Kimberley - After 127 years in Kimberley, De Beers is set to sell its last remaining mining operation in the city.
The company on Thursday announced its intention “to explore the extension of the operating life of mine of its Kimberley Mines Tailings Operation beyond 2018 by placing the mine on the market”.
“This is our ‘old lady’ of Kimberley,” De Beers CEO Phillip Barton, said.
“It is essentially our last daughter we are marrying off – and we are very particular about who she is going to. Whoever buys this must make a success of it.”
He was adamant that there were no potential buyers in the wings, however, and the mine – which is expected to “sell for millions” – will be sold on open tender.
An advertisement calling for expressions of interest appear in newspapers around the country on Friday.
Kimberley Mines currently employs approximately 350 permanent staff and the company is positive that the sale is not expected to result in any job losses because the mine will be sold as a going concern.
It also has commercial arrangements with several companies, providing essential mining and other support services, who employ approximately 300 people.
In a statement issued on Thursday, the company said it was investigating ways to extend the economic life of its tailings-based mining operation in Kimberley, adding that in the past decade the mine had taken steps to sustain the operation and succeed in maintaining production in economically challenging times.
“It is encouraging that our work, to date, in considering all options, has shown that Kimberley Mines may not have to close in the near future,” Barton said.
“We are liaising with directly affected stakeholders outlining feasible options to extend the potential of the mine and its assets.”
‘Engaging fully’
He added that the diamond giant was engaging fully with employees, union representatives, and with the government, including the Northern Cape government and the Sol Plaatje Municipality.
“The asset has a superb team of managers and operators, and we are keen to offer the mine as a going concern to facilitate a greater degree of job security,” Barton added.
“The mine is De Beers’ second largest producer in South Africa with production in 2014 of 722 000 carats. With an appropriate operator, this asset has potential into the next decade.”
He stated that the company hoped to close the “expression of interest” phase, and conclude a sales agreement, in a matter of months.
“It is critical that, thereafter, the transfer of the asset to the new owner meets all regulatory requirements, and is handled with appropriate care to avoid unnecessary delay and the consequent depletion of the diamond resource for the new operator.”
Kimberley Mines produces the lowest value diamonds within the De Beers portfolio and is the only De Beers tailing treatment operation.
Mine no longer fits ‘strategic plan’
While the mine no longer fits into De Beers and Anglo-American’s strategic plan and asset portfolio (large, long-life and low cost operations), according to the company, it still offers an attractive investment opportunity for an experienced operator who can potentially extend the life of the mine to 2030 by developing a new, low-cost operating model, rather than close the mine in 2018.
Standard Bank has been employed to run the sale process and conduct an independent evaluation of potential purchasers and advertisements will be placed in the media calling for expressions of interest from potential purchasers.
The process of identifying a future owner is expected to be completed this year.
The company has committed itself to preserving direct and indirect employment.
“As in previous successful sale processes, bidders will be evaluated on technical ability, financial ability, commitment to the Kimberley region and compliant with SA mining regulations in terms of BEE etc.”
Potential purchases will be required to pay a deposit of R100 000.
The following will not be part of the sale process: De Beers Sightholder Sales South Africa (formerly DTCSA, the company’s diamond sorting and valuation operation in South Africa), Financial Shared Services, Human Resources Shared Services, the Exploration Microdiamond Laboratory; the Ecology Division, the Technical Training Centre, De Beers Benefit Society, De Beers Pension Fund, De Beers Zimele (a small and medium enterprise development hub) and the Big Hole.
The company has also recommitted itself to continuing its corporate social investment (CSI) activities, including the sale of Colville Tailing Mineral Resource (a sale agreement was signed in January this year) and the Sol Plaatje University, the Kimberley International Diamond and Jewellery Academy (Kidja) as well as land donations in Kimberley (De Beers has undertaken to donate land to the Sol Plaatje University to enable the university’s long-term expansion plans. It also includes buildings that may be used as student accommodation).
It will also honour its commitment to donate land for the development of housing in Colville.
Over and above the CSI initiatives, De Beers Zimele has to date approved loans to the amount of R18 million that funded 93 SMEs and created 601 jobs in the Kimberley area.
Referring to the feasibility of the mine into the future, Hendrickse pointed out that De Beers had taken its production over the past four years to a current capacity of about 6.4Mtpa, an increase of more than 30 percent.
“In 2011 we were sitting at just over 4Mtpa; then we went up to 5.2Mtpa in 2012, 5.4Mtpa in 2013, and last year we did just over 6.3Mtpa. This year our budget is for 6.4Mtpa,” he stated.
“On average this translates to around up to 800 000 carats per annum – this year our budget is an increase on the 722 000 achieved in 2014.”
Ongoing learning curve
He pointed out that the company was not mining the resources it mined three years ago as these were long depleted. “This puts us on an ongoing learning curve to get the resource blend going into the plant right,” he explains. “I would say that, for the remainder of the life of mine to 2018, our blending may result in a yield of between 700 000 and 800 000 carats per annum.”
It is expected that once the life of the mine has been reached, Kimberley Mines will still have a resource of close to 100Mt.
“From the De Beers perspective, and under our operating model, it does not make sense for us to mine it. However, from a small miner’s perspective – implementing their mine plan with technology to suit them and an improved operating structure – this is definitely an opportunity to be explored by potential new owners.”
According to Hendrickse, the life of mine will depend on processing capacity. “With a 100mt resource if you were to mine only 2Mtpa, you would have a life of 50 years, whereas if you handle 5mtpa your life-span would be only 20 years.”
In the 1990s De Beers undertook extensive studies to establish the feasibility of treating tailings from the surrounding De Beers-owned surface tailings deposits.
On the basis of this work, a specially designed processing plant, known as the Combined Treatment Plant (CTP), to treat the tailings resources was constructed. The R780 million CTP was officially commissioned on August 2 2003.
“Today’s tailings mining operations are a totally different kettle of fish to our previous ore-type mining,” Hendrickse said.
“In a single shift one faces the possibility of needing a completely different blend because of fineness or oversize, the presence of foreign material, copper wire preventing the process from operating optimally and so on. The team then has had to find innovative ways of countering such problems,’ he observes.
As far as the size of diamonds recovered is concerned, the plant has a treatment size from a diamond sieve perspective, to recover right up to the plus-23 diamond sieve, which means plus-10.8carat stones.
“That is of course not the average – we are predominantly a fine diamond producer, and with the Indian market the way it is, our product is in demand.
Good quality
“We do produce good quality gemstones. There are no fancy colours. We get the yellow stones and the clear stones – there are no unique colours, but there is certainly an adequate proportion of gemstones in our mix,” states Hendrickse.
The tailings removal process is contracted out to Setjhaba Carriers, a division of Unitrans, and they transport the ore and feed it to the plant.
“They handle the dozing, the loading, the hauling, and the dipping into the bin, creating the stockpile, and maintaining the roads. They employ up to 200 people to get the job done. Other smaller contractors operate aspects such as our tailing streams – the coarse rescue dump and base facility, and our scaffolding.”
Hendrickse added that the sooner the new owner could move in and take over the better for everyone. Referring to the impact of the diamond mining industry on the economy of Kimberley and the Northern Cape, Hendrickse admitted that the direct impact of De Beers on the city was not what it used to be.
“While our footprint has been reduced through the disposal of various mines, mainly to Petra, this action on our part has created economic activity in the region. People continue to live and work in the Kimberley area, they spend their money in the Kimberley area, they pay taxes here. So there is no doubt in my mind that that this all contributes directly to the livelihood of the city of Kimberley,” he said.
‘Actively committed to Kimberley’
“I cannot emphasise enough the fact that De Beers remains actively committed to Kimberley, retaining a significant business presence in the city.”
This sentiment was echoed by Barton, who has been based in Kimberley for the last seven years and in his own words, has an emotional attachment to the city.
“I would like to reassure you that, given our long association with Kimberley and its people, De Beers will not be ceasing its operations in city entirely. We will continue to engage in developing sustainable activities in the Kimberley area.”
Hendrickse also gave the assurance that the company’s head office would retain its building in Stockdale Street. “The fundamental thing is keeping people employed and providing them with the means to be independent, to fend for themselves and to make a living. It is through that process that our whole economy is driven.”
Diamond Fields Advertiser