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De Beers Aims to Modernize Mining

Diamond giant De Beers' approach to diamond production is evolving as it seeks to modernize operations and increase productivity.

JOHANNESBURG, South Africa — Since diamonds were discovered in South Africa more than 140 years ago, the precious stone has been inextricable from the country’s history, contributing to its wealth and shaping its evolution from an agricultural backwater in the 19th century to an industrial powerhouse.

The one name most closely associated with diamonds in South Africa is De Beers, founded in 1888 by Sir Cecil Rhodes. While little has changed in the way De Beers markets its diamonds, its approach to diamond production is evolving as it seeks ways to modernize mining operations and increase productivity.

De Beers Consolidated Mines, a private company now controlled by the Oppenheimer family and based here and in London, controls 60 percent of the global diamond trade, making it the largest and most influential player in the industry. It owns and operates several mines in South Africa, and has entered into joint ventures with partner mines in the rest of Africa, as well as with the governments of Namibia and Botswana. It is also present in Canada, Australia and Russia.

Through its marketing arm, Diamond Trading Co., which has its headquarters on Charterhouse Street in London, De Beers sells the rough diamonds extracted from its mining network, as well as those it purchases from other sources, such as Russia and Canada.

De Beers’ diamond stash comprises tens of millions of carats. Diamond sales, called sights, are held at five-week intervals 10 times a year, and are open only by invitation to those called sightholders. De Beers chooses sightholders carefully, based on their diamond and marketing expertise. Those in the diamond trade not fortunate enough to be invited by De Beers may not attend the sights. Instead, they must go to Antwerp, Tel Aviv or Bombay to source their diamonds.

One of De Beers’ youngest sites is the Venetia mine in Limpopo, which was established in 1992. Last year, out of 5.9 millions tons of ore treated at Venetia, 8.5 million carats were recovered, over 60 percent of gem quality, an increase of 15 percent from the 2004 yield of 7.1 million carats. This comprised over 52 percent of De Beers’ annual production, making Venetia one of the company’s most productive and profitable mines.

This story first appeared in the August 7, 2006 issue of WWD.  Subscribe Today.

Venetia employs 934 people as regular staff, plus 500 contract laborers. Almost all employees come from the neighboring town of Musina near the Botswana border. Part of the challenge for De Beers in operating modern-day mines like Venetia is working with the staff, to ensure the company protects its own assets and the health of the workers while achieving record yields.

In 2005, Venetia reported no fatalities and negligible on-the-job injuries. Day-to-day operations are carried out under tight surveillance, and access is restricted to those who complete a rigorous registration and scanning process. There is a red zone for high-security areas and a blue zone for normal-security areas. Diamond recovery and sorting takes place in the red area, while the pit, the plant and the trucking workshop comprise the blue area.

Kimberlite is the diamond-bearing rock named after the Kimberley mine in South Africa where it was first identified. When an area is identified in the pit as being rich in kimberlite, an underground explosion is scheduled. The explosion pushes the kimberlite to the earth’s surface and the resulting ore is then hauled by huge Caterpillar trucks, each costing close to $3 million, and brought to the recovery and sorting area, where the ore is crushed to extract the rough diamonds embedded within.

The diamonds are next taken for sorting. At no time do human hands come into direct contact with the rough diamonds, which are fed through a pipe into the sorting box, a huge square glass container with built-in gloves and tweezers. The gloves are checked twice daily for holes and loose seams to eliminate the possibility of rough stones being pilfered.

“Due to the nature of diamonds being small, easy to conceal and of high value, there will always be attempts at stealing, unfortunately,” said Johnny Velloza, operations manager for Venetia.

Velloza said over the years people have been caught with rough diamonds hidden in almost every part of the body, but the security measures in place tend to catch them. It can take longer to exit the red and blue areas than to enter them.

The scenario is akin to a science fiction movie, where doors open and seal shut, leading visitors through narrow and brightly lit cubicles. They are asked to plant their feet in a marked position, stand straight, turn to the left and to the right, and move closer to the wall. X-rays and lasers scan their bodies. The result is fewer thefts; anyone caught stealing is immediately dismissed.

Venetia also uses incentives to discourage stealing. Last year, Velloza said, a 316-carat rough diamond almost escaped notice and was headed for the crusher when a worker pointed it out. He was rewarded in accordance with the company’s Diamond Pick-Up policy, the details of which are confidential. Velloza admitted that such occurrences are rare, but they nevertheless deter would-be thieves and encourage alertness among the staff.

“I like to believe that honesty is more integral to human nature than theft,” he said.

At the Rosy Blue cutting and polishing factory attached to De Beers’ Cullinan mine north of Johannesburg, security is a concern, but the nature of the processes involved demands direct contact between man and stone. In lieu of X-rays and scanners, Rosy Blue checks meticulously that each and every piece of rough and polished stone is accounted for at every stage of production.

Modern technology has helped increase productivity. Rosy Blue has invested some $2.5 million in new technology since acquiring the South African plant in 2003, transforming it into a state-of-the-art facility. The latest machine at Rosy Blue is called a diamond planner. With the help of a laser scanner and three-dimensional imaging, it illuminates the stone; maps all the grooves, holes and other indentations, and determines the best possible cut for a piece of rough stone with the least carat loss.

At the Venetia mine, and throughout De Beers, the impact of the diamond industry on the local community is significant. As the rampant onslaught of AIDS and HIV infection continues in the country, De Beers has instituted several programs to increase HIV awareness.

Tracey Peterson, De Beers’ HIV/AIDS manager, said conservative estimates put South Africa’s infection rate at 21 percent of the population, or about 4.8 million to 5.6 million people. Some accounts claim it is closer to 40 percent and that around 90 percent of HIV-positive people don’t know they are infected.

“We are literally caught between a rock and a hard place,” said Peterson.

De Beers has implemented a strategy for HIV/AIDS management, recognizing the rights of all employees, even those who are HIV positive, while at the same time minimizing the spread and impact of HIV infection.

“One person may be infected with HIV, but many more are affected by it,” Peterson said.

De Beers provides access to treatment, care and support for infected and affected employees. Education and confidential voluntary counseling and testing, called VCT, are offered at each mine, which also has a medical clinic.

“VCT is one of the most important interventions in tackling the pandemic,” she said. “Our focus on getting employees to know their status achieved excellent results in 2004, with most mines recording up to 80 percent participation and one mine reaching 100 percent in a two-week campaign. Dealing head-on with the reality of HIV makes sound commercial sense. We need to minimize the economic impact of HIV. It is also our social responsibility.”

Advances in antiretroviral treatment have enabled many infected workers to continue working without any decrease in productivity. The De Beers Anti-Retroviral Treatment Program treats employees, including retired and retrenched employees, and their spouses and life partners.

Communication is key, according to Peterson, who concedes there have been so many people in the country who have lived with the reality of HIV/AIDS for so long without really understanding its impact on society that it is “important to counter HIV fatigue.”

The way forward, she said, is through “diligent monitoring and measuring, making HIV testing part of the health management and business processes, moving from focus on treatment registration to treatment compliance, and the continued integration between workplace and community initiatives.”

Key support for this program is provided by the De Beers Fund, which invested more than $500,000 in 22 HIV/AIDS-related initiatives in 2005.