Every Friday morning, SAfm’s AMLive’s radio anchor Sakina Kamwendo speaks to Martin Creamer, publishing editor of Engineering News and Mining Weekly. Reported here is this Friday’s At the Coalface transcript:
Kamwendo: The financial woes of diamond mining surfaced again this week when a fourth mine closed its doors.
Creamer: The small diamond mining companies are falling like nine pins. We have reported on this programme that it started with the Lace Mine in the Free State. There were high hopes for that, because it produced beautiful coloured diamonds and attracted investment from the State-owned Industrial Development Corporation, which put a lot of money into that. It just saw problem after problem ending with a flooding and then announced it was going to go into business rescue.
We see it off the London AIM at the moment and administrators taking over its management. Quite a woeful situation in the Free State, near Kroonstad. Then we got that message from Trans Hex, listed on the Johannesburg Stock Exchange, that Bloeddrif would go under. That was a smaller mine and they said let’s get that out of the way so that we don’t affect our other operations and jobs elsewhere.
At least there is a big group there and some of the people can move into other positions, from a retrenchment point of view. Then, with Rockwell Diamonds listed in Canada and also Johannesburg, there was an application for the liquidations of three of its subsidiaries. That created a shock. They managed to stave off liquidation and those subsidiaries are now in business rescue, but with quite a lot of tick tack between the company and its suppliers, with a lot of accusations flowing to and fro, so it is not too pleasant. Now, we hear that even in Botswana the mines are tumbling.
The one is Lerala Diamond Mine owned by Australians. When this week they found that the workers weren’t going to be paid, they apparently tried to get through to Australia and the Australians just said that they have got no money and to tell the people to leave and close the doors. This has upset some of the unions, because they feel like they are getting the 11th hour treatment. We see that this has been building in the diamond business, because not only at the mining level, but at the supply chain level there has been clogging within the cutting and polishing part of that.
Financing for that is becoming a bit scarce, because it takes a lot of financing and diamonds are very expensive and they have got to be very well protected. As they go through that system, you need funding to put it through, before it they get into the diamond engagement rings and the like and that has been a clogging position. It has also been a factor in lowering the demand growth, which is hitting these smaller mines.
Kamwendo: A puzzling decision by new Minerals Minister Mosebenzi Zwane is putting South Africa’s diamond cutting business at risk.
Creamer: We are supposed to be promoting beneficiation here and they set up a structure to make sure that our beneficiators got the stones. We need bigger stones, because our situation here is not like India where you go for the very small stuff. So, what used to happen is that there would be aggregation. Now, aggregation used to happen in London and they used to let those diamonds go out for aggregation.
Then Botswana said we want that in Botswana, so they moved the centre of gravity of all the sorting to Botswana. Then the idea was that South African diamonds would go across the border and they would aggregated there along with diamonds from Namibia and Canada. Then higher value diamonds would come back in to South Africa and these would then be beneficiated, as we call it, cut and polished.
For some puzzling reason the new Minister of Minerals Resources Mosebenzi Zwane has taken a weird decision. All the Ministers ahead of him have made sure this happens, because we want to promote beneficiation, there are a lot of jobs involved around that and a lot of value addition locally. He suddenly decided that he won’t grant the exemption to allow these to go through from South Africa to Botswana without paying a 5% duty.
Now, De Beers is suddenly hit with this, they have already been complaining about cash flow woes in this diamond sector, but they have been making sure that they meet all the laid down requirements and legal requirements that permit this. In fact, the value of the diamonds has been three times of what has been laid down. You are supposed to involve about R3-billion of diamonds a year and they have been doing R9-billion.
At least 40% of those diamonds have to come back into South Africa. They were even going beyond that by allowing 43% to come back to promote our beneficiation here. Now, all of a sudden the new Minister says no and this has now thrown everything in disarray. So, in desperation the De Beers group is taking the Minister to court. I think we are going to see a lot of this sort of thing. The problem is it creates uncertainty in the industry here and it could create job loss, but we hope not.
Kamwendo: Top South Africans are looking forward to the years when the platinum Mandela coin reigns supreme in the world of precious metals.
Creamer: There has been a good response. It is the 50th anniversary of the gold coin. South Africa had tremendous success with the Krugerrands. They have been selling at an average of about a million of those a year. Now, what they want is to look into the future and the Chamber has announced at its meeting that it is looking forward to the years when the platinum Mandela Coin gains similar preeminence in the world that we have had with gold.
We have had massive success with gold and they are trying to emulate that 50 years later, starting off now to make sure that the late, great and iconic Nelson Mandela’s image is on these coins, which could be a massive selling point for platinum. It depends, of course, on the attitudes of the South African Mint, because the success of the gold coins was a joint effort between the mines, Reserve Bank, Finance Ministry and the South African Mint.
I know personally that the major platinum companies that have been giving the Mint a lot of information, but it still doesn’t seem as though the penny has dropped as yet. We hope that it will so that we can get a boost to our platinum business.
Kamwendo: Thanks very much. Martin Creamer is publishing editor of Engineering News and Mining Weekly.