Diamond Mining Grows Beyond Debswana

Cover StoryDiamond mining grows beyond DebswanaFor years Botswana diamonds’household name has beenDebswana before the emerging ofother junior miners.Over the past decade, the footprint of diamond mining in the country has spreadwings, as the new diamond mining outfitsshare the limelight, though still far fromproducing numbers above the giant minerDebswana.Lucara Diamonds operating Karowe Mine isone such entity that continues to grab theheadlines for its astonishing discoveries.The discoveries include special single diamonds in excess of 10.8 carats from directmilling ore with 786 stones totaling 24,424carats recovered, including 31 diamondsin excess of 100 carats, of which 2 stoneswere in excess of 300 carats including thehistoric 1,758ct Sewelô diamond.Furthermore, specials were also recoveredin treatment of historic, pre-XRT recoverytailings, including a 375 carat stone in Q32019.Apart from astounding unearthing, the company has also embraced latest technologies in its operations, from the beginning ofits processes to the end of the value chain.Lucara’s value chain ends with a digitalsales platform dubbed Clara platform, established in December 2018 and has helpedthe company spur her sales.“The focus in 2019 was to increase the frequency of diamond sales and the numberof customers regularly purchasing throughthe platform.“As of December 31, 2019, the customerbase had increased to 27 participants, withtotal sales volumes of 8.4 million from 15sales on the platform, predominately fromthe sale of Karowe goods,” said Eira Thomas, President and Chief Executive Officer ofLucara.Thomas highlighted that further growth isexpected through 2020 as more supply ismade available through the platform, balanced with demand from the customerbase.“Third-party supply will complement thediamonds from Karowe which are soldthrough the platform and will support increased transaction volumes through2020,” he added.Thomas further indicated that between December 2018 and February 2020, Clara’scustomer base grew to 32 and total salesvolumes of approximately 11.0 million hadbeen transacted from 19 sales on the platform.Though Lucara acknowledges that diamonds are heterogeneous by nature, withthousands of different price points depending on weight, colour, shape, and quality, diamond production from Karowe is characterised by a coarse diamond size frequencydistribution and is positively impacted bythe regular recovery of diamonds in excessof 10.8 carats in size, referred to as ‘specials’.Karowe production is further distinguishedby the consistent recovery of high value,gem quality specials.The specials are reported by total stonecount and as a percentage of the total production. In 2019, a total of 786 stones wererecovered representing 6.1 weight percentof total carats recovered from direct milling6Botswana Mining Review January - March 2020ore, consistent with the resource model forKarowe. “In 2019, a total of 30 individual diamonds were sold for a value of 1 millionincluding 11 diamonds 2 million of which 2diamonds sold for 5 million each.“Sales of individual stones at prices between 2 million and 5 million were consistent with previous years. Achieved pricesin 2019 for high value single diamonds wereimpacted by significant price erosion in highcolour (D) 10 carat and 20 carat polished,”Thomas said.Meanwhile Lucara’s updates indicates thatin 2018, the company embarked on a technical program to support a feasibility levelstudy for a potential underground operationat the Karowe Diamond Mine.The program included the completion ofan updated mineral resource, geotechnicaldrilling of the country rock and AK06 kimberlite, hydrogeological drilling and modelling, and mining trade off studies to addressrisks and issues identified during the PEA.As a result a total of 21.0 million was spentin 2018 in support of this work, which resulted in significant de-risking of the keytechnical components associated with thepotential underground development.During 2019, 13.4 million ( 14.8 million 2019 budget) was spent on the completionof a geotechnical drilling program, geotechnical and geological logging, downholegeophysical survey, hyperspectral analysisof core, geotechnical modeling, hydrogeological drilling and studies, mine planning,engineering, and activities related to dewatering associated with underground preparations.www.botswanamininreview.com

General NewsBotswana ranked the most attractivedestination for mining investors in AfricaRIn the same survey, Botswana was againranked Africa’s 13th most attractive destination for investment.These findings are largely based on the Fraser Institute Annual Survey of Mining Companies, which Botswana regularly tops.The annual survey covers Africa’s 54 countries and primarily ranks them according toeconomic activity, looking at market sizeand growth, as well as the business environment.and Merchant Bank’s ‘Where toInvest in Africa’ survey has rankedBotswana as the most attractivedestination for mining investors in Africa.“Botswana ranks the highest due to political stability and security, low trade barriers,and investor certainty regarding protectedareas,” the RMB report notes.“It is crucial to combine the value of themining sector with the regulatory environment to assess which jurisdictions are themost attractive for investment.“As an example, the DRC shows strength inits mining industry value growth, however,the country’s mining sector still battles withstringent and unpredictable regulations.“Botswana again made the top ranking forAfrica (in the Fraser survey) due to its vastmineral deposits as well as an easy regulatory environment.”www.botswanamininreview.comThe authoritative report is a key instrumentused mainly by investors looking to guidetheir decisions, but also by policymakersand governments to gauge themselves andtheir peers.The latest survey, made available outsideRMB’s client list for the first time, showsthat while Botswana topped the list in its attractiveness to mining, the country’s ranking on the overall list remains unchangedfrom last year.Botswana also climbed up the list of countries with the best operating environment,jumping three spots in the annual RMB survey and coming third after Mauritius andRwanda.“The operating environment is a vital component of an investment case as it balancesthe quantitative macroeconomic view withthe practicalities of doing business,” theRMB report reads.“Of the top 10 operating environments,four are located in Southern Africa, onceagain bearing testament to the importanceof well-developed infrastructure, a healthyand well-educated workforce, an efficientgoods market and strong institutions.”Botswana’s shortcomings, however, include poor work ethic in the national labourforce, which was cited as the single biggestdisincentive for investors. Generally, thetop challenges in Africa include access tofinancing, corruption, tax rates, inefficientgovernment bureaucracy and inadequatesupply of infrastructure.Overall, RMB ranked Egypt, Morocco andSouth Africa as Africa’s top three countriesto invest in, while Burundi, Somalia andEquatorial Guinea were the bottom threerespectively.Botswana MiningReview January - March 20207

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General NewsBotswana seeks to exploit coal withoutadding to carbon footprintBotswana’s Minister of MineralResources Lefoko MaxwellMoagi has revealed that Botswana is exploring ways in which it can exploitits coal without adding to the carbon footprint.State-owned firm Botswana Oil (BOL) issued a tender three years ago seeking investors to build the plant, estimated then tocost around 4 billion, as the diamond-richsouthern African country seeks to secure itsenergy supplies.The country has some of Africa’s largestcoal reserves (estimated at 212 billion)described by Moagi as “God’s gift”.“It (CTL plant) is still in its infancy stage,but we believe now it will be accelerated,”Lefoko Maxwell Moagi, minister of mineralresources, green technology and energysecurity, told Reuters on the sidelines ofthe Mining Indaba investment conference inCape Town.The country wants to exploit them whilecutting harmful emissions hence its commitment in establishing coal-to-liquid (CTL)refinery set to come on stream by 2025.According to the minister, the CTL project,and the 100-megawatt pilot coal bed methane project, are two projects Botswanawould fast-track.“We believe coal has also got a beneficialway of being exploited without adding tothe carbon footprint. We can convert it incoal-to-liquids, we can convert it to gas, wecan do a lot of things with coal and theseare the things we will be exploiting fully,”Moagi said.www.botswanamininreview.comAsked about funding challenges for any future coal-related projects amidst a globalpushback from banks and investors, Moagisaid some banks, which he did not name,as well as Chinese firms, remained potentialfinanciers.Moagi said the government had held preliminary discussions with Sasol, a recognized leader in CTL technology and whoseSecunda refinery currently supplies SouthAfrica with millions of litres of synthetic fueleach year.Sasol did not immediately respond for comment.Last year, Shumba Energy formed a jointventure with two Chinese companies tobuild a separate coal-to-liquids plant at acost of between 1.5 billion and 2 billion.Moagi said the government also expectedto finalize power purchase agreements thisyear for a planned new 100MW pilot powerplant using coal bed methane, gas trappedin underground coal seams.Tlou Energy and Sekaname, a subsidiary ofKalahari Energy, have been shortlisted todevelop the project.“The project is at an advanced stage because what we needed to do is to makesure the power purchase agreements arefinalised and we hope that this year it willbe finalised,” Moagi said.He said the government expected the coalbed methane project to come onstream by2022.Botswana MiningReview January - March 20209

General NewsBotswana set to conclude deal with De Beersby AprilBotswana, in its negotiation with De Beers, is advocatingfor more gems to be cut and polished in the country so asto boost its revenue.These are part of the submissions the country has put forward intheir current negotiations with British Mining Company.Botswana hopes to conclude negotiations with De Beers on a diamond sales agreement by the end of April to replace the currentten-year deal that expires in January 2021.The 2011 agreement concluded on the relocation of De Beers’ siteand operations – professional, skills, equipment and technology –from London to Gaborone by 2013.But according to the country’s Minister of Mineral Resources,Green Technology and Energy Security, Lefoko Moagi, the government is seeking more access to the processing of the gemstonewith this new deal.Lefoko Moagi said, “We now want further to move into the valuespace; the bottom end of the business which involves your valuation, your pricing, cutting and polishing, marketing, selling, jewellery making.” He added that the country is “looking at April, notbeyond, for all of this to happen and be successfully concluded.”Emphasising the need for job creation and human capital development, a statement by the minister reads, “What more really weneed is to see jobs coming through, we want to see young people10Botswana Mining Review January - March 2020participating in these jobs.”De Beers, expressing their commitment to the cause in Botswana,said they are “fully focused on continuing to be a dedicated partner to the people of Botswana, and to delivering” on their commitments.Botswana already owns 15% of De Beers and has a 50% stake inthe Debswana mining company. As part of the existing agreement,De Beers moved diamond sales to Botswana from London, and thegovernment secured the right to sell 10% of Debswana’s production independently.Although the country has recorded much success on economicgrowth in the past 3 years chiefly as a result of good resource management, the gap between what it makes from polished stones incomparison to the rough stones is wide.As of 2018, it made 846 million on the export of polished gemsexported whereas the value of the rough stones involved in the process was worth 5.1 billion.This may account for why wants to derive as much benefit as possible from its mineral resources.It is important for both parties to come to a compromise by April.Botswana accounts for more than two-thirds of De Beers’ production, it also depends heavily on these gems processed by De Beersfor foreign earnings.www.botswanamininreview.com

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General NewsCoal is not going anywhere By Xavier Prévost, senior coalanalyst at XMP ConsultingThe coal sector is living under theconstant threat of being blamedby environmentalists as beingresponsible for a world disaster called global warming.can only make this process as environmentally sustainable as humanly possibleCliques are telling industry and governmentto change and adopt the ‘new energy economy’ or as America’s infamous politicianand activist Alexandra Ocasio Cortez callsit, ‘The New Energy Deal’.“Coal is likely to remain an important sourceof energy in any conceivable future energyscenario. Accordingly, our priority actionsare to reduce the CO₂ emissions that coaluse produces.”She states that the only solution to avoiddevastation to the world is to accept thatrenewable energy is the way to go for allenergy needs, given that it is becoming socheap, and so fast that the move to a worldthat no longer needs oil, natural gas, or coalis unavoidable.We strongly believe that it is still sustainableas part of South Africa’s energy mix. Contrary to the idea that ‘coal is dead’, SouthAfrican reserves and resources are abundant and can provide low-emitting, cost-effective, reliable and sustainable power wellinto the future, using Clean Coal technologies (CCTs).The industry’s answerSchernikau puts in:is,asLars Coal’s importance will further increase inabsolute and relative terms for decades tocome Man-made CO₂ has no effect on globaltemperatures and combustion of fossil fuelsdoes not influence the weather We cannot stop the advance of coal; we12The Massachusetts Institute for Technology(MIT) in “The Future of Coal” 2007 states:Coal mining, power generation, industrialutilisation and allied industries provide morethan 700 000 jobs and this figure should increase as more mines and industries openin the future.It is well recognised that seven times thatnumber is the approximate quantity of dependents on average allied to every personBotswana Mining Review January - March 2020in employment.One further fact not understood by the public is that, for every mine or industry job,many more jobs are created in support industries. This includes transport services,retail shopping complexes, schools, hospitals, and building-related activities.For these reasons, coal is the mainstay ofour economy. If mines, for example, were tobe closed, or become unproductive, manyjobs would be lost, increasing unemployment and poverty. Coal supplies 95% of theelectricity consumed by the country. Electricity from coal is still the cheapest in theworld.Because of the current lack of incentivesand funds to implement new projects in thecountry, production is not growing and because some of the large, older mine’s output is decreasing, our yearly production hasnot improved for years.The reality is that the 2020 ‘Coal Cliff’ ishere! Some banks do not fund power stations, but funding for mining is still available.Coal prices, drivers of a successful industry,have regularly increased in the local market,www.botswanamininreview.com

in decline and cannot expect to support theindustry as in years past.In the seaborne market, steam coal pricesfluctuate extensively, mainly due to the influence of China. The markets for exports’displaced tonnages are new developmentsin NE Asian countries.Trade to the Pacific, eastern Mediterraneanand the Indian Ocean will grow, while exports to Europe will be replaced by growthin exports to India, Latin America and othersmall markets.Exports in the future will be dominated bylow-cost mined coal. Minimum contractualtonnages and sunk costs in rail, barge andterminal will promote exports at very marginal profit levels.The future shows substantial growth in prices and tonnages in the inland market, whileexport prices will remain static or decrease.This will generate an almost price equivalence between inland and export, resultingin the accelerated growth of the local market at the expense of exports.where some grades now show higher prices than similar grades in the export market.Mines are also currently selling more to thatmarket, although the future of Eskom is stilluncertain.Despite Eskom and the renewables industry assertions that they should be used inpower generation, we know that, as in theEU, it can only happen at great peril to theeconomy, so the demand for coal remains.In countries such as China and India, useis growing, because there have no alternatives. A technological new solution willhopefully be found, but it is not here yet.I am confident about the future of the industry. As Reuters Refinitiv declares in thearticle:“Coal may be dying, but growth in the seaborne market says not yet”; it is a bit of asurprise to look at the actual volume of coalbeing shipped around the globe and seethat it is growing so far this year.In the first seven months of 2019 a total of870.8 Mt of coal, thermal and coking, wasimported from the seaborne market, according to vessel-tracking and port datacompiled by Refinitiv.That’s 2.1% higher than the 852.6 Mt in thesame period in 2018. This is not a massiveincrease, but the fact that the seabornewww.botswanamininreview.commarket is stronger in 2019 does challengethe narrative of a dying industry.The overall picture for seaborne coal doesremain gloomy, but as the growth in themarket so far this year shows, coal remainssticky in the global energy system and anydeath may be lingering.The local industry will, for many years tocome, will be a reliable supplier of cheapinland energy and a large source of profit forbig and small producers.The DMRE 2018 production statisticsshowed that of the five main commodities; coal, gold, PGMs, diamonds and ironore, coal was the highest value earner withR145.6 billion (37.5% of the total).The message for the industry is that to copewith an expanding local demand and higherfuture prices, our coal production which hasbeen sluggish since 2013, requires morecapital and the implementation of new projects and mines as soon as possible. If thisdoes not happen and soon, alternative imports from new Botswana’s mines will reapthe benefits.About the authorBorn in La Paz, Bolivia, Xavier Prévost obtained an M.Sc degree in Engineering Geology from the University Of San Andres in 1968,a Diploma in Mining and Exploration fromthe Montanistische Hochschule in Austria, aGraduate Diploma in Engineering from Wits’Leadership in Coal Technology Programmeand an M. Engineering degree from Wits in2002.Observing current seaborne and inland coalprices, sizes and qualities available to themarkets, let us try to provide an illustrationof the status of coal supply and a foretasteof future developments.Before 2009, inland market prices increasedat approximately 10% per annum. From2011 to 2015 by 8% and then again by 5%from 2016 to 2018.As transport plays a big role, with logisticsand fuel costs ever-growing, mines closerto market have had an advantage when determining delivered price to end-users. Coalexports, once best money-makers, are nowBotswana MiningReview January - March 202013

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blueprint should be drafted. The intentions to cut harmful emissions, through establishing a coal-to-liquid (CTL) refinery set by 2025 should be implemented and not become another talk show. According to government, the CTL would be fast-tracked and it is ple