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South African Diamonds Essay Research Paper South

South African Diamonds Essay, Research Paper South African Diamonds South Africa is currently the world’s fifth largest producer of natural diamonds. In 1995, some 9,8 million carats of rough diamonds were produced. A high percentage of these diamonds was of gem and near-gem quality.

South African Diamonds Essay, Research Paper

South African Diamonds

South Africa is currently the world’s fifth largest producer of natural diamonds. In 1995, some 9,8 million carats of rough diamonds were produced. A high percentage of these diamonds was of gem and near-gem quality.

Diamonds occur in pipes and fissures of kimberlite, as well as in alluvial and marine deposits. Pipes of kimberlite are commonly circular in shape, and become smaller with increasing depth. The well-known Premier Pipe, at Cullinan in Gauteng, the largest in South Africa, covers an area of 54 ha.

Approximately one out of every 100 pipes can be economically mined. As the elements erode diamond-bearing pipes, the stones are liberated from the kimberlite and transported over long distances. Such diamonds are transported in rivers and can be concentrated as alluvial deposits in riverbeds. This kind of deposit is found mainly in the North-West, the northern Free State and the Northern Cape.

Diamonds transported by rivers enter the sea and are distributed along the shore by wave action to form marine alluvial diamond deposits. These diamond deposits are restricted to the west coast, in particular the coastline north and south of the Orange River mouth at Alexander Bay in the Northern Cape. Owing to weathering, most of these diamonds are typically of gemstone quality.

Diamond-mining operations in South Africa are dominated by De Beers Consolidated Mines, a company originally formed through the consolidation of the old Kimberley mines.

The former Kimberley mine, the Big Hole, has been declared a national monument, and a museum depicting the history of diamond mining in the country has been established near the site.

South Africa has an established diamond cutting industry. All rough diamonds mined locally are first offered for sale to the cutting industry. Those stones that cannot be processed locally are available for export.

A new system was introduced in January 1993, whereby only De Beers may export all of its diamonds. It then imports the same stones which theoretically would have been sold locally, plus additional rough diamonds from other contracted non-South African diamond mines.

Overview

South Africa has been a major diamond producer for over one hundred years during which time De Beers, primarily through its management of the Central Selling Organisation, has established itself as the pre-eminent diamond mining and marketing company playing a central role in the world diamond industry. Most of the diamonds are mined offshore and onshore the West Coast of South Africa just south of the Namibian border.

South Africa is currently the world+s fifth-largest producer of natural diamonds. In 1997, some 10 million carats of rough diamonds were produced. A high percentage of these are of gem and near-gem quality. Diamonds occur in pipes and fissures of kimberlite, as well as in alluvial and marine deposits. The well-known Premier Pipe, at Cullinan in Gauteng, the largest in South Africa, covers an area of 54 hectare.

De Beers and TransHex are South Africa’s two largest producers of diamonds. TransHex agreed in principle to merge with Ocean Diamond Mining in 1999, but this merger failed to take place.

Diamond Mining

South Africa’s 1995 rough diamond production was more than ten million carats, putting it fifth in the world league of producers by weight, after Australia, the Democratic Republic of Congo, Botswana and Russia. De Beers mines accounted for 94 % of the year’s volume with 625 000 carats from other sources.

De Beers dominates the southern African diamond mining business. De Beers produced 9.4m carats from its SA mines during 1996. De Beers Marine produces around 480,000 carats annually. The De Beers mining complexes are:

* Finsch mine in the Cape, the world’s most modern underground diamond mine, which merged with the Kimberley and Koffiefontein mines to create a single management unit;

* the Premier diamond mine, which has produced many of the world’s largest diamonds;

* and Venetia, the most modern opencast mine in the industry, which contributes about half of all South African production.

The next largest South African diamond producer is the TransHex group which produced 188,000 carats in the year to March 1997 both from alluvial diamond operations along the south bank of the Orange river close to where it reaches the Atlantic at Oranjemund and seven offshore marine concessions. Trans-Hex operates retreatment plants around the Bellsbank, Sover and Roberts Victor mines in the Kimberley area. Trans Hex has operations at Baken, So Ver, Reuning, Komaggas, and Hondeklip Bay and marine operations. Operation ceased at Dokolwayo, Bellsbank and New Elands during the 1997 financial year. Exploration is underway at Reuning South, Nxodap, Bloeddrif and Hondeklip Bay and along the Orange River at Baken, where proven ore reserves have been increased to eight and a half years at current production levels. Trans-Hex sells its production outside the CSO through dealers in Antwerp. Toronto listed subsidiary Trans Hex International (THI) is involved in exploration work in countries including Namibia, Indonesia, Angola and Brazil.

Messina Diamond Corporation, listed on the Toronto Stock Exchange, produces around 50,000 carats / year from operations near Star and Bellsbank which should increase once the new Liqhobong mine in Lesotho starts production. Messina’s annual output is forecast to rise to 400,000 carats in 1999 and 2 million carats by 2001.

Canadian mining company Southern Era is developing an underground diamond mine on the Klipspringer farm in Northern Province. More than 3000 carats, most of them gem quality, were recovered in preliminary excavations. The 62km long Kimberlite pipe is about six times longer than any other in South Africa. The capital cost of the underground mine is estimated at $US US 30 million. The company says it can hold production costs to below $US US 25 a carat for up to 20 years.SouthernEra controls the Klipspringer project. SouthernEra Resources acquired 100% of the mineral rights on the farms Frankryk and Schietfontein, part of the Klipspringer Project property holdings. The farms contain most of the delineated strike trend of the Sugarbird fissure and related structures.

De Beers (60%) and SouthernEra Resources (40%), which bought out partner Randgold Exploration, are jointly developing the M1 diamond pipe on Marsfontein farm in Northern Province. The M1 pipe is small but contains a very high grade of easily mined ore. The site is close toDe Beers’ existing mineral rights at Zebedall. De Beers will pay NGS Resources about R75 million for the mining rights. Marsfontein ore will be processed at the SouthernEra’s treatment plant at Modderfontein. The Central Selling Organisation will buy M1 and Klipspringer output.

In February 1999 De Beers and SouthernEra signed detailed agreements, in terms of which De Beers will manage the project, and SouthernEra is responsible for ore treatment at its plant on the farm Rusland. In terms of the marketing agreements, production from the Marsfontein project and from the SouthernEra Klipspringer project will be sold through the Central Selling Organisation (CSO).

Mazal Mining, an exploration and mining company, has discovered what appears to be the second largest diamond deposit in South Africa, and one which is potentially as rich as the original kimberlite I material which made Kimberley world famous. Paardeberg east, 50km west of kimberley, has already yielded a 2,8 carat diamond worth $393 a carat, and its indicator minerals are consistent with a high value kimberlite pipe. The main pipe has been estimated technically as being larger than 28ha, with the boundary still undetermined and old shafts in the area suggesting a pipe larger than 28ha. Diamonds retrieved show that the kimberlite comprises 60% gem and 40% industrial diamonds. There is an expectation of an eventual yield of around 100 000 carats/y. At 28ha the pipe is second only to the 32,2ha Premier mine, South Africa’s largest diamond mine. The large pipe gives rise to expectations of open pitting to 500m and 100 years of life of mine. Mazal hopes to conclude a feasibility study by March 2000, when the company will start mining, as well as continuing exploration in surrounding areas.

Other mining companies include:

* Alexkor, a parastatal which mines south of the Orange River delta. The Nabera consortium has been awarded a 2 year management contract over this operation, hoping to return it to profitability and to increase the life of the mine. The mine has been running at a loss since 1996. One of the major problems in the area is theft, with as many as 60 sydicates involved in diamond theft operations in the area. Nabera plans to spend R120 million on exploration during its 2 year management contract, as up to 70km of the 120km mine site has not been systematically worked on.

* AfriOre, a Canadian exploration company.

* Ashton Mining, an Australian company.

* Penta Diamond Holdings has started mining operations near Lichtenberg.

* a number of smaller companies, some listed, such as Thabex, involved in exploration and exploitation of alluvial and fissure deposits in the Northern Cape, North West and Free State around towns like Theunissen, Bloemhof, Wolmaransstad and Barkly West.

* New Diamond Corporation (Newco), a black empowerment company founded in January 1999, and owned 51% by De Beers.

Plans are under way to return to production the ill fated Free State Rovic diamond mine which collapsed under a mudslide. The mine is planned to produce about 3 million tons of kimberlite over the mine’s life span.

International syndicates operating out of Port Nolloth are estimated to have smuggled out about R130 m worth of diamonds annually from west coast mines. Between 20% and 40% of Alexkor’s total turnover was smuggled from the mine and production was down to 30%.

Alluvial Mining

As the elements erode diamond-bearing pipes, the stones are liberated from the kimberlite and transported over long distances. Such diamonds are transported in rivers and can be concentrated as alluvial deposits in riverbeds. This kind of deposit is found mainly in the North-West, the northern Free State and the Northern Cape.

Alluvial gravels, extending from the Lichtenburg to Barkly West districts along the Orange and Vaal Rivers and on the Northern and Western Cape coasts, yield diamonds commonly of a better quality than those found in the original rock. The early diamond rushes at Hopetown and near Kimberley, were followed by a succession of rushes to the alluvial diamond fields of the Northern Cape and what is now the North West Province. Examples were those in the 1920s and 1930s at Lichtenburg, Bakerville and the Mafikeng district. Although there are still 1500 alluvial diggers in the North West, Northern Cape and Free State provinces, the prospects for new labour-intensive small-scale diamond mines have been greatly reduced. The historical depletion of alluvial diamonds leaves only the diamond-rich pipes which require deep mining with all the capital and expertise that implies.

Australia’s Moonstone Diamond Mining had unearthed 53 diamonds weighing more than five carats each, including one stone of 60 carats, at the Saxendrift alluvial project on the Orange River in the Northern Cape province. Moonstone Mining has now been bought out by Benguela Concessions Ltd (Benco).

Marine Mining

Diamonds transported by rivers enter the sea and are distributed along the shore by wave action to form marine alluvial diamond deposits. These offshore and onshore alluvial diamond deposits are found along the Atlantic west coast of South Africa and Namibia over a distance of some 1 500 kilometres.

Offshore diamond mining in South Africa started in 1961. There may be as many as 1,5 billion carats of gem-quality diamonds off the Namibian and South African west coasts, probably the world’s largest known resource of high quality diamonds. To date, combined sea and land production in South Africa and Namibia is estimated at around 180 million carats. Marine diamond mining is starting to realise its full potential as a major mining industry, as technological advances improve mining operations. Major problems associated with the industry include engineering and geological problems associated with mining from unsteady platforms.

In 1981 the 12 existing primary mineral lease holdings, or concession areas, were expanded to 20 concession areas varying in coastal extent from 15 to 30 kilometres. These 20 sea areas stretch from Alexander Bay in the north to Cape Columbine in the south. In 1983, each of these areas was in turn subdivided into three diamond mining zones:

* shallow,(’a’ areas) from 31,49 metres seaward of the low water mark to 1000 metres beyond the high water mark

* middle, (’b’ areas) a strip between four to six kilometres wide determined by fixed co-ordinates

* and deep, (’c’ areas) a strip fixed by fixed co-ordinates.

The Government then re-allocated the concessions. In 1995 an additional subdivision was made comprising ultra deep (’d') areas, the area between the 200 metre depth line (isobath) and the 500 metre depth line. The ‘c’ and ‘d’ areas are largely limited to major local and overseas companies. This is because of the water depth and the hostile environment which requires significant financial and technological resources. Medium-sized and smaller companies have generally been more active in the ‘a’ and ‘b’ areas, where known and proven exploration and mining techniques can be applied.

Until 1996, the northern sea areas attracted the most attention, but in that year companies became interested in the sea areas in the Cape Canyon region further south. The whole area is notorious for its foul weather which can sometimes make it impossible for diamond mining ships to operate. The attraction is that the diamonds are all high-grade gems worth on average US$200 per carat. This kind of mining has become possible due to modern technological advances which make it possible to obtain reliable information about the geology of the ocean bed, the presence of diamond-bearing gravel and the extent of the reserves. By October 1996, only 9 vacant sea areas out of 74 remained.

The major participants are:

* De Beers Marine, the world leader in off-shore diamond mining exploration technology

* Ocean Diamond Mining (ODM) mines the marine deposits off the West Coast where it has established itself as the leading deepsea operator after De Beers Marine, producing 18 301 carats in the quarter ending 30 June 1999.

* Benguela Concessions Ltd (Benco) was created with the acquisition of marine diamond concessions on the Namaqualand coast between Kleinzee and Port Nolloth, to which other concessions have been added. Benco currently has interests, or is actively involved, in 29 concessions off the South African and Namibian coastline – an area over 28 700-km2 in extent – which may contain diamonds to the extent of 9.5-million carats. In 1998 Benco took over Australian listed junior mining company Moonstone Diamond Corporation and their jointly owned diamond mining vessel, the Moonstar.

* Namibian Minerals Corporation (Namco), a Canadian mining company listed on the Namibian and Toronto stock exchanges

* and Diamond Fields International, a Canadian company

Diamond Cutting and Polishing

South Africa is the only African country with an established diamond cutting industry.

All rough diamonds mined locally are first offered for sale to the cutting industry. Those stones that cannot be processed locally are available for export. A new system was introduced in January 1993, whereby only De Beers may export all of its diamonds. It then imports the same stones which theoretically would have been sold locally, plus additional rough diamonds from other contracted non-South African diamond mines.

Since 1986, all South African producers have had to offer economically cuttable diamonds to local cutters or pay a 15% export duty. South African mines are no longer major producers of the kind of diamonds which are economically cuttable in South Africa. In 1993, Section 59 of the 1986 Diamonds Act was changed to provide that supplies to South Africa could be provided from the CSO’s world-sourced range of diamonds in London. An elaborate system, monitored by government evaluators through the South African Diamond Board, is designed to ensure the system works smoothly. Under the stewardship of the South African Diamond Board, production from De Beers mines is split at Harry Oppenheimer House in Kimberley into three:

1. South African (the cutters assess them as suitable for local polishing );

2. Conditional (the cutters may wish to polish them, subject to market conditions);

3. and Unconditional (deemed by the Diamond Board to be unsuitable for polishing locally).

The South African category is less than 5% by weight; Conditional diamonds 10% by weight and the Unconditional make up the balance of 85%. South African stones over 10,8 carats are reserved exclusively for South African cutters, as are fancies, stones of unusual and rare colour. South African cutters receive most of their rough diamonds from the same suppliers. In 1994 they obtained only 48% of their supplies from the Central Selling Organisation, 33% from foreign dealers, 17% from local producers and dealers and 2% from other sources.

About 80% of diamonds polished locally are processed in Johannesburg, South Africa’s main diamond centre. Diamonds are also polished in Newcastle (one medium sized factory), Kimberley, Cape Town, Durban and East London. Cutting factories that used to operate in Bloemfontein and Pietersburg are no longer active. Employment in the local cutting industry declined from 5 000 in the mid-eighties to over 3 800 workers in 1989 to about 1 500 in 1995. The South African Diamond Workers Union (SADWU) attributes it also to the world recession in the diamond industry and the abuse of the old decentralisation incentives. According to Diamond Board estimates, the local cutting industry cut about 571 000 carats in 1995.

Morokweng, run by Mr MacDonald Temane, is the first black-owned diamond cutting and polishing company in South Africa.

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