A weak, financially constrained economy continues to see mines retain their cash conservative status. The situation, however, has seen Gem Diamonds rise to the occasion, writes Laura Cornish.

“There is an upside to financially depressed global economic conditions. It forces us to evaluate alternative methods with which to deliver similar targets and aspirations, with significantly smaller cash budgets,” Gem Diamonds’ CEO, Clifford Elphick, points out.

Elphick is specifically referring to its 70%-owned Letšeng diamond mine situated at the highest point of Lesotho’s Maloti mountains. In January 2012, the company commenced with project Kholo – an expansion intended to almost double the mine’s run-of-mine (ROM) output from 5.6 Mtpa to 10 Mtpa with the addition of a third process plant, increasing carat production from just over 100 000 to around 200 000 ctpa.

While economic conditions have seen the mine’s expansion plans change route significantly, the objective remains the same. “Regardless of the world’s financial markets, we are driven to strengthen our position as a global leader in the supply of high-quality diamonds. This has forced us to review our expansion plans and find alternative ways to achieve similar results with the smallest amount of cash necessary,” Elphick continues.

So project Kholo remains in progress, only now it consists of a variety of smaller-scale processes and procedures – at both mine and plant – which will increase ore throughput, improve diamond liberation, reduce diamond damage and increase the amount of production available for cutting and polishing. The optimised Kholo project will not achieve all of the goals of the original Kholo project but will approach this on a ‘piece meal’ basis.

“While the decision to abandon the construction of an entirely new, state-of-the-art third plant and recovery is sound, we believe we can still reach 7.5Mtpa.

The new project Kholo

Step one: improving security measures

It is simple fact that theft is one of the major diamond mine challenges. To reduce this risk further for Letšeng, Gem Diamonds has completed an enhanced and upgraded  security system with measures to ensure that no carats leave the property unaccounted for.

“We have now combined upfront screening of our personnel to determine their risk profile, based on behavioural traits with further regular polygraph testing in the recovery plant. We have also changed our security service provider and incorporated biometric finger printing into our access control. All of the security cameras have also been upgraded into high resolution state-of-the-art cameras,” Elphick reveals. All high risk areas will be controlled with much improved access control generally.

Step two: addressing diamond damage

Letšeng is globally recognised for its large, high-quality diamonds and has a high occurrence of Type II diamonds, which are brittle and prone to damage, particularly with the current on-site crushers.

Following studies in Japan, Gem Diamonds has acquired four new Kawasaki Cybas i1200 crushers, which have been specifically configured to the mine’s ore characteristics. They are already on route to site and will be commissioned by the end of the second quarter of 2013.

“We are expecting better diamond liberation, with recirculating loads being dramatically reduced and far less damage to our diamonds, which ought to immediately lead to increased revenues,” Elphick points out.

Step three: incorporating new technologies

Elphick is expecting to achieve positive results following the incorporation of new diamond recovery technologies into its process. “We are currently undergoing feasibility studies using X-ray transmissive technology (XRT). Because our Type II diamonds have low fluorescence properties and they are sometimes missed using our current technology. The incorporation of XRT in combination will ensure we recover as close to 100% of our Type II diamonds as possible.”

Letšeng conducted tests on this and other technologies for about six months and recovered a number of diamonds from its tailings, which achieved US$12 million (R111.07 million) in revenue. XRT will enable the mine to recover large, high-value diamonds early on in the recovery process, which reduces the chance for damage.

Another technology avenue Gem Diamonds is pursuing is near infrared waste sorting, which has the potential to reduce internal and external waste dilution by as much as 25% in some facies. “By removing basalt waste material, more space is obviously made available for diamond bearing ore in the recovery plant,” Elphick explains. The mine is currently testing the technology on-site, which it will complete at the end of the year.

The Letšeng mine consists of a Main and Satellite pipe. While Elphick admits that the grade from its Main pipe (which comprises 75% of total annual production) has dropped slightly to between 1.6 and 1.7 cpht, the combination of its long lifespan and ability to deliver large, top colour, exceptional white diamonds will ensure it retains its ‘top star’ status, especially as prices increase and global diamond resources deplete.

Ghaghoo

The development of its second kimberlite project, the underground mine at Ghaghoo, located in Botswana, continues to make steady progress. “We are slightly behind schedule due to two fatalities on-site late last year. We immediately suspended tunnelling activities while the accident investigation was completed and have now incorporated additional safety measures, which have slowed down the decline tunnel development rate.”

The process plant, however, is 90% complete and the camp is finished. Water storage dams, slimes facilities and support services are also in place. “We anticipate reaching the ore body at the end of the first half of 2014, with first carats delivered towards the middle of 2014.” Ghaghoo’s average grade is expected to be about 26 cpht. Just over 400 m of the access decline through the Kalahari sand has been developed – of 550 m in total. A unique cement ring lining has been incorporated into the decline to compensate for the soft, Kalahari sand in the area.

Once operational, Gem Diamonds will implement a phased approach to evaluate the full potential of the mine. Phase 1 sees Gem Diamonds fully understand the ore body characteristics in terms of real grade, real diamond price and market demand. Phase 2 is based on the results of Phase 1 and will look at an expansion (either doubling capacity or slightly more). The current plant has been designed to treat approximately 700 000 tpa. “It’s a nice big ore body which has been well sampled and drilled.”

Beyond Letšeng and Ghaghoo

Following the sale of its Ellendale mine in Australia, Letšeng and Ghaghoo remain the only two African assets in the Gem Diamonds portfolio.

“Our immediate strategy is to produce sufficient cash flows to begin dividend payouts to our shareholders. We have a preference for organic growth and that is our focus for the immediate future.