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John Bristow
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» Council staunches Blood Diamond

Regulations kill small diamond miners
David McKay
Posted: Wed, 22 Nov 2006

[miningmx.com] -- THE small diamond mining industry in South Africa is dying.

Martie Lotter, who represents the South African Diamond Producers’ Association (SADPA), says legislation created to promote small mining is suffocating it. This is because applications for prospecting licenses on properties over 1.5 hectares requires the same compliance for a small miner as for Anglo American.

That’s a major problem because small diamond miners can’t get bank loans unless they submit a five-year business plan. Such things can’t be produced unless there’s enough land to prospect. “They can’t get financing on a sustainable basis,” says Lotter.

The effect on small diamond mining has been dramatic. In 2002, there were 1,000 operating diggers: entrepreneurs with some yellow machinery and stars in their eyes. Four years, according to Lotter, later there’s only 164 diggers, representing an 80% decline in numbers.

This is not negligable production. Far from it: independent small scale diamond miners were collectively the second largest producers of diamonds by carats in 2002 producing 1 million carats, or 10% of South Africa production. Production is down 50% and employment from the sector has also fallen to 6,000 from 25,000 jobs previously.

“Empowerment is not the issue,” says Lotter. It’s that prospecting licenses require social and labour compliance small-scale miners can’t afford. “It would be wrong to lay this at the door of BEE.”

The lure of instantaneous wealth has literally hundreds of self-anointed miners digging for diamonds in South Africa. All you need is a second-hand excavator and a property. That’s how Hennie van Wyk started, aged 23. He is now the owner of a company moving 700,000 tons/month of gravel and with plans to expand aggressively.

“I sold everything I had to mine. I mined for a week and ran out of cash. A friend loaned me diesel to keep on going,” he says. Unbelieveably, Van Wyk discovered a 60.3 carat diamond that was sold for R300,000, enough to pay creditors and removing the necessity of selling his house.

Crucially, he also bought another excavator. HC Van Wyk Diamond Company now owns 85 pieces of ‘yellow gear’ (machinery) and sold a 51% in its business to Toronto-listed Rockwell Ventures, which is progressing with a second inward listing on the JSE.
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It must be in the blood. Van Wyk’s grandfather mined Kimberley’s ‘Big Hole’. The land on which the grandson began mining was the old 15 square metre claims from which old timers removed the top, softer gravel before hitting calcrete, an incorrigibly hard rock beneath. Excavators can now tear through the calcrete, but it’s not an easy job.

John Bristow, CEO of Rockwell, says the key is to get the economies of scale. “If you’re mining enough land you can get through the dry patches much quicker. It’s about simple earth-moving and security,” he says.

Securing fledgling diamond mines is a major problem given that months of debt can be wiped out with a single, easily portable stone. Unfortunately, that stone can we carried away in an employee’s shoe in seconds. Rockwell recently foiled a raid by bandits on its Wouterspan mine.