De Beers Launches $2 Billion Venetia Underground Diamond Mine

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--At a time when the South African mining sector is going through a process of soul searching, navel gazing and difficult initiatives to get on board and work together with the government, there is also a feeling that the country is falling behind in new project opportunities as other African countries are launching a series of new projects.

The perceived lack of new projects and capital investment is not an altogether true picture, as new projects are being launched with price tags in the billions of dollars.

The De Beers Group (Luxembourg) plans to build a new underground mine below the current Venetia open pit diamond mine in Limpopo province, in northern South Africa. Venetia is the biggest diamond mine in the country.

The company, which is controlled by Anglo American (LSE: AAL.L) (London, England), announced last week that it would invest $2 billion in the expansion project, which would extend Venetia's operational life through 2042. The new underground mine will become the country's largest diamond mine. All the required regulatory clearances have been received from the government.

De Beers CEO Phillippe Mellier said that underground production would begin in 2021, secure 3,000 jobs and yield 96 million carats of diamonds during the life of the mine. The project will employ semi-skilled and skilled workers, drawn primarily from the region. The development and construction phases of the underground mine are expected to create 1,000 jobs over a period of nine years.

The project will employ semi-skilled and skilled workers drawn mainly from the region. Technical training will enhance South Africa's overall resource base for technical skills. The bulk of equipment and services for the project will be sourced in South Africa.

Mellier said that the new mine would provide a large and predictable supply of rough diamonds for decades to come for De Beers' bulk purchasers, who had significant investments in South Africa's diamond-cutting industry.

The launch of the Venetia underground mine project could be followed in June with a $700 million Canadian diamond mine project. The De Beers team in Canada is working on the Gacho Kue plan, which they will present for board approval. This would become the company's third operation in Canada and would produce about 4.5 million carats per year. De Beers would own 51% of the projects and would invest $350 million.

In 2012, falling demand for diamonds saw the group's year-over-year production fall from 31.3 million carats in 2011 to 27.9 million carats for 2012. This was in line with its strategy of producing to demand, with operations continuing to focus on maintenance and waste stripping backlogs.

The company celebrates its 125th anniversary this year. Anglo American plc owns 85% of De Beers, with the balance of 15% held by the Republic of Botswana.

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