SA's Alexkor grinds to halt (Source: Miningmx)

Brendan Ryan
Posted: Wed, 16 Jan 2008

[miningmx.com] -- THE top management team at state-owned Northern Cape diamond company Alexkor has quit and mining operations appear at a standstill pending the investment of R200m by the state.

That’s the initial amount due to be injected in terms of a deed of settlement reached last year between the South African government and the Richtersveld community after it won its land claim over the area.

Despite this, the future of the mining operations will depend on bringing on board a mining company with deep pockets as a joint venture partner able to fund a large-scale exploration programme. That partner will also need to be able to operate free of interference from the state, which has been a major problem previously.

That was the plan back in 1999 when the state first looked at privatising Alexkor but never followed through. The operation has been on a downhill trend since. Production of 83,000 carats in the year to June 2002 fell to 33,765 carats in financial 2006/2007.

Most of that came from the shallow water marine mining rights that are to be retained by Alexkor. The community now owns the land mining rights.

Both sets of rights are to be placed under control of the board of the PSJV “pool and sharing joint venture” in which Alexkor will have a 51% stake and the community the remainder.

The PSJV board includes, among others, John Bristow, CEO of JSE- and Toronto-listed Rockwell Diamonds, and Mike Solomon, CEO of JSE-listed Wesizwe Platinum. The initial R200m will be paid over to the PSJV once it’s approved a business plan for a viable mining venture that’s supposed to be completed by end-March 2008.

Alexkor’s CEO and company secretary quit in December and sources say its human resources and financial managers are also leaving. The company is currently being run by Geoff Davis – the mineral resources manager – as acting CEO.

An executive chair – Khetiwe McClain – has been appointed to Alexkor. She worked previously for the Department of Minerals & Energy and is a partner in empowerment firm Khusela Womens’ Investment.

Sources say Alexkor’s assets and operations have run down badly due to the South African government’s failure to follow through on its initial privatisation plans, which were to sell 51% of Alexkor to a company that would invest heavily in further development.

The Nabera consortium ran it for two years up to 2001, with a brief to prepare Alexkor for privatisation. Instead, government brought in minerals research public corporation Alexkor for another two years and is still in dispute with Nabera over payments Nabera believes it’s owed.

Says Bristow: “Nobody has ever gone into Alexkor and put up the money to conduct a diligent exploration programme to drill out, delineate and evaluate the remaining ground and take bulk samples on the scale that Trans Hex does, for example, on its operations on the Lower Orange River.

“All they really did was reassess and rework the old data. Nobody has clear insight into what diamond resource remains and much of the equipment left on site is in a very poor state.”

Whatever diamond resource may be left on land lies largely in the south, bordering the Kleinzee operations of De Beers Namaqualand Mines. That lends weight to last year’s proposal by De Beers to merge its Namaqualand Mines with Alexkor to create a stand-alone diamond producer.

De Beers stated at the time it intended giving a 20% equity stake in Namaqualand Mines to the Minerals & Energy Department and that it hoped to conclude the transaction during 2008.

De Beers spokesman Tom Tweedy says the equity transfer hasn’t taken place, in part because during 2007 De Beers was focused on other transactions, such as the sale of its Cullinan mine. He adds a fuller statement on De Beers’ plans could be made towards month-end.

De Beers stated last February that it had no intention of operating the merged company and that it would sell down its equity stake over time. Irony of the situation is that in 1999 the attitude of Government was, apparently, that under no circumstances would De Beers be considered as a partner for Alexkor.

The reason was that government didn’t want to allow the group to increase its influence over South Africa’s diamond industry. The tables are now turned, with De Beers divesting from mines such as Cullinan, Koffiefontein and Namaqualand, which it views as no longer profitable enough.