De Beers, the largest producer of rough diamonds by value, is spending R20-billion building an underground mine at its aging open-cast Venetia mine - the company’s largest investment in South Africa.
The rate of mining investment has slowed in South Africa as companies become increasingly wary about regulatory uncertainty, above-inflation cost increases and growing demands from the government, labour and communities.
The last big project launched by De Beers, which is 85% owned by Anglo American, was at the Voorspoed mine, Free State. It cost R1-billion and started production in 2008.
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The Venetia mine in Limpopo, which produced 3.147-million carats in 2011, is De Beers’ largest mine in South Africa and the biggest source of rough diamonds in the country.
De Beers is a major supplier of rough diamonds to clients, called sightholders, in South Africa and the government is keen to develop a cutting and polishing industry to create jobs. Building the underground mine at Venetia will create 1000 jobs and 3000 more when the underground operation starts in 2021. The mine is expected to deliver about 96-million carats over its 21-year life until 2042.
"Our investment in Venetia enables us to provide much greater certainty around long-term supply for our sightholders, particularly those with manufacturing operations in South Africa," De Beers CEO Philippe Mellier said on Thursday.
"Our sightholders have significant investments in the local cutting industry and this new underground mine will provide a large and predictable supply of rough diamonds."
It is not clear how the project will be funded.
De Beers has sold four diamond mines in South Africa and is selling its Namaqualand operation. Its operating assets in South Africa are the Venetia and Voorspoed mines, and a Kimberley tailings treatment operation.
"To invest this kind of money over nine years reflects the confidence we have in diamonds and South Africa," said the chairman of De Beers Consolidated Mines (DBCM), Barend Petersen. DBCM is the South African arm of De Beers.
Anglo and De Beers boards approved t he Venetia underground project last December.