Rand Strength May Lead De Beers to Close Some Operations

The newly restructured De Beers Consolidated Mines (DBCM) may consider closing some of its operations due to the strength of the rand against the dollar, Chief Executive Jonathan Oppenheimer said.

He also said, however, that mines that have been closed for more than a century could be reopened due to improvements in technology, according to Business Day.

DBCM will incorporate De Beers' South African operations while the global, shared services, such as exploration activities, will now come under De Beers' Societe Anonyme.

Oppenheimer, son of De Beers Chairman Nicky Oppenheimer, said while DBCM had a "very exciting" resource at its Venetia mine, it also had five older mines "which are really struggling right now. Some are losing money. Closure is an option which I am big enough to say we have to consider but hopefully we will not have to go down that road."

He said he hoped to find ways to turn around the loss-making operations, even at the current high rand levels against the dollar.

He said the aim could be achieved either through cost cutting or by boosting revenues while keeping costs contained and his preference was to increase production.

Regarding the rejuvenation of closed mines, Oppenheimer cited the Voorspoed mine in Free State, which was closed in 1902.

"It closed for technical reasons, but our technical people believe things have advanced, so we can cope with this type of problem," he said. "It is potentially a good resource."

Production could be as high as one million carats a year, roughly the same output as comes from its Kimberley operations.

Oppenheimer said that De Beers had been preparing the restructuring of DBCM for 18 months, saying 10,000 people worked on the mining side of De Beers in South Africa.

Oppenheimer confirmed the firm was in discussions with the government over a proposal that there should be a 5 percent tax on diamond exports to replace an existing tax that is waived if the gems have already been offered to local cutters and polishers.

He said that he fully supported the aim of the legislation, which was to promote the local cutting and polishing industry, adding that it was growing, and now rivaled that of Israel.