FROM MINE TO MISTRESS
THE PASSING OF the De Beers syndicate has opened some interesting possibilities for the world’s other diamond miners. One spin-off, for instance, is that there’s more scope for vertical integration. Just as De Beers sells its own diamonds in specially branded De Beers stores, so lesser lights are seeking to access the more lucrative retail end of the diamond market.
Etruscan Diamonds is a newly formed company that has announced its intention to list on the JSE in the next 12 months. It’s building a smallish mine about 150km from Johannesburg in Ventersdorp, which, at full capacity is to produce 500 000 carats of rough diamonds. An interesting development, however, is that it is hooking up with an undisclosed empowerment partner that will cut and polish its diamonds, and then sell them in its own shop.
Kevin McNeill, appointed Etruscan Diamonds’ president, is not able to disclose the name of the partner, but the advantages of the move are all to do with the much higher margins retail sales enjoy over the business of mining rough goods. Selling stones by auction at “gate of mine” is an industry valued at R88bn/year ($12bn). But the value chain is such that there’s some R460bn/year ($63bn) available at the retail level.
“The aim is that we’d participate in the profits of the downstream market while the diamond cutter and polisher gets a guaranteed supply of diamonds,” says McNeill. And as demand for diamonds grows, as it’s forecast to do from 2008, it will become increasingly important for local polishers to secure production.
McNeill, meanwhile, says Etruscan Diamonds is focusing on developing its Hartbeeslaagte/Blue Gum project near Ventersdorp and hopes it can bring its Tirisano prospect out of mothballs. Tirisano is an interesting case because it’s operated by Mvelaphanda Exploration, owned by Mvelaphanda Resources (Mvela Resources). Etruscan Resources, the diamond firm’s major shareholder, has offered to buy the mine from Mvela Exploration, but the SA empowerment firm has refused.
“I think they’re waiting for the rand to weaken further,” says McNeill, concealing his irritation well. Perhaps if Trans Hex, in which Mvela Resources has a stake, continues to struggle, the reopening of that mine might come soon enough. “It’s got a damn good mill if only we could get our hands on it.”
Looking for profits downstream. Kevin McNeill