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Small-scale diamond mining is the future in Botswana – Leon Daniels

29 july 2019

leon_daniels_xx.jpgPangolin Diamonds, which is currently the most active diamond exploration company in Botswana, has called upon authorities in the southern African country to include diamonds into the minerals permit for small scale mining operations.

Botswana’s Mines and Minerals Act Section 52 (1) states that anyone willing to conduct small-scale mining operations may apply for a minerals permit for any mineral other than diamonds over an area not exceeding 0.5km2 per permit.

Pangolin chief executive Leon Daniels told Rough & Polished’s Mathew Nyaungwa on the sidelines of a mining conference in Gaborone recently that small-scale diamond mining is the future as most economically viable kimberlites to be discovered in Botswana will be small, including dykes and small pipes with all operations fitting into a 50-hectare area.

Daniels also said, inter-alia, that his wish was to put all Pangolin discoveries into production.

Below are the excerpts.

Why is it important for Botswana to allow small-scale mining of diamonds?

That [Mines and Minerals Act Section 52 (1)] excludes diamonds from mineral permits and to me it doesn’t make sense because that means that even if you find a small diamond mine you have to go through all the requirements for a full mining licence, whereas the requirements for minerals permit…which is considered to be small scale mining is less rigorous and requires less investigating work and all that kind of stuff to get a minerals permit.

The minerals permit section was established to encourage the development of small mines so if the deposit that you find is a diamond deposit and it’s a small deposit and can comfortably fit within the 50ha area that’s maximum permissible size for a small mine then why not have it in there?

Why specifically have only diamonds excluded from it? It doesn’t make any sense because when you go to the mining licence side in terms of diamonds, the only provision that is in there, relative to any other minerals is that the ownership in terms of government participation needs to be negotiated and the tax structure needs to be negotiated. Now if you have diamonds in the minerals permit you can still [have] exactly those same requirements in terms of diamonds. Isn’t that so?

What do you think will be the net effect of adjusting the minerals permit to include diamonds?

I think the next generation of diamond mines in Botswana are going to be small mines and so the net effect is it will encourage the development of small mines. The Act unfortunate, to some extent, has been written for large mines, but when they brought the minerals permit section in it was specifically designed for small mine development, to encourage small mine development. So if we put diamonds back in there then I think there is room for small mines to develop.

What are the effects of Botswana not allowing the selling of diamonds from exploration activities?

Because there is no provision to sell the diamonds it, in my opinion, has two effects. Under the exploration stage, which includes evaluation right up to bankable feasibility study, it is obviously a far more costly exercise than when you actually mine full time. Some people have commented that my idea was to recover some of the exploration money.

That is not my principle concept, yes it will probably encourage people to do that, but what has happened for example at BK11 and to some extent at Ghaghoo mine, is that the bulk sampling stopped early because it is expensive. At BK11 they produced less than 500 carats for their bulk sample. I can’t remember the exact amount, but about 1200 carats at Ghaghoo.

On those small samples of diamonds, they decided the future of the mine…So what happens is that people are not fully evaluating the kimberlite. I believe at BK11 and Ghaghoo they under evaluated the kimberlite…If they could actually recover a minimum of 2000 carats or possibly 5000 carats and they were then able to sell the diamonds, excluding the 500 carat representative sample, which then belongs to the government… you get the real value of those diamonds because it’s a sale value so you put value as a genuine value into your feasibility study calculations. If you can’t sell them where do you take them for evaluation? You take them to different diamond evaluators. They are under no obligation to buy it and they can put whatever value they want when you can sell the diamonds on tender and people are competing for those different fractions you will get the real value of the diamonds. So in terms of the feasibility study that’s what you want. The real value has to go into that.

Have you approached the government with this suggestion?

I mentioned it sometime ago and I was told, ‘oh send it in in writing’.

Did you do that?

No! I didn’t do that. Look there are other parts of the Act that need to be updated as well. The Act was written a long time ago.

What needs to be updated?

I don’t want to get into those, but the Act was written 20 years ago. Things have changed since then in terms of technology and all kinds of things. There is need for a review of the Act not by government, but the industry and government together. I think time has come, the minister and president are receptive to improving the environment… There are some provisions in there (and as I said I don’t want to go into detail) but the government ignores those provisions so if they are to ignore those provisions why should we have them in there?

Is it easy to raise funds for diamond exploration activities in Botswana?

It is very difficult to raise money. It is almost impossible and nothing comes out of Botswana. We have all these fund managers that when I asked them ‘you say you will be ready for us when we want to go into production, but you are not willing to take the risk to support us to find something to go into production, why should we come back to you? They gave some nebulous answer, but they eventually said, ‘mining is high risk and they have burnt their fingers in mining’. So what about retail? Haven’t they all lost their money on Choppies (a local retail brand)? They don’t want to talk about Choppies, so is retail off the market as well because they burnt their fingers on Choppies? They are not being honest, quite frankly.

So, there are no risk takers in Botswana?

Well am told there are 4000 high net worth families in this country. Surely they will be willing to participate understanding its high risk. I wouldn’t want one of these fund managers that think that they have burnt their fingers before in mining and they don’t want to invest in that, but they don’t want to mention Choppies or the other retail failures, etcetera. I think what is needed if somebody is to set up a high risk venture capital and go to the high net worth families and to the pension fund and say put in 0.1%, I mean if you risk 0.1% of your fund surely that is not a risk. Out of the interest that you get out of the rest of the money that you have I mean you are not going to ruin your pension fund out of that… So when we started African Diamonds and you invested in the company you would have made 20-25 times your money. Yes, others don’t get anything, but one out of every 10 who put money into is a success. But having said that, which companies do you put money in? Well the ones that have a demonstrable track record of actually doing the work. Not the ones that are sterilising the ground, that are doing nothing, etcetera. That venture capital fund will invest in companies that are genuinely doing the work.

You have 14 prospecting licences that you are exploring in Botswana. How optimistic are you of finding something that is economically viable?

I am very optimistic about that, I mean, we have an area which we are now focusing on and a significant percentage of the indicators we are recovering in that area are diamonds and you cannot get a better indicator for diamondiferous kimberlite than a diamond. Now one of the things that I know about termites, because they bring up the indicators from the kimberlites to surface, is that they haven’t been funded to operate X-ray sorting equipment down there. So they only have a system of systematically sorting out the diamonds and bring them up. They are bringing up the diamonds randomly and if you see the percentage of the indicators that we are finding that are diamonds the logical conclusion to derive from that (which might not be correct) is that anybody who would see data like that will say ‘whatever kimberlite is there, it is likely to be high grade’. So that’s another thing, it doesn’t need to be a pipe, it can be a dyke... So there really is an argument from getting away from the concept of large mines.

Are you looking at getting into production should you discover an economic deposit?

Of course! It will depend on the economies of scale, but my preference will be that Pangolin puts its own discoveries into production.

When do you think that will likely happen, considering the work that the termites are doing for you?

(Laughs) I can’t predict that, it’s like asking me, ‘when it’s going to rain?’. You know it’s going to rain but I can’t tell you when it’s going to rain and how much it’s going to rain. But I believe that Pangolin will be focused to bring a discovery like that into production as soon as possible.

You signed an option to enter into an agreement with Makanwu Civil Blasting last July, which would grant you a sole and exclusive option to earn up to a 75% interest in AK10 diamond project. Can you give us an update on that?

Well we have had, for technical, operational reasons, a delay in the operations there. We are awaiting to be given an approval to continue by MCB, but certainly it’s a project that we are interested in. We would like to do the work that we had undertaken under the option period. They have extended the option period because of the technical issues.

They extended the option to when?

End of this year. So as soon as they advise us that we continue with the work, we will continue with the work. It’s one of those things that looks to be low grade, but the mineral chemistry looks to be telling us a completely different picture. The mineral chemistry is suggesting that we could expect to find +50 carats stones in there and so under the option agreement we will be looking at processing 500 tonnes of kimberlite.

Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished