How De Beers is being stymied in hunt for fresh diamond sources
De Beers, which is building a R20bn underground mine at Venetia in SA, is hampered in its hunt for fresh diamond sources by the country’s regulatory environment despite itching to spend millions of dollars here.
De Beers spends $35m a year on exploration in SA, Canada and Botswana but is running into headwinds in SA, which the miner reckons is one of the more prospective regions for new diamond sources.
There is an adage in the diamond industry that the best place to find kimberlites, the carrot-shaped ancient volcanic pipes bearing diamonds, is near other kimberlites. SA was a leading source of diamonds for nearly a century.
However, De Beers’s efforts at securing diamond prospecting permits using an enormous century-old database has become nearly impossible.
The third version of the Mining Charter, which was introduced in mid-June and subsequently suspended pending a court challenge from the Chamber of Mines, stipulates prospecting rights must be 51% owned by black economic empowerment (BEE) partners.
"I would like to explore more in SA because we think it is prospective, but it’s very unli-kely we are going to do that where we don’t have control of the exploration project and don’t have complete certainty of tenure when we move from exploration to mining," said De Beers CEO Bruce Cleaver.
"I can’t see us getting issued exploration licences in the structure we have right now without dialogue and some change," he said.
"I don’t think it’s likely we will do a lot of exploration in SA in the near term.
"If we could get more licences, you would see us spending more money exploring in SA."
The difficulties in securing rights has long been a factor for De Beers in SA, which has one of the few large capital-intensive investments in the local sector, going underground at its opencast Venetia mine.
"It’s not easy to get a prospecting licence in SA. Even prior to Mining Charter Three, the Department of Mineral Resources always took the approach, which wasn’t in the law, that you had to have a 51% BEE partner," said Cleaver.
"We have many prospecting right applications in the wings in the department and we have a number of targets we would like to explore in SA, but getting licences is challenging," he said.
Industry participants immediately singled out the charter’s prospecting clause as problematic and one that would stop most mining companies from investing in high-cost and enormously risky exploration projects if they were rendered minority partners.
The clause was defended as part of the "radical transformation" of the sector by Mineral Resources Minister Mosebenzi Zwane, whose name has repeatedly cropped up in Gupta family e-mails leaks.
The Guptas are enmeshed in controversial arrangements with senior politicians, their families, heads of state-owned companies and agencies, and a growing list of global firms.
A recent conference of junior miners pointed to the dearth of funding available to companies wanting to explore in the country, in large part because of the regulatory environment.