Although its roots are in South Africa,
Much of last year’s budget was directed toward early-stage exploration, resulting in the discovery of 38 new kimberlites in nine different countries, including five in Canada.
“In spite of the much higher operating costs for mining in Canada compared with southern Africa, it is right and proper for De Beers to diversify its production base, which for the moment is concentrated in southern Africa,” says De Beers Managing Director Gary Ralfe.
The permitting process continues for the Snap Lake underground diamond mine project in the Northwest Territories, 220 km northeast of Yellowknife. In February, De Beers submitted an environmental assessment (EA) report for the project with the Mackenzie Valley Environmental Impact Review Board. The company remains optimistic that all necessary permits and approvals will be in hand by the third quarter of 2003. This would allow construction to begin in 2004, leading to startup in late 2005 and full production in 2006.
Operating at the proposed daily production rate of 3,000 tonnes, the underground mine is expected to produce 1.5 million carats annually over a 22-year span. Based on a total resource of 32.3 million carats, as outlined in the EA, the Snap Lake kimberlite dyke contains indicated reserves of 22.8 million tonnes, giving a minable grade of 1.42 carats per tonne based on a 20% dilution rate. A further 20 million tonnes of kimberlite are inferred. The diamonds have a present estimated value of $121 per carat.
Snap Lake has a projected capital cost of US$320 million. The project is currently idle, and will remain so until early 2003 when further trial mining and sampling resume.
De Beers operates 20 diamond mines throughout South Africa, Botswana, Tanzania and Namibia. Some are wholly owned, whereas others are run in partnership with governments. Its operations produced a total of 38.7 million carats in 2001, up 7% from 2000. Snap Lake will be De Beers’ first mine outside of southern Africa.
De Beers has raised the profile of two other Canadian projects. The Victor project in northern Ontario and the Gahcho Kue joint venture (formerly known as Kennady Lake) in the Northwest Territories have been elevated to the prefeasibility stage. In addition, Ralfe says, the company has been recording “interesting results” at the Fort a la Corne joint venture in Saskatchewan. De Beers and joint-venture partners
De Beers is facing several technical challenges at the Victor project in the James Bay Lowlands of Ontario, and these have been compounded by the Attawapiskat First Nation’s unilateral decision to cancel a memorandum of understanding (MOU) with De Beers. The MOU provided the framework for community participation and job creation as the project moves through exploration to the prefeasibility study. Most of the field work for the prefeasibility study has been done, and the Victor project is on hold.
The Victor kimberlite occurs in a cluster of 19 pipes, 90 km west of the coastal community of Attawapiskat on the western side of James Bay. De Beers discovered 16 of these bodies during exploration in 1988 and 1989. The Victor body consists of two pipes that coalesce near surface, which together cover a surface area of 16 hectares. The diamond grade is highly variable within the multi-phase kimberlite that comprises many eruptive crater and hypabyssal facies.
The main Victor pipe contains an inferred resource of 22.8 million tonnes of kimberlite, whereas Victor Southwest hosts 13.3 million tonnes, for a total of 36.2 million tonnes. De Beers has established a preliminary revenue value of $94 per tonne based on the evaluation of stone recovered from some 9,500 tonnes of kimberlite collected from two large surface pits and 37 large-diameter reverse-circulation holes drilled to a maximum depth of 250 metres.
A desktop study in late 2001 identified a host of geotechnical obstacles the project needs to clear before a production decision can be made. Water management, ground water disposal and treatment, site access and logistics, and project costs are all issues that will be addressed in a prefeasibility study due for completion by year-end.
In the meantime, mini-bulk sampling on six other Attawapiskat kimberlites indicates further work is required.
Ndowana deal
On a worldwide basis, De Beers began prospecting in India during the first half of 2002. It also discovered new kimberlites in Botswana. In South Africa, the company signed the Ndowana joint venture with Mvelaphanda Resources, a black empowerment mining company. The joint venture will cover kimberlite exploration in certain parts of the Limpopo and Mpumalanga provinces.
For the half-year ended June 30, 2002, total net earnings of the De Beers group were off 22% from the corresponding period a year earlier, at US$261 million, which includes US$31 million of retained joint-venture income. The lion’s share of the retained income reflects De Beers’ equity interest in the Debswana and Namdeb partnerships. Headline earnings were US$308 million, versus US$744 million a year earlier, which includes US$343 million in earnings from
Operations generated a cash flow of US$1.14 billion for the first six months of 2002, compared with US$733 million in 2001. The net interest-bearing debt has come down from US$3.15 billion at the end of the year to US$2.08 billion at the end of June. Diamond stocks and other net assets have fallen to US$1.9 billion from US$2.65 billion at year-end.
More carats
Despite a 5% reduction in tonnage treated across De Beers’ mines, carat production rose by 8% for the first half, due mainly to better recoveries in Botswana. Operating costs were 15% under budget.
The Diamond Trading Company’s (DTC) rough diamond sales for the first six months of 2002 were just over US$2.84 billion, some 8.5% ahead of the corresponding period a year earlier. The DTC buys rough diamonds from De Beers’ mines in southern Africa, and under contract from Alrosa in Russia and
Ralfe attributes the strength in the diamond markets in the first half of the year to the restocking of the retail pipeline of polished stones — this, after better-than-expected Christmas retail sales in the U.S., combined with reduced inventories. “At the beginning of this year, the retail trade found themselves having to restock on a substantial basis,” says Ralfe. American retail purchases, which account for half the global sales of diamond jewelry, were 2% ahead of the 6-month period of 2001. European retail purchases also improved 2%, while Japan more than offset these gains, both for retail sales and the import of polished stones. As a result, global retail purchases were up only 1%. Polished stocks financed by the cut
ting centres totalled US$4.1 billion at the end of last year. De Beers estimates that this dropped to US$3.4 billion halfway into 2002.
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