Southern African diamonds lure Aussies

Vancouver — Once the exclusive domain of De Beers, southern Africa is today being explored by an increasing number of Australian and Canadian companies.

Often, these smaller companies opt to evaluate and advance projects that do not meet De Beers’ economic criteria. Or else they gain access to areas the major has deemed too risky or hostile.

Australian juniors are more experienced than their Canadian counterparts, owing to the diamond exploration boom Down Under in the 1970s. (The country has two diamond producers: Rio Tinto‘s [RTP-N] Argyle mine and Kimberley Diamond‘s Ellendale operation. The latter, in the northern part of Western Australia, has been producing for just over two years and is undergoing a major expansion.)

In 2004, South Africa’s diamond mines produced 13-14 million carats, or 10% of world output.

Australian-based Crown Diamonds is one of the top non-African companies producing diamonds on the continent. The Messina and Star mines and the recently acquired Helam and Dancarl, are expected produce a total of more than 150,000 carats in 2005.

Recently, Crown produced 56.6- and 42-carat gem-quality stones, selling for more than A$650,000 and A$400,000, respectively.

Australian-listed Namakwa Diamond began producing alluvial diamonds from its coastal operation in western South Africa, north of the mouth of the Olifants River. The marine terraces host diamondiferous gravels fluvially transported from eroded kimberlites in the interior craton. Ocean currents have distributed the gem stones along the Atlantic coast from Lamberts Bay northward through to Luderitz in Namibia.

Namakwa started producing at its namesake project in September 2004 at an initial rate of 95,000 carats per year. Plans call for the mine to be expanded to 240,000 carats annually by 2006. Namakwa recently acquired the 16.5-sq.-km Swartsand project, which is adjacent to several producing mines.

Tawana Resources is using bulk sampling to test alluvial projects in the Kimberley region. The paleo-gravel deposits are close to De Beers’ 2-million-carat-per-year Finsch mine. Large-diameter drilling is being used to extract diamondiferous gravel, which will be processed by means of dense media separation.

The Tawana alluvial diamond project is a joint venture with BHP Billiton (BHP-N), whose proprietary Falcon airborne gravity-gradio-metic system has proved useful in discerning kimberlite targets.

Canadian-listed Superior Mining (smp-v) will explore the Kalkom diamond project in the Bushmanland Plateau region of Northern Cape province. Historic work identified pipe-like structures, and these were initially thought to be kimberlites. The structures were found to have a composition similar to the diamondiferous lamproites in the northern part of Western Australia, such as Argyle. (Alluvial diamonds do occur in drainages in the region.)

Monroe Minerals (MMX-V) has two South African kimberlite projects that have seen only limited work: Allendale in Free State province and SW Transvaal in Northwest province. But mostly the company has been exploring its alluvial projects, which, if developed, carry potential for rapid cash flow. At the London alluvial mine, in Northwest province, trial mining has begun at the monthly rate of 24,000 tonnes, and the average grade is 1 carat per 100 tonnes. The average stone size is 1.3 carats; that value, US$490 per carat.

Partners Etruscan Resources (EET-T) and Mountain Lake Resources (MOA-V) are expanding operations at the alluvial Tirisano diamond mine in the Ventersdorp district. The mine is being operated by Trans Hex through a partnership with Mvelaphanda Resources, a black economic empowerment (BEE) company.

At the end of 2003, operations at the Klipspringer diamond mine were suspended owing to low production and the strengthening South African rand. Situated in Limpopo province, the mine is jointly held by SouthernEra Diamonds (SDM-T) and De Beers (and an affiliated BEE company). In 2003, roughly 75,000 carats were mined from small kimberlite pipes and fissures underground. Indicated resources stand at 1.7 million tonnes grading 46.5 carats per 100 (about 800,000 carats), whereas the inferred figure is pegged at 3.1 million tonnes at the same grade (1.5 million carats).

Meanwhile, SouthernEra continues to explore its Prieska and Hope diamond projects.

Diamcor Mining (DMR-V) perseveres at its 53%-owned So Ver diamond mine, near Kimberley, which, in 2004, achieved monthly production of 2,460 carats of high-quality gem stones, including several large octahedrals.

Diamcor’s recent alignment with a BEE group should enable it to acquire additional projects.

Belgian-based and Canadian-listed Rex Diamond Mining (RXD-T) intends to sell its South African operating subsidiary to Johannesburg-listed African Gem Resources. In return, the latter will issue 50 million shares and pay 2.5 million rand plus a royalty on future rough diamond sales. Rex’s South African operations include the Loxton, Rex and Bellsbank mines.

In 2004, all of Rex’s mining leases in Sierra Leone were cancelled by that country’s government.

Trivalence Mining (TMI-V) operates the Palmietgat mine, near Pretoria. Initially discovered and operated by De Beers, the small cluster of diamondiferous kimberlite pipes, dykes and fissures is being mined from three open pits: K14, K15 and K16. Since 2000, more than 100,000 carats have been recovered with the aid of a 400-tonne-per-day dense-media-separation plant. The company is considering deepening the pits.

Most of Trivalence’s diamond production comes from the Aredor project, in the Republic of Guinea, West Africa.

Botswana

Botswana produces more diamonds than any other country, accounting for 23% of last year’s global output of 145-150 million carats, and De Beers recently renewed the mining licence for its Botswana mines for another 25 years.

But junior explorers, too, are active in the country. Canadian-listed Tsodilo Resources (TSD-V) is busy scouring the Angolan-Congo craton in the country’s northwestern region.

The company holds a 75% interest in the Ngamiland project, which consists of 21 licences totalling more than 17,700 sq. km under thin Kalahari Desert cover. Partner Trans Hex holds the remaining interest. Exploration by a previous operator in the 1990s uncovered 19 small kimberlites.

Reverse-circulation drilling by Tsodilo has resulted in the discovery of several additional pipes, which are being tested.

Trivalence Mining is exploring the Kokong kimberlite project, which comprises more than 2,200 sq. km in the Kgalagadi district. In 2002, the company brought Rio Tinto on as a partner and operator, and the major has earned a 65% interest in return for having spent US$3.5 million on exploration. The major is earning an extra 10% for a further US$5 million in expenditures and agreeing to advance the project to the feasibility stage. Airborne and ground geophysics, coupled with extensive sampling and drilling, has so far identified several kimberlites.

Namibia

Namibia produces about 5% of the world’s diamonds, mostly from marine and beach deposits on the Atlantic coast. The industry is a significant contributor to the economy, as the government receives a royalty equivalent to 10% of the value of the stones produced. De Beers’ subsidiary in the country, NamDeb, is a major producer.

Canadian-based Diamond Fields International (DFI-T) owns half of the Marshall Fork deposit, off the coast from Luderitz, where production resumed in 2004. The other half is owned by Samicor Mining Services, which is part of the Leviev group. The partners’ 104-metre vessel, the MV Kovambo, is furbished with an integrated mining system, which includes a seabed crawler tool as well as an onboard processing and sorting plant. Last year, the partners produced almost 53,000 carats valued in excess of US$10 million.

In 2005, Diamond Fields will resume mining solely on its own, with its recently acquired ship, the 68-metre MV Anya. The vessel, which will be renamed the MV Diamond Fields Discoverer, is equipped with twin 24-inch airlifts, a 30 tonne-per-hour dense medium separation plant, and twin Caterpillar diesel engines. Production will resume in early to mid-2005, once all necessary upgrades to the ship are completed.

Australian junior Reefton Mining is advancing its Skeleton Coast project, a resource estimate for which is expected in mid-2005. The three licences that comprise the project — Henties Bay, Mowe Bay and Cape Fria — cover 220 km of coastline in northwestern Namibia. Trenching results have indicated good diamond recoveries using dry screening, scrubbing and a dense-media-separtion plant. More than 460 carats of diamonds have been recovered from trench sites spread over 45 km of the coastal concessions. Of the almost 2,400 stones retrieved, the average size is 0.19 carat; about 13% of them are 1 carat or more. The largest stone was 2.7 carats. At least 96% of the parcel is gem quality.

Prior to 2000, diamond exploration and development were prohibited on the Skeleton Coast, which is now being investigated by De Beers’ Namibian subsidiary.

Aussie-listed Mount Burgess Mining holds a 90% interest in nine diamond exploration licences covering 8,000 sq. km in northeastern Namibia. The Tsumkwe project is on the southern margin of the Congo-Angolan Craton in favourable rocks and close to several kimberlite pipe fields and dyke swarms.

The properties are under the cover of the Kalahari Desert, so exploration is difficult. However, sampling has identified several macrodiamonds plus G9 and G10 garnets, and though drilling has identified three kimberlites, they were found to be non-diamondiferous.

Afri-Can Marine Minerals (AFA-V) has interests in 25 marine diamond exploration licences covering 23,500 sq. km along the Namibian coast. The Montreal-based junior has a 70% stake in the Woduna (Block J) concession, which is 100 km north of Luderitz and next-door to an area with a significant inferred resource. Test sampling in 2001 and 2002 identified seafloor features hosting concentrations of gem-quality diamonds. Follow-up sampling will endeavour to confirm continuity and provide data for resource estimates.

Afri-Can has earned a 60% interest in the southern concessions from Namibian Gemstone Mining and can increase its stake to 80%. The Namibian Gemstone block is the second-largest offshore diamond marine concession in the country: 23 licences covering 23,000 sq. km of seafloor ranging in depth from 168 to 500 metres and extending north from the mouth of the Orange River.

The company also has extensive copper exploration projects in the country and, in early 2004, inked a deal to acquire a 75% stake in four licences in south-central Namibia. The Gibeon area project has 49 known kimberlitic pipes with evidence of historic production.