70 / 90
67
ESCALATING COST AND COMPLEXITY
Finding, developing and mining kimberlite pipes
in some of the world’s most inhospitable places
are astonishing feats of engineering and human
ingenuity. They each require enormous investments
in exploration, project development, infrastructure,
mine equipment and also human capital – training
miners to mine in a safe and sustainable way.
The cost and capital intensity of diamond mining
projects are rising, for three main reasons. Firstly,
global demand for capital goods has driven price
increases in equipment. At the same time, operating
costs in some of the major mining geographies
have increased significantly over the last few years.
In Botswana, for example, the cost of electricity
increased 11 per cent per year between 2002 and
2012
46
and labour costs increased 14 per cent per
year
47
. In Russia, the price of electricity increased
12 per cent per year over the same period
48
and
labour costs 19 per cent
49
, while in South Africa
power prices have risen by an average of 14 per
cent over the same period
50
(see Fig. 48).
Secondly, diamond miners are developing deeper
and more remote parts of existing deposits, such
as the Jwaneng Cut 8 project or the Venetia
Underground mine.
Finally, new projects are further away, in more hostile
natural environments that include the Arctic. Such
operations are inherently more complex to run and
involve greater infrastructure investments.
Miners go to extraordinary lengths to bring diamonds
to market. This has always been the case and supply
will continue to increase as demand grows. However,
this cannot happen without substantial effort and
investment. The cost and complexity of mining
diamonds will continue to increase, and diamonds will
remain one of the most coveted of earth’s products.
F I G . 48 :
COSTS I NCREASES ACROSS THE MOST COMMON OPEX I NPUT
FACTORS
Canada
4
Russia
12
South Africa
14
Botswana
11
ELECTRICITY
DIESEL
17
7
11
16
i
9
4
19
14
ii
LABOUR
Source: South Africa: Eskom, SAPIA, South Africa Department of Mineral Reserves; Botswana: Ministry of Minerals, Energy and Water Resources,
Botswana department of statistics, press searches; Russia: Russian Statistics
i
From 2006 to 2012
ii
From 2002 to 2011
CAGR 2002-2012 in local currencies (nominal), per cent