London-listed Botswana Diamonds has expressed optimism about the company’s use of artificial intelligence (AI) to scan the exploration database in Botswana to look for new mineralised deposits.
Company managing director James Campbell told Rough & Polished’s Mathew Nyaungwa in an exclusive interview that work has already started and they using data provided by the government of Botswana to complement their database.
Botswana Diamonds acquired the Sekaka Diamond database from Petra Diamonds.
The company’s managing director said they partnered with an unnamed top United Kingdom team and not only looking for kimberlites but also copper, PGMs and gold.
Meanwhile, Campbell said the planned sale of De Beers by its main shareholder, Anglo American, will be a major catalyst for the recovery of the natural diamond market.
He said a top set of marketers, backed by wealthy investors, are the ideal candidates to rescue not only De Beers but the natural diamond market through marketing campaigns that will compete “head-to-head” with lab-grown diamonds.
Campbell also said that nobody currently wants to fund exploration, which looks for future diamond production when current diamond production is troubled.
He, however, said that the current lull in the diamond industry presents a strategic opportunity as asset prices are low and many people have a depressed understanding of where the diamond market is going.
Campbell said Botswana Diamonds is positioning itself to take advantage of opportunities as they come about.
He further said that the company is optimistic of reaching a deal in Zimbabwe, which he said was of great strategic importance to Botswana Diamonds.
Below are excerpts from the interview.
What is your reaction to the South African government’s availing of the R400 million exploration fund?
Although that is a lot of money from a greenfield perspective, when you start to get into inferred and indicated resource development, that is a minimal amount of money.
What I would ideally like to see, though, in parallel to such a good initiative is an expediting of the cadastral in South Africa, so it becomes a lot more transparent and freely available to everybody, as well as a significant focus in terms of opening up the retail market for the ultra-high net worth individuals to get involved in exploration in South Africa. This involves significant deregulation and embracing things such as the flow-through share scheme, which is prevalent in Canada, and similar schemes that the UK and Australia have.
Did Botswana Diamonds submit an application to the Department of Mineral Resources for funding from the exploration fund? If so, how much are you expecting to get if successful?
No, we didn't; there are a couple of reasons behind that. Firstly, the requirement is that predominantly local or black-owned companies are allowed to apply for it; all others are disqualified.
We have a local affiliate called African Irish Diamonds Pty Ltd, which is 74% owned by Botswana Diamonds PLC and 26% owned by a local partner therefore this does not qualify for this fund.
Secondly, and I think this is a wise move by the government, this fund is not open to all minerals and diamonds being as they are at the moment do not qualify for funding and therefore we did not apply for funding with this exploration fund.
We hope the exploration fund will grow over time and companies such as ourselves will be allowed to access it because all of our capital comes from offshore for project development in South Africa and of course Botswana and Zimbabwe.
Botswana Diamonds recently raised £250,000 through the issue of new ordinary shares. Do you have plans to raise more funds in this last quarter of the year?
Mathew, as you know, raising exploration funds is done by way of issuing new ordinary shares and Botswana Diamonds PLC tends to raise money twice a year or thereabout to fund its exploration projects. The theory behind a company like Botswana Diamonds is that you only raise money on the back of successful work programmes, which has led to an increase in the share price. So clearly the theory is troubled at the moment because of where we are in the diamond market.
What is the impact of the current weak diamond market on exploration funding?
I could talk about this, Mathew, for a very long time. There is a very, very significant impact. You already know that many small and medium-sized private operators have put their operations on care and maintenance since the end of last year.
Production is dropping in some of the major mining companies and rough diamond stockpiles are equally increasing in some of the major diamond mining companies.
So basically that means that nobody wants to fund exploration because that looks for future diamond production and when current diamond production is troubled it makes funding of future diamond production even more difficult.
This is notwithstanding that people understand that diamond exploration is a long-term game, but the financial markets are fickle and tend to look at short-term returns.
How do you see the diamond market development?
I think we are going through a structural change at the moment. This is not the normal cyclical change that we have seen with the global financial crisis in the 1930s and all the kinds of recessions in between. This is a structural change I believe.
Lab-grown diamonds are here to stay. There is a market for them and natural diamonds will have to coexist with lab-grown diamonds and find their separate market.
I think if you look at the sapphire and ruby market that has evolved and is probably from a life cycle perspective about 10 to 20 years in front of the diamond market.
So what do you see as a possible catalyst for a resurgence of the diamond market?
I think in my view the major catalyst will be the sale of De Beers. At the moment De Beers is almost like an orphan. It's [85%-owned] owned by Anglo-American. It's been up for sale for several months now and there's no news in terms of who will buy it.
So I think the catalyst for a resurgence in the natural diamond market not back to where it was but back to a much firmer footing is the sale of De Beers to a top set of marketeers, should I say, backed by really deep-pocket investors who could fund the kind of development work and vitally the natural diamond marketing campaigns, which are required to compete for head-to-head with lab-grown diamonds.
I hope that will take place sooner rather than later. Anglo American has stated it as a strategic goal, so I wish them all the very best, and the sooner this can happen, the better for the diamond market.
What are some of the challenges that you are facing as a diamond exploration company focused on Botswana, South Africa, and Zimbabwe?
Well, the primary challenge at the moment is funding, and that's directly due to the state of the diamond industry itself, [as I've addressed above]. That is the primary concern.
The secondary concern is that it is taking us a considerable amount of time to get permits and licences approved at the moment because diamonds felt a bit like an orphan, and we would like to try and expedite that as best as possible.
However, notwithstanding that we see this current lull in the diamond industry as a strategic opportunity, asset prices are low and many people are bleak and have a depressed understanding of where the diamond market is going.
We don't have that view; yes, we are going through a structural change, but we believe will come out of this stronger and better but different and if we can position ourselves as Botswana diamonds to take account of those opportunities as they come about, that would be fantastic.
Botswana Diamonds entered the uncharted territory of using AI for mineral exploration. How optimistic are you about registering success?
This is an excellent question, Mathew. We've got the second-largest exploration database in Botswana.
This comes from the acquisition of the Sekaka Diamond database from Petra Diamonds and now a large database operating in Botswana for the past 20 or so years.
What we've done is put all that data together and we've teamed up with a top UK team. How this process works is that they've got several geological models which they've described in narrative form and this is not just kimberlites; we're looking at copper, we're looking at...PGMs and gold too, because these are all the forms of mineralisation that you have in Botswana, and we're using artificial intelligence to scan the database to look for new mineralised deposits.
I'm very excited about this; the process has started very well and to complement our database, we're using the significant data provided by the government of Botswana too. So in summary, I'm optimistic about this but there's still a long way to go.
Do you have any regrets about selling the AK6 diamond mine considering the large stones being recovered by Lucara at Karowe?
Again, a very, very good question Mathew, yes, Karowe has been a fabulous success and Lucara has done an outstanding job, but if I cast my mind back to the African Diamonds days, we were, as you originally knew, partnered with De Beers on the project and we fell out and we had to launch a High Court interdict against them which we won, we settled and a mining licence was granted and then when we went to seek funding during the bottom of the global financial crisis, De Beers said they could not fund the over $300 million mine development.
Our study suggested that the mine could be developed for under $100 million so then, we were almost cast outside, we didn't want to fight again so we spent a significant amount of time looking for funders.
We came across Lucara, a deal was done, we became great partners and they bought us out, but it was always the intention of Lucara to buy us out.
So companies like African Diamonds and Botswana Diamonds are driven by returns to your ordinary shareholders and we were able to deliver 25 times the return to our ordinary shareholders in African Diamonds. If you were a pioneer investor and if you had invested in every single fundraising round, it would have been 10 times the return.
Yes, we think we could have done better, perhaps if we were still involved now, we wouldn't have done better.
So we did the best we could at the time, we have no regrets, our shareholders did very well out of it and I think that's the prime we aim here, yes it's recovered lots of large stones, which is magnificent but I'm not quite sure that has translated to strong shareholder returns which is the primary goal of companies such as ourselves.
How did the AK6 experience influence your decision to develop late-stage projects like Thorny River?
I don't think, Mathew, there was any direct parallel between the two, why we looked at Thorny River was that the iconic Marsfontein diamond mine, which had a payback of three and a half days is a blow on the Kimberlite dike in the Thorny River area.
There are several other blows in the area and these are surrounding the Klipspringer Mine, which is about eight kilometres to the west, it's the Sugarbird Blow, the Sugarbird Pass Blow and the Kudu Blow, but in the Nkumpi Valley where Marsfontein sits no other blows had actually been found and that was chiefly in our view due to the lack of an application of modern day exploration.
Marsfontein was discovered at the confluence of a structural weakness where a dolerite dike intersected, and a kimberlite dike therefore our exploration focused on areas of structural weakness using, in particular, very detailed gravity surveys over these areas and yes we did discover several blows, sadly nothing of the size of Marsfontein and following extensive exploration, which included drilling we applied for a mining permit on Thorny River.
What is the latest development at Thorny River?
As you know from our press releases we applied for a mining permit on Thorny River some time ago, over a year ago now, but we hope that with our significant engagement with the Department of Mineral Resources in the local office of Polokwane at least one of those permits should be forthcoming in the not too distant future.
However, we may decide not to kind of activate that immediately due to the poor state of the diamond market, but we do need that permit. It's critically important because when the market turns we need to be able to be in a position to start work immediately.
What is known about the prospecting licence on the Reivilo cluster of kimberlites in South Africa?
This is a very exciting cluster of Kimberlites which are our near surface and our three kimberlites which total some 10 hectares. This is an area of kimberlites, which is known for high-value diamonds and if I cast my mind back to the structural changes in the diamond industry we believe those projects with large high-value diamonds and coloured diamonds, in particular, will be the projects, which survive. So we're very excited about this project. We have the core from the kimberlite, which has now been sampled and our next stage in this project is to do micro diamond analysis work on this kimberlite so we can give an estimate or provide an estimate of the macro diamond grade.
What sort of progress have you made in Zimbabwe?
Mathew, as you know Zimbabwe has been of great strategic importance to Botswana Diamonds for several years. It has got highly prospective geology, not wildly dissimilar to Botswana and South Africa with the exception that it doesn't have the cover South Africa has and unlike Botswana where you've had several rounds or phases of modern-day diamond exploration there's been very little modern-day diamond exploration in Zimbabwe and this is why we consider it to be highly prospective.
We've been engaging with several partners over the past few years, I have made several visits to Zimbabwe during this year and we're optimistic that we'll be able to strike some kind of deal, which will be good for all the stakeholders involved, our shareholders in Botswana Diamonds PLC and the government of Zimbabwe and businesses in Zimbabwe. I think this will be a welcome development for Zimbabwe itself by partnering with a London-listed company, which has all the disclosures, which we have, which will hopefully open the door for other investors to come into Zimbabwe in diamonds and in other areas too.
Mathew Nyaungwa, Editor in Chief, Rough&Polished
