South African diamond beneficiation profitable
Tag: South African, South African diamond
Summary: The beneficiation of diamonds locally is not only proving a profitable business but also has the indirect benefit of keeping in place the diamond tender system, which the company favours, says Trans…
The beneficiation of diamonds locally is not only proving a profitable business but also has the indirect benefit of keeping in place the diamond tender system, which the company favours, says Trans Hex CEO Llewellyn Delport.
Delport, who announced a net profit of R208.3-million for 12 months to March 31 from a loss of R45.1-million the year before, tells Mining Weekly Online that the JSE-listed diamond-mining company’s 75% ownership of Trans Hex Diamond Cutting Works in Johannesburg enables it to avoid being exposed to the 5% export duty that is imposed on diamond miners that fail to sell a minimum of 15% of their diamond mining production to South African beneficiators on fully commercial terms.
This is in addition to the 10% of output that has to be made available to the State Diamond Trader.
Against that background, Trans Hex decided to beneficiate its own diamonds itself rather than to sell them on to non-group local beneficiators at below the tender price without properly understanding the process.
By opting to self-beneficiate, it also avoids paying 5% of its diamond sales turnover over to the South African government for its diamonds, which sell at between $1 000/ct and $1 200/ct and which are sought after in international markets.
“Without the factory, we would probably find ourselves exposed to the 5% export duty year after year. So there’s a commercial advantage, which is easy to see in 5% of turnover.
“We have found that it’s possible to polish the right quality goods in South Africa profitably and we’re very happy that we’ve gone the beneficiation route because we can protect the tender system best this way for as long as possible,” he adds in a video interview that is attached to this article.
“The tender system is not only under threat in South Africa, but it’s long been thrown out of the Congo, Angola and other countries and South Africa is one of its last bastions.
“We’re hoping to keep the tender system going for as long as we can because we think it’s the best thing for shareholders,” Delport adds.
Trans Hex provides diamonds for beneficiation that have a known market appeal.
The 32-employee Trans Hex Diamond Cutting Works, which operates under MD and 25% shareholder Prince Mbetse, has its own sales outlet in Belgium.
Mbetse says there is advantage in being part of a mining company as diamond processing can then be turned directly to the clientele.
“The advantage that I have as a person in charge of an operation that is a partner to a mining house is that I have a choice of the kind of diamonds we can beneficiate, which is determined by the logic of what clients want,” Mbetse tells Mining Weekly Online in the video interview.
Post litigation, Trans Hex reports that its relationship with the State Diamond Trader is on an even keel.
“Out of ten parcels we offer to the State Diamond Trader, they probably, at this point, are buying five,” Delport reports.
Previously the company had issues with the diamond valuer not valuing its goods at fair market value.
“For now, touch wood, all of that has stopped. We give the value, they agree the value and then the State Diamond Trader has the opportunity to choose to buy.
“So our relationship is good subsequent to the court case and what we are now doing is simply implementing what the judge ruled on, which was, for us, a positive outcome,” Delport reveals.