reduced. “We would be limited by the shaft and might only be able to extract half of the 10 mtpa figure for Cut 8,” he says.

“The other consideration has to do with safety, because to go underground exposes one to higher safety risks, and we take the safety of our employees seriously. This means more costs than a normal open pit operation,” he points out.

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An electrically-powered hydraulic shovel loading a haul truck with a capacity of 240 tonnes. This process produces 30,000 t of ore and 150,000 t of waste a day.

“In terms of job creation, with the Cut 8 project now mobilising, there are a lot of people being employed, but once it settles and becomes a normal operation with phase two hard at work, you are looking at about 900 people in permanent employment,” Bonyongo adds.

As far as benefits for local industry are concerned, there are already a lot of new businesses opening in Jwaneng town, and there has been significant stimulation of activity. “There’s a lot more employment being created, not only by companies which have been contracted by Cut 8, but also businesses which are setting up to support the mine on an ongoing basis. The increased activity is very visible.

“Being the largest ever single capital commitment in the private sector in Botswana, this project, simply stated, will assist Botswana as a country to deal with very challenging situations like HIV/AIDS. It will continue to support the health infrastructure that is quite massive in the country, and it will assist the government with funds that will enable it to diversify the economy. In short, I see Cut 8 continuing to be a lifeline to the nation,” Bonyongo concludes.