Profitable carats paramount
THERE HAVE BEEN many changes at De Beers Consolidated Mines (DBCM) over the past few years. However, one thing that’s stayed the same is the size and scope of the thinking that keeps the company the leading producer of diamonds and it’s now more focused on the quality of its operations, business and reputation of its diamonds than on quantity produced at any cost. In mining it’s called “profitable carats”.
Mike Brown, head of mining and technical operations at DBCM, says this year it’s on track to mine under 13m carats of diamonds, a million more than it produced in 2003, the year before the company carried out a major restructuring.
“We’re producing the same number of carats with half the people. Productivity has been improved and we’re now well positioned for the future market we’ll operate in,” says Brown. “In 2004 we looked at De Beers SA and came up with six major initiatives. It was clear we had some core assets and some non-core mines. With the rand exchange rate movement strengthening at the time we adopted a policy known as ‘thrive at five’.”
The intention was to ensure all DBCM’s mines would run as viable concerns even at an exchange rate of US$1/R5. De Beers, like many mining companies, sells its products for US dollars and a stronger rand means increased operational costs while at the same time revenue will decline as any dollars gained from sales are changed back to rand.
“It was a strategic decision. We wanted to operate in the upper quartile of mines in terms of margins. It gives you some leeway and when the prices of products fall, the operations can be sustained with higher cost operators dropping out of the market and prices recovering,” says Brown. The decision was made to sell three of De Beers’ mines and tailings from another. At the time those in the industry and communities were shocked that De Beers – so long the custodian of the diamond market over the past century – would make business decision to actually sell mines and questions were asked about the viability of these operations being sold.
“It took some careful consideration before embarking on the sale of assets. However, in the life cycle of an operation some assets perform better under other owners. The sales also added significantly to transformation in SA’s diamond mining, where previously more than 90% of production was controlled by one company,” says Brown.
The intention was to become more productive at De Beers.
The number of employees at De Beers has more than halved since 2003, when it had around 9 000 people. With the possible sale of De Beers’ Namaqualand mine next year, the number of employees will be around 4 000. Many of those workers affected took early retirement or job opportunities on one of its six remaining mines. Those remaining on the mines offered to consortiums with broad-based black empowerment credentials joined the company that bought the operation and Brown says DBCM didn’t have to ask for compulsory redundancies.
Diamond production worldwide by other major players has reportedly fallen slightly, while new production has come on stream in Canada and in SA.
As the same time as the De Beers’ board made the decision to sell some of its DBCM mines, plans were also made to expand others. DBCM has started production at the marine mining areas off SA’s West Coast and built a new kimberlite mine, the Voorspoed mine, which opened in early November this year. De Beers has also brought two new operations into production in Canada in the past year – the first time within 12 months it’s brought four new mines into production in its 120-year history.
DBCM continues with what’s called its Continuous Business Improvement (CBI) initiative introduced at the time of its restructuring.
“The Voorspoed mine came into production in record time. All operators have to have a minimal qualification of a matric pass and are trained over two to three years to a level of expertise where they’d be able to carry out maintenance on the machines they operate and take fuller account for their working area,” says Brown.
Some of the equipment costs millions of rand. “We’re investing in the people operating that expensive capital resource.”
The upshot of its review is that DBCM operations are on a par in terms of efficiency and productivity with some of their diamond-producing competitors.
“Finsch is certainly one of the world’s top diamond underground mines and Venetia is a world-class open pit,” says Brown.
DBCM continues to explore in SA (see separate report) and its mines have a significant number of productive years left. Currently, the gems in SA aren’t as large as those mined in Botswana, with the average carat price being $100 against $200 in Botswana, says Brown.
Venetia has life of mine to 2017 and Brown says work is being carried out on an underground mine design. A feasibility study is being completed that, to date, indicates potential for viable underground mining.
At Finsch, with its current life of operation being 2013, pre-feasibility studies and feasibility studies are being carried out to determine ways to extend its economic life.
Voorspoed’s existing mine plan sees it operating until 2021. And SASA’s – DBCM’s marine mining operations – prospective areas of operation are still to be evaluated from a resources viewpoint and, of course, the dollar per carat is better than kimberlite mined diamonds, says Brown.
Venetia Mine in Limpopo, which is evaluating its deposit for beyond 2017.