This is the story of a remarkable diamond discovery, of a grand adventure in rugged hills on the edge of a plain called the Springbok Flats, of a tiny seam of kimberlite that widened, deepened, branched out, and for three straight years just grew and grew and grew. It's the story of SouthernEra Resources Ltd.'s amazing Klipspringer project, 300 kilometers northeast of Johannesburg, and of the adroit and driven diamond men who've pulled it off.
When I first visited Klipspringer two years ago. SouthernEra's small exploration staff lived in a cool, fragrant grove below the hills, in a massive, thatched, colonial farmhouse with rooms so vast you could have played badminton in them. It had the feel of an earlier Africa, of sundowners on the verandah and the call of animals. Every night at eight-thirty on the dot a battalion of toads materialized in the kitchen. Half an hour later they'd vanish as swiftly as they'd come. Rhino beetles the size of mice cruised into the house to take their place.
Life had the gloriously breezy character of an exploration camp. Geologists drifted in and out of a bungalow nearby, where maps were tacked to walls and the fax machine sank steadily beneath the deepening dust. Every morning Mike Scott, a veteran Johannesburg diamond geologist on contract to SouthernEra, would assemble his small force and plot strategy for the day. Then they would climb into trucks and go bucketing up the steep dirt road that led into the hills.
The name Klipspringer comes from a tiny, nimble breed of deer that throng the cliffs and valleys of the site. Like the deer themselves, the whole enterprise seems to embody agility. Geologists pick their way through the rough terrain, sampling, trenching, drilling. Up hills and into plunging valleys they go, methodically outlining a burgeoning system of kimberlite deposits that now appears to run for 42 kilometers through the harsh topography.
The One De Beers Passed By
In a different scenario, the whole thing might have belonged to someone else. The area now called Klipspringer was first explored more than a decade ago, by De Beers. It was running a team through the whole of the northern Transvaal. Geologists found the fissure, sampled it, and abandoned it as too insignificant to bother with. But Hennie van der Westhuizen, the geologist who directed the sampling, never surrendered his belief that the site was worth a closer look.
In 1995, SouthernEra came looking for South African targets. Mike Scott told Chris Jennings about van der Westhuizen, then retired. Jennings is SouthernEra's chairman, CEO, and founder. A PhD geologist, native South African, and a key figure in the Canadian diamond rush of 1991-92, Jennings has an unquenchable thirst for discovery. When he heard what van der Westhuizen had to say he immediately acquired the ground. In a rush, Jennings and Scott assembled the first, dazzling picture of outcrops and dykes. The belief took root that an entire system of kimberlite swarmed across the choppy hills. Jennings launched a ferocious, silent campaign of acquisition. The Northern Miner, North American mining's journal of record, calls the 1,200-square-kilometre parcel of rights that ensued "one of the largest contiguous mineral packages in South Africa."
"What we've uncovered here is nothing less than a new kimberlite province," claims van der Westhuizen -- a large, tanned, oracular presence who is Klipspringer's patron saint. "What we've found already is magnificent," he told me last year, as he snapped open a can of beer in the cool farmhouse kitchen, "but I'm telling you now, there's more to come."
Stuffed With Rough
A few weeks after that visit, I met Mike Scott in a quiet street in the Johannesburg suburb of Rosebank. We entered a nearby bank, and were shown into a secure room with a small desk. A bank official retrieved a green-painted metal box with Scott's security photo taped to the outside. Scott unlocked the box, and with a wide grin hauled out a plastic supermarket bag filled with clear ziploc envelopes. Each envelope was stuffed with rough from Klipspringer. In all, the sampled weighed almost 5,000 carats, and was later sold to Overseas Diamonds NV, which had valued the goods at $126 a carat.
In the received wisdom of diamond mining, fissure mines are mom-and-pop operations-mining a slot in the earth a few yards wide. Pipes, on the other hand, are the holy grail: they're large, and you can mine them quickly with machinery. High-volume, high cash flow. While a pipe disgorges ore at a daily rate measured in thousands of tons, a fissure operation will often grub along on 300 tons a day. To be fair to De Beers, that's probably why it walked away after one quick look. Just not worth it.
But Chris Jennings believed that Klipspringer had secrets, and he wanted to find them. First there was only the original discovery, the Leopard fissure. Next they found a parallel system, the Sugarbird fissure, 750 metres to the north. Later, they discovered a "blow", where the Sugarbird widened out to 20 meters. And finally last summer-pay dirt! They hit a pipe far to the east of the original discovery, in a corner of the property called Marsfontein. Where the Leopard fissure grades .85 carats per ton, the Marsfontein pipe (M-1) grades 3.35 carats per ton. Where the Leopard's average carat value was $126, the M-1's is $142. SouthernEra's stock shot up from around C$11 to C$20 on the Marsfontein news, and although the share price got chopped back sharply in the aftermath of the 'Asian flu', many observers are betting on a Spring recovery.
What kind of diamonds will the M-1 produce? The company processed 144.6 tons of kimberlite ore from the M-1, and recovered 484 carats. The average size was a respectable .32 carats. Ninety-seven diamonds weighed more than 1 carat each. Of these, 26 are larger than 2 carats, 11 are larger than 3 carats, and 2 are larger than 5 carats.
The plant is hurrying towards completion. Chris Jennings has been on site in South Africa for months, cracking the corporate whip at the complex business of assembling permits, letting contracts, and generally marshalling the troops. Roads have been built, title secured, reliable water sources nailed down. Another heavenly farmhouse has been added to the company's property list, but no one sits around enjoying the gardens. Engineers, geologists, and other professionals tramp in and out. On site, steel rises rapidly into the sky.
Raiding De Beers' Talent
Ensuring that every bolt goes into place exactly as it should are two very experienced managers of the South African diamond-mining scene. Kim Freeman, SouthernEra's chief mining engineer, had a ten-year career at De Beers, including a hitch as second-in-command at Botswana's Jwaneng mine-the largest diamond mine in the world. After snatching Freeman, SouthernEra invaded De Beers again, luring away David Gadd-Claxton, the mine manager at Koffiefontein. Freeman and Gadd-Claxton would be a catch for anyone, but that a Lilliputian-sized outfit has scooped them from the giant of the diamond world is symptomatic of the way new players on the diamond scene are creating ripples that disturb the surface of even the magisterial De Beers.
Today the laid-back feel has gone for good from Klipspringer. A paramilitary force guards the precincts. Razor wire coils along fences. The old road that zig-zagged up into the hills has receded into nostalgia. Now, a broad thoroughfare runs straight up the declivity known as Mine Canyon. The leopards and baboons prowling the hills suddenly have a lot to look at.
In March, when the first material moves through the plant, Klipspringer should manage to chew through 20,000 tons of ore. By the end of the year, when the kinks are ironed out and the plant's in full swing, that figure will rise to 60,000 tons a month. (2,000 tons a day, or 100 tons an hour for 20 hours a day, seven days a week. Four hours a day is set aside for maintenance.) For the first two years SouthernEra will focus on the open-pit M-1, where a recovered grade of 2.37 carats a ton will yield approximately 140,000 carats a month.
Great Expectations
"As the low-cost open pit pipe material is depleted," wrote mining analyst John Hainey in a recent Yorkton Securities bulletin, "we expect production to come increasingly from underground fissure sources at higher cost. However, the exploration potential of the area is very high and if more economic pipe discoveries are made, low-cost open pit mining can be expected to continue for some time before full dependence on underground mining becomes necessary. We rate this probability high."
The italics are mine but the enthusiasm is Hainey's, and certainly the prospects for SouthernEra in what appears to be an entirely new kimberlite region, in which it holds almost all the land, have made other analysts, too, into strong believers in this quick-footed, determined young company. Klipspringer -- a diamond mine to watch!
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