PETRA DIAMONDS
PETRA DIAMONDS
Quality
Over Quantity PRODUCTION: Karl Pietersen
Operating mines responsible for some of the world’s most famous diamonds, Petra Diamonds has a fantastic resource base to work with. Prioritising safety and then looking to drive production of higher value per carat, this is a business with a clear strategy. Enterprise Africa learns more about expansion at Finsch, Koffiefontein and Cullinan.
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It was January 2014 when the Blue Moon of Josephine was discovered in Cullinan. The 29.6 carat blue diamond was described as being ‘fancy vivid’ blue in colour and ‘internally flawless’. After initially being sold to a US-based client, it was eventually sold again for a world record (per carat) $48.5 million to a Hong Kong-based collector. Fast-forward to June 2014 and the Cullinan mine produced a 122.52 carat
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blue diamond which was eventually cut and polished into four notably sized diamonds including the 24.18 carat Cullinan Dream. It sold for $25,325,000 in New York in June 2016 and is the largest and most valuable Fancy Intense blue diamond ever auctioned. In September of the same year, an exceptional 232.08 white diamond was discovered at Cullinan before being sold in October 2014 for $15,219,219. December 2015 saw continued
success for African diamond mining, in terms of large stone recovery, when a 23.16 carat pink diamond was discovered at the Williamson mine in Tanzania, selling for $10,050,000. And then, in March 2016, a 32.33 carat pink diamond was discovered at Williamson, selling for $15 million. What do all of these discoveries have in common? Firstly, they are all classed as exceptional diamonds – some of the greatest world-class gems ever
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INDUSTRY FOCUS: MINING
// PETRA’S STATED STRATEGY IS TO FOCUS ON VALUE AS OPPOSED TO VOLUME PRODUCTION // found. Secondly, they all come from mines now owned by Petra Diamonds. Founded in 1997, Petra Diamonds one of the world’s leading diamond producers. It has a diversified portfolio, with interests in eight producing mines in South Africa and Tanzania and an exploration programme in Botswana. Today, the company is listed on the London Stock Exchange and is headquartered in Jersey. Its operations in South Africa are extensive, owning Cullinan, Finsch, Koffiefontein and Kimberley Underground – purchased from De Beers Consolidated Mines and made financially successful thanks to a small
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cost structure compared to that of De Beers. The company refers to itself as ‘a leading independent diamond mining group’ and ‘one of the world’s largest diamond mining resources’ with 305 Mcts across group resources and more than 5600 employees around the world. In Petra’s 2017 annual report, it stated that 2018 will see ‘continued transformation of the production profile, further to ramping up production from the new undiluted mining areas of underground mines’. For the six months ending 31 December 2017, Petra released a mixed trading update. The company will release its interim results for the same period later this month. In the trading update, CEO Johan Dippenaar remained optimistic, saying: “Petra has delivered a record production performance, with 2.2 Mcts being the highest level achieved for any half year period for the group, and delivered against a solid safety performance, demonstrating
the high level of focus on this most important area. “Petra’s stated strategy is to focus on value as opposed to volume production, which is particularly pertinent to diamond operations, as not all carats are of equal value. Our assessment of optimal recoveries at Cullinan has therefore led us to opt for lower carat volumes, due to the positive impact that not recovering the small diamonds has on the average value per carat. This has led to lowered production guidance for FY 2018, but does not materially impact our expected revenue, further to the positive uplift in Cullinan’s average value per carat. Likewise, we have been very encouraged by the recovery of large diamonds and other higher value single stones through the new Cullinan plant to date, which was in line with our expectations that the incidence of such stones would increase as they are historically associated with the Western side of the orebody.
PETRA DIAMONDS
“Furthermore, Petra has been undertaking a Capex evaluation in H1 in order to optimise cash flow, without impacting the economics of the longer term business plan.” MINE EXPANSION 2018 marks the 21st year of operation for Petra Diamonds, and its most famous mine, Cullinan, located in South Africa’s Gauteng province, is currently implementing an expansion plan to see its life extended further than 50 years. The project will see annual production to ca. 2.2 Mcts by 2019, made up of ca. two Mcts ROM and ca. 0.2 Mcts tailings. Production from the C-Cut phase 1 block cave, at 839 metres, will add to the figures for 2018. At the end of last year, a new processing plant was completed, with a throughout capacity of six million
tonnes per annum. This new plant replaces the large, old, inefficient and expensive processing plant which was first commissioned in 1947 and had become dated. It will reduce operating costs and capex, and will offer gentler approach to processing making for reduced loss from breakage. “This is a good example of how Petra has applied the integrated environmental management principle of ‘Cradle to Grave’ planning for a new project as it has embedded environmental efficiency into the process,” the company says. Similarly, at two other famous mines (Finsch and Koffiefontein), Petra is working hard on expansion projects to extend life and improve efficiencies. At Finsch Diamond Mine, in the Northern Cape, a development plan that will take mining deeper and move from
block caving to sub level caving mining methods. “Initially the 118-million-year-old volcanic pipe was mined as an open pit operation,” explains Finsch Mine Manager, Luctor Roode. “This went on until September 1990, when this mining method was terminated, at which point the pit had a surface area of 55 ha and a depth of 423 m. From then onwards, the mine’s operations moved underground. Two methods of underground mining are being used at Finsch today – block caving and sub level caving, in a mechanised and automated operation.” Last year, the mine reached its 50th anniversary after opening its doors in 1967. It was purchased by Petra in 2011 and has been a success its whole life. “For a mine to reach this milestone is significant; you wouldn’t normally have a mine operate sustainably for this
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INDUSTRY FOCUS: MINING
long. We’re still going strong and hoping to see many more years added to the life of the mine,” says Roode. The mine manager, who was at Finsch before Petra took charge, admits that the change of ownership was a positive thing for the mine. “Sometimes, it’s not a bad thing for a mine to change ownership as the new owners have an appetite to secure the future of the operation and in many cases, bring new innovation and energy to a mature mine into which no significant capital investment was being made,” he says. “This was evident very soon after the transfer of ownership; it wasn’t long before the first drill rig arrived on site and we commenced with tunnel development, opening up access to the Block 5 resource.” At Koffiefontein, so-named because of its positioning in the Free State at point where travellers would stop a boil coffee while moving south to north using water from fresh springs (coffee fountain), expansion is all about going deeper. The hope is to increase
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production from 50,500 ctpa in 2017 to ca. 85,000 ctpa by 2019. Currently, the expectation is that the life of mine could be in excess of 20 years. Mine Manager, Lino Nkuna is delighted with this news as he is committed to improving the life of local community members who have only the mine as a source of employment. “The expansion project started the moment Petra bought Koffiefontein,” he says. “It’s a small volume mine but we had to go beyond the original depth of 490m and we’ve extended to 620m. We’ve added extra levels which hold seven million tons that we can still mine without expanding further. “What we like to do is create a life for the people of the community and look after those people. We will do our level best to make the mine as productive as possible for as long as possible. The pipe is still going and we have put in place studies for the future, but right now we are concentrating on delivering the crush and getting the seven million tons out before we look at
// WE WILL NEVER REST WITH REGARDS TO SAFETY AND WILL ALWAYS STRIVE IN ACHIEVING ZERO HARM // digging deeper and going beyond the 620m mark.” Cullinan, Finsch and Koffiefontein are all considered as pioneering operations in the industry, and all are often looked to as examples of how to perform underground mining activities, particularly when following the sub level caving method. SAFETY AT THE CORE Away from production, the stand out numbers from these mines surround safety. As a group, Petra reported a LTIFR (Lost Time Injury Frequency Rate) of just 0.27% - industry leading figures. Asked about the most critical
PETRA DIAMONDS
sustainability challenges facing the business right now, Dippenaar highlights safety as a premier consideration. First and foremost, we are striving for a zero harm workplace and see safety as the single most important personal and organisational value.” Nkuna says that safety has greatly improved through his tenure and, as a result, mining remains an attractive career prospect for young, ambitious, educated South Africans. “Statistically, safety has been improved across all mining houses and there are many mining students who are very interested in coming into the industry. Every day, we get CVs of graduates who want to get involved in the industry and be trained by the industry, so for me it’s still the core business for many young people in South Africa. With technology coming in further improving safety, we are seeing quality, intelligent people coming into the business. I’m confident that South Africans still believe in mining as a career to follow.”
At Finsch, Roode says that safety remains the top priority. “Our safety record is extremely important to us, because a safe mine is a productive mine. The complexity of mining has increased over time and especially during the development and construction phase, it has been a significant challenge to maintain the safety culture of the mine. We will never rest with regards to safety and will always strive in achieving zero harm.” Longer-term, the company is looking through commodity price dips and economic cycles and is preparing for increased revenues and cash flows, irrespective of the short-term local economic climate. “It is concerning because if you produce a mineral that you cannot sell, you quickly decline,” admits Nkuna. “But one thing that is encouraging is our mineral - diamonds don’t dry out or become old. If we can sustain production, even through instability in the economy, there will be a time where we can sell at a higher price. The more precious minerals you have, the better
position you are in to negotiate.” And with expansion plans expected to take group production from four million carats in 2017 to circa 5.0-5.3 million carats by FY 2019, Petra looks set to enjoy more precious minerals. “Our vision at Petra is to continue to build a world-class diamond mining group. In order to achieve this, we aim for industry leading performance across all areas of the business,” says Dippenaar. Petra’s activities in South Africa – and in Botswana and Tanzania – will be interesting to watch in the future, especially through 2018/19. This is an organisation with a clear vision and a strategy designed to achieve that vision which is now well under way.
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February 2018
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