Diamonds aren’t forever - not in SA

2011-01-25 11:02

It was announced that DeBeers, the South African Company that dominated the global Diamond Market for years, has decided to throw in the towel as far as South Africa is concerned and it was no surprise that they sold their second biggest and one of only two diamond mines remaining in South Africa.

The decision to sell Finsch Mine was an easy one. De Beers, years ago decided to get out of the country. Mining, because of labour (Cosatu) and government (ANC) became too expensive and the margins to thin. The risks of tenure and other regulatory uncertainties curtailed exploration and the decision was made to sweat the assets and get out leading to the mass sell-off of mines.

The Kimberley mines were the first to go with the BEE-company taking them over, KCM - loosely connected to the Zuma clan - recently suspended from the JSE. The Cullinan mine was taken over by Petra and are barely surviving - albeit at a much smaller scale with considerably fewer people than before - thanks to the find of a typically massive and “lucky” gem; luck that cannot continue for much longer.

Finch Mine does not have the luxury of huge and lucky gems. The mine depends on the mass production of cheap industrial diamonds and small low value gems. Petra no doubt will reduce the size of the mine and scavenge dumps and easily accessible ore of which there is little left. Going deeper will require huge investment, investment DeBeers baulked at for good reasons.

The sad thing is that in 2005/6 Finsch Diamond Mine became one of the most technologically advanced hard rock underground mines in the world; a true pioneer. The technology employed at Finsch was critical in ensuring the viability of sustainable continuing operations.

Because of the South African skills shortage it became increasingly difficult to support the advanced mining technology at Finsch mine and future investments in this technology became just too risky given the deviancy of the Department of Minerals. In the end the selling price of Finsch Mine of $200 million hardly equates to the cost of the Mine Automation Project.

Sadly many of the excellent engineers developed in this process have left South Africa. They work abroad for DeBeers and for the companies involved with DeBeers in the development of the technology.

With Finsch gone, Venetia Mine remains the last Bastion of the erstwhile DeBeers South African Empire, in South Africa - an empire destroyed by transformation. The mine will be retained by DeBeers until the easy resources are exhausted, the assets have been sweated properly upon which it will be flung aside to be used by unscrupulous BEE companies, like KCM, to fleece unsuspecting investors.

Resources are not inexhaustible and for that they must be recovered effectively and investments must be made in finding new resources. In South Africa this cannot be done because of inflated labour costs, ineffective training and education, a government threatening ownership, a ruling party prepared to steal mineral rights for the benefit of a select few in the top party echelons.

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  • SimonP - 2011-01-25 11:10

    Another step on the slippery slope towards SA becoming a typical African disaster zone.

      SuperCal - 2011-01-25 14:45

      @ onemantribe....buddy where you live? if you an middle class white man in any of those cities that you talk about then yea, its not a disaster...i know because i am one, but if you a poor black man in one of those cities then you go zero chance. No hope of a decent job, social services or even a decent education for your kids. Cant jump on a metro to go to a shop that sells fresh produce, you can go to the market granted, on a clapped out taxi....Na buddy i think you have your wires crossed somewhere.

      SimonP - 2011-01-25 14:46

      @onemantribe, let me I cant think of a single African country that could be called a disaster lol

      SimonP - 2011-01-25 15:44

      @onemantribe, who said ALL of africa is a disaster? Not me. But surely you must a gree that there are african countries that are disaster zones.

      SA Dhammananda SA Dhammananda - 2013-07-06 15:28

      Agreed 100% it has been like that for sometime now. From the begining of the cANCer rule.

  • DeonL - 2011-01-25 11:17

    Unemployment will most probably gets worse in this sector.

      Zion - 2011-01-26 08:05

      Agreed DeonL Employment will, and is, getting worse in most mining sectors due to the unstable labour and exorbitant costs thereof. That coupled to our friend Malemas utterances and the governments tacit agreement thereof is simply more fuel to move elsewhere.

      Mad Hatter - 2011-01-26 13:00

      True , Sa's competative advantage as a economy has traditionally been mining and agriculture . These are the backbone of the economy and probably the biggest employers . These industries are being polictically sabotaged and economically over-burdened and as such cannot compete or hope for increased investment . Seeing as Chancellor house owns about 85% of mining rights (directly or indirectly) , a conspirtist could be lead to believe that sabotaging the current mining industry would benefit them in the long run or even pave the way for nationalisation.

  • Colin - 2011-01-25 11:34

    In our drive to return " Africa to Africans " ( a loose term used by the various liberation movements, now African governments ), they miss the reality of the status quo. Multi national companies will migrate to areas where they receive the highest ROI ( return on investment ) as the business world becomes more & more competative and globalised. In our focus to get the population involved and benefactors to their countries resources, the " grab " becomes more important than the future benefits.

  • bill - 2011-01-25 11:36

    Mining rights have become the latest cookies to be handed out to the favoured few , creating instant and vast wealth without the necessary expertise to exploit these opportunities.Once the commodity cycle turns , we will be in trouble.

      LP - 2011-01-25 11:56

      As soon as De Beers leave, China steps in - did you know, that whatever project/assistance they provide, the "Consultants" bring their families with them and part of the agreement is that they stay in SA once the project/assistance is complete. China takes no "SH!T" from nobody and will "remove" any ethnic group or government that stands in their way. Think on this little bit of info and take care

  • mfanafuthi.skele - 2011-01-25 11:57

    I hope they (DeBeers) have the decency to return the Cullinan diamond which they recovered from the Cullinan mine which was awarded to the Queen of England( undeserving)which she still wears on her crown . They are leaving the country, it would be in the best interest of the country to return the biggest stone ever recovered in the world to its rightful owners.

      Stevie - 2011-01-25 12:17

      Does Zuma want it for his crown? :-) It was British mining technology that found the stone in the first place. Finders keepers.

      SimonP - 2011-01-25 12:17

      De Beers paid for the right to mine that diamond and you expect them to give it back to its "rightful owners" (who are these rightful owners?).

      Sir Charles - 2011-01-25 12:18

      No the tokolosh would have delivered !

      SimonP - 2011-01-25 13:23

      Hate to tell you mfanafuthi, but you have just completely contradicted yourself. You stated the rightful owners are the ones granting licenses (the government) followed by "There is no obligation that whatever you've mined belongs to the gov". You really should get your story straight and stick to it.

      Sir Charles - 2011-01-25 13:30

      Diamonds made my family rich, thank you Africa ! but we will not be giving anything back, rather go snowboarding in Switzerland ! Viva Mining Rights !

      pop101 - 2011-01-25 13:31

      if (Capital I) they didn't found it idiot(Full stop)check (Capital C)your grammar (Comma) it sucks, it, forget it. I'm not going to check your grammar for you. They did plow money back into the country. Where do think the infrastructure (roads, electricity, piped water etc.) comes from? All of which are required to run a country in a civilized manner. Not to talk about the thousands and thousands of work opportunities given to the inhabitants of South-Africa. All much more valuable than the diamond found at Cullinan. Guess you and the other chiefs (we are now generalising, as you did) can not see further than your noses. I therefore have to recommend to you to do some research yourself, but not before I congratulate you on your great display of stupidity (or should I say retardation) of a typical ANC supporter.

      What de D... - 2011-01-25 14:39

      eish - get to wek...or look at the bet in da tree....or you gonna blame apartheid. survival of the fittest....look at well Zim is doing!!! Not long....then all the pap is gone...and no one knows why...eish...ask malema and zuma to use their magic wands.... bhhaawwaaaahhaaaa

      Bloedrivier - 2011-01-25 15:04

      @Mfana.....luckily they used it to develop Europe, cause everything here are destroyed once its built!!!

      richard - 2011-01-25 21:01

      And to give it to who! To Zuma! And you think he is going to share with his people, don't make me laugh!They actually worked for that, and that is why they are where they are. You keep thinking that the world owes you. Wake up and smell the coffee bro.

      LP - 2011-01-26 07:39

      Quess what, the old biddy is going to show you the finger, just as she did when the "Boere" challenged her for reperation due to the Anglo Boer War. She doesn't give a "SH!T" about us, Britain got what they wanted from their colonies. Would have liked to have that stone back, but quess what, it will be sold and the money will "disappear".

  • craigkaos - 2011-01-25 12:09

    Maybe food for thought, but direct us to the facts. Take it for what it's worth. These days everyone with an internet connection considers themselves an investigative journalist without actually putting in the real graft....

      SimonP - 2011-01-25 15:58

      @Nebula, just admit it, you cant handle reading the truth can you.

  • mzansi2011 - 2011-01-25 12:27

    Maybe the government's mistake was letting De Beers take a lot of its capital offshore? I notice the writer doesn't mention this...

      Bloedrivier - 2011-01-25 15:05

      De Beers obviously knew something we all know now!!!

  • Wishbone - 2011-01-25 12:30

    The author has gone a little overboard on BEE and the current labour laws. While they may be a contributing factor, it's still economics driving the decision. The global demand for luxury goods has dropped which is the main reason for selling marginal mines.

      franssmith100 - 2011-01-25 15:18

      ever wonder why these mines have become "marginal mines", as oppose to others elsewhere being profitable?

      Nebula - 2011-01-25 15:42

      Awesome wishbone.

  • Greegs - 2011-01-25 12:46

    A lot of the other sectors will follow suit. "Labour is too expensive and margins too thin." No doubt a sign of things to come.... viva the ANC viva!!!

  • JohannV - 2011-01-25 12:48

    ATTENTION!!! All Black / Colored / African / Non-White countrymen who do NOT support the ANC: Please note that you are racist. According to some REAL Blacks on this page, if you are against the ANC, you are racist. Read comments by mfanafuthi / Timmy / kolobe and others. Sorry guys! But at least we're all proudly SOUTH AFRICAN racists in our different skin colours.

      SimonP - 2011-01-25 12:56

      Its a shame, these guys have no other arguement to defend the ANC other than "racist". Almost 20 years in power and their staunchest supporters have got nothing to say apart from name calling.

  • Ross - 2011-01-25 13:08

    Tese are the guy's that wanted unions and donated royaly to the ANC. However a sensible move.

      Ross - 2011-01-25 13:10

      Sorry I mean't "These"

      pop101 - 2011-01-25 13:35

      Jip, let's start a fire and run away if it gets out of hand.

  • Thabo - 2011-01-25 13:12

    George, you know nothing about the diamond mining industry. Maybe, if you have invested two more years on your research you would have produced something credible. DeBeers is selling the mines due to economic pressure not political pressure otherwise all multi-national mining companies like xstrata, BHP, Anglo etc would have been deinvesting as well. Since the emergence of peace in many countries like Angola, Congo etc, DeBeers faced stiff competition from diamonds coming from those countries and almost all of them are mined opencast. everyone in the mining industry knows that opencast mining is 90% cheaper than underground mining. DeBeers long realised that they could no longer control the full value chain of the diamonds market, they refocussed and decided to concentrate on buying and marketing DeBeers Branded diamonds. That is why now they are opening DeBeers stores together with Louis Vittonne. George, again, get you facts right...and if you dont like SA, Australia is waiting

      Nutzman - 2011-01-25 13:38

      Thabo. The only reason why most of the earlier mines were underground, was that it was a dimaond bearing "pipe". It's not viable to open cast mine a pipe, the overburden removal costs escalates the deeper you go. Open cast mines are the likes of Jwaneng (Botswana), which is multiple pipes coming up and therefore viable. The rest are alluvial "open cast", or old river beds, along the lower reaches of the Orange river. For the rest, the article is fairly accurate. De Beers are focusing on their core business, selling diamonds. Not mining them.

      geanann - 2011-01-25 13:43

      Maybe you can show us in the BHP Billiton Financial Report where and what percentage of their capital investment came to SA...maybe how much they spend on SA exploriations. Like wise for Rio Tinto.

      geanann - 2011-01-25 13:47

      I wonder why then DeBeers would be spending $Billions on the construction of an underground mine under ice sheets of Northern Canada at Snap Lake?

      markandrewgraves - 2011-01-25 13:58

      So everyone who doesn't agree with you, your views or your opinion of who 'like's SA' must go to Australia? What a moronic comment....

      Thabo - 2011-01-25 14:03

      Geannan, make yourself a favour and check BHP financial report. they still have RBM, coal interest, manganese interest etc in SA. they are still firmly operating here...xstrata is buying mining properties...miners from Australia are also investing e.g Coal of africa, aqurius platinum etc..Most Junior miners listing on the ALTX are either supported by the australians, canadians...or those people sitting in London. Get ur facts right

      SimonP - 2011-01-25 14:52

      "When DeBeers markets their diamonds they market them as Diamonds from Canada irrespective of where they come from". You have outdone yourself on that one, what utter garbage.

      Zion - 2011-01-25 16:08

      Mfanafuthi.skele, Your comment is nogal interesting. What I heard and know is that Snaplake and Victor are two of the best producers ever. I worked for De Beers and do have an inkling as to what is going on inside. Give us your references please. Do you really think that De Beers or any other company would open a fake mine in the God-forsaken iced up northern territories of Canada just to bullsh*t diamond buyers.

  • venterh - 2011-01-25 13:53

    Start using these soon to be empty mines as prisons for all the 1000's of criminals in this country. - 2011-01-25 16:32

      Ja lets spend more money building underground mines. Not a bright idea. Or are you proposing to dump the prisoners into the mineshaft? Now thats a better idea.

  • Rogue69 - 2011-01-25 14:01

    Another massive victory for BEE........

  • GT - 2011-01-25 14:09

    WTF are doing feeling sorry for De Beers for? A global monopoly that has exploited every southern africa country fro 100+ years. A criminal organisation in the USA! They go where the grass is green and guess what, they have emptied SA of her diamonds. If there were diamonds to be found they would be here digging that is for sure.

      Zion - 2011-01-26 11:18

      GT had you been living in Kimberley and the general area you would have seen what De Beers has done for the province and the City. Since about1887 DeBeers has been the MAJOR supplier of jobs to the community, Built thousands, yes thousands of houses for its employees of all races. As for emptied SA of her diamonds is the biggest stront I have heard. And so I can go on but when commenting next time do so after you have rid yourself of bias. Rememberr I was there while you were playing marbles.

  • Francois - 2011-01-25 14:12

    I did not know George Annandale was the CEO of De Beers

  • Enigma07 - 2011-01-25 14:31

    De Beers sold for economic reasons with cosatu and the gov contributing toward that decision. Bee is everywhere and every company has to be compliant and that certificate costs about R800 a year so it is another way of creating employment based on color. At the and of the day Bee creates a financial elite but does nothing for the poor black in the street but he will still vote Anc because of color.

  • mbulelani - 2011-01-25 14:33

    to the negative comments here, this won't help to change the racial tension people have.

      Zoidberg - 2011-01-25 20:23

      Who's side are you taking? I see negative comments from ANC (kolobe) and DA members alike. If you can formulate a solution to these expected negative comments please be my guest. I will support you 100% if you can get it right.

  • HeyApple - 2011-01-25 14:53

    I don't think this article is completely bias. It's most probably the higher cost per carat to mine that caused them to abandon the mines rather than lack of skills or government intervention. One thing I hope is that De Beers will honor their mining agreement to clean up where they have mined and not leave the place in ruins as so many other mines have been left with destroyed ecosystems.

  • Paul - 2011-01-25 14:55

    ANC...Zuma clan ...BEE...= a huge f!@# up

  • HeyApple - 2011-01-25 14:59

    I don't think this article is completely bias. It's most probably the higher cost per carat to mine that caused them to abandon the mines rather than lack of skills or government intervention. One thing I hope is that De Beers will honor their mining agreement to clean up where they have mined and not leave the place in ruins as so many other mines have been left with destroyed ecosystems.

  • Whitefedup - 2011-01-25 15:03


      Zoidberg - 2011-01-25 20:08

      @Lauren - Have you lived anywhere else on this continent? Please do not adopt the pseudonym "white" as you disgrace your own race when you open your dumb flytrap. You give yourself a bad name and no one cares what you say. Capslock mean he is shouting at you and it seems appropriate because you just don't seem to fully listen to what people are saying. And yes as per you previous comments I do sleep soundly because my conscience is clear!

  • Zion - 2011-01-25 15:10

    George, As an ex-employee of De Beers, I would like to commend you on your article. There are some points I beg to differ on. Small diamonds are the big thing in the diamond industry today. Most are sold to the far east and India and used for industrial purposes. De Beers still has a CTP = Combined treatment plant in Kimberley. This plant only separates the small diamonds from the discarded mine dumps of yesteryear using the latest technology. I have worked with people, employed by De Beers, since the 1950's and when surveying the mines production history since then it is clearly seen that the production figures dropped drastically since about 1990. In 2005 it was found that a production foreman was illiterate. How he reached the level of production foreman, given De Beers high standards remains a mystery. De Beers did the next best thing by leaving this country. The profits at Snap Lake in Canada and other parts of the USA are huge. They too, have, interest in the ex-states of the old Soviet Union where the pickings are greater and the labour more skilled. The greatest problem with De Beers relating to the labour market is they expect their pound of flesh come rain or shine.

  • Spade - 2011-01-25 15:13

    I doubt very much if the ANC and labour are the reasons for DeBeers selling Finsch. Big business is not sensitive about who they get into bed with, as long as it is profitable. Selling a mine that is nearing its profitable end, means that DeBeers need not be concerned over rehabilitation of said mine (an expensive operation). Technological advancements applied at Finsch were also applied to other mines where applicable - DeBeers would certainly not view this as "money down the drain"! It was great way to experiment with new technologies and apply workable solutions elsewhere too.

  • Pendragon - 2011-01-25 19:33

    This article and the comments made about are typical examples of that is wrong with SA at the moment. Please will all of you grow up, put aside your differences, pull your fingers out and start building a country everyone can be proud of. If you don't have anything constructive to contribute please shut up and let others dig SA (and you!) out of this hole. Negative attitudes are part of the problem and not the solution. If you aren't happy with your lot then try harder. It's about time we became a nation of South Africans instead of South AfriCAN'Ts.

  • richard - 2011-01-25 20:34

    And once again Zuma's name come up. How many of their voter's knows this. Nobody, because then he would have to share.

  • Big Mouth - 2011-01-25 21:14

    Thanks for the Acid Mine Water DeBeers. Clean up your crap before you flee like a Rat off a sinking Ship.

      Zion - 2011-01-26 07:56

      Hey Big Mouth, Just a word in your ear: I stated earlier that I worked for De Beers. By dint of legislation all accumulations of water underground shall be pumped out to the surface. During my stay two shafts and their workings closed down. The water pumped to the surface was dammed up in huge concrete dams and recycled to the washing plants and other extraction functions in the plants. This brought about a hugh savings on fresh water consumption. Now asseblief, don't be just your namesake and do a tad of research.

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