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07 april 2014

De Beers, a leading global diamond miner in terms of value, said Botswana and South Africa are both highly prospective and geologically form part of the same cratonic region in Southern Africa.

The group’s head of media relations Lynette Gould told Rough & Polished’s African Bureau Editor-In-Chief Mathew Nyaungwa that although they had been continuously prospecting for kimberlites in Botswana since 1955, the diamond producer historically had less access to prospective ground in South Africa due to the mineral legislation pre-1994, in which mineral rights were held privately.

She said with the introduction of the new legislation in 2004, new areas had opened up.

De Beers started exploration work in South Africa last year, although Gould could not be drawn into divulging their areas of interest due to what she called the “competitive nature of the business”.

Meanwhile, the group said it was currently having discussions with the Angolan government and state-diamond company Endiama for new concessions.

This followed reports suggesting that De Beers had found 118 kimberlites in northern Angola but none warranted a mine that met the group’s hurdle rate.

Below are the excerpts.

South African media recently reported that De Beers is stepping up its search for fresh diamond-bearing kimberlites in South Africa. Which areas are you targeting and how optimistic are you of finding new kimberlites in the country?

South Africa is considered highly prospective for new kimberlite discoveries, although it would not be appropriate to divulge our areas of interest, given the competitive nature of the business.

When do you intend to start exploration in South Africa and what is your budget for this work?

Exploration commenced in 2013 and, with the increase in our ground-holdings, expenditure has increased tenfold fr om ZAR2 million in 2012 to our current budget of ZAR25 million for 2014.

Why does it appear as if De Beers had little interest in exploring for new kimberlites in South Africa?

Post 1994, the legislation governing the South African mining and exploration industry has been under review, with new legislation coming into effect in 2004. There have also been a number of challenges in the application process to obtain prospecting rights, and the process does take time. This is quite understandable in the context of wh ere South Africa has come from in these past decades, and the intention of the Government to ensure a fair and transparent system that will allow the Nation to benefit from the development of its natural resources. However, we do need certainty on the legislation and security of tenure over licenses before we can commit to funding and executing a work programme.

Which country do you think is highly prospective between Botswana and South Africa?

Both are highly prospective, and geologically form part of the same cratonic region in southern Africa. In Botswana De Beers has been continuously prospecting for kimberlites since 1955. In South Africa we have historically had less access to prospective ground due to the mineral legislation pre-1994, in which mineral rights were held privately. With the introduction of the new legislation in 2004, new areas have opened up, and new license applications have been submitted; however the application process takes time.

Reports also suggested that De Beers found 118 kimberlites in northern Angola but none warranted a mine that meets the group’s hurdle rate. Can you shed more light on this development?

De Beers completed an extensive exploration program on its Lunda NE concession from 2005 to 2012, in which time 118 kimberlite pipes were discovered. Of these, 75 were tested for diamond grade, leading to the resource evaluation and conceptual study of the Mulepe-1 deposit, which concluded that a stand-alone deposit is not economic under current assumptions. Consequently, the decision was taken to relinquish the Lunda NE concession.

It is understood that De Beers also applied for more prospects in Angola. Can you provide an update on this application?

Discussions are in progress with the Government and Endiama for new concessions, and early stage work should commence in 2014.

De Beers posted its full-year results for 2013 last month through majority shareholder Anglo American, with increased production and profit. Is this a sign of a healthy diamond market or you attribute this to improved asset performance?

Production increased 12 percent to 31.2 m carats due to improved ore grades and the restoration of full operations, after some challenges in 2012, across our assets, most notably the slope failure at the Debswana’s Jwaneng Mine in June of that year.

Talking of production, you said De Beers' diamond output increased by 12 percent to 31.2 million carats last year. What is your projected output for the current year?

Broadly in line with 2013, that is 30-32 million carats.

What is De Beers’ projected outlook for the diamond market this year?

We expect a slight strengthening in growth in diamond jewellery demand this year, driven by continued gradual improvements in the global economy, particularly in our key markets.

The US and China are expected to continue to be the main engines of growth for polished diamonds, while most other markets are expected to show positive growth in local currency, with final dollar-denominated results being partly dependent on currency fluctuations.

Rough-diamond manufacturers face continued pressures regarding levels of bank financing.  In India, further volatility of the Rupee may potentially affect rough-diamond sales. In the medium to long-term, industry fundamentals are expected to strengthen as diamond production plateaus and demand continues to increase. 

Lastly, is the group pleased with the shift of your sales operations from London to Gaborone? Did you face any glitches during your first two sights for the year?

Yes, very pleased.  Since the inaugural Sight in Gaborone in November 2013 our Sightholders have voiced their approval of the facilities, and say they have experienced the same high level of customer service with all systems and processes running smoothly on each occasion.

A new multi-million dollar state-of-the-art facility, which was completed ahead of schedule and on budget, has been supported by investment in Gaborone airport to improve entry for Sightholders. Investment has also been made in technology and systems to ensure that the area can deal with the increased number of visitors.

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