AIM listed junior, Firestone Diamonds used BK11 mine as a ‘fundraising tool’ for its international business, only to dump it later, BG Business has learnt.
Two weeks investigations conducted by this publication found that BK11’s downfall was a long time coming, owing to the ‘corrupt’ mining operations, use of poor mining machinery, and below par security of diamonds making it easier for diamonds to be lost or even stolen, factors which adversely impacted on production despite the mine being highly valuable.
A former mining engineer at BK11 mine told BG Business that Firestone, which recently de-listed from Botswana Stock Exchange (BSE) has itself to blame for poor results at BK11, a mine located in Boteti. He said Firestone executives cared less about Botswana operations. “Their interest was in running Liqhobong mine in Lesotho”, said the source.
BK11commenced operations after 2007 and it is alleged that Firestone executives saw it as an opportunity to raise funds to operate Liqhobong diamond mine, where their interests are said to have been.
Liqhobong mine was only acquired in 2010, less than two years before BK11 was shut down. The source said that after obtaining BK11, Firestone executives laid back, allowing one Lesly Delport, to handle the mining process including setting up the plant. Delport is alleged to have taken advantage of Firestone’s minimal interest in running the mine for personal interests. He allegedly brought cheap and old mining machinery from South Africa to set up the plant, which engineers said were unfit for mining operations, with a limited lifespan. Delport is said to have formed a company called Kgalagadi Mining Engineers, to which Firestone would outsource some services. “When mining diamonds, the first thing you do is to consider your crushers and the dense media separation (DMS). These are the two machines that would ensure extraction of quality diamonds and also avoid loss,” said the former engineer.
He said BK11 crushers, brought by Kgalagadi Mining Engineers were old and dysfunctional. “They were literally crushing and breaking diamonds,” he said, stressing further that the DMS also resulted in some diamonds being lost as waste because it did not function properly. In a DMS plant according to the engineer, an alloy of iron and silicone is suspended in water to form a fluid near the density of diamond to which the diamond bearing material is added to begin the separation process of the heavier minerals from the lighter material. But the source said in BK11’s case, the DMS contained low pressure which was unable to swirl the mixture at full capacity resulting in some diamonds being sucked out as waste rather than settling at the bottom with other dense materials. “This was how the diamonds were lost at BK11.
We questioned that with authorities but we were told to mind our own business and concentrate on taking orders.”Sooner BK11 was closed indefinitely, with the mine officials saying that diamond prices were to blame for the closure. “That was a big lie, if global diamond prices were a challenge why did they not halt their Liqhobong mine operations in Lesotho?” he asked. Group operations manager, Polite Khutjwe was not willing to respond to BG Business questions for two weeks. Instead, he referred all inquiries to the group chief executive and former De Beers man Stuart Brown, who was unreachable and was said to have been travelling. Brown however had mentioned in Firestone’s latest statement that they were considering shutting down BK11 completely or engaging a strategic partner.
The former engineer said that BK11 uses the same kimberlite belt as the Debswana Orapa mine, whose diamonds quality and production are of world class.
“There are too much diamonds along that belt, and BK11 is a very profitable mine, if managed well,” he said, adding that they were only looking at more profits in Lesotho. So they decided to dump BK11 in the process, after getting funds to acquire Liqhobong.
Available data on the Firestone website shows that BK11, a resource of over 11 metric tonnes (Mt) at an average grade of 8.5 carats per hundred tonnes containing 1 million carats, has been identified at BK11 by independent mining and geological consultants, MPH Consulting Limited. With run of mine production valued at US$160 per carat (October 2011 estimate), this gives a gross in situ value of US$150 million. This is against the Liqhobong mine, which is highly, regarded by Firestone. Available data shows that a substantial resource of over 90 Mt at an average grade of 34.3 carats per hundred tonnes containing 31 million carats has been identified at the Main Pipe at Liqhobong by independent mining and geological consultants, ACA Howe Limited. With run of mine production valued at US$110 per carat (October 2011 estimate), this gives a gross in situ value of US$3.4 billion. The source said with the Lesotho based mine being more valuable, Firestone executives driven by a profit motive, chose to abandon BK11 and focus on Liqhobong.
Another frightening issue that emerged was the poor security used at the mine, which might have compromised a number of things. According to former employees at BK11, the mine, which had resorted to cheap operating tactics, did not engage a security company when production commenced. Even at the ‘red area’ where diamonds are easily accessible, BK11 at first chose to have their own internal security which is said to have been less efficient and allowed diamonds to be compromised. Apparently, the cameras installed at the mine were not working for a long time while diamond production was ongoing.
“It was only after an alarm was raised when Zebra Security was engaged to ensure that there was security. After engagement Zebra security was also not given training on how to work in a diamond security and even how to escort diamonds. The employees are afraid that some diamonds could have been taken illegally for personal gain.