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AFRIcA DoWn UnDeR

Business not usual

in Africa

Phil McKeiver
e might have been preaching to the con- ly found things become very problematic.
Hverted, but the underlying message of Phil “We’re all aware that it can take longer
McKeiver’s presentation to Africa Down Under to get things done in Africa, so applying an back end when they’ll say ‘no’ to something
was as clear as day. Australian-type prism can be problematic and that you need or getting in the way,” he said.
“We ignore African politics, African tribal- can certainly hurt your business and cost you “Anyone who has worked on a large project
ism, African history at our peril,” the Gilbert + a lot of money,” he said. understands that you cannot get everything
Tobin projects counsel told delegates. “You need people who understand the that you ask for. If you’ve got limited time, you’ll
“It’s wrong for us to apply completely west- African environment, the African context probably find the cost will be higher and the
ern concepts and Australian expectations and have some experience dealing with and quality will be less.
uniformly, without understanding the history managing these pitfalls. Effectively you need “You need to understand the risk profile
and the local dynamics and all the issues that to take a holistic and integrated approach to and you need to work within that framework.
come into play. managing risk on major projects. Just deal- You can’t get more for less. Often it will take
“We shouldn’t be looking down on Afri- ing with one issue and not taking into account what it takes, it will cost what it costs and to
cans, we should be looking to build a bridge another one will lead to problems in the future take shortcuts, you’ll need to make compro-
of knowledge and understanding and share that you need to deal with.” mises.”
the expectations so that we can all move for- McKeiver stressed that it was imperative McKeiver added that risks on African re-
ward.” for miners and explorers to deal with stake- sources projects are usually “magnified” and
Gilbert + Tobin has been providing legal holders at the front-end of project lifecycle, need to be dealt with “differently, for different
counsel to clients with African connections for especially in Africa where they are often first reasons”.
more than 30 years. Looking back on some of movers to local communities. “It’s simple stuff, but ignore it at your peril,”
those experiences, McKeiver said those who “If you avoid dealing with a stakeholder at he said.
attempted to apply the Australian “business the front end and understand their require-
as usual” approach on African projects quick- ments, you will have to deal with them at the – Michael Washbourne

Lucapa’s all-weather will allow it to sell diamonds at full and transpar-
ent rough market value direct into offtake agree-
ments.
Wetherall said the introduction of a cutting and
strategy polishing marketing agreement would underpin
the returns and value of Mothae over several
years of mining.
“The Minister of Mines has approved this
ucapa Diamonds Ltd has defied market condi- so the margins are increased as well,” Wetherall marketing channel which will allow us to partner
L tions, putting away a $10 million capital raising said. with a select high-end diamantaire, put it in for a
which will allow it to expand its Mothae diamond The expansion is expected generate $US14 number of years and ensure they pay a minimum
operation in Lesotho. million cash in the first year of operation with cash flow price in the first year, guaranteeing our
The $10 million placement, completed in early $US67 million cash forecast over the six-year margins in the first year,” he said.
November, was cornerstoned by Flannery family plan. Guaranteeing margins could prove a vital
office investment vehicle Ilwella Pty Ltd and Graff “The six-year plan only takes into account the boost for Lucapa at a time of high volatility in the
International diamond company Safdico Interna- indicated resource [9.2mt], that excludes 40mt of diamond sector. Diamond prices softened signifi-
tional. our inferred resource we will upgrade as we go cantly through early 2019 before diamond majors
The placement paves the way for Lucapa to deeper. The margin generated per carat is in- De Beers and Alrosa changed strategy from vol-
expand Mothae with the company already pre- creased to $US250/ct.” ume-focused to price-focused. The subsequent
paring to implement a $US6 million capital works As well as the plant modification, Lucapa is recovery in prices was sustained through the
programme which will see Mothae’s 1.1 mtpa also preparing to take Mothae’s output further remainder of 2019 before the onset of COVID af-
capacity increased to 1.6 mtpa by installation of downstream. Diamond miners in Lesotho face fected the market almost immediately.
a jaw crusher and secondary bypass conveyor. restricted marketing channels for their product “With the e-commerce trading, China coming
Mothae has been on care-and-maintenance but Lucapa’s agreement with the Government back earlier, polished trading continued to hap-
since the beginning of the COVID lockdown but pen, and those high polished inventory levels are
was switched back on in September as infection Stephen Wetherall being eaten up. With the rest of the world com-
rates in Southern Africa eased. ing back you’ve seen a significant ramp up and a
Lucapa managing director Stephen Wetherall return of demand. Gem Diamonds [Ltd] recently
said the expansion will deliver a 45% increase said their diamond prices are above pre-COVID
to throughput, carats recovered (31,000 ctpa levels,” Wetherall said,
to 44,000 ctpa) and revenue ($US21 million to “And, with Argyle taking its last shovel from
$US30 million p.a.) at Mothae. underground, that is some 13% of the global dia-
“Most importantly, with additional throughput mond supply.”
there are improvements in economies-of-scale,
– Dominic Piper

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