Debswana bets P65bn on its future
Mbongeni Mguni | Friday April 30, 2021 16:40
Debswana’s plans at Jwaneng are as audacious as they are expensive. The plan to spend an estimated P65 billion on an underground mine at Jwaneng is significantly greater than the P24 billion Cut 8 and the P22 billion Cut 9 expansions of the same mine.
In fact, the underground mine at Jwaneng will be the country’s single biggest project ever by value and, according to Debswana, will create the world’s largest underground diamond mine.
After Cut 8, Jwaneng was already one of the world’s largest open-cast diamond mines at about 625 metres deep and after Cut 9 the pit will reach down to more than 800 metres. Known as post-Cut 9, the underground project dwarfs its predecessor expansions. Internal Debswana documents show the underground operations will feature an estimated 360 kilometres of tunnels, borrowing into the earth.
Each year, the tunnels, blasting and digging operations will bring nine million carats to the surface, starting in 2034 and going up to at least 2054. After that, Jwaneng, which will then be 72-years-old, will most likely cease to exist, again breaking another record by being one of the world’s longest operational diamond mines.
Since its birth in 1982, Jwaneng has co-anchored the country’s economic miracle together with Orapa, another ageing workhorse.
Those involved in mining love talking about ratios; for instance, what is the ratio of earth you move and ore you dig up, to the amount and value of the diamonds you find? Since its opening, Jwaneng has enjoyed some of the world’s best numbers, being rated the world’s richest mine by value. As the years have passed, however, the cost of digging out the diamonds has climbed with each ‘Cut’ a term that describes a new level of mining within the pit. Jwaneng Mine now has to go underground because there it is no longer economic to further expand the pit. The diamonds have to be sought below the earth, an area that Debswana has never mined before in its history in Botswana.
Those tasked with planning the mammoth project are understandably tense, particularly given Jwaneng’s direct linkages with the country’s economy.
“We have to go underground and I can say we are an open pit miner, not an underground miner,” says acting Debswana MD, Lynette Armstrong.
“It’s a hurdle to get through for us.”
In 2020, COVID-19’s devastating impact on Debswana saw the diamond giant restrain its spending and introduce other measures to cut costs. Spending on the plans for the underground and other legacy project went ahead, however, highlighting their importance.
Armstrong says the group is working on various plans to ensure the open pit mindset changes and leans towards underground, which will also involve increasing the skills capacity within the organisation. Other practical steps will involve deciding on the mining model and taking the studies and plans, as well as the all-critical financing proposal to the board. “We have people studying across the world preparing for underground and we have seconded some of our people globally as well.
“Where we do not have the skills, we will partner with the government to bring those into the country. “It’s a huge undertaking, but we are on a path to make sure it’s successful.”
By 2023, Debswana plans to have built an early access decline at Jwaneng Mine. The decline, essentially a ramp cut into the earth to better understand the conditions below the ground, will provide the first look at the future underground mine for Debswana.
As costly as the underground project will be, the diamond giant sees it as essential to Debswana’s existence. Debswana’s core challenges going into the future include ageing plants, growth in expansion expenditure, deepening pits and declining revenues. The golden years of plus-30 million carats are over thanks to the global financial crisis and, most recently, the COVID-19 crisis. The group also has a challenge of fixed costs and ensuring a ‘fit for purpose’ workforce capable of supporting the strategic plans going forward.
In addition, other COVID-19 like disruptions potentially lie in the future for Debswana and the diamond industry as a whole.
Much of the success in enhancing efficiency, productivity while making optimal use of the remaining resources at Jwaneng and other operations, will be based on the ‘FutureSmart’ mining concept, which is anchored on technology, digitalisation and sustainability. FutureSmart mining involves achieving a much-reduced environmental footprint from new ways of mining, including by using several precision mining technologies and data analytics.
Technologies that “more precisely target the desired metals or minerals,” will be employed, leveraging on a cyber-secure data backbone.
An autonomous, electric-powered fleet will be deployed in the mines, while above ground, drones and artificial intelligence will be deployed to minimise losses and enhance operational efficiency. The underground mine at Jwaneng will be built under the FutureSmart model. Thabo Balopi, Debswana’s head of transformation and innovation, says the focus for 2021 is on human resources and the group’s digital transformation.
“Digitisation of the workforce is one of the drivers of our strategy and while we will not be doing this tomorrow, we have to create the capabilities within the organisation for this. “We need a fit for purpose organisational structure and new skills that can take us through the coming years.
“We have to see a reduction in fixed costs, eliminate wastage in terms of costs and also look at how to extend the life of our assets to deliver better returns,” he says. At this point, Debswana says it is not considering job cuts. The mood within the diamond giant, however, suggests such conversations will come in a few years.
The proposal on the underground mine at Jwaneng, supported by the smart mining methods proposed and the fit for purpose workforce, will come before the Debswana board in the next few years. The P65 billion price tag is expected to be a major consideration for the board, particularly for the government, which has said it is not willing to forego dividends as a way of funding expansions, as it did with Cut 8 and Cut 9.
For executives at Debswana, the decision is clear. Jwaneng must and has to go underground.