Industry News
Petra intends acquiring 60% of Cullinan diamond mine, changing plant to recover larger stones, producing one-million carats
30/01/2009
By Martin Creamer
Midtier diamond-miner Petra Diamonds intends exercising its options to acquire 60% of the celebrated Cullinan diamond mine and is tweaking the plant to recover larger stones, Petra CEO Johan Dippenaar says.
Dippenaar tells Mining Weekly that Petra, now the largest diamond company on London’s Aim with aspirations to graduate to the main board of the London Stock Exchange (LSE), has options to ‘claw back’ up to 60% of the shares of the consortium that owns the Cullinan mine, “which we certainly intend to do over time”.
Petra technical director Jim Davidson reports that the new processing procedure at Cullinan is aimed at protecting diamonds in the size range of 500 ct to 600 ct, whereas, in the past, it protected diamonds up to 25 mm in size, which allowed through diamonds to a maximum size of some 200 ct.
“If it were bigger, it went to the crushers. We are changing all that. “The screen sizes are already up to 35 mm and, in the process, we are upgrading and recommissioning the large-diamond recovery plant,” Davidson discloses.
Besides going for bigness, Petra is retaining its volume ambition and is not lowering its target of 2,5-million tons a year.
Petra GM Teon Swanepoel tells Mining Weekly that the company is heading for a production output of close to a million carats in its financial year to June 30, 2009, which will be considerably greater than the 750 000 ct to 850 000 ct that it promised the market.
Cullinan’s general diamond parcels are not spectacular, but it does have the ability to throw up exceptional stones, which boosts its economics.
“In the short time that we’ve had this mine, it has already thrown up three exceptional stones,” Davidson says.
The most valuable was a 39-ct blue sold for $8,8-milion, followed by a 26-ct white that fetched $1,6-million and a 26-ct blue that has still to be sold.
“This is where Cullinan really comes to the party, in throwing up specials, underpinned by the run-of-mine parcel,” Davidson explains.
The celebrated C-Cut notwithstanding, he says that the area for the immediate future is one known as BA West, for which hoisting infrastructure is in place to mine at the current rate of about 2,5-million tons a year. BA West is the traditional producer of blue diamonds and large flawless diamonds.
The Cullinan mine, which is currently Petra’s flagship operation, is divided into three sections – the old A-Cut section, which lies above a 70-m-thick geological sill, the B-Cut section, and the proposed C-Cut section.
The B-Cut is below the sill to a depth of 763 m, where mining is currently under way.
Beneath the B-Cut workings is the much-publicised C-Cut, which is estimated to contain 133-million carats at a grade of 80 ct for every 100 t of material.
There are still 60-million carats in the B-Cut resource, where the proven and probable reserve is 16-million carats at a grade of 50 ct for every 100 t.
“So there’s a large reserve relative to the production we are doing, and a huge resource for years to come,” says Davidson.
Half of current production is from the B-Cut area’s BB1 East section, 35% from BB 1 East AUC and 15% from BA 5, beneath which is the BA West, where mining will head in the future.
The run-of-mine grade achieved in the last six months in the B-Cut was 40,5 ct for every 100 t.
The targeted throughput of 8 500 t/d is being achieved and plant modifications under way will increase the capacity of the plant to 11 500 t/d.
Davidson describes the layout of the Cullinan plant as being “ very complex”.
A modern plant on the footprint the size of Cullinan’s would probably be able to cope with a throughput of 20-million tons a day, whereas continual add-ons over the years restrict the Cullinan plant to a far lower throughput.
“We are in the process of rearranging the layout to optimise throughput,” Davidson discloses.
The average value that Cullinan achieved in the six months to December was $91/ct, against its business plan of $75/ct.
Cullinan produced 450 000 ct in the six months to December and is projecting 950 000 ct in the financial year to June.
Of the 450 000 ct produced in the six months to December, 294 030 ct has been sold and the remaining 156 000 ct is being held in stock.
“Once we have established the new economics of this mine, we can turn to what we intend doing with the C-Cut, which extends to 1 073 m below surface,” Davidson says.
But the immediate mining focus is on the western side of the mine, which is the deliverer of the big diamonds, going right back to the celebrated Cullinan diamond, which was discovered on the south-western sidewall of the pit, very close to surface in the BA West area.
“The mine has a long life without even taking into account the development of the C-Cut,” explains Davidson, who adds that the company has R300-million worth of C-Cut research in its possession, which it will use when it becomes necessary to do so.
Among the ore-processing changes under way to increase the throughput is the introduction of X-ray technology as the first line of recovery, with grease-based technology becoming a backup.
A total of 17 flow-sort machines are on order, the first two having already been commissioned and the remaining 15 expected in the nest six months.
The D-flawless Centenary diamond, which was some 500 ct when cut, was found through the large-diamond recovery plant.
“The significance of all this is that you can choose to go for tons, or you can choose to reorganise the structure of the operation in order to try to recover the big diamonds. “We are opting to try to recover the big diamonds, for which there is a market, and sticking at a volume of 2,5-million tons a year.
“With all the changes in the plant, we are doing both, setting out to recovery larger diamonds and putting through the targeted tonnage.
“There is a major reorganisation of the plant that will be ongoing for at least three years. “You cannot take a big plant complex like Cullinan’s and change it overnight. But we are changing it as we are going along and this is going to deliver some very good diamonds,” Davidson says.
The optical sorting plant (OSP), which has been operating for four years, treats the concentrate tailings from the main plant.
Once the tailings have been through the grease tables and the diamonds extracted, that concentrate becomes the OSP feed.
Cullinan has more than two-million tons of tailings, which was running at 29 ct for every 100 t under De Beers, and Petra has increased that to 70 ct for every 100 t.
“We are looking to do further alterations to increase the feed rate of the OSP, which also delivers some quality diamonds,” Davidson says.
The company is producing at a rate higher than what it promised the market in order to enable it to be able to breathe easily while it implements plant changes.
The plant will be capable of delivering close to a million carats a year.
The incidence of 100-ct diamonds has decreased, which is plant related as there is no change to the orebody.
The incidence of diamonds of up to 100 ct has dropped from 14 ct/y to 2 ct/y, but Petra is setting out to reverse that through plant modification.
In addition to the OSP tailings, there are 165-million tons of tailings in Cullinan’s main tailings resource at an inferred grade of 10,1 ct for every 100 t, giving 16,8-million ct of tailings lying on the surface.
The reason Petra is not processing Cullinan’s main tailings material at this stage is that low-grade diamonds are not in demand in the current market conditions, but will be given attention at a later stage.
Petra, whose turnover rose from $17-million in 2007, to $76-million in 2008, has a resource base of 265-million carats worth $27-billion.
Both Dippenaar and Davidson were diamond entrepreneurs before their company Crown, was brought into Petra.
Petra acquired Cullinan, Koffiefontein, Kimberley Underground and Williamson in the two years from 2006 to 2008 and also has a small portfolio of fissure mines and a diminishing exploration portfolio.
The Cullinan mine, discovered by Sir Thomas Cullinan in 1902, is arguably the world’s most celebrated diamond mine.
It has a surface area of 32 ha and the current mining footprint is 22 ha and has the world’s second-largest indicated diamond resource valued at $17,9-billion and containing 208 ct, including tailings.
It hosted the world’s largest gem diamond, the 3 106-ct Cullinan diamond, in the British crown jewels.
It is also the source of the largest polished diamonds of the world, including the 530-ct ‘Great Star’.
Cullinan has produced 300 diamonds, weighing more than 100 ct, and a quarter of all the world’s diamonds that are larger than 400 ct.
On taking up Cullinan ownership options, Dippenaar says that Petra currently holds 37% of the shares of the consortium that owns Cullinan, which was bought from De Beers for R1-billion in July last year.
The other shareholders of the Petra Diamonds Cullinan Consortium are Al Rajhi Holdings WLL, also with 37%, black economically empowered (BEE) company Thembinkosi, with 14%, and the Petra Employee Share Trust, in which all Petra employees are beneficiaries, and which owns the remaining 12% of Cullinan.
Sedibeng Mining, in turn, owns 6,16% of Thembinkosi; general broad-based BEE company Umnotho we Sizwe 5,04% and women’s mining group Namoise Mining 2,8%.
Sedibeng has partnered Petra from its first BEE deal at the Dancarl diamond mine in the Northern Cape, Dancarl being subsequently consolidated with Petra’s Messina mine, to become Sedibeng diamond mine.
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