James Campbell, MD, Botswana Diamonds

PBotswana Diamonds speaks to GBR about diamond exploration in Southern Africa.

Botswana Diamonds was born from exploration assets acquired from African Diamonds. What is the company’s current focus for 2017?

The focus for Botswana Diamonds is spread across both Botswana and our flagship project in South Africa. Through our joint venture with Alrosa, the world’s largest diamond mining company, we are focusing on the Orapa and Central Kalahari areas on both early stage exploration for a new diamond deposit and the reassessment of older diamond deposits. We also have some fascinating ground in the Central Kalahari where we are partnered with BCL. BCL is currently in liquidation, and we are negotiating to try to bring this particular project out of its dormancy. In South Africa we our focusing on our flagship Frischgewaagt project. The history of this project actually begins in the late 1980s as a legacy from when De Beers discovered the Klipspringer, Marsfontein and Oaks diamond mines in the region. We consider this to be the flagship project of Botswana Diamonds for two primary reasons. First, it is about three hours north of Johannesburg, which means it is well-positioned in terms of accessibility. Secondly, the success of the three mines there suggests the promising nature of the project. The Marsfontein mine had a payback period of just three and a half days, and the Klipspringer mine, owned by ASA Mining, is currently on care and maintenance but there has been a recent offer to buy it. There is a lot of exploration ground between those two mines that has not been explored, and we believe our entrepreneurial team and strong commercial, financial and technical competencies will allow us to capitalize on the project’s many strengths.

Based on the experiences of Botswana Diamonds, what are the most critical differences between operating in Botswana and South Africa?

As mining jurisdictions, Botswana and South Africa are very different. In Botswana, you have minimal political risk and diamonds are a cornerstone of GDP. That being said, there are many diamond explorers active there, so explorers are often looking at ground that has been examined many times over. Botswana may even be over-explored, which means a significant technical edge becomes vital, therein why Botswana Diamonds is partnered with Alrosa. South Africa is almost the exact opposite, with perceived high political risk and a subsequent lack of interested investors. However, because no other public companies are actively exploring for diamonds in South Africa, there is essentially no competition there.

In terms of gaining a technological edge, what expertise does Botswana Diamonds offer that enhance its exploration activities?

During the early discovery stage, utilizing the best geophysical technology available is critical. Technological innovation is also key during the evaluation stage, particularly in diamond exploration when key variables in grade, color and size matter immensely. Furthermore, drilling is a necessary but destructive phase in the process. One of the most significant areas of concern for us is trying to minimize diamond breakage through the efficient application of drilling technology and very sophisticated modeling techniques; there are not many people in the world who can do this. Botswana Diamonds maintains an elite network of the best in the diamond business, which is absolutely vital to getting these projects done to high technological standards.

What is your outlook for the supply and demand of diamonds, and what trends are driving this forecast?

The current supply of diamonds, contrary to many other gemstones, is diminishing. The mines are getting older. De Beers is spending a fraction of what it used to spend on exploration and there is not much of a market in investing in diamond juniors; therefore, supply is either flat or declining. From a demand perspective, you have two defining features. Firstly, the American economy is much stronger than people expected it to be, and they are a vast consumer of diamonds, accounting for consumption of just under half of the world’s diamonds. Secondly, the growth of the middle class in India, China and the Far East will contribute to rising demand. Therefore, for diamond supply to match diamond demand, there has to be a real diamond price growth because that divergence is economically not possible. We are looking at a 3 to 5% price growth in real diamonds. From a long-term business perspective, diamond demand and pricing is robust.

What message would you send to international investors regarding the opportunities in diamonds in both Botswana and South Africa?

The diamond industry is probably one of the better industries to be in because of the supply and demand economics. If you are keen to invest in the diamond industry, you need to be in the right addresses and those happen to be South Africa and Botswana. You also need to be with a team that has a track record of finding commercial discoveries, which is what the Botswana Diamonds team can offer.

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