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Unusual weather in Southern Africa caused problems for De Beers and Diamcor Mining in the first quarter of this year, but both companies are confident that no lasting damage has been done.
Southern Africa has seen some unusual weather this year. In mid-January, the region, which is normally semi-arid, experienced flooding after torrential rains in both South Africa and Zimbabwe caused the Limpopo River to overflow, Al Jazeera reported.
The flooding, which was so extensive that it was visible from space, had a plethora of devastating effects; by the end of January, it had killed 38 people, forced over 150,000 people from their homes and destroyed 32,000 acres of crops, according to New Scientist. To top it all off, the BBC reported that around 15,000 crocodiles escaped from a farm after their owner opened the doors to prevent a storm surge.
However, diamond giant De Beers and Diamcor Mining (TSXV:DMI), both of which have operations in South Africa’s Limpopo Province, have emerged largely unscathed.
Venetia to return to normal in H2
De Beers’ open-pit Venetia diamond mine is South Africa’s largest diamond producer, contributing 40 percent of the country’s annual production, according to the company’s website. Last year, it accounted for 3 million of the 4 million carats that De Beers produced.
Speaking to Reuters in late April, Varda Shine, CEO of Diamond Trading Company, De Beers’ sales and distribution arm, said that the flooding had little effect on Venetia, though it did lower the mine’s production somewhat. She commented, “South Africa had the worst rain in the last 200 years and our big mine Venetia had 23 meters of water, so therefore our production was slightly lower.”
Venetia will certainly have the opportunity to make up for lost time: in March, De Beers invested about US$2 billion into adding a new underground mine beneath Venetia’s current open-pit operation, thereby extending the mine’s life to 2040 and beyond.
Diamcor rises to challenges
Diamcor acquired the Krone-Endora at Venetia project, which, as its name suggests, is directly adjacent to Venetia, from De Beers in 2011. It is currently finalizing site preparations, infrastructure and the construction of a modular processing plant and, according to its website, has a targeted production level of 120,000 to 240,000 carats a year for about 10 years.
As with Venetia, Krone-Endora was adversely affected by the flooding. However, the company announced in a March press release that it was nevertheless able to complete upgrades at the project. On that note, Dean Taylor, president and CEO of the company, commented, “I am very pleased with the commitment of our entire team who have again demonstrated their abilities by completing these significant upgrades in a very short period of time, despite dealing with the record rains and flooding which have been widely reported in the area throughout most of January.”
Taylor was similarly optimistic this week when the company announced the recovery of “the first ‘special’ diamond in the +10.8 carat category” from the mine, a “very good quality 11.23 carat diamond.” He said that although the flooding caused some delays during Q1 — the company could not process “stockpiles of larger material in the +12.0mm size fractions” and could only process limited quantities of different-sized material — “operations are now returning to normal” and Diamcor is “focusing on ramping up operations.”
Onward and upward
While it is impossible to control the weather, both De Beers and Diamcor have shown that it can be endured; hopefully it will not be necessary to do so for another two centuries.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
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INN Video: Dean Taylor of Diamcor Mining on Taking Krone-Endora at Venetia to Production in 2013