"Barriers lowered on diamond sector"

By Sherilee Bridge

Johannesburg - Transformation of the diamond pipeline by diamond giant De Beers over the past few years has lowered the barriers to entering the diamond industry, De Beers managing director Gareth Penny said on Wednesday.

Speaking at the Mining Indaba, Penny said diamond industry transformation had been effected by the group's disposal of some of its South African mines and the repositioning of its asset portfolio.

Among the bigger transactions concluded last year by De Beers Consolidated Mines, the South African arm of the global diamond giant, was the one billion rand sale of its historic Cullinan Diamond Mine to a consortium of companies led by AIM-listed diamond mining junior Petra Diamonds.

De Beers has also disposed of the Dancarl Mine in the Barkley West district of the Northern Cape, the Koffiefontein mine in the Free State and its Kimberley underground mines - all to Petra.

This has left De Beers with just a handful of mines, including its Venitia mine near Musina in Limpopo province and Voorspoed mine in the Free State, which Penny said had both just received their licence conversions.

It also left De Beers more focused.

Penny said the company had also "fundamentally" restructured its partnerships in exploration, and concentrated its new business development.

"Our principle exploration focus was in the Democratic Republic of the Congo, Angola, Botswana, Russia and South Africa," said Penny, adding that De Beers spent $100 million on exploration annually.

"Forty-five new kimberlites were discovered in 2007," he said.

Having revisited its exploration partnerships, De Beers said it now had 57 joint ventures and 42 partners across the world.

But only four new mines were currently under development - two in South Africa and two in Canada.

Moving from the supply side to demand side of the business, De Beers has taken a decision to shift its London diamond sorting facility to Botswana where Penny says doing business is much cheaper.

On the subject of beneficiation, Penny warned that there "were many challenges to be faced", primarily because of a lack of skills.

Despite this, by 2009 roughly $1 billion will have been supplied across southern Africa for value-adding purposes.

Petra Diamonds said the industry was seeing "unprecedented" market conditions.

The company said the market, worth an estimated $14 billion in 2007, was expected to grow to just under $18 billion in 2011.