Petra and Trans Hex to size up Finsch

[] — PETRA Diamonds (Petra) and Trans Hex seem the most likely bidders for the Finsch diamond mine in the northern Cape, which De Beers is considering selling.

Trans Hex is also viewed as the most likely – perhaps the only – bidder for De Beers’ Namaqualand alluvial diamond division, which is also up for sale.

Petra has already bought the Koffiefontein, Cullinan and Kimberley underground mines in South Africa from De Beers as well as the Williamson mine in Tanzania.

Trans Hex was a bidder for Cullinan and negotiated with De Beers over acquiring the Namaqualand division between September 2008 and March 2009, when the talks were terminated.

Speaking to Miningmx in May, Trans Hex CEO Llewellyn Delport said: “It was difficult to price those assets given the market circumstances at the time, but we made an offer to De Beers for Namaqualand based on our perspective of what was going to happen in the diamond industry and to the world economy.

“De Beers decided not to continue with the process. We remain interested in Namaqualand because it’s in our backyard.’

Namaqualand is currently on care and maintenance. Previous attempts by De Beers to negotiate a deal over Namaqualand with the nearby state-run Alexkor diamond mining operation also failed.

De Beers announced on Thursday it had received approaches from potential investors interested in buying Finsch and Namaqualand.

The group said it would evaluate offers received from “companies with good mining track records and strong empowerment credentials’.

Llewellyn told Miningmx on Friday: “I saw the De Beers announcement, and we are exercising our minds on it.’

Petra CEO Johan Dippenaar said: “We will wait for more information from De Beers on their planned process. We will then judge the proposal on its merits and determine our stance.’

An industry source said two other groups – Rio Tinto and Gem Diamonds – “might give Finsch a look-over as they did Cullinan’, but were unlikely to be serious contenders.

Cullinan was sold to Petra for R1bn, but Finsch is unlikely to go for anything like that amount. The mine is loss-making, according to De Beers, while financial and strategic circumstances have changed for both Trans Hex and Petra.

According to an analyst, “Finsch is not as profitable as Cullinan and it may need a considerable injection of capital. De Beers may well ask for around $100m (R750m), but whether they get it remains to be seen.

“Both Petra and Trans Hex just might play hardball with De Beers on price. Petra has financial commitments at both the Cullinan and Williamson mines, and no longer has the pressing need to acquire production capacity that it did previously.

“But Petra probably could raise the funds required fairly easily from its backers.

“That may not be the case with Trans Hex, where its major shareholder Remgro is about to unbundle its 28% stake in the company. You have to ask where Trans Hex would raise that kind of money.’

Finsch produced at a rate of about 2.3 million carats annually in 2008 and 2007, prior to the drastic production cutbacks implemented by De Beers across its operations in 2009 to cope with the slump in the worldwide diamond market.

In May, De Beers announced it intended restructuring operations at Finsch and issued Section 189 notices to the entire 870-strong workforce indicating that about 350 positions may be affected.

De Beers said in a statement it “has to run all its operations profitably, and in the case of Finsch it has incurred significant losses as a result of a number of factors impacting on the profitability of its mining business; including the high costs of operating Finsch Mine.’

Should De Beers sell Finsch and Namaqualand, its remaining South African operations will consist of the Venetia and Voerspoed mines; the CTP dump retreatment operation in Kimberley and the South African Sea Areas marine operation.